Re Gunthers Will Trusts, Alexander and Another v Gunther and Others

[1939] 3 All ER 291


Categories:        SUCCESSION; Administration of Estates        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        3, 4, 5, 25 MAY, 14 JUNE 1939        


Executors and Administrators Residuary estate Determination of residue Valuation Date for valuing estate for purpose of final distribution.

By his will, dated 29 July 1919, the testator, who died on 30 August 1931, after giving certain pecuniary legacies to his executors, and a specific devise of one estate and a life interest in another to his wife, gave the whole of the residue to trustees upon trust for sale and conversion with power to postpone, and declared that the whole of the net income of his estate as from his death should be treated as income, no part thereof being set aside as capital, and that no reversion or other property not actually producing income should be treated as producing income. He further directed that the trustees should stand possessed of the proceeds of the sale and conversion as a residuary trust fund to hold in two moieties on certain trusts as to the first moiety for the children of his first wife and in case of failure to be added to the second moiety, the income of the second moiety to be paid to his present wife during her life, and, subject thereto, in trust for her children surviving the testator and attaining the age of 21 in equal shares. Then followed provisions as to what should be brought into hotchpot in the division of the residuary trust fund as between the two moieties and charged against the same. There was also power to the trustees to advance and authority to appropriate all or any part of the real or personal estate in the actual condition or state of investment for the time being in or towards the satisfaction of any legacy bequeathed by the will, and incidental powers, inter alia, to settle all accounts and wind up the estate. There was a long interval between the date of the death of the testator, the date of retainer for legacy duty purposes and the date of distribution:

Held (i) the question as to what date should be taken as the date on which the estate of the testator was to be valued for the purpose of adjusting the rights of the parties inter se in the final distribution was primarily one of the construction of the particular will in each case.

(ii) there was nothing in the will to show that the testator had some particular date in his mind, and, in the absence of such an indication, it was a matter of convenience. In all the circumstances, that date should be the date of the death of the testator.

Notes

The question asked in this case has not been made the subject of decision in the past. The answer given is of a two-fold nature. It may be that the will contains an indication of the date to be taken for this purpose, and then it is a matter of construction. Where the will contains no such reference, the matter is one for a rule of convenience, since there is no good reason for choosing any one of the possible dates rather than another.

As to Residuary Estate, see Halsbury (Hailsham Edn), Vol 14, pp 366368, paras 685688; and for Cases, see Digest, Vol 23, pp 459464, Nos 53285357.

Case referred to

Barnardos Homes v Income Tax Special Comrs [1921] 2 AC 1; 28 Digest 84, 483, 90 LJKB 545, 125 LT 250, sub nom R v Income Tax Acts Special Purposes Comrs, Ex p Dr Barnardos Homes National Incorporated Assocn 7 Tax Cas 646.

Adjourned Summons

Adjourned summons to determine, inter alia, what date should be taken as the date on which the estate of the testator should be valued for the purpose of adjusting the rights of the parties inter se in the final

Page 292 of [1939] 3 All ER 291

distribution. The facts and arguments are fully set out in the judgment.

F R Evershed KC and J W M Holmes for the executors.

J M Gover KC and R H Hodge for Mrs Alexander and Mr H Gunther.

Lionel Cohen KC and B F Mendel for the beneficiaries.

14 June 1939. The following judgment was delivered.

FARWELL J. In this case, the testator died on 30 August 1931. He made his will on 29 July 1919, having made a codicil thereto on 12 October 1927. By his will, he appointed his wife, Helen Gunther, Mr John Bell and Mr Carlisle to be his executors and trustees, and he gave them pecuniary legacies. He then gave to his wife a pecuniary legacy of £4,500 and certain chattels, to which I need not refer. He then made a specific devise of a certain estate to his wife, and also of his land and hereditaments at Romney Marsh and certain chattels to the use of his trustees, upon trust that his wife should pay all outgoings in respect of the premises, and keep the same in repair, and should have an interest for her life in that property. On her death, the premises were to fall into the residuary estate. The testator then, after another specific legacy, gave the whole of his residue to his trustees upon trust for sale and conversion in the usual way, with power to postpone, and declared as follows:

… that the whole of the net income of my estate as from death shall be treated as income no part thereof being set aside as capital and that no reversion or other property not actually producing income shall be treated as producing income provided that (a) my sons James Henry Gunther and William John Gunther shall (subject as hereinafter mentioned) have the option in succession according to seniority of purchasing my said estate …

I do not think that it is necessary to refer to that more in detail. In cl 7, however, the testator provided as follows:

As to the moneys to arise from such sale and conversion I direct that my trustees (after paying thereout or retaining all the costs charges and expenses attendant or incident thereto and paying my debts funeral and testamentary expenses and the legacies given by me and the duties on any devises or bequests made free of duties) shall stand possessed of such moneys and the investments representing the same (hereinafter called my residuary trust fund) in trust (subject as hereinafter provided) to divide the same into two equal moieties of which one moiety is hereinafter called the first moiety and the other moiety is hereinafter called the second moiety.

Then cl 8 provides as follows:

As to the first moiety (a) my trustees shall hold the same in trust for all or any of my children or child by my first wife who survive me and if more than one in equal shares … (c) in case the foregoing trusts concerning this moiety shall fail then subject to such trusts and to all powers vested in my trustees concerning the same such moiety shall be added to and form part of the second moiety.

Then cl 9 provides as follows:

As to the second moiety: (a) The income thereof shall be paid to my said present wife during her life. (b) Subject as aforesaid my trustees shall hold such moiety in trust for all or any my children or child by my said present wife who survive me and attain the age of 21 years and if more than one in equal shares …

Then there comes a substitutionary gift, which I need not read. Then in cl 10 the testator provides as follows:

In the division of my residuary trust fund the following shall be brought into hotchpot as between the said two moieties thereof and charged against the same

Page 293 of [1939] 3 All ER 291

respectively: (a) There shall be charged against the first moiety (1) the aggregate sum of £52,500 and (2) the aggregate amount or value of all gifts or settlements (other than allowances out of current income) exceeding in amount or value the sum of £5,000 made or agreed to be made by me after Sept. 2, 1918, to or for any child or remoter issue of mine by my former marriage. (b) There shall be charged against the second moiety (1) the aggregate amount or value of all gifts or settlements exceeding as aforesaid (other than as aforesaid) made or agreed to be made by me after the date aforesaid to or for any child or remoter issue of mine by my present marriage and (2) the aggregate amount or value of all gifts or settlements (other than those made out of current income) made or agreed to be made by me after the date aforesaid to or for my said present wife but so that in no event shall anything be charged in respect of the policies settled [by a certain settlement] and in the division of the first moiety as between the children of my first marriage or the persons taking in substitution for them respectively the following shall be brought into hotchpot and charged against the respective shares in such moiety: (c) There shall be charged against the share of my daughter Edith Julia Alexander or those taking in substitution for her (1) the sum of £52,500 and (2) the aggregate amount or value of such of the gifts and settlements covered by subclause (a) aforesaid as are made or agreed to be made to or for her or any of her issue. (d) There shall be charged against the share of my son Herbert Robert Paul Gunther or those taking in substitution for him the aggregate amount or value of such of the gifts and settlements covered by subclause (a) aforesaid as are made or agreed to be made to or for him or any of his issue and in the division of the second moiety as between the children of my present marriage or the persons taking in substitution for them respectively the following shall be brought into hotchpot and charged against the respective shares in such moiety: (e) There shall be charged against the share of each of such child or those taking in substitution for him or her the aggregate amount or value of such of the gifts and settlements covered by subclause (b)(1) aforesaid as are made or agreed to be made for such child or any of his or her issue and I declare that if any question or difficulty shall arise in construing or working out the provisions of this clause the same may be determined by my trustees and their determination (whether formally made or only implied in their acts or proceedings) shall bind all persons interested.

Then in cl 11 the testator recites that “by a deed of covenant dated Sept. 2, 1918,” he entered into certain covenants with

… the three then surviving children of my former marriage as to the devolution of my estate at my death of which three children two now survive namely Edith Julia Alexander and Herbert Robert Paul Gunther now I hereby declare that it is my wish that each of such two now surviving children or in case of decease his or her executors or administrators shall within 6 calendar months after my death or such extended time (if any) as my trustees shall in their discretion think fit to allow for the purpose execute at the expense of my estate a deed or deeds releasing my estate from all liability under such covenants and as to each such child who or whose executors or administrators omit to execute such a release the claims and demands of such child his or her executors or administrators under such covenants shall be satisfied out of the share or shares and interest under this my will and any codicil hereto of or for such child and of or for his or her spouse or issue if any and subject as aforesaid my will and codicils shall take effect in all respects as if such child had died before me without ever having been married and I declare that if such share or shares and interest as aforesaid are insufficient to satisfy such claims and demands then the balance of the same shall be satisfied out of the rest of the first moiety in the relief of the second moiety and the necessary marshalling shall be treated as having been made.

Then there is a power to the trustees to advance, and authority to the trustees to appropriate, all or any part of the real or personal estate in the actual condition or state of investment for the time being in or towards the satisfaction of any legacy bequeathed by the will. Then there are other incidental powers given to the trustees, including the power to settle all accounts and wind up the affairs of the testator. There is nothing else in the will to which it is necessary, I think, to refer. The codicil is not important on any question which I have to consider. It merely substituted one trustee for another.

Page 294 of [1939] 3 All ER 291

As I have said, the testator died on 30 August 1931, he being twice married. He had children by his first marriage, two of those children surviving him, and children by his second marriage. After the death of the testator, and in course of administration, various questions arose which were the subject-matter of a summons, which was heard by Bennett J. The estate was a large one, and consisted of a considerable number of investments of various kinds in different countries. It was, necessarily, an estate which took a considerable time to administer, involving questions of some difficulty as to duties which had to be settled with the Inland Revenue authorities. While the administration was proceeding, the summons which I have already mentioned was taken out, dated 25 February 1932. That summons came before Bennett J, and he made an order upon it. The questions which were raised by that summons were for the most part entirely, or very largely, questions of the amounts which had to be brought into hotchpot by the various beneficiaries. Bennett J, however, did also deal with the question of how the income should be adjusted after the date of the death of the testator and the date of distribution. He made a declaration, to which my attention has been called, which I am invited to say really is a decision, or in effect is a decision, on the point which I have to decide. The court declared that various large sums had to be brought into hotchpot, and then it dealt with the question of how the income should be treated in the meanwhile. The administration of the estate, as I have said, was complicated, and there has not yet been a final distribution of capital. It appears from the affidavit of Mr Bagnall that he had been supplied by the defendant trustees:

… with full particulars of the estate of the testator as delivered to the Commissioners of Inland Revenue for the purpose of calculating the value of his residuary estate and payment of legacy duty thereon.

He also had given to him:

… particulars of the investments held by the executors (1) at the date of the testators death; (2) at the date of retainer for legacy duty purposes [which was taken as Dec. 31, 1936], and (3) at Aug. 23, 1938.

The first question on the summons which I am asked to determine is what date should be taken as the date on which the estate of the testator is to be valued for the purpose of adjusting the rights of the parties inter se in the final distribution. It seems odd that there does not appear to be any reported case in which this question has been decided. It therefore falls to me to consider the way in which the matter should be dealt with. A question of this sort must be primarily a question of the construction of the particular will in each case. That is to say, the court must look at the will and see whether there is anything in the will which indicates that the testator intended that the valuation should be made at any particular time. There may be provisions in the will which, although not expressly stating any particular date, may point to a conclusion as to what the testator did intend. In the present case, however, I am

Page 295 of [1939] 3 All ER 291

unable to find anything in the will which is sufficient to say that the testator contemplated any particular date. There is nothing in the will which I can say indicates that he had some particular date in his mind. I have, therefore, to consider, as it were, at large, what is the appropriate date. The three dates which have been suggested to me in argument as being the appropriate dates are (i) the date of the death of the testator, (ii) the date of retainer for legacy duty purposes [31 December 1936], and (iii) the date of distribution.

It has been said on behalf of those who desire the later date to be taken that there is, and can be, no residue, properly speaking, until the liabilities of all kinds have been discharged. Reference has been made to Barnardos Homes v Income Tax Special Comrs, an income tax case where it has been held that no one residuary legatee is entitled to any income for the purposes of tax on that income. That is to say, the income cannot be treated as the residuary legatees income until after the date of retainer. It is said that that indicates that some date other than the date of the death is the date which should be taken. In my judgment, those considerations do not really assist me, because it is not a question of ascertaining what the residue is. It is a question of fixing the date at which the estate is to be valued, or has been valued, for the purpose, not of ascertaining what the residue is, but of adjusting the rights of the parties in a case of this sort, where there are hotchpot provisions in the ultimate distribution.

The date of retainer is suggested, because it is said that after that date the residue has been ascertained, and the various persons will thenin equity, at any ratebe entitled to whatever their shares may be. Logically, however, if one is to take any date other than the date of the death, it would seem to me that, failing the retainer date, the date really would be the date of actual distribution.

In this case, as it happens, there has been, as already appears, a long interval between the date of the death of the testator, the date of retainer and the date of actual distribution. As it happens, the various investments which form part of the testators estate have very much altered in value, with the consequence that the persons interested under the estate in some cases would be well affectedthat is to say, affected to their own advantageby taking one date, whereas other classes of beneficiaries would be affected prejudicially by taking that date. There is nothing, I think, in the fact that the beneficiaries rights or interests may vary according to the date which is taken which assists me in arriving at a conclusion, except for this consideration. The fact that the interests of the parties may vary according to the date which is taken is some indication that a date should be chosen which is a fixed date, and not one which is in any way dependent upon the energies of the executors and administrators.

I have been referred to a considerable number of authorities in which this sort of question has arisen with regard to the interim distribution

Page 296 of [1939] 3 All ER 291

of income, and the amounts to be brought in for that purpose. As I have already said, that question did arise, and was determined by Bennett J. In my judgment, however, those cases really do not assist me in coming to a conclusion in this matter. This is a question of a date to be taken for the purpose of valuing the capital of the estate. Other considerations may well arise when the court is dealing with income, and not with capital. In these circumstances, it seems to me that I have to determine this point without the assistance of any decided cases at all. As I have said, it seems curious that there should not be any such case, but, so far as counsel has been able to discover, there is no case which really covers this point. It may be that in most cases the period between the death and the date of distribution is comparatively short, and, therefore, there is not much difference between the values at the death and at the date of distribution. The difference may be so small as not to make it necessary or desirable that any question should be raised.

Having regard to the fact that, if a date other than the date of the death is taken, the date must depend to some extent upon the individual executors, it seems to me desirable, if possible, to take a date which is not so dependent. I am not suggestingI have no reason to suggestin the particular case before me that there has been any undue delay in the administration of the estate. The estate was a large one, and a complicated one, and it may well be that the matter could not have been dealt with and disposed of more quickly. However, there will be cases in which the administration may be delayed because the executors do not exert themselves as they might have done, and are dilatory in their duties, with the result that the date for distribution may be postponed, and by such postponement some of the beneficiaries may suffer. That is a position which, in my view, is not a desirable one, if it can be avoided. I am unable to see that there is really any question of principle at stake in this case. It is really a matter of convenience. Some date must be taken at which the value of the estate can be ascertained for the purpose of making the proper adjustments in the interests of all parties. In my judgment, having regard to all the circumstances, I have come to the conclusion that the right date, in this case at any rate, is the date of the death of the testator, and I will make a declaration to that effect.

Solicitors: Holmes Son & Pott (for the executors and for the beneficiaries); G & A Cosens (for Mrs Alexander and Mr H Gunther).

Maurice Share Esq   Barrister.


Tunnicliffe v Pickup

[1939] 3 All ER 297


Categories:        ENVIRONMENTAL: TRANSPORT; Road        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HUMPHREYS AND LEWIS JJ        

Hearing Date(s):        9 MAY 1939        


Highways Damage to highway Inadvertently caused Lorry catching fire Highway Act 1835 (c 50), s 72.

The appellant was driving a motor lorry laden with bales of cotton along the highway. Without any fault on the part of the appellant, the cotton became ignited and the lorry was set on fire. The appellant promptly did all he could to put the fire out and telephoned for the fire brigade. The heat of the fire, however, damaged the highway, and the appellant was summoned under the Highway Act 1835, s 72, for causing damage to the highway, and was convicted and fined:

Held as the appellant had not wilfully caused the damage, but, on the other hand, had done all he could to avert it, he was wrongly convicted, and the conviction ought to be quashed.

Notes

The contention in this case was that the words in the Highway Act 1835, s 72“shall cause any injury or damage to be done to the highway”were in effect an absolute prohibition. The court, however, have held that, where the accused does all he can to prevent or mitigate the damage ensuing from a cause not due to his negligence, he is not guilty of any offence under the section. There is no offence within the meaning of the section unless the accused is guilty of some wilful act or omission.

As to Damage to Highway, see Halsbury (Hailsham Edn), Vol 16, pp 375377, para 509; and for Cases, see Digest, Vol 26, p 436, Nos 15371539.

Cases referred to

Re Mahmoud & Ispahani [1921] 2 KB 716; 14 Digest 32, 37, 125 LT 161, sub nom Mahmoud v Ispahani 90 LJKB 821.

Fearnley v Ormsby (1879) 4 CPD 136; 26 Digest 416, 1345.

Moses v Midland Ry (1915) 84 LJKB 2181; 25 Digest 48, 437, 113 LT 451.

Brackenborough v Thorsby (1869) 19 LT 692; 26 Digest 416, 1356.

Dennis & Sons Ltd v Good (1918) 88 LJKB 388; 26 Digest 417, 1361, 120 LT 88.

Hawkins v Robinson (1872) 37 JP 662; 26 Digest 420, 1396.

R v Ewart (1905) 25 NZLR 709; 14 Digest 32, case 33ii.

Harrison v Leaper (1862) 5 LT 640; 26 Digest 437, 1542.

Emary v Nolloth [1903] 2 KB 264; 14 Digest 31, 31, 72 LJKB 620, 89 LT 100.

R v Sleep (1861) Le & Ca 44; 14 Digest 32, 33, 30 LJMC 170, 4 LT 525.

Strutt v Clift [1911] 1 KB 1; 14 Digest 32, 36, 80 LJKB 114, 103 LT 722.

R v Bishop (1880) 5 QBD 259; 14 Digest 37, 70, 49 LJMC 45, 42 LT 240.

Cundy v Le Cocq (1884) 13 QBD 207; 30 Digest 86, 667, 53 LJMC 125, 51 LT 265.

Chisholm v Doulton (1889) 22 QBD 736; 14 Digest 32, 32, 58 LJMC 133, 60 LT 966.

Mousell Brothers v London & North Western Ry [1917] 2 KB 836; 14 Digest 44, 133, 87 LJKB 82, 118 LT 25.

Batting v Bristol & Exeter Ry Co (1860) 3 LT 665; 14 Digest 51, 176.

Page 298 of [1939] 3 All ER 297

Case Stated

Case stated by justices for the petty sessional division of Warrington, Lancashire. An information was preferred by Roger Pickup, the respondent, a district highway surveyor, under the Highway Act 1835, s 72, against John William Tunnicliffe, the appellant, for that he on 3 October 1938, at Haydock in the county of Lancaster near the Old Boston Colliery bridge on the East Lancashire road A580 did cause damage to be done to that highway by reason of a fire when the motor lorry which he was driving caught fire.

The appellant was a motor driver employed by a firm of carriers, and on 3 October 1938, in the course of his employment he was driving a motor lorry from Liverpool to Manchester along the East Lancashire road. The motor lorry was loaded with bales of cotton properly covered with tarpaulin sheeting. At or about the part of the highway near the Old Boston Colliery bridge, the cotton became ignited without any knowledge of the appellant, and the motor lorry was set on fire. The heat of the fire resulted in damage to the tarmacadam surface of the highway, to certain kerbstones along the highway, and to the grass verge at the side thereof, and the total cost to the Lancashire County Council, the highway authority for that highway, for the repair of the damage was the sum of £20 19s 2d. The appellant properly attempted to extinguish the fire and telephoned for the fire brigade, and the damage was not caused by any wilful act or omission on his part.

On behalf of the respondent, it was contended that the appellant was guilty of causing damage to be done to the highway within the meaning of the Highway Act 1835, s 72, and that, accordingly, the appellant had committed an offence thereunder.

On behalf of the appellant, it was contended (i) that the appellant did not cause damage to the highway, (ii) that, since the damage was to the surface of the highway, in order to constitute an offence under the Highway Act 1835, s 72, the onus would be on the respondent to prove that the appellant wilfully caused the damage, and that the respondent had failed to discharge such onus, and had admitted that the damage was not wilfully caused, and (iii) that the respondent had failed to discharge the onus of showing the presence of mens rea on the part of the appellant.

The following authorities were referred to: Re Mahmoud & Ispahani, Fearnley v Ormsby, Moses v Midland Ry, Brackenborough v Thorsby, Dennis & Sons Ltd v Good, Hawkins v Robinson, R v Ewart, Harrison v Leaper, Emary v Nolloth, R v Sleep, Strutt v Clift, R v Bishop, Cundy v Le Cocq, Chisholm v Doulton, Mousell Brothers v London & North Western Ry and Batting v Bristol & Exeter Ry Co.

The justices were of opinion that, on the facts as stated, the contention of the respondent was right in law, and that it was not necessary, in order to constitute an offence, for the respondent to prove that the damage was wilfully caused by the appellant, nor for the respondent to prove

Page 299 of [1939] 3 All ER 297

mens rea on the part of the appellant, and accordingly they held that the appellant had committed an offence, and convicted him.

The appellant appealed.

Robertson Crichton for the appellant.

J Harcourt Barrington for the respondent.

9 May 1939. The following judgments were delivered.

LORD HEWART LCJ. It is quite obvious, and the efforts of counsel for the respondent have not in any way got rid of, or mitigated, the fact, that there were no materials to justify this conviction. The unfortunate appellant, who has been convicted and ordered to pay a sum of costs and a further sum for damages, was not only, so far as the facts found, perfectly innocent of what happened, but also, in the words of the case, he properly attempted to extinguish the fire and telephoned for the fire brigade. He was not guilty of any wilful act or omission, and apparently was not guilty of anything at all tending to form part of the causation of this fire. I think, therefore, that the appeal ought to be allowed.

HUMPHREYS J. I agree.

LEWIS J. I agree.

Appeal allowed with costs. Conviction quashed.

Solicitors: Daphnes, agents for Bartley Cocks & Bird, Liverpool (for the appellant); Norton Rose Greenwell & Co, agents for Sir George Etherton, Preston (for the respondent).

Michael Marcus Esq   Barrister.

Batty v Schroder (Baron)

[1939] 3 All ER 299


Categories:        COMPANY; Partnerships: TAXATION; Trade        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        19, 20 APRIL, 25 MAY 1939        


Income Tax Succession to trade New partnership Exercise of option of treating old trade as discontinued Limits of right of continuing partner to relief in respect of losses in old trade Finance Act 1926 (c 22), ss 32(1), 33.

A partnership business was carried on by four partners until February 1932. A fifth partner was then admitted and notice was given under the Income Tax Act 1918, Sched D, Cases I and II, r 11(1) (inserted by the Finance Act 1926, s 32(1)), that all members of the new partnership exercised the option of having the tax computed as if the old trade had been discontinued and a new trade set up at the time of the change in the partnership. There had been a loss in trading during the last year of the old partnership. The respondent claimed, under the Finance Act 1926, s 33, to set off the outstanding balance of the loss against his assessment in respect of the profits of the new partnership, contending that the relief granted by that section was a personal relief in favour of the individual partner:

Held the computation of tax made upon the exercise or the option included the final ascertainment of tax after giving all proper allowances, including allowances for losses, and losses of the old partnership cannot afterwards be set off against profits of the new partnership.

Page 300 of [1939] 3 All ER 299

Notes

This case turns upon the construction of the Finance Act 1926, s 33, and the argument for the taxpayer is founded upon certain incidental remarks in the course of the judgment in the Court of Appeal in United Steel Companies Ltd v Cullington. Where the old trade has sustained losses, any adjustment of the tax must be made, and finally made, at the time the option is exercised to treat the change of partnership as the cesser of an old trade and the commencement of a new.

As to Claims for Reliefs on Change of Partnership, see Halsbury (Hailsham Edn), Vol 17, pp 170, 171, paras 348350; and for Cases, see Digest, Vol 28, pp 4042, Nos 208214. For the Finance Act 1926, ss 32, 33, see Halsburys Complete Statutes of England, Vol 9, pp 671673.

Case referred to

United Steel Companies Ltd v Cullington [1939] 1 All ER 454; Digest Supp.

Case Stated

Case stated under the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice.

At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 2 February 1938, Baron R Bruno Schroder (hereinafter referred to as Baron Schroder) preferred a claim under the Finance Act 1926, s 33, by way of appeal against that portion of the assessment under Sched D made upon the firm of J H Schroder & Co for the year 1936/37 which, by virtue of s 33(2), is taken as “the amount of profits or gains on which he is assessed” for that year. The ground of the appeal was that a certain sum should be deducted from, or set off against, that portion of the assessment in respect of a loss sustained by him as hereinafter appearing. A similar claim by way of appeal in respect of the year 1936/37 was preferred at the same time by F C Tiarks.

The present partners in the firm (hereinafter referred to as the new partnership) are Baron Schroder, F C Tiarks, Helmut Schroder, H F Tiarks, and Veritas Trust Ltd. Up to the end of February 1932, the business was carried on in partnership by the four first-named (hereinafter called the old partnership), sharing profits in definite proportions, but in the case of a loss in any year Baron Schroder bore two-thirds and F C Tiarks one-third, the remaining partners not bearing any part of the loss.

On 1 March 1932, a new partnership agreement was entered into, under which Veritas Trust Ltd, was admitted a partner. Veritas Trust Ltd, was registered on 26 February 1932, with a capital of £50,000, of which £49,998 was held by Baroness Schroder (the wife of Baron Schroder) and Baron Johann Rudolph von Schroder of Hamburg jointly, and £1 each by two clerks of Slaughter & May, the companys solicitors. There was no change in the character of the trade or business carried on. In the year to December 1931, the old partnership sustained a loss in its trade.

Following the change of partnership, formal notice was given on 14 April 1932, by all the partners both before and after the change under

Page 301 of [1939] 3 All ER 299

the proviso to the Finance Act 1926, s 32(1), r 11(1), requiring that the tax payable should be computed as if the trade had been discontinued on 29 February 1932, and a new trade had been set up on 1 March 1932. The assessments were adjusted accordingly.

For the year 1931/32, Baron Schroder and F C Tiarks made claims under the Income Tax Act 1918, s 34, in respect of their shares of the loss of the year to 31 December 1931, and relief was thus given in respect of a small proportion of the loss. No relief under the Finance Act 1926, s 33, has been given for any of the years 1932/33 to 1935/36 in respect of the balance of the loss sustained by Baron Schroder or F C Tiarks in the year to December 1931. The amount of the loss was sufficient, in the case of each, to swallow up the aggregate amount of his share of the assessed profits of the new partnership for the years 1932/33 to 1935/36 inclusive, and to leave a balance in excess of his share of the assessed profits of the new partnership for the year 1936/37 to which this appeal relates.

There was also before the special commissioners an appeal by the new partnership against the assessment made upon it in the firm name for the year 1936/37. In arriving at that amount, no allowance had been made in respect of the losses sustained by Baron Schroder and F C Tiarks in the year to December 1931, and the ground of the appeal was that those losses should be deducted from, or set off against, that assessment.

The contentions on each side are set out in the judgment. The commissioners allowed the claims, and confirmed the assessment on the new partnership for the year 1936/37 in the sum of £53,556, subject to a set-off against the appropriate portions thereof of £20,721 and £7,540 in respect of losses sustained by Baron Schroder and F C Tiarks respectively.

The Crown appealed.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the appellant.

A M Latter KC and F Heyworth Talbot for the respondent.

25 May 1939. The following judgment was delivered.

LAWRENCE J. The question in this appeal is whether continuing partners who have exercised the option contained in the proviso to r 11(1) of Sched D, Cases I and II, inserted by the Finance Act 1926, s 32, can claim that losses sustained in the partnership shall be carried forward and deducted from profits accruing after the exercise of the option.

Counsel for the respondent contends that the right conferred by the Finance Act 1926, s 33, is a purely personal right, that the function of the proviso to s 32, r 11(1), of that Act is merely to secure that the computation and charge of tax as between the outgoing continuing and incoming partners shall be ascertained as if the trade had been discontinued and a new trade set up at the date when the option is exercised, and that that does not affect the personal rights conferred upon continuing

Page 302 of [1939] 3 All ER 299

partners by s 33, which may continue so long as the trade of the partnership is the same trade. He says, moreover, that that was implicit in the judgment of the Court of Appeal in United Steel Companies Ltd v Cullington, at p 461:

If the matter is to be treated as if a new trade had been set up at the crucial date then it is clear that the old partners, and they alone, obtain the benefit of any allowances or deductions available at that date.

He also drew my attention to the Finance Act 1927, s 29.

The Solicitor-General, on the other hand, contends that the right conferred by s 33 is only to set off losses against profits in respect of that tradenamely, the trade in which the loss was sustainedand that, as, by s 32, tax is to be computed and charged as if the trade of the old partnership had been discontinued and the trade of the new partnership had been set up on the exercise of the option, it cannot be that the right can be claimed as against the profits of the new trade. The Solicitor-General relies upon the observation of the Court of Appeal in United Steel Companies Ltd v Cullington, at p 461:

The direction to compute the tax payable can only mean that the tax payable has to be ascertained after making all proper allowances on the basis that the trade was set up or commenced on the last mentioned date. This must of necessity exclude any allowances to which the predecessor might be entitled in respect of the period antecedent to the acquisition of the trade by the successor.

Moreover, he says that this passage means that computation of tax in the proviso to r 11(1) includes the final ascertainment of tax, which involves the giving of all proper allowances, including allowance for losses, and that, as this computation and charge are to be made as if a new trade had been set up, losses cannot be set against the profits of the new trade, having regard to the words of s 33. I have come to the conclusion that the Crowns contention as to the meaning of the reasoning of the Court of Appeal is correct, and I think, therefore, that the appeal must be allowed with costs.

Appeal allowed with costs. Respondents claim disallowed.

Solicitors: Solicitor of Inland Revenue (for the appellant); Slaughter & May (for the respondent).

W J Alderman Esq   Barrister.

Bush, Beach & Gent Ltd v Road

[1939] 3 All ER 302


Categories:        TAXATION; Profits        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        9, 10, 26 MAY 1939        


Income Tax Profits from trade and trade receipts Lump sum paid for cancellation of contract Contract in ordinary course of trade Cancellation not excluding company from part of business.

From 1920 to 1933, the appellant company carried on business as chemical merchants, confining their business to industrial chemicals. In 1933, they entered into a contract for the purchase of agricultural chemicals, in the selling of which they were to have exclusive rights in certain parts of the country. This contract was terminated on 1 May 1935, upon a payment to the appellant company of £4,750. The question

Page 303 of [1939] 3 All ER 302

was whether such payment must be treated as income or as a capital payment:

Held the sum paid represented profits which the appellant company would or might have made under the contract, and, although a payment for the cancellation of the contract, was an income payment.

Notes

The point of this case is whether the payment was one for the cancellation of a contract, where such cancellation would result in the closing down of a self-contained part of the companys business, or was made in the ordinary course of the business of the company, and in lieu of, or as a prepayment of, future profits. The judge, in considering this matter, has come to the conclusion that this sum represents the profits which might have been made under the contract, and that it was, therefore, not to be treated as the purchase price of the cancellation of the contract, but rather as the prepayment of profits. It must be noted that the cancellation of the contract did not in any way exclude the company from dealing in any particular kind of chemicals.

As to Payments for Cancellation of Contracts, see Halsbury (Hailsham Edn), Vol 17, pp 126, 127, para 237; and for Cases, see Digest, Vol 28, pp 4749, Nos 242252.

Cases referred to

Short Bros Ltd v Inland Revenue Comrs (1926) 12 Tax Cas 955.

Inland Revenue Comrs v Northfleet Coal & Ballast Co Ltd (1927) 12 Tax Cas 1102.

Van den Berghs Ltd v Clark [1935] AC 431; Digest Supp, 104 LJKB 345, 153 LT 171, 19 Tax Cas 390.

Chibbett v Robinson (J) & Sons (1924) 132 LT 26; 28 Digest 19, 98, 9 Tax Cas 48.

Henry v Foster (A) Henry v Foster (J) Hunter v Dewhurst v Hunter (1932) 16 Tax Cas 605; Digest Supp, sub nom Dewhurst v Hunter 146 LT 510.

Henderson v Meade King Unreported.

Inland Revenue Comrs v Gliksten (J) & Son Ltd (1929) 14 Tax Cas 364; Digest Supp.

Glenboig Union Fireclay Co Ltd v Inland Revenue Comrs (1922) 12 Tax Cas 427.

Anglo-Persian Oil Co Ltd v Dale [1932] 1 KB 124; Digest Supp, 100 LJKB 504, 145 LT 529, 16 Tax Cas 253.

Greyhound Racing Assocn (Liverpool) Ltd v Cooper [1936] 2 All ER 742; Digest Supp, 20 Tax Cas 373.

Kelsall Parsons & Co v Inland Revenue [1938] SC 238; Digest Supp.

British Insulated & Helsby Cables v Atherton [1926] AC 205; 28 Digest 52, 264, 95 LJKB 336, 134 LT 289, affg SC sub nom Atherton v British Insulated & Helsby Cables Ltd [1925] 1 KB 421.

Case Stated

Case stated by the Commissioners for the General Purposes of the Income Tax for the City of London pursuant to the provisions of the Income Tax Act 1918, s 149, for the opinion of the High Court of Justice. The facts are fully set out in the judgment.

It was contended for the company that the selling of industrial and of agricultural chemicals were two separate and distinct branches of its business, and that the cancellation of the contract in question destroyed the whole of its business in agricultural chemicals. The sum of £4,500 was, therefore, an agreed compensation for the loss of that business and the sterilisation of a capital asset.

It was contended on behalf of the Crown that the contract was made

Page 304 of [1939] 3 All ER 302

in the ordinary course of the business of the company, and that the use for which the chemicals were sold was immaterial. The cancellation of the contract did not affect the structure of the companys business as a whole, and the sum of £4,500 was paid in lieu of future profits, and was itself a profit of the companys business.

The following authorities were referred to: Short Bros Ltd v Inland Revenue Comrs, Inland Revenue Comrs v Gliksten (J) & Son Ltd, Chibbett v Robinson (J) & Sons, Glenboig Union Fireclay Co Ltd v Inland Revenue Comrs, Van den Berghs Ltd v Clark, Anglo-Persian Oil Co Ltd v Dale, Greyhound Racing Assocn (Liverpool) Ltd v Cooper, Kelsall Parsons & Co v Inland Revenue, British Insulated & Helsby Cables v Atherton and Inland Revenue Comrs v Northfleet Coal & Ballast Co Ltd.

The commissioners held that the sum of £4,500, of which sum £3,000 falls to be included in the year 1937/38, was chargeable as a profit liable to income tax, and the appeal failed.

The appellant company appealed.

F Heyworth Talbot for the appellants.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondent.

26 May 1939. The following judgment was delivered.

LAWRENCE J. The appellant company have carried on business since 1920 as chemical merchants. Up to 1933 their business had been confined to industrial chemicals. In 1933 they entered into a contract for the purchase of agricultural chemicals, which, by the contract, were to be sold only in certain parts of the country, the sellers undertaking to debar all their other buyers from selling the same chemicals in those parts of the country. For the purposes of this contract, the appellants set up a new sales organisation. This contract was terminated by agreement as from 1 May 1935, on payment to the appellant company of £4,500, and the question is whether the proportion of that payment attributable to the year in question is to be treated as income or capital. The commissioners have held that it is income.

The appellants contended before the commissioners, and now contend, (i) that the selling of industrial and agricultural chemicals were two separate and distinct branches of the appellant companys business, (ii) that the cancellation of the contract destroyed the whole of their business in agricultural chemicals, and that the sum of £4,500 was paid by way of agreed compensation for the loss of that business, and (iii) that the sum of £4,500 was paid by way of compensation for sterilisation of a capital asset. It was further argued that the appellants had, by the contract, established for themselves, not only a source of supply, but also a market, that the sale of agricultural chemicals was a new and profitable field, and that, in view of the agreement not to supply competitors, the contract was a capital asset, and the payment for its cancellation was, therefore, capital.

Page 305 of [1939] 3 All ER 302

In my opinion, the present case is more closely analagous to cases such as Short Bros Ltd v Inland Revenue Comrs and Inland Revenue Comrs v Northfleet Coal & Ballast Co Ltd than to cases such as Van den Berghs Ltd v Clark.

The sum paid, in my view, represented profits which the appellants would or might have made under the contract, and not the purchase price of the contract itself: Inland Revenue Comrs v Northfleet Coal & Ballast Co Ltd, per Rowlatt J, at p 1108. Nor do I accept the argument that the structure of the appellant company was affected by the contract or its cancellation, as in Van den Berghs Ltd v Clark. The appellant company could always have sold agricultural chemicals, and it can still do so. The contract was made in the ordinary course of the companys business, although in a new field, and the exclusion of competition is an ordinary incident of such contracts, and not, as it seems to me, analogous to a pooling agreement. It is clear that the dictum of Rowlatt J, in Chibbett v J Robinson & Sons, at p 61, is too widely expressed: Hunter v Dewhurst, at p 653. Henderson v Meade King is distinguishable. There money had been lent to secure a certain sole agency, and the loss on that loan was held to be of a capital nature. Here no money was paid to secure the contract in question, and the money paid for its cancellation was not a repayment of any such money, but must have been a payment in respect of the profits to have been earned under the contract. I am therefore of opinion that the commissioners decision was right, and the appeal is dismissed with costs.

Appeal dismissed with costs.

Solicitors: Blundell Baker & Co (for the appellants); Solicitor of Inland Revenue (for the respondent).

W J Alderman Esq   Barrister.

Welch v Royal Exchange Assurance

[1939] 3 All ER 305


Categories:        ADMINISTRATION OF JUSTICE; Arbitration: CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        6 JUNE 1939        


Practice Costs Set-off Proceedings commenced in arbitration and proceeding to Court of Appeal Set-off notwithstanding solicitors lien RSC Ord 65, r 14.

In an arbitration, the arbitrator allowed an amendment of the defence, and ultimately gave his award in favour of the respondents. He then ordered that the claimant should receive his taxed costs down to the time of the amendment and that he should pay to the respondents one-half of their taxed costs of the arbitration. The matter then came before the court and later before the Court of Appeal. In both instances the respondents were successful, and were awarded their costs. It was contended that the respondents were entitled to set off the costs in the appeals against the costs ordered to be paid by them in the arbitration, since the solicitor for the claimant had a lien for his costs only as against his own client:

Held (i) the application was properly made to the judge who heard the case stated by the arbitrator.

Page 306 of [1939] 3 All ER 305

(ii) the costs, being due to the party in the same capacity, ought to be set off, despite the fact that the solicitor had a lien for them.

Notes

The first point here is a point of practice. It has been held that for the purposes of a set-off of costs, county court proceedings are not the same proceedings as proceedings in the Court of Appeal on appeal from the county court. The judge has, however, held that proceedings on a special case stated by an arbitrator are the same proceedings as the arbitration. The solicitors lien referred to in the latter part of the case is not the common law lien, but the right of a solicitor to ask for the intervention of the court for his protection so that a successful client shall not receive the fruits of a judgment obtained for him without providing for the solicitors costs.

As to Set-off of Costs, see Halsbury (Hailsham Edn), Vol 26, pp 9398, paras 179185; and for Cases, see Digest, Practice, pp 902, 903, Nos 44234427. See also Yearly Practice of the Supreme Court 1939, p 1484.

Cases referred to

David v Rees [1904] 2 KB 435; 13 Digest 524, 745, 73 LJKB 729, 91 LT 244.

Re Bassett, Ex p Lewis [1896] 1 QB 219; 4 Digest 524, 4790, 65 LJQB 144, 73 LT 736.

Hassell v Stanley [1896] 1 Ch 607; 13 Digest 524, 744, 65 LJCh 494, 74 LT 375.

Puddephatt v Leith (No 2) [1916] 2 Ch 168; 42 Digest 284, 3195, 85 LJCh 543, 114 LT 1159.

Mercer v Graves (1872) LR 7 QB 499; 42 Digest 286, 3213, 41 LJQB 212, 26 LT 551.

Application

Application for an order that the respondents in the arbitration, the applicants here, shall be entitled to set off against the claimant the costs which they were awarded when the decision of the arbitrator was appealed to the Kings Bench Division of the High Court and the Court of Appeal under an award in the form of a case stated. The facts are fully set out in the judgment.

Philip Vos KC and A S Wilson for the applicants.

R E Borneman for the respondent.

6 June 1939. The following judgment was delivered.

BRANSON J. In this case, the position in fact appears to be as follows. The arbitrator, having allowed an amendment in the defence of the respondents in the proceeding before him, awarded against the claimant, but gave the claimant his taxed costs of the arbitration down to the date of the order permitting the amendment of the points of defence. After that, the claimant was to pay to the respondents one-half of their taxed costs of the arbitration. The matter came before me, and I upheld the award and ordered that the respondents should receive the costs of the hearing before me. The claimant appealed to the Court of Appeal, who affirmed my decision and made an order that the respondents should be paid the costs of the hearing before them. It now appears that the taxing master is in doubt as to whether the argument of the respondentsthat they are entitled to set-off the costs in this court and the Court of Appeal against the costs which the arbitrator ordered that they should pay to the claimantis right, or whether he

Page 307 of [1939] 3 All ER 305

should refrain from doing so by reason of the fact that the solicitor of the claimant has a lien for his costs as against his own client.

The first question which arises is whether or not I have any jurisdiction to intervene at all in this matter. On that, it seems to me to be a case in which, the question having arisen, application has to be made to the court for a decision upon it, and, as I was the judge who was seised of the matter when it came to this court, it is right that application should be made to me. The same thing seems to have been done in David v Rees.

The question then arises, assuming that I have jurisdiction in the matter, whether or not this is a case in which a set-off is allowable at all. It is said, on the one hand, that, in order to allow a set-off, the proceedings in which the two sets of costs have been incurred must be the same, and the parties to those proceedings must be the same. It is said here that this is not the same proceeding. That is to say, the proceeding in this court and the Court of Appeal was not the same proceeding as that before the arbitrator. In support of that submission numerous cases have been quoted by counsel for the respondent. First of all he quoted Re Bassett, Ex p Lewis. In my view, that case has really no resemblance to the present case at all. Lewis, in his capacity as liquidator of the company, sued Bassett for the payment of a sum of money. He obtained an order against Bassett for the payment of a sum of money with costs. Bassett appealed against that order, and his appeal was dismissed by the Divisional Court. Lewiss costs came to £14 19s. 4d. Then, in September 1934, Lewis, not as liquidator of the company at all, but in his private capacity, presented a bankruptcy petition against Bassett, and that petition was dismissed with costs. He appealed, and that appeal was dismissed with costs. He then sought to set off the costs he was ordered to pay in those proceedings against the costs which Bassett owed him in respect of the other proceedings, and Vaughan Williams J, as he then was, refused to allow it, because the proceedings were different. The parties were suing in different capacities, and no set-off was possible at all. I do not think that that case touches this case in the slightest.

Then the next case was Hassell v Stanley. That is nearer this case, because what happened there was this. There was an action commenced by Hassell in the Liverpool County Court against the defendants as trustees for the Royal Liver Friendly Society. Then the defendants moved in the High Court for a certiorari to remove the action into the Chancery Division, and that application was dismissed with costs. The action was tried in the county court, and was dismissed with costs. Then the defendants moved that execution for the costs ordered to be paid by them might be stayed until the plaintiff had paid the county court costs in that action. Chitty J, refused the application, because he said that RSC Ord 65, r 14, which says that a set-off for damages or costs between parties may be allowed, notwithstanding the solicitors

Page 308 of [1939] 3 All ER 305

lien for costs in the particular cause or matter in which the set-off is sought, did not apply to enable a set-off to be made of the costs of the certiorari in the High Court against the costs of the action in the county court. That case does not apply to the present one unless it appears that an arbitration before an arbitrator stands in the same relation to an appeal by way of case stated to this court as the county court proceedings did to High Court proceedings in Hassell v Stanley. In my view, they do not. When there is an arbitration, and the arbitrator is asked to state a case, and does so, his award in the form of a special case to this Court is not a new proceeding. It is a continuation of the proceeding before the arbitrator. The arbitrator finds the facts, states the facts, and asks the court to apply the law to those facts. The two matters are intimately connected, but, until the court has decided upon the law, and until the matter has come to this court, there is no decision by the arbitrator at all. Of course, the party who has asked for the special case may change his opinion and come to the conclusion that, after all, the arbitrators view of the law is a correct view, and that it is no good proceeding any further with the matter. Then, when the time for setting down the case has gone by, he has a final decision. In the ordinary course, when an arbitrator states his award in the form of a special case, and that special case is brought to this court, it seems to me that it would be a misuse of language to speak of it as a different proceeding. It is the working out of the same proceeding which was initiated before the arbitrator. Therefore, in my view, the rule is applicable.

The question then arises whether or not, in the exercise of the discretion which I have in the matter, I should order that a set-off may take place between these two sets of costs. The position is this. The claimant in the arbitration, having failed in his claim, and having been awarded costs down to a particular date, when it comes to taxation is shown to be entitled to a certain sum for costs, but it is said that, between the time when the award was made and the time when the appeal from the award was heard, the claimant had assigned away any rights which he might have had as against the respondents in the matter, and, consequently, when the costs were ordered against him in the court here and in the Court of Appeal, they were ordered against him in a different capacity. I think that it is plain enough that, in order to get a set-off, one must have claims and cross-claims between the parties in the same rights. For example, if A is sued in his private capacity and A sues the same person but sues as trustee for X, then no doubt there could be no set-off, but, although no doubt in fact Welch had executed a deed of assignment for the benefit of his creditors he was still appearing in this court in his capacity as Welch, the assured under the policy of insurance under which he was making a claim. His capacity as party to the action was the same throughout. He was the assured claiming against his underwriters for a loss under the policy. The underwriters, having been ordered to pay to their assured certain costs by the arbitrator, seem to me to be entitled

Page 309 of [1939] 3 All ER 305

in reason and fairness to set off the costs which, on appeal from that arbitrator, they were awarded by this court and by the Court of Appeal.

With regard to the question of the solicitors lien, I think that that matter really falls under the principle of the decision of Younger J, in Puddephatt v Leith (No 2). As was said by Sir Alexander Cockburn LCJ, in Mercer v Graves in the passage cited by Younger J, one has to remember that a solicitors lien is a lien against his client, really, and not against the other party. As Sir Alexander Cockburn LCJ said, at p 503:

The question is simply whether the defendant has or has not a right to set off his judgment against that of the plaintiff, the reason alleged in the replication that he cannot is, that the attorney for the plaintiff has a lien for his costs on the order or judgment obtained by the plaintiff, and the plaintiff is suing as trustee for his attorney. But the attorney has no such lien for costs as to be able to compel the plaintiff to bring the action on his behalf as trustee for him. In truth, as Mr. Brown pointed out, there is no such thing as a lien except upon something of which you have possession. The matter is thoroughly well explained in Chittys Archbolds Practice, 12th Edn., pp 139, 140, that although we talk of an attorney having a lien upon a judgment, it is in fact only a claim or right to ask for the intervention of the court for his protection, when, having obtained judgment for his client, he finds there is a probability of the client depriving him of his costs.

That is not the position here. The position before me is that it is not the client who is trying to deprive his attorney of his costs. The only question is whether the attorney is to be entitled to a prior claim on the costs, and so defeat a set-off which the opposite party is seeking to obtain in order to recover the costs for which they have received an order from this court against the solicitors client. I think that the respondents are entitled to the order for which they ask, which is that, notwithstanding the solicitors lien, the taxing master should set off the costs of the respondents in this court and the Court of Appeal against the costs which the respondents were ordered to pay the claimant by the award.

Solicitors: William Charles Crocker (for the applicants); Philip Conway Thomas & Co (for the respondent).

W J Alderman Esq   Barrister.

Inland Revenue Commissioners v Marbob Ltd

[1939] 3 All ER 309


Categories:        COMPANY; Other Company: TAXATION; Other Taxation        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        12, 15 MAY 1939        


Income Tax Undistributed income Dividend paid by cheque on condition that sum paid be lent to payer No genuine distribution of income.

The respondent company was incorporated on 22 January 1936, with a capital of £100 in £1 shares, each carrying one vote. Of these shares, 98 were held by a company called M Ltd, and two by L M Ltd, was registered on the same day, and, although L originally held certain shares in it, at all material times he had transferred them and was no longer a shareholder. On 27 March 1936, L entered into a deed of covenant to pay to M Ltd £12,000 per annum for 7 years from 4 April 1935, or for the rest of his life, whichever period should be the shorter. The consideration for this payment was the issue to L of non-interest-bearing

Page 310 of [1939] 3 All ER 309

debentures amounting to £57,300, redeemable at 3 months notice at a premium of 10 per cent. These arrangements were admittedly made in order to reduce the liability of L to sur-tax. The annuity was paid by L, and the company redeemed debentures to an amount equivalent to the amount of the annuity, so that there were no funds available to M Ltd. On 3 April 1937, the second instalment of the annuity was paid. On 5 April 1937, the respondent company declared a dividend of £166 per share, and drew a cheque in favour of M Ltd for £16,268 in respect of the dividend on the 98 shares held by that company. That cheque was indorsed back by M Ltd to the respondent company, and the sum of £16,268 was treated as a loan to the respondent company. No part of this loan was repaid, and no interest was paid in respect of it. On 1 December 1937, the respondent company went into liquidation. A direction and an apportionment were made under the Finance Act 1922, s 21, as amended by the Finance Act 1937, s 14, in respect of the income of the company, and it was then contended that the transaction was a sham, and that, if that were not so, the payment by cheque on condition that the money should be immediately lent to the payer was not a distribution of income:

Held (i) as the commissioners had not found as a fact that the transaction was a sham, it was not open to the court to treat it as such.

(ii) the cheque for £16,268 was handed over on condition that it should be immediately indorsed back to the drawer and such conditional handing over was not a distribution of income by the company to one of its members. Such a condition negatived the idea of a genuine distribution of income.

Notes

It was here sought to be said that the arrangement under which the cheque was paid was in fact a payment of the sum for which the cheque was drawn. This argument seems an impossible one in the present case, since the company drawing the cheque had not sufficient funds to meet it. In such circumstances, it could not amount to a payment, and there was, therefore, no distribution of income.

As to Distribution of Income, see Halsbury (Hailsham Edn), Vol 17, pp 291, 292, para 577; and for Cases, see Digest, Supp, Income Tax, Nos 674a674z.

Cases referred to

Inland Revenue Comrs v Morgan-Grenville-Gavin [1936] 1 All ER 895; Digest Supp, 20 Tax Cas 529.

Bouch v Sproule (1887) 12 App Cas 385; 9 Digest 176, 1124, 56 LJCh 1037, 57 LT 345, revsg SC sub nom Re Bouch, Sproule v Bouch (1885) 29 ChD 635.

Parker v Chapman (1928) 138 LT 729; Digest Supp, 13 Tax Cas 677.

Case Stated

Case stated under the Finance Act 1922, Sched I and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice. The facts are fully set out in the judgment.

The Attorney-General (Rt Hon Sir Donald Somervell KC), J H Stamp and Reginald P Hills for the appellants.

F Grant for the respondents.

15 May 1939. The following judgment was delivered.

LAWRENCE J. This case raises the question whether the special commissioners on appeal were right in discharging a direction which had been made by the special commissioners of first instance under the Finance Act 1922, s 21(1), the basis of that direction being that it

Page 311 of [1939] 3 All ER 309

appeared to the special commissioners that the company had not distributed to its members, in such manner as to render the amounts distributed liable to be included in statements to be made by the members of the company of their total income for the purposes of sur-tax, a reasonable part of its actual income from all sources.

The company was incorporated on 22 January 1936. Its capital was £100 in £1 shares, each carrying one vote, and 98 shares in the company were held by a company called Marjon Ltd, and 2 shares by a Mr Oliver Lucas. Marjon Ltd, was registered on the same day, with a share capital into which I need not go. Some of that was originally held by Mr Oliver Lucas, but at a subsequent date Mr Oliver Lucas transferred his shares, and was no longer a shareholder in Marjon Ltd, on 5 April 1937. Mr Lucas entered into a deed of covenant to pay an annuity of £12,000 per annum for 7 years or for the rest of his life to Marbob Ltd. That was the only asset of that company. It was admitted that the two companies concerned were formed, and the deed of covenant was entered into, for the sole purpose of reducing the liability to sur-tax of Mr Oliver Lucas. The annuity was paid by Mr Lucas in due course, and the company redeemed debentures which were held by Mr Lucas to an amount equivalent to the amount of the annuitythat is to say, to the amount of £9,130, the net amount of the annuity being £9,300so that then there were no funds available to Marbob Ltd. On 3 April 1937, the second instalment of the annuity was paid. On 5 April 1937, Marbob Ltd, declared a dividend which amounted to £16,268, or rather a dividend of £166 per share, free of tax, and on the same day they drew a cheque in favour of Marjon Ltd (which, as I have already said, held 98 shares in Marbob Ltd), for £16,268, and another cheque for £332 in favour of Mr Lucas. On the same day, it was resolved at a meeting of the directors of Marjon Ltd, that Marjon Ltd, should lend to Marbob Ltd, the same amount of money as was received in dividendnamely, £16,268with interest at 5 per cent per annum, the loan to be repayable on a months notice. The cheque drawn by Marbob Ltd, was indorsed by Marjon Ltd, back to Marbob Ltd. No part of the sum of £16,268 was ever repaid to Marjon Ltd, and no interest was paid in respect of it. Marbob Ltd, went into liquidation on 1 December 1937.

In these circumstances, the special commissioners of first instance directed that the sum in question should be apportioned to Mr Oliver Lucas for the purposes of sur-tax. On appeal to the special commissioners, it was held by the special commissioners that Marbob Ltd, had distributed to its membersnamely, to Marjon Ltd, and to Mr Lucasa reasonable part of its actual income from all sources. The special commissioners on appeal decided the question without giving any reasons for their decision, and without making any specific finding of fact. They said simply that they discharged the direction and apportionment for the year 1936/37, and the sur-tax assessment for that year made on Mr Oliver Lucas in the name of the company.

Page 312 of [1939] 3 All ER 309

In these circumstances, it is contended by the Attorney-General, in the first place, that the documents and the whole transaction were a sham, that there was no evidence upon which the commissioners could reasonably have found otherwise, and that, apart from that, the matter was not solely a question of fact, but was really a question of principle. In the second place, he contended that the cheque for £16,000 odd was handed to Marjon Ltd, upon the condition that an equivalent amount should be lent back by Marjon Ltd, to Marbob Ltd, and that that was not a distribution to its members of any part of the actual income of the company. Thirdly, he contended that, on the facts of this case, what had really taken place was, not a distribution of actual income, but an increase of the loan capital of Marbob Ltd.

Counsel for the respondents in an able and ingenious argument has contended, in the first place, that the question whether or not the transaction was a sham, or whether or not the documents were shams, is a question of fact which the commissioners have impliedly found in his favour, and that it is impossible to say that there was no evidence upon which they could come to that finding. He cited to me, among other cases, a decision of my own which was not appealed against, Inland Revenue Comrs v Morgan-Grenville-Gavin, in which, on facts which are not unlike the present, I came to the conclusion that the finding of the commissioners ought not to be interfered with upon that question as to whether the document and the transaction in substance were a sham. In view of that decision, I am not prepared to decide this case upon that ground. I am, however, clearly of opinion, that no tribunal of fact could come to any conclusion other than that the cheque for £16,000 odd was given upon the condition that the equivalent loan should be made by Marjon Ltd, at the same time.

I have to consider, therefore, whether or not such a conditional handing over of a cheque by one company to one of its shareholders is a distribution to its members in such manner as to render the amount distributed liable to be included in the statements to be made for the purposes of sur-tax. In my judgment, such a condition negatives the idea of a genuine distribution of its income. The very condition itself necessitates that the person to whom the cheque is given should at once repay the amount of the cheque, and in such circumstances, in my judgment, there is no distribution of income within the meaning of s 21. The condition may equally be regarded, in my view, from the other point of view which has been put in the argument of counsel for the Crownnamely, that, if that condition attached to the drawing and handing over of this cheque, it was not distribution in such manner as to render the amount distributed liable to be included for the purposes of sur-tax of the members, but was in reality a capitalisation of the sum alleged to have been distributed.

On this part of the argument, Bouch v Sproule was relied upon. There it was held that, even though the shareholder to whom the dividend

Page 313 of [1939] 3 All ER 309

was paid had an option to take either shares or cash, as the intention of the company was that the dividend should be taken in shares, because that was the intention to be inferred from the facts, that was really capital in the hands of the shareholder, and, if capital, would not have to be returned for the purposes of sur-tax. The present is, in my view, a stronger case than that upon the question as to whether the declared dividend was capital or income, because here, if I am right in finding, as I do, that the condition attached to the receipt of this dividend, the shareholder, Marjon Ltd, had no option whatever, and never would have received the cheque for £16,000 odd, had it not been arranged that the equivalent sum would be immediately repaid by way of loan by Marjon Ltd, to Marbob Ltd.

Parker v Chapman is quite different in its facts from the present case. That was dealing with the case of a shareholder who had a debt against the company. He could have discharged that debt, if he wished, by taking shares (as he did) in order to support the credit of the company, or he could have insisted upon payment of the debt in cash. The matter was entirely in his dominion and in his option, and it is entirely different from the facts in this case, in which, as I have said, in my opinion, Marjon Ltd, never would have got the cheque for £16,000 odd unless their directors had agreed that an equivalent sum should be repaid to Marbob Ltd, at the same time. I am not satisfied that these considerations were present to the minds of the commissioners on appeal, but I see no reason for sending the case back to them, because I am satisfied that they could not properly find that the condition which I have found did not attach to the cheque for £16,000 odd. I therefore find that that condition did attach, and the appeal will be allowed with costs.

Appeal allowed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellants); Ashurst Morris Crisp & Co (for the respondents).

W J Alderman Esq   Barrister.


Court Line Ltd v Dant & Russell Inc

[1939] 3 All ER 314


Categories:        CONTRACT: SHIPPING        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        13, 14, 15, 16 JUNE 1939        


Contract Impossibility of performance Frustration Duration of impossibility Estimate of parties at happening of event and not as subsequently ascertained Charterparty War Boom placed across river Ship in fact released in time to fulfil charter.

A ship was chartered on a time charter to trade within certain limits, hire to be paid monthly in advance and the voyages to be prosecuted with the utmost dispatch. During the term of the charter, the ship was carrying a cargo of lumber and scrap iron to Wu-hu, a town about 750 miles up the Yangtse River. She was discharging there in August 1937, when hostilities broke out between the Chinese and the Japanese. As a part of such hostilities, a boom was placed across the river, and it was impossible for the ship to go down the river. In the normal course, she would have reached Shanghai, at the mouth of the river, on 19 August 1937, but in fact she did not reach that port until 17 December 1937. The Japanese made a passage through the boom on 9 December 1937, and this would have permitted the ship to get to Australia before the date fixed for redelivery of the ship:

Held the fair inference from the facts was that the delay due to the presence of the boom would be indefinite, and therefore the contract was frustrated. The fact that, in the events which happened, the Japanese were able to break a passage through the boom, which would have allowed the re-delivery of the ship at the stipulated time, was immaterial.

Notes

In considering frustration, where the question whether or not a certain event amounts to frustration depends upon the duration of that event, that duration must be fixed by the estimate of the parties at the time of the first happening of that event, and not by the duration as afterwards ascertained, when all the facts are known. Thus, in the present case, it was not known in August 1937 how long the ship would have to stay in the Yangtse River. The period to be taken for the purposes of the doctrine of frustration is not the period until December 1937, when in fact the ship was able to proceed out of the river, but such a period as the parties, taking into consideration all the facts of the case in August 1937, would have estimated as the probable duration of the ships stay in the river.

As to Frustration of Contract, see Halsbury (Hailsham Edn), Vol 7, pp 212220, paras 296298; and for Cases, see Digest, Vol 12, pp 386392, Nos 31723200.

Cases referred to

Re Comptoir Commercial Anversois & Power, Son & Co [1920] 1 KB 868; 12 Digest 396, 3218, 89 LJKB 849, 122 LT 567.

F A Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916] 2 AC 397; 12 Digest 390, 3194, 85 LJKB 1389, sub nom Re F A Tamplin SS Co Ltd and Anglo-Mexican Petroleum Products Co Ltd 115 LT 315, affg [1916] 1 KB 485, [1915] 3 KB 668.

Bank Line Ltd v Capel (A) & Co [1919] AC 435; 12 Digest 391, 3198, 88 LJKB 211, 120 LT 129.

Turner v Goldsmith [1891] 1 QB 544, 12 Digest 382, 3157, 60 LJQB 247, 64 LT 301.

Tatem (W J) Ltd v Gamboa [1939] 1 KB 132, [1938] 3 All ER 135; Digest Supp, 108 LJKB 34, 160 LT 159.

Page 315 of [1939] 3 All ER 314

Hogarth v Miller, Brother & Co [1891] AC 48; 41 Digest 360, 2091, 60 LJPC 1, 64 LT 205.

Appeal

Appeal by way of case stated in an arbitration between the owners of the Errington Court and the charterers of that ship. The facts are fully set out in the judgment.

Sir Robert Aske KC and A A Mocatta for the shipowners.

H U Willink KC and C A Roberts for the charterers.

16 June 1939. The following judgment was delivered.

BRANSON J. In this case, a ship, the Errington Court, was chartered on a time charter which contemplated a trading for 9 months to 10 months between the limits defined by the institute warranties and delivery, unless lost, at a safe port in Australia between Newcastle, New South Wales, and Port Pirie. Payment of hire was to be monthly in advance, and the captain was to prosecute his voyages with the utmost despatch and to be under the orders and directions of the charterers as regards employment and agency. There was an “off hire” clause (cl 15) and an “exceptions” clause (cl 16) excepting, amongst other things, restraint of princes.

The vessel entered upon her service on 18 March 1937, and was variously employed until, in July 1937, she loaded a cargo of lumber and scrap iron at Port Origon for Wu-hu and Shanghai. She arrived at Wu-hu on 7 August 1937. Wu-hu is 750 miles up the Yangtse River, and Shanghai is at the mouth of it. Whilst the ship was discharging at Wu-hu on 13 August 1937, hostilities between Chinese and Japanese armed forces broke out in the neighbourhood of Shanghai, and, on 14 August 1937, the Chinese government placed a boom across the river near Chin-Kiang about 100 miles below Wu-hu. This boom, while it existed, rendered it impossible for the Errington Court to go down the river to Shanghai. She completed the discharge of her Wu-hu cargo on 17 August and, in the normal course, would have reached Shanghai on 19 August. On 21 August the master was ordered by the charterers agents to discharge the Shanghai cargo at Wu-hu. This was completed by 3 September. On 9 December a Japanese flotilla made a passage through the boom, and the ship was able to proceed down river on 17 December. The owners claimed that the ship was still on hire, but the charterers asserted that the contract had been frustrated on 3 September and declined to issue further orders to the master. The matter went to arbitration, and now comes before me upon an award stated by the umpire, Mr Develin, in the form of a special case.

The umpire found that the adventure provided for by the charterparty was frustrated on 3 September 1937, and the charterparty thereby dissolved, and that neither party had any further claim against the other thereunder, except as to some bunker coals with regard to which no question arises before me. He sets out in para 19 of his award certain findings as to the opinions expressed by various persons as to the probable

Page 316 of [1939] 3 All ER 314

duration of the delay to which the vessel would be subjected, the net result of which is that it was likely to be indefinite. As the object of the Chinese in building the boom was to prevent the Japanese from getting up the river to such places as Hankow, it is obvious that they would maintain the boom for as long as they could, or until the Japanese gave up the attempt to ascend the river.

Upon this set of facts, the first question which is raised for my decision is whetherthe umpire having found that the contract was frustratedthe court is bound by his decision if there is any evidence upon which it was possible for him so to find, or whether the question whether or not there was frustration is one for the court. This question is decided for me by the Court of Appeal in Re Comptoir Commercial Arversois & Power Son & Co, where Bankes LJ, says, at p 890:

The question whether the doctrine of frustrated adventure applies to any particular state of facts must, I consider, always be a question of law to be decided by the court upon the facts.

Later, Scrutton LJ, at p 898, states the same conclusion more at length.

The next matter in controversy is as to the true basis upon which the doctrine of frustration of contract rests. Does it depend upon a term to be implied into the contract, or does it arise by operation of law as soon as it appears that the “basis of the contract has gone,” whatever that expression may mean? I am not sure myself that the distinction is more than academic. In F A Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products Co Ltd, Earl Loreburn, at p 403, and Lord Parker, at p 422, expressly based the principle upon a term to be implied in the contract itself, and not on something dehors the contract, whilst Viscount Haldane, at p 406, used language open to the construction that no implied term was involved. In Bank Line Ltd v Capel (A) & Co, Lord Finlay LC, referring to Tamplins case, said, at p 442:

… it will be found that the principles of law enunciated by Lord Loreburn and by the two dissentients are identical, the difference between them being as to the application of these principles to the particular circumstances of the case.

Thus it is plain that Lord Finlay LC, considered that there is no real distinction to be drawn. The court will not regard the basis of a contract as gone unless circumstances have altered to such an extent that the court will conclude that no reasonable men who contemplated such an alteration would be content to remain bound by the contract if it came about. If there be any material difference between the two views, however, the question is settled for me as a judge of first instance by the express decision of the Court of Appeal in the Comptoir case, to which I have already referred. Bankes LJ says, at p 886:

Having regard to the facts of the present case I do not think that the question of the frustration of the adventure, and the question whether the contract contained an implied condition that they should in certain events be dissolved, need be con-

Page 317 of [1939] 3 All ER 314

sidered separately. The present is a case in which it seems to me clear that the view taken by Lindley LJ, in Turner v. Goldsmith and by Lord Sumner in Bank Line, Ltd. v. Capel (A.) & Co. applies, namely, that the so-called doctrine of the frustration of an adventure rests on an implied condition in the contract between the parties.

This judgment does not appear to have been brought to the notice of Goddard J, in W J Tatem Ltd v Gamboa. I cannot think that he would not have held himself bound by it if it had been.

Next comes the question, what is the term to be implied? It is suggested on behalf of the charterers that it should be a term in general language, such as that, “if the adventure is frustrated, the charterparty shall come to an end.” I do not think that this suggestion is compatible with the language used in the decided cases. The condition suggested by Earl Loreburn in Tamplins case was, at p 406:

… that they should be excused if substantially the whole contract became impossible of performance, or in other words impracticable, by some cause for which neither was responsible.

The difficulty created by the use of a diversity of terms to define the circumstances which lead to a dissolution of the contract has been pointed out by Lord Sumner in the Bank Line case, at p 457. I do not propose to add another to the various attempts which have been made, but intend to apply to the case before me the condition suggested by Earl Loreburn. Here was a time charter for some 9 months to 10 months, contemplating that for that period the owners should keep the ship at the disposal of the charterers to carry goods for them to any port within the prescribed limits, as and when ordered by the charterers, with the utmost despatch. For this service, the charterers were to pay the prescribed hire. That is, in my opinion, a commercial adventure in the performance of which both parties were interested, and in respect of which both parties had continuing duties to perform: per Lord Sumner in the Bank Line case, at p 453. What was the effect upon this adventure of the closing of the Yangtse by the boom on 15 August? It is true that the charterers could go on paying hire and giving orders, if so minded, but the owners could not obey the orders nor move the ship out of the river. It was urged, on behalf of the owners, that the doctrine of frustration cannot apply to a time charter unless the ship is physically removed from the control of both parties. I cannot see why the adventure in question before me was any the less frustrated than was the adventure in the Bank Line case. All power in the ships officers to continue the adventure was taken away, in the one case, by requisition, and, in the other, by the construction of the boom.

The only question left on this part of the case is whether the delay imposed was long enough to effect frustration. The authorities upon this point are again by no means unanimous. They agree, I think, in holding that the time as at which the question must be decided is the time when the parties came to know of the cause, and the probabilities

Page 318 of [1939] 3 All ER 314

of the delay, and had to decide what to do. In the Bank Line case, Lord Sumner said, at p 454:

… the main thing to be considered is the probable length of the total deprivation of the use of the chartered ship compared with the unexpired duration of the charterparty …

Indeed, this was the only distinction on the facts between Tamplins case, where the charterparty was for 60 months, of which nearly 3 years remained to run when the ship was requisitioned, and was held not frustrated, and the Bank Line case, where the charterparty was for 12 months, all yet to run, and frustration was held to have taken place. The court must, as the parties have to when the event arises which is alleged to cause frustration, estimate as best it can the probable duration of that event. The probabilities as to the length of the deprivation, and not the certainty arrived at after the event, are material: per Lord Sumner in the Bank Line case, at p 454.

According to Lord Shaw of Dunfermline in the Bank Line case, at p 449, if stoppage and loss arise from a declaration of war, they must be considered to have been caused for a period of indefinite duration, and so to have effected an immediate solution of the contract arrangements for and dependent upon the completion or further continuance of the adventure. His Lordship thought that the rule so stated would apply equally to a requisition, and I think that it must also apply to hostilities which are being carried on without a formal declaration of war. Other authoritiesfor example, Lord Sumner in the Bank Line case, at p 455indicate that the causes of frustration may have to be in operation for long enough to raise a presumption of inordinate delay before frustration takes place. The fair inference from the findings of the umpire as to what persons interested thought of the prospects of the ship getting down the river is that he concluded that the probabilities were that the ship would be kept up the river by the boom for an indefinite period. Once that conclusion is reached, the contract is frustrated. The fact that the Japanese were able to break a passage through the boom in time to permit the ship reaching Australia before the date fixed for redelivery is immaterial.

For these reasons, I have come to the conclusion that the award is correct, and ought to be affirmed. I need not, therefore, deal in any detail with the other points which would have arisen if I had come to the opposite conclusion. If there was no frustration, the contract stands, and hire is payable, unless there is anything in the contract to prevent its becoming payable. The charterers rely on cl 15 for this. The argument depends upon whether or not the delay caused by the boom comes within the words: “any other cause preventing the full working of the vessel.” In my opinion, it does not. I do not rely on Hogarth v Miller, Brother & Co for this conclusion, but upon the words of this charterparty, which are materially different from those

Page 319 of [1939] 3 All ER 314

which the court had to construe in that case. The words are not apt to cover a case where the ship is in every way sound and well found, but is prevented from continuing her voyage by such a cause as this. If there were no “off hire” period, the charterers could recover nothing in respect of coal consumed or hire paid, but they would, on the other hand, be liable for hire and damages, as suggested in cl 25 of the award.

Award upheld.

Solicitors: Holman Fenwick & Willan (for the shipowners); Thomas Cooper & Co (for the charterers).

W J Alderman Esq   Barrister.

Barrowford Holdings Ltd v Inland Revenue Commissioners

[1939] 3 All ER 319


Categories:        COMPANY; Directors: TAXATION; Other Taxation        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        11, 25 MAY 1939        


Income Tax Undistributed income Subsidiary company Subsidiary of foreign company Finance Act 1922 (c 17), s 21(6) Finance Act 1927 (c 10), s 31(3).

An English company which is the subsidiary of a company incorporated outside England is not a subsidiary company within the meaning of the Finance Act 1922, s 21(6), as amended by the Finance Act 1927, s 31(3), and a direction as to undistributed profits can be made in respect of such a company.

Notes

The Finance Act 1922, s 21, making provision as to the undistributed income of companies, does not apply to a subsidiary company. The word “company” in the section is also defined as meaning an English company. It is therefore held that the subsidiary of a company which is not itself an English company is not a subsidiary company within the meaning of the section.

As to Undistributed Income, see Halsbury (Hailsham Edn), Vol 17, pp 290, 291, para 576; and for Cases, see Digest, Supp, Income Tax, Nos 674r674x.

Case Stated

Case stated under the Finance Act 1922, Sched I, and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice.

At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 5 July 1938, the appellant company appealed against a direction made by the special commissioners under the Finance Act 1922, s 21(1), as amended by the Finance Act 1927, s 31, in respect of the period from 2 December 1936, to 5 April 1937.

The appellant company is a private company incorporated on 2 December 1936, its business being to hold stocks and shares. It has a nominal and issued capital of £100, divided into 100 shares of £1 each, all of which are beneficially owned by C D Holding Ltd, St. Johns, Newfoundland, a company registered under the Companies Acts of Newfoundland. The

Page 320 of [1939] 3 All ER 319

appellant company made up its first accounts to 5 April 1937, and a profit of £344 was shown, none of which was distributed.

At the hearing of the appeal before the special commissioners, the company did not attempt to justify the retention of its profits by reference to the current requirements of its business, or to such other requirements as might be necessary or advisable for the maintenance and development of that business.

On behalf of the company, it was contended that it was a subsidiary company within the meaning of the Finance Act 1922, s 21(6), as amended by the Finance Act 1927, s 31(3), and was, therefore, outside the terms of the section.

On behalf of the Crown, it was contended that the company was not a subsidiary company within the meaning of that expression in the Finance Act 1922, s 21(6), as amended.

The commissioners who heard the appeal were of opinion that the company was not a subsidiary company within the meaning of the Finance Act 1922, s 21(6), as amended, and they accordingly confirmed the direction.

The company appealed.

The Finance Act 1922, s 21(6), as amended by the Finance Act 1927, s 31(3), provides as follows:

This section shall apply to any company which is under the control of not more than 5 persons and which is not a subsidiary company or a company in which the public are substantially interested. For the purpose of this subsection, a company shall be deemed to be a subsidiary company if, by reason of the beneficial ownership of shares therein, the control of the company is in the hands of a company not being a company to which the provisions of this section apply, or of two or more companies none of which is a company to which those provisions apply. … The expression “company” means a company within the meaning of the Companies (Consolidation) Act, 1908.

H Heathcote-Williams for the appellants.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondents.

25 May 1939. The following judgment was delivered.

LAWRENCE J. The question in this case arises upon the construction of the Finance Act 1922, s 21(6). Is the appellant company, the shares in which are held by a foreign company, a subsidiary company within the meaning of s 21(6) or not? If it is not, it is within the section, and the direction of the commissioners under the Finance Act 1922, s 21, cannot be challenged.

It is contended for the appellant company that C D Holding Ltd, which controls the appellant company, is “a company not being a company to which the provisions of this section apply” within the meaning of the second paragraph of sub-s (6), because it is not a company within the meaning of the Companies (Consolidation) Act 1908, and that, therefore, the appellant company shall be deemed to be a subsidiary company.

Page 321 of [1939] 3 All ER 319

In my opinion, this contention is unsound. The section does not say: “The provisions of this section do not apply to companies which are not companies within the meaning of the Companies (Consolidation) Act 1908.” The word “company” means a company within the meaning of the Companies (Consolidation) Act 1908. It follows that the words “a company,” where they first occur in the fourth line of the second paragraph of sub-s (6), mean, and mean only, an English company. This reading does no violation to the qualifying words which follow, for these are English companies which are not companies to which the provisions of the section apply.

The fact that this construction prevents the subsidiary of a foreign company from obtaining exemption from the provisions of the section cannot, in my judgment, alter the clear meaning of the words used. I am therefore of opinion that the commissioners were right, and the appeal is dismissed with costs.

Appeal dismissed with costs.

Solicitors: Francis White & Needham, agents for Frank Roberts Sons & Baldwin, Nelson (for the appellants); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.

Re De Chassiron, Lloyds Bank Ltd v Sharpe and Others

[1939] 3 All ER 321


Categories:        SUCCESSION; Gifts        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        16, 17 MAY 1939        


Wills Gifts of annuities Annuities payable out of residue Power to resort to capital Abatement Rights of annuitants and residuary legatees.

The testatrix by her will gave certain legacies which had priority to a number of annuities payable out of her residuary estate. There were six annuities payable to annuitants of ages ranging from 41 years to 80 years, and upon the death of any annuitant, his or her annuity was to be paid equally between the survivors. Upon the death of the last survivor, the residuary estate was to be divided between certain named charities. The trustee was given power to resort to capital in so far as the income of the residuary estate was insufficient to provide the annuities. The income of the residuary estate proved insufficient to provide the annuities and the trustee asked for the direction of the court as to how the residuary estate ought to be dealt with:

Held (i) it was a question of construction of the will whether the rule in Re Cottrell ought to be applied.

(ii) upon the proper construction of the will in this case, that rule ought not to be applied, and there was no necessity to value the annuities.

(iii) the testatrix had contemplated and provided for the deficiency of income, and the annuities must be paid in full, the trustee having recourse to capital. Capital must be resorted to for payment of the annuities, if necessary, until the whole residuary estate was exhausted. If after payment of all the annuities in full, there was any surplus, that would be paid to the charities as directed by the will.

Page 322 of [1939] 3 All ER 321

Notes

Under the rule in Re Cottrell, where the estate is insufficient to provide for the payment of annuities in full, the annuities have to be valued and abate with the other pecuniary gifts not having priority to them. Whether this rule has to be applied, however, is a question of the construction of the will, and if the testator has foreseen the possibility of a deficiency of income and provided for that contingency, then the provisions of the will must be carried out and not the procedure under the rule.

For the Law on the Point, see Halsbury (Hailsham Edn), Vol 28, pp 188191, paras 346349; and for Cases, see Digest, Vol 39, pp 124129, Nos 182217.

Cases referred to

Re Cox, Public Trustee v Eve [1938] Ch 556, [1938] 1 All ER 661; Digest Supp, 159 LT 13.

Re Cottrell, Buckland v Bedingfield [1910] 1 Ch 402; 39 Digest 126, 195, 79 LJCh 189, 102 LT 157.

Todd v Bielby (1859) 27 Beav 353; 23 Digest 421, 4925.

Heath v Nugent (1860) 29 Beav 226; 39 Digest 161, 528.

Re Wilkins, Wilkins v Rotherham (1884) 27 ChD 703; 39 Digest 161, 527, 54 LJCh 188.

Re Farmer, Nightingale v Whybrow [1939] 1 All ER 319; Digest Supp, 160 LT 59.

Adjourned Summons

Adjourned summons taken out by the trustee of the will asking whether the trustee ought to have the annuities valued, and, if so, directions as to how the valuation should be made, and, if no valuation was necessary, directions how the residuary estate ought to be distributed as between the annuitants and the residuary legatees. The terms of the will and the facts are fully set out in the judgment.

Gerald R Upjohn for the trustee.

Wilfrid M Hunt for the younger annuitants.

C R D Richmount for the other annuitants.

A L Ungoed-Thomas for the charities.

17 May 1939. The following judgment was delivered.

MORTON J. The testatrix made her will on 5 September 1938, and died on 27 September 1938. The will was proved on 8 December 1938, by the plaintiff bank and the other persons therein named. By the will, after appointing the bank and the other persons therein named to be executors and trustees, and making dispositions which I need not read, she gave certain pecuniary legacies free of duty. No question arises with regard to them. They all have been or will be paid, and they have priority to certain annuities which are payable out of residue.

The gift of residue is to the trustees on trust for sale, conversion and investment. The testatrix refers to the residue and the investments as “my trust fund” and proceeds:

I direct that my trustees shall out of the income of my trust fund and the investments for the time being representing the same pay the annuities which I give as follows, all free of duty: To my niece the said Rose Alice Guinness Sharpe the sum of £500 per annum for her life and an extra sum of £100 per annum for so long as she shall own and occupy the house No. 19, Brunswick Terrace, Hove, which I have hereinbefore devised to her.

Page 323 of [1939] 3 All ER 321

I am told that the house referred to has since been sold so that the annuity of £100 has ceased to be payable to Miss Sharpe. The next annuities are:

to my brother Gordon Vincent the sum of £50 per annum for his life; to to my sister Ada Vincent the sum of £300 per annum for her life. To my sister Maud Vincent the sum of £200 per annum for her life: to my brother Henry Vincent the sum of £300 per annum for his life: to my nephew John Sharpe the sum of £50 per annum for his life.

The facts giving rise to the present summons are as follows. The testatrix directed that on the death of each and every one of the annuitants her trustees should pay the annuity of the annuitant so dying equally between the surviving annuitants in addition to the annuity given by her to the surviving annuitants. She directed also that if at any time the income of the trust fund should be insufficient to answer the annuities recourse might be had to the capital thereof. She declared that any surplus income of the trust fund not required to pay the annuities should be paid equally to the charities thereinafter mentioned, and directed that, on the death of the last of the annuitants to die, the trustees should hold the capital and future income of the trust fund, and of the investments representing it, on trust to be equally divided absolutely between the Lady Chichester Hospital (Incorporated); the Royal Hospital and Home for Incurables, Putney; the Royal London Ophthalmic (Moorfields Eye) Hospital, and the Brighton Institution for Deaf and Dumb Children. The estate amounted to about £23,000, which, when invested in authorised securities, would provide an annual income of about £750. The aggregate amount of the annuities payable at the date of this summons was £1,650 per annum, and it was impossible to provide for payment of the annuities out of the residuary trust estate. The bank has been advised that the proper course is to value the annuities and to pay the respective annuitants the respective amount, or, if necessary, the abated amount, of the valuations. But it has been also further advised that, on the true construction of the will, difficult questions arise as to how the valuations are to be made. The bank has had all the annuities valued except the additional annuity of £100 given to Rose Alice Guinness Sharpe, but there has been excluded from the valuation the share of any accruing annuity to which each annuitant may be entitled in the will. At the date of the testatrixs death the value of Rose Alice Guinness Sharpes annuity was £8,729; that of Stanley Gordon Vincents, £3,115; that of Ada Vincents, £2,591 5s; that of Maud Vincents, £2,121 13s 4d; that of Henry Vincents, £1,591 5s; and that of John Charles Gillies Sharpes annuity, £913 10s 10d. It has been ascertained from a firm of actuaries that, although it would be difficult, if not impossible, to value the accruing annuities correctlyespecially if they were not bequeathed free of dutiesaccording to the government tables, it would not be impossible to propound a scheme which would be a reasonable approximation.

Page 324 of [1939] 3 All ER 321

The ages of the annuitants vary substantially. Rose Alice Guinness Sharpe is 49 years old, Gordon Vincent 64, Ada Vincent 73, Maud Vincent 68, Henry Vincent 80, and John Sharpe 41. It has been contended by counsel for the youngest annuitants, that the proper way of dealing with the matter is for all the annuities to be valued and for each annuitant to be paid, with abatement where necessary, when the value has been ascertained. In Re Cox, Public Trustee v Eve, Simonds J, followed Re Cottrell, Buckland v Bedingfield, and carried out the method which was employed in that case of administering the estate. The rule in question is that, as between pecuniary legatees and annuitants, where the estate is inadequate to provide for the payment of both in full, it is necessary to have a valuation of the annuities, and the pecuniary legatees and the annuitants are entitled to have paid to them their legacies and the amount of the valuation of the annuities pari passu. That is a rule of administration adopted by the court to produce justice between parties ranking pari passu.

In the present case I must ascertain from the will, first, the testatrixs intention, and, secondly, whether she made provision for the event which has arisen. If I find that her intention was that other steps should be taken, I ought to give effect to that intention. There are two clauses in the will which throw strong light on her intention. The first is:

And I also direct that if at any time the income of my trust fund shall be insufficient to answer the said annuities recourse may be had to the capital thereof,

and the second is:

And I declare that any surplus income of my trust fund not required to pay the said annuities shall be paid equally to the charities hereinafter mentioned.

In those clauses the testatrix has contemplated two events: (i) that when the residuary trust fund has been constituted the income from it may be insufficient to provide for the annuities which are for the time being payable, and, in that event, recourse may be had year by year to the capital of the fund as far as necessary; (ii) that the income may be more than sufficient to pay the annuities. It is true that she has not said “recourse shall be had,” but she does begin the first of the two clauses with the words: “And I also direct.” She has foreseen the event and has indicated what is to be done.

There is a very clear distinction between the present case and Re Cox, Public Trustee v Eve, where there was no such direction as the one I have just read. In Re Cox, Public Trustee v Eve, the trustees were given power to provide a fund, but it was impossible to set aside a fund, as the estate was insufficient. Simonds J, applied the rule of administration as laid down in Re Cottrell, Buckland v Bedingfield, and said, at pp 562, 563 ([1938] 1 All ER., at pp 665, 666):

The question here is whether, in order to do justice between annuitants inter se it is necessary that their annuities should be valued and the amount of the valuation

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paid out to them. It is I think quite clear that where the estate is inadequate to provide the actuarial amount of the annuities according to a proper valuation, then they are entitled to have their annuities valued and the available estate distributed among them rateably according to that value: see Todd v. Bielby, Heath v. Nugent and Re Wilkins, Wilkins v. Rotherham. The reason is clear from a hypothetical example. Suppose an annuity of £100 is bequeathed to one annuitant, A, who is 90 years of age, and a similar annuity to another, B, who is 19 years of age, and suppose that the whole estate available for satisfaction of the annuities is only £1,000. If both the income and the capital of that sum are applied year by year until it is exhausted in payment of the two annuities, A will probably get his annuity paid in full for the whole of his life, but B will not do so. There is thus an inequality in this treatment, which the testator is presumed not to have intended. The only fair way of dealing with annuities as between annuitants of different ages is to make an actuarial valuation of the annuities, and to pay the value of each so ascertained to the annuitants, as was done in the cases last cited.

I entirely agree with what Simonds J, has there said. A testator is not, in the absence of very clear words, to be presumed to have intended a fund to be applied in the manner described in the hypothetical example given by the judge. But in the present case I think that the testatrix did intend the fund so to be applied. She may be taken to have known the approximate ages of her sisters, brother, nephew and niece, and, to my mind, must be taken to have made the provision deliberately.

In Re Cox, Public Trustee v Eve, a testatrix, by her will, after giving certain pecuniary legacies, bequeathed to her husband an annuity of £1 per week during his life, and directed her trustees to appropriate and set apart and invest such sum of money as would when invested produce by the income thereof an annual sum equal to the amount of the annuity and to apply the income or (if necessary) the corpus of the fund so appropriated in payment of the annuity, which sum should on the dropping of the annuity fall into and form part of her residuary trust estate. And she devised and bequeathed the residue of her real and personal estate to her tustees on trust for sale and conversion and payment of her debts, funeral and testamentary expenses and legacies, and to invest the moneys which should remain in certain investments, and to hold such investments on certain trusts for the benefit of her son. The estate of the testatrix was insufficient to pay the pecuniary legacies and to set apart a sum sufficient to answer the annuity to her husband in full. It was, however, sufficient to pay the pecuniary legacies and the value of the annuity as at the date of her death, and the court held that the proper course for the trustees to adopt was to value the annuity as at the date of the death of the testatrix according to the government scale and to pay the amount of such valuation to the annuitant or invest it in the purchase of an annuity, as he should choose, and to pay the pecuniary legacies in full. Simonds J, in Re Cox, Public Trustee v Eve, referring to Re Cottrell, Buckland v Bedingfield, said at pp 563, 564 ([1938] 1 All ER, pp 666, 667):

The estate was realised and the trustees had in their hands the sum of £1,250. Now comes the fact which was of vital importance. That sum was insufficient to pay the pecuniary legacies in full and to enable a sufficient sum to be set aside and invested in trust securities to produce the annuity. It was, however, sufficient to

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pay the pecuniary legacies in full and the value of the annuity as at the date of the death of the testatrix. Warrington J, held that the proper course was to value the annuity as at the death of the testatrix according to the government scale, to pay the amount of such valuation to the annuitant, and to pay the pecuniary legacies in full. The learned judge thought that thus only could justice be done to all three classes of beneficiaries: the legatees would be paid in full, the annuitant would get the value of his annuity and there would remain a residue to which the residuary legatee would be entitled. Logically I can see no reason why, if that is the rule to be followed where there is competition between legatees and an annuitant and the residuary legatees, as in Re Cottrell, Buckland v. Bedingfield, it should not also be the rule where the competition is between annuitants inter se and residuary legatees. To introduce a different rule in the latter case is a refinement which is calculated to cause confusion. Therefore I propose to follow, not to distinguish, Re Cottrell, Buckland v. Bedingfield.

With those observations of Simonds J, I entirely agree. The cases of Re Cox, Public Trustee v Eve, and Re Cottrell, Buckland v Bedingfield are, however, distinguishable from the present case, because, in each of those cases, a direction was given to set aside a fund, but the direction could not be carried out and the court applied the principle of administration to which I have referred. In the present case the testatrixs intention can be carried out exactly and fully, though it is true that in the process the fund may be exhausted and the older annuitants may be paid in full and the younger may not. That, however, is what the testatrix intended.

I have been referred also to Re Farmer, Nightingale v Whybrow. In that case there was, again, a direction which could not be carried out, so that there is nothing in it to lead me to a conclusion other than that at which I have arrived. I therefore hold that there should be no valuation of the annuities, but that the directions given in the will should be carried out.

Solicitors: Quicke & Card agents for Cockburn Gostling & Co, Hove (for the trustee); Simon Haynes Barlas & Ireland (for the younger annuitants); Wilfred Light & Co (for the remaining annuitants); Farrer & Co (for the charities).

T A Dillon Esq   Barrister.


Coles v Enoch

[1939] 3 All ER 327


Categories:        CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, FINLAY AND LUXMOORE LJJ        

Hearing Date(s):        7, 12 JUNE 1939        


Agency Remuneration of agent Commission Contract to let premises Prospective tenant Communication by him to second prospective tenant Causa Causans Chain of causation Novus actus interveniens.

The defendant, who was the owner of empty shop premises, authorised the plaintiff to attempt to let them on the terms that the plaintiff was to be paid a commission if he succeeded in doing so. The plaintiff spoke on the telephone to A, whom he considered to be a possible tenant, but A gave no definite answer, as he desired to consult his partner. W overheard this telephone conversation and asked A for information. A merely mentioned that they were in the neighbourhood of Victoria, and added that, if his partner and himself did not want the premises, he would put W in touch with them. W thereupon, without communicating further with A, went to Victoria, and, finding the defendants empty shop with a notice in the front window that it was to let, took it at a rent of £1,100 per annum:

Held it was not the plaintiffs action which was the causa causans of W becoming the tenant of the shop. The deliberate withholding of the address of the premises by A must be construed as a deliberate withholding by the plaintiff, and he was not entitled to commission:

Decision of Oliver J ([1939] 1 All ER 614) reversed.

Notes

It is well settled that, in order to earn his commission, the agent must be the causa causans of the transaction going through, but probably there is no more difficult problem in practice than to determine the application of this principle to the facts of particular transactions. The present case considers the application of the doctrine in difficult, though not unusual circumstances, and for that reason will be found of importance in considering this question that so often arises in practice.

As to Effective Cause in Commission Cases, see Halsbury (Hailsham Edn), Vol 1, pp 259261, para 434; and for Cases, see Digest, Vol 1, pp 488493, Nos 16641692.

Appeal

Appeal by the defendant from a decision of Oliver J, dated 23 January 1939, and reported [1939] 1 All ER 614. The facts are set out in the judgment of Scott LJ, and more fully in that of Oliver J, in the report of the hearing in the court of first instance.

S Cope Morgan for the appellant.

Rodger Winn and G K McCulloch for the respondent.

12 June 1939. The following judgment was delivered.

SCOTT LJ. In this case, the judge held, though not without difficulty, that the plaintiff had earned his commission. The defendant appeals. He was the owner of a shop in Victoria Street, London. The shop was one which, if its front was removed, was of suitable dimensions to make a pin-table arcade. The position of the shop, being one where people congregate and are at leisure, was suitable for such a business. In December 1937, Coles, who had pin-table arcades of his own in the north of England, and who was trying to find in London a suitable site for himself, called on the defendant and had a conversation with him. Coles indicated that he thought that he would be able to find the necessary finance to enable

Page 328 of [1939] 3 All ER 327

him to take the place for himself, but added: “If I cannot take the place myself, I suppose I had better turn agent and try to find a tenant for you upon the usual agency terms.” The defendant promised to pay commission if Coles found a tenant. Coles applied to Scott & Adickes, business friends of his, who were manufacturers and distributors of pin-tables. He spoke about the premises on the telephone to Adickes. During that conversation, one Wilkie was seated in Adickes room, and he ultimately took the shop for a pin-table arcade. Adickes in his evidence said: “I deliberately did not tell him the exact location of the premises, because I thought, if Scott came into the deal, we might run them ourselves.”

I agree with the judge that this case is near the line, and it is easy for two judges to take different views. The passages which I have quoted from the evidence seem to me quite definitely to show that, in this particular case, and on these rather peculiar facts, the evidence falls short of an introduction of the particular property to the person who in fact became tenant of it. I think that here the plaintiff did not achieve the result which the commission contract contemplates as the result which must be achieved by him as agent in order to earn commission. He must accept what his sub-agent, Adickes, did just as if he did it himself, and if, instead of Adickes talking to Wilkie, he had said to Wilkie what Adickes said, and deliberately kept back the actual address of the premises and all specific means of identification, because he wanted to keep open for himself the opportunity of taking the shop, the proper inference must necessarily be that he deliberately stopped short of doing that which would entitle him to his commission. He stopped short of being the direct or efficient cause of Wilkie taking that shop. The fact that he did not give the address must be interpreted as a deliberate act falling short of what was essential to bring him within the terms under which he would be entitled to commission under the oral contract.

In these circumstances, I feel compelled to arrive at the conclusion that the plaintiff fell short of finding a tenant for the defendants shop, and that the letting was due to the act of the tenant himself. In fact, the tenant found this shop for himself. For these reasons, the appeal must be allowed.

FINLAY and LUXMOORE LJJ agreed.

Appeal allowed with costs.

Solicitors: Norman Hart & Mitchell (for the appellant); F Blacket Gill (for the respondent).

C St J Nicholson Esq   Barrister.


Taylor and Another v Liverpool Corporation

[1939] 3 All ER 329


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant        

Court:        LIVERPOOL SUMMER ASSIZES        

Lord(s):        STABLE J        

Hearing Date(s):        20, 21 JUNE 1939        


Landlord and Tenant Liability of landlord for injuries due to want of repair Liability to tenant and his family Injury suffered outside demised premises Yard atttached to premises over which tenants have a right to pass Fall of brick from defective chimneystack.

The male plaintiff was the tenant of 3 rooms in a house which had been acquired by the defendant corporation for demolition. The house had not been vacated, because no alternative accommodation was available for the tenants. The female plaintiff was the daughter of the male plaintiff and acted as his housekeeper. The daughter was in a yard adjoining the house when she was hit by a brick which fell from the chimneystack, and was severely injured. The chimneystack was in a bad state of repair when the house was acquired by the defendant corporation, and its want of repair had been brought to their notice. The yard was within the curtilage of the house, and was used in common by all the occupants of the house, mostly as the only access to the water-closet. It was contended on behalf of the defendant corporation that the corporation were not liable for damage sustained by a tenant of the corporation, or by the tenant's guest, servant or relation:

Held (i) the yard was no part of the demised premises and the principle of Cavalier v Pope did not apply, and the plaintiffs were entitled to recover.

(ii) if the yard was part of the demised premises, the plaintiffs were entitled to recover under the authority of Cunard v Antifyre Ltd.

Notes

The authority of Cavalier v Pope is quite definite so far as the rights of a tenant or his guests are concerned, and there is no liability to such persons for injuries sustained by reason of want of repair of the demised premises. It is equally clear that the landlord is liable to anyone on the highway or on other premises adjoining the demised premises. The judge here has, however, not found it necessary finally to decide whether or not the yard was part of the demised premises; for he has held that, even if it was, the plaintiffs could recover under the authority of Cunard v Antifyre Ltd. The corporation were in exclusive occupation of the defective chimneystack and the ordinary principles of the law of tort applied. Having negligently allowed the chimneystack to remain in disrepair, the corporation was equally liable to any person, whether tenant or mere passer-by, suffering injury by reason of such want of repair.

As to Liability of Landlord for Injury to Tenant and his Guests, see Halsbury (Hailsham Edn), Vol 23, pp 596600, paras 846850; and for Cases, see Digest, Vol 31, pp 347, 348, Nos 48924905.

Cases referred to

Robbins v Jones (1863) 15 CBNS 221; 31 Digest 347, 4895, 33 LJCP 1, 9 LT 523.

Cavalier v Pope [1906] AC 428; 31 Digest 348, 4900, 75 LJKB 609, 95 LT 65.

Cheater v Cater [1918] 1 KB 247; 2 Digest 65, 413, 87 LJKB 449, 118 LT 203.

Erskine v Adeane, Bennetts Claim (1873) 8 Ch App 756; 2 Digest 66, 416, 42 LJCh 835, 29 LT 234.

Shirvell v Hackwood Estates Co Ltd [1938] 2 KB 577, [1938] 2 All ER 1; Digest Supp, 107 LJKB 713, 159 LT 49.

Cunard v Antifyre Ltd [1933] 1 KB 551; Digest Supp, 103 LJKB 321, 148 LT 287.

Fairman v Perpetual Investment Building Society [1923] AC 74; 31 Digest 99, 2381, 92 LJKB 50, 128 LT 386.

Page 330 of [1939] 3 All ER 329

Action

Action for damages (i) for injuries suffered by the second plaintiff, the daughter of the first plaintiff, when a brick fell out of the chimney stack of a house rented from the defendants in which both plaintiffs lived, and (ii) for loss of the services of the second plaintiff, who admittedly acted as housekeeper for the first plaintiff, her father, with the result that the first plaintiff was put to expense and suffered damage.

William Gorman KC and B R Rice-Jones for the plaintiffs.

F E Pritchard KC and H I Nelson for the defendants.

Pritchard KC: The defendants are not liable, because the injured person was the daughter of a tenant. (Counsel referred to Robbins v Jones, Cavalier v Pope, Cheater v Cater, Erskine v Adeane, Bennetts Claim, Shirvell v Hackwood Estates Co Ltd and Cunard v Antifyre Ltd.) The yard was part of the premises let.

William Gorman KC and B R Rice-Jones for the plaintiffs.

F E Pritchard KC and H I Nelson for the defendants.

21 June 1939. The following judgment was delivered.

STABLE J. This case is one of some difficulty and considerable importance. It is important, not only because the amount of money involved in this particular claim is considerable, but also because it raises a question of principle which, in view of the activities of local authorities in improving the housing conditions of their respective areas, may be one of some general application. The case was tried before me and a jury, but, for reasons which will hereafter appear, on my direction, the function of the jury was confined to assessing the amount of damages to be recovered in the event of my holding as a matter of law on the undisputed facts, that the defendant corporation were liable to pay damages to one or other or both of the plaintiffs.

There are two plaintiffs before the court: Ellen Taylor, a young woman who at the material time was aged 26 years, and her father, Edward Taylor, the latter being at all material times a tenant of 3 rooms in a dwelling-house, No 42, Portland Street, in the city of Liverpool, owned by the Liverpool Corporation. The claim arises in this way. On 14 October 1938, a brick which formed part of the chimneystack of the house fell from the stack and hit Miss Taylor on the head, as a result of which she sustained very terrible injuries, and her claim is for compensation for those injuries. Mr Taylor claims on the footing that he has lost the services of his daughter, who admittedly acted as his housekeeper, with the result that he has been put to expense and has suffered damage.

I ought to say at the very outset, to remove any possibility of misapprehension, that this is not a case in which the corporation, the defendants, are slum landlords, who have been deriving rents from tenants whom they have housed in dilapidated houses for the purpose of financial advantage to the corporation. The facts are precisely the opposite. The property in question originally belonged to a Mr Roberts. It was condemned as a slum and was acquired by the corporation, under the powers which they possess, for the purpose of having the slum demolished and the occupants housed in more suitable conditions. Of

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course, these things cannot be done in a moment. One cannot turn people out of their dwellings into the street, no matter how unsuitable the dwellings may be for human habitation. Alternative accommodation has to be built, and the process of transferring the population from the condemned slum to one of the very admirable development sites which one sees on almost every side in Liverpool must of necessity be a gradual one. The motive of the corporation in acquiring this property was wholly admirable, and the purpose for which they acquired it was beneficent. I do not think, however, that the propriety of their motives can or does affect their legal liability.

As this case may well go further, I think it desirable to state the facts, and the course which the trial of the action took. Evidence was called on behalf of the plaintiffs, but no evidence was called by the defendant corporation, and at the close of the evidence it appeared to me that there was no question of fact whatever for the jury to determine. That is to say, there was no question of pure fact on which more than one answer was open to the tribunal appointed to decide the question of fact, because the evidence was all one way, and was not contradicted, for the simple reason that it could not be contradicted. There was one possible exceptionnamely, the question as to whether or not Mr Taylor was the tenant of the yard adjoining this house, where Miss Taylor was standing or walking at the moment when she was hit by the brick. In my judgment, that was not a question of fact for the jury at all. The actual facts of the matter were undisputed, and whether or not those facts created a relationship of landlord and tenant in respect of this particular yard as between the corporation and Mr Taylor is, in my judgment, an inference of law, and not a question of fact at all.

As so often happens in cases of this kind, the actual legal relationship, and the area over which that relationship operated, as between Mr Taylor and the corporation remains somewhat obscure and in the realm of conjecture. When Mr Roberts owned the property, it appears that a certain Mrs Kays, who was the married daughter of the plaintiff, Mr Taylor, held the whole of the house under some agreement or another between her and Mr Roberts. Precisely what the terms of that agreement were I do not know. All I know about it is that there was no written agreement, and that the arrangement between Mrs Kays and Mr Roberts was oral, or perhaps a matter of inference from the fact that she was responsible to Mr Roberts for the whole of the rent, while she, on her part, sublet some of the rooms to two other tenants, of whom Mr Taylor was one. Whatever that arrangement was, it is perfectly plain that, when the corporation acquired the property, an entirely new state of affairs came into being, for thereafter, instead of the corporation collecting rent from Mrs Kays in respect of the whole of the premises, or so much of the premises as theretofore had been occupied by Mrs Kays, the corporation collected from Mrs Kays rent for those rooms of which she was in actual physical possession, and they collected the rents

Page 332 of [1939] 3 All ER 329

from Mr Taylor and the other tenant in respect of the rooms which they respectively occupied.

There was no written agreement between the corporation and Mr Taylor, and Mr Taylor told me (and I accept his evidence) that there was no oral arrangement made. There was no interview at which either the terms or the particular scope of his tenancy were discussed or agreed. All that happened was that the officer of the corporation, having informed Mr Taylor that the corporation had acquired the property, informed him that thereafter the rent for the premises which Mr Taylor occupied was to be paid to the corporation direct. This was done, with the result that the terms of the tenancy thus created, and the area of the building over which the tenancy operated, are a matter of inference.

Mr Taylor occupied 3 rooms. He occupied a room on the ground floor in front, and two rooms in the middle, one on the first floor and one on the second floor. He apparently had the right to useor in fact he did usea room or an area inside the house which was described as the “slop,” but whether or not that user arose as a result of an understanding between him and his daughter, Mrs Kayswhether or not in relation to the “slop” he was a mere licencee seems to me to be entirely immaterial to anything which I have to decide.

Adjoining the house, No 42, Portland Street, there was an enclosed yard, and there is no doubt whatever that this yard was part of the premises. It was all part of the curtilage. It was used by the occupants of the house for the purpose, partly of getting access to the only water closet which the premises possessed, which was situate in the yard, and also for the purpose of getting access from the back of the premises to the street. When the corporation acquired the property, there is no doubt whatever that it was in a dirty and a dilapidated condition. A schedule of dilapidations which had been prepared by the corporation as far back as 9 November 1933, proved quite clearly that the brickwork of the chimneystack was decayed, and that the state of decay was known to the corporation. No repairs to the decayed brickwork were executed at all between 1933, when the schedule of dilapidations was prepared, and October, 1938, when the mischief happened, and there is no reason to suppose that its state had got any better. In fact, I think that one can arrive without much difficulty at the opposite conclusionnamely, that the decayed brickwork certainly had not got any better in the interval, even if it had not got considerably worse.

On 14 October 1938, Miss Taylor, who, as I have said, was living in the house, she being under no contractual relationship in relation to the house or any part of it with the corporation, was leaving the premises for some purpose or another, and she was passing across the yard to which I have already referred when she was undoubtedly and admittedly struck on the head by a large brick, which formed a part of the upper course of brickwork of the chimneystack, and which had become dislodged and fell a very considerable distance, striking her on the head.

Page 333 of [1939] 3 All ER 329

An architect was called. His evidence was not contradicted. It merely confirmed what the schedule of dilapidations had disclosednamely, that the brickwork of this chimneystack was in a decayed condition, and the mortar perished. The top course of bricks, of which the brick in question was one, were detached from the rest of the brickwork, and maintained their position in the chimneystack simply as a result of the ordinary law of gravity and their own weight.

It was conceded, and very properly conceded, by counsel for the defendants that the corporation, having known of the decayed state of this chimneystack for a matter of 5 years, and having done nothing to put the matter right, would have been unquestionably liable in damages if the brick had fallen off and hit on the head somebody who was passing in the highway, or had hit somebody present on adjoining premises which were not the property of the corporation, or which were not held under any lease or tenancy agreement from them. Counsel for the defendants contended, however, in the course of a very forcible argument (which lost nothing in clarity or force by reason of the brevity and conciseness with which it was presented to me), that, because Mr Taylor happened to be the tenant of the corporation, and because Miss Taylor, although not a tenant of the corporation, was living in rooms with her father, the corporation were absolved in law from any legal liability for the damage which the tenant or the tenants guest, servant or relation might sustain. The proposition is a little startling. It involves the proposition that, if I am the owner and in occupation and possession of, shall we say, a chimneystack, which I am warned is in a highly dangerous condition, and likely at any moment to collapse, and if it appears that, when it does collapse, it is going to collapse on an adjoining yard, which also happens to belong to me, and which I may have let for the purpose of being used as a childrens playground, and if what everybody expects to happen does happen, and the chimneystack collapses, and it collapses on to the playground when the playground is full of children, and kills, injures and maims a large number of them, I escape from liability for what appears to be the most tortious act, simply and solely because the chimneystack happens to have fallen on a yard which is held under some form of tenancy agreement from me. That, at first sight, strikes one as a somewhat startling proposition of law. Counsel for the defendants supported the proposition, first of all, by reference to the well-known case of Robbins v Jones. The case is familiar. The proposition of law which it establishes is quite incontrovertible, and may be summarised by a short quotation from the judgment of Erle CJ, at p 240:

A landlord who lets a house in a dangerous state, is not liable to the tenants customers or guests for accidents happening during the term; for, fraud apart, there is no law against letting a tumbledown house; and the tenants remedy is upon his contract if any.

The distinction between this case and Robbins v Jones lies in the fact that the defective structure which caused the damage in Robbins

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v Jones was part of the demised premises. It was actually a physical part of the demised premises, and the proposition of law which that case establishes beyond controversy is that, in those circumstances, apart from any contractual obligation which there may be, the landlord, the owner, who has parted with the possession, and who is not in occupation of the property at all, is not liable to anybody for any ill consequences which may ensue from the dilapidated state in which the property may be. It seems to me that that case is a very long way from the present one.

The next case which was cited was the equally familiar case of Cavalier v Pope. That case carried the principle of Robbins v Jones a step further, because there the owner of the dilapidated house had contracted with the tenant to do the requisite repairs, but had failed to do them. The result was that the tenants wife, who lived in the house, and who, incidentally, was well aware of the danger, was injured by an accident which was caused by the want of repair, and it was held by the House of Lords, affirming the judgment of a majority of the Court of Appeal, that, in those circumstances, the wife having no contractual rights against the landlord, and, in the absence of a contract, there being no obligation to repair on an owner who has parted with the legal possession of real property, her action failed. There again, however, it is to be observed that the defective structure which caused the accident was a part of the demised premises.

The next case, I think, which is important is Cheater v Cater. That is a rather interesting case. It was a case in which a yew tree which grew on the landlords land had a branch which overhung a field which was let by the landlord to a tenant, and during the course of the tenancy the branch was eaten by a mare belonging to the tenant, with the result that the animal died. The tenant brought an action against the landlord, and the action failed. It was held by the Court of Appeal that, although, if the animal which ate the yew tree had belonged to an adjoining owner, and not to a tenant of the gentleman on whose land the offending tree was growing, the action would have succeeded, yet a distinction was drawn between the rights of an adjoining owner and the rights of an adjoining tenant, and it was held by the Court of Appeal that the action failed because the yew tree was, when the tenancy began, in substantially the same position as it was when the branch was eaten by the mare. Bankes LJ, cites a passage from a judgment of Mellish LJ, in Erskine v Adeane Bennetts Claim at p 761, which he accepts in full as being a statement of the law in accordance with a long line of cases, as follows, at p 255:

The law of this country is that a tenant, when he takes a farm, must look and judge for himself what the state of the farm is. Just as in the case of a purchaser of a business the rule is caveat emptor, so in the case of taking the lease of property the rule is caveat lessee; he must take the property as he finds it.

The Court of Appeal were careful to point out in that case that they did not

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decide what the position would have been if, when the tenancy had commenced, the yew tree had not been overhanging the demised land, but had grown and expanded so as to overhang the land during the course of the tenancy. That case decides that the lessee must take the subject matter of his lease as he finds it when the lease comes into existence.

The next authority to which counsel for the defendants referred is Shirvell v Hackwood Estates Co Ltd. That was a case between a landlord and a tenant. There was a tree which was partly dead growing on the landlords adjoining land, with a branch overhanging the tenants land. The servant of the tenant was killed by the fall of the branch. His master paid compensation to the widow under the Workmens Compensation Act, and then proceeded to bring an action against the landlord under the provisions of s 30(2) of that Act, and, although in that action the nominal plaintiff was the tenant, it is perfectly plain from the argument and the judgments that the right of action which he was seeking to enforce was an action founded in tort, and a right of action which accrued to the nominal plaintiff by reason of the statutory provision in the Workmens Compensation Act, which in substance transferred to the nominal plaintiff the claim which the workman would have had if the master had not paid workmens compensation and an action had been brought against the landlord for damages for tort. It is important to see in that case that the Court of Appeal dismissed the action on the ground that no negligence had been proved, and that what the landlord had done or had omitted to do did not constitute negligencenot actionable negligenceand was not even carelessness. There was no act or omission proved which the court held to constitute carelessness, but two members of the court held that, even if there had been, the action could not have been maintained, because the relationship between the plaintiff and the defendant was the relationship arising as between the servant of a tenant and the landlord of an adjoining piece of property. In my view, the latter part of that decision can only be regarded as obiter, because what the Court of Appeal decided was that, on the evidence in fact, there had been no carelessness, but the case is unquestionably important in this relation, partly from the weight of the dicta of Greer LJ, and Bennett J, and partly from the fact that Greer LJ, said that the decision in Cunard v Antifyre Ltd was a wrong decision if it was inconsistent with the decisions in Robbins v Jones and Cavalier v Pope. Greer LJ, says, at p 594 ([1938] 2 All ER at p 8):

I do not think the case [the Antifyre case] can be relied upon as in any way inconsistent with Robbins v. Jones and Cavalier v. Pope referred to above. If it is so inconsistent, the decision was wrong and is not binding on this court.

He does not say, however, that the decision was wrong. He says that it was only wrong if it was inconsistent with the other two decisions, and he says that in his view that case was not inconsistent with either Robbins v Jones or Cavalier v Pope.

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In that state of the authorities, it was argued by counsel for the defendants that the yard where Miss Taylor was standing when she was hit by the brick was either a part of the premises which Mr Taylor occupied under the terms of his tenancy agreement or was so closely connected with the rooms of which he was in exclusive occupation that the yard must be regarded in precisely the same way, so far as legal consequences are concerned, as it would be if it had formed part of the property comprised in the tenancy agreement. In my judgment, that argument breaks down at the very threshold. I do not think that Mr Taylor was the tenant of this yard. He certainly had no exclusive occupation of the yard. There is no evidence before me that he had any right to use the yard at all, except for the purpose of passing to and from the rooms in which he lived, either to the street or to the water-closet. I think that the true position as between Mr Taylor and this yard was that of which Fairman v Perpetual Investment Building Society is an example. In that case, there was a house let in separate tenements, the landlord retaining possession and control of the common staircase, and the House of Lords held that a lodger with one of the tenants who was using the staircase was at most an invitee as between himself and the landlord, and more probably a licensee. The House of Lords held that there the lodger who had sustained the injuriesas a result of a defect, be it noticed, in the staircase itselfwas unable to recover unless he could prove that the defect in the stair was something in the nature of a trap, or a concealed danger, or something which the landlord knew, or ought to have known, and which was not apparent to the person who was using the staircase. On the facts of that case, it was held that the defect was perfectly apparent to the lodger, and that there was no concealed danger at all.

If the case which I have to decide really comes within that principle at all, I am quite satisfied here that the chimneystack was in the nature of a trap. That is to say, it was a concealed danger of which the landlord knew, and of which neither Miss Taylor nor Mr Taylor had knowledge at all. It is true that Mr Taylor had written to the corporation and complained about the house in which he was living. He said that it was a disgrace. He said that it was nothing less than a rat trap, and that the rats had actually been getting into his bed. I have no doubt Mr Taylor knew that he was not living in Buckingham Palace. That probably was apparent, but there is no reason to suppose, and there is no evidence before me, that he knew that this particular brickwork was decayed, and it is common ground that the landlord did. Thus, if the question depends on whether or not the injury was caused by a concealed danger in the nature of a trap, on the facts of this case, it seems to me that there is no possible conclusion at which one can arrive other than that it was a trap, and, if that be the right principle to apply, I apply it.

I ought to add that I do not really think that that case has any application at all, because in that case the defect which caused the injury

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was a defect present in the structure which the tenants had something in the nature of a licence to use. That case would have been of direct application if the defect which had caused Miss Taylors injury had been a loose stone or a hole, a trap present in the yard which she was using.

In my judgment, where the cause of the trouble was this defective brick in the chimneystack, of which the landlord was in exclusive occupation and possession, the ordinary principles of tort apply, and I think that the landlordI call him the landlord, it is a mere accident that he was the owner of the chimneystackwho negligently allowed the brickwork to remain for a matter of 5 years in this dangerous state was equally liable at law whether the brick fell on his tenant, on his tenants daughter, or on a casual passer-by, and whether the tenant or the daughter or the passer-by was in the yard or on the highway or on the property of an adjoining owner.

In my judgment, Cheater v Cater has no application, because the basis of that decision was that the tenant had to take the demised property as he found it, and he found the demised property with the branch of the yew actually overhanging the property. This brick did not fall on the demised property at all, but, even if it had, the whole trouble was not that the brick at the time of the accident was where it was at the commencement of the tenancy. The whole trouble was caused by reason of the fact that it was not. It had moved. It had become dislodged. It had fallen off the chimneystack and hit Miss Taylor on the head.

So far as authorities are concerned, my attention was called to Cunard v Antifyre Ltd. That case is directly in point. If I may respectfully say so, that case seems to me to be rightly decided, but, whether or not I thought that it was, it would be my duty to follow that case, and I do follow it. It seems to me to establish here that all this discussion as to the liability of the landlord towards his tenant or the tenants friends, guests, servants, lodgers and the like, where injury has been caused either by some defect in the demised premises or by the situation of something overhanging the demised premises which, at the time the damage is done, remains substantially where it was at the time of the creation of the tenancy, is entirely irrelevant to the principles which I have to consider and apply.

In my judgment, this case is concluded by the decision in Cunard v Antifyre Ltd and, if that case is decided wrongly, it is for the Court of Appeal, and not for me, to say so. The only doubt which I have in my mind as to whether I am bound to follow that case is caused by the report of Shirvell v Hackwood Estates Co Ltd and, as I have already said, that case does not seek to overrule Cunard v Antifyre Ltd. All that is said is that the Cunard case is not inconsistent with Robbins v Jones and Cavalier v Pope but that, if it was, of course, it does not express the law. In those circumstances, it seems to me that it is my duty to follow the decision of the Divisional Court, which is directly in

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point, rather than to follow the dicta in Shirvell v Hackwood Estates Co Ltd.

I ought perhaps to add that, unless the yard must be regarded as though it were part of the property held under the tenancy agreement, Shirvell v Hackwood Estates Co Ltd and the cases which preceded it have no application at all. As I have already said, in my judgment this yard never was in the legal occupation of Mr Taylor. It never formed part of the property which he held under his tenancy agreement, and consequently Cavalier v Pope, Cheater v Cater, Shirvell v Hackwood Estates Co Ltd and that line of cases have no application at all. If I am wrong in that, and if the yard must be regarded as being a part of the property which Mr Taylor held under his tenancy agreement, then I think that the matter is determined by Cunard v Antifyre Ltd, and I follow that decision in preference to the dicta in Shirvells case. I do that with all the more readiness because in Cunard v Antifyre Ltd, the court arrived at the conclusion at which I should have arrived if I had not been assisted by the authorities to which my attention has been directed.

It only remains to add that, in either view of the precise legal relationship between Mr Taylor and the corporation in connection with this yardwhether he must be regarded as holding the yard as a part of his tenancy, or whether, as I think, the relationship is really that of licenseeI see no distinction whatever between his rights as against the corporation and those of his daughter, Miss Taylor. If the fact was that he was precluded from recovering because he happened to be a tenant, it is quite plain from Cavalier v Pope that his daughter can have no higher rights than he has.

The jury, to whom the question of damages was left, have awarded £100 to Mr Taylor, and the sum of £4,000 to Miss Taylor in respect of her injuries. It is not necessary in this judgment to make any reference to the very terrible injuries which Miss Taylor sustained. The result is that there will be judgment for Mr Taylor for the sum of £100. As regards Miss Taylor, I am quite satisfied on the evidenceand I think that the verdict of the jury confirms itthat Miss Taylor is not in a condition in which she can give a valid receipt for the money. In those circumstances, I am going to direct the sum of £4,000 to be brought into court, and steps will have to be taken to see that this young woman is protected, because she is in no mental condition to protect herself.

Solicitors: Silverman & Livermore (for the plaintiffs); W H Baines, Town Clerk, Liverpool (for the defendants).

M D Chorlton   Barrister.


Burke and Unsworth v Elder Dempster Lines Ltd

[1939] 3 All ER 339


Categories:        HEALTH; Health and safety at work: QUANTUM        

Court:        LIVERPOOL SPRING ASSIZES        

Lord(s):        CROOM-JOHNSON J        

Hearing Date(s):        1, 2 MAY 1939        


Workmens Compensation Alternative remedies Election between two remedies Receipt of compensation Knowledge of workman Receipt signed “without prejudice” Onus of proof where unequivocal act proved Workmens Compensation Act 1925 (c 84), s 29(1).

On 8 March 1938, the two plaintiffs were injured in the course of their employment, and such injury was admittedly due to a breach of statutory duty by the defendants. From 18 March 1938, until 12 August 1938, in the case of the first plaintiff, and until 19 August 1938, in the case of the second plaintiff, workmens compensation at the appropriate rate was paid to both the plaintiffs without any reservation by them, and from those dates down to the date of trial they had continued to receive the same amounts of compensation but in their receipts for such compensation they added the words “without prejudice.” At no time did they make any other reservation of their rights, either to the clerk paying them the compensation or to anyone else acting on behalf of the defendant company. It was proved that the first plaintiff by the end of July became aware that he had to elect between receiving workmens compensation and suing in an action for damages, and that the second plaintiff had no such knowledge at the time he first signed the receipt “without prejudice”:

Held (i) in the case of the first plaintiff, the receipt of compensation without any reservation and with knowledge of his right to elect was an election to accept workmens compensation, and he could not succeed in an action for damages.

(ii) the mere addition of the words “without prejudice” to the receipt was not a sufficient reservation of the rights of the plaintiffs to prevent such receipt being an election to receive workmens compensation, and for that reason the second plaintiff could not recover.

(iii) the mere receipt of workmens compensation does not amount to an election. It must also be shown that the person accepting such compensation is aware of his right to claim damages.

(iv) (following Selwood v Towneley Coal & Fireclay Co Ltd) the provision in the Workmens Compensation Act 1925, s 29(1), that the employers shall not be liable to pay compensation both under and independently of the Act does not provide a separate obstacle against recovery by the workman. The whole of the section must be read together, and it all relates to the one question of election.

(v) when what appears to be an unequivocal act on the part of the workman is proved, then the onus is upon the workman to satisfy the court that the circumstances in which this seemingly unequivocal act took place were such as to render it not a binding election on his part.

Notes

The question whether or not there has been a binding election is largely one of fact, and, indeed, one of those questions of mixed fact and law upon which every case must more or less be an authority only on its own facts. At the same time, there has been a widely held opinion that a receipt for compensation which includes the words “without prejudice” was a sufficient protection for the workman. The present case considers this matter very fully, and shows that that is not so in all cases. The essential matter underlying such a case as this is the knowledge of the workman of his choice between two remedies, and, if the receipt of compensation is relied upon as an election, the receipt of such compensation must be at a time when he had such knowledge. The matter, however, is certainly carried a step further. If the employers, by their own evidence or by cross-examination of the workman, can prove an unequivocal act on the part of the workmansuch as the receipt of compensation without any reservation of his

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rightsthen the onus is upon the workman to show that that act did not amount to a definite election on his part.

As to Alternative Remedies, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 195, 196, paras 430, 431; and for Cases, see Digest, Vol 34, pp 490492, Nos 40634071. See also Williss Workmens Compensation (31st Edn), pp 478483.

Cases referred to

Selwood v Towneley Coal & Fireclay Co Ltd [1939] 2 All ER 132; Digest Supp.

Codling v Mowlem (J) & Co Ltd [1914] 3 KB 1055; 34 Digest 491, 4067, 83 LJKB 1727, 111 LT 1086, 7 BWCC 786, affg [1914] 2 KB 61.

Bennett v Whitehead (L & W) Ltd [1926] 2 KB 380; 34 Digest 492, 4068, 135 LT 329, 19 BWCC 133.

Scarf v Jardine (1882) 7 App Cas 345; 36 Digest 382, 581, 51 LJQB 612, 47 LT 258.

Kendall v Hamilton (1879) 4 App Cas 504; 21 Digest 218, 540, 48 LJQB 705, 41 LT 418.

Davenport v R (1877) 3 App Cas 115; 31 Digest 472, 6195, 47 LJPC 8, 37 LT 727.

Croft v Lumley (1858) 6 HL Cas 672; 31 Digest 376, 5229, 27 LJQB 321, 31 LTOS 382, affg (1856) 5 E & B 682.

Re Daintrey, Ex p Holt [1893] 2 QB 116; 4 Digest 105, 946, 62 LJQB 511, 69 LT 257.

Oliver v Nautilus Steam Shipping Co [1903] 2 KB 639; 34 Digest 495, 4087, 72 LJKB 857, 89 LT 318, 5 WCC 65.

Huckle v London County Council (1910) 27 TLR 112; 34 Digest 495, 4090, 4 BWCC 113, affg 26 TLR 580.

Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell) [1931] AC 575; Digest Supp, 100 LJPC 113, 145 LT 289, 24 BWCC 181, affg SC sub nom. Waddell v Kinneil Cannel & Coking Coal Co Ltd (1930) 23 BWCC 567.

Kelly v North British Ry Co [1916] SC 19; 34 Digest 496, case m.

Action

Action for damages for negligence and for breach of statutory duty. The facts are fully set out in the judgment. The plaintiffs alleged that at the material times (i) they were ignorant of their right to damages, (ii) they were ignorant of their right to elect as between damages and workmens compensation, and that, therefore, in law, there was no valid or binding election, and (iii) when they eventually received compensation, this was not in any binding form. For the defendants, it was alleged (i) that the two plaintiffs had accepted workmens compensation under the Workmens Compensation Act 1925, s 29(1), (ii) that the admitted receipt of compensation was evidence of this in the absence of other explanation, and (iii) that in any event the defendants were not liable under s 29(1).

William Gorman KC and B R Rice-Jones for the plaintiffs.

G J Lynskey KC, Hartley Shawcross KC and J R D Crichton for the defendants.

2 May 1939. The following judgment was delivered.

CROOM JOHNSON J. The two plaintiffs are dock labourers, working at the Liverpool Docks on half-daily engagements, and their remuneration

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was paid to them through a clearing-house each Saturday on behalf of all their employers. On 8 March 1938, they were working at the West Brunswick Dock on a motor ship known as the Accra, owned by the defendants, Elder Dempster Lines Ltd. They were working in No 2 hold. They had just gone down to the lower hold. Three sections of the hatches were off, and one beam had been left on.

During the unloading, a hook descending into the hold caught and dislodged the beam and the beam fell upon each of the plaintiffs, severely injuring the plaintiff Burke on the head and left hand (so far as it is material for me to consider the injuries) and the plaintiff Unsworth on the left hand. It was a heavy beam, some 15 cwts in weight, and it fell because it had not been adequately secured to prevent its displacement. It should have been so secured, having regard to the Docks Regulations 1934.

In those circumstances, the plaintiffs, by writ issued on 21 November 1938, claimed against the defendants as their employers damages for negligence, or, alternatively, damages for the alleged breach of the statutory duty. By letter dated 26 January 1939, the solicitors for the defendants informed the solicitors for the plaintiffs that the defendants admitted that the accident to which I have referred was brought about by a breach of statutory duty for which they must accept responsibility, and they went on to inform the plaintiffs solicitors that it would be unnecessary for the plaintiffs to call evidence on the question of negligence or breach of duty. Accordingly, the action has proceeded before me on the basis that, but for certain matters which I will indicate in a moment or two, the plaintiffs would have been entitled to recover damages from the defendants.

The defence, and the only defence, is that the plaintiffs have elected to accept compensation for their injuries under the Workmens Compensation Acts 1925 to 1931, and that, accordingly, pursuant to s 29(1) of the Act of 1925, the plaintiffs are not entitled to recover. It was argued before me (i) that the plaintiffs had elected to receive workmens compensation under the section, (ii) that, once it was shown that the plaintiffs had in fact received compensation, that was such positive evidence of an election that it was unnecessary to go any further, and (iii) (although this point was not very much argued before me, I apprehend that counsel for the defendants desired to keep it open) that, inasmuch as, at the end of the subsection, it is provided that the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of, and also under, the Act, the defendants were not, in any event, liable to pay.

It was not disputed that the plaintiffs did receive workmens compensation under the Acts referred to, but both of them alleged before me (i) that they were ignorant of their right to recover damages at any material time, and (ii) that they were ignorant of their right to

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elect and consequently that there could not be in law a valid election which bound them. They further stated that, when they did discover the true facts which would otherwise have enabled them to make an election, they received workmens compensation in such a form that they were, in effect, not bound by their acts, so that there was even then no election. Generally on these points each of the parties referred me to my own previous decision in Selwood v Towneley Coal & Fireclay Co Ltd.

Each of the plaintiffs received serious injuries to certain fingers of his left hand, but, in view of the suggestions which have been made in at least one of the cases to which my attention has been directed in the course of the argument, I think it right to say that it was not suggested that there were any injuries to either of these two men affecting their general health so that their general understanding of the position was affected in any way. I was satisfied that each of the plaintiffs knew of the regulation to which I have referred, both at the time of the accident and before. They were men who had been working on the docks for some years. Each of them was, in my opinion, a highly intelligent man, and a very good type of dock labourer, and I came to the conclusion that this was a case in which they knew almost everything which would have enabled them to make a valid election in general with regard to this particular matter. I was satisfied that at any material time, and at the latest within 2 days after the accident, each of them knew how the accident had happened, and that it happened by reason of a breach of the regulation. Each of them knew that he could claim compensation from his employers in respect of an accident, to put it shortly, which happened when he was at work, and I was satisfied that each of them knew that he was entitled to receive, in respect of such an accident, accident money or compensation, which at the Liverpool Docks, apparently, is generally called “compo.” Each of them knew that such compensation consisted of half his average weekly wages, and each of them knew what, by the practice of those docks, he had to do to get compensation. In addition, the plaintiff Burke knew that the compensation was payable under an Act of Parliament. Unsworth did not know that until quite recently.

In these circumstances, each of the plaintiffs a few days after the accident inquired from the defendants servants or servant at the docks what he had to do to obtain his accident money or “compo.” He was told, and he did what was required, and on 18 March 1938, each of them attended at the appropriate office of the defendants where Burke received £1 10s from a clerk in the employment of the defendants, and Unsworth received £1 5s 9d. Upon receipt of these two sums, each of them signed a sheet which contained against his name the figures of the amount so paid. The sheet is marked “Compensation,” although I should doubt whether either of these two people observed that word upon the sheet. There was no reference on the sheet to the Act of Parliament. There

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was no statement other than the one to which I have referrednamely, that the money was being paid as compensation in respect of an accident or injury arising out of or in the course of the employmentand the figures upon the sheet are entered in a column which is headed “Net wages paid.” The sheet is apparently one commonly used for the purpose of paying workmens compensation. It was signed by several other persons who were claiming and being paid compensation upon that day, and I entertain no doubt at all that the defendants were paying and were intending to pay, and that the plaintiffs were claiming and intending to receive, compensation in respect of the injuries which they had respectively received in the accident of 8 March 1938.

Thereafter the plaintiff Burke for 20 further weeks up to and including 5 August 1938, and the plaintiff Unsworth for 21 further weeks up to and including 12 August 1938, attended at the office of the defendants and received from somebody on behalf of the defendants similar amounts week by week, and signed similar receipts upon similar documents. I find that those subsequent payments were payments which were made by the defendants to the plaintiffs as and for workmens compensation in respect of the accident, and were received as such by the plaintiffs, and signed for as such by the plaintiffs unconditionally.

I stop at that point to consider whether, in those circumstances, and on those facts, it can be said that the plaintiffs had elected to receive workmens compensation, and not damages for injuries, such as they have claimed in this action. As I pointed out in the Selwood case, as I understand the law, election in such a matter must be governed by the ordinary law, and it will be sufficient if I say that, for the purposes of this judgment, I direct myself in the terms of the judgment of Atkin J (as he then was), in Codling v Mowlem (J) & Co Ltd, at p 66, and further in the words of Bankes LJ, in Bennett v L & W Whitehead Ltd, at p 387. That passage in the judgment of Atkin J in Codlings case contains a citation of an earlier opinion of Lord Blackburn in Scarf v Jardine, at pp 360, 361, as follows:

The principle, I take it, running through all the cases as to what is an election is this, that where a party in his own mind has thought that he would choose one of two remedies, even though he has written it down on a memorandum or has indicated it in some other way, that alone will not bind him; but so soon as he has not only determined to follow one of his remedies but has communicated it to the other side in such a way as to lead the opposite party to believe that he has made that choice, he has completed his election and can go no further; and whether he intended it or not, if he has done an unequivocal actI mean an act which would be justifiable if he had elected one way and would not be justifiable if he had elected the other waythe fact of his having done that unequivocal act to the knowledge of the persons concerned in an election.

In Codlings case, however, Atkin J goes on to point out that there cannot be an election without knowledge of the right to elect, citing for that another opinion of Lord Blackburn in Kendall v Hamilton at p 542.

Therefore, in this case I am satisfied that an unequivocal act or series of acts was done between 18 March 1938, and the dates in August 1938,

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to which I have referred. The question is, what is the effect of that if it should turn out that there is no knowledge by the workmen, or one of them, of some material fact?

A man cannot elect, as Lord Blackburn points out in Kendalls case, at p 542, if he does not know that he has a right to elect. Similarly, as it seems to me, since the whole point of the Workmens Compensation Act 1925, s 29(1) is whether or not he is taking one remedy in preference to another, if I were satisfied that he had no knowledge of the other remedy, it would be impossible for him to elect.

In the course of the case, counsel for the plaintiffs stated a proposition which I think is rightnamely, that, when one has an act which appears to be an unequivocal act, in the absence of any explanation by the workpeople, what Lord Blackburn said in Scarf v Jardine at pp 360, 361, may be said to conclude the matter. In other words, the onus is then cast upon the workmenin this case, the plaintiffsto satisfy the court that the circumstances in which this seemingly unequivocal act took place were such as to render it not a binding election on their part. That point, I think, must be subject to a point which I shall have to discuss later in the case, and a point which I indicated as being reserved by counsel for the defendants in the case. I have come to the conclusion that that contention is right, and that, accordingly, upon proof by counsel for the defendants (which proof he obtained by cross-examining the two plaintiffs) that workmens compensation had, to the knowledge of these people, been paid to them for weeks and had been accepted by them as such, in the absence of some satisfactory explanation by them, their remedy was barred.

The explanation given by the two plaintiffs was that they did not know that they had a right to elect, and that they did not know that they had a right to claim damages. The evidence was not quite the same from each man. I think that it was Burke who told me that he had heard of other men at the docks getting damages. Unsworth told me that he knew that one could claim damages, but only in respect of accidents in the streets. I am not prepared to ascribe to these two workmen knowledge which was inferred with regard to workpeople as to their rights in these matters in one of the Scottish cases which was cited to me. I do not infer it for the reason that, having closely watched these two plaintiffs under examination and in cross-examination, not without some hesitation I have come to the conclusion that they satisfy me that they did not know of the right to elect, and did not know that they had a right to claim damages. At all events, for the purposes of this case I shall assume that they did not, and for the purposes of this judgment I shall proceed upon the basis that the acceptance of workmens compensation down to the two several datesnamely, 5 August and 12 August 1938 was made in the circumstances without the two points of essential knowledge which, in my judgment, it was vital for

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these plaintiffs to possess before either of them was capable in law of making an election.

That being so, the task devolves upon me of considering what happened afterwards, in order to see whether or not these two plaintiffs after those dates lost their rights, subject to one other point which I must keep in reservenamely, whether before either 5 August or 12 August and almost at the last moment, either of them did acquire the necessary information, and still went on receiving workmens compensation, at first without objection, and later under some sort of reservation, and I find myself obliged to draw a distinction on this part of the case between these two men. So far as Burke was concerned, the situation is that I am satisfied that before the date when he ceased giving an unconditional receipt for workmens compensation he had obtained information on the two vital points in which I have held that he was formerly deficient.

The evidence about it is not quite as clear as I should have liked, but he told me that, knowing most of these facts, and knowing of other men at the docks getting damages, after he had finished with the hospital (which I took to be some date towards the end of July 1938), and a fortnight before he went to see a solicitor, he had heard from a man named Swift that it might be possible for him to get damages. He had heard of a man named Rudd, who had been injured in the hold of a ship, and who had recovered damages to the extent of £350. It was not clear to me when he had acquired that information, but I place it at somewhere about the end of July 1938. He knew that this action on his part was a claim for damages, and not for “compo.” He did not know that his employers could redeem workmens compensation by a lump sum, but he went to see his solicitor to see if he could claim damages. He said:

I only heard a fortnight before that that I might be able to claim damages. I knew I had a right to choose between making a claim for compensation and bringing a claim for damages.

That answer was an answer which was directed to the time when Mr Swift had put the idea into his head that he had a right to claim damages. He was asked:

Did you know [at that time] that you had a right to choose between making a claim for compensation and bringing a claim for damages?

His perfectly frank and honest answer to that was: “Well, yes.”

He told me that that was after he had finished with the hospital, and it is plain that he did not go to see his solicitors until a fortnight after he had been told those facts. In the meantime, during that critical fortnight, with this added knowledge, I am forced to find that he received from the defendants workmens compensation knowing that it was being paid to him as such in respect of this accident, and he signed without any question the unconditional receipt in respect of it. In those circumstances, when it comes to the last two or three of these unequivocal payments, if I may so call them, it is plain, not only that

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the plaintiff Burke has not discharged the onus of satisfying me that he did not know the relevant and material facts, and all of them, which would make what he did a binding election in law, but it is also plain, on his own admission, that he did. I find it impossible, in these circumstances, to say that Burke is not bound by the receipt of those payments, and that would, in so far as Burkes case is concerned, be an end of the case. Inasmuch, however, as in dealing with Unsworths case I have to deal, as I shall show in a moment, with other and much more difficult points it is necessary to consider what happened in Burkes case after he had seen the solicitor, although perhaps, strictly speaking, that does not arise as far as Burkes case is concerned.

For this purpose it is necessary to look and see what happened after Burke did decide, a fortnight after getting this information, to go to Mr Silverman, his solicitor. He told me that he went to see his solicitor after he had been told this information:

… because I thought I might be able to get damages. I went to see Mr Silverman about it to see what he could do for me.

He appears to have told Mr Silverman what had been going on. He said:

I thought perhaps he could bring my case to court about my accident. He [Mr Silverman] asked me did I know anything about damages, and I told him no.

In face of the answers which subsequently emerged, that was not accurate, but he was apparently warned by Mr Silverman that there might be a difficulty in the case, and he told me this:

I did not know I could claim damages for breach of regulations. [That was at the time when he was claiming originally.] I found that out when I went to Silverman & Livermore about 4 August 1938, after I had finished with the hospital.

That must be the time, thereforea fortnight after his getting the information from Mr Swiftthat he went to Mr Silverman. I am by no means satisfied that that datenamely, 4 August is right, because on 5 August he signed another of these sheets without any reservation. It is quite plain that Mr Silverman, giving him the only advice that could really be of the smallest use at that time, as I see the case, if he was going on receiving this money, told him that he was to sign “without prejudice,” and therefore I am satisfied that the interview with Mr Silverman took place after 5 August and before 12 August.

I shall have to discuss the effects of the first of the payments marked “without prejudice” when I deal with the other mans case, but at the moment I think I can pass to the general facts relating to Unsworth, down to the date when Unsworth saw his solicitor. Unsworth did not have passed on to him the information which Swift had given to Burke. Unsworth, too, went to Mr Silverman. I think that he actually saw Mr Livermore. I should be inclined to draw the inference that his going to Mr Livermore to be advised was because he had learned something. There is no evidence about it, and Burke himself told me that one of the reasons for going (and I shall pass this as a mantle, as it were,

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over Unsworth, too, although he did not say it) was that he thought it would be better, instead of going down to the docks for 10 years to get “compo,” to go off and see if a solicitor could do anything for him. Mr Livermore asked Unsworth if he knew that he might have been able to claim damages if he had not accepted compensation. Unsworth said in evidence:

… and with that knowledge I still went on taking compensation. I had no alternative. I could not afford to wait for a claim for damages. My solicitor told me to sign “without prejudice.”

Accordingly, inasmuch as the first of the “without prejudice” receipts is dated 12 August 1938, in the case of Burke, I put Burkes interview with Mr Silverman as in the week preceding that and after 5 August. I put the interview of Unsworth with Mr Livermore in the week after 12 August and before 19 August.

We thus come to this situation. On and after 12 August 1938, Burke, and on and after 19 August 1938, Unsworth, continued to attend at the defendants office, and continued to receive week by week right down to the date of the writnamely, 21 November 1938and, more extraordinary still, thereafter right down to the very day when the evidence was being taken before me, the same weekly payments which they and each of them knew were being paid to them by the defendants as and for workmens compensation in respect of the accident of 8 March 1938.

There is no evidence before me that, when these men went to the office to receive the payments, Burke of 12 August 1938, and Unsworth of 19 August 1938, they made by word of mouth any reservation of their rights, or said anything by way of objection to whomsoever it was who paid them the money, or that there was any conversation before the money was paid over on each of those two days.

What they each of them did on those respective days was to append to their signatures upon the same form of document which they had been signing for so many months the words “without prejudice.” They were asked why they did that. They each said that it was done upon the advice of their respective solicitors. They were asked what they understood by the words “without prejudice.” I think it was Burke who gave, if it were appropriate to use the words at all, a not inapt explanation. He said:

I put in the words “without prejudice” meaning “no harm done.”

He went on rather to modify that by saying: “No ill feeling.” Unsworth told me that he thought the words meant “without bias.” It is quite plain that neither of the two men really appreciated that what they were seeking to do was to reserve all rights, which in my judgment the words “without prejudice,” in the ordinary acceptation of the term, do not mean. I shall have to discuss that at a later part of this judgment.

However that may be, neither of the men has said that the clerk, who was obviously performing a routine duty in paying workmens compensation to a number of injured workmen observed, or had his

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attention called to, the appending of these words to the signatures. There is no evidence before me that the clerk who paid over those moneys had any authority to pay moneys over on those terms. There is no evidence before me that there was any bargain that the money should be paid over upon the terms that the defendants and the plaintiffsit must be both of themwere left free to pursue whatever their remedies were, notwithstanding the payments. There was no evidence before me that the clerk ever knew anything at all about it, and there was certainly no evidence before me that the defendants, the employers, who were responsible under the Workmens Compensation Act 1925, s 12, for continuing to pay that which they had started to pay as workmens compensation, ever knew in any way that any sort of reservation was being intended by either of these plaintiffs.

I do not know, although all the subsequent payments were made and signed for “without prejudice,” when, if at all, it was ever brought to the notice of the defendantsuntil the correspondence, much later in the course of the historythat they were signing “without prejudice,” and it seems to me, upon authority to which I shall refer hereafter, with regard at least to the first of the two payments in each case signed for “without prejudice,” that, at the moment of the receipt of the money, when the money was being handed over by the clerk or other servant of the defendants, it was being handed over for workmens compensation, without equivocating and without any sort of reservation by anybody. It seems to me that it would be an extremely dangerous principle to permit a man to receive money which was handed over to him for a particular purpose, and, having got it in his pocket, then to say: “Now I will sign a receipt without prejudice, and thereby I shall have reserved all my rights.” I accordingly find, with regard to Burke, that, having, as I have found already, with full knowledge of all the facts, elected to receive at least two payments unconditionally prior to 12 August on 12 August, at the moment of receipt, he received another payment unconditionally.

I find, with regard to Unsworth, that he, not being bound by any election which he had theretofore made, for the reason which I have already indicated (although, as I say, I have come to that conclusion with some doubt), on 19 August with full knowledge of the facts, and with the advice of his solicitor, without any communication with the defendants before receiving the money that he was receiving it without prejudice, whatever that may mean, and without any reservation of his rights, or, indeed, without any communication to the defendants that he was reserving his rights, except for these words appended to his signature on the form, on that day elected, with full knowledge of the facts, to receive workmens compensation.

Accordingly, in my judgment, that is an end of the case. However, inasmuch as I am told that this is one of some cases which may go further, I think it desirable that I should state my views on the next

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stage in the case. I am by no means surecounsel for the defendants elected to call no evidence on behalf of the defendants, and there is no evidence about it at allthat the fact that these two men had signed “without prejudice” was brought to the notice of any responsible officer or person of the defendants, at all events for many weeks, and during those many weeks these papers were still being received. In those circumstances, I should have been prepared to hold that to receive money without objection as and for workmens compensation, without anything in the nature of an express reservation by prior notice to the defendants, is an election within the meaning of s 29(1) of the Act.

For this purpose, however, it is necessary, I think, to inquire a little further what is the effect of the words “without prejudice.” First of all, I think that they can only have an effect at all where both parties know that they are being used, and both parties accordingly are presumed to know what the general effect of those words is. So far as I have been able to see in the course of the authorities cited before me, the words really relate to an offer of settlement of a disputed claim. They are not, in my judgment, notwithstanding an authority to which I will refer hereafter, appropriate to be used in a case where one party wants to reserve his rights. The usual way in which they are used is that which I have mentioned, and I think that their use is strictly confined to cases where people are trying to purchase peace in connection with a contested claim: see PHIPSON ON EVIDENCE, 7th Edn, p. 224, to which my attention was directed by counsel for the defendants, and Halsburys Laws of England, (Hailsham Edn), Vol 13, p 703. In cases where they are used in connection with other payments, it occurred to me that it might be useful to look and see what effect the courts had given to them, and, without going through a number of authorities, it occurred to me that the question whether or not one could receive rent so as to amount to a waiver if one took it and said, “I will take it without prejudice,” is a likely example of the sort of thing which was in my mind.

In Davenport v R, a case of receipt of rent without prejudice, the court laid down that the money was paid as rent and received as rent, and that, accordingly, forfeiture of a lease could not be insisted on, because the receipt of the rent amounted to a waiver. The statement was made that, when money is in fact received as rent, there is no right to take the money except as rent. I cannot see what right these plaintiffs had in this case to receive this money as anything other than that which it was. It was offered to them, and they knew it was offered to them, as workmens compensation in respect of this accident: see also Croft v Lumley.

The same sort of point has arisen in bankruptcy, and I was referred by counsel for the defendants to an interesting case, Re Daintrey Ex p Holt  where a debtor thought of a scheme of indicating to a claiming creditor that he was going to call a meeting of his creditors, but said that that was without prejudice. Vaughan Williams J, at p 119, in a

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passage  which I will not cite, had no difficulty in disposing of that argument.

The authorities with regard to rent are further collected in the last edition of Foa on Landlord and Tenant (5th Edn), p 608, and particularly in note (a) at p 635, and that is the view to which I should have come, simply on principle, and apart from authority. Counsel for the plaintiffs, however, have suggested that the matter is disposed of by authority, and indeed in Williss Workmens Compensation (31st Edn), p 492, it is said that payments accepted from an employer without prejudice do not bar the remedy of the workman against a stranger. For that, Oliver v Nautilus Steam Shipping Co is cited, and it is said that in Huckle v London County Council a Divisional Court took a like view under the present Act. If that statement is right, and if those two cases did decide that, then it seems to me that, by parity of reasoning, I ought to accept that authority as binding on me, having the same effect in a case where payments are accepted from the employer. The trouble is that an examination of those two authorities convinces me that they are quite clearly distinguishable from the present, and that, in the course of the judgments, it was made clear that the court was not accepting the view that a mere acceptance without prejudice, without any agreement or bargain between the workman and the employer, would suffice.

I think that that appears from the judgment of Vaughan Williams LJ, in Olivers case, where he made it clear that the basis of his judgment was that the acceptance of the payments had been stipulated for by the workman. He said, at p 647:

Had it not been for the evidence as to the acceptance of payments “without prejudice,” which was stipulated for by the workman upon the occasion of receiving the second payment, and which, moreover, was noted by the agent in his book when making that payment, I should have been inclined to say that the action against the person other than the employer could not possibly have been brought, having regard to the terms of sect. 6 of the Act. I think the statement which was made by the workman in the hospital as to the payments being accepted by him “without prejudice,” and which was assented to by the agent who made the payments, makes all the difference. Mr. Abel Thomas frankly accepted the proposition that if there had been no first payment made without being subject to this expression of “without prejudice,” he could not have supported his case here. He accepted the position that the result of the reservation “without prejudice” was that which was described by the learned judge in his judgment…

All that is further dealt with at p 648, where it appears that, in effect, the two parties agreed together that these payments were to leave each of them in the same position, or at all events leave the workman in the same position as if he had not taken them, and, if later on he had thought it better not to accept the money from the employer, but to elect to take his remedy in another form, he was to be at liberty to do so. I have read the statements made in the same judgment at p 649, but I do not think that they are really, when closely examined, inconsistent with what I have said is the effect of this judgment. The only point on which the case was really argued was whether, in the circumstances

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of the case, a first payment which had been made without any particular stipulation or note was one which was governed by the same considerations as the second. As a question of fact, and as inferences from the facts in the case, all the Lords Justices came to the conclusion that it was.

That brings me to this. Counsel for the plaintiffs, in a very forcible reply on the whole argument, took the point that in effect the workman says, “I will take the payments,” and subsequently the employer goes on making them, with the words “without prejudice” in the book, and that, he says, although done without agreement, enables those payments to be made and accepted on those terms, and that that will apply to all payments back to the first. I do not find in this case that I am obliged by the authority of Olivers case to come to any such conclusion. I do not draw any such inference. One of the reasons why I do not draw it is that I am not satisfied, and there certainly is no evidence, that the employers, for weeks and weeks, knew anything at all about it.

The second case to which I have to refer on this pointnamely, Huckle v London County Councilcontains a passage in the judgment of the Divisional Court (Pickford and Coleridge JJ), the judgment apparently being that of Coleridge J, to this effect, at p 581:

If the receipts had been signed on account of compensation “which may be or become due under the Act,” or if the receipts had been signed “without prejudice,” we shall be disposed to hold that, the money having been thus paid, compensation had not been “recovered” under the Act, because it had not been paid to or received by the workman in such a manner as to bind both parties…

He cites for that proposition Oliver v Nautilus Steam Shipping Co. I think that in that passage Coleridge J must have meant receipts signed “without prejudice” in circumstances similar to those in Olivers case. I do not find myself bound by that decision to hold that the mere signing of receipts “without prejudice” is sufficient. In any event, that statement was, I think, obiter as far as the decision in the particular case was concerned.

At some time I must, I suppose, assume that the form of those receipts came to the notice of the defendants. I have had correspondence produced to me. There is, so far as I can see, no reference to the words “without prejudice” in it from 13 August 1938, onwards. On the contrary, in a letter of 9 November 1938, the defendants solicitors, writing to the plaintiffs solicitors, assert that their clients have elected to accept workmens compensation, and it looks to me as if the fact of the signature upon these documents, as from the dates in August to which I have referred, being marked “without prejudice” had not at that date come to the notice of the defendants or their advisers. No other correspondence took place before the writ in this action was issued, and that took place on 21 November. On that day, as it seems to me, the rights of these parties with regard to election and these other matters must be tested. Accordingly, I find that throughout these workpeople had accepted workmens compensation knowing what it was, and knowing from some date about the

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beginning of August 1938, all the relevant circumstances, and that, accordingly, they have made an election within s 29(1).

I have already dealt incidentally in this judgment with the second point taken by counsel for the defendantsnamely, that the mere acceptance of workmens compensation amounts to an electionand disposed of it adversely to his contention. I must say just a few words about the third point, which is that the employers, having paid them, are not obliged to pay again. In Selwoods case, I came to the conclusiona conclusion to which I adherethat the words of sub-s (1) of s 29 are all of them relating to election, and do not give an independent defence to the employers. What I said in Selwoods case, at p 141, was this:

It looks to me as if all the words of the section must be read together, and I think that the whole section relates to the one question of election.

I referred, of course, to the subsection, and the report must be amended in that particular. I was dealing with subsection (1) of s 29, and nothing else.

I have been referred in this case as I was referred in Selwoods case, to certain authorities, and I gather from the report of Selwoods case that I did not mention them in the course of delivering that judgment. Atkin J (as he then was), in Codlings case appears to have said something, at p 61, with which my observations are inconsistent, and, of course, if that were so, I should have been guilty of not following an expression of opinion of the judge, an expression of opinion which not only binds me, but for which I have the utmost respect.

It is perhaps unnecessary for me to say more than that in a later case that expression of opinion of Atkin J, was differed from, that either in the same cases or in a still later case he re-expressed the opinion which he had expressed in Codlings case, but that ultimately, in a judgement which binds us all, in Kinneil Cannel & Coking Coal Co Ltd. v Sneddon (or Waddell), it is, as I understand the case, laid down that the expression of Lord Atkin that this is a separate and independent defence by the employer, and not a mere part of the general rule about election contained in the subsection, was stated not to be a correct exposition of the law. I refer to the opinion of Lord Buckmaster, at pp 581, 583, to the opinion of Lord Warrington of Clyffe at p 588, and to the opinion of Lord Thankerton, at p 591. I understand that Selwoods case may be considered in another court. I hope that, when it is, those who argue the case will be so good as to call the attention of the Court of Appeal to the fact that these cases to which I have just referred were all mentioned to me in the very careful arguments to which I listened in Selwoods case, and that these passages were cited to me by counsel who appeared on each side. That being so, I decide once more against the contention, if it is advancedit was only very hesitatingly put forward by counsel for the defendants in the present casethat the mere fact that workmens compensation has been paid by the

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employer to the workman does not put an end to the whole controversy. As I said in Selwoods case, if that were right, I could not appreciate how some of the points which had been argued and decided in some of the other cases could ever have arisen. In these circumstances, I have come to the conclusion that these claims fail, but, in case this should go further, I have thought and think it my duty to deal with two other matters.

I have observed in Williss Workmens Compensation (31st Edn), p 493, an opinion expressed in the Court of Session with regard to the statement made in that work about Oliver v Nautilus Steam Shipping Co and Huckle v London County Council. The authorities cited in support of what is stated about the law in Scotland have not been cited before me. I mention this so that whoever has to consider this case afterwards may be aware of what is stated. The passage in Williss Workmens Compensation (31st Edn), then continues as follows, at p 493 :

The only question to be asked and answered is whether in fact compensation or damages have been recovered … unless there has been some express arrangement which preserves his alternative remedy. …

For that, Kelly v North British Ry Co is cited as an authority. If that is right, and if my judgment is right, it would seem to follow that there is no difference between the English view and the Scottish view of this particular matter.

Finally, in case anybody hereafter should take a different view of this case, I must assess what damages I should have awarded if these plaintiffs had been held, or should hereafter be held, entitled to recover them. [His Lordship then assessed the damages.]

Judgment for the defendants with costs. Workmens compensation assessed in the case of the first plaintiff.

Solicitors: Silverman & Livermore (for the plaintiffs); Forwood Williams & Co (for the defendants).

M D Chorlton   Barrister.

Lane v Herman

[1939] 3 All ER 353


Categories:        ADMINISTRATION OF JUSTICE; Arbitration        

Court:        COURT OF APPEAL        

Lord(s):        LUXMOORE AND DU PARCQ LJJ AND HUMPHREYS J        

Hearing Date(s):        19 JUNE 1939        


Arbitration Stay of proceedings “Step in proceedings” Transfer of summons to counsels list Arbitration Act 1889 (c 49), s 4.

An action was brought upon a contract which contained a provision that all disputes should be submitted to arbitration. The plaintiff issued a summons for judgment under RSC Ord 14. The defendant thereupon took out a summons asking that the action be stayed, and had both summonses transferred to counsels list. The plaintiff contended that the act of transferring a summons to counsels list constituted a step in the proceedings within the meaning of the Arbitration Act, 1889, s 4:

Held the mere act of transferring a summons from one list to another is not a step in the proceedings, and the defendant was, therefore,

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not debarred from having the action stayed and the dispute referred to arbitration.

Notes

Where proceedings are brought in relation to a matter which is the subject of a reference to arbitration, the defendant may apply to stay the proceedings, but he is prevented from doing so if he has taken a step in the proceedings. There have been many decisions as to what is a step in the proceedings, but it is here held that the transfer of a summons from one list to another is not such a step.

As to Stay of Proceedings, see Halsbury (Hailsham Edn), Vol 1, pp 639, 640, para 1087; and for Cases, see Digest, Vol 2, pp 375, 376, Nos 395408. See also Yearly Practice of the Supreme Court 1939, p 2181 et seq.

Cases referred to

Ives & Barker v Willans [1894] 2 Ch 478; Digest, Pleading, 131, 1198, 63 LJCh 521, 70 LT 674.

Fords Hotel Co Ltd v Bartlett [1896] AC 1; Digest, Pleading, 151, 1343, 65 LJQB 166, 73 LT 665.

Brighton Marine Palace & Pier Ltd v Woodhouse [1893] 2 Ch 486; Digest, Pleading, 151, 1342, 63 LJCh 697, 68 LT 669.

Richardson v Le Maitre [1903] 2 Ch 222; Digest, Practice, 508, 1817, 72 LJCh 779, 88 LT 626.

Appeal

Appeal by the plaintiff from an order of Tucker J, dated 26 May 1939, whereby it was ordered that the action between the parties be stayed. The facts are fully set out in the judgment of Luxmoore LJ.

F Ashe Lincoln for the appellant.

Neil Lawson for the respondent.

Lincoln: The question here is whether or not the defendant took any step in the action. He should have notified the other side that he was going to take arbitration proceedings, and then applied for a stay. Taking out a summons is a step in proceedings: Fords Hotel Co Ltd v Bartlett. (Counsel referred to Brighton Marine Palace & Pier Ltd v Woodhouse and Richardson v Le Maitre.) In this case, the defendant took the case out of one list and put it into another. That is a step.

Lawson referred to Ives & Barker v Willans.

F Ashe Lincoln for the appellant.

Neil Lawson for the respondent.

19 June 1939. The following judgments were delivered.

LUXMOORE LJ. This is an appeal from an order made by Tucker J, whereby he dismissed an appeal from an order made by the master directing that the proceedings in the action should be stayed. That order was made because, in an agreement relating to the subject-matter of the action, there was a provision for the reference of disputes and differences to arbitration. A summons was taken out by the defendant in the action asking that the proceedings might be stayed by reason of the provisions of the Arbitration Act 1889, s 4. The master and the judge both upheld the defendants contention and made the order sought. The plaintiff now appeals from that order on the ground that the defendant had taken a step in the proceedings before he made his application

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for a stay, and was, therefore, precluded from asking the court to make that order.

The Arbitration Act 1889, s 4, provides as follows:

If any party to a submission … commences any legal proceedings in any court against any other party to the submission … in respect of any matter agreed to be referred, any party to such legal proceedings may at any time after appearance, and before delivering any pleadings or taking any other steps in the proceedings, apply to that court to stay the proceedings. …

It is quite plain from that that the person applying for a stay must not have delivered any pleadings or taken any other steps in the proceedings. There are numerous cases in which those words have been considered, but, so far as I know, there has never been any attempt made to classify what is a “step.” In Ives & Barker v Willans, Lindley LJ, said, at p 484:

The authorities show that a step in the proceedings means something in the nature of an application to the court, and not mere talk between solicitors or solicitors clerks, nor the writing of letters, but the taking of some step, such as taking out a summons or something of that kind, which is, in the technical sense, a step in the proceedings.

What is it which is relied upon in this case as constituting a step in the action? The writ was issued on 18 April. On 27 April an appearance was entered by the defendant. On 2 May the plaintiff issued a summons for judgment under RSC, Ord 14. Before that summons had been issued, the defendants solicitors wrote to the plaintiffs solicitors, on 1 May referring to the appearance which had been entered and asking whether they would extend the time for delivery of defence pending the hearing of a summons. That letter was answered on 2 May as follows:

We are unable to grant you any further time for delivery of defence herein. We have to-day issued a summons for judgment and enclose same herewith together with an affidavit in support thereof by the plaintiff, service of which please accept by post.

Pausing there, the mere writing of a letter asking for additional time has been held not to be a step in the proceedings within s 4, but on 3 May the defendants solicitors wrote saying that they had received the letter from the plaintiffs solicitors and the copy of the summons for judgment, together with the copy of the affidavit in support, service of which they accepted by post, and continued as follows:

We have to-day had the summons put into counsels list, and it is No. 3 at 1.30 p.m. on Thursday, May 11.

Nothing further was done until 9 May, when the defendant took out a summons to stay the proceedings. That summons and the summons under RSC, Ord 14, appeared in counsels list on 11 May and counsel attended and the order was made staying the proceedings. The plaintiff says that the action of the defendants solicitors in getting the summons put into counsels list was a step in the action. I cannot see that that was so. All that is necessary to be done for a case to be put into counsels list is for one party to notify the appropriate officer of the court that he intends to appear by counsel. If that is done, the case is

Page 356 of [1939] 3 All ER 353

automatically put into counsels list, unless there are special circumstances, in which case an informal application is made to a practice master. It cannot be said that the defendant has taken a step which is a step in the proceedings. It seems to me that he has done nothing of the sort. All that the defendant has done is to say: “When the summons is heard, I will appear by counsel, and he will take any steps which he thinks fit in the interests of his client.” That is not taking a step in the proceedings. Under the Act, it is the taking of a step in the proceedings by the party who makes an application for a stay that prevents the court from ordering a stay. I think that what was said by Lindley LJ, is really the best guide to what is a step in the proceedings in a case of this kind. It must be a step taken in the proceedings in the technical sense if it is to be held to bar an application for a stay under s 4. In this case, there was no step taken in any technical sense. I think Tucker J was right, and the appeal must fail, with the usual consequences.

DU PARCQ LJ. I agree. In this case, the defendant merely desired to assert through counsel that it was a bona fide dispute. He was bound to do that, or summary judgment would be given against him under RSC, Ord 14. I think, therefore, that he did not take any step in the proceedings, and I agree that this appeal should be dismissed.

HUMPHREYS J. I am of the same opinion, and I base my decision mainly on the judgment of Lindley LJ, in Ives & Barker v Willans, to which Luxmoore LJ has referred.

Appeal dismissed with costs.

Solicitors: Rowley Ashworth & Co, agents for Sebag Cohen & Co, Sunderland (for the appellant); Culross & Co (for the respondent).

E Fuller Briscoe Esq   Barrister.

Matthen and Others v Trivandrum District Magistrate and Another

[1939] 3 All ER 356


Categories:        COMMONWEALTH; Commonwealth countries: CONSTITUTIONAL; Civil Rights and Liberties        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, LORD PORTER AND SIR GEORGE LOWNDES        

Hearing Date(s):        30, 31 MARCH, 3 APRIL, 5 JUNE 1939        


Privy Council India Extradition Surrender of prisoner to native state Exclusion of writ of habeas corpus Indian Extradition Act 1903 (No 15 of 1903), s 7 Code of Criminal Procedure 1898 (No 5 of 1898), ss 75, 491, 561A Government of India Act 1935 (c 42), s 223 Appellate Side Rules of the Madras High Court, rr 2, 2A.

The appellants were arrested in Madras on warrants, which were not dated, issued by the resident for the Madras States under the Indian Extradition Act 1903 (No 15 of 1903), s 7, and directed to the chief presidency magistrate of Madras, the second respondent. On the following day, when the appellants were about to be taken to Travancore, a petition was presented to Pandrang Row J, a judge of the High Court, at his residence, on behalf of all the appellants, for a writ of

Page 357 of [1939] 3 All ER 356

habeas corpus, and with it a further petition for a stay of execution of the warrants, and the judge made an order issuing a rule nisi. Subsequently the district magistrate, Trivandrum, the first respondent, presented a petition to the High Court praying that the order of Pandrang Row J, should be quashed, as having been made without jurisdiction. The latter petition came before a Divisional Bench, who referred certain questions of law to a Full Bench and suspended the operation of the writ nisi. The Full Bench held (i) that the common law writ of habeas corpus did not run in British India in a case such as this one, and that any power which the court formerly had to issue such a writ in a case of this kind had been taken away and the powers conferred by the Code of Criminal Procedure 1898, s 491, substituted, (ii) that the Appellate Side Rules of the Madras High Court, rr 2, 2a, were intra vires the courts powers, and that a single judge of the High Court had no jurisdiction to deal with applications in the nature of habeas corpus, whether made under s 491 or otherwise, (iii) that the order of Pandrang Row J, issuing a rule nisi was passed without jurisdiction, and was null and void, and (iv) that the application filed by the appellants under the Code of Criminal Procedure 1898, s 491, must, in accordance with the rules of court, be dealt with by the Criminal Bench. The Divisional Bench accordingly made orders dismissing the petition of the appellants and setting aside the order of Pandrang Row J, which had directed the issue of the writ nisi. On an appeal from these orders:

Held (i) the first respondent was entitled to intervene by his petition.

(ii) the High Courts Act 1861, authorised the legislature, if it thought fit, to take away the powers which the court obtained as the successor of the Supreme Court, and subsequent Acts of the legislature left no doubt that the powers to issue the prerogative writ of habeas corpus, in matters contemplated by the Code of Criminal Procedure 1898, s 491, had been so taken away.

(iii) the Appellate Side Rules of the Madras High Court which were material here were not ultra vires.

(iv) the form which the warrants should take was not prescribed by the Extradition Act or the rules. The warrants here clearly described the offences with which the appellants were charged, and the place at which and the person to whom the appellants were to be handed over were sufficiently indicated. There was no provision in the Act or the rules requiring any further particulars or requiring directly or implicitly that the warrants should be dated.

Notes

This case turns solely upon the law of India relating to the extradition of offenders under the Indian Extradition Act. The suggestion in the case, which, however, was not substantiated, was that the appellants were to be tried for political offences. The most important matter in the appeal is the question whether the common writ of habeas corpus has been superseded in India, and this is held to be so. At the same time, the appeal deals fully with the law and practice relating to such extradition.

As to Extradition in British Possessions, see Halsbury (Hailsham Edn), Vol 11, pp 217221, paras 420424; and for Cases, see Digest, Vol 17, pp 470, 471, Nos 351365.

Cases referred to

Re Govindan Nair (1922) ILR 45 Mad 922.

Girindra Nath Banerjee v Birendra Nath Pal (1927) ILR 54 Cal 727.

Ferris v Emperor (1928) ILR 53 Bom 149.

Re Stallmann (1911) ILR 39 Cal 164.

Re Ganesh Narayan Sathe (1889) ILR 13 Bom 600; 14 Digest 169, case t.

Ex p Terraz (1878) 4 Ex D 63; 14 Digest 187, 1667, 48 LJQB 214, 39 LT 502.

Page 358 of [1939] 3 All ER 356

Appeal

Appeal by special leave from 3 judgments of the High Court of Judicature at Madras: (i) a judgment of the Full Bench of the High Court of Madras (Sir Alfred Leach CJ, Madhavan Nair, Veradachariar, Wadsworth and Lakshmara Rao JJ), dated 4 November 1938, which on a reference by a Division Bench of the same court (Burn and Stodart JJ), held that the orders of Pandrang Row J, a single judge of the court, on an application for writ of habeas corpus and relative applications, were null and void; (ii) a judgment and order of the Division Bench, dated 7 November 1938, in implement of the above judgment, and (iii) a judgment and order of the Division Bench, dated 7 November 1938, dismissing a petition by the appellants for a writ of habeas corpus. The facts are fully set out in the judgment of their Lordships delivered by Lord Thankerton.

D N Pritt KC, Sidney Smith and V K Krishna Menon for the appellants, referred to Ferris v Emperor, Re Stallmann and Re Ganesh Narayan Sathe.

Rt Hon Sir William A Jovitt KC and John G Foster for the first respondent, the district magistrate of Trivandrum, referred to Girindra Nath Banerjee v Birendra Nath Pal and Ex parte Terraz.

J M Tucker KC, W Wallach and J Megaw for the second respondent, the chief presidency magistrate, Madras.

D N Pritt KC, Sidney Smith and V K Krishna Menon for the appellants.

Rt Hon Sir William A Jowitt KC and John G Foster for the first respondent, the district magistrate of Trivandrum.

J M Tucker KC, W Wallach and J Megaw for the second respondent, the chief presidency magistrate, Madras.

5 June 1939. The following judgments were delivered.

LORD THANKERTON. This is an appeal from (i) a judgment of the Full Bench of the High Court of Madras, dated 4 November 1938, in Criminal Miscellaneous Petition No 1,003 of 1938, which, on a reference by a Division Bench of the same court, held that the orders of Pandrang Row J, a single judge of the court, on an application for writ of habeas corpus and relative applications, and dated 21 October 1938, 24 October 1938, and 26 October 1938, made in Criminal Miscellaneous Petitions Nos 986, 990 and 985 of 1938, respectively, were null and void; (ii) a judgment and order of that Division Bench, dated 7 November 1938, made in petition No 1,003 in implement of the above judgment, and (iii) a judgment and order of that Division Bench, dated 7 November 1938, made in petition No 985, dismissing the application for a writ of habeas corpus.

The appellants challenge the validity of certain warrants issued by the resident for the Madras States under the Indian Extradition Act 1903 (No 15 of 1903), s 7, to the chief presidency magistrate of Madras, under which they were arrested, and they ask to be discharged. The course of procedure which has been followed has raised important questions as to the jurisdiction of the High Court of Madras to issue a writ of habeas corpus in the present case, and as to the competency of a single judge of the High Court to issue such a writ or the analogous writ under the Code of Criminal Procedure, 1898 (No 5 of 1898), s 491.

The warrant against the first appellant was in the following terms:

Whereas Mr C P Matthen, director of the Travancore National and Quilon Bank Ltd (which is now under liquidation), who is now reported to be residing at

Page 359 of [1939] 3 All ER 356

Marble Hall, Sterling Road, Nungumbakam, Madras, stands charged with offences punishable under sects. 410, 419, 421, 480 and also sects. 99 and 104 of the Travancore Penal Code corresponding to sects. 409, 418, 420, 477a, 109 and 114 of the Indian Penal Code committed in the Travancore State, you are hereby directed to apprehend the said Mr. C. P. Matthen and surrender him to the frontier police station of the Travancore State for production before the district magistrate, Trivandrum.

The warrants against the other 3 appellants were in the same terms. The fourth appellant denies that he is a director of the bank, but that is not material at this stage. It will be noted that the warrants were not dated. The appellants were all arrested in Madras on the instructions of the chief presidency magistrate, who is the second respondent in this appeal, on 20 October 1938. The Travancore National and Quilon Bank Ltd, was formed by the amalgamation of two banks and was incorporated in Travancore in September 1937, though the head office was in Madras and the larger part of its business would appear to be carried on in the Madras presidency. The appellants, who are Travancore subjects, had taken up residence in Madras in 1937, in order to conduct the business there. The district magistrate, Trivandrum, referred to in the warrants, is the first respondent in this appeal.

Learning that the appellants were to be taken to Travancore by a train leaving at 11 am on 21 October 1938, and having in view that the High Court did not sit until 10.45 am, the sons of the first and second appellants presented a petition (No 985 of 1938) under the Code of Criminal Procedure 1898, s 491, for a writ of habeas corpus in respect of all the appellants early on the morning of that day to Pandrang Row J, a judge of the High Court, at his residence. This petition was supported by an affidavit by the son of the first appellant, and along with it a further petition (No 986 of 1938) was presented to the judge asking for a stay of execution of the warrants. On the latter petition (No 986 of 1938), Pandrang Row J, made the following order:

As the matter is extremely urgent the chief presidency magistrate, Egmore, should detain these prisoners in his custody and not send them away from Madras pending further orders of the High Court.

The appellants had meanwhile been produced before the chief presidency magistrate, and made an application for a reference to the local government under the Indian Extradition Act 1903, s 8(a). While this application was in course of being heard, the order passed by Pandrang Row J, was produced, and the magistrate thereupon remanded the appellants to custody. Subsequently on the same day, the Crown Prosecutor presented a petition (No 980 of 1938) praying that the order of Pandrang Row J, on petition No 986 be vacated, mainly on the ground that it was passed without jurisdiction, as, under the Appellate Side Rules of the Madras High Court, r 2(a), jurisdiction under the Code of Criminal Procedure, 1898, s 491, could only be exercised by a Bench of the High Court, and not by a single judge. This petition, No 990, was heard by Pandrang Row J, on 22 October 1938, and on 24 October the judge made an order in petition No 990 refusing to vacate the order for stay in petition No 986, and dismissing petition No 990.

Page 360 of [1939] 3 All ER 356

The judge held himself to be bound by the decision of a Full Bench of the High Court of Madras in Re Govindan Nair, to the effect that the High Court had jurisdiction at common law to issue a writ of habeas corpus, and not a petition to the High Court to exercise its powers under judges of the High Court, and could not be taken away by rules.

On the same day, 24 October 1938, the first of these petitions, No 985, came before a Bench of the High Court (Burn and Stodart JJ), who refused to proceed with the matter, as Pandrang Row J, was seised of it. In answer to the court, counsel for the applicants stated categorically that the application was for a common law writ of habeas corpus, and not a petition to the High Court to exercise its powers under the Criminal Procedure Code, 1898, s 491. On 26 October 1938, Pandrang Row J heard petition No 985, and made an order that a writ of habeas corpus should issue to the chief presidency magistrate, returnable before himself on 28 October 1938, and a writ nisi was accordingly issued. On the same day, 26 October 1938, the district magistrate, Trivandrum, the first respondent in this appeal, presented a petition (No 1,003 of 1938) to the High Court, under the Code of Criminal Procedure 1898, s 561a, and the Government of India Act 1935, s 223, praying that the orders of Pandrang Row J, dated 21 October 1938, 24 October 1938, and 26 October 1938, respectively, should be quashed as having been made without jurisdiction, and calling the present appellants as respondents. This petition was supported by an affidavit by the superintendent of police, Criminal Investigation Department, Travancore.

This petition, No 1,003, came on for hearing on 27 October before Burn and Stodart JJ, who, as the hearing could not be completed on that day, made an order suspending the operation of the writ nisi issued under the order of Pandrang Row J dated 26 October and staying further proceedings on petition No 985 until the further orders of the court should be known, with a direction to the second respondent to keep the prisoners in his custody till further orders.

After the further hearing on petition No 1,003, Burt and Stodart JJ, on 2 November 1938, referred the following questions of law to a Full Bench:

(1) Can this High Court or any judge of it issue the common law writ of habeas corpus in any of the cases covered by the Code of Criminal Procedure, 1898, s 491?

(2) Can an application for a common law writ of habeas corpus or for directions under the Code of Criminal Procedure, 1898, s. 491, be heard and disposed of by a single judge of this court? In other words: Are the Appellate Side Rules, rr 2, 2a, intra or ultra vires?

(3) If a single judge has power to issue the common law writ of habeas corpus, is the writ issued by Pandrang Row J, on 26 October liable to be quashed by this court for the reason that it has been issued in contravention of the rules in force in the High Court in England?

In stating their reasons for the order of references the judges dealt with the contentions submitted to them as follows. The petitioner, the first respondent in this appeal, submitted three contentions. In the first place, he submitted that the High Court has no jurisdiction to issue the common law writ of habeas corpus in cases, which admittedly include the present

Page 361 of [1939] 3 All ER 356

case, covered by the Code of Criminal Procedure 1898, s 491. The judges held themselves bound to reject this contention, by reason of the decision of the Full Bench in Re Govindan Nair, already referred to, but gave reasons why they thought that it should be reconsidered. In the second place, the petitioner maintained that, even if the High Court had still power to issue the common law writ of habeas corpus, nevertheless r 2 was intra vires and binding on all judges of the court, and that, accordingly, a single judge had no power to deal with such proceedings. The judges held this to be well-founded. In the third place, the petitioner maintained that, even if a single judge had jurisdiction to issue the common law writ of habeas corpus, the procedure in this case had not been proper, in that Pandrang Row J, had made the writ returnable to himself, and not to the court, during term time, which was in contravention of the rules in force in the High Court in England, which would apply in the case of a common law writ in the High Court of Madras. The judges agreed with this contention. The respondentsthe present appellantsmaintained two arguments. First, they maintained that in a criminal matter, such as this one, there was no right of appeal, but the judges held that the court was entitled to entertain the petition by virtue of the Code of Criminal Procedure 1898, s 561a. In the second place, the respondents objected to the locus standi of the petitioner, who had not been a party to the application for a writ. The judges rejected this objection. Having regard to the importance of three of the questions argued before them, the judges made the reference already mentioned.

On 4 November 1938, the Full Bench (Sir Alfred Leach CJ, Madhavan Nair, Veradachariar, Wadsworth and Lakshmana Rao JJ), having heard arguments, made an order in which the questions were answered as follows:

(1) The common law writ of habeas corpus does not run in British India in a case like this. Assuming that the court formerly had the power to issue a writ of habeas corpus in a case like this, that power has been taken away and the powers conferred by the Code of Criminal Procedure, 1898, s. 491, substituted.

(2) Rules 2 and 2a of the Appellate Side of this court are intra vires the courts powers.

(3) Pandrang Row, J.s, order issuing a rule nisi was passed without jurisdiction and is consequently null and void.

(4) The position therefore is that the application filed by the respondents under the Code of Criminal Procedure, 1898, s 491, must be dealt with in accordance with the rules of the court which means that it must be dealt with by the Criminal Bench.

In the same order, Sir Alfred Leach CJ, directed that the application under s 491 (No 985) should be placed before the Criminal Bench on the following Monday 7 November. The reasons of the Full Bench for their judgment were subsequently given on 8 November in a judgment delivered by Sir Alfred Leach CJ.

The proceedings in petition No 1,003 were resumed by Burn and Stodart JJ, on 7 November 1938, when they made an order in accordance with the answer of the Full Bench, setting aside the order of Pandrang Row J, in petition No 985, dated 26 October 1938, which directed the issue of the writ nisi already referred to. On the same day, 7 November  1938,

Page 362 of [1939] 3 All ER 356

Burn and Stodart JJ, dealt with petition No 985, which came before them under the direction of Sir Alfred Leach CJ. After hearing arguments and considering the affidavits, the judges delivered judgment and made an order dismissing the petition.

This appeal is taken against (i) the judgment of the Full Bench, dated 4 November 1938, on the questions referred to them in petition No 1,003 (ii) the judgment of the Division Bench, dated 7 November 1938, in petition No 1,003, and (iii) the judgment of the Division Bench, dated 7 November 1938, dismissing petition No 985.

Counsel for the appellants submitted four contentionsnamely, (1) that the first respondent had no locus standi in the matter raised in the appellants petition No 985, and that, for the same reason, his petition No 1,003 was incompetent and should not have been entertained, (2) that the Appellate Side Rules, rr 2, 2a, were ultra vires, or, in any event, were not applicable to the present case, that the warrants were illegal and invalid for the following reasons, (a) that there is definite jurisdiction in the High Court to examine, on evidence, whether the conditions laid down by the Extradition Act and the rules made thereunder for issue of the warrants have been complied with, (b) that, when thus examined, it would be found that such conditions had not been complied with, and (c) that, in any event, the warrants were ex facie invalid, in respect that (i) they did not show that the conditions had been complied with, (ii) they did not show sufficiently with what offence the appellants were charged, or when they were committed, (iii) they did not sufficiently show where and to whom the appellants were to be delivered up, and (iv) that they were undated, and (4) that jurisdiction to issue the common law writ of habeas corpus in a case such as the present still subsisted, and that Pandrang Row J, had jurisdiction to order the issue of the writ nisi.

On the first contention, their Lordships are clearly of opinion that the first respondent was entitled to intervene in the appellants petition No 985, and that the petition No 1,003 was competently presented by him. Counsel for the appellants referred to the rules made by the Governor-General in Council, under the Indian Extradition Act 1903, s 22, as to the Procedure of Political Agents for Surrender of Accused Persons to Native States 1904 (No 1862 IA), and in particular r 2, which provides as follows:

2. The political agent shall not issue a warrant under sect. 7 of the said Act except on a request preferred to him in writing either by or by the authority of the person for the time being administering the executive government of the state for which he is a political agent, or by any court within such state which had been specified in this behalf by the Governor-General in Council, or by the Governor of Madras or Bombay in Council, as the case may be, by notification in the official Gazette.

He maintained that the only parties who were entitled to take part in the proceedings relative to the warrants in the present case were (a) the appellants, (b) the second respondent, the chief presidency magistrate,

Page 363 of [1939] 3 All ER 356

(c) the British Resident for the Madras States, and (d) the government of Travancore. Their Lordships are of opinion, however, that the terms of the warrants show that the authority to whom, in terms of s 7 of the Act, the appellants are to be delivered is truly the first respondent, who will control their custody, though the police of Travancore at the frontier station will receive the delivery on his behalf. Rule 7 of the rules above referred to makes this sufficiently clear. It provides as follows:

In the case of an accused person made over for trial to the court of the state, the political agent shall satisfy himself that the accused receives a fair trial, and that the punishment inflicted on conviction is not excessive or barbarous; and if he is not so satisfied he shall demand the restoration of the prisoner to his custody, pending the orders of the Governor-General in Council.

It is clear that, if occasion arose for such an application in the present case, it would fall to be made to the court of the first respondent. Their Lordships are of opinion that the first respondent is entitled to vindicate his right to obtain the custody of the appellants, and that this contention of the appellants fails.

It will be convenient to dispose next of the fourth contention of the appellants. On this point, their Lordships agree with the conclusions of the Full Bench in the present case, which are stated in the judgment delivered by Sir Alfred Leach CJ, as follows:

The High Courts Act, 1861, authorised the legislature, if it thought fit, to take away the powers which this court obtained as the successor of the Supreme Court, and Acts of the legislature lawfully passed in 1875 and subsequent years leave no doubt in my mind that the legislature has taken away the power to issue the prerogative writ of habeas corpus in matters contemplated by the Code of Criminal Procedure, 1898, s 491.

Indeed, counsel for the appellants stated that he found difficulty in pressing this contention, and the reasoning of Sir Alfred Leach CJ, on which he based the above conclusion, is so clear and convincing, including his narration of the legislative Acts referred to in his conclusion, that their Lordships are content to adopt it, as also to state that, like Sir Alfred Leach CJ, they are in entire agreement with the judgment of Rankin CJ, in Girindra Nath Banerjee v Birendra Nath Pal. Accordingly, the appellants fourth contention also fails. It follows that the appellants petition No 985 must be treated as an application under the Code of Criminal Procedure 1898, s 491.

The second contention of the appellants related to the Appellate Side Rules of the Madras High Court. The Code of Criminal Procedure 1898, s 491, so far as material, provides as follows:

(1) Any High Court may, wherever it thinks fit, direct … (b) that a person illegally or improperly detained in public or private custody within such limits [i.e., the limits of its appellate criminal jurisdiction] be set at liberty. (2) The High Court may, from time to time, frame rules to regulate the procedure in cases under this section.

The Appellate Side Rules, rr 2, 2a, provide, so far as material, as follows:

2. The following matters may be heard and determined by a Bench of two judges provided that if both judges agree that the determination involves a question of law they may order that the matter, or question of law, be referred to a Full Bench…(4) (c) for issue of writ of habeas corpus.

Page 364 of [1939] 3 All ER 356

2a. All applications for writ of habeas corpus shall go before a Bench of judges dealing with criminal work.

In view of their Lordships opinion, already expressed, as to the incompetence of the issue of a common law writ in the present case, the appellants contention that these rules are ultra vires, so far as they affect the issue of such a writ, does not arise, but the appellants maintain that, on proper construction, these rules do not apply to an application for directions under s 491, which they maintain is not covered by the words “all applications for writ of habeas corpus.” Their Lordships are unable to accept this contention, and their view is confirmed by the terms of the statutory notifications in the Fort St. George Gazette as to r 2a, which first appeared in a somewhat different form in the Gazette 1925, Part II, p 307, under date 3 January 1925, in which it is expressly described as an amendment to the rules regulating proceedings under the Code of Criminal Procedure 1898, s 491, and it was as follows:

All applications for writ of habeas corpus shall go before a Bench of 3 judges, of which the chief justice, unless otherwise ordered, shall be one.

The alteration of the rule to its present form appeared in the Gazette 1929, Part II, p 1309, under date 17 August 1929, and the description of the amendment is identical with that in the earlier notification. Accordingly, Pandrang Row J, as a single judge, had no jurisdiction to deal with petition No 985.

It only remains to deal with the appellants contentions as to the warrants. In the first place, they maintained that the court is entitled to examine, on evidence, whether the conditions laid down by the Extradition Act and the rules made under s 22 of the Act have been complied with, and that the appellants were entitled to an opportunity to satisfy the court (a) that the offences must have been committed in Madras, and (b) that, in reality, the Travancore authorities desired to get the appellants into their jurisdiction in order to charge them with political offences, which would not be extraditable offences. It must be remembered that the warrants are issued by the agent of the government of India, and not by an agent of the Travancore State, and this executive act is safeguarded in various ways by the Act and by the rules. For instance, r 4 provides that the political agent shall, in all cases before issuing a warrant under s 7 of the Act, satisfy himself, by preliminary inquiry or otherwise, that there is, prima facie, a case against the accused person. The appellants do not suggest that the resident did not so satisfy himself in the present case, but, if such a suggestion were to be made, their Lordships are of opinion that it would not be properly the subject of inquiry by the court, but should be stated to the magistrate on an application to him to report to the local government under the Extradition Act 1903, s 8(a). Their Lordships see no reason why the offences charged cannot have been committed in Travancore, and what they have stated above directly applies to the suggestion that the true object of the extradition is to enable the appellants to be charged with

Page 365 of [1939] 3 All ER 356

political offences. It may be added that a bogus trial of the offences in respect of which the extradition is made would appear to fall within r 7, and to make it the duty of the political agent, in such an event, to demand the restoration of the prisoners to his custody.

Lastly, the appellants contend that the warrants are illegal ex facie in respect (a) that they do not sufficiently show with what offences the appellants were charged or when they were committed, (b) that they do not sufficiently identify the place where, and the person to whom, the appellants were to be delivered up, and (c) that they are undated. As regards (a), no form of warrant is prescribed by the Extradition Act or the rules, and the warrants clearly describe the offences with which the appellants are charged, which is all that is required by the ordinary form of warrant of arrest prescribed by the Code of Criminal Procedure 1898, s 75, Sched  V, Form II. Their Lordships may also refer to the explanation to the Indian Penal Code, s 477a. This objection fails. As regards (b), the Extradition Act 1903, s 7(1), uses the words “for his arrest and delivery at a place and to a person or authority indicated in the warrant,” and their Lordships are of opinion that all that is required is that the place and person shall be sufficiently indicated to enable the chief presidency magistrate, to whom the warrants are addressed, to act in pursuance of such warrants and to give directions accordingly. It is clear that the second respondent has no difficulty in this regard, and, if there were any doubt on the warrants taken by themselves, which their Lordships are not prepared to assume, the matter is placed beyond doubt by the Government of Madras (Home Department) Order No 1,293, dated 10 March 1938, under which the government direct that in future all persons extradited should be handed over at “the nearest frontier police station in the Travancore State.” That order was addressed, among others, to the second respondent. There can be no difficulty in identifying the nearest frontier police station of the Travancore State for production before the district magistrate, Trivandrum, and, in their Lordships opinion, a police station is a perfectly lucid description of the authority to whom the surrender is to be made. Contention (c) as to the absence of date also fails, in their Lordships opinion. While it undoubtedly would be the usual and better practice to date the warrants, no provision in the Act or the rules appears to require directly or implicitly that the warrants must be dated. No period is expressed as running from the date of the warrants. This disposes of all the appellants objections to the validity of the warrants. Their Lordships have now stated the reasons which led them on 3 April 1939, humbly to advise His Majesty that the appeal should be dismissed.

Solicitors: Hy S L Polak & Co (for the appellants); Sanderson Lee & Co (for the first respondent, the district magistrate of Trivandrum); The Solicitor, India Office (for the second respondent, the chief presidency magistrate, Madras).

T A Dillon Esq   Barrister.


Cowan v Hendon Borough Council

[1939] 3 All ER 366


Categories:        ENVIRONMENTAL: TOWN AND COUNTRY PLANNING        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        20, 21 JUNE 1939        


Town and Country Planning Access to highway Carriageway giving access to building behind buildings fronting on highway Minimum width “Street” Public Health Act 1875 (c 55), s 4.

The plaintiff was the owner of a triangular piece of land situated behind certain houses which fronted immediately on a highway. The sole means of access from this triangular area to the highway was a strip of land about 100 ft long and of a width varying from 13 ft to 20 ft, also owned by the plaintiff. The plaintiff wished to erect upon the triangular area a building containing 6 flats, and to convert the strip of land leading to the highway into a carriageway for the use of the occupiers of the flats and their visitors. A planning scheme, in force with reference to the area in which this land was situate, defined “street” as having the same meaning as that which it has in the Public Health Act 1875, and as including part of a street. The scheme prohibited the approval of a plan which was contrary to a bye-law or local Act, but gave the council in proper cases a discretion to permit certain types of new street not likely to be used generally for through traffic. The minimum width of a street under the scheme was 20 ft:

Held the proposed carriageway would be a street within the meaning of the scheme, and, as it could not be made of the permitted minimum width, the local authority were right in refusing to pass the plans for it.

Notes

The point in this case is in a very narrow compass, and is purely one of the construction of the planning scheme. The importance of the matter lies in the necessity for access to buildings at the rear of buildings fronting on to a highway, and in the fact that for that reason the precise position in such a case must be known.

As to Meaning of “Street,” see Halsbury (Hailsham Edn), Vol 16, pp 192201, paras 221233; and for Cases, see Digest, Vol 26, pp 268279, Nos 79163.

Action

Action for a declaration that the means of access from the Great North Way to a proposed block of 6 flats upon land belonging to the plaintiff and adjacent to the Great North Way, as shown upon plans submitted on or about 2 July 1938, to the defendants by or on behalf of the plaintiff for their approval, was not a new street within the meaning of the Hendon Planning Scheme, No 1, cl 17, and that the defendants were not entitled to refuse their consent to those plans by reason of the provisions of that clause. The defendants pleaded that the means of access was a new street within the meaning of the planning scheme.

Michael E Rowe for the plaintiff.

E Milner Holland for the defendants.

21 June 1939. The following judgment was delivered.

FARWELL J. The facts in this case are not in dispute, and the question to be determined, though not by any means an easy one, is in a very small compass. The plaintiff is the owner of a piece of land some half an acre in extent, which is in the shape more or less of a triangle, situate at the back of certain houses which front immediately upon the Great North Way at Hendon. The plaintiff is also the owner of a strip of land running from one end of the triangular piece down to the Great

Page 367 of [1939] 3 All ER 366

North Way. That strip of land runs past the wall of the house No 194, and is the only reasonable means of access to his land at the rear of those houses. The strip of land in question is some 100 ft long, and varies in width from some 13 ft to nearly 20 ft. It runs up into the piece of waste land at the back of the houses, and affords direct access from the Great North Way to that piece of land. The plaintiff desires to erect upon a portion of the half-acre of land a building containing 6 flats, and he is proposing to lay out the remainder of that half-acre of land as a garden for the use of the persons who occupy the flats.

The defendants, the Hendon Borough Council, are the local authority responsible for this particular area in which this piece of land is situate, and they have prepared a town planning scheme under the Town and Country Planning Act 1932, which has received the approval of the Minister of Health, and is, therefore, a binding scheme, and controls the use of the land in this neighbourhood, including this particular strip of land, the property of the plaintiff. That being so, before the plaintiff can make any use of his land, by building upon it or otherwise, it is necessary for him to obtain the approval and consent of the town council. The plans for the erection of this building, which will contain 6 separate flats, have been submitted to the proper authority and have received their approval. So far as the building itself is concerned, there is no difficulty between the parties, but, as part of the scheme which the plaintiff desires to carry out, he is proposing to make up the strip of land leading from the Great North Way. He is proposing to make a carriage-drive and plant certain trees or shrubs on each side of it so as to form a ready means of access for the persons who occupy the flats, and for other persons who have business at, or desire to go to, those flats, and, as part of the scheme which has been submitted to the defendant council, there is this plan to make a roadway out of the strip of land which I have mentioned. The whole width of the strip, when made up into a carriage drive, will be less than that which, according to the town planning scheme, is the necessary width for such a road, if it is in fact a street. The defendant council have informed the plaintiff that, although, so far as the building itself is concerned, the use to be made of the half-acre of land is approved, they do not approve and do not consent to the scheme as a whole, because they say that this strip of land will be a new street, and, as such, must comply with the regulations of the town planning scheme, and that, as it will not comply with those requirements, they cannot approve the scheme.

The position is one which is unfortunate from the point of view of the plaintiff, because he has this half-acre of land which he desires to use in the way I have mentioned, and he has no means of making access to the highway for the persons using the piece of land unless he can make use of the strip. There is a serious difficulty about widening this strip because on one side of the strip there are gardens, or back premises of houses, which face on to Tenterden Drive, and on the other side there is

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this house, No 194, Great North Way, which is the property of the plaintiff, but which would have to be demolished, or partly demolished, in order to widen the strip of land to the extent required, if it be a new street and, as such, must comply with the requirements of the town planning scheme.

In those circumstances, the plaintiff has commenced this action against the defendants, and he asks for:

A declaration that the means of access from Great North Way to a proposed block of 6 flats upon land belonging to the plaintiff and adjacent to Great North Way, as shown upon the plans submitted on or about July 2, 1938, to the defendants by or on behalf of the plaintiff for their approval and numbered building application No A.7593, is not a new street within the meaning of Hendon Planning Scheme, No 1, cl. 17, and that the defendants were not entitled to refuse their consent to the said plans by reason of the provisions of the said clause.

The defendants, on the other hand, say that this is a new street under their scheme, and that, accordingly, they are entitled, and were in fact bound, to object to the proposed arrangement.

The question which I have to decide, which, as I have said, lies in a very small compass, is whether the laying out of this strip of land in the way proposed will make this strip of land a new street, or whether it is only a means of access somewhat analogous to a carriage-drive from the Great North Way on to the plaintiffs property at the rear. As I have said, both the half-acre of ground at the rear and this strip are in the ownership of the plaintiff. In those circumstances, one has to consider the exact language of the town planning scheme to see what is a street within the meaning of that scheme. There have been many cases in which the question of what is a street has been decided, and counsel have very properly called my attention to some of those cases. It would be, I think, both a useless and a very lengthy operation to refer to all the authorities. Counsel have called my attention to those which they think are most relevant to the question which I have to determine, and they are of some assistance, but, in my judgment, they do not help me very much, except to the extent that I think it appears from all the authorities that this question is really a question of degree, to be determined on the full consideration of all the circumstances of the matter. Therefore, although it is helpful to see how the matter has been dealt with and considered in other cases, I cannot see that they are in any way decisions which regulate the question which I have to determine, and in truth it is largely a matter of construction of this particular town planning scheme.

I turn at once to that scheme to see what is a street within the meaning of the scheme. The first clause in the scheme is an interpretation clause, and I look to see how “street” is defined. I find that “street” has the same meaning as that which it has in the Public Health Act 1875, and includes part of a street. Therefore it is necessary to see how “street” is defined in the Public Health Act 1875, and I find that the definition is stated in this way:

“Street” includes any highway (not being a turnpike road), and any public

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bridge (not being a county bridge) and any road, lane, footway, square, court, alley or passage whether a thoroughfare or not.

I think it is quite plain that that definition in the Public Health Act 1875, is a definition of the word “street” which includes many things which in ordinary common parlance would not be called a street. The man in the street would hardly use the term “street” for a square, or a court, and it is obvious that the word is used so as to include a great deal more than what is ordinarily meant by a street. I think that to the ordinary person a street connotes the idea of a way on one side of which, at any rate, there are houses. Indeed, there is to be found in the cases a statement that, ordinarily speaking, a street, even as defined in that Act of Parliament, means a way which has on one side or the other of it more or less continuous houses. In my judgment, however, that statement was not intended to be exclusive, so to speak, so as to exclude from the definition of “street” any way which has not houses on each side of it, or on one side of it only, so long as the way in question can properly be termed a street having regard to the context in which it is used. However that may be, it is clear from the definition that the word “street” is used with an extended meaning.

I turn back to the scheme, and I think that the only clause to which I have to refer is cl 17, which provides as follows:

Except in relation to streets proposed to be constructed by a highway authority the following provisions shall have effect with respect to new streets proposed to be constructed, whether on land reserved for streets or not. …(6) The council shall approve the plans, sections and specifications of the proposed street with or without modification, or disapprove them, and shall forthwith notify the applicant of their decision, but they shall not approve a plan, section or specification which is contrary to any bye-law or local Act, except that they may, in proper cases, permit (a) the laying out or making of a new street not likely to be used generally for through traffic, if it is of one of the types described in the first schedule to this scheme or of a substantially similar type, or a street of such other type as the Minister may from time to time approve; (b) the temporary laying out or making of a new street of less width, or with narrower carriageways and footways, than authorised by them in approving the street. …(7) As soon as the street is made in accordance with the plans, sections and specifications approved under this clause, the council shall on the application in writing of the person making the street and within 3 months from the date thereof, post a notice in the street declaring it to be, and the street shall thereupon become, a highway repairable by the inhabitants at large.

I do not think that I need read the proviso to that subclause or the next subclause, but subcl (9) is of some importance. It provides as follows:

An applicant who is aggrieved by (a) a decision of the council under subcl. (6) in regard to (i) the plans or sections of the proposed street; or (ii) the specifications of the proposed street; or (b) a refusal of the council to pay any sum which under the preceding subclause they are required to pay; may appeal.

Then subcl (10) provides as follows:

A person laying out or making a street shall lay it out or make it in accordance with the plans, sections and specifications approved under this clause, and all conditions applicable thereto contained in the first schedule to this scheme or in the approval shall be binding on him, and, in so far as they relate to the use of any adjoining land on all persons deriving title under him to that land.

I think that there is nothing else to which I need refer in the scheme, except the first schedule, which has been already referred to in that

Page 370 of [1939] 3 All ER 366

clause. When I look at the schedule, it provides for the dimensions and conditions which are required, and there are various types defined there. For instance, type A must have a maximum length of street of 1,500 ft, and a minimum width of 36 ft. Then there are other requirements, and the construction of the surface is provided for, and, in connection with other streets, turning spaces and other requirements. I do not think it necessary to refer to either A or B in any detail, but C is said to be:

Applicable only to streets intended to give access solely to buildings forming 3 sides of a quadrangle or arranged in some other similar manner so as to front on to an open space.

With regard to that, if this building had been erected as a separate building so as to form 3 sides of a quadrangle, or arranged in some other similar manner so as to form an open space, it is difficult to see why this way would not have been a street within the meaning of this town planning scheme, because it would be a way giving access to buildings in that particular form. That is not, of course, the way in which the building is proposed to be erected, and, therefore, strictly, this is not applicable. For a street which comes within that definition, however, the requirements are that the minimum width of the street shall be 20 ft, the minimum width of the carriageway shall be 14 ft, the minimum width of each footway shall be 4 ft 6 in, and the surface of the carriageway shall be so constructed as to fall to a channel at one side of the carriageway, and so on. Then there are other matters to which I need not refer. Then the next to which I must refer is type D:

Applicable only to streets intended for use as a secondary means of access to premises for the purpose of the removal of house refuse and other matters.

Type E is :

Applicable only to streets not intended for use as carriageways.

Then there is a note in the following terms:

The street shall not without the consent of the council be used as a principal means of approach to any buildings.

Whatever the nature of the street may be within that schedule, the proposed way which the plaintiff desires to make would not come within the dimensions which I have mentioned and which are there required.

Having regard to the terms of this scheme so far as it applies to streets, and to the schedule to the scheme, I think that it is quite plain that the word “street” is here used with a more extended meaning than that which the word ordinarily bears, but that is not in the least inconsistent with the definition which is to be derived from the Public Health Act 1875, because, as I have already pointed out, the definition itself extends to things which are not, ordinarily speaking, streets at all.

Really the question which I have to determine comes to this. On the one hand, the plaintiff says: “This is nothing more than a carriage-drive. When it is made, it will be nothing more than a carriage-drive allowing entrance and egress to and from the plaintiffs own land at the

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rear, and a carriage-drive of that sort is not a street within the meaning of the town planning scheme at all. Also, there is some authority for saying that, ordinarily speaking, a carriage-drive would not be a street within the ordinary meaning of that word, or even as defined by the Act.” On the other hand, it is said by the defendants: “This will be a street in fact. It will be a way to be used by the persons who occupy the flats, and any other persons having any occasion to go to the flats, and it is essential for us to have control over such a way as this, because, in the unfortunate event of a fire, it will be necessary for the fire engines to get there, and in other ways the matter should be under our control. It is not, in truth, simply a carriageway, but it comes within the definition, as derived from the scheme itself, of a street.” In my judgment, the answer to the problem is one at which it is by no means easy to arrive, and it may well be that it is a matter in which one person might take one view and another person might take another view, but the conclusion to which I have come is one which, I feel, is open to possible question, because there are strong reasons for thinking either wayfor thinking this is a street or not a streetbut, having regard to the very wide interpretation which I think is put upon the word “street” under the town planning scheme, I have come to the conclusion that this strip of land, when made up and used in the way it is proposed to be used, will be, and is, a street, and that, that being so, the defendant council must see to it that the street complies with the requirements of the town planning scheme. I feel some difficulty about seeing exactly where the line is to be drawn between that which is a street and that which is not a street. It must be in either case partly a question of construction, and it is a matter of degree, having regard to all the circumstances.

Having given the matter the best consideration I can, and having carefully considered the terms of the town planning scheme so far as they relate to a “street,” I have come to the conclusion that this is a street, and that, therefore, the town council are bound to exercise control over it. In those circumstances, the plaintiff is not entitled to the relief which he seeks, and the action must be dismissed with costs.

Action dismissed with costs.

Solicitors: Boxall & Boxall, agents for Edwin Boxall & Kempe, Brighton (for the plaintiff); Leonard Worden (for the defendants).

Maurice Share Esq   Barrister.


Shacklock v Ethorpe Ltd

[1939] 3 All ER 372


Categories:        CONTRACT: LEISURE AND LICENSING: TORTS; Tortious Liability        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        27, 28 APRIL, 27 JUNE 1939        


Inns and Innkeepers Care of guests property Liability for negligence Failure of guest to take reasonable care of property Locking bedroom Failure to deliver jewellery to innkeeper for safe custody.

The appellant placed her jewels in a jewel-case which she locked. She then placed the jewel-case in a dressing-case which was provided with three locks, all of which she locked. She left the case under the luggage-stand in her bedroom at an hotel owned by the respondents while she was absent from the hotel for some hours. On leaving the hotel, she did not lock the door of her bedroom:

Held the facts that she did not lock the bedroom door and that she did not deposit the jewellery with the hotel-keeper for safe custody were not sufficient evidence that she failed to take the ordinary care which a prudent person would take, and the appellant was entitled to recover damages for her loss.

Decision of Court of Appeal ([1938] 2 All ER 315) reversed and decision of Greaves-Lord J ([1937] 4 All ER 672) restored.

Notes

In the court of first instance, this case was reported on the question of the place of exhibition of the statutory notice. In the court of Appeal and the House of Lords, that point has disappeared, but, as those courts have dithered on the proper inference to be drawn from the facts, the views of the House of Lords on this question are here included. The matter is one of mixed fact and law, and possibly is largely dependent on the facts of the particular case, but the views of their Lordships cannot now be ignored in considering any similar cases.

As to Duty of Innkeepers in respect of Guests Property, see Halsbury (Hailsham Edn), Vol 18, pp 150159, paras 208218; and for Cases, see Digest, Vol 29, pp 1315, Nos 170187.

Cases referred to

Renniger v Fogossa (1552) 1 Plowd 1.

Nugent v Smith (1875) 1 CPD 19; 3 Digest 53, 2, 45 LJQB 19, 33 LT 731, revsd on another point (1876) 1 CPD 423.

Robins & Co v Gray [1895] 2 QB 501; 29 Digest 19, 240, 65 LJQB 44, 73 LT 252.

Cashill v Wright (1856) 6 E & B 891; 29 Digest 14, 178, 27 LTOS 283.

Oppenheim v White Lion Hotel Co (1871) LR 6 CP 515; 29 Digest 14, 179, 40 LJCP 231, 25 LT 93.

Calyes Case (1584) 8 Co Rep 32a; 29 Digest 2, 1.

Appeal

Appeal from an order of the Court of Appeal, dated 1 April 1938, and reported [1938] 2 All ER 315, setting aside a judgment given in favour of the appellant by Greaves-Lord J, dated 29 November 1937, and reported [1937] 4 All ER 672, in an action wherein the appellant was plaintiff and the respondents were defendants. The facts and the arguments are set out in the opinion of Lord Macmillan.

Gilbert Beyfus KC and Sylvester Gates for the appellant.

N L C Macaskie KC and Montague Berryman for the respondents.

27 June 1939. The following opinions were delivered.

LORD ATKIN. My Lords, I have had an opportunity of reading the opinion which is about to be delivered by my noble and learned friend

Page 373 of [1939] 3 All ER 372

Lord Macmillan, and I entirely agree with it. For the reasons which he has given, it appears to me that there was no reason for interfering with the decision of the trial judge, a decision to which, after considering all the circumstances, I have no hesitation in saying I should myself have come.

LORD MACMILLAN. My Lords, I am authorised by my noble and learned friends Lord Thankerton and Lord Porter to state that the opinion which I am about to deliver has their concurrence. On 15 October 1935, while the appellant was a guest in the Bull Hotel, Gerrards Cross, which is owned and managed by the respondents, jewels valued at £578 10s and £24 in notes belonging to her were stolen from her bedroom. In these proceedings, she seeks to recover from the respondents the amount of her loss. Greaves-Lord J, before whom, sitting without a jury, the action came in the first instance, gave judgment in the appellants favour for £550 and costs, but his judgment was set aside by the Court of Appeal, and the case has now, by your Lordships leave, been brought to this House for final determination.

Many authorities were cited at the bar in the course of the hearing, but apparently no previous case on this branch of the law has reached this House. The law was not, however, really in dispute. By the common law of England, an innkeeper is responsible to his guests if any of their goods are lost or stolen while on his premises. As it was put so long ago as 1550 in argument in Reniger v Fogossa, at p 9:

… by the common custom of the realm, hosts shall be charged for the goods of their guests lost or stolen out of their houses …

The principle, whose origin is discussed by Lord Esher, then Brett J in Nugent v Smith, is common to most, if not all, systems of jurisprudence, and was first promulgated in the praetors edict, nautae, caupones, stabularii. It has been said historically to have arisen from the view that the goods of travellers were exposed to special risk owing to the danger of collusion between innkeepers and thieves.

The innkeepers liability exists quite apart from any question of negligence on his part. When the old form of writ charges the innkeeper pro defectu hujusmodi hospitatorum, the defectus means merely “a failure de facto to keep safely”: Holmes on the Common Law 1881, p 201. In the words of Lord Esher MR, in Robins & Co v Gray, at pp 503, 504:

The duties, liabilities, and rights of innkeepers with respect to goods brought to inns by guests are founded, not upon bailment, or pledge, or contract, but upon the custom of the realm with regard to innkeepers. Their rights and liabilities are dependent upon that, and that alone; they do not come under any other head of law … the innkeepers liability is not that of a bailee or pledgee of goods; he is bound to keep them safely. It signifies not, so far as that obligation is concerned if they are stolen by burglars, or by the servants of the inn, or by another guest; he is liable for not keeping them safely unless they are lost by the fault of the traveller himself. That is a tremendous liability: it is a liability fixed upon the innkeeper by the fact that he has taken the goods in …

It is important to emphasise this because the passage from Bullen

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and Leakes Precedents of Pleadings (3rd Edn), p 344, which Greer LJ, quotes in his judgment in the present case, incorrectly states that:

An innkeeper at common law is not an insurer of the goods of his guests but he is liable only for negligence or default in keeping the goods by himself or his servants. The loss of the goods is presumptive evidence of such negligence which it lies upon the innkeeper to rebut.

The error is not repeated in the current edition of Bullen and Leake, where the form of claim contains no allegation of negligence against the innkeeper. It has always been the law, however, that the innkeeper can escape liability if he can show that, as Erle J, delivering the judgment of the court in Cashill v Wright, said, at p 900:

… the negligence of the guest occasions the loss in such a way as that the loss would not have happened if the guest had used the ordinary care that a prudent man may be reasonably expected to have taken under the circumstances.

The word “negligence” is tending in modern legal usage to be restricted to denoting the breach of a duty owed to some other person, but it is not in this correlative sense that the word is used in the present context. The innkeepers defence is not based on the breach of any duty owed to him by his guest, but simply on the plea that the loss or theft of his guests property was due to the guests own carelessness, his own failure to take reasonable care of it. It is technically inaccurate to speak of the guests contributory negligence.

The respondents originally pleaded the protection of the Innkeepers Liability Act 1863, but the trial judge found that the statutory requirement that a copy of s 1 of the Act must be exhibited in a conspicuous part of the hall or entrance had not been complied with, and this point has disappeared from the case. Both the trial judge and the Lords Justices asked themselves the right question in the present casenamely, whether the respondents had proved that the appellant by her conduct was herself to blame for the loss of her propertybut they have given different answers to the question. It is, therefore, necessary to examine critically the facts of the case. On the day of the theft, the appellant went up to London in the morning. Before leaving the hotel, she had placed her jewels and money in a jewel-case which she locked. She then put the locked jewel-case in a crocodile leather dressing-case or dressing-bag with three locks, described by a police witness as “fairly massive,” all of which she locked. Finally she placed the locked dressing-case under a luggage-stand in her bedroom on which there were some other articles of baggage. She did not lock her bedroom door or hand in the key at the office. When she returned in the evening, it was found that the dressing-case had been forced open and the jewel-case abstracted. It was subsequently ascertained that the theft had been perpetrated by an expert thief, who had arrived at the hotel during her absence and taken an adjoining bedroom. The thief was later arrested, and, on his own confession, found guilty and sentenced. Some of the appel-

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lants jewellery, to the value of about £50, was found in his possession and restored to her.

The main points on which the respondents relied to prove that the appellant had only herself to blame for her loss were that she did not lock her bedroom door and leave the key at the office and that she did not, as she ought to have done, deposit her jewellery in the office for safekeeping. As to the first point, I may quote the words of Montague Smith J, in Oppenheim v White Lion Hotel Co, at p 522:

I agree that there is no obligation on a guest at an inn to lock his bedroom door. Though it is a precaution which a prudent man would take, I am far from saying that the omission to do so alone would relieve the innkeeper from his ordinary responsibility. The law of Calyes case may remain untouched. But the fact of the guest having the means of securing himself, and choosing not to use them is one which with the other circumstances of the case should be left to the jury. The weight of it must, of course, depend upon the state of society at the time and place. What would be prudent in a small hotel, in a small town, might be the extreme of imprudence at a large hotel in a city like Bristol, where probably 300 bedrooms are occupied by people of all sorts.

What was “the state of society at the time and place” of the theft here in question? The Bull Hotel is a small hotel with some 20 bedrooms, and is situated in a small country town. The internal arrangements are such that the comings and goings of guests and visitors are under the observation of the staff. The appellant had stayed there on several occasions, and knew the ways of the house. It was not the practice of guests to lock their bedroom doors and leave their keys at the office. No notice requesting this to be done was placed in the bedrooms or anywhere else in the hotel. There were no duplicate keys or master key for the use of the staff, and on one occasion when the appellant had locked her bedroom door and taken the key away with her she found on her return that her bedroom had not been attended to, as the chambermaid could not get access to it. On these facts, I find myself in agreement with Slesser LJ, who says:

I do not think that this lady was negligent alone in leaving the door unlocked.

It is apparently on the other groundnamely, that the appellant did not deposit her jewellery in the office for safe keepingthat the Court of Appeal have found that she acted imprudently and carelessly. On this point, several considerations are relevant. There is the question of the nature and value of the articles. I do not doubt that, if a guest takes jewels of exceptional value to an hotel, this does render it proper for him to take special precautionsfor example, by locking his bedroom door, or depositing the articles with the hotelkeeper. The appellants jewels, however, were of an ordinary description, such as any lady of her position might have with her. They consisted of 23 miscellaneous items, ranging in value from a diamond ring at £120 to a French paste brooch at 10s. The appellant had not worn them to any extent while staying at the hotel, and it was not known to the management or to the other guests that she had them in her room. In a small room, which served as a reception office and service bar, there was a notice stating

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that the proprietors would not be responsible for any property left in the hotel unless deposited at the office for security and a receipt was taken for same, but this notice was not conspicuously exhibited, and the appellant had not seen it. None of the judges of the Court of Appeal makes any reference to this notice, and it is, therefore, not a point which need be taken into account. An incident which took place on the day before the theft is of some significance. The appellant on that day also went up to London, and, before leaving, asked the young woman in the reception office to take charge of her opal necklet for her. On returning in the evening, the appellant received back the necklet, and, as a result of a conversation at the time, seems to have received the impression that there was no safe in the hotel. This was wrong, for there was a safe in the room of the manageress, but the trial judge finds that, as to this, there was a genuine misunderstanding on the part of the appellant, and that she did not know that there was a safe available. Greaves-Lord J, with all the facts before him, came to the conclusion that, in the circumstances, the appellant had not failed in due care of her property by not depositing it in the office. The Lords Justices took the contrary view. Greer LJ, said:

It seems to me quite clear that, if she had deposited her valuable jewellery in the office, had taken her jewellery case or her bag which contained her valuables to the office, no thief could have got at the place where they would have been putnamely, the safe which in facts exists in the office.

This is true, but it is not the question, which is whether the appellant in not so depositing her jewellery had failed to take the ordinary care which a prudent person might reasonably be expected to take in the circumstances. Slesser LJ, says that the proper care:

…could very readily have been taken by handing those jewels to the landlady and asking her to keep them in safe custody in the safe which she had; or alternatively, if she wished to keep them close at hand to have deposited them in a neighbouring bank.

The alternative suggestion seems to me, with all respect, to be quite untenable, but, on the question whether the appellant did not take proper care of her property inasmuch as she did not deposit it at the office, I am of opinion that the conclusion reached by the trial judge was, in the whole circumstances, justified, and ought not to have been disturbed. I am accordingly in favour of allowing the appeal, reversing the judgment of the Court of Appeal, and restoring the judgment of the trial judge, with costs in this house and in the Court of Appeal.

LORD WRIGHT. My Lords, I am in agreement with the opinion which has just been delivered by my noble and learned friend Lord Macmillan, and have nothing further to add.

Appeal allowed with costs.

Solicitors: Vickress & Clare (for the appellant); Berrymans (for the respondents).

Michael Marcus Esq   Barrister.


Fawcett v Johnsons Service Garage

[1939] 3 All ER 377


Categories:        ADMINISTRATION OF JUSTICE; Courts: CIVIL PROCEDURE: QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        LUXMOORE AND DU PARCQ LJJ AND HUMPHREYS J        

Hearing Date(s):        19, 20 JUNE 1939        


Practice Remission of action for personal injuries to county court Grounds for exercise of discretion Action against two defendants Probability of plaintiffs success in action County Courts Act 1919 (c 73), s 2.

The plaintiffs claimed damages for personal injuries alleged to have been caused by the negligent driving of a motor vehicle by one or both of two defendants. Each defendant pleaded that the accident causing the injuries had been caused by the negligence of the other defendant. A summons was taken out by the defendants asking that the plaintiffs should give security for costs, or that, in default of such security, the action should be remitted to the county court:

Held as it appeared that the plaintiffs were practically certain to succeed against either one or both of the defendants, there was little chance of their being ordered to pay either of the defendants costs, and this was, therefore, not a proper case in which to order that security for costs should be given or that the action should be remitted to the County Court.

Notes

Previous authorities have dealt with the retention of cases in the High Court by reason of the amount of damages likely to be awarded and the difficult questions of law likely to be raised. In the present case, it is sought to remit the case to the county court on the ground that the plaintiff has not given security for costs, but the plaintiff is allowed to retain his case in the High Court, for the reason that, on the pleadings, he is practically certain to succeed, and it is most unlikely that he will be called upon the pay any costs.

As to Remission of Action to County Court, see Halsbury (Hailsham Edn), Vol 8, pp 181, 182, paras 284, 285; and for Cases, see Digest, Vol 13, pp 484, 485, Nos 340352.

Cases referred to

Stevens v Walker [1936] 2 KB 215, [1936] 1 All ER 892; Digest Supp, 106 LJKB 683, 154 LT 550.

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Appeal

Appeal by the plaintiffs from an order of Asquith J, dated 6 June 1939, confirming an order of the master for security for costs. The facts of the case are fully set out in the judgment of Luxmoore LJ.

David Weitzman for the appellants.

D M Rosenberg for the first respondents.

J F F Platts Mills for the second respondents.

20 June 1939. The following judgments were delivered.

LUXMOORE LJ. This is an appeal from an order made by Asquith J, by which he affirmed an order made by the master. The masters order directed that, unless the plaintiffs furnished security for the costs of the two defendants in the sum of £20 in each case, the action should be remitted to the county court. The plaintiffs have appealed from that order with the leave of the judge, and they ask that it be reversed and that the action be allowed to continue in the High Court without any security for costs being furnished by them.

The application on which the original order was pronounced was

Page 378 of [1939] 3 All ER 377

made by the defendants under the County Courts Act 1919, s 2, which provides as follows:

In any action founded on tort commenced in the High Court the defendant may, on an affidavit made by himself or by any person on his behalf showing that the plaintiff has no visible means of paying the costs of the defendant should a verdict not be found for the plaintiff, apply to the court or a judge for an order to transfer the action to a county court; and thereupon the court or judge, unless the plaintiff satisfies the court or judge that he has such means, may, if the court or judge having regard to all the circumstances of the case thinks fit so to do, make an order that unless the plaintiff within a time to be limited in the order gives security for the defendants costs to the satisfaction of the court or a judge the action shall be transferred to such county court to be named in the order as the court or judge may deem the most convenient to the parties.

It is plain that the section confers on the court or judge a discretionary power, but, before the discretion comes into being, the court must be satisfied that, if a verdict is not found for the plaintiff, the plaintiff has no visible means of paying the costs. The defendants evidence in this case is sufficient to satisfy the court on this point, but of course this is only the first step in the matter. Once the court is satisfied on this point, it is its duty to consider, as the section says, all the circumstances of the case before exercising its discretion and ordering the security sought, or making the order for transfer.

The section has already been considered by this court in Stevens v Walker. In that case, Du Parcq J, had directed that, unless security was given to the extent named, the case should be remitted to the county court. The cause of action arose out of the alleged tort of a lorry driver in driving his lorry negligently to the injury of the plaintiff, who was a passenger in the lorry. When the application under the section came before the court, no defence had been delivered in the action, nor was there any affidavit on behalf of the defendant disclosing the nature of his defence. It was pointed out in this court that, in the absence of a defence or such an affidavit, it was difficult to form any conclusion as to whether or not there was any likelihood of a successful defence. Speaking for myself, however, I must confess that in many cases the presence of a defence without any evidence on which the allegations in the defence are based must necessarily make the task of the court in ascertaining the chances of the defendants success, to say the least of it, conjecture. What Lord Wright MR, said in that case which is material for the consideration of the matter which is now before us appears, I think, at pp 221, 222 ([1936] 1 All ER at p 894):

It was pointed out quite recently that these applications [under the County Courts Act, 1919, s. 2] should not be considered until after the statement of claim had been delivered. I agree with that, and I go further, because I think they should not be considered until the defence has been delivered, or, at least, until there is an affidavit which shows that a defendant is in a position to swear that he has, according to his judgment, a good defence on the merits. What I want to emphasise, therefore, as the most material circumstances to be taken into account by the court under the County Courts Act, 1919, s. 2, are: first, the severity of the injuries in a personal injury case, and the gravity of the case for the plaintiff, and secondly, the question whether there is a probable or prima facie defence as shown by the defendant. These two matters seem to me to be quite essential for consideration.

He is not saying there that one is more essential than the other. He

Page 379 of [1939] 3 All ER 377

is saying that they are both essential for the consideration of the court. I think that Charles J, who was a member of the court on that occasion, emphasised the same point when he said, at p 225 ([1936]1 All ER at p 895):

The learned judge who considers the matter has to be satisfied, having regard to all the circumstances of the case, whether or no he will make an order under this section. Surely one of the most material considerations, and perhaps the vital consideration, that should be before the learned judge is: Ay or No, is there any defence to the action, or is there any reasonable chance of a verdict not being found for the plaintiff?

In the same case, Romer LJ, pointed out that, before the discretion can properly be exercised under the section it is essential that the court or judge shall ascertain precisely what are the issues which will have to be tried when the case comes on for hearing, whether it be in the High Court or in the county court.

Bearing those matters in mind, I have to consider the material facts of this case, as disclosed in the statement of claim and the two separate defences which have been delivered on behalf of the two defendants. There are three plaintiffs. Each of them is claiming damages for injuries resulting from the overturning of a car in which they were all being driven by the servant of the first defendant. One at least of the plaintiffs suffered considerable injuries, but in no case can it be said that the injuries were of so serious a nature as to preclude any order for transfer to the county court from being made. If and so far as the appeal is based upon this consideration, I should not find it possible to disagree with the order which has been made by the judge. The main foundation of the appeal, however, rests upon the nature of the defences. As I have said, the action results from the overturning of a car. In the words of the statement of claim, the car was driven on to the grass verge on the side of the road. It got out of control and then passed across into a ditch on the off-side of the road, finishing up against a tree. The plaintiffs alleged that this was due either to the negligence of the first defendant, whose servant was driving the car in question, or, alternatively, to the negligence of the second defendant, who was driving a car in the opposite direction to that in which the first defendants car was travelling, or, in the further alternative, to the negligence of both defendants. The first defendant denies any negligence on his part, and says that the accident was due to the negligence of the second defendant, while the second defendant denies negligence on his part and says that the accident was due to the negligence of the first defendant. On these pleadings, one thing seems reasonably plain, and that is that the substantial issue at the trial will be whether the first or second defendant is liable to the plaintiffs, or perhaps whether both defendants are liable. It is most unlikely that the plaintiffs will fail to succeed against one or other of the defendants, if they do not succeed against both.

In this case, I feel no difficulty in answering in the negative the test question which was proposed by Charles J, in Stevens v Walker,

Page 380 of [1939] 3 All ER 377

to which I have already referrednamely, whether or not there is any reasonable chance of a verdict not being found for the plaintiff. Speaking for myself, I find it impossible in these circumstances to exercise the discretion given by the section in favour of the defendants. As I have already said, the matter is one of discretion. The master and the judge have purported to exercise the discretion in favour of the defendants. This court is always slow to interfere with an exercise of discretion, but it is, I think, bound to do so if it is satisfied that the exercise of the discretion is not fair to the plaintiff. If any authority is necessary for such a view, I find it in Evans v Bartlam, where I find this statement in the opinion of Lord Atkin at pp 480, 481 ([1937] 2 All ER at p 650):

Appellate jurisdiction is always statutory: there is  in the statute no restriction upon the jurisdiction of the Court of Appeal: and while the appellate court in the exercise of its appellate power is no doubt entirely justified in saying that normally it will not interfere with the exercise of the judges discretion except on grounds of law, yet if it sees that on other grounds the decision will result in injustice being done it has both the power and the duty to remedy it.

In the same case, Lord Russell of Killowen pointed to a number of cases where this rule has been observed, including, among others, Stevens v Walker, to which I have already referred.

In the present case, we have not had the benefit of any note of a judgment delivered by the judge. Indeed, I gather that no judgment was delivered. Nevertheless, it seems to me, after a careful consideration of all the facts of this case, that he has failed to give proper weight to the fact that in the present case the plaintiffs are in all human probability practically certain to succeed against one or other of the defendants, if not against both. If they succeed against one of them, the probable order as to costs will provide for the payment of the successful defendants costs by his unsuccessful co-defendant, and not by the plaintiffs. Consequently, there is little chance of the plaintiffs being ordered to pay any costs, and such a chance is a remote one. For these reasons, I think that the appeal should succeed, the order of the judge and the master should be discharged, the summons for security or remission to the county court should be dismissed, and the costs both here and below should be the plaintiffs costs in any event.

DU PARCQ LJ. I agree, and I think it undesirable to add anything, because I could only repeat what has been said by Luxmoore LJ. I entirely agree with everything which has fallen from him.

HUMPHREYS J. I agree with the result proposed by Luxmoore LJ, and the reasons given for it.

Appeal allowed with costs. Judges order discharged. Summons for security or remission dismissed.

Solicitors: Silkin & Silkin (for the appellants); S Rutter & Co (for the first respondents); Wm Easton & Sons (for the second respondents).

E Fuller Briscoe Esq   Barrister.


Adabla (substituted for Afianu, deceased) on behalf of himself and all other members of the Anyigbe Tribe v Gbevlo Agama and Others

[1939] 3 All ER 381


Categories:        ADMINISTRATION OF JUSTICE; Courts: COMMONWEALTH; Commonwealth countries: CIVIL PROCEDURE        

Court:        PRIVY COUNCIL        

Lord(s):        LORD RUSSELL OF KILLOWEN, LORD ROMER AND SIR GEORGE RANKIN        

Hearing Date(s):        2, 15 MAY 1939        


Privy Council West Africa Practice Appeal from high native tribunal Leave to appeal Jurisdiction of Court of Appeal to hear appeal although leave to appeal not given Native Administration Ordinance 1927 (No 18 of 1927), s 77 Native Administration Amendment Ordinance 1935 (No 18 of 1935), s 13.

The provisions relating to appeals from high native tribunals, otherwise paramount chiefs tribunals, are contained in the Native Administration Ordinance 1927 (No 18 of 1927). S 77 of the ordinance provides as follows: “(1) A party desiring to appeal from a paramount chiefs tribunal shall first obtain the leave of such tribunal so to do; provided that, if the said tribunal shall have refused such leave, the provincial commissioners court or the district commissioners court may nevertheless grant leave to appeal. (2) Leave to appeal from a paramount chiefs tribunal shall not be granted unless and until the appellant shall either have paid the costs in such tribunal or shall have deposited therein or in the court to which the appeal is being taken a sum of money sufficient to satisfy such costs; and such court shall not grant a stay of execution with respect to the said costs.” This section was amended by the Native Administration Amendment Ordinance 1935 (No 18 of 1935), s 13, which provides as follows: “Sect 77(2) of the Native Administration Ordinance shall be amended by adding at the end thereof the following proviso: Provided that notwithstanding anything in this section contained the West African Court of Appeal may in its discretion, for the purpose of doing substantial justice between the parties, hear and determine any appeal brought before it on such terms and conditions as it may deem just. ” After a judgment of the high native tribunal, and within the time required, an order was made by the provincial commissioners court granting to the appellant leave to appeal from the decision of the tribunal, and on the hearing the appeal was allowed. The respondents thereupon appealed to the West African Court of Appeal, and contended that the provincial commissioner had no jurisdiction to grant leave to appeal to his court, as application for leave to appeal had not been made to the high native tribunal. Upon inquiry being made, no record could be traced in the high native tribunal of any application by the appellant for leave to appeal, and for this reason the Court of Appeal for West Africa by a majority allowed an appeal:

Held the proviso introduced by the Native Administration Amendment Ordinance 1935 (No 18 of 1935), s 13, operated as a qualification of the whole of the Native Administration Ordinance 1927 (No 18 of 1927), s 77. The Court of Appeal had jurisdiction to hear and determine the appeal on its merits, if, in its discretion, it thought proper to do so.

Notes

The Court of Appeal in West Africa were of opinion that they had no jurisdiction to hear an appeal from a judgment of the provincial commissioner where it did not appear that the Paramount Chiefs Court had given leave to appeal. This is held, upon the construction of the relevant ordinances, to be a wrong view, and the Court of Appeal has a discretion to hear an appeal in such a case.

As to West African Courts, see Halsbury (Hailsham Edn), Vol 11, p 203, para 386; and for Cases, see Digest, Vol 17, pp 452, 453, Nos 212216.

Page 382 of [1939] 3 All ER 381

Appeal

Appeal from a judgment of the West African Court of Appeal, Gold Coast Session (Sir Donald Kingdon CJ (Nigeria), Sir Philip Petrides CJ (Gold Coast), and Webber CJ (Sierra Leone), dated 9 December 1936, allowing an appeal by the respondents from a judgment of the provincial commissioners court (Eastern Province) of the Gold Coast, dated 16 August 1934. The latter judgment had reversed a judgment of the high native tribunal of Ada, dated 18 January 1929, in favour of the respondents. The judgment of their Lordships was delivered by Lord Russell of Killowen.

W H Stoker for the appellant.

The respondents did not appear before their Lordships Board.

15 May 1939. The following judgments were delivered.

LORD RUSSELL OF KILLOWEN. This appeal is brought from a judgment of the West African Court of Appeal (Gold Coast Session) allowing the appeal of the respondents from a judgment of the provincial commissioners court (Eastern Province) of the Gold Coast in favour of the plaintiff in the proceedings. That judgment had reversed a judgment of the High Native Tribunal of Ada given in favour of the respondents. The appellant has been substituted in the course of the proceedings for the original plaintiff, who had died. The litigation is between representatives of two tribesnamely, the Anyigbe tribe and the Fieve tribeand relates to the ownership of land. The representative of the Anyigbe tribe is the appellant before the Board, but their Lordships are not, on this appeal, in any way concerned with the merits of the dispute between the litigants. The appeal relates to the questions whether, in the circumstances of the case, the judgment of the provincial commissioners court was pronounced without jurisdiction, and, if so, whether the Court of Appeal (in its discretion) could, and should, have heard and determined the appeal therefrom. The answer to these questions depends primarily upon the true construction and effect of the Native Administration Ordinance 1927 (No 18 of 1927) and the Native Administration Amendment Ordinance 1935 (No 18 of 1935). The relevant sections of the first-named ordinance are ss 75, 76 and 77, which provide as follows:

75. In any suit or matter relating to the ownership, possession, or occupation of any land an appeal shall lie from the decision of the paramount chiefs tribunal to the provincial commissioners court.

76. No appeal shall lie under sect. 73, sect. 74, or sect. 75 unless the party appealing shall give notice of appeal within the proper periods hereinafter in this section prescribed, reckoning from the date of the decision appealed against, namely, (1) From a divisional chiefs tribunal to a paramount chiefs tribunal, within 2 months; (2) From a paramount chiefs tribunal to the district commissioners court, within 4 months; (3) From a paramount chiefs tribunal to the provincial commissioners court, within 6 months.

77. (1) A party desiring to appeal from a paramount chiefs tribunal shall first obtain the leave of such tribunal so to do; provided that, if the said tribunal shall have refused such leave, the provincial commissioners court or the district commissioners court may nevertheless grant leave to appeal. (2) Leave to appeal from a paramount chiefs tribunal shall not be granted unless and until the appellant shall either have paid the costs in such tribunal or shall have deposited therein or in the court to which the appeal is being taken a sum of money sufficient to satisfy

Page 383 of [1939] 3 All ER 381

such costs; and such court shall not grant a stay of execution with respect to the said costs.

The Native Administration Amendment Ordinance 1935, s 13, provides as follows:

S 77(2) of the Native Administration Ordinance shall be amended by adding at the end thereof the following proviso: “Provided that notwithstanding anything in this section contained the West African Court of Appeal may in its discretion, for the purpose of doing substantial justice between the parties, hear and determine any appeal brought before it on such terms and conditions as it may deem just.”

The facts relevant to the present appeal may now be shortly stated. After the judgment of the High Native Tribunal (which is a paramount chiefs tribunal), and within the 6 months required by s 76(3), an order was made (dated 16 April 1929) by the provincial commissioners court granting to the plaintiff leave to appeal from the decision of the paramount chiefs tribunal on certain conditions. The conditions were duly complied with, and on 15 May 1929 the conditional leave was made final. There is at present no material available to show that any application for leave to appeal had been made to the paramount chiefs tribunal, or that, if made, it had been refused. On the one hand, their Lordships were told by counsel for the appellant that the affidavit which was filed in support of the application leading up to the order of 16 April 1929, and which was not printed in the record before the Board, had been read by him, and that it contained no reference to any application to the paramount chiefs tribunal for leave to appeal. On the other hand, their Lordships find it difficult to believe that the commissioner would act under s 77(1) without being satisfied that the conditions precedent to his being competent to make any order thereunder which are therein specified had been complied with.

However that may be, the plaintiffs appeal was subsequently heard and adjudicated upon in the provincial commissioners court, with results favourable to the plaintiff. The defendants thereupon appealed to the West African Court of Appeal. The appeal came on for hearing before Sir Donald Kingdon CJ (Nigeria), Sir Philip Bertie Petrides CJ (Gold Coast), and Arthur Webber CJ (Sierra Leone), on 28 April 1936. Counsel for the defendants contended (amongst other grounds of appeal) that the provincial commissioner had no jurisdiction to grant leave to appeal, and that, consequently, his judgment on the hearing of the appeal was without jurisdiction. Counsel for the plaintiffs asked that inquiry be made. The case was accordingly adjourned for a report from the provincial commissioner upon two pointsnamely, (i) whether there were any proceedings in the native tribunal by way of application filed for appeal between the date of the original judgment and the date of the order of the provincial commissioners court giving conditional leave to appeal, and (ii) the delay which had apparently occurred in the case. The report of the commissioner gave an explanation of the delay, but gave no information on the first point.

The adjourned hearing of the defendants appeal took place on 16 November

Page 384 of [1939] 3 All ER 381

1936, when the matter was again adjourned in order to get a reply on the first point from the commissioner. At the further hearing on 3 December 1936, a telegram from the commissioner was read which stated as follows:

No record can be traced in Ada Manches tribunal [i.e., the native tribunal in question] of any proceedings by way of application for leave to appeal between Jan. 18, 1929, and Apr. 16, 1929.

Counsel for the plaintiff desired to read a letter written by direction of the paramount chief (who, he said, was illiterate) indicating that leave must have been granted, but the court refused to look at it. Judgment was reserved, and was delivered on 9 December 1936.

It was held by Arthur Webber CJ, that the proviso introduced by the Native Administration Amendment Ordinance 1935 (No 18 of 1935), qualified only s 77(2) of the Native Administration Ordinance 1927 (No 18 of 1927), and that since no record could be traced in the paramount chiefs tribunal of any application for leave to appeal, the proceedings before the provincial commissioners court amounted to a nullity. He was also of opinion, however, that, assuming that the proviso applied also to s 77(1), the case was not one for exercising the discretion conferred by the proviso, because the granting of leave by the paramount chiefs tribunal was discretionary, and might or might not be granted, and in his (the Chief Justices) view: “an appeal should not be entertained when this essential step has been omitted.” Sir Donald Kingdon CJ, concurred in that judgment. Sir Philip Bertie Petrides CJ, concurred with that part of the judgment which dealt with the exercise of discretion under the proviso, but dissented from the construction of the Native Administration Amendment Ordinance 1935, (No 18 of 1935), s 13. He was of opinion that the proviso qualified both subsections of s 77, feeling unable to depart from the ordinary meaning of the word “section” in the proviso. In the result, an order was made allowing the defendants appeal, setting aside the judgment of the provincial commissioners court and restoring the judgment of the High Native Tribunal.

The appellant now asks His Majesty in Council to discharge that order and to remit the matter for reconsideration by the West African Court of Appeal, on the grounds (i) that the majority misconstrued the proviso in question, (ii) that the court had jurisdiction in the proper exercise of its discretion to hear and determine the defendants appeal, notwithstanding that the provisions of s 77(1) had not been complied with, (iii) that in their hypothetical use of their discretion as stated in the judgments the judges had proceeded on wrong grounds, and (iv) that in any event the court should have presumed that everything had been duly performed, and that the provincial commissioners order of 16 April 1929, had been lawfully made, unless and until it had been affirmatively proved that the conditions precedent to the existence of his jurisdiction had not been fulfilled.

The defendants did not appear before their Lordships Board, so their

Page 385 of [1939] 3 All ER 381

Lordships did not have the advantage of hearing the questions argued adversely to the appellant. Nevertheless, they feel no doubt that the matter should not rest where it is. In their opinion, the construction of the Native Administration Amendment Ordinance 1935, (No 18 of 1935), s 13, is, from its language, reasonably plain. The word “section” admits of no doubt. It does not in its natural signification mean “subsection,” and it certainly cannot mean it in a section which itself uses both words in its opening line. The only possible ground for suggesting the contrary (for the marginal note must be disregarded) is that s 13 enacts that “sub-s (2) … shall be amended.” The word “amended” in that context, however, need mean no more than “altered,” and is not inconsistent with the alteration introduced into that subsection operating as a qualification of the whole section. Their Lordships agree with the opinion of Sir Philip Bertie Petrides CJ. The Court of Appeal had accordingly jurisdiction to hear and determine the appeal on its merits, if, in its discretion, it thought proper to do so. The judges have intimated that, upon the hypothesis of jurisdiction, they would not exercise their discretion in favour of hearing the appeal. To that extent they have hypothetically used their discretion, but they have also stated the grounds upon which they would in this case exercise their discretion in the particular way indicated. They say that, since the granting of leave under s 77(1) is discretionary in the paramount chiefs tribunal, and might be refused there, an appeal should not be entertainedthat is, the discretion given by the proviso should never be exercisedin cases where the essential step of applying to that tribunal has been omitted. This view, however, would reduce the operation of the proviso on s 77(1), to which ex hypothesi it applies, to a nullity. Their Lordships are accordingly of opinion that the Court of Appeal has, in the present case, exercised the discretion conferred upon it on wrong grounds.

Their Lordships do not feel able in the present case to act upon the presumption that leave to appeal was asked for and was refused by the paramount chiefs tribunal. The fact that the affidavit above-mentioned is silent upon the point is an important fact in this connection. On the other hand, it may be doubtful whether the absence of a record on the files of the tribunal is necessarily conclusive. That is a question which can best be answered by those who are familiar with the degree of care and accuracy with which such records and files are kept. It is, however, a matter into which further inquiry might well be made, and upon which any communication authorised by the paramount chief would be of value. In the result their Lordships are of opinion that the order appealed from should be discharged and the appeal remitted for rehearing to the West African Court of Appeal. Their Lordships will humbly advise His Majesty accordingly. On such rehearing, if and when satisfied that the provisions of s 77(1) have not been observed, the discretion conferred by the proviso in question should be exercised after a consideration

Page 386 of [1939] 3 All ER 381

of the relevant facts subsequent to the original judgment, including, their Lordships would suggest, the question whether the omission to apply to the paramount chiefs tribunal for leave to appeal was deliberate or accidental or the result of a bona fide mistake. If the court decides to exercise the discretion in favour of hearing the appeal, it will do so on such terms and conditions as it may deem just. The respondents must pay the costs of this appeal.

Appeal allowed. Order appealed from discharged and appeal remitted for rehearing to the West African Court of Appeal.

Solicitors: Sydney Redfern & Co (for the appellant).

T A Dillon Esq   Barrister.

Inland Revenue Commissioners v Delamere (Lord)

[1939] 3 All ER 386


Categories:        TAXATION; Settlement        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        7, 9 JUNE 1939        


Income Tax Disposition in favour of children Settlement Full discretionary trust to pay income to father, any wife of his, and his issue No power of revocation Revocable settlement Finance Act 1936 (c 34), s 21(8), (10).

By a settlement made in 1932 the income of certain land was, so far as is here material, to be paid or applied for the benefit of all or any one or more exclusively of the following persons; namely the husband, who was the settlor, his wife or children in such manner generally as the trustees of the settlement in their absolute discretion might think fit. The settlement contained no power of revocation. It was contended that this was a revocable settlement within the meaning of the Finance Act 1936, s 21:

Held (i) the Finance Act 1936, s 21(10) must be construed together with sub-s (8) of that section.

(ii) this settlement, despite the absolute discretion given to the trustees, provided for payment to the settlor within the meaning of the Finance Act 1936, s 21(8).

(iii) the settlement provided for payment to the settlor during the life of a child of the settlor to or for the benefit of whom any income was or might be payable.

(iv) the Finance Act 1936, s 21, applies to income paid during the year 6 April 1936 to 5 April 1937, and is not limited to commence from the date of the passing of the Act in July 1936.

Notes

The real question in this case is whether sub-s (10) of the Finance Act 1936, s 21, is to be read as an enactment by itself, or whether it is to be read and construed with sub-s (8) of that section. It is held that the two subsections are to be construed together and, therefore, a settlement including a full discretionary trust to pay income to a father, mother or children in a settlement made before 22 April 1936, is a revocable settlement, although it, in fact, contains no power of revocation.

As to Dispositions in favour of Children, see Halsbury (Hailsham Edn), Vol 17, pp 268270, para 538; and for Cases, see Digest, Supp, Income Tax, Nos 575a, 575b.

Case Stated

Case Stated under the Finance Act 1927, s 42(7), and the Income Tax Act 1918, s 149, by the commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice.

Page 387 of [1939] 3 All ER 386

In pursuance of articles of agreement entered into on 13 June 1924, by the respondent (then the Hon. Thomas Pitt Hamilton Cholmondeley) prior to his marriage, a deed of settlement was executed on 20 June 1932, under which deed of settlement the respondent, referred to as “the husband,” conveyed certain properties referred to as “the settled land” to trustees upon trust during the life of the husband to pay or apply the profits and income of the settled land “unto and for the maintenance and support or otherwise for the benefit of all or any one or more exclusively of the other or others of the following persons for the time being in existence namely: the husband and his wife if any for the time being living and his children and remoter issue for the time being living whether by his present or any future marriage and whether minors or adults and the other persons for the time being interested in remainder or reversion whether absolutely or contingently in the settled land under the limitations hereinafter contained such payment to be made at such times upon such terms and conditions and in such manner generally as the trustees in their absolute discretion and without being liable to account for the exercise of such discretion shall think fit and so that they shall have full power if they so think fit to permit any of the said persons either successively or concurrently to occupy or enjoy personally any part or parts of the settled land upon any terms or conditions which the trustees may think fit to impose but so that such permission shall in any case be revocable at any time and shall not give any right to continued or future enjoyment.” In the course of the year 1936/37 (partly before and partly after 16 July 1936), the trustees, acting in their absolute discretion, paid sums for the benefit of the respondents 3 infant children, amounting in the case of each child to approximately £500 net. They paid practically the whole of the balance of the trust income to the respondent.

The Finance Act 1936, s 21(10), provides as follows:

This section applies to every settlement, wheresoever it was made or entered into and whether it was made or entered into before or after the passing of this Act, except a settlement made or entered into before Apr. 22, 1936, which immediately before that date was irrevocable.

On behalf of the respondent, it was contended (i) that the word “irrevocable” was used in the Finance Act 1936, s 21(10), in its ordinary plain meaning, that the settlement of 20 June 1932, was “a settlement made or entered into before 22 April 1936”, which immediately before that date was irrevocable, and that it was, therefore, outside the operation of the section, (ii) that the settlement was a discretionary trust, that its terms did not, within the meaning of the words of sub-s (8), “provide for” any payments to be made to the settlor or his wife, and that it was therefore not covered by sub-s (8), even if, contrary to contention (i), the provisions of sub-s (8) had any bearing on the construction of sub-s (10), (iii) that the terms of the settlement did not provide for payments to the settlor or his wife within the meaning of the words of

Page 388 of [1939] 3 All ER 386

sub-s (8) “during the life of any child of the settlor,” and that the settlement was therefore not covered by sub-s (8) even if, contrary to contention (i), the provisions of sub-s (8) had any bearing on the construction of sub-s (10), and (iv) that, in any event, the Finance Act 1936, s 21, could not affect any applications of income made before 16 July 1936, when the Finance Act 1936, was passed.

On behalf of the Crown, it was contended (i) that the settlement of 20 June 1932, was not an irrevocable settlement within the meaning of the Finance Act 1936, s 21, but was a settlement to which s 21 applied, (ii) that the settlement provided by cl 2 for payment of income to, inter alios, the settlor or his wife during the life of a child of the settlor to or for the benefit of whom any income might be applicable under the settlement, and (iii) that, in consequence, the settlement of 20 June 1932, was a settlement to which the Finance Act 1936, s 21, applied, and that the whole of the sums applied for the benefit of the respondents children in the course of the year 1936/37 had rightly been included in the computation of the respondents liability to sur-tax for the year 1936/37.

The commissioners decided as follows:

…that the word “irrevocable” in the Finance Act, 1936, s. 21(10), was used in its ordinary sense, and was not to be interpreted by reference to the provisions of subsect. (8). We accordingly held that the settlement of June 20, 1932, was, within the meaning of subsect. (10), “a settlement made or entered into before Apr. 22, 1936, which immediately before that date was irrevocable,” and that it was, therefore, not a settlement to which sect. 21 applied. The sums paid for the benefit of the respondents children during the year 1936/37 should therefore not be treated as the income of the respondent for the purposes of sur-tax for that year.

Accordingly, the assessment of the respondents total income was reduced to £6,298.

The Crown appealed.

The Solicitor-General (Sir Terence OConnor KC), J H Stamp and Reginald P Hills for the appellants.

Cyril King KC and F Grant for the respondent.

9 June 1939. The following judgment was delivered.

LAWRENCE J. This case raises certain questions upon the construction of the Finance Act 1936, s 21. The commissioners have decided the case in favour of the respondent, on the view that the Finance Act 1936, s 21(10), is not affected by s 21(8), and that the settlement in question in this case was an irrevocable settlement within the meaning of sub-s (10), which is to be construed irrespective of sub-s (8), and on that view it was clear, in the opinion of the commissioners, that this settlement was irrevocable. The settlement here in question was made in 1932, in pursuance of articles of agreement made in 1924. It provided that during the life of the husbandthat is, the respondentthe trustees should stand possessed of the settled land upon trust to pay the proceeds for the benefit of all or any one or more exclusively of the other or others of the following persons for the time being in existence, namely, the husband, his wife or his children, in such manner generally as the trustees in their absolute discretion should think fit. Thus, the settlement pro-

Page 389 of [1939] 3 All ER 386

vided that the trustees had absolute discretion to pay to the father, or to any of the children in their absolute discretion. There was no power of revocation in the settlement, so that, in the ordinary sense of the English language, the settlement was not revocable. The question is, however, whether, on the true interpretation of s 21, sub-s (10) must not be read along with sub-s (8), and whether the word “irrevocable” in sub-s (10) is not given an extended meaning by sub-s (8). Sub-s (8) provides as follows:

For the purposes of this section, a settlement shall not be deemed to be irrevocable, if the terms thereof provide(a) for the payment to the settlor or, during the life of the settlor, to the wife or husband of the settlor for his or her benefit, or for the application for the benefit of the settlor or, during the life of the settlor, of the wife or husband of the settlor, of any income or assets in any circumstances whatsoever during the life of any child of the settlor to or for the benefit of whom any income, or assets representing it, is or are or may be payable or applicable by virtue or in consequence of the settlement. …

The contention of the Crown in this appeal is that the judgment of the commissioners was wrong in construing sub-s (10) irrespective of sub-s (8), and that, if one construes sub-s (10) by the light of sub-s (8), the settlement here in question was not an irrevocable settlement within the meaning of sub-s (10), and, therefore, s 21 applies to it. In my opinion, prima facie, sub-s (10) must be read with sub-s (8), because sub-s (8) provides as follows:

For the purposes of this section, a settlement shall not be deemed to be irrevocable. …

Sub-s (10) is, of course, a part of the section. It is contended by counsel for the respondent, however, that the words in sub-s (8) “a settlement shall not be deemed to be irrevocable,” being in the future tense, cannot be treated as applicable to the word “irrevocable” in sub-s (10), because sub-s (10) was clearly dealing with the past, in that it excepted settlements made before 22 April 1936, which immediately before that time were irrevocable. On the other hand, counsel for the Crown contended that, as there are only two parts of s 21 in which the irrevocability of the settlement is mentionednamely, sub-s (3) and sub-s (10)and in both those subsections the past is dealt with, the respondents argument makes the provision of sub-s (8) altogether nugatory. As counsel for the Crown argued, the words used in sub-s (8) really are descriptive, and are not historic, and might just as well have been: “a settlement shall not be deemed irrevocable.” As he said, the point of time considered by sub-s (8) was the point of time when the revenue authorities would be considering whether or not a settlement was then, at that moment, irrevocable, and therefore the words “to be irrevocable” were aptly used. In my opinion, the argument of the Crown on this matter is correct, and there is nothing in the use of the words “shall not be deemed to be irrevocable” instead of the words “shall not be deemed to have been irrevocable” which indicates an intention not to refer in sub-s (8) to the settlements excepted by sub-

Page 390 of [1939] 3 All ER 386

s (10). I am unable, therefore, to agree with the ground upon which the commissioners have based their decision.

However, there are other grounds which were presented to the commissioners which I must consider. The first is as to the words of sub-s (8):

… if the terms thereof [of the settlement] provide(a) for the payment to the settlor. …

It was said that here the terms of the settlement did not provide for payment to the settlor, because the matter rested entirely within the discretion of the trustees, and the trustees might never have paid any money to the settlor. But the subsection then goes on to say, if the terms of the settlement provide “for the payment to the settlor of any income or assets in any circumstance whatsoever.” It is said on behalf of the Crown that a circumstance is the exercise of their discretion by the trustees to pay to the settlor, and that it is impossible to say, when the trustees have exercised their discretion and paid the settlor, that they have not done so in accordance with the provisions of the terms of the settlement. In my opinion, the Crowns argument upon this point is right. I do not think that one can say that one of the circumstances is not the exercise of the discretion of the trustees, and, in that circumstance, the terms of the settlement have provided for a payment to the settlor.

The next point raised on behalf of the respondent is that the settlement in question does not fall within the terms of sub-s (8), because the payment to the settlor provided for by the settlement is not in any way dependent upon the existence of the life of a child, and does not necessarily continue during the life of a child. In my opinion, however, this argument does not hold good, because it is impossible to say that the settlement has not provided for the payment to the settlor in certain circumstances during the life of a child, to whom an income is or may be payable. The trustees had the power under the settlement to pay to the settlor during the life of a child to whom the income might be payable by virtue of the settlement. Such a settlement as that, in my opinion, fulfils the words of sub-s (8). For these reasons, I think, reading sub-s (10) with sub-s (8), as I hold that it must be read, that this settlement is a settlement to which s 21 applies.

The only other point which is raised is as to the period between 6 April and the time when the Finance Act 1936, was passed. It is contended on behalf of the respondent that any income paid during that period would not be affected by s 21. In my opinion, there is no substance in this argument, which depends, I think, on the words of s 21(1):

Where, by virtue or in consequence of any settlement to which this section applies and during the life of the settlor, any income is paid to or for the benefit of a child of the settlor in any year of assessment, the income shall, if at the commencement of that year the child was an infant and unmarried, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.

In my view, it is clear that the year of assessment is the year from 6 April 1936, to 5 April 1937, and not from the time in July when the

Page 391 of [1939] 3 All ER 386

Finance Act received the Royal Assent until 5 April 1937. Equally, the commencement of the year at which time the child must be an infant and unmarried was 6 April 1936. I am of opinion, therefore, that any income paid to the children during the period between 6 April 1936, and the time when the Finance Act 1936, received the Royal Assent is affected by s 21. The appeal will therefore be allowed with costs.

Appeal allowed with costs.

Solicitors: Solicitor to the Inland Revenue (for the appellants); Williams & James (for the respondent).

W J Alderman Esq   Barrister.

Re Browns Settlement, Public Trustee v Brown

[1939] 3 All ER 391


Categories:        SUCCESSION; Family Provision: TRUSTS        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        18, 19 MAY 1939        


Powers Release of power Release as regards one particular object Whether fiduciary relationship between donee and objects Whether distinction between release and covenant not to exercise power.

A settlement executed on 18 September 1895, gave a power of appointment to the survivor of the settlor and his wife exercisable in favour of the issue of the settlor and of his then or any future wife, such issue being born in the lifetime of the settlor, and such appointments to take effect not earlier than the time when such issue should attain 21 years of age or marry. The wife survived the settlor, and then released the power to appoint in favour of a granddaughter, and later by her will made an express appointment in favour of that granddaughter. It was contended that the donee of a power was in a fiduciary relationship to the objects thereof, and could not validly release the power:

Held the release precluded the donee from making any subsequent appointment under the power in the granddaughters favour.

Notes

The judgment in Re Evered makes it clear that the donee of a power can covenant not to exercise it in favour of a particular object of the power. The fact that, in dealing with the similar case of a restriction of the power as to part of the property subject to it, Sir H H Cozens-Hardy MR, had used the words “release or covenant” caused a doubt whether a release was applicable in the case of the exclusion of a particular object. The judgment herein considers all the authorities, and decides that a release in such a case is valid and operates to exclude the particular object from taking any benefit by an exercise of the power subsequent to such a release.

As to Release of Power, see Halsbury (Hailsham Edn), Vol 25, pp 588592, paras 10411044; and for Cases, see Digest, Vol 37, pp 518521, Nos 10921116.

Cases referred to

Re Evered, Molineux v Evered [1910] 2 Ch 147; 37 Digest 520, 1115, 79 LJCh 465, 102 LT 694.

Palmer v Locke (1880) 15 ChD 294; 37 Digest 508, 1008, 50 LJCh 113, 43 LT 454.

Re Little, Harrison v Harrison (1889) 40 ChD 418; 37 Digest 519, 1108, 58 LJCh 233, 60 LT 246.

Re Radcliffe, Radcliffe v Bewes [1892] 1 Ch 227; 37 Digest 520, 1111, 61 LJCh 186, 66 LT 363.

Page 392 of [1939] 3 All ER 391

Davies v Huguenin (1863) 1 Hem & M 730; 37 Digest 520, 1113, 32 LJCh 417, 8 LT 443.

Re Somes, Smith v Somes [1896] 1 Ch 250; 37 Digest 504, 971, 74 LT 49, sub nom. Re Somes, Somes v Somes 65 LJCh 262.

Diggess Case (1600) 1 Co Rep 156b.

Green v Green (1845) 2 Jo & Lat 529; 44 Digest 486, case r.

Re Chambers (1847) 11 I Eq R 518; 37 Digest 517, case n.

Stuart v Kennedy (1851) 3 Ir Jur 305.

Hurst v Hurst (1852) 16 Beav 372; 37 Digest 520, 1112, 22 LJCh 538.

Adjourned Summons

Adjourned Summons taken out by the Public Trustee as the present trustee of a settlement, dated 18 September 1895, made between William Wallace Brown (hereinafter called the settlor) of the one part and Charles Franklin Brown of the other part to determine, inter alia, whether or not the release, by the donee of a power of appointment, of the power to appoint in favour of one of the objects of the power precluded the donee from exercising the power in favour of that object. The defendants to the summons were Leslie Wallace Brown, the settlors son, Kathleen Isabel Brown and Irene Ethelwyn Stafford, the settlors daughters, and Constance Ethelwyn White, a granddaughter of the settlor.

The summons asked (i) whether or not the release operated to preclude Mary Brown from making, under the power of appointment in the settlement, any appointment in favour of Constance Ethelwyn White, (ii) if it did so operate, whether Mary Browns will operated to appoint one-third of the capital of the trust funds comprised in the settlement to Kathleen Isabel Brown absolutely, a life interest in another third to William Wallace Brown, and a life interest in the remaining third to Irene Ethelwyn Stafford, but had no further or other operation as an appointment of the capital, and (iii) if the release did not so operate, whether Mary Browns will operated to appoint one-third of the capital of the trust funds to Kathleen Isabel Brown absolutely, a life interest in another to William Wallace Brown and an absolute interest in remainder in that third to Constance Ethelwyn White, and a life interest in the remaining third to Irene Ethelwyn Stafford, but had no further or other operation as an appointment of the capital.

Geoffrey Cross for the Public Trustee.

F B Alcock for William Wallace Brown, the settlor.

G C Dare for Kathleen Isabel Brown and Irene Ethelwyn Stafford, the settlors daughters.

E M Winterbotham for Constance Ethelwyn White, the settlors granddaughter.

19 May 1939. The following judgment was delivered.

MORTON J. This summons raises an interesting question in regard to the limiting of special powers of appointment which does not appear to be covered by any authority. On 18 September 1895, an indenture of settlement was executed between William Wallace Brown of the one part and Charles Franklin Brown of the other part. It was a settlement of certain securities, and the trusts of the settlement were as follow:

The trustee [Charles Franklin Brown] shall pay the income of the trust funds to

Page 393 of [1939] 3 All ER 391

Mary Brown the wife of the said William Wallace Brown during her life for her separate use and so that she shall not have power to dispose thereof in the way of anticipation and after her death shall pay the said income to the said William Wallace Brown if he shall survive her [William Wallace Brown in fact pre-deceased Mary Brown] and from and after the death of the survivor of them the said Mary Brown and William Wallace Brown shall stand possessed of the trust funds in trust for all or any one or more of the issue of the said William Wallace Brown as well by the said Mary Brown as by any future wife (such issue being born in the lifetime of the said William Wallace Brown) at such ages or times, age or time (not being earlier as to any object of this power than his or her age of 21 years or day of marriage) in such shares if more than one and in such manner as the survivor of them the said Mary Brown and William Wallace Brown shall by deed or will appoint and in default of such appointment and so far as any such appointment shall not extend in trust for all the children of the said William Wallace Brown as well by the said Mary Brown as by any future wife who being a son or sons shall attain the age of 21 years or being a daughter or daughters shall attain that age or marry in equal shares and if there shall be only one such child the whole to go to that one child.

Then follows a hotchpot clause and an ultimate trust if there should be no child to take in trust for the settlor, William Wallace Brown, absolutely. William Wallace Brown died on 1 January 1914. He was married once onlynamely, to Mary Brownand there were issue of such marriage 3 children, all of whom were born during the lifetime of William Wallace Brown and have attained the age of 21 years. One of these 3 childrennamely, Leslie Wallace Brownis married, and has one child and no morenamely, the defendant to this summons, Mrs Constance Ethelwyn White, who was born on 5 May 1909. Accordingly, she was born during the lifetime of William Wallace Brown, and is one of the objects of the special power of appointment given to Mary Brown, in the events which have happened, by the settlement of 18 September 1895. On 21 August 1928, Mary Brown executed what is described in the opening words as a “release.” It is a deed poll, and it begins as follows:

This release is made by Mary Brown of Enfield House, Baring Road, Grove Park, in the county of London, widow.

Then there follow a recital of the material parts of the settlement of 18 September 1895, and a recital of the family of William Wallace Brown and Mary Brown. Then there is a recital that there were issue Leslie Wallace Brown, a son of that marriage born during the lifetime of the said William Wallace Brown and that he had one daughter bornnamely, Constance Ethelwyn Brown, who is an infant. Constance Ethelwyn Brown married Mr White, and is the defendant Constance Ethelwyn White. Then the document proceeds as follows:

And whereas the said William Wallace Brown died on 1 January 1914, and whereas the said Mary Brown has determined to relase the power of appointment in favour of the said Constance Ethelwyn Brown which in the events which have happened is vested in her by the settlement Now This Deed Witnesseth that in pursuance of such determination she the said Mary Brown hereby releases the trust funds or the stocks funds shares and securities now or at any time hereafter representing the same from the power of appointment in favour of the said Constance Ethelwyn Brown so vested in her as aforesaid.

Looking only at the terms of this deed, I think that it is in the plainest possible terms a release of the whole of the trust funds from the power of appointment in favour of one particular member of the class of possible objects of the power, and the intention is declared that she, Mary Brown,

Page 394 of [1939] 3 All ER 391

the donee of the power, may be absolutely precluded from exercising the power in favour of that particular object of the power.

Mary Brown made her will on 15 September 1937. After certain dispositions, which I need not read, she devised and bequeathed her residuary real and personal estate unto her trustees upon trust for sale and conversion, with power to postpone such sale and conversion, and she directed that out of the clear moneys to arise from such sale and conversion her trustees should pay her debts, funeral and testamentary expenses, and the legacies given by that her will or any legacies given by any codicil thereto, and the duties on all legacies given free of duty. The will proceeded as follows:

…and subject thereto my trustees shall stand possessed of the proceeds of sale calling in and conversion of my said real and personal estate and any money belonging to me at my death and any part or parts of my said real and personal estate for the time being unconverted (hereinafter called my residuary estate) upon the following trusts namely (a) my trustees shall divide my residuary estate into 3 equal shares or parts and shall pay or apply one equal third share or part to my said daughter Kathleen Isabel Brown absolutely (b) my trustees shall stand possessed of another equal third share or part of my residuary estate or of the investment representing the same (hereinafter called the L. W. Brown fund) upon trust for my son Leslie Wallace Brown and his daughter the said Constance Ethelwyn White upon the trust and subject to the conditions hereinafter mentioned (c) my trustees shall stand possessed of the remaining one-third share or part of my residuary estate (hereinafter called the I. E. Stafford fund) upon trust for my daughter Irene Ethelwyn Stafford and her sons upon the trusts and subject to the conditions hereinafter mentioned.

Leslie Wallace Brown, Kathleen Isabel Brown and Irene Ethelwyn Stafford were the 3 children of the marriage of William Wallace Brown and Mary Brown. Clause 6 is in the following terms:

My trustees shall stand possessed of the L W Brown fund upon the trusts following that is to say (a) to pay the income thereof to my said son Leslie Wallace Brown during his life and from and after his death (b) upon trust as to both capital and income for his said daughter Constance Ethelwyn White absolutely.

Clause 7 sets out the trusts of the I E Stafford fund, which are trusts in favour of Irene Ethelwyn Stafford during her life and after her death upon trust in favour of her two sons. I need not read that at length, but there is the following provision:

And in the further event of both the said sons failing to attain the age of 25 years and dying without leaving issue who attain the age of 21 years then the I. E. Stafford fund shall go and accrue in equal proportions to augment the share of my residuary estate given to my said daughter Kathleen Isabel Brown and the L. W. Brown fund respectively.

Clause 8 provides as follows:

In exercise of the power conferred upon me by a settlement dated Sept. 18, 1935, and made between my husband William Wallace Brown of the one part and Charles Franklin Brown of the other part I hereby appoint that the trust funds shall be held by the trustee or trustees for the time being of the said settlement upon similar trusts mutatis mutandis as those declared by cll. 6 and 7 of this my will in respect of my residuary estate in favour of my said daughter Kathleen Isabel Brown my said son Leslie Wallace Brown and his daughter and my said daughter Irene Ethelwyn Stafford and her sons as therein mentioned.

For reasons which I shall state hereafter, I have no doubt that the reference to cll 6 and 7 of the will was intended to be a reference to cll 5, 6

Page 395 of [1939] 3 All ER 391

and 7 of the will, and that I ought to supply in this case a reference to cl 5. However, apart altogether from that question, it is to be observed that the testatrix, having in 1928 released the trust fund from the power of appointment in favour of Constance Ethelwyn White, has by cl 8 appointed that one-third of the settlement fund over which she has this special power of appointment shall be held upon trust to pay the income to Leslie Wallace Brown during his life and from and after his death upon trust as to both capital and income for Constance Ethelwyn White absolutely.

Mary Brown died on 19 April 1938, and the first question which I have to decide is whether or not the release of 21 August 1928, operated to preclude Mary Brown from making any appointment thereafter in favour of the defendant Constance Ethelwyn White under the power of appointment reserved to Mary Brown by the settlement of 1895. I have been referred to the judgments of the Court of Appeal in Re Evered Molineux v Evered, and in particular to the judgments of Sir H H Cozens-Hardy MR, at pp 156, 157, and of Buckley LJ, at p 161. Sir H H Cozens-Hardy MR, after dealing with the particular case which he had to decide, proceeded as follows, at pp 156, 157:

I think it will be convenient to state shortly some of the propositions which are either elementary and beyond dispute or which have been so settled by authority as to bind us. In the first place, a power to appoint by will cannot be executed by deed. In the second place, a covenant to appoint by will in a particular way cannot be the subject of specific performance or have any legal operation: Palmer v. Locke. In the third place, an exercise of the power by will is not rendered invalid by reason of the fact that the appointor has covenanted to make such an appointment, there being no other circumstances which might render the appointment invalid apart from the covenant: see Palmer v. Locke. In the fourth place, a release by the appointor, or a covenant by the appointor not to exercise the power, is not open to objection even though the effect of the release is for the benefit of the appointor. This is expressly enacted by the Conveyancing Act, 1881, s. 52, and decided by this court in Re Little, Harrison v. Harrison and Re Radcliffe, Radcliffe v. Bewes. In the fifth place, such a release or covenant may apply either to the whole of the settled property or to a part only, leaving the power intact as to the rest of the property.

Pausing there, it is manifest that Sir H H Cozens-Hardy MR, has not dealt with the case which I have to decide, which is a case where the donee of the power purported to release the trust fund from the power of appointment in favour of one of the classes of beneficiaries who were objects of the special power. Then Sir H H Cozens-Hardy MR, proceeds as follows, at p 157:

In the sixth place, the appointor may covenant not to exercise his power in favour of a particular object of the power, and in such case the power could thereafter only be exercised subject to the fetter or limitation thus imposed by the negative covenant.

It is to be noted that, when Sir H H Cozens-Hardy MR, is dealing with a release of the whole or a part of the settled property, he uses the words “a release” or “a covenant,” but, when he is dealing with the case where it is intended to exclude any particular object of the power from any appointment, he uses the word “the appointor may covenant,”, and Mr Winterbotham, who has argued that this release is of no effect,

Page 396 of [1939] 3 All ER 391

has relied upon that as indicating that, while there may be a release of a power of appointment so far as regards a part of the property, there may not be a release of the power of appointment so far as regards one  or more of the objects of the power. It is certainly clear, I think, that Sir H H Cozens-Hardy MR, is not in any way stating the law in regard to the precise point which I have to decide, but I think his judgment is of great assistance to me, for reasons which I shall state shortly. Buckley LJ, said in Evereds case, at p 161:

The law is that the donee of a power exercisable only by will cannot by deed appoint or do any act equivalent to appointing the fund or any part of it. He cannot affirmatively by deed affect the fund in any way. But he can by deed negatively tie his own hands as to the manner in which he shall thereafter exercise his testamentary power. He can release his power or covenant that he will never exercise it (which will be equivalent to a release), or can covenant that he will not exercise it so that a defined distribution of the fund or of some part of it shall not result. Thus he may covenant that a particular beneficiary shall not have less than a certain share. In such a case he will retain his power over the whole fund, but will be restricted as to the use of the power. He will remain at liberty to exercise the power by appointing by will to that beneficiary the named sum or share, or by so appointing by will to other beneficiaries as that there shall remain unappointed such a sum as, with the assistance of a hotchpot clause, if any, shall result in the particular beneficiary receiving the named sum or share. But he will by reason of his covenant be precluded from so exercising the power as that his covenant shall be defeated. Any act purporting to be an exercise of the power which will defeat the covenant will be an invalid exercise of the power to the extent to which the covenant will be defeated. Subject to what I have to say as to Davies v. Huguenin, all the authorities seem to me consistent with this view of the law.

I apprehend that, when Buckley LJ, says that he may covenant that a particular beneficiary shall not have less than a certain share, it would equally be true to say that he may covenant that a particular beneficiary shall not have any share at all. There again, however, one gets this reference to a covenant when Buckley LJ, is dealing with cutting out a particular object of the power.

The other cases to which I have been referred are, first of all, Re Somes Smith v Somes, which decided as follows:

The fact that a release of a limited power of appointment will result in a benefit to the donee of the power is not sufficient to make the release fraudulent and void. The doctrines applicable to the fraudulent exercise of a power of appointment do not apply to the release of a power not coupled with a duty.

In that case, Chitty J, said, at p 255:

… I may say that it appears to me that there is a fallacy in applying to a release of a power of this kind the doctrines applicable to the fraudulent exercise of such a power. There is no duty imposed on the donee of a limited power to make an appointment there is no fiduciary relationship between him and the objects of the power beyond this, that if he does exercise the power of appointment, he must exercise it honestly for the benefit of an object or the objects of the power, and not corruptly for his own personal benefit; but I cannot see any ground for applying that doctrine to the case of a release of a power; the donee of the power may, or he may not be acting in his own interest, but he is at liberty, in my opinion, to say that he will never make any appointment under the power, and to execute a release of it.

Thus, it appears that the donee of a power is not in a fiduciary relationship to the class of people who are objects of the power. He can release the power so that he will be precluded thereafter from exercising it in

Page 397 of [1939] 3 All ER 391

favour of any of the objects. That being so, it would seem that there is no logical reason prima facie for holding that he cannot release the power to a limited extent so as to preclude himself from afterwards making an appointment in favour of one particular object of the power. Mr Winterbotham has referred me to Sugden on Powers, 8th Edn, pp 82, 83, and in particular to the following passage on p 83:

It seems to have been doubted whether a power can be released in part; but there appears to be no sufficient foundation for the doubt.

At first sight, that passage would seem to be helpful, but Mr Winterbotham has referred me to the case cited, which is Diggess case, and I think he is right in saying that the observation in Sugden on Powers probably applies only to a release of a part of the property which is subject to the power from the power of appointment. I cannot found myself upon that passage. Then Mr Winterbotham has also referred me to Green v Green, and in particular to where Sugden LC, said, at p 541:

There is no doubt upon the authorities, that a man having a power, may bind himself not to execute it, save subject to particular restrictions and conditions. He may release it altogether; or covenant to execute it in a particular manner and the court will give effect to such a covenant. Where the donee of the power restricts and limits himself in the execution of it, he must execute it accordingly, or not at all.

Mr Winterbotham relies on that passage by reason of the contrast in the words: “He may release it altogether; or covenant to execute it in a particular manner …” I do not think, however, that there is any limit upon the generality of the words which follow:

Where the donee of the power restricts and limits himself in the execution of it he must execute it accordingly, or not at all.

These words may be directed only to a restriction and limitation by covenant, but they are equally applicable as they stand to a restriction or limitation by deed which is not a deed of covenant. I do not think that I need refer to the other cases cited by Mr Winterbotham of Re Chambers and the subsequent case of Stuart v Kennedy, as I do not think that they carry the matter any further.

It is clear from Re Evered, Molineux v Evered and the summary of the law which I have quoted that an appointor may covenant not to exercise his power in favour of a particular object of the power, and that in such a case the power could thereafter only be exercised subject to the fetter or limitation imposed by the negative covenant. That being so, I cannot see any good reason why I should hold that the donee of a power may not by deed release the property subject to the power from the power, so far as relates to a particular object, with the intent of precluding himself from appointing in favour of that object. The reason why a covenant can have this effect is stated as follows in Farwell on Powers, 3rd Edn, p 19:

The powers to which the rule refers [the rule which appears on p. 16 of the edition] may be affected either by dealings inconsistent with their exercise or by express

Page 398 of [1939] 3 All ER 391

or implied release. A covenant or agreement not to execute a power operates in equity, either entirely or pro tanto, as the case may be, as a release of the power.

Hurst v Hurst and Davies v Huguenin are then cited, and the paragraph proceeds as follows, at p 19:

And a covenant may have this effect, although it is merely voluntary.

It appears to me that, if a covenant operates in equity as a release of the power pro tanto, and a covenant may have this effect, although it is merely voluntary, there can be no good reason why a donee should not achieve the same result by executing a release which is not in the form of a covenant at all. By the Law of Property Act 1925, s 155, it is provided as follows:

A person to whom any power, whether coupled with an interest or not, is given may by deed release, or contract not to exercise, the power.

In the present case, in the events which have happened, Mary Brown had a power to appoint amongst a number of people, of whom Constance Ethelwyn White was one. She chose to release the property subject to the power from any power she had to appoint in favour of Constance Ethelwyn White. I can see no reason why that document should be invalid, and I propose to hold, in the absence of any authority which counsel have been able to find which decides the matter one way or the other, that the release in question operated to preclude Mary Brown from making any appointment thereunder in favour of the defendant Constance Ethelwyn White.

As to question (ii), after careful consideration I have decided that, cl 8 of this will, which refers to the trusts declared by cll 6 and 7 of the will, ought to be read as including a reference also to cl 5. I think that the present case comes precisely within the principle which is stated as follows in Jarman on Wills, 7th Edn, p 556:

Where it is clear on the face of a will that the testator has not accurately or completely expressed his meaning by the words he has used, and it is also clear what are the words which he has omitted, those words may be supplied in order to effectuate the intention, as collected from the context.

In the present case, I think that it is abundantly clear that the testatrix intended to insert the number 5 before the number 6 in cl 8. She refers in cl 8 to:

…similar trusts mutatis mutandis as those declared by cll. 6 and 7 of this my will in respect of my residuary estate in favour of my said daughter Kathleen Isabel Brown my said son Leslie Wallace Brown and his daughter and my said daughter Irene Ethelwyn Stafford and her sons as therein mentioned …

If one inserts a reference to cl 5, that is a perfectly clear and sensible clause. By cll 5, 6 and 7, trusts were declared in respect of the residuary estate in favour of the persons named. On the other hand, if cl 5 is omitted, trusts are not declared in favour of the residuary estate at all, but in favour of the L W Brown fund and the I E Stafford fund, and nothing is given to Kathleen Isabel Brown except an ultimate remainder in one-half of the I E Stafford fund in a certain event therein mentioned.

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I cannot believe that the testatrix intended cl 8 to have only this operation so far as Kathleen Isabel Brown was concerned, and, moreover, unless I insert a reference to cl 5, I think that it is uncertain what shares of the appointed fund are dealt with by cl 8. For these reasons, I have no hesitation in writing in a reference to cl 5.

Solicitors: Alfred Powell (for the Public Trustee); Long & Gardiner (for the settlor); Goodman Brown & Co (for the settlors daughters); Rochester Pusey & Co (for the settlors granddaughter).

T A Dillon Esq   Barrister.

Milne v Commissioner of Police for City of London

Leonard v Commissioner of Police for City of London

Boundford v Commissioner of Police for City of London

[1939] 3 All ER 399


Categories:        CRIMINAL; Criminal Law, Sentencing: LEISURE AND LICENSING        

Court:        HOUSE OF LORDS        

Lord(s):        LORD MAUGHAM LC, LORD ATKIN, LORD MACMILLAN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        20, 21, 24 APRIL, 27 JUNE 1939        


Gaming and Wagering Betting houses Club Used by bookmaker Special user Betting Act 1853 (c 119), s 3.

The defendant M was the manager of a club the members of which came there in the afternoon during the hours when bets are usually made. A servant of a bookmaker had an office directly above the premises occupied by the club, and the members of the club placed their bets with him by telephone. It was not proved that there was any ready-money betting, but it was proved that the servant of the bookmaker came down to the club premises after the result of each race had been declared, whereupon the members either received their winnings or paid their losses. The judge directed the jury that it was not sufficient that the bookmakers servant should use the club premises as an ordinary member of the club, but that it was necessary that he should have had some special user of the club for the purpose of the betting transactions. He added: “… supposing the bookmaker was present and that what was said on the telephone was said to him in person, then, clearly, the premises would be used for the purpose of making bets.” The jury convicted the defendant M, with two other defendants, of conspiring together to keep a betting house, contrary to the Betting Act 1853, s 3:

Held the mere use of the telephone, in the circumstances of this case, was not a sufficient user to establish the offence of using the premises for betting purposes. It was wrong to shift the local situation of the bookmaker from the place in which he was when using the telephone to the club premises. In this respect, the jury were not properly directed, and the convictions must be set aside.

Decision of Court of Criminal Appeal ([1939] 1 All ER 529) reversed.

Notes

The real point in this case is whether club members using the telephone on the club premises for the purpose of betting with a bookmaker thus cause the bookmaker to be using the premises for betting purposes. In the courts below, the view had been taken that, as the bookmaker had, and was using, a room immediately above the club premises, there was a colourable user of those premises. The House of Lords have rejected this view, and, so long as

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the bookmaker is not actually on the club premises, there is no user of the premises.

As to User of Premises for Purposes of Betting, see Halsbury (Hailsham Edn), Vol 15, pp 513516, paras 919921; and for Cases, see Digest, Vol 25, pp 445, 446, Nos 380394.

Cases referred to

Samuel v Adelaide Club Ltd [1934] 2 KB 69; Digest Supp, 103 LJKB 561, 151 LT 116.

Powell v Kempton Park Racecourse Co [1899] AC 143; 25 Digest 441, 358, 68 LJQB 392, 80 LT 538, affg [1897] 2 QB 242.

Hawke v Dunn [1897] 1 QB 579; 25 Digest 437, 339, 66 LJQB 364, 76 LT 355.

Young v Darrah [1929] SC (J) 17; Digest Supp.

R v Brown [1895] 1 QB 119; 25 Digest 446, 395, 64 LJMC 1, 72 LT 22.

R v Preedy (1888) 17 Cox CC 433; 25 Digest 436, 337.

R v Deaville, R v Deaville, R v Simpson [1903] 1 KB 468; 25 Digest 446, 392, 72 LJKB 272, 88 LT 32.

R v Crawshaw (1860) Bell CC 303; 25 Digest 457, 457, 30 LJMC 58, 3 LT 510.

Bradford v Dawson [1897] 1 QB 307; 25 Digest 445, 385, 66 LJQB 191, 76 LT 54.

Appeals

Appeals from an order of the Court of Criminal Appeal (Lord Hewart LCJ, Charles and Humphreys JJ), dated 19 December 1938, and reported [1939] 1 All ER 529, affirming convictions for conspiring together to keep a betting house, contrary to the Betting Act 1853, s 3. The facts; and the arguments are fully set out in the opinion of Lord Wright.

A T Denning KC and H C Leon for the appellants.

J G Trapnell KC and E Clarke for the Crown.

27 June 1939. The following opinions were delivered.

LORD MAUGHAM LC. My Lords, this is an appeal from the decision of the Court of Criminal Appeal of 19 December 1938, in the matter of the convictions of Florence Milne, John Charles Leonard and Howard Boundford, under the Betting Act 1853. The appeals of those persons to the Court of Criminal Appeal were dismissed, and the persons convicted have each of them presented petitions of appeal, the certificate of the Attorney-General that the decision of the Court of Criminal Appeal involved a point of law of exceptional public importance having been duly obtained.

The facts will be carefully stated by my noble and learned friend Lord Wright, whose opinion I have had the advantage of reading, and I will not detain your Lordships by going through them. It will be sufficient to say that the indictments were based on a conspiracy to keep a betting house, and on the keeping of a betting house contrary to the Betting Act 1853, s 1, and one of the appellantsnamely, the appellant Boundfordwas charged with assisting in keeping a betting house, contrary to the Betting Act 1853, s 3. The trial took place before His Honour Judge Beazley and a jury. The three appellants were found guilty. The appellant Milne was sentenced to pay a fine of £50, and the appellants Boundford and Leonard were sentenced to pay a fine

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of £25. The appeal to the Court of Criminal Appeal was based on the contention that the judge had given a wrong decision on a question of law, that there had been certain misdirections, and that there had been a miscarriage of justice. In the Court of Criminal Appeal, which consisted of Lord Hewart LCJ, and Charles and Humphreys JJ, it was held that there was no ground for interfering with the convictions, and the appeal was dismissed.

The facts may be summarised by saying that the appellant Milne was the tenant of the first floor of No 72, Bartholomew Close, in the City of London, where she carried on the business of the Byculla Club, which was largely used by the members for the purpose of betting, that the appellant Boundford had assisted her in the management of the club, of which he was a member, and that the appellant Leonard, who was also a member of the club, and made many bets whilst there, was alleged to be aware of an undefined arrangement made between the appellants Milne and Boundford for facilitating the betting of members. The fee for membership was ls per annum. The bookmaker, with whom most of the bets by members were made, was one Payne. There were 2 public telephones, and the bets of the members were made with Payne, who did not himself come into the premises for the purpose of betting, by the use of one or other of those telephones. There was no ready-money betting on the club premises. A clerk employed by Payne, one Green, occupied some premises taken in the name of Payne above the club premises. The amounts won or lost by members upon the bets by telephone were communicated by Payne to Green by a telephone to Greens room, and, after the days racing was over, members settled their accounts with Green in the rooms on the second floor, although on occasions Green came down to the club premises and settled those matters with the appellant Milne.

This summary is not in any way intended to represent the whole of the case against the appellants, for which reference should be made to the judgment of my noble and learned friend Lord Wright, and I also accept and gratefully adopt his statements as to the indictment, the directions given to the jury by His Honour Judge Beazley, the decision of the Court of Criminal Appeal, and the two main objections to the summing up. For the purpose of my remarks, I propose to assume that the club premises were used mainly as a betting club, that all three appellants were fully aware of the methods employed for facilitating betting by members, but, on the other hand, that the bets were made on a public telephone with Payne (and sometimes with other bookmakers), who did not come to the club premises for that purpose. I should add that the judge, on the authority of a case which I shall consider laternamely, Samuel v Adelaide Club Ltdwas of opinion that the use of the telephone by Payne or others for the purpose of making bets with members was such a use of the club premises as would justify the jury in finding that the position was precisely the same as if the bookmaker was actually

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on the premises, or was standing at the door of the club and making bets with the members. The Court of Criminal Appeal adopted the same view. One of the questions which your Lordships have to decide is whether this view, which formed part of the directions to the jury, was correct.

In the present instance, we are dealing with a case where there was “an office, room or other place used for the purpose” of betting taking place with “persons resorting thereto.” The rooms, as I have said, were a part of No 72, Bartholomew Close, and the “persons resorting thereto” were the members of the Byculla Club, which occupied those premises. The question as to what is a place, which in other cases has occasioned a good deal of doubt, does not arise here. The difficult question is in relation to the activities of the bookmaker Payne. It is beyond dispute that betting is not an unlawful act, and that no offence is committed by opening, keeping, or using a club for the purpose of the members betting with each other. To justify a conviction under ss 1, 3 and 4 of the Act, the place must be opened, kept, or used for one of the two purposes mentioned in s 1. The first purpose is the one asserted to apply here. That is, it is said that the place was open, kept, or used for the purpose of certain specified persons betting with (in this case) the members of the club. These persons must be in one or more of the following descriptions or categories, in s 1 of the Act:

…(1) the owner, (2) occupier, or (3) keeper thereof, or (4) any person using the same, or (5) any person procured or (6) employed by or (7) acting for or on behalf of such owner, occupier, or keeper, or person using the same, or (8) of any person having the care or management or (9) in any manner conducting the business thereof …

I have supplied the numbers for the sake of clarity, and have italicised the words which are said to apply.

It is alleged for the prosecution that the bookmaker Payne “used” the club rooms for betting with the members who were there, and the question is whether or not he so used them within the meaning of the word “use” in that part of s 1 of the Act. To avoid misconception, I will add that the difficulty is not as to the word “used” in the preliminary words “shall be opened, kept, or used,” as to which there is no trouble in the present case, but as to the words employed in the description of the first purpose mentioned in the sectionnamely, “… for the purpose of the owner, occupier, or keeper thereof, or any person using the same …” In what follows, I am mainly confining my remarks to the meaning of “person using the same” in this part of the section.

The Betting Act 1853, is certainly not a model of good drafting, and a generation of judges has been puzzled by it. The numerous decisions in regard to the sections cannot altogether be reconciled, but, on the other hand, it is, I think, impossible for this House wholly to disregard them and to start de novo. It is, moreover, plain that we are bound to follow the decision of this House in Powell v Kempton Park Racecourse

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Co, if, and in so far as, it applies. It may be useful to attempt a simplification of ss 1, 3 and 4 of the Act. For that purpose, I shall employ the word “place” for the words “house, office, room or other place,” the word “used” for “opened, kept, or used,” and the words “any designated person” for the nine classes or categories I have above mentioned. With these abbreviations, ss 1, 3 and 4 would in substance run as follows, the numbers and letters being supplied by me for the sake of clarity:

1. No “place” shall be “used” (1) for the purpose of “any designated person” betting with persons resorting thereto or (2) for the purpose of any money or valuable thing being received by or on behalf of “any designated person” (a) as … consideration for any … promise, or agreement … to pay … thereafter any money or valuable thing on any event … relating to … sport, or exercise, or (b) as … consideration for … the paying or giving by some other person of any money or valuable thing on any such event. …

3. Any person who, being the owner or occupier of any “place” or a person using the same; shall “use” the same for the purposes … mentioned … and any person who being the owner or occupier of any “place,” shall knowingly … permit the same to be “used” by any other person for the purposes … and any person having the care or management of or … assisting in conducting the business of any “place” “used” for the purposes … shall, on summary conviction … be liable to [a fine of £100 or 6 months imprisonment].

4. Any person, (a) being the owner or occupier of any “place” “used” for the purposes aforesaid, or either of them, or (b) … acting … on behalf of … such owner or occupier, or (c) … having the care or management or … assisting in conducting the business thereof, who shall receive … any money or valuable thing as a deposit on any bet on condition of paying any … money … on the happening of any event or contingency of or relating to … any … race, or any fight, game, sport, or exercise, or as or for the consideration for any … promise, or agreement … to pay … money … on any such event or … (d) giving any acknowledgment … on the receipt … purporting … to entitle the bearer … to receive any money … on … any … event … shall [be liable to a fine of £50 or 3 months imprisonment].

Some points on these somewhat artificial provisions are worth noting. S 1 deals with the user of the place for one of two defined purposes, and the user is made a common nuisance and illegal. The sanctions are in ss 3 and 4, and they both refer to the user of the place for one or other of the purposes mentioned, but the sanctions are more severe under s 3 than under s 4. It may be noted in passing that, under s 3, the persons mentioned in 6 of the categories above-mentioned (the owner, occupier, keeper, the person using, the person managing, and the person conducting the business) are made liable, but it omits the persons procured, and the persons employed on behalf of the owner, etc, and the agent of the manager. S 4 inflicts the lower penalty on all the 9 classes or categories who receive money, etc, as a deposit or on a promise to pay, or who give an acknowledgment or receipt.

As I have already said, the question arises whether Payne was a “person using” the placenamely, the club premisesand, in order to answer this question, it is necessary to determine as a matter of construction what meaning is to be given to the word “using,” having regard to its association with the words “owner, occupier, or keeper” of the place. The “person using” may clearly procure or employ, or appoint an agent to bet, but that does not take us very far. It is

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also clear (from s 3) that a person using the place may use it for the purpose of some person using the place betting with persons resorting thereto, and that the owner or occupier may permit the place to be used by any other person for the purpose of some person using the place betting with persons resorting thereto. The constant repetition of the word “using”not always, it would seem, in the same sense is one of the circumstances which has given rise to decisions which are not very easy to reconcile.

The important case of Powell v Kempton Park Racecourse Co must now be considered. It did not, of course, arise on a prosecution under the terms of the Betting Act. The matter was brought before this House by means of a friendly action brought by a shareholder in the company against the company, for the purpose of obtaining a decision as to the legality of the betting carried on in an uncovered enclosure of about a quarter-of-an-acre adjacent to the racecourse, to which enclosure the public, including bookmakers, were admitted on payment of a small entrance fee. The injunction was to restrain the use of that part of the companys premises for what was alleged to be an illegal purpose, and the question before this House was whether the purpose for which the enclosure was in fact being used was illegal. If it was, the injunction ought to have been granted. If not, the action ought to have been dismissed. It may be mentioned that there were one or two hundred professional bookmakers accustomed to attend in the enclosure, and from five hundred to two thousand members of the public, most of whom entered the enclosure for the purpose of backing horses with the bookmakers. The bookmakers, who were accompanied by their clerks, did not use any apparatus, such as a desk, stool, umbrella or tent, but particular bookmakers were usually to be found in or near the same part of the enclosure calling the odds to attract backers. This use of the enclosure was known to, and permitted by, the company.

The trial judge was Lord Russell of Killowen LCJ, who, upon the authority of Hawke v Dunn, gave judgment for the plaintiff and granted the injunction. The Court of Appeal, consisting of Lord Esher MR, and five Lords Justices, allowed the appeal (Rigby LJ, dissenting), but in the elaborate judgments the main point was taken to be whether the enclosure to which I have referred could be described as a place within the meaning of the Betting Act 1853, ss 1, 3. In this House, the appeal was dismissed, and Hawke v Dunn was overruled. There were only two opinions with full reasons for the decision of the noble Lords, the elaborate opinion of the Earl of Halsbury LC, and a shorter one by Lord James of Hereford. The former was concurred in as regards the conclusion by six Lords. Lord Watson stated that he was of the same opinion “for substantially the same reasons.” Lord Macnaghten and Lord Morris simply concurred in the motion proposed by the Earl of Halsbury LC

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Lord Shand was of the same opinion. Lord James of Hereford concurred in the proposed motion on the ground that the enclosure was not within the word “place” upon the true construction of the sections already referred to. Lord Herschell, who was present at the hearing, and who saw the opinion of the Earl of Halsbury LC, but did not live to hear it delivered, had concurred in the views expressed by the Earl of Halsbury LC. The Lord Chancellor of Ireland, who had assisted at the hearing, said that he also agreed with the judgment proposed to the House. On the other hand, Lord Hobhouse and Lord Davey delivered dissenting judgments.

It should be noted at the outset that the Earl of Halsbury LC, stated that he did not think that the important question was, what is a place? He said that any place which is sufficiently definite and in which a betting establishment might be conducted would satisfy the words of the statute. From his opinion, it seems that in his view the true ground on which the case fell for decision was the meaning to be given to the word “using” in the phrase “for the purpose of owner, occupier or keeper thereof, or any person using the same betting with persons resorting thereto,” and, after criticising the reasoning of Lord Hobhouse and Lord Davey he said, at p 160:

It is not the repeated and designed, as distinguished from the casual or infrequent use which the employment of that word imports here, but the character of the use as a use by some person having the dominion and control over the place, and conducting the business of a betting establishment with the persons resorting thereto.

A little later he says, at pp 161, 162:

It seems to me clear that the thing against which the enactment is levelled is any place used in the sense I have explained. There must be a business conducted, and there must be an owner, occupier, manager, keeper, or some person who, if these designations do not apply to him, must nevertheless be some other person who is analogous to and is of the same genus as the owner, keeper, or occupier who bets or is willing to bet with the persons who resort to his house, room, or other place. In this view it is not an offence under this Act of Parliament to allow persons to assemble for the purpose of betting with each other; there is, upon this hypothesis, no business being conducted at all. The different betting people, or each individual bettor, is conducting his own business, and doing it in a house used indeed, but only used, just as he might do it on the racecourse or on the high-road. There is no betting establishment at all, and there is no keeper of one.

It is important to note that the Earl of Halsbury LC, expressed strong approval of what he called the “luminous judgment” of A L Smith LJ, in the Court of Appeal, and I think it is desirable to quote a passage from that judgment which the Earl of Halsbury LC, must, I think, be taken to be approving. A L Smith LJ, after an elaborate consideration of the various sections, observed, at p 276:

If a person carries on the business of betting in a place akin to a betting house whether such place is set up upon a racecourse or elsewhere, then he is guilty of the betting made illegal by the Act, for he is then carrying on the business of a betting house in a prohibited place. There must however be an user such as takes place in the keeping of a betting house or office to be within the Act, and the user of a place in common with mankind in general is not such an user as is contemplated by the Act. It is this user of the prohibited place for the business of betting which is struck at by the Act.

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My Lords, I am not able to take the view that this House is bound to accept the language of the Earl of Halsbury LC, as if the words employed were those of a statute. The passage which I have quoted, which requires that the character of the use must be a use by some person having the dominion and control over the place, is a passage which, I think, cannot be regarded as being expressed in technical language. The word “dominion,” as its derivation shows, is one which in strictness indicates that the person has a legal right over the place and can in general exclude others by virtue of that dominion, and I doubt very much whether the word “control” is used in a sense indicating that the person has the right either of legal control or of exclusive control. I am confirmed in my opinion by the view that a succession of judges during the last half-century has given a somewhat wide meaning to the phrase in question. I cannot think that at this date it would be possible to doubt that dominion and control must include dominion or control de facto. I agree with the judgment of Lord Justice-General Clyde in Young v Darrah, when he said, at p 21 :

I think Lord Halsburys dictum must be interpreted, not necessarily to refer to any kind of de jure dominion or control, but to include dominion or control de facto.

I do not take the view that this means that the user in question is equivalent to the popular sense of the words “making use of,” and, if there must be some description of the limitation which, I think, should be placed upon the phrase “person using the same,” I prefer the language of A L Smith LJ, with which, as I have said, I think the Earl of Halsbury LC, agreed, that the user must be such as takes place in the keeping of a betting house, or, I will add, the carrying on of some kind of betting business in some localised place in order to come within the Act. I doubt whether it is satisfactory to substitute for the words “dominion and control” a reference to permissive user, or an introduction of what I may call the doctrine of permission. Admittedly there was a permissive user in the Kempton Park case. Nor do I think it is proper to divide the racecourse decisions from those relating to other premises, except in so far as the actual facts of each case may require different considerations arising from those facts. Finallyand this is the decisive feature, as I think, as regards the question with which I am dealingI can find no words in any part of the Act, including the preamble, which justify the view that the user involves a dominion and control, using the words in the ordinary legal sense.

The question must now be answered, did Payne, by employing public telephones for the purpose of sending and receiving messages to and from the members in the club, so communicate with, or make such an employment of, the club premises that he was “a person using the same” within the meaning of the Act? The answer, if I am right so far, must

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depend on whether the user was in a fair sense a user similar or analogous to that which takes place when an owner, occupier, or keeper of a house or place carries on a betting business there with persons resorting to it. Before we answer this question, we should consider what the position would be if Payne had sent letters, or telegrams, through the Post Office to members of the club at the club premises. Would that make Payne “a person using the club” within the section? If so, what shall we say if the members of the club take the initiative and ring up the bookmaker, who merely answers by quoting the odds and accepting the bets? Does he “use” the premises if he merely uses a public telephone for that purpose? Does a man who speaks to a house, whether near or distant, by means of a public telephone for any purpose “use” the house within the sense of that word in s 1 of the Act? If the view I have indicated as to the meaning of the decision in the Kempton Park case is accepted, it does not seem to me possible to answer these questions in the affirmative, because there is in truth in such cases (assuming there is nothing more to indicate user of the place) no use similar or analogous to that which exists when an owner, occupier, or keeper carries on a betting business in the place.

My Lords, I think we are driven to the conclusion that the owner or other persons in control of the place who open, keep or use it for the first purpose mentioned in s 1 of the Act are only doing something illegal if the “user” is one which involves that the betting with persons resorting thereto is carried out by the owner, occupier or keeper, or by a person using the place in a popular sense who, if not present by himself or some agent or nominee, is permitted to exercise, or in fact exercises, some de facto control or some privilege or right over the place in question not being a control, privilege or right possessed by the public at large. Such a conclusion might be arrived at if the owner, occupier or person using the place received a commission on the bets, or if he permitted the bookmaker to install and use a private telephone, or if he allowed the bookmaker to stand outside at an open window and to call out the odds. Other examples might be given of permission, express or implied, extended to the bookmaker in, near, or over the room or place for the purpose of enabling him to make bets with persons resorting there which would be special to him, and not given to the public, and clearly allowed to him merely for the purposes of betting. In those cases, the surrounding circumstances may well establish that there is such a user of the place as comes within the grounds of the decision in the Kempton Park case. I am unable to see in this case how the mere use of the public telephone by Payne is sufficient to establish the offence against the appellants. They doubtless knew that Payne was ringing up members, and was being rung up by them, and they doubtless in a sense “permitted” these things, but how could they prevent them if there was a public telephone? Members were doing nothing unlawful by communicating on the telephone and making

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bets with a bookmaker. It may be observed in this connection that bookmakers, who send and receive from their offices messages by telephone or telegram which lead to, or which are the evidence of, betting contracts, are not liable under the Act, because the persons with whom they bet are not “persons resorting” to the house, office, room or other place where the bookmakers carry on their business, for resorting must imply a physical presence in or close to the place: R v Brown. To prevent misconception, I should add that “user” does not, in my opinion, necessarily imply a physical presence in or near the place, if the circumstances above referred to exist.

My Lords, as I have said, the question before the House in the Kempton Park case was not concerned with a conviction under the Betting Act, and the Earl of Halsbury LC, was accordingly not called upon to express any opinion as to the question which should be submitted to the jury in a prosecution under the Betting Act. Your Lordships are not in that fortunate position, but it is not possible to do more than to indicate the general lines on which the jury should be directed in such a case, since the circumstances vary to an almost unlimited extent.

I will add a few remarks on Samuel v Adelaide Club Ltd. The plaintiff had leased premises to the defendants on condition that they should not be used for any illegal purpose. The defendants permitted a social club to occupy the premises. They made an arrangement with a bookmaker for facilitating bets by the members with him, and private telephones were installed between the club premises and the bookmakers office. A commission was paid by him to the club on all bets made by the members through him. The decision by Atkinson J, was that the defendants were permitting the premises to be “used” for the purpose of a person (the bookmaker) “procured” by the club, as occupiers of the place, betting with the members as persons resorting thereto. In my opinion, this decision was quite correct. Atkinson J, also expressed the view that a person so “procured” by the occupier must be “procured to bet for the benefit of the occupier.” That was the fact in the case before him, and it would almost always be a reasonable inference from the circumstance that the occupier had so procured the person in question. It should be noted that the case turned on the phrase: “any person procured or employed by or acting for and on behalf of such owner, occupier, or keeper …” It did not turn on the meaning of the words: “or any person using the same.”

My Lords, if the views above expressed are accepted, it must follow that the directions given by the judge on the trial of this case were incorrect, and that the convictions of the appellants cannot stand, and should be set aside. The appeals should, accordingly, be allowed.

LORD ATKIN. My Lords, the appellants were convicted at the Central Criminal Court at a trial before His Honour Judge Beazley

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and a jury on indictments which charged them with offences against the Betting Act 1853. They appealed to the Court of Criminal Appeal under the Criminal Appeal Act 1907, s 3(a)that is, on grounds of appeal which involve questions of law alone. No leave of the Court of Criminal Appeal was asked, and therefore no question of fact, apart from law, is, or can be, raised. The Court of Criminal Appeal dismissed the appeal. The Attorney-General granted his certificate that the decision involved a point of law of exceptional public importance, and that it was desirable that a further appeal should be brought, and thereby enabled the appellants to appeal from the decision to this House (s 1(6)). I mention the section in order to support the view that, whatever be the point of law upon which the Attorney-General grants his certificate, once it is granted, there is “a further appeal” to this House upon all the grounds open to the court below. The appeal is not limited to the point of law of exceptional public importance, which, indeed, is not specified in the certificate. The result is that this House is armed with all the powers of the Court of Criminal Appeal in like case, and, amongst other matters, may act upon the proviso to s 4(1) if it were to consider that, though the point of law was wrongly decided, no substantial miscarriage of justice has occurred.

The facts and contentions have been so fully set out in the opinion of my noble and learned friend Lord Wright that I need not recapitulate them. I would only say that I am not impressed by the novel procedure in this case of providing an “agreed statement of facts.” Speaking generally, facts cannot be agreed in a criminal case, and in fact we were referred at some length to the evidence as recorded in the shorthand note.

I wish in the first place to call attention to the form of the charges made against the appellants in this case, for it appears to me that some confusion has arisen in the books and in the practice in dealing with the sections of the Betting Act 1853. S 1 of the Act, in my opinion, is directed, by way of suppression of the evil mentioned in the preamble, to making the keeping or using a house, etc, for the purposes mentioned a common nuisance. No penalty is imposed, for the persons responsible would be guilty of a common law misdemeanour. They could only be proceeded against by indictment, and the punishment would be that applicable to common law misdemeanournamely, a fine without limit of amount, with or without imprisonment for a term not exceeding now, I think, 2 years. However, in addition to the remedy by proceedings against a common nuisance, the Act, by s 3, constitutes a criminal offence which may be committed by the persons named in the section in the manner specified, the obnoxious purposes being taken from s 1, which specifies them for the purpose of defining the common nuisance. These offences are only triable summarily before any two justices of the peace, and on conviction the “penalty” imposed may be any sum not exceeding £100, and the offender may also be imprisoned with or without hard labour for any period up to 6 calendar months.

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In any case, it is plain that proceedings under the two sections were mutually exclusive. The one constituted an indictable offence, the other a summary offence, and the penalties under the latter had no relation to the former. Before 1879, offences under these two sections could not be tried together. By the Summary Jurisdiction Act 1879, however, a person charged with a summary offence under which he was liable to imprisonment for a term exceeding 3 months could claim to be tried by a jury, and thereupon the offence was for all purposes to be deemed as regards that person to be an indictable offence. This means that a person charged under s 3, if he elects to be tried by a jury, will be committed as though the summary offence were an indictable offence and will be indicted accordingly. The indictment, therefore, will be under s 3, and will follow its terms. The ordinary procedure in indictable cases will be followed, however, and the indictment may therefore contain any charge which would be justified on the evidence disclosed in the depositions, and may therefore no doubt contain a charge so supported for causing a common nuisance under s 1. The question arose in R v Brown. The accused, having been charged before the justices as the occupier of a house for using it for the purpose of betting with persons resorting thereto, elected to be tried by a jury, and the indictment contained a count making this charge and also other counts charging him with using the house for ready-money betting, and also using the house without alleging that he was occupier. The Court of Crown Cases Reserved held that all these counts were in order, being founded on evidence disclosed in the depositions. Hawkins J, at p 131, incidentally seems to express the construction of s 1 to which I have referred. He had already in R v Preedy, at p 436, expressed the same view:

The object of the first section undoubtedly was to render liable to prosecution for causing a public nuisance any person who, having the control, over any house or other place, used or sanctioned its use for the illegal purposes mentioned. The third section, however, had as it seems to me a very much more extensive object in view, viz., to render liable to pecuniary penalties not only those who being … occupiers … used … but also those who, though not owners or occupiers actually used …

In this case, the appellants were, as we are told, charged before the court of summary jurisdiction under s 3. They elected to be tried before a jury. When the indictment is looked at, however, it will be found that only in the case of Boundford was any charge made against them under s 3. He was charged with assisting in conducting the business of premises used for the purpose of persons using the same betting with persons resorting thereto. All the appellants were charged with conspiracy to effect a common nuisance, on which count alone Leonard was convicted, and Milne was on count 2 charged with the offence of, as occupier, using the premises for the purpose of persons using the premises betting with persons resorting thereto, and, though convicted on counts 1 and 2, was only sentenced on count 2. The offence charged in that count was stated to be “keeping a betting house contrary

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to s 1,” and the count appears to have been clearly defective under that section for not alleging the common nuisance. Green, who was acquitted, was indicted on a count expressed to be based on s 1, which was similarly defective. I have examined, I think, all the cases reported as offences under this Act. In all the cases after 1879 but one, the accused seems to have elected to be tried on indictment, and the indictments quite properly follow the words of s 3. In the one case excepted, R v Deaville, there is no indication how the case came before the recorder of Hanley, who stated the case for the Court of Crown Cases Reserved, but I think there can be little doubt that it would be on proceedings originally taken summarily. In the only case I have found tried on indictment before 1879namely, R v Crawshawthe counts of the indictment based on the Betting Acts plainly alleged a common nuisance. I venture to think that the form of indictment to be found in the present edition of Archbold on Criminal Pleadings, p 1373, which is said to be for keeping a betting house contrary to the Betting Act 1853, s 1, is mistaken. It would be correct if expressed to be contrary to s 3. If under s 1 it omits to charge the common nuisance. The note wrongly imports the penalties from s 3. The appellants have not relied on defects in the form of the proceedings as grounds of appeal, but, inasmuch as this House has the opportunity of reviewing the law on this difficult topic, I have thought it desirable to comment on the proper procedure.

On the merits of the appeal, before discussing the alleged misdirections in point of law complained of, it seems desirable to formulate for oneself what is the law against which the appellants are said to have offended. No question here arises as to the appellants being owners or occupiers of the premises in question, for in the counts on which they were convicted the material charges were that they used the premises for the purpose of persons using the premises betting with persons resorting thereto. There is there the double application of the word “using” which is also to be found in the statute. The charge is not that they used the premises to bet with persons resorting thereto, but that they used the premises for the purpose of a third personin the present case a known person Payne, a bookmakerusing the premises for betting with persons resorting thereto. Incidentally, I think that the indictment was clearly faulty for not stating the name of the person alleged to have used the premises for the betting purpose. When known, the particulars should be given. Where unknown, it should be so stated. The precedent in Archbold on Criminal Pleadings above referred to in this respect is correct. I am myself not clear that in the section the two “users” are not intended to be the same person, reddendo singula singulis to owner, occupier or user, so that the present offence should be covered by the express words in the section:

… knowingly or wilfully permitting the same to be used by any other persons for the purposes aforesaid…

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Otherwise, it is not easy to see the necessity for the words quoted. Assuming, however, that the section can be construed in the way suggested by the prosecution, there are at least two essentials of the offencenamely, (i) that a house, office, room or other place is used, and (ii) that the house, office, room or places is used by some person for betting with persons resorting thereto. (i) The present case does not raise the question whether the premises in question are a place within the meaning of the Act, the debated question which is supposed to have been decided in Powell v Kempton Park Racecourse Co. That case seems to be relevant here only in the guidance it gives as to the meaning of using in connection with a house, office, room or place. In the present case, there can be no question as to the premises being a house or room. However, as the argument discussed fully the cases dealing with room or place, and the supposed decision of this House in Powells case that no room or place can fall within the section unless the person using it for betting has dominion or control over the room or place, I think it desirable to say something on that topic. I doubt whether it would be said that the majority of the learned Lords taking part in the decision expressed their assent to the particular words of the Earl of Halsbury LC, which are relied on, but it seems to me clear that, when he referred to “the character of the use by some person having dominion and control over the place,” he was not confining himself to legal dominion and control. They would be inadequate words to express use by a person having a licence from the true owner. I cannot think, however, that the Earl of Halsbury LC, meant that, if a bookmaker took possession of an unoccupied house or premises, and there, without the knowledge of the lawful owner, carried on the business of betting with persons resorting thereto, he would not be committing an offence. An apparent dominion and control must be sufficient to satisfy the words of the Earl of Halsbury LC. It seems to be agreed that the use of an umbrella or stand on an unauthorised racecourse would be the use of a place. Could it be relevant that the use of the umbrella or stand had escaped the attention of the owners of the course? So in the public-house cases I cannot see why, if the bookmaker uses the bar of the public-house for betting in conditions which make it an offence if committed with the permission of the licensee of the premises, exactly similar user fails to be an offence if done without the licensees permission. The user appears to be the same in both cases. I think, therefore, that R v Deaville and the cases that followed it were wrongly decided, so far as they laid down the test of permission by the occupier.

(ii) What, then, is the meaning of using the premises for the purpose of betting with persons resorting thereto? It is conceded that it does not apply to members of a club using the club premises and therein betting with other members of the club. It is a different kind of user from that of the persons who resort to it for betting. Further, it seems to me primarily to convey the idea of physical presence at the place.

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That does not exclude a secondary meaning which must be discussed, but primarily it has the meaning suggested, and there will hardly be found a case in the books where the ultimate offender “using the premises for betting” was not in fact by himself or his agent on the premises.

It is on this aspect of the case that things were said in the courts below which have no doubt led to the certificate being given which authorised this appeal. The trial judge used language which perhaps was sufficient to convey to the jury that telephoning was not enough, though he did say:

You must be satisfied that there was some definite arrangement between Milne and himself that he should be there for that purpose. …The intervention of the telephone does not eliminate the user and take the bookmaker outside the forbidden persons.

In the judgment of the Court of Criminal Appeal, however, these words occur, at pp 533, 534:

It was [said in Samuel v. Adelaide Club Ltd, and rejected] that it could not be said that in that case the bookmaker was using the premises, because he was only telephoning to the premises. As Atkinson J., pointed out, and as this court is clearly of opinion, it is the right and only view that a person who uses the telephone by permission of the owner of the premises, and who telephones, and continues telephoning the whole afternoon, to the members of the club is acting in exactly the same way as if he stood at the door of the club and talked to the members and made bets with them. It is his voice which reaches the members at the other end of the telephone, and the oral arrangement which is sufficient to make the bet is made on the telephone in exactly the same way as that in which it would be made if those persons were face to face, instead of being separated, as they were, by a distance of 50 yds.

The distance of 50 yds was the distance between the appellants club and Paynes offices. My Lords, one would agree that, if the bookmaker stood at the door and made his bets verbally with the members, he would be using the premises for betting with the members. It cannot matter whether it was during the whole afternoon or less, and it cannot matter whether he did so with the permission of the owner or not. I entirely disagree, however, with the notion that when two persons converse on the telephone, they are to be considered, for any purpose of locality, to be both face to face. It seems to me to be an unscientific conception which is plainly wrong. If A in London speaks to B in Manchester, are they face to face in London, or in Manchester, or in both? Moreover, if the parties are in London and Paris, or Ostend, or New York, is the same proposition true? Also if A, the bookmaker, when telephoning to B, his customer, at the club, is face to face with him at the club, is B, the customer, face to face with A at the bookmakers office? If so, is B resorting to the office? I think that, though it is true that bets can be made by telephone, and may be completed, according to circumstances, either at the club or at the bookmakers office, the bookmaker while at the office is not using the club, any more than the butcher or the baker is using his customers residence when orders are given and accepted over the telephone. If this is so, it surely can make no difference that the owner of the premises “permits” the use of the telephone.

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The use of the telephone, therefore, does not constitute the bookmaker a user of the premises so that he can be said to be physically there. On the other hand, it is plain that he may be using the premises for betting if an agent is there conducting betting business for him. I also think that he can be said to be using the premises if he has such a degree of control over them that it can be said that the premises are a place where he is carrying on his betting business. I do not think that he need have any legal right of occupation, or that he need be a partner with the actual occupier. Payments made to the occupier or keeper or user of the premises, either by way of commission or otherwise, for the privilege of betting with the persons resorting to the premises, the installation by the bookmaker on the premises of facilities for betting with him, such as a private telephone, or possibly a private letter-box, the provision by the occupier, etc, of the premises of special messengers to convey betting communications, or special facilities given on the premises for the reception of such messengers, special facilities given to the occupier for procuring betting credit for the persons resorting to the premises (as suggested in the present case), might well afford evidence of the question of fact whether the bookmaker was in fact carrying on his business on the premises. Possibly none of these facts would be sufficient of itself, but in every case it must be a question of fact for the jury whether the business was carried on as stated, and a question of law for the judge whether there is any evidence to satisfy the onus of proof which exists in every criminal case. It would have to be pointed out that the business on the premises need not be the whole, or even the principal part, of the betting business. In this respect, it does not seem to be necessary to decide that the occupier had in fact “arranged” with the bookmaker that he should carry on his business there. As I have said, premises can be “used” in contravention of the Act without the permission of the occupier. It will be obvious, however, that the kind of evidence which I have suggested would not usually exist without the consent of the owner.

I have not dealt with the case of the occupier procuring a bookmaker to bet with persons resorting to the premises. The facts suggested above might also be evidence of “procuring”a question of fact which was decided against the occupier in Samuel v Adelaide Club Ltd. There was, no doubt, evidence to support such a finding. The only objection to the decision is that it led to the view as to telephoning taken by the Court of Criminal Appeal in the present case. The passage in the judgment is at p 74. For the reasons I have given, so far as it suggests that the two persons telephoning and in personal contact at the place where the message is received or sent, it seems to me, with respect, to be wrong.

The question, then, to be considered by the tribunal of fact, whether justices or jury, when a charge is made that a bookmaker has used premises for the purpose of betting with persons resorting thereto, is the

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same whether the bookmaker has been actually present on the premises or notnamely, has he in fact been carrying on his betting business there, betting with persons resorting thereto? The jury should be warned, and justices should remember, that the fact has to be established beyond reasonable doubt, as in all criminal proceedings.

In the present case, I think that all your Lordships are of opinion that the summing up did not sufficiently define the offence, and that the conviction must be quashed on that ground. I will not enumerate the various passages which are assailed by the appellants. It is sufficient to say that, though the judge repeatedly warned the jury that it was not sufficient to show that in fact bets were made by telephone with Payne, yet he repeatedly told them that the offence would be constituted if they were satisfied that in addition an “arrangement” existed between Payne and the appellant Mrs Milne, but he never defined what that arrangement must be. To give one instance, the judge said:

You must be satisfied that there was an arrangement between him, Payne, and Mrs. Milne, that betting should take place.

He then went on to say:

If you are satisfied that there was an arrangementtacit, if you like, but which was perfectly well understoodthat it was to the advantage of both of them that Payne should have the connection with the club which he undoubtedly had, that that room upstairs was taken by him or his clerk in furtherance of that arrangementas I have said to you, it may be a useful pointer to you when you consider what Green said, that it was an arrangement with the club that that room was thereif you are satisfied of that, then the offence has been committed.

My Lords, for the reasons I have given, this passage does not appear to me to state at all accurately or definitely the true issue. Standing alone, however, in my view, it would be sufficient to cause the conviction to be quashed, for the judge, no doubt inadvertently, upon the very issue which he had repeatedly told the jury they must findnamely, an arrangement between Mrs Milne and Paynetold the jury that the statement of Green, which was evidence only against himself, was evidence against Mrs Milne of that very arrangement. I am myself quite unable to follow the passage in the judgment of the Court of Criminal Appeal which says, at pp 534, 535:

The expression “it may be a useful pointer to you” is not quite the same as sayingindeed, it is quite a different thing from saying“I direct you that you may consider that evidence.”

Surely any member of a jury told that a fact referred to was a pointer towards a conclusion at which he was invited to arrive would think that he was being told that the fact would guide him to the conclusionin other words, that it was not only evidence, but strong evidence, of the conclusion. At any rate, I know that I should. In view of the unsatisfactory evidence as to the alleged arrangement, this direction might well have led to the conviction. For these reasons, I am clearly of opinion that the appeal should be allowed and the conviction set aside.

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LORD MACMILLAN. My Lords, I agree with the opinions which have been expressed by my noble and learned friends Lord Macmillan LC and Lord Atkin and also with those about to be expressed by or on behalf of my noble and learned friends Lord Wright and Lord Porter all of which I have had the advantage of reading in print.

LORD WRIGHT. My Lords, these appeals have been brought under certificates, given under the Criminal Appeal Act 1907, s 1(6), by the Attorney-General, that the decisions of the Court of Criminal Appeal which are appealed from involve points of law of exceptional public importance, and that it is desirable in the public interest that the appeals should be brought. They raise questions under the Betting Act 1853, which will be described as the Act. The substantial issue may be said to be whether the appellant Florence Milne used or kept certain premises called the Byculla Club, of which she was occupier, for the purpose of one Payne, a bookmaker, using the same for betting with persons resorting thereto contrary to the Act.

Your Lordships were furnished with a statement agreed by all parties to this appeal, prepared for the use of your Lordships subsequently to the decision of the Court of Criminal Appeal. However, transcripts of the shorthand notes of the evidence at the trial were also supplied, and certain passages have been referred to in argument before your Lordships. The agreed statement of facts was as follows:

The appellant Milne at the time of the prosecution was the tenant of the first floor of premises at 72, Bartholomew Close, in the city of London, where for over 4 years she had carried on the business of a club known as the Byculla Club. The appellant Boundford, who is her step-brother, had for the 2 years prior to this prosecution assisted her in the management of the club of which he was also a member.

The club had approximately 600 members, who paid a yearly subscription of 2s. 6d. until Jan., 1938, afterwards reduced to 1s. Meals and refreshments, including alcoholic liquor, could be obtained at the club which opened at 11 a.m. and closed at 7 p.m., and there were facilities for playing darts. The club premises consisted of a club room (in which was a bar), a kitchen, and two other rooms. One of those rooms was extensively used by the club members for making credit bets by telephone, mostly with a bookmaker called Payne, but also with other bookmakers. There were two coin-operated telephones on the club premises, one in the passage and the other in the room above described as extensively used for making bets by telephone. Both of the telephones were rented by the appellant Milne.

The bookmaker, Payne, had his office situated at 43, Little Britain, some 50 yds. from the club premises. Members used to make credit bets with him by telephone from the club to him at 43, Little Britain. About 2 years before this prosecution Payne, who had been a member of the club for over 3 years, rented 2 rooms on the second floor of 72, Bartholomew Close, immediately above the club premises, and 2 months before the prosecution he engaged a member of the club named Green as a “settlement clerk” at 30s. per week and installed him on the said second floor. The rooms rented by Payne on the second floor had an ordinary post-office telephone in them which was rented by him. There were telephone communications between Payne at 43, Little Britain, and Green on the said second floor for the purpose of informing Green the amounts won or lost on the betting transactions made by telephone from the club with Payne at Little Britain. Green on occasions left the keys of the rooms on the second floor with the appellant Milne for safe custody when he went out, and the appellant Milne was permitted to store bottles in one of them. None of the appellants had any measure of control over Paynes premises on the second floor. There was no ready-money betting on the club premises or on the said second floor.

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Observation was kept in the club premises between May 18, 1938 and June 24, 1938. During that time it was established that many members whilst at the club premises made bets by telephone with Payne at his office at 43, Little Britain, and on no occasion was a single stake heard to exceed 10s. The amounts won or lost by members upon these bets were communicated by Payne to Green by telephone to his room on the second floor above the club premises and after the days racing was over members settled their accounts with Green in the rooms on the second floor, although on occasions Green came down to the club premises and settled with Mrs Milne the winnings or losses on bets which she had previously made with Payne by telephone to his office at 43, Little Britain.

The appellants Milne and Boundford were present on the premises at all material times and were aware of the arrangements between Green and Payne (described in para. 3 above) to facilitate the payment after the races of losses and winnings upon bets made by the members of the club. The appellant Leonard, who was a member of the club, was also aware of this arrangement. He attended regularly at the club on Mondays to Fridays inclusive during racing hours, and used to make up to 12 bets a day by telephone with Payne at his office at 43, Little Britain, usually for himself but occasionally for somebody other than himself. The appellants Milne and Boundford also made bets by telephone with Payne at his office at 43, Little Britain, both for themselves and for others.

Documents in Greens possession established that the daily stakes in respect of bets made by members of the club occasionally exceeded £40, and averaged £20. During the 3 weeks prior to June 24, the appellant Leonard paid £19 19s. 2d. and the appellant Milne, mainly on behalf of others, paid £25 12s. 5d. During the observation each of the appellants were heard in the club room to refer to the making of bets or to the results of races or bets.

There was no evidence of any express agreement between Payne and any of the appellants that any betting facilities should be provided. It was not, however denied that all the appellants knew and acquiesced in the method by which the betting and settling was carried on and that it had only so been carried on for months prior to May, 1938.

Payne in his evidence denied that the mere fact that a man was a member of the Byculla Club was a sufficient qualification to open an account with him so that he could telephone his bets from the club. He said that he would meet the member, perhaps at the club, and, if satisfied with him, would accept his bets by telephone from the club. The appellant Mrs Milne, who had an account, would often, according to the evidence, put through it bets for other members who had no account in their own name, as did also the appellants Leonard and Boundford.

The indictment consisted of five counts. Of these, counts 1, 2 and 3 are now material. Leonard was acquitted on count 4, which charged him with using the premises of the Byculla Club for betting with persons resorting thereto. Green was acquitted on count 5 which charged him with ready-money betting. Count 1 was a charge of conspiracy to commit the offence of using premises for betting, contrary to s 1 of the Act. The 3 appellants were convicted under that count, Green being acquitted. The appellant Milne was convicted under count 2 of keeping a betting house contrary to s 1 of the Actnamely, that on 18 May 1938, and other days between that date and 24 June 1938, she used the premises of the Byculla Club for the purpose of persons using the premises betting with persons resorting thereto. At the trial, the category of “persons” so using the premises, who were not identified by name in count 1, was limited to Payne, and the count was treated as restricted to him. Boundford was convicted under count 3 of assisting in conducting the business of the Byculla Club as a betting house. The case was tried

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before His Honour Judge Beazley at the Central Criminal Court on 27 September 1938. The appellant Milne was sentenced under count 2 to pay a fine of £50 and to pay the costs of the prosecution. No sentence was passed on her under count 1. Boundford was sentenced to a fine of £25 on count 2, and Leonard was sentenced to a fine of £25 on count 1. The appellants appealed against the conviction and sentences to the Court of Criminal Appeal, which on 19 September 1938, discussed the appeals. The ground of appeal was that the judge had misdirected the jury in respect of certain directions on the law which he gave in his summing-up. Before your Lordships, the appeals have been based on the grounds that the summing-up to the jury contained statements which expressed or involved errors of law, in particular on the construction and effect of the Act as applied to the facts of the case.

The judge explained to the jury that credit betting, whether or not by telephone, was not per se an offence, but he said that the case made by the prosecution was that the premises of the club were used primarily for betting:

Member after member comes in and bets and mostly with the same bookmakerthat is, Payneand … here there was a perfectly obvious artifice to try to get out of the Act.

As to s 1 of the Act, the judge said that it was necessary for the prosecution to show, not merely that the club premises were in fact used for betting, but also that the owner, occupier or person using the same was using them for the purpose of betting with persons resorting thereto. It will be convenient to set out the most material passages relied on by the appellants as constituting the misdirection. The judge stated that the case for the prosecution was that it was not necessary for Payne, the bookmaker, to be there on the premises, if an important part of the transaction, such as telephoning the bets, was done in the premises in the way that the members did to Payne, Green also being put by Payne in the room above, and that the jury were driven to an irresistible conclusion that there was an arrangement that it should go on. It is not quite clear how much of this was merely a statement of the case for the prosecution, but the judge went on to say as follows:

There is no evidence in this case that Payne paid Mrs. Milne anything for it but you can see for yourselves, members of the jury, when you get a club of that type, the advantage that the club gets from it. These people come to make bets there. Mrs. Milne knows perfectly well what is going on there, and she knows that they come and make bets, and, so far as the evidence goes, for precious little else. Of course. they can get a glass of beer, or a sandwich, but what is the main purpose for which this place has been used. If you come to the conclusion that the main purpose for which that club was used was for making bets with Payne, then, members of the jury, you would be entitled, when you look at all the circumstances of the case, if you were satisfied that they irresistibly pointed to the conclusion that Mrs. Milne and Payne, although they may have had no written agreement about the thing and although there was no evidence that there was any oral agreement, no evidence of anything except what actually went onyou may well come to the conclusion that there was a tacit arrangement between these two all along that it would be a very fine thing for the club to get this sort of thing going on there, and that it should be done. Now, members of the jury, if you come to that conclusion, and it is entirely a matter for you, I should then say that Payne, the

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bookmaker, does come within the category of a person using that club, because he is so identified with the owner or occupier of it as to bring him within the section.

A little later the judge said:

If you think that there was no arrangement between Payne and Mrs. Milne at all, and if you think that this was merely the case of members of a club going to the place and ringing up their bookmakers and placing bets with them, or, if you like, asking Green or Leonard to do so for them, and that there was nothing more to it than that, then there is no offence. … If, on the other hand, having weighed all the evidence, you came to the conclusion that this place was used by Mrs. Milne for the purpose of the persons who used it, in the sense that they were identified with her by an arrangement, that it should be so used, for the purpose of betting with the membersif you are satisfied of that, then the offence would be committed.

Later on, there is a further passage in the summing up which is complained of. The judge was stating the two questions to be considered by the jury before they could find a verdict of guilty. The first was whether the premises were in fact used for the purpose of betting. Then the judge stated the second question as follows:

Is Payne a person using the said premises in the sense I have tried to point out to you, for the purpose of persons betting with persons resorting thereto? That is to say, is he in the description of forbidden persons? I hope, also, I have made that clear to you, that, in order that he should come within that class, you must be satisfied that there was some definite arrangement, or understood definite arrangement, between Milne and himself, that he should be there for that purpose. There is no doubt that the mere fact that the bets were telephoned does not take the case outside the Act. The intervention of the telephone does not eliminate the user and take the bookmaker outside the forbidden persons. You can see that for yourselves, because what is the position, supposing the bookmaker was present and that what was said on the telephone was said to him in person? Then, clearly, the premises would be used for the purpose of making bets. The essential parts towards the completion of the bet occurred at the premises.

The judge went on to summarise the material facts, and referred to the constant telephone messages by members of the club, “most of them to Payne” and to the room Green had on the next floor under a lease separate from that of the club, and went on as follows:

Members of the jury, it is entirely a matter for you. If you are satisfied that Payne had that room there, and that Payne had these bets with the membersI mean bets in the sense that they were telephone betsand that it was all in pursuance of an understanding between him and Mrs. Milne, I do not think you will have very much hesitation in coming to the conclusion that those club premises were used consistently for the purpose of bets being made through the telephone with Payne and that Payne was in fact a person using those premises for the purpose of betting with persons resorting thereto.

The judge told the jury to exercise their common sense and knowledge of the world, and proceeded as follows:

But if, on considering the whole of the evidence, you come to the conclusionand there is plenty of evidence for itthat this place was used for very little else except for the purpose of betting, that that was the major portion of its duty, and that Payne had that office upstairs, with Green officiating there, on an understanding, because it was convenient for him, because there seemed to be a lot of members betting at that club, that they should be able to telephone those bets to Payne, and that he, Payne, should have Green on the spot to make settlements after the racebecause it was a business that did earn a bit of commissionif you are convinced of that, then they would be guilty of the offence with which they are charged.

Finally, the judge concluded his direction to the jury on this part of the case as follows:

You have got to be satisfied of two thingsthat the club premises were used for the purpose of betting, and that Payne was a person using those premises for the

Page 420 of [1939] 3 All ER 399

purpose of betting with the persons resorting thereto, in the sense I have endeavoured to describe. The onus of proof is on the prosecution to satisfy you of that. You must be satisfied that there was an arrangement between him, Payne, and Mrs. Milne that betting should take place. Mr. Clarke [for the Crown] in his final speech to you went so far as to say that Mrs. Milne procured Payne to carry on that business. He went so far as that, but I do not think it is necessary that you should go so far as that. If you are satisfied that there was an arrangementtacit, if you like, but which was perfectly well understoodthat it was to the advantage of both of them that Payne should have the connection with the club which he undoubtedly had, that that room upstairs was taken by him or his clerk in furtherance of that arrangementI have said to you, it may be a useful pointer to you when you consider what Green said, that it was an arrangement with the club that that room was thereif you are satisfied of that, then the offence has been committed.

The jury were not directed as to what “arrangement,” if there were one, between the appellant Milne and Payne would in law be sufficient to constitute Payne a person who was using the club premises in breach of s 1 of the Act. Payne was not charged in the indictment. The facts as to his position seem to have emerged only at the trial.

The Court of Criminal Appeal held that there was no misdirection by the judge, and approved of his summing up. In particular, the court expressed the opinion that a person who uses the telephone by permission of the owner of the premises and makes bets is acting in exactly the same way as if he stood at the door of the club and talked to the members and made bets with them. Hence it was said Payne used the premises just as much as if he made the bets with the members face to face, and thus used the club premises as his betting office, though all the time he stayed on his own premises, for the essential part of the business of making a bet that is, the acceptance of the bet. The mere fact, it was said, that he used the telephone for that purpose could make no difference to the legal position.

The two main objections to the summing up are (i) that the jury were told that Payne, in receiving at his own office bets telephoned by the members from the club premises, was as much using the club premises as if he were personally present in them, and (ii) that the jury were not instructed what kind of arrangement between Milne and Payne might constitute a user of the club premises by Payne for betting with persons resorting thereto. Both these objections turn on the construction of the essential provision of the Act which forbids the using of any house, office, room or other place for the purpose of the owner, occupier or keeper thereof or any person using the same (in this case, Payne) betting with persons resorting thereto. There is no question that the club premises constituted a “place,” or that the members were persons resorting thereto. The question is, was Payne using the club premises for betting with the members resorting thereto. The two main objections to the summing up thus involve two separate questions, but, though they are distinguishable, and have to be considered apart from each other, they involve under associated aspects the question of law, what is the meaning of “using” the premises for the purpose specified. On the first point, it is said that Payne used the club premises for the purpose of betting with the members resorting thereto, because the members telephoned from

Page 421 of [1939] 3 All ER 399

the premises the bets to him and he accepted them by telephone to the members who were in the club. This seems to me to be a distortion of the ordinary meaning of the plain word “using.” The people who use the club premises for telephoning the bets are the members, not Payne, who in turn uses his own premises to telephone the answer. The mechanical device of the telephone enables people at a distance to speak to each other and hear each others voices, but it does not change the local position of each speaker, or per se make Payne a person using the premises at which, at the moment, he is not. How far the respondents contention is removed from ordinary parlance becomes obvious when it is seen to follow from it that the local tradesman who accepts a telephoned order from my cook is, on that view using my house and similarly that, when a member of an ordinary social club telephones a bet from the club to his bookmaker, the bookmaker is using the club. In this connection, distance would be immaterial. If a man telephones from England to a bank in New York, can he be said to be using the bank premises in New York? If the banker replies, can he be said to be using the premises of his interlocutor? I am for the moment treating this point in abstraction, as indeed it must be considered. Nor can the accuracy of the abstract proposition that a person who telephones to another person who is in other premises, is thereby using those premises be affected in any way because the telephoning is repeatedly done, or because it is done in the course of betting. The question which for the moment must be separately examined is simply whether the bookmaker is using the premises to which he telephones. If he is not, then the further and more complex question of user of the premises for the purpose of betting with persons resorting thereto does not arise, unless there are further circumstances showing such user. The court has no right to give an unnatural meaning to a plain word because the particular, mechanical device was undreamt of at the time of the Act, or because it might be thought that the particular operation is within the mischief of the Act. The Act must be construed according to the natural meaning of the language used, all the more so since it is an Act creating a criminal offence. It is for the legislature, if they so desire, to amend the law to meet the new circumstances.

In my opinion, the judge misdirected the jury when he told them that the intervention of the telephone did not eliminate the user. He went on to say:

You can see that for yourselves, because what is the position, supposing the bookmaker was present and that what was said on the telephone was said to him in person, then, clearly, the premises would be used for the purpose of making bets.

The latter statement is correct. The misdirection is in treating the use of the telephone as shifting the local situation of the bookmaker from the place in which he actually was, and which he was using, to the club premises, which not he, but the club member who resorted thereto, was using, quite lawfully, so far as he was concerned, for the purpose of making bets. It follows that I cannot agree with the perhaps clearer statement

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to the same effect on this matter made by the Court of Criminal Appeal to which I have referred. If a similar statement is involved in the judgment of Atkinson J, in Samuel v Adelaide Club Ltd, I do not agree with it. That case was a case of “procuring” under s 1 of the Act, and is not directly material in this case.

The second objection, which is different in principle, and requires separate consideration, turns on the references by the judge in his summing-up to an “arrangement” between Mrs Milne and Payne, which would justify the jury in finding that Mrs Milne was using the premises for the purpose of Payne using them for his betting business. I do not question that there might be an arrangement such as to make Payne a person using the premises though he was not personally upon them. For instance, it might have been proved that Mrs Milne was simply a nominee or agent of Payne, and, in that way, Payne, though not physically on the premises, was using them by her instrumentality in the conduct of his betting business with the members. Short of so clear a case, the same result might be achieved by a less obvious machinery. The actual occupier of the house, office, room or place might be in partnership with the bookmaker, or in some other way the premises and the business of betting done thereon might be conducted by the occupier and the bookmaker on a joint basis of co-operation in some form or other. I do not attempt to imagine all the schemes which ingenuity and desire of gain might devise to enable the bookmaker to use the premises for his betting business without appearing to do so. The scheme might depend on a variety of concurrent circumstances. For instance, if a private telephone was installed in the club premises, especially if it was done at the cost of the bookmaker for use by the members for betting with him, and the occupier of the premises was paid a commission on all bets telephoned, these circumstances, perhaps combined with others, might constitute evidence on which a jury would be entitled to find that the bookmaker was using the house or place for betting with persons resorting thereto. I am not attempting to exhaust the possible permutations and combinations of fact which the jury might have to consider. It must be a question of fact for the jury and for the justices in all the circumstances of the particular case. The vice of the judges summing up under this aspect is that he gave the jury no guidance as to what they had to consider or what they had to find in order to convict. There was, in fact, so far as I can see, no evidence of any arrangement between Mrs Milne and Payne which would justify the conclusion that the former was using the premises for the purpose of Payne using them for his betting business. So far as the evidence went, the club was used, indeed, for betting, but it was so used by the members, which was not unlawful. The presence of Green in the separate premises on the floor above no doubt was a convenience in the prompt settlement of bets, but in itself it was legitimate. Payne gave no special facilities to the members, and Mrs Milne used the open account of her own which she had with Payne to make bets for

Page 423 of [1939] 3 All ER 399

members with Payne, so far as appears, in order to help the members not Payne. This is all that appears on the evidence, and is consistent simply with the position that Paynes business was the bookmakers business which was most largely, though not exclusively, patronised by the club members. The judge never warned them what sort of arrangement they would have to find between Mrs Milne and Payne before they could find that Payne, though not personally present and conducting a betting business at the club premises, was in fact using the premises for that purpose. All he did was to speak vaguely of Mrs Milne being identified with Payne, or of an arrangement that it should go on. I do not think that convictions by a jury who were left in such confusion as to the facts of which they must be satisfied before they could convict can be supported. This is a matter larger than, and distinct from, the mere use of the telephone. Moreover, it is a further defect of the summing up that the two matters are confused, and never separately put before the jury by the judge, and thus the defectiveness of the summing up is aggravated.

I have not found much assistance from the cases cited, except in so far as they illustrate such general propositions of law as that it is not unlawful for members of a club to bet with each other, or with bookmakers. Some reference was made to the phrase of the Earl of Halsbury LC, in Powell v Kempton Park Racecourse Co, where he said, at p 160, that under the Act the illegality depends on:

… the character of the use as a use by some person having the dominion and control over the place, and conducting the business of a betting establishment with the persons resorting thereto.

It is not clear, but I shall here assume that the opinion of the Earl of Halsbury LC, represented the opinion of the majority of the House. It may be that these words would, if taken in their full and literal significance, at once rule out Payne from the category of a person using the club premises. Equally, however, they would rule out other cases where the offence has been held to have been committed, rightly as I think, such as the case of the bookmaker who used a slag heap on waste land as the place for his betting business, or the workman in Scotland who, without the knowledge or permission of his employers, used the room in which they were allowed to have their dinner to conduct a betting business with his fellow-workmen: Young v Darrah. I agree with that decision. A like case would be that of a bookmaker who, without the permission of the publican or any authorised agent of his, carried on his betting business in the bar of the public-house. Permission is, I think, immaterial in cases of this type if in fact the place is used for the prohibited purpose. The offence may be committed by a licensee or by one who is not even a licensee and has no permission from the occupier. I think that the Earl of Halsbury LC, meant no more by these words than such de facto dominion and control as enabled the bookmaker to ply his trade in the place. I do not need further to discuss the much

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canvassed case of Powell v Kempton Park Racecourse Co which does not seem to throw light on the questions discussed here. There is here obviously no question that the club premises were potentially a place within the meaning of the Act. The question whether they were used in the prohibited manner turned on considerations different from those in Powells case.

On the questions of procedure discussed by my noble and learned friend, Lord Atkin, I agree with what he has said. In my opinion, the convictions appealed from cannot stand, and the appeals should be allowed.

LORD PORTER (read by Lord Macmillan). My Lords, your lordships have already heard from the opinion of my noble and learned friend Lord Wright what are the facts proved in evidence, and that the question to be determined is whether the judges summing up was accurate in point of law or adequate in point of fact. In considering these questions, it is necessary to bear in mind exactly what the charge was, and to eliminate the possibility of a conviction for some other offence. Your Lordships have not analysed the evidence for the purpose of considering whether a conviction for offenders other than those for which the appellants were found guilty could have been supported, and no question arises as to whether a charge of opening, keeping or using the Byculla Club for the purpose of a person procured or employed by or acting for or on behalf of the owners betting with persons resorting thereto could have been sustained. If, then, the charge actually preferred alone be considered, the question of the correctness of the summing up and the liability of the appellants may be adequately discussed by confining the attention to count 2 of the indictmentnamely, that against Milne for using the premises for the purpose of a person, Payne, using the premises betting with persons resorting thereto. It is unnecessary to consider the question of conspiracy, since, to be convicted of that offence, the parties would still have to conspire to commit the offence charged in count 2.

In the present case no question arises as to whether there was a defined place such as directly arose in Powell v Kempton Park Racecourse Co. The house the user of which is complained of is identified. The charge is of user of the Byculla Club. Nor is there any question whether persons resorted thereto, or whether those persons used the club for betting with Payne. The evidence was ample to prove both facts. The matter to be determined however, is not whether the club premises were used for bettingas indeed they werebut rather whether Payne used them for betting with the members.

Apart from authority, I should have said that a de facto user of the premises must be proved but that a de jure user is unnecessary. X may commit an offence by using the place for the purpose of X himself using the premises betting with persons resorting thereto or by using it for

Page 425 of [1939] 3 All ER 399

the purpose of Y using the premises betting with such persons, and, in the second case, Y also commits an offence under s 1. However, Y, who is himself merely a user, may commit an offence even if the owner or occupier is ignorant of his action, provided that his acts constitute a user of the premises for the purpose of Y betting with persons resorting thereto. In either of the first two cases, X must have some sort of control over the premises. Otherwise, he could not use the premises. So likewise in the second and third cases must Y have some measure of control, and for the same reason, but neither the one nor the other need be an owner, occupier or keeper. A defined place and sufficient control over it to stay there and bet with persons resorting thereto would seem to be enough. However, there must be a place to which people can resort and sufficient occupation of it in fact by some person to enable them to bet with him.

So far as Milne is concerned, the evidence showed that she was tenant of the premises and carried on the club, and the place was opened, kept or usedany of the three words is appropriateby her. Moreover, it was used for the purpose of Payne betting with persons resorting theretonamely, the members. Those matters are not in question, but are not enough to support a conviction. In order that the conviction may be affirmed, Payne must, it is true, bet with persons resorting to the premises, but he must also use the premises for that purpose.

What, then, is meant by “user”? No doubt physical presence might be enough, and, though the mere opening of the house for the purpose specified before any actual betting took place would constitute an offence, yet as a rule some evidence of the repetition would be required to show the purpose for which the premises were opened, kept or used. User through a servant or agent including a partner would also, I think, suffice. Some physical control, such as a private telephone connecting other premises with those alleged to be used, might be enough, and some sharing of profits or payment for the privilege of betting with members might constitute a user of the premises, but I doubt if it is possible to find a formula which would fit all cases. The draughtsman of the Act has adopted the word “User,” and, though the wording might have been clearer, I doubt whether any more definite word would express the meaning more accurately. If no general definition is possible, one is thrown back upon a consideration of the evidence in the present case to discover if there was in fact a user by Payne. It is true that he was a member of the club, but there is no evidence that he used the club premises in any different way from the other members, except that Green came down from the room above and settled members accounts, either by collecting or paying money. That, however, is not to bet, but to settle bets which have previously been made, and is no offence under the section: Bradford v Dawson. It is true also that Milne had a betting account with Payne, and was accustomed to use that account

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in order to place bets and at times to pay winnings to, or recover losses from, members, but to do so is prima facie to act as agent for the members, and not as agent for Payne, and, though her action constituted a user of the premises by the members for betting with Payne, it does not constitute a user by Payne for betting with the members. Nor, in my view, is the fact even if established, that Payne would accept members of the club as clients more readily than outside persons a user of the premises. I doubt whether an expectation, even if justified, or even an arrangement, that members of the club would receive special consideration from an individual bookmaker would, without more, constitute a user of the premises by that individual. However, no such arrangement was proved or found by the jury to exist, and it is not necessary finally to determine this question.

Finally, it was suggested, upon the authority of Samuel v Adelaide Club Ltd, that Payne might be said to be present at the club because Milne or the club members were accustomed to use a particular room in order to make bets with Payne by telephone. The telephone was a public one, and, though the members no doubt used the room for betting, Payne did not. If he were held to have done so, then a bookmaker might be said to use any premises from which his clients communicated with him. It is said, however, that the primary use of the room was for telephoning to, and receiving messages from, Payne as a result of which bets were made either on the club premises or at Paynes offices. If an arrangement had been proved between Milne and Payne that the room should be reserved for Paynes purpose, or even partially so reserved, that might amount to a user by Payne, but no such reservation was proved, and, in any case, the summing up was not directed to the existence of any such arrangement, or, indeed, of any defined arrangement. It was to this last aspect of the case that the appellants directed their main attack against the summing up. Some arrangement between Milne and Payne, they acknowledged, might constitute a user of the premises by Payne, but the judge who tried the case never directed the attention of the jury to the kind of arrangement required, but left them to imagine that any arrangement aiming at the encouragement of betting between Payne and members of the club was sufficient. The judge says that Payne need not be there, and adds:

… if an important part of the transaction such as telephoning the bets is done on the premises, and you come to the conclusion that it is in pursuance … of some arrangement between Milne and Payne, that would be sufficient to bring Payne within the description of a person using the same.

Elsewhere he speaks of “an arrangement between Milne and Payne that it” (presumably telephone betting) “should go on,” and again of “a tacit arrangement between these two that it would be a very fine thing for the club to get this sort of thing going on there and that it should be done,” and of Payne thereby “being identified with the owner.” Later he says that there must be some definite arrangement

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between Milne and Payne that Payne should be there for the purpose of betting with members, and adds:

The mere fact that the bets were telephoned does not take the case out of the Act.

Later again, he says, after speaking of the room which Payne had hired in the same building as the Byculla Club:

If you are satisfied that Payne had that room there, and that Payne had these bets with the membersI mean bets in the sense that they were telephone betsand that it was all in pursuance of an understanding between him and Mrs. Milne, I do not think you will have very much hesitation in coming to the conclusion that those club premises were used consistently for the purpose of bets being made through the telephone with Payne, and that Payne was in fact a person using those premises for the purposes of betting with persons resorting thereto.

Finally he says:

You have got to be satisfied of two things: that the club premises were used for the purposes of betting, and that Payne was a person using those premises for the purpose of betting with the persons resorting thereto in the sense I have endeavoured to describe. The onus of proof is on the prosecution to satisfy you of that. You must be satisfied that there was an arrangement between him Payne, and Mrs. Milne, that betting should take place. Mr. Clarke [for the Crown] in his final speech to you went so far as to say that Mrs. Milne procured Payne to carry on that business. He went so far as that, but I do not think it necessary that you should go so far as that. If you are satisfied that there was an arrangementtacit if you like, but which was perfectly well understoodthat it was to the advantage of both of them that Payne should have the connection with the club which he undoubtedly had, that that room upstairs was taken by him or his clerk in furtherance of that arrangementas I have said to you, it may be a useful pointer to you when you consider what Green said, that it was an arrangement with the club that that room was thereif you are satisfied of that, then the offence has been committed.

I have quoted in each case from that part of the summing up complained of, and at the end I find it difficult to ascertain what the suggested arrangement was. An arrangement; an arrangement that it would be a very fine thing for the club to get this sort of thing going; an arrangement that Payne should be there for the purpose of betting, and he might be there though bets were telephoned; the taking of the upstairs room and telephone bets with members in pursuance of an understanding; an understanding that the members should be able to telephone bets to Payne and Payne should have Green on the spot to make settlements; a procurement of Payne is not necessary; it is enough if there was an arrangement that Payne should have the connection with the club which he undoubtedly had.

Those are the explanations given of the kind of arrangement required to make Payne a user of the premises. I do not think that they give sufficient guidance. There was no evidence that the upstairs room was taken under an arrangement with Milne except a statement of Green, admissible, indeed, against him, but against no one else, yet a jury might possibly have thought that taking the room upstairs was a sufficient arrangement, and would in any case consider telephone betting a contravention of the Act, provided it was done with Milnes connivance.

No case gives any real measure of support to the present decision. The Court of Criminal Appeal base their judgment substantially on the

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ground that the judge left to the jury the question whether there was an arrangement between Milne and Payne that Payne should have facilities for betting with members of the club, and that Payne might none the less be using the club though he spoke only through the telephone. They said, at p 533:

… a person who uses the telephone by permission of the owner of the premises, and who telephones, and continues telephoning the whole afternoon, to the members of the club, is acting in exactly the same way as if he stood at the door of the club and talked to the members and made bets with them.

For this statement, they quoted Samuel v Adelaide Club Ltd. That case, however, was decided, so far as the bookmaker was concerned, not on the ground that he was “a person using” the premises, but on the ground that he was “a person procured” by the owner. In the present case, no question of procurement arose, and the jury neither found nor were asked to find that Payne was given any special privileges in the club itself, though, like anyone else, he could telephone or be telephoned to.

Many cases have been decided upon the terms of the section, mostly with reference to the meaning of the word “place,” but also with reference to the “user” required to create an offence. Both matters were discussed in Powell v Kempton Park Racecourse Co. That case is primarily a decision as to what is a “place,” and determines that Tattersalls ring, in which many bookmakers congregate, is not a place within the meaning of the Act, inasmuch as no bookmaker, though usually to be found at a particular spot, takes his stand at an individual place, nor has any particular spot been allotted to him. He is free to bet on any part of the course, and, though the owners of the course know that he goes to Tattersalls ring, yet they do not set aside any particular part of the course for his use. The appeal was heard by 10 Lords of Appeal, and, of those, 4 appear also to have held that “user” was not established unless the person using had some sort of control over the place used, and 2 more concurred in the general result.

The Earl of Halsbury LC, who delivered the leading opinion, indicated that in his view the person using the place must occupy a position analogous to an owner, occupier or keeper of the place, and that, unless he did so, there was no user such as was contemplated in the wording of the section.

The action was a civil one brought by a shareholder of the defendant company claiming an injunction to restrain that company from opening or keeping the inclosure known as Tattersalls inclosure for the purpose of persons using the same for the purpose of betting with persons resorting thereto. Its object was to test the correctness of the judgment in Hawke v Dunn, which, being decided upon a case stated, was not appealable beyond the Divisional Court. In Hawke v Dunn, it was held that a bookmaker who carried on the business of betting in Tattersalls ring at Hurst Park was guilty of unlawfully using that enclosure

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for the purpose of betting with persons resorting thereto, contrary to the Betting Act 1853, s 3. Powell v Kempton Park Racecourse Co in effect overruled that decision. In neither case, however, was any de jure user provedthe bookmaker had no more rights in the ring or elsewhere on the course than any other member of the publicand no de facto user was established because no particular place was set aside for, or used by, any particular bookmaker. Moreover, though the result was concurred in by all save two of their Lordships, I do not think that the majority necessarily indorsed the observations of the Earl of Halsbury LC, in full. In so far as those observations may seem to indicate that the section requires a de jure user before an offence can be committed, they must, I think, be read in the light of the matters there in issue. So read, they do not conflict with the interpretation which I venture to think the Act bears. However, whatever their meaning, they give no support to the respondents contentions in the present case. I would allow the appeal and quash the conviction.

Appeals allowed and convictions set aside.

Solicitors: Docker, Andrew & Co (for the appellants); Anthony Pickford, City Solicitor (for the Crown).

Michael Marcus Esq   Barrister.

Re A Debtor (No 419 of 1939)

[1939] 3 All ER 429


Categories:        BANKRUPTCY        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        9 JUNE 1939        


Bankruptcy Petition Service Substituted service Debtor proceeding out of jurisdiction and concealing whereabouts Bankruptcy Rules 1915, r 156.

A debtor went to the United States in April 1939, with the intention of proceeding to Canada, having taken a return ticket for the voyage. She owed the petitioning creditors £1,456, and on 19 May 1939, they filed a petition in bankruptcy. As the address of the debtor was not known, application was made to allow substituted service by advertisements in a New York newspaper and a newspaper circulating in Canada. It was not shown that the debtor was still in the United States or in Canada. The registrar held that this was not a case in which such substituted service could be ordered:

Held on the facts of the case, the decision of the registrar was right.

Notes

The Bankruptcy Rules 1915, r 156 provides that where a debtor is keeping out of the way to avoid service, the court may order service to be made by delivery of the petition to some adult male inmate at the last address of the debtor or in such other manner as the court may direct. Having regard to the result of the present proceedings, it would seem that where the debtor has gone out of the jurisdiction and conceals his whereabouts, it is virtually impossible to effect service of the petition.

As to Substituted Service of Bankruptcy Petition, see Halsbury (Hailsham Edn), Vol 2, pp 72, 73, para 87; and for Cases, see Digest, Vol 4, pp 136138, Nos 12591275. For the Bankruptcy Rules 1915, r 156, see Halsbury's Complete Statutes of England, Vol 1, p 744.

Page 430 of [1939] 3 All ER 429

Cases referred to

Re Judgment Debtor (No 1539 of 1936), [1937] Ch 137; Digest Supp, 106 LJCh 183, sub nom. Re Judgment Debtor (No 1539 of 1936), Judgment Debtor v Judgment Creditor [1936] 3 All ER 767, 156 LT 16.

Re Urquhart, Ex p Urquhart (1890) 24 QBD 723; 4 Digest 137, 1264, 59 LJQB 364.

Appeal

Appeal against the refusal of Mr Registrar Parton to make an order for substituted service of a bankruptcy petition. The debtor went to the United States in April 1939, with the intention of proceeding to Canada. The petition was filed on 19 May 1939. The petitioning creditors asked that substituted service should be allowed by advertisement in certain London newspapers. This application was refused. The application was then amended by asking that the advertisements should be inserted in the New York Times and in the Evening Citizen, which circulates in Canada. The registrar refused the application on the grounds that such substituted service could not be allowed by reason of the decision in Re Judgment Debtor (No 1539 of 1936), as there was no reason to believe that the advertisements were certain to come to the notice of the debtor. In the absence of a rule dealing with the case where a debtor departs out of the jurisdiction and conceals his whereabouts, a debtor can by so doing evade service. The evidence showed that the debtor had taken a return ticket for the voyage, and it was not shown that the debtor was still in the United States or in Canada.

Cyril Salmon (for the petitioning creditors): The ground on which this application is made is that the debtor has gone out of the jurisdiction in order to evade service. The registrar accepted that view, but held that, by reason of the decision in Re Judgment Debtor (No 1539 of 1936), an order for substituted service could not be made. The registrar overlooked the case of Re Urquhart, Ex p Urquhart, which is entirely in favour of the petitioning creditors. The petitioning creditors debt is for £1,456 for goods supplied. The act of bankruptcy alleged is that the debtor departed out of England with intent to delay or defeat her creditors.

Cyril Salmon for the petitioning creditors.

9 June 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. On the facts of this case, the decision of the registrar was the right one. This appeal must be dismissed.

CLAUSON and GODDARD LJJ agreed.

Solicitors: Trower Still & Keeling, agents for T M Sowerby, Bristol (for the petitioning creditors).

W K Scrivener Esq   Barrister.


Dobson Ship Repairing Co Ltd v Burton

[1939] 3 All ER 431


Categories:        EMPLOYMENT; Contract of service: HEALTH; Health and safety at work        

Court:        HOUSE OF LORDS        

Lord(s):        LORD MAUGHAM LC, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        11 MAY, 27 JUNE 1939        


Workmens Compensation Review of compensation Infant workman Time within which application must be made Meaning of “review” Change in probable earnings at a date later than application but prior to hearing Workmens Compensation Act 1925 (c 84), s 11(2) Workmens Compensation Act 1926 (c 42), s 1.

An infant, who was apprenticed under a seven-year contract to the appellant firm of shipbuilders, was injured in an accident on 31 August 1932. A declaration of liability was made by consent. Upon an application for review, heard on 8 October 1937, it was proved that he was earning 30s per week working for his mother, and, as he had therefore suffered no loss of earning capacity, no order was made. On 8 December 1937, 6 days before the workman attained the age of 21 years and 6 months, his solicitor wrote notifying the appellants of his intention to apply for a further review. At that date, the applicant would still have been under his contract of apprenticeship, had he not been injured, but by 24 February 1938, he would have qualified as a shipwright, and would have been earning about £3 per week. He was at that time earning 35s per week. It was contended by the employers that the application for review must be bad, on the ground that, at the time it was made, the applicant was earning as much as he would have done had he not been injured, and that, therefore, he had lost nothing:

Held (i) the letter making a definite application for review was sufficient compliance with the statute.

(ii) in the circumstances of the present case, whether the review took place at the time at which the tribunal gave its award or at the time from which that award took effect, the respondent would be enabled to succeed.

Order of Court of Appeal ([1938] 3 All ER 410) affirmed.

Notes

In the Court of Appeal, this case largely rested on the proposition that the date of review was the date at which the change in compensation took effect. Their Lordships have not found it necessary to decide this point, as they hold that the letter written 6 days before the expiration of the statutory period was a sufficient application for review within the Act.

As to Review in Cases of Infants, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 236, 237, para 559; and for Cases, see Digest, Vol 34, pp 458460, Nos 37523768. See also Williss Workmens Compensation (31st Edn), pp 339344.

Cases referred to

Jones v Meiros Collieries Ltd (1926) 95 LJKB 754; 34 Digest 458, 3753, 135 LT 469, 19 BWCC 182.

Powell v Main Colliery Co [1900] AC 366; 34 Digest 367, 2971, 69 LJQB 758, 83 LT 85, 2 WCC 29.

Vickers-Armstrong Ltd v Regan [1933] 1 KB 232; Digest Supp, 101 LJKB 657, 147 LT 298, 25 BWCC 211.

Appeal

Appeal from an order of the Court of Appeal, dated 28 June 1938, and reported [1938] 3 All ER 410, affirming an award made on 19 May 1938, by His Honour Judge Langham at Great Grimsby County Court, Lincolnshire, in favour of the respondent. The facts and the arguments are set out in the opinion of Lord Porter.

Page 432 of [1939] 3 All ER 431

Rt Hon Sir William Jowitt KC and J Alun Pugh for the appellants.

A T Miller KC and W K Carter for the respondent.

27 June 1939. The following opinions were delivered.

LORD WRIGHT. My Lords, the opinion which I am about to read is the opinion of my noble and learned friend Lord Porter. I am authorised by my noble and learned friend Lord Maugham LC, to say that he has read and considered that opinion and is in agreement with it. I may say that I also have had the same advantage, and that I also agree with that opinion.

LORD PORTER (read by Lord Wright). My Lords, the dispute in this case arises under the Workmens Compensation Act 1925, as amended by the Act of 1926. The question to be determined is what steps are required to be taken by a workman injured before he is 21 years of age in order to obtain a revision of the amount of his compensation so as to entitle him to receive an award based, not on the weekly amount which he was receiving at the date of the accident, but on the amount he would probably have been receiving after he attained his majority.

The point at issue is best approached by considering the changes to be found in the wording of the various Workmens Compensation Acts beginning in 1897 and ending in 1926. Under the original Act, the amount which an injured workman could recover was determined once for all, and was either half the difference between his average weekly wages before disablement and those he could earn afterwards or a lump sum. For the purposes of the present case, the lump sum may be ignored.

When the Act of 1906 was passed, it was apparently felt that the position of workmen who were under 21 at the time of injury required special consideration. Accordingly by Sched I(1)(b) it was enacted that, in the case of a minor, the whole average weekly wage, subject to a limit of 10s, should be given as compensation if his average weekly wages were less than £1, and by a proviso to Sched I(16) it was further enacted as follows:

Provided that where the workman was at the date of the accident under 21 years of age and the review takes place more than 12 months after the accident, the amount of the weekly payment may be increased to any amount not exceeding 50 per cent. of the weekly sum which the workman would probably have been earning at the date of the review if he had remained uninjured, but not in any case exceeding £1.

This provision remained in force until the Act of 1923 was passed, when by s 24(6) there was substituted for the proviso to Sched I(16) to the Act of 1906 the following provision:

Provided that, where the workman was at the date of the accident under 21 years of age, and the review takes place more than 6 months after the accident, and before the workman attains the age of 21 years, the amount of the weekly payment may be increased to such an amount as would have been awarded if the workman had at the time of the accident been earning the weekly sum which he would probably have been earning at the date of the review if he had remained uninjured.

The result of this change was that the infant workman could claim to have

Page 433 of [1939] 3 All ER 431

his compensation increased after 6 months had elapsed from the date of the accident, but the review had to take place before he was 21. At the same time, his revised compensation was no longer limited to £1 per week. Except that it is contained in a substantive enactment, and not by way of proviso, the same wording is adopted in s 11(2) of the Act of 1925.

It is idle to speculate as to what induced Parliament in passing the bill to enact that the review must take place before the workman attained 21, but the result was that in Jones v Meiros Collieries Ltd the Court of Appeal held that an infant workman who was injured but did not apply for a review until after he had attained 21 was not entitled to any variation in the amount of his compensation. After, and probably as the result of, this decision, the Workmens Compensation Act 1926 again altered the wording, and s 11(1), (2), of the Act of 1925, as amended by the Act of 1926, is now worded as follows:

(1) Any weekly payment may be reviewed at the request either of the employer or of the workman, and on such review may be ended, diminished, or increased subject to the maximum hereinbefore in sect. 9 provided, and the amount of payment shall in default of agreement, be settled by arbitration under this Act.

(2) Where the workman was at the date of the accident under 21 years of age and the review takes place more than 6 months after the accident and the application for the review so made before or within 6 months after the workman attains the age of 21 years, the amount of the weekly payment may be increased to such an amount as would have been awarded if the workman had at the time of accident been earning the weekly sum which he would probably have been earning at the date of the review if he had remained uninjured.

In the case under consideration, the facts proved were as follow. (1) 23 February 1931. The respondent, who was born on 12 June 1916, entered upon a seven-year apprenticeship as shipwright with the appellants. (2) 31 August 1932. The respondent met with an accident causing the loss of his right eye, and 4s 11d per week was paid as compensation until 23 January 1933. (3) 23 January 1933. The respondent returned to work. (4) 10 February 1933. The respondent met with a second accident, which caused only slight injuries but induced him to give up his apprenticeship and work as a bakers roundsman for his mother. (5) 13 October 1933. The respondent filed an application for arbitration. (6) 7 November 1933. In the consequent proceedings, the respondent was awarded a declaration of liability only, as he was earning in the employment of his mother as much as, or more than, he would have been earning as a shipwrights apprentice. (7) 14 June 1937. The respondent reached 21 years of age. (8) 26 August 1937. The respondent, thinking that his apprenticeship ended at the age of 21, applied to the county court for a review of his weekly payment. This application was dismissed, without prejudice to the right of the applicant to make a further application for compensation, declaration of liability or otherwise, on the ground that the respondents wages from his mother amounted to 35s per week, whereas his wages in his last year as shipwrights apprentice would have been 30s only. The county court judge accordingly found that the respondent was not then suffering any loss of wages, but that

Page 434 of [1939] 3 All ER 431

there was a probability of loss of earning capacity in the future. (9) 8 December 1937. The respondents solicitors wrote a letter to the appellants in these terms:

I have been instructed by Mr. Frank Burton of 106, Weelsby Street, Grimsby, formerly in your employ as apprentice shipwright, and in respect of whose accident injuries, sustained on Aug. 31, 1932, an award of the Grimsby County Court was made in the form of a declaration of liability on Nov. 7, 1933.

My client applies for a review, and asks for a weekly payment in respect of his partial incapacity at 18s. a week.

(10) 14 December 1937. Six months had elapsed after the respondent had attained 21 years of age. (11) 23 February 1938. The seven-year apprenticeship would have expired, had it not been terminated as the result of the respondents accident. (12) 26 April 1938. The appellants not having acceded to the application for a review and payment of 18s per week, the respondent applied to the court for an arbitration with respect to review. (13) 19 May 1938. The arbitration was held, and the county court judge found that the respondents average weekly wages as a shipwright on the termination of his apprenticeship would have been 60s, whereas his earnings were only 35s. He accordingly made an award of 12s 6d per week, starting as from 24 February 1938.

In this state of facts, the appellants maintained that the respondent had not taken the requisite steps to entitle him to a review of the declaration of liability which he had obtained. The application to review must, they said, be made within 6 months of the respondent attaining 21 years of age, whereas it was not made until 26 April 1938. The solicitors letter of 8 December 1937 was not, in their submission, an application for review. The application required by the section was a formal application to the court, and the letter was merely an intimation of the action intended to be taken. Alternatively, they argued that, even if the letter was an application to review within the meaning of the section, still the increased sum to be awarded was that which the workman would probably have been earning at the date of the review, and the date of the review was the date of the applicationnamely, 8 December 1937. At that date, his remuneration as an apprentice would still only have been 30s, whereas from his mother he received 35s, and consequently he was entitled to the declaration of liability, and to no more.

The respondent on his part maintained that the letter of 8 December was an application for review, and was made within 6 months of his attaining 21 years of age, and that the review took place either at the time as from which the increased payment was directed to begin by the county court judge or at the date at which the county court judges award was made, and that in either case the difference of 25s in wages was then in existence.

The determination of these questions depends, it is clear, upon the true construction of the wording of s 11(2) of the Act of 1925, as now amended. Prima facie, the words “application for review” may mean either a request contained in a letter or the formal application

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prescribed by the Workmens Compensation Rules 1926, Form V, and a workman making either within the prescribed 6 months would have complied in time with the statutory obligations. In considering the true meaning of the phrase, however, it is proper to take into consideration the use of the word “application” in the Act generally, and in particular its use in the other parts of the same section. Not much assistance, however, is to be gained by considering its use in other sections of the Act. Some of themfor example, ss 19(2), 22, 23(7) and 49refer in terms to the court, the sheriff, or registration, or, as in the case of s 12(3)(ii), to a medical referee. Others, such as s 7(3) and s 13, are not necessarily confined to applications to the court, though no doubt they are primarily intended to refer to such an application.

It is said, however, that, if sub-ss (1) and (2) of s 11 be read together, it is apparent that sub-s (1) deals with reviews by agreement and sub-s (2) deals only with reviews by the court, and that, if review in sub-s (2) means review by the court, the application to review must bear the same meaning and be used only of an application to the court. It is not, I think, necessary, for the purpose of the present case, to determine whether the word “review” in sub-s (2) is confined to a review by the court, since, even if it were, I do not think that it follows that application to review means application to the court or to such other body as has to arbitrate between employer and workman.

The Act was not meant to effect its result by normal methods. Settlement by agreement was the object primarily aimed at. As the Earl of Halsbury LC said in Powell v Main Colliery Co, at pp 371, 372:

It appears to me that the statute deliberately and designedly avoided anything like technology. I should judge from the language and the mode in which the statute has been enacted that it contemplated what would be a horror to the mind of a lawyer, namely, that there should not be any lawyers employed at all, and that the man who was injured should be able to go himself and say, “I claim so much,” and that then he should go to the county court judge and say, “Now please to hear this case, because my employer will not give me what I have claimed.” It appears to me that that is the meaning and construction of the whole statute, and that is what the legislature intended, and that is the reason why it avoided any technical phrases. It strikes one at once that, if anything which to a lawyers mind would be in the nature of a technical application or a technical commencement of the litigation was intended, the legislature was competent, and had sufficient knowledge to say what it meant.

It is true that that case was a decision on the use of the word “claim,” and “claim,” as may be seen by reference to ss 2(3), 6 and 14 of the Act, is used for informal as well as for formal claims, but the case is an authority for the wider proposition that the steps directed by the Act to be taken include applications to the parties as well as formal applications to the court, and it sets out the principles to be followed where the rights conferred by the Workmens Compensation Acts have to be considered. What is required is notice to the employer, not an arbitration, and a letter making a definite application for review is, I think, sufficient. Had application to the court been required, it would have been easy to express such a requirement in clear words, as indeed

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has been done in the form prescribed (the Workmens Compensation Rules 1926, Form V), which speaks of an “application for an arbitration with respect to a review,” and not of an “application to review.”

The view which I have expressed was that taken by the Court of Appeal in Vickers-Armstrong Ltd v Regan, a decision which they followed in the present case, and from which the present petition to Your Lordships house is in substance an appeal. For the reasons I have given, that decision is, I think, right in its conclusion, and in the grounds on which that conclusion is based.

The second point may, I think, be treated very shortly. Even if the word “review” were used alone, I should not have thought a review had taken place until the award had been pronounced. Where, however, as in s 11 as amended, one finds the words “application to review” and “review” used side by side, those expressions are apparently intended to bear different meanings, and it seems impossible to say that each takes place at the same time. The application to review, whether it be formally or informally made, is one thing. The review itself is another. For the purpose of the present case, it is unnecessary to decide whether the review takes place at the time at which the tribunal gives its award or at the time from which that award takes effect. It must be one or the other, and either meaning would enable the respondent to succeed in the present case. I would dismiss the appeal, and by their undertaking the appellants must in any case bear the costs of this appeal.

Appeal dismissed with costs.

Solicitors: Carpenters, agents for F G & H E Smith, Bradford (for the appellants); Smith & Hudson, agents for Walter West, Grimsby (for the respondent).

Michael Marcus Esq   Barrister.


Pratt v Pratt

[1939] 3 All ER 437


Categories:        FAMILY; Divorce        

Court:        HOUSE OF LORDS        

Lord(s):        LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT, LORD ROMER AND LORD PORTER        

Hearing Date(s):        18 MAY, 29 JUNE 1939        


Divorce Desertion Letter by deserting spouse asking for meeting to discuss resumption of cohabitation No reply by other spouse Whether period of desertion interrupted Matrimonial Causes Act 1937 (c 57), ss 2, 4.

A wife had admittedly deserted her husband in 1934. In 1936, the wife wrote asking the husband to meet her and discuss the future, but the husband refused to see her. In 1938, the husband petitioned for divorce on the ground of desertion for a period of more than 3 years immediately preceding the presentation of the petition:

Held by refusing to meet his wife when she requested him to do so, the husband caused the desertion to continue, or prevented the possibility of its termination. In the circumstances, therefore, he had failed to discharge the burden imposed upon him by proving desertion without cause for the statutory period.

Order of Court of Appeal ([1939] 1 All ER 503) affirmed.

Notes

The spouse who claims to have been deserted is not justified in refusing a bona fide offer by the other spouse to return to cohabitation. The present case goes a step further, and shows that, where such an offer is made, its terms must be considered and an opportunity given for the matter to be discussed between the parties, unless it is perfectly clear that it is not made in good faith.

As to Offer to Return, see Halsbury (Hailsham Edn), Vol 10, pp 657, 658, para 967; and for Cases, see Digest, Vol 27, pp 312315, Nos 29012929.

Cases referred to

Macaskill v Macaskill [1939] SC 187.

Thomas v Thomas [1924] P 194; 27 Digest 315, 2925, 93 LJP 61, 130 LT 716.

Appeal

Appeal from an order of the Court of Appeal (Scott, MacKinnon and du Parcq LJJ), dated 15 December 1938, and reported [1939] 1 All ER 503, affirming an order of Finlay J, dated 13 July 1938, by which the appellants petition for divorce on the ground of desertion was dismissed. The facts are fully set out in the opinion of Lord Romer.

Noel Middleton KC and J T Molony for the petitioner.

The respondent did not appear and was not represented.

29 June 1939. The following opinions were delivered.

LORD MACMILLAN. My Lords, I am authorised by my noble and learned friend Lord Thankerton to say that he concurs in the opinion which I am about to read, and also in that of my noble and learned friend Lord Romer, which will be subsequently read.

My Lords, in his printed case the appellant states that:

The respondent deserted the appellant on Aug. 11, 1934, and the question for decision in this appeal is whether that desertion was terminated by the respondent writing two letters dated Sept. 23, 1936, and September 25, 1936, to the appellant suggesting a meeting between the appellant and the respondent.

I take exception to this way of stating the question which your Lordships have to decide.

Page 438 of [1939] 3 All ER 437

By the Matrimonial Causes Act 1937, s 2, it is enacted that a petition for divorce may be presented on the ground that the respondent:

… has deserted the petitioner without cause for a period of at least 3 years immediately preceding the presentation of the petition.

By s 4 it is provided that:

… on a petition for divorce it shall be the duty of the court to inquire, so far as it reasonably can, into the facts alleged … if the court is satisfied on the evidence that the case for the petition has been proved … the court shall pronounce a decree of divorce.

The question for decision accordingly is whether the appellant has proved to the satisfaction of the House that for at least 3 years the respondent has without cause deserted him. The fact that the petition is unopposed in no way absolves the appellant from the obligation of discharging the burden of proof imposed on him, or this House from the duty of satisfying itself that the case has been proved.

In my opinion, what is required of a petitioner for divorce on the ground of desertion is proof that throughout the whole course of the 3 years the respondent has without cause been in desertion. The deserting spouse must be shown to have persisted in the intention to desert throughout the whole period. In fulfilling its duty of determining whether, on the evidence, a case of desertion without cause has been proved, the court ought not, in my opinion, to leave out of account the attitude of mind of the petitioner. If, on the facts, it appears that a petitioning husband has made it plain to his deserting wife that he will not receive her back, or if he has repelled all the advances which she may have made towards a resumption of married life, he cannot complain that she has persisted without cause in her desertion. In Scotland, where desertion has been a ground for divorce since 1573, the pursuer has always been required to satisfy the court that throughout the period of desertion he or she was ready and willing to receive back the erring spouse. The recent Divorce (Scotland) Act 1938, in amending the law, has enacted that the court may grant a decree of divorce on the ground:

… that the defender (a) has wilfully and without reasonable cause deserted the pursuer and persisted in such desertion for a period of not less than 3 years …

The language of the Scottish Act is rather more expanded than that of the English Act, but the two statutes are substantially equivalent. In a case decided by the Second Division of the Court of Session this year, it has been held that the law still requires, as it has always required in the past, that regard should be had to the attitude of mind of the spouse who is seeking the remedy: Macaskill v Macaskill. I quote the following passage from the opinion of Lord Justice-Clerk Aitchison, at p 193:

The essential character of desertion remains unchanged. It must be a separation against the will of the spouse seeking the remedy of divorce. Separation of consent, whether express consent or implied from facts and circumstances, is not desertion. The judge therefore must be satisfied that the aggrieved spouse has been willing to fulfil the duties of the marriage throughout the whole statutory period, so that,

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if the offending spouse had returned, he or she would have been willing to resume the normal relationships of marriage and continue to adhere, always provided that it was a bona fide return, and not merely a device to interrupt the currency of the desertion. The pursuers state of mind is an essential feature of the inquiry. But when it is said, as it frequently has been said in these cases, that the pursuer must desire the return of the offender, it is not to be taken in too literal a sense as signifying the requirement of a subjective state of mind, a desire in the emotional sense. It is obvious that in a great many cases of desertion, the conduct of the deserting spouse must have been of a kind to destroy affection, and that it would be a mockery for the innocent spouse to pretend that there was or had been a desire for the resumption of the married life. It is enough that a pursuer should be able honestly to say that he or she was all along willing to fulfil the duties of the marriage, and that the desertion was against his or her will, and continued throughout the statutory period without his or her consent.

In quoting these words, I am not to be taken as laying down that the law as to divorce for desertion is in all respects the same in England as it is in Scotland. I quote them rather as expounding an element which, in my view, is inherent in the conception of marital desertionnamely, that the desertion must be persisted in without the consent, and against the wishes, of the deserted spouse.

In the present case, the respondent undoubtedly deserted the appellant on 11 August 1934. Within the statutory 3 years, however, the respondent wrote to the appellant, on 23 September 1936, proposing a meeting. The appellant replied on the following day that he did not think an interview would serve any useful purpose. In a further letter to the appellant, dated 25 September 1936, the respondent urged the appellant to agree to meet her. In this letter, she wrote as follows:

I am feeling that, as we are still married, it will be best if we can come together, as it is undoubtedly the only course. My idea in coming to see you was to discuss this, and I suggest that we should meet occasionally and go out togetherin short make a new start, with a view to making a home together in the future.

To this the appellant once more replied that he “did not consider an interview would serve any useful purpose.” Your Lordships have no reason to regard the respondents letters as insincere. They certainly cannot have been written as a device to interrupt the running of the statutory 3 years, for in October 1936, the Matrimonial Causes Act had not been passed, and the law of England did not then permit of divorce for desertion. In my opinion, Finlay J and the Court of Appeal were right in holding that a husband who had point blank repelled such overtures on the part of his erring wife had failed to prove that she had been in desertion without cause for the statutory period. By the attitude which the appellant took up, he himself caused the desertion to continue, or at least prevented the possibility of its termination. I accordingly concur in the motion that this appeal be dismissed.

LORD WRIGHT. My Lords, the opinion which I am about to read is that of my noble and learned friend Lord Romer. I have considered that opinion in print, and I agree with it. I am also authorised by my noble and learned friend Lord Porter to say that he too agrees with the opinion of Lord Romer.

Page 440 of [1939] 3 All ER 437

LORD ROMER (read by Lord Wright). My Lords, on 1 January 1938, the appellant filed a petition for the dissolution of his marriage with his wife, the respondent, alleging that she had deserted him for a period of 3 years and upwards immediately preceding the date of the petition. The only question to be determined upon this appeal is whether that allegation has been proved to be true.

The facts relevant to the consideration of this question are as follow. The marriage between the appellant and the respondent took place on 14 September 1933. The parties thereafter resided together at Lloyds Bank House, Blandford, until 11 August 1934. On that day the respondent left the matrimonial home, and has never since returned to it. She has never suggested that the appellant has been guilty of any matrimonial offence, and her desertion of him at that time was without any cause which the law can regard as being just or reasonable. During the remainder of 1934, correspondence took place between the parties and between their respective solicitors with a view to bringing about a reconciliation, but the respondent was only prepared to return to the matrimonial home upon conditions that the appellant was justified in rejecting as being unreasonable. The correspondence was renewed by the respondent in June 1935, when she suggested that the appellant should furnish her with evidence on which she could obtain a divorce:

Will you do this gentlemanly thing and give me my freedom, i.e., cause to divorce you?

This grossly improper suggestion on her part was immediately and very rightly rejected by the appellant. From that time until September 1936, no further advance was made by the respondent, and it is plain that between 11 August 1934 and that date, she had been continuously deserting the appellant without cause. In September 1936 however, the respondent began a further correspondence with the appellant, and this correspondence has such a vital bearing upon the question before your Lordships House that two of the letters must be set out in full. The first of these is dated 23 September, and is in the following terms:

Dear Frank

You will, no doubt, be very surprised to hear from me. I am, however, writing to say I should like to see you, and am thinking about coming over one day next week. Which day suits you best? I suppose Wednesday? Do not imagine I am coming in a hostile spirit. I wish to meet you perfectly agreeably, and trust you will do the same. I wish to have a talk with you, but I am anxious for it to be a perfectly pleasant one. I have had every intention of coming in for some time, but when passing have always been with friends.

Will you let me know what day suits you, any day bar Tuesday suits me, or if you prefer to meet me anywhere outside, I am perfectly willing.

I am,

Your wife,

Eileen.

PSI have a nice house here and lovely garden, and you are always quite welcome if you care to come. E.

The only response vouchsafed by the appellant to this friendly overture was a curt note, dated 24 September, in which, after acknowledging its receipt, and referring to a letter she had written to him in July 1935, he stated

Page 441 of [1939] 3 All ER 437

that he did not think an interview would serve any useful purpose. On 25 September 1936 however, the respondent made yet one more attempt to bring about a meeting with the appellant. She wrote as follows:

Dear Frank,

Your letter received. I suppose the letter to which you refer was the one I wrote offering you your freedom, feeling at the time that it was the only way out of an anomalous position. You preferred to remain tied. But a good deal of time has passed since then, and I am feeling that, as we are still married, it will be best if we can come together, as it is undoubtedly the only course. My idea in coming to see you was to discuss this, and I suggest that we should meet occasionally and go out togetherin short, make a new start, with a view to making a home together in the future.

I should like you to come and see me, and have no risk for further hostilities or bitterness which do neither of us any good. Therefore I am sure you will see that it is essential we meet and that the future shall be arranged between us as agreeably as possible. Anything you have to say as regards this, or suggestions you may make I shall be pleased to consider. As I wrote, any day or time, bar Tuesday, will suit me next week. Please let me know.

Eileen.

This letter was no more successful than the former one. The appellant wrote to his wife that her letter “of the 25th inst.” was “to hand” and that he could only repeat what he had said in his letter “of the 24th inst.” that he did not consider an interview would serve any useful purpose. I ought, perhaps, to have stated that the appellant is a bank manager.

Her husbands very businesslike replies to her two friendly letters seem to have produced in the respondent a not altogether unpardonable feeling of irritation. She referred to them in a letter of 1 October 1936, as his two absurd little notes, and expressed her sorrow that he should have no decent feelings:

I was willing to do my part, it was up to you to do yours.

That was the last letter that passed between them. The respondent made no further attempt to bring about a reconciliation or a resumption of conjugal relations, and on 1 January, as I have already stated, the appellant filed his petition for divorce. The respondent entered an appearance, but filed no answer, and on 13 July 1938, the case came on for hearing before Finlay J, as he then was, at the Winchester Assizes as an undefended cause. The appellant was the only witness. He narrated the circumstances leading up to the departure of the respondent from the matrimonial home on 11 August 1934, and stated that he had not seen her since that date. With reference to the respondents letters of 23 September 1936, and 25 September 1936, he said that he had formed the view that she was not honest in the desire which she expressed of wanting to come back to him. This was not, however, the view which was taken of the letters by Finlay J. He thought that it was impossible to say after these letters that she was still guilty of the matrimonial offence of desertion. He accordingly dismissed the petition.

The appellant thereupon took the matter to the Court of Appeal, where it was heard on 15 December 1938 by Scott, MacKinnon and du

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Parcq LJJ. Scott LJ, in whose judgment the other Lords Justices concurred, after reading the letters of September 1936, said, at p 504:

We have considered the cases cited, and we do not think that they establish any legal principle applicable to the question which we have to decidenamely, whether or not the husband can say that the wife still deserted him without cause after he had refused even to see her and discuss their relations. In my opinion, it is impossible to say that Finlay, J., decided the matter wrongly.

When husband and wife are living apart in circumstances constituting desertion of the one by the other, and when the deserting spouse writes to the other and asks for an interview to discuss the position, it is the duty of the party receiving that request at least to meet the deserting spouse, and give him or her an opportunity of saying what he or she wishes. In my opinion, the judge was right. …

The appeal was accordingly dismissed. The appellant, however, managed to obtain leave from the court to bring the matter before this House, and the present appeal is the result.

My Lords, it is plain from this narrative of the facts that, if the letters of 23 September 1936 and 25 September 1936 had never been written, the appellant would have been entitled to the decree which he sought, for he himself would have been under no legal obligation to take any steps to induce the respondent to return. Can it be said, however, in view of those letters, that the respondent thereafter was continuing to desert her husband? For the purpose of assisting your Lordships in answering this question, counsel for the appellant called your Lordships attention to several reported cases in which the subject of desertion by one of the spouses of the matrimonial home has been considered by the courts. These were, no doubt, the authorities which had been cited to the Court of Appeal and were referred to by Scott LJ in the passage in his judgment to which I have already referred. I agree with him in thinking that they do not lay down any principle of law applicable to the question which we have to decide, for, as was pointed out by Warrington LJ in Thomas v Thomas, at p 200, approving a statement made in the Divisional Court:

… the question whether desertion continues is one of fact to be determined in view of the circumstances of the particular case …

That was a case where a husband shortly after committing the matrimonial offence of desertion had written to his wife offering to resume cohabitation. The court, however, came to the conclusion that the husbands offer was not a genuine one. His desertion was accordingly treated as continuing, notwithstanding the offer.

My Lords, in the present case, I can find nothing which even remotely suggests that the offer of the respondent contained in the two September letters was other than genuine. The appellant, indeed, concedes that the writing of the letters was a spontaneous act on the part of the respondent, and not one done upon the advice or at the instigation of her legal advisers. Nor does he suggest that the letters were written for the purpose of being used by her in any legal proceedings. All that he could say about the letters, when giving his evidence, was that he took the view at the time that the respondent was not “ honest in her desire to come back.” By this, I think, he must have meant that she only desired to come back

Page 443 of [1939] 3 All ER 437

on conditions to which he could not be expected to submit. However, there is no word in either letter to justify any such suspicion on his part. Nor should I have expected there to be, for she had tried to impose such conditions in the correspondence in 1934. Her effort had failed at that time, and there was no reason to suppose that a similar effort would succeed in 1936. The letters, in my opinion, indicate a genuine and honest desire to see and discuss matters with her husband, in the hope that this would result in their “coming together,” in their making “a new start,” and “a home together in the future.” It is idle to suggest that she had it in her mind to impose conditions which she knew would effectually prevent any of these results being attained.

It was indeed at one time contended by counsel for the petitioner that mere letters, however sincere, could never put an end to the respondents desertion. Nothing, he argued, short of an actual return to the matrimonial home, could have this effect. My Lords, I find myself wholly unable to accede to this contention. It would, in my opinion, be quite unreasonable to hold that the respondent, guilty though she was of the serious matrimonial offence of desertion, should be expected to present herself at her husbands door without any knowledge of how she would be received, and therefore at the risk of being subjected to the indignity of having admission refused her by her husband or by one of his servants. It is, moreover, to be remembered that by September 1936, the respondent had been living away from her husband for over 2 years. In such circumstances, there would necessarily be, apart altogether from other matters, many arrangements of a domestic character to be made and discussed before they could take up their married life at the point at which it had been broken off. It is plain, therefore, that before the respondent could return there would have to be some sort of discussion between her husband and herself in person or by letter. It could not be expected that she should suddenly make an unheralded entry into his house. Even so, it was argued, however, that it was necessary, in order to put an end to her desertion, for the respondent to take some active step towards returning to the matrimonial home. This, no doubt, is true, but in writing the letters of September 1936, she did take such a step, and the only one which she could reasonably be expected to take, in the circumstances. Whether the meeting for which she asked would have brought about a reconciliation between the two is a question which must ever remain unanswered. The respondent never in fact returned to her husband. In view of his refusal to allow a meeting to take place, however, her continued absence thereafter cannot without an utter misuse of language be called a desertion. I am of opinion that the decisions of Finlay J and the Court of Appeal were right, and that this appeal should be dismissed.

Appeal dismissed.

Solicitors: Peacock & Goddard, agents for Traill Castleman-Smith & Wilson, Blandford (for the petitioner).

Michael Marcus Esq   Barrister.


Reardon Smith Lines Ltd v Black Sea and Baltic General Insurance Co Ltd

The Indian City

[1939] 3 All ER 444


Categories:        INSURANCE: INTERNATIONAL; Law of the Sea: SHIPPING        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        1, 2, 4 MAY, 29 JUNE 1939        


Insurance Marine insurance Shipping Claim for general average Charterparty Ship proceeding from Poti to Istanbul Voyage via Constantza Deviation Whether evidence of trade custom admissible Absence of ambiguity in terms of charterparty.

A vessel was chartered “to proceed … to Poti and there load and being so loaded with all convenient speed proceed to Istanbul and thence to a trans-Atlantic port to be named.” Owing to facilities for obtaining oil cheaply at Constantza, the voyage to Istanbul was made via that port. While entering that port, the vessel was stranded, and a part of the cargo had to be jettisoned. Evidence was given that about a quarter of the oil-burning vessels proceeding from Black Sea ports to the Bosphorus bunkered at Constantza:

Held evidence as to a trade custom of calling at Constantza was admissible, not only on general principles, but also in order to ascertain and explain what the parties meant by their contract as applied to the facts of the case, and, as, in the circumstances, the vessel was pursuing a usual and reasonable commercial route, there was no deviation from the contract voyage.

Order of Court of Appeal ([1938] 2 All ER 706) reversed.

Notes

However wide the language used in the deviation clause may be, it cannot confer a power of visiting ports out of the course of the voyage as contemplated by the parties at the time of the contract. The question in this case is, therefore, what was the voyage contemplated by the parties, and, upon this question, the evidence of a trade custom of calling at certain ports is material. A voyage carried out in accordance with a trade custom is one following a usual and reasonable route, and, in choosing his route, the shipowner may be guided by the consideration of the cheapness of bunkers at certain ports.

As to Deviation, see Halsbury (Hailsham Edn), Vol 18, pp 257260, paras 351, 352; and for Cases, see Digest, Vol 29, pp 145152, Nos 9751052.

Cases referred to

Grant v Grant (1870) LTR 5 CP 727; 17 Digest 249, 629, 39 LJCP 272, 22 LT 829.

Frenkel v MacAndrews & Co Ltd (1928) 139 LT 327; 41 Digest 486, 3177, affd [1929] AC 545, 98 LJKB 389, 141 LT 33.

Evans, Sons & Co v Cunard SS Co Ltd (1902) 18 TLR 374; 41 Digest 486, 3175.

Glynn v Margetson & Co [1893] AC 351; 41 Digest 311, 1715, 62 LJQB 466, 69 LT 1, affg [1892] 1 QB 337.

Leduc v Ward (1888) 20 QBD 475; 41 Digest 485, 3172, 57 LJQB 379, 58 LT 908.

Morrison (James) & Co Ltd v Shaw, Savill & Albion Co Ltd [1916] 2 KB 783; 41 Digest 486, 3176, 86 LJKB 97, 115 LT 508.

Hain SS Co Ltd v Tate & Lyle Ltd [1936] 2 All ER 597; Digest Supp, 155 LT 177.

Appeal

Appeal by the respondents in the Court of Appeal, the defendants in the court of first instance, from an order of the Court of Appeal (Slesser and Clauson LJJ, Greer LJ dissenting), dated 12 April,

Page 445 of [1939] 3 All ER 444

1938, and reported [1938] 2 All ER 706, reversing a judgment of Goddard J, dated 22 March 1937. The facts and the arguments are set out in the opinions of Lord Wright and Lord Porter.

A T Miller KC and Cyril T Miller for the appellants.

G St C Pilcher KC and H G Willmer KC for the respondents.

29 June 1939. The following opinions were delivered.

LORD ATKIN. My Lords, I have had an opportunity of reading the opinion which is about to be delivered by my noble and learned friend Lord Wright. I entirely agree with it, and for the reasons which he has given I find myself unable to agree with the decision of the Court of Appeal. I move that this appeal be allowed.

LORD MACMILLAN. My Lords, I also have had the advantage of reading in print the views about to be expressed by my noble and learned friend Lord Wright, as also those embodied in the opinion of my noble and learned friend Lord Porter, which will shortly be laid before the House. With the views there expressed I find myself in entire concurrence.

LORD WRIGHT. My Lords, this appeal raises an important question in the law of carriage of goods by sea which has given rise to difference of judicial opinion. Goddard J decided in favour of the appellants, but his decision was reversed by a majority of the Court of Appeal, consisting of Slesser and Clauson LJJ. Greer LJ, who dissented, agreed with Goddard J. The substantial question is whether the appellants vessel, the Indian City, had deviated in calling for bunkers at Constantza while on a voyage from Poti to Sparrows Point, in the United States of America. The vessel grounded at Constantza, and sustained considerable damage, besides incurring salvage, general average and other expenses.

The appellant company at the material time owned 28 vessels, of which 19, including the Indian City, were capable of being readily converted into either oil or coal burners. In 1930, cheap fuel oil for bunkers became available at Constantza, in Roumania. Constantza thereupon became largely used as a bunkering port, in particular for vessels bound from the Black Sea on long ocean voyages. In 1932 and 1933, 114 oil-burning vessels called at Constantza for bunkering only. This figure shows the importance of the port as a bunkering port. It is not necessary to analyse closely what proportion of oil-burning vessels sailing through the Bosphorus on ocean voyages bunkered at Constantza. It is sufficient for the purposes of this case to record what has been accepted on both sidesnamely, that 25 per cent of the whole number called and bunkered at Constantza in the 3¼ years before the casualty which overtook the Indian City. I emphasise these facts, because the position of Constantza as a usual and recognised bunkering port in the Black Sea seems to me to be a key point in the case.

Page 446 of [1939] 3 All ER 444

The charterparty in respect of which the dispute arose was dated 1 September 1933. It was between the appellant as shipowner and the Manganexport GmbH as charterer, and was for 3 vessels to be nominated by the appellant. The vessels were to be of 8,300 tons minimum and 9,000 tons maximum capacity, and were to proceed with all convenient speed to Nicolaieff or Poti, as ordered on arrival at Istanbul, and there load ore and proceed with all convenient speed to one of a range of ports in the United States of America at charterers option. The vessels were to be addressed for custom house business to charterers agents at the port of loading, and were to apply there to Soyusmetimport for cargo. It was also stipulated that the vessels were to be consigned to Sovflot Nicolaieff or Sovflot Poti for loading and custom house business. The contract provided that the owners were not to be called upon to take bunkers from charterers, and it was stated that the vessels would be burning oil. The contract gave the steamers liberty, inter alia, to call at any port or ports in any order or places to bunker and for other purposes, and to deviate for saving life or property. The contract was for one steamer monthly in October, November, December 1933. The Indian City was the third steamer nominated.

This charterparty was the eighteenth charter entered into between the appellant company and the charterer in this trade. Before the voyage of the Indian City, the appellant made 28 voyages in the trade, 19 for the same charterer, which was a Russian state trading corporation, and nine for other Russian state trading corporations. Except the first of these voyagesthat performed in July 1930, by the Orient City, which bunkered at Constantza on her way to Poti to loadall the appellants vessels bunkered at Constantza on their voyage. In each case, some departure from the shortest sea route from the loading port to the Bosphorus was involved. The extra distance steamed in these cases was considerably greater where the loading ports were situated in the eastern part of the Black Sea, as were Poti, Batoum or Novorossiisk. The extra distance amounted approximately to 120 miles in the case of Novorossiisk, and to 193 miles in the case of Poti. Where the port of loading was in Ukrainia, the extra distance to be steamed in order to bunker at Constantza was 14 miles or 21 miles, according to the port of loading. When the loading port was in the Crimea or Sea of Azov, the extra distance might be about 80 miles.

The master of the Indian City was instructed by his owner to fuel at Constantza after loading his cargo. On arrival at Poti, Backal, who at that port was manager of Sovflot, a Russian state corporation which was acting as charterers agents, came on board and said he was acting as the ships agent. He was the only person there who spoke English. The master arranged all the ships business with him, and in particular told him that he was bunkering at Constantza and gave him a cable for transmission to the oil suppliers at Constantza, ordering oil bunkers for the steamer at that port. A similar procedure had been followed in the

Page 447 of [1939] 3 All ER 444

case of the other two vessels nominated under this charterparty, and also in the case of other vessels on voyages from the Black Sea to distant ports under similar charters between the appellant and the same charterer.

The respondent in this appeal is an insurance company which was sued under the guarantee which it gave to the appellant at the request of the charterer to pay any contribution in general average, salvage or special charges due in respect of the cargo and to admit a loss of freight in general average, and also to be responsible for a balance of freight withheld, so far as the same might be held to be properly due and payable by the charterer. This agreement was in consideration of the appellant agreeing to release its lien, which it did when the cargo was eventually delivered at Rotterdam on the termination of the voyage to that port, which was substituted by agreement for the contract voyage in consequence of the damage sustained at Constantza. It is not now disputed that the liability of the respondent under this guarantee is the same as the liability of the charterer under the freight contract. That liability depends on whether the Indian City had deviated from the contract voyage by calling for bunkers at Constantza so as to have lost the right to claim, in respect of the damage, expense and losses, consequent on the grounding at Constantza, the protection of the exception clauses which were contained in the charterparty, and which were in the usual form including perils of the seas and negligence. As the property in the cargo remained throughout at all material times in the charterer, the charterparty provisions are the contractual terms which govern the position.

The appellant does not rely on the liberty to call for bunkers which is expressed in the charterparty. That liberty, accordingly, need not be further considered. Its case is that what was done in calling for bunkers at Constantza was not a deviation or departure from the contract voyage, but was within the contract voyage, because the vessel was pursuing a usual and reasonable commercial route for carrying out that particular adventure. Its contention was that the charterparty words “shall with all convenient speed proceed to … Sparrows Point” imported by necessary intendment that the vessel should proceed by a usual and reasonable route and that the ascertainment or identification of what was a usual and reasonable route depended on evidence, since the court, not being possessed by itself of expert navigational or mercantile knowledge, must, if need be, call in aid such evidence. This is not because the contract is ambiguous, but simply because it does not write out in full what the parties are assumed to know or to be able to ascertain. It is only an instance of the familiar rule that evidence is admissible, not of the parties intention, but of the surrounding circumstances, in order to identify what the parties were contracting about and to identify the subject-matter of the contract. Such evidence must not contradict any express term of the contract. For example, if it had been stipulated

Page 448 of [1939] 3 All ER 444

that the vessel should not call at Constantza, the evidence would have been inadmissible. Where, however, as here, there is no such inconsistency between the evidence and the document, the evidence is not merely competent, but may be necessary if the court is to give effect to the contract. The general rule is that stated by Blackburn J, in Grant v Grant, at p 728:

The general rule seems to be, that all facts are admissible which tend to show the sense the words bear with reference to the surrounding circumstances of and concerning which the words were used, but that such facts as only tend to show that the writer intended to use words bearing a particular sense are to be rejected.

The question here is what sense is to be attributed to the words “proceed with all convenient speed from Poti to … Sparrows Point”that is, proceed from the one terminus to the other. The contract voyage has to be identified. It must refer to some route or other. It cannot be said as a matter of law that the meaning is necessarily by the direct sea-track. In Frenkel v MacAndrews & Co Ltd, at p 557, Viscount Dunedin quotes from Wills J, in Evans, Sons & Co v Cunard SS Co Ltd, the statement that the expression “the voyage from Bari to Liverpool” must be understood in a business sense, which were the words used by Lord Herschell LC, in Glynn v Margetson & Co. Viscount Dunedin then proceeds as follows, at p 557:

That case [Evans case] puts an end to the idea of the geographical route being the only route. It lets in the evidence of what the route under the circumstances of the ship really was. Many cases may be figured where there is more than one route which might be used by a ship. It might be a choice between the Suez Canal, the Panama Canal or round Cape Horn. In such a case even if the port of starting and of destination were stated, it would be necessary to make inquiry to find out what was the usual route.

Again in Frenkels case, at p 561, Viscount Sumner to the same effect said that evidence in that case was needed to prove what the voyage was, and, being admitted, showed what was a usual commercial route, which in his Lordships opinion was reasonable in the circumstances. Viscount Sumner, after referring to opinions of Lord Esher MR and Lord Herschell LC, in Glynns case, goes on as follows, at p 563:

The mention of other matters, all of them depending on facts relating to the circumstances of trade and navigation and varying somewhat as time goes on and progress takes place, really shows how clearly these great authorities desired to guard themselves in view of the fact, that on many grounds deviation from the sea-track might still not be beyond the ordinary route. … Such things must be matters of degree and may not always be equally important for all classes of ships, all kinds of cargo, or all periods of trade.

In Frenkels case, certain earlier decisions were discussed and distinguished. Thus, Leduc v Ward was a case where goods were shipped on a general ship for carriage from Fiume to Dunkirk. The vessel, instead of proceeding direct to Dunkirk, sailed for Glasgow, and was lost with her cargo at the mouth of the Clyde. It was not suggested that she was pursuing a usual route in any sense. A plea that the shippers knew and agreed that the vessel was intended to proceed via

Page 449 of [1939] 3 All ER 444

Glasgow was irrelevant, because the plaintiffs were indorsees of the bill of lading, and were entitled to enforce the bill of lading according to its terms. The only other plea, which was a plea based on the deviation clause, failed because the liberty to call at any ports in any order meant ports which were substantially ports which would be passed on the named voyage. There was no question, as Viscount Dunedin pointed out, in Leducs case of alternative routes, or a customery route which might displace the geographical route. On that footing, Lord Esher MR, spoke of the voyage being one on the ordinary sea-track from Fiume to Dunkirk, but added that an exact line is not meant, for he said, at p 481:

… it would necessarily vary somewhat according to circumstances, the ordinary track for sailing vessels would vary according to the wind, the ordinary track for a steamer, again, might be different from that for a sailing vessel; I mean the ordinary track of such a voyage according to a reasonable construction of the term.

Obviously in proper cases this would let in evidence of what the voyage was. In Glynn v Margetson & Co, the steamer was a general ship. Oranges were to be carried from Malaga to Liverpool. The vessel, after loading the oranges, proceeded from Malaga up the east coast of Spain, and then returned to Malaga, before proceeding to Liverpool. There was no claim that such a voyage was a usual or reasonable course, or was, in a business sense, within the voyage described in the contract. The defence was based on the deviation clause, which gave a very wide liberty to call at ports. The House held that, however wide the words were, the liberty was limited to ports “in the course of the voyage.” Lord Herschell LC said that he was using these words in a business sense, and added, at pp 355, 356:

It may be said that no port is directly in the course of the voyage … inasmuch as in merely entering a port or approaching it nearly you deviate from the direct course between the port of shipment and the ultimate port of destination. That is perfectly true; but in a business sense it would be perfectly well understood to say that there were certain ports on the way between Malaga and Liverpool, and those are the ports at which I think the right to touch and stay is given.

I quote these observations because, though in a slightly different connection, they recognise the necessity of ascertaining what is the understanding of business men on the matter, presumably by appropriate evidence. In Frenkels case, the authorities last cited were distinguished. I disregard a subsidiary point which was raised in that case on the form of the bills of lading. The real distinction drawn was that there was evidence showing that the contractual voyage was not the direct or ordinary sea-route. In fact, the vessel, after loading the barrels of olive oil at Malaga with destination for Liverpool, went up the Spanish coast in the Mediterranean to various ports and to Palamos, close to the French frontier, before she proceeded towards England. The shipowners did not rely on the deviation clause. They contended that the steamer was on the contract voyage, and had not departed from it when the oil was damaged in a storm between Malaga and Cartagena. In support

Page 450 of [1939] 3 All ER 444

of their contention, they relied on the evidence, which showed that the route taken was a usual commercial route for the vessel to follow in the circumstances, and was the route which had been advertised for her for the voyage some time beforehand, and was (as Viscount Sumner in fact held) reasonable in the circumstances. Viscount Sumner added, at p 561:

I cannot see that it is the less a reasonable and usual commercial route, though the evidence referred only to the ships of the respondents own line.

This shows how remote such evidence is from evidence which would be required to prove a strict custom. Viscount Sumner also treated the fact that the course of business was well known to those of the plaintiffs employees to whom he confided this part of his business as strongly confirming the usual and reasonable character of such a voyage, since no objection was taken, though no estoppel or collateral agreement arose. I may also here quote certain observations from Morrison (James) & Co Ltd v Shaw, Savill & Albion Co Ltd. The vessel in that case was one of a regular line trading between New Zealand and Europe. The plaintiffs parcel was shipped in New Zealand for London. The vessel made for Havre to discharge a parcel of meat. This was during the War. The vessel was torpedoed and sunk while near Havre. Evidence was given that the usual and well-known route for steamers of this line on the voyage from New Zealand to London, which was always substantially followed, was by Cape Horn to Montevideo or another named port, then to Teneriffe or Madeira, and thence direct to London. The outward voyage was by the Cape of Good Hope. Phillimore LJ, referring to the route as the usual route, said that it needed no liberties or permissions to justify it. He added that the call at the coaling port, which might be Tenerife or Madeira, did not need the liberty to call at intermediate ports, and added, at p 797:

This call is one of the incidents of the voyage and is no departure. There are many similar instances, such as calling at weather stations to inquire about ice or going to some state for a government pass through territorial waters, or to pick up a pilot, or calling at a preliminary port to lighten the ship in order that she may finish the voyage with a less draught. These are not, in my view, departures from the usual and customary course of the voyage.

That case illustrated the serious consequences of a deviation, because the shipowners were held not to be entitled to rely even on the exception of the Kings enemies to which carriers are generally entitled even in the absence of a special contract. The effect of even an accidental deviation, if not justified, is illustrated in Hain SS Co Ltd v Tate & Lyle Ltd, where the deviation was due to an error in transmitting orders to the master. No one would seek to minimise the importance of the rule that a vessel must not deviate without justification from the contract voyage, but that makes it also essential to ascertain correctly what the contract voyage is.

The cases cited above were cases of liners or general traders, and it may be said that the same principles do not apply in the same sense to

Page 451 of [1939] 3 All ER 444

a chartered vessel, carrying a single cargo for a single shipper or consignee. Even in such cases, however, it is obvious that there will be in general various considerations, commercial or navigational, which determine what sea-route is usual and reasonable. Thus, in the old sailing-ship days, routes were chosen in order to make use of trade winds, and varied from season to season. Thus, between the same termini there might be several usual routes. In modern times, in all long ocean voyages, the need to replenish bunkers (coal or oil) has to be considered. The doctrine of stages of the voyage, which enables a shipowner to start with bunkers sufficient for the stage, so long as he fills up his bunkers at the next bunkering port, necessarily involves calling at that port, and perhaps later ports, in order to fulfil the recurring obligation to keep the vessel seaworthy in regard to bunkers. Thus, to call at such ports has become an ordinary incident of the voyage. The need to do so may help to determine the general routefor instance, whether it is to be by the Cape of Good Hope or by the Suez Canal. A shipowner is entitled, within certain limits determined by what is reasonable, to be guided in his choice of bunkering ports by considerations of cheapness and convenience. Thus, evidence was given in this case that it is usual for a coal-burning ship bound to Australia by the Cape of Good Hope to bunker at Durban, where coal is cheaper, instead of at Cape Town, though Durban is farther off the route. Other similar instances were given in evidence. In the voyages here in question, various choices are open to the shipowner when his ship is burning oil. He may fill up his bunkers for the whole voyage at Constantza on his way to the loading port. That course may be objected to by the charterer because it may reduce the quantity of cargo his ship can load, and for the same reason may be disadvantageous to the shipowner. He may decide to fill up his bunkers, after sailing from the port of loading, at some convenient port. He may decide to do this at Constantza, or at Istanbul, or at Algiers, or at Oran, or at Ceuta (all of which are available bunkering ports), starting from the loading port with sufficient bunkers to take the ship to the next bunkering port which he decides to use. In this way he selects the stage for bunkering. The vessel must be seaworthy for that stage, but it is the shipowners province to fix the stagethat is, to determine where he will bunkerso long as his decision is reasonable and usual. In the present case, as in the other voyages during the relevant period, the appellant selected Constantza as the bunkering port. Its case is that it has done so a great many times without objection, and, save in this one case, without mishap. It relied on all the evidence to which I have briefly referred to support its claim that the route by Constantza is a usual route. The position, therefore, is that to call at some port for bunkers is no deviation, and the only question is whether Constantza is a usual and reasonable port of call for this purpose.

I agree with Greer LJ that the evidence that 25 per cent of oil-burning vessels sailing from the Black Sea on ocean voyages call at

Page 452 of [1939] 3 All ER 444

Constantza for bunkers is sufficient to show a usual route. The ship-owner is not here attempting to prove a custom. To prove a custom, he would have to show that it was uniform and universal in the trade, but that is not what is in question here. Nor need he show that other routes were not availablethat is, that there were not alternative ports of call at which he might bunker. There are no doubt other available ports of call for this purpose, some, and perhaps all, of which would involve much less extra steaming. I think the shipowner is entitled to balance the cost to him of extra steaming against the cheapness or convenience of Constantza, so long as to do so is not unreasonable in regard to the interests of the charterer or any other persons who might be concerned. It is obvious that to put in to any port to bunker involves, not merely extra steaming, either more or less, but also the entry into and departure from an extra port, which in itself is a separate risk, however close it may be to the direct ocean route. Again, it is said that the habit of bunkering at Constantza sprang up suddenly in 1930, and ceased as suddenly in 1935at least, so far as concerned the practice of the appellant. I think, however, that a commercial habit or practice like the one claimed may come into existence in a short time and cease as rapidly. In modern business, things are constantly changing, and commercial habits may change as rapidly. That the practice of calling at Constantza for bunkers was not unreasonable is also, I think, supported by the evidence that it was well known to responsible officials who represented the charterers on the spot, and that they never objected. I refuse to believe that, if the charterers interests had been prejudiced, they would not have objected. I refuse to believe, in view of all the evidence, that the practice was not well-known. I do not treat this evidence as evidence of a waiver, or an agreement to vary the contract, which might raise questions of authority to vary a written contract. I merely regard it, as Viscount Sumner, did in Frenkels case, at p 561, as confirming the usual and reasonable character of such a voyage, which is fairly inferred from the fact that no objection was taken.

As the necessity of using ports of call for bunkering is so obvious, I think that less evidence is needed to justify that it is usual and reasonable to use a port like Constantza for that purpose than if the ship had gone there for purposes of trade. However, I do not think it necessary to lay down any specific measure of departure from the direct sea-route which may be held to be reasonable. If I am asked how far I go, I say that I go as far as this case requires. The test of what is usual and reasonable in a commercial sense may arise in very different circumstances, and must be decided whenever it arises by the application of sound business considerations, and by determining what is fair and reasonable in the interests of all concerned.

I have found myself unable to concur in the reasons which led Slesser and Clauson LJJ, to reverse the decision of Goddard J.

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Slesser LJ seems to start from the assumption that the contract stipulates for one voyage onlynamely, from the port of destination to the port of discharge, being a voyage by the ordinary track by sea. I think he bases that on a view of what was meant by Lord Esher MR in Leduc v Ward. However, as Viscount Dunedin and Viscount Sumner pointed out in Frenkels case, Lord Esher was not dealing with a case where there was any question of there being any usual route or routes other than the ordinary sea-track. Slesser LJ next holds that, the contract being clear, evidence was not admissible to vary it, unless it went to prove a custom in the strict sense. It is true that, if a contract is clear, it cannot be varied by evidence of a custom, or even a trade usage, inconsistent with its clear terms, but, in my opinion, for reasons which I have explained, the evidence is admissible here, not only on general principles, but on the particular rulings in Frenkels case, in order to ascertain and explain what the parties meant by their contract as applied to the facts of the case. Again, I do not agree with Slesser LJ that there is any question here of a custom in the strict sense. The evidence, however, to prove a commercial usage is in any event not the same as that necessary to prove a custom, say, in matters of land law, and, as appears from the authorities I have quoted, the question here is simply what is a usual and reasonable mode of performing the necessary operation of calling for bunkers. I observe that Slesser LJ adds that, if the evidence were admissible, it might well be that it would prove a usual commercial route. Clauson LJ seems to have treated the contract as being for a voyage Poti-Istanbul, and on that basis to have held that it was unambiguous and that there was no possibility of treating the case as a case of alternative routes, Poti-Istanbul or Poti-Constantza-Istanbul. He said that the termini of the voyage were fixed, and that there were no navigational alternatives such as were contemplated by Viscount Dunedin in Frenkels case. With great respect, I cannot agree with the view that the charterparty does not admit of explanatory evidence. Clauson LJ himself admits that some owners may prefer to go direct and not call at Constantza, preferring the shorter sea-route to the convenience of cheaper bunkers. Perhaps Clauson LJ may have been influenced in the view he arrived at by treating the voyage as one from Poti to Istanbul. There was no such voyage. The voyage was to Sparrows Point, in the United States of America, which was a vitally different voyage, because it involved the necessity of providing the bunker supply for the whole voyage in appropriate stages at the shipowners reasonable discretion. It is this which was the essence of the whole problem, and led to what were called the navigational alternatives. For the reasons I have explained, I agree with the judgments of Goddard J and Greer LJ. I think that the appeal should be allowed and the judgment of Goddard J restored, and that the respondent should pay the appellants costs in this House and in the court below.

Page 454 of [1939] 3 All ER 444

LORD ATKIN. My Lords, I am asked by my noble and learned friend Lord Thankerton to say that he agrees with the opinion which has just been delivered.

LORD PORTER (read by Lord Atkin). My Lords, in this appeal your Lordships are asked to reverse the decision of the Court of Appeal, who by a majority reversed the decision of Goddard J. The appellants are owners of a line of steamers which mostly operate under charter on ocean voyages. At the material date, they owned 28 vessels, of which 19 were steamships capable of burning either coal or oil fuel and of being rapidly converted for the use of one or the other. The ship with which the present appeal is concerned is one of these 19, and is named the Indian City. By a charterparty dated 1 September 1933, the appellants undertook to provide 3 vessels to be nominated by them to proceed to Nicolaieff or Poti in the Black Sea as ordered by the Trade Delegation of the USSR at Istanbul and there take a full cargo of between 8,300 tons and 9,000 tons of ore for carriage to a port on the east coast of the United States of America.

Amongst the provisions of the charterparty are to be found the following:

(2) The said ship … shall … proceed with all convenient speed to Nicolaieff or Poti as ordered and there load … a full and complete cargo of ore, 8,300 tons minimum not exceeding 9,000 tons maximum quantity in owners option … and being loaded shall with all convenient speed proceed to … Baltimore (including Sparrows Point) …

(12) The steamer is to be addressed for the custom house business to charterers or their agents at ports of loading. …

(19) Ship to apply to Soyusmetimport at loading port for cargo, and wire on leaving last port of discharge “Soymangan Berlin” and “Sovflot Istanbul” and “Soyusmetimport Moscow.”

(20) … stranding … and all and every other damages and accidents of the seas … of whatever nature and kind whatsoever, before and during the said voyage always excepted. Steamer has liberty to call at any port or ports in any order or places, to bunker.

(28) At Nicolaieff or Poti, steamer to be consigned to the Odessa Freight Office or their agents, telegraphic “Sovflot, Nicolaieff” or “Sovflot Poti” for loading and custom house business.

(41) Owners not to be called upon to take bunkers from charterers. Vessels will be burning oil.

(43) General average shall be payable according to York/Antwerp Rules, 1924, and shall be adjusted in London in accordance with English law and custom. Guarantee for cargos liability for general average contribution and/or salvage charges shall be given by Messrs. Black Sea and Baltic General Insurance Co. Ltd., 106, Fenchurch Street, London, E.C.3. …

The Indian City was the third vessel to be nominated by the appellants under this charterparty. She was ordered, upon calling at Istanbul, to proceed to Poti, where she arrived on 10 December 1933, and loaded a cargo of 8,430 tons of ore for Sparrows Point, Baltimore. After loading, she sailed on 31 December 1933 for Constantza, on the west coast of the Black Sea, for bunkers. In entering that port on 3 January 1934, she ran aground. Considerable damage was done to the ship, and cargo to the value of £1,061 14s 4d had to be jettisoned. Temporary repairs were completed by 6 March 1934, and she set sail for her destination. In the Mediterranean, however, she began to leak again, and was obliged to put into

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Malta. There it was agreed by all the parties interested that her destination should be changed to Rotterdam, at which port she arrived on 20 April 1934. As a result of the casualty, the appellants incurred by way of general average sacrifice an expenditure of £6,986 5s 5d, and claimed from the charterers their proportion of this sum. The charterers repudiated liability for any general average, and withheld the sum of £1,061 14s 4d from the freight in respect of the cargo undelivered. The appellants thereupon refused to deliver the cargo without some security for payment of these two sums if a legal right to their recovery could be established, and, in order to surmount this difficulty, the respondents entered into a bond, dated 15 January 1934, guaranteeing to the appellants the payment of any contributions of general average which might thereafter be ascertained to be properly due in respect of the cargo, and, by a later instrument, dated 5 March 1934, agreed to treat the loss of freight as if it were general average.

The respondents maintained that in going to Constantza the ship had deviated from her contractual route, and it is admitted that, if they are right in so contending, they are not liable, either for the general average claim or for the freight withheld. The question which your Lordships have to decide, therefore, is whether or not, in proceeding to Constantza to bunker, the Indian City deviated. On behalf of the respondents, it was said that the appellants were under a duty to proceed from Poti to Sparrows Point by the direct route through Istanbul. Indeed, in their submission, the terms of the charterparty were plain, and no evidence could be given in order to establish the right of the appellants to proceed by any other route. The appellants, on the other hand, maintained that in every case it was permissible to adduce evidence in order to establish what was the usual route, and that in the present case they had established by evidence the existence of an alternative route via Constantza for bunkers.

The facts proved in evidence were as follow. Up to 1930, no oil fuel was obtainable at the port of Constantza, but in that year cheap oil fuel became available there, and in that year the appellants began to charter their vessels to various of the Russian state trading corporations upon ocean voyages from the Black Sea with cargoes of ore, grain and salt. Between July 1930, when the first of the appellants vessels to engage in this trade loaded a cargo of ore at Poti, and the sailing of the Indian City from that port in December 1933, the appellants vessels had made 28 voyages in this trade, on 19 of which the ships were under charter to the same charterers as was the Indian City, and upon the remaining 9 voyages the ships were under charter to other of the Russian state trading corporations. On each of the 28 voyages except the first, the ships had taken fuel bunker oil for the chartered voyage at Constantza after loading their cargoes, and on many occasions the charterers representatives at the various loading ports had been informed by the captains of the appellants vessels of their intention to bunker at Constantza after

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leaving the loading port, and no objection to the adoption of this route had been raised by any of the charterers until the casualty to the Indian City. During this period, oil fuel was much cheaper at Constantza than at other ports such as Istanbul, Algiers and Ceuta, and the appellants entered into the charters by reason of the fact that oil could be obtained at Constantza at the cheaper price. The charterparty of 1 September was the eighteenth charterparty into which the appellants had entered with Messrs. Manganexport in this trade.

At the trial before Goddard J, the appellants (i) gave evidence as to the number of vessels bunkering at Constantza during 1932 and 1933, (ii) gave evidence as to the route followed by all the appellants vessels which had loaded at Black Sea ports in 1930, 1931, 1932 and 1933, and (iii) furnished a list of the various vessels sailing from Poti in 1931, 1932 and 1933, showing whether or not they called at Constantza to bunker. The result of that evidence was as follows. In 1932 and 1933, prior to the voyage of the Indian City, 114 oil-burning vessels called at Constantza for bunker purposes only. In 9 cases it was not possible to tell where the vessels loaded their cargoes, but, of the remaining 105, in 83 instances the vessels bunkered at Constantza after loading their cargoes elsewhere at Black Sea or Danube ports, or, if Danube ports be excluded, the vessels called at Constantza to fuel after loading their cargoes in 45 out of 65 instances. If, on the other hand, eastern Black Sea ports alone be considerednamely, Novorossiisk, Tuapse, Poti and Batumof a total of 33 vessels which called at Constantza, 18 bunkered after loading, and, of those from Poti itself, out of 22 oil-burning vessels, 9 bunkered at Constantza after loading their cargoes. These 9, however, included the Indian City and 2 vessels which proceeded to Novorossiisk before calling at Constantza.

As against this evidence, the respondents adduced two lists of vessels sailing from Poti and Novorossiisk in 1932 and 1933 from which it appeared that, out of 19 oil-burners sailing from Poti, 6 called at Constantza after loading, and, of these 6, 5 belonged to the appellants. These figures exclude the Indian City and the 2 vessels which sailed via Novorossiisk. From Novorossiisk the numbers were 36 oil-burners, of which 8 called at Constantza after loading, and 4 belonged to the appellants. It was also proved that, in the case of chartered vessels other than those belonging to the appellants, the representative of the charterers, whether those charterers were Messrs. Manganexport or other Russian state trading corporations, were in a number of instances informed that the vessel intended to call at Constantza for bunkers after loading, and that no objection to this course was taken. Moreover, in the case of the 3 ships nominated under the charterparty of 1 September 1933, the first, the Atlantic City, loaded at Poti, and her captain not only informed the manager of Sovflot at that port, who was acting as agent for the charterers as well as the ship, that he intended to bunker at Constantza, but before sailing handed to that agent for transmission to Constantza

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a cable to the suppliers of oil at that port concerning the expected arrival of the Atlantic City. The second vessel, the Jersey City, was ordered to Nicolaieff, and a procedure similar to that which had taken place at Poti was adopted. In the case of the third vessel, the Indian City, similar information was given and a similar telegram sent.

In this state of affairs, the appellants maintained that to proceed to Sparrows Point via Constantza for bunkers was to proceed by a usual route, and that they were entitled to adduce the facts proved in evidence in support of their contention. The law upon the matter is, I think, reasonably plain, though its application may from time to time give rise to difficulties. It is the duty of a shipat any rate, when sailing upon an ocean voyage from one port to anotherto take the usual route between those two ports. If no evidence be given, that route is presumed to be the direct geographical route, but it may be modified in many cases, for navigational or other reasons, and evidence may always be given to show what the usual route is, unless a specific route be prescribed by the charterparty or bill of lading. In each case, therefore, when a ship is chartered to sail, or when a parcel is shipped upon a liner sailing from one port to another, it is necessary to inquire what the usual route is. In some cases, there may be more than one usual route. It would be difficult to say that a ship sailing from New Zealand to this country had deviated from her course whether she sailed by the Suez Canal, the Panama Canal, round the Cape of Good Hope or through the Straits of Magellan. Each would, I think, be a usual route. Similarly, the exigencies of bunkering may require the vessel to depart from the direct route, or, at any rate, compel her to touch at ports at which, if she were proceeding under sail, it would be unnecessary for her to call. It is not the geographical route but the usual route which has to be followed, though in many cases the one may be the same as the other. The inquiry must always be, however, what is the usual route, and a route may become a usual route in the case of a particular line though that line is accustomed to follow a course which is not that adopted by the vessels belonging to other lines or to other individuals. It is sufficient if there is a well-known practice of that line to call at a particular port.

These principles have been set out in at least two cases, one of which was decided in your Lordships House. The first is Evans, Sons & Co v Cunard SS Co Ltd, and the second is Frenkel v MacAndrews & Co Ltd. Each case, it is true, was concerned with a parcel of goods shipped on board a liner, and to that extent it may be said that there was a particular defined route, or several defined routes, known to be followed by the vessels of that line, but I do not think that the decisions turn solely upon that fact. The observations of Viscount Dunedin and Viscount Sumner in Frenkels case are of more general application. As Viscount Dunedin said, at p 557:

There may be … either alternative routes or a customary route which in either case might displace the geographical route.

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Then at p 557 he quotes from Evans Sons & Co v Cunard SS Co Ltd, the words of Wills J, at p 375:

“The description of the particular voyage agreed upon must be the keynote to which the bill of lading must conform. What then is meant by the voyage from Bari to Liverpool? Lord Herschell says the expression must be understood in a business sense. In Glynn v. Margetson & Co., there was no evidence as there is in this case that the only practicable way to get a cargo from Bari to Liverpool is by a more or less uncertain route via the Adriatic round by Levantine or Black Sea ports. …” That case puts an end to the idea of the geographical route being the only route. It lets in the evidence of what the route under the circumstances of the ship really was.

In the same case, Viscount Sumner says, at p 561:

Evidence was needed to prove what that voyage was and that evidence was tendered and was admitted without objection. Its effect was that the ship, having shipped the oil at Malaga, was to proceed “via Levante” calling at various ports as far eastward and north-eastward as Palamos, and, returning thence, calling at other ports, until, having passed Malaga without calling again, she proceeded “directo” for the United Kingdom. No question arises here as to the precise meaning of “via Levante” or as to the ports to be called at and the order of the calls, which that expression may connote. This was shown to be a usual commercial route for the Cervantes to follow under the circumstances and to be the route which had been advertised for her for this voyage some time beforehand, and it was one which I think was reasonable under the circumstances. I cannot see that it is the less a reasonable and commercial route, though the evidence referred only to the ships of the respondents own line. Their prominent position in this trade, the number of ships they run, and the length of time that this kind of practice has been followed by them all go to prove this conclusion. The evidence further shows that these facts were well-known to those of his employees, to whom the plaintiff confided this part of his business, and the usual and reasonable commercial character of such a voyage was thereby strongly confirmed, since no objection was taken.

It was said, however, on behalf of the respondents, that the main ground of the decision in Frenkels case was that neither the port of departure nor the port of destination was set out in the bill of lading, and that, for that reason, only evidence to ascertain the ports of departure and arrival and the course to be followed between them, was admissible. The opinions in your Lordships House undoubtedly took the omission into consideration in reaching the conclusion at which they arrived, but I do not read the observations as confined to that ground, or necessarily dependent upon it. I think that both your Lordships House and the Court of Appeal took the wider view that in every case evidence is admissible to show what is the usual, or a usual, route, and that, if the evidence adduced is sufficient to establish a practice to follow a particular route, proceeding by that route would not be a deviation. Such a conclusion in no way weakens the authority of, or contradicts the principles laid down in Leduc v Ward and Glynn v Margetson & Co. In those cases, the question was not what was the route prescribed by the bill of lading, whether by custom or otherwise, as that to be followed, but whether it was permissible, when once that route was ascertained, to deviate from it.

In the present case, no question of deviation from the contractual route arises. It is conceded that, if the appellants were not entitled to proceed to Constantza as part of their ordinary route, the deviation

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clause will not avail them. Any doubt which I have felt in the present case has not been as to the principles applicable, but as to whether the evidence was sufficient to establish the voyage via Constantza as a usual route for the appellants vessels from Black Sea ports to America and other ports to be reached by ocean voyages. Upon consideration, however, I think there was enough to enable the judge rightly to find that a customary route was followed, and I see no necessity for differing from the view expressed by him and by Greer LJ. In saying this, however, I must not be taken to desire in any way to weaken the obligation of a shipowner to proceed by a usual course. The obligation remains, but, as was recognised in Frenkels case, evidence may always be adduced to show what the usual course is. It is in this, I think, that the majority of the Court of Appeal have erred. In their view, evidence was not permissible. In my view, unless a specific route is laid down in the charterparty or bill of lading, it is always permissible, and may be essential. No doubt prima facie the route direct from Poti to Sparrows Point through Istanbul would be the ordinary course, but I think that in this case we have evidence sufficient to show that the route had been varied, and that the practice of proceeding to Constantza to bunker after loading had become a usual one. It is true that a considerable number of vessels proceeding from Black Sea ports do not call at Constantza for bunkers, and that, if one is to take particulars of Poti and Novorossiisk alone, only about one-quarter of the ships proceeding on ocean voyages call at Constantza after loading. It is true also that the journey to Constantza lengthens the voyage by some 200 miles, and that shortly after the accident to the Indian City the cost of oil at Constantza increased, and the appellants thereafter have taken their bunkers from Algiers, instead of Constantza. All these are matters to be considered, but a short usage, particularly where the obtaining of bunkers is concerned, may still be a sufficient usage to create a usual route.

I do not, for myself, place much reliance upon the argument that the representative of the respondents heard of, and forwarded instructions as to, the intention of bunkering at Constantza. He neither had power to, nor did he purport to, vary the prescribed route. Nevertheless, it is, I think, an element to be considered, not as altering the contract, but as showing the usual reasonable and commercial character of such a voyage. In coming to this conclusion, I find myself in agreement with Goddard J and Greer LJ, and reach a conclusion which might have been that of Slesser LJ, had he not thought that no evidence as to the route to be followed was admissible. Nor do I find myself in disagreement with Clauson LJ when he says that a ship sailing from Poti to Istanbul would not pursue a usual course if she proceeded via Constantza. It might be difficult to prove that such a voyage was other than a deviation. The transit with which we are concerned, however, is one, not to Istanbul, but to Sparrows Point, and for such a voyage the increase in distance may be of little or no importance. It is not necessary

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to prove a custom in the strict sense, and the evidence given is, as I think, admissible, and sufficient to establish the voyage via Constantza as a usual route. I would allow the appeal and restore the judgment of the judge.

Appeal allowed with costs.

Solicitors: Botterell & Roche (for the appellants); Thomas Cooper & Co (for the respondents).

Michael Marcus Esq   Barrister.

Moss Empires Ltd v Olympia (Liverpool) Ltd and Another

[1939] 3 All ER 460


Categories:        CIVIL PROCEDURE: LANDLORD AND TENANT; Leases        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        25, 27 APRIL, 29 JUNE 1939        


Landlord and Tenant Repairs Covenant by lessees to spend £500 per annum on repairs or pay difference between £500 and sum actually spent Whether failure to pay gives rise to action on covenant or for breach of covenant Damage to reversion Landlord and Tenant Act 1927 (c 36), s 18(1).

Certain premises were leased by the plaintiffs to the defendant companys assignors. The lessees covenanted to expend £500 per annum on repairs and decoration or to pay the lessors the difference between £500 and the amount actually expended. It was found as a fact that from 1933 to 1935 the lessees did not spend the stipulated sum. This action was brought by the lessors claiming damages for breach of covenant, or, alternatively, for money due on the covenant:

Held (i) the covenant was legal, as the amount payable thereunder was not payable as “damages for breach of a covenant to repair” within the meaning of the Landlord and Tenant Act 1927, s 18(1), but was payable as debt, being in respect of each year the difference between £500 and the amount in fact expended in performing the repairing covenants.

(ii) as the covenant ran with the land, this was not a bare obligation to pay money which did not touch the thing demised, but was binding upon the assignees.

(iii) as the sum was payable whether or not there were breaches of the covenant, it was not a penalty.

Order of Court of Appeal ([1938] 3 All ER 166) reversed.

Notes

The point at issue here is the legality, since the passing of the Landlord and Tenant Act 1927, s 18(1), of a covenant in a lease to spend in each year a stated sum upon repairs, or, in default, to pay to the lessor the difference between that sum and the sum actually spent. The legality of such a covenant turns upon the question whether an action brought upon it will be an action for debt or an action for breach of covenant. The Court of Appeal decided by a majority that such an action was founded on breach of covenant, but the House of Lords have reversed this decision, and it is now settled that the action is one for debt, and the covenant is a legal one. In fact, the matter is not in any way governed by the Landlord and Tenant Act 1927, s 18(1).

As to Repair Covenants, see Halsbury (Hailsham Edn), Vol 20, pp 208, 209, para 228; and for Cases, see Digest, Vol 31, pp 319, 320, Nos 46094620.

Case referred to

Spencers Case (1583) 5 Co Rep 16a; 31 Digest 144, 2798.

Page 461 of [1939] 3 All ER 460

Appeal

Appeal from an order of the Court of Appeal (Greer, Slesser and MacKinnon LJJ), dated 2 June 1938, and reported [1938] 3 All ER 166, reversing by a majority (Greer LJ dissenting) a judgment of Hilbery J, dated 25 January 1938, in an action in which the appellants were plaintiffs and the respondents were defendants. The facts and the arguments and the relevant clauses of the lease are set out in the opinions of Lord Atkin and Lord Porter.

Cyril Radcliffe KC and P B Morle for the appellants (the plaintiffs).

C E Harman KC and Hon B L Bathurst for the first respondents (the first defendants).

J V Nesbitt for the second respondent (the second defendant).

29 June 1939. The following opinions were delivered.

LORD ATKIN. My Lords, this is an appeal from a decision of the Court of Appeal (Slesser and MacKinnon LJJ), who (Greer LJ dissenting) reversed the judgment of Hilbery J, in favour of the plaintiffs, the present appellants. The action was brought to recover money said to be due under the covenants of a lease, and it is necessary to refer to the relevant documents. By a lease dated 16 October 1924, the appellants demised to E A Abrahams Ltd, the lessees, the premises known as the Olympia Theatre Ltd, together with certain fixtures and effects for a term of 24 years from 22 March 1925, determinable at the expiration of the third, seventh, fourteenth, or twenty-first year of the term at the rents therein mentioned, and in consideration of the covenants therein contained, reference to which must be made later. Mr Abraham Emanuel Abrahams, the second respondent, was a party to the lease as a guarantor. He guaranteed that the lessees would perform all the covenants on the part of the lessees. By a supplemental indenture, dated 17 December 1934, between the same parties, a further covenant by the lessors was given, which was recited to have been omitted by inadvertence from the original lease, that, subject to the conditions there mentioned, the lessors would on notice effect any necessary structural repairs to the premises. On 1 July 1925, by an indenture made between the same parties, the lessors granted to the lessees licence to assign the lease to Olympia (Liverpool) Ltd, and Mr A E Abrahams guaranteed that the licensees should perform all the covenants and conditions by them to be performed.

Accordingly, by indenture dated 3 September 1925, and made between the original lessees, Mr A E Abrahams and Olympia (Liverpool) Ltd, the original lessees duly assigned the lease to Olympia (Liverpool) Ltd, and Mr Abrahams as guarantor under the original lease concurred in the assignment. Thereupon Olympia (Liverpool) Ltd, held under the assignment until in the course of these proceedings they terminated the lease at the expiration of the fourteenth year of the term. The claim in this action by the lessors is based on sub-cl (vii) of the lease. Up to the end of the year ending 22 March 1928, no question had arisen. For the 4 years from March 1928 to March 1932, there was a surplus over the

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£500 per annum mentioned in sub-cl (vii) of £205 7s 11d, resulting in a credit to the lessees of that amount under the second proviso in sub-cl (vii). For the 3 years ending in 1933, 1934, and 1935, the defendants expended in each year less than £500, leaving a balance in favour of the plaintiffs of £942 16s 9d, which, after deducting a credit of £205 7s 11d, leaves a final balance of £737 8s 10d, for which the judge gave judgment. The details will be found in his judgment, and need not be restated.

The defences raised are as follows. 1. The defendants say that to allow the plaintiffs to recover this sum is to violate the provisions of the Landlord and Tenant Act 1927, s 18(1), which provides as follows:

Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no cases exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid. …

The amount claimed is, they say, damages for breach of a covenant to keep in repair, and no diminution in the value of the reversion was or could be proved. 2. If this sum is not recovered as damages for breach of a covenant to repair, the covenant to pay the sum claimed was a bare covenant to pay money not touching the thing demised, did not therefore run with the land, and did not bind the assignees. 3. If this was a covenant to pay money, it was to pay money by way of penalty, and no damages are proved. 4. Before the £500 became due to be spent each year, the proportion to be expended on repairs to the structure had to be determined by the lessors surveyor. This was a condition precedent to liability, and had not been performed. 5. The guarantor was only sued in respect of the default of the assignees, and, if the covenant did not run with the land, he escaped liability in this action. The Court of Appeal decided in favour of the defendants, on the ground that they were protected by the terms of the Landlord and Tenant Act 1927. My Lords, I think that the answer is that the defendants are not being sued for damages for breach of covenant to repair. They are being sued in debt on covenant to pay a fixed sum of money. The covenants must no doubt be read together. So read, they form part of a carefully devised and co-ordinated arrangement by which in substance the liability of the tenant for repairs during the term is limited to £500 per annum, which sum he has to pay whether or not repairs are necessary.

There were years during the term in which the covenants to paintnamely, sub-cll (v) and (vi)would not be operative at all. In any year, the general covenant to keep in repair might not require the expenditure of £500. Sub-cl (vii), therefore, could not be construed to impose an obligation to spend £500 on repairs and decoration in the performance of the covenants to repair where the covenants to repair did not themselves require the expenditure of such a sum. In other words, the covenant in sub-cl (vii) must be construed as a covenant to spend during each year up to £500 in the performance of the repairing covenants.

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The balance of £500 nevertheless had to be paid to the lessors, and quite plainly, therefore, as it seems to me, that balance is not payable as “damages for breach of a covenant to repair” within the meaning of the Landlord and Tenant Act 1927. One may suppose three possible conditions in any given year. 1. No repairs at all required by the repairing covenants to be executed on the premises. 2. £300 only required by the repairing covenants to be expended on repairs, and duly expended. 3. £700 required by the covenants to be expended on repairs, and nothing expended. In conditions 1 and 2, neither £500 nor £200 has any relation to damages for non-repair. In the last case, there would be a breach of the repairing covenant, but £500 would be payable, not as damages for breach of the covenants, but as a sum agreed to be paid as a means of satisfying the obligation to repair. I think, therefore, that the sums claimed in this action are not damages, but debt. The amount to be paid is not determined by the amount of damages for breach of repairing covenants, but by the amount in fact expended in performing the repairing covenants. The Landlord and Tenant Act 1927 has no application, and, if it does not apply in its ordinary and natural construction, I do not understand how there can be said to exist any principle of law which would avoid an agreement not in terms avoided by the statute sought to be applied. The defence of the statute fails.

2. On the other hand this is not a bare obligation to pay money which does not touch the thing demised. On the contrary, the performance of the repairing covenants and the obligations under sub-cl (vii) are so inextricably bound together that it would be impossible to sever sub-cl (vii) and treat it as a collateral provision to pay money. The relevant clauses read as a whole provide a scheme whereby, if things work smoothly, the obligation of the tenant over the term is limited to £500 per annum, less than one-sixth of the total rent, while the lessor is provided with sums which, if he chooses, he may apply towards meeting the obligation which he has assumed of performing structural repairs. In my opinion, the clause in question closely touches the thing demised, and runs with the land.

3. The exposition of the clauses given above disposes of the contention that this was a penalty. The sum is payable whether or not there are breaches of the covenants, and is not intended as a substitute for damages.

4. The contention that the determination of the lessors surveyor as to the amount to be spent on structural repairs is a condition precedent to the payment of £500 cannot, in my opinion, be supported. It would give the covenant a construction which it would be quite impracticable to fulfil in the ordinary conduct of the lessees business, and is quite inconsistent with the view expressed above that the £500 may be due though nothing needed to be expended under any obligation to repair.

5. As the assignees are held liable for payment, this defence does not arise, and the guarantor is liable under his guarantee of performance by the assignees.

Page 464 of [1939] 3 All ER 460

For these reasons, which merely restate the reasons given by Hilbery J and Greer LJ, I think that the appeal should be allowed, with costs, here and in the court below, and that the judgment of Hilbery J in favour of the plaintiffs should be restored. My Lords, I am asked by my noble and learned friend Lord Thankerton to say that he agrees with the opinion which I have just read.

LORD MACMILLAN. My Lords, it certainly cannot be said that the covenants contained in the lease of 16 October 1924, and the relative supplementary deed of 17 December 1924, with which this appeal is concerned, were entered into with any idea of defeating or evading the Landlord and Tenant Act 1927, s 18(1), for they antedate the statute by 3 years. However, they may nevertheless be affected by this supervenient legislation, if it applies to them. When a statute purports to interfere with subsisting contracts, it is, in my opinion, incumbent on the party who claims that it has released him from his obligations to show clearly that it covers his case. In the present instance, in order to secure the benefit of the statute, the respondents have to satisfy your Lordships that the appellants are seeking in these proceedings to recover, in the words of s 18(1):

Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease. …

Your Lordships will hear from my noble and learned friend Lord Porter a detailed analysis of the covenants in question which I have had the advantage of reading in advance and with which I agree. In view of that analysis, the present action cannot, in my opinion, properly be characterised as an action for damages for breach of a covenant to repair. It is difficult to see how the action could be so characterised, inasmuch as it would be no defence to it to aver and prove that at the date of the summons the premises were in perfect repair. The contract in suit was entered into between business people, obviously competently advised, and, so far from being within the mischief of the Act, appears to me to embody a sensible and convenient arrangement for obviating all questions about the repair of the premises let. If the covenants are not, as in my opinion they are not, covenants to keep or put premises in repair within the meaning of the statute of 1927, then there is nothing to prevent the appellants from enforcing them according to their terms, and, as I agree with your Lordships that, by their nature, they run with the land, they are enforceable against the respondent company as assigns of the lease, and also against the individual respondent as guarantor. The appeal should, in my opinion, be allowed, and the judgment of Hilbery J should be restored.

LORD WRIGHT. My Lords, I agree with the opinions which have been delivered by my noble and learned friends Lord Atkin and Lord Macmillan. I also agree with the opinion of my noble and learned friend Lord Porter, which he has asked me to read on his behalf.

Page 465 of [1939] 3 All ER 460

LORD PORTER (read by Lord Wright). My Lords, by a lease dated 16 October 1924, and made between the appellants, A E Abrahams Ltd (the lessees), and A E Abrahams (the guarantor), the appellants demised to the lessees the premises known as the Olympia Theatre (Liverpool) Ltd, for a period of 24 years (subject to certain rights of earlier determination) from 22 March 1925, at the yearly rent specified. The lease included certain articles or effects required for the purpose of carrying on performances, and contained a number of covenants for repair and decoration. Those covenants may be described as (i) a general covenant for repair, cl 2(iv), (ii) a covenant for outside painting, cl 2(v), (iii) a covenant for inside painting and decoration, cl 2(vi), (iv) a covenant to repair, and, if necessary, to replace, the effects, cl 2 (viii).

Cl 2 (vii), upon which the decision of the case largely turns, must be set out in full. It is as follows:

In the performance of the covenants in subcll. (iv), (v), (vi) and (viii) herein contained to expend during each year of the said term on such repairs and decoration a sum of £500 and at the end of each year of the said term to produce to the lessors evidence of such expenditure or to pay to them at the end of each such year a sum equal to the difference between the amount so expended and £500 provided that the whole of the said sum shall not be expended on decorations alone but a proper proportion thereof shall be expended on necessary repairs to the structure of the said premises such proportion to be determined by the surveyor of the lessors provided nevertheless that the expenditure and payment by the lessees of such sum of £500 per annum shall be accepted by the lessors as full satisfaction of the covenants (iv), (v), (vi) and (viii) so that if in any one year a larger sum than £500 shall with the consent in writing of the lessors be expended by the lessees for the like purpose the amount of such expenditure in excess of £500 shall be taken in or towards satisfaction of the lessees future liability under this subclause.

Clause 2(xxi) contained the covenant to yield up the premises and effects in good repair, and continued as follows:

… but so that these provisions shall as regards the demised premises and the said effects be deemed by the lessors to have been satisfied by the expenditure at the rate of £500 per annum as hereinbefore provided.

It appears that, when the deed was drafted or engrossed, one of the terms agreed upon was omitted by mistake. As a result, a supplemental agreement of 17 December 1924 was entered into between the same parties, providing as follows:

… subject to the expenditure by the lessees provided by the principal indenture the lessors will at their own expense in any year in which the lessees shall have expended not less than the sum of £500 referred to in the principal indenture upon notice of any defects being given to the lessors by the lessees effect any structural or other repairs which may be necessary for the proper maintenance and support of the demised premises.

By an indenture of 1 July 1925, the appellants granted the lessees liberty to assign the premises and effects to Olympia (Liverpool) Ltd, the first respondents. The guarantor was also a party to this agreement, and guaranteed the payment of the rent and performance of the covenants in the lease by the assigns, as he had previously guaranteed the payment and performance by the original lessees. In pursuance of the permission so granted, A E Abrahams Ltd, with the concurrence of A E Abrahams, did, by indenture of 3 September 1925, assign the lease of the

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premises and effects to the first respondents. The first respondents went into possession of the premises and admittedly paid all the rent due.

It is accepted by the appellants that at first the assignees also substantially performed the covenants of the lease. Indeed, it is conceded that at 22 March 1933, the first respondents were entitled under cl 2(vii) to a credit of £205 7s 11d, because they had in previous years expended, with the consent in writing of the lessors, sums exceeding £500. The appellants asserted that in each year after that date the first respondents had broken the covenants of the lease by failing to pay the difference between what they had spent on the premises and £500. The duty of the first respondents was, they said, either to spend £500 on repairs in each year, and produce evidence that they had done so, or, if so much was not required in any year, or if they did not expend so much, whether required or not, to pay the difference between what they did spend and £500. The respondents denied that this was the true construction of the lease or its legal effect.

The appellants thereupon issued a writ, dated 26 January 1937, claiming £1,078 8s against the first respondents for their failure to perform the covenants of the lease and against the second respondent under his guarantee. This sum was arrived at by adding together the amounts by which the first respondents expenditure on the premises was alleged to have fallen short of £500 in each of the years ending 22 March from 1933 to 1936. At the trial, the judge, by his judgment delivered on 25 January 1938, found the first respondents liable under the covenants of the lease and the second respondent liable under his guarantee, but he did not accept the figures put forward. He found that the respondents were entitled to a credit of £205 7s 11d on 22 March 1933. He found also that the first respondents had failed to spend and prove that they had spent more than £268 1s for 193233, £168 2s 3d for 193334, and £121 for 193435. The full sum at least had been spent in 193536. These figures left a total shortage, after allowing for the credit of £205 7s 11d, of £737 8s 10d, a sum for which the judge gave judgment against both respondents. From this judgment the respondents appealed to the Court of Appeal, who, by a majority, allowed the appeal and ordered judgment to be entered for the respondents.

In both courts, the main contest turned upon the question whether the respondents were protected from liability under the Landlord and Tenant Act 1927, s 18(1), which runs as follows:

Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.

Page 467 of [1939] 3 All ER 460

Each party relied upon the terms of cl 2(vii) of the lease, the respondents affirming and the appellants denying that failure to comply with that subclause was a breach of a covenant to repair. It was common ground that, if the section applied, the appellants had given no evidence from which the amount by which the value of the reversion had diminished could be ascertained, and therefore they could recover nothing in the present action. It follows that it is essential to determine in the first place the exact meaning of that subclause. The respondents construed it as imposing an obligation to spend £500 on repairs in each year. If that sum was not spent on repairs, whether those repairs were required or not, there was, they said, a breach of covenant to repair. The damage thereby caused was no doubt quantified and limited to the difference between £500 and the sum actually spent, but it still remained damages for breach of a covenant to repair. I do not so read the covenant. To do so is, I think, to neglect the opening words “In the performance of the covenants in sub-cll (iv), (v), (vi) and (viii)” and to give no effect to the words “or to pay … a sum equal to the difference between the amount so expended and £500.” The obligation is to expend on such repairs the sum of £500 or pay the required difference, and such repairs must mean the repairs and decoration necessary to perform the covenants contained in sub-cll (iv), (v), (vi) and (viii). If that sum is not required for those purposes, the contract cannot be fulfilled if it is to be construed as the respondents contend. If the appellants construction be accepted, however, it will be fulfilled by spending what is required on the necessary repairs and paying in addition a sum sufficient to make up £500 in all. I should read the subclause as meaning: “The lessees shall spend £500 each year on repairs so far as the covenants to repair require it. If, however, so much is not required, or if the lessees do not in fact spend, and prove they have spent, so much, then they may fulfil their obligation by paying a sum which, with what they have spent, will amount to £500.” They have not, in my view, broken their contract by failing to spend £500. They are given what I think is a true alternativenamely, a right to fulfil their contract either by spending £500 or by spending a less sum and paying the difference between what they have spent and £500. If they have spent nothing, that difference would be £500. If they have spent less than £500, it would be the difference between the sum spent and £500. Not to pay that sum is not a breach of a covenant to repair, but a failure to pay the amount by which the expenditure falls short of the stipulated sum. It is not expenditure which is required alone. Expenditure and payment, or even payment without expenditure, are also a performance of the contract.

Such a construction is, I think, more consistent with the second proviso than that contended for by the respondents. Moreover, it does not compel the adoption of a construction which would impose upon the respondents an obligation either to spend £500 on repairs, whether required or not, or in default to be held guilty of breaking their contract

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by failing to do repairs which might not be required. I do not think that non-compliance with cl 2(vii) is necessarily a breach of covenant to repair. No doubt an action could be framed upon that clause for such a breach, but, if the claim be for failure to pay the difference between the sum expended and proved and £500, in my view the claim is for a sum of money, and not for breach of repairing covenants.

However, the respondents, even if they are held to be wrong in the contention that they are freed from liability under s 18 of the Act, maintain that the stipulation that they shall pay the sum by which their expenditure falls short of £500 is a penalty, and not a liquidated sum as damages. I doubt if it is either. It is, I think, a sum payable as an alternative to spending £500 per annum, not a penalty for failing to do so, or liquidated damages for that failure. If it were not for the provisions of cl 2 (vii), the lessees would be obliged to spend in each year any sum, however large, required to keep the premises in repair in accordance with the terms of cl 2(iv), (v), (vi) and (viii). The amount might exceed £500 per annum, and at any rate would be an unknown quantity. Clause 2(vii), whilst it imposes a minimum payment, also provides a limit beyond which the lessees shall not be liable. Moreover, so far as structural repairs, at any rate, are concerned, the supplemental agreement imposes upon the lessors any excess beyond that which is required of the lessees.

It is true that, by reason of the first proviso contained in cl 2(vii), the lessees have to expend what the lessors surveyor considers a reasonable proportion of the sum to be provided by them in structural repairs, but, even when that obligation is fulfilled, a considerable expense may still fall upon the lessees. Moreover, by providing a yearly sum of £500, the lessees not only escape further liability for current repairs but also, under cl 2(xxi), avoid paying what might be a large sum in fulfilling their obligation to leave the premises in good repair. The scheme seems to be to limit the lessees liability to £500 per annum unless in any one year they think it necessary to spend more than £500 for the purposes of their business and cannot obtain the consent of the lessors to their doing so. If these facts are borne in mind, the terms of cl 2(vii), as I think, lack every element which would constitute a penalty. They constitute a provision for the mutual advantage of lessors and lessees under which one or the other stands to gain according as more or less repairs are found to be required, and, so far as the lessees are concerned, they put a limit upon their obligations.

In the event of failure to succeed upon the matters already considered, the respondents asserted that, being only assignees, they were not liable for non-payment of the sum claimed. The appellants were, they said, in a dilemma. Either the action was for breach of a covenant to repair which ran with the land or it was for payment of a sum of money which did not run with the land, but was merely collateral, and bound only the original lessees. I think your Lordships are all of opinion that this argument

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should not succeed. In the first place, the original lease provides that the term lessees “shall when the contract admits include permitted assigns,” and, though this is by no means determinative where the covenant is merely collateral, it is an element to be considered. In the second place, the covenants in the present case are not merely collateral. They directly touch and concern the thing demised, and so come within the first rule in Spencers Case.

This is not a bare or mere covenant to pay £500, or even to pay the difference between the sum spent and proved and £500. It is part of a number of covenants whereby the mutual obligations of landlord and tenant in repairing and redecorating the premises are fulfilled, and is inextricably bound up with them. In my opinion, it runs with the land. This view makes it unnecessary to determine whether, even if the obligations of the lessees did not pass to the assignees, the guarantor would still be liable upon his guarantee contained in the original lease, though he would escape liability under the licence to assign in which he guaranteed the assignees only, and was, therefore, under no liability in a case where the assignees were not liable, because the covenant on which they were sued did not run with the land. The point is a pleading point, and turns upon whether the word “guarantee” in para 9 of the statement of claim refers to both guarantees or only to that contained in the licence to assign. No question of principle is involved, and to discuss the question would be merely academic. I would allow the appeal and restore the judgment given by the judge in the court of first instance.

Appeal allowed with costs.

Solicitors: Burton & Ramsden (for the appellants); H S Wright & Webb (for the respondents).

Michael Marcus Esq   Barrister.

Tribune Press, Lahore (Trustees) v Income Tax Commissioner, Punjab, Lahore

[1939] 3 All ER 469


Categories:        CHARITIES: COMMONWEALTH; Commonwealth countries: TAXATION; Relief        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, SIR GEORGE RANKIN AND MR M R JAYAKAR        

Hearing Date(s):        11, 12 MAY, 13 JUNE 1939        


Privy Council India Income Tax Charity Object of general public utility Policy of newspaper Duty of commissioner Indian Income Tax Act 1922 (No 11 of 1922), s 4(3)(i).

Sardar Dayal Singh, a Sikh inhabitant of the Punjab, died in 1898, having by his will created 3 separate trusts to be administered by 3 independent “committees of trustees.” Two of the trusts were for the establishment and maintenance of (i) an arts college, and (ii) a public library, which are not material to this case. By the third trust, the testator directed “that my property in the stock and goodwill of the Tribune Press and newspaper in Anarkali Lahore shall vest permanently in a committee of trustees … that it shall be the duty of the said committee of trustees to maintain the said press and newspaper in an efficient condition keeping up the liberal policy of the said newspaper and devoting the surplus income of the said press and newspaper after

Page 470 of [1939] 3 All ER 469

defraying all current expenses in improving the said newspaper and placing it on a footing of permanency.” Since the death of Sardar Dayal Singh in 1898, the trust in respect of the Tribune Press had been carried out, and the newspaper of that name continued to be published, the profits of the press and newspaper being assessed to income tax since 1918. A claim to exemption was first made by the appellants in respect of the year 193233 in the proceedings out of which this appeal was brought, the question for decision being whether the property was held under trust wholly for the advancement of an object of general public utility, and, as such, exempt from tax under the Indian Income Tax Act 1922, s 4(3)(i). The respondent contended that the Tribune newspaper, as its founder intended it to be carried on, would contain matter in the nature of political propaganda, and would be devoted to the advocacy of particular legislative measures considered by its founder to be measures of reform, the political character of such views or measures preventing the trust from being held to be an object of general public utility:

Held (i) the question whether a particular object was of general public utility was a question of law, though doubtless it was for the commissioner to find and state any facts bearing thereon.

(ii) the object of the paper might fairly be described as that of supplying the province with an organ of educated public opinion, and it should prima facie be held to be an object of general public utility. As such, it was not outside the ambit of the exemption in the Indian Income Tax Act 1922, s 4(3)(i).

Notes

The question whether the promulgation of a particular principle will or may benefit the public is to be decided by the court upon all the evidence. As the trust in the present case was created by will and was to keep up the liberal policy of a newspaper, it was immaterial to consider what had been done under the trust since its creation. It was only material to consider the policy of the newspaper in the testators life, when determining whether it was an object of general public utility.

As to General Public Utility, see Halsbury (Hailsham Edn), Vol 4, pp 125127, paras 166, 167; and for Cases, see Digest, Vol 8, pp 259, 260, Nos 209217.

Cases referred to

Brighton College v Marriott [1926] AC 192; 28 Digest 24, 127, 134 LT 417.

Re Macduff, Macduff v Macduff [1896] 2 Ch 451; 8 Digest 296, 731, 65 LJCh 700, 74 LT 706.

Income Tax Special Purposes Comrs v Pemsel [1891] AC 531; 28 Digest 10, 51, 61 LJQB 265, 65 LT 621, 3 Tax Cas 53, affg SC sub nom R v Income Tax Comrs (1888) 22 QBD 296.

Inland Revenue Comrs v Temperance Council of Christian Churches of England & Wales (1926) 136 LT 27; Digest Supp, 10 Tax Cas 748.

Re Foveaux, Cross v London Anti-Vivisection Society [1895] 2 Ch 501; 8 Digest 259, 206, 64 LJCh 856, 73 LT 202.

Re Hummeltenberg, Beatty v London Spiritualistic Alliance [1923] 1 Ch 237; Digest Supp, 92 LJCh 326, 129 LT 124.

Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381; 8 Digest 261, 237.

Fatmabibi v Advocate-General (1881) ILR 6 Bom 42.

R v Income Tax Special Comrs, Ex p University College of North Wales (1909) 78 LJKB 576; 28 Digest 11, 53, 100 LT 585, 5 Tax Cas 408.

Bowman v Secular Society Ltd [1917] AC 406; 8 Digest 265, 270, 86 LJCh 568, 117 LT 161.

Page 471 of [1939] 3 All ER 469

A-G v National Provincial & Union Bank of England [1924] AC 262; Digest Supp, sub nom Re Tetley, A-G v National Provincial & Union Bank of England 93 LJCh 231, 131 LT 34, affg SC sub nom Re Tetley, National Provincial & Union Bank of England Ltd v Tetley [1923] 1 Ch 258.

Re Scowcroft, Ormrod v Wilkinson [1898] 2 Ch 638; 8 Digest 247, 68, 67 LJCh 697, 79 LT 342.

Re Hood, Public Trustee v Hood [1931] 1 Ch 240; Digest Supp, 100 LJCh 115, 143 LT 691.

Bonar Law Memorial Trust v Inland Revenue Comrs (1933) 49 TLR 220; Digest Supp, 17 Tax Cas 508.

Appeal

Appeal from a judgment of the Full Bench of the High Court at Lahore (Sir Douglas Young CJ and Addison J, Tek Chand J dissenting), dated 4 June 1935, upon a reference by a Division Bench (Jai Lal and Skemp JJ), dated 13 December 1934, before whom the matter had come on a reference made by the income tax commissioner, Punjab, North West Frontier and Delhi Provinces, Lahore, dated 26 January 1934. The judgment of their Lordships was delivered by Sir George Rankin.

A M Latter KC and H W Williams for the appellants.

J Millard Tucker KC and E L Norton for the respondent.

13 June 1939. The following judgments were delivered.

SIR GEORGE RANKIN. The trustees of the Tribune Press, Lahore, appeal from the decision given on 4 June 1935, by the majority of the judges composing a Full Bench of the High Court at Lahore upon a reference made to that court under the Indian Income Tax Act 1922, s 66(2).

On 31 January 1933, the income tax officer, Lahore, for the year of assessment 193233, assessed the appellants to tax upon an income of Rs 61,629, calculated upon the figures for the previous year. No question now arises as to the amount of the assessment or the computation of the tax. The sole question is whether or not the income of the appellants is exempt from tax under s 4(3)(i) of the Act, which provides as follows:

(3) This Act shall not apply to the following classes of income: (i) any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application thereto. In this subsection “charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.

Sardar Dayal Singh, a Sikh inhabitant of the Punjab, died in 1898, having by his will, dated 15 June 1895, created 3 separate trusts to be administered by 3 independent “committees of trustees.” Two of the trusts were for the establishment and maintenance of (i) an arts college, and (ii) a public library. The third trust was declared by cll 20 and 21 of the will in the following terms:

20. That my property in the stock and goodwill of the Tribune Press and newspaper in Anarkali, Lahore, shall vest permanently in a committee of trustees consisting of the following members viz.: 1. Babu Jogendra Chandra Bose, M.A., B.L., Pleader, Chief Court, Lahore. 2. Mr. Charles Golak Nath, B.A., LL.B., Barrister-at-Law. 3. Mr. Harkishen Lal, B.A., Barrister-at-Law, Lahore.

21. That it shall be the duty of the said committee of trustees to maintain the

Page 472 of [1939] 3 All ER 469

said press and newspaper in an efficient condition keeping up the liberal policy of the said newspaper and devoting the surplus income of the said press and newspaper after defraying all current expenses in improving the said newspaper and placing it on a footing of permanency.

By a deed of compromise, dated 1 December 1906, whereby certain litigation as to the validity of the will was brought to an end, it was agreed between the parties thereto that “in case the Tribune newspaper should cease to exist or be impossible to exist” the property belonging to the Tribune Press should become the property of the arts college trust.

Since the death of Sardar Dayal Singh in 1898, the trust in respect of the Tribune Press has been carried out, and the newspaper of that name has continued to be published. The profits of the press and newspaper have been assessed to income tax since 1918. The claim to exemption was first made by the appellants in respect of the year 193233that is, in the proceedings out of which this appeal arises. The claim was made for the first time before the assistant commissioner, and, on his rejecting the appellants contention, they applied to the commissioner praying that on this point (and on another point which is not now in controversy) he would either accept their contentions or make a reference to the High Court. On 20 January 1934, the commissioner referred to the High Court two questions framed in the following terms:

(1) Is the income of the Tribune trust liable to be assessed in the hands of the trustees under the provisions of the Income Tax Act?

(2) If so, is it not exempt under sect. 4(3)(i) of the Act?

Upon the second question, which alone need now be referred to, the commissioner, having set out cll 20 and 21 of the will, gave his opinion as follows:

It will be very difficult to say whether the running of a newspaper is an object of general public utility, but the mere fact that income is used for the improvement of the paper is not enough to take it out of the category of a business concern.

The judges of the Division Bench before whom the reference was first heard were of different opinions, Jai Lal J, holding that the appellants income was exempt from tax, and Skemp J, holding that it was not. The question was referred to a Full Bench, with the result that Sir Douglas Young CJ, and Addison J, held that the income in question was not exempt, Tek Chand J, dissenting. From this decision of 4 June 1935, the present appeal to His Majesty was brought, and at the first hearingon 22, 23 July 1937it was considered by the Board to be desirable that the powers conferred by s 66(4) of the Act should be employed to obtain further information. Accordingly, by an order in council dated 29 July 1937, it was directed in accordance with the advice tendered by the Board:

… (2) that the case ought to be remitted to the High Court of Judicature at Lahore with a direction that the said High Court shall refer the case back to the said commissioner under the Indian Income Tax Act, 1932, s. 66(4), first for the addition of such facts during the life time of the testator Sardar Dayal Singh as may bear upon the proper interpretation of the expression “keeping up the liberal policy of the said newspaper” in cl. 21 of the will of the said testator dated June 15, 1895, and secondly for the addition of such facts as to a compromise dated Dec. 1,

Page 473 of [1939] 3 All ER 469

1906, as may show whether the said compromise is binding on all parties interested in the estate of the said testator.

There is now before their Lordships a supplementary statement made by the present commissioner, Mr K C Basak, who has carefully assembled considerable material explanatory of the direction given by the testator in the phrase “keeping up the liberal policy of the said newspaper,” and showing, as their Lordships think very fairly, the nature and purpose of the trust. The first issue of the paper was dated 2 February 1881, and contained an article entitled Ourselves, which was a statement of the papers aims and objects. Two years later, on 3 February 1883, a further article of the same character was published, headed Our Second Anniversary. Extracts from issues of the paper between 1881 and 1898 have been selected by the commissioner and by the appellants to throw light on the character and policy of the paper in the lifetime of its founder. The sole use which their Lordships are concerned to make of these materials is to arrive at a true construction of the trust, the testator having expressed his intentions by reference to a newspaper which had been published in his lifetime and to a policy the character and purpose of which must necessarily be collected from its previous issues. It is not necessary or relevant to inquire as to the manner in which the trust has been, or is being, carried out since the date of the testators death. The question is as to the true nature and character of the trust.

No question here arises such as was dealt with in Brighton College v Marriott, where it was held that the English Act as it then stood provided no exemption for profits of a trade carried on by a charity, even if the carrying on of the trade was the sole and only purpose of the charity. In the letter of reference, there is no suggestion that the income under assessment is not derived from property held under the trust declared in cll 20 and 21 of the will.

Their Lordships are not prepared to hold that the property referred to in these clauses of the will is held for the purpose of “education” in the sense of that word as it appears in s 4 of the Act. Prima facie, therefore, the only question for decision is whether that property is held under trust wholly for the advancement of an object of general public utility. This was the view taken in the High Court by Tek Chand J, who contrasted the wide terms of the exempting clause in the Indian Income Tax Act with the observations of Lord Lindley in Re Macduff, Macduff v Macduff, at p 467, where, after referring to a well-known passage in the opinion of Lord Macnaghten in Income Tax Special Purposes Comrs v Pemsel, at p 583, Lord Lindley held that in English law there might be some purposes of general utility which might be charitable and some which might not, the true test being the spirit or intention of the statute of Elizabeth (43 Eliz c 4). Counsel for the respondent in the present case, while not apparently conceding that, under the Indian statute, the sole test to be applied to the object of a trust was that of general public utility, was willing that this should

Page 474 of [1939] 3 All ER 469

be assumed in the present case. He suggested that the question whether an object was of general public utility was a question of fact to be found and stated by the commissioner, and not a question of law for the court. Their Lordships, while unwilling to pronounce upon any matter which has not been argued before them, consider that the courts in India might be misled if the Board appeared to cast doubt upon the view that the admissibility of a claim to exemption from income tax must be determined by the language of the special provision made by the Act in that behalf. They are also of opinion that the question whether a particular object is of general public utility, like the question whether a particular trust is charitable, is a question of law, though doubtless it is for the commissioner to find and state any facts bearing thereon: Inland Revenue Comrs v Temperance Council of Christian Churches of England & Wales, at p 772. In the present case, the commissioner properly stated it as a question of law under s 66, and answered it as such. Indeed, he put the point as being “whether the trust can be deemed to be a charitable trust.” The importance of applying correct principles in such a matter is manifest by reason of the rule against perpetuity laid down as to wills in the Indian Succession Act 1925, s 114, and as to transfers inter vivos by the Transfer of Property Act 1882, s 14. As to the latter, by s 18 exception is made for transfer of property:

… for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.

By a long course of judicial decisions following English authority, an exemption for charitable trusts has been implied or read into the Succession Act 1925, s 114, and by s 118 restrictions are imposed upon bequests for “religious or charitable uses.” Moreover, the Charitable Endowments Act 1890, s 2, contains the same definition of charitable purpose as is given by the Income Tax Act, but with the addition of words excluding religious purposes.

It was considered by Jai Lal and Tek Chand JJ, that, on the question whether a particular object or purpose was of general public utility, the true test is, not what the court considers to be beneficial to the public, but what the testator considered to be so. In so holding, they were following what was said by Chitty J, in Re Foveaux, Cross v London Anti-Vivisection Society. That case was on this point dissented from by Russell J, in Re Hummeltenberg, Beatty v London Spiritualistic Alliance, where it was held that, though the personal or private opinion of the judge is immaterial, nevertheless, for a charitable gift to be valid, it must be shown (i) that the gift will or may be operative for the public benefit, and (ii) that the trust is one the administration of which the court itself could, if necessary, undertake and control. Russell J added, at p 242:

If a testator by stating or indicating his view that a trust is beneficial to the public can establish that fact beyond question, trusts might be established in perpetuity for the promotion of all kinds of fantastic (though not unlawful) objects. …

Page 475 of [1939] 3 All ER 469

Their Lordships are in agreement with this view, and see nothing in the Indian Income Tax Act to discharge the court of its responsibility in coming to a finding as to the character of the object of a trusta matter which bears directly upon its validity. It is to be observed, moreover, that, under the Income Tax Act, the test of general public utility is applicable, not only to trusts in the English sense, but also to property held under trust “or other legal obligation”a phrase which would include Moslem wakfs and Hindu endowments. The true approach to such questions in cases which arise in countries to which English ideas, let alone English technicalities, may be inapplicable, was considered by the Board in Yeap Cheah Neo v Ong Cheng Neo, and it was well said by Sir Raymond West in an Indian case, Fatmabibi v Advocate-General, at p 50:

But useful and beneficial in what sense? The courts have to pronounce whether any particular object of a bounty falls within the definition; but they must in general apply the standard of customary law and common opinion amongst the community to which the parties interested belong.

In the High Court, stress was laid by Sir Douglas Young CJ, and by Addison J, on the fact that the Tribune newspaper charges its readers and advertisers at ordinary commercial rates for the advantages which it affords. As against this, the evidence or findings do not disclose that any profit was made by the newspaper or press before 1918, and it is at least certain that neither was founded for private profit, whether to the testator or to any other person. By the terms of the trust, it is not to be carried on for profit to any individual. It cannot, in their Lordships opinion, be regarded as an element necessarily present in any purpose of general public utility that it should provide something for nothing, or for less than it costs, or for less than the ordinary price. An eleemosynary element is not essential, even in the strict English view of charitable uses: R v Income Tax Special Comrs, Ex p University College of North Wales, at p 414. There seems to be no solid distinction to be taken under the phrase “general public utility” between a school founded by a testator but charging fees to its pupils and a paper founded by a testator and sold to its readers. The purpose of providing the poor or the community in general with some useful thing without price, or at a low price, may doubtless be in itself a purpose of general public utility, but, if another object be independently in itself of general public utility, the circumstance that the testators bounty was only in respect of the initial capital assets, or had only to meet a working loss temporarily, and not permanently, will not, necessarily at least, alter the character of the object.

The main objection now taken to the appellants claim for exemption is on the ground that the Tribune newspaper, as its founder intended it to be carried on, would contain matter in the nature of political propaganda, and would be devoted to the advocacy of particular legislative measures considered by its founder to be measures of reform. It is not

Page 476 of [1939] 3 All ER 469

suggested that the views or measures to be advocated were in any way unlawful, but, even so, the political character, it is said, prevents the trust from being held to be for an object of general public utility. Lord Parker said, in Bowman v Secular Society Ltd, at p 442:

… a trust for the attainment of political objects has always been held invalid, not because it is illegal, for everyone is at liberty to advocate or promote by any lawful means a change in the law, but because the court has no means of judging whether a proposed change in the law will or will not be for the public benefit, and therefore cannot say that a gift to secure the change is a charitable gift.

Moreover, in Re Tetley, National Provincial & Union Bank of England Ltd v Tetley, where the gift was for “patriotic” and charitable objects, Russell J said, at p 262:

But must every application of the fund for a patriotic purpose be beneficial to the community and therefore charitable? It seems to me that it is impossible to hold that. What is or is not patriotic is in many cases mere matter of opinion. Subsidising a newspaper for the promotion of particular political or fiscal opinions would be a patriotic purpose in the eyes of those who considered that the triumph of those opinions would be beneficial to the community. It would not be an application of funds for a charitable purpose.

Again, in Inland Revenue Comrs v Temperance Council of Christian Churches of England & Wales, Rowlatt J, finding that the first purpose of the assessees was legislative temperance reform, though the work was to be of a strictly non-party character, observed, at p 752:

Any purpose of influencing legislation is a political purpose in this connection. Under these circumstances, this is mainly a trust to secure a certain line of legislation, and if that is so, I do not understand it to be disputed that that would not be a charitable trust. I think the authorities are clear upon it and I am not going to say anything more about it.

On the other hand, it is to be observed that in that case Rowlatt J rejected, but only upon the facts, the argument that the purpose of the council was temperance and that legislation came in in a subsidiary way. Moreover, in Re Scowcroft, Ormrod v Wilkinson, the devise of a building known as the Conservative Club and Village Reading Room in a certain parish to be maintained “for the furtherance of Conservative principles and religious and mental improvement, etc.,” was held to be a gift for religious and mental improvement. Stirling J said, at pp 641, 642:

It is, therefore, a gift in one form or another for religious and mental improvement, no doubt in combination with the advancement of Conservative principles; but that limitation, it appears to me, is not sufficient to prevent it from being a perfectly good charitable gift, as undoubtedly it would be if it were a gift for the furtherance of religious and mental improvement alone.

In Re Hood, Public Trustee v Hood, a testator had bequeathed his residuary estate for the purpose of spreading Christian principles and aiding all active steps to minimise and extinguish the drink traffic. On the view that the former was the dominant purpose and that the latter was subsidiary thereto, the gift was upheld, even on the hypothesis that the latter purpose would not have been charitable in itself.

In Bonar Law Memorial Trust v Inland Revenue Comrs, Finlay J had to deal with a college founded in connection with the Conservative

Page 477 of [1939] 3 All ER 469

party, and, after reviewing the cases above-cited, held that the question was whether the dominant purpose was a good charitable purpose or not. He added, at p 517:

The fact that the education was entrusted to the Conservative party would not I think, affect the validity of the trust if in truth it was a trust for education; but on the other hand, if the true view is that the trust was a trust for the promotion of Conservative principles … and that the education, the lectures and so forth were subsidiary to that which was the main and dominating purpose then the fact that the lectures, and so forth, would be educative would not be sufficient to make the trust a trust for charitable purposes only.

Holding that the college was in effect an educational centre for the Conservative party, and that this was in accordance with the trust deed, Finlay J decided that the claim for exemption from tax could not be sustained.

These English decisions are in point only in so far as they illustrate the manner in which political objects, in the wide sense which includes projects for legislation in the interests of particular causes, affect the question whether the court can regard a trust as being one of general public utility. In the original letter of reference, it was not suggested by the commissioner that the newspaper was intended by its founder to be a mere vehicle of political propaganda, and in the case of Sardar Dayal Singh it seems unreasonable to doubt that his object was to benefit the people of Upper India by providing them with an English newspaperthe dissemination of news and the ventilation of opinion upon all matters of public interest. While not perhaps impossible, it is difficult for a newspaper to avoid having or acquiring a particular political complexion, unless indeed it avoids all reference to the activities of governments or legislatures, or treats of them in an eclectic or inconsistent manner. The circumstances of Upper India in the last decade of the nineteenth century would doubtless make any paper published for Indian readers sympathetic to various movements for social and political reform. Their Lordships, however, having before them material which shows the character of the newspaper as it was in fact conducted in the testators lifetime, have arrived at the conclusion that questions of politics and legislation were discussed only as many other matters were in this paper discussed, and that it is not made out that a political purpose was the dominant purpose of the trust. They think that the object of the paper may fairly be described as “the object of supplying the province with an organ of educated public opinion,” and that it should prima facie be held to be an object of general public utility. Having regard to the particular circumstances of the time, the directions of the testator and the evidence as to the contents of the paper before 1898, their Lordships think that the present case is nearer on its facts to Re Scowcroft, Ormrod v Wilkinson than it is to Bonar Law Memorial Trust v Inland Revenue Comrs or to the case put by Russell J, in Re Tetley, National Provincial & Union Bank of England Ltd v Tetley of a newspaper subsidised for the promotion of particular political or fiscal opinions. They do not think

Page 478 of [1939] 3 All ER 469

that, in these circumstances, the case can be regarded as outside the ambit of the exemption clause of the Indian Act. It is not necessary to consider what the position would be if the trust declared by the will were for any reason to fail in the future. For the reasons given, their Lordships are of opinion that this appeal should be allowed, and that the second of the two questions referred to the court by the commissioners letter of reference, dated 26 January 1934, should be answered in the affirmative. They will humbly advise His Majesty accordingly. The respondent will pay the appellants costs of the reference in the High Court and of this appeal.

Appeal allowed with costs.

Solicitors: Nehra & Co (for the appellants); The Solicitor, India Office (for the respondent).

T A Dillon Esq   Barrister.

Aldham v United Dairies (London) Ltd

[1939] 3 All ER 478


Categories:        ANIMALS: TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        HUMPHREYS J        

Hearing Date(s):        15, 16, 26 JUNE 1939        


Animals Liability of owner Negligence Ordinary consequences of negligence Scienter Horse left unattended attacking passer-by.

The plaintiff was attacked and injured by the defendants horse, which, attached to a milk-cart, had been left unattended for half-an-hour in a main thoroughfare. Evidence was given on behalf of the defendants that the horse was docile and quiet. The jury negatived scienter on the part of the defendants, but found them guilty of negligence in leaving the horse unattended, and awarded the plaintiff damages:

Held (i) the question of negligence was one of fact for the jury, and, on the facts of this particular case, it was impossible to say that there was no evidence upon which the jury could find negligence.

(ii) the injury caused to the plaintiff was not an ordinary and natural consequence of the defendants negligence, and the plaintiff could not recover.

Notes

The owner of a domestic animal is only liable for injury caused by reason of his negligence where the injury is one which may be reasonably expected to result from that negligence. An attack upon a human being is not the natural result of leaving a horse unattended unless scienter be proved in respect of the particular horse. The judgment herein discusses at some length whether negligence is a question of fact or a mixed question of fact and law.

As to Negligence in Relation to Domestic Animals, see Halsbury (Hailsham Edn), Vol 1, p 542, para 932; and for Cases, see Digest, Vol 2, pp 229233, Nos 201220.

Cases referred to

Haynes v Harwood [1935] 1 KB 146; Digest Supp, 104 LJKB 63, 152 LT 121.

Hendry v MDougall [1923] SC 378; 36 Digest 64, case h.

MEwan v Cuthill (1897) 25 R (Ct of Sess) 57; 36 Digest 64, case f.

Deen v Davies [1935] 2 KB 282; Digest Supp, 104 LJKB 540, 153 LT 90.

Cox v Burbidge (1863) 13 CBNS 430; 2 Digest 233, 218, 32 LJCP 89.

Page 479 of [1939] 3 All ER 478

Bradley v Wallaces Ltd [1913] 3 KB 629; 2 Digest 236, 236, 82 LJKB 1074, 109 LT 281, 6 BWCC 706.

Lee v Riley (1865) 18 CBNS 722; 2 Digest 228, 194, 34 LJCP 212, 12 LT 388.

Ellis v Loftus Iron Co (1874) LR 10 CP 10; 2 Digest 227, 183, 44 LJCP 24, 31 LT 483.

Action

Action for damages for injuries suffered by the plaintiff when she was bitten by a horse belonging to the defendants. The facts and the arguments are fully set out in the judgment.

Robert Fortune for the plaintiff.

Cyril Salmon for the defendants.

26 June 1939. The following judgment was delivered.

HUMPHREYS J. The plaintiff in this case brings her action against the defendants for damages on the ground that she was injured by a horse belonging to the defendants. She puts her claim in two ways, (i) that the defendants were the owners of the horse, which they knew to be either vicious or likely to attack a person, a human being, and that the horse did so, or, in the alternative, (ii) that the defendants were negligent in leaving the horse unattended, and, as the reasonable natural consequence of that negligence on their part, the horse was enabled to injure the plaintiff.

The undisputed facts of the case are these. On 31 May 1938, the plaintiff, who was some 55 years of age, was walking up Palace Gate from south to north, and, when she got near to the corner of Palace Gate and Kensington Road, which separates that part from Kensington Gardens, and when she was opposite a very large block of flats called Thorney Court, she saw what she had often seen beforenamely, one of the defendants milk-carts drawn by a small horse or pony, the horse having its forefeet on the kerb, or possibly just over the kerb, and on the pavement. It is common ground that she did see, and could have seen, that happening many times before. On this occasion, the plaintiffs story was that what happened was this. She got up to the horse, which in fact was facing the same way as she was going, but was necessarily turned more or less to the kerb, with its forefeet on the kerb. She got close to the horse, and for some reason or other it suddenly lunged out, and, as she described it, made a jab at her. She said that it bit her cheek. She explained a little later that she did not mean that its teeth met with the cheek in between them, but that with its teeth it grazed her cheek, and she said that she still had the scar of that graze. She said that the horse, being unable to reach her eye, then caught hold with its teeth of the lapel of her coat, and, by holding that, forced her to the ground, and then, as she said, “dragged me towards the gutter,” and, when she lay on the ground, she said, “it pawed me with its feet.” She got up and was helped home by, amongst others, one of the defendants employees who happened to be passing, but, so far as the evidence goes, he had not seen, or had anything to do with, the accident. There is no doubt at all that the plaintiff, as a result of something which happened

Page 480 of [1939] 3 All ER 478

between herself and the horse, did fall to the ground in the way which she has described. The story was a somewhat remarkable one, and there was a good deal of medical evidence about the plaintiff and the state of her nerves and so forth. I thought it right to ask the jury in terms whether they accepted that story. In answer to the first two questions put to them, the jury accepted the whole of the story. Those, therefore, must be taken to be the facts of the case. I must assume that that is precisely what happened, whether or not I believe it. The other evidence called on behalf of the plaintiff did not assist this part of the case at all. There was no witness of the accident, and the defendants evidence consisted of evidence to show that in point of fact this pony was as quiet and docile an animal as it is possible to find. A man named Frith was called who was in charge of the horses of the defendant company, and had been so since 1934, or longer, I think. This particular horse was bought on 8 June 1934, and he bought it. He described it as a perfectly fool-proof “wooden” pony. He said that it was perfectly docile, and, indeed, peculiarly docile and quiet. Every day since then, the pony has gone the same round, and there has never been any sort of complaint about its conduct from anybody or from any quarter. The man who in fact was in charge of it on this day, or who was supposed to be in charge of it, was a man named Hyde, who had been with the defendant company for 41 years, and in fact had taken out this pony every day since it had been bought. He described it as docile and quiet. He said that on his round, including Thorney Court, the pony had always made a practice, for some reason or other, when it got to that place, and nowhere else, of putting its forefeet upon the kerb. Why it did so I am unable to say, and the only person who made any suggestion about it was one of the defendants witnesses, a man who understands horses. He said that he thought that it was because the pony got some rest by lifting up its feet and putting them on the kerb, which is there substantially higher than the roadway. However that may be, that is what the pony did, and that is what it had been in the habit of doing. I exaggerated when I said “every day.” It was substantially every daynamely, five days a week. It had done that ever since it had been bought. The witness Hyde said that in fact people from Thorney Court used to feed this pony, which may account for its possibly behaving in that way. Upon these facts, the jury negatived the scienter, as they were bound to do. Indeed, there was no evidence at all to suggest that the pony was other than the docile, quiet animal which it was described as being. On the other hand, in answer to a question, the jury found that in the circumstances of the case, the defendants were negligent in leaving the horse unattended, and they awarded the plaintiff £300 damages.

Counsel for the plaintiff asked for judgment upon those findings, and counsel for the defendants raised some questions of law. The first point which he raised was that there was no evidence of negligence to

Page 481 of [1939] 3 All ER 478

go to the jury. In my judgment, there can be no doubt at all that the question of whether or not, if a person in charge of a horse leaves it unattended, he has been guilty of negligence is a pure question of fact, to be decided upon the circumstances of each case. If authority is wanted for that proposition, it is sufficient to quote one of the many cases which were cited to me. There is Haynes v Harwood, where Greer LJ made these observations, at p 153:

Of course it does not follow that in all circumstances it is negligence to leave horses unattended in a highway; each case with all its circumstances has to be considered; but the circumstances which make it quite clear that the defendants servant was guilty of a want of reasonable care in leaving his horses unattended are that this was a crowded street in which many people, including children, were likely to be at the time when the horses were left and before the defendants servant could get back to them. The defendants servant had been frequently in the neighbourhood; he had often delivered goods at Quineys wharf; and he must be taken to know something of the character of the neighbourhood, although he denied any knowledge of schools being there. To leave horses unattended, even for such a short time as three minutes, in a place where mischievous children may be about, where something may be done which may result in the horses running away seems to me to be negligenthaving regard to the proved circumstances.

Similar observations were made by Roche LJ, as he then was, and he entirely agreed that it was a question of fact, in each case. I will only refer to one other case, Hendry v MDougall, a Scottish case, where some observations were made as to the sort of matters which would be rightly considered by a jury in considering whether negligence was proved in any particular case. The Lord Justice-Clerk, Lord Alness, observed, at p 382:

… the question whether a driver is in fault in leaving his horse unattended is a question of circumstances, and I agree with what the Lord Justice-Clerk said in MEwan v. Cuthill, that “there is no general rule.” Much, for example, will depend upon the type of horse, the time during which the driver is absent, the distance to which he goes, and also the character of the locus.

In my opinion, it is quite impossible to say that, on the facts in this case, there was no evidence upon which the jury could find that the leaving of this horse unattended was negligence. The evidence of the defendants themselves was that the man supposed to be in charge of the horse was absent for half-an-hour, and that that was his practice. In my opinion, that fact alone is ample justification for a jury finding, as this jury found, that the defendants were negligent, quite apart from the particular observation made by the jury, which I do not think they intended to imply as being the only evidence of negligence, that, in the circumstances, to leave this horse unattended was negligent, since the defendant knew that the horse had a habit of straying onto the pavement. I think that what the jury meant by that was that that was an indication at least that the horse was getting tired, restive, and restless. Therefore, if this had been a case in which the horse had bolted, as happened in most of the cases which have come before the courts, or if the horse had merely got bored, turned round and walked home, or trotted home, as was the case in Deen v Davies, and in the course of its going home had injured somebody, I think that the case would have been unarguable. Counsel

Page 482 of [1939] 3 All ER 478

for the defendants, however, has drawn my attention to a much more formidable difficulty in the way of the plaintiff. It is the law in this country that the owner of a domestic animal is not responsible for damage to a person done by that animal unless he has knowledge of some propensity on the part of the animal to behave in that way, and clearly there is no such evidence here. Counsel for the defendants says that, if the plaintiff is going to rely upon ordinary common law negligence, she must show that the injury caused to her was a reasonably natural consequence following from the negligence alleged and proved. If that is right, I do not think that there can be any dispute. The matter was concluded by authority as long ago as 1863, in Cox v Burbidge. In that case, the law was laid down by Erle CJ, in language which has been accepted ever since. The facts of the case were totally different, and they do not assist the matter. The passage which is always referred to as a classic exposition of the law since 1863 is a passage in the judgment of Erle CJ, where, after dealing with the question of whether or not there was negligence from the facts of that case, Erle CJ observed, at pp 436, 437:

… even if there was any negligence on the part of the owner of the horse, I do not see how that is at all connected with the damage of which the plaintiff complains. It appears that the horse was on the highway and that, without anything to account for it, he struck out and injured the plaintiff. I take the well-known distinction to apply here, that the owner of an animal is answerable for any damage done by it, provided it be of such a nature as is likely to arise from such an animal, and the owner knows it. Thus, in the case of a dog, if he bites a man or worries sheep and his owner knows that he is accustomed to bite men or to worry sheep, the owner is responsible; but the party injured has no remedy unless the scienter can be proved. This is a very familiar doctrine; and it seems to me that there is much stronger reason for applying that rule in respect of the damage done here. The owner of a horse must be taken to know that the animal will stray if not properly secured, and may find its way into his neighbours corn or pasture. For a trespass of that kind, the owner is of course responsible. But, if the horse does something which is quite contrary to his ordinary nature, something which his owner has no reason to expect he will do, he has the same sort of protection that the owner of a dog has; and everybody knows that it is not at all the ordinary habit of a horse to kick a child on a highway. I think the ground upon which the plaintiffs counsel rests his case fails. It reduces itself to the question whether the owner of a horse is liable for a sudden act of a fierce and violent nature which is altogether contrary to the usual habits of the horse, without more.

There were views given by other judges to the same effect.

To come to more modern times, there is the authority of Bradley v Wallaces Ltd, where Sir H H Cozens-Hardy MR, after referring to Cox v Burbidge, and reading part of the passage to which I have just referred, observed, at p 633:

The damage in the present case does not naturally flow from the trespass and is not an ordinary consequence of the trespass. It is too remote. Does it make any difference that there was negligence on the part of the owners man in leaving the horse unattended? In my opinion it does not. It is impossible to read the judgments in Cox v. Burbidge without seeing that the negligence of the owner is not a vital point. The negligence can only render the owner liable for the ordinary and reasonable consequences of the negligence, and not for any damage which cannot fall within those terms. I can see no ground for holding that the mans negligence in leaving the horse unattended in any degree rendered the sudden and unexpected vicious act of kicking more probable. In my opinion there was no evidence to justify the decision of the learned judge [who had held that in giving judgment for the plaintiff], and this appeal must be allowed.

Page 483 of [1939] 3 All ER 478

In the same case, Kennedy LJ emphasised the same matter, at p 637:

In the cases of Lee v. Riley and Ellis v. Loftus Iron Co., which stand, as it were, on the other side of that which is sometimes a rather narrow border line, the damage done to the owner of the property on which the horse trespassed was held, upon the facts, to be a natural consequence of the trespass. The learned county court judge, if, as I hope, I follow his line of reasoning, seems to have thought that directly you have a horse in a position which renders his owner constructively a trespasser, every damage done in any way by the horse to any person or to the property of any person is an actionable wrong. I venture to think that such is not, and never was, the law.

I come to the conclusion upon those casesI have glanced at others to which I have been referred by counsel on each sidethat in this case the plaintiff cannot have judgment or the damages which have been awarded to her by the jury unless she can show that there was in that animal something vicious which was known to the owner, or unless she can prove negligence, the reasonable consequence of which was the behaviour of the horse as proved. I feel bound to enter judgment for the defendants in spite of the findings of the jury.

Judgment for the defendants with costs.

Solicitors: W T Iggulden (for the plaintiff); Blount Petre & Co (for the defendants).

E Fuller Briscoe Esq   Barrister.

Milk Marketing Board v Lawrence

[1939] 3 All ER 483


Categories:        AGRICULTURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        ASQUITH J        

Hearing Date(s):        20, 24, 25, 26, 27 APRIL, 17 MAY 1939        


Agriculture Marketing scheme Milk Marketing Board contract Provision for stop notices on 7 days default by purchaser Subsidiary agreement for non-issue of stop notices on certain conditions Implied term that stop notices issuable immediately on breach of subsidiary agreement.

The defendant entered into a contract with the plaintiffs for the supply of milk, the contract being in the Milk Marketing Boards standard form and providing (inter alia) for the giving of stop notices terminating the agreement in case of default in payment by the purchaser for 7 days thereunder. At the end of December 1936, the defendant owed the plaintiffs over £4,000, and on 5 January 1937, he entered into a subsidiary agreement, whereby the plaintiffs agreed not to sue for arrears or issue stop notices if he complied with three conditions: (i) to pay £200 per month in reduction of the arrears outstanding on 5 January 1937, (ii) to pay for all current monthly supplies of milk by two monthly payments within the month of supply, and (iii) to provide security for his indebtedness either by granting a charge on his property or by finding an acceptable guarantor. The defendant failed within the month of May to pay fully for supplies delivered in that month, and on 7 June the plaintiffs issued stop notices which expired before payment was made. These stop notices were served by hand on 7 June, and the defendant contended that they should have been issued a clear 7 days after 31 May, and were therefore premature and in breach of the subsidiary agreement:

Held (i) in the circumstances in which the subsidiary agreement was made, it was necessarily an implied term that, in the event of a

Page 484 of [1939] 3 All ER 483

breach of any one of the three obligations, the plaintiffs should be remitted to their rights as they stood immediately before the subsidiary agreement was made. The stop notices were issued, not in respect of a failure to pay for May 1937, supplies within that month, but in respect of a whole mass of defaults which had accumulated before the subsidiary agreement was made. On failure of the defendant to make punctual payment under the subsidiary agreement, the plaintiffs were entitled to revert to the rights which existed before the subsidiary agreement was made.

(ii) the subsidiary agreement was a promise supported by a consideration and not a mere voluntary forbearance on the part of the plaintiffs.

Notes

In preparing a subsidiary agreement it is usual to insert a clause that, upon breach thereof, the parties shall immediately revert to their position before the agreement and be in a position to enforce all and every remedy then available to them. In the present case, it is held that there is an implied term to this effect in such an agreement, or, at any rate, in the agreement here in question, which does not, however, appear to have any special feature.

As to Marketing Schemes, see Halsbury, Supp, Agriculture, para 643; and for Cases, see Digest, Supp, Food and Drugs, Nos 476i4761.

Case referred to

Payzu Ltd v Saunders [1919] 2 KB 581; 39 Digest 571, 1765, 89 LJKB 17, 121 LT 563.

Action

Action for the balance of the price of goods sold and delivered under contracts made between the plaintiffs and the defendant and producers of milk during the years 1933 to 1936 inclusive. The defendants counterclaim sought to set off against the plaintiffs claim an equivalent amount due from the plaintiffs to the defendant by reason of breaches by them of a subsidiary contract entered into by them and the defendant in or about January 1937. The facts are fully set out in the judgment. By reason of certain admissions made by the defendant, the action proceeded on the defendants counterclaim.

B J M MacKenna for the plaintiffs.

R T Monier-Williams and L B Schapiro for the defendant.

MacKenna: The defendant has failed to prove the existence of a contract. He has proved only a voluntary forbearance on the part of the plaintiffs. If there was a contract, it was subject to two conditions to be performed by the defendant. He was bound to pay for his current supplies twice monthly, and also to pay £200 per month in reduction of his arrears. Time was of the essence of this provision. Payzu Ltd v Saunders has no application to the present case. In that case, the parties had not indicated an intention that the time of payment should be of the essence. Here the parties have indicated such an intention. The defendant was also bound to provide a guarantor within a reasonable time. He failed to perform either of these conditions. He was in arrears with his payments when the stop notice was served. There was no waiver of the requirement that payments should be made punctually. There is no plea of waiver. The defendant also failed to provide a guarantor. At the date when the stop notices were served, a reasonable

Page 485 of [1939] 3 All ER 483

time for providing a guarantor had elapsed. It was then impossible for the defendant to find a guarantor. He had broken the conditions of his manufacturing licence, and the plaintiffs were about to cancel that licence. That would have brought the defendants business to an end. In the circumstances, no guarantor would have guaranteed the defendants account.

Monier-Williams: The defendant contends that the plaintiffs, by reason of entering into the agreement with him and accepting from him the sums of money paid by him between 7 January 1937 and 7 June 1937, were estopped from contending that he was at any time during this period in default with his payments under any of the standard contracts. Time was not of the essence of this contract. The plaintiffs had permitted the defendant to fall into arrears over a period of time. The defendant paid off the arrears from time to time as far as his business profits permitted. The subsidiary agreement entered into by the parties in January 1937 was the only basis upon which the defendant could save a business which, before the Milk Marketing Boards scheme came into operation in October 1933, showed a handsome profit, and which was capable of expansion to meet the demands of consumers. In May, when the defendant had got behind with his payments under the subsidiary agreement, he was making successful efforts to raise money on mortgage for the purpose of paying off some of his indebtedness. He actually raised £1,100, which he offered to the plaintiffs, but they refused to accept it. This showed that the defendant was not intending to repudiate the subsidiary agreement, and, unless the plaintiffs could prove such repudiation, they had no right to have recourse to stop notices. All they were entitled to do was to sue the defendant for instalments overdue: Payzu Ltd v Saunders.

B J M MacKenna for the plaintiffs.

R T Monier-Williams and L B Schapiro for the defendant.

17 May 1939. The following judgment was delivered.

ASQUITH J. In this action, the Milk Marketing Board claim from the defendant a sum of over £6,000, with interest, as the balance of purchase price of milk sold and delivered by the board to the defendant. The defendant concedes that, subject to his counterclaim, the sum claimed, or something approximating closely to it, is due. The only dispute as to the claim relates to its exact quantum in respect of a single monthnamely, December 1936. In these circumstances, the onus was substantially on the defendant, whose counsel accordingly opened his counterclaim and called his evidence first. At the end of the defendants case, counsel for the plaintiffs submitted that, accepting the whole of the evidence called for the defendant as true, yet, in law, no case was made out in support of the counterclaim, and this submission I felt bound to accept.

The defendant is a dairyman, and had for some years before these proceedings conducted on an increasing scale a business of manufacturing dairy productsprincipally cheese, butter and creamunder the style of the Somerset Dairies, at Fishponds, in Somersetshire. The Milk Marketing Scheme came into force in the latter part of 1933, and from

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then on until 1937, when the material events happened, the defendant purchased milk from the Milk Marketing Board and the producers subject to the provisions of the scheme. The defendant purchased the great bulk of this milk for manufacturing purposes, and received the rebates provided for by the scheme in the case of milk destined for those uses, but he occasionally bought minor quantities for sale for liquid consumption. It is unnecessary to refer at length to the provisions of the Milk Marketing Scheme. Some reference should be made to the contracts under which the defendant bought milk from the board. So far as is relevant to this case, each of these contracts provides by cl 1 that the vendor agrees with the board and the purchaser to sell, and the purchaser agrees with the vendor and the board to buy, during the period covered by the contract the quantities of milk therein specified. By cl 3, it is provided that the purchaser shall monthly on or before the due date pay the regional price for such milk, and that the due date in relation to any calendar months deliveries of milk means the tenth day of the next month. Finally, by cl 7, it is provided as follows:

If the purchaser shall at any time have failed to pay any sum due (whether under this agreement or otherwise) from him to the board on or before the seventh day after the due date then and in that case the board may (without prejudice to any other available remedies) give to the purchaser written notice (hereinafter called stop notice) of the boards intention to determine this and such other registered agreements to which the purchaser is a party as the board may think fit on a date or dates … to be specified in the stop notice in relation to each agreement. Unless the purchaser shall on or before the fourth day after the sending of the stop notice pay the amount due the said registered agreements shall be deemed to determine at midnight on the stop date or dates.

Thus, for milk delivered in January, the “due date” for payment would be 10 February. If no payment had been made by 18 February, a stop notice would then be issued notifying the purchaser that this agreement and other registered agreements would be determined within a named period unless payment were made within 4 days of the service of the notice. It is conceded, as I have said, that at the end of 1936 there was a very considerable sum of arrears owing by the defendant to the plaintiffs. These arrears amounted by agreement to some £4,000 at the end of November, and to more at the end of December, though the precise amount of the additional indebtedness for that month is not agreed. Again, it is conceded that, at the end of 1936, the board were entitled to sue for the arrears, and also that they could lawfully have issued stop notices depriving the defendant of all further supplies of milk, thus bringing his business to an end. On 5 January 1937 however, there was a meeting between the defendant and Mr Wynne Owen, the boards regional officer at Worcester, to discuss the position. The result of the discussion was a subsidiary agreement, of which, for the present purpose, I am accepting the defendants version. According to this version, the effect of the agreement was that the board would not sue for arrears or stop supplies of milk by stop notices if and so long as the defendant complied with 3 conditions which I will indicate. The defendants counterclaim

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alleges in effect that he did comply with these conditions, but that the plaintiffs nevertheless, in breach of the subsidiary agreement, on 7 June 1937 issued stop notices, the effect of which was to cut off his supplies of milk, bring his business to a standstill, and, in effect, ruin him completely. He counterclaims for damages for this alleged breach. The 3 conditions laid down in this subsidiary agreement, subject to which the board were not to cut off supplies or sue for arrears, were (i) that the defendant should pay £200 per month in reduction of the arrears outstanding on 5 January, (ii) that he should pay for all current monthly supplies of milk by two monthly payments to be made within the month of supply, and not later, and (iii) that he should provide security for his indebtedness, either by granting a charge on his property or business or by finding a guarantor acceptable to the board. It seems to me that this last obligation, for which no time was assigned, was impliedly to be performed within a reasonable time.

I hold that, in the circumstances in which this subsidiary agreement was made, it was necessarily an implied term thereof that, in the event of a breach of any of the three obligations I have indicated, the board should be remitted to their rights as they stood immediately before the subsidiary agreement was made. These rights included, inter alia, the right to issue stop notices by reason of the defaults which had occurred before and up to 5 January. I also hold that the agreement was made with a contracting mindthat is, with the intention of creating legal relations between the partiesand that it was not a mere voluntary forbearance or a mere statement by the board of an intention, which the board was free to change or revoke, to forbear from certain action so long as certain conditions were satisfied. It was, I think, a promise supported by a consideration, the consideration moving from the defendant being an undertaking to pay for monthly supplies of milk earlier than under the original contracts, and also to provide security.

Finally, I hold that, as to the obligation to pay £200 per month against arrears, and to pay for monthly supplies within the month, time was of the essence of the contract. It is true that there is a statutory presumption against time of payment being of the essence of a contract for sale of goods. Cases such as Payzu Ltd v Saunders illustrate the operation of this presumption. The circumstances of this case, however, are in my view amply sufficient to displace it. What importance the board had all along attached to time of payment appears in nothing more clearly than it does in the provisions relating to that matter in the original contracts. Under those contracts, the board are expressly given the right, if any payment is not made under any of the contracts within 7 days after the due date, to issue notices, the effect of which (subject to 4 days grace) is to terminate entirely, not only the contract defaulted on, but also all similar contracts. Time of payment was, therefore, clearly of the essence of those contracts, and not a matter sounding only in damages. Was it likely that the board would set less

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store on the time factor so far as time limits were imposed for payment under the subsidiary agreement, seeing that the very reason for making that agreement was that the defendant had been so behindhand with his payments under the original contracts, and that the object of the subsidiary agreement was to accelerate and stiffen the time-table for the future? Nor do I think that this condition was waived or that the board is estopped from relying on it. It is true that, under the original contracts, late payment was repeatedly not followed by the issue of a stop notice when it could have been, and that, under the subsidiary agreement, a payment made on 10 May was accepted and allocated by the board to the month of April, in which month it ought to have been made. Nevertheless, there is no plea of waiver or estoppel or variation of either of the original contracts or the subsidiary agreement in the defence or counterclaim, nor was leave asked to amend.

It is indisputable, and is conceded by the defendant, that on 31 May 1937, the defendant had failed within the month of May to pay fully for supplies of milk delivered in that month. The extent of the deficiency is disputable. If a sum of £850 paid by the defendant on 7 January is to be regarded as a payment under the subsidiary agreement, the deficiency at the end of May was £978. If that £850 ought properly to be allocated to the period before the subsidiary agreement was made, then the deficiency at the end of May would be increased by £850. On any view, however, there was at midnight on 31 May-1 June a deficiency of at least £978 below the sum which should have been paid in that month for current supplies of milk and the £200 payable against arrears. The effect of this was, in my view, to entitle the board to revert immediately after 31 May to its rights as they existed before 5 January. On 7 June, the board issued stop notices which expired before payment was made. In doing so I think they were fully within their rights. The issue of stop notices was not a breach of the subsidiary agreement. No damages can be claimed for that issue, and the counter claim fails.

The defendant argued, inter alia, that the stop notices should have been, but were not, issued a clear 7 days after 31 May. They were in fact served by hand on 7 June, and were, therefore, it is said, premature and invalid. According to the view which I take, these stop notices were issued, not in respect of a failure to pay for May 1937, supplies within that month, although this was the occasion of their issue, but in respect of a whole mass of defaults which had accumulated before the subsidiary agreement was concluded. On failure of the defendant to make punctual payment under the subsidiary agreement, the board were entitled to revert to the rights which existed before the subsidiary agreement came into existence. These rights included that of issuing stop notices based on the pre-subsidiary agreement defaults.

If my decision on the point considered above is right, no other question arises. If it is wrong, it remains to consider whether or not there was a breach by the defendant of the further condition of the subsidiary

Page 489 of [1939] 3 All ER 483

agreement requiring him to find security for his indebtedness either in the form of a charge on his property or business or in the form of a guarantor acceptable to the board. This obligation must have been an obligation to be performed within a reasonable time from 5 January. The defendant contended that all he was asked for was a letter stating his intention to charge his business, and that he sent such a letter in January. It is true that by a letter of 12 January the board asked him for such a letter, and obtained it from him on 14 January, but I do not think that this was all they were asking for, or all that they were entitled to ask for. They were, I think, entitled, failing a guarantor, to an actual charge. When pressed, the defendant appears to accept this position. There is a long interchange between the parties about the title deeds to the defendants property, which he could not induce his solicitors to release. There is the letter, for instance, of 24 February from the board, and the letter of 9 March from the defendant, in which he says:

I am sorry I have been dilatory about your security. As soon as I can you shall sight them and register a charge on the deeds, or I will get a suitable guarantee.

On 15 March, the board were insisting on the production of those title deeds within 30 days “in order that the board may draw up a charge on your business.” From that time on, the idea of a charge fades into the background, and the defendant is searching for a suitable guarantor. Messrs Matthews and Skailes, customers of the defendant, and purchasers of his output, consider the idea of acting as guarantors, but, after investigation, they retreat. This is not altogether surprising, since in 1936 the defendant made a trading loss, and in the first 3 months of 1937 he made a larger trading loss. Down to the middle of April, no security of any kind has been provided. On 28 April, one Cooper told the boards representative that he was prepared to guarantee the whole of the defendants account. This is the defendants and Coopers evidence, and I accept it for the purpose of this judgment. The plaintiffs have suggested that a more limited obligation was assumed by Coopernamely, that he was to guarantee £1,800, and that £1,000 was to be raised by the defendant by a mortgage on his property. However this may be, certain stop notices which had been issued, rightly or wrongly, in March, and which had been extended from time to time, were withdrawn shortly after Mr Coopers promise, and in consequence of that promise. On 7 June, the final stop notices were served. The plaintiffs claim that by then it was beyond the power of the defendant to provide an acceptable guarantor, and they say this notwithstanding Coopers alleged promise on 28 April. They say it for the reason that in May they had themselves decided, and decided for good reasons, to withdraw the defendants manufacturing licence, which meant, in substance, that he would go out of business, or at any rate out of the business of manufacturing dairy products. In these circumstances, they say that it would have been dishonest on their part to allow a guarantor to assume liabilities without informing him of the impending dissolution of the business, which

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constituted a guarantors only security, and, if so informed, no guarantor in his senses, no proposing guarantor, would give the necessary guarantee. Mr Cooper agreed that it would have been madness to do so. I think that the plaintiffs have established, by admissions drawn from the defendant in cross-examination, that he had violated at least one of the conditions indorsed on his manufacturers licence. He had kept his accounts in a form which understated his disposals of liquid milk, and he admitted in the box that the charge of so doing brought against him in para 2 of the letter of 10 June was true. I do not think that the evidence establishes fraud on the part of the defendant, nor is a finding of fraud necessary. It is clear, however, that the defendant kept his accounts and records in a form which was a breach of the conditions on which he held his licence, and that the board were entitled in the latter part of May, if they chose, to cancel his licence under the Milk Marketing Scheme, cl 59A(3)(a). It is true that the plaintiffs, not having given evidence, have not proved what their own evidence alone could provenamely, a definite decision on their part to cancel the licencebut it is clear on the face of the correspondence that the plaintiffs had taxed the defendant with these alleged irregularities and that the explanations which the defendant offered had left them dissatisfied, incredulous and sceptical of his bona fides. They must have been at least seriously contemplating the cancellation of his licence, and, if such a decision were even on the cards, it would be dishonest not to inform a proposing guarantor to that effect, and a proposing guarantor so informed would certainly not have fulfilled his intention.

In these circumstances, I do not think that the defendant, on whom the onus lies, has established that on 7 June he had provided, or was able then or thereafter to provide, an acceptable guarantor. On the contrary, circumstances had arisen which made it impossible for him to do so. On this ground also, although not without hesitation, I think that the counterclaim fails. However, the case seems to me clear on the first ground. There should, therefore, be judgment for the plaintiffs with costs on the claim for a sum to be agreed or referred and interest at the rate of 4 per cent and judgment for the plaintiffs on the counterclaim, also with costs.

Judgment for the plaintiffs with costs.

Solicitors: Ellis & Fairbairn (for the plaintiffs); Guscotte Wadham Thurland & Howard, agents for Burges Ware & Scammell, Bristol (for the defendant).

Charles Newton Esq   Barrister.


Farley and Others v Westminster Bank Ltd and Others

(Re Ashtons Estate, Westminster Bank Ltd v Farley)

[1939] 3 All ER 491


Categories:        CHARITIES        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD RUSSELL OF KILLOWEN AND LORD ROMER        

Hearing Date(s):        29, 30 JUNE 1939        


Charities Charitable purposes Gift to vicar and churchwardens for parish work.

By her will, a testatrix gave part of her residuary estate to the vicar and churchwardens of certain churches “for parish work”:

Held as the words “for parish work” were too wide to be restricted to charitable purposes, the bequest was void.

Order of Court of Appeal ([1938] 1 All ER 707) affirmed.

Notes

Previous authorities have suggested that a gift for the general purposes of a parish, as distinct from one to the church or the vicar and churchwardens, might not be charitable, as being wide enough to include purposes which are not religious purposes. The House of Lords have now confirmed this view, and such a gift is, therefore, not charitable.

As to Religious Purposes, see Halsbury (Hailsham Edn), Vol 4, pp 118122, paras 155160; and for Cases, see Digest, Vol 8, pp 248254, Nos 74160.

Cases referred to

Dunne v Byrne [1912] AC 407; 8 Digest 294, 718, 81 LJPC 202, 106 LT 394.

Baker v Sutton (1836) 1 Keen 224; 8 Digest 298, 750, 5 LJCh 264.

James v Allen (1817) 3 Mer 17; 8 Digest 293, 708.

Appeal

Appeal from an order of the Court of Appeal, dated 22 February 1938, and reported [1938] 1 All ER 707, affirming an order of Luxmoore J, dated 8 June 1937, and reported [1937] 3 All ER 279. The facts and the arguments are fully set out in the opinion of Lord Atkin.

H B Vaisey KC and W S Wigglesworth for the appellants.

C Harman KC and R W Goff for the next of kin.

The Solicitor-General (Sir Terence OConnor KC) and A Andrewes Uthwatt for the Attorney-General.

30 June 1939. The following opinions were delivered.

LORD ATKIN. The question which arises in this case is as to whether or not there was a valid gift by the will of the testatrix, which was made on 16 August 1933. After giving certain legacies, she made the following residuary gifts. She directed that her trustees were to stand possessed of the residue:

… upon trust in equal shares for St. Clements Mission Notting Dale (of which my uncle Edmund Waller was founder and which he and I have supported) for their mission work, the Society for the Propagation of the Gospel in Foreign Parts, to the vicar and churchwardens of St. Columbas Church, Hoxton (for parish work), and the vicar and churchwardens of St. Cuthberts Church, Philbeach Gardens, Kensington (for parish work).

The question is whether the last two gifts are valid or whether they are not too vague as going beyond what is, within the meaning of the law, a charitable gift. If they go beyond the legal definition of a charitable gift, they are too vague. The principle has been expressed perhaps as

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well as it could be expressed by Lord Macnaghten in delivering the judgment of the Privy Council in Dunne v Byrne, at p 411. In that case, the gift was expressed in these words:

I will and bequeath … that the residue of my estate should be handed to the Roman Catholic Archbishop of Brisbane and his successors to be used and expended wholly or in part as such archbishop may judge most conducive to the good of religion in this diocese.

It was held that that was not a good charitable bequest, and was void. I quote the case not because of the terms of that bequest, but because of what was stated in the opinion of Lord Macnaghten at p 411:

The language of the bequest (to use Lord Langdales words) would be “open to such latitude of construction as to raise no trust which a court of equity could carry into execution.”

For that, Lord Macnaghten quotes Baker v Sutton, and then continues, as follows, at p 411:

If the property, as Sir William Grant said in James v. Allen “might consistently with the will be applied to other than strictly charitable purposes, the trust is too indefinite for the court to execute.”

The question is, what is the meaning of the words “the vicar and churchwardens of St. Columbas Church, Hoxton (for parish work)”? Counsel for the appellants in the course of a forcible argument said that that is equivalent to a gift to the vicar and churchwardens of St Columbas Church, Hoxtonit is in fact in Haggerston, but we need not trouble about thatand he says that that would mean a gift to the vicar and churchwardens for the purpose of their spiritual duties as vicar and churchwardens, and that it would be a good charitable bequestwhich is perfectly trueif there were no words added. Then he says that the words “(for parish work)” simply mean to express what would be implicit in the words “the vicar and churchwardens” without the addition of those words in brackets; and, if so, he says, then there is nothing to prevent this gift from being a charitable gift. Alternatively, he says, the words limit their duties in some particular respect which I do not think he found it very easy to define, and which, if he finds it difficult to define, I find it still more difficult to define. In some sense or other, however, he says that the words limit what would be ordinarily understood if one had a gift to the vicar and churchwardens simply.

My Lords, I am entirely unable to accept that construction. I think that the words are quite plainly enlarging words. They are words of definition, it is quite true, but I think that they were used for the very purpose of defining what the testatrix meant as the purpose for which the money was to be applied, and “parish work” seems to me to be of such vague import as to go far beyond the ordinary meaning of charity, in this case in the sense of being a religious purpose. The expression covers the whole of the ordinary activities of the parish, some of which no doubt fall within the definition of religious purposes, and all of which no doubt are religious from the point of view of the person who is responsible for the spiritual care of the parish, in the sense that they are

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conducive, perhaps, to the moral and spiritual good of his congregation. However, that, I think, quite plainly is not enough, and the words are so wide that I am afraid that on no construction can they be brought within the limited meaning of “charitable” as used in the law. I find myself in entire accord with what was said by Sir Wilfrid Greene MR, in the Court of Appeal, at p 711:

To my mind, the whole question in this case turns on whether or not the words “for parish work” can in some way be limited, either by their own inherent meaning or by reference to the character and quality of the trustees. I have come to the conclusion, and I do so with regret, that that limitation cannot be imposed upon the words. It seems to me that the words “for parish work” are of a very wide character, and embrace not merely those limited functions in the parish which it is the duty of the vicar to perform, and not merely those limited functions in the parish which it is the duty of the churchwardens to perform. Nor can I limit those words by narrowing them down to religious purposes in the strictly charitable sense. It appears to me that, taking them as words of ordinary English, they cover any activity in the parish, any work in the parish which trustees of that character may be expected to perform, whether that work be strictly a religious purpose or strictly a charitable purpose, or whether it be a work considered to be conducive to the good of religion, or considered to be benevolent, or generally useful to the inhabitants of the parish or the congregation of the church. It seems to me that the words “for parish work” cannot be cut down or limited, either by construing them in isolation or by reference to the character of the trustees.

My Lords, it seems to me that that is quite sufficient to dispose of this case. I find myself quite unable to disagree with the views taken by Luxmoore J, by Sir Wilfrid Greene MR, and by Farwell J. I am sorry not to be able to accept the view taken by Clauson LJ, but I think that it would be too narrow a view, upon these words. I share the regret which has been expressed by all the judges in coming to this conclusion. I think that this case is a warning to those persons who desire to make wills with a benevolent intention, giving legacies for charitable purposes in the broad sense of the words, that they should make it clear that their objects are within the legal definition of charity, and are certain. Nevertheless, the law has been the law now for a very great number of years, and it is quite plain to my mind that words of such general import as these suggest an uncertainty of purpose which it is quite impossible to bring within the purview of the law of trusts. I am of opinion, therefore, that this appeal should be dismissed. It is a case which has given rise to judicial doubt, and which, I think, it was very proper for the persons representing these parishes to bring for decision in this House. I notice that there was a condition made, on giving leave to appeal, that there should be no opposition offered to a suggestion that the costs should come out of the two bequests which fail. Of course, we are not bound by that condition, but it appears to me to be one which it would be quite proper to make, and, in those circumstances, I propose to your Lordships that the appeal should be dismissed, and that the costs should come out of the two funds in question.

LORD RUSSELL OF KILLOWEN. My Lords, I agree. Clauson LJ found himself able to construe this gift as a gift to the vicar and churchwardens, the purposes for which the money was to be applied being

Page 494 of [1939] 3 All ER 491

restricted by the words in brackets to the furtherance of work which it was the duty of the vicar and churchwardens to perform. That is to say, the application of the money was restricted to what I may call the religious purposes of the parish in the strict sense. For myself, I am unable to put so narrow a construction upon the words used by the testatrix. In my opinion, upon the true construction of this will, the words in brackets mean that the gift is not a gift for ecclesiastical or religious purposes in the strict sense, but that it is a gift for the assistance and furtherance of those various activities connected with the parish church which are to be found, I believe, in every parish, but which, unfortunately for the donees here, include many objects which are not in any way charitable in the legal sense of that word.

I find myself in complete agreement with the judgments delivered by Sir Wilfrid Greene MR, and by Farwell J, and I would accordingly dismiss this appeal, but with the provision as to costs which has been referred to by Lord Atkin.

LORD ROMER. My Lords, I too agree. Notwithstanding the excellent argument which we have heard from counsel for the appellants, I find myself quite unable to extract from the will or the surrounding circumstances, to which we can refer, any justification for giving to these words “(for parish work)” any other than their ordinary meaning, and it is, I think, without question that their ordinary meaning includes objects which are not charitable in the legal sense of the term. Great reliance was placed by counsel for the appellants upon the fact that the trustees who are to administer these two funds are the vicar and churchwardens of these respective parishes, but I find myself in complete agreement with what was said by Farwell J, in the Court of Appeal, at p 716:

It is only, in my judgment, in a case where the trust itself is not specified that the character of the trustees may be sufficient to indicate the purpose of the trust.

In the present case, the trust itself is specified quite clearly. My Lords, I agree with the motion which has been proposed.

Appeal dismissed.

Solicitors: Thomas Eggar & Son (for the appellants); Ravenscroft Woodward & Co (for the next of kin); Treasury Solicitor (for the Attorney-General).

Michael Marcus Esq   Barrister.


Daponte v Schubert and Another

[1939] 3 All ER 495


Categories:        ADMINISTRATION OF JUSTICE; Courts: CIVIL PROCEDURE        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        24, 25 MAY, 28 JUNE 1939        


Mortgage Charging order of judgment creditors Remedy Foreclosure Sale Judgments Act 1838 (c 110), s 14.

The plaintiff had obtained a charging order against the second defendant in respect of certain shares. The order having remained unsatisfied, the plaintiff, by originating summons, claimed an order of foreclosure, or, alternatively, “that the said charging order be enforced in such other way as the court shall think fit.” The question arose whether the court had jurisdiction to make an order for foreclosure upon a charging order, or whether the power of the court was confined to the making of an order for sale:

Held (i) the court had no jurisdiction to make an order for foreclosure.

(ii) the appropriate order was an order for sale.

Notes

The only question here is whether there is jurisdiction to make an order for foreclosure or merely an order for sale upon an application to enforce a charging order upon shares in a limited company. The authorities upon the point are not quite consistent, but, the decision in DAuvergne v Cooper having been followed in an unreported case in 1927, the judge has followed that decision, and decided that this is not a case in which an order for foreclosure can be made. The matter is of importance in cases where a sale of the shares at their proper value is not commercially possible.

As to Enforcement of Charging Order under Judgments Act 1838, see Halsbury (Hailsham Edn), Vol 23, pp 458, 459, para 672; and for Cases, see Digest, Vol 35, pp 551, 552, Nos 28012811.

Cases referred to

DAuvergne v Cooper [1899] WN 256; 35 Digest 551, 2805.

Hosack v Robins [1917] 1 Ch 332; 35 Digest 552, 2808, 86 LJCh 282, 115 LT 879.

Attwood v Gibbons (1927) Unreported.

Ford v Wastell (1848) 2 Ph 591; 35 Digest 587, 3240, 17 LJCh 368, 13 LTOS 461.

Footner v Sturgis (1852) 5 De G & Sm 736; 35 Digest 551, 2804, 21 LJCh 741, 19 LTOS 324.

Jones v Bailey (1853) 17 Beav 582; 35 Digest 551, 2806.

Kennard v Futvoye (1860) 2 Giff 81; 42 Digest 728, 1494, 29 LJCh 553, 2 LT 30.

Messer v Boyle (1856) 21 Beav 559; 35 Digest 552, 2807.

Leggott v Western (1884) 12 QBD 287; 21 Digest 658, 2363, 53 LJQB 316.

Originating summons

Originating summons for an order for foreclosure pursuant to a charging order, or, alternatively, for enforcement of the charging order “in such a way as the court shall think fit.” The facts are fully set out in the judgment.

E M Winterbotham for the plaintiff.

J A Reid for the second defendant, Roy Nominees Ltd, the nominee and holder of the shares.

The first defendant was not represented.

Winterbotham: There is no market for these shares, and a sale would seriously prejudice their price. The only suitable remedy, therefore, is

Page 496 of [1939] 3 All ER 495

an order for foreclosure. The court has power to make such an order. A number of older cases and the Judgments Act 1838, ss 13, 14, make it clear that the court has jurisdiction to make an order for foreclosure. Of more recent enactments, there is the Courts (Emergency Powers) Act 1914, from which it follows that the plaintiff is entitled to exercise all his rights, including that of foreclosure, once he has taken the proper steps of procedure. This is provided for by s 1(1)(b) of the Act. There are a number of recent cases, in particular Hosack v Robins, in my favour. Lord Cozens-Hardy MR, in that case reviewed the earlier case of DAuvergne v Cooper and remarked that there was no prohibition against an order for foreclosure in that case. The view that sale should be regarded as the proper remedy, was, in the opinion of Lord Cozens-Hardy MR, a rule of practice, and not a question of procedure. Moreover, I rely on the following passage in The Annual Practice 1939, p 849:

Sale, and not foreclosure, is usually ordered … but this is a rule of practice only and semble in a proper case foreclosure could be ordered. …

Attwood v Gibbons is against the plaintiff, but it is indeed strange that, if it were really regarded as good law, it should not have found its way into The Annual Practice after 12 years. Relying on Hosack v Robins and the pronouncement in The Annual Practice 1939, therefore I ask the court to disregard Attwood v Gibbons and to make an order for foreclosure.

Reid: As I am appearing for the nominee only, I am not interested in this point of law. All I desire is an order of the court, in order to be protected.

E M Winterbotham for the plaintiff.

J A Reid for the second defendant, Roy Nominees Ltd, the nominee and holder of the shares.

The first defendant was not represented.

28 June 1939. The following judgment was delivered.

MORTON J. By a contract in writing, dated 8 March 1937, the plaintiff agreed to sell to the first-named defendant, Sami Wickersham Schubert, 80,000 ordinary shares of 5s each in a company known as Dufay-Chromex Ltd, and the defendant agreed to pay to the plaintiff the sum of £20,000 for those shares. The £20,000 was to be paid, as to £10,000 by the defendants cheque in favour of the plaintiff, and as to the other £10,000 by a bill accepted by the defendant and payable to the plaintiff as therein mentioned. The 80,000 shares were duly delivered to the defendant, and the plaintiff received the defendants cheque for £10,000 and a bill accepted by the defendant also for £10,000. On the presentation of the cheque, it was returned by the defendants bankers with the words “Orders not to pay” indorsed thereon. The defendant, however, had dealt with 50,000 of the shares either by sale or charge, and transfers in respect thereof have been registered by the company. I am told by counsel for the second defendant, Roy Nominees Ltd, that that company were originally nominees for the plaintiff, and that subsequently the plaintiff authorised them to deal with the shares in accordance with the instruction of the first defendant, and that it was in consequence of that that 50,000 of the shares were in fact dealt with.

Page 497 of [1939] 3 All ER 495

On 23 June 1937, the plaintiff commenced an action against the first defendant in the Kings Bench Division claiming a sum of £10,000, the sum of £10,000 being the amount of the dishonoured cheque, and he also claimed interest thereon. The action came on for trial on 28 July 1937. The facts were investigated, and judgment was given in favour of the plaintiff for £10,065 15s 1d and costs to be taxed. Then on 12 August 1937, an order was made whereby, after reciting that the defendant was still indebted to the plaintiff in the sum of £10,065 15s 1d, and that there were standing in the name of Roy Nominees Ltd, on behalf of the first defendant, 30,000 ordinary shares of 5s each (and then the numbers were given), it was ordered that the defendants interest in these 30,000 shares should stand charged with the payment of the above-mentioned sum of £10,065 15s 1d due under the judgment, together with £3 5s 6d, the costs of that application, such sum of £3 5s 6d to be added to the judgment debt. On 18 November 1938, the plaintiff issued a summons to which the defendant in the Kings Bench action, Schubert, and Roy Nominees Ltd, were made defendants, and he asked for an order for foreclosure on all the first-named defendants interest in the 30,000 shares in question and for delivery up to the plaintiff of the certificate or certificates representing the first-named defendants title to such shares, together with an executed transfer of such shares in favour of the plaintiff. Alternatively, he asked that:

… the said charging order may be enforced in such other way as the court shall think fit.

In my view, this is most certainly a case in which I ought to give the plaintiff relief by way of foreclosure if I have the jurisdiction to make such an order. The 30,000 shares in question were formerly the property of the plaintiff. He has never been paid for them, and he has been deprived of them in the manner which I have set out in my statement of the facts. However, the question whether or not I have in fact any jurisdiction to make an order for foreclosure is one of some importance, and also, I think, of some difficulty. Counsel for the plaintiff has, most helpfully, referred me to all the authorities which he can find which deal with the matter, and he has also referred me to the terms of the Judgments Act 1838, ss 13, 14. I do not propose to review the cases in detail, because this precise point, as I read the report, came before North J, in DAuvergne v Cooper. In that case, the plaintiff had recovered judgment in an action in the Queens Bench Division against the defendant John Edmund Cooper. He obtained a charging order under the Judgments Act 1838, s 14 (made absolute on 2 August 1898), for the amount of his debt on 6,606 £1 shares in a limited company standing in the name of Edith Cooper, the other defendant, as trustee for the first defendant, her husband. The report of the case states, at p 256:

This was an action to enforce the charge, brought in as a short cause, or notice for judgment in default of appearance.

The plaintiff claimed an account and foreclosure on sale.

Page 498 of [1939] 3 All ER 495

The report says “on sale,” but I think that that is clearly a misprint.

The shares at present were depreciated and if they were sold now the purchase money would be insufficient.

Counsel for the plaintiff asked that there might be foreclosure. North J, as it is stated at p 256:

reviewed the authorities, holding that it was settled law that the remedy of a person having a charge under sect. 14 of the Judgments Act was sale, not foreclosure. He directed an account and sale, with liberty for the plaintiff [to bid] if he did not have the conduct of the sale.

I have inserted the words “to bid,” as I think that they clearly ought to appear in the report, but they do not. It is unfortunate that that case is so briefly reported, but, as I read it, it is a decision upon the very point which I have to decide here. It appears from the report that counsel asked for foreclosure and the judge held that it was settled law that the remedy of the person having a charge under this section was sale, and not foreclosure.

In 1916, Hosack v Robins came before Astbury J and the Court of Appeal. The point for decision there was whether it was necessary for the plaintiff to obtain leave to take certain proceedings under the Courts (Emergency Powers) Act 1914, s 1(1)(b), as amended by the Courts (Emergency Powers) (No 2) Act 1916, s 1(1)(b). In the course of the case, however, DAuvergne v Cooper was referred to, and there are observations both in the judgment of Astbury J, and in the judgments of Lord Cozens-Hardy MR and Warrington LJ, which would seem to indicate that they did not regard the court as having no jurisdiction to make an order for foreclosure in such a case as the present. Those observations were, to my mind, obiter. Lord Cozens-Hardy MR, in particular, said, at p 336:

… I regard the view taken by North, J., long ago in the case of DAuvergne v. Cooper that sale and not foreclosure was the proper remedy of a person having a charge under the Judgments Act, 1838, s. 14, as merely a rule of practice, and not a question of jurisdiction. As a matter of convenience the court says that the charge shall be enforced not by foreclosure but by sale. I guard myself from saying there is any real prohibition which could prevent the court, if it thought fit, from granting either foreclosure or a sale in lieu of foreclosure. If the court did grant foreclosure, it could at once, under the statute referred to, make an order for sale instead of for foreclosure.

The matter does not end there, because in 1927 the case of Attwood v Gibbons came before Eve J. In that case, the plaintiff had obtained a charging order absolute, dated 28 July 1926, and made in an action in the Probate, Divorce and Admiralty Division, whereby a sum of £144 7s 6d consolidated stock standing in the name of the defendant Gibbons in the books of the Wolverhampton Gas Co stood charged with the payment to the plaintiff of the sum of £1,500 and certain costs. On 15 February 1927, the plaintiff took out a summons to which Gibbons was a defendant asking that the stock might be sold, with the approbation of the judge, or that such further or other order might be made in the

Page 499 of [1939] 3 All ER 495

premises as to the court might seem just. It appears clearly from the masters notes in that case that the defendant did not appear, and on 26 April the plaintiff appeared before the master and asked for an order for foreclosure. The master took the view that Hosack v Robins did not overrule the decision of North J in DAuvergne v Cooper, but only commented upon it, and that he ought to adjourn the case to the judge. On 2 May 1927, the matter came before Eve J, and the following passage appears in the masters note:

The judge said that DAuvergne v. Cooper is to be followed notwithstanding the observations of Lord Cozen-Hardy, M.R., in Hosack v. Robins, which were obiter.

It seems to me that that case amounts to the fact that again there was an application by a judgment creditor who had obtained a charging order for foreclosure instead of sale, and Eve J declined to make the order and himself followed DAuvergne v Cooper. It is to be regretted that Attwoods case was not reported. Certainly the master does not appear to have brought it to the attention of those responsible for The Annual Practice, because there still appears in The Annual Practice 1939, the following note, at p 849:

The court has no jurisdiction to order the sale or foreclosure of shares comprised in a charging order, except in a separate proceeding instituted for that purpose. … The proceedings must be commenced in the Chancery Division … they should be commenced by originating summons under R.S.C., Ord. 55, r. 5A.

Now follows the relevant passage:

Sale, and not foreclosure, is usually ordered (DAuvergne v. Cooper), but this is a rule of practice only, and semble in a proper case foreclosure could be ordered (per Cozens-Hardy, M.R., in Hosack v. Robins).

I do not propose to review in detail the earlier cases referred to by counsel for the plaintiff. The cases to which he referred are, first of all, certain cases on the Judgments Act 1838, s 13, which were concerned with real property. The first of these is Ford v Wastell. It appears from the report that the order made in Ford v Wastell was a consent order. The next case is Footner v Sturgis. Then there was Jones v Bailey. The two latter cases are extremely difficult to reconcile with one another. I may add that it would appear from the report of Kennard v Futvoye, that the decree as actually drawn up in Jones v Bailey was for sale, and not for foreclosure. That appears in the note at the foot of p 557 of Vol 29 of the Law Journal Chancery Reports. The last of the cases on s 13 to which counsel for the plaintiff referred was Messer v Boyle, in which, without giving any reason, Sir John Romilly MR held that the plaintiff was entitled to a decree for foreclosure.

Counsel for the plaintiff also referred me to Leggott v Western. That was a case in which the plaintiff had obtained an order charging shares of the defendant in a company with the payment of the judgment debt and interest, and he applied to the court in the same action for an order for sale of the shares. The decision went only to this, that the application for sale could not be made in the same action in which the

Page 500 of [1939] 3 All ER 495

order had been made. Counsel for the plaintiff, however, relied upon the judgment of Lopes J, at p 289:

It is admitted that before the Judicature Acts it would have been necessary for him to institute separate proceedings in order to obtain a sale or foreclosure of the shares subject to the charging order …

Counsel for the plaintiff also relied upon the judgment of Cave J, at p 289:

The powers given by the legislature do not extend to enabling the court to order a foreclosure or sale in a case like the present where that relief is not claimed in the action.

Counsel for the plaintiff relied on the fact that in these passages in the judgments the judges bracketed together foreclosure and sale, and he suggested that that was an indication that foreclosure was an alternative remedy.

As I have said, I do not propose to express any view as to the question of jurisdiction beyond saying that, in my view, the point has been considered by North J, and decided against the plaintiff, and I think that, in the interests of judicial comity, I should follow what I conceive to be a clear decision of North J, and one which has already been followed by Eve J in chambers in Attwood v Gibbons, and make an order for sale.

Order for sale, with liberty to apply. Plaintiff to pay the costs of the second defendant and to add them to his security.

Solicitors: Bischoff Coxe & Co (for the plaintiff); Ellis Peirs & Co (for the second defendant).

F Honig Esq   Barrister.

Eaves v Eaves

[1939] 3 All ER 500


Categories:        FAMILY; Family Proceedings: SUCCESSION; Gifts        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        29 JUNE 1939        


Mistake Determination of gift on marriage Marriage annulled on ground of husbands incapacity Wife waiting 12 years before taking proceedings Acquiescence Loss of right to restitution.

Will Construction Gift during widowhood Decree of nullity in respect of second marriage Whether gift restored.

By his will, the testator, who died in December 1919, gave his wife, inter alia, “during her life and widowhood,” the use of his house for the unexpired residue of the term for which it was held. In 1923, by agreement between the wife and the testators son, who were both the trustees of the will and the principal beneficiaries thereunder, the house was sold and the proceeds invested. On 24 September 1925, the widow remarried and the investments were thereupon transferred to the son (the latter being entitled to them under the will upon the determination of the widows interest), who converted them to his own use. On 24 May 1937, a decree nisi of nullity was pronounced of the widows marriage in 1925 on her own petition alleging the husbands incapacity, and this was duly made absolute. The widow now contended that her life interest in the house had not determined in 1925, and claimed the appropriate relief:

Held (i) the decree of nullity made the marriage void ab initio and the widowhood had never determined.

Page 501 of [1939] 3 All ER 500

(ii) the widow, although she took no proceedings for nullity for 12 years, must have known the true position of the marriage and, as she took no steps to alter the position in regard to the investments representing the proceeds of sale of the house, she could not after such delay claim to be entitled to the benefit of the life interest given by the will.

Semble: the position might have been different if there was a trust fund still in existence, or if the widow, the plaintiff in this action, had not been a trustee.

Notes

It appears from the present decision that a decree of nullity will, so to speak, restore an interest which has been determined upon the apparent marriage. This, however, does not conclude the matter. It must still be asked whether the position of the parties has been so altered as to make the restoration inequitable, and, further, whether the party seeking such restoration was a trustee consenting to the distribution of the estate.

As to Effect of Nullity Decree, see Halsbury (Hailsham Edn), Vol 10, pp 640, 641, para 937; and for Cases, see Digest, Vol 27, pp 265, 266, Nos 23262345.

Cases referred to

Fowke v Fowke [1938] Ch 774, [1938] 2 All ER 638; Digest Supp, 107 LJCh 350, 159 LT 8.

Re Robinson, McLaren v Public Trustee [1911] 1 Ch 502; 32 Digest 518, 1761, 80 LJCh 381, 104 LT 331.

Re Wombwells Settlement, Clerke v Menzies [1922] 2 Ch 298; 27 Digest 457, 4752, 92 LJCh 18, 127 LT 295.

Inverclyde (otherwise Tripp) v Inverclyde [1931] P 29; Digest Supp, 100 LJP 16, 144 LT 212.

Dodworth v Dale [1936] 2 KB 503, [1936] 2 All ER 440; Digest Supp, 105 LJKB 586, 155 LT 290, 20 Tax Cas 285.

Re Baker, Baker v Baker [1904] 1 Ch 157; 44 Digest 1232, 10656, 73 LJCh 172, 89 LT 742.

Rogers v Ingham (1876) 3 ChD 351; 35 Digest 93, 25, 35 LT 677.

Action

Action for, inter alia, a declaration that, on the true construction of the will of the testator, Charles Hobley Eaves, and in the events which happened, and in particular the decree absolute, dated 15 November 1937, pronouncing that an apparent marriage solemnised on 24 September 1925, between the plaintiff and one Charles Powell had been and was absolutely null and void, the life interest of the plaintiff and the proceeds of sale thereof, and the moneys or investments representing the same under such will, in the premises No 23, Calthorpe Road, Birmingham, was not determined on 24 September 1925, and had since continued, and still continued for the rest of her life unless and until she remarried, and that the plaintiff had been and was entitled to the benefit of such life interest and all income of the proceeds of those premises or the sum of £1,000 War stock or other the investments or moneys representing the same (a) as from 24 September 1925, or (b) in the alternative, as from 15 November 1937. The plaintiff sued as an individual and also as an executor and trustee of the will, and the defendant was sued as an individual and as the other executor and trustee of the will. By his defence, the defendant contended that the marriage of 24 September 1925, was not void, but voidable, and that it was not avoided for all purposes by the decree absolute of 15 November

Page 502 of [1939] 3 All ER 500

1937. He denied that the plaintiff remained the widow of the testator, or that such widowhood had continued since the death of the testator. He also relied on the Statute of Limitations 1623.

C E Harman KC and Gerald R Upjohn for the plaintiff.

F Baden Fuller for the defendant.

Harman KC: The payment of 24 September 1925, by the plaintiff to the defendant was made under a mistake of fact, and not of law, and the defendant is liable for money had and received to his own use. Once the Divorce Court intervenes, it strikes out the whole marriage ab initio. Although, knowing the facts, the plaintiff allowed the money to be applied in this way, non constat that she is not entitled to her rights. The Statute of Limitations cannot apply, as the cause of action only arose when the decree of nullity was made absolute on 15 November 1937. [Counsel referred to Re Robinson, McLaren v Public Trustee, Re Wombwells Settlement, Clerke v Menzies, Inverclyde (otherwise Tripp) v Inverclyde, and Fowke v Fowke.]

Fuller: The true question is whether or not the plaintiffs interest had determined. It determined on her remarriage. The decree absolute of nullity did not avoid the marriage for all purposes: Dodworth v Dale. The plaintiff was a wife in the eyes of the law when she remarried. In the analogous case of a life interest until assignment it has been held that the life interest is determined once and for all on assignment: Re Baker, Baker v Baker. On the footing that the marriage was valid, the fund has been distributed, and the matter cannot now be reopened. The plaintiff herself is one of the trustees. [Counsel referred to Rogers v Ingham.]

C E Harman KC and Gerald R Upjohn for the plaintiff.

F Baden Fuller for the defendant.

29 June 1939. The following judgment was delivered.

FARWELL J. This action raises a very curious point with regard to a sum of money which was in the hands of the plaintiff and the defendant as trustees under the will of Charles Hobley Eaves. The facts which give rise to this question are in a very small compass, and are not in dispute at all between the parties. In 1907, the plaintiff, who is now a widow, married the testator, Charles Hobley Eaves. He was a widower with one son by his first marriage, the defendant in this action. The testator had two children by his second marriagetwo daughtersand in December 1919, he died, leaving his widow (the plaintiff) and his son (the defendant) and the two daughters of the second marriage surviving him. He made his will on 8 January 1918, and by that will he appointed the plaintiff and the defendant to be executors, and he appointed his wife during her life, and his son after her decease, to be the guardian of the infant children. Then he gave to his wife a legacy of £500, and continued as follows:

I also give to her during her life and widowhood the use of my house No. 23 Calthorpe Road with the appointments for the unexpired residue of the term subject to her paying the rent and observing and performing the covenants and conditions of the lease and paying all outgoings. …

Then he gave her certain chattels, and he gave the whole of his residue

Page 503 of [1939] 3 All ER 500

upon trust for sale and conversion in the usual way, and out of the residue to purchase from the government an annuity of £600 per annum, to be paid to the wife for and during her natural life and widowhood, free of duty. Then he gave directions for the purchase of other annuities, and finally he gave the ultimate residue to his son the defendant.

The estate in question was a large one, and there has been considerable residue. The will was proved in March 1920, and the executors proceeded to administer the estate, and paid all the debts and expenses and wound up the estate as far as they could. The widow (the plaintiff) received her £500, and the defendant and the plaintiff purchased an annuity for her life, and, therefore, by arrangement, it was a life annuity, and not an annuity which ceased upon her remarriage. With regard to the house, the plaintiff continued to live in it for some time, but in 1923 the plaintiff and the defendant agreed that the house should be sold, and it was sold for the sum of £1,000. In connection with that, there had to be paid certain expenses and some other moneys, which I think were found by the defendant, and ultimately the sum of £1,000 was invested in 5 per cent War stock in the joint names of the defendant and the plaintiff as trustees of the will, and from that time down to 1925 the plaintiff received the interest on that sum of money.

In 1925, the plaintiff was minded to remarry. She knew, of course, that, if she remarried, and if she ceased to be the widow of the testator, her life interest in the house, or in the proceeds of sale representing the house, would come to an end. In fact, she realised that position so clearly that she agreed with the defendant to have the War stock sold and to hand over, or permit the defendant to receive, the proceeds of sale. The defendant did in fact pay to the plaintiff what she would have received by way of actual interest until the date when the ceremony of marriage was solemnised, but as from that date she ceased to receive any part of, or have any interest in, the money so received, and the proceeds of sale were paid to and received by the defendant, who used them for his own purposes and converted them to his own use. There is no doubt about that, and there is no doubt that that arrangement, under which the money got into the hands of the defendant, and was received by him, was a matter of mutual arrangement between the plaintiff and the defendant, both parties, of course, believing that, by the marriage which the lady was contemplating, her interest in that sum would cease entirely. The marriage took place on 24 September 1925, and on 24 May 1937, a decree nisi for nullity was granted to the plaintiff on her petition, and that decree nisi was made absolute on 15 November 1937. The effect of that decree was that the marriage which had been solemnised on 24 September 1925, was pronounced by the Divorce Court to be, and to have been, absolutely null and void, and the petitioner (the plaintiff) “was and is free from all bond of marriage with the respondent,” the ground of it being the incapacity of the husband to consummate the marriage.

Page 504 of [1939] 3 All ER 500

In those circumstances, the plaintiff says: “I went through a ceremony of marriage, but in fact I never was married at all. I never ceased to be the widow of the testator, because, by the decree absolute which was made, the so-called marriage was pronounced to have been null and void, and never was a marriage at all. Therefore I never ceased to be the widow of the testator, and, never having ceased to be the widow of the testator, I am entitled to a life interest in this fund, and I never have ceased to be entitled to a life interest in this fund of £1,000. The distribution of it, or the handing over of it to the defendant, was done under a common mistake of fact, and therefore I am entitled to have the money replaced, and to be put back in the position in which I should have been had I never gone through the ceremony of marriage, a ceremony which in fact resulted in there never having been a marriage at all.”

The question as to the effect of a decree of nullity of marriage has been considered in several cases, and was considered by myself in Fowke v Fowke, and I think there is no doubt that, if two persons go through a ceremony of marriage, and, ultimately, at the suit of one of them, the marriage is declared null and void on the ground of the incapacity of the other party, the position of the parties is that, as from the time when the marriage is solemnised, those two persons are, to all intents and purposes, man and wife. They have the status of married people. No one can be heard to say that they are not married people, and it is not open to anyone to challenge the validity of the marriage except one or other of the parties themselvesthat is, the party aggrievedwho could, by properly prosecuted proceedings in the Divorce Court, attempt to impeach the validity of the marriage. Until that is done, and is successfully done, the parties have, and remain having, the status of married people. They have all the obligations to one another which married people have, and the rights against each other which married people have, and, if no step is taken to have the marriage annulled, then they remain for all intents and purposes, until they are dead, people having the status of married people, and the results which flow from that status must necessarily flow during the whole of that period. When the marriage is declared null and void, however, it is not the same as a marriage which is dissolved by the Divorce Court on other grounds, because in the latter case there has been a marriage. There is no question about that. The relationship of married people ceases when the decree nisi is made absolute, but until that date the parties were married. They were legally married, and they were legally man and wife, and there is no escape from that position. As I pointed out in my judgment in Fowke v Fowke, the position differs wholly again from the case of a bigamous marriages because, in such a case as that, there never was a marriage at all, and anybody could give information or take other steps to impeach the marriage.

Having regard to that, the question here is whether or not, as a matter of construction, the plaintiff ceased to be the widow of the testator by

Page 505 of [1939] 3 All ER 500

reason of the ceremony of marriage which was subsequently solemnised. If she did, then there is no doubt that this money ceased to be payable to her when she ceased to be entitled to this interest, because it was only payable during her widowhood.

It is said on behalf of the defendant, that her widowhood came to an end when this ceremony of marriage was performed, and that, although the marriage has since been declared null and void, her widowhood none the less ceased when the ceremony was performed. I am not able to accept that view. It seems to me that, if the so-called marriage is treated by the Divorce Court as having been null and void, that means null and void ab initio, and, therefore, although these two people, the so-called husband and wife, for many years lived together, and had all the status of married people, in truth and in fact the widowhood never determined, because the lady never became in law the wife of the second so-called husband. However, that is not, in my view, the conclusion of this matter, because, although the plaintiff did not in fact cease to be the testators widow, she may yet have ceased to be entitled to this fund, having regard to all the circumstances.

The position is this. These two people, the plaintiff and the defendant, had this War stock in their joint names. They both were under the belief that the plaintiff was about to enter into a second marriage, which would have the effect of putting an end to her widowhood, and they thereupon agreed that this fund, in which up to that time she had had a life interest, should be distributed or be handed over to the defendant, who was the only other person having an interest in the fund itself. That was an arrangement which was entered into by the two parties perfectly lawfully, and by mutual agreement that position was accepted. The plaintiff went through the ceremony of marriage, and for many years lived as his wife with the man with whom she went through the ceremony, and she was for all purposes his wife until the decree absolute was made. During the whole of that period, she took no steps to have her marriage annulled. She went on permitting the defendant to receive the income in questionor, rather, she permitted the defendant to remain in possession of the fund itselfmaking no attempt to claim it in any way. She must have known the facts with regard to her so-called marriage, but, notwithstanding that, she chose to leave things as they were until ultimately she elected to take the necessary steps in the Divorce Court. In those circumstances, can the lady now say that her widowhood had not ceased, and that the arrangement under which the fund passed into the hands of the defendant was one which she is now entitled to claim was made under a mistake of fact and that she can recover the fund? She says: “There was a mistake of fact.” The position is that it is a case of money had and received, and that there is no statute which applies, because it was not until her right of action arose, which was only when the decree absolute was made, that the statute began to run.

Page 506 of [1939] 3 All ER 500

In my judgment, having regard to the particular circumstances of this case, I think that the plaintiff has made it impossible for herself to succeed in this action. She has acquiesced in the fund being handed over to her co-trustee. There is now no longer any fund in existence. It has gone, and has gone to her knowledge and with her consent. She took no step, throughout all the years which have elapsed since the ceremony of marriage was solemnised, to make any sort of suggestion, and took no step to have her marriage annulled, or to interfere in the ordinary way with the position to which she herself had been a party, and, in my judgment, it is not right, after all these years, that she should now make this claim against the defendant, who long since may have disposed of the money for his own purposes, and done it in complete innocence and in the perfectly clear belief that he was entitled to the money and that she had acquiesced in his receiving that money. He had no means of ascertaining what the position was as between the so-called husband and wife. He was entitled to treat the matter, and bound to treat the matter, on the footing that they were husband and wife, and, as such, he was entitled to assume, and to act on the assumption, that the plaintiffs widowhood had ceased, and that the consequences resulting from that flowed. In my judgments it, would be most inequitable now to hold that, in all the circumstances, the defendant was bound to recoup this money, which, as I have said, he has received and has dealt with. Had there been a trust fund in his hands which was still available, it might be that the plaintiff could have claimed thatat any rate, as from the decree absoluteshe was entitled to the interest on that fund, and, if she had not been herself a trustee, the position might have been different. However, having herself, as trustee, consented and agreed to this fund being dealt with in the way in which it was dealt with, in my judgment it is not now open to her to come to the court and say: “I require the defendant to replace this fund, which I myself permitted him to receive, and of which he has been in possession all these years, notwithstanding that I might, by taking the necessary proceedings in the Divorce Court, have established some claim to recover it.” In all the circumstances, I am not prepared to make any order against the defendant, and the action must be dismissed with costs.

Action dismissed with costs.

Solicitors: Gisborne & Co (for the plaintiff); Ward Bowie & Co, agents for Lane Clutterbuck & Co, Birmingham (for the defendant).

Maurice Share Esq   Barrister.


White v J & F Stone Ltd

[1939] 3 All ER 507


Categories:        TORTS; Defamation        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND LUXMOORE LJJ AND HUMPHREYS J        

Hearing Date(s):        22, 23 JUNE 1939        


Libel and Slander Slander Defamatory statements made to plaintiff and overheard by bystanders Privileged occasion Reciprocity of interest.

C, a director of the defendant company, said to the plaintiff: “What have you done with the money, White? You are £120 short.” These words were overheard by T, a co-employee of the plaintiff, who happened to be in a cellar below the room in which the statement was made. Later, C said to the plaintiff in the presence of P, another co-employee: “You understand on what conditions I am dismissing you. You find the £120 short and Ill give you your weeks money.” In an action for slander based on these statements, it was contended that the occasions were privileged:

Held for an occasion to be privileged, there must be an interest or duty to make a statement to the person to whom it is made, and that person must have a corresponding interest or duty to receive it. The words “the person to whom it is made” do not include the plaintiff. No such interest or duty existed in the case of T and P, and the occasions were not privileged.

Adam v Ward followed.

Toogood v Spyring considered.

Notes

In order to be within the privilege, it is necessary that the person who makes the communication has an interest or duty to make it, and the person to whom it is made has a corresponding interest or duty to receive it. In this statement of the law, the words “the person to whom it is made” do not include the plaintiff, and the occasion is not privileged merely because the plaintiff has an interest to receive the statement.

As to Privileged Occasion, see Halsbury (Hailsham Edn), Vol 20, pp 470479, paras 573578; and for Cases, see Digest, Vol 32, pp 117, 118, Nos 14881499.

Cases referred to

Adam v Ward [1917] AC 309; 32 Digest 129, 1608, LJKB 849, 117 LT 34, affg (1915) 31 TLR 299.

Toogood v Spyring (1834) 1 Cr M & R 181; 32 Digest 117, 1489, 3 LJEx 347.

Taylor v Hawkins (1851) 16 QB 308; 32 Digest 160, 1931, 20 LJQB 313, 16 LTOS 409.

Harrison v Bush (1856) 5 E & B 344; 32 Digest 123, 1550, 25 LJQB 25, 99, 25 LTOS 194, 26 LTOS 196.

Jones v Thomas (1885) 53 LT 678; 32 Digest 116, 1479.

Hebditch v MacIlwaine [1894] 2 QB 54; 32 Digest 114, 1460, 63 LJQB 587, 70 LT 826.

Tompson v Dashwood (1883) 11 QBD 43; 32 Digest 116, 1478, 52 LJQB 425, 48 LT 943.

Watt v Longsdon [1930] 1 KB 130; Digest Supp, 98 LJKB 711, 142 LT 4.

R v Rule [1937] 2 KB 375, [1937] 2 All ER 772; Digest Supp, 106 LJKB 807, 157 LT 48.

Anderson v Calvert (1908) 24 TLR 399; 32 Digest 165, 2014.

Poliakoff v News Chronicle Ltd [1939] 1 All ER 390; Digest Supp.

Minter v Priest [1930] AC 558; Digest Supp, 99 LJKB 391, 143 LT 57.

Hobbs v Tinling, Hobbs v Nottingham Journal [1929] 2 KB 1; Digest Supp, 98 LJKB 421, 141 LT 121.

Page 508 of [1939] 3 All ER 507

Bray v Ford [1896] AC 44; 32 Digest 164, 1988, 65 LJQB 213, 73 LT 609, revsg (1894) 11 TLR 32.

Appeal

Appeal by the defendant from a verdict and judgment of Macnaghten J, and a common jury at the Northampton Assizes, dated 22 January 1939. The facts of the case are fully set out in the judgments.

C Gallop for the appellants.

R C Vaughan for the respondent.

Gallop: The man in the cellar was a co-employee of the plaintiff, in whose presence Comras would have been entitled to make the remark. All the more was he entitled to make it when the other person was not actually present but happened to overhear it. A privileged occasion must be distinguished from a privileged communication. [Counsel referred to Toogood v Spyring.] The judge was wrong in holding that this occasion was not privileged.

Vaughan: It is clear that this occasion was not privileged. Privilege only begins to operate when there is publication. There must be a reciprocity of obligation in order to have privilege. The persons present must be persons interested: Taylor v Hawkins. The statement of the law by Parke B, in Toogood v Spyring has not been followed, on this particular point of an interested party, except in one unreported case. Although in old cases the position may have been different, it is now settled that there must be a community of interest before privilege arises, and the court will not follow Toogood v Spyring on that point to-day. In 1856, there was for the first time a clear definition of the law on this point in Harrison v Bush, but in 1885 this was not fully applied in Jones v Thomas. In Hebditch v MacIlwaine, which reversed Tompson v Dashwood (the case which was relied on in Jones v Thomas) it was said that the paragraph headed “semble” in the headnote of Harrison v Bush is wrong, and that an honest belief that the person to whom one is speaking is an interested person is not sufficient to establish privilege. [Counsel referred to Adam v Ward, Watt v Longsdon, R v Rule, Anderson v Calvert and Poliakoff v News Chronicle Ltd.]

Gallop in reply: It is the person to whom the statement is made who must have a common interest, not a person who happens to overhear. The question is how far Toogood v Spyring has been altered or modified, as the facts there are identical with this case. It is not necessary to have a privileged occasion before one can have publication. All that is meant by a privileged occasion is that in a proper place and on a proper occasion a communication is made to a proper person. The person to whom the publication is made need not be the person to whom the statement is made. In this case, the publication was not to the plaintiff, but to Turnham and Peers. It is a defence to show that the publication occurred when one was saying something to someone to whom one was entitled to say it. It cannot be right to say that one can say words to a plaintiff in the presence of two strangers

Page 509 of [1939] 3 All ER 507

and a person interested, but not to a plaintiff in the presence of the two strangers. That would be an absurdity. The recipient either means everyone who hears, or means only the person spoken to. It means everyone who hears. Otherwise one cannot support anything in Toogood v Spyring. [Counsel referred to Watt v Longsdon, Adam v Ward, Minter v Priest, Hobbs v Tinling and Bray v Ford.]

C Gallop for the appellants.

R C Vaughan for the respondent.

23 June 1939. The following judgments were delivered.

MACKINNON LJ. In this case, the plaintiff was, until 8 July 1938, in the employment of the defendant company. Upon that day he had an interview with one Comras, a director of the defendant company, which resulted in his leaving their employment instantaneously. He brought an action claiming damages for wrongful dismissal, but no question now arises about that. He was employed under terms providing that he could be dismissed at a weeks notice, and his weeks wage of £4 odd was paid into court. At the interview which resulted in his departure, certain words were spoken by Comras, and the plaintiff alleged that they were defamatory and that they were published to two overhearers. First, the plaintiff said, he spoke the words to him, the plaintiff, which were overheard by one Turnham: “What have you done with the money, White? You are £120 short.” Then, the plaintiff said, later in the day Comras spoke to him words overheard by one Peers: “You understand on what conditions I am dismissing you. You find the £120 short and Ill give you your weeks money.” The suggestion was that in both of these statements there was the suggestion that the plaintiff had taken the money, or goods representing that sum of money, that that was charging him with a criminal act, and that it was, therefore, a defamatory statement published to those hearers.

The judge left to the jury the questions (i) whether the words were spoken, (ii) whether they were defamatory, (iii) whether Comras spoke them with malice, and (iv) damages. All those questions the jury answered in favour of the plaintiff, and they awarded him £400 damages. This appeal is brought asking for a new trial on the ground of misdirection.

The first ground alleged in regard to misdirection is that the judge did not sufficiently direct the jury as to what was meant by “malice.” The necessity for asking the jury any questions about malice, or giving them any direction as to what constituted malice in law, only arose if the words were spoken on a privileged occasion. The judge intimated that in his view they were not spoken on a privileged occasion, but, in view of the contention that they were, he thought it was desirable to leave the question of malice to the jury, and he did so. If there was an insufficiency or error in his direction to the jury on the point of malice, that is immaterial if the occasion was not privileged.

In view of the course which this appeal has taken, and in view of the fact that, for another reason, we think that we must make an order

Page 510 of [1939] 3 All ER 507

directing a new trial, it is desirable, if not necessary, that we should express our view upon this question of whether or not this was a privileged occasion. In my view, it was not. We have had a number of cases cited to us, but I do not think that the definition of a privileged occasion can be put more clearly or accurately than in the words used by Lord Atkinson in Adam v Ward, at p 334:

It was not disputed, in this case on either side, that a privileged occasion is, in reference to qualified privilege, an occasion where the person who makes a communication has an interest or a duty, legal, social, or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. This reciprocity is essential.

Applying that test to this case, I think the question is whether or not Comras, in making a communication, had an interest or duty, legal, social or moral, to make it to Turnham or Peers, and whether or not Turnham and Peers had a corresponding interest or duty to receive it. The whole essence of liability for libel or slander is the publication of the defamatory statement to some third person, not the use of language of a defamatory kind to the person complaining of it. When Lord Atkinson speaks of “the person to whom it is made,” I think that he means the person to whom the alleged defamatory statement is published. Counsel for the appellants says that the mere words “the person to whom it is made” will include, and ought to be taken to include, the plaintiff to whom a disparaging statement is made, and that it is a privileged occasion if the plaintiff fills the description of a person to whom the speaker has “an interest or a duty, legal, social or moral,” to speak, and the plaintiff has an interest or duty to receive the statement. I do not think that that is included in that definition. I think that “the person to whom it is made” in that statement of principle must be the third person, the person other than the plaintiff, to whom the alleged defamatory statement is published. The only reason for suggesting that “the person to whom it is made” can include the plaintiff rests upon the facts of Toogood v Spyring. In that case, there was a rather famous statement of the nature of a privileged occasion by Parke B, at p 193, which passage I need not read. That passage has been repeated in many subsequent cases as being a classic exposition of the nature of a privileged occasion. I do not think that it has ever been pointed out, as counsel for the appellants has pointed out to us here, that in fact, so far as one can see, the persons to whom the statement was published in that case were not persons to whom the speaker had a duty to communicate, or persons who had an interest in receiving that communication, and it may be that the only person who had such an interest was the plaintiff who was complaining of the words used. For that reason, it may beI do not say that it is, because it would need more than this occasion to overrule so famous a case as thatthat the general observations and the general statement of the law, which have been approved over and over again in subsequent cases, when applied to the actual facts of that case on the question of privileged occasion, did not, upon those facts, arise. That

Page 511 of [1939] 3 All ER 507

does not make the general statement of the principle of law any less accurate or any less deserving than it has been found to be by subsequent quotation and approval. Now that the point is raised, and in view of the frequent repetition of this definition of the nature of a privileged occasionas I have said, nowhere more clearly than in the statement of Lord Atkinson in the passage I quotedI think that the privileged occasion must arise because the publication of the statement in question is made to a person to whom the speaker has a duty or interest to make it, and that hearer has a corresponding duty or interest to receive it. That qualification does not seem to me to have arisen in this case with either Turner or Peers; and I think that this was not a privileged occasion. That being so, the judge was right in the view which he took that he need not leave the question of malice to the jury, though he did leave it to them ex abundanti cautela. As it was not necessary for him to leave that question to the jury, the criticism of his summing up in his explanation of what constituted malice becomes immaterial. Therefore, I think that on that ground this motion for a new trial should fail.

Unfortunately, however, there was another matter. The plaintiff sued both for damages for slander and for damages for wrongful dismissal. It being apparent that, on the wrongful dismissal ground, he could get only the £4 5s which was paid into court, that ground of claim was withdrawn from the jury, and was abandoned at an early stage. In the course of the summing up, having dealt with other matters, the judge came to the question of the damages which the jury should award if they thought the statements were defamatory, and, if they were, on the other questions which he asked them, in favour of the plaintiff. Unfortunately, in that matter the judge used this language:

If you think that he was unjustly dismissed [which was perfectly immaterial on the question of slander]because he was unjustly dismissed if he was dismissed because Mr. Comras thought he had been dishonestif that was the reason that he was dismissed, and you may think that was the only reason which could have justified such a dismissal and such a letter and no regret, if you think that was the imputation that those words conveyed you should give a sum of damages which will make it clear to all the world, or all his world, that there was no ground whatsoever for any such imputation. You should compensate him for the loss of employment, the natural loss that he has suffered. If you think it right, take that into consideration. But the main consideration is this. If you think that those words impute dishonesty …

In the course of the plaintiffs evidence, he was asked:

And you then went?I just went.

As a matter of fact, were you out of work for some time before you could get a new job?Six months.

It seems to me quite clear that in the above passage in his summing up the judge has invited the jurythe claim for wrongful dismissal having been properly withdrawn from them and settled by the acceptance of the small amount of money paid into courtto give the plaintiff as damages for slander compensation for having lost his employment and having been out of work for 6 months. That is incorrect, and seriously incorrect. I am unable to say, within the terms of RSC Ord 39,

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r 6, that I think that this did not cause any substantial wrong or miscarriage. I think that in all probability it must have done. That being so, with some regret I am driven to the conclusion that there must be a new trial in this case. That will mean that at the new trial the defendants will be in a position to contend that there was no publication, becauseat any rate, in the case of Turnhamit was an unsuspected overhearing of the words. It might be said that there was no publication at all to him. It will be open to them to contend that the words were not defamatory, and it will be open to them to contend that the damages ought to be very small, if any. In my view, however, they ought not to be allowed to ask the judge to rule that this was a privileged occasion, and that, therefore, before the plaintiff can succeed, the jury must find that the words were spoken maliciously. I think, therefore, that this appeal should be allowed with costs. There will be an order for a new trial, and, having regard to the peculiar circumstances of this case, I think that the costs of the first trial should be in the discretion of the judge who conducts the second trial.

LUXMOORE LJ. I agree, and do not desire to add anything.

HUMPHREYS J. I also agree, and only desire to add this. This action was brought, as appears from para 4 of the statement of claim, in respect of a publication of an alleged slander to one Peers, and, as appears from para 5 of the statement of claim, in respect of an alleged publication of a malicious slander to one Turnham. That being so, when the court is asked to decide whether or not the occasion of the utterance of those defamatory matters was privileged, it seems to me that the court is bound to treat the occasion which is privileged or without privilege as the occasion of the uttering and publication of those slanders to those persons, and that it is impossible to accept for that reason the argument of counsel for the appellants, which I need not repeat, in regard to the matter.

I feel the same difficulty as my Lord has expressed with regard to Toogood v Spyring, and I have nothing to add to what he has said about it, and I agree with his judgment as a whole.

Appeal allowed with costs. Order for a new trial. Costs of first trial to be in discretion of judge at second trial.

Solicitors: Dixons Ward Umney & Burdon (for the appellants); Vizard Oldham Crowder & Cash, agents for Dennis Faulkner & Alsop, Northampton (for the respondent).

E Fuller Briscoe Esq   Barrister.


Draper v Trist and Others

[1939] 3 All ER 513


Categories:        INTELLECTUAL PROPERTY; Trade Marks: TORTS; Passing off        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        23, 26, 27, 28 JUNE 1939        


Trade marks and Trade Names Passing off Damages Right to substantial damages Sales to middleman.

Upon an inquiry into damages in a passing-off action, the judge held that, where goods were sold to a middleman and there was no evidence of resale by him, the plaintiff was only entitled to nominal damages. The plaintiff appealed:

Held (i) in a passing-off action, once it is proved that deceptive goods have been put upon the market, the plaintiff is entitled to damages. What those damages are to be must be determined by a jury, or the court, in the light of all the facts of the case, and applying the ordinary knowledge of business which a jury are entitled to use. There is no onus on the plaintiff to show that purchasers are deceived, nor is there an onus on the defendant to show the contrary, but fair weight must be given to all the facts and considerations on each side.

(ii) upon a sale of a large quantity of deceptive goods to a middleman, even if there is no evidence of resale to the public, the plaintiff is entitled to damages in respect of the damage to his business by the presence of those deceptive goods on the market. It is quite unnecessary to show that there has been a fraudulent resale by the middleman.

(iii) upon a sale to a middleman, the loss of profit by the plaintiff is not a relevant consideration in assessing damages. The proper consideration is the damage which is fairly to be attributed to the wrongful act of selling deceptive goods to the middleman.

(iv) Quœre: whether in a passing-off action it is necessary to establish a fraudulent intent.

Notes

The judgments herein contain a full review of the law of assessment of damages in a passing-off action, with particular reference to the case where there have been considerable sales of deceptive goods to middlemen, but no evidence adduced that those goods have been resold to the public. It is pointed out by Goddard LJ that, upon the question of damages, a passing-off action is similar to an action for libel or for the wrongful dishonour of a cheque of a trader. The law assumes that the presence on the market of a quantity of deceptive goods will have an adverse effect upon the plaintiffs business, and he is, without proof of damage, entitled to damages. It is open to the defendant to show that he has suffered little or no damage in fact, but this can only result in a low assessment of damages in the plaintiffs favour.

As to Damages in a Passing-off Action, see Halsbury (Hailsham Edn), Vol 32, pp 665667, para 976; and for Cases, see Digest, Vol 43, p 334, Nos 15541559.

Cases referred to

Spalding & Brothers v Gamage (A W) Ltd (1915) 84 LJCh 449; 43 Digest 264, 1018.

Burgess v Burgess (1853) 3 De GM & G 896; 43 Digest 286, 1155, 22 LJCh 675, 21 LTOS 53.

Reddaway v Banham [1896] AC 199; 43 Digest 277, 1098, 65 LJQB 381, 74 LT 289.

Rodgers v Nowill (1847) 5 CB 109; 43 Digest 264, 1017, 17 LJCP 52, 10 LTOS 88.

Lever v Goodwin (1887) 36 ChD 1; 43 Digest 334, 1562, 57 LT 583.

Marzetti v Williams (1830) 1 B & Ad 415; 17 Digest 81, 21, 9 LJOSKB 42.

Page 514 of [1939] 3 All ER 513

Rolin v Steward (1854) 14 CB 595; 17 Digest 122, 306, 23 LJCP 148, sub nom Rollin v Steward 23 LTOS 114.

Leather Cloth Co v Hirschfield (1865) LR 1 Eq 299; 43 Digest 237, 825, 13 LT 427.

“Singer” Machine Manufacturers v Wilson (1877) 3 App Cas 376; 43 Digest 272, 1070, 47 LJCh 481, 38 LT 303.

Ledger, Sons & Co v Munro (James) & Son Ltd (1916) 33 RPC 53.

Alexander & Co v Henry & Co, Mitchell Henry & Waller & Co (1895) 12 RPC 360; 43 Digest 237, 826.

Davenport v Rylands (1865) LR 1 Eq 302; 43 Digest 237, 829, 35 LJCh 204, 14 LT 53.

Appeal

Appeal by the plaintiff from an order of Luxmoore LJ, sitting as an additional judge of the Chancery Division, made on 8 May 1939, in an inquiry as to damages in an action for passing off.. The facts are fully set out in the judgment of Sir Wilfrid Greene MR.

K E Shelley KC and Guy Aldous for the appellant.

C E Harman KC and W F Waite for the respondents.

Shelley KC: For the purpose of recovering damages in a passing-off action, fraud or intention is utterly irrelevant. It is sufficient to show that the plaintiffs trade was less than it would have been in normal circumstances. The court is asked to infer that the falling off was due to the unfair competition of the defendants. Lever v Goodwin establishes that it is a wrongful act to sell through a middleman, who is not deceived, an article which is calculated to deceive. Purchasers have bought the goods in the belief that they are the goods of the plaintiff, and it is for the defendants to show that there was no passing off. There must be reasonable evidence that the plaintiff has suffered damage, but it is not necessary for him to give absolute proof if, on the facts of the case, it is reasonable to conclude that he has suffered damage. The plaintiff has made a loss which is closely associated with the sales which the defendants have made, and the plaintiffs business has been permanently injured. [Counsel referred to “Singer” Machine Manufacturers v Wilson, Spalding & Brothers v Gamage (A W) Ltd and Leather Cloth Co v Hirschfield.]

Aldous: If an article is calculated to deceive, it must deceive, unless steps are taken to prevent its doing so. The court has to determine whether or not such articles were sold, and, secondly, whether or not deception took place through those sales.

Harman KC: The true question is as to the inference which the court will draw from the facts. I do not say that the plaintiff has to prove that every person in respect of whom he claims damages has been deceived, but I do say that the defendants have not to prove the opposite. It is a question as to whether or not, on the facts of the case, there has been deception. If, in a passing-off action, a plaintiff elects to claim damages, and not to ask for an account of profits, he must prove his damage. The sales to Mr Baker, in the present case, were sales to a perfectly independent factor. To recover damages, the plaintiff

Page 515 of [1939] 3 All ER 513

must prove the deception of the ultimate purchaser. In Leather Cloth Co v Hirschfield, it was held that the onus was upon the plaintiff to prove some damage or loss of profit. In the present case, there is no evidence from which damage can be inferred.

[Goddard LJ referred to Rodgers v Nowill.]

Harman KC: It would not make much difference if the damages were at large, because, if one considers the whole of the facts, a jury could not come to the conclusion that they could give substantial damages. The first point one has to consider is whether or not the purchaser was confused when he bought the goods, and the second point is whether or not he would have bought the goods of the plaintiff if he had not bought those of the defendants. The plaintiff has not proved any loss. The defendants have, in fact, proved the contrary. The loss of sales to one particular customer accounts for the loss of profit. On no view of the present case has substantial damage been proved. [Counsel referred to Ledger, Sons & Co v Munro (James) & Son Ltd, Alexander & Co v Henry & Co and Davenport v Rylands.]

Shelley KC in reply: The proper way in which to regard this case is to look at it from a jurys point of view. The defendants set up a factory immediately opposite to the plaintiffs factory, and that made it incumbent upon them to see that no confusion arose. The amount of damage should be substantial, having regard to the interests involved. In bringing a case of this kind, the plaintiff must have some regard to realities. He has done all that he reasonably can to collect evidence, and the evidence shows that he has sustained a very serious loss.

K E Shelley KC and Guy Aldous for the appellant.

C E Harman KC and W F Waite for the respondents.

28 June 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This is an appeal from an order of Luxmoore LJ, sitting as an additional judge of the Chancery Division, made after an inquiry as to damages which had been directed by a consent order of 12 July 1935, by Eve J. On the inquiry as to damages, two matters of complaint fell to be considered, (i) the allegation of improper solicitation by the defendants or their agents of customers of the plaintiff, and (ii) the question of passing off by the defendants. On the first of those two matters, the judge awarded to the plaintiff a sum of £250 by way of damages, and no appeal is brought on either side with regard to that branch of the case. Upon the other branch of the case, the judge, after hearing a great deal of evidence, came to the conclusion that the plaintiff had not established the facts necessary to be established before an award of anything but nominal damages could be made. He accordingly awarded damages of 40s to the plaintiff upon that head, and made a special order as to costs in view of an offer which had been made by the defendants but not accepted by the plaintiff.

The claim as originally presented under the head of passing off was a claim to a very large sum by way of damages. That sum, even allowing for the matters to which I shall presently refer, was one which, in my opinion, can fairly be said to have been very greatly exaggerated. I am

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not prepared, in arriving at the figure which I consider to be the proper figure of damages, to come anywhere near the sum at which the plaintiff laid it.

Before Luxmoore LJ, the plaintiff produced evidencepartly new evidence on the inquiry and partly references to evidence which had been led at the trial before Eve Jwith a view to establishing, first of all, the number of the sales which the defendants had made of goods which may, for convenience, be described as deceptive goods. He also produced evidence that in certain cases actual deception had taken place. I shall refer a little more fully to the evidence presently. At the moment, I merely want to show the various departments into which the case fell, because before the judge the sales upon which the plaintiff relied were divided into a number of heads. In view of certain findings of fact to the effect that in regard to some of those heads it had been established to the satisfaction of the judge that the purchasers were not misled, the appellant before us did not bring in the sales under those heads as matters to which attention ought to be paid in assessing the damages which the plaintiff had suffered, and the relevant heads were limited to certain heads to which I shall refer more particularly in a moment.

When the action was heard before Eve J, he had no occasion or opportunity to come to any conclusions of fact, for the simple reason that, after the evidence had been closed, a consent order was made. It is important to look at the terms of that order, because it is upon the basis of certain facts which that order necessarily assumes to be established that the inquiry as to damages fell to be made. In that order, which is dated 12 July 1935, there was, first of all, an undertaking by the defendants not to solicit. Then there was an undertaking that they would refrain from in any manner holding out that they, or either of them, are or is carrying on business in continuation of, or in succession to, the business carried on by the late firm of Hubert H P Trist & Co. Then they undertake to change the name of the defendant company to the name Transport Brakes Ltd, and thereafter to do business under that name, or some other name not containing the word Trist or Tristbestos or any other word calculated to cause confusion between the business of the plaintiff and that of the defendant company. Then they undertake to vacate the trade mark “Tristbestos,” and then, after one or two other matters, comes an order directing inquiry. The first inquiry was one which related to solicitation, and I need say no more about that. The second inquiry, the one with which we are concerned, was:

An inquiry what damage has been suffered by the plaintiff by reason of the acts of the defendants mentioned in para. 13 of the statement of claim.

Para 13 of the statement of claim is as follows:

The defendants have traded and intend to continue to trade in manner as set out in para.7 hereof in consequence whereof the defendant companys business

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and goods are calculated to be passed off as and for the plaintiffs goods and the public are likely to be deceived.

Paragraph 7 contains an allegation of the incorporation of the defendant company at the instance of the defendant Trist, and continues as follows:

The said defendant company was formed for the purpose of carrying on the business of brake and clutch linings and other articles connected therewith and has carried on business as aforesaid under the name Tristbestos Brake Linings, Ltd., giving special and unnecessary prominence to the name “Hubert H. P. Trist,” using and advertising for use a postal address identical with that used by the said partnership and since May 16, 1934, by the plaintiff, advertising their brake and clutch linings as “Tristbestos” linings, and occupying premises in near proximity to those occupied by the said partnership and since May 16, 1934, by the plaintiff and has failed to take any or any sufficient steps to distinguish its business or goods from those of the plaintiff.

The basis of the order, of course, must be that the acts of the defendants complained of were acts which were calculated to deceive. In the case of the actual goods themselves, they were marked, or the packages containing them were marked, with the offending word “Tristbestos.” The whole basis of the relief in a passing-off action is that, as a matter of fact, the goods (if it be a case of goods) are calculated to deceive when sold under the description or in the get-up, or whatever it may bethe way in which the defendants sell themand that they are in effect telling a falsehood about themselves. The matter, therefore, starts upon the hypothesis, not that there is a certainty that in every case goods of that description will mislead, but that they are of such a nature that they are calculated to mislead. In Spalding & Brothers v Gamage (A W) Ltd Lord Parker said, at p 449, with regard to the passing-off action:

This principle is stated by Turner, L.J., in Burgess v. Burgess, and by Lord Halsbury, L.C., in Reddaway v. Banham, in the proposition that nobody has any right to represent his goods as the goods of somebody else. It is also sometimes stated in the proposition that nobody has the right to pass off his goods as the goods of somebody else. I prefer the former statement, for, whatever doubts may be suggested in the earlier authorities, it has long been settled that actual passing off of the defendants goods for the plaintiffs need not be proved as a condition precedent to relief in equity either by way of an injunction or an inquiry as to profits or damages. … Nor need the representation be made fraudulently.

There is one matter which I can get rid of at once, and that is the suggestion, which was discussed to some extent in argument, that, in a claim for damages based on passing off, it is essential to establish a fraudulent intentwhich is the same, of course, as a dishonest intenton the part of the defendant. I should be prepared myself to hold, if it were necessary to do so, that now, both in claiming damages and in claiming purely equitable relief, whether by way of injunction or by way of account of profits, or both, fraud is not a necessary element in the transaction. In the present case, however, the fact that the inquiry as to damages was ordered by a consent order does involve, in my opinion, that the elements upon which damages can be awarded are by consent agreed to be sufficiently present by reason of the facts set out in the relevant paragraphs in the statement of claim. I therefore do not discuss that matter any further.

In arriving at his conclusion in the present case, Luxmoore LJ held,

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as I have said, that there was not before him evidence upon which he was entitled to find that the plaintiff had suffered anything more than nominal damages. There are two passages in his judgment which bring out that point of view quite clearly. The first one is as follows:

Having elected to take damages instead of profits, the plaintiff must satisfy the court that the sale of the goods complained of has in fact injured him, and he must also satisfy the court as to the extent of such injury. If the immediate purchaser of the goods is a middleman, who was not himself deceived, the plaintiff must satisfy the court that the middleman has in fact resold the goods to subpurchasers who would otherwise have purchased similar goods from the plaintiff, and it is not sufficient, in my judgment, to show that the goods were so got up as to be calculated to deceive, leaving the court to infer that because the goods were so got up every subpurchaser from the middleman was tricked into purchasing those goods instead of the plaintiffs goods. In the absence of evidence of resale by the middleman, there can be no evidence of damage, for the goods may still remain in the hands of the middleman, either because they are unsaleable or for some other reason.

Then later on, in dealing with one of the casesnamely, that of sales to a firm called Bryant & Co, who were middlemenhe says:

In the absence of any other evidence either of deliberate passing off or of resale of the goods purchased, I should not be justified in holding that the plaintiff is entitled to damages in respect of the sales by the defendant company to Bryant, and I decline to do so, for I cannot properly hold that the resale by Bryant in a fraudulent manner of the articles sold by the defendant company is the reasonable and probable result of such sale.

With all respect to Luxmoore LJ, I think that in those passages there are matters in respect of which he has erred.

The right which is infringed in a passing-off case is one which was regarded at law as one the mere violation of which led to damage. In other words, it was not regarded at law as a case in which damage was of the gist of the action. It is true that in the old cases at law the element of fraudulent intent was a necessary element in the commission of the tort. I have already referred to that matter, and I propose to say no more about it, but the position was that a jury, properly instructed, were entitled to award damages as for the violation of a right, and that at the least the plaintiff would be entitled to nominal damages, as he would always be entitled to nominal damages on the violation of a right.

The practical question which presents itself in a matter of this kindand it is convenient to consider it from a practical point of view, at any rate for the momentis this. The defendant in a passing-off action has in the normal case, the simple case, sold a quantity of deceptive goods. He may have sold those goods direct to the public, the ultimate purchaser, or he may have sold them to a middleman who is himself going to sell them to members of the public or perhaps to some other trader, who, in his turn, deals directly with the public. The defendant, therefore, has put upon the market, and sent in to the market, a quantity of goods which, on the face of them, and ex hypothesi, are saying something about themselves which is calculated to mislead. That is the very gist of the conception of passing off. It is manifest that, if the plaintiff, before he could recover damages, had to show that, in the case of each sale, the purchaser was deceivedbecause it is on the assumption that

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purchasers are deceived that the plaintiffs damages are basedthen his task, save in very exceptional circumstances, would be a quite impossible one. On the other hand, it is equally true to say that to impose upon a defendant the task of showing that the purchasers were not deceived would be an equally impossible one. It is, in my opinion, misleading to consider too much the question of onus of proof in a case of this kind. The real problem is, when all the facts are considered and all the considerations on either side are given fair weight, the proper sum at which to estimate the plaintiffs damage. That a jury would be entitled, if it were shown that goods were sold under a deceptive appearance or description, to award something more than nominal damages is, in my opinion, the law. I find, on looking at Rodgers v Nowill, to which Goddard LJ called attention in the course of the argument, the following observation by Maule J, at p 127. He is referring to the direction of the trial judge to the jury in a case where the plaintiffs were not really troubling themselves about the quantum of damages. What they were anxious to obtain, apparently, was relief in equity, and, accordingly, what they were endeavouring to get in this particular action in the Court of Common Pleas was a judgment establishing their right. In referring to the direction of the trial judge, Maule J says, at p 127:

That direction in substance was, that a manufacturer has a right of action against one who affixes to his own goods, the known and accustomed mark of the former and sells them upon a representation that they are of the manufacture which such mark would denote them to be. Such conduct towards a trader, naturally imports damage; for, it cannot be doubted that supplying the market with spurious goods, has a tendency to injure the maker of the genuine article.

That, if I may say so with respect, appears to me to be not merely good law but also good sense, and to say to a jury that, in spite of the fact, as it might be, that the market has been flooded with deceptive goods, they are not in law entitled to return a verdict for more than 40s damage unless the plaintiff establishes passing off in fact would appear to me to violate ones common sense. It is a matter in which the ordinary knowledge of business which a juryman is entitled to use tells him that it is impossible in business to put upon the market large quantities of deceptive goods without doing, at any rate, some damage. What that damage is to be is a matter which is to be considered in the light of all the facts of the case and the whole of the evidence led.

I may relate that to one specific matter to which Luxmoore LJ refersthe case of the sales to the middleman in the present case. Luxmoore LJ calls attention to the fact that resales by those middlemen were not proved. It seems to me, with all respect, that, if a large quantity of deceptive goods is sold to a middleman who in the ordinary course of business, will resell them, even if a jury is not entitled to infer that, in the ordinary course of business, those goods had been resold, they can surely take into account the necessary damage to the plaintiffs business caused by having overhanging his market, so to speak, a quantity of deceptive goods which are liable to be sold at any moment.

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It seems to me that that is a consideration of a practical business kind which must be borne in mind.

There is one further matter in connection with the passages which I have read from the judgment of Luxmoore LJ. He thinks, if I do not misconstrue his words, that the inference which he would have to draw in the case of these middlemen before he could award anything but nominal damages in respect of those sales was an inference that the middleman himself would act fraudulently in reselling those goods to his own customers. If that is what he meant, I respectfully cannot agree with him. When deceptive goods are sold to a middleman, the middleman, in dealing with those goods, may take various courses. If he honestly does not see any possibility of confusion, then he will take no steps to distinguish the goods of the defendant from the goods of the plaintiff. He will take no steps to distinguish because the necessity of doing so will not present itself to his mind. That is one possibility. On the other hand, he may perceive the possibility of confusion and he may take special steps to see that that confusion does not take place. Thirdly, he may see the possibility of confusion and decide that it will pay him to take advantage of it, and accordingly to take no steps to distinguish the goods. All those things are possible, and it is not right to infer necessarily that any one of those courses will be taken. I must dissent, however, from the view that the only case in which it would be permissible to award damages to the plaintiff would be a case in which it was shown that the middleman had resold fraudulently. After all, the question is the amount of the damage which the plaintiff has suffered by having these deceptive goods sold. He will suffer precisely the same damage if the ultimate purchaser from the middleman is in fact misled by their deceptive description, whether or not the middleman is himself fraudulent in his intent.

Having made those observations in relation to some of the reasons of Luxmoore LJ, I can proceed to examine, and to examine very briefly, some of the more salient considerations in the present case. I take the view that it was competent to Luxmoore LJ, as it is competent to us, on a consideration of all the evidence in this case, to award such sum as we think is properly and reasonably shown to be, by taking all proper inferences into account, the damage suffered by the plaintiff by reason of the wrongful acts of the defendants. It becomes necessary, therefore, to consider shortly some of the facts of this case, and some of the considerations to which attention must be paid.

First of all, it has been said more than onceand, indeed, it is obviousthat, in the case of sales of deceptive articles, the court is not entitled to assume that every one of those sales would have been obtained by the plaintiff. For obvious reasons, that is an assumption which would be quite unwarranted. The unwarrantable nature of such an assumption is further strengthened, of course, where there are differences in price, differences in quality and so forth, because it is not legitimate to assume

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that a person who bought the defendants article at a lower price, if it were sold at a lower price, would necessarily have bought the plaintiffs article at a higher price even if he were deceived into thinking that the defendants article was the plaintiffs. That is a consideration which must be borne in mind. In the present case, I may say in passing, on the matter of price, that it seems to me that the evidence, when properly considered, does not show that the price at which the defendants were selling in comparable cases was very much less than the price of the plaintiffs articles, although, as I have said, it is not legitimate to assume that even a small reduction in price would not have had some effect.

The next matter to which attention may be called is that of the sales which took place. A proportion onlyI need not go into figureswas, to customers of the old firm, the business of which the plaintiff had acquired. It is manifest that different considerations may well apply, and different probabilities may come into the case, when customers are being dealt with. A customer, ex hypothesi, knows about the person with whom he has dealt in the past, and, knowing about that person, and presumably, but not necessarily, knowing his namein the present case, I think he would necessarily know his namewhen he finds a deceptive name, he is likely to confuse the one with the other. On the other hand, it may fairly be said that a non-customer, one who had not previously been a customer, would not be so likely to be confused in that way. In the present case, it is to be observed that the only customers with whom we are concerned are persons in the trade. This is not a case where sales to the publicto a private car owner for example, who has brake linings put upon his carreally come into the picture, although, of course, there are many cases of direct sales to transport undertakings. People of that kind and concerns of that kind one would expect to find more or less in the same state of knowledge as that in which the trade would be as to who were the manufacturers in the trade, and that, again, is another matter of which account should properly be taken. Another matter which may properly be taken into account is, no doubt, that the defendant Trist was personally known to customers and to the trade, and that it is not the least bit improbablein fact, it would be probablethat a certain amount of business would naturally follow him without any improper action upon his part. That is a circumstance to which counsel for the respondents rightly calls attention, and it is a factor in the matters to be considered. Again, it is pointed out that a receiver and manager had been in for some time, and that certain employees of the old business had left when the partnership broke up. That is referred to, and several of the matters to which I have referred are relied upon to explain the alleged drop in sales.

That brings me to this question. It is said on behalf of the plaintiff that he has established a drop in his sales which is evidence of damage suffered owing to this improper trading. Counsel for the defendants criticised that evidence, and claimed that the evidence showed

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no drop in sales referable to the improper trading, and relied upon that circumstance as disproving damage. I myself do not find any real assistance in the evidence in this case with regard to the alleged drop in sales. There are various explanations given of why that drop should have taken place, and there is a great deal of controversy about it. Personally, I find the evidence in such a state that it does not assist me one way or the other. Evidence of a general drop in sales may be valuable or may be quite valueless in cases of this kind. Similarly, evidence of no drop in sales again may be valuable or may be quite valueless. It does not in the least follow that, because there has been a drop in sales, it is necessarily due to the deceptive trading complained of, nor does it in the least follow that, because there has been no drop in sales, therefore the deceptive trading has had no effect. Evidence of that kind is evidence which must be regarded with very great caution. Valuable though it may be in certain cases, in other cases it may be of very little value. In the present case, I do not find the evidence in such a condition with regard to that matter as to enable me to base any inference on it or to strengthen any inference by its help.

I now come to say a word with regard to the sales to the middlemen, who are three in number. In, I think, one case, we have some idea of the proportion who were customers of the plaintiff. I have already said that the absence of resale by the middlemen is not a thing which troubles me. Nor am I very much affected by the suggestion that, in the case of those sales, the plaintiff, in order to secure them, would have had to incur very much greater expenses than he suggested in his own figures. I think on the whole that in those sales to the middlemen it is not an unfair inference to draw that, in any case where the plaintiff could have obtained the sale, he could have sold to the ultimate purchaser upon substantially the terms which they claimed. In the case of one of the middlemen at least, one has to remember that a substantial proportion of the people with whom he dealt consisted of customers, and one has to give due weight to that fact.

In the case of a sale to a middleman, the tort is really complete when the offending goods are sold to him. That matter was decided by this court in Lever v Goodwin, where the controversy was as to the form of the account of profits, which was the particular type of relief which the plaintiff elected to take in that case. Of course, in taking an account of profits, which is the equitable relief, the damage which the plaintiff has suffered is totally immaterial. The object of the account is to give to the plaintiff the actual profits which the defendants have made and of which equity strips them as soon as it is established that the profits were improperly made. However, in my opinion, whichever form of relief is granted, the wrong is the same. There are not two separate wrongs, one conferring a right to an account of profits and one conferring a right to damages. They are the same wrong, and in Levers case Cotton LJ, in dealing with an argument that the only profit which the plaintiff could

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ask for was profit in respect of sales to the ultimate purchaser, said, at p 7 :

But, in my opinion, that is mistaking the whole gist of this action. The defendants, as I understand, do not sell anything to retail purchasers, what they sell they sell to middlemen, that is to say, to people who purchase from them as wholesale merchants, and who are going to sell it by retail and the complaint against the defendants is this: “You have dressed up your soap in such a dress that those middlemen to whom you sell it are enabled, by its having that deceptive dress upon it, to sell it to the ultimate purchasers as the soap of the plaintiffs.” The profit for which the defendants must account is the profit which they have made by the sale of soap in that fraudulent dress to the middlemen. It is immaterial how the middlemen deal with it. If they find it for their benefit not to use it fraudulently, but to sell the soap to the purchasers from them as Goodwins that cannot affect the question whether the sale by the defendants to those middlemen of this soap in a fraudulent dress was a wrongful act. It still remains a wrongful act, because it put into the hands of the middlemen the means of committing a fraud on the plaintiffs by selling the soap of the defendants as the soap of the plaintiffs.

A tortious act, therefore, in the case of a sale to a middleman, is committed by selling the deceptive goods to that middleman, and, if the relief given is an account of profits, one stops there and finds out the profits on those sales. If, on the other hand, what is being asked for is damages, obviously the profit made on those sales is not the relevant consideration, and a further inquiry falls to be madewhat is the damage which is fairly to be attributed to that initial wrongful act of selling deceptive goods to the middleman?and that will appear on a consideration of all the circumstances and the probabilities of the case. Let me take the exact case which Cotton LJ takes, where he assumes that the middleman sells the soap to the purchaser as Goodwinsthat is to say, as the defendants. That, as he points out, has nothing to do with an inquiry as to profits. However, I agree with what counsel for the respondents saysnamely, that it has a great deal to do with the question of damages, because, if it were proved, or if the proper inference were, that a middleman, in making his sales, had taken steps to distinguish those goods from the plaintiffs goods, it could be truly said with regard to those sales that the plaintiff had not suffered damage. In the case of sales to the middleman, the real problem is the probabilities of the case, and the inference which in fairness may be drawn.

Then there are the cases of the sales direct to purchasers, transport people, and so forth. I need not deal specially with those except to say that I think I am right in saying that the actual cases of persons who were misled, with regard to which evidence was called, came from that category. It is also pointed out that the actual cases of deception proveddeception in factwere cases of persons who had been customers of the old firm. There are two cases, Ludgate and McKay. Counsel for the appellant relies on two further cases, Cox and Caunter, and in addition to that there is evidence of confusion in cases where the deceptive goods were not actually bought.

Taking all that, I think it comes to this. The plaintiff has called evidencenot a great volume, but some evidenceshowing how in this

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particular business the deception is likely to take place in practice. It shows that the possibility of deception is a real business possibility, and he is entitled to have due weight attributed to that evidence which he has called. I do not propose to go into any more detail with regard to that, except to say that, with regard to the two cases of Cox and Caunter, Luxmoore LJ, in dealing with those cases, which he thought were not cases of deception, took the view that the evidence of those two witnesses did not suggest that they were asking for the plaintiffs goods. We have had the evidence read to us and have carefully considered it, and, speaking for myself, I cannot take the view of it which Luxmoore LJ took. I think that the evidence does show that they were intending to get, in the orders which they placed, the plaintiffs goods, and that, when they got the defendants goods with the misleading description upon them, they were led to suppose that their requirements had been duly satisfied, and it was only subsequently that they discovered that this was not the case. It is a perfectly fair matter of criticism that the volume of evidence of actual deception and confusion which the plaintiff has called is not great, and that is a matter which it is fair to take into account. On the other hand, it does show, and I think clearly shows, as I have said, the way in this particular trade, in which deception comes about in practice, and it is valuable evidence, and not by any means to be brushed aside.

The only other matter to be considered is the question of general injury to the plaintiffs business. A claim, which in my opinion is highly exaggerated, was made with regard to that, and I cannot find any evidence which would justify me in attributing a large sum to that particular matter. On the other hand, this court is entitled, as I think a jury would be entitled, to use ordinary business knowledge and common sense, and to consider that one cannot have deceptive trading of a considerable volume without inflicting, at any rate, some measure of damage on the goodwill. How long that will last, what its extent will be, is a thing which no evidence, except in the most exceptional case, could satisfactorily define, and the matter is reduced, as many of these matters are reduced, to the formation of a rough estimate in a way in which a jury could properly form one.

I have referred in some detail to some of the considerations put before us. I am conscious that I have not referred to all of them, but I have carefully listened to the whole of the arguments on each side, and have given due weight to all the considerations which arise in the casenot merely those which I have mentioned, but also those which I have not mentioned. I have also borne in mind that some of the sales in question are sales in respect of which the plaintiff has already been awarded damages under the heading of solicitation. Doing the best I can, and forming what I conceive to be a conclusion fair and just to both sides, and being careful only to draw such inferences as may fairly be drawn, I have come to the conclusion that a fair sum to award to the plaintiff

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by way of damages for what he has suffered is the sum of £2,000, with the result, therefore, that the order of Luxmoore LJ must be varied by substituting that sum for the sum of 40s which he awarded.

CLAUSON LJ. In view of the terms of the consent judgment taken in this case, it must, in my judgment, be taken as established for the purposes of the present inquiry that the defendants conduct was such as to give the plaintiff a right to recover from the defendants such damages as, in the opinion of the court, the plaintiff had suffered by reason of the defendants conduct. Accordingly, it is unnecessary, for the purposes of the present case, to attempt to answer the question whether the presence of fraud is a necessary element in the defendants conduct if that conduct is to lead to a judgment for damages in favour of the plaintiff. I should feel great difficulty, myself, in answering that question in general terms, and without reference to the facts of a particular case, as such an answer would, as I venture to think, be of little value unless it were accompanied by a definition of the word “fraud” as used in the question, and I am not prepared at the present moment to commit myself to such a definition.

I agree with the reasons which have been given by Sir Wilfrid Greene MR, for the conclusion that Luxmoore LJ was wrong in regarding himself, in the circumstances of this case, as bound not to fix the damages in excess of the figure of 40s, and I agree with the figure which Sir Wilfrid Greene MR has mentioned as a proper figure to adopt as a fair estimate of the damage which, in the circumstances put in evidence before the court, has been occasioned to the plaintiff by the defendants conduct. I do not find it necessary to add any further observations upon that evidence.

GODDARD LJ. I agree both with the order proposed by Sir Wilfrid Greene MR, and also with the figure which he has suggested as to the amount of damages to be given in this case. I should like to add a few words of my own upon the question generally, because points of considerable interest have been argued. It is, perhaps, odd that there is no clearer authority than there is as to the principles which are to be applied in these cases to the assessment of damages.

We are concerned in this case only with a claim for damages, which is essentially a legal claim, a claim at law. This class of action was well-known to the common law, and precedents in works on pleading have been cited in the course of the case as showing what it was necessary to plead.

I find it of some assistance in coming to a conclusion in this case to analyse in my own mind what exactly are the cause of action and the right of action, which are two different things. The action is one of that class which is known as an action on the case, akin to an action of deceit. In an action on the case, the cause of action is the wrongful act or default

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of the defendant. The right to bring the action depends on the happening of damage to the plaintiff. A man, for instance, may be negligent, and the consequences of his negligence may not cause damage for 12 months. The cause of action is the breach of duty. The right to bring the action depends upon the happening of the damage. This class of case, however, forms an exception, or an apparent exception, to the ordinary action of deceit, because, in an ordinary action of deceit, the plaintiffs cause of action is false representation, but he cannot bring the action until the damage has accrued to him by reason of that false representation. In passing off cases, however, the true basis of the action is that the passing off by the defendant of his goods as the goods of the plaintiff injures the right of property in the plaintiff, that right of property being his right to the goodwill of his business. The law assumes, or presumes, that, if the goodwill of a mans business has been interfered with by the passing-off of goods, damage results therefrom. He need not wait to show that damage has resulted. He can bring his action as soon as he can prove the passing-off, because it is one of the class of cases in which the law presumes that the plaintiff has suffered damage. It is in fact, I think, in the same category in this respect as is an action for libel. We know that for written defamation a plaintiff need prove no damage. He proves his defamation. So it is with a trader. The law has always been particularly tender to the reputation and goodwill of traders. If a trader is slandered in the way of his business, an action lies without proof of damage. That does not mean to say that the plaintiff cannot give evidence showing that he has suffered damage in fact. The more he can show that he has suffered damage in fact, the larger the damages he can recover. The more the defendant can show that he has suffered no damage in fact, the less he will recover. In the case of a libel published to a person who knew the true facts, and to him only, although the plaintiff would have a cause of action, the damages would necessarily be very small. In the case of a libel published in a newspaper with a large circulation, the damages would naturally be larger.

The class of case to which I have referred in argument, which is very nearly akin to this class of case, is one which is an exception to the law of damages for breach of contractnamely, the action by a trader for the wrongful dishonour of his cheque. In Marzetti v Williams, it was decided that a person could bring an action for the wrongful dishonour of a cheque without proving actual damage. However, it was later decided, in Rolin v Steward, that in the case of a trader substantial damages could be given for the wrongful dishonour of a cheque, because the act of a bank in dishonouring a cheque must be detrimental to a trader. The proper direction to the jury, as laid down by Lord Campbell LCJ in that case, was as follows, at p 599:

[The jury] ought not to limit their verdict to nominal damages, but should give … such temperate damages as they should judge to be a reasonable compensation for the injury [the plaintiff] must have sustained from the dishonour of [his] cheque.

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Exactly the same considerations seem to me to apply to a case of passing off. If authority be needed, Rodgers v Nowill is ample authority for that. I need not repeat, as Sir Wilfrid Greene MR has read it, the passage in which Maule J showed that damage was imputed in that case. If damage is imputed in that case, then it is for the jury, taking all the facts of the case into consideration, to say what is fair and proper compensation to the plaintiff, without being limited to questions of what in truth are special damages. If it be necessary for a plaintiff in this class of case, before he can get more than nominal damages, to show that he has lost this, that or the other order, one would have to put this class of case, I think, into a third division of law, a case in tort, in which nominal damages can be recovered, although no damage be proved. If, however, a plaintiff wants more than nominal damages, he will have to prove this, that and the other. However, I do not think that that is the law. I think that Rodgers v Nowill shows that, once one has established passing off, there is injury to goodwill, and this court or the jury must assess, by the best means they can, what is a fair and temperate sum to give to the plaintiff for that injury. It is true that in Rodgers v Nowill only 40s was given, but, if I may follow out the history of the case, one finds by reference to the report in 6 Hare that what had happened in the case was that an action was started before Sir James Wigram V-C, asking merely for an injunction, not even asking for an account of profits, or for damages. In fact, damages in those days could not have been given, because I think the case was before the passing of the Chancery Amendment Act 1858. However, there being a conflict of fact, Sir James Wigram V-C sent the case to be tried at law, and that was how it came to be tried before Williams J. Williams J told the jury, when some comment was made upon the small amount of damages which apparently had been suffered by the plaintiff in that case, that they need not trouble themselves with damages, because the action was brought merely to establish a right, not to recover money. However, it was arguedunsuccessfully, as it appears in that casethat the jury ought not to have given more than a farthing, and that the damages ought to be reduced from 40s to a farthing. The court, however, would not have that argument, for the reasons which have been pointed out.

I have one word to say on the cases which have been decided. Leather Cloth Co v Hirschfield, has been cited and relied on by counsel for the respondents. It is curious that in that case, although there was a claim for damages, Sir William Page Wood V-C gave no damages at all. He did not even give nominal damages. I respectfully think that that was wrong. I think that that was contrary to the decisions at law, which say that, if passing off is established, some damages must at any rate be given. Notwithstanding his high authority, if, by his remarks at p 302, beginning “It lies with the plaintiff to prove some distinct damage” down to the end of his judgment, he means that the

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plaintiff can recover only such damages as he can actually prove in pounds, shillings and pence, and can actually put before the court by means of showing loss of individual sales, and so forth, I can only say that I respectfully dissent from that part of the judgment, and that I do not think it is in accordance with the other authorities to which I have referred.

The only other thing I desire to say is that I share with Clauson LJ a doubtand a very considerable doubtas to whether it is the law that damages can be claimed for innocent passing off. It is not necessary to decide it in this case. It may beI say no morethat, in such a case, where there has been an unwitting invasion of the plaintiffs right, though innocent, the plaintiffs claim would be limited to nominal damages. However, that is not a point which it is necessary to decide in this case, and I do not think that it ought to be decided without a great deal more consideration and argument.

Appeal allowed and judgment entered for the appellant for £2,000.

Solicitors: Ashurst Morris Cripp & Co (for the appellant); Gregory Rowcliffe & Co, agents for Bevan Hancock & Co, Bristol (for the respondents).

W K Scrivener Esq   Barrister.

W I Radcliffe SS Co Ltd and Wynnstay SS Co Ltd v Exporthkhleb of Moscow

The Llanishen

[1939] 3 All ER 528


Categories:        SHIPPING        

Court:        KINGS BENCH DIVISION        

Lord(s):        SINGLETON J        

Hearing Date(s):        21 JUNE 1939        


Shipping Charterparty Construction Option to charterers to load and discharge at two safe berths in one port without extra charge.

A charterparty contained a clause giving the charterers the option of discharging at two safe berths in one port without extra charge. There was also a further clause providing for the delivery of the cargo at such wharf, dock, or other safe place as charterers might direct. The charterers shifted the vessel from a wharf in the Millwall Dock to one in the Victoria Dock, both within the limits of the Port of London, and the owners contended that the option of two safe berths for discharging the cargo must be exercised within one wharf or dock by reason of the words in the further clause:

Held the charterers were entitled, in exercise of their option under the charterparty, to act as they had done.

Notes

The question here is whether, upon the construction of the charterparty, there is an option to call for a shift from one dock to another or merely from one berth to another in the same dock. The matter is decided, upon a consideration of the whole document, in favour of the former construction.

For the Law on the Point, see Halsbury (Hailsham Edn), Vol 30, p 546, para 693; and for Cases, see Digest, Vol 41, pp 524528, Nos 35293559.

Case referred to

King Line Ltd v Moxey, Savon & Co Ltd (1939) 62 Lloyd LR 252.

Page 529 of [1939] 3 All ER 528

Appeal

Appeal by the claimants by way of special case stated from the decision in an arbitration between the claimants and respondents. The facts are fully set out in the judgment.

A A Mocatta for the appellants.

J V Naisby for the respondents.

21 June 1939. The following judgment was delivered.

SINGLETON J. The question involved in this case is a very short one. The claimants, W I Radcliffe SS Co Ltd, and Wynnstay SS Co Ltd, are the owners of the steamship Llanishen, and the respondents, Exportkhleb of Moscow, were the charterers. The steamer, under the charterparty, loaded a full and complete cargo at Theodosia, and other ports mentioned in the charterparty, in September 1938, and proceeded therewith towards Falmouth, for orders to the discharging port. On 26 September, the respondents, the charterers, through their agents, gave orders to the claimants agents that the ship was to proceed to London to discharge, first at the wharf of Messrs McDougal in the Millwall Dock, and then at the respective wharves of Messrs Rank and Messrs Spillers at the Victoria Dock. The claimants, through their agents, denied the right of the respondents to order the ship to discharge at two separate docks. The orders were followed, and the expense of the removal of the ship from the Millwall Dock to the Victoria Dock amounted to £140. The claimants claim that sum of £140 against the respondents, there being no question to be decided between the parties as to the later shift within the Victoria Dock itself.

The matter came before Mr Cyril Miller, who was the umpire appointed in accordance with the terms of the Arbitration Act, and before him it was agreed:

… that both the Victoria and the Millwall Docks are geographically and commercially within the limits of the Port of London.

Moreover, Mr Miller so found. The contentions of the parties, then, were based clearly and wholly upon what was the true construction of certain parts of the charterparty itself. The contention of the claimants was that:

… under the charterparty the respondents were not entitled to require the ship to discharge at two separate docks in the same port without paying for the expense of shifting the ship from one dock to the other.

The respondents contention was that, under the provisions of the charterparty:

… they were entitled, without extra charge, to require the ship to discharge at any two safe berths within the port of discharge whatever the distance between the berths and whether they were or were not situate in the same dock or other discharging area within the port.

As I have said, the question I have to determine is on this particular charterparty. There is no dispute on the common law. It is laid down in Scrutton on Charterparties (14th Edn), p 146, as follows:

In the absence of express provision or custom the shipowner is not bound to shift from the selected berth to suit the convenience of the charterer.

Page 530 of [1939] 3 All ER 528

The authority cited in support of that is King Line Ltd v Moxey, Saxon & Co Ltd. In that case, Goddard LJ, dealing with the question of a charterparty in another form altogether, said:

Under the charterparty in this form, once the charterer has designated the berth to which the ship is to go and the ship has arrived at that berth, the shipowner has discharged his full duty that he has undertaken under the contract to perform at the port when he takes his cargo on board. I do not know if it was in the mind of the county court judge who decided this case that there is any right on a charterer or his agent to order the ship, if she has once arrived at her berth which has been selected, to go to another berth at her own expense within the limits of the port. What the circumstances may be which led to the shifting of this particular ship and why she shifted is evidently a matter which has to be fully inquired into, and, therefore, I say no more about that. But the ship is not bound, once she has arrived and made fast to a berth to which she has been ordered, to shift again from that berth for the purpose of taking on board part of the cargo which is the subject-matter of the charter.

That is, of course, dealing with the case of a ship which had gone to a particular port to take on board a cargo, and the berth to which she should go had been nominated or designated by the charterer. In those circumstances, she could not be called upon to move unless the charterer made arrangements, and, of course, any expense of that sort which was involved would apply in the case of a ship which had discharged at any particular berth, the berth being nominated by the charterer. The circumstances of this case, however, are not the same. It is pointed out to me, in the first place, that the charterparty, which bears the date of 10 August 1938, gives an option to the charterers to load at one or two ports. Nothing arises upon that, but it is interesting to notice that, at the end of cl 1 of the charterparty, it is provided as follows:

Shifting from one berth to another shall not be considered as a further place of loading. Charterers have the option of loading and discharging at two safe berths in one port without extra charge and time for shifting not to count. Further shiftings to be for charterers account and time for shifting to count.

Counsel for the charterers submitted to me that the true meaning of the middle part of that is that the charterers can have one free shift. They have the option of loading and discharging at two safe berths in one port. The area mentioned is “port,” not “dock” or “wharf.” Counsel for the appellants in his argument relied chiefly on cl 21 of the charterparty, which deals with the discharge, and which is in these terms so far as relevant:

The cargo to be delivered according to the custom of the port, at such wharf, dock, or other safe place (always afloat) as charterers or their agents may direct on steamers arrival in accordance with bills of lading.

Counsel for the appellants submitted that, if there was to be a free shiftin other words, if the option of two safe berths for discharging the cargo was to be exercised by the chartererit must be within one wharf or dock or other safe place, by reason of the words in cl 21 of the charterparty. He said that, if the words at the conclusion of cl 1 were to be read in the way in which the charterers would have them read, cl 21 would have read, and ought to have read: “Such wharves, docks or other safe places.” In other words, they would have been in the plural.

Page 531 of [1939] 3 All ER 528

It seems to me that, if the argument of the shipowners is to be accepted, one destroys entirely the option given to the charterers by the words which are almost at the end of cl 1 of the charterparty. The charterers had the option of discharging at two safe berths in one port. They called upon the ship to proceed to London and discharge first at the wharf of Messrs McDougal, in the Millwall Dock, and then at the respective wharves of two other firms in the Victoria Dock. The shift being called for, the first shift, was from the Millwall Dock to the wharf of Messrs Rank in the Victoria Dock. Those were, as I think, two safe berths in one port. They were both within the Port of London. That is admitted, and it is found by the umpire as a fact. Indeed, it could not be disputed. In those circumstances, it seems to me that the charterers, in calling upon the ship to proceed to a discharging berth within the port of loading, first at the wharf of Messrs McDougal, at the Millwall Dock, and then at the wharf of Messrs Rank, at the Victoria Dock, were exercising their option under the charterparty. The umpire, in para 6 of the special case, so finds:

Subject to the opinion of the court, I hold that the respondents were entitled under the charterparty to require the Llanishen to discharge first at a wharf in the Millwall Dock and then at a wharf in the Victoria Dock, without any extra charge to the respondents, and accordingly I award and determine that the claimants are not entitled to recover the sum of £140 or any sum from the respondents.

That is my view. In para 7, the umpire states the question for the opinion of the court as follows:

The question for the opinion of the court is whether upon the true construction of the charterparty and upon the facts found in this case the respondents are entitled to order the steamship to discharge at two wharves in separate docks, both of which docks are within the Port of London.

As I have said, I agree with the umpires view. I think that the answer to that question is in the affirmative. Then it follows that, under para 8 of the special case, the award set out in para 6 stands.

Judgment for the respondents with costs.

Solicitors: Holman Fenwick & Willan (for the appellants); Richards Butler & Co (for the respondents).

W J Alderman Esq   Barrister.

Re Swanwick House, Prestbury

[1939] 3 All ER 531


Categories:        LAND; Other Land: TRUSTS        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        15 JUNE 1939        


Land Improvement Expenditure payable out of capital Alterations To enable buildings to be let Conversion of dwelling-house into shops and flats Settled Land Act 1925 (c 18), Sched III, Part I (xxiii).

Settlements Incidence of expenditure as between capital and income Conversion of dwellinghouse into shops and flats Expenditure to enable buildings to be let.

The tenant for life of settled property consisting of a Georgian dwelling-house, a cottage and a shop desired to convert the premises into residential flats and shops, with a view to increasing the rental

Page 532 of [1939] 3 All ER 531

value thereof, and applied to the court for a direction that the expenditure was payable out of capital moneys in the hands of the trustee of the settlement:

Held the proposed conversion was an improvement within the Settled Land Act 1925, Sched III, Part I (xxiii), and the expenditure ought to be sanctioned and paid out of capital.

Notes

The matter here is quite a short one, but is of importance, because it is often desired to convert an old-fashioned house into flats or some other form of dwelling which is more easily let at the present time. Such reconstruction cannot, of course, generally be considered by a tenant for life unless the expense is to be borne by the capital of the settled property.

As to Alterations Payable out of Capital, see Halsbury (Hailsham Edn), Vol 19, pp 382385, para 790; and for Cases, see Digest, Vol 30, pp 286288, Nos 128143.

Case referred to

Stanford v Roberts [1901] 1 Ch 440; 30 Digest 287, 130, 83 LT 756, sub nom Re Stanford, Stanford v Roberts 70 LJCh 203.

Adjourned Summons

Adjourned summons for the determination of the question whether the conversion of a dwelling-house, known as Swanwick House, and a cottage and a shop adjoining it into residential flats and shops was an improvement authorised by the Settled Land Act 1925, the costs whereof might properly be paid out of capital moneys arising under that Act.

Settled estates including the above-mentioned property stood limited to a tenant for life with remainders in tail, the remaindermen being infants at the time of the summons. Swanwick House was a Georgian dwelling-house situated in the main street of Prestbury, formerly let at a rent of £90 per annum, but at the time of the summons unoccupied. The cottage was let on a monthly tenancy and the shop upon a yearly tenancy. With a view to increasing the rental value of the property, it was desired to convert it into shops and flats, the shops being on the ground floor and the flats on the upper floor, the cost of such conversion to be paid out of capital moneys in the hands of the Public Trustee, the trustee of the settlement. It was estimated that, as a result of the conversion, aggregate rental would be greatly increased, and that the alterations would enable the same to be let.

J M Easton for the tenant for life, the applicant.

A Walmsley for the Public Trustee.

F C Watmough for the infant tenant in tail.

Easton: The proposed conversion is an improvement under the Settled Land Act 1925, Sched III, Part I(xiii), and will enable the property to be let more profitably than it can be at present. The necessary expenditure ought to be sanctioned and the money paid out of capital moneys in the hands of the trustee: Stanford v Roberts.

Walmsley supported the proposal.

Watmough: The expenditure will benefit the infant tenant in tail, and is a proper expenditure to enable the property to be let to the best advantage.

Page 533 of [1939] 3 All ER 531

J M Easton for the tenant for life, the applicant.

A Walmsley for the Public Trustee.

F C Watmough for the infant tenant in tail.

15 June 1939. The following judgment was delivered.

SIMONDS J. The expenditure ought to be sanctioned, and the question asked must be answered in the affirmative.

Declaration that the conversion of the property was an addition or alteration reasonably necessary or proper to enable the same to be let within the Settled Land Act 1925, Sched III, Part I, para xxiii, or was otherwise an improvement authorised by that Act for the benefit of the settled land within s 83 of that Act, and that the cost of such conversion be paid out of capital.

Solicitors: Milne Bury & Lewis, Manchester (for all parties).

T A Dillon Esq   Barrister.

Way & Waller Ltd v Verrall

[1939] 3 All ER 533


Categories:        CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        SINGLETON J        

Hearing Date(s):        22, 23, 26 JUNE 1939        


Agency Commission Agent prevented from earning Wilful default of principal Just excuse.

The defendant had for some time been in negotiation for the sale of his property to a prospective purchaser, when he received another offer through the plaintiffs. The plaintiffs were informed of the earlier negotiations, but were told that, although the price had been agreed, no contracts had been exchanged, and that the defendant was free to accept their offer, which was accordingly accepted on 17 June 1938, “subject to contract.” On the same day, the defendants solicitors wrote terminating the previous negotiations, and also on the same day sent a draft contract to the solicitors for the plaintiffs client. On 27 June, the defendants solicitors wrote pointing out that they had not received the approval of the draft contract, and that there were “other persons in the market making inquiries about the property.” The solicitors of the plaintiffs client replied on 29 June that they were awaiting the result of certain searches, and also put several questions to the defendants solicitors. The latter on the same date wrote a letter stating that, owing to continued delay in settling the terms of the contract, their client had decided to sell the property elsewhere. On the following day, the purchasers solicitors returned the draft contract approved. Meanwhile, on 27 June, the first prospective purchaser had written to the defendants solicitors reopening negotiations, and the property was ultimately sold to him for the price which the plaintiffs client had agreed to pay:

Held there was an implied term in the agreement between the plaintiffs and the defendant that the defendant would not by his wilful default prevent the plaintiffs from earning their commission. There had been no delay in the approval of the draft contract, and the defendant had ultimately obtained only the price offered by the plaintiffs client, so there could not be a “just excuse” for the defendants action, the real purpose of which was to avoid the payment of two commissions. There had, therefore, been wilful default, and the plaintiffs were entitled to damages.

Notes

In Trollope v Caplan it was said that there might be “just excuse” for the withdrawal from a contract of sale, but the term “just excuse” was not further defined. Since then the matter has been considered in one or two cases, and, in the present case, nearly all the authorities are considered in detail. The judge arrives finally at the view that in the present case the vendor refused to go on with the sale because he would become liable to pay two commissions, and that, in the circumstances

Page 534 of [1939] 3 All ER 533

of this case, that was not a just excuse. Of course, where there are a number of agents, preliminary negotiations can be carried on simultaneously with a number of prospective purchasers, who may all be willing and able purchasers, and of whom at some time or other the vendor has to choose one. It would seem that, upon entering into an agreement to sell “subject to contract,” the vendor has made a choice from which he cannot resile unless there is unreasonable delay or inability supervenes on the part of that purchaser.

As to Preventing Agent from Earning Remuneration, see Halsbury (Hailsham Edn), Vol 1, pp 261, 262, para 435; and for Cases, see Digest, Vol 1, pp 509512, Nos 17541769.

Cases referred to

Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436; Digest Supp, 103 LJKB 634, 152 LT 88.

The Moorcock (1889) 14 PD 64; 12 Digest 611, 5048, 58 LJP 73, 60 LT 654.

Hamlyn & Co v Wood & Co [1891] 2 QB 488; 12 Digest 610, 5042, 60 LJQB 734, 65 LT 286.

Lazarus v Cairn Line of Steamships Ltd (1912) 106 LT 378; 12 Digest 611, 5051.

Trollope (George) & Sons v Caplan [1936] 2 KB 382, [1936] 2 All ER 842; Digest Supp, 105 LJKB 819, 155 LT 365.

Kahn v Aircraft Industries Corpn Ltd [1937] 3 All ER 476; Digest Supp, affg [1937] 1 All ER 757.

Keppel v Wheeler [1927] 1 KB 577; Digest Supp, 96 LJKB 433, 136 LT 203.

Raymond v Wooten (1931) 47 TLR 606; Digest Supp.

Dickinson & Son v Vickers (1931) Estates Gazette p 16.

Musson v Moxley [1936] 1 All ER 64; Digest Supp.

French (L) & Co v Leeston Shipping Co [1922] 1 AC 451; 12 Digest 612, 5054, 91 LJKB 655, 127 LT 169.

White v Turnbull, Martin & Co (1898) 78 LT 726; 1 Digest 516, 1785.

Dudley Bros v Barnet [1937] SC (Ct of Sess) 632.

Action

Action claiming commission earned for securing a purchaser for the defendants property. The facts are fully set out in the judgment.

S R Edgedale for the plaintiffs.

Maxwell Fyfe KC and R Etherton for the defendant.

26 June 1939. The following judgment was delivered.

SINGLETON J. This is a difficult case. The plaintiffs are a firm of estate agents and the defendant was at all material times the owner of certain properties. The plaintiffs were employed by the defendant on the terms that, if they introduced a purchaser of those properties, or were instrumental in introducing a purchaser, or one who was ready and willing to complete, on terms properly acceptable to the defendant, the defendant would pay them commission on the usual scale. They say that they did introduce a purchaser of those properties who was ready and willing to complete on the defendants terms, and that commission of £157 5s is due to them accordingly. Alternatively, they claim as follows:

… if, contrary to the plaintiffs contention the said commission by the terms of the said agreement was only payable in the event of sale being effected the

Page 535 of [1939] 3 All ER 533

plaintiffs say that it was an implied condition of the said agreement that the defendant would not wrongfully prevent the plaintiffs from earning the said commission.

It is pleaded as follows:

In breach of the said agreement the defendant by his solicitors wrongfully prevented the plaintiffs from earning the said commission in that they by letters dated June 29, 1938, and July 1, 1938, to the solicitors for the said purchaser refused to complete the sale of the said property to the said purchaser notwithstanding that all the terms of the said sale had been agreed or would have been agreed between the parties.

The defendant denies that the plaintiffs introduced a purchaser who was ready and willing to complete on terms acceptable to him. He further denies that there was any implied term to pay commission, and he further denies that he has committed any breach of any such implied term. He further contends that it was well known to the plaintiff that other agents were employed and that the ultimate purchaser was introduced by other agents, and he also pleads as an alternative plea that he had “just excuse” for not continuing the negotiations entered into with the purported purchaser of the plaintiffs.

The facts are in a small compass. The property had been in the hands of different agents for some time, and among the agents who had been concerned were a firm of Cory & Cory, who had introduced a prospective purchaser, a client of Messrs Waterhouse & Co, to purchase at the figure of £6,700. On 1 April 1938, Messrs Frere, Cholmeley & Co, the defendants solicitors, sent to Messrs Waterhouse & Co for their approval a draft contract for the purchase of the property. Certain difficulties arose in regard to drains and other matters, and on 24 May the vendor agreed to reduce the price to £6,400. On 26 May 1938, Messrs Waterhouse & Co returned the draft contract to be slightly amended. There was some further delay, and nothing was done until 16 June, when Messrs Waterhouse & Co wrote to Messrs Frere, Cholmeley & Co as follows:

We understand from you to-day that your client has not yet signed the contract and that you cannot give us any assurance as to when you will be in a position to exchange. As you are aware, you and we have agreed the draft contract in accordance with Messrs. Cory & Corys letter accepting our clients offer on the understanding that completion took place on the 25th instant. We agreed to that date as the date for completion. You will of course appreciate that if your client considers that not being legally bound to our client he could negotiate a sale elsewhere, he could hardly object if our client took him at his word and refused to go on with the purchase. We appreciate that points may arise on the settlement of contracts which justify either side withdrawing from an agreed sale or purchase but we think it would be extremely unfortunate to the profession if, where contracts are actually signed, a purchaser or vendor is to be put to that expense and the matter goes off when there is no subject-matter in dispute between the parties. We have had to consult three trustees, whose signatures we have had to obtain to the necessary cheque for the deposit and we have done our best to keep you in touch with the position and to meet your client by agreeing to complete on the 25th instant. There is very little time now to complete the purchase but assuming that the matter could be completed by the end of the month, we should not be disposed to quarrel with your client in regard to the question of payment of interest as from the date actually fixed by the contract, which, having been signed, we would rather not alter.

That letter of 16 June was received with pleasure, apparently, by Messrs

Page 536 of [1939] 3 All ER 533

Frere, Cholmeley & Co, because on 17 June 1938, they wrote as follows:

We are in receipt of your letter of yesterday. Your client has played fast and loose with our client, and while we much regret that negotiations have terminated, we have no alternative but to ask you to be good enough to return to us by the bearer of this letter the copy documents which we sent to you.

Thus the negotiations with Messrs Waterhouse & Co came to an end. I can understand that, in the circumstances, the defendant may have felt that he was under some moral obligation to pay commission to Messrs Cory & Cory, who had introduced Messrs Waterhouse & Cos client as a prospective purchaser. Indeed, it may well be, but I express no opinion, that there was more than a moral obligation upon him in those circumstances. It may be that some question might have arisen as to whose fault it was that the negotiations had not gone through, because the contract had been signed on the one side, and the parties seem to have agreed in general at least, but, as far as I can see, that purchase by the clients of Messrs Waterhouse & Co would have gone through in a short space of time at the figure of £6,400 had not the defendants solicitors broken off the negotiations as they did by the letter of 17 June. It may be that the reason for breaking off the negotiations was that an offer had come from the plaintiffs, Messrs Way and Waller Ltd.

Mr Halsey of the firm of Way and Waller Ltd, told me that on 3 June he had a conversation with Mr Verrall, the defendant, and he asked if this property, which had previously been mentioned to the plaintiffs, had been sold, because he had a likely purchaser. Mr Verrall told him that the property was not actually sold, but the price had been agreed, although the contract had not been exchanged. He said further that there had been delay on the part of the proposed purchasers, and he added that, as the other negotiations had been going on so long, he thought that he was entitled to deal with Messrs Way and Waller Ltd, if they could get a purchaser, and he would tell the other agents that. He mentioned that he was agreeable to pay commission, as indeed it had been intimated in an early correspondence that commission would be payable to them if they brought about a sale. Mr Halsey told him that he had a buyer who might be interested at about £6,500. Something was said about the other agents commission, and Mr Verrall added something to the effect that, if Messrs Way and Waller Ltd were able to put forward an offer equal to the other, plus the amount which he would have to pay the other agent, he would either accept, or consider accepting, the offer.

Messrs Way and Waller Ltd, on 3 June sent particulars of this property to a surveyor, at the request of Mr Graham Green, who is a solicitor with the firm of Kingsford, Dorman & Co, and on 15 June, Mr Graham Green made an offer of £6,650 for the property. The offer of £6,500 was the first offer, and, in accordance with that, the plaintiffs telephoned to the defendant and told him that they had received this offer and asked

Page 537 of [1939] 3 All ER 533

for his instructions. The defendant said that he was disposed to accept that offer. On 17 June, the defendants solicitors informed the plaintiffs that they were at once sending the contract to Messrs Kingsford, Dorman & Co. They added that they had received a letter from the other solicitors about the other negotiations, but that they could not force them, the defendants solicitors, to complete, and that, therefore, the defendant was quite free to deal with the people put forward by the plaintiffs. The evidence for the plaintiffs showed that, unless they were assured by the defendants solicitors that the latter were in a position to deal with the proposed purchasers put forward by them, they would not have gone on with the matter at all.

It is clear to my mind that the defendant was ready and willing to accept this offer of £6,650 for the property which was put forward by the plaintiffs. I heard the evidence of the different witnesses, and I am bound to say that I prefer the evidence of the witnesses for the plaintiffs to the defendants evidence and the evidence called on behalf of the defendant. The offer put forward by the plaintiffs was accepted “subject to contract,” and on 17 June Messrs Frere, Cholmeley & Co sent the draft contract to Messrs Kingsford, Dorman & Co who were the solicitors acting for the proposed purchaser.

I am satisfied that, in the ordinary course, the plaintiffs clients would have acquired this property. However, on 27 June, Messrs Frere, Cholmeley & Co wrote to Messrs Kingsford, Dorman & Co as follows:

We are rather surprised that we have not heard from you ere this in regard to the final approval of the draft contract. We understood from Mr. Graham Green when we had the pleasure of speaking to him on the telephone, that he was only waiting the receipt of his local land charge certificate before releasing to us the document in question. We need hardly remind you that there are other persons in the market making inquiries about the properties in question.

That letter was replied to by a letter of 29 June from Messrs Kingsford, Dorman & Co in the following terms:

We duly received your letter of the 27th instant and regret that it has not been possible for us to return the draft contract approved hitherto. We have not yet received the result of all our local land charge searches and we are also awaiting certain information from the companys surveyors, before we can return the contract to you approved. We have little doubt, however, that we shall be able to return it to you within the next day or two. On referring to the two licences you sent us on the 23rd instant, we find that the licence dated Feb. 20, 1934, is a licence to Mr. Fuller, the original lessee, to assign to Messrs. Arno & Gatter. The licence dated Nov. 28, 1934, is one to Arno & Gatter giving them permission to assign to Fullers Library, Ltd. We understand that Messrs. Arno & Gatter are the present lessees of No. 1D and we therefore imagine that a contemplated assignment by Messrs. Arno & Gatter to Fullers Library, Ltd., was never carried into effect. Can you confirm this?

That letter crossed one of the same date, 29 June, from Messrs Frere, Cholmeley & Co to Messrs Kingsford, Dorman & Co, in the following terms:

We regret to inform you that owing to the continued delay in settling the terms of the contract herein, our client has decided to sell the property elsewhere. We should be glad therefore if you would kindly return to us the documents which we have sent to you in connection with the matter.

Page 538 of [1939] 3 All ER 533

That letter surprised Messrs Kingsford, Dorman & Co, and I think that it was a letter which might well surprise any solicitors in view of what had happened. On 30 June, Messrs Kingsford, Dorman & Co write to Messrs Frere, Cholmeley & Co as follows:

We have received your letter of yesterdays date and have endeavoured to get in touch with you by telephone but without success. By the same post we received the replies to the remainder of our local land charge searches and we are therefore able to return the draft contract approved and this is sent herewith. On hearing from you that you are able to proceed we will at once have the contract engrossed for signature.

It is clear, however, that on 29 June the defendant through his solicitor refused to continue with the purchaser introduced by the plaintiffs. The reason for that also is clear, because, before writing their letter of 27 June 1938, Messrs Frere, Cholmeley & Co had had a letter on the same date from Messrs Waterhouse & Co. The reason for writing that letter of 27 June, which contained the sentence “We need hardly remind you that there are other persons in the market making inquiries about the properties in question,” was that the defendants solicitors had heard from Messrs Waterhouse & Co, who were ready and willing to buy, and they thought, apparently, that the first prospective purchaser might still buy. They did not say to Messrs Kingsford, Dorman & Co, “There are other people, with whom we had a contract at one time, who are again coming along, and who want to do something,” but put it in that rather doubtful way: “… there are other persons in the market making inquiries about the properties in question.”

As a result of a letter from Messrs Waterhouse & Co to Messrs Frere, Cholmeley & Co on 27 June, those parties again became in negotiation, and by 29 Junethat is, within 2 dayscontracts had been exchanged, stating the purchase price as £6,650, the same figure as the plaintiffs client had been willing to pay.

I have no doubt myself that, after the letter of 27 June from Messrs Waterhouse & Co to Messrs Frere, Cholmeley & Co, they were told that there were othersnamely, the plaintiffs proposed purchaserwho were willing to pay £6,650, and that led the client of Messrs Waterhouse & Co to come up from the figure of £6,400 to £6,650. That figure of £6,650 is £250 more than the figure at which the defendant was ready and willing to sell to the client of Messrs Waterhouse & Co up to 17 June, and the increased figure clearly came about because of the efforts of Messrs Way and Waller Ltd. There had not been any delay on the part of Messrs Kingsford, Dorman & Co, nor had they raised any questions unnecessarily. I am satisfied that the matter would have gone through in the ordinary course within a few days. I am further satisfied that it is usual to allow a reasonable time for inquiries when a stage of “subject to contract” has been reached, and there was no more than a reasonable time taken in this case.

The defendant apparently felt that he ought to pay, or might be liable to pay, some commission to Messrs Cory & Cory, even if the sale to the

Page 539 of [1939] 3 All ER 533

plaintiffs purchaser went through. Counsel for the plaintiffs suggested at a comparatively early stage of the case, and he still suggests, that the reason for this change was that the defendant might avoid the liability, legal or moral, to pay two commissions, and that he was liable to pay two commissions. I am forced to say that I find it difficult to discover any other reason whatever for the change which was made. Counsel for the defendant suggested that there was some delay. I have said that I do not think that there was any delay. Counsel for the defendant suggested too that some of the questions raised by Mr Graham Greens firm presented difficulties, and that the answers had not been completed. I do not think that there was any such difficulty in fact. I think that Mr Graham Green and his firm were ready and willing to carry this matter through, and would have carried it through in the course of a few days but for the breaking off of negotiations by Messrs Frere, Cholmeleys letter written on the instructions of their client. I am really forced to the conclusion that the change was made to avoid this possibility of two commissions being payable. I can see no other reason for it.

Counsel for the defendant submitted that the plaintiffs were not entitled to succeed. In the first place, he said that there was no sale, and that commission was only payable on the sale, and he further submitted that the plaintiffs were not entitled to damages because there was no breach of any implied term. He said that it was known that other agents were concerned, and that, if another agent introduced the one who ultimately bought, that was a risk of the plaintiffs employment, and they were not entitled either to commission or to damages. In any event, he submitted that there was “just excuse” for the defendant acting as he did, and it could not be said that there was any arbitrary breach of any implied term by him, or any unlawful default by him. The words “just excuse” he took, of course, from the judgment in the well-known case of Trollope (George) & Sons v Martyn Bros. In that case, George Trollope & Sons, the plaintiffs, estate agents, were instructed by the defendants to find a purchaser for certain property “subject to contract.” In that case, the facts are stated as follows, at pp 437, 438:

The plaintiffs … wrote to the defendants as follows: “With reference to our conversation … we confirm your acceptance of the offer made by … Major Howard, to purchase the freehold of this property subject to contract. … We take this opportunity of confirming that in the event of the sale materialising we shall look to you for payment of the usual scale commission.” To that letter the defendants replied: “We have to acknowledge receipt of your letter … and confirm our telephone conversation with you … to accept the offer … for this property, subject to contract. We also confirm that, in the event of this sale being satisfactorily completed, we shall pay you the usual scale of commission.”

An engrossment of the contract was … signed by Major Howard. … The defendants refused to proceed further with the sale.

Thereupon the plaintiffs claimed commission, or, alternatively, damages for breach of an implied term that the defendants would do nothing to prevent the plaintiffs from earning their commission. It was found

Page 540 of [1939] 3 All ER 533

as a fact that Major Howard was ready and willing to buy the property. It was held (Scrutton LJ dissenting):

… that although in an agreement “subject to contract,” the matter, as between vendor and purchaser, must be deemed to remain in negotiation until contracts are exchanged, there must, as between the plaintiffs and the defendants, be implied a term that if the purchaser introduced by the plaintiffs was ready and able to complete the contract, the defendants would not by refusing to complete prevent the plaintiffs from earning their commission, and as the defendants had, without just excuse, refused to complete, they were liable to the plaintiffs in damages, the proper measure of which in the circumstances was the amount of commission the plaintiffs would have earned had the transaction been completed.

In the course of his dissenting judgment, Scrutton LJ, dealing with an implied term in the contract, uses these words, at p 443:

… it is not enough to say it is “reasonable.” I refrain from doing more than mention The Moorcock. Lord Esher, M.R., expresses the rule in Hamlyn & Co. v. Wood & Co [p. 491]: “I have for a long time understood that rule to be that the court has no right to imply in a written contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an implication necessarily arises that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense that I have mentioned.” I myself have given a long judgment on the cases involved in Lazarus v. Cairn Line of Steamships, Ltd. In my opinion the proposition that if the employer prevents the agent from earning his commission he is liable, is much too wide.

I think that everyone accepts that statement as sound. The statement that the mere fact that the employer prevents the employee from earning his commission is much too wide, or, as Scrutton LJ said, at p 443:

The prevention must be a fault or a default, in the sense that it is a breach of all express contract, or of some contract that must of necessity be implied, as where the employer has no title to the property he contracts to sell, or in breach of contract does not perform a term of the contract. In my opinion the “prevention” by the employer must be “wrongful,” a “default,” a breach of his contract with the purchaser to entitle the agent to base an action upon it. Mr. Bowstead heads his art. 65 “if he wrongfully prevents.”

The judgment of the majority of the court in Trollope (George) & Sons v Martyn Bros was the judgment of Greer LJ, and Maugham LJ, as he then was. I refer to the judgment of Greer LJ, at p 450:

It is to be observed that the contract between the plaintiffs and the defendants made by the letters of Apr. 21 and Apr. 24 related to commission in the event of the completion of a sale of the property “subject to contract.” It is quite true that commission in terms would not become due until the satisfactory completion of the sale, but I think the agreement means that if the purchaser from whom the plaintiffs had obtained the offer for the property subject to contract was prepared to sign a contract in the terms required by the owners, they would do nothing to prevent the satisfactory completion of the transaction so as to deprive the plaintiffs of the commission which they had agreed to pay.

I think that Greer LJ there was meaning to say that in so doing they would do nothing wrongful. He continued, at pp 450, 451:

The view I take of the present case may be shortly stated as follows. The service for which the defendants engaged Messrs. Trollope & Sons was, that they would introduce as a purchaser of the property in question their customer Major Howard who would be prepared to buy on the terms of contract prepared by the defendants solicitors and approved by Major Howards solicitors. When the latter assented to the terms of contract sent by the vendors solicitors, and on behalf of the buyer indicated the latters acceptance of those terms, the plaintiffs had completed the

Page 541 of [1939] 3 All ER 533

work they had undertaken to do, though the vendor might still have been free to refuse to sign the contract, without any liability on his part to the proposed purchaser. But as between the plaintiffs and the defendants, the latter could not after the plaintiffs work was complete deprive them of the fruits of their work by withdrawing their consent to the signing of the contract and the completion of the sale. I think this view is in accordance with the trend of the decisions I have cited.

He added, at p 452:

In my judgment, having regard to the terms of the contract between the plaintiffs and the defendants in this case, there was an implied undertaking by the defendants that they would not after the plaintiffs work was completed deprive them of the fruits of their labour by refusing to sign the contract tendered to the plaintiffs buyer by the defendants solicitors with their authority, or by refusing without just cause to complete the transaction on the terms to which they had asked the plaintiffs customer to consent. I think such a term may be implied in the contract contained in the two letters to which I have called attention. Adopting the words of Lord Esher, M.R., in Hamlyn & Co. v. Wood & Co., I am of opinion, on considering the terms of the contract in the present case in a reasonable and businesslike manner that an implication necessarily arises that the parties must have intended that there should be a stipulation in favour of the agent that when the agent had done all that he had contracted to do, the principal would not by withdrawing, without reasonable cause, so far as the agent was concerned, from the transaction, deprive the agent of the commission which would become due if the sale with his customer had been completed.

In the same case, Maugham LJ said, at p 456:

The sole cause of the matter not going through was the default of the defendants. By “default” I mean a refusal without any reasonable ground to proceed with the matter.

The question then remains whether there was not an implied term in the circumstances that the defendants would not prevent the plaintiffs from earning their commission. In my opinion where a person is employed to do work on behalf of another, payment to be made on completion of the work, there is a necessary implication that the employer will not do anything to prevent the earning of the remuneration, unless at any rate he has some just excuse for his interference with the course of events obviously contemplated by both parties when they entered into the contract of employment.

I think it is clear that the course of events obviously contemplated by both parties when they entered into the contract of employment was that, if the agent did introduce a purchaser who was apparently ready and willing to agree to the terms required by the vendor, a reasonable time should be given to the plaintiff to see if there was this agreement. In other words, if a state of agreement was reached “subject to contract,” a reasonable time should be given to see if the terms of the one were accepted by the otherthat is, to see if there was agreement. That is an ordinary course of proceeding between solicitors in a matter such as this, as Mr Graham Green pointed out to me, and the course of events contemplated by the parties was that the ordinary practice should be followed.

The case of Trollope (George) & Sons v Martyn Bros was followed by Trollope (George) & Sons v Caplan. In that case, there had not been complete agreement between the parties. Probably it was thought that there would be, and the county court judge gave judgment and assessed the full amount of the commission. A retrial was ordered on the ground that he had not considered whether or not it was certain, or highly probable, that there would have been complete agreement

Page 542 of [1939] 3 All ER 533

between the parties. In that case, GreerLJ, in dealing with the matter, said, at p 392 ([1936] 2 All ER at p 848):

The learned county court judge who tried this case gave judgment on the alternative claim made by the respondents for damages for breach of contract, and he awarded as such damages the full amount of the commission. In order to succeed in recovering anything more than normal damages the respondents would have had to prove not merely that the appellant had broken an implied term of the contract of employment, but they would have had to establish by sufficient evidence that by reason of the appellants wrongful withdrawal of their authority to sell on the basis that the tenants rent was £180 they had lost the amount of their commission. This means that there would have had to be evidence making it highly probable that if the appellant had allowed the transaction to go on all the terms would have been agreed and a contract would have been entered into between the appellant and the proposed purchasers at the agreed price.

In the same case, Greene LJ put it a little differently, at p 399 ([1936] 2 All ER at p 853):

I am unable to accept this [the county court judges judgment] as a correct statement of the law. It is not the circumstances that the agents have done everything they could to earn their commission coupled with a withdrawal by the principal without reasonable cause that justifies an award of damages equal to the commission. Before such an award can properly be made it must in my opinion be found as a fact that but for the action of the principal a binding contract would have been made which is quite a different thing. It does not in the least follow from the fact that the agent has done everything he can do that a binding contract will be made. Nor does it follow from the fact that the withdrawal of the vendor at that stage was an arbitrary one that but for such withdrawal a binding contract would have been made. It is, in my judgment, a question of fact in each case whether or not the contract would have been made if it had not been for the vendors action, and to this question the learned county court judge does not appear to have directed his mind; or at least if he did direct his mind to it it was on the hypothesis (which I have already shown was incorrect) that all the terms of the proposed contract had been agreed.

I refer to that case because in the present case, at the time of the withdrawal by the defendant, it had not been notified to the defendant that all the terms were agreed to. Virtually I think that they were. I am satisfied with the evidence of Mr Graham Green that if I use the expression of Greer LJ, in Trollope (George) & Sons v Caplan, it is highly probable, to say the least of it, that the whole thing would have been carried through within a day or two, and, indeed, on the evidence of Mr Graham Green, I am satisfied that it would have been. As Greer LJ pointed out, I think that it would have been carried through within a few days but for the breaking off of the negotiations.

It is necessary, I think, that I should say a few words about certain other authorities which were cited to me. I have already said that I regard this as a case of difficulty, and many people have thought that there has been somewhat of a readiness to imply a term into a contract of this kind, and that cases in favour of agents have gone quite a long way. One case which was cited to me was Kahn v Aircraft Industries Corpn Ltd, a case which was before me, and one in which there was a considerable amount of money involved. That case reached the Court of Appeal, and, indeed, it was thought at one time that it would go to the House of Lords, as there was a considerable amount of money involved, but it did not. I do not think that it carries this case any further.

Page 543 of [1939] 3 All ER 533

Keppel v Wheeler, however, is of importance, not so much on the actual decision of the case, as because of certain words of Bankes LJ, at pp 586, 587. That case had to do with what happened when an agents duty to his principal terminated. In giving judgment, Bankes LJ said, at pp 586, 587:

In these circumstances, I am not going to discuss all the matters which have been debated in testing this question whether the agency had or had not determined, because it seems to me that an agent may well say: “I have done everything which, assuming that the matter went through, would entitle me to receive my commission,” and yet remain under the obligation of an agent to disclose such matters as the particular offer in this case. As indicating that this is the correct view of the situation I will give three instances of what might have occurred during the interval between May 29 and June 12. Of course Mr Essam might have changed his mind; the matter was only in negotiation. If he had done so it could not be said that the respondents were entitled to their commission upon the ground that they had done all they were bound to do, and had earned their commission as soon as the appellant accepted the offer subject to contract. Again, these respondents were not employed as exclusive agents; if the appellant had found a purchaser during this period who was prepared to give more, or who for some reason was a more desirable purchaser, he would have been entitled to sell the property to that person, and the respondents would have had no cause of complaint. Or again, if the other agents had found during this interval a person whom the appellant preferred, or who would give a larger amount, the appellant would have been entitled to accept that person, and the respondents would have had no cause of complaint. Those are three good tests of the position as between these parties, indicating that it is not true to say that the relationship between the parties ceased on May 29, and that on that date the respondents were entitled to their commission and were entitled to say that they were free for all purposes from any duty as agents for the appellant.

Counsel for the defendant pointed out to me that those words of Bankes LJparticularly the third available course of action and to some extent the secondcovered the position in this case. He submitted that, if the defendant had found elsewhere a purchaser whom he preferred, he was entitled to sell to him, and, following the words of the second available course of action of Bankes LJ, the plaintiffs would have no remedy. Equally, he said, if the other agents had come forward with a purchaser whom the defendant preferred, and who would give a larger amount, there was no remedy to the agent. I confess that that passage makes me pause considerably, and it was followed in Raymond v Wooten. I ought to say that those words of Bankes LJ were not, as I think, a necessary part of his judgment.

In Raymond v Wooten, which was a case in the Divisional Court, it was held as follows:

Where an agent is instructed, but not as sole agent, to sell a house, and he procures an offer to purchase “subject to contract,” and that offer is accepted by the vendor “subject to contract,” but the sale subsequently goes off owing to the vendors obtaining a better offer through another person, the agent cannot recover commission from the vendor as there is no binding contract of sale, and he cannot recover damages from the vendor, as the vendor has not committed any breach of contract whereby the agent was prevented from earning his commission.

That case was in the Divisional Court on 27 July 1931, but in January 1931, there had been in the Divisional Court the case of Dickinson & Son v Vickers. I am not sure, I confess, whether or not the first decision was cited in the second case. Scrutton LJ, in Trollope (George) & Sons

Page 544 of [1939] 3 All ER 533

v Martyn Bros appears to think that it was not, but I am not sure whether that is so. When Raymond v Wooten was considered in the Court of Appeal in Trollope (George) & Sons v Martyn Bros, Greer LJ said that it was wrongly decided, and added, at p 450:

The appellants relied upon the decision of the Court of Appeal in Keppel v. Wheeler, but in my judgment this decision does not help them, as the court held that the agents were entitled to their commission but were liable in damages for breach of a duty in not communicating an offer received for an additional price before the completion. I note that Bankes, L.J., says [p. 586] “In these circumstances I am not going to discuss all the matters which have been debated in testing this question whether the agency had or had not determined, because it seems to me that an agent may well say: I have done everything which, assuming that the matter went through, would entitle me to receive my commission, and yet remain under the obligation of an agent to disclose such matters as the particular offer in this case.” The opinion expressed, in my judgment, is, I think, inconsistent with the decision of Swift, J., and Charles, J., in Raymond v. Wooten, but in my opinion that case was not rightly decided.

That is the view of Greer LJ, on Raymond v Wooten, and, although Greer LJ did not say so, I think that it follows that the third available course of action of Bankes LJ in Keppel v Wheeler is likewise open to question. That was the view taken by Horridge J, in Musson v Moxley. I think that again it is right to say that it was not a necessary part of his judgment, because Horridge J came to a conclusion on another point altogether, but he added, at p 65:

If I am wrong on that, I think the plaintiff is entitled to succeed, because the defendant would then, in refusing to go on with the contract, have prevented the plaintiff from earning his commission. The case of Raymond v. Wooten raised the very point, and in that case the Divisional Court held that as the contract was “subject to contract” therefore the plaintiff could not recover. That case was considered in the judgment of Greer, L.J., in George Trollope & Sons v. Martyn Bros. …

Then he sets out the passage which I have just read, and goes on, at p 66:

Therefore, if this is to be followed out logically, it means that in Raymond v. Wooten, where the defendant had refused to go on with the transaction, even though the contract was subject to contract, the plaintiff was entitled to damages in lieu of his commission.

That seems to me to be exactly this case. Horridge J continues, at p 66:

Therefore, if I am wrong about the deposit, the plaintiff would recover the amount he claims by way of damages.

Then he proceeds to deal with Keppel v Wheeler.

In the course of his argument, counsel for the defendant said that, if one referred to Trollope (George) & Sons v Martyn Bros, it was clear that the defendant could escape responsibility for commissions in all cases of this nature if he had “just excuse” for the action which he took, and that that was shown by the judgment both of Greer LJ, and of Maugham LJ. The “just excuse” which counsel for the defendant put forward in this case may be that the defendant preferred to sell to someone else. It may be, as he put it, that there was delay, and that there was another offer. I think that that covers the two ways in which

Page 545 of [1939] 3 All ER 533

he put it forward. I have said already that there was no delay, and that cannot be a “just excuse.” Nor do I think that there was anything between the parties really. There was no real reason to think that the sale would not have gone through. I think that it would have gone through. As to the fact of another offer being a “just excuse,” if Greer LJ is right in that passage of his judgment in Trollope (George) & Sons v Martyn Bros in which he said that Raymond v Wooten was wrongly decidedif he is right in saying that another offer and an increased offer would not provide a “just excuse”then can it be a “just excuse” if another offer of the same figure is put forward? I gather from what Greer LJ said in Trollope (George) & Sons v Martyn Bros that he would have decided Raymond v Wooten otherwise and held that the agent was entitled to commission, but, when all these cases are examined, one thing is clear, and that is that the subject is one of great difficulty. I hope very much that this case will go elsewhere, and that the law may be made clearer than it is, but I have to look at it on its own facts. I think that the only reason which I can draw for the change from the purchasers introduced by Messrs Way and Waller Ltd to Messrs Waterhouse & Co about 29 July is that the defendant in this case desired to avoid the risk of having to pay two commissions. If that was so, he broke off the negotiations with Messrs Way and Waller Ltds prospective purchaser arbitrarily and wrongfully when they had introduced a purchaser who was ready and willing to complete on the terms the vendor desired. In saying this, I am bearing in mind L French & Co v Leeston Shipping Co. There is a passage in the opinion of Lord Dunedin which gives me considerable trouble in any case with which I deal. Lord Dunedin said in that case, at p 455:

I would only like to add one observation as to the reservation which was made in White v. Turnbull, Martin & Co., and which seems to have rather troubled Bankes, L.J., in this case, as to wilful default. I think that wilful default would only arise if it could be shown that the act which had been done, and which should have had as its sequel the non-earning of further commission, had been done by the doer of it, not prima facie for the purpose of his own, but simply and solely to avoid payment of the commission.

That is putting the law on the facts of that case fairly high against the agent. In my view, if this case is right, the change was to avoid payment of commission to Messrs Way and Waller Ltd, as well perhaps as being liable for commission to Messrs Cory & Cory, and I think that that is of itself sufficient to decide this case.

Counsel for the plaintiffs referred me to a recent case in Scotland, Dudley Bros v Barnet, which I think covers this case. He further submitted that in any event the defendant ought not to be allowed to escape liability, when in fact the purchasers were those with whom the defendant had broken off negotiations and had told the plaintiffs that those negotiations were broken off. In those circumstances, counsel for the plaintiffs submitted that the defendant could not be heard to say that no commission was payable to the plaintiffs merely because the

Page 546 of [1939] 3 All ER 533

defendant had sold to someone, as to whom he had told the plaintiffs that the negotiations had ceased. I do not think it is necessary to go into that further.

The plaintiffs are entitled to damages. I have considered whether or not I ought to award as damages the total sum or a part of it, and, in view of what I have said as to the likelihood, or more than likelihood, that the sale to the plaintiffs proposed purchaser would have gone through, I think that the amount ought to be the full amount claimed. There will be judgment for the plaintiffs for £157 5s and costs.

Judgment for the plaintiffs for £157 5s and costs.

Solicitors: Seaton Taylor & Co (for the plaintiffs); Frere Cholmeley & Co (for the defendant).

W J Alderman Esq   Barrister.

Terry v Terry

[1939] 3 All ER 546


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HODSON J        

Hearing Date(s):        22, 27, 28 JUNE 1939        


Divorce Desertion Institution of proceedings for justices order Date of institution Issue of summons Matrimonial Causes Act 1937 (c 57), s 6(3).

The respondent deserted his wife on 27 January 1934. On 28 January 1937, she instituted proceedings in a court of summary jurisdiction, and on 3 February following, obtained a separation order. She subsequently presented this petition for divorce on the ground of desertion for a period of 3 years immediately preceding the presentation of the petition:

Held on the true construction of the Matrimonial Causes Act 1937, s 6(3), the date of the institution of the proceedings was the date of the issue of the summons, and not the date on which the order thereon was made, and the date of the issue of the summons was the terminal date which concluded the period of desertion. Desertion for the statutory period had, therefore, been proved.

Notes

Where a spouse has brought proceedings for a decree of judicial separation or for an order in a court of summary jurisdiction, a period of 3 years desertion must be proved before the institution of the proceedings. The question here is whether the words “institution of proceedings” mean the date of the issue of a summons or the date of the service of the summons or the date of the order made upon the summons. The judge has decided in favour of the date of the issue of the summons.

As to Effect of Justices Order on Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 658, 659, paras 968, 969; and for Cases, see Digest, Vol 27, pp 319321, Nos 29782999.

Case referred to

Gibbs-Smith v Gibbs-Smith [1939] P 170, [1939] 1 All ER 332; Digest Supp, 160 LT 364.

Undefended petition

Undefended petition by wife for dissolution of marriage on the ground of desertion. The facts are fully set out in the judgment.

Leslie Brooks for the petitioner.

Page 547 of [1939] 3 All ER 546

28 June 1939. The following judgment was delivered.

HODSON J. This is a petition for dissolution of marriage on the ground of desertion. On 3 February 1937, the petitioner obtained an order in the court of summary jurisdiction on the ground of desertion directing, inter alia, that she should be no longer bound to cohabit with her husband, the respondent to this petition. The summons was issued on 28 January, on a printed form containing the following words:

Wherefore your wife, pursuant to the statute in that case made and provided, applies that an order may be made that she be no longer bound to cohabit with you.

The summons was served on 30 January 1937. Under the Matrimonial Causes Act 1937, s 6, the period of desertion immediately preceding the institution of proceedings for an order under the Summary Jurisdiction Acts shall, if the parties have not resumed cohabitation and the order has been continuously in force since the granting thereof, be deemed immediately to precede the presentation of the petition for divorce.

The question has arisen in this case whether or not the desertion which had preceded the separation order had extended for 3 years immediately preceding the institution of those proceedings. It has been argued that the section should be read as if the date of the order were the terminal date which concludes the period, but, on the true construction of the section, I think that the date of the institution of the proceedings is the material date. S 6(3) of the Act of 1937 provides as follows:

For the purposes of any such petition for divorce, a period of desertion immediately preceding the institution of proceedings for a decree of judicial separation or an order under the said Acts having the effect of such a decree shall, if the parties have first resumed cohabitation and the decree or order has been continuously in force since the granting thereof, be deemed immediately to precede the presentation of the petition for divorce.

It is true that the mere issue of the summons was nugatory until it was brought to the notice of the respondent by service, and did not suspend the obligation to cohabit, as Henn Collins J decided in Gibbs-Smith v Gibbs-Smith. In that case, he was considering the effect of a petition for divorce in the High Court. However, the words of the statute are plain, and I think that the date of the summons must be taken to be the date of the institution of the proceedings. The desertion commenced in this way. In October 1933, the respondent said that he would prefer to live with his mother, and left his wife against her will. She saw him repeatedly, and asked him to reconsider his decision. At Christmas 1933, she rejoined him at his mothers house for a period which it has been difficult to ascertain with accuracy. The petitioner, however, has given evidence that they were together there until about 27 January 1934. She fixes the date as being about 4 days before her father had purchased a business, which it was intended should be run by the petitioner and the respondent, in conjunction with her father and mother, at Kingston. The father and mother took over the business on 1 February or 2 February 1934. The petitioner left the house of the respondents mother as she did for the purpose of going home to pack

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up, and, when she left, she was under the impression, given to her by her husband, that he was going to join her at the shop at Kingston on the date arranged. He never did so, notwithstanding her request by letter, and they never lived together again. The business was given up within a few weeks, and on 10 June 1934, the husband wrote to his wife finally declaring his intention not to return to her any more.

The terminal date from which desertion must commence would be, at the latest, 28 January 1934, and I think, therefore, that the date on which the husband failed to arrive at the new business, as promised, was too late to come within the period of 3 years. I am satisfied, however, from the conduct of the respondent, that he never really intended to rejoin his wife, and that desertion commenced from the time when she left his mothers house, which I find to be either 27 January or 28 January 1934, to pack up her things with a view to settling in the new home. The law takes no account of part of a day for such a purpose as this, and desertion for a period of 3 years, therefore, was complete on 27 January 1937, the day before the issue of the summons. In these circumstances, desertion has been proved, and there will be a decree nisi.

Decree nisi granted.

Solicitors: Kingsford Dorman & Co, agents for Weigall & Inch, Margate (for the petitioner).

J F Compton Miller Esq   Barrister.

Re Ripon (Highfield) Housing Order 1938

Applications of White and Collins

[1939] 3 All ER 548


Categories:        HOUSING: TOWN AND COUNTRY PLANNING        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND LUXMOORE LJJ AND HUMPHREYS J        

Hearing Date(s):        21, 22 JUNE, 6 JULY 1939        


Public Health Housing Compulsory purchase “Park, garden or pleasure ground” “Required for the amenity or convenience of any house” Finality of Ministers decision Housing Act 1936 (c 51), s 75.

A local authority, proceeding under the Housing Act 1936, ss 73, 74, made a compulsory purchase order for the purpose of acquiring land as a site for the erection of houses for the working classes. The land acquired was alleged to be part of the grounds of a large house, and, therefore, not properly included in a compulsory purchase order as formingin the words of s 75“part of any park, garden or pleasure ground, or otherwise required for the amenity or convenience of any house.” A local inquiry was duly held, and the Minister confirmed the order, but excluded a considerable part of the land therefrom:

Held (i) for land to be protected from a compulsory purchase order under s 75, it may either be land which is part of a park, garden or pleasure ground, or land which is otherwise required for the amenity or convenience of a house. Once it has been shown to be part of a park, it is unnecessary to show in addition that it is also required for the amenity or convenience of a house.

(ii) the word “park” in this section bears, not its original legal meaning, but its wider popular meaning. Land does not cease to be parkland merely because it is let for grazing.

(iii) there is no general rule that, when the Minister has made a

Page 549 of [1939] 3 All ER 548

decision under this section, that decision cannot be questioned in a court of law. The proceedings before the court are not in the nature of an appeal. They are new and independent proceedings. The court has jurisdiction to review a finding of fact on which the existence of its jurisdiction dependsin this case, the question of whether the land was part of a park.

(iv) on the facts of the present case, the land in question was part of a park. A compulsory order for its purchase was, therefore, not within the powers given by the Act, and there was no jurisdiction to make or confirm such an order. The order of the Minister ought, therefore, to be quashed.

(v) there is, however, nothing in the Act to prevent a local authority from compulsorily acquiring the whole of a property. It is a part only which cannot be compulsorily taken.

Decision of Charles J ([1939] 1 All ER 508) reversed.

Re Bowman, South Shields (Thames Street) Clearance Order 1931(3) distinguished.

Bunbury v Fuller followed

Notes

It was stated in the court of first instance that, there being evidence upon which the Minister could arrive at his decision, and there being no usurpation of jurisdiction, the matter could not be reviewed in the courts. The Court of Appeal, however, have not taken this view, and they have held that there is jurisdiction to review a finding of fact in this case. Properly considered, the proceedings were not in the nature of an appeal, but were new and independent proceedings. In addition to this general question on the jurisdiction, the court have carefully considered the construction of the Housing Act 1936, s 75, and also the meaning of the word “park” as used therein.

As to Conditions of Acquisition of Land for Housing Purposes, see Halsbury (Hailsham Edn), Vol 26, pp 562564, para 1185; and for Cases, see Digest, Supp, Public Health, Nos 502g506d. For the Housing Act 1936, s 75, see Halsburys Complete Statutes of England, Vol 29, p 622.

Cases referred to

Pease v Courtney [1904] 2 Ch 503; 40 Digest 746, 2766, 73 LJCh 760, 91 LT 341.

R v Bradford [1908] 1 KB 365; 26 Digest 356, 819, 77 LJKB 475, sub nom R v Bradford, Ex p Chambers 98 LT 620.

Re Bowman, South Shields (Thames Street) Clearance Order 1931 [1932] 2 KB 621; Digest Supp, 101 LJKB 798, 147 LT 150.

Bunbury v Fuller (1853) 9 Exch 111; 19 Digest 482, 3416, 23 LJEx 29, 23 LTOS 131.

Re Newhill Compulsory Purchase Order 1937, Application of Payne [1938] 2 All ER 163; Digest Supp, 158 LT 523.

Re Butler, Camberwell (Wingfield Mews) No 2 Clearance Order 1936 [1938] 2 KB 210, [1938] 2 All ER 279; Digest Supp, 107 LJKB 419, sub nom Butler v Minister of Health 159 LT 47.

Stocker v Minister of Health [1938] 1 KB 655; Digest Supp, 107 LJKB 146, 158 LT 29, sub nom Re London County (Stoke Newington) Housing Order 1936, Stockers Appeal [1937] 4 All ER 678.

London General Omnibus Co Ltd v Lavell [1901] 1 Ch 135; 22 Digest 188, 1585, 70 LJCh 17, 83 LT 453.

Appeal

Appeal from a decision of Charles J, dated 8 February 1939, and reported [1939] 1 All ER 508, where the facts of the case and a description of the property in question are fully set out.

Page 550 of [1939] 3 All ER 548

R M Montgomery KC and W E P Done for the appellants.

The Solicitor-General (Sir Terence OConnor KC) and Valentine Holmes for the respondent.

Montgomery KC: To make the order in question here, the Minister must have decided that this land was not part of a park. There is no evidence that that was so. The word “park” has the ordinary meaning which it has in common speech. The definition given in the Imperial Dictionary was accepted by Swinfen Eady J, as he then was, in Pease v Courtney. [Counsel referred to R v Bradford, Bunbury v Fuller and Re Newhill Compulsory Purchase Order 1937, Application of Payne.]

Done: The statute gives a certain power to a local authority, but there are limitations of that power, and it is for the courts to see that those limitations are not exceeded. The court is not concerned with the view of the Minister, but only with what he has done. Otherwise the right to appeal given by s 2 would be valueless.

The Solicitor-General: The words “land … which forms part … of any park … or is otherwise required for the amenity or convenience of any house” cannot be applied to a park by itself. The word “otherwise” shows that the park must be associated with the house. [Counsel referred to Re Newhill Compulsory Purchase Order 1937, Application of Payne, R v Bradford, Re Bowman, South Shields (Thames Street) Clearance Order 1931, Re Butler, Camberwell (Wingfield Mews) No 2 Clearance Order 1936 and Stocker v Minister of Health.]

Holmes: In Re Bowman, South Shields (Thames Street) Clearance Order 1931, Swift J construed the 1930 Housing Act and that case has invariably been accepted by all three judges who dealt with cases under that Act, and by the Court of Appeal. Swift J decided that these were matters solely for the Minister. The provisions of that Act were repeated by Parliament in precisely the same form in 1936. The Act provides an alternative remedy to a writ of certiorari, but it is a very limited right of appeal. Even if all the evidence before the Minister were to the effect that this land was a park, that would not conclude the matter. The court must also find that all that the evidence showed was that it was required for the amenity of the house. If it is not required for the amenity or convenience of the house, the land can be taken even if it is part of a park. The court must give a meaning to the word “otherwise” in this section. Any other construction renders that word otiose.

Montgomery in reply: In Re Bowman, South Shields (Thames Street) Clearance Order 1931, the position was one to which s 75 (or its equivalent) did not apply, and in that case Swift J did go too far. The question whether a house is insanitary is not one suitable for a court to decide. It is more for an engineer or an architect. This is not an appeal at all, and therefore it is not a retrial. The court has evidence, just as in a case of certiorari, to show that there was no ground on which the Minister could decide as he did. The 1936 Act was a mere consolidating

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Act, and cannot, because it repeats the words of the old Act, mean that no court can question the decision of Swift J. A view by an inspector cannot take the place of evidence: London General Omnibus Co Ltd v Lavell.

R M Montgomery KC and W E P Done for the appellants.

The Solicitor-General (Sir Terence OConnor KC) and Valentine Holmes for the respondent.

6 July 1939. The following judgments were delivered.

MACKINNON LJ. This is an appeal from an order of Charles J, by which he dismissed a motion by the appellants. That motion was made pursuant to RSC Ord 55B, r 71, and the Housing Act 1936, Sched II, s 2. The appellants, alleging themselves to be persons aggrieved by a compulsory purchase order confirmed, under the Act of 1936, by the Minister, moved the court to quash the order on the ground that it was not within the powers of the Act. The question, therefore, was whether the order was within those powers. If, on such an application, the court is satisfied that the order was not within the powers of the Act, the court, under Sched II, s 2(ii), “may”and, if so satisfied, ought toquash the order. By RSC Ord 55B, r 72, the evidence upon such an application is to be by affidavit, unless at the hearing the court orders oral evidence to be given. No order for any but affidavit evidence was made in this case.

The material parts of the Housing Act 1936, are as follow. By s 74, a local authority may make an order for the compulsory purchase of land and submit such order to the Minister for his consideration under Sched I. By s 75, it is provided as follows:

Nothing in this Act shall authorise the compulsory acquisition … of any land which … forms part of any park, garden or pleasure ground, or is otherwise required for the amenity or convenience of any house.

By Sched I, s 3, the local authority, before submitting the order to the Minister, must publish advertisements and serve notices, so that persons interested in the land may put forward their objections. By s 4, if such objections are made, the Minister, before confirming the order, shall cause a local inquiry to be held, and shall consider any objection not withdrawn, and also the report of the person who held the inquiry, and may then confirm the order with or without modification. By Sched II, s 1, when an order has been confirmed by the Minister, the local authority is to publish that fact in a specified manner. By Sched II, s 2, any person aggrieved by an order so confirmed, and desiring to question its validity on the ground that it is not within the powers of the Act, may apply to the court to quash the order, and the court has thereupon the power and the duty which I mentioned above.

This case concerns a property named Highfield, on the outskirts of Ripon. The property consists of a large house with some 35 acres of land surrounding it. Its occupant is an old lady who is of unsound mind. The applicants were Mr Rennoldson, the receiver in lunacy of her estate, and the executors of the will of her deceased sister, who, subject to her life interest, have a half-share of the property. On 3 January 1938, the Ripon City Council made an order, under s 74 of

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the Act, for the compulsory purchase of some 23 acres of the land attached to Highfield House, and on 12 January they served a notice of this order on Mr Rennoldson, as receiver. On 26 January, he served on the Minister a notice of objection. In that he specified 8 grounds of objection, of which the second was as follows:

That the order is contrary to the Housing Act, 1936, s. 75. The land proposed to be acquired forms part of parkland, garden, and pleasure ground, and is required for the amenity or convenience of Highfield House.

The Minister thereupon directed Mr E E Hall to conduct a public inquiry at Ripon, and Mr Hall did so on 23 March and 25 March. We were told that Mr Hall is an architect. We have had in evidence a report of the proceedings before him. It appears from that that Mr Hall intimated that he intended to inspect the property himself. It is probable that he did so, but we have no evidence about that. The proceedings before him appear to have ranged over a great diversity of topics. The precise point, relied on by the appellants before us, that this land was part of a “park,” and therefore, under s 75, outside the powers of the Act, does not appear to have been clearly raised. In the examination of Mr Ingram, housing director to the corporation, however, counsel for the corporation asked:

With regard to the question of parks, gardens and pleasure grounds in relation to Highfield, is it within your knowledge that the land is let?Yes. To a Mr. Scholefield, who uses it for agricultural purposes, the grazing of cattle.

In the examination of Mr Molyneux, the city surveyor, reference was made to a previous order in regard to a place called Holmfield, and he was asked:

Was not this a similar proposal to purchase a paddock adjoining a large house?It was turned down by the Minister, inasmuch as in his opinion, it came within the protection of the Housing Act … the Highfield paddock was let on a yearly tenancy, while the other [at Holmfield] was not let at all.

Mr Denman, an expert land agent, said that this land was “a typical piece of parkland,” that the amenity of it was having it attached to the house, and that, from the point of view of that amenity, it did not in the least matter if it was occupied by the owner or let for grazing. Finally counsel for the corporation is reported as making a submission as follows:

With regard to sect. 75 of the Act, it is obvious that it means a park, garden or pleasure ground attached to the house. … This land is now in no sense attached to this house as park or garden. … It cannot be said to be a park, garden or pleasure ground, because it is let on a yearly tenancy and not required for the purpose of this house. It is not used at all by the occupiers.

Presumably Mr Hall made a report to the Minister, and the Minister, under Sched I, s 4, considered that report. What he reported we do not know. An affidavit by Mr Wrigley, of the Ministry of Health, was before us. Paras 3 and 4 of that are as follow:

(3) Before a decision was arrived at to confirm the order the subject matter of this appeal with modifications the report of Mr. E. E. Hall as to the evidence given

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at the inquiry and as to his personal inspection of the land included in the order together with the representations made by the applicants were duly considered.

(4) As a result of such consideration it was considered that the land the subject-matter of this appeal did not form part of the park, garden or pleasure ground of Highfield and that in any event the same was not required for the amenities or convenience of the said house.

That, however, is all we know of the materials before the Minister on which he made his decision.

On 24 June 1938, the Minister confirmed the compulsory purchase order, with a modification (by decreasing the amount of the land to be taken) which is immaterial. On 13 July, notice of this confirmation was served by the council on Mr Rennoldson.

On 22 August, notice of motion under RSC Ord 55B, r 71, was served on the Minister and the council by the present applicants, asking that the order might be quashed as being “not within the powers of the said Act.” This alleged as the most material ground that “the said land formed and still forms part of a park.” The only evidence filed on this motion, under RSC Ord 55B, r 72, consisted of three affidavits, by Mr Rennoldson and Mr Denman, for the applicants, and by Mr Wrigley for the respondents. The only material evidence on the question whether this land is part of a park is that of Mr Denman, who describes the estate as follows:

The estate comprises approximately 35.72 acres of land including 27 acres of paddock land in the nature of amenity parkland and approximately 8 acres of grounds with chauffeurs lodge, large garages, conservatories and kitchen gardens. The house itself is an imposing stone-built residence. It is a house of the type and size to which it is invariably expected to find paddock and parkland attached. Without them the house and grounds are not such as to attract a purchaser or tenant.

To the west and north-west of the dwelling-house and gardens lies an expanse of open grassland studded with trees of an approximate area of 23.46 acres. This land is undoubtedly the parkland attaching to the house of Highfield. It is obvious on inspection of the site that the architect in designing Highfield so placed the house as to benefit by the amenity of the open stretch of land on its west side while at the same time a convenient and pleasant approach was provided from Palace Road and College Road with a through drive, the approach from Palace Road being made through the gardens and the latter through the park. It is an essential part of a house of this type to possess besides its ordinary formal garden an open expanse of paddock land, generally as in this case possessing ornamental timber and described as a park or parkland. The primary purpose of this parkland is the protection of the mansion house, both as to its approach and its aspect. Often the land can be utilised for running horses etc. but usually it is let off to neighbouring farmers or owners for grazing purposes, and the fact that this land is so let does not render it the less properly described in the market as parkland.

A plan of the property is exhibited to Mr Rennoldsons affidavit.

The Oxford English Dictionary defines a park as follows.

1. Law. An enclosed tract of land held by royal grant or prescription for keeping beasts of the chase. 2. Hence extended to a large ornamental piece of ground, usually comprising woodland and pasture, attached to or surrounding a country house or mansion, and used for recreation, and often for keeping deer, cattle, or sheep. (In these the name has either come down from a time when the ground was legally a park in sense 1, or has been more recently given to a ground laid out in imitation of such as were originally parks …)

It is true that 35 acres is not a very large piece of ground, but I see no reason why it should not be a park, if perhaps a small one. In Pease v Courtney, Swinfen Eady J was concerned with an area of 55 acres attached to a house. He held that this was a “park” within

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the Settled Land Act 1890, s 10, and that the word as used in that section is not confined to an ancient legal park, but includes an ordinary private park. Not having available then the Oxford English Dictionary, he had to rely on the following definition in the Imperial Dictionary:

A considerable extent of pasture and woodland, surrounding or adjoining a mansion-house, devoted to purposes of recreation or enjoyment, but chiefly to the support of a herd of deer, though sometimes to cattle and sheep.

So in R v Bradford the court held that a field of 30 acres attached to a house was a “park” within the meaning of that word in the Highway Act 1835. It is to be noted that the field in that case was let for grazing.

Upon the evidence before us, I am satisfied that this land was part of a park within the meaning of s 75 of the Act of 1936, that its compulsory purchase was, therefore, not within the powers of the Act, and that therefore the order of the Minister ought to be quashed. I say “upon the evidence before us.” I have said that we do not know what materials were before the Minister, though para 3 of Mr Wrigleys affidavit refers to, but does not specify, these materials. I would add, however, that, if Mr Hall, and the Minister in his turn, accepted the contention of counsel for the corporation at the inquirynamely, that this land had ceased to be a park when, and because, it was let for grazingthat was manifestly an erroneous view. It is notorious that hundreds of undoubted “parks” throughout the country are so let for grazing. I should not be surprised to hear that this obtains at Chatsworth or Badminton, or even in Windsor Great Park.

In the court below, Charles J appears to have approved a contention which was renewed before us for the respondentsnamely, that this case is governed by the decision of Swift J, in Re Bowman, South Shields (Thames Street) Clearance Order 1931, and by some later cases in which a supposed principle laid down by that case has been followed. Bowmans case arose under the Housing Act 1930, but that Act contained in s 11(3) a provision identical with Sched II, s 2, of the 1936 Act. Bowman, as the person aggrieved, was complaining of a clearance order, and alleged, among many things, and as his principal grievance, that his houses were not unfit for human habitation. That was a pure question of fact. Counsel for the applicant had to admit that there was evidence on which the council and the Minister might come to the conclusion that the houses were unfit. In those circumstances, Swift J said, at p 635:

I do not think that this court is authorised to retry or rehear the case …

Accordingly, he declined to hear evidence as to the condition of the houses. That decision, upon the facts of that case, was no doubt correct. It is absurd, however, to deduce from it a suggested rule that, whenever the Minister has made a decision, it cannot be questioned in this court by an aggrieved person. Indeed, any such rule would obviously reduce

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to a complete nullity the right of anybody to apply to the court under Sched II, and would make that right absolutely worthless.

Counsel for the respondent impressed upon us the importance of the duties of local authorities as to rehousing under this Act, and deprecated interference with them. I appreciate that importance, but it must be subject to observance of the clear words of s 75 of the Act. Moreover, I might point out that that section refers only to Land “which forms part of any park, garden or pleasure ground.” There would be nothing to prevent the Ripon Council from acquiring compulsorily the whole of the Highfield property, including the house, or the whole of the Holmfield property, as to part of which they made a previous unsuccessful attempt. The owners would have no power to interfere with them. Perhaps they would have the consolation that, however much they suffered sentimentally, they would not suffer financially. In the result, I think that Charles J was wrong in dismissing this application, that the appeal should be allowed, and that the Ministers order should be quashed. The appellants must have their costs here and below.

LUXMOORE LJ. The question to be determined on this appeal is whether there was jurisdiction for a local authority to make an order empowering the compulsory purchase of land forming part of a residential property known as Highfield. This property is situate at Ripon in Yorkshire, and contains a total area of approximately 35 acres. The part which is included in the order occupies about 20 acres. The appellants who are persons interested in the property, contend that there was no jurisdiction to make or confirm the order, because the land to which it relates is part of the park of Highfield, or, alternatively, that it is required for the amenity of the dwelling-house situate on the Highfield estate.

The order in question was made by the Ripon Borough Council and has been confirmed by the Minister of Health. It purports to have been made and confirmed under the powers conferred by a number of sections contained in the Housing Act 1936, Part V. This part of the Act relates to the provision of housing accommodation for the working classes. S 71 imposes on every local authority the duty of reviewing housing conditions in its areas and of framing proposals. S 72 provides for the mode in which such housing accommodation may be provided. S 73 confers on each local authority power to acquire land, including any houses or other buildings thereon, as a site for the erection of houses for the working classes. S 74 provides as follows:

Land for the purposes of this part of this Act may be acquired by a local authority by agreement, or they may be authorised to purchase land compulsorily for those purposes by means of a compulsory purchase order made and submitted to the Minister [of Health] and confirmed by him in accordance with the provisions of Sched. I to this Act.

S 74(4) provides as follows:

The provisions of Sched. II to this Act shall have effect with respect to the

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validity and date of operation of a compulsory purchase order made under this section.

Pausing here, it is to be observed that up to this point no limitation is placed on the nature of the land which may be taken by a local authority, whether the purchase be by agreement or under a compulsory purchase order. S 75, which contains restrictions upon the compulsory acquisition of land for the purposes of Part V of the Act, provides as follows:

Nothing in this Act shall authorise the compulsory acquisition for the purposes of this part of this Act of any land which is the property of any local authority, or which is the property of statutory undertakers, having been acquired by them for the purposes of their undertaking, or which at the date of the compulsory purchase order forms part of any park, garden or pleasure ground, or is otherwise required for the amenity or convenience of any house.

It is under the last-mentioned section that the question to be determined arises, for it is contended that the land which is comprised in the order under consideration is part of the park of Highfield, and cannot, therefore, be the subject of an order empowering compulsory purchase. It is also contended that, if the land is not part of the park of Highfield, the order is invalid because the land affected is required for the amenity or convenience of the house on the Highfield estate. A question was raised on the construction of the section, the contention on the one hand being that, if the land sought to be taken were part of a park, garden or pleasure ground, no further question could arise, while on the other hand it was said that the words “required for the amenity or convenience of any house” qualify the words “part of a park, garden or pleasure ground.” It is to be observed that the words “part of a park, garden or pleasure ground” are themselves words of qualification, the governing words being “any land.” In the dependent sentence, beginning with the words “which at the date of the compulsory purchase order,” the words “forms part of any park, garden or pleasure ground, or is otherwise required for the amenity or convenience of any house” relate to the antecedent “any land,” and the words “forms part of any park, garden or pleasure ground” are as much descriptive of the words “any land” as are the words which are to be found in the latter part of the dependent sentence, introduced by “or,” the second disjunctive. The section should, in my judgment, be read in the same way as if it had been expanded as follows: “any land which is part of a park, garden or pleasure ground, or any land which is otherwise required for the amenity or convenience of any house.” The presence of the word “otherwise” seems to preclude any other meaning, for it predicates that the land to which it refers is other than “part of a park, garden or pleasure ground.”

Apart from any question of grammar, this construction appears to me to be the sensible one, for it recognises that, once it is established that land sought to be taken is part of a mans park, garden or pleasure ground, it ought not to be necessary for its owner to show that he requires

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it for the amenity or convenience of his house. It is obviously in a different position from that of land belonging to such an owner which does not form part of his park, garden or pleasure ground. In such a case, it seems fair to put on the owner, who seeks to prevent the making of a compulsory order, the burden of proving that the land sought to be affected is required by him for the amenity or convenience of his house, which is not being taken. It is to be noticed that, so far as the “park, garden or pleasure ground” is concerned, what is prohibited from being subjected to a compulsory order is a part only of land falling within that description. There is nothing in the section to prevent the house, park, garden and pleasure ground from being taken compulsorily, if they are taken as a single entity. In my judgment, the section, on its true construction, excludes from liability of inclusion in a compulsory purchase order any part of a park, and, if it can be shown that the land in question in this case is part of a park, there is no jurisdiction to make or confirm such an order, and it ought to be quashed. So much for the question of construction.

The next question to be determined is what is meant by the word “park.” Is it used here in its strict legal sense, or is it used in its wider and more popular meaning? In its strict legal significance, the word “park” means:

A tract of land enclosed and privileged for wild beasts of chase by the monarchs grant or by prescription.

In its popular sense, it is defined in the Oxford English Dictionary as follows:

… a large ornamental piece of ground, usually comprising woodland and pasture attached to or surrounding a country house or mansion, and used for recreation, and often for keeping deer, cattle, or sheep.

The word “park” has frequently been held to have been used in its popular sense in Acts of Parliament: Pease v Courtney, where Swinfen Eady J held that the word was so used in the Settled Land Acts, and R v Bradford, where a Divisional Court, of which Channell, Bray and Sutton JJ, were members, held that the word was used in the same sense in the Highway Act 1835. I have no hesitation in holding that in the Housing Act 1936, the word “park” is used in its popular meaning.

No question arises with regard to the procedure followed in the making and confirming of the order to which objection is made. The proper steps laid down by Sched I of the 1936 Act were complied with. One of those steps included the holding of a public inquiry by an inspector appointed by the Minister of Health, who heard counsel for various parties interested, including the borough council and the appellants, and the evidence of certain witnesses. In addition, the inspector viewed the land in question. He made a report as to the result of his inspection and also relating to the inquiry. Both these reports were submitted to, and considered by, the Minister of Health, who, after considering them,

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confirmed the order made by the borough council. We are told that the order was confirmed because:

… it was considered that the land the subject of the order did not form part of the park, garden or pleasure ground of Highfield and that in any event the same was not required for the amenities or convenience of the said house.

After the order had been confirmed, the appellants, being persons who felt themselves aggrieved by the order, and being desirous of questioning the validity of the order on the ground that it was not within the powers of the Act, made an application to the High Court for that purpose under the provisions of Sched II, s 2. It is to be remembered that an application made under this section is not by way of appeal from the order of the borough council or from its confirmation by the Minister. It is an independent proceeding, and is made to the High Court by motion, as required by RSC Ord 55B, r 71. The application in the present case was by motion, and it was supported by affidavit evidence in accordance with the provisions of RSC Ord 55B, r 72. This rule provides that the evidence upon the hearing of the applicationthat is, under the Housing Act 1936shall be by affidavit, except in so far as the court at the hearing may direct oral evidence to be given. The appellants evidence consisted of two affidavits, the contents of which were directed to informing the court with regard to the physical features of the land comprised in the order, and certain other information material for the consideration of the two points raised by the appellantnamely, (i) that the land in question was part of the park of the dwelling-house, and (ii) that it was required for the amenity and convenience of that house. The respondents to the motion are the Minister of Health and the Ripon Borough Council. The evidence filed on their behalf consists of an affidavit by an officer of the Ministry of Health who is described in the affidavit as the director and principal assistant secretary of the Housing and Town Planning Division of the Ministry of Health. He states as follows in his affidavit:

(3) Before a decision was arrived at to confirm the order … with modifications [which are not material to be considered on this appeal] the report of Mr. E. E. Hall [the inspector who held the public inquiry to which reference has already been made] as to the evidence given at the inquiry and as to his personal inspection of the land included in the order together with the representations made by the applicants [the appellants] were duly considered. (4). As a result of such consideration it was considered that the land the subject-matter of this appeal did not form part of the park, garden or pleasure ground of Highfield and that in any event the same was not required for the amenities or convenience of the said house.

There are exhibited to this affidavit (i) the order made by the Ripon Borough Council, and the plan attached thereto, (ii) the applicants notice of objection, and (iii) the transcript of the shorthand notes of the proceedings at the inquiry. No disclosure is made of either of the two reports made by the inspector, nor is there any statement of the reasons why the Minister came to his conclusion, but it appears from the statement in para 4 of the last-mentioned affidavit that the Minister took the view that the material point to be considered was whether the law affected was required for the amenities or convenience of the house,

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and that, if it was not required for those purposes, it was immaterial whether or not it formed part of the park. If this was the view taken of the construction of s 75 of the 1936 Act, I think, for the reasons already stated, that the Minister was in error in so doing.

A consideration of the transcript of the proceedings before the inspector shows that the only ground relied upon by the Ripon Borough Council to establish that the land in question was not part of the park of Highfield was the admitted fact that it was let to a farmer for the grazing of cattle and sheep, and it was argued that this letting prevented the land from being part of the park. It was admittedat any rate, in this courtthat this argument was untenable. It appears to me that, in view of the decision in R v Bradford, that admission was inevitable. The evidence before the inspector was not given on oath, and the proceedings were necessarily far less formal than they would be in a court of law. I have carefully considered the transcript, and can find but little evidence directed to prove that the land in question is part of the park of Highfield, and none to justify a finding that it is not part thereof. There is some evidence, however, to support the view that the land is not required for the amenities or convenience of the house. The evidence in the affidavits in support of the application is uncontradicted, and leads only to the conclusion that the land is part of the park. This evidence was not before the Minister, and, although it was before Charles J, when he heard the motion, he does not appear to have considered it, for, in refusing to quash the order of the borough council and its confirmation by the Minister, he based that refusal on the ground that the Minister had decided that the land in question was not part of the park, or required for the amenity or convenience of the house, and that, as these were questions of fact, he would not interfere with the findings, as he had no power to retry or to rehear the case. In my judgment, Charles J was in error in deciding as he did. As I have already pointed out, the proceeding before Charles J was not by way of appeal from any order made by the borough council, or its confirmation by the Minister of Health. It was a new and independent proceeding, and not a rehearing of a retrial.

The first and most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact, for, unless the land can be held not to be part of a park, or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. In such a case, it seems almost self-evident that the court which has to consider whether there is jurisdiction to make or confirm the order must be entitled to review the vital finding on which depends the existence of the jurisdiction relied upon. If this were not so, the right to apply to the court would be illusory. There is, however, ample authority that the court is entitled so to act, for the point has been considered in a number of cases. It is sufficient to refer to Bunbury v Fuller. In that case,

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Coleridge J, delivering the judgment of the Court of Exchequer Chamber, said, at p 35:

… it is a general rule that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars making up together that subject-matter which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet upon this preliminary question its decision must always be open to inquiry in the superior court. Then, to take the simplest casesuppose a judge with jurisdiction limited to a particular hundred, and a matter is brought before him as having arisen within it, but the party charged contends that it arose in another hundred, this is clearly a collateral matter independent of the merits. On its being presented, the judge must not immediately forbear to proceed, but must inquire into that preliminary fact and for the time decide it, and either proceed or not with the principal subject matter according as he finds on that point; but this decision must be open to question, and if he has improperly either forborne or proceeded on the main matter in consequence of an error on this, the Court of Queens Bench will issues its mandamus or prohibition to correct his mistake.

As in Bunbury v Fuller, and also in R v Bradford, so also in the present case, the decision on the question whether or not the particular land is part of a park is preliminary to the exercise of the jurisdiction to make and confirm the order conferred by the Housing Act 1936, s 76, and is, therefore, open to review in this court. In arriving at his decision, Charles J stated that he agreed with the decision of du Parcq J in Re Newhill Compulsory Purchase Order 1937, Application of Payne, and with that of Swift J in Bowmans case, in support of the view that he had no power to review the decision of the Minister of Health because the question to be determined was one of fact. In the latter case, a question arose with regard to the validity of a clearance order under the Housing Act 1930. The validity was challenged on a number of grounds, one of which was that there was no sufficient evidence to show that the buildings were unfit for habitation or dangerous or injurious to health. Counsel for the applicant admitted that there was evidence upon which the local authority might have come to the conclusion that the buildings were unfit for habitation or dangerous or injurious to health, although he asked to be allowed to call further evidence on the point. During the argument, Swift J said, at p 627:

An application may be made to this court under sect. 11(3) [which for all practical purposes is the same as the Housing Act, 1936, Sched. II, s 2(ii)] only on the grounds there specified, namely, that the order is not within the powers of the Act, or that some requirement of the Act has not been complied with, or on the further ground that there was no evidence to support the order; but not on the ground that there was not sufficient evidence to support the order. In this case it cannot be contended that there was no evidence to support the findings as to the condition of these houses.

There is nothing to show what was the nature of the further evidence it was desired to bring before the court, and it may well be that in substance the evidence before the court was, for all practical purposes, sufficient. In this court, reliance was placed on the statement of Swift J, at p 634, that an aggrieved person:

… is not … entitled to come here and complain that the local authority have made

Page 561 of [1939] 3 All ER 548

a mistake in fact in making the order. He is not entitled to say that his house is not insanitary or unfit for human habitation, and, that, therefore, the order should not have been made.

If this statement was intended by the judge to be of universal application to all cases under s 11(3) of the 1930 Act, and therefore also to all cases under Sched II, s 2, of the 1936 Act, I should have no hesitation in saying that it went too far, for it ignores the rule laid down in Bunbury v Fuller, to which reference has already been made, a decision which Swift J had no power to overrule. Indeed, no reference appears to have been made to it during the argument of Bowmans case. I think that the remarks of Swift J must be read in the light of the facts of the case before him, and especially with regard to the provisions of s 1 of the 1930 Act, which appear in express terms to make the local authority the judge of whether or not the houses in question are fit for habitation, for the material words of that section are as follow:

(1) Where a local authority, upon consideration of an official representation or other information in their possession, are satisfied [that the houses in the area are unfit, then an order may be made].

This provision differs materially from the present case. S 75 of the 1936 Act does not refer in terms to the local authority being satisfied that the land is not part of a park. The making of the order for compulsory purchase is prohibited if the land is part of a park, a matter which can only be proved or disproved by evidence. In the Newhill case, du Parcq J came to a conclusion on the facts, and added, at p 167, that, if he was wrong in so doing, it was:

… enough to say that the evidence does not satisfy me that the Minister was wrong when he came to the conclusion … that it [the land in question] was not a pleasure ground. … The Minister having made up his mind about it, as far as I can tell, on proper materials, and without misdirecting himself as to the true point at issue, it is not for me to interfere, when there are no materials upon which I can interfere.

The judge obviously thought that the materials for deciding the particular case were sufficient, for he came to a conclusion on them, and, that being so, no question arose with regard to the consideration of further evidence, for there was no reason why the question of further evidence should be considered. I am quite unable to accept the view of this case taken by Charles J, that du Parcq J purported to lay down a rule that a finding by the Minister in respect of any matter arising under s 75 cannot be disturbed.

The true position with regard to applications under Sched II, s 2, of the 1936 Act appears to me to be that the judge to whom the application is made is bound to consider the available evidence, whether given at the local inquiry or given by the affidavits in support of, or in opposition to, the motion, and, if there is a conflict with regard to the facts raised, or if the evidence is insufficient to enable him to come to a conclusion, he is free to direct that oral evidence be given, whether by way of cross-

Page 562 of [1939] 3 All ER 548

examination or by way of additional evidence under the provisions of RSC Ord 55B, r 72.

In the present case, as I have already stated, I am satisfied that there was no evidence before the inspector sufficient to entitle the local authority or the Minister to come to a conclusion that the land in question was not part of the park of Highfield. I am further satisfied that, on the affidavit evidence on the present application, which could not be excluded or ignored, although it was not before the Minister of Health, the only conclusion open to the court is that the land was a part of the park of Highfield. If there was any other evidence before the Minister, he has failed to disclose it, and the court is, therefore, unable to consider it. I have refrained from dealing with the question whether the land was required for the amenity or convenience of the house, because, on the construction of s 75 which I have held to be correct, this question is immaterial. In these circumstances, it seems to me plain that there was no jurisdiction in the Ripon Borough Council to make, or in the Minister to confirm, the order for compulsory purchase, and that Charles J should, therefore, have quashed the order. In my judgment, the appeal must be allowed, with costs here and in the court below.

MACKINNON LJ. I am authorised and desired by Humphreys J, to say that he has read these judgments, and that he concurs in them and agrees with the proposed order.

Appeal allowed with costs in both courts.

Solicitors: Clarke Rawlins & Co, agents for J H & H F Rennoldson, South Shields (for the appellants); The Solicitor, Ministry of Health (for the respondent).

E Fuller Briscoe Esq   Barrister.

Lock v Abercester Ltd

[1939] 3 All ER 562


Categories:        LAND; Property Rights        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        3, 4, 5 JULY 1939        


Easements Right of way Proof of user for horses and carts Right to use for mechanically-propelled vehicles.

The successive rectors of H had used a way across a farm as the means of getting to and from the rectory. It was proved that the rectors and those having business with them had used the way both on foot and with horses and carts for more than 40 years. Upon a union of benefices, the rectory was sold, and the new owner, who used the land for agricultural purposes, caused the way to be used by mechanically-propelled vehicles. It was contended that proof of user by horse-drawn vehicles did not give a right to use the way for mechanically-propelled vehicles:

Held the user proved gave a right to use the way for mechanically-propelled vehicles.

Notes

A somewhat similar point to that here discussed was mentioned incidentally in A-G v Hodgson [1922] 2 Ch 429; Digest Supp, but there

Page 563 of [1939] 3 All ER 562

the right of way was created by grant. In the present case, the right of way is claimed by reason of user, but it is held that, although the user proved is one by horse-drawn vehicles only, yet the right of way acquired is a general right of way for vehicular traffic however propelled. It therefore extends to motor traffic.

As to Extent of User, see Halsbury (Hailsham Edn), Vol 11, pp 322327, paras 574578; and for Cases, see Digest, Vol 19, p 112, Nos 719724.

Action

Action for a declaration that the plaintiff was entitled to a right of way.

Erskine Simes for the plaintiff.

Alexander Grant KC and Roger Turnbull for the defendants.

5 July 1939. The following judgment was delivered.

BENNETT J. The object of this action is to establish that the plaintiff as the owner of property in the parish of Holt, in the county of Worcester, known as the Old Rectory, has as an appurtenance to the Old Rectory a right of way for herself and her servants on foot and with horses, cattle, and carriages over part of the farm known as Naunton Farm, owned by the defendants. The dominant tenement, the Old Rectory, is shown coloured pink on the plan annexed to the statement of claim, and the servient tenement owned by the defendants and the ground over which the right of way passes is also shown on the plan, the servient tenement being coloured yellow. The way to the Old Rectory was in the occupation, first of all, of the parson of the parish, Mr Sale, who was rector from 1847 to 1896, and his successor was a Mr Stamer, who was rector from 1897 to 1900. He was succeeded by Mr Eccleston, who was rector till 1904, and Mr Ecclestons successor was a Mr Fox, who was rector from 1904 till 1931, when he died. Then, or shortly after the date when he died, there was a union of benefices, and, as the result of that, the Ecclesiastical Commissioners for England, acting under the powers of the Union of Benefices Measure 1923, sold the rectory and some land forming part of it to the plaintiff, who was then Miss Matthews, and her aunt, Mrs Hodgetts. The property was conveyed to those two ladies by a deed dated 14 December 1932. Since the date of that deed, Mr Hodgetts, the plaintiffs aunt, has released her interest to the plaintiff, who is now seised in fee simple of the Old Rectory and the land shown on the plan drawn on the conveyance coloured pink and green. The proof by the plaintiff is that, from about 1882, until March 1938, the successive rectors of Holt and persons having business at the rectory used the way in dispute as a means of getting to and from the rectory. There is proof that the rectors of Holt themselves, and their horses and carts, went to and from the rectory over the way in dispute without ever having been stopped, and without their ever having asked permission of anyone. There is proof that the butcher and the baker during the whole of that period delivered goods at the rectory using the way in dispute as a means of getting to and from the rectory. There is proof that tradesmen who sold hay, straw, and corn to the rectory used the way in question as a means of bringing to the rectory the goods which they sold to the rector, conveying their goods sometimes on

Page 564 of [1939] 3 All ER 562

floats, sometimes on drays, drays dragged by a horse and sometimes by two horses. Moreover, there has been given before me evidence of witnesses whose evidence is really unimpeachable as to the general user over the period I have stated, which is more than 40 years, of the way in question as a means of conveying goods by horses and carts to and from the rectory, and, as a result of that evidence, I have no doubt whatever that the plaintiff has established that there is an easement to persons on foot, with carts and with horses, over the way in question, shown on the statement of claim plan coloured purple, from the rectory to the main road leading to Worcester. When the rectory house was sold to the plaintiff, she put the house and the land to a use not altogether the same as that to which it had been put by the several owners who occupied it before her. She began to use it for agricultural purposes, and I gather that she now has cows, chickens, and so on, which require to be fed, and that the tradesmen who supply her with the goods which she requires for that purpose, and with goods required for what is now the Old Rectory house, use not only horse-drawn vehicles but also vehicles which are mechanically propelled. A great many of the vehicles which are used by tradesmen for delivering things of that kind usually weigh more than the horse drawn vehicles which were used in the days before the petrol engine had been invented and before people made use of the modern motor car, and, not perhaps unnaturally, the present occupier of Naunton Farm, occupying the field over which the way in dispute passes, did not altogether like mechanically-propelled vehicles passing over his ground, nor did his landlords, the defendants. The question is whether they have a right to object. In March 1938, the defendants, taking the ground that there was no right of way at all over the way in dispute, and that the enjoyment theretofore had been merely permissive, locked one of the gates which was on the alleged right of way, and denied that there was a right of way for the plaintiff to the Old Rectory. It was that act on the part of the defendants which has given rise to the present litigation. I have already said that, in my judgment, the evidence has established beyond question that, as an appurtenance to the rectory, there is a right of way on foot, with horses and with carts. Of course, so far as proof is concerned, in the earlier part of the period there was no proof, so far as carriages were concerned, as regards carriages other than horse-drawn vehicles. The point which counsel for the defendants has taken is that, if proof is given of the use of horse-drawn vehicles, that does not give the right to use the way by mechanically-propelled vehicles, and, before a way used by mechanically-propelled vehicles can be claimed by the plaintiff, there must be proof that there has been a regular user by vehicles mechanically propelled. In my judgment, that is not the law. What is claimed is a carriageway, and, if one is claiming a carriageway, ones right is not restricted to carriages drawn by a particular kind of animal which one proves has drawn carriages over the way in question. As an example of the proof, if ones carriage

Page 565 of [1939] 3 All ER 562

has been drawn by a horse and one is not infringing ones rights, then if one drives over it in a cart drawn by a donkey or an ass one is still within ones rights, and, in my judgment, the claim is proved if the carriage is propelled by some form of engine. That I hold to be the law, and I do not think that it would be right to hold otherwise. As regards a great many rights of way which have been acquired by prescription, there are now no longer available for use the methods which were used in those days. In these days, there are used horse-drawn carriages and motor vehicles. As a matter of law, I decide that, where proof is given of a user over the required period by carriages drawn by horses, so as to establish a carriageway as an appurtenance, the right which is acquired is one which enables the owner of the property to which the road is an appurtenance to use the way with mechanically-propelled vehicles.

The action, in my judgment, succeeds. The defendants acted wrongfully from any point of view, because plainly, in my judgment, the right to use the way for horse-drawn vehicles has been established, and also because the defendants have failed to establish the real point in the case which has been arguednamely, whether or not the proof entitles the plaintiff to a way for mechanically-propelled vehicles. I think that the declaration to be made is that the plaintiff is entitled to the right of way from the Old Rectory as shown on the plan annexed to the statement of claim and thereon coloured pink and green, and over the way shown on the statement of claim plan coloured purple to the public highway and back again to her premises for herself, her servants on foot, and with horses, carriages and other conveyances at all times and for all purposes. There is a reference to a way for cattle, too, but there is no proof of any use which I think would warrant the making of a declaration that the way in question is a drift way. I will make the declaration in the terms I have stated. I do not know whether an injunction to restrain the defendants from locking the gates is necessary, but I will give the plaintiff liberty to apply for an injunction. The defendants must pay the costs of the action.

Judgment for the plaintiff with costs.

Solicitors: Clinton & Co, agents for Harrisons, Worcester (for the plaintiff); Edwin Coe & Calder Woods, agents for Tree Hemming & Johnston, Worcester (for the defendants).

Maurice Share Esq   Barrister.


Hartog v Colin & Shields

[1939] 3 All ER 566


Categories:        CONTRACT: SALE OF GOODS        

Court:        KINGS BENCH DIVISION        

Lord(s):        SINGLETON J        

Hearing Date(s):        27 JUNE 1939        


Mistake Price of subject-matter of transaction Goods offered at certain prices per pound instead of per piece Offerees knowledge of mistake Whether acceptance of such offer a binding contract.

The defendants contracted to sell to the plaintiff 30,000 Argentine hare skins, but by an alleged mistake they offered the goods at certain prices per pound instead of at those prices per piece, the value of a piece being approximately one-third that of a pound. In verbal and written negotiations which took place prior to the sale, reference had always been made to the price per piece and never to the price per pound, and expert evidence was given that Argentine hare skins were generally sold at prices per piece:

Held the plaintiff could not reasonably have supposed that the offer expressed the real intention of the persons making it, and must have known it to have been made by mistake. The plaintiff did not, by his acceptance of the offer, make a binding contract with the defendants.

Notes

An intending purchaser is not permitted to “snap up” an offer which he knows to have been made under a mistake. There have been decisions on this matter as a point in the law of contract, but there is no previously reported decision of a case of this kind where the contract was one for the sale of goods.

As to Mistake in Price Offered, see Halsbury (Hailsham Edn), Vol 23, p 138, para 195; and for Cases, see Digest, Vol 35, pp 108, 109, Nos 312140.

Cases referred to

Tamplin v James (1880) 15 ChD 215; 35 Digest 101, 84, 43 LT 520.

Webster v Cecil (1861) 30 Beav 62; 35 Digest 108, 133.

Paget v Marshall (1884) 28 ChD 255; 35 Digest 128, 291, 54 LJCh 575, 51 LT 351.

Harris v Pepperell (1867) LR 5 Eq 1; 35 Digest 111, 164, 17 LT 191.

Wood v Scarth (1855) 2 K & J 33; 35 Digest 140, 385, 26 LTOS 87.

Islington Union v Brentnall & Cleland (1907) 71 JP 407, 35 Digest 108, 137.

Smith v Hughes (1871) LT 6 QB 597; 35 Digest 107, 125, 40 LJQB 221, 25 LT 329.

Action

Action for damages for breach of a contract of sale of goods. The plaintiff alleged that the defendants had agreed to sell him 30,000 Argentine hare skins and had failed to deliver them. He claimed loss of profit, or, in the alternative, the difference between the contract price and the market price at the time of the breach.

The defendants pleaded that their offer was by mistake wrongly expressed. They alleged that they had intended to offer the goods sold at certain prices per piece, and not at those prices per pound, as their offer was expressed. They further alleged that the plaintiff was well aware of this mistake on their part, and fraudulently accepted an offer which he well knew that the defendants had never intended to make. In the circumstances, the defendants denied that any binding contract was entered into, and, if there was, counterclaimed for its rescission.

E Holroyd Pearce and H J Phillimore for the plaintiff.

Page 567 of [1939] 3 All ER 566

H C Marks for the defendants. [Counsel referred to Tamplin v James, Webster v Cecil, Paget v Marshall, Hams v Pepperell, Wood v Scarth, Islington Union v Brentnall & Cleland, Smith v Hughes, Halsburys Laws of England (Hailsham Edn), Vol 23, p 23, p 138, para 195, and Pollock on Contracts (10th Edn), p 485.]

E Holroyd Pearce and H J Phillimore for the plaintiff.

H C Marks for the defendants.

27 June 1939. The following judgment was delivered.

SINGLETON J. In this case, the plaintiff, a Belgian subject, claims damages against the defendants because he says they broke a contract into which they entered with him for the sale of Argentine hare skins. The defendants answer to that claim is: “There really was no contract, because you knew that the document which went forward to you, in the form of an offer, contained a material mistake. You realised that, and you sought to take advantage of it.”

Counsel for the defendants took upon himself the onus of satisfying me that the plaintiff knew that there was a mistake and sought to take advantage of that mistake. In other words, realising that there was a mistake, the plaintiff did that which James LJ, in Tamplin v James, at p 221, described as “snapping up the offer.” It is important, I think, to realise that in the verbal negotiations which took place in this country, and in all the discussions there had ever been, the prices of Argentine hare skins had been discussed per piece, and later, when correspondence took place, the matter was always discussed at the price per piece, and never at a price per pound. Those witnesses who were called on behalf of the plaintiff have had comparatively little experience of dealing in Argentine hare skins. Even the expert witness who was called had had very little. One witness, Mr Caytan, I think, had had no dealings in them for some years, though before that he had had some, no doubt. On the whole, I think that the evidence of Mr Wilcox, on behalf of the defendants, is the more likely to be rightnamely, that the way in which Argentine hare skins are bought and sold is generally per piece. That is shown by the discussions which took place between the parties in this country, and by the correspondence. Then on 23 November came the offer upon which the plaintiff relies. It was an offer of 10,000 Argentine hares, winters (100 skins equalling 16 kilos), at 10¼d per lb; 10,000 half hares at 6¾d per lb; 10,000 summer hares at 5d per lb. Those prices correspond, roughly, in the case of the winter hares, to 3¾d per piece, half hares 2d per piece, and summer hares 1¾d per piece. The last offer prior to this, in which prices were mentioned, was on 3 November from the defendants, and the price then quoted for winter hares was 10¾d per piece. Even allowing that the market was bound to fall a little, I find it difficult to believe that anyone could receive an offer for a large quantity of Argentine hares at a price so low as 3¾d per piece without having the gravest doubts of it.

I mention merely the price of the winter hares, because Mr Wilcox told me and I accept his evidence, that at some time the price of

Page 568 of [1939] 3 All ER 566

Argentine winter hares fell to 9d. I am satisfied, however, from the evidence given to me, that the plaintiff must have realised, and did in fact know, that a mistake had occurred. What did he do? Mr Hartog put it forward as being a bona fide act on his part that he at once went to Mr Caytan and entered into a contract with him. I am not sure that it points to a bona fide act at all. Mr Caytan, who was called before me, apparently entered into an arrangement with him on that same day, 23 November, to buy Argentine winter hares at 11¾d per lb, so that the price, if there had been a contract at 10¼d per lb, has risen on the sale of the goods to Mr Caytan to 11¾d per lb. That is 1½d up, which is a considerable increase, and much greater than that which he had been offering to pay in the letters which passed earlier. It is a much greater increase.

I cannot help thinking that, when this quotation in pence per pound reached Mr Hartog, the plaintiff, he must have realised, and that Mr Caytan, too, must have realised, that there was a mistake. Otherwise I cannot understand the quotation. There was an absolute difference from anything which had gone beforea difference in the manner of quotation, in that the skins are offered per pound instead of per piece.

I am satisfied that it was a mistake on the part of the defendants or their servants which caused the offer to go forward in that way, and I am satisfied that anyone with any knowledge of the trade must have realised that there was a mistake. I find it difficult to understand why, when Mr Caytan bought in this way at 11¾d per lb, he could not tell me what the total purchase price was, and I cannot help thinking that there was an arrangement of some sort, amounting rather to a division of the spoil. That is the view I formed, having heard the witnesses. I do not form it lightly. I have seen the witnesses and heard them, and in this case can form no other view than that there was an accident. The offer was wrongly expressed, and the defendants by their evidence, and by the correspondence, have satisfied me that the plaintiff could not reasonably have supposed that that offer contained the offerers real intention. Indeed, I am satisfied to the contrary. That means that there must be judgment for the defendants.

Solicitors: J H Fellowes (for the plaintiff); Wild Collins & Crosse (for the defendants).

W J Alderman Esq   Barrister.


Re Landi, Georgi v Navani

[1939] 3 All ER 569


Categories:        CIVIL PROCEDURE: LAND; Land Tenure, Property Rights        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        29, 30 JUNE 1939        


Limitation of Actions Co-owners Receipt of rent and profits by one co-owner Co-owner trustee of the legal estate Real Property Limitation Act 1833 (c 27), s 12 Law of Property Act 1925 (c 20), s 12.

L and F were tenants in common of certain premises in which they resided until the end of 1923. Thereafter the rent of the premises was received by L down to the date of his death on 14 May 1935. It was contended that the title of F to his half-share in the property was divested at the end of 12 years by the operation of the Real Property Limitation Act 1833, s 12:

Held (i) the provisions of the Real Property Limitation Act 1833, s 12, which were the appropriate limitation in respect of undivided shares until 31 December 1925, were not saved by the Law of Property Act 1925, s 12.

(ii) the Real Property Limitation Act 1833, s 12, though unrepealed, ceased on 31 December 1925, to apply to undivided shares, when the latter became merely interests in the proceeds of sale of the land.

(iii) as from 31 December 1925, L was a trustee, and could not plead any Statute of Limitations, and an account of the net rents received since that date must be ordered.

Notes

Before 1925, joint tenants and tenants in common had an interest in the land, and, for the purpose of limitation of actions, the appropriate provision was the Real Property Limitation Act 1833, s 12. This provision is in its terms applicable to an interest in the land only, and is plainly inapplicable to an interest arising under a trust for sale. The Court of Appeal have rejected the argument that the section, which has not been repealed, is still applicable to undivided shares by reason of the Law of Property Act 1925, s 12, and it would appear that, where a tenant in common is also a trustee of the entirety, there is no Statute of Limitations applicable to the case.

As to Co-owners and Limitation of Actions, see Halsbury (Hailsham Edn), Vol 20, pp 711, 712, paras 942944; and for Cases, see Digest, Vol 32, pp 457459, Nos 12271253.

Cases referred to

Re Jolly, Gathercole v Norfolk [1900] 2 Ch 616; 32 Digest 484, 1467, 69 LJCh 661, 83 LT 118.

Kennedy v De Trafford [1897] AC 180; 38 Digest 694, 389, 66 LJCh 413, 76 LT 427, affg [1896] 1 Ch 762.

Henderson v Eason (1851) 17 QB 701; 20 Digest 269, 293, 21 LJQB 82, 18 LTOS 142, revsg (1848) 12 QB 986, previous proceedings (1847) 2 Ph 308.

Interlocutory Appeal

Interlocutory Appeal from an order of Simonds J, dated 8 May 1939. The testator, Egisto Landi, died 14 May 1935. In May 1936, an originating summons was taken out for the determination of a number of questions concerning his estate, and an administration order was made on 26 July 1937. One of the claims against the estate was that of the appellant, Eleanora Fantoni, as the personal representative of her late husband. The testator and Mr Fantoni were entitled in equal shares to a property known as 125, Whitechapel Road, E. The testator alone, however, had received the rents since 1923. Mrs Fantoni claimed a half share of the property and one half of the net rents received by the

Page 570 of [1939] 3 All ER 569

testator. The matter came before Simonds J, who found as a fact that the property had been purchased by the testator and Mr Fantoni as co-owners in equal shares, but that the Statutes of Limitation afforded an answer to the claim made by Mrs Fantoni. It was from the second of those findings that this appeal was brought.

E Milner Holland for the appellant.

H Wynn Parry KC and J F Bowyer for the respondent.

Holland: In order that the claim against the testators estate could be barred, the period of 12 years must have been completed before his death. It is an admitted fact that the two purchasers were in joint occupation until 1923. The testator was not in adverse possession after 1923, but he was treating himself as agent for his co-tenant, and collecting the rents and managing the property in that capacity. If that be a fact, the statute could not run in his favour on principle, and also on the wording of the Real Property Limitation Act 1833, s 12. Prior to the enactment of that section, the occupation of one of a number of co-tenants was the occupation of all. The conditions imposed by s 12 are special. The effective limitation section is now the Real Property Limitation Act 1874, s 9. The statute 4 & 5 Anne, c 3, gave one co-tenant a right to an account. Since 1925, that statute has not been needed, as, by the Law of Property Act 1925, the testator was converted into a trustee. Re Jolly Gathercole v Norfolk establishes that when title has been extinguished, there can be no right to recover rent. It will be necessary to limit the claim for rent received from 1 January 1926, onwards,. The appellants right is a right to an account. Either it is an action of a beneficiary against a trusteein which case no Statute of Limitations runsor the appellant is entitled as a creditor. The evidence shows that Landi was not in occupation for 12 years. Simonds J, has found that he was, having been influenced to come to that conclusion by Kennedy v De Trafford. The right claimed by the appellant up to 1926 was, under the Act of 1705, which was repealed by the Law of Property Amendment Act 1924. Since 1925, co-owners have been trustees for each other. I am clearly entitled to an account from 1926, and I ask for an account from 1923. [Counsel referred to Henderson v Eason. ]

Parry KC: The Law of Property Act 1925, s 35, must be read in conjunction with, and subject to, any qualification in s 12 of the same Act. There is a qualification there to the effect that, if there appears to be, at the time when the Act comes into force, any Statute of Limitations in operation which would, but for s 35, have endured to benefit one co-owner, the full effect of s 35 must not be given. Where two people were not to be regarded as, statutory trustees, before the Actand therefore either of them might be a person against whom the Statute of Limitations might runneither of them is to be adversely affected by s 35. Otherwise, there is no force in s 12. In considering the case of two co-owners, whose relationship to each other was

Page 571 of [1939] 3 All ER 569

created prior to the coming into operation of the Act, one must ascertain whether there is a Statute of Limitations running in favour of one of them. The mere presence of s 35 in the Act of 1925 does not defeat a claim under any Statute of Limitations. The words “for his own benefit” in the Real Property Limitation Act 1833, s 12, are directed to the circumstances in which the money is received, and not to the legal consequences which flow from its receipt. The mere receipt of money by one co-owner in circumstances in which he ought to pay it over will prevent that money from being received by him for his own benefit. The test is the circumstances in which the money was received. At any time within 12 years, one co-owner could bring an action against, or make an arrangement with, the other co-owner, and thus prevent his saying he was receiving the money for his own benefit. S 12 of the Act of 1833 has not been repealed, and therefore effect should be given to it if possible. The continued preservation of s 12 of the Act of 1833 has the effect of making it necessary to bring into effect s 12 of the Act of 1925. [Counsel referred to Re Jolly Gathercole v Norfolk.]

Bowyer followed on the same side.

Counsel for the appellant was not called upon in reply.

E Milner Holland for the appellant.

H Wynn Parry KC and J F Bowyer for the respondent.

30 June 1939. The following judgments were delivered

SIR WILFRID GREENE MR. This appeal from a decision of Simonds J, raises for consideration a large number of interesting points, but, upon the view which I take of the case, it will not be necessary for me to express any concluded opinion upon some of them. The question arises in this way. At the date of his death, on 14 May 1935, Egisto Landi was, as Simonds J, found, co-owner with one Mr Fantoni of certain leasehold premises, No 155, Whitechapel Road. Their interests were those of tenants in common in equal shares. That matter of fact Simonds J, decided in favour of the present claimant, and from that decision there is no appeal. Simonds J, also decided, however, that the claim of the plaintiff was barred by the Statute of Limitations, that claim being a claim to one moiety of the net rents of the property received by the testator during his life and not accounted for. One curious feature of the case is that, assuming that the title of Mr Fantoni and his legal personal representativefor he is deadto his moiety of the land had been extinguished by the Statute of Limitations, by the will of the testator the testators interest in the property is bequeathed to Mr Fantoni and his wife. The effect of that might give rise to an interesting question in connection with the application of the Statute of Limitations, for the reason that, at the death of the testator, the statutory period of limitationif, indeed, the Statute of Limitations applied to the factswas not yet completed, and, accordingly, at that date the title to one moiety, on any view, remained vested in Mr Fantoni. However, it is not necessary to go into that matter.

The parties had lived in the premises down to the end of 1923, and

Page 572 of [1939] 3 All ER 569

thereafter they were out of occupation and the rents were received throughout by the testator down to his death, which took place on 14 May 1935. The statutory period of limitation, therefore, if it applied, began at the end of 1923, and would not have come to an end until the end of 1935that is to say, some 7 months after the death of the testator.

The judge dealt with the question of the Statute of Limitations in this way. The claim, being a claim in respect of a share of rents which had accrued before the end of the 12 years, could only be rejected if the statute had run against the claimant, and if, moreover, the effect of its so running had been, not merely to divest the claimant (who is, as I have said, the legal personal representative of Mr Fantoni) of title to the undivided moiety, but also to bar the right to recover a share of rents which had accrued before that title was extinguished by the statute. The judge proceeded upon the basis that, if extinction of the title was shown to have taken place by virtue of the statute, that operated to bar the right to a share of rents which accrued before that date. There, again, whether or not that consequence would follow from the extinction of the title is a question of some nicety. I need say no more about  it than that the right to recover the share of rents from Mr Fantoni was originally a right under 4 & 5 Anne, c 3 (the relevant section of which was repealed by the Law of Property (Amendment) Act 1924, s 10), and, therefore, had a special character of its own. I do not propose to enter into the question whether or not that proposition is rightnamely, that the extinction of the title extinguished the claim to the share of the previous rents. The judge, proceeding upon that basis, therefore had to consider the question whether or not the title of Mr Fantoni and his legal personal representative had been extinguished under the relevant Statute of Limitations. He points out in his judgment that, but for the Real Property Limitation Act 1833, s 12, the possession of the testator would have been a possession on behalf of both of the tenants in common, with the result that that possession could not have been relied upon for the purpose of the Statute of Limitations. S 12 deals with that matter, because it provides that, when one of several tenants in common (I take only the relevant case) has:

… been in possession or receipt of the entirety, or more than his or their undivided share or shares of such land or of the profits thereof, or of such rent, for his or their own benefit, or for the benefit of any person or persons other than the person or persons entitled to the other share or shares of the same land or rent, such possession or receipt shall not be deemed to have been the possession or receipt of or by such last-mentioned person or persons or any of them.

If that be the relevant section, and if the matters to which I have already referred are assumed to be decided in a particular way, I agree that a question would arise whether, upon the facts of this case, the receipt by the testator, Mr Landi, of the profits and rents which he received was a receipt for his own benefit, and that that question would be the crucial question. The judge dealt with it by answering it adversely to the claimant. He held that, notwithstanding the fact that during

Page 573 of [1939] 3 All ER 569

the time he was receiving these rents the testator admitted to his co-owner that he was receiving them on behalf of both, and was accordingly liable to account for them, and notwithstanding the fact that in his account-book under a head showing that they were co-owners of the property he entered all his receipts and payments, on the true construction of the section, applying it to the facts, his receipt was a receipt for his own benefit. I do not find it necessary to examine the reasons for the judges judgment in that respect, but it must not be taken from that that I accept the correctness of his view, because it appears to me that there are very formidable arguments in support of the contrary opinion. That particular problem I do not attempt to solve, because, upon the view which I take of this case, it does not fall for decision. I only wish it not to be taken that, either upon that point or upon any of the other questions which I have mentioned, as to which I am not proposing to express my opinion, I am accepting anything which has been said.

The ground upon which I think the case falls to be decided is one with which the judge does not deal, since it was not argued before him. The whole position of land held in undivided shares was, of course, entirely altered by the recent property legislation. Before that legislation came into force at midnight on 31 December 1925, tenants in common were each of them entitled to possession. Each of them was entitled to receive and collect the rents, and each of them had the right given him by 4 & 5 Anne, c 3, to call upon the other to account if he had received more than his share. They were the legal owners of the land, but, when midnight of 31 December 1925, arrived, the position was entirely changed. They then acquired a character which they had not acquired beforenamely, the character of trustees. The previous relationship of tenants in common, or joint tenants, had nothing to do with trusteeship. It was, of course, possible for tenants in common by appropriate conveyancing methods to introduce the conception of trusteeship into their relationship, but the mere fact that they were tenants in common introduced no fiduciary element at all. Under the Law of Property Act 1925, that fiduciary element unquestionably came into the picture, and it constitutes a trust under which their obligation as trustees is an obligation to sell the property and divide the proceeds, and in the meantime their possession is the possession of trustees, because it is in that capacity that they hold the legal title. Their receipts of the rent would be in the same capacitynamely, as reversioners holding the reversion expectant on the determination of the lease. Of course, they have another character as well, that of beneficiaries. Each of them is a trustee and each of them is a beneficiary. Nevertheless, as from that midnight, the character in which they, if they act jointly, or one of them, if one acts alone, receive or receives rent is entirely different from the character in which the same persons or person would have received it before that midnight. Their obligations with regard to rent received are prima facie the usual obliga-

Page 574 of [1939] 3 All ER 569

tions of trustees. I may add in passing that, where there are more than 4 co-owners, the effect is to vest the land in the Public Trustee, and, assuming that he receives the necessary request to act, there can be no question that, in respect of his ownership, his possession, his receipt of rents and profits, his capacity is that of a trustee, and none other.

There is one further point to which I may call attention in this connection. Under the old law, when one tenant in common died, his heir or devisee before 1897, and since 1897 his legal personal representative, succeeded to his rights and succeeded to his rights at law, with the result that that legal personal representative had, equally with the surviving tenant in common, a right to possession and a right to receive the rents and profits. One result of the Law of Property Act 1925, is to take that right away. When one tenant in common dies now (I will still call him a tenant in common, his legal personal representatives have no right to go into possession, and have no right to collect the rents. That right survives, and survives only, to the survivor in his capacity as surviving trustee, and, unless and until another trustee is appointed, his hand, and his hand alone, is the hand to receive the rents.

That has some bearing, as will at once appear, upon the question with which I am now about to deal, because the effect of the Act has been to deprive the legal personal representative of a deceased co-owner of any right himself to go into possession or to obtain the rents, and by that means prevent the other co-owner from continuing to enjoy the currency of the Statute of Limitations, if (as it is argued) it still applies. If he wished to stop the running of time (assuming that it does run), he would have to take more elaborate proceedings to do it.

Prima facie (and this is really, I think, not disputed by counsel for the respondents, the Real Property Limitation Act 1833, s 12, does not upon its face contain language apt to apply to the situation as it has existed since 31 December 1925. S 12 is contemplating a quite different state of affairs from that which now exists. It is contemplating the legal ownership of land owned by joint tenants, tenants in common or co-parceners, carrying with it the rights which those interests conferred. The language is quite inapt to cover the case of one of two trustees who are also their own beneficiaries, and for the reason, if for none other, that a trustee in possession can never be possessing for his own benefit. He can never be receiving rents and profits for his own benefit. Therefore, if the matter had stood there, I should have had no difficulty in coming to the conclusion that s 12 of the Act of 1833 has no application to the case, and that the period since 31 December 1925, must, for the purpose of the Statute of Limitations, be dealt with upon the footing that the possession of Mr Landi was the possession of a trustee in whose favour no Statute of Limitations could run, because he would have been in possession of trust property, and the rents which he received would have been trust property, and he therefore would have been accountable for the entirety all from January 1926.

Page 575 of [1939] 3 All ER 569

In answer to that argument, however, attention is called to the Law of Property Act 1925, s 12, which provides as follows:

Nothing in this part of this Act affects the operation of any statute, or of the general law for the limitation of actions or proceedings relating to land. …

I need not read the rest, which deals with easements and things of that kind. It is said that, before the Act came into operation, the Statute of Limitations relevant to the case embodied s 12 of the Act of 1833 (a section which enured for the benefit of a tenant in common who had been in possession for his own benefit), and that the language of s 12 of the Act of 1925 must be construed so as to lead to the result that a tenant in common who had been in possession for his own benefit previously to 31 December 1925, should be considered thereafter as still remaining in possession in a similar character, notwithstanding the fact that he had had imposed upon him by the Act the character of a trustee. It is said that, unless that effect be given to the Law of Property Act 1925, s 12, the curious result will be produced that s 12 of the Act of 1833 is left upon the statute book with no apparent subject-matter upon which it can act. That argument is one which does not particularly impress me, because it would not be strange to find, in dealing with this very complicated and novel land legislation, that a particular section like that had been left unrepealed. I do not know that that section may not have some scope or operation in regard to other matters. It may have some operation in a case where there are more than four co-owners. I do not know, and I do not pause to inquire whether there might not be a case where it might still have an operation. However, even if there are no such cases, I should not be embarrassed by that argument. Moreover, in passing, it is worth noticing that many of the repeals consequential upon this legislation were not made until later, because the necessity had escaped the observation of the legislature at the time. For example, the section of the Act 4 & 5 Anne, c 3, which conferred the right on one co-owner to obtain an account from his fellow co-owner, although it had become unnecessary and obsolete by the passing of the Law of Property Act 1922, was not repealed until the Act of 1924. However that may be, I find myself unable, as a matter of construction, to give to the Law of Property Act 1925, s 12, the effect which is claimed for it. To make s 12 of the Act of 1833 apt to cover the present position under which co-owners are trustees would involve an alteration of its language, which I myself find extremely difficult to make, because it would involve recasting the whole of a section aimed, as I have already said, at one particular type of right in order to fit it to a totally different type of right. I cannot extract any such wide and sweeping effect from the language of s 12 of the Act of 1925, which appears to me to be directed to very much simpler matters. It is further to be noticed and this, I think, is a very important aspect of the matter, as was pointed out by Clauson LJ, in the course of the argumentthat land is defined by s 205 of the Act, unless the context

Page 576 of [1939] 3 All ER 569

otherwise requires, as excluding an undivided share in land. That is not inconsistent with, and, indeed, as Clauson LJ, pointed out, flows from, the scheme of the Act in dealing with undivided shares. It is worth noticing that the section which first introduced that schemenamely, the Law of Property Act 1922, s 10is expressed as follows:

For removing the difficulties incidental to land being held in undivided shares and for preventing the creation of undivided shares in land, except under a settlement and behind a trust for sale, the provisions contained in the third schedule to this Act (under which land held in undivided shares is vested or will become vested in trustees on trust for sale) shall have effect.

The object, therefore, was to get rid of well-known practical inconveniences and substitute for the real rights of the co-owners personal rights by converting their interests into personalty by virtue of the statutory trust for sale, and this was done by putting up the screen, so to speak, of the trusteeship affecting the legal estate, and keeping the beneficial interests behind it. That being the position, and interests of co-owners being now interests which merely entitle them to enforce the trusts for sale and to secure by proper means their proper share of the proceeds and the rents until sale, it was natural that, in the definition of land, undivided shares should be excluded. Therefore, on that ground, if on no other, I should be prepared to say that s 12 of the Act of 1925 has no application to the present case. However, that is only an additional ground reinforcing, I think, the view which I have expressednamely, that, applying s 12 of the Act of 1925, s 35 of that Act, and s 12 of the Act of 1833 to the circumstances of this case, it is not possible so to construe them as to give to them the joint effect for which counsel for the respondent contends. I can myself see no reason in good sense why the legislature should have wished to enable trustees of this character to be in any better position with regard to the Statute of Limitations than any other trustees, or than the Public Trustee himself is in a case where land held in undivided shares vests in him. If the legislature had wished to do that, I cannot bring myself to believe that it would have done it by leaving its intention to be extracted by applying s 12 of the Act of 1833 to a set of facts to which its language is hopelessly inappropriate and by producing that result by such language as that of the Law of Property Act 1925, s 12. If my reasoning is correct, the Statute of Limitations has not run against the present claimant either with regard to her title as representative of Mr Fantoni or with regard to her right to call for his share of the past rents.

The only matter which remains is the question how far she can recover those rents. It follows necessarily, from the reasoning which I have endeavoured to expound, that, as from 1 January 1926, Mr Landi received the rents in the character of trustee, that no Statute of Limitations in respect of the rents so received, being trust moneys, could run in his favour, and that, therefore, the claimant is entitled to receive the rents as far back as that time. With regard to the rents between the end of 1923, when they first began to come in, and midnight of 31 December 1925,

Page 577 of [1939] 3 All ER 569

Mr Fantonis right in 1924 and 1925 with regard to them was a right to claim an account of them and payment under the statute of 4 & 5 Anne, c 3, and, even assuming in the claimants favour that all the other various questions were answered favourably to her, she would still admittedly be met, in respect of those rents, with the fatal answer that the period of limitation for a claim to an account conferred by statute is 6 years. The result is that Mr Fantonis right in his lifetime was barred in respect of the rents during that period, 6 years after they were received. Accordingly, the right of the claimant to recover is limited to rents as from 1 January 1926, but it extends to all the rents received since that date. For these reasons, I am of opinion that the order must be varied or discharged in order to give effect to the judgment which I have just delivered. When I said “rents,” I meant, of course, the net rents less outgoings.

CLAUSON LJ. I agree for the reasons given by Sir Wilfrid Greene MR.

GODDARD LJ. I agree.

Solicitors: Clyde & Co (for the appellant); B Hoddinott & Son (for the respondent).

W K Scrivener Esq   Barrister.

Gibbons v Westminster Bank Ltd

[1939] 3 All ER 577


Categories:        BANKING AND FINANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        20 JUNE 1939        


Bankers Cheque Wrongful dishonour Non-trader Proof of damage.

A bank wrongfully dishonoured a cheque of the plaintiff, who was not a trader. The plaintiff did not, in the statement of claim, plead any matters showing a loss of credit, but proved that, after the cheque was dishonoured, her landlords had asked her to pay her rent in cash, and not by cheque:

Held (i) the plaintiff, not being a trader, was entitled to only nominal damages in respect of the wrongful dishonour of a cheque by her bank.

(ii) in the circumstances, the plaintiff was not entitled to leave to amend the statement of claim.

Notes

It appears that, while there is a line of authorities establishing the right of a trader to substantial damages in respect of the dishonour of his cheque without the necessity of pleading or proving actual damages, it has never been decided that the corollary to that propositionthat is, that a non-trader is entitled to only nominal damagesis the law. The present decision establishes that proposition.

As to Wrongful Dishonour, see Halsbury (Hailsham Edn), Vol 1, p 827, para 1348; and for Cases, see Digest, Vol 3, pp 217221, Nos 549570.

Cases referred to

Marzetti v Williams (1830) 1 B & Ad 415; 17 Digest 81, 21, 9 LJOSKB 42.

Rolin v Steward (1854) 14 CB 595; 17 Digest 122, 306, 23 LJCP 148, sub nom Rollin v Steward 23 LTOS 114.

Page 578 of [1939] 3 All ER 577

Bank of New South Wales v Milvain (1884) 10 VLR 3; 3 Digest 220, case w.

Kinlan v Ulster Bank Ltd [1928] IR 171; Digest Supp.

Addis v Gramophone Co Ltd [1909] AC 488; 17 Digest 78, 1, 78 LJKB 1122, 101 LT 466.

Action

Action claiming damages for the dishonouring by the defendants of a cheque drawn by the plaintiff when her account was in funds. The facts are fully set out in the judgment.

G H Oliver for the plaintiff.

B B Stenham for the defendants.

20 June 1939. The following judgment was delivered.

LAWRENCE J. In this case, the plaintiff brought an action against the defendant bank for dishonouring a cheque of hers when her account was in funds. The cheque was dishonoured owing to a mistake. The plaintiff had paid in previously a sum of money, and this had been credited, by a slip, to a wrong account, and the bank was therefore under the impression that the plaintiff had no funds to meet her cheque. She gave a cheque to her landlords for her rent, and this cheque was dishonoured. She went and saw the bank manager when she heard of this, and she was paid £1 1s by the bank manager, and the question which was fought out before the jury was whether she accepted that £1 1s which was so paid to her by the bank manager in full satisfaction of any claim she might have in respect of the dishonour of her cheque. The jury found that she did not so accept it.

The question was raised at an early stage of the case, on behalf of the defendants, whether the plaintiff was entitled to nominal damages only, as she had not pleaded any special or actual damage, and it was agreed between counsel that the question of damages should be left to the jury and that this question as to whether the plaintiff was entitled to recover anything more than nominal damages should be considered after the jury had given their verdict on the basis that she was entitled to recover substantial damages. The jury accordingly gave their verdict for the amount of substantial damages to which they thought she was entitlednamely, the sum of £50. It has now been argued before me as to whether the plaintiff is entitled to anything more than nominal damages for the dishonour of her cheque by the defendant bank. It has also been argued before me that the plaintiff ought to have leave to amend the pleading so as to allege as special damage the damage which it is said she suffered from the dishonour of this cheque, in that on 18 August Messrs Ainslie, her landlords, wrote to her as follows:

In view, however, of the unsatisfactory way in which your rent has been paid in the past, and the incident of your cheque being returned on the last occasion we think it is easier for all concerned if you were to remit your rent in future in cash.

Since that date, the plaintiff says that she has had to remit her rent in cash. I do not think that it would be right for me to allow an amendment in respect of this alleged damage. The letter in question was not

Page 579 of [1939] 3 All ER 577

pleaded, and nothing was pleaded in regard to any actual damage of that sort suffered by the plaintiff. The letter was not disclosed until after a payment in had been made, the amount of which I do not know, and it would, therefore, be an obvious injustice to the defendant to allow the plaintiff to raise the other matter of special damage at this stage. Therefore, I refuse the application for an amendment of the pleading, and I have to consider the question whether or not the plaintiff, who, it is argued, is a trader, is entitled to recover more than nominal damages for the dishonour of her cheque without pleading or proving special damage.

The authorities which have been cited to me all lay down that a trader is entitled to recover substantial damages without pleading and proving actual damage for the dishonour of his cheque, but it has never been held that that exception to the general rule as to the measure of damages for breach of contract extends to anyone who is not a trader. The cases in which this view has been taken, and which have been cited to me, are Marzetti v Williams, Rolin v Steward, Bank of New South Wales v Milvain and Kinlan v Ulster Bank Ltd. The rule is so expressed in Grant on Banking 7th Edn, pp 88, 89, and in Smiths Leading Cases 13th Edn, Vol 2, p 574, where it is also stated that the exception to the general rule is an exception which ought not to be extended, and reference there is made to the opinion of Lord Atkinson in the House of Lords in Addis v Gramophone Co Ltd at p 495. In my opinion, I ought to treat this matter as covered by these authorities, and I must hold that the corollary of the proposition which is laid down by these cases in the lawnamely, that a person who is not a trader is not entitled to recover substantial damages unless the damages are alleged and proved as special damages. I am therefore of opinion that the plaintiff, whom I hold not to be a trader, is entitled to recover only nominal damages, and she will have judgment for 40s.

Judgment for the plaintiff for 40s.

Solicitors: H G Taunton (for the plaintiff); Alfred Bright & Sons (for the defendants).

W J Alderman Esq   Barrister.

Westhoughton Coal and Cannel Co Ltd v Wigan Coal Corporation Ltd

[1939] 3 All ER 579


Categories:        ENVIRONMENTAL        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        15, 16, 19, 20, 21 JUNE, 6 JULY 1939        


Mines Flooding After defendants mines abandoned Due to presence of artificial work outside their land No right in defendants to interfere with artificial work.

For the purpose of draining a number of coal mines, water was allowed to flow to a pumping-pit and there pumped out of the mines. It order to facilitate the water reaching the pumping-pit, a tunnel was

Page 580 of [1939] 3 All ER 579

made in 1886 for the defendants, but this tunnel was outside the defendants property, and, after 1916, the defendants had no interest in, or right to interfere with, the tunnel. From 1886 to 1932, the defendants, by means of their pumping-plant, kept their own and adjacent mines free from water, but at no time did they do this under any agreement with the plaintiffs. By 1932, the defendants mines in the neighbourhood of the pumping-station had been worked out, and in August 1932, the defendants ceased pumping. As a result, the water accumulated in the pumping-pit, and in 1933 the plaintiffs mines were flooded. It was contended that the defendants were liable to the plaintiffs in respect of such flooding because by having the tunnel constructed the defendants had diverted the water to the pumping-pit, whence it had overflowed into the plaintiffs property:

Held as the defendants had no power to stop the water from flowing through the tunnel, it could not be said that at the relevant time they were causing or permitting the water to flow into the plaintiffs mine, and they were not liable in damages to the plaintiffs for such flooding.

Notes

The judgment in this case is concerned only with the increased amount of water which collected on the defendants premises because of the construction of the tunnel. The tunnel was an artificial work, and the diversion of the water through it, if it resulted in damage to third parties, was a matter which might render the defendants liable in damages. However, the defendants are here held not to be liable for damage resulting from water flowing through the tunnel at a time when they had no right to block up the tunnel or otherwise prevent the water from flowing through it. The fact that the defendants had for many years for their own benefit pumped away such water gave the plaintiffs no right to a continuance of the benefit to them of such pumping.

As to Liability for Flooding, see Halsbury (Hailsham Edn), Vol 22, pp 669671, paras 14381443; and for Cases, see Digest, Vol 34, pp 724727, Nos 10631086.

Cases referred to

Hanson v Wearmouth Coal Co Ltd & Sunderland Gas Co [1939] 3 All ER 47; Digest Supp.

Smith v Kenrick (1849) 7 CB 515; 34 Digest 725, 1067, 18 LJCP 172, 12 LTOS 556.

Roswell v Prior (1701) Holt, KB 500; 36 Digest 215, 581.

Rainham Chemical Works Ltd v Belvedere Fish Guano Co [1921] 2 AC 465; 36 Digest 192, 332, 90 LJKB 1252, 126 LT 70, affg [1920] 2 KB 487.

Appeal

Appeal by the plaintiffs from an order of Luxmoore LJ, sitting as an additional judge of the Chancery Division, dated 11 January 1939. The facts are fully set out in the judgment of the court delivered by Goddard LJ.

K E Shelley KC, Hon H Fletcher Moulton and W J Kenneth Diplock for the appellants.

Hon Sir Stafford Cripps KC, C E Harman KC, Wilfrid M Hunt and G Granville Slack for the respondents.

Shelley KC: It was the act done by the defendants in 1886 which caused the water to reach the plaintiffs in 1933. The defendants had an opportunity of preventing the consequences of their act from injuring the plaintiffs, and they did not take advantage of that opportunity. It can make no difference that the defendants had put it out of their power

Page 581 of [1939] 3 All ER 579

to stop the flow of water when it came to the plaintiffs. The defendants had caused the tunnel to be constructed, and, if they wanted to avoid liability, they should have put matters back as they were. They cannot escape liability by saying that they are no longer in charge of the water. This water would not have got through if it had not been for some act of man. The persons who have done the acts which have permitted the water to reach the plaintiffs are the defendants themselves and the Scot Lane company who built the tunnel: Hanson v Wearmouth Coal Co Ltd & Sunderland Gas Co. The defendants have undoubtedly adopted the act of the Scot Lane company. The only possible defence is that it was the proper and normal working of the mine. That defence has not been set up. No Statute of Limitations is available. The pumping agreement was in force until 1931. It would have been contrary to the implied licence in existence for the Scot Lane company to have blocked up the way. The passage of water through Scot Lane was something the defendants had a right to compel. The existence of the wayleave in Scot Lane shows that the defendants were in fact bringing this water down to their own mine. When they stopped pumping, they did not stop bringing the water down. The defendants still continue to bring down the water by artificial means. The person who interferes with the natural course of water is primarily liable for the consequences. The only defence is that based upon Smith v Kenrick. [Counsel referred to Roswell v Prior and Rainham Chemical Works Ltd v Belvedere Fish Guano Co.]

K E Shelley KC, Hon H Fletcher Moulton and W J Kenneth Diplock for the appellants.

Hon Sir Stafford Cripps KC, C E Harman KC, Wilfrid M Hunt and G Granville Slack for the respondents.

6 July 1939. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). This is an appeal from a judgment of Luxmoore LJ, sitting as an additional judge of the Chancery Division, dismissing an action brought by the plaintiffs, who claimed damages for the flooding of a mine worked by them known as the Westhoughton Bone Mine, situate in the South Lancashire coalfield. They alleged that this mine had been flooded by water introduced into the mine on or after 11 August 1933, coming from other workings in the neighbourhood known as the Ridgways workings, and that the defendants were responsible for bringing this water from the latter into their Bone Mine. Further claims were made in respect of floodings of other mines of the plaintiffs, but it was conceded by them that, if the defendants were not liable in respect of the Bone Mine, neither were they liable for what happened at the other mines.

In this coalfield there are several seams of coal worked from shafts belonging to various owners, and for the purpose of this judgment it is necessary to mention only fournamely, the Cannel, which is nearest the surface, the King Coal, which is next beneath it, the Bone, which is still lower, and the Arley, which is the deepest of all. The plaintiffs mines are situate to the south of the area with which we are concerned. To the north-west of their mines lies the Scot Lane mining area, and this is intersected by a large fault running roughly north and south. To the west

Page 582 of [1939] 3 All ER 579

of, and adjoining, the Scot Lane workings lies a large area, which was worked by the defendants, who also owned a pumping-station known as the Aspull pumping-pit, where for many years they pumped water rising, not only in their own pits, but also in the Scot Lane area. Towards the north of the Scot Lane area, and to the west of the fault, is a group of three pits known as Scot Lane Nos 1, 2 and 5, and to the south, quite close to the defendants pumping-pit, is another Scot Lane shaft, known as No 4. To the north-east of the Scot Lane area, and east of the fault, are some old workings called Ridgways, and this area was in part separated from Scot Lane by some mining land owned by one Dorning. Until 1886, there had been on Ridgways land a pumping-station which dealt with the water in the King Coal seam, but in 1886 or 1887 it was closed down, in circumstances which will appear hereafter.

In 1871, an agreement was made between the defendants and the owners of the Scot Lane area whereby the former undertook to pump at the Aspull pit all the water which came to that pit from the Scot Lane workings for an annual payment of £600. The agreement was for a period of 20 years, with a right to extend it for a further 10 years, and in fact it was from time to time extended till a new agreement was made for the same service in February 1924.

In 1886, the defendants were minded to work the coal in the Arley seam lying under or near the Ridgways land. The freeholder of the Ridgways coal was Mr Roger Leigh, and the lease which he had granted to Ridgways expired in 1885, as appears from the recitals to an agreement dated 31 July 1886, made between Ridgways and the defendants. From that agreement it also appears that Ridgways had to remove the pumping-plant from the land within 12 months of the expiration of their lease. The defendants, however, would have to deal with the water in the Ridgways area at the King Coal level in order to protect their workings in the Arley seam, and, accordingly, as appears from the agreement, they agreed with Ridgways to buy and continue to work that pumping-plant till they were able to draw off the water from the King Coal level to their pumping-plant at Aspull. To enable them to do this, a tunnel had to be driven from the Ridgways area, through the land owned by Dorning, thence through part of the Scot Lane area, whence it passed again through some of Dornings land and finally emerged again on the Scot Lane area. The water would pass through this tunnel and flow to the Scot Lane pit No 1 on the Cannel seam, which there adjoined the King Coal seam owing to the fault. Thence the water passed down the shaft to the road known as the King Coal water-road in the Scot Lane workings, and so to the Aspull pumping-pit.

The agreement between Ridgways and the defendants shows that the latter had an agreement with Mr Leigh enabling them to construct this tunnel, and, by an indenture of even date with the agreement, Dorning granted the defendants an easement of waterway through

Page 583 of [1939] 3 All ER 579

his land for a term of 30 years, expiring in 1916, at a rent of £10 per annum. There was never any written agreement as to this tunnel, or as to the water flowing through it, with the Scot Lane owners, but there is no question but that they made the whole of the tunnel in question for, and at the cost of, the defendants, who also paid for its maintenance. This tunnel was referred to throughout as Tunnel 1B. So matters continued till June 1906. In that month, the Scot Lane owners gave notice to the defendants that they intended to stop working the King Coal mine, and inquired whether the defendants wished them to keep open the tunnel in question, to do which would have involved keeping an engine-winder and furnace-man at the pits. The defendants determined not to go to this expense, and to rely on the water finding its own way down the tunnel and thence to the pumping-station. They continued to pay the rent reserved to Dorning under the indenture of 1886 until June 1916, when the term expired and was not renewed. In fact, since 1906 no one had ever troubled about the tunnel, and nothing had been done by way of repair or maintenance, but water continued to pass down it from the Ridgways area, and it must be assumed that it was continuing to do so in 1932 and 1933.

On 8 February 1924, a new agreement was made between the defendants and the owners of the Scot Lane area, under which the defendants agreed for a payment of £500 per annum to pump at the Aspull station all the water from their mines and all the water from the Cannel and King Coal mines of the Scot Lane company, and certain other waters not material to this action, for a period of 6 years and thereafter till either party gave the other 12 months notice to determine the agreement. There was also a provision that, if the defendants gave this notice, the Scot Lane company were entitled to buy the defendants interest in the pumping-plant, shaft and surface-works, so as to enable them to dispose of their water.

On 27 June 1930, the defendants gave notice to the Scot Lane company of their intention to determine this agreement on 30 June 1931, but in fact they continued to pump at Aspull till 11 August 1932, when the station was closed down, presumably because the defendants mines in the neighbourhood were worked out and were being abandoned. The inevitable result was the formation of a large pound of underground water in the neighbourhood of the Aspull pumping-shaft, which was fed in part by the water which was still flowing down Tunnel 1B and thence down the route above described. It is with regard to this water that the plaintiffs complain. Their case is that, as the water rose, it banked up in the Scot Lane workings, and, when it reached a certain height, it flowed through openings in the area, in particular one or both of the roadways which had been driven through the fault of the Scot Lane company in connection with their workings, which gave it access ultimately to the plaintiffs mine. They contended that the water in the Scot Lane area was increased in volume by that introduced by artificial meansnamely,

Page 584 of [1939] 3 All ER 579

the tunnelfrom the Ridgways area, and so their mine was flooded sooner than it otherwise would have been but for the added water.

The evidence in this case was very voluminous, and counsel for the appellants, when opening the appeal, suggested that in everyones interest it would be desirable to argue first a question of law based on an assumption most favourable to his case, admitting that, if he were wrong in law on this assumption, he could not succeed in the appeal. To this course counsel for the respondents assented, and accordingly the argument proceeded on the following assumption of fact, which was put into writing and assented to by both parties. The judge found that, when pumping ceased, Ridgways water was still flowing through Tunnel 1B. There is no reason to suppose that it ceased flowing at once. Assume that the water continued to flow for some reasonable timesay a week. It thus contributed to the formation of a corpus of water. The accumulation formed is (a) partly on the defendants land and partly on the Scot Lane area, or, alternatively (b) on the Scot Lane area. The water which came to the plaintiffs land could only have come from that corpus of water. Accordingly, it came by reason of the overflow of a corpus of water which had been fed by water brought into it from the Ridgways area by the defendants own voluntary act. The voluntary act was the construction of Tunnel 1B, which, at the time it was constructed, was a proper miner-like operation for the purpose of conducting the Ridgways water to the Aspull pumping-station, thereby facilitating the winning of the defendants coal in another and lower mine.

For the purpose of the argument, and without deciding the point, the court is prepared to accept the contention of the appellants that, if a mining lessee, in the course of working his mine, artificially diverts a flow of water, whether in his own or in a neighbouring mine, by a work constructed solely for that purpose, with the result that the diverted water would, but for a precaution taken by the lesseefor example, pumpingfind its way into a neighbours mine, and if the precaution is afterwards abandoned so that the water does invade the neighbours mine, he is liable. This, in our opinion, is the highest at which the proposition can be put, and, in accepting it for the sake of the argument, we express no opinion as to whether it makes any difference if it be found that the artificial work or diversion was or was not a proper miner-like operation.

The point which we have to decide, however, is whether, taking this assumption in conjunction with the history of the case above set out, it can be said that the defendants have been bringing and were continuing to bring, at the relevant timesthat is, from August 1932, to August 1933, when the flooding took placerelevant water into the plaintiffs mine. By relevant water is meant water which caused the flooding. In our opinion, it cannot. The defendants committed no wrong towards anyone in making the tunnel, or in bringing the water on to the Scot Lane workings, during the period they had control of the tunnel. They

Page 585 of [1939] 3 All ER 579

had no interest in, or right to interfere with, the tunnel after 1916. The owners of the Scot Lane mines raised no objection to the water being brought on to their area after 1916. Both before and after that year, they took care of the water, if one may use that expression, by arranging with the defendants to pump it for them. When the agreement of 1924 expired, however, the defendants were under no duty to the Scot Lane company or to anyone else to pump any water which might be in the Scot Lane workings. It is true that the water accumulated at the sump of the Aspull pit, which was on the defendants land, but it was from the Scot Lane area that it flowed to the sump, and it was from the Scot Lane area that it escaped to the plaintiffs mine. It is also true that, on the assumed facts, the presence of Ridgways water in the plaintiffs mine was, as a matter of history, due to the construction of Tunnel 1B. Nevertheless, at no time when the defendants had control of the tunnel did the Ridgways water reach the plaintiffs mine. At the relevant timenamely, the period following the cessation of pumping in August 1932Ridgways water was flowing through the tunnel to the Scot Lane workings, but for this flow the defendants, who had ceased to possess any right in respect of the tunnel some 16 years before, cannot be held to be responsible. The tunnel was not under their land. They had no power to stop the flow of water in it, and we are unable to see how, on any view, it can be said that at the relevant time they were causing or permitting this water to flow into the plaintiffs mine. Nor can it make any difference if it be assumed that, on its way to the Scot Lane mine, the Ridgways water which contributed to the flooding passed through part of the defendants mine at or near the Aspull pumping-station.

Upon the facts, the defendants were not at this time responsible for the presence of Ridgways water in their mine. It came to them from another areanamely, Ridgwaysby a route over which they had no control whatever. They were perfectly entitled to let it flow through their mine into the Scot Lane mine, and were not bound to do anything to stop it reaching the plaintiffs workings via the Scot Lane mine. Accordingly, if the plaintiffs have a remedy against anyone, it is not against the defendants. In thus disposing of the appeal, we are deciding the case on grounds different from those upon which Luxmoore LJ, dealt with it, but, as we agree with him in the result, it is unnecessary for us to deal with the grounds upon which he founded his judgment.

Appeal dismissed with costs.

Solicitors: W Pingree Ellen, agent for Peace & Darlington, Liverpool (for the appellants); Gregory Rowcliffe & Co, agents for Grundy Kershaw Farrar & Co, Manchester (for the respondents).

W K Scrivener Esq   Barrister.


Re Cooper, Le Neve Foster v National Provincial Bank Ltd and Others

[1939] 3 All ER 586


Categories:        SUCCESSION; Wills        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        6 JULY 1939        


Wills Secret trust Revocation of will Secret trust excepted from revocation Sum subject to secret trust increased by later will Increase not communicated to trustees Failure of increased gift.

In February 1938, the testator appointed F and W executors of his will, and made, inter alia, the following bequest: “I bequeath to the said F. and W. the sum of £5,000 … upon the trusts which I have already communicated to them with respect thereto.” The testator communicated to F and W that the sum of £5,000 was to be held on protective trusts for the benefit of the last defendant during her lifetime. In March 1938, the testator revoked that will, and thereby restored a will made by him in 1931, and provided as follows: “The sum of £5,000 bequeathed to my trustees in the will now cancelled is to be increased to £10,000 they knowing my wishes regarding this sum.” It being admitted that the gift of £5,000 made by the will of February 1938, was excepted from the cancellation of that will, the question arose whether there was a valid secret trust in respect of the additional £5,000 contained in the will of March 1938:

Held as there was no communication to the trustees in respect of the additional sum of £5,000, there was no acceptance by them of the trust in respect of that sum, and no trust was created. Although the testator may have intended to confer an additional benefit on the beneficiary, the additional gift failed.

Decision of Crossman J ([1939] 2 All ER 192) affirmed.

Notes

It is settled that, in order that a secret trust may be enforceable, the terms of the trust must be communicated to, and accepted by, the trustee. Here the terms had been communicated in so far as the first gift of £5,000 was concerned, but the communication could not be extended to a second gift of £5,000, although that gift was in terms an extension of the former gift.

As to Communication of Secret Trusts, see Halsbury (1st Edn), Vol 28, Trusts, pp 21, 22, paras 34, 35; and for Cases, see Digest, Vol 43, pp 601, 602, Nos 486491.

Cases referred to

Blackwell v Blackwell [1929] AC 318; Digest Supp, 98 LJCh 251, 140 LT 444.

Re White, Knight v Briggs [1925] Ch 179; 44 Digest 394, 2272, 94 LJCh 211, 132 LT 481.

Appeal

Appeal by the defendant, the beneficiary under the secret trust, from an order of Crossman J, dated 17 March 1939, and reported [1939] 2 All ER 192, where the facts are fully set out.

H B Vaisey KC and Roger W Turnbull for the appellant.

J V Nesbitt for the respondents the widow and children of the testator.

Wilfrid M Hunt for the respondents the trustees.

Vaisey KC: The terms of the trust were already ascertainable, and were embodied in a document. So long as it can be ascertained, outside the will, what the trusts are, there is no objection. Crossman J, seems to have thought that, because the trustees agreed only to administer

Page 587 of [1939] 3 All ER 586

a trust of £5,000, they could not be required to administer one of £10,000. That must be fallacious. There are trusts formulated and ascertained with regard to £5,000. It is difficult to see why the testator could not leave £10,000 for the purpose. The trusts were of the most simple description. The terms applied to whatever pecuniary legacy was received by the trustees on the testators death, irrespective of the amount of the legacy. The testator knew that the trustees had no objection to a particular amount, and he relied upon that. A sum could be left to the trustees of a marriage settlement to be held upon the same trusts. No one can doubt what the testator intended, and there is a good trust for £10,000. [Counsel referred to Blackwell v Blackwell and Re White Knight v Briggs. ]

Counsel for the respondents were not called upon.

H B Vaisey KC and Roger W Turnbull for the appellant.

J V Nesbitt for the respondents the widow and children of the testator.

Wilfrid M Hunt for the respondents the trustees.

6 July 1939. The following judgments were given

SIR WILFRID GREENE MR. In this case, it is not possible to give effect to what the testator obviously desired, because he has not taken the steps which the law requires to enable that desire to become effective. He was minded to make a disposition by means of what is commonly called a secret trust. That is to say, he was not disposed to set out upon the face of his will, or upon the face of some identifiable document described in his will, the dispositions which he desired to make. Accordingly, he adopted the familiar device of bequeathing in favour of named persons a legacy which they were to hold as trustees. The actual trusts upon which they were to hold it, however, had been communicated by him to them, and accepted by them, in his lifetime. In order that a disposition which it is desired to make by that process can be effective, it is necessary that the intention of the testator be communicated to the trustees, that the trustees accept the instructions of the testator, and that, acting on the faith of that acceptance, the testator makes the gift, or, if it is a gift which has been already made, leaves it unrevoked. It would be better if, instead of using language of my own which I have just used, I were to take three short passages from the opinions delivered in the House of Lords in Blackwell v Blackwell. First of all, Lord Buckmaster says, at p 329:

It is, I think, more accurate to say that a testator having been induced to make a gift on trust in his will in reliance on the clear promise by the trustee that such trust will be executed in favour of certain named persons, the trustee is not at liberty to suppress the evidence of the trust and thus destroy the whole object of its creation, in fraud of the beneficiaries.

Then Viscount Sumner says, at p 334:

The necessary elements, on which the question turns, are intention, communication, and acquiescence. The testator intends his absolute gift to be employed as he and not as the donee desires; he tells the proposed donee of this intention and, either by express promise or by the tacit promise, which is signified by acquiescence, the proposed donee encourages him to bequeath the money in the faith that his intentions will be carried out.

Then Lord Warrington Of Clyffe says, at p 341:

It has long been settled that if a gift be made to a person or persons in terms absolutely but in fact upon a trust communicated to the legatee and accepted by

Page 588 of [1939] 3 All ER 586

him, the legatee would be bound to give effect to the trust, on the principle that the gift may be presumed to have been made on the faith of his acceptance of the trust, and a refusal after the death of the testator to give effect to it would be a fraud on the part of the legatee. Of course in these cases the trust is proved by parol evidence, and such evidence is clearly admissible.

I may say with regard to the presence of the word “absolutely” in that paragraph that Lord Warrington of Clyffe was there referring to the class of case where, on the face of the will, the gift is absolute. One of the matters decided in Blackwell v Blackwell, however, was that similar principles apply where the gift on the face of the will is a trust gift. Therefore, if a testator is minded to make use of the machinery of a secret trust, there must be present those elements to which reference is made in the extracts which I have readnamely, communication to the trustees, acceptance by the trustees, and the execution of the will or the codicil in reliance upon that acceptance.

In the present case, there is no question that, when the testator made his will of 10 February 1938, the legacy of £5,000 thereby bequeathed to the two named trustees was effectively given and the giving of it complied with the requirements of a secret trust. The terms had been communicated, the trustees had acquiesced, and the testator made his will upon the faith of that acquiescence. However, the only trust which was in the picture on that occasion was one which related to a defined and stated sum of £5,000. That was the legacy the intention to bequeath which was communicated to the trustees. That was the legacy in respect of which they gave their acceptance. That was the legacy which the testator, induced by that acceptance, in fact bequeathed. At a later date, when, after an unfortunate sudden illness, which proved fatal in Kenya, the testator made a will on 27 March 1938, he had no communication with those trustees with regard to the dispositions which he thereby made. There was no acquiescence by the trustees in the dispositions in question. The testator made that will not induced by any such acquiescence by the trustees, although he made it quite clearly in the belief that what he was doing would be effective, and that his trustees would carry it out. Nevertheless, none of the elements necessary to constitute a valid secret trust was present on the occasion of the making of that will. The actual form of that will was the cancellation of the will of February 1938, and the reinstatement of an earlier will. The will continues as follows:

The sum of £5,000 bequeathed to my trustees in the will now cancelled is to be increased to £10,000 they knowing my wishes regarding this sum.

The judge construed the testamentary instructions of the testator by saying that the original gift of £5,000 was not revoked by this will and that in substance the effect of this will was to leave that gift in the earlier will unrevoked and to add to it a further £5,000. Speaking for myself, I do not think that any difference in principle emerges based on a distinction between the revocation of the original legacy and the bequest of a new legacy of larger amount, and the leaving of the original

Page 589 of [1939] 3 All ER 586

legacy unrevoked and the addition to it of a further sum. It does not seem to me possible to say that anything can turn on so fine a point. The substance of the matter is that, having imposed on the conscience of these two trustees the trust in relation to the legacy of £5,000, and having written that legacy into his will of February 1938, by this will the testator in effect is giving another legacy of the same amount, to be held upon the same trusts. It seems to me that, upon the facts of this case, it is impossible to say that the acceptance by the trustees of the onus of trusteeship in relation to the first and earlier legacy is something which must be treated as having been repeated in reference to the second legacy, or the increased legacy, whichever way one chooses to describe it. In order that a secret trust might be made effective with regard to that added sum, in my opinion, precisely the same factors were necessary as were required to validate the original trustsnamely, communication, acceptance or acquiescence, and the making of the will on the faith of such acceptance or acquiescence. None of these elements, as I have said, was present. It is not possible, in my opinion, to treat the figure of £5,000, in relation to which the consent of the trustees was originally obtained, as something of no essential importance. I cannot myself see that the arrangement between the testator and the trustees can be construed as though it meant: “£5,000 or whatever sum I may hereafter choose to bequeath.”  That is not what was said, and it was not with regard to any sum other than the £5,000 that the consciences of the trustees (to use a technical phrase) were burdened. It must not be thought from what I have been saying that some trifling excess of the sum actually bequeathed over the figure mentioned in the first bequest to the trustees would necessarily not be caught. Such an addition might come within the rule of de minimis, if the facts justified it. Similarly, it must not be thought that, if a testator, having declared to his trustees trusts in relation to a specified sum, afterwards in his will inserts a lesser sum, that lesser sum would not be caught by the trusts. In such a case, the greater would, I apprehend, be held to include the less. In the present case, neither of these two possible methods of dealing with the difficulty is available, because here we have something to which the rule of de minimis could not possibly apply, for it is an increase, and a very substantial increase, of the legacy originally bequeathed. There is no ground, in my opinion, which would justify the court in treating the reference to that specific sum which passed between the testator and the trustees as having significance of so loose and indeterminate a character that it could be expanded at will.

That really disposes of this appeal. I should, however, just mention one argument which counsel for the appellant submitted to usnamely, that, on the facts of this case, we should construe the provision in question as incorporating by reference into the testamentary dispositions of the testator the trusts actually declared to his trustees. The answer to that argument is a short one. Although it is true that Mr Swan for his own

Page 590 of [1939] 3 All ER 586

convenience committed to writing the trusts which had been verbally declared, there is no mention on the face of the will of March 1938, of that document, or of any document at all. Accordingly, there is no question here of incorporating by reference into a will the terms of some existing document described sufficiently and identified in the will itself. The result is that the judgment of Crossman J, in my opinion, was perfectly right, and the appeal must be dismissed.

CLAUSON LJ. I agree. Crossman J, asked himself, as it appears to me, the relevant and the crucial question as to whether or not he could, on the evidence, arrive at the conclusion that the trustees ever accepted a trust, either impliedly or expressly, with regard to the second £5,000. He came to the conclusion that the evidence did not show that they had ever accepted such a trust, and I cannot see my way to differ from him. For those reasons, I agree that the appeal must be dismissed.

GODDARD LJ. I agree, and I have nothing to add.

Appeal dismissed. Costs to come out of residue. Trustees costs as between solicitor and client.

Solicitors: Elvy Robb & Co (for the appellant); Warren Murton Foster & Swan (for the respondents).

W K Scrivener Esq   Barrister.

A Vigers Sons & Co Ltd v Swindell

[1939] 3 All ER 590


Categories:        CONSTRUCTION        

Court:        KINGS BENCH DIVISION        

Lord(s):        ASQUITH J        

Hearing Date(s):        24, 26 MAY, 14 JUNE 1939        


Building Contracts Building owner and subcontractor Privity of contract RIBA standard form of contract Insolvency of contractor Ratification.

On 17 February 1938, the defendant entered into a contract on a standard Royal Institute of British Architects form of contract, with T & A Ltd, a firm of building contractors, for the building of a block of flats, the intention of the contract being that there should be no privity of contract between the defendant and the subcontractors, even if the defendant exercised the right which she had under the contract of paying a subcontractor direct and debiting the contractor. The plaintiffs tendered for the work of flooring the flats, and in June 1938, their tender was accepted. One B was at all material times treated by the defendant as the architect in connection with the building. Early in June, T & A Ltd went into liquidation, and on 9 June B, with the acquiescence of the defendant, wrote to T, a director of the liquidated company, informing him that it had been decided that he should take over the contract. On the same day he wrote to the defendant enclosing a copy of the letter sent to T, and also enclosing for her signature a mandate to the bank from which she had borrowed money on the security of the building advising that T had been substituted as contractor, and authorising the bank as from 10 June to pay all subsequent amounts to T or to such nominated subcontractors as appeared on certificates signed by the architect and countersigned by the defendant. On 10 June, this mandate, duly countersigned by the defendant, was sent to the bank. On 15 June, B gave the plaintiffs a verbal order

Page 591 of [1939] 3 All ER 590

to lay the flooring, and then purported to pledge the defendants credit to the plaintiffs for the cost of the work:

Held (i) so long as the original contract was not modified, B had no authority to pledge the defendants credit to the plaintiffs.

(ii) the letters of 9 June and the mandate to the bank created a new contract with T on the same terms as the original contract. They did not, therefore, create any privity of contract between the parties, nor were they evidence of an antecedent authority in B to pledge the defendants credit with the plaintiffs. The reference in the mandate to the payment of subcontractors by the bank, assuming that payment direct was intended, was referable to the defendants right under the contract to pay a subcontractor direct.

(iii) the defendant did not know before the plaintiffs had finished the work, that B had pledged her credit to them, and had, therefore, not ratified his act in doing so.

Notes

The position between the various persons engaged in building operations is of importance when, as here, one party is overtaken during the period of construction by financial difficulties. In a case governed by the standard form of contract, it is held that there is no privity of contract between the building owner and a subcontractor.

As to Relationship between Building Owner and Subcontractor, see Halsbury (Hailsham Edn), Vol 3, pp 313315, paras 580582; and for Cases, see Digest, Vol 7, pp 421424, Nos 351368.

Cases referred to

Ramsden & Carr v Chessum & Sons & Ward (1913) 110 LT 274; 7 Digest 435, 409.

Hampton v Glamorgan County Council [1917] AC 13; 7 Digest 427, 375, 86 LJKB 106, 115 LT 726, affg (1915), 84 LJKB 1506.

Flemyng v Hector (1836) 2 M & W 172; 8 Digest 515, 65, 6 LJEx 43.

Pole v Leask (1863) 33 LJCh 155; 1 Digest 267, 1, 8 LT 645.

Action

Action to recover from the defendant the sum of £112 4s 3d as a reasonable price for work and labour done and materials supplied, or, alternatively, the same sum as damages for breach of contract. The facts are fully set out in the judgment.

G O Slade for the plaintiffs.

N R Fox-Andrews and John Stephenson for the defendant.

Slade: The plaintiffs are entitled to succeed on the grounds (i) that Booth (by virtue of his office as the defendants architect) was enabled to enter into contractual relations with the plaintiffs which were legally binding on the defendant, (ii) that Booth had express oral authority to contract on the defendants behalf, (iii) that the defendants express direction to Booth gave him implied authority to contract on her behalf, and (iv) that the defendants representation that Booth had authority to contract on her behalf amounts in law (a) to estoppel by holding out, and (b) to ratification. The plaintiffs are not bound by the original Royal Institute of British Architects contract, as this building contract is res inter alios acta, in so far as the plaintiffs are concerned. The defendants mandate to her own bankers authorised them to pay moneys direct to persons employed by her architect, Booth, thereby postulating that her architect should have authority to contract for the work.

Stephenson: Booth had no authority to pledge the defendants credit.

Page 592 of [1939] 3 All ER 590

Express authority is negatived by the uncontradicted evidence of the defendant, and of Booth himself. The proposition that an architect qua architect has implied authority to pledge his employers credit is impliedly negatived by two decisions of the House of Lords, Ramsden & Carr v Chessum & Sons & Ward, per Viscount Haldane LC, at p 275, and Hampton v Glamorgan County Council, per Earl Loreburn, at p 19. No such power is included in the functions of an architect specified in Halsburys Laws of England, Hailsham Edn, Vol 3, p 329 et seq para 603 et seq and no evidence has been called, or could be called, to prove that it was customary in the profession. An agents authority to pledge his principals credit is less easily implied when the principal gives the agent the means of payment: Flemyng v Hector per Lord Abinger CB, at p 181, and per Parke B, at p 185. The defendant never ratified Booths unauthorised contract, either before or after the completion of the plaintiffs work. The fact that she never did so after the completion of the plaintiffs work is not relied on by the plaintiffs: Halsburys Laws of England, Hailsham Edn, Vol 3, p 313, para 518. As to the ratification of that unauthorised contract before the work was completed, the unauthorised act must be known before it can be adopted, and there is uncontradicted evidence that neither the defendant nor Castle knew of Booths orders to the plaintiffs until after action brought. They knew that the flooring was being done, but were entitled to assume that it was being done for Taylor. The plaintiffs took the risk of Booths warranty of authority turning out untrue, and they must pay for their failure to apply to the defendant for confirmation of it: Pole v Leask per Lord Cranworth, at p 162.

G O Slade for the plaintiffs.

N R Fox-Andrews and John Stephenson for the defendant.

14 June 1939. the following judgment was delivered.

ASQUITH J. The work and materials in question in this case were furnished by the plaintiffs on an order given by one R G Booth, an architect. The order was ostensibly given on behalf of the defendant, and Booth purported to pledge her credit to pay for them. The plaintiffs say that Booth was authorised to do this, and that, since they have admittedly performed the work fully, and in an unexceptionable manner, and since also, by admission, the prices charged are reasonable, the defendant is liable to them for the amount. Alternatively, they say that, if it was a further condition of the defendants liability that the architect had presented to her a certificate in respect of this work, and if no certificate was so presented by Booth, it was an implied term of the contract between the plaintiffs and the defendant that, on the due completion of the work, the defendant would cause Booth, the architect, to present such a certificate, and they claim the same sum as damages for breach of this implied term.

The contract on which the plaintiffs rely is pleaded as an oral contract of 17 June 1938, evidenced by certain letters of 18, 20, 21 June or alternatively, as a written contract contained in, and constituted by, these letters. The sole issue is whether Booth had authorityexpress, implied,

Page 593 of [1939] 3 All ER 590

or by way of estoppel or ratificationto bind the defendant in placing the order with the plaintiffs, subject to the fact that, if, and only if, he had such authority, and a contract therefore resulted, the question as to the presentation of a certificate being a precondition of payment also arises. The issues can be yet further narrowed. The plaintiffs did not rely at all strongly on the suggestion of authority by estoppel, of which there was in fact no evidence at all, nor on ratification by acceptance of the benefit of the work after it was done, for it was then impossible to reject it. The questions, therefore, apart from that of the certificate, are whether or not there was express or implied authority in Booth at the time when he placed the order, and, if there was not, whether or not his act in placing it was ratified before the work was completed.

The circumstances were the following. The defendant was minded early in 1938 to build, inter alia, a block of four self-contained flats in the neighbourhood of Saffron Walden. To that end, on 17 February 1938, as building owner, she entered into a written contract with building contractors named Taylor & Ash, Ltd, on a standard RIBA form of contract. The terms of this form of contract which are material are the following. By cl 15(a) it was provided as follows:

Specialists … and others executing any work or supplying and fixing any goods for which prime cost prices are included in the specification who may be nominated or selected by the architect are hereby declared to be subcontractors employed by the contractor and are herein referred to as “nominated sub-contractors.”

In a document referred to on the first page of this building contract, and amounting, in my opinion, to a specification within this subclause, there were set out certain prime cost items. These included the flooring of the four flats, and in respect of this work on 28 March the plaintiffs made a tender. In the middle of June, this tender was accepted, and they became “nominated subcontractors” within cl 15(a). By cl 15(a)(3), it is provided as follows:

Payment is to be made to the nominated subcontractor by the contractor within 14 days of his receipt of the architects certificate under cl 25 hereof which includes the value of such subcontractors work.

By cl 15(b), it is provided as follows:

Before any such certificate is issued to the contractor the latter shall if requested by the architect furnish to him reasonable proof that all nominated subcontractors accounts included in previous certificates have been discharged, in default whereof the employer may pay the same on a certificate of the architect and deduct the amount thereof from any sums due to the contractor. The exercise of this power shall not create privity of contract as between the employer [the building owner] and the subcontractor.

It is quite clear that the intention of this agreement is that there shall be privity of contract between building owner and building contractor, and between building contractor and such subcontractors as may be nominated by the architect, but that there shall be no privity of contract between the building owner and any nominated subcontractor, and this even if the building owner exercises the right conferred on her

Page 594 of [1939] 3 All ER 590

by cl 15(b), in the events therein specified, of paying a nominated subcontractor direct and debiting the contractor. So long, therefore, as nothing has happened to modify the scheme embodied in this building contract, neither the architect nor anybody else is intended to have any authority to pledge the credit of the building owner with a nominated subcontractor. Under this contract, one C Howard Crane was nominated as architect. R G Booth was at this time working with Mr Crane, but later, in May, he separated from him. For the purposes of the contract, however, he was at all material times treated throughout by the defendant as the architect in connection with the building operations.

In March, the defendant had raised a loan from the Midland Bank on the security of the building, so far as it was then completed, to finance her further operations. Towards the end of May or the beginning of June, Taylor & Ash, Ltd, the building contractors, became deeply involved financially, and went into liquidation. On 9 June R G Booth wrote to Mr Taylor as follows:

Further to my conversation with you yesterday it was decided that Messrs Taylor & Ash [Taylor & Ash, Ltd.] should cease from carrying on the works at Saffron Walden, and that you yourself will be taking on this contract.

Booth enclosed a copy of this letter in a letter which he wrote on the same day to the defendant, and from this letter it appears that they had discussed the substitution of Mr Taylor for Taylor & Ash, Ltd, the day before, and it does not appear from her evidence that the defendant had objected to this substitution. Booth also enclosed in the same letter a draft mandate to the Midland Bank. This was a mandate to be signed by the defendant, and was in the following terms:

With reference to the loan on the above-mentioned property Messrs. Taylor & Ash, Ltd., have ceased to be employed as contractors as from to-day [10 June ]. The contract is being carried on by Mr. H. T. Taylor, one of the directors of the company, and I hereby authorise you to pay all subsequent amounts to him or such nominated subcontracts as appear on the certificate signed by the architect, and countersigned by me as formerly.

That mandate was countersigned and sent to the Midland Bank by the defendant.

The effect of this correspondence is, I think, clearly to create a new contractnamely, a contract between the defendant and Taylor in the same terms as the contract of 17 February between the defendant and Taylor & Ash, Ltd, unless some modification of those terms should be deduced from the mandate of the defendant to the bank, or from the letters sent or enclosed by Booth for the defendants perusal. Taylor personally assumes the obligations of Taylor & Ash, Ltd, under the old contract, so far as the unperformed part of the work is concerned. He is to complete the works for the same estimated costs that were contracted for by Taylor & Ash, Ltd, less all payments made either to Taylor & Ash, Ltd, or to various subcontractors for work already done by them but not yet paid for.

How much more, if anything do the letters and mandate to the bank

Page 595 of [1939] 3 All ER 590

establish? Do they in particular confer upon Booth an express or implied authority to pledge the defendants credit direct to a nominated subcontractor, or do they merely implement the arrangements provided for by cl 15(b) of the contract? In the latter case, they could not be construed as conferring on Booth any such authority.

The subsequent history of the matter is relevant, and is as follows. The contract relied on was made a few days after these communications. On 15 June, one Palmer received from Booth by word of mouth an order for his principals, the plaintiffs, to lay the flooring in the flats. On 18 June the plaintiffs wrote to Taylor & Ash, Ltd, reporting this fact, and on 20 June Booth wrote to the plaintiffs as follows:

The above contract is now no longer in the hands of Taylor & Ash, Ltd., but is carried out by Mr. Taylor. Your work being carried out by a p.c. sum will be paid by my client, Mrs. Evers Swindell, of The Little House, Saffron Walden, on presentation of my certificates.

On 21 June the plaintiffs wrote as follows:

We note with pleasure that this account will be paid direct by your client.

Booth is here quite plainly purporting to pledge the defendants credit with the plaintiffs.

Two questions accordingly arise. First, do the letters of 9 June 1938, and the mandate of the bank of that date create, or evidence, an antecedent authority in Booth to pledge the defendants credit with the plaintiffs? Secondly, if not, did the defendant ratify Booths unauthorised act in so purporting to pledge her credit between the date of the order and its execution? The order was placed sometime between 15 June and 20 June, and was executed between 12 August and 20 August.

On the first question, my mind has fluctuated a great deal, and I have modified the view which I had provisionally formed at one period. I have come to the conclusion that, on their true construction, the material letters and the mandate neither constitute nor are evidence of any such authority in Booth. I think that the references to payment of subcontractors by the defendants bank, assuming that they mean payment direct, are referable to cl 15(b) of the building contract. They are intended to operate in the events specified in that subclause, and are sufficiently accounted for by the existence of that subclause, without its being necessary to have recourse to the hypothesis of a new authority vested in the architect. It is quite true that Booth proceeded to act as though he were authorised to pledge the defendants credit, either directly or as guarantor of Taylors obligations. Mr Taylors cheques began to be dishonoured, and subcontractors, unwilling to look to his credit alone, had to be galvanised into continued action by pledges of Mrs Swindells creditfor instance, on 18 June, Farmers, Ltd, who supplied staircases, on 23 June, Barnett, the supplier of paint, on June 30, Messrs Attree, electrical contractors, on 30 June, contractors named Finch, Ltd, on 19 July, Coloured Concrete Tiles, Ltd, and, later still, after August, people named Jenner & Johnson. At the material

Page 596 of [1939] 3 All ER 590

time, howeverthat is, on 9 JuneBooth does not seem to be asserting or asking for a general authority to pledge the defendants credit. In the very letter in which he enclosed the bank mandate to the defendant for her signature, he says:

I have to-day received from the Marley Tile Co. a letter, and they have asked me to get you to sign a guarantee in regard to the payments of their tiles. This I have promised to do, and I am bringing this letter and its enclosure down with me tomorrow.

This implies that Booth thinks he needs, and is requesting, a special ad hoc authority to pledge the defendants credit, even as guarantor, and is inconsistent with the view that he had obtained, or was obtaining, a general authority to pledge her credit without special reference or consultation in each case. It is also to be noted that The Marley Tile Co are the only subcontractors who have a separate certificate made out by Booth in their favour. All the rest of the subcontractors, so far as they are paid at all, are paid on certificates made out in favour of Taylor. A letter of 6 August from the defendant to Booth has been relied on by the plaintiffs as evidence that the defendant had given Booth an authority wide enough to cover the pledging of her credit. “I put myself entirely in your hands” she says, complaining of heartbreaking delays. However, I do not think that more can be drawn from these words than the assumption that she relied upon him to expedite matters within the limits of his original functions and authority. I therefore hold that there was no antecedent authority.

The second point is whether, failing antecedent authority, there was ratification. To establish ratification, it is necessary, inter alia, to show that, between 9 June and 20 August, the defendant knew what Booth was doing. Neither then nor at any time until the writ did she know that Booth had pledged her credit to the plaintiffs, or that the plaintiffs even existed. If she knew that he was pledging her credit to other subcontractors wholesale, and approved or affirmed his conduct, this might ratify the transaction with the plaintiffs, even if she had no specific knowledge of that transaction. By letter of 22 July, one Castle, the defendants agent, complains that Booth had ordered staircases from subcontractors called Farmers, Ltd, on the defendants account. By a subsequent letter of 13 August, he refers with bitterness to a similar transaction. I can find no instance between the middle of June and 20 August (the time this work was completed) showing that the defendant or her agent Mr Castle knew that her credit had been pledged to a subcontractor without authority specifically sought and obtained, and without her approval or acquiescence. On the contrary, as I have indicated, Castle more than once protests. There is, indeed, one early letter written on 26 May 1938, in which subcontractors named Rota Products, Ltd, ask to be paid by Mrs Swindell as they were paid last time, or words to that effect. No one from Rota Products, Ltd, was called to give evidence, and the letter itself is not evidence

Page 597 of [1939] 3 All ER 590

of the truth of its contents. In any case, however, there is no evidence that the defendant complied with this demand for direct payment. If she had done so, she might have been acting in pursuance of cl 15(b) of the building contract, not by way of ratifying a pledge of her credit. Moreover, even if it were a ratification of that transaction, it would not amount, without much more, to a ratification of all similar ones, whether or not known to her.

In the result, I find or hold that the defendant neither authorised Booth to pledge her credit to the plaintiffs nor ratified his act in doing so, either specifically or by ratifying such act generally. On this finding, it is not necessary to consider the other issuenamely, whether a certificate covering the plaintiffs fees was presented to her, or whether she ought to have procured the presentation of such a certificate to herself. I appreciate that this decision causes real hardship to the plaintiffs, who have done good work in good faith and have not been paid. As I have said, they did their work in an unexceptional fashion. The alternative remedy against Booth, which might in happier circumstances have indemnified them, is worthless, owing to Booths insolvency, and they suffer. A decision in favour of the plaintiffs, however, would also have caused hardship, because the defendant has, as I find, paid Taylor for this work, the money not reaching the plaintiffs owing to Taylors insolvency or misapplication of it. It would have been a hardship to the defendant to have to pay twice over, and, for the fact that the choice lies between these objectionable alternatives, Booth is to blame.

In the result, there must be judgment for the defendant, but I do not think that she should have her full costs. Discovery was most incomplete and belated. Many highly material documents were only disclosed in the course of the hearing, a circumstance which complicated and prolonged the trial. This being so, I think that she should be entitled to recover only two-thirds of the taxed costs.

Judgment for the defendant with two-thirds of the taxed costs.

Solicitors: Beaumont Son & Rigden, for the plaintiffs; Warren & Warren, agents for D R W Stevenson Squires & Co, Cambridge, for the defendant.

Charles Newton Esq   Barrister.

Newcastle-under-Lyme Borough Council v Wolstanton Ltd, and Duchy of Lancaster

[1939] 3 All ER 597


Categories:        CIVIL PROCEDURE: ENVIRONMENTAL        

Court:        COURT OF APPEAL        

Lord(s):        CLAUSON, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        3, 4 JULY 1939        


Mines Working of mines Letting down surface without compensation Plea of custom or prescription Invalid plea.

In a defence to an action for an injunction to restrain the defendants from so working their mines as to let down the surface, and thus damage the plaintiffs property, the defendants pleaded, inter alia, both a custom

Page 598 of [1939] 3 All ER 597

and a right by prescription to work their mines so as to let down the surface without making compensation:

Held following Hilton v Granville (Lord), such a custom or prescriptive right was unreasonable and invalid. That decision, being one affecting property rights, and having stood for over 90 years, ought not to be disturbed.

Decision of Farwell J ([1939] 3 All ER 190) affirmed.

Notes

Farwell J held that Hilton v Granville (Lord), decided in 1844, completely covered the points taken upon the unreasonableness of the custom and upon the prescriptive right in this case. The position in the Court of Appeal was not quite the same, in that the earlier decision was one of the old Court of Queens Bench, and, therefore, not binding upon the present Court of Appeal. The Court of Appeal, however, have treated the matter as one governed by the doctrine of stare decisis, and have refused to overrule an authority regulating property rights which has stood for over 90 years.

As to Custom to Cause Subsidence, see Halsbury (Hailsham Edn), Vol 22, pp 629, 630, para 1359; and for Cases, see Digest, Vol 34, p 711, Nos 961966.

Cases referred to

Hilton v Granville (Lord) (1841) Cr & Ph 283; 34 Digest 714, 987, 10 LJCh 398.

Hilton v Granville (Lord) (1844) 5 QB 701; 34 Digest 703, 923, 13 LJQB 193, 2 LTOS 419, subsequent proceedings (1848) 12 QB 737, n.

Love v Bell (1884) 9 App Cas 286; 34 Digest 708, 947, 53 LJQB 257, 51 LT 1, affg SC sub nom Bell v Love (1883) 10 QBD 547.

Tyson v Smith (1838) 9 Ad & El 406; 17 Digest 4, 5.

Johnson v Clark [1908] 1 Ch 303; 17 Digest 13, 107, 77 LJCh 127, 98 LT 129.

Rowbotham v Wilson (1860) 8 HL Cas 348; 34 Digest 613, 121, 30 LJQB 49, 2 LT 642, affg (1857) 8 E & B 123.

Carlyon v Lovering (1857) 1 H & N 784; 17 Digest 15, 126, 26 LJEx 251, 28 LTOS 356.

Broadbent v Wilks (1742) Willes 360; 17 Digest 14, 117, affd sub nom Wilkes v Broadbent (1745) 2 Stra 1224.

Rogers v Taylor (1857) 1 H & N 706; 19 Digest 176, 1276, 26 LJEx 203, 28 LTOS 275, subsequent proceedings (1858) 2 H & N 828.

Salisbury (Marquis) v Gladstone (1861) 9 HL Cas 692; 17 Digest 14, 114, 34 LJCP 222, 4 LT 849.

Blackett v Bradley (1862) 1 B & S 940; 34 Digest 711, 963, 31 LJQB 65, 5 LT 832.

Buccleuch (Duke) v Wakefield (1870) LR 4 HL 377; 34 Digest 704, 927, 39 LJCh 441, 23 LT 102.

Consett Industrial & Provident Society Ltd v Consett Iron Co [1922] 2 Ch 135; Digest Supp, 91 LJCh 630, 127 LT 383.

Bateson v Green (1793) 5 Term Rep 411; 11 Digest 42, 581.

Young v Robertson (1862) 4 Macq 337; 30 Digest 187, 547.

Mersey Docks & Harbour Board v Cameron, Jones v Mersey Docks & Harbour Board (1865) 11 HL Cas 443; 42 Digest 745, 1706, 35 LJMC 1, 12 LT 643, on appeal from SC sub nom Mersey Docks & Harbour Board v Jones, Same v Cameron (1861) 30 LJMC 185, 239.

Pugh v Golden Valley Ry Co (1880) 15 ChD 330; 30 Digest 187, 548, 49 LJCh 721, 42 LT 863.

Page 599 of [1939] 3 All ER 597

Appeal

Appeal by the first defendants from an order of Farwell J, dated 24 May 1939, and reported [1939] 3 All ER 190. The facts are fully set out in the judgment of Clauson LJ

G P Slade KC and W J C Tonge for the first appellants.

Sir Herbert Cunliffe KC, Hon Charles Romer KC and A Andrewes Uthwatt for the second appellant.

C E Harman KC, Cyril Radcliffe KC and Wilfrid M Hunt for the respondents.

Slade KC: The decision in Hilton v Granville (Lord) was based upon a ground which has been overruled. It has never been affirmed in any subsequent case. When the matter is examined, upon principle, Hilton v Granville (Lord) is seen to be wrong. When once a custom is proved to exist, it will not be held to be unreasonable if the right alleged to exist would be valid or enforceable if conferred by express grant or reservation. The question is not whether or not the court ought to presume an agreement on the part of the colliery owners to subject themselves to the right claimed, but whether or not the right claimed by the copyholder is one which ought not to be enforced against the colliery owners. In the alternative, the true test is as follows. Ought the court, having regard to the nature of the right claimed, to presume that the copyholder would have agreed to have been bound by that right. The plaintiff, in order to succeed, must show, not only that the agreement which the court is asked to presume is unlikely, but that it is inconceivable whatever presumption of fact be made. Both of these propositions involve the assumption that at some time before legal memory there was some kind of an agreement between the lord and the tenant. On any view of the matter, one starts with an assumption which lies at the root of the whole theory of copyhold tenure. The theory is that copyholders were formerly villains who held their land at the will and pleasure of the lord, without any legal claim or right. In course of time, they came to hold as of right that which they had previously held at the will of the lord. The custom to let down the surface at the will of the lord is proved in the best possible manner. The court will never interfere if the custom is found to be based upon principles which the court applies. The burden is upon the copyholder to show that the court would refuse on some ground to enforce the custom. One assumes that the copyholder has certain rights and that the lord has certain rights, and that these rights have existed from time immemorial. Unless some reason can be shown why the lord should not enforce the right, it should be enforced. Tyson v Smith and Johnson v Clark indicate the principles applicable when the court is considering whether or not a custom is reasonable. The custom claimed in the present case is claimed only for the purposes of the necessary work, and the mere fact that it may have an injurious effect on the copyholder does not make it contrary to law. The court is entitled to consider that there is a mining industry, and that the right claimed

Page 600 of [1939] 3 All ER 597

is for the purpose of enabling the lord to win the minerals, and they could not be properly won without the existence of this right. It is necessary to consider the circumstances at the time when this supposed agreement between the lord and the tenant was made. In Rowbotham v Wilson, there was a question of a reservation of this kind in a grant, and the court upheld the reservation. The copyholders estate is always held subject to the usages of the manor, and the copyholder must be taken to know what those usages are. The court is not precluded from investigating the real question, which is whether or not Hilton v Granville (Lord) was properly decided, as the court is being asked to review the decision of a lower court. The custom of the manor, in the present case, is on all fours with the custom in Carlyon v Lovering and it differs from the custom in Broadbent v Wilks. The custom is necessary for the proper working of the minerals. It does not destroy the land, and it is not arbitrary. Notwithstanding the decision in Hilton v Granville (Lord), the usage has continued to the present day. It is a perfectly recognisable right, and the custom is not more unreasonable than was the custom in Carlyon v Lovering. When the whole matter is examined, and the true principles which underlie this branch of the law are considered, the decision in Hilton v Granville (Lord) is manifestly wrong. [Counsel referred to Love v Bell, Rogers v Taylor, Salisbury (Marquis) v Gladstone, Blackett v Bradley, Buccleuch (Duke) v Wakefield, Consett Industrial & Provident Society Ltd v Consett Iron Co and Bateson v Green.]

Romer KC: I adopt what has been said on behalf of the first appellants. The notice of appeal of the second appellant is in a different form. It asks that it may be declared that the custom and prescriptive and other rights alleged are in law possible, and are reasonable and capable in law of being sustained or presumed. Hilton v Granville (Lord) is not merely wrong. It is so wrong that the court is entitled to reverse it, notwithstanding the fact that it has applied for so many years. It is a case which treated as an abstract proposition a subject matter not susceptible of being so treated. It treated as a matter of theory something which cannot possibly be treated solely as a matter of theory, but which involves in a greater or lesser degree a question of fact. Not only the existence, but also the validity, of the custom and its reasonableness are questions of fact. “Reasonable” is a relative, and not an absolute, term. What would be reasonable in some circumstances would be unreasonable in others. One has to know the facts before deciding whether or not a matter is reasonable. I know no case other than Hilton v Granville (Lord) where the question of reasonableness has been decided in vacuo without any evidence on the matter whatever. A question of reasonableness is a question of law which can be determined only by established facts. In Buccleuch (Duke) v Wakefield, Lord Hatherley LC doubted whether the decision in Hilton v Granville (Lord) was a right one. Hilton v

Page 601 of [1939] 3 All ER 597

Granville (Lord) was wrong, and ought to be overruled. The effect of it has not been such as precludes the court from reviewing it. In fact, the authority of that case has not been recognised in this manor, and the custom has been observed.

Radcliffe KC: There is no question as to what course the court ought to take in this matter. Some things in the law are not so much a question of logical reason as a question of legal learning. With regard to customs, it is important that it should be known what is a good custom and what is a bad custom according to the judges of the land rather than that such a custom should be open to review from time to time, with new reasoning and new methods applied. In the present case, the court is dealing with a decision made nearly 100 years ago to the effect that persons dealing with land in the manor of Newcastle-under-Lyme could from that time onwards acquire title to the land with the certainty that they were not to be exposed to having their house or factory overthrown by mining operations without their receiving compensation. Under the shelter of that judgment, three generations have lived in that manor and have dealt with their property. The court is bound by a principle which the courts have always recognised. That principle is stated very conveniently in Beal On Cardinal Rules of Legal Interpretation, 3rd Edn, p 16, where the author summarises many cases dealing with this principle. Hilton v Granville (Lord) was decided in 1844, and in 1862 the court in Blackett v Bradley held itself bound by that decision. It was treated in Salisbury (Marquis) v Gladstone in 1861 as being a typical instance of a bad custom. It was expressly approved by Baggallay LJ, in Love v Bell, and from 1883 to this day persons have been entitled to base their rights upon it without question. In Halsburys Laws of England, Hailsham Edn, Vol 22, p 629, the custom is described as unreasonable and void. That view is based upon Hilton v Granville (Lord). Unreasonableness is a ground for rejecting a custom. The order of Farwell J, was right, and the court ought to dismiss this appeal. [Counsel referred to Young v Robertson, Mersey Docks & Harbour Board v Cameron and Pugh v Golden Valley Ry Co. ]

G P Slade KC and W J C Tonge for the first appellants.

Sir Herbert Cunliffe KC, Hon Charles Romer KC and A Andrewes Uthwatt for the second appellant.

C E Harman KC, Cyril Radcliffe KC and Wilfrid M Hunt for the respondents.

4 July. The following judgments were delivered.

CLAUSON LJ. In 1841, the then Lord Granville was working mines under and within the manor of Newcastle-under-Lyme. The then owner of a house, built upon a copyhold close, parcel of the manor, by bill in equity applied to Lord Cottenham LC for an injunction to restrain the working of the mines by Lord Granville, who was working them under some lease or licence from the Duchy of Lancaster. The application Hilton v Granville (Lord)came before Lord Cottenham LC on 16, 18 June 1841. I ought to have said that some short time before an application for an interim injunction had been made to Lord Langdale MR, and it was renewed by way of appeal before Lord Cottenham LC, Lord Langdale MR, having refused the motion.

Page 602 of [1939] 3 All ER 597

The matter was canvassed at considerable length, and, after a good deal of discussion in the presence of counsel of the greatest eminence on each side, an order was drawn up giving the plaintiff liberty to bring such action as he might be advised against the defendant touching the working of the mines:

And it is ordered that the defendant do admit, on the trial of such action, for the purposes of such action, that the working by the defendant, his servants or agents, of the mines under the surface near to the plaintiffs houses in the said bill mentioned, hath caused damage to the foundations thereof; but such admission is not to be used for any other purpose, in this cause or otherwise, and is not to preclude the defendant from insisting, in any other proceeding than such action that no such damage has in fact been done. And it is ordered that the motion do stand over until after judgment shall have been obtained in such action, or until the further order of this court. …

That was in 1841.

The object of the order made by Lord Cottenham LC was, of course, to enable a determination to be obtained from the appropriate court having jurisdiction in the matter as to whether or not the lessee of the mines had a good defence to the action on the ground adumbrated in the arguments of counsel before Lord Cottenham LCnamely, that there was a valid custom in the manor which gave the lord and the lessee or licensee, claiming under the lord, the right to mine in such manner as to damage the house of the plaintiff upon the copyhold close. The matter proceeded in due course, and in 1844, three years having elapsed, in which I doubt not there was not a little popular interest in what the result of the litigation might be, the matter came before the Court of Queens Bench (Hilton v Granville (Lord)) in this way. There had been the usual pleadings, and the defendant, Lord Granville, had pleaded the custom which I have indicated as justifying him in mining so as to damage the plaintiffs house. I do not propose to refer to the details of the pleading, but merely to state that, after a long and elaborate argumentan argument which was conducted by counsel of almost equal eminence among practitioners in the court of common law as the practitioners in Chancery who had appeared before Lord Cottenham LC on the previous occasionthe court reserved judgment, and the judgment of the court was delivered by Lord Denman CJ. The effect of his judgment was to determine that the local law, governing in the manor of Newcastle-under-Lyme the relations between the lord and his copyhold tenants, did not enable the lord to mine so as to occasion damage, without paying compensation for it, to the houses on the copyhold tenements of the copyholders. That was in 1844. The ground of the decision, which it will be remembered was on demurrer, was that, assuming such a usage to have been proved as that the lord had been in the habit of so mining, no valid custom had been proved, because the usage was of such a character that it could not be the foundation of a custom to be recognised as valid in the Kings courts, because such a usage was, in the opinion of the court, as a matter of Law, unreasonable. That, as I say, was in 1844.

Page 603 of [1939] 3 All ER 597

In 1938, 94 years thereafter, when three generations had come and gone within the ambit of the manor of Newcastle-under-Lyme, the Newcastle-under-Lyme Borough Council, being then owners of a piece of land formerly copyhold which under recent legislation had become freeholdit is not suggested that that in any way affects the rights of the partiesfinding that the lessees or licensees of the Duchy were mining in such a manner as to endanger the stability of the structure, which appears to be a fire-station of some magnitude and importance, upon the councils piece of land, commenced an action, which is the proceeding which is now before us, claiming a declaration that the defendantswho were not only the mining lessees but also the Attorney General of the Duchy of Lancaster, as representing His Majesty the King in the capacity of Duke of Lancasterwere not entitled to mine under or near the plaintiffs hereditament in such a manner as to let down, destroy or injure the surface of the land or the buildings or erections thereon, and asking for consequential relief. Instructed, possibly, by the result of the interlocutory application for an injunction made 94 years before to Lord Cottenham LC, they do not, so far as I am aware, appear to have asked for an interlocutory injunction, but the pleadings were put in in the usual way and the defendants have pleaded precisely the same plea as that which the mining lessees pleaded 97 years earlier, setting up the same custom as that which was set up in 1844.

By an order made by Bennett J, it was ordered that the point of law raised by this replythat is to say, as the order puts it, “that in any event no such custom or prescriptive or other right as is alleged in the defences could or can be sustained ought to be presumed as the same would be unreasonable”be set down for hearing in the non-witness list and disposed of before the trial of the action pursuant to RSC, Ord 25, r 2, a procedure which, of course, replaces what, in 1844, was represented by the demurrer.

Under the terms of that order, the matter came before Farwell J, who held that the question of law which was propounded for his considerationwhich was, to put it shortly, the question whether the custom, if proved, was reasonablewas a question of law which had been determined three generations earlier by a decision of the then Queens Bench Court, which must be treated for this purpose as of co-ordinate jurisdiction with the High Court of Justice. He pointed out that exactly the same question came before the court in 1844, and in that case the judgment decided quite clearly that the custom alleged was unreasonable and, therefore, not enforceable. He also took the view that the judgment covered the question as to whether or not a prescriptive right of such a kind as was suggested in the pleading could be upheld. Farwell J, pointed out that there was one passage in the judgment of Lord Denman CJ, delivering the judgment of the court, which had not met with the approval of those who subsequently had to consider the matter, but Farwell J, heldand, in my opinion, quite

Page 604 of [1939] 3 All ER 597

rightlythat that passage, though it furnished a possible ground to support the decision, was not of the essence of the decision, and that the decision was perfectly clear. The decision was binding upon him because, as a court of co-ordinate jurisdiction, he was bound to follow it.

From that decision the appeal now comes to us, and the question before us is not precisely the same question as that which was before Farwell J, for, as far as he was concerned, it would have been very difficult for him to express a judgment on the point of law which would contradict that of a court of co-ordinate jurisdiction. Here, in the Court of Appeal, we are in some sense in a more fortunate position. We are not bound as strictly as was Farwell J, by that decision, because our jurisdiction is to exercise that which in 1844 would have been exercised in error by the Court of Exchequer Chamber. However, we are faced with the position that all this time ago there was a decision of the proper and competent court which laid down quite clearly what was and what was not the local law governing the relations, in regard to this matter of mining, between the lord and the copyholders. That decision had never been taken to a court of error, and there had been no proceeding since that period in any way challenging that decision. The highest at which the matter can be put is this. It is said that there are indications in some of the cases that some more recent judges, had they had to consider this question of law in 1844, might have been disposed to come to a different conclusion. However, the fact nevertheless stands that no less than 56 years ago in Bell v Love at p 561, Baggallay LJ, sitting in this court, expressed the opinion that the decision, apart from the sentence in the judgment of Lord Denman CJ, to which I have referred, was a correct decision, laying down correctly the law upon the validity of a custom of this character. In those circumstances, it appears to me that the question which we have to consider is not whether, if we had sat in 1844 in the Court of Queens Bench, we should have formed the same opinion as to the law. Personally, I do not find it necessary to commit myself to any opinion on that topic, though I feel bound to say for myself that I see no reason to disagree with the view which Baggallay LJ, no less than 56 years ago in this court expressed about that decision. The position is this. For three generations this decision has been standing. It has appeared during all that time in the textbooks to which members of the profession turn in matters of this kind for assistance and instruction as representing the decision of the court as to the law dealing with this particular matter. In all this time, it is obvious that many transactions must have taken place in such a populous borough as that of Newcastle-under-Lyme on the footing that the local law in this matter had been settled.

Questions as to how far long-standing decisions ought to be overruled have been considered in many cases and I do not propose to go through them. They will be found collected in a very convenient form in

Page 605 of [1939] 3 All ER 597

Beal on Cardinal Rules of Legal Interpretation, 3rd Edn, p 16, where the effect of the cases is stated to be as follows:

The courts should be careful not to overrule decisions which, not being manifestly erroneous and mischievous, have stood for some time umchallenged, and from their nature and the effect which they may reasonably be supposed to have produced upon the conduct of a large portion of the community, as well as of Parliament itself, in matters affecting the rights of property, may fairly be treated as having passed into the category of established and recognised law.

Can this particular decision on the unreasonableness of this custom be said to be manifestly erroneous and mischievous? To my mind, merely to state the proposition is to answer it. It is quite plain that, though the views of various judges on the matter might differ, the decision in 1844 cannot be said to have been manifestly erroneous and mischievous. Has the decision stood for some time unchallenged? A glance at the cases referred to in Beal will show that in some cases as little as 10 or 12 years has, in particular circumstances, been considered sufficient to justify the view that the decision has stood for some time unchallenged. This decision has stood unchallenged for three generations. Can it be reasonably supposed from the nature and effect of the decision to have affected the conduct of a large portion of the community in matters affecting rights of property? To my mind, it is clear that this decision must have affected the conduct of all those in the community within the ambit of the manor of Newcastle-under-Lyme who were concerned with matters of this kind. To suggest to the contrary, it seems to me, would be quite absurd.

In those circumstances, in my view, the duty of this court is plain, and that is, to use the old maxim stare decisis, to hold fast to that which has been decided for so long to be the local law in this community, and, on that ground, to take the same course which Farwell J, has taken, and hold that that case is binding upon us for the purposes of this action.

I have dealt with the matter purely as a matter of custom. In the course of the discussion, something has been said about prescription, but little importance has been attached to it, and I do not propose to deal with that aspect of the case beyond saying that Farwell J, heldand, I think, quite rightlythat the decision on the point of custom covered the matter of prescription so far as raised by this appeal. In those circumstances, in my opinion, the right order for this court to make is to dismiss this appeal, with the usual results.

LUXMOORE LJ. I agree, and do not desire to add anything.

GODDARD LJ. I agree.

Appeal dismissed with costs.

Solicitors: Hancock & Willis, agents for Ellis & Ellis, Burslem (for the first appellants); The Solicitor, Duchy of Lancaster (for the second appellant); Sharpe Pritchard & Co, agents for Joseph Griffith, Town Clerk, Newcastle-under Lyme (for the respondents).

W K Scrivener Esq   Barrister.


Batchelar v Evans and Another

[1939] 3 All ER 606


Categories:        CIVIL PROCEDURE: SUCCESSION; Administration of Estates        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        30 JUNE, 4 JULY 1939        


Executors Actions against personal representatives Judgment by default Return of nulla bona on execution Presumption of devastavit Rebuttal of presumption Order for administration and appointment of receiver of estate.

The deceased during her lifetime advanced to D about £2,000 upon a mortgage of certain leasehold property. The mortgagee died in 1931, and the mortgagor, D, died in 1933. The money due under the mortgage had not been paid, and in 1936 the personal representative of the mortgagee obtained judgment against the personal representatives, and, in so far as those effects were insufficient, out of the effects of the personal representatives. The action was undefended, and the judgment, therefore, was an admission that assets sufficient to satisfy the claim were in the hands of the personal representatives. Very shortly after this judgment, two of the beneficiaries commenced proceedings for the administration of the mortgagors estate, and a receiver of that estate was appointed. In due course, the order for administration was made, and at the time of this action that estate was still being administered by the court. In 1937, execution was levied in respect of the above judgment, and a return of nulla bona was made. Thereupon, the present action was brought, claiming that the personal representatives of the mortgagor were personally liable to satisfy that judgment as the return of nulla bona was evidence of a devastavit:

Held the return of nulla bona was only prima facie evidence of a devastavit, and it was open to the defendants to show that assets to satisfy the judgment were no longer in their hands. The order for administration, the appointment of the receiver, and the consequent handing over of the assets to the receiver rebutted the presumption of a devastavit, and the action must be dismissed.

Notes

In the case of a return of nulla bona on an execution on a judgment by default against personal representatives, there is a presumption that the personal representatives are guilty of a devastavit, and the plaintiff in the action may thereupon apply to issue execution against the personal representatives. The present case shows that this is a rebuttable presumption, and is rebutted by an order for administration of the estate made after the judgment.

As to Judgment by Default against Personal Representatives, see Halsbury (Hailsham Edn), Vol 14, pp 437, 438, paras 832834; and for Cases, see Digest, Vol 24, pp 744, 745, Nos 77317743.

Cases referred to

Leonard v Simpson (1835) 2 Bing NC 176; 24 Digest 744, 7734, 4 LJCP 302.

Rock v Leighton (1700) 1 Com 87; 24 Digest 744, 7731.

Erving v Peters (1790) 3 Term Rep 685; 24 Digest 745, 7738.

Re Timms (1878) 47 LJCh 831; 24 Digest 778, 8075, 38 LT 679.

Action

Action against personal representatives to recover from them personally a sum of £2,082 11s 1d and costs recovered under a judgment against them in their representative capacity, a return of nulla bona having been made upon an execution issued under that judgment. The facts and arguments are fully set out in the judgment.

G P Slade KC and E M Winterbotham for the plaintiff.

Ronald F Roxburgh KC and J Leonard Stone for the defendants.

Page 607 of [1939] 3 All ER 606

4 July 1939. The following judgment was given

FARWELL J. This action by the administratrix of Hubert Walters Batchelar and the administratrix of one Mrs Bowen, who died on 9 December 1931, raises a very curious point. The position was this. Mrs Bowen the mortgagee of whom I will speak in a moment, died intestate on 9 December 1931, and administration of her estate was granted to Mrs Doreen Clifford Batchelar on 10 March 1932. On 13 October 1933, Doreen Clifford Batchelar died, and administration de bonis non was granted to the plaintiff, and, as such, the plaintiff is now suing in this action.

The question arises in this way. The defendants are the executors of Mrs L C Davies, who died on 9 June 1933. The will was proved in January 1934, and the defendants are her executors. During her lifetime, Mrs Bowen had advanced to Mrs Davies a sum of about £2,000, which was charged upon certain leasehoId property which was held by Mrs Davies for a long term of years. At the date of the death of both these two ladies, that money had not been repaid, and was still owing. The plaintiff, after he had become the administrator, proceeded to bring an action against the two defendants in the Kings Bench Division claiming payment of the sum of £2,082 11s 1d , being the amount due under the mortgage, and costs. To that writ the defendants put in no defence. Leave to sign judgment against the defendants was given on 15 April 1936. The judgment in the Kings Bench Division was, I think, in the ordinary form:

It is adjudged that the plaintiff recover against the defendants the sum of £2,082 11s. 1d. and £12 1s. 6d. costs, such sum of money and costs to be levied of the goods and chattels which were of the deceased at the time of her death come to the hands of the defendants as executors of L. C. Davies deceased, to be administered if they have or shall thereafter have so much thereof in their hands to be administered, and if they have not so much thereof in their hands to be administered, then, as to the costs aforesaid, to be levied out of the proper goods and chattels of the said defendants.

As I say, no defence was put in to that action, and, as a result of that, the position was that the defendants had admitted by taking no steps in the judgment and having judgment signed against them, that they had in their hands assets of the deceased sufficient to satisfy the claim.

The next event which happened was this. Very shortly after the judgment, two of the beneficiaries commenced proceedings in the Chancery Division for the administration of the estate, the defendants in this action being the defendants in that action. Upon a motion made in that action to this court, a Mr Morgan was appointed receiver of the estate, and the defendants were ordered as executors to deliver over to the receiver all securities in their hands of the outstanding personal estate, and so on, and there was a direction to give security in the ordinary form within due course. The order for administration was made. I think it was made in default of defence on motion for judgment. That was on 24 June 1936. The estate has been, and is now being, administered by the High Court in this Division. On 25 March 1937, the plaintiff issued a writ of fieri facias for the purpose of enforcing that judgment, and in due course the sheriff made a return of nulla bona. Upon that,

Page 608 of [1939] 3 All ER 606

the plaintiff commenced this action on 20 July 1937, claiming payment by the defendants personally of the sum of £2,000 odd owing under the mortgage. An application was made to this court by the defendants to stay those proceedings, and the matter came before Crossman J. He, however, did not make any order staying the proceedings, upon the plaintiff by his counsel undertaking not to make any claim in the action against the assets of the testatrixs estate, and there was no order made except that the costs should be costs in the action.

That being so, this action has proceeded, and the way in which the plaintiffs put their case is this. They say, and they say truly, that the fact that the judgment in the Kings Bench Division went by default is conclusive evidence against the defendants that at that time they had assets in their hands sufficient to pay the mortgage debt, and by the return, so far as that is concerned, there is no possible doubt that a judgment in that form is conclusive against the defendants, and that they cannot now be heard to say that they had not assets at that date. The plaintiff goes on to say that that return by the sheriff of nulla bona is evidence that the defendants have committed a devastavit, and on such evidence they are entitled to personal judgment against those defendants.

The position, as I understand it, in a case of this sort is this. There is no doubt whatever, as I have said, that the Kings Bench judgment is conclusive against the defendants, so far as it goes as an admission of assets, and the return of nulla bona by the sheriff raises a presumption that a devastavit has been committed by the defendants. The matter was dealt with as follows by Tindal CJ, in Leonard v Simpson, at p 179:

The short point in this case is, whether such evidence of a devastavit was given at the trial on the part of the plaintiff, as, being unanswered by the defendant, entitles the plaintiff to a verdict; and we think the evidence was sufficient for that purpose.

Pausing there for a moment, it is quite plain from that statement alone, taken from the judgment of Tindal CJ, that there must be evidence of devastavit before the plaintiff can get a personal judgment against the defendant, because the whole point which the court was considering in that case was whether there was such evidence, and the court in that case came to the conclusion that there was, the evidence being the return by the sheriff of nulla bona. Then Tindal CJ continues as follows, at p 179:

The judgment by default in the former action is conclusive upon the defendant, that he has assets to satisfy the judgment.

Pausing there again, it is quite plain that what Tindal CJ thought was the effect of a judgment by default in such a case was that that was a conclusive admission by the defendant that he had assets to satisfy the judgment, and that, I think, is in accordance with the contention put forward here by counsel for the plaintiff as to the effect of such a judgment. Tindal CJ continues as follows, at p 179:

This is so thoroughly settled in the case of Rock v. Leighton, and in other

Page 609 of [1939] 3 All ER 606

cases which had preceded it, that it was admitted to be the law by the defendants counsel in arguing the case of Erving v. Peters.

The fact therefore is conclusively established against the defendant, that he has assets of the testator in his hands: and the only question which remains is, what evidence is necessary to show that he has wasted those assets.

Again I stress it, evidence is necessary to show there has been a devastavit. Then Tindal CJ continues as follows, at pp 179, 180.

In reason and good sense, very little evidence ought to be necessary for that purpose. It is his duty when called upon by notice, or by a writ of execution, either to satisfy the debt out of the monies of the testator, or to show the assets to the sheriff, that he may make the debt out of them; and accordingly, very slender evidence has at all times been held to be sufficient to prove the devastavit. The issuing of a writ of fieri facias directed to the sheriff of the county where the action was laid, and a return nulla bona thereto, has, for a long time past, been deemed evidence enough. And yet, if the reason of the thing be considered, the suing out and return of such writ unto the county where the action is laid, affords no necessary presumption that the defendant has ever heard of it.

It is plain that in the view of Tindal CJ what was to be presumed from the return of nulla bona was a mere presumption, and, like every other presumption, was rebuttable if it could be rebutted. Then Tindal CJ continues as follows, at p 180:

For it is a mere fiction of law to suppose the defendant resident in the county where the venue is laid in a personal action: and even if he be, the sheriff would as a matter of course, return nulla bona to the writ, unless authentic information was given to him where the testators goods were to be found, and they were exposed to his officers. And before the present practice prevailed, of issuing a fieri facias and returning nulla bona thereto, it was usual for the sheriff to summon an inquest of office, and to return a devastavit in addition to his return to the writ of fieri facias which being an ex parte proceeding, gives no notice whatever to the defendant.

It appears that originally the sheriff summoned an inquest, of which, I suppose, notice was given to the defendant, and returned a devastavit, if he was so satisfied, and if the defendant had not put in any sufficient answer at that inquest. Then Tindal CJ continues as follows, at pp 180, 181:

In the present case, the plaintiff sued out a testatum fieri facias to the sheriff of Litchfield, with a return that the sheriff had caused to be levied the costs de bonis propriis of the defendant, and that the defendant had no goods or chattels of the testator in his hands to be administered. Now it must be admitted, that the testatum fieri facias in this case was irregular, inasmuch as it proceeds upon the suggestion of an award of a writ of fieri facias to the sheriff of London; whereas the court must take judicial notice that there are two sheriffs and not one only.

But the testatum fieri facias is irregular only, it is not a nullity. And if the plaintiff had applied to amend the recital, no doubt such amendment would have been permitted and no objection could have been then taken to the fieri facias.

But the question is, as the testatum fieri facias has been actually issued and returned, and no objection taken against its irregularity, whether such return that the sheriff has actually levied the amount of the costs, out of the proper goods of the defendant, and that there are no goods of the testator within his bailiwick, does not afford more satisfactory evidence that the defendant had notice of the claim, so as to call upon him to pay the debt or offer the goods of the testator to the sheriff than if a fieri facias had been returned in the ordinary course, nulla bona, by the sheriff of the county where the action was brought? And we feel no doubt that such is the case; and that the defendant was called upon at the trial after the production of the testatum fieri facias and return, to show, that he had not wasted the goods of the testator, but was ready to give them to the sheriff, so that it was the sheriffs fault that he did not make the debt out of them; and as no such evidence was offered by the defendant at the trial, we think the plaintiffs evidence sufficient to establish a devastavit.

In my judgment, it is clear from that case that, in the view of Tindal

Page 610 of [1939] 3 All ER 606

CJ, the sheriffs return of nulla bona is not conclusive against the defendants, but it is open to the defendants, if they can, to show why, at the date of the return of nulla bona, the assets, admittedly in their hands at the date of judgment, are no longer in their hands and to show that that is not due to any devastavit committed by them.

In the present case, the defendants have shown conclusively that, after the judgment, and long before the writ of fieri facias, an order had been made by this court appointing a receiver and making an administration order, and that the receiver had been ordered to get in the assets of the deceased. That, it seems to me, must afford a complete rebuttal of the presumption. The defendants were not entitled to disobey the order of the court. They were bound to hand over the assets to the receiver, and the evidence which has been called before me has proved in my judgment, quite conclusively that they did in fact hand over to the receiver the assets, and that the receiver has since that time administered those assets under the direction of the court. Indeed, that position has been recognised by the plaintiff himself, who, in the administration action, has sold under the power of sale. The mortgage on the property has fetched, I think, £900, and he has put in a proof in the administration for the balance due to him, but, notwithstanding that, he seeks in this action to obtain an order against the defendants personally.

In my judgment, this action must fail, because, although the plaintiff has satisfied the first of the two requirements to get judgment in an action of this sortnamely, has proved conclusively that at the date of the Kings Bench judgment the defendants had admitted assets in their handshe has failed to show that the return of nulla bona which the sheriff made was due to a devastavit committed by the defendants. In fact, the defendants have shown conclusively, in my judgment, that it was not due to a devastavit, but was due to the fact that the Court of Chancery had intervened and had made itself master of the assets.

I was referred to Re Timms, which was to some extent relied upon, where Bacon V-C had refused to stay the proceedings against the executors personally where an administration order had been made. That case differs wholly from this, because there the judgment of the Kings Bench Division and the return of nulla bona by the sheriff both preceded the administration order, and therefore it was not open to the defendant in that case to show that any intervention of the court was the cause of there being no assets to be found at the date when the sheriff went into possession. That seems to me to be no authority whatever in this case. The truth of the matter is that this sort of action is, of course, very artificial. The defendants may quite well let judgment go by default without really appreciating in the least what they are doing by that act. They may quite well fail to understand that they are in that way admitting assets, and may be making themselves personally liable, and the next step, the return of the sheriff, merely raises a presumption. That is in itself no evidence of a devastavit, although it may well be sufficient

Page 611 of [1939] 3 All ER 606

evidence if there is no explanation forthcoming by the executors. It is the presumption which the executors can rebut, and will rebut if they can. In my judgment, in this case that presumption has been amply rebutted. The plaintiff has his remedy in the administration action, but he is not entitled, in my judgment, to an order against the defendants personally.

I should add that other defences have been raised in this case, and one very technical defence was raised out of the undertaking given by the plaintiffs counsel when the motion to stay the proceedings was before the court. It is said that the form of the judgment in an action of this sort is a judgment against the goods of the deceased in the first instance, and afterwards is a judgment against the executors personally, and that, that being the form of judgment, it would be a breach of the undertaking given to the court if this action were to be maintained and judgment sought, which would be, it is said, necessarily in the first instance, a judgment against the estate itself. Whether or not that be a sufficient ground for dismissing this action, I am not proposing to consider further. It is enough for me to say that, for the reasons I have already given, this action must fail, and must be dismissed with costs.

Action dismissed with costs.

Solicitors: T D Jones & Co, agents for F N Powell Son & Prichard, Llanelly (for the plaintiff); R I Lewis & Co, agents for Leslie Williams, Llanelly (for the defendants).

Maurice Share Esq   Barrister.

Bradford Third Equitable Benefit Building Society v Borders (No 2)

[1939] 3 All ER 611


Categories:        ADMINISTRATION OF JUSTICE; Other Administration of Justice: CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        10 JULY 1939        


Practice Appeal Transcripts of proceedings in court below Right to bring appeal without providing such transcripts and to rely upon the judges notes RSC Ord 58, r 11(b).

In a case where the appellant can show that for some reason it is not possible to supply to the Court of Appeal a transcript of the proceedings in the court below, he may bring that evidence before the Court of Appeal as best he can. If the material he supplies proves to be inadequate, the appeal must necessarily fail. There is no need for a special application for leave to bring the appeal without providing the transcript of the proceedings below. In such a case, under RSC Ord 58, r 11(b), the judges notes must be furnished to the Court of Appeal.

Notes

A previous application in this matter is reported [1939] 3 All ER 29, where the court refused to review a refusal by the trial judge to allow the cost of the necessary transcripts to be defrayed out of public funds. It is understood that a similar application made to the House of Lords was also refused. In these circumstances, the appellant may proceed without supplying the transcripts, and no application to the court is necessary. It may well be that such material

Page 612 of [1939] 3 All ER 611

as the appellant has may not be sufficient to substantiate his case before the Court of Appeal, and this is a risk which the appellant must take.

As to Bringing Evidence before the Court of Appeal, see Halsbury (Hailsham Edn), Vol 26, pp 123, 124, para 243; and for Cases, see Digest, Practice, pp 798801, Nos 36123650. See also Yearly Supreme Court Practice 1939, pp 12721276.

Application

Application in an appeal by the defendant for leave to proceed without supplying the court with the transcript of the shorthand note of the proceedings at the trial. The trial was before Bennett J, and is reported [1939] l All ER 481. A previous application had been made that the cost of such transcript might be defrayed out of the public funds, and this application is reported [1939] 3 All ER 29.

Hon Sir Stafford Cripps KC and C H A Lewes for the applicant.

10 July 1939. The following judgment was delivered.

SIR WILFRID GREENE MR (delivering the judgment of the court). The relevant rule relating to the manner of bringing before this court evidence which was heard in the court below is RSC, Ord 58, r 11, which provides as follows:

When any question of fact is involved in an appeal, the evidence taken in the court below bearing on such question shall, subject to any special order, be brought before the Court of Appeal as follows.

Para (b), which is the relevant paragraph, provides as follows:

As to any evidence given orally, by the production of a copy of the judges notes or such other materials as the court may deem expedient.

The scheme under which official shorthand notes are taken forms no part of the rules of court. It is a scheme formulated by the Lord Chancellor, and it appears in The Annual Practice, 1939, p 1276. That scheme is a scheme for guidance, and has no statutory force.

Wherever an appellant is proposing to bring before this court the evidence given orally at the trial by the production of transcripts of the official shorthand note under the scheme, those will normally be the “materials” which this court will use. However, cases may arise when, for some good reason, that is not a possible course. This court in such circumstances, is thrown back upon the rule, and under the rule there is no obligation on this court to insist upon the production of the shorthand notes. This court must decide in each case whether or not the manner in which it is proposed to bring before it the evidence given orally in the court below is expedient. Of course, in an appeal raising issues of fact, it is for the appellant to satisfy this court that the decision of the court below was wrong, and, if the materials supplied to this court are insufficient to enable it to act, the result will be that the appeal will be unsuccessful. On the other hand, this court is not entitled to refuse to hear an appeal merely on the ground that among the papers furnished to the court there are not present copies of the official shorthand note. The court will naturally expect to have those copies, wherever it is possible, but, if for one reason or another it is not possible, the appellant can bring

Page 613 of [1939] 3 All ER 611

the evidence before this court as best he can, and, if the material which he furnishes is inadequate, then, as I have said, the natural result must necessarily follow. There is no need for an application to be made beforehand to this court for leave to bring the evidence before the court in this manner, but, for obvious reasons of convenience, it would be most desirable that any appellant who was proposing to conduct his appeal in that way should indicate in sufficient time to the other side what was the material which he proposed to bring before this court in order to inform it of the evidence given orally at the trial.

One further matter. In such cases, the rule must be observed, and a copy of the judges note must be furnished, because that is what the rule says. Obviously, under the present system the judges notes will not be, as a rule, so full as they were before the system was introduced, but, if it is the judges note which is relied upon, a copy of the judges note must be furnished in the usual way. The result is that upon this particular application it is not necessary to make any order, because, when the matter comes before this court, whatever material the appellant may have will be placed before it, and, if this court can deal with the issues of fact upon that material, it will do so. If, on the other hand, it cannot, then certain consequences necessarily will follow.

Solicitor: W H Thompson (for the applicant).

W K Scrivener Esq   Barrister.

Culkin v McFie & Sons Ltd

[1939] 3 All ER 613


Categories:        TORTS; Negligence        

Court:        LIVERPOOL SUMMER ASSIZES        

Lord(s):        CROOM-JOHNSON J        

Hearing Date(s):        26, 27 JUNE 1939        


Negligence Degree of care required Children Allurement Child running into highway Lorry laden with sacks of sugar Sugar escaping on to highway Provision of look-out man at rear.

The infant plaintiff, a boy of 7 years of age, ran out from the pavement towards a lorry and trailer, laden with sacks of sugar, for the purpose of catching some of the sugar escaping from one of the sacks. At the time he ran out, the lorry had passed him, but not the trailer. He was injured by the trailer running over his left foot. It was found as a fact that the leakage of sugar was not due to any act of the infant plaintiff or other boys, but was due to damage suffered by the bags either during unloading from the ship or during loading on the lorry. The lorry was proceeding at a reasonable speed, and the driver had kept a proper look-out. There was a look-out man on the lorry, and, while he was in no way negligent, he was not in a position to see the boys approaching the lorry and to warn them to keep away. In the street in which the accident happened, there were three large elementary schools, and the accident happened outside one of them, on a day which was a whole holiday. The practice of the boys to run after such lorries was well-known, and the driver of the lorry had frequently had trouble with the boys. There was an alternative route close by, and the defendants had done nothing to cover or protect the sacks in any way, or to prevent the sugar from escaping on to the roadway:

Held the lorry was an allurement to the infant plaintiff, and a concealed danger to him. The infant plaintiff was lawfully on the

Page 614 of [1939] 3 All ER 613

highway, and in collecting the sugar he was merely indulging the natural instincts of a child of his age, and was not guilty of contributory negligence. The defendants had placed a manifest allurement to children upon the highway with an insufficient number of look-out men, and were liable in damages for the injury to the infant plaintiff.

Notes

When a person places a dangerous thing upon the highway, and that dangerous thing is one with which children are likely to meddle, there is a duty placed upon that person to take a higher degree of care than that which would ordinarily be required. The fact that children have meddled with such things is no defence, because the duty is to guard against such meddling, which is likely to cause injury to the children. The considerations to be applied to such a case are quite different from those to be applied to a case where the injured plaintiff is an adult, for a child is allured by things which may not be an allurement to an adult, and what is an effective warning to an adult may not be a warning at all to a child.

As to Standard and Degree of Care in Case of Children, see Halsbury (Hailsham Edn), Vol 23, pp 584586, para 836; and for Cases, see Digest, Vol 36, pp 6872, Nos 433472.

Cases referred to

Rawsthorne v Ottley [1937] 3 All ER 902; Digest Supp.

Cooke v Midland Great Western Ry of Ireland [1909] AC 229; 36 Digest 70, 450, 78 LJPC 76, 100 LT 626.

Latham v Johnson (R) & Nephew Ltd [1913] 1 KB 398; 36 Digest 38, 223, 82 LJKB 258, 108 LT 4.

Liddle v North Riding of Yorkshire County Council [1934] 2 KB 101; Digest Supp, 103 LJKB 527, 151 LT 202.

Hardy v Central London Ry Co [1920] 3 KB 459; 36 Digest 71, 457, 89 LJKB 1187, 124 LT 136.

Addie (R) & Sons (Collieries) v Dumbreck [1929] AC 358; Digest Supp, 98 LJPC 119, 140 LT 650.

Excelsior Wire Rope Co Ltd v Callan [1930] AC 404; Digest Supp, 99 LJKB 380, 142 LT 531.

Mangan v Atterton (1866) LR 1 Exch 239; 36 Digest 71, 464, 35 LJEx 161, 14 LT 411.

Harrison v Rutland (Duke) [1893] 1 QB 142; 26 Digest 317, 491, 62 LJQB 117, 68 LT 35.

Bird v Holbrook (1828) 4 Bing 628; 36 Digest 94, 629, 6 LJOSCP 146.

Lynch v Nurdin (1841) 1 QB 29; 36 Digest 24, 118, 10 LJQB 73.

Donovan v Union Cartage Co Ltd [1933] 2 KB 71; Digest Supp, 102 LJKB 270, 148 LT 333.

Clark v Chambers (1878) 3 QBD 327; 36 Digest 22, 103, 47 LJQB 427, 38 LT 454.

Action

Action by the infant plaintiff, suing by his father, for damages for injuries to his foot. The plaintiff was injured by the defendants lorry when attempting to obtain sugar escaping from bags loaded upon the lorry. The plaintiff alleged that this escaping sugar was such an inducement to children as to constitute a danger likely to cause injury to them.

E G Hemmerde KC and R S Nicklin for the plaintiff.

Hartley W Shawcross KC and J Melville Kennan for the defendants.

Page 615 of [1939] 3 All ER 613

His Lordship made the following findings of fact before hearing legal argument:

Croom-Johnson J: This is an action brought by Bartholomew Culkin, an infant, suing by his father and next friend, to recover damages for personal injuries sustained as long ago as 21 May 1936. There is a claim added by the father, in his personal capacity, for various items of special damage, which have been agreed at the sum of £20.

The statement of claim alleges that this little boy ran into the roadway, and that, as he ran into the roadway, his left foot was crushed by the rear offside wheel of the trailer of a motor vehicle and trailer in St Johns Road, Liverpool, the motor vehicle being driven by a driver of the defendants, a man named James Welsh, who at that time had been driving for them for many years, and was apparently a responsible person. The little boy in running to the side of the lorry, started his journey at the moment at which the driver in his cab was passing, or had passed, the spot. Accordingly, the little boy ran to the side of the defendants vehicle at a moment when it was impossible for the driver to stop, or to do anything to avoid the accident. This particular motor vehicle was laden with bags of sugar. It was a very well-laden vehicle, and was being driven at about 6 or 7 mph. There is no evidence that the driver of the vehicle was, in fact, driving negligently or too fast. Although it is pleaded that the defendants servants failed to keep a proper look-out, I do not think that, in the special circumstances of this case, I ought to feel satisfied that there was any failure by the driver of the vehicle to keep a proper look-out. He looked all round him, and I do not think that it was to be reasonably expected by him that this child would run out after he had passed. I must, therefore, come to the conclusion, having already indicated the facts about the speed at which the vehicle was being driven that day, that I cannot find anything like negligence on the part of the driver of the vehicle.

How did the little boy come to be there? In the ordinary way, from what I have said already, there would be judgment for the defendants, but the facts of this case are quite unusual. It appears that the defendants were accustomed in 1936 to send from the docks at Liverpool to different destinations in Liverpool on this flat lorry with four wheels, and with a trailer attached to it, a number of bags of sugar. Those bags, I was told, and I find, were closely arranged so as to leave no spaces between them. They were bags of Peruvian sugar, unloaded by the stevedores men and put on the quayside. Having been placed on the quayside, they were loaded from there on to the defendants lorry. There is a large business done in this kind of commodity at the Liverpool docks. When the bags of sugar have been loaded on the trailers or lorry, they are then driven through the streets of the city. It is said that these particular bags were sent off from the docks in perfect condition, with no holes in them.

Page 616 of [1939] 3 All ER 613

It is, I think, now an undisputed point that, if there were holes in the bags, while they were being driven upon the road, some of the sugar would escape. It is now upon the evidence reasonably established that in some way or another, from some cause or another, on previous occasions some sugar had come out. On the evidence, I am driven to the conclusion that sugar was leaking from these bags on the day of the accident. I find that one bag at least, on the side where the little boy ran out, was leaking.

I am satisfied, from the statements made by the driver, that he knew that there was a bag which was leaking. He spoke of it as a burst bag, and I find no satisfactory evidence which I can accept that that was due to deliberate acts by boys cutting the bags on this particular road. Nobody has suggested, since the very early part of the case, that the infant plaintiff cut these sacks. Therefore, I must deal with the case upon the basis that, by the time these bags reached St Johns Road, at least one of them was leaking, and that the driver knew that it was leaking. The driver used the expression “burst,” which, in my judgment, would not be an appropriate word for him to use if, in fact, the bags had been cut by naughty little boys while the bags were upon their journey.

In these circumstances, I can find no other explanation than that these bags had been damaged in the process either of being unloaded from the ship or of being loaded on to the lorry and trailer. I was told that, in the ordinary case, when that happened, it was the practice to send along a stitcher, who would stitch up the bags. However, there is no evidence before me that any stitcher was, in fact, sent up on this day, or that he had in fact stitched up the bags. Accordingly, I find that these bags were not stitched. In other words, this was a cargo of sugar from which sugar was leaking, and leaking as I find, to the knowledge of the defendants by their servant.

There is one other factnamely, that apparently on this day, and on this journey, according to the evidence of the mate, Frost, he had some difficulty with boys. Three or four, he said, ran after the lorry and trailer somewhere before St Johns Road was reached, and he shouted at them and tried to get them away from the side of the lorry. There is also the evidence of a witness who spoke to having seen the lorry after the accident. She said that sugar was coming out of the bags, and she spoke of the warning she gave to the driverthat, if he did not go back and look after the sugar, there would soon be none leftwhich I do not recollect that the driver specifically denied.

As to the general position, I am not satisfied by the evidence for the defendantsupon whom, I think, the onus must liethat the reason for the bags leaking on previous occasions was that boys had cut them with razors. I think that, in general, the holes must have been made when the loading was being done. I am not satisfied that, while the journey is in progress and while the vehicles are running along the road, the little boys come out and cut the sacks.

Page 617 of [1939] 3 All ER 613

I think that I have found sufficient facts to enable the matter to be discussed from the point of view of legal liability. I have purposely refrained from saying specifically at this stage whether it is a finding of fact or of law that sacks carried along in that way would be likely to be a danger. I particularly desire to leave that over.

I had better dispose of one other matter. It was suggested that this accident might have been due to the negligence of the look-out man, the mate. His job was to sit at the rear of the vehicle on his near side, and, as I understand it, to warn the boys away. I am not satisfied that that was where he was sitting. I know that he said that he was, but the driver, on the other hand, said, as I understood him, that he could see the man from where he was sitting, and I do not think that, if he was sitting at the rear end, the driver could see him. I am judging of that largely from the photographs. I think that it is much more likely that the mate was sitting in the middle, where a witness told me that he saw him, with his back to the driver. I think that in that position the driver probably could have seen him, and could have seen where he was. Whether “in the middle” means right in the centre of the load, or whether it means nearer one side than the other, I do not know, but I should expect him to be in the very middle on the top of the sacks. In those circumstances, I cannot see any negligence on the part of the look-out man in not seeing a little boy who suddenly darts across the street behind the vehicle and catches sugar out of a bag. If the look-out man did not see him, I do not see that he could be expected to see him, and, if he did see him, I am not convinced that the little boy would not have gone out just the same. In other words, so far as the failure to keep a proper look-out is concerned, as is alleged by the particulars of negligence, I cannot see that there was any such failure, and, if there was, I cannot see that it was the cause of this particular accident. I do not propose to say anything more before I hear the legal argument

The following legal argument then took place.

Hemmerde KC: Children were reasonably to be expected to be playing in the street, because the day was Ascension Day, a general holiday for schools in the district. It was within the defendants knowledge that children made a practice of coming after sugar. There was an alternative route close by which their lorry might have followed, but it did not. The defendants offered an inducement or opportunity for children to run into danger. There was a duty upon them, therefore, to prevent such inducement or opportunity from resulting in danger, or a duty to guard against the consequences.

Shawcross KC: A mere lorry is not an allurement: Rawsthorne v Ottley. The allurement must be a concealed danger or trap: Cooke v Midland Great Western Ry of Ireland and Latham v Johnson (R) & Nephew Ltd. The plaintiff was not in the roadway for the purpose of passing and repassing, but for some other purpose, and was therefore a trespasser: Liddle v North Riding of Yorkshire County Council.

Page 618 of [1939] 3 All ER 613

In the circumstances, the defendants owed no duty to the plaintiff to take care, other than a duty not to cause him wilful damage or not to do a wilful act in reckless disregard of humanity towards him: Latham v Johnson (R) & Nephew Ltd. The plaintiff knew he was doing wrong, and cannot recover damages flowing from his own wrongful act or contributory negligence. There is no evidence of a concealed trap or danger. There is nothing about a mechanically-propelled vehicle which a child would not encounter every day. The question of allurement in the case of a child trespasser is one of law. [Counsel referred to Hardy v Central London Ry Co, Addie (R) & Sons (Collieries) v Dumbreck, Excelsior Wire Rope Co Ltd v Callan and Mangan v Atterton.]

E G Hemmerde KC and R S Nicklin for the plaintiff.

Hartley W Shawcross KC and J Melville Kennan for the defendants.

27 June 1939. The following judgment was delivered.

CROOM-JOHNSON J. I have now considered the arguments addressed to me upon my preliminary findings of fact in this case. It was assented to by counsel on each side that, in giving judgment, I should add findings upon any point with which I had not previously dealt, and I now proceed to do so.

The day upon which the accident happened was Ascension Day, 21 May 1936. The elementary schools in Liverpool were closed upon that day for a whole holiday. There were three large elementary schools in St Johns Road, and the accident happened outside the gates of one of them. The children were, therefore, reasonably to be expected to be playing in the street at the time. There was no evidence that the infant plaintiff had himself ever been warned, or been present when other children were warned, to keep away from the particular vehicle involved in the accident, or from any other vehicle similarly laden. He had never previously done what he did on that day, but he stated: “I knew it was wrong. I had been told by my schoolmaster not to run after the sacks.” Whether he knew it was wrong because it involved an act of disobedience to his schoolmaster, or because the escaping sugar did not belong to him, was not finally elicited or ascertained.

It was the practice of children in this neighbourhood, when a lorry laden with sacks of sugar hove in sight, to raise the clarion cry of “Togy!” and thereupon they descended upon what fell from it as their lawful spoil. The defendants driver told me that he had frequently had trouble with boyshaving to pull up to avoid their getting hurtthat his mate had chased boys away on other occasions, that there were scores of children in the neighbourhood, and that he had, at some other time, stopped at one of the schools and complained to the master. He said that he had seen children filling their caps with sugar from other vehicles, but not from his. I do not accept that it had not previously happened to his own vehicle. I cannot believe that these facts had not come to the knowledge of at least one responsible officer of the defendants. They were not new or recent.

There was another and a main alternative route close by. It is remarkable that the defendants or their driver, who was in control of their

Page 619 of [1939] 3 All ER 613

vehicle, with his knowledge of the circumstances I have just indicated, elected to drive this lorry and trailer, with its flat, open, platform laden with sacks leaking sugar into the roadway, by this particular route on this particular day. It is further remarkable that they should have done so without protecting the sacks in any way, and without taking any steps to secure that the sugar escaping from the sacks should not fall away from the vehicle into the roadway. No one would expect them to take any elaborate precautions, but I think that quite simple care would have prevented the escape of the sugar. Removable boards round the back and sides of the platform, such as I have seen in other parts of the country, would seem to have been at least a possible and simple contrivance to keep the sugar on the platform and out of the reach of the childrens hands. I can think of few things more likely to tempt young children from the comparative safety of the footpath (or parapets, as they are commonly called in Liverpool) into the dangers of the roadway, and into close proximity to a vehicle bearing so tempting a cargo, than the spectacle of sugar dropping from the vehicle and being abandoned to whomsoever chose to pick it up.

It was not suggested that any attempt was made by anyone on behalf of the defendants to gather up the fallen sugar, and I was satisfied that the property in it was abandoned as it escaped and fell. I find that the infant plaintiff was so tempted on the day in question, and succumbed to the temptation for the first time in order to secure some of the escaping sugar for his own immediate consumption. I find that he sustained the injuries complained of by being run over by a wheel of the trailer whilst, being so tempted, he was securing some of the sugar referred to.

I have already found that such sugar was escaping to the knowledge of the defendants driver. Where a person of full age does that which will probably afford an inducement, or an opportunity, for children to run into danger, he is bound to take reasonable precautions to prevent such inducement, or opportunity, resulting in danger, or to guard against the consequences: see Halsburys Laws of England, Hailsham Edn, Vol 23, p 585. I do not think that the defendants or their servants took any effective or reasonable steps or precautions to prevent such an inducement, or opportunity, resulting in the danger I have indicated, or to guard against the consequences. Whilst I acquit the defendants driver and look-out man of any personal negligence in the matter, I think that they were, in all the circumstances, given an impossible task by the defendants, and I cannot acquit the defendants of a breach of duty. One look-out man was not enough. To avoid any misunderstanding, I add that I was not satisfied as to the recollection of the police officer called as a witness for the defendants, and I did not accept his evidence.

The arguments for the defendants proceeded upon these lines: (i) a mere lorry is not an allurement: Rawsthorne v Ottley; (ii) the allurement must be to a concealed danger or trap: Cook v Midland

Page 620 of [1939] 3 All ER 613

Great Western Ry of Ireland and Latham v Johnson (R) & Nephew Ltd; (iii) the plaintiff was not in the roadway for the purpose of passing and repassing, but for some other purpose, and was, therefore, a trespasser: Liddle v North Riding of Yorkshire County Council; (iv) in these circumstances, the defendants owed no duty to the plaintiff to take care other than a duty not to cause him wilful damage or not to do a wilful act in reckless disregard of humanity towards him: Latham v Johnson (R) & Nephew Ltd; (v) the plaintiff knew he was doing wrong, and therefore could not recover damages flowing from his own wrongful act or his own contributory negligence; (vi) strong reliance was placed on the decision as to the duty to child trespassers in Cookes case: Hardy v Central London Ry Co, Addie (R) & Sons (Collieries) v Dumbreck, Excelsior Wire Rope Co Ltd v Callan and Liddle v North Riding of Yorkshire County Council; (vii) it was further submitted (a) that there was no element of a concealed trap or danger, inasmuch as the vehicle was moving at all material times, (b) that there was nothing about a mechanically-propelled vehicle which a child would not encounter every day, (c) that there was no reported case in which it had been held that a temptation to a child to get itself into a position of danger was an allurement or enticement, and (d) that there was no reported case in which the enticement of a child into the street in circumstances such as these had been considered; (viii) reliance was also placed upon the decisions in Mangan v Atterton; (ix) the question of whether or not a child trespassing on another persons land had been allured or enticed thereon was a question of law.

Upon these arguments, I come to the following conclusions. (i) This is not a mere lorry, but a species of juggernaut dropping sugar into the roadway as it goes and blinding children of such tender years as the plaintiffs to the danger of too close an approach to it. (ii) The danger in the circumstances to this plaintiff was in effect a concealed one. (iii) The motive which induced the plaintiff to run out into the roadway in the exercise of his lawful right so to do is, I think, immaterial. It is a question of fact whether a person is using a highway as a highway for passing in accordance with reasonable and ordinary user of it for that purpose: Harrison v Rutland (Duke), at p 156. I come to the conclusion that the plaintiff was not a trespasser upon the highway, and that he was, in all the circumstances, making a reasonable use of it. To hold otherwise would be to turn into a trespasser any child who chased his ball into the roadway or ran across the roadway in play. (iv) To send this moving and attractive vehicle down this street with an insufficient number of look-out men, as I said that the defendants did, was, in the circumstances, to act with a reckless disregard of the consequences. (v) The defendants, having tempted this child into danger, ought not to reproach him for yielding to the temptation. Bird v Holbrook is a decisive authority against the general proposition that misconducteven wilful and culpable misconductmust necessarily exclude the plaintiff who is guilty

Page 621 of [1939] 3 All ER 613

of it from the right to sue: Lynch v Nurdin, at p 37. The plaintiff was only a little over 7 years of age, and he merely indulged in the natural instincts of a child in chasing this tantalising offer of a free sweetmeat: Lynch v Nurdin, at p 38.

Applying the tests indicated in Halsburys Laws of England, Hailsham Edn, Vol 23, p 689, para 972, I find as a fact that the plaintiff was not guilty of contributory negligence. Lynch v Nurdin has been explained upon the basis that the horse and cart left unattended constituted a nuisance. Without expressly so deciding, I should be prepared to hold that the use of the defendants vehicle scattering sugar as it went upon the roadway was not a reasonable user by them of the highway, and was capable of at least being a nuisance. In any event, even if the plaintiff was a trespasser upon the highway, that does not relieve the defendants of the duty of taking care towards him. (vi) The cases cited were not in point. The plaintiff was not trespassing upon any property owned or occupied by the defendants. He neither climbed upon nor touched the vehicle or any part of it. There was no evidence that he even as much as touched one of the sacks. It was argued that the sugar was the property of the defendants at the time when the plaintiff caught it in his hands, but I do not find that it was. I know of no authority for the proposition that the defendants owe no duty to a trespasser upon a highway. Quite the reverse. (vii)(a) A moving vehicle may be a dangerous one: see per Acton J, in Donovan v Union Cartage Co Ltd, at p 74. (b) There was something about this vehicle which a child might not encounter every daynamely, its special attraction. (c) and (d) Lynch v Nurdin. (viii) Mangan v Atterton was severely criticised in Clarke v Chambers, and, having regard to the manifest distinction between the facts of that case and those of the present case, I do not regard myself as being bound by that decision to decide in favour of the present defendants. No property of the defendants was touched or interfered with by the plaintiff. (ix) I accept this proposition, but it seemed to me, having regard to what I have said under heading (vi), not to be in point.

There is a duty upon every user of the highway to exercise reasonable care for the safety of others. Knowledge that children were likely to meddle with that which the defendants themselves provided, which was dangerous in character and a manifest allurement to children, in my judgment, imposed upon the defendants a relatively higher degree of duty to take care: Halsburys Laws of England, Hailsham Edn, p 584, para 836, and cases there cited. I think that the defendants were wanting in that care, that their defence fails, and that there must be judgment for the infant plaintiff for the sum of £1,250 and for the adult plaintiff for the sum of £20, and in each case with costs.

Solicitors: Neville Mullen & Co (for the plaintiff); Rutherfords (for the defendants).

M D Chorlton   Barrister.


Stephens v Snell

[1939] 3 All ER 622


Categories:        ENVIRONMENTAL: LAND; Property Rights        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        6, 7, 10 JULY 1939        


Fisheries Private fisheries Evidence of title Several fishery in tidal waters Necessity to prove existence of grant prior to Magna Carta Manorial fishery Boundaries.

The plaintiff claimed a right to a sole and several fishery in the tidal waters of the river A, and brought an action against the defendant, a fisherman, alleging trespass thereon. She based her claim to the right on a grant of the manor of A, together with the fishery, to the then Abbot of Monteburg by “Lord Henry of good memory, formerly King of England,” whom she contended was either Henry I or Henry II, and therefore a King who reigned before Magna Carta. After the dissolution of the monasteries, the manor, with the fishery, reverted to the Crown. It was later regranted by Henry VIII, and thereafter the plaintiffs title was clear. The defendant was proved to have fished within the limits of the harbour of A, as defined by statute, and the question arose as to the limits of the plaintiffs fishery, which she herself sought to limit to the harbour of A:

Held (i) on the evidence, the plaintiff had established that the grant of the fishery had been made prior to Magna Carta.

(ii) the limits of a manorial fishery are determined by the bounds of the manor, which in this case were wider than those of the harbour. The defendant had, therefore, trespassed upon the plaintiffs fishery.

Notes

This case is concerned with the manner of proof of a grant of a several fishery before the time of Magna Carta. Proof of a grant made so long ago is necessarily difficult, but here the court is satisfied that sufficient proof has been adduced. The case is also important on the extent of a grant of a fishery to a manor.

As to Proof of Crown Grants, see Halsbury (Hailsham Edn), Vol 13, pp 665667, para 735; and for Cases, see Digest, Vol 22, pp 326334, Nos 32233319.

Case referred to

Neill v Devonshire (Duke) (1882) 8 App Cas 135; 25 Digest 7, 41.

Action

Action for an injunction restraining the defendant from trespassing upon a sole and several fishery claimed to exist in Axmouth Harbour, in the county of Devon. The facts are fully set out in the judgment.

George Pollock for the plaintiff.

J Lhind Pratt for the defendant.

10 July 1939. The following judgment was delivered.

BENNETT J. The defendant to this action is Harry Snell, a fisherman, and it is alleged that he had, with his boat and his nets, trespassed upon the plaintiffs fishery in the harbour of Axmouth.

In order that a right to a sole and several fishery in tidal waters may be established, the person who claims to be the owner of it has to found his claim upon a grant made by the Crown before the date of Magna Carta. By the common law of England, the public had a right to fish in tidal waters, and the claim to a several fishery is a claim to exclude the public from that right, and the prerogative right of the Crown to grant that right is taken away by the provisions of Magna Carta. That I understand to be the law, and I think it is accepted to be the law by counsel for the defendant.

Page 623 of [1939] 3 All ER 622

In support of his case that the plaintiff has this sole and several right of fishery, the plaintiffs counsel founds himself upon the charter roll of 1331, the fourth year in the reign of King Edward III. The first relevant entry in that charter roll is an entry, as I understand it, made by, or at the instance of, an officer of the Crown who had the duty of inspecting charters granted by the Crown, and the roll contains a record of the inspection of two charters granted by a person described in the one case as “Lord Henry of famous memory, formerly King of England,” and in the other as “Lord Henry of good memory, formerly King of England,” and, as well as recording that the officer or officers inspected those two charters, it records the confirmation and re-grant by King Edward III in favour of the Abbot of Monteburg.

It is necessary to consider the terms of one of the inspeximus charters and the charter confirming the grant be found in the inspeximus charter. The first of the three documents on the charter roll by Lord Henry of famous memory, formerly King of England, is a grant freeing from toll, passage-money and custom the gear, clothing and belongings of the monks of Monteburg, and it is, apparently, a grant made for the Abbot of Monteburg, an abbey in Normandy. The first charter or grant is stated to have been witnessed by Thomas, Earl of Gloucester, at St Leofrics Cross. The second document on the roll, as I understand it, is properly called an inspeximus charter by Lord Henry of good memory, formerly King of England. It is a grant:

… to the Abbey of St. Mary of Monteburg, and to the abbot and monks, the place in which the abbey is situated, and the town of Monteburg [of certain rights in the Kings forest].

In addition, it is expressed in the following words:

I grant also and confirm to the above-mentioned Abbey of Monteburg and the monks in England, a certain manor which is called Loders in Dorset, with the church of the same manor and the chapel of Bolemerton, and all appurtenances; and another manor which is named Auxemud in Devon, with the church of the same manor, and a fishery, and two draughts which are there, to drag with nets

There is no question but that Auxemud and Axmouth are the same place. Then the roll records a grant by Edward III in these terms:

We, moreover, for us and our heirs, as much as is in us, grant and confirm, as the charters and writings aforesaid witness, to our beloved in Christ the now Abbot of Monteburg and the convent of that place, and their successors, the gift, grant, confirmations, and acquittances aforesaid  and the grant and confirmation which Baldwin, late Earl of Exeter, made by his charter to God and the Abbey of St Mary of Monteburg and the monks serving God in the same place, of all gifts which Richard de Revers, father of the aforesaid Earl Baldwin, made to the same abbot and monks in England, free and quit altogether of all things belonging to the same Baldwin and his heirswhich gifts were, a manor in Devon, in the bishopric of Exeter, which is called Auxemud, free and quit, with all appurtenances, and with the church of the same manor, and a fishery, and two draughts which are there, to drag with nets.

Those are the documents upon which the plaintiff relies as establishing that there was a several fishery granted to her predecessors in title in the tidal waters of the River Axe before the date of Magna Carta. The question depends, in my judgment, upon whether or not it is a proper

Page 624 of [1939] 3 All ER 622

inference to draw that Lord Henry of good memory, formerly King of England, was either Henry I or Henry II, and not Henry III. Either Henry I or Henry II would be good enough, because both of those Kings of England reigned before Magna Carta.

The entries of the chartersthat is to say, the two inspeximus charters and the charter of Edward IIIupon the charter roll are in the same hand. Thomas, Earl of Gloucester, witnessed the first inspeximus charter, and it has been proved that no Earl of Gloucester living in the reign of Henry III bore the Christian name of Thomas. It would follow, therefore, that the first of the inspeximus charters must have been granted either in the reign of Henry I or in the reign of Henry II, and it could not have been granted in the reign of Henry III. It is almost inconceivable that the clerk making the entries in the charter roll would have made two entries relating to two separate and distinct charters, both made by a Lord Henry, King of England, and would have failed, if the charters had been granted by different Henrys, to have made some record of the fact that they had been so granted. I think that one should also act upon the footing that Henry III, who came to the throne so soon after Magna Carta, would not have violated the provisions of that document, and I think one should therefore presume that the inspeximus charter was granted by a King who had the right to grant it. Thus, I come to the conclusion that the inspeximus charter was granted either by King Henry I or by King Henry II, and that it granted a sole and several fishery to the Abbot of Monteburg in the manor of Axmouth.

It would seem that at a later date the manor of Axmouth got back into the possession of the Crown, probably as a result of the dissolution of the monastery, because it appears that the manor was settled by King Henry VIII upon Katherine Parr, his wife, for her life. That appears from a document to which I shall presently refer.

The law is that, once there is proof of the grant of the several fishery before Magna Carta, there is no merger of it if, after that date, it gets back into the possession of the Crown. The law is that it can be regranted by the Crown. That seems to me to be well settled, and is so stated by Lord Blackburn in a passage in his opinion in Neill v Devonshire (Duke), at p 180, where he adopts as his own a statement by the Master of the Rolls in Ireland in these terms:

“It is not law, and this can never be too often repeated, that the Crown cannot grant a several fishery in tidal waters since Magna Charta. Such a statement is illusory and contrary to law. It can grant a several fishery in such waters since Magna Charta, if that fishery existed before Magna Charta. If a tidal river in which there was prima facie a right in the public to fish was appropriated by an individual or by the Crown before Magna Charta, that individual or the Crown, if the Crown has got it back, can grant it after Magna Charta. That is a settled principle on which every one of the cases connected with several fisheries in tidal rivers have been adjudicated upon in this country. …

With that passage in mind, although the plaintiff has not shown any title between the date of 1331 and the date of the document to which I am now about to refer, she has in her possession, as one of her title deeds,

Page 625 of [1939] 3 All ER 622

letters patent dated 11 July 1552, by King Edward VI, whereby he grants the lordship and manor of Axmouth to one Walter Earle, together with “fisheries, fishings, woods,” and so forth, appertaining thereunto. It is those letters patent which show that King Henry VIII had granted the manor to his wife, Lady Katherine, late Queen of England, and it was on her death seemingly, that the manor and lordship of the manor reverted to the Crown. That is simply a matter of historical interest.

The next document of title which the plaintiff has is letters patent by Philip and Mary, King and Queen of England, France, Naples, Jerusalem, and Ireland, and, according to the title in the letters patent:

Princes of the Spains and Sicily; Archdukes of Austria; Dukes of Milan, Burgundy, and Brabant; Counts of Hapsburg, Flanders, and Tyrol.

They confirm the grant of the manor and of the fishery to their:

… beloved servant Walter Earle, esquire, one of the gentlemen of our Privy Chamber of the said lady [Queen Mary].

From then, there is a good paper title, and also this fact admissible in evidence of the possession by the lord of the manor of Axmouth for the time being of the fishery in question. The evidence is the record of an action tried at the Devonshire Assizes at Exeter in the reign of George III between Sir William Templer De La Pole as defendant and the then lord of the manor of Axmouth, Richard Hothersall Hallett who seems to have been a parson. He sued Sir William Templer De La Pole for trespass upon his several fishery, and, after trial before a jury, a verdict was given in favour of the plaintiff. That fact is admissible in evidence, and establishes that at that date the owner of the lordship of the manor of Axmouth was possessed of the several fishery which the plaintiff claims. Her title is traced from one of the Halletts, who was lord of the manor of Axmouth. Mortgagees of his, exercising their powers of sale, conveyed the fishery, along with the lordship of the manor, to the plaintiffs father by a deed dated 2 February 1891, the material part of the conveyance being as follows:

All that the honour hundred manor and lordship of Axmouth in the county of Devon with its rights members and appurtenances and all the manor or reputed manor of Stedcombe in the same county and all that the sole and exclusive right of fishery and fishing in the River Axe in the same county from the bridge over the said river known as Axe Bridge to the sea.

The plaintiffs title to the fishery is as tenant for life under the will of her father, who died in August 1910, and a vesting deed in her favour was executed on 27 May 1926, so that I have no doubt that the plaintiff has established her title to a sole and several fishery in the tidal waters of the River Axe.

The defendant has been proved to have fished from a boat with nets from a point just east of what might popularly be described as the mouth of the River Axe. It is between highwatermark and lowwatermark that his boat is proved to have been at the time when he put out his net and spread it across the mouth of the river, and the only question which

Page 626 of [1939] 3 All ER 622

I think is of difficulty is the question of whether or not the defendant, when he fished, was fishing within the limits of the plaintiffs several fishery. There has been no definition of the limits of the fishery granted before Magna Carta until an attempt to define the limits was made in the conveyance of 2 February 1891. The plaintiff in her statement of claim has sought to limit the fishery to the harbour of Axmouth, and has taken the limits of that harbour from the provisions of an Act of Parliament, passed in the eleventh year of the reign of George IV, for the purpose of maintaining and governing the harbour of Axmouth. S 3 provides as follows:

That the extent and boundary of the said harbour of Axmouth next the sea shall be deemed and is hereby declared to be from the boundary-post on the beach, which divides the parishes of Axmouth and Seaton, extending down to lowwatermark, on the west, to the eastern extremity of the cliff commonly called or known by the name of Haven Cliff, extending down to lowwatermark, on the east (the whole of the property of the shore between these two points being part of the manor of Axmouth); and that the extent and boundary of the said harbour within the said River Ax shall be deemed and is hereby declared to be to the south point of a piece of land commonly called or known by the name of The Slime, nearly opposite the village of Axmouth, the whole of the lands on both sides of the River Ax from the mouth to the said point of land called the Slime being the property of the said John Hothersall Hallett; and the said harbour, so bounded, shall be called Axmouth Harbour.

The boundary-stone or boundary-post on the beach, which is the boundary-mark between the parishes of Axmouth and Seaton, is shown on the Ordnance survey map. I have the survey made in 1887, revised in 1933, the scale being 25 ins to the mile. It is difficult to determine on this map what is described in the Act as “the eastern extremity of the cliff commonly called or known by the name of Haven Cliff,” but the fact is quite clear that it would be to the east of the point at which it has been proved that the defendant was fishing, and I think that that is all which it is necessary for me to say as regards the statutory definition. It is also clear, however, that the foreshore which is owned by the lord of the manor extends to the east of the eastern extremity of Haven Cliff.

I have to determine whether or not where the defendant fished was within the fishery of the plaintiff. It plainly was within Axmouth Harbour as defined by the Act of Parliament. What are the limits of the plaintiffs fishery, a fishery granted in a manor? It is stated in Halsburys Laws of England, Hailsham Edn, Vol 15, p 54, that the extent in length of a fishery, in the absence of evidence to the contrary, is determined, in the case of a manorial fishery, by the bounds of the manor. There is no authority, so I am told, which supports that proposition, but I think that it is a proposition which must be true. A several fishery granted by the Crown is granted in tidal waters. The fishery cannot be above highwatermark of ordinary tides. It cannot be the bed of the river at low water, because it is in tidal waters, and, as soon as the tide begins to flow, the boundaries of the fisherythe limits of itbecome impossible of identification. The only other limit which,

Page 627 of [1939] 3 All ER 622

as it seems to me, can be placed upon it is the limit which is stated as the limit in Halsburys Laws of England namely, the bounds of the manor. In this case, those are outside, so far as the defendant is concerned, the place at which proof has been given that he did fish, and it would seem from the conveyance of 2 February 1891, to extend right up to the adjoining parish.

On the facts established in this case, the plaintiff, in my judgment, has established that the defendant has trespassed upon her several fishery, and there must be an injunction granted to restrain him from repeating the acts which he has been proved to have committed. I think that the limits of the plaintiffs fishery are wider than the limits of the harbour of Axmouth as defined by the Act of Parliament, and the injunction to which she is entitled is an injunction to restrain the defendant, his servants and agents from fishing within the tidal waters in the boundary of the manor.

Solicitors: Gedge Fiske & Co (for the plaintiff); Hancock & Willis, agents for Cecil Forward, Axminster (for the defendant).

Maurice Share Esq   Barrister.

Hampton & Sons Ltd v George

[1939] 3 All ER 627


Categories:        CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        DU PARCQ LJ, SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        5, 6 JULY 1939        


Agency Commission Agent prevented from earning Sole agent Sale effected through another agent after termination of his authority Damages Assessment of damages.

On 18 December 1936, one M, since deceased, appointed the plaintiffs sole agents for the sale of the lease of a hotel of which he was lessee. No agreement was made as to the amount of the plaintiffs remuneration, nor as to the event in which it was to be paid, but the plaintiffs gave to M a printed scale of charges made for various cases. Prior to instructing the plaintiffs, M had, to the knowledge of the plaintiffs, put the property in the hands of A & Co, a firm of brokers dealing almost entirely with licensed premises, but he terminated their authority on 19 December. On this date the plaintiffs wrote to M confirming their appointment, and on the same day wrote to A & Co advising that they had been appointed sole agents and that the letter was to be treated as a cancellation of any previous instructions received by A & Co. On or about 10 December, a Mrs S had, through A & Co, offered £2,500, which was not then accepted. At a later date, and after A & Cos authority had been terminated, she again approached them, and renewed her previous offer, which was this time accepted. The plaintiffs commenced action against the defendant as sole executor of M, claiming commission on the sale of the property:

Held (i) the appointment of the plaintiffs as sole agents terminated the agency of A & Co.

(ii) the plaintiffs were entitled to damages for the loss of the opportunity of earning their commission, but, in all the circumstances of the case, they were not entitled to the full amount of commission as damages.

Notes

The position of a sole agent for the sale of property is perhaps a little bare of authority. From the present case it is clear that the sole

Page 628 of [1939] 3 All ER 627

agent is not entitled to his full commission in any event, if the property is sold during his agency. The judgment also investigates the position where negotiations for a sale by other agents are nearly complete at the time the sole agency is granted, and also the effect of the creation of the sole agency as a determination of a previous agency.

As to Sole Agents, see Halsbury (Hailsham Edn), Vol 1, pp 256, 257, para 431; and for Cases, see Digest, Vol 1, pp 559, 560, Nos 20812083.

Case referred to

Bampton (Ronald) & Partners v Garner (D) & Sons Ltd [1937] 3 All ER 438; Digest Supp.

Action

Action claiming commission on the sale of the lease of a hotel, the property of G A Mallows, deceased. On 18 December 1936, Mallows verbally appointed the plaintiffs sole agents for the sale of the property, and on the following day the plaintiffs wrote to him confirming that he had agreed to leave the sale solely in their hands. They also stated that they had written to Abb & Co, who had previously been agents for the sale of the property, and that they enclosed a copy of that letter. The letter to Abb & Co stated that Mallows desired to leave the sale solely in the hands of the plaintiffs, and asked them to take that letter as a cancellation of any instructions they had received. The letter concluded by saying that the plaintiffs would be pleased to co-operate with Abb & Co if the latter had any likely applicants with whom the plaintiffs had not been in direct or indirect touch.

N A J Cohen for the plaintiffs.

Frederick Wishart for the defendant.

Cohen: Even if it is right that the first agents were entitled to a commission, it does not follow that the plaintiffs are not entitled to one if the deceased allowed other agents to intervene in the matter. Messrs Hamptons are entitled to the full commission. Alternatively, they are entitled to damages. They could have done what the other agents did, or they might have got more, if they had been given an opportunity.

Wishart: The defendant is entitled to judgment because of the previous transaction. It makes no difference that the offer was at one time refused, if it eventually fructified. Negotiations were still proceeding, until eventually the contract of sale was signed. Everything was done to earn the commission before the contract with the plaintiffs was made, because the sale eventually went through. If the plaintiffs are entitled to anything, it is damages, which will amount to little or nothing. This chance of finding a purchaser who would give £4,000 or thereabouts was very remote.

Cohen, in reply, referred to Bampton (Ronald) & Partners v Garner (D) & Son Ltd.

6 July 1939. The following judgment was delivered.

DU PARCQ LJ. The first question is this. What was the contract, if as, made in December 1936, between the plaintiffs and Mr Mallows? I have no doubt that there was a contract, and, looking at the correspondence, and particularly at the unanswered letter from Messrs Hamp-

Page 629 of [1939] 3 All ER 627

tons to Mr Mallows, I have no doubt that he agreed, using their words, to leave the sale solely in Messrs Hamptons hands. The sale to which I am referring is the sale of the lease of the Dumb Bell Hotel. I am sure that at the interview no very great detail was gone into. Certainly no detail at all was gone into as to what the remuneration of the plaintiffs was to be, nor was that later discussed, nor, I think, was any precise language used as to what exactly was to be the event in which Messrs Hamptons were to have their remuneration. It may be patent that they were to have remuneration if they introduced a purchaser. As to the scale, the scale of charges was handed to Mr Mallows, who put it in his pocket. I should think it is highly probable that he never read it, and, if he ever read it, I am not at all sure that he would have understood it, because it has taken me some time to find out from counsel, and counsel do not agree, under what head the charges ought to be fixed. I am bound to say that I think that, without some explanation, it would be very difficult for Mr Mallows to be at all sure what he would have to pay, I must not construe this too much in favour of Messrs Hamptons, who put forward what appears to me to be a somewhat ambiguous document. I think that, if they had succeeded in introducing a purchaser, what they would have been paid would have been £104, accepting the statementwhich is hardly contradictedthat, on a profit of £200 per annum for the last 3 years, £600 would have represented the goodwill. It is said that Messrs Hamptons have lost that sum, and that they ought to have that by way of damages. Before Mr Mallows went to Messrs Hamptons, he had already put this property in the hands of Messrs Abb & Co who are brokers dealing almost entirely with licensed premises, and Messrs Hamptons knew that. It was plain that Messrs Abb & Co were entitled to find a purchaser down to the moment when their authority was determinednamely, on 19 December when it was properly determined. If Mr Mallows had kept his contract, he would have had no more to do with Messrs Abb & Co. He ought then to have looked entirely to Messrs Hamptons to act as his agents until he came to the conclusion that he would determine their authority as he had determined that of Messrs Abb & Co, and, of course, he might have done it at some later time. In the meanwhile they would have had an opportunity of finding a purchaser. I think that, if they had sought to produce Mrs Shuttleworth as a purchaser, they would have been in difficulties. Mrs Shuttleworth, I must explain, is the lady who had already been to Messrs Abb & Co on 10 December and had offered £2,500, which Mr Mallows had refused to accept. Later on, Mrs Shuttleworth repeated her offer and she again dealt through Messrs Abb & Co. This time, Mr Mallows accepted her offer of £2,500. Counsel for the plaintiffs says that, when Mrs Shuttleworth renewed her offer Mr Mallows ought to have said: “If you want to deal with me, you must go to Messrs Hamptons.” I am not sure that Mrs Shuttleworth would have gone to Messrs Hamptons. One could not drive her there, and, if she had gone to Messrs Hamptons and said, “Well, I repeat

Page 630 of [1939] 3 All ER 627

to you what I said to Messrs Abb & Co. £2,500 is my price, and not a penny more. Take it or leave it,” and they had said, “We will take it,” I think that it would be very difficult for them to say that they had introduced Mrs Shuttleworth, or negotiated a sale with Mrs Shuttleworth. However, counsel for the plaintiffs truly said that the persuasive powers of Messrs Hamptons might have been such that Mrs Shuttleworth would have been persuaded to give more than £2,500, and they have lost that chance. They have also lost the chance of finding somebody else who might have given more than, or, at any rate, as much as, £2,500. I think that I have to assess the value of that chance. There are various things to take into account. I take into account, on the one hand, that Messrs Hamptons are experienced and efficient people, but are not specialists in this particular class of business. Their branch dealing with licensed premises was a small one. There were difficulties in this case. The brewers were not easily satisfied, and they were quite right, for reasons into which I need not go. They were very much inclined to jump at Mrs Shuttleworth, to use an expression which was used in this case, and they might have been much less inclined, having once heard the name of Mrs Shuttleworth, to accept anyone else. However, they would have acted reasonably, no doubt, and they might have accepted somebody else, and it might have been possible for Messrs Hamptons to find somebody. They might even have got more than £2,500, and they might have done it within a reasonable time, so that Mr Mallows would not have determined their agency. However, all this is, of course, in the region of speculation, and I have to do the best I can and estimate what their chance of earning the commission of £104 was. I award £80 damages, and I think that the costs should be on the High Court scale.

Judgment for the plaintiffs for £80 with costs on the High Court scale.

Solicitors: Edward Betteley Smith & Stirling (for the plaintiffs); Pownall & Co (for the defendant).

C St J Nicholson Esq   Barrister.

Turk Gemi Kurtama v Ithaka (Owners)

The Ithaka

[1939] 3 All ER 630


Categories:        ADMINISTRATION OF JUSTICE; Arbitration: INTERNATIONAL; Law of the Sea: SHIPPING        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        4 JULY 1939        


Arbitration Restraint of arbitration Arbitration under salvage agreement Action in Turkish courts to set aside salvage agreement.

The steamship Ithaka grounded in the Dardanelles, but only so lightly that by the removal of part of her cargo she could have been refloated by her own power. The exclusive control of salvage work in those waters was, under the law of Turkey, in the hands of a salvage company. The master of the ship was consequently unable to hire lighters otherwise than from that company, and for that purpose the company required him to enter into a salvage agreement in the ordinary Lloyds form. That form provides for an arbitration in England, and

Page 631 of [1939] 3 All ER 630

an arbitrator had been duly appointed. The owners brought proceedings in Turkey to set aside the salvage agreement, on the ground that it was obtained by duress. Thereupon they applied to the Admiralty Court in England to stay all proceedings in the arbitration pending the decision of the action in Turkey. The court refused the application, whereupon this appeal was brought:

Held the prosecution of the action in Turkey, in the circumstances, did not justify the staying of the arbitration proceedings. The owners of the ship were bound by the salvage agreement.

Notes

The court in this case have regarded the salvage agreement as a binding agreement, although proceedings had been commenced in the Turkish courts to obtain a declaration that it was void. It should be noted that the arbitrator would have full power in his award to do justice between the parties, and possibly to give effect to the fact that the ship was bound to employ the salvage company.

As to Staying Arbitration Proceedings, see Halsbury (Hailsham Edn), Vol 1, pp 630, 631, para 1077; and for Cases, see Digest, Vol 2, pp 377381, Nos 412427.

Case referred to

Logan v Bank of Scotland (No 2) [1906] 1 KB 141; 11 Digest 477, 1310, 75 LJKB 218, 94 LT 153.

Appeal

Appeal by the defendants from an order of Bucknill J, dated 22 May 1939. The facts are fully set out in the judgment of Scott LJ

H G Willmer KC and J B Hewson for the appellant.

G St Pilcher KC and Owen L Bateson for the respondents.

4 July 1939. The following judgments were delivered.

SCOTT LJ. In this appeal from an order made by Bucknill J, the appellants ask us to reverse the order which he made. That order was made in rather exceptional proceedings, and upon an application of an exceptional kind. It related to a claim for salvage of the German ship Ithaka in the Hellespont, in Turkish territorial waters, where, under the law of Turkey, the only salvors allowed to effect salvage are a company with limited liability, registered under the law of Turkey, in which the Turkish Government have an interest as, I take it, shareholders. The vessel was on a voyage to Istanbul with a cargo destined for Istanbul. She took the ground on a sandy bottom in the Hellespont, and could not get off with her own engine action. The control of lighters in the Hellespont is entirely in the hands of this Turkish salvage company, under the law of Turkey, passed in recent years, relating to salvage. In consequence, the master of the ship was unable to hire lighters, and, in the circumstances, he had no option but to ask the salvage company for lighters. They carry on their salvage business by a method of taking agreements of Lloyds standard form of salvage agreement, well-known in this country, which provides that salvage shall be paid on a “no cure, no pay” basis, in the event of success the amount being unspecified, and the agreement containing a provision for arbitration as to the amount.

In this particular case, the master, according to the evidence, made an oral protest against being asked to sign a salvage agreement, because he said that it was quite easy, by lightening the ship, to get the ship off, and

Page 632 of [1939] 3 All ER 630

that that was all he wanted, and that there was no cause for salvage. However, he could not get his lighters unless he signed the agreement, for the reasons I have mentioned, and he consequently signed an agreement. Then, pursuant to the agreement, an arbitrator was appointed in this country, and a bankers undertaking was obtained for security for the claims against the ship, freight and cargo, which was arranged by, and at the expense of, the owners of the ship, in a total amount of £12,000 sterling, through a bank in London. Mr Carpmael KC, was duly appointed arbitrator by the committee of Lloyds under that agreement. However, the owners of the ship took advice, and thought that they were likely to be prejudiced if the arbitration under Lloyds salvage agreement was allowed to proceed. They took the view that, in the circumstances of the case, they had been forced, as it were, by duress to sign the agreement. They thereupon instituted proceedings in Turkey with a view to a declaration that that agreement was obtained by duress, and was, therefore, invalid. They then came to the Admiralty Court and asked that proceedings before the arbitrator should be indefinitely postponed pending the decision of the action in Turkey, on the ground that in that action they hoped to obtain judgment, the result of which would be to invalidate the agreement under which the arbitration was to take place. Bucknill J, who dealt with the application, held that he could not grant it, and he gave a judgment, of which we have the transcript of the shorthand note. He stated the facts as I have stated them, but in rather greater detail, and in the course of the judgment he pointed out that there was no protest against the agreement recorded on the document, and he statedinaccurately, according to the affidavit evidence tendered by the owners of the shipthat no oral protest was made at the time. Apart altogether from that question of protest or no protest, the judge points out that apparently in the agreement itself the captain accepted that agreement as the condition of being given the assistance which he desired, and that consequently it would be unfair to the salvage company if the arbitration were postponed for an indefinite period of time, with the possible result that, if the plaintiffs proceedings succeeded in Turkey, there would be no security for the salvors. He held, in the circumstances, that the owners of the Ithaka were estopped from setting up that they were forced by duress of circumstances to sign an agreement which they did not really mean to sign, and that by their conduct they had precluded themselves from saying that the agreement was an improper agreement obtained in circumstances which rendered it invalid. The judge added that, so far as he could see, there was no ground for upsetting it. I think that that sentence may, as counsel for the appellants has pointed out, be misunderstood in the Turkish court as an expression of opinion that the action in Turkey is obviously a mistaken view of the rights of the owners of the Ithaka, and that there is no ground for the Turkish proceedings. I do not so read it for one moment. All I think that the judge meant by that was that, on the facts stated in the

Page 633 of [1939] 3 All ER 630

affidavits in the proceedings here, there was no sufficient ground for the court here to say that the agreement was one which could not be treated here as an agreement accepted by the owners of the Ithaka. I agree with counsel for the appellants that if that phrase were to be read by the Turkish court as meaning that the action brought in Turkey was misconceived, it would be unfair to his clients. However, as I have said, I do not think that the judge used the phrase in that sense at all. I think that his intention was to leave the owners of the Ithaka to prosecute their action in Turkey, and that he did not in any way desire to impair the case which they might there present. What he did feel was that, having actually signed an agreement the captain, however little he wanted to sign the agreement, did so with his eyes entirely open, and that, in the circumstances, there was no ground for the Admiralty Court here, intervening in its equitable jurisdiction, to say that one particular clause of the agreementnamely, the arbitration clauseshould be treated as ineffective.

In those circumstances, therefore, he quite properly, in my view, refused to make any such order as that which he was asked to make, which was an order in these terms:

Take notice that the court will be moved for an order that the appointment of the arbitrator appointed herein by the committee of Lloyds in pursuance of an agreement on Lloyds standard form of salvage agreement dated 25 November 1938 may be revoked and that the submission to arbitration contained in the said agreement shall cease to have effect, or that the said arbitrator may be restrained from proceeding with the said arbitration thereunder, or for such further or other order as to the court may seem just.

Before us, counsel for the appellants said that he would be content with an order postponing the arbitration proceedings until after the action in Turkey had been concluded. He also offered, in order to compensate the salvors for any loss they might suffer through standing out of the salvage money by that delay in the determination of their rights, to pay interest at any rate which the court thought right, for whatever time was necessary. He further offered, in answer to questions by the court, to agree that the bankers guarantee of the amount of £12,000 sterling should remain available even if the action in Turkey succeeded, and the agreement was set aside, pending any proceedings which might be taken by the salvage company for obtaining salvage in any court. That was a reasonable offer, but that does not, in my view, remove the fundamental difficulty in which he is.

In my view, in the circumstances in which the captain entered into the agreement, this court ought not to treat it as inoperative, or to suspend the operation of the arbitration under it. On 31 December Messrs Wendt & Co, agents of the owners of the Ithaka, with their authority addressed to the committee of Lloyds a request that they should act upon the salvage agreement. It was in the following terms:

We duly received your letter of the 5th instant for which we thank you, and pursuant to cl. 6 of Lloyds form of salvage agreement [which had been signed during November by the master] we hereby give you notice that it is the desire

Page 634 of [1939] 3 All ER 630

of our principals that this matter should proceed to arbitration. In the arbitration proceedings Messrs Bentleys, Stokes & Lowless will act on our behalf.

It was pursuant to that request that the arbitrator was appointed and that the arbitration proceedings in that sense started, and in my view it would be unfair to the Turkish salvors, in those circumstances, to say that the arbitration should not go through. Counsel for the appellants says that, if the view of the facts which he is instructed to put forward is well-founded, there was no salvage in the true sense here, that it was merely work and labour, and that, under the arbitration agreement, there is an admission that the services were salvage services. That may be, but it will not prevent the arbitrator from doing effective justice when he comes to make his award, because, if he thinks that there was a slight aspect of salvage in it, he will make his award accordingly. I therefore do not think that the owners of the Ithaka will really be prejudiced by the arbitration proceedings being held, and that, on the other hand, it would involve an unfairness to the salvage company if the arbitration proceedings were held up indefinitely. As they are business people, it must be a matter of importance to them that the arbitration proceedings under Lloyds agreement, which we understand is the method by which they carry on the whole of their business, should not be unduly postponed. In those circumstances, I think that the appeal ought to be dismissed.

MACKINNON LJ. I agree. I think that this was a hopeless application before Bucknill J, and there are a great many reasons why it should have failed. I mention only two of them. The parties entered into an agreement on 25 November 1938. On 31 December pursuant to cl 6 of the agreement, the owners of the Ithaka gave notice to the committee of Lloyds that they desired to claim arbitration. An arbitrator was appointed, solicitors were appointed to appear before him for the Ithaka, and more than one meeting took place. Suddenly, on 22 March 1939, the owners of the Ithaka moved to stop further proceedings in the arbitration, upon the ground that they were not bound by the agreement under which it took place. To that claim, as a matter of fair play and common sense, the most obvious and complete answer is: “You cannot be allowed to assert that that agreement does not bind you. We had a lien on your ship and on the cargo. In pursuance of this agreement, you gave security for the fulfilment of the obligation under this agreement, and, upon your giving that security, we released this ship and cargo, on the faith of your having entered into the agreement and acted upon it. If you now deny that it is a valid agreement, we, the salvors, shall be grossly damnified, because we shall lose the ship and cargo which we were entitled to retain, and we shall lose the security which you gave, treating the agreement as a valid one. In those circumstances, you must not be allowed in this court to claim to stop the carrying on of this arbitration upon the ground that you are not bound

Page 635 of [1939] 3 All ER 630

by this agreement to arbitrate.” That is one aspect of it, and I call it common sense and elementary fair play.

The other aspect of it seems to me to be this. This is an application by motion under the equitable jurisdiction of the court to stop legal proceedings being pursued in this country. It is an application to stop an arbitration which is, on its face, perfectly valid and proper, and within the jurisdiction of the arbitrator. I think that one should refer to the powers of the court to stop an action which has been started within the jurisdiction, the parties having been properly served within the jurisdiction. The grounds on which such action will be taken by the court are set out in the headnote in Logan v Bank of Scotland (No 2) as follows:

The court will stay an action, brought within the jurisdiction, in respect of a cause of action arising out of the jurisdiction, if satisfied that no injustice will be done thereby to the plaintiff, and that the defendant would be subject to such injustice in defending the action as would amount to vexation and oppression …

Thus, here, if one seeks to stop this arbitration, I think that one can do so only if one satisfies the court that these salvors will not suffer any injustice thereby, and that the owners of the Ithaka will be subject to injustice in defending the proceedings in the arbitration. Neither of these conditions can possibly be satisfied in this case. For that, and for the other reason I have mentioned, and others into which I need not go, Bucknill J, was perfectly right and this appeal fails.

FINLAY LJ. I also agree that Bucknill J, was perfectly right, and I do not desire to add anything to what has been said.

Appeal dismissed with costs.

Solicitors: Bentleys Stokes & Lowless (for the appellants); Middleton Lewis & Clarke (for the respondents).

C St J Nicholson Esq   Barrister.

Holt v Dawson

[1939] 3 All ER 635


Categories:        LANDLORD AND TENANT; Rent        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND DU PARCQ LJJ        

Hearing Date(s):        17 JULY 1939        


Landlord and Tenant Rent restriction “Actual possession” by landlord Key handed over to landlords agent Premises let to new tenant at increased rent Application to register house as decontrolled Error in filling in form Wrong date inserted Whether application valid Rent and Mortgage Interest Restrictions Act 1923 (c 32), s 2 Rent and Mortgage Interest Restrictions (Amendment) Act 1933 (c 32), s 2(2).

The tenant of a controlled house, which was let at a weekly rent of 14s 2¼d, gave notice to terminate her tenancy on 12 March 1938, and suggested to the landlords agent that her nephew should be accepted as a new tenant. The agent agreed, on condition that the house should be decontrolled and the rent increased to 15s 6d per week. The outgoing tenant handed over the key to the landlords agent, who, shortly after, handed it to the new tenant. The landlord applied to register the house as being decontrolled, but, by an error, described on the form of application the date on which he regained possession of the house as

Page 636 of [1939] 3 All ER 635

being in June. The new tenant applied to have the rent fixed, contending (i) that the landlord had never regained “actual possession” of the house within the meaning of the Rent and Mortgage Interest Restrictions Act 1923, s 2, and (ii) that the error in filling in the form rendered the application to register invalid:

Held (i) the symbolic act of handing over the key to the landlords agent was sufficient, on the facts of this case, to give the landlord actual possession within the meaning of s 2 of the 1923 Act.

(ii) the error as to date was not a material error or a material departure from the requirements of the Act. The essential feature was that the landlord should make a claim that the house was decontrolled.

(iii) the house had, therefore, become decontrolled, and the higher rent was validly due.

Notes

This decision, so far as it deals with “actual possession,” has been the subject of previous decisions, which, however, were not altogether consistent. It would seem now to be settled, on this point, that possession of the key is “actual possession” in the absence of special circumstances leading to a contrary conclusion. The case is one of first impression on the point raised upon the form of application for registration as a decontrolled house. There is nothing imperative in the requirements as to the form of such application, and, if an application is made at the proper time, immaterial error in the form is of no legal consequence.

As to Decontrol, see Halsbury (Hailsham Edn), Vol 20, p 318320, paras 378380; and for Cases, see Digest, Vol 31, pp 585, 586, Nos 73497361.

Cases referred to

Thomas v Metropolitan Housing Corpn Ltd [1936] 1 All ER 210; Digest Supp.

Hall v Rogers (1925) 133 LT 44; 31 Digest 558, 7049.

Caledonian Heritable Estates Ltd v Methven [1927] SC 39; Digest Supp.

Peizer v Federman (1921) 38 TLR 54; 31 Digest 569, 7164.

Barton v Fincham [1921] 2 KB 291; 31 Digest 579, 7280, 90 LJKB 451, 124 LT 495.

Appeal

Appeal from a decision of His Honour Judge Leigh, given at the Manchester County Court, dated 6 February 1939. The facts of the case are fully set out in the judgment of Scott LJ.

J Dill Smith for the appellant.

J C Jolly KC and J L Elson Rees for the respondent.

Dill Smith: The effect of the landlord having put in a wrong date is that the registration was void. Where a statute gives a person a right provided that he complies with a certain condition, if he fails to comply with it, he loses that right. S 4(1) of the 1938 Act says that a landlord shall apply in the prescribed form. This application was not in the prescribed form, because there was an error of substance. [Counsel referred to Maxwell on the Interpretation of Statutes, 8th Edn, p 321, and Peizer v Federman.] The only person who can give a new tenant possession is the landlord. The mere handing over of a key does not give possession to a landlord when it is immediately handed over to a new tenant. An outgoing tenant can only hand over the key to a new tenant by the consent of the landlord, and, therefore, for a moment he is the landlords agent. Therefore, in every case of a change of tenancy, the landlord would get possession for a moment, and that

Page 637 of [1939] 3 All ER 635

cannot possibly be right. There must be a substantial period of time in between the two tenancies, otherwise it is merely a change of tenancy by consent. Where there is only an insignificant period during which the key is in the hands of the landlord, that will not give him possession. A party cannot contract out of the Rent Acts: Barton v Fincham. [Counsel referred to Caledonian Heritable Estates Ltd v Methven and Thomas v Metropolitan Housing Corpn Ltd.]

Jolly KC was not called upon.

J Dill Smith for the appellant.

J C Jolly KC and J L Elson Rees for the respondent.

17 July 1939. The following judgments were delivered.

SCOTT LJ. This is an appeal from a decision of His Honour Judge Leigh given at the Manchester County Court on 6 February 1939, on a question arising under the Rent and Mortgage Interest Restrictions Acts. Like most of the cases arising under those Acts, it has prima facie some aspects which are puzzling, but in our view the questions are simple when they are understood, and in the result we agree with the careful judgment of the county court judge, in which he analysed the position and came to the conclusion that the landlord had had the actual possession in the premises which is required under the Act, in order that the house should be decontrolled within the 1923 Act, and that the house thereby became a house to which the Acts no longer applied.

There is a subordinate point raised by the appellantnamely, that, although the Act said that the premises were decontrolled, yet under the Act of 1938 the provision that premises, although decontrolled, should still be deemed to be controlled, unless the landlord applied that the house should be put on the register of decontrolled houses, prevented this house from escaping from the ambit of the Acts, because the form of application used departed in one particular from the prescribed form.

Those two points were considered by the judge. On the first point, the question was whether the premises ever came into the actual possession of the landlord within s 2 of the 1923 Act, which by sub-s (1) provides as follows:

Where the landlord of a dwelling-house to which the principal Act applies is in possession of the whole of the dwelling-house at the passing of this Act, or comes into possession of the whole of the dwelling-house at any time after the passing of this Act then from and after the passing of this Act, or from and after the date when the landlord subsequently comes into possession, as the case may be, the principal Act shall cease to apply to the dwelling-house: Provided that, where part of a dwelling-house to which the principal Act applies is lawfully sublet, and the part so sublet is also a dwelling-house to which the principal Act applies, the principal Act shall not cease to apply to the part so sublet by reason of the tenant being in or coming into possession of that part, and, if the landlord is in, or comes into possession of, any part not so sublet, the principal Act shall cease to apply to that part, notwithstanding that a subtenant continues in, or retains, possession of any other part by virtue of the principal Act: Provided also that, where a landlord comes into possession under an order or judgment made or given after the passing of this Act, on the ground of non-payment of rent, the principal Act shall, notwithstanding anything in the foregoing provisions of this subsection, continue to apply to the dwelling-house.

Sub-s (3) provides as follows:

For the purposes of this section, the expression “possession” shall be construed as meaning “actual possession,” and a landlord shall not be deemed to have come into possession by reason only of a change of tenancy made with his consent.

Page 638 of [1939] 3 All ER 635

The facts of the case were stated by the county court judge in his judgment as follows. Prior to March, 1938, the house was let to a Mrs Donaldson at a weekly rent of 14s 2¼d. She decided to leave the house, and suggested to the landlords agent that her nephew should be accepted as a tenant. The landlords agent said that he was willing, but only if the house became decontrolled and the rent raised to 15s 6d per week. Mrs Donaldson gave notice to terminate the tenancy on 12 March 1938. On that date she came to the agents office and handed the key to the agent. After the key had been handed over, the nephew came in a moment or two later, and the agent, who had already intimated the position which he took up on behalf of the landlord, handed the key over to the nephew. The question is whether or not that transaction gave the landlord actual possession. In my opinion, it did, and the reason why I say that is that handing over a key is a symbolic act, which at common law carries with it possession of that to which the key is the means of access, and, where the key is handed over, its possession carries with it the possession of the thing or house of which it is the key. If the symbolic act is one which, on the facts of the case in evidence, is shown quite clearly to be an act in which the key is intended to carry possession, then it is impossible to treat the handing over of the key as anything but the handing over of possession. Where a tenancy comes to an end, whether it be by the effluxion of time or because it is surrendered to the landlord and the tenant brings the key and hands it over, the presumption is that the key is handed over in order to give the landlord possession. That was what happened in this case. It is argued that in fact the new tenant came in a very short time afterwards, and that a new tenancy on different terms was entered into when he came in. However short the time was, I cannot see that there was any evidence at all to take away from the act already accomplished its character of a transfer to the landlord of actual possession within the meaning of s 2(3) of the Act of 1923. Therefore, there was actual possession within the meaning of the section, and the house became decontrolled.

The matter is not free from authority. There was a case before this court of Thomas v Metropolitan Housing Corpn Ltd. In that case, a tenant had handed over to the landlords agent the key of some premises, and the premises were unoccupied for one or two days. The question was whether actual possession was handed over. Slesser LJ, quoting Scrutton LJ, in Hall v Rogers at p 45, says, at p 214:

“I think Parliament in using the phrase actual possession intended to reject the legal right to possess and to require actual control or apparent dominion in fact.”

I pause to observe that “apparent dominion in fact” exactly describes the possession of the key when one has that one fact and nothing else in evidence. Slesser LJ, held that, the key being in the possession of the landlords agent for a day or two, the landlord had had actual possession, and I agreed, and so did Eve J, with a reservation as to

Page 639 of [1939] 3 All ER 635

the scope of the phrase “actual possession.” Counsel for the appellant cited Caledonian Heritable Estates Ltd v Methven, where, upon different facts, the Court of Sessions, Lord Blackburn dissenting, held that a landlord had not come into actual possession. However, that was a case in which the tenant of the house gave notice, on a date in February, of his intention to remove on Whitsunday, and thereafter in the next month the landlord relet the house to a new tenant. The old tenant went and the new one came in, and the new tenant subsequently sought the protection of the 1920 Act.

These cases as to actual possession must be decided on the facts of each case, and the fact that judges have taken one view as to the meaning of that phrase in one case as a rule is very little guide as to whether or not another case is within that expression. In my view, here the fact that the landlords agent explained to both tenants that he was taking the key on the terms of the house becoming a decontrolled house clothes the symbolic act with evidence of intention which is unanswerable.

The other point in the case is that, under the 1933 and 1938 Acts, if a landlord desires the benefits of decontrol he must make an application to the local authority to have his claim that his house is decontrolled registered. Unless he does that, and the house is so registered, the two Acts provide that his premises shall be deemed to be still controlled. The 1938 Act provides that the registration must be effected within 3 months and the decontrol then continues for 4 years. The point is that the Acts and the regulations made under the Acts by the Minister provide that the application shall be made in a certain form, and the form provides, inter alia, that certain particulars shall be mentionednamely, the address and the rateable value of the premises in April 1931, if then separately rated, the occurrence which produced decontrol, and the date of that occurrence. In this case, the date in fact was 12 March 1938, but the landlord put in the form a date in June. That fact became known to the tenant, through his going to look at the register and finding a reference to that date. The solicitors advising him decided that he should take the point that the registration had not been in accordance with the Act, because it did not state that date accurately, and therefore the whole registration fell to the ground and the house was still controlled. That argument cannot be accepted because, under the provisions of these Acts, the essentially important thing is the making of the application to a local authority by a landlord. That is contained in s 4 of the 1938 Act and s 2(2) of the 1933 Act, which latter section reads as follows:

If the landlord of any dwelling-house let as a separate dwelling immediately before the passing of this Act, being a duelling-house of which the rateable value on the appointed day did not exceed the respective amount mentioned in the last foregoing subsection, claims that by virtue of the provisions of the said sect. 2 of the Act of 1923 the principal Acts had ceased to apply to the dwelling-house before the passing of this Act, he shall within 3 months after the passing of this Act make to the council of the county borough or county district in which the dwelling-house is situated application in the prescribed form for the registration

Page 640 of [1939] 3 All ER 635

of the dwelling-house, and if in any proceedings with respect to any dwelling-house which is, or immediately before the passing of this Act formed part of, such a dwelling-house as aforesaid, it is proved that but for the provisions of the said sect. 2 of the Act of 1923 the principal Acts would have applied to the dwelling-house and that no such application has been made by or on behalf of the landlord within the time aforesaid, the dwelling-house shall, subject as hereinafter provided, be deemed to be a dwelling-house to which the principal Acts apply …

That section is amended and continued under the 1938 Act without any alteration of its substance, and it is to be noted that the essential features are a claim by the landlord that the house has become decontrolled and an application to the local authority for registration. Those features were preserved by the 1938 Act, and there is nothing in the regulations or the form itself which touches those provisions. That being so, I think that the error in the date in the form itself does not prevent the application made from being one for the registration of the claim that the premises are decontrolled. To hold otherwise would be to read into the Act a provision similar to that contained in the Bill of Sales Amendment Act 1882, providing that, unless a particular form is followed faithfully, the result will be the total avoidance of a form as an effective instrument. There is nothing of that sort here. There is nothing in the Act which shows that these details in the form are anything more than directory, and therefore I hold that this error as to the date on which the landlord obtained possession is not a material error, and is not a material departure from the requirements of the Act. It therefore does not invalidate the registration.

I therefore am of the opinion that this house was a decontrolled house, and that the provisions as to registration in the Acts of 1933 and 1938 were complied with. Therefore the new tenancy granted on 12 March 1938, was a decontrolled tenancy, in respect of which the increased rent was valid. The appeal must be dismissed.

CLAUSON LJ. I agree.

DU PARCQ LJ. I agree.

Appeal dismissed.

Solicitors: V M Lawson, agent for Albert Aboudi, Manchester (for the appellant); Johnson Weatherall Sturt & Hardy, agents for Martin & Co, Manchester (for the respondent).

E Fuller Briscoe Esq   Barrister.


B Sunley & Co Ltd v Cunard White Star Ltd

[1939] 3 All ER 641


Categories:        CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        HALLETT J        

Hearing Date(s):        3, 5, 6 JULY 1939        


Damages Measure of damages Breach of contract Deprivation of use of chattel Machine let on hire for short periods Machine idle for one week through delay in transit.

The plaintiff company secured a contract in November 1937, to level the site of the new aerodrome in Guernsey. For the performing of such work it was necessary to remove a tractor and a scraper from a site at Doncaster to the site in Guernsey. The defendants contracted to collect the machine at Doncaster on 10 November 1937, and to transport it to Guernsey, where it should have arrived on the morning of 15 November. The defendants failed to carry out this contract as arranged, and the machine did not reach Guernsey until 22 November. The result was that the machine was kept idle at Doncaster for a week. The machine had been procured from America at a cost of £4,500, and, at the time of the above events, there were only very few such machines in England. The plaintiffs claimed damages in respect of the machine being kept idle, and the defendants contended that they were entitled to only nominal damages and interest on the cost of the machine and overhead charges:

Held the proper measure of damage was not based on interest on purchase price and depreciation, but was the amount the plaintiffs would have made by the use of the machine during the period it was idle.

Notes

The question here is purely one of the measure of damages. Any unusual advantage or loss arising from a breach of contract is not generally a matter for damages unless notice thereof is given to the other contracting party. Thus, the special damages arising from the special features of the machine in this case appear too remote, but, in dealing with a commercial concern and an object of commercial utility, the loss of hire of the machine is a matter to be taken into account. The damages will not be the whole loss of hire, but the true value to the plaintiffs of the use of the machine for the time during which they were deprived thereof.

As to Damages for Breach of Contract, see Halsbury (Hailsham Edn), Vol 10, pp 97102, paras 122127; and for Cases, see Digest, Vol 17, pp 86, 87, Nos 5358.

Cases referred to

Mediana (Owners) v Comet (Owners etc), The Mediana [1900] AC 113; 17 Digest 79, 9, 69 LJP 35, 82 LT 95.

The City of Peking v Compagnie des Messageries Maritimes, The City of Peking (1888) 14 App Cas 40; 41 Digest 702, 5373, 58 LJPC 64, 61 LT 136, subsequent proceedings (1890) 15 App Cas 438.

No 7 Steam Sand Pump Dredger (Owners) v Greta Holme (Owners), The Greta Holme [1897] AC 596; 41 Digest 808, 6689, 66 LJP 166, 77 LT 231, revsg SC sub nom The Emerald, The Greta Holme [1896] P 192.

Clydebank Engineering & Shipbuilding Co v Yzquierdo y Castaneda (Don Jose Ramos) [1905] AC 6; 12 Digest 434, 3514, 74 LJPC 1, 91 LT 666.

Mersey Docks & Harbour Board v Marpessa (Owners) [1907] AC 241; 17 Digest 86, 54, 97 LT 1, sub nom The Marpessa 76 LJP 128, affg SC sub nom The Marpessa [1906] P 95.

Admiralty Comrs v SS Chekiang [1926] AC 637; 41 Digest 805, 6663, 95 LJP 119, sub nom The Chekiang, 135 LT 450.

Page 642 of [1939] 3 All ER 641

Admiralty Comrs v Susquehanna (Owners), The Susquehanna [1926] AC 655; 41 Digest 802, 6624, 95 LJP 128, 135 LT 456.

The West Wales [1932] P 165; Digest Supp, 101 LJP 92, 148 LT 80.

Liesbosch (Dredger) v Edison (SS) [1933] AC 449; Digest Supp, 102 LJP 73, sub nom The Edison, 149 LT 49.

Re Polemis & Furness, Withy & Co [1921] 3 KB 560; 36 Digest 29, 151, sub nom Polemis v Furness, Withy & Co, 90 LJKB 1353, 126 LT 154.

Hadley v Baxendale (1854) 9 Exch 341; 17 Digest 93, 101, 23 LJEx 179, 23 LTOS 69.

Action

Action to recover £577 10s and interest thereon on account of the loss of the use of a tractor and a scraper by reason of a breach of contract by the defendants. The facts are fully set out in the judgment.

G R Blanco White KC and E Holroyd Pearce for the plaintiffs.

A J Hodgson and W J Kenneth Diplock for the defendants.

White KC: The machine was worth so many pounds per diem, and the plaintiff company is entitled to have that number of pounds by way of compensation for being deprived of the use of the machine for a week by the defendants breach of contract, subject always to such deductions by way of mitigation as may be necessary in order to allow for the expenses which the plaintiffs have been saved. The plaintiff company would not have used this expensive machine had it not been worth to them at least something in the nature of £30 per 8-hour shift. When they were deprived of the machine it may therefore be presumed that they suffered a loss in the neighbourhood of £30 per every 8-hour shift for which they would have used it, less any sums saved through the machine standing idle. These would naturally be in the contemplation of everybody, and certainly within that of the defendants. The plaintiffs rely upon the principles expressed in The Mediana. They are entitled to recover from the defendants, not only the out-of-pocket expenses, but also substantial damages for the loss of the machines services during that one week. However, the principle expressed in the Chekiang case, foreshadowed in The Greta Holme, and followed in The Susquehanna, cannot apply to the present case, because here the plaintiff company required the machine for profit-making purposes. All these rules are rules to assist the court in answering the real question of fact, which is the amount of damage the plaintiffs have in fact suffered through the breach, excluding, of course, any damage too remote under the second rule in Hadley v Baxendale. The hire of the machine is an indication to the court of what it is worth to the plaintiffs. The damage actually suffered by a contractor in Guernsey through the performance of his contract being delayed is always a difficult matter to arrive at. The plaintiffs put forward the hire rate as the simpler means of answering the question. The method of arriving at the measure of damages by reference to the market price obviously cannot apply, because of the special nature of this machine.

Diplock: The true measure of damages flowing from a breach of contract is the loss to the plaintiff capable of assessment in money,

Page 643 of [1939] 3 All ER 641

disregarding any circumstances peculiar to himself. When it is plant used for work, the measure of damages is the loss due to disturbancenamely, overhead charges, expenses of staff, and equipment thrown away: Liesbosch (Dredger) v Edison (SS). In so far as cost of hire of substitute is suggested, it is contrary to the decision in The Greta Holme, where the hire would have been the sum of £1,500, but the sum of £500 was awarded. The matter was also discussed in The Susquehanna. The decision in The Mediana does not say, as was said by Lord Sumner in a later case, Admiralty Comrs v SS Chekiang, at p 643, that juries must find a figure as best they can, and escape criticism by being anonymous and dumb, and accordingly proof against anything but perversity. In the Chekiang case, the decision as to the measure of damages was that that measure must be the loss of interest over a period of 20 days. In The Susquehanna, the claim was on commercial value if the ship had been let out on hire, but the court held that the damages ought not to be assessed on the footing that the P., a naval oil-tanker, should be treated as a ship to be let out on a mercantile charter, but should be assessed on the principle of The Greta Holme, with such rates of interest and depreciation as the evidence might justify. In the present case, the measure is the damage actually proved, and thus the only damages which can be recovered, are (i) loss of interest for one week, which is so small that it is a waste of time to calculate the amount, and (ii) overheads, wages of drivers for one week less 2 days. No sum is recoverable for depreciation, because the evidence is that the machine depreciates only while working, and the result of its weeks idleness was to add another week to the length of its working life.

G R Blanco White KC and E Holroyd Pearce for the plaintiffs.

A J Hodgson and W J Kenneth Diplock for the defendants.

6 July 1939. The following judgment was delivered.

HALLETT J. In this case, the amount at issue is not very large, since the claim originally amounted to only £577 10s, and counsel for the plaintiffs has conceded, in the course of his argument, that the sum which is found to be recoverable will be something substantially less than the full amount originally claimed. It appears to me, however, after having had the advantage of very careful argument by counsel both on the facts and on the law, that the case does involve a question of considerable difficulty, and, it may be, of considerable importance. Having regard to the admission of liability which was forthcoming from the defendants counsel during the course of the hearing, I need only state the facts, in so far as they are relevant to the question of damage which has remained for my decision.

The plaintiffs are a firm of public works contractors who, in October and November 1937, were securing, and ultimately did secure, a contract from the states of Guernsey to level the site of the new aerodrome. For the performing of such work the plaintiffs owned certain machines. I need not describe them in any detail, but it is sufficient to state that each unit consisted of a tractor and a scraper, both of them very heavy

Page 644 of [1939] 3 All ER 641

and bulky machines, which at that time were procured from America at a cost of about £4,500 for the whole unit. There appear to have been only a few of them in England at the time with which this case is concerned, of which most were owned by the plaintiffs. I think that there were altogether then only 5 owned by the plaintiffs. However, they now have 19, and there are now some 200 of them in this country. At the time in question, it was a type of equipment of which there were very few in this country.

At the time when the plaintiffs secured this contract in Guernsey, they were using one of their scraper and tractor units to perform some levelling work at Doncaster as subcontractors to a company called Frank Haslam, Ltd, who are also public works contractors, and who had a contract with the Doncaster Corporation. Accordingly, it was necessary for the plaintiffs to have the tractor and scraper moved from the site at Doncaster to the site at Guernsey, and it became known to the defendants, the well-known shipping company, through, I think, their agent in Guernsey, that the plaintiffs had secured this contract in Guernsey, and that, as a result of having secured the contract, the plaintiffs might well wish some transport to be provided between England and Guernsey. Accordingly, negotiations were opened between the defendants and the plaintiffs with a view to the defendants providing the necessary transport for the tractor and scraper with which I am concerned in this case. Originally, there was a dispute between the parties as to the terms of the contract which was ultimately arrived at, but, having regard to the admission which has since been made on the part of the defendants counsel, I do not think that it is necessary for me to go into the question as to those exact terms. I think that it is sufficient to summarise the essential features of them by saying that under the contract, as I think it is now conceded, and as, in any event, hold, the defendants undertook to collect the machine at Doncaster on 10 November 1937, to have it conveyed to Liverpool, and thence to carry it to Guernsey on the steamer Staghound, sailing from Liverpool on Friday, 12 November and arriving in Guernsey in the ordinary course some time on the morning of Monday, 15 November at latest. So far as the marine portion of the transport is concerned, the defendants were going to do it by means of their vessel the Staghound, as I have said, but, as far as the land portion of the transportnamely, from Doncaster to Liverpoolwas concerned, the defendants employed subcontractors. Unfortunately, when 10 November, which was a Wednesday, arrived, and the subcontractors attended at Doncaster with the vehicle or vehicles for the purpose of giving the transport, it turned out, for reasons into which I need not go, that it was impossible to load the tractor and scraper on to the vehicles provided. The defendants were informed of that fact, and they did their very best, undoubtedly, to find some other means of getting the tractor and scraper to Liverpool in time to catch the Staghound, but unfortunately they failed. As I

Page 645 of [1939] 3 All ER 641

have said, this was a very bulky piece of equipment, and I dare say that it was not very easy to find in a moment anyone who was willing and able to transport it. The defendants view of the next best thing they could do, which they in fact did, was to arrange for the tractor and scraper to be conveyed to Liverpool in time to catch the Beryl, the next boat on that service, which left exactly a week later, on 19 November from Liverpool, and accordingly in the ordinary course would deliver the tractor and scraper, as it in fact did, in Guernsey on the morning of Monday, 22 November. The result was, to put it quite shortly, that the tractor  and scraper were kept at Doncaster for a week and delivered in Guernsey exactly a week late, and it is said, and now admitted, that, by their failure to convey the tractor and scraper at the earlier date, the defendants committed a breach of contract. It was admitted that some damages must be paid by them, but the question which I have to determine is how those damages should be arrived at, and what should be their amount. I should perhaps here definitely add that, the defendants having done their very best, as appears from the correspondence, to mitigate the breach by providing some other means of transport earlier than the Beryl for the machinery, and having failed, it is not altogether surprising that there is no suggestion on their part that there was anything which the plaintiffs could reasonably have done in order to mitigate the loss which they say that they have sustained.

I am satisfied that the machine was standing idle at Doncaster by reason of the breach of contract on the part of the defendants. I have also to examine how far the machine would have been employed at Guernsey if it had been transported there by the defendants in due performance of their contract. It is said that it would have done work on the first Sunday, and I think that it quite properly would, but it turns out that, after the machine had once been worked on the Sundaywhich, as it happens, was in the week ending 1 Decemberthe authorities in Guernsey objected to Sunday working, and it was not allowed to work on Sunday again. Therefore, inasmuch as it had its first Sunday without interference, although it had it a week late, it seems quite clear that I cannot allow for any Sunday work in arriving at what it would have done during the first week in Guernsey, because it did work on the Sunday in the second week, and it would not have worked in the second week if it had worked in the first week. Then there is the question of the time it would have worked, and counsel for the plaintiffs put it on the basis that this machine was employed by other people for 22½ hours per day, and its value was put by the plaintiffs on the basis of a unit of 8 hours. Some information has been put before me which shows that on certain occasions the machine did work on some similar work certainly for 22½ hours per day, and on a certain occasion, especially at Minchinhampton, it worked as much as 24 hours per day, which was not possible on certain shorter days, when time was taken for servicing the machine. It also appears that in April 1938, with this very contract at Guernsey,

Page 646 of [1939] 3 All ER 641

the machine was working day and night, and a period of something like 22½ hours out of the 24 was worked. There is no evidence, however, that the machine worked the double shift day and night in November or December at Guernsey. It is said that that was due to the weather, as the week which the machine missed through being delayed was a very fine week, and that, although for the first week they could work during the day only, in fact in the second week what had been done during the first week would have enabled them to have a double shift. It was said that in fact they could work only single shifts in the second week because of the absence of that preliminary work in the first week which would have enabled them to work a double shift in the second week. Therefore, in effect they have lost a double shift, it is said. On the other hand, the view might be taken that it would have worked, say, 11½ to 12 hours per day, which is what it seems to have worked normally during a single undertaking. On the whole, I am not satisfied that it would have worked, on an average, a double shift, but I find, having regard to all the circumstances, that it might have worked somewhat in excess of the time it did in fact work, and the sum at which I arrive, if I can go on that basis, is somewhere midway between those amounts.

I now come to consider the question of law in this difficult and interesting matter. Counsel for the plaintiffs has relied in the main upon certain principles which he asks me to discern in the well-known case of Mediana (Owners) v Comet (Owners etc), The Mediana. He says that the compensation to which his clients are entitled should be arrived at by calculating as best I can what will express in terms of money the value of the use of this machine. In this case, there was no question of hiring substitutes, and there is no evidence that the performance of the contract was delayed by the absence of this machine for a week in such a way as to produce any specific pecuniary loss to the plaintiffs. Counsel for the plaintiffs takes his stand by saying: “We submit that the machine was worth so many pounds, and I ask your Lordship to accept it, and, therefore, I am entitled to have that number of pounds by way of compensation for being deprived of the use, of the machine by this breach of contract, subject always, of course, to such deductions as may be necessary in order to allow for the expenses which I have also been saved.” The figure which he puts forward is the gross figure of £30 per 8 hours, reduced to £22 10s by the saving of certain expenses, which, according to the evidence, amount to £7 10s. As regards the deduction of £7 10s, I say offhand that I accept that, because those figures were not challenged. With regard to the £30, the way in which counsel for the plaintiffs seeks to establish that figure is as follows. In the first place, he says, and he has proved by his evidence, that, in quoting the machine for hire, the plaintiffs at the material time quoted £30 per 8 hours for the use of the machine in question, and he says, as I understand it, that, inasmuch as they were prevented from letting out on hire this machine, they want £30 compensation for 8 hours,

Page 647 of [1939] 3 All ER 641

and that affords some guide by which I can arrive at the compensation which ought to be allowed to-day if they are compulsorily deprived of the use of the same machine. Secondly, he points to the fact that, under the contract with Messrs Haslam, the amount to be paid by Messrs Haslam, if the machine is left idle through no fault of the plaintiffswhich means, of course, if it is left idle by the defendantsis to be £30 per 8-hour day. He says that there again they are stipulating what they are to be paid if they are deprived of the use of their machine through Messrs Haslams fault, and that that ought to afford some indication of what they ought to be paid if they are deprived of the use of their machine through the fault of the defendants, and I think it is really on those two pieces of material that he bases his figure of £30. I ought to mention that counsel for the plaintiffs brought out very properly that, as the number of machines had increased, the hire which could be asked for such machines, or the demurrage, if I may use that expression, which was claimed in respect of them, had fallen very greatly, until recently, when it again went upwards, and indeed went up above £30. I do not think that either of those circumstances is of very great importance. Indeed, to me they appear to be of no importance at all, as there are special considerations which may well account for it, and the drop is only what one would expect when the number of machines increases, as it did, from only a few to something like 200 at the present time. There is some relevance, however, in the fact that, according to the evidence, a statement of the sums which the machines were able to earn if let on hire in December 1937, is no real evidence of what they would be able to earn if they were let on hire at a much later date. That is a consideration which may be of some importance in connection with one of the arguments addressed to me by counsel for the defendants.

Counsel for the plaintiffs then claims that his clients are entitled to obtain by way of compensation a sum arrived at by taking £22 10s per 8 hours and deciding how many hours were wasted because the machine was not at Guernsey by the contract time. For instance, he says that, if one arrives at the conclusion that during that wasted week the machine would have worked 80 hours, then one should give the plaintiffs ten times £22 10s, whatever that figure in pounds may be, and it is upon that basis he invites me to assess the damages. Counsel for the defendants, on the other hand, contends that that is altogether a wrong basis, and that damages should be either nominal or so small as to be practically nominal, because they should be arrived at, according to his argument, in another way, which will in fact produce practically nominal results.

I have to decide which of those two views is right, and, in so deciding, I am not directly, it seems to me, assisted by the authorities. I have already mentioned that counsel for the plaintiffs relies primarily on The Mediana, which is one of a series of cases to which I think I ought to refer. The first of the series which I need mention at all is

Page 648 of [1939] 3 All ER 641

The City of Peking, and, having regard to the observation of Lord Macnaghten in The Mediana, at p 120, upon the decision in The City of Peking, to which he was a party, I do not think I need say anything more about The City of Peking except that it appears to have depended upon the special circumstances in that particular case. The first case after The City of Peking which appears to require notice is The Greta Holme, another very well-known case. Then after that comes The Mediana, to which I have already referred. I need not mention all the cases, but only those I have found of some assistance. The next is Clydebank Engineering & Shipbuilding Co v Yzquierdo y Castaneda (Don Jose Ramos). Then come Mersey Docks & Harbour Board v Marpessa (Owners), Admiralty Comrs v SS Chekiang and The Susquehanna. Then comes The West Wales, which I do not think has been examined by counsel, and finally there comes Liesbosch (Dredger) v Edison (SS), which I mentioned to counsel during the argument. All those cases, with the exception of The West Wales, I think have been carefully examined by counsel, and I have read them all myself, and, looking at them as a whole, I think that there are two features which at once attract ones attention. The first feature is that, with the exception of the Clydebank case, about which I shall have something more to say, they are all cases where the action is founded on tort. The second feature which strikes one is that, including the Clydebank case, they are all cases where the subject-matter was some piece of property owned by a body which did not use that piece of property for profit or personal profit. The nature of the property varies. It was a dredger in the case of The Greta Holme, a lightship in the case of The Mediana, some torpedo destroyers in the Clydebank case, a dredger again, in Mersey Docks & Harbour Board v Marpessa (Owners), belonging to the Mersey Docks and Harbour Board, a light cruiser in Admiralty Comrs v SS Chekiang, and, in the case of The Susquehanna, what the Admiralty lost was the use of the services of an oil-tanker. The property in the Edison case, on the other hand, which I should have excepted in my list, did not belong to public owners. The claimants were a trading company who used the subject-matter referred to for a profit, and I should therefore have excepted that case from the general description which I gave of the other cases. Finally, in The West Wales, the subject-matter which was used was partly a British battleship and partly a naval drydock which was occupied by that British battleship whilst under repairs. So, with the exception of the Edison case, in every case the claiming owners were not people who used the subject-matter for the purpose of putting money into their pockets. What I have to consider, then, are these two questions. First of all, I have to consider whether the principles applied to The Mediana and other similar cases have any application at all where the claim is founded upon contract, and not upon tort.

Page 649 of [1939] 3 All ER 641

I rather think that, in answer to some observations of mine at an earlier stage, counsel for the plaintiffs suggested that there was no distinction in the two cases, but, if he did so, I am quite sure that he meant only that there was no distinction for the present purpose. Of course there is no doubt whatever that there are distinctions in the rules applicable to damages in contract, on the one hand, and in tort, on the other hand, and the two distinctions relevant for me to bear in mind for the present purposes, it seems to me, are these. In the first place, in many actions founded on contract, compensation may be awarded for a loss or damage which is not of a financial character at all. For instance, in an action founded upon negligence, compensation is awarded for pain and suffering, and in libel or slander compensation is awarded for loss of character and in breach of promise it is awarded for injuries to feelings. In a case of breach of contract, however, the only kind of loss, as I understand it, which is a subject for compensation is a financial loss. I take the well-known rule, by way of illustration, that, in a case of wrongful dismissal by reason of improper notice, no damages are obtainable for the circumstances attending the dismissal, although they may have greatly aggravated the mental suffering and injury to reputation which may have been caused by the dismissal. That is one matter I have to bear in mind, because, this being an action founded on contract, I take the view that it is only in so far as financial loss has been incurred that I am entitled to award compensation to the plaintiffs. Counsel for the plaintiffs says: “This is financial loss. This is a deprivation by the defendants, at the expense of my clients, of some article which is of financial value to my clients.” Indeed, I think that he might perhaps rely upon the very case upon which counsel for the defendants has been relying, The Susquehanna, and particularly on the opinion of Lord Blanesburgh where the distinction is drawn adversely to the plaintiffs in that case between subject-matter owned by a non-profit-making concern and subject-matter owned by a profit-making concern. I need not refer in detail to the opinion of Lord Blanesburgh but it will be observed that the distinction was present to his Lordships mind, and in that case he seems to have been drawing it adversely to the claimants.

The other great distinction which exists, and is relevant to the present case, between damages in contract and damages in tort is that, in the case of damages in tort, as is generally now thought to have been decided by the well-known case of Re Polemis & Furness Withy & Co, the damages in fact flow from the tortious act, and it does not matter if that particular kind of damages was not in the contemplation of either party at any previous time. On the other hand, in contract it is not sufficient to show that the damages flowed from the breach of contract if they are damages of what I will call for the moment a peculiar kind (although the word “special” is a better word), because then it is necessary in a court of law to show that they were within the contemplation of the other contracting party. I have a little hesitation

Page 650 of [1939] 3 All ER 641

in using the word “special” because that has acquired a particular meaning, but I may use the word “special” if it is understood that I use it in the colloquial or usual sense of the term, rather than in the technical sense in which it is often used for legal purposes. What counsel for the plaintiffs will say, I understand, in regard to the second distinction is this: “In this case, I am not claiming special damages in the sense in which they have just been described. What I am claiming are only damages which would naturally be in the contemplation of everybody, and certainly within that of the defendants, which flow from the deprivation of the use of this article for a weeknamely, the value of that use expressed in terms of money.” Further, he says that the question of remoteness of damages does not arise here at all. I am with him on the facts to the extent that it is quite plain from the correspondence that the defendants knew perfectly well that this machinery was required in Guernsey for the purpose of working on a contract which the plaintiffs had secured to level the site of an aerodrome, and that they knew that it was wanted to be used in that way and on the date when it was to be sent there, because there was in the early stages some question as to whether it would do if it were sent a week later by the Beryl, which had better capacity for carrying this machinery, and it was made plain that, whatever the reasons might be, the plaintiffs wanted it to go by the earlier steamer. Therefore, up to a point, there is no doubt that they knew what was likely to be the consequence of holding back this machine for a week, which would deprive the plaintiffs of the use of the machine which they intended to work, and the use for profit-making purposes in the sense that it was to be used for the purpose of carrying out the profit-making operations of the plaintiff company, more particularly in connection with the preliminary work for the aerodrome site.

In considering what are the two main distinctions between the rules for the assessment of damages in contract and those for the assessment of damages in tort, I have to make up my mind whether I can discard the line of cases of which The Mediana is an example as relevant to this action, being an action founded on tort. On the whole, I think that it would be wrong to do so, and I think that I get some slight support for my view from the Clydebank case, to which I have already referred. In the Clydebank case, which was an action founded upon contract, there was a contract in which there was a provision whereby a stated sum of £500 per week was to be paid in respect of each of 4 torpedo destroyers which were being built for the Spanish government if they were not delivered by the contractors within the contract time. There was a breach of the contract, and the Spanish government claimedand in the first instance secureddamages which amounted to £67,500 with interest. In that case, it is to be observed that there was no question of quantifying the damages in the first instance, because the damages had been quantified by the penalty clause in the contract.

Page 651 of [1939] 3 All ER 641

A question arose as to whether that sum could be recovered at all, it being argued for the defendants that it was in the nature of a penalty. In support of that argument, it was urged that damages of that character could not be recovered at all, and the Earl of Halsbury LC, discusses and considers that argument and says, at p 12:

If it was an ordinary commercial vessel capable of being used for obtaining profits, I suppose there would not be very much difficulty in finding out what the ordinary use of a vessel of this size and capacity and so forth would be, what would be the hire of such a vessel, and what would therefore be the equivalent in money of not obtaining the use of that vessel according to the agreement during the period which had elapsed between the time of proper delivery and the time at which it was delivered in fact. But, says counsel, you cannot apply that principle to the case of a warship because a warship does not earn money. It is certainly a some what bold contention. I should have thought that the fact that a warship is a warship, her very existence as a warship capable of use for such and such a time, would prove the fact of damage if the party was deprived of it, although the actual amount to be earned by it, and in that sense to be obtained by the payment of the price for it, might not be very easily ascertainednot so easily ascertained as if the vessel were used for commercial purposes and where its hire as a commercial vessel is ascertainable in money. But, my Lords, is that a reason for saying that you are not to have damages at all? It seems to me it is hopeless to make such a contention, and although that would not in itself be a very cogent argument because the law might be so absurd, yet it would be a very startling proposition to say that you never could have agreed damages for the non-delivery of a ship of war although, under the very same words with exactly the same phraseology in the particular contract, you might have damages if it was a vessel used for commercial purposes; so that you would have to give a different construction to the very same words according to whether the thing agreed to be built was a warship or a ship intended for commercial purposes. My Lords, I think it is only necessary to state the contention to show that it is utterly unsound.

Then he goes on to deal with a bolder contention.

I hope I have made it plain that I quite realise the distinction between the Clydebank case and this case. Indeed, there is more than one distinction between the Clydebank case and the case which I have to consider. I think, however, that it does afford some ground for the view which I take that the doctrine to be found in The Greta Holme and The Mediana and other cases to which I have referred is not limited to a case of a claim founded upon tort, and, if, instead of the claim by the Admiralty in some of the cases I have cited being founded on tort, as it was, it had been founded on contract, I do not think that the cases would, for that reason, have been inapplicable.

That disposes of the first of the two main questions I have put to myself, but it still leaves the second, and it is the second which has caused me the greater difficulty of the two. The second question is as to whether or not this line of authorities has any application at all where the plaintiff is a person or a commercial concern using the thing in question for the purposes of putting financial gain into the pocket of the plaintiff. That seems to me to be a very difficult question. I have already corrected my error when I said that the Edison case was in the same position as were the other cases. It is not. In the Edison case the owners were contractors who were doing dredging work for the Patras Harbour Commission. They were people who were owning the dredger and using the dredger for the purpose of profit. Therefore, it is very natural that

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counsel should have emphasised that the Edison case is one from which I should derive assistance. In fact, although I have perused the Edison case hopefully, I doubt very much whether I can get much assistance from the opinion of Lord Wright in that case, for the simple reason that what was being decided there was a question of what the owners ought to get by way of compensation for being deprived once and for all of their dredger. The case is rather complicated, but the substance of the matter was that the owners lost the Liesbosch once and for all. The Liesbosch, I gather, was at the bottom of the sea, and it was that capital loss, if I may put it in that way, which was the subject of the claim for compensation, and what their Lordships were concerned with in the Edison case was the way in which a proper sum could be arrived at in respect of the valuation of that capital loss. If here Cunard White Star, Ltd, instead of delaying the machine a week, had dropped it overboard on the journey, then very likely the Edison case would have been a very great authority as to how I should approach the question of valuing the capital loss which the plaintiffs had sustained. However, the defendants in this case did nothing of the kind, and I am not at all sure that the law in this most valuable decision on the question of estimating the capital loss in that case really assists me to determine the method of evaluating the loss in this case, which is the matter with which I have to deal.

In the other cases, as I have said, the plaintiffs were not people who were using the subject-matter for profit-making purposes, and I should hesitate very considerably before coming to the conclusion which I have finally reachednamely, that none the less the pleading, for which counsel for the plaintiffs contends, can be regarded as soundif I were not somewhat assisted in coming to that conclusion by a consideration of other matters. The argument of counsel for the defendants in substance is that the only damages which can be recovered by the plaintiffs in the event which has happened are damages in the sense which I have mentioned. That is, supposing that it could be shown that the completion of the contract was delayed by a week, and that that resulted in penalties becoming payable by the plaintiffs, then I think that, as far as that goes, that is the sort of item I could take into account. However, having said that it is only “special” damages, or, as I would rather say, peculiar damages, which I am entitled to take into account, he comes forward with his second argument, which would appear to be that, if such damages followed, none the less they could not be taken into account, on the ground of being too remote, because, as regards the special damages, there is no evidence that the defendants would have sufficient notice. Thus one gets to the position that the only thing, according to the argument of the defendants, which the plaintiffs can recover is special damages, and all the special damages of which one can speak in that sense would probably be too remote. That argument results in this position. Here are the plaintiffs, who have lost the use of a very

Page 653 of [1939] 3 All ER 641

valuable piece of plant, worth £4,500, which they wanted in connection with their business. They have lost it for a week, and I distinctly feel that any argument which produces the result that for that they are to get nothing but nominal compensation must be wrong, because I do not think the result of such an argument can be right. Counsel for the defendants, however, seeks to avoid that position by saying: “I do not say that they can recover only nominal damages. I say that they can recover something more than nominal damages, but one must arrive at it on a very different basis from that which counsel for the plaintiffs claims.” He says that one must give them only the third head of damages mentioned in the opinion of Lord Wright in the Edison case at p 468:

… compensation for disturbance and loss in carrying out their contract over the period of delay between the loss of the Liesbosch and the time at which the substituted dredger could reasonably have been available for use in Patras, including in that loss such items as overhead charges, expenses of staff and equipment, and so forth thrown away, but neglecting any special loss due to the appellants financial position.

Giving the matter the best consideration I can, I regard that head of loss which was approved of as one of the three heads of loss by Lord Wright as quite inapplicable to the present case. I do not think that it fits the circumstances here at all, and I do not feel at all compelled to direct myself as a jury, as counsel for the defendants says that I ought to do, that that is the loss which I have to find. On the other hand, I recognise that in The Greta Holme the full amount of hire was not in that case taken as the proper measure of loss, because in that case the full amount of hire would have amounted to £1,500, and the amount which was actually awarded was, I think, only £500. Nevertheless, I think that here, where I am dealing with a commercial concern and an object of commercial utility, the hire is a matter which I ought to bear in mind.

I find in The West Wales a very valuable view of the matters which are relevant for my purpose, and in particular I would like to refer to where Bateson J, is dealing with some of the earlier cases, and says, at p 170:

With regard to the law on the matter, I think that it is necessary to follow the decision in Admiralty Comrs. v S.S. Chekiang, which really sums up the other cases as well. Lord Sumner, in his speech, says: “The Marpessa was a decision which was consequent on The Mediana, and the Mediana professed to follow the principle of The Greta Holme. The only principle as to this measure that I can find there stated is in Lord Herschells words”; and then he cites the words: “ How can they the less be entitled to damages because instead of hiring a dredger, they invested their money in its purchase? The money so invested was out of their pockets, and they were deprived of the use of the dredger, to obtain which they had sacrificed the interest on the money spent on its purchase. A sum equivalent to this, at least, they must surely be entitled to.' To this I would add Lord Loreburns words: Those services are at least worth what we are habitually paying for them year after year, including what we sacrifice in depreciation.

I do not think that mere interest on the money plus mere depreciation is necessarily the limit of what they can recover. I think that what

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they can recover is the true value to them, as best I can ascertain it, as a jury, of the use of this machine as it could have been used at Guernsey during the week in question, and, if they have been deprived of that use by a breach of contract, they are entitled to compensation expressing in money as near as possible the value of that use of which they have been wrongfully deprived. I arrive at that conclusion, having looked at these cases and having formed the further conclusion that, upon the whole, they do afford me assistance, notwithstanding the distinctions of which I am fully conscious and to which I have referred in a summary fashion. It seems to me that, at the same time, I must say that the case is a complicated one, and not, as I think, covered by any authority greatly in point.

The next question, and the last question, which arises in this long judgment is as to the figure at which I arrive taking that view, and, upon the whole, I feel that the lump sum figure at which I ought to arrive is £250. That is a lump sum figure arrived at in consideration of all the circumstances, and any attempts to analyse it by an analytical process will, I think, be doomed to failure. There will be judgment for the plaintiffs for £250 and costs.

Judgment for the plaintiffs for £250 and costs.

Solicitors: Munton Morris King & Co (for the plaintiffs); Hill Dickinson & Co (for the defendants).

Charles Newton Esq   Barrister.

Johnson v Cartledge and Matthews (Matthews, Third Party)

[1939] 3 All ER 654


Categories:        CIVIL PROCEDURE: TORTS; Tortious Liability        

Court:        NOTTINGHAM SUMMER ASSIZES        

Lord(s):        CASSELS J        

Hearing Date(s):        3 JULY 1939        


Estoppel Res judicata Two actions in respect of same street accident One for personal injuries, other for damage to car.

Tort Joint tortfeasors Contribution Party found not negligent not a tortfeasor Law Reform (Married Women and Tortfeasors) Act 1935 (c 30), s 6(1)(e).

The plaintiff was a passenger in a car driven by the first defendant, C, and was injured in a collision between that car and a taxi-cab driven by a servant of the second defendant, M. He sued both defendants, and recovered judgment against C, whose negligence, the judge found, was the sole cause of the accident. In third-party proceedings attached to the action, C claimed an indemnity from M under the provisions of the Law Reform (Married Women and Tortfeasors) Act 1935, s 6(1)(e), on the ground that in a previous action in the county court, in which M had sued C for the damage to his taxi-cab caused in the same collision, the county court judge had found the negligence of M to be the sole cause of the accident, and that the matter was, therefore, res judicata:

Held (i) as the defendant M had not been negligent, he was consequently not a tortfeasor, and therefore the defendant C could not recover indemnity or contribution from him.

(ii) this was not a case of res judicata, as the damage in the two cases was different.

Page 655 of [1939] 3 All ER 654

Notes

Upon the question of res judicata, the judge has seen his way to distinguish this case from that of Marginson v Blackburn Borough Council. Upon the question of contribution or indemnity under the Law Reform (Married Women and Tortfeasors) Act 1935, it is held that, where a party is found not to have been negligent, he is not a tortfeasor, and, therefore, no question of contribution or indemnity can be raised.

As to Contribution between Tortfeasors, see Halsbury (Hailsham Edn), Vol 32, pp 190, 191, para 284; and for Cases, see Digest, Vol 42, pp 979, 980, Nos 95108.

Case referred to

Marginson v Blackburn Borough Council [1939] 1 All ER 273; Digest Supp, 160 LT 234.

Third-Party Proceedings

Third-Party Proceedings in an action for damages for personal injuries sustained in a road accident. The facts are fully stated in the judgment.

Richard Elwes for the plaintiff.

W K Carter for the first defendant.

Arthur Ward for the second defendant.

Carter: In any proceedings between Cartledge and Matthews, Matthews cannot be heard to say that Cartledge is to blame, because he has already been found not to blame by the county court judge in proceedings between himself and Matthews. Therefore, although, in proceedings brought by the plaintiff against Cartledge and Matthews Cartledge was found to be negligent, and could be so found because the parties were not the same, in these third-party proceedings, where the parties are the same as they were in the county court, Matthews cannot be heard to say that Cartledge was negligent.

Ward: Before the question of res judicata can arise, the parties, the damage, and the issues of law and fact must all be the same. Here the damage, at least, is different.

Richard Elwes for the plaintiff.

W K Carter for the first defendant.

Arthur Ward for the second defendant.

3 July 1939. The following judgment was delivered.

CASSELS J. These are third-party proceedings attached to, and forming part of, the proceedings between the plaintiff, Mr Johnson, and Mr Cartledge and Mr Matthews as the defendants. In effect, in these third-party proceedings Mr Cartledge is really in the position of plaintiff and Mr Matthews is in the position of defendant. Indeed, he was in the position of one of two defendants in the proceedings by the original plaintiff. In other words, Mr Cartledge is seeking to obtain from Mr Matthews in these third-party proceedings a complete indemnity for the damages and costs which he will have to pay to Mr Johnson, the plaintiff.

On 11 October 1938, motor vehicles belonging to each of these parties in these third-party proceedings, going in opposite directions, came into collision with each other upon a wide road. It is a matter for reflection that that incident has led to five different sets of proceedings in courts of law, and the result has not always been the same. Mr Cartledge was driving his own car, A servant or agent of Mr Eric Matthews was driving

Page 656 of [1939] 3 All ER 654

Mr Eric Matthews taxi-cab. A court of summary jurisdiction has found Mr Cartledge to blame for the accident. A court of summary jurisdiction has dismissed a summons against Mr Eric Matthews in respect of responsibility for the accident. The county court judge in proceedings between Mr Cartledge and Mr Matthews has found Mr Matthews solely to blame by reason of the negligence of his servant or agent, and I, sitting here in proceedings brought by a perfectly innocent passenger against both parties, Mr Cartledge and Mr Matthews, have come to the conclusion, upon the evidence, that Mr Cartledge was solely to blame, and that Mr Eric Matthews was not to blame at all. In consequence of that, I have given judgment for the plaintiff, Mr Charles Johnson, against Mr Cartledge solely.

Mr Cartledge now seeks, by reason of his having obtained the county court judges judgment against Mr Eric Matthews, to pass on the burden of his liability in respect of these proceedings, and the damages which he has to pay and the costs which he has to pay to Mr Johnson, to Mr Eric Matthews, and it is urged upon his behalf that this is res judicata, and that this matter has already been settled as between the two of them. Indeed, so firm is the foundation upon which his claim in this matter rests that it is said that Mr Eric Matthews cannot even be heard to contend otherwise than that, inasmuch as the county court judge held him liable once to Mr Cartledge, he remains liable for all time, and in all circumstances and in all proceedings arising out of this accident I am not able to come to that conclusion.

Mr Cartledge rests his case upon the provisionsand, indeed, can only rest his case upon the provisionsof the Law Reform (Married Women and Tortfeasors) Act 1935, s 6(1) which provides as follows:

Where damage is suffered by any person as the result of a tort (whether a crime or not) … (c) any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage …

By reason of those words, Mr Cartledge seeks to recover from Mr Matthews, not only contributionhe does not limit himself to that, although the principle upon which he is proceeding is the samebut complete indemnity, though the result would have been the same if he had been seeking contribution.

The first difficulty which Mr Cartledge has in this matter is that in these proceedings, and in respect of this damage to Mr Charles Johnson, Mr Eric Matthews is not a tortfeasor. I have held that the only tortfeasor in these proceedings was Mr Cartledge. Mr Matthews is not a tortfeasor, and, further, this is not the same damage, and, in looking at Marginson v Blackburn Borough Council, I think that I can distinguish that case by saying that it is quite clear that the parties must be the same and the damage must be the same and the issues of law and of fact must be the same before the question of res judicata can be successfully raised.

Page 657 of [1939] 3 All ER 654

The point was certainly one of interest. It would seem almost to add a new terror to litigation which may arise out of a collision between vehicles upon the highway. Whether or not steps will be taken to prevent a multiplicity of cases arising out of the same incident I do not know, but it seems lamentable that it should be possible for so many different courts to be engaged at different times in different places considering the unfortunate results of the negligent driving of a motor car. Upon these third-party proceedings, I give judgment for the third party with costs.

Solicitors: Browne & Rosenberg (for the plaintiff); John Barkers (for the first defendants); Walter West, agents for Stanley & Co (for the second defendants).

W Woodrow Harding Esq   Barrister.

Re Riall, Westminster Bank Ltd v Harrison and Others

[1939] 3 All ER 657


Categories:        SUCCESSION; Wills        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        18 JUNE 1939        


Wills Construction Gift to tenants in common for life Gift over on death of all tenants in common Implication of cross-remainders.

The testatrix directed her trustees, after payment of certain legacies, to divide the balance of her residuary estate into two equal parts to pay the income from one moiety to one of her two sisters for life, and, after her death, to pay the income of that moiety to that sisters husband (who, however, predeceased the testatrix). The income of the other moiety was given to her other sister for life. On the death of the last survivor of the life tenants, the residuary estate was to be divided among a number of charitable institutions. The trusts of the first moiety having determined on the death of the first sister, the question arose whether cross-remainders could be implied so as to entitle the surviving life tenant during the remainder of her life to the income to which the deceased life tenant had been entitled, or whether during this period such income passed to the charitable institutions or passed as on an intestacy:

Held the income ought to be paid to the surviving life tenant during the remainder of her life.

Notes

Where life interests are given to several persons in a fund or the residue of an estate, and there is a gift over only after the death of the last survivor, the survivors or survivor take estates for life. This is an implication of law made in order to give effect to the intention of the testator. It will be noted that under the will in this case the capital was divided into equal moieties, and it was argued that the testatrix, having divided her estate in two separate parts, there was no reason for the implication to be made. This view was not, however, taken by the court, and the case has been treated as similar to that of Re Ragdale, Public Trustee v Tuffill.

As to Implication of Cross Life Interests, see Halsbury (1st Edn), Vol 28, Wills, p 848, para 1508; and for Cases, see Digest, Vol 44, pp 12121215, Nos 1048010506.

Cases referred to

Re Ragdale, Public Trustee v Tuffill [1934] Ch 352; Digest Supp, 103 LJCh 181, 150 LT 459.

Page 658 of [1939] 3 All ER 657

Armstrong v Eldridge (1791) 3 BroCC 215; 44 Digest 1212, 10481.

Re Stanleys Settlement, Maddocks v Andrews [1916] 2 Ch 50; 40 Digest 563, 1016, 85 LJCh 809, 114 LT 933.

Re Telfair, Garrioch v Barclay (1902) 86 LT 496; 44 Digest 1215, 10503.

Re Hobson, Barwick v Holt [1912] 1 Ch 626; 44 Digest 1205, 10426, 106 LT 507.

Sarel v Sarel (1856) 23 Beav 87; 44 Digest 1214, 10496.

Stevens v Pyle (1860) 28 Beav 388; 44 Digest 1160, 10045.

Originating Summons

Originating Summons to determine whether, on the true construction of the will and codicil of the testatrix, and in the events which have happened, the income of the moiety of the residuary estate of the testatrix whereof Louisa Caroline Alford was tenant for life ought as from her death to be paid to the defendant Mary Emma Harrison during the remainder of her life or whether the income during this period passes under the gift to the charitable institutions named in cl 9 of the will or whether it passes on an intestacy, or how otherwise, and whether the income of the moiety of the proceeds of sale of a dwelling-house known as, St Annes, Higher Woodfield Road, Torquay, in the county of Devon, whereof Louisa Caroline Alford was tenant for life, ought as from her death to be paid to the defendant Mary Emma Harrison during the remainder of her life or whether the income during this period passes under the gift to the charitable institutions aforesaid or whether it passes on an intestacy or how otherwise.

J B Richardson for the plaintiffs.

Roger W Turnbull for the defendant Mary Emma Harrison.

Wilfrid M Hunt for the defendants The National Lifeboat Institution.

J H Sparrow for the defendants The British Empire Cancer Campaign.

Meyrick Beebee for Stuart Carnegie Knox.

Ian Campbell for Margaret Ellen Banks, Miriam Frances McSwiney, and the trustee of the property of Robert George Banks, a bankrupt.

J A Reid for Sir Holbert Waring, treasurer of The Imperial Cancer Research Fund.

Turnbull: One must read into cl 8 an implied trust to pay income to my client for life, or, if I am wrong, there is an intestacy. Re Ragdale Public Trustee v Tuffill is in distinguishable from the present case. [Counsel referred to Armstrong v Eldridge, Re Stanleys Settlement, Maddocks v Andrews and Re Telfair Garrioch v Barclay.]

Hunt: This is not a case where there are life interests given under cl 8. There is no room for an implication, and, on the death of these persons, each moiety goes out of cl 8 and is held on the trusts in cl 9. [Counsel referred to Armstrong v Eldridge and Re Hobson Barwick v Holt.] There is no room for any joint tenancy. The testator has divided the estate into two parts.

Sparrow adopted Hunts argument.

Campbell: There is a hiatus in respect of a certain portion of the income: Theobald on Wills, p 581. The question of implied interests is considered in Re Hobson Barwick v Holt. [Counsel referred to

Page 659 of [1939] 3 All ER 657

Sarel v Sarel, Stevens v Pyle and Theobald on Wills p 196.]

J B Richardson for the plaintiffs.

Roger W Turnbull for the defendant Mary Emma Harrison.

Wilfrid M Hunt for the defendants The National Lifeboat Institution.

J H Sparrow for the defendants The British Empire Cancer Campaign.

Meyrick Beebee for Stuart Carnegie Knox.

Ian Campbell for Margaret Ellen Banks, Miriam Frances McSwiney, and the trustee of the property of Robert George Banks, a bankrupt.

J A Reid for Sir Holbert Waring, treasurer of The Imperial Cancer Research Fund.

18 June 1939. The following judgment was delivered.

SIMONDS J. In this case, the testatrix made her will on 15 December 1933, and a codicil thereto on 22 February 1934, and she died on 28 March 1936. By her will she appointed the plaintiffs to be executors and trustees thereof, and, after bequeathing certain pecuniary and specific legacies, and devising her freehold house known as St Annes, Higher Woodfield Road, Torquay, upon the trusts therein set out, devised and bequeathed all her residuary estate both real and personal to her trustees upon trust for sale and to hold the proceeds of sale, after payment of her debts, funeral and testamentary expenses, the legacies and duties on such legacies as were given free of legacy duty, and two further legacies, upon the following trusts:

8. After payment of the legacies bequeathed by cl. 7 of this my will I direct my trustees to hold the balance of my residuary estate upon trust to divide the same into two equal parts and to hold one such equal part thereof upon trust to pay the income thereof to my sister the said Louisa Caroline Alford for her life and from and after her death upon trust to pay the income thereof to my said brother-in-law the Rev. William Powell Alford for his life and from and after his death to hold the same upon the trusts declared concerning the same in cl. 9 of this my will and as to the other such equal part thereof to hold the same upon trust to pay the income thereof to my sister the said Mary Emma Harrison for her life and from and after her death to hold the same upon the trusts declared concerning the same in cl. 9 of this my will.

9. Subject to the trusts declared in cl. 8 of this my will I direct my trustees to stand possessed of my residuary estate upon trust after the death of the last survivor of my said two sisters and my brother-in-law and after payment thereout of all proper and due expenses attending the administration of such trust to pay a further legacy of £200 free of legacy duty to the said Cecil Charles Langley and to divide the balance thereof equally between the following charitable institutions …

Then there followed a list of the charitable institutions which the testatrix wished to benefit. Then by the codicil the testatrix revoked the devise of her freehold house known as St Annes contained in her will, and substituted therefor the following provision:

I devise my said freehold dwelling-house known as St Annes aforesaid unto my trustees upon trust to sell the same as soon as conveniently may be after my death and after payment thereout of the costs and any other necessary and proper expenses incidental to such sale to invest the net proceeds thereof in their names in any of the investments authorised by law for the investment of trust moneys and to stand possessed of such investments upon trust to divide the same into two equal parts and to hold one such part thereof upon trust to pay the income thereof to my sister the said Mary Emma Harrison for her life and from and after her death to hold the same as to both capital and income thereof upon the trusts declared in my said will concerning my residuary estate and as to the other such equal part thereof upon trust to pay the income thereof to my sister the said Louisa Caroline Alford for her life and from and after her death upon trust to pay the income thereof to my brother-in-law the said Rev. William Powell Alford for his life and from and after his death to hold the same as to both capital and income thereof upon the trusts declared in my said will concerning my residuary estate.

William Powell Alford, the brother-in-law, died on 8 October 1934, predeceasing the testatrix. Both of the sisters survived the testatrix, and one of them, Louisa Caroline Alford, died on 30 October 1938. The other sister, Mary Emma Harrison, still survives and is a defendant to this summons. The question therefore arises as to who is entitled to

Page 660 of [1939] 3 All ER 657

the income of the moiety which, in the events which had happened, was payable to Louisa Caroline Alford. The summons asks whether the income of this moiety is to be paid to the surviving sister, Mary Emma Harrison, during the remainder of her life, whether it passes to the charitable institutions, or whether there is an intestacy in respect of that income during this period. I have been referred to a number of authorities upon the construction of this will, and in my view the position here is governed by the decision in Re Ragdale Public Trustee v Tuffill. Reading the will as a whole, I think that it is clear that it was not the intention of the testatrix to benefit the charities until after the decease of all three tenants for life. Her intention was that those tenants for life should receive the whole income from the residuary estate until the death of the last survivor of them and that only then should the charitable institutions mentioned in the will become entitled to their shares in the capital of the residue. I therefore declare that the income of the moiety of the residuary estate of which Louisa Caroline Alford was tenant for life ought as from her death to be paid to the defendant Mary Emma Harrison during the remainder of her life, and I make a similar declaration in respect of the income of the moiety of the proceeds of sale of the freehold property.

Declaration accordingly. Costs of all parties as between solicitor and client to be paid out of the estate.

Solicitors: Woodcock Ryland & Parker, agents for Hooper & Wollen, Torquay (for the plaintiffs and for the defendant Mary Emma Harrison); Clayton Sons & Fargus (for the defendants, the Royal National Lifeboat Institution), G & G Keith (for the defendant, the British Empire Cancer Campaign); Hall Brydon & Chapman (for Stuart Carnegie Knox); Andrew Purves Sutton & Creery, agents for Newman & Bond, Barnsley (for Margaret Ellen Banks, Frances McSwiney, and the trustees of the property of Robert George Banks, a bankrupt); Wilde, Sapte & Co (for Sir Holbert Waring, treasurer of the Imperial Cancer Research Fund).

T A Dillon Esq   Barrister.

Lucas v Postmaster-General

[1939] 3 All ER 660


Categories:        HEALTH; Health and safety at work        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        7, 17 JULY 1939        


Workmens Compensation Accident arising out of and in the course of the employment Boy employed to repair telephone apparatus Condition of employment that he should attend gymnasium class Accident while attending class.

The applicant was employed by the Post Office to repair telephone and other apparatus. One of the conditions of employment was that he should “attend educational classes provided by the department normally for 8 hrs weekly, of which 5 hrs will be in the departments time, and 3 hrs in [his] own time.” On 5 October 1938, the applicants

Page 661 of [1939] 3 All ER 660

work had ended at 5.45 pm, but, under the terms of the above condition, he was attending a gymnasium class from 6.15 pm to 7.15 pm, when he fell and sustained an injury:

Held this was not an accident arising out of and in the course of the employment.

London & North Eastern Ry Co v Brentnall distinguished.

Notes

In London & North Eastern Ry Co v Brentnall, a railway company required their engine-drivers coming off duty in a town where they were not residing, to stay at a hostel provided by the company, unless they obtained permission to stay elsewhere. An accident having occurred to an engine-driver while he was in the hostel, it was held that that accident occurred in the course of the mans employment. The Court of Appeal have here held that the facts of that case are distinguishable from the facts in this case.

As to Compulsory Use of Premises, see Williss Workmens Compensation (31st Edn), pp 33, 34; and for Cases, see Digest, Vol 34, pp 277, 278, Nos 23412349.

Case referred to

London & North Eastern Ry Co v Brentnall [1933] AC 489; Digest Supp, 102 LJKB 438, 148 LT 530, 26 BWCC 225.

Appeal

Appeal by the applicant from a decision of His Honour Judge Earengey KC, at the Clerkenwell County Court dated 3 May 1939. The facts of the case are fully set out in the judgment of the court delivered by Finlay LJ.

Graham Brooks for the appellant.

J Alun Pugh and Martin Jukes for the respondent.

17 July 1939. The following judgment was delivered.

FINLAY LJ (delivering the judgment of the court). In our opinion, this appeal must be dismissed. We should be prepared to rest our conclusion upon the careful and admirable judgment of the county court judge, but, out of respect for the arguments which were addressed to us, we add a few sentences. The facts, which were not in dispute, are stated in detail by the county court judge. The appellant was a boy employed in the Post Office stores department, his work being in connection with the repair and so on of telephone and other apparatus. He was employed on certain conditions, the most material of which was in the following terms:

All boys until they reach 18 years of age are required, as a condition of their employment, to attend educational classes provided by the department normally for 8 hrs weekly, of which 5 hrs will be in the departments time and 3 hrs in their own time.

Among the classes the appellant was required to attend was a gymnasium class conducted by an employee of the London County Council at a London County Council school. On Wednesday, 5 October while attending this class, which was held from 6.15 pm to 7.15 pm, the appellant fell and sustained an injury which, though not very serious, was such as to entitle him to compensation if the accident arose “out of and in the course of the employment.” The appellants work had ended that day at 5.45 pm, and he duly clocked out at that hour.

Page 662 of [1939] 3 All ER 660

It seems to us to be impossible to contend that this accident arose out of and in the course of the plaintiffs employment. The plaintiff was employed to repair telephone apparatus. It is quite true that, as a condition of obtaining the employment, he was required to attend, among other classes, this gymnasium class. When performing gymnastic exercises, however, he was not doing the work which he was employed to donamely, repairing telephones. Various analogies may be put, and were putthe governess required as a condition of being employed to attend the parish church, the employee required to join a particular Territorial battalion, and the like. On the other hand, variations in the facts were suggested to us, as, for example, where, during working hours, technical instruction by way of lectures was given to employees. We do not discuss the analogies nor the variations of facts. It has been pointed out by very great authorities that what is to be desired is not any survey of different facts and various analogies, but rather the application of the words of the section to the particular facts in hand. For much the same reason, we do not discuss the authorities. We merely observe that London & North Eastern Ry Co v Brentnall on which much reliance was placed both before us and in the court below, is plainly distinguishable. In our opinion, the judgment of the county court judge was perfectly correct, and this appeal must be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Darling & Taylor (for the appellant); Sir Raymond Woods (for the respondent).

E Fuller Briscoe Esq   Barrister.


Owens v Thomas Scott & Sons (Bakers) Ltd, and Wastall

[1939] 3 All ER 663


Categories:        LANDLORD AND TENANT; Leases: TORTS; Negligence        

Court:        LIVERPOOL SUMMER ASSIZES        

Lord(s):        STABLE J        

Hearing Date(s):        28 JUNE 1939        


Negligence Property adjoining highway Forecourt indistinguishable from pavement Duty to repair forecourt Liability to passer-by.

Landlord and Tenant Lease Extent of demise Appurtenances Forecourt Law of Property Act 1925 (c 20), s 62.

In or about 1908 the owner of the freehold of certain houses with gardens in front of them converted those houses into shops. The walls enclosing the gardens were taken down and the land which had constituted the gardens was thrown into the pavement though it was at no time dedicated to the public. Some part of that land was flagged but the land immediately in front of the property here in question was asphalted. In 1919 one of the shops was let to the first defendants by the predecessor in title of the second defendant, the then owner of the freehold. The parcels in the tenancy agreement were “all that messuage or dwellinghouse and shop known as No. 92 St. Johns Road Waterloo with the appurtenances thereto.” The plaintiff on the night of 26 August 1937, when walking on the asphalted land in front of those premises fell and was injured by reason of the want of repair of the asphalt in which there were shallow cavities. The plaintiff was not going to or coming from the shop let to the first defendants or any of the converted premises. The reason for the accident was that the surface of the asphalt was different from, and worse than, the surface of the surrounding pavement and there was nothing to indicate that there was any difference between the two:

Held (i) the tenants were not liable, since the asphalted land was not, upon a proper construction of the tenancy agreement, included in the land demised thereby.

(ii) the freeholder had failed in her duty to keep the property safe for persons using the highway and was liable in damages to the plaintiff.

Notes

There are two points in this case, the first being one only of the construction of the tenancy agreement. The second and more important point is the duty of the owner of property adjoining the highway to persons using the highway where a part of their property is indistinguishable from the highway. The circumstances here are the common case where, on the conversion of a private house into a shop, the front garden becomes a forecourt of the shop. Generally, the owners do not desire to dedicate that forecourt to the public, as it may be of considerable value for the exhibition of goods. If the forecourt appears to a passer-by to be all one with the highway, then it appears that the owner of the property, or the occupier if there has been a demise of the forecourt, is under a duty to keep it in such a state of repair that it is not a danger to a passer-by, who would be unaware that he had passed from the highway on to private property.

As to Duty towards Public of Owner of Premises Adjoining Public Place, see Halsbury (Hailsham Edn), Vol 23, pp 619621, para 870; and for Cases, see Digest, Vol 26, pp 416419, Nos 13561380.

Cases referred to

Lister v Pickford (1865) 34 Beav 576; 17 Digest 377, 1867, 34 LJCh 582, 12 LT 587.

Harrold v Watney [1898] 2 QB 320; 7 Digest 286, 155, 67 LJQB 771, 78 LT 788.

Action

Action for damages for injuries received by the plaintiff when she was passing in front of the shop occupied by the first-named defendants

Page 664 of [1939] 3 All ER 663

on a piece of ground once a garden of those premises, but, at the time of the accident, one with the pavement, except that at the material place it was covered with asphalt, and not with flags. The second-named defendant was joined as owner of the fee simple.

G J Lynskey KC and F J Nance for the plaintiff.

S Scholefield Allen for the first defendants.

William Gorman KC and J Fraser Harrison for the second defendant.

Gorman KC referred to the Law of Property Act 1925, s 62, and to Lister v Pickford and Harrold v Watney.

G J Lynskey KC and F J Nance for the plaintiff.

S Scholefield Allen for the first defendants.

William Gorman KC and J Fraser Harrison for the second defendant.

28 June 1939. The following judgment was delivered.

STABLE J. This is a case, in my view, of considerable difficulty, which raises a question of principle of importance. The plaintiff, Mrs Owens, has sued a limited company, Thomas Scott & Sons (Bakers), Ltd, and, by an amendment, has added as defendant a Mrs Wastall, and she claims from one or other of these defendants that they are under a legal obligation to compensate her for the injury she sustained on the night of 26 August 1937, when she fell and injured her right knee and her left ankle. The company are the lessees of a shop which is known as No 92, St Johns Road, Waterloo, and the claim against them is based on the allegation that they were the occupiers of the particular piece of land on which Mrs Owens was walking at the time when she fell and sustained those injuries. Alternatively, she says, if Scotts were not in occupation of this land, Mrs Wastall, who is the owner of the fee simple, was. The company and Mrs Wastall each say that the other is in occupation.

The position is this. The fee simple is in Mrs Wastall, and, unless she parted with the possession of this particular land to the company, there is no suggestion that she has parted with the possession of it to anybody else. The only evidence before me is a memorandum of an agreement made on 26 November 1919, between the agents of her deceased husband, her predecessor in title, and Messrs Lunt & Co Ltd, a company which has since changed its name to Thomas Scott & Sons (Bakers), Ltd, the first defendants. Under that agreement, it was agreed as follows:

… the landlord agrees to let and the tenant agrees to take all that messuage or dwelling-house and shop known as No. 92 St. Johns Road Waterloo with the appurtenances thereto for the term of a quarterly tenancy from Dec. 1, 1919 subject to the rent and the covenants contained in the agreement.

The history of the property, so far as it is material and before me in evidence, is this. At some time or another prior to 1909, this particular property was one of a row of houses, and in front of the houses was a row of small gardens separated from the highway by some sort of wall or fence, and no doubt separated one from the other by a wall or fence. At some date, which I cannot fix with precision on the evidence, but which was subsequent to 1908, and prior to 26 November 1919, Mrs Wastalls predecessor in title converted the property, and what was a row of houses

Page 665 of [1939] 3 All ER 663

became a row of shops, and in the course of this conversion the little gardens which lay in front of the houses, separated from the highway by the wall, were for all practical purposes obliterated. The wall was pulled down. Shop fronts were put in, and the area of land which unquestionably belonged to Mrs Wastall, and which had constituted the gardens, was, so far as mere physical appearance goes, thrown into the pavement. I do not mean that it was dedicated as a highway, or became the highway. It was thrown into the pavement, and it was covered with asphalt, and I think in some cases actually with flags. No doubt, as appears from the correspondence, the part which was covered with flags was the part belonging to adjacent owners who dedicated their land as a public highway, and consequently transferred the obligations and burden of repair to the highway authority.

The particular piece with which I am concerned, however, was covered with asphalt, so that it presented a slightly different appearance from the rest of the pavement, although I do not think that any stranger (by stranger, I mean anybody who was not conversant with the legal and other history of this property) who happened to be walking along that road would have had the slightest conception that, at some point or another, he was stepping off the pavement on to somebodys private garden.

That was the position as it existed in 1919. To all outward appearance, the old garden had become part of the pavement, and in those circumstances this lease was executed. It is now being suggested that I ought to hold that the words “messuage or dwelling-house and shop with the appurtenances thereto” operated as a demise to the tenant of the shop of a considerable area of land which had been the garden years before, but which in 1919, for all practical purposes, was part of the pavement. It seems to me that it is quite impossible to come to such a conclusion. There is not the slightest evidence here that the agreement comprised this forecourt, as I will call it. There is no evidence before me that it was ever brought to the attention of the lessee that part of the land leased to him consisted of this particular piece of land which might entail somewhat peculiar obligations. There was no evidence before me that the limited company who took the lease, or the agreement, in 1919 had the remotest conception that in 1909 the pavement immediately in front of, and adjoining, the shop had consisted of a private garden.

In those circumstances, it seems to me to be stretching the words of the agreement to an extent which they cannot possibly bear to say that the words “messuage or dwelling-house and shop with the appurtenances thereto” comprise this area of what, for all practical purposes, was nothing more nor less than part of the pavement. I think that we can dismiss the word “appurtenances” from the argument. In Lister v Pickford, Sir John Romilly MR said, at p 580:

… it is settled by the earliest authority, repeated without contradiction to the latest, that land cannot be appurtenant to land. The word “appurtenances”

Page 666 of [1939] 3 All ER 663

includes all the incorporeal hereditaments attached to the land granted or demised such as rights of way, of common, of piscary, and the like, but it does not include lands in addition to that granted.

It may beand I think that it is sothat in subsequent cases the somewhat restricted meaning which Sir John Romilly MR, says must invariably and inevitably be attached to the word “appurtenances” is extended somewhat, but there has never been a decision, so far as I know, which has said that the addition of the word “appurtenances” operates so as to grant land which, apart from the word “appurtenances,” is not already included in the grant.

My attention has been called to the Law of Property Act 1925, s 62. That section is a statutory statement of the law, but that does not throw any light on the matter at all. It provides as follows:

(1) A conveyance of land shall be deemed to include and shall by virtue of this Act operate to convey, with the land [the land conveyed], all buildings, erections, fixtures, commons, hedges, ditches, fences, ways, waters, watercourses, liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof. …

In other words, where one has a conveyance of a piece of land, the conveyance operates to convey with the land the various things which are set out in the section. The section does not say that, when one conveys land A, it operates to convey land B. The section continues as follows:

or, at the time of conveyance, demised, occupied, or enjoyed with or reputed or known as part or parcel of or appurtenant to she land or any part thereof.

There was absolutely no evidence before me that, when this agreement was made, this piece of land which looked like a pavement was enjoyed with the shop, or was reputed to be part of the shop, or anything of the kind. I think that, if one had asked anyone what it was, they would have said that it was part of the pavement. I think that the company entered into an agreement in respect of the shop, and that is all. No doubt they have some rights over this piece of pavement as between them and their landlord. If the landlord put an iron railing round it so that the servants of the company could not get out and the customers could not get in, I am sure that the company would have something to say, but exactly what those rights are is not in issue here. I have to decide whether or not I am satisfied that this agreement operated as an agreement to demise this particular area of land. I am quite satisfied that it did not. The result of that is that the first defendants are not concerned with this matter, and the duty, if duty there be, is a duty which falls on the second defendant, owner of the fee simple, who is, in my judgment, the occupier of this land.

The existence of a duty seems to me to be plain enough. The difficulty arises in defining the extent and scope of the dutywhere it begins and where it ends. The facts are these. Mrs Owens, when she fell over the broken bit of asphalt, was not visiting Scotts shop. She was not visiting any of the adjacent property. She was an ordinary member of the public who thought she was walking down the public highway, and so,

Page 667 of [1939] 3 All ER 663

to an extent, she was, because, so long as she kept on the flagged part, she was on the highway. If she put her foot on the asphalt, however, she went off it, but there was absolutely nothing to indicate to her what was highway and what was not.

The first question which I have to ask is whether or not she was there as a matter of right, which she could have asserted and enforced as against the owners of this particular piece of land (by which I mean the offending piece of asphalt). I have come to the conclusion that she was not. I have no doubt that the public had been walking upon it and treating it like a pavement for something like 30 years, but no rights had been acquired, so that, strictly speaking, Mrs Owen was there as a licensee. There was no express licence, but there was, in my judgment, most certainly an implied licence, and I think the fact that the barriers had been removed by the owner, the walls pulled down, and all traces obliterated, so that to the passer-by there was nothing whatever to indicate when and where she or he stepped off the highway, constitutes the plainest possible licence, until it is revoked and the pavement walled off.

If Mrs Owens was simply in the position of a licensee, and the obligation of the owner and occupier was to warn or protect her against what is sometimes called a trapwhich I understand to mean some hidden danger which was known, or which should have been known, to the owner or occupier, and was unknown to the person complainingif that was the full extent of the complaint, then, in my judgment, the plaintiff would fail. Counsel for the plaintiff has not satisfied me that here was anything in the nature of the trench which was dug in one case, the pit which was dug in another, and, even if there had been, there is no evidence that Mrs Wastall knew about it, and I see no conceivable reason for saying that, in the absence of the wider obligation to repair, she ought to have known about it. If she was under an obligation to repair, then, cadit quoestio. If she was not, how can it be said that she ought to have known? How can it be said that she owed a duty to know when the asphalt got worn? There was no manifest hidden danger, in the form of a pit, or hole, or large cavity, present in this asphalt, but what there was, and what constituted the danger, was this. The asphalt was considerably worn. It was broken. The surface was extremely uneven. There were cavities, not very deep and not very big, and, if the whole area had been in that condition, I do not think that to walk across it without falling would have presented any formidable difficulty to anyone. The real danger was that the surface was different from, and worse than, the surface of the surrounding footpath, and there was absolutely nothing to indicate to anyone that there was any difference between the two. The result was that Mrs Owens, as, indeed, would be the case with anyone else who was walking along, coming along the footpath, suddenly found herself in an area of ground where the surface was much rougher than, and quite different from, the surrounding surfaces, and it was that change, that deterioration, of the surface, without any sort of warning of what to

Page 668 of [1939] 3 All ER 663

expect, which, in my judgment, constituted the danger and caused the accident.

What is the obligation of the defendant? I think that the principle is exactly stated and completely covered by Harrold v Watney, and more particularly in the judgment of Vaughan Williams LJ. This is, in my judgment, a case a fortiori, because, in Harrold v Watney, the property adjoining the highway was a defective fence. It was perfectly apparent to everybody that the fence was not part of the highway and for a little boy, or for anybody, to climb up the fence and put his foot on it might almost be said to constitute a trespass, whereas here the propertynamely, the asphalt pavement immediately adjoining the highwaybore no sort of indication to anyone that it did not form part of the highway itself. Vaughan Williams LJ says that there is an obligation on the owner of the fence to maintain the fence so as not to be a nuisance to the people using the highway. It must not be a danger, and it seems to me that it makes no difference in principle that here, instead of the property being a fence adjoining the highway, it is, in fact, an asphalt pavement which adjoins, and appears to be a part of, the highway. I think that that asphalt pavement was dangerous, and I think that the danger was twofold. first of all, the pavement was rough and broken, and, secondly, it was quite differentdifferent in surface, and in the degree of smoothnessfrom the rest of the pavement, and there was no indication whatever to the passer-by that suddenly he or she was going to pass from reasonably kept pavement on to rather rougher territory. It may be said that the duty is not an absolute duty to repair, and I think that that is right, although it may come to very much the same thing. It is true that the defendant owes no contractual duty to Mrs Owens to repair. She does not owe a duty to anyone to repair. She can, if she likes, fence off this part of the old garden and prevent people from traversing it as they go up and down the street. If she does that, then there is no obligation to repair. The obligation is an obligation to keep the property safe, to render it not dangerous, for people who are using the highway, and that obligation, which, in my judgment, the law imposed on Mrs Wastall, was an obligation which she failed to perform. There will be judgment against Mrs Wastall for the sum of £120.

Solicitors: G L Greene (for the plaintiff); Buckley Pidgeon Watson & Blackpool (for the first defendants); Wood Lord & Co (for the second defendants).

M D Chorlton   Barrister.


Bond v Nottingham Corporation

[1939] 3 All ER 669


Categories:        LAND; Property Rights        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        19 JULY 1939        


Easements Support Interference Demolition of adjoining house by corporation in pursuance of clearance order Liability of corporation Housing Act 1936 (c 51), ss 13, 26.

The plaintiff was entitled to an easement of support in respect of his premises from the premises of one N, and it was agreed that, if the premises of N were demolished, there would be a serious danger of the plaintiffs premises collapsing. N was ordered, by a clearance order made by the local authority and confirmed by the Minister of Health, to demolish his premises. N having failed to demolish his premises as provided for in the order, the defendant corporation, in pursuance of their statutory duty under the Housing Act 1936, intimated their intention to demolish Ns premises without providing support for the plaintiffs property. Thereupon the plaintiff brought this action to restrain the defendant corporation from demolishing Ns premises without providing adequate support for his, the plaintiffs, property:

Held although the Housing Act does not provide for compensation for any damage done to neighbouring premises by a local authority in exercise of its statutory duty of entry and demolition of a building, there was nothing in the Act which justified the local authority in depriving the plaintiff of his easement of support.

Notes

In the previous proceedings it was held that the owner of the house to be demolished was bound to have regard to the right of support vested in the adjoining owner. The question here is whether the local authority was under a similar duty when exercising their statutory power to enter and demolish the property included in the clearance order. It is held that the local authority must have regard to the easement of support, and, if they proceed to demolish the premises in accordance with the order and their statutory powers, they must provide equivalent support for the plaintiffs building.

As to Interference with Easement of Support, see Halsbury (Hailsham Edn), Vol 11, pp 368, 369, paras 647, 648; and for Cases, see Digest, Vol 19, pp 173, 174, Nos 12301233.

Cases referred to

Geddis v Bann Reservoir Proprietors (1878) 3 App Cas 430; 38 Digest 25, 137.

A-G v Horner (1884) 14 QBD 245; 42 Digest 743, 1679, 54 LJQB 227, on appeal (1885) 11 App Cas 66.

Public Works Comr (Cape Colony) v Logan [1903] AC 355; 11 Digest 109, case k.

Motion

Motion for an injunction to restrain the defendant corporation from demolishing adjoining premises belonging to the plaintiff without providing proper support for the plaintiffs property. This matter was before the court on 21 April and 4 May 1939, and the proceedings on those days are reported [1939] 2 All ER 610. By consent the hearing of this motion was treated as the trial of the action. The plaintiff owned certain premises known as Aspley House, Alperton Road in the city of Nottingham. One Norman owned premises immediately adjoining Aspley House known as Aspley Place. There was uncontradicted evidence that the wall of the plaintiffs premises, where it abutted on Normans premises, had for 50 years or more been supported by those premises, and that if

Page 670 of [1939] 3 All ER 669

they were demolished there would be considerable danger of a collapse of the plaintiffs premises unless some equivalent support was provided. Normans premises became the subject of a clearance order made by the council of the county borough of Nottingham under the authority of the Housing Act 1930 and confirmed by the Minister of Health. Norman failed to demolish the premises within the specified time, and it then became the duty of the local authority under the Housing Act 1936, s 26(4) to enter and demolish the premises. It was conceded that the plaintiff was entitled to an easement of support in respect of the premises to be demolished, but the local authority proposed to demolish the premises without providing an equivalent support, contending that they were exercising a statutory duty, and that provided they exercised this duty without negligence, were under no obligation to the plaintiff to maintain the support of his premises.

E J Rimmer and A J Irvine for the plaintiff

Wilfrid Hunt for the defendants.

19 July 1939. The following judgment was delivered.

SIMONDS J. The duty of the corporation arises under the Housing Act 1936, s 26. They have made, and the Minister of Health has confirmed, a clearance order ordering the demolition of the buildings in question. The order having become operative and the owner, Norman, having failed to demolish the buildings, it is their positive duty under s 26(3) to “enter and demolish the buildings, and sell the materials thereof.” Sub-s 4 of the same section provides that the provisions of s 13(2) to (5) of the Act shall apply in relation to any expenses incurred by the authority under the last subsection and to any surplus remaining in the hands of the authority with the necessary modifications. No provision is made by the Act for compensation for any damage done to neighbouring buildings by the authority in the exercise of its statutory duty of entry and demolition of the buildings subject to the clearance order. It is in these circumstances that the question arises whether the authority is authorised by the Act to do that which Norman could not do, namely, to deprive the plaintiff of the support afforded by the condemned building without providing equivalent support.

The case for the defendant corporation is simply put. For them it is contended that they have an absolute and unqualified duty and if, in the course of performing it, they let down a neighbouring house, that is no affair of theirs and it is immaterial whether or not, as between the owners of the demolished and the neighbouring house, there was any easement of support. They concede, I think, that they must perform their statutory duty without negligence, but say that their duty being merely to demolish, they are not guilty of negligence in the performance of it, if they do not, by means of shores or otherwise, provide support for this house, which the demolished house previously supported.

For the plaintiff it is contended in the first place that apart from the easement of support, to which he is entitled, the defendant corporation

Page 671 of [1939] 3 All ER 669

has no right so to perform its statutory duty of demolition as to let down his housein brief, demolition is negligent demolition, if it is so carried out as to damage premises outside the clearance area. It is urged that it is an ordinary incident of the work of demolition to shore up the buildings which the demolished building has supported, and that to demolish without that precaution is in effect to choose a mode of performing a statutory duty which is injurious to a third party, when a method of performing it without such injury is available. The principle laid down in Geddis v Bann Reservoir Proprietors, is thus invoked. Secondly, it is urged that, whatever may be the position where there is no easement of support, the Act cannot be interpreted as authorising the defendant corporation to deprive the plaintiff of his easement, for so interpreted it would take away the plaintiffs proprietary rights without compensation. It is true that no compensation is provided for him whose house is demolished, but that, it is said, is the penalty of owning a house which has become unfit for human habitation or dangerous or injurious to the health of the inhabitants of the area, and no such consideration applies to him whose house is outside the area and who is in no degree responsible for the condition of any house within it. It may be observed that if the defendants are right the result is that they, whose right of entry and demolition only arises in substitution for Norman, yet can do that which he could not do, namely, deprive the plaintiff of his easement of support; on the other hand, if the plaintiff is right in his larger proposition that, even if he had no easement, the defendants could not demolish in such manner as to let down his building, then he is in a better position than he would be if Norman complied with the demolition order, for it has not been suggested that Norman, apart from the easement, could not, in the course of demolishing his own house, let down the plaintiffs house also.

In the view which I take of this case it is unnecessary for me to determine the correctness of the plaintiffs wider proposition, which may affect many interests outside this case. For I think that, in his narrower proposition, he is clearly right. He has a valuable proprietary right, which the law recognises, an easement of support from his neighbours house. If that right is to be taken from him, it must be by plain enactment or necessary intendment. In A-G v Horner, Sir William Brett MR, said, at p 257:

…it is a proper rule of construction not to construe an Act of Parliament as interfering with or injuring persons rights without compensation, unless one is obliged to so construe it.

Again, Lord Davey, in the course of delivering the judgment of the Privy Council in Public Works Comr (Cape Colony) v Logan, said, at p 363:

… the effect of the appellants construction would be to take away the respondents property without any compensation. Such an intention should not be imputed to the legislature unless it be expressed in unequivocal terms.

Applying this principle, I can find nothing in the Housing Act 1936, which justifies the defendants in depriving the plaintiff of his right of

Page 672 of [1939] 3 All ER 669

property. It is urged by counsel on their behalf that it does not lie within their knowledge whether the premises, which it is their statutory duty to demolish, are subject to any servitude, and that it imposes a heavy burden on them if they must ascertain whether it is so subject, or, without ascertaining it, run the risk of making themselves liable to the neighbouring owner. I see little force in this contention. The possibility in fact of the neighbouring house being damaged and the possibility in law of the damage being an injury to the neighbouring owner are equally patent. If the defendants choose to ignore or to challenge the one or the other, they must do so at their own risk. Their difficulty, if any, affords no reason why the plaintiff should suffer.

In this case it is conceded that the plaintiff is entitled to an easement of support from the house which is to be demolished. The defendant corporation must, accordingly, be restrained from demolishing it without providing an equivalent support.

Injunction restraining the defendant corporation from demolishing the premises without providing equivalent support.

Solicitors: Peacock & Goddard, agents for Hunt Dickins & Willatt, Nottingham (for the plaintiff); Sharpe Pritchard & Co (for the defendants).

F Honig Esq   Barrister.

Angfartygs A/B Halfdan v Price & Pierce Ltd

[1939] 3 All ER 672


Categories:        SHIPPING        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        14, 17 JULY 1939        


Shipping Charterparty “Full and complete cargo” Timber shipped in bundles Custom to bundle Stowage place completely filled but cargo short of carrying capacity Dead freight.

By a charterparty in the Baltwood form the defendants chartered from the plaintiffs a steamship of the carrying capacity of about 750 standards of timber, which was to be loaded with a full and complete cargo of timber. This ship was loaded with about 727 standards. She was well stowed, and fully loaded in the sense that she could not hold any more timber or any more broken stowage. The composition of the cargo was: shipped loose, 325 standards, slatings, 77 standards, laths, 30 standards, weatherboards, 119 standards, and sawn boards, 175 standards. The weatherboards and the sawn boards were bundled. It was contended that the bundling of the weatherboards and the sawn boards was contrary to the provisions of the contract. It was also contended that there was an overriding duty to deliver a full and complete cargo, and that the bundling of the timber had prevented the cargo from being a full and complete one. The claim was for dead freight in respect of about 30 standards:

Held (i) the charterparty dealt with a full and complete cargo of specified goods, and what, with relation to those goods, would be “a full and complete cargo,” was a question to be determined when the nature of those goods was ascertained and the usual methods of loading them established.

(ii) where, in relation to a particular class of goods, there is more than one usual method of loading, and the obligation is to load a full and complete cargo, it is open to the charterers to load in either of the

Page 673 of [1939] 3 All ER 672

ways in question, and if the shipowner wishes to exclude the charterer from using a particular method, he must do so in express language.

(iii) if one finds what is the usual method of stowage, the words “a full and complete cargo” do not prevent the charterers from adopting that usual method, and the fact that there is more than one usual method of stowage does not affect the result.

(iv) a full and complete cargo had been delivered within the meaning of the charterparty.

Decision of Atkinson J ([1939] 1 All ER 322) affirmed.

Notes

The obligation to ship a full and complete cargo is satisfied by filling the whole cargo space in the ship, and, so long as the stowage or the packing or preparation of the goods for shipment is done in the customary way, no complaint can be made. The real issue in the present case is that certain timber was specified in the charterparty to be bundled, and, in fact, much more was bundled than that specified. The objection founded upon this, however, was overruled as soon as it was shown that it was the custom of the trade to bundle timber of the kind that was shipped in bundles. There is no right, apart from special provision in the charterparty, to have the cargo prepared in other than the usual way for the purpose of saving space.

As to Amount of Cargo, see Halsbury (Hailsham Edn), Vol 30, pp 304306, para 497; and for Cases, see Digest, Vol 41, pp 340, 341, Nos 19151922.

Cases referred to

Cuthbert v Cumming (1855) 11 Exch 405; 17 Digest 66, 700, 24 LJEx 310, 25 LTOS 234.

Hunter v Fry (1819) 2 B & Ald 421; 41 Digest 323, 1818.

Mikkelsen v Arcos Ltd (1925) 134 LT 92; 41 Digest 340, 1920.

Cole v Meek (1864) 15 CBNS 795; 41 Digest 343, 1942, 33 LJCP 183.

Appeal

Appeal by the plaintiffs from a judgment of Atkinson J, dated 25 January 1939, and reported [1939] 1 All ER 322. The facts are fully set out in the judgment of Sir Wilfrid Greene MR, and in the judgment of Atkinson J.

Sir Robert Aske KC and A W Roskill for the appellants.

Gordon Alchin and Patrick H Dean for the respondents.

Aske KC: There is an obligation on the part of the charterer to load a full and complete cargo, which has been held to mean that he must load as much cargo as the ship can safely carry. If the charterer loads timber of the specified kind, but bundled so that the ship does not carry so much as it could carry if the timber were loaded loose, there is not a full and complete cargo. That principle can only be modified if there is a custom at the port of loading that the cargo may be packed in containers or in a special way and that, when loaded packed in that way, there is a full and complete cargo. In the absence of proof of such a custom, the charterer does not fulfil the obligation to load a full and complete cargo unless he loads as much as the ship can carry. There is no proof of such a custom in the present case. A ship carries 10 per cent less timber if it is made up in the manner this cargo was, than if it had been packed loose. In this case the bundles were small, and consequently the ropes occupied substantial space. If the wood had not been in bundles, more could have been put on board, and thus a full and complete cargo could have been loaded. It was laid down in

Page 674 of [1939] 3 All ER 672

Hunter v Fry that a full cargo meant as much as the ship could carry. Cuthbert v Cumming was decided on custom. In that case, it was held that the custom was reasonable and good in law. If there is no stipulation that the goods should be shipped bundled, they are shipped unbundled, but that is a matter as between buyer and seller. The ship will take 800 standards of timber if it is shipped loose, and only 720 standards if it is shipped bundled. Can the charterers therefore say that they have shipped a full and complete cargo? There still remains the question as to what is a full and complete cargo. I know of no decision on that point in the circumstances of this case. [Counsel also referred to Mikkelsen v Arcos and to Cole v Meek.]

Roskill: The expression “full and complete cargo” is a contractual obligation and every one of the articles in question can be shipped loose. If it were possible to say that any one of them could only be shipped bundled, the position would be different. Unless one specifies “bundled,” the boards come loose, and the position as between buyer and seller should not be different from what it is as between shipowner and charterer. Hunter v Fry indicates quite clearly the nature of the obligation to ship a full and complete cargo. Sawn timber is sometimes loaded bundled and sometimes it is loaded loose. It should have been loaded loose in the present case or the charterparty was not complied with. To ship bundled, the charterers must show a custom at the port of loading and they have not done so.

Counsel for the respondents were not called upon.

Sir Robert Aske KC and A W Roskill for the appellants.

Gordon Alchin and Patrick H Dean for the respondents.

17 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This appeal from a judgment of Atkinson J, raises a short question of construction upon a charterparty in the “Baltwood” form. The appeal arises out of a claim by the shipowners to be entitled to what is curiously called “dead-freight,” which is really a claim for damages for breach of contract by reason of the charterer having failed to ship the requisite quantity of goods as required by the charter. The goods with which we are concerned in this case are timber goods shipped at a port in Finland, and the relevant words of the charter, describing the nature of the cargo, are as follows:

a full and complete cargo of mill sawn red and/or white firwood deals and/or battens and/or boards and/or scantlings and/or slatings in bundles and/or laths in bundles … and/or planed boards and/or floorings … the quantity of slatings to consist of about 80 standards, the quantity of laths to consist of about 30 standards … (“about” within this bracketed clause being read as meaning 10 per cent. more or less) with a sufficient quantity of ends … for broken stowage only.

I need not read any more from the charter than that.

The charterers provided for the vessel a cargo consisting of timber which, except for timber of one particular type, namely, weather boards, as to which there was a dispute, admittedly fell within the meanings of the various descriptions of the cargo to be shipped as set out in the charter party. Moreover, the vessel, when so loaded, was, as a matter of

Page 675 of [1939] 3 All ER 672

fact, loaded with a full and complete cargo in the sense that her accommodation for cargo was filled by the goods tendered by the charterers to the shipowners.

The controversy in this case arises in these circumstances. It appears that in dealing with timber goods of the description in question, if they are stowed in bundles (which are roped together), about 10 per cent of the stowage space is lost in the sense that, if the timber had been stowed loose and not in bundles, there would have been that much more cargo within the capacity of the vessel.

In the present case, a certain proportion of the cargo was loaded bundled, and as to part of it, namely, slatings and laths, no question arises, because the charterparty in terms uses the words “in bundles” in connection with those two descriptions of goods. However, in addition to those goods, there were loaded weatherboards and three categories of sawn boards, all in bundles, and it is said with regard to those goods that, in so far as stowage room was wasted by reason of the bundling of those goods, the shipowner has a claim for dead freight. The question is really one of the construction of a few words in this charterparty, but before I come to examine those words, I should refer to the crucial findings of fact of the judge in the court below. First of all, he found that weatherboards come within the description “boards or planed boards” in the charterparty. He also found with regard to weatherboards that the universal practice is to ship them bundled. With regard to sawn boards, he found that

boards 5/8 in. and ¾ in. thick by 4 ins. are often bundled and that 1¼ ins. by 3 ins. are practically always bundled.

These are the three categories of sawn boards with regard to which the controversy arises in this case. It will be seen, therefore, that out of the four categories of boards, namely, weatherboards and the three types of sawn boards, the judge finds with regard to one of them, namely, weatherboards, that they are always shipped bundled, and with regard to sawn boards he finds that boards in two of those categories are “often” bundled and that boards in the third category are “practically always” bundled.

Sir Robert Aske has referred us to the evidence given before the judge below with a view to persuading us to differ from his findings of fact. Speaking for myself, I am quite unable to do that, because it seems to me that the evidence is not only sufficient to justify those findings, but establishes them as quite unimpeachable. This case, therefore, must be approached on the basis of those findings of fact.

Now, bearing in mind those findings of fact when approaching the construction of the charterparty, it is argued, on behalf of the appellants, that it is not open to the charterer under this charterparty to fulfil his contract by loading on the ship any of the specified goods in bundles other than those with regard to which bundles are expressly mentioned, namely, slatings and laths. The argument is shortly thisthat the

Page 676 of [1939] 3 All ER 672

obligation is to load a full and complete cargo, which means that every available bit of space in the vessel must be filled with the specified cargo, and that if, as was the case here, more cargo could be stowed unbundled than bundled, the charterer is precluded from loading bundled goods. Now that really comes to thisthat with regard to certain of the goods falling within the description mentioned (and I take one example, namely, weatherboards) it is not open to the charterer to load those goods under this charterparty at all, because, if he were to tender, for instance, weatherboards in bundles, according to this document he could be told: “Although the charterparty entitles you to load weatherboards”(because the judge finds on the facts that weatherboards come within the description named)“nevertheless that right is taken away from you by the words full and complete cargo since if you load weatherboards in the natural method of loading them, namely, bundled, you will not get as full and complete a cargo as you would if you loaded them loose.” That is the argument put before us, and the basis of that argument is to be found in what, in my opinion, is a wrong emphasis placed upon the words “a full and complete cargo.” It is said that those words have some definite and final meaning as a matter of law and that once they appear everything else in the contract must yield to them. In my opinion, that is not the correct method of construing the relevant parts of this charterparty. This charterparty deals with a full and complete cargo of specified goods, and what, with relation to those goods, will be “a full and complete cargo” is a question which must be determined when the nature of those goods is ascertained and the usual methods of loading them are established.

The argument put forward on behalf of the appellants is, if I may summarise it, that, if in a case such as this the charterer finds that the specified goods can only be loaded if bundled, he cannot load them at alland a fortiori where he finds that according to the custom of the port they are sometimes loaded unbundled and sometimes bundled, the charterparty constrains him to adopt the unbundled method of loading to the exclusion of the bundled method of loading; in other words, that he is by this form of words precluded from adopting any usual method of loading bundled at the port of loading and is confined to the method of loading unbundled, and further that where bundling is the only method of loading any particular description of goods he is precluded from loading them at all. I do not think that this is the true construction to be put upon the words of the charterparty. I think that, if the shipowner wished to exclude the charterer from using a particular and well-known method of loading at the port in question, that should have been provided for in express and clear language. Where, in relation to a particular class of goods, there is more than one usual method of loading at the port and the obligation is to load “a full and complete cargo,” it is, in my opinion, open to the charterer to load them in either of the ways in question, and if the shipowner wishes to confine the charterer

Page 677 of [1939] 3 All ER 672

to one of those ways he must say so. I think that that is the proper way of construing these words, not in vacuo but in reference to the whole clause, and in particular to the subject-matter with which they deal.

In support of the argument that the words “full and complete cargo” have some intractable meaning, reliance was placed on the case of Cuthbert v Cumming. It is said that that case establishes that, unless it is shown that the custom of the port is to treat the words “full and complete cargo” as satisfied by a cargo shipped in such a form that the entire space is not used as fully as it otherwise would have been, the only method of stowage which can be adopted is the one which will get on to the boat the greatest quantity of goods possible. However, in my opinion, that case establishes nothing of the kind. The effect of the evidence as to the custom of the port is stated by Coleridge J, at p 408, as follows:

… I will assume for the present that the custom is good in law, and was properly received in evidence; and that being so, we have a right to construe this as a contract to load a full and complete cargo, according to the usual mode of stowage of sugar and molasses or other produce, so that the charterer would have the option of loading sugar and molasses either with or without other produce.

If one finds what is the usual method of stowage, the words “a full and complete cargo” do not prevent the charterers from adopting that usual method, and the fact that there is more than one usual method of stowage does not appear to me to alter the result.

I think that really disposes of the whole case, and I do not think I can usefully add anything to what I have already said. In my opinion this appeal fails, and must be dismissed with costs.

MACKINNON LJ. I agree. It is well settled that when a charterparty calls for a full and complete cargo of various or alternative commodities, the charterer is at liberty to make his own selection of the quantities or proportions of goods shipped within the description specified. It is in the interests of the shipowner that the greatest possible quantity of cargo should be put on board the ship. The question here, therefore, is solely whether, in the description of the cargo which the charterer may ship under this charterparty, these particular wood goods in bundles are amongst those specified commodities. That is a simple question of the construction of the words used in the charterparty. It is said that, as the charterparty refers to laths and slatings in bundles, there is an implied prohibition to ship any of the other categories of wood goods in bundles. I do not think any such implication can properly be drawn from the words of the charterparty. It may be that these words forbid the shipment of laths or slatings loose and not in bundles, but I cannot see why they should prevent the shipment of other descriptions of goods in bundles and not loose. I am fortified in that view by the fact that, on the evidence given both on behalf of the plaintiffs and of the defendants in the court below, it is proved to be customary to

Page 678 of [1939] 3 All ER 672

ship at least two of these other categories, namely, planed boards and floorings, in bundles. If the shipowners want to stipulate, as they seem to suggest in this case, that nothing except laths and slatings may be shipped in bundles, they must say so expressly, and I cannot accede to the argument that they impliedly said so by the terms of this charterparty. I agree, therefore, that this appeal fails.

FINLAY LJ. I agree with the judgments of Sir Wilfrid Greene MR, and Mackinnon, LJ, and, I may add, with the judgment of the judge below, and do not wish to add anything.

SIR WILFRID GREENE MR. I ought perhaps to add that I entirely agree with Mackinnon LJs, observation with regard to the effect of the words “slatings in bundles” and “laths in bundles.”

Solicitors: Sinclair Roche & Temperley (for the appellants), William A Crump & Son (for the respondents).

W K Scrivener Esq   Barrister.

Rynolds v Phillips

[1939] 3 All ER 678


Categories:        LANDLORD AND TENANT; Rent        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND DU PARCQ LJJ        

Hearing Date(s):        18, 19 JULY 1939        


Landlord and Tenant Rent restriction House let in two portions Recovery of possession by landlord in 1924 Portions united, but redivided in different manner in 1928 No registration of house as decontrolled Whether portion of house controlled Rent and Mortgage Interest Restrictions Act 1923 (c 32), s 2 Rent and Mortgage Interest Restrictions (Amendment) Act 1933 (c 32), s 2(2).

The respondent had, up to 1924, been the tenant of the two upper floors of a controlled house. In 1924, he acquired the whole house and obtained possession of it. In 1928, the house was divided in a different manner from what it had been previously into separate tenements, which were let to tenants, one of whom was the appellant. The respondent had not made any application to register the house as decontrolled. In an action by the respondent to recover arrears of rent, the appellant contended that the portion of the house which was let to him was one to which the 1920 Act had applied, and that therefore, as it had not been registered as decontrolled, it was still a controlled dwelling-house within the Acts:

Held when the landlord obtained possession of the whole house in 1924, the house became decontrolled. Nothing that had subsequently happened operated to bring any portion of the house within s 2(2) of the 1933 Act, and therefore the portion let to the respondent was decontrolled.

Fox v Marshall followed.

Notes

The material facts in this case would appear to be that the decontrol and the present subdivision of the house were before 1933. The present subdivision was a new subdivision, quite different from a previous subdivision of the house when controlled. In this state of facts, the house remains decontrolled although there has been no registration under the 1933 Act.

As to Effect of 1933 Act, see Halsbury (Hailsham Edn), Vol 20, pp 317319, paras 375378; and for Cases, see Digest, Supp, Landlord and Tenant, Nos 7359f7361c.

Page 679 of [1939] 3 All ER 678

Cases referred to

Fox v Marshall [1938] 4 All ER 773; Digest Supp.

Brooks v Brimecome [1937] 2 KB 675, [1937] 2 All ER 637; Digest Supp, 157 LT 417.

Lloyd v Cook [1929] 1 KB 103; Digest Supp, 97 LJKB 657, 139 LT 452.

Appeal

Appeal by the plaintiff from a decision of His Honour Judge Woodcock at the Marylebone County Court, dated 9 February 1939. This was an action in which the plaintiff claimed £2 arrears of rent, and the defendant counterclaimed for a sum alleged to have been paid in excess. The facts of the case are fully set out in the judgment of Scott LJ.

T F Southall for the appellant.

F Whitworth for the respondent.

Southall: The question is whether, on the facts of this case, Fox v Marshall or Brooks v Brimecome apply. In 1924, when the plaintiff purchased this house, the premises consisted of two dwelling-houses, one in his occupation and one let to a tenant. The upper part became decontrolled when he got possession, and the bottom floor had been decontrolled by the vendor. However, the house was still one to which the Rent Acts applied, because they applied to part of it, and by s 12(2) of the 1920 Act any part is also a dwelling-house to which the Acts apply. At the date of purchase, in 1924, the top part of the house was still a dwelling-house within the Acts. As the house was never registered as decontrolled, it remained controlled.

Whitworth: If a house is split up and one portion happens to be one that had been split up previously, that will not bring the part back within the Acts. The part must have existed as a part continuously. Once a whole house has become decontrolled and amalgamated, it does not matter if it is subsequently broken up again. The parts still remain decontrolled. [Counsel referred to Fox v Marshall, Brooks v Brimecome and Lloyd v Cook.]

Southall in reply.

T F Southall for the appellant.

F Whitworth for the respondent.

19 July 1939. The following judgments were delivered.

SCOTT LJ. This is an appeal from the decision of His Honour Judge Woodcock sitting in the Marylebone County Court on 1 March last. It raises a question under the Rent Restriction Acts and in particular under the Rent and Mortgage Interest Restrictions (Amendments Act 1933, s 2(2), or the similar provision of the Act of 1938. The case has been argued before us in regard to the 1933 Act, and there is no need to refer to the 1938 Act for the purpose of the decision.

It is essential to understand the facts of the case, because in my view when the facts are once stated they are in effect covered by a decision of this court in the case of Fox v Marshall. The facts were these. The house in question is within the Metropolitan Police area, and is consequently a house to which the £20 dividing line of value applies. The house contained ten rooms, and, prior to 1923, it was let in two

Page 680 of [1939] 3 All ER 678

portions, the two top floors being one portion and the two lower floors being the other portion. The plaintiff, who is now the landlord, was then a tenant of the first and second floors at a rental of 25s per week. There was another tenant of the lower part of the house, and each of those two tenements were dwelling-houses within the meaning of the Act of 1920, and at that time the whole house was a controlled house.

In 1924, the then landlord came into vacant possession of the lower tenement and shortly after that the plaintiff, who was then tenant to the then landlord of the upper part of the house, bought the whole house from that landlord and came into possession of the whole house, actual possession in the fullest sense of the word, as he and his family lived in the whole house from 1924 to 1928. Consequently under the terms of s 2 of the Act of 1923, he having come into possession of the whole house, the whole house was decontrolled.

In 1928, he thought that he would prefer to live elsewhere and let the house, divided in quite a different way into a series of separate tenements, to different tenants. The appellant here is the tenant of one such tenement, and that tenement happens to be a separate tenement carved out of the house in a different way from the subdivision of the house before 1924, the rooms of this tenement being as to one of them within the upper two floors and as to two of them within the lower two floors of the house, a cross division, so that the tenement of to-day has no identity with the divisions of the house in 1924 when it was still subject to the Rent Restriction Acts.

The application in the case is for a decision on the question of the amount of rent payable, which depends on the decision as to whether the rent payable is a free contractual rent, to use the language used in the court below, or a controlled rent. The only way in which it could be a controlled rent would be if the tenement in question which I have described can be regarded as a dwelling-house to which s 2(2) of the Act of 1933 applies. It can only apply for this reasonnamely, that the landlord here (the plaintiff), who had occupied the whole house and redivided it as he thought fit in 1928, had never thought that the house was affected by the Act of 1933, and consequently had made no application to the local authority for registration under the provisions of s 2. Those provisions shortly are that where a dwelling-house let as a separate dwelling immediately before the passing of the Act was one which would have been within the Acts but for the Act of 1923, the landlord is called upon in effect to make an application to the local authority to register the house as a house that is a decontrolled house, with the provision that if he does not it shall be deemed to be a controlled house.

The question, therefore, in this appeal, as the landlord did not so register and never thought of registering, is whether or not this particular tenement in the circumstances can be treated as a dwelling-house which falls within the provisions of s 2(2) of the Act of 1933. If it does,

Page 681 of [1939] 3 All ER 678

then the rent in question was a controlled rent, and if it does not, it was a free contractual rent and the decision falls to be made accordingly. The county court judge decided, in a judgment of which we have a full note, that the landlord was right and the tenant wrong, in that the house which was occupied by the tenantnamely, the three roomswas not after the passing of the 1933 Act within s 2(2) of this Act so as to call for registration. The question is whether that decision was right or wrong. The county court judge based his decision upon a judgment of this court to which I have referred, namely, the case of Fox v Marshall, and he thought that that covered the facts of the present case. In my opinion he was right. I think the decision in that case does precisely cover the facts in the present case.

The argument before this court has gone into great detail on the interpretation of s 2(2) of the Act of 1933. In my opinion the decision of this court in the case of Fox v Marshall is directly in point. That decision is binding on us, and I prefer to leave this case with the conclusion of this court that the decision in Fox v Marshall is right, and I think it wise to add no new disquisition on the interpretation of s 2(2), because it is so important, in my opinion, that a decision of the Court of Appeal on a question of this kind in perfectly clear language should not be embroidered by subsequent pronouncements by this court upon its limitations. The decision in that case was that the landlord having obtained possession of a whole dwelling-house which had been subject to control at a date subsequent to the passing of the 1933 Act, the house became decontrolled, but that when he subsequently subdivided it so as to make the subdivided portions fall within the limited value of £20, when the Act of 1933 came into operation and no application was made to register it, it was not permissible to apply the 1933 Act to one part of it, and to treat that part as excluded from the decontrol which resulted from possession in 1928.

Those facts are identical with the facts here. In 1924 the landlord in this case obtained possession of the whole house and lived in it for four years. Then in the exercise of his own unfettered discretion he relet the house in different parts, differing from the subdivision which had existed before 1924, and to those new tenements so subdivided, in my opinion, for the reasons stated in the case of Fox v Marshall, the Rent and Mortgage Interest Restrictions (Amendment) Act 1933, s 2(2), has no application at all.

The appeal will therefore be dismissed with costs.

CLAUSON LJ. I agree.

DU PARCQ LJ. I agree.

Appeal dismissed with costs.

Solicitors: J Gaster (for the appellant); N Mackover (for the respondent).

E Fuller Briscoe Esq   Barrister.


Delgoffe v Fader

[1939] 3 All ER 682


Categories:        SUCCESSION; Gifts        

Court:        CHANCERY DIVISION        

Lord(s):        LUXMOORE LJ, SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        13, 14, 17 JULY 1939        


Gifts Donatio mortis causa Chattels Delivery Choses in action Bank deposit book.

During her last illness the deceased showed the plaintiff a bag containing certain articlesmoney and jewellerywhich would pass by delivery, and a bank deposit book in an envelope; but, having done so, desired her to replace the bag in the deceaseds wardrobe from which it had been taken. The deceased stated that, if she should die, the plaintiff was to get everything in the bag including what was in the envelope. The deceased repeated this statement several times, and later, while being nursed in the plaintiffs house, asked that the bag should be placed in the plaintiffs wardrobe, but added: “So that I can keep my eye on it.” It was proved that the bank would have paid the deposited money without production of the deposit book:

Held (i) although on the first occasion there was no donatio mortis causa, the deceased requiring the bag to remain in her dominion and custody, there was later a valid donatio mortis causa of the articles passing by delivery.

(ii) there was not a valid donatio mortis causa of the money deposited in the bank, the delivery of the deposit book being, in this respect, indistinguishable from the delivery of an ordinary bank passbook.

Notes

It is necessary that there should be delivery of the chattels which are stated to be the subject of a donatio mortis causa. In the present case this matter is carefully considered, since, in the first transaction, the deceased required the bag to be replaced in her own custody, whereas, at a later date, she asked that it should be placed in the donees wardrobe. This is held to be sufficient delivery, although the deceased added that, if it were placed there, she could keep her eye on it. As to the deposit book, the evidence of a bank official proved that it was indistinguishable from a passbook and the position was therefore covered by authority.

As to Delivery in Donatio Mortis Causa, see Halsbury (Hailsham Edn), Vol 15, pp 743747, paras 12841287; and for Cases, see Digest, Vol 25, pp 543546, 550555, Nos 300315, 357390.

Cases referred to

Duffield v Elwes (1827) 1 Bli NS 497; 25 Digest 549, 351.

Re Dillon, Duffin v Duffin (1890) 44 ChD 76; 25 Digest 543, 298, 59 LJCh 420, 62 LT 614.

Moore v Darton (1851) 4 De G & Sm 517; 25 Digest 541, 288, 20 LJCh 626, 18 LTOS 24.

Duckworth v Lee [1899] 1 IR 405; 25 Digest 547, case e.

Re Weston, Bartholomew v Menzies [1902] 1 Ch 680; 25 Digest 544, 302, 71 LJCh 343, 86 LT 551.

Action

Action against the personal representative of the deceased to establish that certain money and jewellery and a bank deposit book were the subjects of a valid donatio mortis causa. The facts are fully stated in the judgment.

C V Rawlence for the plaintiff.

A A Watson for the defendant.

17 July 1939. The following judgment was delivered

LUXMOORE LJ. In this case, the plaintiff seeks to establish that the late Mrs Emilie Krieg made a delivery to her of a black handbag

Page 683 of [1939] 3 All ER 682

and its contents in such circumstances as to constitute a valid donatio mortis causa of the black bag and its contents. The claim is supported by the plaintiffs evidence, and is resisted by the defendant, who is the legal personal representative of the late Mrs Krieg.

The material facts appear to be these. Mrs Krieg was a German lady. She lived with her brother-in-law and sister, her sister having married an Englishman, a Dr Williamson. Her sister died, and she continued living in the same house with her brother-in-law at 68, Madrid Road, Barnes, until he died in December, 1937. Some years previous to that date, Mrs Krieg had made the acquaintance of the plaintiff. The first acquaintance had been due to a business relationship, Mrs Delgoffe having for a number of years carried on the business of a ladies hairdresser in High Street, Kensington, of which business Mrs Krieg had been a regular customer. I think that she had come, according to the plaintiffs evidence, every Monday for a period of 9 years. Mrs Delgoffe gave up her business some 4 years agothat would be in April 1935and, after she gave up her business, she used frequently to see Mrs Krieg. She called at Mrs Kriegs house and transacted a number of small business commissions for her, and so on. After Dr Williamsons death, she saw Mrs Krieg more frequently, and went to see her some three or four times a week. Mrs Krieg had gone abroad in the summer of 1937, and, while she was abroad, she wrote to Mrs Delgoffe and asked her to come to meet her at the station on her return. Mrs Delgoffe met her at the station. She was not well when she came back, and, although she recovered slightly, after a fortnight she became worse, and Mrs Delgoffe called in a Dr Davie, who went to see her. He attended her until October, when Mrs Krieg took to her bed. Mrs Delgoffe was with her practically every day. She looked after her wants, waited on her for meals, and so on, and did her shopping, but Mrs Krieg was left alone at night. A specialist was called in, as she got considerably worse, and, with the approval of Dr Davie and the specialist, Mrs Krieg was taken to the West London Hospital. About a week before she was taken to the West London Hospital, when she was still very ill, and, as Dr Davie says, in an apprehensive state with regard to the future, she spoke to Mrs Delgoffe and asked her to go to the washstand, which was in her bedroom, and take from the drawer in the washstand a key and unlock a medicine chest which was in the washstand. Inside the medicine chest was another key, which was the key of the wardrobe in her room, and Mrs Krieg asked Mrs Delgoffe to open the wardrobe and take from it a black bag. When Mrs Delgoffe had done this, Mrs Krieg said that she wanted Mrs Delgoffe to pay attention to what she was going to say to her, and Mrs Delgoffe says that Mrs Krieg said in German:

If I should die, then you are to get everything in this bagthe jewellery and also what is in the envelope.

I should say that the bag contained a number of articles, coins, money,

Page 684 of [1939] 3 All ER 682

articles of jewellery, a watch, some chains, and so onarticles which would pass by delivery, chattels in the ordinary acceptation of the word. In addition, there was an envelope containing a deposit book of the Midland Bank, which showed that Mrs Krieg had a sum of some £933 8s standing to her credit on that deposit account. Having said this, Mrs Krieg told Mrs Delgoffe to put the bag back in the wardrobe, and asked her to put the key back in the medicine chest in the washstand. Mrs Delgoffe says:

She told me to put it back in the same place where I could find it.

She says that then Mrs Krieg added: “Should I die, then you will have the bag and everything that is in it.” That is the first occasion on which it is alleged that there was a valid donatio mortis causa. I will deal with that later.

The second occasion on which reliance is placed happened some time afterwards. After the first occasion, some few days later, Mrs Krieg was taken to the West London Hospital. She was taken there on 11 November. Mrs Delgoffe continued to visit her. She went there twice each day, and stopped until 9 pm every night. Mrs Krieg was there for 3 weeks, and ultimately she left the hospital, not because she was cured, but because, I think, she felt that she would rather be in her own house. However, as she was alone in her house, she asked Mrs Delgoffe to take her to the house in which Mrs Delgoffe livedthat is, No 32, Sinclair Roadand Mrs Delgoffe agreed to do so. While Mrs Krieg was in Mrs Delgoffes house, she occupied one of the rooms which was set aside for Mrs Delgoffes use. It is referred to as the dining-room. She had her bed in that room, and, after she had been there two or three days, she said to Mrs Delgoffe that she wished that Mrs Delgoffe had the black bag, and she asked her to go and fetch it from Madrid Road. Mrs Delgoffe went to Madrid Road with a Mrs Sharman, who occupied the same house, and brought back the bag. She had been given Mrs Kriegs keys for the purpose of getting it. When she brought back the bag, she gave it to Mrs Krieg, who opened it and looked inside to see if everything was in order. She said that everything was in order. She said to the plaintiff: “Put this bag into your wardrobe, so that I can keep my eye on it.” The wardrobe was opposite the bed which Mrs Krieg was occupying. Then Mrs Krieg added:

Should I die, I wish you to have the bag and everything that is in it.

Mrs Delgoffe says that after that she put it in the wardrobe, which was facing the bed. A few days afterwards, Mrs Krieg was taken to the German Hospital, and died there, I think, 9 days after her admittance. Mrs Delgoffe says that Mrs Krieg often told her that she would do something for her, and that she was anxious that she should have everything in the black bag.

The questions which I have to determine are whether or not there has been a donatio mortis causa in respect of the whole, or any, and, if so,

Page 685 of [1939] 3 All ER 682

which, of the articles contained in the black bag, and the black bag itself. A donatio mortis causa is a well-recognised form of gift. It is one made in contemplation of the death of the donor, and is to take effect only in that event, being recoverable by the donor if that event does not occur. Such a gift is, in effect, I think, in the nature of a legacy, being subject to a condition, express or implied, that it is to take effect only in the event of the survivorship of the donee. There are, according to the casesand there are to be found in the books many cases dealing with the subject-matter of donatio mortis causathree essentials to constitute such a giftnamely (i) the gift must be made in contemplation of the death of the donor, although not necessarily in expectation of death; (ii) there must be delivery of the subject-matter of the gift to the donee, or, I think, a transfer of the means of, or part of the means of, getting at the property; and (iii) the circumstances must be such as to establish that the gift is to take effect only on the death of the donor. It follows that the title of the donee is not complete until the donor is dead. If the subject-matter of the gift is not completely vested, the question arises whether or not the donee can call upon the legal personal representative of the donor to complete the title. Where there is a donatio mortis causa of a subject-matter which is not completely vested, I think that the true legal aspect is that a trust has been raised under which the donee can call on the legal personal representative of the donor to complete the gift. I think that that aspect of the case was settled in Duffield v Elwes, and has been recognised for years. Of course, in the case of a chose in action, physical delivery is impossible, but it has been held that in such cases the delivery of a document essential to its recovery may be sufficient. The test of whether the delivery of the document constitutes a good donatio mortis causa of a chose in action depends on the answer to the question whether the document expresses the terms on which the subject-matter of the chose in action is held by the donor, or the terms under which the chose in action came into existence. I think that that is really the result of the authorities, which begin with the decision of the Court of Appeal in Re Dillon, Duffin v Duffin. In that case, the question was whether a bankers deposit note was a good subject-matter of a donatio mortis causa. The form of the deposit note in question is set out in the report at p 76. It was stated in the body of the note as follows:

This deposit receipt is not transferable. The amount is repayable on demand but will bear no interest unless it remains undisturbed for one month. The rate of interest is subject to alteration, of which notice will be given by advertisement in The Times newspaper. When the money is withdrawn or the interest paid the depositor must sign the cheque on the back hereof, first affixing a 1d. stamp. If part only is withdrawn a new receipt will be given for the balance.

Then on the back of the note was a form of cheque, indorsed to the bank which had issued the note, directing the bank to pay “to self or bearer” the sum which would be filled in in the bank, and it was necessary, in order to withdraw the whole or any part of the money, the subject-

Page 686 of [1939] 3 All ER 682

matter of the note, for the depositor to sign that cheque. In dealing with the matter, Cotton LJ, says, at pp 81, 82:

If we go on principle, why should not this document be a good subject of donatio mortis causa? It is true that the fact of the cheque having been filled in and signed does not give the donee a title at law to be paid, since the cheque was not presented till after the death of the drawer. But why should there not be a good donatio mortis causa apart from the cheque? The case of Duffield v. Elwes shows that there may be a good donatio mortis causa of an instrument which does not pass by delivery, and that the executors of the donor are trustees for the donee for the purpose of giving effect to the gift. The case of Moore v Darton is very instructive as to the class of instruments which are subjects of donatio mortis causa. There a document was executed when a deposit of money was made. The mere fact of the deposit would create a debt; but the document, beside acknowledging the receipt of the money, expressed the terms on which it was held, and showed what the contract between the parties was. It was held that the delivery of that document was a good donatio mortis causa of the money deposited, And so, in my opinion was the delivery of the deposit note in the present case. The delivery gives no legal title to the donee, nor did the delivery of the security in Duffield v. Elwes; but the House of Lords there laid it down that the executors were trustees for the donee and must do what was necessary to perfect the transfer. This would not be so in the case of an incomplete voluntary gift inter vivosthe court would not interfere to compel either the donor or his executors to perfect it; the doctrine is an anomalous one peculiar to the case of a donatio mortis causa but it is established by the decision of the House of Lords.

I think that what Cotton LJ, is pointing out there is that, in Moore v Darton, the actual document which was delivered was a necessary link in the obtaining by the donee of the money which was the subject matter of the written document which had been delivered. Without it the donee would not have been able to get anything. It was the document which showed that the money was due to the donor on a specialty, and was not any ordinary debt, and it was the document which showed the terms which it would be necessary to establish in order to prove the existence of the contract.

In Duckworth v Lee, the Irish case to which my attention was called, the English cases were considered, including Moore v Darton, and Lord Ashbourne LC, said, at p 407:

In all the cases which have been cited where the gift has been upheld the document or deed delivered was essential to the recovery of the debt.

I think that that statement is justified by the authorities. In Re Weston Bartholomew v Menzies, a more recent case in the English courts, the question arose whether there was a valid donatio mortis causa of a Post Office savings bank book and also of certain share certificates in a certain building society. It was held that the share certificates in the building society were not the subject-matter of a donatio mortis causa, but the judge held that the savings bank book was capable of delivery so as to constitute such a gift. It seems plain from the reasoning of Byrne J, that the ground on which he held that the Post Office savings bank deposit book could be the subject-matter of a valid donatio mortis causa was that the book itself contained in substance the whole of the terms regulating the contract of deposit, and that one of the important matters which was present in that case was the fact that the book itself had to be

Page 687 of [1939] 3 All ER 682

produced when money was deposited or withdrawn. Byrne J, said, at p 685:

With reference to the remaining question, as to the gift of the savings bank book, ever since the decision of the Court of Appeal in the case of Re Dillon, Duffin v. Duffin it is well-established that a bankers deposit receipt in a form showing the terms of the contract and being more than an acknowledgement for the receipt of money is good subject for a donatio mortis causa. The question had not previously come before a Court of Appeal in England, although there had been, as stated by Cotton, L.J., in the last-mentioned case, a current of decisions in courts of first instance in England in favour of that view …

Then Byrne J, refers to Moore v Darton and the judgment of Cotton LJ, in Re Dillon Duffin v Duffin, and says, at pp 685, 686:

An examination of the savings bank book in the present case appears to me to show a fulfilment of the test; and although every rule regulating the contract is not set out in the book itself, all the essential rules are. The book is not a mere receipt. It must, as stated on the face of it, be produced whenever any money is deposited or withdrawn, and it contains the terms of the contract as to payment of interest and withdrawal, As well as the other material terms of the contract between the depositor and the savings bank department.

Then he goes on to say, at p 686:

Apart from authority pointing the other way, I should have considered it impossible, after comparing the terms of the deposit receipts in the cases of Re Dillon, Duffin v. Duffin and Moore v. Darton with the savings bank book, to hold that the latter is not a good subject for donatio mortis causa.

Then he refers to two Irish cases, including the Irish case of Duckworth v Lee, to which I have just referred.

That being, as I think, the test to be applied in the case of a chose in action, what is the position in the present case with regard to the deposit book? Mr Drury, the manager of the particular branch of the Midland Bank where the deposit was made, was called, and he told me that the deposit book which was in the black bag was in no way essential to be produced if the depositor had required to withdraw her money, or if she had desired to deposit further money in the bank. The book itself is, in form, the passbook of the deposit account. The only statement which makes it different from an ordinary passbook is the statement that 7 days notice of withdrawal is required. No other conditions appear in the book. Nothing is said with regard to the interest to be paid in respect of the deposit, or anything of that kind, nor is anything said about the mode of withdrawal from the account. Mr Drury, the bank manager, said that the usual method of withdrawal was by a formal receipt given by the depositor to the bank for the amount withdrawn, or by transfer on the written instructions from the depositors account to a current account. Mrs Krieg had no current account, but she in fact operated her deposit account by making deposits and drawing cheques upon it, just as she would have operated a current account. This was, I think, by the courtesy of the bank, but, if the deposit book had been lost, no indemnity would have to be given, or anything of that sort. The contract with regard to interest was that the bank could vary

Page 688 of [1939] 3 All ER 682

it at short noticeI think 24 hoursand that the interest was worked out on a day-to-day basis, and the balance was credited half-yearly in the actual account. Those, I think, are the whole of the material circumstances with regard to this deposit account. In view of the evidence of the bank manager, it seems to me impossible to say that this was such a document as would enable the holder of it to make a valid donatio mortis causa in respect of the money standing to the credit of the account. I see no difference between this deposit book and the ordinary passbook of a current account. That being so, I must hold thatat any rate, so far as the deposit book is concernedit is not the subject-matter of a valid donatio mortis causa.

With regard to the other matters in the bag, I have come to the conclusion that the requirements of a donatio mortis causa have been satisfied. In the first place, of course, the claim is a claim by a woman against the estate of a deceased person. It is uncorroborated, but I have had the advantage of seeing Mrs Delgoffe in the witness-box. I am quite satisfied that she was a truthful witness, and that the story she told is one which I am not only entitled, but also bound, to accept. I think that there was a sufficient delivery of the black bag and the contents of it, other than the passbookon the second occasion, at any rateto satisfy the requirements of a valid donatio. So far as the first occasion is concerned, I do not think that, if that stood alone, it would have been sufficient to justify my holding that Mrs Krieg had parted with the possession of the subject-matter of the gift, because she required the plaintiff to replace the black bag with its contents in the place whence it was taken, and where it was kept under the dominion of Mrs Krieg the whole time, and Mrs Delgoffe would not have been in a position to demand the possession from Mrs Krieg.

On the second occasion, I think that the handing of the bag to Mrs Delgoffe with the direction to place it in the wardrobe which was in the room in questionwhich was Mrs Delgoffes wardrobe, although Mrs Krieg had the benefit for the time being of using itwas not a sufficient circumstance to prevent the delivery of the bag to Mrs Delgoffe from being a complete delivery sufficient for an absolute gift, and therefore the delivery was a sufficient delivery. I hold that the black bag and all the articles in it, other than the passbook and the money standing to the credit of the deposit account, passed under a valid donatio mortis causa to the plaintiff, and to that extent the plaintiffs action succeeds. So far as the passbook and the £933 8s standing to the credit of the deposit account are concerned, however, I must hold that there is no valid donatio mortis causa in that respect.

Solicitors: Ford Michelmore Rose & Wilkins (for the plaintiff); Watson Sons & Room (for the defendant).

C St J Nicholson Esq   Barrister.


Re Smithers, Watts v Smithers and Others

[1939] 3 All ER 689


Categories:        SUCCESSION; Wills        

Court:        CHANCERY DIVISION        

Lord(s):        CROSSMAN J        

Hearing Date(s):        6, 19, 20 JULY 1939        


Wills Construction “My securities” “Remainder of the money.”

By her will a testatrix, after directing that all her just debts and funeral and testamentary expenses be paid as soon as conveniently might be after her decease, gave to the defendant Bernard Smithers “when my securities have been converted into cash, two-thirds of the proceeds,” and to the defendant Harry Otway Smithers £500, and to the defendant Leonard Smithers “the remainder of the money.” Questions arose as to what the testatrix meant by “securities” and by “the remainder of the money”:

Held (i) the primary meaning of the word “security,” is a debt or claim which is in some way secured, and the term does not include other investments such as stocks and shares unless there is something in the context to displace the primary meaning and to show that the wider meaning is intended.

(ii) the gift of “the remainder of the money” meant the remainder of the residuary personal estate after paying the just debts and funeral and testamentary expenses and providing for the specific legacies.

Notes

For certain purposes the Administration of Estates Act 1925, has removed the distinction between real and personal property, and the word “money,” or the word “moneys,” has been held to pass the whole residuary estate, including freeholds. These words, however, are still strictly construed, and, in the absence of any context, they only pass actual cash. Similarly the word “securities” is strictly construed, in the absence of context, to mean only money secured upon some fund or property, but, here, the legislation of 1925 has made no alteration in the view to be taken.

As to Construction of Particular Words, see Halsbury (1st Edn), Vol 28, Wills, pp 699711, paras 13171332; and for Cases, see Digest, Vol 44, pp 689740, Nos 52995964.

Cases referred to

Re Rayner, Rayner v Rayner [1904] 1 Ch 176; 44 Digest 623, 4535, 73 LJCh 111, 89 LT 681.

Re Neville, Neville v First Garden City Ltd [1925] Ch 44; 44 Digest 736, 5913, 94 LJCh 130, 132 LT 602.

Singer v Williams [1921] 1 AC 41; 28 Digest 78, 430, 89 LJKB 1218, 123 LT 625.

Re Hutchinson, Crispin v Hadden (1919) 88 LJCh 352; 44 Digest 707, 5509, 121 LT 239.

Re Scorer, Burtt v Harrison (1924) 94 LJCh 196; 44 Digest 706, 5486, 132 LT 529.

Re Mellor, Porter v Hindsley [1929] 1 Ch 446; Digest Supp, 98 LJCh 209, 140 LT 469.

Re Emerson, Morrill v Nutty [1929] 1 Ch 128; 44 Digest 720, 5696, 98 LJCh 145, 140 LT 217.

Re Shaw, Mountain v Mountain (1929) 168 LTJo 371; Digest Supp, 68 LJo 334, [1929] WN 246.

Stocks v Barre (1859) John 54; 44 Digest 725, 5773, 33 LJOS 8.

Originating Summons

Originating Summons to determine (inter alia) whether upon a true construction of the will of the testatrix the expression “my securities” as used therein comprises (a) all the stocks and shares belonging to the testatrix at the date of her birth, or (b) some and if so which of such stocks

Page 690 of [1939] 3 All ER 689

and shares, or (c) any and what other property. Also whether, upon the true construction of the will, the bequest of “the remainder of the money” to the defendant Leonard Seneton Smithers comprises (a) the whole residuary personal estate of the testatrix not specifically bequeathed, or (b) cash in the house at the date of her death, or (c) the balance of the proceeds of sale of the securities mentioned above, or (d) any and what other property.

A E Ormerod for the plaintiff.

Gerald R Upjohn for the defendant Harry Otway Hirsh Smithers.

N C Armitage for the defendant Bernard Francis Hirsh Smithers.

Hon Denys Buckley for the defendant Leonard Seneton Smithers.

R O Wilberforce for the defendant Charles Otway Mackinnon Morris and persons interested upon an intestacy.

20 July 1939. The following judgment was delivered.

CROSSMAN J. The question which I have to determine upon the construction of this will is what is included in the expression “my securities” as used in the will. In considering this question I have to bear in mind first of all the words used by Vaughan Williams LJ, in Re Rayner Rayner v Rayner, at p 188:

I wish to addalthough it is not necessary to do so for the decision of this case, having regard to the ground upon which the court is deciding itthat, in my judgment, the meaning of a word is relative to the circumstances and occasion and date on which the word is used; and that if a judge is entitled to take into consideration at all the fact that at the date of the will “securities” is largely used in a sense other than a pledge for an advance of money, or in the particular sense of “investments in property transferable by the assignment of indicia such as certificates,” it is the duty of the judge to inform his mind, not only by reference to dictionaries of good reputation, but also by evidence of the meaning ordinarily given to such a word amongst those who deal in such property.

The first part of that dictum as to the method of construing an expression such as “my securities” was confirmed and adopted by Tomlin J, as he then was, in Re Neville Neville v First Garden City Ltd, when, at p 53, he quoted and adopted those words of Vaughan Williams LJ, at p 188:

… the meaning of a word is relative to the circumstances and occasion and date on which the word is used.

There is no doubt that the word “securities” is very commonly used as a synonym for investments or property dealt with on the stock exchange, but the word undoubtedly has a primary meaning, and something is needed to displace this primary meaning.

I think that a passage from the opinion of Viscount Cave in the House of Lords in Singer v Williams really makes it quite clear how I have to approach this question. Viscount Cave said, at p 49:

My Lords, the normal meaning of the word “securities” is not open to doubt. The word denotes a debt or claim the payment of which is in some way secured. The security would generally consist of a right to resort to some fund or property for payment; but I am not prepared to say that other forms of security (such as personal guarantee) are excluded. In each case, however, where the word is used in its normal sense, some form of secured liability is postulated. No doubt the meaning of the word may be enlarged by an interpretation clause contained

Page 691 of [1939] 3 All ER 689

in a statute, as by the interpretation clauses in the Conveyancing and Law of Property Act, 1881, the Settled Land Act, 1882, the Trustee Act, 1893, and the Finance Act, 1916; or the context may show, as in certain cases relating to the construction of wills … that the word is used to denote, in addition to securities in the ordinary sense, other investments such as stocks or shares. But, in the absence of any such aid to interpretation, I think it clear that the word “securities” must be construed in the sense above defined, and accordingly does not include shares or stock in a company.

Now that statement in the opinion of Viscount Cave was made in reference to quite a different matter, namely, in reference to a question under the Income Tax Acts as to the meaning of “securities,” but it is in general terms, and I think it exactly expresses what I have to consider, and Viscount Cave dealt expressly with the case of construction of wills. It is pointed out to me in the case of construction of wills that the context might show that “securities” has some wider meaning than (p. 49)

… a debt or claim the payment of which is in some way secured.

But that makes it quite plain also that in the absence of such an aid to interpretation (and in the particular case I have to deal with here) the only aid to interpretation I can find is the aid Viscount Cave LC refers to in his opinion (p 49):

… in the absence of any such aid to interpretation, I think it clear that the word “securities” must be construed in the sense above defined, and accordingly does not include shares or stock in a company.

There are, however, two other cases, to which I have been referred, which in some ways are of assistance, and in others are perhaps a little embarrassing. One is Re Hutchinson Crispin v Hadden, in which case P O Lawrence J, as he then was, in 1919 discussed all the previous cases relating to the meaning of the word “securities” and came to the conclusion that, in that case, the phrase “securities for money” was indistinguishable from the word “securities,” and that, in the absence of a context, stocks and shares did not pass under a bequest of “my moneys and securities for money.” The judge found in that case that there was no sufficient context at all events to enable stocks and shares to pass under the bequest of “securities for money.” However, in Re Scorer Burtt v Harrison, the same judge in December 1924, found a sufficient context to enable him to construe “securities” as including stocks and shares, one of the grounds of the decision, or at all events one of the points to which the judge expressly referred, being that the testatrix had drawn the will herselfit was a home-made will, which is the case here. Looking again at the actual will in this case, I have to consider (and I think it is the only question which I have to consider) whether I can find here a sufficient context to show that the word “securities” ought to be given the wider meaning. If I cannot find sufficient context, whatever view I may take of what the intention of the testatrix may have beenwhich after all is a matter of guessingthen I have to decide that “my securities” is limited to securities in the strict sense.

Page 692 of [1939] 3 All ER 689

Now counsel for the plaintiff, the legatee to whom this bequest is made, contends that there is a context here, but I find it difficult to see exactly to what he refers me as the context beyond the fact that this will is a home-made will. The testatrix has a printed document into which in her own handwriting she writes passages and by so filling up the blanks, makes a will. In the printed document the words begin like this:

I hereby revoke all wills by me at any time heretofore made. I appoint

and then she writes in the names of her executors. Then come the words in print

to be my Execut

and she does not fill that up. Then the printed form goes on

and direct that all my just debts and funeral and testamentary expenses shall be paid as soon as conveniently may be after my decease.

That is all in print. Then the print begins a fresh paragraph in capital letters:

I GIVE AND BEQUEATH UNTO

and then the print ends and she fills in

My son Bernard Smithers when my securities have been converted into cash, two-thirds of the proceeds.

Then there is a full stop, and then a capital letter:

To my son Harry Otway Smithers £500. To my son Leonard Smithers the remainder of the money.

Now that is the whole of the will, and I have to considerI was going to say, see whether I can find but I think I ought not to put it in that waywhether there is any such context here as will enable me to say that “my securities” means anything more than the debts secured on something. The evidence which has been given shows me that the testatrix had an estate of £2,812 of which the sum of £984 7s 8d consisted of stocks, bonds and shares. Those are set out in an exhibited list which shows that they were as follows; £100 Victory Bonds 4 per cent bearer; 16 shares Alexandria Engineering Works bearer; £290 Lever Brothers Limited 7 per cent cumulative preference stock; £100 Dominion of Canada 3¼ per cent registered stock 1950/55; and £277 14s 7d New Zealand 3 per cent inscribed stock 1952/55.

Now as regards those five items which are the ones I have to consider, the first, the fourth and the fifth I hold to be securities in the strict sense of the term, because they are all government debts secured, I think, by the government revenues. Consols have certainly been held to be securities in the strict sense, so there is no doubt whatever that those three items passed under the bequest of two-thirds of the proceeds. The only question is as regards the 16 shares in the Alexandria Engineering Works, and the £290 Lever Brothers Limited 7 per cent cumulative

Page 693 of [1939] 3 All ER 689

preference stock, and those are not securities unless I can find sufficient context to construe “securities” as including stocks and shares.

Now I have looked at this will very anxiously, and I have tried to see my way clear to find some context here, but I am unable to find here sufficient context to construe “my securities” as meaning anything other than securities in the strict sense of the term. It is true there is a direction to pay “all my just debts and funeral and testamentary expenses,” and the gift which I have to construe follows that, but I do not find that that is a context which indicates that the testatrix necessarily meant to include something more than “my securities” would naturally cover. It is true that the phrase “two-thirds of the proceeds” arises only rather indirectly, because the words “when my securities have been converted into cash” refer to something which she assumes will be done, and it might well be she assumed that all her investments, and not only those particular ones, would be converted, but that, I am afraid, is mere guesswork on probabilities, and I do not think I am entitled to make such a guess. With the best will in the world in this case I do not think I am entitled to come to the conclusion that the expression “my securities” can properly be construed as including the items to which I have referred. I must, therefore, hold that two-thirds of the second and third items in this list do not pass to Bernard Smithers under the bequest of two-thirds of the proceeds. That is the answer to question one.

The further question which I have to determine is as to the meaning of the words “To my son Leonard Smithers the remainder of the money.” The important thing to note is that the testatrix directsit happens to be in the printed part of the will, but I do not think that on that account I can lay any stress upon it

that all my just debts and funeral and testamentary expenses shall be paid as soon as conveniently may be after my decease.

and then:

I give and bequeath to my son Bernard Smithers when my securities have been converted into cash, two thirds of the proceeds. To my son Harry Otway Smithers £500. To my son Leonard Smithers the remainder of the money.

Now, counsel for Leonard Smithers says that “the remainder of the money” there means the residuary personal estate, and he bases his argument entirely upon the fact that you have previously had a direction that all her just debts and funeral and testamentary expenses shall be paid as soon as conveniently may be after her decease, and that “the remainder of the money” must be the remainder after taking something out, and what is to be taken out is the just debts and funeral and testamentary expenses, and, I suppose, the legacy of £500 to the son Harry Otway Smithers; and that as those are to be taken out of the residuary personal estate as a whole, for the purpose of this will I could not consider the rest of the estate, but “the remainder of the money” should be construed to mean the remainder of the residuary personal estate.

Page 694 of [1939] 3 All ER 689

Counsel for Bernard Smithers, on the other hand, says that, in this particular will, I have got previously a reference to the proceeds of sale of what the testatrix calls “my securities,” which are disposed of, and that the natural meaning of the words “the remainder of the money” would be the remainder of those proceeds of sale.

Counsel for Leonard Smithers, in support of his argument, has relied upon Re Mellor Porter v Hindsley, Re Emerson Morrill v Nutty, and I think he also supported his argument by Re Shaw Mountain v Mountain, a decision of Farwell J. I think these cases go to show that where you have a gift of the remainder of the testators money, following upon a direction to pay debts, etc, the words “the money” ought to be, and in fact I think must be, construed as meaning the personal estate of the testator or testatrix.

The only question in this case is whether the point taken by counsel for Bernard Smithers overrides that, his point being that the words “the money” here naturally mean the proceeds of sale referred to above. I find difficulty in arriving at that conclusion, tempting though it is, because I think I must note the fact that the testatrix has used the expression “the proceeds” above, and she has given “two-thirds of the proceeds,” and I think I should reasonably expect that two lines below she would have referred to it by the same term, and would have said: “To my son Leonard Smithers the remainder of the proceeds”; but instead of that she has said: “To my son Leonard Smithers the remainder of the money.”

I think that is an expression that she may very well have used having in her mind the remainder of her property, and I think I ought not so lightly to get rid of the rule which has been laid down, I think originally in Stocks v Barre, on account of the presence of the previous gift of the proceeds of the property which she describes as “my securities.” I think I must treat the gift of “the remainder of the money” here as a gift of the remainder of her property after paying her just debts and funeral and testamentary expenses and deducting the property described as the securities, and paying the £500 to the son; that is to say, it is the remainder of her residuary personal estate. I hold that this gift “to my son Leonard Smithers the remainder of the money” is a gift to him of the residuary personal estate.

Declaration accordingly. Costs of all parties as between solicitor and client to be paid out of the residue.

Solicitors: Walker Martineau & Co (for the plaintiff and for the defendants Harry Otway Hirsh Smithers and Bernard Francis Hirsh Smithers); Bennett Ferris & Bennett (for the defendant Leonard Seneton Smithers); Montagus and Cox & Cardale, agents for Snell & Co, Tunbridge Wells (for the defendant Charles Otway Mackinnon Morris).

Charles Shelley Esq   Barrister.


Central Advance and Discount Corporation Ltd v Marshall

[1939] 3 All ER 695


Categories:        BANKING AND FINANCE        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        13, 25 JULY 1939        


Moneylending Memorandum Insufficiency Guarantee and bill of sale Clause that if bill of sale became invalid, guarantors would repay loan and interest Clause not referred to in memorandum Moneylenders Act 1927 (c 21), s 6.

The plaintiffs had advanced £50 to the defendant upon the terms of repayment by monthly instalments. Repayment was secured by a bill of sale executed by the defendant, and a guarantee executed by guarantors. The guarantee contained a clause providing that, in the event of the bill of sale being or becoming invalid or inoperative, the guarantors would on demand pay the lenders the amount of the loan and interest on the unpaid part thereof. The memorandum of the contract mentioned the bill of sale and the guarantee, but did not disclose the above clause:

Held (i) the guarantee was a security within the meaning of the Moneylenders Act 1927, s 6.

(ii) this clause was one which imposed a further liability on the borrower, and was, therefore, a term of the contract which should have been set out in the memorandum. A mere reference to the fact that it was a term of the contract that a guarantee should be given without any reference to this clause was insufficient to satisfy the provisions of s 6.

Notes

It has been decided that the memorandum of a moneylending contract must contain a statement of the terms of a security. In the present case, it is held that, where there is a guarantee of the loan containing additional terms to those usually included in a guarantee, it is necessary to set out those additional terms in the memorandum.

As to Sufficiency of Memorandum, see Halsbury (Hailsham Edn), Vol 23, pp 190, 191, para 280; and for Cases, see Digest, Supp, Money and Moneylending, Nos 353a353y.

Cases referred to

Reading Trust Ltd v Spero, Spero v Reading Trust Ltd [1930] 1 KB 492; Digest Supp, 99 LJKB 186, 142 LT 361.

Westropp v Equitable Investment Co Ltd unreported.

Mitchener v Equitable Investment Co Ltd [1938] 2 KB 559, [1938] 1 All ER 303; Digest Supp, 107 LJKB 316, 158 LT 176.

Eldridge & Morris v Taylor [1931] 2 KB 416; Digest Supp, 100 LJKB 689, 145 LT 499.

Simmons v Russell Financiers Ltd [1934] 2 KB 487; Digest Supp, 103 LJKB 724, 151 LT 472.

Appeal

Appeal by the defendant from a decision of His Honour Judge Dumas at the Westminster County Court dated 1 February 1939. The facts of the case are fully set out in the judgment of the court, delivered by Clauson LJ.

H Samuels for the appellant.

D C L Potter for the respondent.

Samuels: The memorandum is silent as to the terms of the securities, and contains no copy of the securities. Further, it should have been signed by the guarantors, and a copy of it sent to them. A guarantor

Page 696 of [1939] 3 All ER 695

is in fact a borrower. He should be treated as such. [Counsel referred to Reading Trust Ltd v Spero, Spero v Reading Trust Ltd, Westropp v Equitable Investment Co Ltd, Mitchener v Equitable Investment Co Ltd, and Eldridge & Morris v Taylor.]

Potter: It is not necessary to set out the effect of the terms, but only the terms themselves: Simmons v Russell Financiers Ltd.

Samuels was not called on to reply.

H Samuels for the appellant.

D C L Potter for the respondent.

25 July 1939. The following judgment was delivered.

CLAUSON LJ (delivering the judgment of the court). On 24 September 1937, the plaintiffs, who are registered moneylenders, advanced £50 to the defendant on the terms of repayment by certain monthly instalments, the repayment being secured by a bill of sale executed by the defendant and a guarantee executed by the guarantors, the bill of sale and the guarantee being delivered to the lenders against the advance. Nothing turns in the present case on the contents of the bill of sale. The guarantee contains a clause providing that, in the event of the bill of sale being or becoming invalid or inoperative in whole or in part, the guarantors will on demand pay to the lenders the amount of the loan and interest on the unpaid part thereof.

The defendant paid thirteen instalments, and, two further instalments having fallen due, the lenders sued the defendant for them in the county court. The defendant put in a defence raising various points under the Moneylenders Act 1927. The only matter to which it is necessary for us to refer is the contention that the contract for repayment and the bill of sale and the guarantee are unenforceable on the ground that the note or memorandum in writing of the contract did not contain all the terms of the contract, in that while the note or memorandum mentioned the bill of sale and the guarantee, it did not disclose the clause mentioned above, imposing on the guarantors immediate liability for repayment of the whole debt in the event of the bill of sale being or becoming inoperative in whole or in part. The existence of this clause obviously resulted in the possibility of the guarantors becoming liable to pay the whole debt immediately in the event mentioned of the bill of sale being or becoming inoperative in whole or in part, and in the event of the lenders enforcing the relevant clause against the guarantors.

On the facts stated, it appears to us to be plain that one of the terms of the contract was that the clause in question should be contained in the guarantee, and that no sufficient statement of this term of the contract appears in the note or memorandum. A mere reference to the fact that it was a term of the contract that a guarantee should be given without any reference to the presence of this clause in the guarantee seems to us to be insufficient to satisfy the provisions of the Moneylenders Act 1927, s 6. The Act does not require the terms of a security to be set out in the memorandum, but, if the effect of the security is that a liability different in any respect to that described in the memorandum is, or may be, directly or indirectly imposed on the borrower, this

Page 697 of [1939] 3 All ER 695

further liability must appear in the memorandum. The presence of the clause in question in the guarantee (a guarantee given as a term of the contract) imposes the possibility of a serious liability directly on the guarantors, and, owing to the relation between the guarantors and the borrower, indirectly upon the borrower. It appears to us to follow that the failure to state this term of the contract has the result that the note or memorandum fails to disclose a material term of the contract, and thus fails to comply with s 6 of the Act.

It was not made clear to us how far the point, which appears to us to be decisive of the case, was put before the county court judge; but it was clearly open to the defendant on his pleadings, and was clearly raised by the notice of appeal, and we feel bound to have regard to it.

It appears to have been suggested that the guarantee is not a security within the meaning of that word in s 6. We can see no ground for this suggestion. The point is material only on the question of the form which our order should take.

The appeal will be allowed with costs. There will be judgment for the defendant in the action, with costs on the scale adopted in the court below. On his counterclaim the defendant is entitled to a declaration that the contract of repayment and the bill of sale and the guarantee are unenforceable, and to an order for delivery up of the bill of sale and the guarantee, and to an order for costs, on the scale adopted in the court below.

Appeal allowed with costs. Declaration that the contract of repayment, the bill of sale, and the guarantee are unenforceable. Order for delivery up of the bill of sale and the guarantee.

Solicitors: Stone & Stone (for the appellant); Barnes & Butler (for the respondents).

E Fuller Briscoe Esq   Barrister.

Perkins v Hugh Stevenson & Sons Ltd

[1939] 3 All ER 697


Categories:        HEALTH; Health and safety at work        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        17, 18, 19 JULY 1939        


Workmens Compensation Alternative remedies Election between two remedies Receipt of compensation Notice to employer that payments being received without prejudice Workmens Compensation Act 1925 (c 84), s 29(1), (2).

The plaintiff, a workman in the employ of the defendants, met with an accident on 17 September 1937, in the course of his employment, and applied for, and was paid, compensation under the Workmens Compensation Act 1925, until October 1938, by which date he had recovered from his injuries. On 21 March 1938, he issued a writ claiming damages for negligence, and for breach of statutory duty, alternatively, compensation under the Employers Liability Act, and, in the further alternative, compensation under the Workmens Compensation Act. On 10 November 1937, the plaintiffs solicitors wrote informing the defendants that the payments which were being made were received without

Page 698 of [1939] 3 All ER 697

prejudice to the plaintiffs common law rights. The defendants replied that the plaintiffs common law rights were barred as he had already made his election. It was contended that there could be inferred from the correspondence and the conduct of the parties an agreement that the payments received by the workman should be without prejudice to his common law rights:

Held (i) it was not possible to infer such an agreement between the parties.

(ii) the employer had paid full compensation under the Workmens Compensation Act 1925, and was therefore not liable to a claim for damages at common law by reason of the provisions of s 29(1), that the employer shall not be liable both independently of and also under the Act.

Notes

This is a decision of the Court of Appeal upon a subsection that has been the subject of much litigation in the past few months. The facts of the present case make it perhaps of limited application in the solution of the problems presented in certain recent cases. Here the solicitors sought, after the workman had received a number of payments based upon the Act, to make the receipt of those payments without prejudice to a claim independent of the Act, but the workman, in fact, received further payments under the Act and gave a clean receipt for them. He continued to receive such payments and give such receipts until he had recovered from the injury. The Court of Appeal state that, in such circumstances, there is no method known to the law whereby such payments could be set off against an award of damages at common law. Such being the case, the matter seems clearly to be within the closing words of s 29(1) of the 1925 Act, and the workman cannot recover apart from the Act.

As to Alternative Remedies, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 195, 196, paras 430, 431; and for Cases, see Digest, Vol 34, pp 490492, Nos 40634071. See also Williss Workmens Compensation (31st Edn), pp 478483.

Cases referred to

Codling v Mowlem (J) & Co [1914] 3 KB 1055; 34 Digest 491, 4067, 83 LJKB 1727, 111 LT 1086, 7 BWCC 786, affg [1914] 2 KB 61.

Bennett v Whitehead (L & W) Ltd [1926] 2 KB 380; 34 Digest 492, 4068, 135 LT 329, 19 BWCC 133, CA.

Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell) [1931] AC 575; Digest Supp, 100 LJPC 113, 145 LT 289, 24 BWCC 181, affg SC sub nom Waddell v Kinneil Cannel & Coking Coal Co Ltd (1930) 23 BWCC 567.

Kelly v North British Ry Co [1916] SC 19; 34 Digest 496, case m.

Oliver v Nautilus Steam Shipping Co [1903] 2 KB 639; 34 Digest 495, 4087, 72 LJKB 857, 89 LT 318, 5 WCC 65.

Selwood v Towneley Coal & Fireclay Co Ltd [1939] 2 All ER 132; Digest Supp, 32 BWCC 37.

Burke & Unsworth v Elder Dempster Lines Ltd [1939] 3 All ER 339; Digest Supp.

Kendall v Hamilton (1879) 4 App Cas 504; 21 Digest 218, 540, 48 LJQB 705, 41 LT 418.

Scarf v Jardine (1882) 7 App Cas 345; 21 Digest 224, 577, 51 LJQB 612, 47 LT 258.

Pusey v Desbouvrie (1734) 3 P Wms 315; 35 Digest 125, 265.

MGinty v Kyle [1911] SC 589; 34 Digest 493, case d.

Davenport v R (1877) 3 App Cas 115; 31 Digest 472, 6195, 47 LJPC 8, 37 LT 727.

Little v MacLellan (1900) 2 F (Ct of Sess) 387; 34 Digest 491, case h.

Page 699 of [1939] 3 All ER 697

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Appeal

Appeal by the plaintiff from a judgment of Hilbery J, dated 20 February 1939. The facts are fully stated in the judgment of Sir Wilfrid Greene MR.

Neville J Laski KC and D M Wilson for the appellant.

C L Henderson for the respondent company.

Laski KC: If a workman receives compensation and then recovers damages, the employer can set off the compensation against the damages. Until the workman has exercised his option, he is entitled to claim damages at common law, notwithstanding that he has received compensation in ignorance of an alternative remedy: Codling v Mowlem (J) & Co Ltd. A meaning must be given to the word “option” in the phrase “at his option.” It is an option given to the workman and not to the employer. It is intended to operate for the benefit of the workman, but it cannot do so unless the workman knows what the alternatives are. A man does not claim compensation under the act because he is sent to his employers by the Public Assistance Committee to get compensation. The words “at his option” are bereft of meaning unless they can be construed in the way above suggested. [Counsel referred to Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell), Selwood v Towneley Coal & Fireclay Co Ltd, Burke & Unsworth v Elder Dempster Lines Ltd, Kendall v Hamilton, Scarf v Jardine.]

Wilson following on the same side, referred to Pusey v Desbouvrie.

Henderson: The plaintiff has given no evidence of incapacity, and he has received the full amount of compensation to which he is entitled under the Workmens Compensation Act. In MGinty v Kyle it was held that if a claimant elected to proceed in one way, he thereby repudiated the other. In Codling v Mowlem (J) & Co Ltd, it was said that an employer had a right not to be sued twice. The workman claimed compensation and received it, and has therefore been paid workmens compensation and he cannot claim twice. It is misleading to take the case of a claim which was made in the first instance at common law. The court can fix compensation under the Act if the workman is found entitled to it. There is, however, no similar provision where the claim which is made in the first instance is for compensation under the Act. If the workman asks for and receives compensation, the question of option does not arise by reason of the words of s 29(1). It is clear that compensation under the Act and compensation otherwise are mutually exclusive remedies. If the plaintiff in the present case were to succeed, the remedies would not be mutually exclusive but cumulative. The employer has not to pay twice. If, however, the plaintiff were to recover damages, the employers could not deduct what has been paid as workmens compensation as having been paid by mistake. It was not paid by mistake but in response to a legal claim. The word “pay” has been inserted in the section because the legislature recognised that if payment

Page 700 of [1939] 3 All ER 697

was made by reason of a claim, the option could no longer be exercised. Kelly v North British Ry Co was relied upon by Croom-Johnson J, in Burke & Unsworth v Elder Dempster Lines Ltd, but in the present case there is no evidence of any agreement between the workman and the employer that the payments were made or received without prejudice. In Selwood v Towneley Coal & Fireclay Co Ltd, the judge did not find that the workman had received compensation, but that he had received money offered to him. Also, that there was an absence of the knowledge which was necessary to enable the workman to make an agreement binding upon him in law. The words “without prejudice,” in the absence of agreement between the parties, do not alter the position: Davenport v R. [Counsel also referred to Little v MacLellan, Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell), Evans v Bartlam, Bennett v Whitehead, and Oliver v Nautilus Steam Shipping Co.]

Laski KC in reply.

Neville J Laski KC and D M Wilson for the appellant.

C L Henderson for the respondent company.

19 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. In my opinion, the judge came to a correct decision in the action out of which this appeal arises.

The appellant was a workman who, on 17 September 1937, suffered an accident while in the employment of the respondents. He applied for, and was paid as such, weekly sums by way of compensation under the Workmens Compensation Act. Those payments continued until October 1938, at which date it appears, at any rate, highly probable, on the evidence, that his right to compensation had come to an end owing to his recovery from the accident. On 21 March 1938, while those payments were being made and received, he issued the writ in the present action, claiming damages for negligence and for breach of statutory duty; alternatively, compensation under the Employers Liability Act; and alternatively, compensation under the Workmens Compensation Act. That last claim was no doubt put in with the object of obtaining, if he failed in his proceedings outside the Workmens Compensation Act, the assessment of compensation under that Act, the right to which is given by the Workmens Compensation Act 1925, s 29(2), to the workman who is unsuccessful in proceedings at common law or otherwise than under the Act. The first payments which were made by the employers in pursuance of the appellants claim were not in any way qualified, nor was the receipt of them in any way qualified. I should mention here, in parenthesis, that a claim under the Act for compensation can be quite informal, and, in the present case, there is, in my judgment, no doubt that the claim was made under the Act and that the payments were made in pursuance of that claim.

After, I think, eight payments had been made, the appellant obtained the assistance of solicitors who, on 10 November 1937, wrote to the respondents, referring to the accident, and adding the following paragraph:

We understand that certain payments have been made to Mr. Perkins and we write to inform you that his acceptance of such payments was without prejudice

Page 701 of [1939] 3 All ER 697

to his rights at common law and under the Employers Liability Act and that if any further payments are made, they will be accepted subject to the same qualification.

The reference in the letter to the earlier payments was, of course, a valiant attempt on the part of the solicitors to preserve their client from any prejudice that the receipt of the earlier payments might have caused him. That letter was answered on 19 November 1937, by an insurance company acting on behalf of the respondents. The letter contained this paragraph:

We must point out that your client has already made his election, and has in fact claimed and received compensation under the Workmens Compensation Act. This being so, his claim for damages at common law is barred.

On 22 November the appellants solicitors answered that letter as follows:

We deny that our client has made any election in this matter or that he has claimed and received compensation under the Workmens Compensation Act. In any case, however, it is a matter for the court and you will be hearing further from us in due course.

The payments, as I have said, continued long after that letter of 10 November was written, and on each occasion when a payment was made the receipt was a clean receipt and no terms were imposed, much less agreed to, in respect of any of those payments. The judge, upon the facts, held that at the time when the workman made his claim for compensation and received the first payment he did not know that he had a right under s 29(1) of the Act to elect as between two alternative remedies, and on that basis he held, in conformity with a decision of Atkin J, as he then was, in Codling v Mowlem (J) & Co Ltd, a decision on this point which was approved in this court in the case of Bennett v Whitehead (L & W) Ltd, that the workman, not knowing of the existence of his right to elect, could not be said to have exercised the option given to him by the subsection. I do not propose to examine that part of the judgment, in so far as it rests upon a finding of fact as to the workmans knowledge at the time. The evidence about that is not complete, but I will assume, for the purposes of this judgment, that the workman did not know at that time that he had that statutory right. The effect of his subsequently becoming aware of that statutory right, as he clearly did by 10 November, coupled with the subsequent payments, I shall deal with later in this judgment. For the moment, the matter with which I propose to deal is not concerned with the effect of that letter, but is upon the basis that the payments were made under the Workmens Compensation Act and obtained under that Act, without complicating the matter by any question of receipt without prejudice.

S 29(1) of the 1925 Act, and the similar section in the earlier legislation, have given rise to a number of problems and a not inconsiderable difference of judicial opinion on certain points. Many cases have been decided upon the language of the subsection; but, fortunately, upon the facts of the present case, I do not find it necessary to refer in any detail to any of them. The subsection reads as follows:

When the injury was caused by the personal negligence or wilful act of the

Page 702 of [1939] 3 All ER 697

employer or of some person for whose act or default the employer is responsible nothing in this Act shall affect any civil liability of the employer, but in that case the workman may, at his option, either claim compensation under this Act or take proceedings independently of this Act; but the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act, and shall not be liable to any proceedings independently of this Act, except in case of such personal negligence or wilful act as aforesaid.

The case that we have here is not a case where the workman has claimed compensation and, without receiving payment under that claim, has subsequently abandoned his claim and brought proceedings at common law, nor are we concerned with a case where a contested claim has gone part of the way to arbitration and has then been dropped. Questions which arise upon cases of that kind are not questions with which we are concerned, because we have here the fact that the workman has received compensation pursuant to a claim made under the Act.

It must, I think, be accepted that the mere making of a claim without knowledge of the existence of the right of choice which the Act gives will not amount to an exercise of the option in circumstances where the workman did not know of the existence of his right of choice. It would also appear that the mere making of such a claim, even if he had the knowledge, would not bar him from abandoning it and afterwards proceeding at common law. That appears to be the effect of the decision of this court in the case of Bennett v Whitehead. What is to happen where the workman, having at the time of making his claim and receiving the money ex hypothesi no knowledge of his right of option, nevertheless receives and puts into his pocket money paid in pursuance of that claim and in liquidation of the employers statutory liability under the Act? In answering that question, it is important to consider the language of what I may call the second limb of the subsection. As I view that second limb, at any rate for the purposes of the present case, there is no necessity to decide whether or not it operates as a qualification on the option given by the first part of the subsection, or whether it is rather an independent provision. The result, for the present purposes, would be the same, and the decision of any such fine point would, for present purposes, be academic.

The effect of the second limb of the subsection is to exempt the employer from liability to pay compensation both under the Act and outside the Act. Whether or not that is limited to cases of payment to the same person is a matter which has been much debated, and eventually, I think, set at rest by the decision of the House of Lords in Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell). The words, in my opinion, do exempt an employer from liability to pay to the same person and in respect of the same accident compensation both under the Act and outside the Act. The words “shall not be liable to pay compensation for injury,” require a word or two of comment. They cannot, I think, be interpreted as meaning that no liability shall exist. What happens when an accident takes place, if it be one giving a right to

Page 703 of [1939] 3 All ER 697

compensation under the Act and also a right of action at common law is, I apprehend, that from that moment the employer is under two liabilities. Which one will ultimately be made effective against him is, at that moment, uncertain. He is not to have both liabilities made effective against him. But, at the outset, both liabilities are there, and it is for the workman, by the appropriate action, to enforce the one or the other. I therefore regard these words as referring to the enforcement of the liability, and, to put it in quite popular language, the employer is not to be made to pay twice over to the same person. I add those words, “to the same person,” because I do not wish it to be thought that I am saying anything which is inconsistent with what was said in the House of Lords in Kinneils case. The liability of the employer to pay compensation under the Act, which arises when the accident takes place, is one which, of course, like all liabilities, can be enforced in one of two waysI should not, perhaps, say “enforced,” but can be made effective. It can be made effective either by satisfaction of the liability out of court, or by the obtaining by the workman of an award which entitles him to payment from his employers. But whichever method is in fact adopted in any particular case, the result is necessarily the same, in the sense that, by the payment in the one case and by the making of the award in the other case, the liability of the employer under the Act is discharged; and where the employer, in response to a claim under the Act, has made a payment of compensation under the Act, that payment discharges once and for ever, in whole or pro tanto, the statutory liability under the Act. It seems to me impossible to say in a case where, in response to a claim for compensation under the Act, the employer, in satisfaction of that claim, has made the statutory payment, that he has not been made liable to pay compensation under the Act. He has been made liable to pay just as much by acceding to the claim, without litigation, as he would have been made liable to pay if he had resisted the claim and had had it enforced against him as the result of that litigation.

The matter can be looked at in another way. Suppose the employer, having had workmens compensation claimed against him, satisfies that claim up to the hilt, and when he has done so the workman begins an action at common law and says, “At the time when I made that claim and received those payments I knew nothing about my option under the subsection, and, therefore, it cannot be said that I exercised that option at all. The first part of the subsection, therefore, does not affect me.” What would be the position with regard to the second part of the subsection? Suppose that in the action the workman were to be held entitled to recover damages at common law, what would be the result of the whole matter? The result of the whole matter, truly stated, would be that the employer had, in respect of his liability under the Workmens Compensation Act, paid compensation under that Act, and, in respect of his liability at common law, had paid damages for negligence at common law, and a breach of that limb of the subsection must have

Page 704 of [1939] 3 All ER 697

taken place. It seems to me that the second limb of the subsection in terms makes it impossible for such a situation ever to arise.

The argument is reinforced, if it be necessary, by the circumstance that where the workman has received compensation under the Act and subsequently brings proceedings at common law, there is no machinery by which the money he has received as compensation can be set off against or deducted from the damages to be awarded to him at common law. The Act is silent upon that matter; there is no provision dealing with that matter as there is for dealing with costs in the other case where he brings his claim at common law and fails, and then claims under the Workmens Compensation Act 1925, s 29(2). There is no provision of that character dealing with the case of a workman receiving payments under the Act, in circumstances where he could not elect because he did not know, and then afterwards recovering damages at common law. There is no principle of law known to me under which, in those circumstances, it would be possible to deduct or set off what he had been paid as compensation under the Workmens Compensation Act. The result would accordingly be that, as the result of the whole transaction, the employer would have discharged two liabilities: (1) a liability under the Act, and (2) a liability at common law, and that is the very thing against which the subsection protects him. Now the decision of the point with which I have just dealt is not, in my view, assisted in any way by the authorities to which we have been referred. It is one that I myself find easy of solution once the language of the subsection is sufficiently appreciated in its relation to these particular facts.

I have, so far, dealt with the case without reference to the circumstance that, by 10 November 1937, the workman was aware of his right of option. From that moment onwards, but for the point which I will mention presently, it could not have been suggested that he was doing otherwise than exercising his option and electing between two mutually exclusive remedies, and he would, on that basis, have exercised it effectively with no locus pœnitentiœ, because his claim had been complied with and satisfied. When that happened it seems to me that any locus pœnitentiœ which he might have had after making the claim and before it was satisfied would not exist, after payment had been made, any more than it would have existed after an award had been obtained. But it is said that that result does not follow by reason of the circumstance that, in the solicitors letter of 10 November, it was said that all future payments would be accepted without prejudice. Counsel for the appellant thereupon conceded, and I think he was bound to concede, that unless there could be inferred from the correspondence and the conduct of the parties an agreement with the employer, the mere insertion of the words “without prejudice” in the letter cannot alter the character of the payments which were made and received. That is a proposition which, I think, cannot be disputed. The question, therefore, is whether or not it is possible to infer, from that correspondence and the conduct of the

Page 705 of [1939] 3 All ER 697

parties, an agreement between the workman and his employer, to the effect that any moneys paid by weekly payments thereafter should not be finally treated as payments under the Workmens Compensation Act, but should be held, so to speak, to abide the event, with the result that they would be set off against or deducted from any damages which the workman might ultimately recover. If there had been an agreement of that sort, the situation would, I think, have been different, and the case would have fallen within the principle which was dealt with in a Scottish case, Kelly v North British Ry Co.

I find myself quite unable, in the present case, to infer any agreement at all between these parties. In fact, the correspondence and the acts of the parties appear to me to show that, so far from being in agreement, they were completely at arms length. The employer continued to pay pursuant to the claim which had been made upon him and pursuant to his statutory liability. He declined to agree to those payments being made without prejudice or to abide the event. That he refused to do. He tendered the money and a clean receipt was given. In those circumstances, the position merely was that the workman, under the cover of the letter was, in effect, saying, “I am still claiming workmens compensation, but I propose to treat the money received under the Act as received without prejudice,” and the employer was agreeing to no such thing, but merely making payments pursuant to the claim under his statutory liability. The insistence by the recipient that the receipts were without prejudice appears to me to be of no avail at all.

I think I have dealt with all the points with which it is necessary to deal for the decision of this case, and, in my opinion, as I said at the outset, the decision of the judge was perfectly correct and must be affirmed, with the result that the appeal must be dismissed.

MACKINNON LJ. I agree. I observe that Scrutton LJ said, in Bennett v Whitehead (L & W) Ltd, at p 396, with regard to the equivalent of this s 29:

… there has been an embarrassing difference of opinion between the judges of the English, Scotch and Irish courts, both between nations, and individual judges of the same nation. It is to be hoped that the House of Lords may in some case have the opportunity of giving a final construction of the sections.

Fortunately, I think in this present case none of the nice questions which were debated in that case arise.

When the action came on for trial in February 1939, the plaintiff had received weekly payments of 30s per week for the whole period during which he had been disabled by the accident, those weekly payments amounting in all to £81. He had given a receipt for each payment expressed to be

Compensation … in respect of injuries by accident … for which injuries I hereby claim and elect to be compensated, in accordance with the Workmens Compensation Act, 1925.

It is true that, in the course of those payments being made, his solicitors

Page 706 of [1939] 3 All ER 697

had written a letter stating that he had previously accepted, and would in future accept, such weekly payments without prejudice to his right at common law, but the insurance company refused to agree to any such suggestion, and, in face of their refusal, the plaintiff continued to accept the weekly payments and to sign the receipts for them in the form I have quoted.

If the present action had been allowed to proceed and succeed and the plaintiff had been awarded damages at common law, I can think of no legal ground on which the defendants could claim to deduct from the amount of those damages the £81 they had paid to him by those weekly payments. If, as in Oliver v Nautilus Steam Shipping Co, or in Kelly v North British Ry Co, the weekly payments had by agreement between the plaintiff and the defendants been made subject to a condition, the defendants might have claimed credit for the £81 by virtue of such agreement, but apart from any such agreement there would be, as I say, no ground on which the defendants could claim credit for the £81 against the damages awarded at common law. If that be so, quite clearly the result of allowing this action to proceed and succeed would be to bring about a breach of the words towards the end of s 29(1):

but the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act …

That being so, I think it is clear that these considerations are sufficient to dispose of this ease and to show that it was rightly decided by Hilbery J.

FINLAY LJ. I agree, and I will add very few words. I assent to everything which Sir Wilfrid Greene MR, has said. For myself, I think that this particular case can be decided upon the ground upon which indeed the judge below decided itthat is, on what has been called the second limb of s 29(1), which is as follows:

the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act …

Now I find difficulty in seeing how it can possibly be said that the employer can be said to be not liable to pay compensation under the Act. He was liable to pay and did pay, and, indeed, paid the whole amount which the workman could have obtained under the Act. It seems to me that it cannot matter in the least whether he paid pursuant to an order of the court made in an arbitration, or whether he paid because, being clearly liable, he agreed to pay without troubling to go to the court. It is a case to which the words in this limb of the subsection appear to me precisely to apply, and I agree with what MacKinnon LJ has just said. If an action brought independently of the Act were to succeed, that would happen which the legislature

Page 707 of [1939] 3 All ER 697

expressly says is not to happen, namely, that the employer would then be held liable independently of the Act, having already become liable under the Act.

I think the absence of any provision for any deduction by way of set-off, or anything of that sort, from the amount recoverable at common law or under the Employers Liability Act in respect of the amount paid under the Workmens Compensation Act, clearly shows that the view, which seems to me to be quite obvious, is correct. When the legislature made no provision for any deduction or any taking into account of the payment under the Workmens Compensation Act, I think it meant to say, and perfectly expressly said that, if there is a liability to make payment under the Workmens Compensation Act, then there shall be no liability independently of the Act. For these reasons I entirely agree that the judgment of the judge in this case was quite right.

Appeal dismissed.

Solicitors: Murray Napier & Co (for the appellant); W Stanley Eastburn (for the respondents).

W K Scrivener Esq   Barrister.

Hari Chand and Ors v Secretary of State

[1939] 3 All ER 707


Categories:        COMMONWEALTH; Commonwealth countries: LAND; Sale of Land: TOWN AND COUNTRY PLANNING        

Court:        PRIVY COUNCIL        

Lord(s):        LORD MACMILLAN, SIR GEORGE RANKIN, MR M R JAYAKAR        

Hearing Date(s):        29, 30 JUNE 1939        


Privy Council India North-West Frontier Province Compulsory purchase Resumption of possession of cantonment Appurtenances Compensation Land Acquisition Act (I of 1894), ss 4, 6, 9, 11, 18.

Where the government grant any rights to individuals within the area of cantonments, one of the cardinal conditions of the grant is that the government retain the power of resumption at any time on giving one months notice. If they give that notice, they are required to pay the value of such buildings as may have been authorised to be erected. The government proposed to resume certain properties originally granted out, comprising the sites of twelve bungalows, and issued notifications of resumption. The appellants, the owners of the lands comprising the sites of the bungalows, contended: (i) that the notification was bad because it was not a notification for the acquisition of the land, but a notification of an intention to acquire only buildings on the land; (ii) that they were entitled to the sites upon which the various bungalows were erected; (iii) that the compensation awarded to them had not been made on a proper basis, and that nothing had been given in the awards in respect of the appurtenances of the buildings, namely, roads, culverts, gardens, trees, etc:

Held (i) the government here were the owners of the land and when they sought to put in force the provisions of the Land Acquisition Act they did not requisition what was their own, but what they desired to acquire, namely, the buildings on the land.

(ii) it was for the claimants (the appellants) to establish affirmatively their title to the sites, and this they had not done.

(iii) the subject to be valued being a building apart from the site, the principle here adopted of fixing value by ascertaining the cost of

Page 708 of [1939] 3 All ER 707

reproducing the building at the present time and then allowing for depreciation, was the proper principle to follow in making the awards which were made. As the premises were enjoyed throughout on precarious terms, all the grantee was entitled to recover was the value of the buildings erected on the ground, and anything which the grantee might have done in the way of utilising the ground surrounding the building for the purposes of amenity or enjoyment was associated rather with the site than with the building. Compensation had, therefore, to be restricted to the value of the buildings.

Notes

This case is of purely local interest. Their Lordships have here considered the general principles relating to the resumption of possession of cantonments by the government. The principal point in the case is whether the compensation extends to gardens, roads and things other than buildings placed upon the land.

As to Land Acquired for Government Purposes, see Halsbury (Hailsham Edn), Vol 6, pp 185, 186, paras 228, 229.

Case referred to

Secretary of State for India in Council v Satish Chandra Sen (1930) 57 IA 339.

Consolidated Appeals

Consolidated appeals from a judgment and twelve decrees of the Court of the Judicial Commissioner, North-West Frontier Province, Peshawar [Middleton JC and Kazi Mir Ahmad AJC] dated 28 July 1936, which substantially affirmed the judgment of the district judge of Peshawar, dated 15 February 1935. The judgment of their Lordships was delivered by Lord Macmillan.

A M Dunne KC and S P Khambatta for the appellants.

J Millard Tucker KC, W Wallach and Hon Quintin M Hogg for the respondent.

30 June 1939. The following judgment was delivered.

LORD MACMILLAN. Their Lordships are invited in these 12 consolidated appeals to reconsider a number of awards made by way of compensation for the acquisition by the government of certain bungalows in the Cantonment of Peshawar. In the courts below a large number of questions were raised and debated in relation to the awards, but before their Lordships, counsel on behalf of the appellants confined himself to two or three main issues.

As a matter of history, the cantonments are regulated, so far as regards grants to individuals, by an order of the Governor-General in Council dated so far back as 1836. That order appears to have been carried forward to date by a series of subsequent orders more or less identical in their terms. Where the government grant any rights to individuals within the area of the cantonments, one of the cardinal conditions of the grant is that the government retain the power of resumption at any time on giving one months notice. If they give that notice, they are required to pay the value of such buildings as may have been authorised to be erected.

In this case the government proposed to resume 12 or 13 of properties originally granted out, and they issued notifications of resumption,

Page 709 of [1939] 3 All ER 707

of which there is an example in the case of the first appellant Hari Chands property. It runs as follows:

Whereas the land comprising the site of the property known as Bungalow No. 5, Fort Road, Peshawar Cantonment, belongs to Government and is held by you on cantonment tenure under which Government are entitled to resume the said land subject to paying the value of such buildings as may have been authorised to be erected thereon; And whereas Government have decided to resume possession of the said land and to obtain possession of the buildings standing thereon: Take notice therefore that Government will under all powers enabling them in that behalf through their agent on Oct. 15, 1932, resume possession of the said land and your occupation and any rights, easements and interests you may have in the said land and the buildings thereon shall cease as from that date.

The notification also contained an offer of compensation.

Apparently none of those to whom the notices were addressed was satisfied with the offer, and while the natural and ordinary course would have been to proceed to arbitration for the purpose of assessing the compensation, for some reason or other that course does not seem to have been pursued or to have been acceptable to the parties, and the government accordingly resorted to the Land Acquisition Act of 1894 for the purpose of expropriating the owners of the bungalows on the terms of that statute. Accordingly, a notification was served on each of the proprietors of the bungalows, and in the recital of each notification it is set out that the government claimed to be the owners of the land upon which the various bungalows and outhouses had been erected. That is set out as a matter of narrative in the notification. Then it proceeds to state that the government have given notice that the land has been resumed by them and that they are desirous now of acquiring the buildings thereon and any other outstanding interest therein, and for that purpose they invoke the provisions of the Land Acquisition Act of 1894.

The first point taken here has been that the notification was bad because it was not a notification for the acquisition of the land, but a notification of an intention to acquire only buildings on the land. It was said that the Land Acquisition Act only authorised notification of an intention to acquire land and therefore that the whole proceedings under the Land Acquisition Act were fundamentally bad because the notification upon which the proceedings started was invalid. It has to be noticed, however, that in the Land Acquisition Act

the expression “land” includes benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth.

In the present case, the governments position being that they were the owners of the site, it would have been manifestly idle for them to have proposed to acquire what was already their own, and therefore when they sought to put in force the provisions of the Land Acquisition Act, they naturally requisitioned what was not their own but what they desired to acquire, namely, the buildings on the land. It appears to their Lordships that in any event this objection to the notification comes too late, because the parties proceeded under the Land Acquisition Act to follow all the procedure which that statute lays down right up

Page 710 of [1939] 3 All ER 707

to and including the final determination of compensation. The court that dealt with the matter was really a compensation court, and if it had been intended to attack the whole proceedings as initially invalid, this would more properly have been done before some other tribunal. The court did, however, incidentally consider the question of the validity of the notice, and their Lordships agree with the view taken that the notification is not open to objection.

Junior counsel for the appellants sought to satisfy their Lordships that the statement in the recital, namely, that the site belonged to the government, was in fact inaccurate, and that the claimants were entitled to the sites upon which the various bungalows were erected. One thing is quite clear from the legal point of view, and that is that a claimant who desires to obtain compensation must establish his title, and in the recent case to which we were referred, Secretary of State for India in Council v Satish Chandra Sen, where the question of cantonment tenure in Bengal was under consideration, it was made clear that a claimant must establish his title affirmatively. In the present case it may be that there might be some question as to the governments title, but it was for the claimants themselves to establish affirmatively their title to the sites. The court below which had the advantage of having documents before them which have not been before their Lordships, went very fully into the matter and satisfied themselves that the claimants here had not established their title to the sites. Their Lordships see no reason to differ from this conclusion.

That being so, the only remaining question is whether the compensation to which the claimants are entitled for the deprivation of their buildings has been ascertained according to law. It is not the practice of their Lordships to consider detailed criticisms of valuation. It is always open to an appellant before their Lordships to raise a question of principle relating to the method of assessment, and if their Lordships are satisfied that the compensation officer or the court which reviewed his award has erred on a matter of principle, then relief will be given. In the present instance the subject-matter of valuation or compensation being the buildings and not the site, inasmuch as the site was already the property of the government, the question is what was the appropriate method of valuing the buildings. It was made a matter of complaint that in consequence of the resumption notice having been served, the value of all these buildings, some of them no doubt attractive residences, had been seriously depreciated. Their Lordships could have appreciated that criticism if the principle of valuation adopted had been that of proceeding upon the rental value of the buildings, but in the present case the method adopted has been what is commonly known as the contractors method. The subject to be valued being a building apart from the site, the principle of fixing value by ascertaining the cost of reproducing the building at the present time and then allowing for depreciation in consideration of the age of the building and for the cost

Page 711 of [1939] 3 All ER 707

of such repairs as might be required apart from depreciation, is quite a well-known and recognised method of valuing buildings for the purpose of compensation. That method was pursued here, and that method is not, as their Lordships conceive it, affected by the resumption notice, because the prices which would be taken and were taken in this case for the purpose of ascertaining the cost of reproducing the building would not be affected by the resumption notice at all. The buildings accordingly, in their Lordships view, have been valued for the purpose of compensation on a perfectly admissible and perfectly legitimate principle, and that being so, there would appear to be no valid objection on this score to the awards that were made.

One further point was taken, howevera point of detail, to which it is proper that allusion should be made. It is said that nothing has been given in the awards in respect of what might be called the appurtenances of the buildings, such things as roads, pathways, culverts, gardens, trees and various things which were enjoyed by the occupants of the bungalows as useful amenities in connection with them. The court below considered this matter, and were of opinion that it was not proper to include any figure for these items in the awards, with one small exception; they did allow something, a small acknowledgment, in respect of what are described as necessary roads, presumably accesses which were necessary for the enjoyment of the bungalows, and a small addition was made to the awards under this head. Their Lordships do not feel called upon to comment upon that circumstance, but they are of opinion that in the case of premises such as had to be valued here and which were enjoyed throughout on terms which were certainly precarious, namely, that at any time the government might resume the premises on giving one months notice, and that all that the grantee was to be entitled to receive in the event of that power being exercised, was the value of the buildings erected on the ground, anything which might be done by the grantee in the way of utilising the ground surrounding the building for the purposes of amenity or enjoyment was, as the court below has held, associated rather with the site than with the building. If the compensation has to be restricted, as it has to be in this case, to the value of the buildings, their Lordships agree with the court below that no additional allowance should be made in respect of amenities such as trees and gardens and so on associated with the enjoyment of the bungalows.

Counsel for the appellants, on behalf of his clients, has brought before their Lordships all that could be advanced by way of criticism of the awards, but these criticisms, in their Lordships opinion, fail. The result is that their Lordships will humbly advise His Majesty that the appeals should be dismissed with costs.

Solicitors: T L Wilson & Co (for the appellants); The Solicitor India Office (for the respondent).

T A Dillon Esq   Barrister.


Wirth v Weigel Leygonie & Co Ltd

[1939] 3 All ER 712


Categories:        BANKING AND FINANCE: TAXATION; Stamp Duties        

Court:        KINGS BENCH DIVISION        

Lord(s):        DU PARCQ LJ SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        11, 12 JULY 1939        


Bills of Exchange Promissory note Irrevocable undertaking to pay contained in letter Bills of Exchange Act 1882 (c 61), s 83(1).

Revenue Stamps Irrevocable undertaking to pay Whether agreement or promissory note for purposes of stamping Stamp Act 1891 (c 39), ss 33(2), 38(1).

By an agreement between K, an export and import merchant, and the plaintiff, the latter was from time to time to finance certain of Ks transactions. For this purpose the plaintiff opened a special banking account in his own name into which he paid £3,000, over which he was to have sole control. He was to pay to the defendants the amounts required by K to cover particular transactions of K and in consideration of such advances he was to receive one-third of the net profits subject to a minimum percentage on the monthly turnover. A letter in the following form, which was described as a guarantee, was addressed by the defendants to the plaintiff in respect of each transaction. “We confirm herewith that we undertake to pay irrevocably the sum of £—— to you or into your banking account on —— in respect of the above reference.” K was to put the defendants in funds to meet the proposed payments by the defendants to the plaintiff, but eventually K was unable to provide such funds, and the defendants refused to pay the sums due to the plaintiff:

Held (i) there was no partnership between the plaintiff and K.

(ii) the letters were not promissory notes within the meaning of the Bills of Exchange Act 1882, s 83(1), nor within the meaning of the Stamp Act 1891, s 33(2), and did not require stamping as promissory notes.

(iii) the transactions between the parties was not a guarantee.

(iv) the letters required to be stamped with a 6d stamp as agreements.

Notes

The main question in this case was whether the “confirming letters,” as they were called, were promissory notes within the Bills of Exchange Act 1882, and, if that were not so, whether they were documents deemed to be promissory notes within the Stamp Act 1891. Both these questions are answered in the negative. Apart from this question, there arose a further matter whether these letters ought to be stamped as agreements. This, being a stamp objection, was not a matter in which the defendants were concerned, but one between the court and the plaintiff.

As to Documents Requiring to be Stamped as Promissory Notes, see Halsbury (Hailsham Edn), Vol 2, pp 731733, paras 10301032; and for Cases, see Digest, Vol 6, pp 497501, Nos 31493173.

Cases referred to

Yeo v Dawe (1885) 53 LT 125; 6 Digest 498, 3153.

Mortgage Insurance Corpn v Inland Revenue Comrs (1888) 21 QBD 352; 6 Digest 497, 3150, 57 LJQB 630.

Guaranty Trust Co of New York v Hannay & Co [1918] 1 KB 43; 6 Digest 428, 2775, 117 LT 754, revsd on another ground [1918] 2 KB 623.

Action

Action to recover £2,450 due under agreements in the form set out in the judgment whereby the defendants irrevocably undertook to pay certain sums of money to the plaintiff. The facts are fully stated in the judgment and the following are the translations of the letters shortly

Page 713 of [1939] 3 All ER 712

referred to in the judgment. That of 7 March 1935, from Kischner to the plaintiff was as follows:

Dear Mr. Wirth. I have pleasure in confirming our conversation at which we have come to the following agreement. You undertake to open at Barclays Bank an account to the amount of £3,000, viz., £1,000 at once, and the remaining sum according to requirements, but at latest within 3 months. The money is to be used for financing my overseas transactions as set forth in the following. The amount remains on your account over which you have the sole right of disposal. The financing will be carried out in such a manner that you will remit the amounts in question on my instructions, provided that I give you at the same time a guarantee by a trustworthy forwarding agent for the repayment of the amount involved. The guarantee must secure irrevocably repayment to your account with Barclays Bank, or direct to you, within a fixed period of time. You will give instructions for the remittance of the amounts after you have satisfied yourself as to the guarantee provided. You shall be free to withdraw from this agreement provided you give me 2 months notice.

I undertake to pay you as consideration for the financing above referred to a remuneration of one-third of the total net profit. We have, however, agreed that the minimum rate shall be 1½ per cent. of the monthly turnover for transactions carried out within one month, that is to say, when the money is repaid within the month. A rate of 4 per cent. as the minimum has been agreed upon for transactions which take up to 2 months. In the event of a transaction taking a longer time than 2 months you will receive a remuneration on the lines of 4 per cent. per 2 months of the turnover.

The letter of 8 March 1935 from Kischner to the defendants was as follows:

Re Account No. 3

Dear Sirs. I beg to refer to our conversation of this morning regarding the opening of account No. 3 and have pleasure in confirming the arrangements made as follows:

You will make payments in respect of consignments to be handed over to you for shipment, such payments to be considered as advances, and to be subject to terms, etc., governing the existing account No. 2. No interest, however, is to be charged as the funds necessary for these advances will be placed by me at your disposal. In order to obtain these funds you will please submit your letter for every amount required, confirming the repayment of this sum on a certain date according to requirements. Your letter is to be addressed to Mr A. H. Wirth and a draft of such letter is enclosed. Every transaction will have a specific reference number, viz., A.C.3 T.R./W.L. (numbered 1, 2, 3 and so on) meaning account No. 3, Transaction Weigel Leygonie, No. 1, 2, 3, etc. On receipt of your confirming letter for any particular transaction, the details of which will be given by me as to the sum required and the date of repayment to be indicated, I shall be pleased to submit to you (i) my cheque for the amount in question, which is to be credited to my account No. 3, and instructions as to the disposal of each sum will be given in due course by me. (ii) My letter confirming to you that I will repay the amount of the particular advance not later than the date indicated in your letter to Mr. Wirth.

As soon as any particular advance under account No. 3 is repaid by myself, the procedure will be reversed. On repayment to you, you will return my letter of confirmation to me. I shall request you to forward the amount to Mr. Wirth in fulfilment of your undertaking covering the particular transaction. Mr. Wirth will surrender to you your letter of confirmation relating to the repayment in question.

Hon Quintin M Hogg and G R Rougier for the plaintiff.

A T Denning KC and R M Wilson for the defendants.

Denning KC: The plaintiff must rely on the letters of the defendants alleged to be guarantees. In law these amount to promissory notes, and, as they are not stamped as required by the Stamp Act 1891, cannot be used for any purpose whatever. In these transactions Kischner and the plaintiff were in fact partners. Therefore the plaintiff is equally liable to the defendants for the sum due by Kischner to them. If the

Page 714 of [1939] 3 All ER 712

plaintiff is a partner of Kischner he is liable to put us in funds to meet any liability there may be on the documents. If it is held that these letters constitute a guarantee of a debt by Kischner to the plaintiff they do not amount to a sufficient memorandum within the Statute of Frauds. Necessary terms cannot be incorporated in a document merely by cross reference numbers.

Hogg: These documents are not promissory notes. Even without them I am entitled to succeed. Starting with an oral agreement in 1935 there has been a long series of completed transactions from which it is possible to imply a tripartite arrangement which binds the defendants. The plaintiff was in effect advancing the money to Kischner. The letters relied on were not intended by the parties to be promissory notes and intention is an important element in deciding their nature: Yeo v Dawe. Each document was only part of a contract containing other stipulations. An unconditional promise to pay which is incorporated with other matters is not a note. By the test of the Bills of Exchange Act alone, or in conjunction with that of the Stamp Acts, these are not promissory notes. The cross reference on the documents introduces various conditions beyond the bare promise to pay a definite sum. Further, the sums mentioned were not payable to a specific person because of the provision for the alternative payment into the plaintiffs special banking account. There is no guarantee here, and the defendants being primarily liable no memorandum under the Statute of Frauds is necessary. That is also the case if, on the true construction of the arrangement between the parties, there is a joint and several liability to the plaintiff. [Counsel referred to Mortgage Insurance Corpn v Inland Revenue Comrs and to Alpe on Stamp Duties (22nd Edn), p 88.]

Hon Quintin M Hogg and G R Rougier for the plaintiff.

A T Denning KC and R M Wilson for the defendants.

12 July 1939. The following judgment was delivered.

DU PARCQ LJ. The plaintiff in this case came to England a few years ago with a small capitalnamely, what was left to him, I gather, of a much larger fortune. He had about £5,000, and he met a man named Kischner, who, like himself, was a foreigner, being a German. The plaintiff, being a business man, knew that it would be dangerous to trust too much to anybody without very satisfactory references, and, as a result of what he knew, he would not be disposed to trust too much to Kischner. However, he was quite ready to advance some of his money to Kischner if it was properly secured, and on 7 March 1935, an agreement was written out and signed by both Wirth and Kischner, Kischner signing first. That agreement was in the German language, and I have a translation of it before me. I think that, in looking at a translation, one must be a little careful not to give necessarily to the translation the full meaning to a precise word in a document which is to be construed by English law, when one finds that that word is a translation of a German word, but, subject to that, I have no doubt that it is a strictly accurate translation. I do not propose to read that letter, but what it comes to is,

Page 715 of [1939] 3 All ER 712

putting it very shortly, that Wirth promised that he would open an account at Barclays Bank. That account was to be entirely under the control of Wirth, and Wirth was to advance money from it to Kischner at Kischners request, Kischner undertaking to use the money for financing his overseas transactions in the export and import business he carried on. As to the repayments of the amounts, Kischner said that he would provide what was called a guarantee by a credit-worthy forwarding agent for the payment of the sums involved, and they were subject to repayment irrevocably, and were to be paid into Barclays Bank or to Wirth. There were terms under which Wirth was to be entitled to withdraw from the agreement, and there were terms set out as to what Wirth was to get for what he did. He was to be remunerated by a payment of one-third of the total net profit, but there was to be a minimum rate of 1½ per cent of the monthly turnover, and 4 per cent as the minimum for transactions which took up to 2 months.

That was quite a satisfactory agreement, no doubt, provided that a really credit-worthy forwarding agent could be found to give what he called a guarantee, and I cannot read that as meaning that Kischner would be bound to repay the sum advanced to him. I read it as meaning that he would find a forwarding agent worthy of credit who would promise to repay those sums, and one can assume that it was intended that Kischner would put that agent in funds which would ensure the payment of the amount as it fell due. He might put him in funds, of course, beforehand, or he might persuade the shipping agent to give him credit. However, that matter was arranged between Kischner and the forwarding agent. Wirth would look primarily to the forwarding agent, and I do not think that this is strictly a guarantee in the sense that the forwarding agent would say, “I will be surety for Kischner.” On the contrary, I think that the forwarding agent was to be persuaded to undertake the liability to pay, and, if he did not pay, Kischner would have to pay, although it was expected that Kischner would so arrange matters that, when the money was due, on the appropriate date the forwarding agent would pay.

About the same time, there was an interview between Wirth and somebody representing the defendant company. Bardot, managing director of the defendant company, said in evidence that he saw the plaintiff on 8 March. Kischner brought him, and there was present one, Cooper, who was then shipping clerk to the defendants, but who is now no longer alive. Bardot said that really very little passed at that interview. It was a mere introduction. He says that he was shown no draft letter at that time, and I gather from his evidence that the arrangement of the transaction was left rather in the hands of Cooper. I find as a fact, that on or about 7 March 1935, Wirth had a conversation with someoneeither Bardot or Cooperwho was certainly acting with the full authority of the defendant company, and that, in the course of that conversation, the representative of the defendant company was shown

Page 716 of [1939] 3 All ER 712

the draft agreement, and said to Wirth, in reply to a question as to whether the company was prepared to repay such moneys as were advanced in any event:

Yes. You have it in black and white. It is mentioned in your letter and it is irrevocable.

I am not reading the exact words which Wirth used. He spoke English well, but not quite grammatically, and his exact words were as follows:

Yes, because you have it in black and white. It is mentioned in your letter irrevocably, and it means you get your money in any case back.

It is no good saying that those words were used, because they were not, as the conversation was in German, but I am satisfied that words which are correctly represented by those which I have read out were used, and, as I say, if they were used by Bardot, he, as the managing director of the company, had authority. However, if they were said by Cooper, it amounts to the same thing, because the negotiations in this matter were left by the defendant company in Coopers hands.

The document in question was one which had been prepared by Kischner and had been seen by the solicitor employed by Wirth (not those who are now advising him). It is in the following terms:

We confirm herewith that we undertake to pay to you irrevocably the sum of [£100 is put in, but it might have been any other figure] in respect of the above reference, on Apr. 30, 1935. …

That is a subsequent date, and then some words were written in by the solicitor to whom I have referred, but I think that they add nothing to it, although they were embodied in the document.

The arrangements between Kischner and the defendant company are set out in another letter of 8 March, and one may be inclined to think that probably 8 March was a day later than the day of the interview between the plaintiff and the defendants, but nothing really turns on the precise date, and what was to happen is plain enough. I am not going to read that letter. Wirth was quite satisfied, providing he knew that what he paid over would be repaid by the defendants, and he had their assurance that they would repay him. The defendants quite understood, as Bardot put it, that Wirth would give the money to Kischner on the strength of the letter or document signed by the defendants. Bardot says that he got all his information about the way the account was going to be run from Cooper, and he said that it was set out in the letter of 8 March, to which I am referring. The money was to be advanced after one of these letters, as I will call it, to use a neutral word, had been signed by the defendants and handed to the plaintiff, and the plaintiff would then advance his money and Kischner would presumably make the necessary arrangements with the defendants, and the defendants would pay. So it went on in what seemed to be quite a satisfactory manner until on no less than 128 occasions money was paid by Wirth and repaid

Page 717 of [1939] 3 All ER 712

by the defendants. Then came a time when it seems that Kischner no longer made satisfactory arrangements. The defendants took up this attitude: “Well, we did promise to pay you. We did give an irrevocable promise to pay, but that was because we thought that Kischner would pay us, and, now we find that he has dishonoured his cheque, we are not going to pay you.” That, I have no doubt, came, as it obviously did, as a very great shock to Wirth, because he thought that he had protected himself by getting terms which seemed to him, and might seem to people with a greater knowledge of the English language than he had, to be a most unequivocal and categorical promise that, whatever Kischner might do, the defendants would pay him.

I need hardly say that it is not the slightest use for the defendants to put forward as a defence the allegation that they were only to pay if Kischner paid them. Any such suggestion would be, as it seems to me, quite nonsensical, in view of the arrangement between the parties, and, if that were all, it would be very simple to say that my judgment must be for the plaintiff. However, it is not all, because, although any layman, whether a foreigner or an Englishman, would probably think that the defendants ought to pay in this case, the money being owing, the defendants quite rightly took legal advice, and those who advised them looked to see, as they were bound to do, whether there was any defence available to the defendants. As a result, various defences have been pleaded, with which I must deal and with which I will deal shortly. I am able to deal with them shortly because of the clear and concise way in which they have been argued before me.

It is said that the plaintiff entered into a transaction with Kischner which was in fact a partnership, and that he was a partner, and that, if he was a partner, that means that he must suffer the default of Kischner, and cannot make any claim against the defendants here. I am quite satisfied that he was not a partner. It is quite true that he was to be remunerated for the loans he made to Kischner by getting a share of the profits, but it has long been well settled law, and was so before the Partnership Act 1890, that the mere fact that a lender is remunerated by interest on his money, which varies with the profit, so that he gets a share of the profits, does not of itself make him a partner. Here it would be quite untrue to say that one penny of the plaintiffs money was invested in Kischners business. Some attempt was made to suggest that they were very closely in league with one another (i) because, when Kischner left some premises of which he was tenant, Wirth took them over and went and carried on business there, (ii) because, whereas Kischner carried on an export and import business, so did Wirth, although indeed they were quite separate businesses, and I have no evidence that they even overlapped, and (iii) because their letter-heading was rather similar, only because, as far as I can gee, they used the game type. None of these reasons is at all adequate to justify my holding that there was the slightest resemblance to a partnership in the transactions in which they were

Page 718 of [1939] 3 All ER 712

engaged. I think, looking at the agreement between them, that it was plainly a mere loan, and I say that Wirth was not risking his capital in Kischners business at all, and there was not a contract in writing signed by the parties thereto to satisfy the Partnership Act 1890, s 2(3)(d). I may add that no question at all arises as to any holding out as a partner. It is not suggested that Wirth has ever held himself out as being a partner, and it is quite plain, I think, that nobody concerned in the case thought he was a partner until that idea occurred to someone with legal knowledge who was advising the defendants.

The next point is this. The defendants say that these documents were promissory notes, and that a promissory note must be stamped when it is made, and it is too late to stamp them now. Wirth says that he raised the question of the stamping of these documents, and was told by Bardot that they need not be stamped. I am not at all satisfied that he was so told. I think that he was told by somebody at the defendants office, but I am not at all prepared to find that it was Bardot. It may have been Cooper. I think that it was said in all honesty, that it might not have occurred to the man speaking to Wirth that it might be said to be an agreement requiring a stamp. I am quite sure that it never entered the head of anybody in the defendants office that these documents were promissory notes. It may be possible to say that, strictly and technically, they did not issue these, if they were notes, though I should think that they might be in a very dangerous position, because, if they did not issue them, they gave them to Kischner in order that, acting on their behalf, he should hand them to Wirth. I am quite sure, however, that they would not knowingly have given documents which they believed to be promissory notes on ordinary paper without stamps, and I am quite certain that, if they said that they did not need to be stamped, it would be wrong to say that they were acting fraudulently because they knew very well that they were promissory notes. There is no fraud in this case at all. A man may think that another man ought to honour his obligation, and may apply one or more epithets to his character for not doing so, but, as far as the law goes, one cannot say that a man has carried on a fraud if he does not pay his debts.

Having set that aside, I have to consider, as a matter of law, whether or not those documents are promissory notes which require to be stamped as such. Before proceeding with that, however, a preliminary question arises with which I must deal. Counsel for the plaintiff says that I really need not trouble about that, because he is entitled to succeed even if I do not look at the documents at all, on the general principle that, if a man promises to carry out a contract or pay money, and fails to fulfil his promise, one may have in ones pocket a document which ought to be stamped as a promissory note, which would be direct evidence of the promise, but one need not produce it. That is true, of course, but I think that counsel for the plaintiff is in some difficulty about that in this case, although the general principle is clear enough. The trouble I feel

Page 719 of [1939] 3 All ER 712

about it is that what the defendants really agreed to do in this case was to give a document, and to pay according to the terms of that document, and, until they gave the document, they were under no liability, in my opinion.

The Stamp Act 1891, provides that a promissory note must be stamped according to the rate prescribed in the schedule, and then by s 38(1) it imposes a penalty on anyone:

… who issues, indorses, transfers, negotiates, presents for payment, or pays any bill of exchange or promissory note liable to duty and not being duly stamped. …

Then it says that the unstamped promissory note is not to be available for any purpose whatever. There is a definition clause in the Stamp Act 1891, although we all know, or think we know, what a promissory note is, and there is a definition clause in the Bills of Exchange Act 1882, which, I suppose, is explanatory of the common law, and applicable to merchants. However, the Stamp Act 1891, is by no means allied to that, and the legislature is seeking to separate the thing as widely as possible. The Bills of Exchange Act 1882, s 83(1) provides as follows:

A promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money. ...

If one thinks what that means literally, one begins to see what difficulties are created by this legislation. The Stamp Act 1891, s 33(2) provides as follows:

A note promising the payment of any sum of money out of any particular fund which may or may not be available, or upon any condition or contingency which may or may not be performed or happen, is to be deemed a promissory note for that sum of money.

That is to say, a good many documents which are not promissory notes are to be deemed to be promissory notes. A great many documents which do not come within the terms of the Bills of Exchange Act 1882, must be deemed to be promissory notes, and the definition in the Bills of Exchange Act 1882, are to be included in the term “promissory note” in the Stamp Act 1891. It is necessary to cut down the meaning of that definition to some extent, as the court has recognised. I have had cited to me the decision of the Court of Appeal in Yeo v Dawe, and another decision of the Court of Appeal, in which Lord Esher MR gave another judgment in Mortgage Insurance Corpn v Inland Revenue Comrs. I think that it is fair to say that if a document comes within the Bills of Exchange Act 1882or, putting it more correctly, if a document really is a promissory notethere can be no question that it must be stamped as one, and it then comes within the Stamp Act 1891. The definition of what is a promissory note is certainly struck at by the Stamp Act 1891, but, when one gets beyond the region of the definition of what are promissory notes into the region of the definition of what are to be deemed to be promissory notes, one perhaps gets the best guidance

Page 720 of [1939] 3 All ER 712

as to what is to be included by what was said by Bowen LJ in the Mortgage Insurance Corpns case, at p 358:

… they are meant to include documents the contents of which consist substantially of a promise to pay a definite sum of money, and of nothing else.

I think that one might say that, if one has what is really an agreement, or part of an agreement, set out in writing, then it is not necessary, at any rate, to include it for the purpose of the Stamp Act 1891, in the term “promissory note.” I think that I ought first to ask myself whether or not these documents are promissory notes so far as the common law meaning or definition in the Bills of Exchange Act 1882, is concerned, and then whether or not, if they are not, the Stamp Act 1891, includes them, and I have come to the conclusion that I ought not to hold that these are promissory notes. I think that it is right to say, in judging that question, that one must look at the document as it stands. Supposing that somebody had attempted to deal with these promissory notes, or, to put it another way, supposing that they were produced to a judge who had not yet been told of the surrounding circumstances, and it was for him to adjudicate whether or not they were promissory notes, the first thing to be noticed by the business man, or by the less commercially minded judge, would be these words on the heading of the document of 9 March 1935:

Reference A.C.3 T.R./W.L.1 S. Kischner, London, W.C.1. We confirm herewith that we undertake to pay irrevocably the sum of £200 to you or into your banking account on May 25, 1935, in respect of the above reference.

He would at once ask: “What do those words mean? Is this a confirmation of something which the parties have apparently agreed?” It relates to a man named Kischner, and, if I read to the end of the document, I find that it is in respect of the reference to Kischner that there is an undertaking to pay this sum. That may mean that it is to be paid if Kischner does not pay it, or it may mean that it is to be paid, to put the matter in a slightly different way, unless Kischner pays it first. That is to say, Messrs Weigel Leygonie & Co and Kischner were all liable to pay, or are both liable to pay. It would depend on there being an account between Kischner and Messrs Weigel Leygonie & Co, which may be subject to all sorts of stipulations and difficulties, and I cannot believe that anyone can take this as an entirely unconditional promise to pay that sum. On the other hand, if I consider the surrounding facts and circumstances, then I know that it was a writing which confirms, as it purports to do, something which had been orally agreed, and that it was part of the working of these transactions that the defendants were promising to pay this sum upon payment by Mr Wirth. In other words, they were saying: “We will repay you.”

The document of 9 March 1935, and the other similar documents contain these words: “to you or into your banking account.” I do think that, because it contains those words, that is an additional reason for

Page 721 of [1939] 3 All ER 712

saying that it is not a promissory note. The Bills of Exchange Act 1882, s 83(1), defines a promissory note as follows:

A promissory note is an unconditional promise in writing made by one person to another … engaging to pay … a sum … in money, to, or to the order of, a specified person or to bearer.

I doubt whether a promise to pay to a man or to somebody else, who may be his creditor or debtor, is a promissory note. I think that the terms show that the defendants had the option whether they paid the money due to Mr Wirth or into his banking account. It is to be observed that it is not a payment at a particular place or at a bank, and it may be an account on which the customer of the bank is owing money to the bank, and not on which the bank is owing money to the customer, and it may mean that the defendants would carry out their undertaking by paying the money, not to the plaintiff, but to creditors of his. I do not desire to make that my main ground for my decision on that point, although it gives a certain amount of assistance, but I think that counsel for the plaintiff was disposed to adopt it as an argument, and I mention it because I think that it may have some importance.

I do not think that there is any case entirely on all fours with this. It is plain, of course, that, where one has a case like Guaranty Trust Co of New York v Hannay & Co, and one has words such as occur therenamely, “charge the sum to account of [a named person],” that is to say, the particular accountit does not prevent what on the face of it looks like a bill of exchange from being a bill of exchange. That does not seem to me to touch this case at all. Here is a document in the form of a letter on the face of it referring to several provisions not dealt with in the document, and I say that, when one knows something of the surrounding circumstances, that knowledge seems to me to make it difficult, if not impossible, to regard this as a promissory note within the meaning of the Bills of Exchange Act 1882. I think that I am also justified in saying, and bound to say, that it does not come within the Stamp Act 1891, because there is clearly more in it than a promise to pay a definite sum of money. There are those words, which would be mysterious to anyone who did not know the full circumstances, which form an important addition to the mere promise to pay a sum of money, and it may be that such a qualification of a promise, for all that a man ignorant of those circumstances would know, would make it of no effect. On the other hand, however, if one does know all the circumstances, I think that one ought to assume that there are other conditions and stipulations imported into this document. I feel sure that these documents do not require to be stamped as promissory notes and that I am entitled to look at them.

That leaves only one more point, which I must deal with shortly. It is said that, if they are not promissory notes, at any rate they are guarantees. Counsel for the plaintiff is quite right in saying, of course, that the State of Frauds uses, not the word “guarantee,” but the words “debt, default or miscarriage of another.” As I have indicated already,

Page 722 of [1939] 3 All ER 712

it is not at all easy to say that these letters did amount to a promise to answer for the debt, default or miscarriage of another. I think that they were a promise to pay the sum, and, as between the plaintiff and the defendants, the plaintiff was looking to the defendants for the money, and was entitled to do so. I do not think that Kischner was not bound to pay. He could not be called upon to pay, in my view, unless the defendants on 25 May, according to this document of 9 March, fail to pay. If they did so fail, however, then no doubt he would have been so bound to pay. If he liked, I have no doubt, he could have gone to Wirth before 25 May and paid him, and then the defendants would not have been obliged to pay. That does not mean, however, that they were guaranteeing payment by him, which, indeed, was not contemplated. It was not contemplated that, either before or on 25 May, Kischner would pay the plaintiff. What was contemplated was that before 25 May came, or on 25 May, every step would be taken by Kischner which would make it right to expect the defendants to pay. That is to say, he was going to enable them to pay. Therefore, I do not think that this can be called a guarantee at all, and I am not satisfied, even if it was a guarantee, that anything is omitted which ought to be in it.

The question was then argued by counsel for the plaintiff that the document of 9 March 1935, and similar documents were not liable to stamp duty and referred to Alpe on the Law of Stamp Duties (22nd Edn), pp 58, 59.

Du Parcq LJ held that that document and those similar to it required to be stamped as agreements with a 6d stamp and the plaintiffs thereupon undertook to procure them to be so stamped and to pay the appropriate penalty.

Judgment for the plaintiff for £2,450 and interest at 4 per cent on each separate sum from the date on which it became due with costs.

Solicitors: Herbert Baron & Co (for the plaintiff); Tanner & Worley (for the defendants).

C St J Nicholson Esq   Barrister.

Caswell v Powell Duffryn Associated Collieries Ltd

[1939] 3 All ER 722


Categories:        ENVIRONMENTAL: HEALTH; Health and safety at work        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD MACMILLAN, LORD WRIGHT, LORD PORTER        

Hearing Date(s):        4, 5, 8, 9, 15, 16 MAY, 25 JULY 1939        


Mines Coal mine Dangerous machinery Absolute duty to fence Machinery only dangerous while moving Duty on workman to see that fence was in position Standard of  care to be applied to workmen Impracticability of preventing statutory breach Coal Mines Act 1911 (c 50), ss 55, 102(8).

The defendants were the proprietors of a coal mine in which there was a conveyor belt. This was originally totally enclosed, but, in order that some rollers might be cleaned, it was found necessary to make a portion of the fencing removable. The correct method of cleaning was

Page 723 of [1939] 3 All ER 722

to have the engine stopped and to scrape one half of each roller with a scraper, and then, having moved the belt slightly by restarting the machinery, to scrape the remainder. A workman was found dead with his head inside the machinery. On the day in question, the machinery had been stopped only in order to allow full trucks to be removed from under the end of the conveyor and empty ones to be substituted:

Held (i) contributory negligence is a defence to an action for breach of statutory duty.

(ii) the defendants had not established any contributory negligence on the part of the deceased workman.

(iii) the absence of a portion of the fencing amounted to a breach of statutory duty on the part of the respondents, which was a substantial cause of the accident.

(iv) defendants had failed to show that “it was not reasonably practicable to avoid or prevent the breach” within the meaning of s 102(8) of the Act.

Per Lord Atkin: A system which involved work being done at a machine which might be set in motion without any signal to the workman engaged in cleaning it seems to me most defective. Any kind of signal could have been employed which would give the cleaner time to stop cleaning and close the fence.

Per Lord Wright: What is all important is to adapt the standard of what is [contributory] negligence to the facts, and to give due regard to the actual conditions under which men work in a factory or mine, to the long hours and the fatigue, to the slackening of attention from constant repetition of the same operation, to the noise and confusion in which the man works, to his pre-occupation in what he is actually doing at the cost perhaps of some inattention to his own safety.

Order of Court of Appeal ([1938] 3 All ER 21) reversed.

Notes

In this case the House of Lords has considered fully the action founded on a breach of statutory dutysuch a breach usually arising under the Factories Act or the Coal Mines Act. The chief point of interest, however, will be that the House of Lords have now had an opportunity of expressing their views upon the much-discussed dictum of Lord Wright in Flower v Ebbw Vale Steel, Iron & Coal Co, and it is satisfactory to know that Lord Wright was a member of the House that heard this appeal. There was a direct conflict of view between that dictum and the judgment of the High Court of Australia in Bourke v Butterfield & Lewis Ltd, and the Court of Appeal in England have at times stated the law, if not in such directly conflicting terms, at least in terms which suggested that the dictum required some qualification. The effect of the present decision is to reconcile the English decisions and to reject the view taken by the High Court of Australia. The standard of negligence is, in all cases, not an absolute standard, but is dependent upon the attendant circumstances, and in the case of contributory negligence consisting of neglect of ones own personal safety, the court must have regard to the distractions of the plaintiff or deceased at the time of the accident, and to the strain and fatigue of the work which may make a workman give less thought to his personal safety than persons with less trying surroundings and preoccupations. Thus, though there is only one standard of negligence, that standard is subject to qualifications in all cases, but more particularly so in the case of a person employed in a factory or a mine.

As to Dangerous Machinery in Mines, see Halsbury (Hailsham Edn), Vol 22, pp 821824, para 1689; and for Cases, see Digest, Vol 34, pp 746, 747, Nos 12111213.

As to Contributory Negligence in Actions for Breach of Statutory Duty, see Halsbury (Hailsham Edn), Vol 23, pp 686, para 969; and for Cases, see Digest, Vol 24, pp 908911, Nos 6281.

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Cases referred to

Wakelin v London & South Western Ry Co (1884), [1896] 1 QB 189 n; 36 Digest 7, 4, 65 LJQB 224 n, 73 LT 615 n, on appeal (1886) 12 App Cas 41.

Bourke v Butterfield & Lewis Ltd (1927) 38 CLR 354; Digest Supp.

Radley v London & North Western Ry Co (1876) 1 App Cas 754; 36 Digest 109, 729, 46 LJQB 573, 35 LT 637.

Butterfield v Forrester (1809) 11 East 60; 36 Digest 112, 745.

Flower v Ebbw Vale Steel, Iron & Coal Co Ltd [1934] 2 KB 132; Digest Supp, 103 LJKB 465, 151 LT 87, on appeal [1936] AC 206.

Swadling v Cooper [1931] AC 1; Digest Supp, 100 LJKB 97, 143 LT 732.

Caswell v Worth (1856) 5 E & B 849; 36 Digest 111, 735, 25 LJQB 121, 26 LTOS 216.

Dew v United British SS Co Ltd (1928) 98 LJKB 88; Digest Supp, 139 LT 628.

Senior v Ward (1859) 1 E & E 385; 36 Digest 137, 910, 28 LJQB 139, 32 LTOS 252.

Pringle v Grosvenor (1894) 21 R (Ct of Sess) 532; 24 Digest 911, case g.

Lochgelly Iron & Coal Co Ltd v MMullan [1934] AC 1; Digest Supp, 102 LJPC 123, 149 LT 526, 26 BWCC 463.

Davies v Mann (1842) 10 M & W 546; 36 Digest 113, 751, 12 LJEx 10.

Britton v Great Western Cotton Co (1872) LR 7 Exch 130; 36 Digest 98, 651, 41 LJEx 99, 27 LT 125.

Groves v Wimborne (Lord) [1898] 2 QB 402; 24 Digest 911, 80, 67 LJQB 862, 79 LT 284.

Craze v Meyer-Dumore Bottlers Equipment Co Ltd [1936] 2 All ER 1150; Digest Supp.

Lewis v Denyé [1939] 1 All ER 310; Digest Supp.

Coltness Iron Co Ltd v Sharp [1938] AC 90, [1937] 3 All ER 593, 106 LJPC 142, 157 LT 394.

Appeal

Appeal from an order of the Court of Appeal (Greer and MacKinnon LJJ, Slesser LJ, dissenting) dated 12 May 1938 and reported [1938] 3 All ER 21, affirming, by a majority an order of Humphreys J, dated 14 December 1937, whereby judgment was directed to be entered for the defendants, the present respondents. The facts and the arguments are set out in the opinion of Lord Atkin.

D P Maxwell Fyfe KC and Joshua D Davies KC for the appellant.

Rt Hon Sir William Jowitt KC, Trevor Hunter KC and Godfrey Parsons for the respondents.

25 July 1939. The following opinions were delivered.

LORD ATKIN. My Lords, this is an appeal from a decision of the Court of Appeal who dismissed an appeal from a judgment of Humphreys J in favour of the defendants at the trial at the Cardiff Assizes in December 1927. The appellant, the plaintiff in the action, is the mother of a young man, Arthur Caswell, who was killed while working underground at the Pandy Pit of the Naval Colliery, Penygraig, belonging to the respondents. She sues under the Fatal Accidents Acts, and also as administratrix of his estate to recover damages on the ground that his death was caused by a breach of a statutory duty imposed upon the

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defendants by the Coal Mines Act 1911, s 55. That section prescribes that:

Every fly-wheel and all exposed and dangerous parts of the machinery used in or about the mine shall be kept securely fenced.

Caswell had been employed at the pit since he was 15. At the time of his death he was 22. Five days before his death he had been given the work at which he was killed. The facts of the case as they emerged in this House are as follows. They were not fully ascertained in the courts below, a circumstance which is especially unfortunate in view of the fact that the inquiry was into the conditions attending the death of a workman. The parties, however, gave every assistance to place the full facts before this House. It appears that, about 15 months before the date of the occurrence in question, the defendants had installed a system of conveyor belts which transported the coal when gotten from the face to trams, in which by a rope haulage system it was eventually conveyed to the pit bottom. The conveyor belt, which directly led the coal to the trams, is the one with which this case is concerned: it was in fact fed by two other conveyor belts communicating with the face. The belt, which was rather less than 3 ft wide, passed along the roadway, being supported on trestles with rollers until it reached the chute, down which it deposited its load into trams. The trams were made up in “journeys” of 15 trams, and unloaded were drawn in turn beneath the chute which had a device to check the discharge during the interval between one tram and the next. The belt itself during the loading went on revolving. As the belt discharged its load it passed round a roller or pulley and proceeded on its return journey immediately below the full portion. It was, of course, reversed so that the surface which had been uppermost and in contact with the coal was now undermost. The belt was driven by a compressed air turbine actuating three drums, pulleys or rollers, as they have been called in the case, each of 12 ins diameter and about 3 ft in width. This engine was at the side of the roadway: the upper belt with the coal passed over it: the lower belt passed into it at the top of the engine and passing over the three rollers received its motive force. It passed into the machine at the height of about 6 ft. Originally the whole structure was enclosed, but after a years working it was found necessary to have facilities for access to the top roller, the point met by the belt, for the purpose of cleaning. It was found that when the coal was damp, portions of coal and slimy stuff adhering to the surface of the belt would cake into hard obstructions on the surface of the roller, and cause the belt to run out of alignment. For this purpose the upper portion of the plate on the approach side of the engine was made detachable. The machine remained enclosed up to the height of about 4 ft 5 in and the remaining portion about 1 ft 6 in was loose, and was fitted into a slot so as to be removed and replaced without much difficulty. It was about 3 ft wide and to remove or replace it the operator had to stand in front: apparently it could not be placed in the slot from the side. From the line

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of the plate to the nearest portion of the roller was a distance of 2 ft. To the bite of the roller and the belt was 2 ft 9 ins. Part of Caswells duty was to clean this upper roller when necessary. For this purpose he was provided with two iron scrapers which were produced at the hearing. They were heavy implements about 4 ft in length, shaped like a hoe, the scraper end being about 6 ins in width; at the other end there was a rough handle in the shape of a ring. They were sufficiently heavy to make it improbable that a man would seek to handle them with only one hand. He could not, of course, clean the roller without removing the movable plate. The machine was about 12 yds away from the chute end of the belt. It was put in motion and off again, not at the machine itself, but by a lever at this chute, which was in charge of an assistant foreman, at this time Christopher Williams. The remaining work of Caswell was to bale the water that accumulated at this part of the roadway. The tramway was laid on sleepers laid transversely in the usual way: but sleepers were put down by the side of the tram lines and parallel with them to afford a footing and intervals were left between these sleepers to afford a sump or sumps from which the water could be withdrawn. For this purpose Caswell was provided with a bucket with which he baled the water into a cask on one of the trams at the beginning of the first shift: and afterwards into any empty tram that might be standing by. As far as his duties of cleaning the roller were concerned, it was proved that he had received instruction that he was not to clean while the machinery was in motion and that he was to replace the plate when he had finished. On the day in question four journeys had been completed. The men were engaged in loading the fifth journey: they had loaded three out of the fifteen trams; the fourth was under the chute when the machinery stopped. They went to the machine, and there they found the dead body of the unfortunate Caswell; his right hand was outstretched, caught between the belt and the roller and his head was drawn up against the roller: his neck was broken. The body was drawn up so that his feet were two ft from the ground, and beneath his feet and lying in water beneath his feet was one of the iron scrapers. The movable plate was standing up against the fixed plate below.

It is in these circumstances that this action was brought. It seems to me quite clear that this machinery when unfenced and in motion was dangerous: that it was not fenced at the time and therefore was not left fenced: and that the omission to keep the machine fenced “materially contributed to the death complained of,” to use the text of Lord Watson in Wakelin v London & South Western Ry Co It would appear, therefore, that the defendants would be liable unless they proved (i) under the terms of the Coal Mines Act 1911, s 108(8) that it was not reasonably practicable to avoid or prevent the breach, or (ii) that a contributory cause of death was the negligence of the deceased workman. It will be convenient to deal with the second defence first, for the principal discussion in the case was on that topic.

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There were four ways in which it was possible for Caswell to have cleaned the roller. The first, the forbidden way, was to scrape the dirt off the roller while it was in motion, ie, while the conveyor belt was actually discharging into the trams. This was, as the assistant manager proved, forbidden. The plaintiff called three trustworthy trade union officials who deposed to interviews with the manager in which he had said that this was the only way in which the roller could be cleaned. The manager deposed that he was misunderstood. He was referring to another method which is later to be described. The judge who saw the witness accepted the managers explanation, and we cannot differ from his finding. The plaintiff also called a witness, Howells, who was at the time of the accident working at the mine. He not only spoke of this practice but said that no scrapers were providedonly a long rod: that the movable plate was always absent, and that cleaning was constantly done by hand. The trial judge entirely disbelieved this witness with good reason. The defendants witnesses made it plain that the dirt on the roller caked into hard excrescences which could not be flicked off by the hand but had to be hit off with the scraper. There is no evidence that Caswell ever cleaned the roller while in motion: and it seems reasonably clear that, at any rate at the time of this accident, he was not doing so. It would, according to the defendants own evidence, be very unlikely that he would be doing such a futile thing as to use his hand alone: and if he were using the scraper (i) his hand would not have got into a position to be caught, (ii) the scraper would not have been found in the position where it was, lying at his feet. The second method was to clean the roller while the trams were being loaded. It might happen that the belt would be out of alignment or even stop because of obstruction on the roller. In these circumstances, Williams, of his own accord or on a hail from the cleaner, would stop the engine. The roller would be cleaned and a half-turn given so as to expose and clean the whole, and when finished, on another shout from the cleaner, the conveyor would be started again. This involved, of course, stopping the conveyance of coal throughout the entire part of the mine served by the conveyors: and seems a course which a boy of 22 would be disinclined to take on his own initiative. On the day in question it had not been adopted, for the machinery had never stopped except during the changing of the journeys. The third method was that which the manager said gave rise to the misunderstanding at the interviews. While the machinery was stopped during the changing of the “journeys,” a period of about 15 minutes, the exposed portion of the roller would be cleaned by the scraper: the cleaner would then call for another half-turn of the machine and the other half of the roller would so be exposed and cleaned. This would have been a simple method: it seems to have been assumed at the trial that it was the normal method: and I think it clear that the trial judge so thought. But on ascertaining the facts for this House it was made clear that this was not how it was done. The system of work-

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ing required Christopher Williams, who was in charge of the lever operating the machine to leave the spot at the chute where the lever was and attend the outgoing journey up to the spot about 80 yards away where there were double lines of tramway, detach one end of the haulage rope from the outgoing journey, attach it to the incoming journey of empty trams and accompany the latter to the chute. During this time, therefore, there was no one available to give the necessary half-turn: and this reasonably safe and effective system was not adopted. The fourth method was to wait until the machinery had stopped for the change of journeys and then clean the half of the roller which happened to be exposed, waiting to clean the remainder of the roller when it came into view at a subsequent stop. This was somewhat fortuitous for the cleaned portion might come up again at the next stop. I think, however, that it is almost demonstrable that this was the method adopted by Caswell on this morning. The first method of cleaning in motion is, I think, negatived by the evidence. The second and third were not used that morning as is shown by Williams evidence as to the engine. As to the fourth, I think there must have been some occasion to clean. The manager said the roller required cleaning twice an hour: the movable plate had been taken off: and one scraper at least had been handled by Caswell, for it was lying at his feet and not at the side where it had been left by the night overman at the end of the night shift.

Is there, then, any evidence that Caswell had been guilty of negligence contributing to the accident? If there is, it must be in the fact that he had not replaced the movable plate. That he was authorised, indeed bound, to remove it from its closed position is manifest. The machine could not be cleaned unless he did. The facts seem to show that he had been using the scraper to clean the roller while at rest. Is it proved that he was negligent in not replacing the plate? Now it is quite plain that there was no system of signalling or calling to the cleaner before starting the engine for the new journey. It was therefore perfectly possible for the machinery to start while the cleaner was at work at the roller. What was he then to do? He would cease cleaning and put down his scraper. The plate could only be replaced while facing the moving machinery: and I cannot think that it was negligent on his part not to incur this particular risk once the machinery started. The plate would have to be lifted to within about two or three inches at the most from the moving belt. I think it would be fair to conclude not only that it was not negligent to omit to replace the plate in the circumstances but that caution required that it should not be replaced. But if there was no negligence proved in not replacing the plate what other careless act of omission or commission is proved? Clearly none. What precisely happened is not known. It is perfectly possible, as pleaded in the alternative by the defendants themselves, that the unfortunate man slipped and stumbled with his arm through the opening and thereby was caught. Four or five minutes probably elapsed from the time the machinery started. I cannot see

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that he was doing anything careless in standing near the orifice during that period or perhaps taking the preliminary steps to resume his other job of baling. I should add that I do not think he is shown to be careless by not noticing either from the lapse of time or from the passing of the journey of empty trams that the stop interval was coming to an end. If closely engaged in cleaning he might well be regardless of time. I come to the conclusion, therefore, that the defendants have not established any contributory negligence on the part of the deceased man. I propose, however, later to say something on the interesting question whether any and what contributory negligence affords a defence to such an action as this.

I will, however, first discuss the other defence I mentioned under s 108(8) of the Act. As to this it is plain that the defendants were entitled to entrust the cleaner with the duty of removing this guard, for the roller could not otherwise be cleaned. It was their duty, however, to see that the guard was replaced: and though primarily that had to be done by the cleaner, yet it was their duty to see that such a system of working was adopted as made the performance of that duty practicable with reasonable safety. A system which involved work being done at a machine which might be set in motion without any signal to the workman engaged in cleaning it seems to me most defective. Any kind of signal could have been employed which would give the cleaner time to stop cleaning and close the fence. The defendants entirely fail, in my judgment, to show that “it was not reasonably practicable to avoid or prevent the breach.”

Though I have come to the conclusion that in this case the defendants failed to prove negligence on the part of the deceased workman, I feel bound to say something on the topic, which was much discussed in argument, whether contributory negligence is ever a defence to an action based upon a breach of a statutory duty, or, more narrowly, based upon a breach of a statutory duty to protect workmen and others imposed by such Acts as the Factory Acts, Mining Acts, etc. Authority for the proposition that contributory negligence in the ordinary sense is not a defence to such an action is to be found in the judgment of the High Court of Australia in Bourke v Butterfield & Lewis Ltd. The argument is that safety obligations are placed upon employers for the purpose of protecting not only workmen who are careful but also those who are careless: and that the object of the legislature is defeated if the right to sue for injuries caused by the breach of the safety regulations is denied to the careless workman for whose benefit amongst others the legislation was specially enacted. I venture to think that this attractive theory does not give sufficient weight to the true cause of action in such cases. The statute does not in terms create a statutory cause of action. It does not, for instance, make the employer an insurer. The person who is injured, as in all cases where damage is the gist of the action, must show not only a breach of duty but that his hurt was due to the breach. If his damage

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is due entirely to his own wilful act no cause of action arises as, for instance, if out of bravado he puts his hand into moving machinery or attempts to leap over an unguarded cavity. The injury has not been caused by the defendants omission but by the plaintiffs own act. The injury may, however, be the result of two causes operating at the same time, a breach of duty by the defendant and the omission on the part of the plaintiff to use the ordinary care for the protection of himself or his property that is used by the ordinary reasonable man in those circumstances. In that case the plaintiff cannot recover because the injury is partly caused by what is imputed to him as his own default. On the other hand, if the plaintiff were negligent, but his negligence was not a cause operating to produce the damage, there would be no defence. I find it impossible to divorce any theory of contributory negligence from the concept of causation; It is negligence which “contributes to cause” the injury, a phrase which I take from the opinion of Lord Penzance in Radley v London & North Western Ry Co. And whether you ask whose negligence was responsible for the injury, or from whose negligence did the injury result, or adopt any other phrase you please, you must in the ultimate analysis be asking who “caused” the injury: and you must not be deterred because the word “cause” has in philosophy given rise to embarrassments which in this connection should not affect the judge. Nor is this question of contributory negligence one that arises only in cases where the defendant is charged with negligence as though the negligences belong to the same pack and one trumps the other. In the leading case of Butterfield v Forrester the action was for obstructing the highway whereby the plaintiff was injured. No negligence appears to have been alleged, and the action appears to have been a simple action for a nuisance on the highway. The authority cited in argument from Bullers Nisi Prius, 26a so describes the action. I quote from the 7th Edn of 1817:

So if a man lay logs of wood cross a highway, though a person may with care ride safely by, yet if by means thereof my horse stumble and fling me, I may bring an action; for wherever a man suffers a particular injury by a nuisance, he may maintain an action …

Yet it is in such an action that Lord Ellenborough laid down the classic rule, “One person being in fault will not dispense with anothers using ordinary care for himself.” And the omission by the plaintiff to use ordinary care may be the sole cause of the injury as was held in Butterfields case, or have contributed to cause the injury as in the numerous cases which appear in the books. It may be said finally that if contributory negligence is not regarded from the point of view of causation it is difficult to see how damage comes to be divided under the Admiralty rule which is adopted in ordinary cases of injury in other systems of jurisprudence, and which persons of authority think should be adopted in ours.

I cannot therefore accept the view that the action for injuries caused

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by breach of statutory duty differs from an action for injuries caused by any other wrong. I think that the defendant will succeed if he proves that the injury was caused solely or in part by the omission of the plaintiff to take the ordinary care that would be expected of him in the circumstances.

But having come to that conclusion I am of opinion that the care to be expected of the plaintiff in the circumstances will vary with the circumstances; and that a different degree of care may well be expected from a workman in a factory or a mine from that which might be taken by an ordinary man not exposed continually to the noise, strain and manifold risks of factory or mine. I agree with the statement of Lawrence J in Flower v Ebbw Vale Steel, Iron & Coal Co Ltd at p 140, cited by my noble and learned friend Lord Wright in 1936 AC, at p 214:

I think, of course, that in considering whether an ordinary prudent workman would have taken more care than the injured man, the tribunal of fact has to take into account all the circumstances of work in a factory and that it is not for every risky thing which a workman in a factory may do in his familiarity with the machinery that a plaintiff ought to be held guilty of contributory negligence.

This seems to me a sensible practical saying, and one which will afford all the protection which is necessary to the workman. I cannot go further with the High Court of Australia and limit contributory negligence in this kind of case to wilful or serious misconduct. I have already said that I see no ground for imputing any negligence to the deceased man in the present case judged by any standard: but in any case judging the question of fact by the standard suggested by Lawrence J, I think that the defence of contributory negligence inevitably failed. This appeal must be allowed: and as the amount of damages has not been determined there must be a new trial on the question of damages only. Unless the parties otherwise agree the case will be reheard at the next Assizes for the county of Glamorgan. The appellants must have the costs so far incurred here and in the courts below.

My lords, I am requested by my noble and learned friend, Lord Thankerton, to say that he agrees with the opinion which I have read.

LORD MACMILLAN. My Lords, this is an action of damages by the mother of a mine worker who met his death while at work in a colliery belonging to the respondents. Her case is that her sons death was due to the respondents breach of their duty, under the Coal Mines Act 1911, s 55, to keep securely fenced the exposed and dangerous machinery in the mine which the deceased was employed to tend.

It has to be borne in mind that the Coal Mines Act 1911, while largely concerned with prescribing precautions to be taken for ensuring the safety of workmen in mines, does not confer any right of civil action for breach of its provisions. The statute enforces its requirements by imposing penalties of fine or imprisonment for their infringement. So

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far as I am aware, the only reference in the Act to civil proceedings is to be found in s 102(8), which enacts that

The owner of a mine shall not be liable to an action for damages as for breach of statutory duty in respect of any contravention of or non-compliance with any of the provisions of this Act if it is shown that it was not reasonably practicable to avoid or prevent the breach.

Consequently a civil action for damages in respect of an accident to a miner alleged to be due to a breach of statutory duty on the part of his employers must, in my opinion, be based upon negligence, and be subject to the general principles of law which govern actions of damages for negligence. Indeed, under the Workmens Compensation Act 1925, s 29(1), it is not permissible to take proceedings otherwise than under that Act in respect of an accident to a workman unless the injury is alleged to have been due to the personal negligence or wilful act of the employer or of some person for whose act or default the employer is responsible.

In such an action as that which is now before your Lordships it is therefore incumbent on the plaintiff to prove that the defendant owed a duty to the deceased workman, that the defendant failed to fufil that duty, and that the death of the workman was attributable to that failure of duty on the part of his employers. The Coal Mines Act 1911, does, however, materially assist the plaintiff in such a case. It absolves him from proving the existence and the nature of the employers duty, for it imposes and defines the duty. If the plaintiff can show that there has been a breach of the statute he has established the existence of negligence. It remains for him only to prove that the accident was due to that negligence. On this latter issue the defendant is entitled to avail himself of the recognised pleas open to the defendant in an action based on negligence. He can either (i) maintain that the plaintiffs evidence has failed to show that the defendants negligence caused the accident or (ii) prove affirmatively that the accident was caused wholly or in part by the plaintiffs own negligence.

Now in the present case the appellant starts with the advantage that the duty which the respondents owed to her deceased son is defined and prescribed by the statute and that the respondents admit that they were in breach of that duty. The only remaining questions are whether it has been sufficiently shown that the deceaseds death was due to that breach of duty on the part of the respondents, and whether the respondents have proved that the deceased by his own negligence caused or materially contributed to the accident which befell him.

The mere fact that at the time of an accident to a miner his employers can be shown to have been in breach of a statutory duty is clearly not enough in itself to impose liability on the employers. It must be shown that the accident was causally associated with the breach of statutory duty.

I do not propose to rehearse the facts of the present accident. They have been fully set out by my noble and learned friend Lord Atkin,

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with whose exposition both of the facts and of the law applicable thereto I find myself in entire agreement. While the precise manner in which the deceased met his death remains unascertained because there was no eye-witness of the accident, it has been proved to demonstration that if it had not been for the respondents breach of their statutory duty the accident would not have happened. The respondents breach of duty was clearly a cause of the accident. Having thus causally connected the accident with the respondents breach of duty, I do not think that it was incumbent on the appellant to eliminate and disprove all conjectural possibilities that the deceased may himself have been in some way careless of his own safety. From the facts established by the appellant it may be reasonably inferred that the respondents breach of duty was a substantial cause of the accident. It is then for the respondents to show that the deceased himself was by his own negligence wholly or partly responsible for the accident. The respondents have been at pains to suggest grounds for attributing possible negligence to the deceased. These grounds have been largely conjectural. I agree with all your Lordships that the respondents have failed, as matter of evidence, to establish any of them. They have also failed to bring themselves within the statutory defence provided by the Coal Mines Act 1911, s 102(8). That being so, the appellant is in my opinion entitled to succeed and I concur in the motion that the appeal be allowed.

LORD WRIGHT. My Lords, the precise manner in which the accident occured cannot be ascertained as the unfortunate young man was alone when he was killed. The court therefore is left to inference or circumstantial evidence. Inference must be carefully distinguished from conjecture or speculation. There can be no inference unless there are objective facts from which to infer the other facts which it is sought to establish. In some cases the other facts can be inferred with as much practical certainty as if they had been actually observed. In other cases the inference does not go beyond reasonable probability. But if there are no positive proved facts from which the inference can be made, the method of inference fails and what is left is mere speculation or conjecture.

In the present case there are, I think, certain known facts which enable some inferences to be drawn. Beyond that point the method of inference stops and what is suggested is conjecture. It is not necessary to recapitulate the facts which have been fully stated by my noble and learned friend, Lord Atkin. I shall be content to state what I regard as proved by the method of inference, and reject what appears to me to be matter merely of conjecture. I take it as proved by inference that the deceased had taken off the movable plate before the accident and had not replaced it. The evidence of the man whom he relieved at the job is clear that the plate was on when he left, and there was no one else at the place between 7 am, when Caswells shift began and the time of the accident, say 9.45 am. It is also matter of inference that the plate

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was off before the accident for about six minutes after the belt began to move to load the new journey, because there is nothing to justify the inference that Caswell took off the plate after the belt began to move, and that a certain number of trams must have passed along the lines for a few minutes before the belt began to move at the side of the place where Caswell stood. These facts, I think, can be properly inferred. But there is nothing to enable the court to infer what Caswell was doing at the time of the accident. I accept the evidence that Caswell had been told not to put his hand into the space opened by removal of the plate in order to clean the roller, indeed, it is clear that the deposit was so hard caked as to make that operation not only dangerous but useless. I accept the evidence that the belt had not been stopped for cleaning operations since Caswells shift began. I gather from the evidence that a proper, perhaps the best, opportunity to clean was when the machine was stopped during the 10 minutes or so while a journey of trams was being changed. In order to clean the roller the plate must have been removed. It is a reasonable, though perhaps not a certain, inference from the evidence that Caswell had thought it necessary to clean the roller when the machine stopped and had removed the plate to do so, but had been caught unawares with the plate off when Christopher Williams restarted the machine. I find it impossible to infer what Caswell then did. His duty was to clean the roller when necessary and to bale the water which collected in the sumps close to the machine. I infer from the position of the movable plate that at the time of the accident he was not trying to replace it. That, it seems, would have been a dangerous operation. The position in which one of the scrapers was found justifies the inference that he had been using it that morning, but not that he was using it at the time of the accident. The suggestion that he may have slipped while about to apply the scraper to the moving roller, is perhaps no more than a possibility. The suggestion that he may have been reaching up to clear the belt of coal which threatened to obstruct it, and that his hand had been drawn into the bite is a mere conjecture, with, so far as I can see, no objective fact to give it plausibility. There is no evidence where the bucket or baler, which it is assumed there must have been for him to bale with, was found. Hence it is not safe to infer that he had slipped while baling, though that is perhaps more probable than any other reconstruction. That he did slip, for whatever reason, seems to be almost the only possible inference from the evidence as a whole.

What is clear is that the absence of the movable plate, rendering the machine unfenced, was, if not the sole cause, at least a cause and a substantial cause, to adopt in this context what was called in Swadling v Cooper, at p 11, the crucial question in a road accident case, “whose negligence was it that substantially caused the injury?” Indeed it seems to me that the absence of the fence can properly be described as the dominant, effective, or common sense cause. It is in my opinion

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clear that if at the material time the machine had been fenced, the man could not have been killed, or even come to any serious harm. His death was caused by the absence of fencing. Merely to slip, unless in proximity to the unfenced machine, would have caused at most a bruising or by very bad luck perhaps a broken bone. The actual death was caused because the man was drawn into the open space, that is, it was caused by the want of fencing. That there was a breach of the Coal Mines Act 1911, s 55, is, I think, clear. It is true that the machine was not dangerous when stationary. The danger came when it was working. The mischief came because, owing to the defective system of working, the man who started the machine was, 12 yds from the machine, and started it in practice, as he did in this case, without knowing whether or not the guard was on and without any warning to the man at the turbine. Hence the respondents could not rely on s 102(8) of the Act because they could not show that it was not reasonably practicable to avoid or prevent the breach. That could have been done if the system of working had provided that the machine should not be started unless the guard was on. I think that the breach of s 55 caused, or at least substantially caused, the death.

It follows that the onus is shifted on to the respondents to prove that the deceased man was guilty of some misconduct or negligence which would have the effect of excluding his claim if the injury had not been fatal, and which would therefore exclude the claim in this action, because the appellant has not a higher right than the man would have had if not killed. I think for this purpose in this connection the same rule applies as that stated by Lord Watson in Wakelin v London & South Western Railway Co, at p 47, applicable to an ordinary plea of contributory negligence.

If the defendants negligence or breach of duty is established as causing the death, the onus is on the defendant to establish that the plaintiffs contributory negligence was a substantial or material co-operating cause. As Lord Watson said, “the plaintiff is not bound to prove the negative in order to entitle her to a verdict in her favour.” Here the breach of the statutory duty on the part of the respondent is established, and there is, in my opinion, no evidence justifying the inference that Caswell was guilty of any conduct such as to bar the claim, whether or not the term contributory negligence is used. But it is necessary to consider the arguments strenuously advanced on behalf of the respondent to justify such an inference. They may, I think, be fairly summarised as follows. Let it be conceded that the man was doing nothing wrong in removing the plate to clean the roller when the machine was stopped; to assume that would be the view most favourable to the man. In that event his duty was to replace it in due time. He should have done so the moment the machine started or if he had not time to replace it, stopped the machine for that purpose by signalling to the man in charge of the starting lever. Or still better he should have realised at an earlier

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stage that the new journey of trams was coming in as the trams passed him on their way to the point where each in turn would come in under the chute, and then he had ample warning to replace the plate. As he failed to do so, he was just as blameworthy as if he had taken off the plate when the machine was working, a course which if taken by him would have been negligence or misconduct sufficient to bar the claim. Such are the contentions on behalf of the respondents. The answers made on behalf of the appellant are, first, that all this is mere conjecture and does not discharge the onus which arises from the established fact of a breach of the statute by the respondents, and, secondly, that even assuming the set of circumstances which the respondents put forward as the reconstruction of the accident most favourable to the appellants claim, the failure of the man to replace the plate was not contributory negligence or conduct such as to bar the claim even on the assumptions postulated by the respondents. It was pointed out that there was no evidence that the man had been warned what he was to do if the machine started when the plate, having been properly removed during a stoppage, was off. To stop the machine after it had started for a journey of trams was to stop the work of the colliery, and the man might hesitate to do that and decide to wait till the next stoppage. It was not his fault that the machine started without his having an opportunity to replace it, and if he had kept away from the aperture he would have been safe enough, whereas the attempt to replace the plate while the machine was in motion was obviously dangerous. It may be that, if he so thought, he was guilty of an error of judgment, but not one for which he was to be blamed in the particular emergency. Nor was he to be blamed for not taking note as the empty trams began to pass him, that the machine would be starting as soon as the first tram of the journey reached the chute. There was no evidence that he had been directed to take note of that event, or that it had been recognised as constituting a warning to replace the plate. Thus, I think the answers on behalf of the appellant may be summarised.

In my opinion the appellant is right on both points. There is, first, no sufficient evidence that Caswell was guilty of any fault, so as to displace the onus imposed on the respondents by reason of their breach of statutory duty which caused the death, and secondly, the hypotheses relied on by the respondents, if established, would not show that he was guilty of more than an error of judgment or heedlessness or inadvertence in regard to his own safety not amounting to contributory negligence or misconduct such as to displace the claim. On this latter point I adopt, as an adequate criterion of what would bar the mans claim, the statement of Lawrence J in Flower v Ebbw Vale Steel &c Co, at pp 139 and 140. He accepted, as he was required to do by the authorities binding him, that contributory negligence was a valid defence to a claim for breach of a statutory duty such as had been committed in that case, but he proceeded to do what I think had not been done previously, ie, to define a standard to help a jury or a judge to decide whether or not a

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man had been guilty of negligence in cases of this type. The principle, he said, did not demand of “a workman in a factory a higher degree of care than an ordinary prudent workman in a factory would show.” He proceeded:

The question is then whether the plaintiff by the exercise of that degree of care which an ordinary prudent workman would have shown in the circumstances could have avoided the result of the defendants breach of duty. I find that he could and that the proximate cause of the accident was his own disobedience of orders …

I note the word “proximate” for the use of which there is support in Swadling v Cooper. He added:

… in considering whether an ordinary prudent workman would have taken more care than the injured man, the tribunal of fact has to take into account all the circumstances of work in a factory and that it is not for every risky thing which a workman in a factory may do in his familiarity with the machinery that a plaintiff ought to be held guilty of contributory negligence.

His judgment was affirmed by the Court of Appeal, but was reversed unanimously in this House on the ground that there was no evidence to justify the finding of disobedience to orders and that the decision of Lawrence J was based on this finding, which he described as the proximate cause of the accident, and not on the fact that the man was doing a risky thing in putting his hand as he had done inside the machine. In the opinion which I delivered in this House, at ([1936] AC at p 210), I added, without considering whether such a plea was properly described as one of contributory negligence, some observations in explanation and support of the judges definition of what constituted contributory negligence in such cases, which I regard as a valuable contribution to the law on this subject.

The circumstances under which men working in a mine or a factory are exposed to risk when machinery is unfenced in breach of statutory duty have general characteristics of their own. These have to be carefully considered when the question is whether a man was negligent. I think the importance of the ruling of Lawrence J is that he drew attention to these general conditions of work, and thereby gave a good practical direction and definition to help in deciding the issue of fact in any particular case. The judge did not mean that there are grades or degrees of negligence or that the plaintiff is not prevented from recovering by “mild” negligence, but only by “gross” negligence. Generally speaking in civil cases “gross” negligence has no more effect than negligence without an opprobrious epithet. Negligence is the breach of that duty to take care, which the law requires, either in regard to anothers person or his property, or where contributory negligence is in question, of the mans own person or property. The degree of want of care which constitutes negligence must vary with the circumstances. What that degree is; is a question for the jury, or the court in lieu of a jury. It is not a matter of uniform standard. It may vary according to the circumstances from man to man, from place to place, from time to time. It may vary even in the case of the same man. Thus, a surgeon doing an

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emergency operation on a cottage table with the light of a candle might not properly be held guilty of negligence in respect of an act or omission which would be negligence if he were performing the same operation with all the advantages of the serene atmosphere of his operating theatre; the same holds good of the workman. It must be a question of degree. The jury have to draw the line where mere thoughtlessness or inadvertence or forgetfulness ceases, and where negligence begins.

What was the standard of negligence in such cases had been left somewhat vague in the decisions before Flowers case. The word “wilful” has figured as affording some guide when applied to negligence as by Lord Campbell CJ and Wightman J in Caswell v Worth, and many years later by Scrutton LJ in Dew v United British SS Co Ltd; but wilful in this connection does not necessarily mean deliberate or intentional wrong-doing. In Senior v Ward, Lord Campbell CJ held that the deceased man had been guilty of gross negligence which materially contributed to his death. In Pringle v Grosvenor, the plaintiff, a woman, was employed to clean a revolving plate while in motion. It was safe on three sides, though unfenced. She was aware of the danger if she went on the other side, but did so and was injured. The Court of Session held that as she did not go into danger wilfully or out of mere bravado, but was committing a mistake by inadvertence, she was entitled to recover because she could not have been injured if the defendant had performed the statutory duty to fence. It is, I think, clear that epithets like “wilful” or “gross” do not advance the inquiry and can well be avoided. “Wilful” is not a term of art and is often used as meaning no more than a high degree of carelessness or recklessness. It is not necessarily limited in its use to intentional or deliberate wrongdoing.

I do not attempt to ascribe to the formula of Lawrence J the universality or literal sanctity which appertains to the provisions of a statute, but it is, in my opinion, not only a valuable guide, but is in accordance with the authorities which the judge considered. It also seems to me to minimise if not to destroy the practical importance of the question which was much debated whether the employers defence in such cases is properly described as a plea of contributory negligence. That it is not properly so described was held by the High Court of Australia in Bourne v Butterfield & Lewis Ltd. But I find in the conclusion of the judgment of the majority of the court delivered by Knox CJ these words, at p 361:

We think that in English law the phrase “contributory negligence” is appropriate only in an action for negligence and not in an action founded on breach of a positive statutory duty; but if no more was meant than that in such an action the plaintiff may be disentitled to succeed because of his own misconduct, we agree that that is an accurate statement of the law.

A little earlier in the judgment, at p 360, it is said:

Whether the conduct of an employee goes beyond mere thoughtlessness or want of care and amounts to misconduct is in every case a question of fact.

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On the facts of that case I think that according to the formula of Lawrence J the plaintiff would have succeeded, as in fact he did under the judgment of the High Court of Australia. But Lawrence J would have held that there was no negligence, whereas the High Court held that there was no misconduct.

I do not think that an action for breach of a statutory duty such as that in question is completely or accurately described as an action in negligence. It is a common law action based on the purpose of the statute to protect the workman, and belongs to the category often described as that of cases of strict or absolute liability. At the same time it resembles actions in negligence in that the claim is based on a breach of a duty to take care for the safety of the workman. The cause of action is sometimes described as statutory negligence and it is said that negligence is conclusively presumed. Thus, in Lochgelly Iron & Coal Co Ltd v MMullan, it was held that a breach of the statutory duty constituted personal negligence or wilful act of the employer within the Workmens Compensation Act 1925, s 29(1). I am not prepared to agree that the defence of contributory negligence should be excluded in such cases simply on the technical ground that the cause of action is not negligence in the strict sense, whereas contributory negligence presupposes original negligence. I have, however, come to the conclusion on a consideration of the English cases, that English law has accepted contributory negligence as a defence in this class of case. If the matter had been free from authority I should, I think, have thought it simpler to hold that a workmans claim for injury caused by breach of the employers statutory duty to fence and like duties, is only barred by blameworthy conduct on the mans part of such gravity and so directly causing the accident as in the judgment of the judge or jury to be properly described as the substantial cause of the accident and to shift the responsibility to him. This view would have been in accord with the general intention of the statute and would have avoided the technicalities which have gathered round the doctrine of contributory negligence. But that path is closed by the line of decisions in England, and if contributory negligence is properly defined, I do not feel that the distinction is for practical purposes generally other than one of words. What is all important is to adapt the standard of what is negligence to the facts, and to give due regard to the actual conditions under which men work in a factory or mine, to the long hours and the fatigue, to the slackening of attention which naturally comes from constant repetition of the same operation, to the noise and confusion in which the man works, to his pre-occupation in what he is actually doing at the cost perhaps of some inattention to his own safety. In Dews case, I question if this point of view was fully realised by Scrutton LJ when he dissented from the view of MacKinnon J, the trial judge. The latter was of opinion, as appears from what he said to the jury, that the real effective cause of the accident was the breach of the statutory regulation, and that the mans act in

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slipping was not the proximate cause of the accident. Scrutton LJ held that as the man slipped when going about his duty and thus fell into the open unfenced hatch, the slipping was negligence, because he would not have slipped if he had been more careful, and was a co-operating cause, and hence that the man was disentitled to recover. So far as I follow the facts, I should have thought that they did not show negligence on the part of the man even if he might have walked more warily and further that slipping was not the proximate cause of the injury. The negligence to be contributory must also be, in the words of Lord Campbell CJ in Senior v Ward, negligence “materially contributing” to the injury. The rules of contributory negligence have been mainly developed in connection with road accidents, but at least since Davies v Mann, the law, in discussing contributory negligence in such cases, has disregarded as not materially contributing causes some acts of the plaintiff, which might be regarded as negligence in a sense, and treated them as of subsidiary moment in ascertaining the causation of the injury, and has fixed attention on what was judged to be the proximate or effective cause. Hence the question was stated as it was in Swadling v Cooper to be what was the substantial cause. Contributory negligence involves two elements, negligence and contributing negligence. The policy of the statutory protection would be nullified if a workman were held debarred from recovering because he was guilty of some carelessness or inattention to his own safety, which though trivial in itself threw him into the danger consequent on the breach by his employer of the statutory duty. It is the breach of statute, not the act of inadvertence or carelessness, which is then the dominant or effective cause of the injury. This follows, I think, if the rules of contributory negligence in road accident or collision cases are suitably adapted to deal with breaches by an employer of his statutory duty.

I have dwelt on these legal questions out of respect to the very careful arguments of law with which counsel on each side have assisted the House. On the footing that contributory negligence is the test, I repeat that the respondents have not discharged the onus of establishing it, and further that such evidence as there is goes to negative a case of contributory negligence, and finally that the hypothetical reconstruction of the facts propounded on behalf of the respondents, even if accepted, would not show a case of contributory negligence.

I am for allowing the appeal.

LORD PORTER (read by Lord Macmillan). My Lords, the facts have already been fully set out and I need not repeat them, but some short statement of the duties of, and instructions given to, the deceased man is desirable. His death was caused as a result of his hand and arm being drawn in between a belt and roller which it was his duty to clean. At the time when the accident occurred the machine driving the conveyor belt was working and the guard covering the roller had been removed.

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It was admittedly part of his duty to take off the guard and to clean the roller set behind it. His only instructions were not to clean the roller whilst the machine was in motion.

He does not appear to have been told not to clean the roller whilst the railway trucks which had been filled by the conveyor belt were being removed and the empty journey was being drawn into position. Indeed as the manager stated in evidence, that would have been the obvious and convenient time to use for cleaning the roller, subject to the difficulty that whilst the machine was at rest half only of the roller would be exposed and the other half could not be cleaned, unless it were given a half turn by setting the engine in motion. But there may have been times when the half turn would be unnecessary because the removal of a lump or the cleaning of the half would effect all that was required. To have removed the guard at the time when the engine was stopped, would, in those circumstances have been part of the deceased mans duty, and in itself no evidence of negligence.

But, it is said, it was in any case negligent not to have replaced the guard before the engine started again. By consent of the parties and at the request of your Lordships certain information which had not been ascertained in evidence was supplied to your Lordships House. From this evidence it appeared that shortly before the engine was restarted, the journey of trucks would be moved into position alongside the deceased man and it was said that this truck movement would give him ample warning of the restarting of the engine. However, it has to be remembered that the trucks are being changed many times a day; that the young man would be busy cleaning or baling, and that his attention being so distracted he might well fail to notice the approach or presence of the trucks. Their arrival and removal were constantly repeated and in no sense intended to be a warning, though to one who was not engaged on other matters they might incidentally act as such. No doubt, however, once the engine was started again, the deceased man must have known that it was working, and if engaged in cleaning the roller, ought to have ceased to do so. The respondents maintain that it was his duty thereupon not only to cease cleaning, but also to replace the cover at once, and that he was guilty of negligence or misconduct in not doing so. I cannot take this view. The cover had to be replaced from the top and must touch or nearly touch the moving belt in the process.

If the machinery, when unfenced, was dangerous to one working in the vicinity, I think it was at least equally dangerous to anyone replacing the cover. Indeed to fail to replace it may have been a prudent rather than a negligent act. If this view be accepted the fact that the accident did not take place for five or six minutes after the engine was restarted can make no difference. Once the belt had begun to revolve, the cover might remain off without any negligence or misconduct on the part of the workman.

As to how the accident happened I think at best only a guess is possible.

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Since the scrapers had been taken from the place where they had been left, and one at least was found in the water immediately below the dead mans body, it seems to be established that he must have removed the cover for the purpose of cleaning the roller. That he continued to clean the roller after the engine started is improbable. Had he been doing so the scraper would have remained inside the fixed guard, not outside. The planks on which he stood were slippery and he was baling. He may have slipped, and where a slip might carry him it is impossible to say. On the other hand it is conceivable, though not very likely, that he was attempting to brush off some of the matter adhering to the belt either inside or outside the guard and that his hand was carried on and gripped between belt and roller. In these circumstances I think the true finding is that there was a breach of statutory duty on the part of the respondents, since the guard was off at a time when the machine was working; but there is nothing to show that the workman was in any way implicated in that breach of duty. He could rightfully remove the guard whilst the engine was stopped during the time the journey of trucks was being changed, and there is no evidence that he took it off at any other time. Nor have the respondents shown, either by positive evidence or necessary implication from the facts proved, that the workman was guilty of any misconduct, negligence or any wrongful act causing or contributing to his own injury. On the other hand it has not been shown by the appellant that the deceased man was not guilty of misconduct or negligence, and if such evidence be necessary she must fail.

What is the result of this finding? The respondents say that it is the duty of the appellant to show two things (i) that there was a breach of statutory duty, and (ii) that the breach was the cause of the accident. They admit, however, that if these two facts be proved the onus is on them to show negligence on the part of the workman causing or contributing to the accident. They add, however, that in this as in any case, the facts as proved by the plaintiff may establish without further evidence either that the accident was not caused by the breach of duty or that the person meeting with an accident must have been guilty of negligence. With the first contention the appellant does not quarrel. She acknowledges that she must show a breach of statutory duty and that it was at least a cause of the accident though not that it was necessarily the sole cause. She also agrees that the evidence called on her behalf might of itself establish that the respondents fault did not cause the accident or that the deceased man was in whole or in part the cause of his own misfortune. The principle applicable is to be found in the well-known passage from Lord Watsons speech in Wakelin v London & South Western Ry Co, where he said, at p 48:

If the plaintiffs evidence were sufficient to show that the negligence of the defendants did materially contribute to the injury, and threw no light upon the question of the injured partys negligence, then I should be of opinion that, in the absence of any counter-evidence from the defendants, it ought to be presumed that, in point of fact, there was no such contributory negligence. Even if the plaintiffs

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evidence did disclose facts and circumstances bearing upon that question, which were neither sufficient per se to prove such contributory negligence, nor to cast the onus of disproving it on the plaintiff, I should remain of the same opinion.

If for the word “negligence” of the defendants, the words “breach of statutory duty” be substituted, the opinion is exactly applicable to the facts of the present case. Undoubtedly the absence of the guard contributed to the injury which caused the death of the workman. Had the guard been in its place the accident would not have happened. On the other hand the evidence, as I have indicated, throws no light upon the deceased mans negligence nor casts the onus of disproving contributory negligence upon the appellant. The most that can be said on behalf of the respondents is that their employee may or may not have been guilty of some wrongdoingthere is nothing to show that he was. This finding would entitle the appellant to succeed, but the argument on behalf of the appellant has gone further and her representatives have maintained that once it is shown that the respondents have been guilty of a breach of statutory duty and that that breach materially contributed to the accident, the respondents cannot succeed unless it be shown that the workman knowingly and wilfully incurred the risk.

For this contention they rely upon the judgment of Lord Campbell CJ in Caswell v Worth. The case itself is not, I think, an authority for the principle propounded. It happened that in that case there was not only a want of ordinary care, but wilful misconduct, and Lord Campbell CJ fastened on that fact. He does not, however, assert that nothing less than wilful misconduct will constitute a defence, and Coleridge J in the same case, said, at p 855

The action, however, must be subject to the rules of common law; and one of those is, that a want of ordinary care, or wilful misconduct, on the part of the plaintiff, is an answer to the action.

The italics are mine.

The appellant, however, gets her chief support for the proposition from an Australian case, Bourke v Butterfield & Lewis Ltd, and in particular from the judgment of Isaacs J in that case.

Undoubtedly that judgment goes some way towards upholding the principle contended for, but such a contention was, I think, unnecessary for the decision, and is not supported to its full extent by the majority of the court, whose judgment was delivered by Knox CJ who said, at p 360:

But did Parliament intend to extend that protection to every employee in every circumstance? We think not. In our opinion it would be unreasonable to attribute to Parliament an intention to impose upon the employer responsibility for an injury which the employee deliberately invites, whether by adopting the means of inflicting it, or by rejecting the means of avoiding it, or for an injury which has happened because the employee deliberately took an unnecessary risk not in the interests of the employer, but for his own purposes. It is not easy to frame an exact formula; but it may be said that the employer is responsible for the negligence, but not for the misconduct, of his employee. Whether the conduct of an employee goes beyond mere thoughtlessness or want of care and amounts to misconduct is in every case a question of fact.

The speech of Lord Wright in Flower v Ebbw Vale Steel, Iron &

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Coal Co Ltd is also prayed in aid of the appellants contention, but I do not think it can be said to confirm that view. In terms the noble and learned Lord says, at p 212:

I shall assume, though the question is reserved for decision in this House if it should ever arise in the future, that contributory negligence, properly defined and properly established, is a defence in this action.

He then goes on to a consideration of what the proper definition of contributory negligence in such a case should be.

As against the view that contributory negligence is not a defence to a claim based on a breach of statutory duty, there are a number of dicta in cases beginning with Britton v Great Western Cotton Co, to the effect that it is such a defence. Perhaps the best-known is that contained in the judgment of Vaughan Williams LJ in Groves v Wimborne (Lord), at pp 418, 419. Moreover, in three recent cases the Court of Appeal have decided in terms that in such a case the contributory negligence of the injured party is a defence. See Dew v United British SS Co Ltd, Craze v Mayer-Dumore Bottlers Equipment Co Ltd and Lewis v Denye.

But the question, though debated, has never been determined in your Lordships house. Strictly speaking the phrase “contributory negligence” is not a very happy method of expressing an act of the employee which may relieve the employer from liability. Probably the phrase “negligence materially contributing to the injury” would be more accurate, but if the word “contributory” be regarded as expressing something which is a direct cause of the accident, either phrase is accurate enough, and the less accurate phrase is, I think, sanctioned by long usage.

Whatever form of words be used, I see no reason for differing from the numerous dicta extending over many years, or from the decision of the Court of Appeal. It was held in Lochgelly Iron & Coal Co Ltd v MMullan that a breach of statutory duty is personal negligence on the part of the employer within the meaning of that phrase in the Workmens Compensation Act 1925, s 29(1), and it is suggested that an action founded on breach of statutory duty is an action founded on negligence. Whether this be so or whether a breach of statutory duty he regarded as a cause of action in itself, the question is the same. Is the employer liable for all accidents caused by a breach of statutory duty, and if not, what is the limitation? Is it a defence to prove such negligence as would constitute contributory negligence in an action founded on a breach of common law duty, or must the employer go further and show that the workman knowingly and wilfully incurred the risk? These last are the words of Lord Campbell CJ. Knox CJ in the Australian case speaks of “misconduct” simpliciter.

No doubt the Mines Act was intended to protect both careful and careless workmen, but neither the appellant in the present case, nor the High Court in Australia were prepared to go the length of saying that

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no action on the part of the workman would relieve the employer, and the protection required may well be given by making the failure to fence a criminal act. I do not see why the ordinary common law rules should not apply, leaving the careless workman to his remedy under the Workmens Compensation Acts and reserving the additional protection for breach of statutory duty to those who exercise such reasonable care as a reasonable man working in the particular mine or factory would exercise. It is the reasonable man who is to be considered, not the particular individual, and therefore the degree of care will not vary from man to man, but it will, I think, vary from mine to mine and from factory to factory. The skill gained by a worker may enable him to take risks and do acts which in an unskilled man would be negligence, and on the other hand the fatiguing repetition of the same work may make a man incapable of the same care, and therefore not guilty of negligence, in doing or failing to do an act which a man less fatigued would do or leave undone.

The question to be determined was thus put by Lawrence J in the court of first instance in Flower v Ebbw Vale Steel, Iron & Coal Co Ltd, at p 139:

The question is then whether the plaintiff by the exercise of that degree of care which an ordinary prudent workman would have shown in the circumstances could have avoided the result of the defendants breach of duty.

With this I agree, and I doubt if the speech of Lord Wright in your Lordships house in the same case did more than express his views as to what was the standard required in that case. The High Court in Australia in Bourkes case may have thought that it required misconduct, and not lack of the appropriate degree of care, to prevent the plaintiff from succeeding. If they did, I do not agree with them.

There remains only to be considered the defence under the Coal Mines Act 1911, s 102(8), a section which exempts the employer from liability if it is not reasonably practicable to avoid or prevent a breach of s 55 of the Act. In Coltness Iron Co Ltd v Sharp, it was held that s 102(8) applied, because it was not reasonably practicable to keep the gearing which caused the accident securely fenced during the time at which it had to be observed whilst being tested.

So I suppose in the present case it might be argued that it was not reasonably practicable to prevent the guard from being removedindeed, that it was necessary to do so in order to clean the roller. In a sense this contention is true. But though the absence of the guard in an inchoate danger whilst the engine is not in motion, it is only an actual danger when it is working. It may be impracticable to avoid removing the guard whilst the machine is motionless, but it is not impracticable that it should be fenced whilst the machine is in motion, or at any rate to ensure that the workman shall have sufficient notice of the fact that the engine is about to be used again, and ample opportunity of replacing the guard. A bell ringing or a warning shout, and in either case a reply,

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should be sufficient to avoid any danger; and so would instructions that the cleaning should only take place if the engine was stopped for that purpose, and after the necessary stop and half turn, was started again at the request of the cleaner. This failure to give adequate warning is no doubt a fault of system. But it is not a fault of system of which the workman primarily complains. His complaint is that the guard was off. The employer might have excused himself by proving it impracticable to have it on, but he cannot rely upon his own want of system for that purpose. It is not the workman who wishes to rely, as a cause of action, upon the system adopted. It is the employer who desires to use it as an excuse for failing to keep the machinery guarded. I think then that the workman has proved a breach of statutory duty, and that that breach was a cause of the accident, that the employer has proved neither that the removal of the guard was an act which the workman should not have done, nor that its absence or the accident was due in whole or in part to the negligence of the workman, much less to his misconduct. I take the view that it would be a sufficient defence to the employer to prove that the accident was in part caused by the act of the workman, in the sense that it was materially contributed to by his negligence, and by negligence I mean a failure to exercise such a degree of care as an ordinary prudent workman in that mine would exercise. But the onus of proving that defence is admittedly on the respondents, and I do not think they have discharged it. The appellant is therefore, in my view, entitled to recover, and I would allow the appeal and order the respondents to pay the costs in your Lordships house and below.

Appeal allowed with costs.

Solicitors: Smith Rundell Dods & Bockett, agents for Morgan Bruce & Nicholas, Pontypridd (for the appellant); Furniss & Co, agents for Arthur J Prosser, Cardiff (for the respondents).

Michael Marcus Esq   Barrister.

Re Wester Wemyss, Tilley v Wester Wemyss

[1939] 3 All ER 746


Categories:        SUCCESSION; Administration of Estates        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, FINLAY AND LUXMOORE LJJ        

Hearing Date(s):        24 MAY, 6 JUNE, 18 JULY 1939        


Executors Retainer Against costs of administration action Discretion of court Administration of Estates Act 1925 (c 23), s 34 RSC Ord 65, r 1.

In 1934, the appellant commenced an action against the testators personal representative, the respondent in this appeal, in respect of a debt due to him from the testator. The estate of the testator was found to be insolvent, and the respondent claimed to be entitled to exercise the right of retainer, the money having been paid into court. Judgment was given in favour of the respondent and a declaration was made that the respondent was entitled to exercise the right of retainer in priority to the appellants costs in the action. It was contended that the rule that the executors right of retainer had priority

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over the right of a plaintiff in an administration action to be paid his costs had been displaced by RSC Ord 65, r 1, and that the court has, since the making of that rule of court, been entitled to make such order as it thinks just. Also, that the costs of administration are given priority by the Administration of Estates Act 1925, s 34(1). It was further contended that the rule does not apply where the effect of administration proceedings has been to establish a claim having priority over the executors debt, because the plaintiff, having preserved assets for the benefit of a preferential creditor, is entitled to his costs in priority to the claim of that creditor and therefore in priority to the right of retainer:

Held (i) the appellant was not entitled to his costs on the footing that he preserved assets for the preferential creditor as there was no reason to suppose that the creditors debt would not have been paid.

(ii) the words “subject as aforesaid” in the Administration of Estates Act 1925, s 34(2), refer to the earlier part of the subsection and not to sub-s (1) and therefore the directions given by sub-s (1) as to priority of administration expenses do not affect the right of retainer.

(iii) (Luxmoore LJ dissenting): the discretion of the court upon the question of costs does not affect the principles which govern the rights of retainer. The facts of the present case are not such as would justify the court (if it had a discretion) in exercising it so as to deprive the respondent of her priority.

Per Luxmoore LJ: in the circumstances of this case, the court ought to exercise its discretion as to costs by ordering that the appellants costs of the action down to and including the order on further consideration should be paid out of the funds in court except so far as such costs were increased by the appellant challenging the respondents right of retainer.

Decision of Crossman J ([1939] 1 All ER 382) affirmed.

Notes

The personal representatives right of retainer is founded upon his disability to bring an action against himself in respect of a debt due from the estate to him in his personal capacity. The present case is exceptional, in that the claim, which would be defeated by the retainer, was one for the costs of an administration action, and, it being a claim for costs, it was alleged to be one wholly within the discretion of the court. After a consideration of the cases, it has been decided that the right of retainer is paramount to the right to the costs.

As to Right of Retainer, see Halsbury (Hailsham Edn), Vol 14, pp 332337, paras 617628; and for Cases, see Digest, Vol 23, pp 370384, Nos 43924545.

Cases referred to

Tipping v Power (1842) 1 Hare 405; 23 Digest 373, 4427, 11 LJCh 257.

Chissum v Dewes (1828) 5 Russ 29; 23 Digest 373, 4426.

Re Rhoades, Ex p Rhoades [1899] 2 QB 347; 23 Digest 374, 4429, 68 LJQB 804, 80 LT 742.

A-G v Jackson [1932] AC 365; Digest Supp, sub nom Re Cockell, A-G v Jackson 101 LJCh 186, sub nom Re Cockell, Jackson v A-G 146 LT 450, 16 Tax Cas 681.

Richmond v White (1879) 12 ChD 361; 23 Digest 373, 4428, 48 LJCh 798, 41 LT 570.

Re Alpha Co Ltd, Ward v Alpha Co [1903] 1 Ch 203; 10 Digest 809, 5162, 72 LJCh 91, 87 LT 646.

Re Roby, Sherbrooke v Taylor (1916) 60 Sol Jo 291; 24 Digest 837, 8692.

Larkins v Paxton (1835) 2 My & K 320; 24 Digest 855, 8905.

Re Blake, Jones v Blake (1885) 29 ChD 913; 24 Digest 782, 8135, 54 LJCh 880, 53 LT 302.

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Fuller v Green (1857) 24 Beav 217; 24 Digest 840, 8728.

King v Bryant (1841) 4 Beav 460; 24 Digest 840, 8726, sub nom King v Hammett 11 LJCh 14.

Loomes v Stotherd (1823) 1 Sim & St 458; 23 Digest 371, 4401, 1 LJOSCh 220.

Woodward v Darcy (Lord) (1558) 1 Plowd 184; 23 Digest 370, 4392.

Wilson v Coxwell (1883) 23 ChD 764; 23 Digest 372, 4417, 52 LJCh 975.

Re Sanson, Robbins v Alexander [1906] 2 Ch 584; 23 Digest 373, 4423, 76 LJCh 21, 95 LT 633.

Re Harris, Davis v Harris [1914] 2 Ch 395; 23 Digest 381, 4511, 83 LJCh 841, 111 LT 666.

Harloe v Harloe (1875) LR 20 Eq 471; 24 Digest 848, 8817, 44 LJCh 512, 33 LT 247.

Appeal

Appeal by the plaintiff from an order of Crossman J, dated 2 February 1939, and reported [1939] 1 All ER 382. The facts are fully stated in the judgment of Sir Wilfrid Greene MR, and also in the judgment of Crossman J.

Lionel Cohen KC and G E Timins for the appellant.

F R Evershed KC and R O Wilberforce for the respondent.

Cohen KC: In a creditors action, the plaintiff must represent all the creditors, including any preferential creditor. The judgment of Crossman J was wrong for two reasons. First, the matter of costs is a discretionary matter, and the respondent did not, before the writ was issued, set up any right of retainer. She represented that she had no claim and did not ask for any special order as to costs. An administration action, when once commenced, cannot be stopped until further consideration. Secondly, the rule which the judge purported to follow only applies where there is no preferential creditor of higher degree than the one who seeks to exercise the right of retainer. The right of retainer has been waived by the respondent putting in an affidavit of proof of debt. The second point is that there was a preferential claim. Re Roby, Sherbrooke v Taylor is applicable. On the making of the order, no application was made that costs be reserved. The Supreme Court of Judicature (Consolidation) Act 1925, did not alter the previous practice of the Chancery Division, so far as RSC Ord 65, r 1, is concerned. The effect of the Act has been to make the Chancery practice applicable in the other divisions of the court. In Richmond v White and in Chissum v Dewes, there does not appear to have been any preferential creditor, which thus distinguishes them from this case. Where there is a creditor of a higher degree, he is entitled to his costs. The fund in court ought to have been applied to the payment of costs in the first place, and then in payment of the preferential claim. The executor cannot exercise the right of retainer as against a creditor of a higher degree. Chissum v Dewes and Tipping v Power go no further than establishing that an executor may exercise a right of retainer, even out of a fund in court, where there is no creditor of a higher degree than himself. Where, however, there is a creditor of a higher degree than the executor, the position

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is altered. It is clear from Larkins v Paxton that a preferential creditor ranks in front of an executor. A plaintiff who brings an action for the benefit of that preferential creditor must be entitled to his costs because he has created the fund out of which the preferential creditor receives payment.

Timins: RSC Ord 55, r 10, and Ord 65, r 1, were both introduced in 1883, and they were both considered two years later in Re Blake, Jones v Blake. The practice which has grown up since the date of that case was correctly stated by Peterson J in Re Roby, Sherbrooke v Taylor.

Evershed KC: Apart from any question of a right of retainer, it would not be right to throw upon the respondent the costs incurred by the plaintiff after he had been warned that the estate would contain nothing for the ordinary creditors. In such a case the plaintiff goes on at his peril: Daniells Chancery Practice, Vol 2, p 1068. I have not asked for the costs of the respondent to be paid by the plaintiff, but I am entitled to do so: Fuller v Green, King v Bryant. The existence of a right of retainer puts an entirely different complexion upon the matter. As regards the application of Larkins v Paxton to the present case, the rule that the plaintiffs costs should be allowed has no place when the retainer is exercised, as an executor who exercises a right of retainer is treated as if he had exercised it before the suit was commenced. Therefore, there is here no fund out of which the plaintiffs costs can be paid. It is not now denied that the respondent had a right to retain. The money either was or must be treated as having been in her hands. In Re Rhoades, ex p Rhoades, Lindley MR said that until the executor had done some act to show which assets he retained, it was obvious that the property in them could not be changed. Richmond v White shows that the fact that the money was paid into court by a third party, and not by the executor, does not prevent the money being treated as though it had passed through the executors hands. The right of a creditor to have his costs is based upon the hypothesis that there is a fund available. The right of retainer, however, is not affected by anything in the Administration of Estates Act 1925, except s 34(1)(2). Those subsections mean that the right of retainer is not affected subject to what is found in sub-s 1. In Tipping v Power, the plaintiff was an equitable mortgagee. A mortgagee is entitled to add to his security any costs he has incurred. The right of retainer is dealt with in Williams on Executors (12th Edn), p 648. The right of a creditor, who institutes an administration action, to be paid his costs out of a fund in court, does not affect the executors right of retainer for satisfaction of a debt due to himself. [Counsel also referred to Loomes v Stotherd, Woodward v Darcy (Lord), Wilson v Coxwell, Re Samson, Robbins v Alexander, and Re Harris, Davis v Harris, and to Ingpen on Executors And Administrators (2nd Edn), p 379.]

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Cohen KC in reply: Prior to the Administration of Estates Act 1925, the right of retainer could not be exercised until the preferential creditors had been paid or provided for. If an administration action is commenced and results in the payment of the preferential creditors, the plaintiff, as representing those preferential creditors, is entitled to be paid his costs before the executor can exercise his right of retainer. Since 1 January 1926, the costs in an administration action have express priority by reason of the Administration of Estates Act 1925, Sch I. Also, under RSC Ord 65, r 1, the court has the widest discretion as to costs, and, in the present case, the court should exercise its discretion in favour of the plaintiff. Re Roby, Sherbrooke v Taylor shows that the proper time to exercise the right of retainer so as to deprive a plaintiff of his costs is at the time the order is made. The discretion as to costs given by RSC Ord 65, r 1, is now wider than it was, and there is now an absolutely unfettered discretion. [Counsel also referred to Re Rhoades, ex p Rhoades, A-G v Jackson, Harloe v Harloe, Re Blake, Jones v Blake, Larkins v Paxton, Daniells Chancery Practice, Vol 2, p 1067, Setons Judgments and Orders, Vol 2, p 1466.]

Lionel Cohen KC and G E Timins for the appellant.

F R Evershed KC and R O Wilberforce for the respondent.

18 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. On 9 May 1934, the plaintiff, a creditor of the testator, issued an originating summons asking for administration of his estate (which was admittedly insolvent) and on 31 May an order for administration in the usual form was made. In answer to the inquiry as to debts, a joint affidavit by the respondent, the executrix, and her solicitor was filed on 16 October 1934. Among the claims set out in the exhibits to that affidavit there appeared the following: (1) As “claims which ought to be proved by the claimants” two claims by the commissioners of inland revenue, one for a sum of £682 6s 11d in respect of income tax, and the other for a sum of £1,029 5s 3d in respect of surtax. (2) As a “claim proper to be allowed without further evidence” the plaintiffs claim in respect of a debt of £1,000 and interest. (3) As similar claims, the respondents claim (a) to a sum of £2,049 15s 8d, the amount of loan and interest repaid by her to Martins Bank Ltd on behalf of the deceased, (b) to the value of certain stocks alleged to have been deposited by the respondent with bankers as security for overdrafts and loans to the deceased, and (c) to a sum of £1,000 alleged to have been paid to the inland revenue on behalf of the deceased. On 25 March 1935, the respondent filed a further affidavit in which she quantified her claims at the figure of £6,049 15s 8d. That sum was made up of the two sums of £2,049 15s 8d and £1,000 already referred to, together with a sum of £3,000 to represent the value of the deposited securities which had been sold by the bank. On 3 January 1936, a further affidavit was filed by the respondent, in which, for the first time, she claimed to retain the whole of the assets of the deceaseds estate, subject to any claims having priority, in or towards reduction of the

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alleged debt of £6,049 15s 8d. On 23 April 1937, the respondent filed another affidavit dealing with her alleged debt, but there is nothing in it to which reference need be made. On 30 July 1938, the master issued his certificate. In the first schedule, part I, there appeared, as a debt entitled to priority, two sums amounting to £793 3s 8d, part of the claim of the commissioners of inland revenue. The remainder of that claim was not entitled to priority. In part II of the first schedule there appeared among the debts allowed, the amount claimed by the appellant, and the sum of £2,049 15s 8d part of the amount claimed by the respondent as already mentioned. With regard to this latter sum, the certificate stated the respondents claim to exercise her right of retainer and that

the plaintiff not admitting such right the question whether the defendant has established such right is reserved for the decision of the court on further consideration.

In the third part of the first schedule, among the claims disallowed, there appeared the respondents claim in respect of the deposited securities and the sum of £1,000 already mentioned. Paragraph 2 of the certificate stated that of the sum of £408 2s 5d paid for funeral expenses, the sum of £100 only was allowed. Paragraph 3 recorded the payment into court by the respondent of a balance of £484 0s 7d remaining in her hands. In addition to this sum of £484 0s 7d, there had been paid into court by the respondent as recorded in the same paragraph, two sums of £733 4s 4d and £1,022 19s 1d. The outstanding property of the testator was set out in the second schedule. It consisted of certain shares and a loan which are apparently of no value, a reversionary interest which is stated in the body of the certificate to be at present unascertained, and £1,716 4s 8d 3½ per cent conversion stock, and £484 0s 7d cash in court to the credit of the action.

When the action came before Crossman J on further consideration two questions arose for argument. The first question was whether or not the respondent was entitled to exercise her right of retainer in respect of the sum of £2,049 15s 8d. The argument appears to have been that the respondent must be taken by her conduct to have waived her right of retainer. This argument Crossman J refused to accept, and, by the order made on further consideration on 2 February 1939, it was declared that, subject to the payment of the claim of the commissioners of inland revenue to the sum of £793 3s 8d, which was entitled to priority, the respondent was entitled to exercise her right of retainer in respect of the debt of £2,049 15s 8d. There is no appeal against this part of the order. The other question related to the appellants costs of the action. The appellant claimed that, notwithstanding the respondents right of retainer, he was entitled to have his costs of the action paid out of the funds in court in priority to the claim of the respondent. This question Crossman J decided in favour of the respondent, and the order contains a declaration that her right of retainer is exercisable in priority to the payment of the appellants costs of the action. It is

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against this part of the order that the present appeal is brought. The order also directed that the account of the testators property be continued and the second further consideration of the action was adjourned. The payment schedule to the order provided for the sale of the conversion stock and for the payment of £793 3s 8d to the commissioners of inland revenue, and of the residue of the funds in court to the respondent.

At the hearing before Crossman J the respondent, by her counsel, offered to allow the appellant his costs down to 3 January 1936 (the date when she first claimed to exercise her right of retainer) in priority to her claim, provided that he abandoned the rest of his claim in respect of costs. This offer was declined. Before us counsel for the respondent stated that, by way of concession and not of admission, the respondent would not in any event claim priority over the costs down to 3 January 1936. Crossman J held that the general rule that the executors right of retainer takes priority over the right of the plaintiff in an administration action to have his costs paid out of the fund, has not been displaced by Ord 65, r 1, which puts costs (including expressly the costs of administration proceedings) in the discretion of the court.

The argument before us fell under three heads. First, it was said that the rule, if it applied at all upon the facts of the present case, has been displaced by Ord 65, r 1, in the sense that the court is entitled to disregard it and to make such order as to costs as in the circumstances it thinks just. Secondly, it was said that the costs of administration are given priority by the Administration of Estates Act 1925, s 34(1). Thirdly, it was said that in any event the rule does not apply to a case where the effect of the administration proceedings has been to establish a claim having priority over the executors debt, the argument being that the plaintiff, having by his action preserved the assets for the benefit of the preferential creditor, is entitled to his costs in priority to the claim of that creditor and, therefore, in priority to the executors right of retainer.

It is convenient to deal first with the third of these contentions. In order to arrive at the true answer to the question which it raises, the nature of the executors right of retainer must be considered. It is stated in Blackstones Commentaries, Vol III, ch 2, at p 18, that

the executor having the whole personal estate in his hands, so much as is sufficient to answer his own demand is, by operation of law, applied to that particular purpose.

If there are no administration proceedings in which the executor is ordered to bring money into court, no difficulty arises in the application of this rule, subject, of course, to the rights of creditors of higher degree. As against other creditors the rule is absolute. When, however, the executor is ordered to bring the money in his hands into court, the court takes the assets provisionally into its charge pending the decision of the question whether or not the right of retainer exists. However, in doing so the court acts entirely without prejudice to the right, if it is

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ultimately shown to exist, and the executor in that event is put back into the same position as if the money had never been brought into court at all. This principle is nowhere more clearly expressed than in the judgment of Sir James Wigram VC in Tipping v Power, where he said, at p 411:

The next point is on the question of retainer by the executors. They have clearly a right to retain their debt. The fact of the money having been brought into court can make no difference. The debt of the executors being a simple contract debt, the court will not allow them to keep the fund in their possession; but the court will nevertheless ultimately place them in the same position as if they had kept it in their hands. If an executor says, “I have paid so much money in satisfaction of debts,” he is not charged with it, or, if he is charged with it, he is allowed it in his discharge; but the court does not give the same effect to the allegation, “I have retained so much for my own debt.” The rule is to consider the executor as having a right to retain in a due course of administration; but the court says, until the accounts are taken it cannot see that the right of retainer will exist. When the court has determined that there is no creditor of a higher degree than the executor, he must be remitted to his original position, to which the right of retainer was incident; and he is entitled to retain his debt in preference to the costs of administering the fund, for to that extent he is in the same situation as a creditor whose debt was paid before the suit, and who cannot therefore be afterwards affected by the costs of administration. Chissum v Dewes decided this very point, and I shall follow that authority.

It was suggested that the penultimate sentence of this paragraph means that, where there is a creditor of a higher degree, the executors right of retainer loses its priority over the plaintiffs costs even where the plaintiff is a creditor of the same degree as the executor. I cannot so read it. The reference to the creditor of a higher degree merely means that where such a creditor exists, his claim takes priority; it has nothing to do with the question with which we are here concerned.

The nature of the executors right of retainer and the basis upon which it rests were discussed at length by this court in Re Rhoades, where Sir N Lindley MR, in delivering the judgment of the court, said, at p 353:

It is quite plain from these authorities that the executors right to retain assets in his hands was, as against him, treated as enforced as soon as he could properly enforce it. It would be very strange if it were held that he had lost his right because he had done nothing to assert it before there was any occasion to do so. It is only when some one seeks to take assets out of the executors possession that it becomes necessary for him to assert his right of retainer; and, if he asserts it then, his right must be protected, unless, of course, he has released it or done something to deprive himself of it.

And again he said, at p 354:

He has no right to retain against creditors of a higher degree than himself; but his right to retain is a right to withdraw from the assets in his hands and distributable amongst himself and other creditors of equal degree enough to pay himself in full.

I may also refer for a statement of the origin and nature of the right to the opinion of Lord Atkin in A-G v Jackson, at p 370.

That payment into court by an executor in administration proceedings is without prejudice to his right of retainer is stated in terms in the judgments delivered in this court in Richmond v White. In that case money had been paid into court by an insurance company, but the

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executors right of retainer was held nevertheless to be exercisable. James LJ (with whom Brett LJ agreed), said, at p 363:

That must have been without prejudice to the right of the executor, just as much as if the form had been gone through of the money being paid to him and then paid by him into court.

Cotton LJ said, also at pp 363, 364:

The Vice-Chancellor says in his judgment, “The executor might have protected himself when the money was paid into court,” that is, as I understand it, the executor might have had a clause put in the order that the money was paid in without prejudice to his right of retainer. But I am of opinion that the order must be read as if such a reservation had been contained in it. … The court never allows an order for payment of money into court to prejudice the rights of the person paying it in.

I may add that I have looked at the original order of this court in Richmond v White and the assumption of Crossman J with regard to it is shown to have been correct. The order directs the funds in court to be applied in the first place in payment of the debt owing to the executor and the balance was paid to his solicitor on account of his costs.

I need not discuss the other authorities or the opinions of text book writers, the most important of which are referred to in the judgment of Crossman J. I may summarise what, in my opinion, is the effect of the authorities by saying that assets, in respect of which the executor is entitled to exercise and claims to exercise a right of retainer, are in effect withdrawn from the pool of assets available for the payment of debts of the same or a lower degree, that payment into court in an administration action is without prejudice to the executors right and does not affect the substance of the situation, that payment being mere machinery for preserving the assets pending a decision upon the executors claim, and that the inevitable result is to preserve the priority of that claim, if established, over the plaintiffs costs of action, since the result of the establishment of the claim is to put the executor back into the same position with regard to the assets in question as he would have been in if he had been allowed to exercise his right of retainer at the outset. If this view is correct, I am unable to see how the fact that there is a debt of higher degree can affect the position. If there had been no administration proceedings, the respondents right of retainer would have extended to the whole of the funds in her hands after satisfying the claim of the Crown; neither the appellant nor any other creditor of equal degree would have had any right to those funds. Before payment into court, the funds in the respondents hands belonged to her subject to the right of the Crown, and payment into court was made without prejudice to her right. I am unable to see why the existence of the Crowns claim can have put the appellant into a better position as against the executrix than he would have been in if that claim had not existed. The only practical result of the proceedings has been to determine the extent of the Crowns priority as against the executrix, a matter with which the appellant and the other creditors of equal degree have no

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concern whatever. The result of the plaintiffs contention, if accepted, would be to throw his costs upon the executrix, which is the very thing that a plaintiff in an administration suit is not entitled to do where the executor has a right of retainer. It is, in my opinion, fallacious to say that the plaintiff stands for this purpose in the shoes of the Crown, and that he is entitled to his costs upon the footing that by instituting the proceedings he preserved the assets for the Crown. There were ample funds to meet the Crowns claim, and there is no reason whatever to suppose that it would not have been duly met.

I now come to the first of the two arguments summarised above. I agree with the view of the judge that the discretion conferred upon the court in the matter of costs does not affect the well-settled principles which govern the right of retainer. To use the words of James LJ in Richmond v White, at p 363, the right of retainer

is a well-established right of the executor which the court has to apply to the facts of this case without allowing any technicality to defeat it.

There is no suggestion to be found in any of the authorities or the text books that the right is affected by the Judicature Act 1890, s 5 (now the Supreme Court of Judicature (Consolidation) Act 1925, s 50), and on principle I do not think that a discretionary power as to costs ought to be construed so as to enable the court to override a definite and well-established legal right such as that of retainer. Of course, the conduct of the executor may be such as to amount to a waiver of the right or to preclude him from asserting it, either absolutely or to the extent of the plaintiffs costs or some part of them. But any priority so obtained by the plaintiff would not be due to an exercise of the courts discretion; it would be due to the extinction of the right of retainer, in whole or pro tanto. If, contrary to this view, the court is entitled in a proper case to override the right of the executor, I see nothing in the facts of this case to justify it in doing so.

Upon this branch of the argument reliance was placed upon two matters. First it was said that, in proceeding with the action, the plaintiff was carrying out the directions of the court, and that he was accordingly constrained to carry it as far as further consideration. But even if it be assumed that there was any such compulsion on the plaintiff (a view which I cannot accept) this argument proves too much, for it would apply to every creditors administration action. The result would be that the plaintiffs costs of such an action would always have priority over the executors right of retainer, unless indeed it were to be expressly stated in the decree that the proceedings were to be without prejudice to that right. There is, in my opinion, no warrant in principle or in authority for giving any such effect to an administration decree and the subsequent proceedings under it. The other matter relied upon was an affidavit sworn by Mr Woolcott, a managing clerk in the employment of the solicitors to the plaintiff. In this affidavit, which was first produced in this court and was read by leave, an attempt is made to show that by

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reason of certain statements made by the solicitors to the respondent at an early stage before proceedings were commenced, she ought not to be allowed to claim priority. However, this evidence appears to me to be nothing more than additional evidence directed to the suggestion (which Crossman J rejected) that the respondent by her conduct had in some way waived her right to claim priority. If effect were given, to the argument it would mean that the respondent had surrendered her priority pro tanto. I do not think that it is open to the appellant, having failed on the question of waiver, to put forward the same class of facts as a ground upon which the court should exercise a discretion in his favour, the result of which would be to deprive the respondent pro tanto of her right of retainer. In any event the facts relied on are not, in my opinion, such as to justify the court, if it has a discretion, in exercising it so as to deprive the respondent of her priority.

The argument based on the Administration of Estates Act 1925, s 34, can be dealt with quite shortly. Sub-s (1) of that section incorporating part I of the first schedule gives priority to the funeral, testamentary, and administration expenses where the estate is insolvent. However, sub-s (2), after making certain provisions as to the right of retainer, continues:

Subject as aforesaid, nothing in this Act affects the right of retainer of a personal representative, or his right to prefer creditors.

In this paragraph the words “subject as aforesaid,” in my opinion, quite clearly refer only to the earlier part of sub-s (2) and do not refer to sub-s (1), with the result that the directions given by that subsection as to the priority of administration expenses do not affect the right of retainer (see A-G v Jackson, at p 384, per Lord Tomlin).

In the result the appeal is dismissed with costs, but in view of the respondents offer, referred to earlier in this judgment, there will be inserted, after the declaration of the prior right of the respondent, a paragraph to the effect that she consents to the payment of the appellants costs as between solicitor and client, down to 3 January 1936, being paid out of the fund in priority to her claim and a direction for taxation of those costs. The appellant must pay the costs of the appeal with the usual set-off. The necessary consequential alteration in the payment schedule must be made.

I am authorised by Finlay LJ to say that he has read and agrees with the judgment which I have just delivered.

LUXMOORE LJ. This appeal is from an order made by Crossman J on 2 February 1939, on the further consideration of an action for the administration of the estate of the late Lord Wester Wemyss.

The main question raised was, whether the plaintiff was entitled to his costs of the action down to and including the order made on further consideration, notwithstanding the right of the defendant executrix to retain a debt found to be due to her by the masters certificate in the

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action. The existence of the right of retainer was challenged unsuccessfully before Crossman J, but there is no appeal from that part of his decision. Crossman J held that the plaintiff was not entitled to have his costs of the action in priority to the defendants right of retainer, with the result that as the assets at present available are insufficient to satisfy the debt found due to the defendant, the plaintiff is deprived, at any rate for the time being, of his costs of the action. The plaintiff has appealed from this part of the order and asks that it may be varied by providing that his costs of the action down to and including the order on further consideration may be directed to be paid out of the funds standing to the credit of the action, notwithstanding the defendants right of retainer in respect of her debt, and after payment of the debt of £793 3s 8d due to the commissioner of inland revenue, which admittedly has priority to the right of retainer.

The appellant put his case in this court on three different grounds. His first ground was that the costs of an administration action, unless all questions with regard thereto are reserved by the order for administration, are a first charge on the estate which is being administered, and consequently take priority over any right of retainer exercisable by the legal personal representative. If this contention was rejected, he claimed that, upon the true construction of the Administration of Estates Act 1925, s 34, statutory priority is, in the case of insolvent estates, given to the costs of administration and, thirdly, he claimed that under the provisions of Ord 65, r 1, the court has the widest discretion with regard to the costs of any action, including an action for the administration of the estate of a deceased person, and that, if the right of retainer has priority over the costs of administration, the circumstances of the present case are such that the court ought, in the exercise of its discretion, to order the payment of the plaintiffs costs of action, down to and including the order on further consideration, out of the funds in court, notwithstanding the existence of the defendants right of retainer. In support of this last contention further evidence was deduced before this court to explain the material circumstances in which the action was instituted and the order for administration made. The further evidence consisted of an affidavit made by one R H Woolcott, the managing clerk to the solicitors acting for the plaintiff, together with an exhibit marked “R H W” containing the original notes made by him at an interview he had with a representative of the defendants solicitors on 26 April 1934. Reference was also made to the correspondence passing between the solicitors of the plaintiff and the defendant with regard to this action. It appears from the affidavit, exhibit, and correspondence, that the plaintiff, who was a creditor of the estate of the testator for a sum in excess of £1,000, being desirous of enforcing his claim, consulted his solicitors, who, by Mr Woolcott, interviewed a representative of the solicitors acting for the defendant. At that interview Mr Woolcott was told that the defendant as executrix had obtained probate of the testators will, that the estate

Page 758 of [1939] 3 All ER 746

was insolvent, the assets being sworn at £2,915 19s 7d, while the liabilities amounted to £13,734 14s 3d, that such liabilities included the debt due to the plaintiff, and that the funeral expenses amounted to £371 16s 10d. Mr Woolcott was also told that no creditor would take administration proceedings, and was given particulars of the principal creditors, among whom were the commissioners for inland revenue and certain banks. It was not suggested that the defendant executrix was a creditor of the estate or had any claims against it. The affidavit for probate contains no mention of any claim by the defendant against the estate. This affidavit was produced to Mr Woolcott in support of the statements made to him. Mr Woolcott was also told that if the plaintiff instituted administration proceedings, no opposition would be made by the defendant, and that every assistance would be given by her to get in the estate. In these circumstances the summons for administration was issued on 9 May 1934. In so doing the plaintiff was, in my judgment, entitled to rely upon the statements made to him on behalf of the defendant, and to act on the assumption that no question of executors retainer could thereafter arise, for such an assumption was the natural consequence of the information given by the defendants solicitors. The solicitors for the respective parties appeared before the master on 31 May 1934, and, on the defendants admission that the estate was insolvent, the master made an order for general administration, as he was entitled to, in accordance with the provisions of Ord 55, r 15a. A joint affidavit by the defendant and her solicitor was filed on 16 October 1934, setting out the testators debts, which included particulars of the debt due to the plaintiff, the debts due to the commissioners for inland revenue and the debts alleged to be due to the defendant. This affidavit for the first time mentioned the defendants claims against the estate. A further affidavit was filed by the defendant on 25 March 1935, in which she stated that her claims as a creditor against the testators estate amounted to £6,049 15s 2d. On 3 January 1936, a further affidavit was made by the defendant, in which she set up her claim to retain the whole of the testators assets in or towards reduction of the £6,049 15s 2d, subject only to any claim having priority thereto. Before the last mentioned affidavit was sworn, the plaintiffs solicitors wrote to the defendants solicitors on 27 June 1935 (sending to them a copy of a case for the opinion of counsel and the opinion of counsel thereon) stating in effect that, in view of the defendants claims and the value of the assets, the plaintiff did not propose to take any further steps in the action. The master, however, insisted on the action proceeding so that his certificate could be made and filed. This was done. The master made his certificate on 30 July 1938. By it he certified that the debts of the testator which had been allowed amounted to £12,309 18s 8d. These included three sums of £793 3s 8d, £520 0s 5d, and £412 4s 7d, respectively due to the commissioners for inland revenue, a sum of £1,083 4s 4d due to the plaintiff, and a sum of £2,049 15s 8d due to the

Page 759 of [1939] 3 All ER 746

defendant. The certificate found that the sum of £793 3s 8d due to the commissioners for inland revenue was entitled to priority over all other debts, and stated that the defendant claimed to exercise her right of retainer in respect of the £2,049 15s 8d but, the plaintiff not admitting such right, the question whether the defendant had established such right was reserved for decision of the court on the further consideration of the action. When the action came before Crossman J, on further consideration, the question whether the defendant was entitled to exercise her right of retainer was challenged but; as I have already stated, the judge declined to accept the plaintiffs contention that the right could not be exercised, and declared by the order on further consideration that, subject to the payment to the commissioners of inland revenue of the sum of £793 3s 8d, the defendant was entitled to exercise her right of retainer in respect of the sum of £2,049 15s 8d. The only matter in question on the appeal is whether the plaintiff is entitled to his costs of the action out of the estate. The defendant, while not admitting the plaintiffs right to be paid any part of his costs of the action in this court, stated that as a matter of grace the defendant would in any event pay such costs down to and including 3 January 1936, the date on which the defendant claimed for the first time to exercise her right of retainer.

As I have already stated there are three questions to be determined on this appeal. The first and second questions have been fully dealt with in the judgment which has been delivered by Sir Wilfrid Greene MR. I have had the advantage of reading that judgment and, so far as those two questions are concerned, I find myself in complete agreement with the conclusion at which he has arrived, namely, that the right of retainer has priority over the costs of an administration action, and I respectfully agree with his reasons for that conclusion. I, therefore, think it unnecessary for me to deal further with those questions.

The other question, however, remains. I have come to the conclusion that the court ought, in the exercise of its discretion, and notwithstanding the existence of the right of retainer, to order that the plaintiffs costs of the action down to and including the order on further consideration, with an exception to which I will refer later, be paid out of the funds in court. The reasons why I have come to this conclusion are as follows. The plaintiff did not start the proceedings for administration without making proper inquiries. As the result of the conversation between the respective solicitors, the plaintiff was entitled to act on the assumption that the representations made on the defendants behalf as to claims against the estate were correct, and that no question of the executors right of retainer would arise, because there was a representation that the executrix had no claim against the estate. The representations, although made in good faith, were inaccurate, but I see no reason why the plaintiff was not entitled to rely upon them or why the defendant was not to be bound by them. It is to be observed that to allow the plaintiff so to do does not deprive the defendant of her right of retainer; that right still

Page 760 of [1939] 3 All ER 746

remains. In my judgment, having regard to the nature of the representations made, it would be inequitable not to direct payment of the plaintiffs costs of the action out of the funds in court. So far as the exercise of the courts discretion as to costs is concerned, I think the plaintiff is in the same position as if the defendant had requested him to start the proceedings for administration and to obtain an order therefor with her concurrence, on the footing that the defendant had no claim against the estate, for the plaintiff instituted his action for administration with the full knowledge and co-operation of the defendant, and the order for administration was made upon the defendants admission that the estate was insolvent, and was made in the presence of her solicitors. After the order was made, the administration of the estate passed out of the defendants hands and was assumed by the court, for the order for administration directed that the testators property should be applied in payment of his debts and funeral expenses in due course of administration. After this order, neither the plaintiff nor the defendant could stop the proceedings, nor could the defendant, in the absence of a certificate in answer to the inquiry as to debts, have applied to the court with any hope of success, for payment to her out of the assets on the basis of her right of retainer.

The position of the court with regard to staying further proceedings in an administration action after a general order has been made containing a direction that the assets are to be applied in payment of a testator s debts in due course of administration is stated in Re Alpha Co Ltd, Ward v Alpha Co. That action was what is known as a debenture holders action, and not an action for administration of the estate of a deceased person. In it the rule with regard to the discontinuance of an administration action was stated, and was held not to apply to a debenture holders action. Kekewich J said, at pp 205, 206:

… the plaintiff wishes to discontinue his action, and the question is whether he is entitled to do that after judgment. … The action has been likened to an administration action by a creditor, suing on behalf of himself and all other creditors, against an executor or administrator for administration. I do not pause to distinguish between an action by a specialty creditor, or any other particular class of creditor, but I take the simple case. The creditor who is plaintiff obtains a judgment. The moment he has done that, if it is a proper judgment, he cannot possibly stop … for this reason, namely, that if it is a proper judgment it not only directs inquiries as to debts, etc., but also that the assets shall be applied “in a due course of administration.” It is perfectly well settled that if there is not that direction as to the administration of assets the decree is not an administration decree in the proper sense of the term, and actions at law cannot be restrained. But if that direction is given, they can be restrained, and for the reason that the court has then taken upon itself the duty of administering the assets … until there is a certificate that all the other debts have been paid, the plaintiff after decree is not dominus litis; he is, so to speak, a trustee of the action for the benefit of the other creditors.

The position in the present case is that the plaintiff was not able to stop the proceedings. He had, with the assent of the defendant, obtained an order for administration of the testators estate in the proper form, and the court, having by reason of such order, undertaken the duty of administering the estate, could properly refuse to make any order for payment out of the assets until after the masters certificate in answer to the inquiry

Page 761 of [1939] 3 All ER 746

as to debts had been made. The defendant was not in a position to ask the court to allow her to exercise her right of retainer, at any rate, until the debts having priority to her claim, had been ascertained and certified. In substance, so far as the defendant is concerned, she has taken advantage of the work done by the plaintiff in this action to obtain the benefit of her right of retainer. The question whether the court should exercise its discretion as to costs in favour of the plaintiff is, I think, different from the question whether there has been any waiver of the right of retainer, and the answer to it depends upon considerations different from those to be considered on the latter question.

I am of opinion that the court ought, in order to do what is right between the parties, to exercise its discretion as to costs by ordering that the plaintiffs costs of the action down to and including the order on further consideration should be paid out of the funds in court, but with this exception. The plaintiff has challenged the existence of the defendants right of retainer and has failed. He should not be allowed any additional costs incurred in respect of this challenge. In my judgment, the order should be limited by excluding from the plaintiffs costs any increase therein occasioned by such challenge.

For the reasons I have given I would allow the appeal and direct that the order of Crossman J be varied to give effect to the opinion expressed by me.

Appeal dismissed with costs.

Solicitors: Attenboroughs (for the appellant); Bridges Sawtell & Co (for the respondent).

W K Scrivener Esq   Barrister.

Cull v Inland Revenue Commissioners

[1939] 3 All ER 761


Categories:        TAXATION; Surtax        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD MACMILLAN, LORD WRIGHT, LORD PORTER        

Hearing Date(s):        15, 16, 19, 20, 22 JUNE, 27 JULY 1939        


Income Tax Dividends Sur-tax Dividend paid “without deduction of tax” Nil assessment upon company Sum set aside to meet future tax on sum paid as dividends Whether net or gross sum Finance Act 1931 (c 28), s 7.

The appellant was the holder of 20,000 ordinary shares in a company upon which for the year ending 31 March 1934, a dividend of 21s per share was declared “without deduction of tax,” the appellant therefore receiving £21,000. The company had incurred losses in previous years, with the result that it was not liable to be assessed to tax under Sched D for the year ending 5 April 1934. The dividend paid to the appellant had been paid out of a sum of £559,374 2s 1d, in respect of which a sum of £99,114 9s 7d had been put to reserve as a provision for the payment of income tax thereon in a subsequent year. The question at issue was whether the appellant ought to be assessed for the purposes of sur-tax upon £21,000 or upon that sum “grossed up” to £28,000, the standard rate of tax being 5s in the £:

Held as the dividend was paid without deduction of tax, the amount received was the gross sum and not a “net” sum within the

Page 762 of [1939] 3 All ER 761

meaning of the Finance Act 1931, s 7(2). For the purposes of sur-tax, therefore, the appellant should be assessed upon the sum of £21,000, being the amount actually received.

Decision of Court of Appeal ([1938] 1 All ER 467) reversed.

Inland Revenue Comrs v Pearson, Inland Revenue Comrs v Pratt overruled.

Neumann v Inland Revenue Comrs followed.

Notes

The opinions in this case review in detail the decision in Neumanns case. It has been thought that that was a decision upon special facts and of limited application, but their Lordships, while they agree that the facts were special, hold that the decision itself is of general application. A shareholder is not taxed under Sched D in respect of that part of his income which consists of dividends. The profits of the company are charged to tax in the hands of the company, and that fact is deemed to redound to the benefit of the shareholder. It therefore follows that dividends paid out of profits charged to tax, or, where no tax is payable on them (as was the case here), notionally charged to tax, cannot be “grossed up,” and the sur-tax is payable in respect of the sum actually paid. There is, therefore, a distinction between a tax-free dividend and one without deduction of tax.

As to Income Tax on Dividends, see Halsbury (Hailsham Edn), Vol 17, pp 249255, paras 504518; and for Cases, see Digest, Vol 28, p 82, Nos 463468.

Cases referred to

Neumann v Inland Revenue Comrs [1934] AC 215; Digest Supp, 103 LJKB 210, 150 LT 481, 18 Tax Cas 332.

Fry v Salisbury House Estate Ltd; Jones v City of London Real Property Co Ltd [1930] AC 432; Digest Supp, 99 LJKB 403, 143 LT 77, 15 Tax Cas 266, affg [1930] 1 KB 304.

Inland Revenue Comrs v Pearson, Inland Revenue Comrs v Pratt [1936] 2 KB 533, [1936] 2 All ER 731; Digest Supp, 105 LJKB 639, 155 LT 351, 20 Tax Cas 433.

Ashton Gas Co v A-G [1906] AC 10; 10 Digest 1162, 8225, 75 LJCh 1, 93 LT 676, affg SC sub nom A-G v Ashton Gas Co [1904] 2 Ch 621.

Bradbury v English Sewing Cotton Co [1923] AC 744; 28 Digest 81, 445, 92 LJKB 736, 129 LT 546, 8 Tax Cas 481.

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR and MacKinnon LJ, Lord Romer dissenting), dated 31 January 1938, and reported [1938] 1 All ER 467, dismissing an appeal by the appellant from an order of Finlay J dated 16 June 1937. The facts and the arguments are set out in the opinion of Lord Wright.

J Millard Tucker KC and Terence N Donovan for the appellant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondents.

27 July 1939. The following opinions were delivered.

LORD ATKIN (read by Lord Russell of Killowen). My Lords, this is an appeal from the Court of Appeal, Sir Wilfrid Greene MR and MacKinnon LJ, Romer LJ dissenting, who affirmed a decision of Finlay J reversing, upon a case stated by the commissioners for special purposes, the determination of the commissioners. The appeal to the commissioners by the present appellant was against an assessment

Page 763 of [1939] 3 All ER 761

to sur-tax for the year ending 5 April 1934, in the sum of £70,637. The question that arises is said, no doubt correctly, to be one of importance to the revenue. It was fully debated at the hearing, but inasmuch as it appears to me to be completely covered by a recent decision of this House, I find it unnecessary to deal with many of the topics of discussion. The appellant was the holder of 20,000 ordinary shares in Cull and Co, an unlimited company having a share capital of £800,000 divided into 700,000 preference and 100,000 ordinary shares of £1, all issued and fully paid. The company carries on business as bankers and financiers. On 13 March 1934, the directors resolved:

that the dividends on the 5 per cent. cumulative preference shares for the four years to Mar. 31, 1934, be paid on Mar. 31, 1934, and that an interim dividend for the year to Mar. 31, 1934 on the ordinary shares of 21s. per share be paid on Mar. 31 1934, without deduction of income tax.

In making his return of total income for sur-tax purposes, the appellant included the sum of £21,000, his dividend on his holding of ordinary shares. The assessing commissioners added £7,000 as representing income tax in respect of this dividend, thus increasing the assessment to £28,000. On appeal the commissioners for special purposes reduced the assessment by the sum of £7,000; and it was this determination which was reversed by Finlay J and gives rise to the present appeal.

My Lords, it is now clearly established that in the case of a limited company, the company itself is chargeable to tax on its profits, and that it pays tax in discharge of its own liability and not as agent for its shareholders. The latter are not chargeable with income tax on dividends, and they are not assessed in respect of them. The reason presumably is that the amount which is available to be distributed as dividend has already been diminished by tax on the company, and that it is thought inequitable to charge it again. At one time it was thought that the company in paying tax paid on behalf of the shareholder: but this theory is now exploded by decisions in this House: and the position of the shareholders as to tax is as I have stated it. The company may, however, in declaring a dividend, declare that it shall be paid tax-free. Such a declaration is equivalent to giving the shareholder the right to such a sum as after making the deduction of the appropriate amount attributed to tax, will produce the net tax-free dividend in fact paid. Such larger sum in truth represents the profit to which the shareholder has become entitled from the company, and is properly returnable in his total income for sur-tax purposes: just as the gross income from which deductions of the appropriate sum for tax has in fact been made on payment is true income and is duly returnable. The right of the company to make a deduction, which is not in fact tax, for it represents a sum which is neither chargeable on the shareholder nor payable by the company to the Inland Revenue, is given now by All Schedules Rules, r 20. Rule 20 is as follows:

The profits or gains to be charged on any body of persons shall be computed in accordance with the provisions of this Act on the full amount of the same before

Page 764 of [1939] 3 All ER 761

any dividend thereof is made in respect of any share, right or title thereto, and the body of persons paying such dividend shall be entitled to deduct the tax appropriate thereto.

The deduction is optional, and when it is made, the result in the instances I have givena dividend which is paid less the reduction, and a dividend which is declared to be tax-freeis that the shareholder has suffered a deduction authorised by statute from a total sum which otherwise he would be entitled to receive in full. In 1927 sur-tax was substituted for super tax: and one of the provisions made for arriving at the total income for purposes of sur-tax is contained in the Finance Act 1927, s 39(2):

In estimating under the Income Tax Acts the total income of any person, any income which is chargeable with income tax by way of deduction at the standard rate in force for any year shall be deemed to be income of that year. …

That provision was not apt to cover the case of the deduction which a company is authorised under r 20 to make when paying a dividend, for, as I have said, the dividend is not in fact chargeable with tax.

No doubt to avoid this amongst other difficulties, the Finance Act 1931, contained s 7(2) upon which this case depends:

Subject as hereinafter provided, a dividend paid by a body of persons, whether before or after the commencement of this Act, shall, to the extent to which it is paid out of such profits and gains as are mentioned in subsect. (1) of this section be deemed, for all the purposes of the Income Tax Acts, to represent income of such an amount as would, after such deduction of tax as is authorised by the provisions of the said rule 20, be equal to the net amount received …

The Crown contended that this subsection on its true construction applied to all cases where a deduction was authorised to be made, and was not confined to those in which a deduction had actually been made. In their submission, it, therefore, for the purposes of income, imputed to the person receiving a payment in cases where no deduction had in fact been made the receipt of a hypothetical sum calculated as though deduction had been made: what is now known in income tax slang as “grossing up.” Whatever might have been said for this construction before 1934, it is impossible now to accept it, for by the decision of this House in Neumann v Inland Revenue Comrs, it was expressly held to be wrong. In that case The Salisbury House Estate Ltd, had been assessed to income tax upon the whole of its receipts from rents which happened to exceed the Sched A assessment to which it had been assessed and paid tax. In the case of Fry v Salisbury House Estate Ltd, it was decided that the company were not assessable on receipts in excess of the Sched A valuation. On the question being raised between the company and the inland revenue, the company had placed to income tax reserve a sum equivalent to the amount of tax further demanded: and upon the case being decided in their favour they then distributed amongst the shareholders without any deduction, the total sum as placed to reserve. In Neumanns case the appellant was one of those shareholders. Originally the company had declared the dividend as being free of tax, and had sent the shareholders a cheque for £4,275,

Page 765 of [1939] 3 All ER 761

stating that it was equivalent to a gross amount of £5,343 15s. The appellant had therefore returned the larger sum as part of his total income. Later the company withdrew and stated that they had erroneously described the dividend as tax-free. Thereupon the appellant claimed to reduce his total income return, alleging that neither the smaller nor the larger sum had to be included in his total income return, and appealed against his assessment.

The special commissioners decided against him: on appeal Finlay J decided in his favour, holding that the sum was not paid out of profits brought into charge: the Court of Appeal decided against him. On appeal to this House, it was held that the smaller sum had to be returned on the ground that it had been paid out of profits and gains brought into charge. But as to the larger sum, it was held that s 7(2) did not apply. All the Lords held that that subsection did not operate unless there had been a deduction in fact. They were impressed with the apparent anomaly arising in the case before them from the fact that the whole sum, divisible amongst the shareholders and distributed by the dividend in question, was in fact paid to the shareholders, so that if there had been a “grossing up” of the dividend, the shareholder would have had imputed to him an income to which he had not and never could have become entitled. Seeing that the contention of the Crown led to this result, the House came to the conclusion that the subsection had not the wide meaning imputed to it. Each of the Lords construed the subsection in its general application, and each of them came to the conclusion that it had no application to a case where in fact no deduction had been made. The language used appears to me to be quite free from any ambiguity or qualification.

Lord Tomlin said, at p 231:

If a deduction from the gross sum was authorised but was not in fact made, as was the case here, there is in my opinion nothing in the language of the subsection which entitles the inland revenue to treat the gross sum as being greater than in fact it was.

Lord Warrington of Clyffe said, at p 233:

… I agree with my noble and learned friend. In such a case as this, namely where no deduction is in fact made, there is no distinction between a gross sum and a net sum. The actual sum paid, and not some wholly fictitious sum, is therefore that which should be included in the return of income.

Lord Wright said, at pp 242, 243:

But I think the claim of the respondent fails because it ignores the word “net” in subsect. 2. That word involves the idea of deduction, which in this case must be a deduction of tax. … What was distributed, being £4,275, was in my judgment the gross amount: the company, though authorised to deduct tax from it, were not bound to deduct it and did not in fact do so. I cannot see any justification for describing the sum distributed as a “net amount” and hence I conclude that sect.7(2), does not apply.

My Lords, I cannot think of words more apt to convey that the members of this House were putting a general construction on the words in question, and that in their view, where no deduction was in fact made, the subsection did not apply, The position where a “tax-free” dividend was

Page 766 of [1939] 3 All ER 761

declared was not within the purview of the decision. The construction so authoritatively stated, binds us as it bound the courts below. I find no justification for limiting it to facts precisely similar to those existing in this instance, or to cases where it might be supposed that no deduction could be made. Still more without warrant is it to put a limited construction upon the decision of the House because of the untoward results to the revenue which may result. I decline to embark upon the consideration of the question whether the decision was right or wrong: it binds me, and I necessarily accept it. If it leads to ill results the effect can be remedied by legislation. It follows from that I have said that the cases of Inland Revenue Comrs v Pearson, Inland Revenue Comrs v Pratt, were wrongly decided and must be overruled. The appeal should be allowed, the orders of the Court of Appeal and Finlay J should be set aside, and the determination of the commissioners for special purposes of the income tax restored. The appellants should have the costs here and in the courts below.

LORD RUSSELL OF KILLOWEN. My Lords, I agree with the motion proposed. I do not restate the facts.

Our decision in this case depends, in my opinion, and depends solely upon what is the proper construction to be placed upon the Finance Act 1931, s 7(2). All Schedules Rules, r 20 enables a company, if it thinks fit, but does not compel it, before paying a dividend of its profits or gains “to be charged,” to deduct “the tax appropriate thereto.” The words “appropriate thereto” were subsequently made the subject of legislation by the Finance Act 1927, s 39, which provided by sub-s (1) that:

Such of the provisions of the Income Tax Acts as provide … that there may be deducted from any dividend the tax appropriate thereto … shall have effect as if they provided that tax may be deducted … at the standard rate for the year in which the amount payable becomes due.

The Finance Act 1931, s 7, is as follows:

(1) The provisions of Rule 20 of the General Rules, which authorise the deduction of the appropriate tax from any dividend paid by a body of persons, shall, in relation to a dividend paid by any body of persons, whether before or after the commencement of this Act, be construed as authorising the deduction of tax from the full amount paid out of profits and gains of the said body which have been charged to tax or which, under the provisions of the Income Tax Acts, would fall to be included in computing the liability of the said body to assessment to tax for any year if the said provisions required the computation to be made by reference to the profits and gains of that year and not by reference to those of any other year or period.

(2) Subject as hereinafter provided, a dividend paid by a body of persons, whether before or after the commencement of this Act, shall, to the extent to which it is paid out of such profits and gains as are mentioned in subsect. (1) of this section, be deemed, for all the purposes of the Income Tax Acts, to represent income of such an amount as would, after such deduction of tax as is authorised by the provisions of the said Rule 20, be equal to the net amount received. …

The first subsection of this section brought the dividend now in question within r 20, so as to enable the company if it thought fit, to deduct tax; but it will be observed that while the amount which it could have

Page 767 of [1939] 3 All ER 761

deducted as the “tax appropriate thereto” has been definitely fixed at the standard rate for the year in which the amount of the dividend became due, it is in no way comparable with the tax payable by the company itself. The second subsection is the crucial one in the present case, the sole question being, as I conceive, whether upon its true construction, it does or does not apply to a dividend which is paid by a company without any deduction of tax having in fact been made by the company. My Lords, in my opinion that very question was decided by this House in the case of Neumann v Inland Revenue Comrs, in which, as I read their opinions, all the noble Lords who took part in the debate, expressed the view that the subsection only applied to cases where a company, after declaring a dividend of a stated amount, pays in satisfaction thereof a sum less than the stated amount of the dividend by a sum equal to tax thereon. In other words, that the subsection only applies to cases in which what the shareholder receives is a “net amount,” namely, an amount reduced from a larger amount by reason of a deduction made by the company against the shareholder.

Lord Tomlin can have meant nothing else when he said, at pp 230, 231:

The subsection in effect provides that it is the gross amount before deduction which is to be treated as the income for the purposes of the Acts. If a deduction from the gross sum was authorised but was not in fact made, as was the case here, there is in my opinion nothing in the language of the subsection which entitles the inland revenue to treat the gross sum as being greater than in fact it was.

Lord Warrington of Clyffe agreed with Lord Tomlin. He said, at p 233:

In such a case as this, namely where no deduction is in fact made, there is no distinction between a gross sum and a net sum. The actual sum paid, and not some wholly fictitious sum, is therefore that which should be included in the return of income.

Lord Wright is quite explicit on the point. What was distributed was in his opinion the gross amount; and he continues, at p 243:

… the company, though authorised to deduct tax from it, were not bound to deduct it and did not in fact do so. I cannot see any justification for describing the sum distributed as a “net amount” and hence I conclude that sect. 7(2) does not apply. I cannot treat the word “net” as mere surplusage or as simply meaning the actual amount, whether gross or net.

It was argued that the case was decided only upon its own special facts. I cannot assent to this view. It was a decision that the section on its true construction did not apply if no deduction had in fact been made by the company before payment. Indeed, as I read the case, if the word “net” had not been in the subsection, the decision must have been in favour of the Crown. I agree with the result which was reached by Lord Romer, although-there are some statements in his judgment with which I cannot concur. In particular I do not agree with the view that the cases of Pratt and Pearson were rightly decided. But I do agree with the following passage which contains the grounds upon which

Page 768 of [1939] 3 All ER 761

he was prepared to allow the appeal ([1939] 2 KB at p 135; [1938] 1 All ER at pp 480, 481):

The only question, therefore, to be determined in the present case is whether the dividend falls within sect. 7(2). … In my opinion it does not. The company has made it quite clear that it has made no deduction for tax, it being expressly stated in the resolution for the dividend that it should be paid “without deduction of tax.” The amount received by the appellant cannot, therefore, be regarded as being a net amount within the meaning of the subsection as interpreted in Neumanns case. For these reasons I respectfully differ from Finlay J. He thought that there was no difference between the expression “without deduction of tax” and “tax free.” In this I cannot agree with him. … It is, therefore, the precise opposite of “without deduction of tax.”

My Lords, for the reasons which I have given I would allow this appeal: and restore the reduction of the assessment which was made by the special commissioners.

LORD MACMILLAN. My Lords, it is now well settled that the shareholders of a company are not liable to be directly charged with income tax at the standard rate on the dividends which they receive from the company. It is also settled that dividends received by an individual must be brought into computation in ascertaining his total income for sur-tax purposes; they are a source of income within the meaning of the Income Tax Act 1918, s 4. So far as income tax at the standard rate is concerned, dividends received by the shareholders of a company are regarded as franked by the payment by the company of income tax on its profits or gains. Companies are not, however, liable to, and do not pay sur-tax, which is levied only on individuals. Consequently, dividends received by shareholders of a company are not franked, so far as regards sur-tax, by any payment of sur-tax by the company. The present appeal relates to the question of the proper way of treating dividends in the individual taxpayers return of his total income from all sources for the purpose of ascertaining his liability to sur-tax. In making a return of his total income, the taxpayer has to classify the items of his income under two main heads, namely, (i) income not taxed at the source and (ii) income taxed at the source. Income which has been received by the taxpayer without any deduction in respect of income tax, is entered at the actual amount received as income not taxed at the source; income which has been received less a deduction in respect of tax is income taxed at the source, and must be entered at the gross amount before deduction of tax, for income tax paid or suffered is not a permissible deduction in computing total income. A company on paying dividends to its shareholders is entitled, but not bound, to deduct income tax at the standard rate at the time of payment. If the company exercises this right, and deducts the tax from the dividends which it pays, the shareholders must, on entering the dividends in their return of total income, add back the deducted tax to the net amount actually received. But what if the company does not exercise its right of deduction, and chooses to pay its dividends without deduction of tax? Ought the

Page 769 of [1939] 3 All ER 761

shareholder (i) to enter the actual sum received by him as income not taxed at the source, or ought he (ii) to enter such a sum as, after deduction of tax, would give the sum actually received, thus treating the dividends as income taxed at the source? That is the question which the present appeal poses.

Apart from the terms of the Finance Act 1931, s 7(2), I cannot see any justification for the second of these alternatives. The dividend has been received by the shareholder without deduction of tax. Why should he add back tax which has not been deducted? Why should he treat as income taxed at the source, income which has not been taxed at the source? It is said, however, that s 7(2) of the 1931 Act requires this to be done, and regards every dividend received, whether tax has or has not been deducted from it, as a “net amount received.”

In my opinion this contention cannot be entertained by your Lordships in view of the decision of this House in Neumann v Inland Revenue Comrs. I do not read that decision as turning on the special facts of the case. It is an authoritative interpretation of the meaning and effect of s 7(2) of the 1931 Act, and it gives no countenance to the argument which has been advanced on behalf of the Inland Revenue at your Lordships bar, and which commended itself to the majority of the lords justices in the Court of Appeal. I do not feel called upon either to criticise or to justify the decision in Neumanns case, but I may at least say that it is consonant with the general scheme of computing income for tax purposes, which I have outlined. One conception which found favour with Sir Wilfrid Greene MR, I find myself, with the greatest respect, unable to accept as applicable to the interpretation of the critical subsection. He suggests that a shareholder who receives a dividend from which the company has not deducted tax, may, in some cases at least, be said to receive a “net amount,” because he is receiving payment from a company which has already paid income tax on the fund out of which the dividend is paid. But the tax which the company pays on its profits and gains need not be the same, either in rate or in total amount, as the tax which it refrains from deducting, in paying dividends to its shareholders without deduction of tax. The company has not suffered deduction of income tax from its profits or gains; it has paid income tax on its profits or gains. The divisible fund is diminished by that payment, no doubt, but this cannot properly be described as a deduction of tax at the source of the shareholders dividend. The question of deduction or no deduction arises only when the company proceeds to distribute its dividends. I do not think that the word “net” in the subsection can be read as equally applicable to the amount which the shareholder receives whether the company does or does not deduct tax. So to hold would be to treat the same word as having two quite different meanings.

The case of the so-called tax-free dividend does not arise, but as it has been discussed both in this House and in the Court of Appeal,

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I may point out that such a form of dividend is unknown to the income tax code, which knows only dividends from which tax has been deducted at the source, and dividends from which tax has not been deducted at the source. The expression has, however, been judicially interpreted to mean a dividend of such a sum as after deduction of tax gives the actual sum received. The tax-free dividend is not really a dividend of the amount received, but a dividend of a larger sum less the tax thereon. It is therefore treated notionally as income taxed at the source, and in the return of total income must be entered at the gross amount which, less tax, gives the actual net amount received.

With these few observations I concur with your Lordships in holding that the appeal should be allowed.

LORD WRIGHT. My Lords, the question in this appeal is what is the effect of the judgment of this House in Neumann v Inland Revenue Comrs. It was sought on behalf of the respondent to distinguish that decision on the ground that it did not lay down any general rule for the construction of the Finance Act 1931, s 7(2), but was limited to the special facts of that case, and should not be applied to the facts of this case. Such was in substance the contention before your Lordships of the Attorney-General, which succeeded before Finlay J, and the majority of the Court of Appeal, consisting of Sir Wilfrid Greene MR and MacKinnon LJ. Lord Romer, in dissenting, agreed with the conclusion of the Commissioners for Special Purposes of the Income Tax Act. The question can be shortly stated to be whether a dividend of £21,000 declared by Cull & Co, “without deduction of income tax,” could be treated for sur-tax purposes as though it had been a dividend of £28,000 from which the company had deducted standard income tax of £7,000. The question may be stated in other words, as being whether the sum of £21,000 was a net sum which under s 7(2) was to be deemed to represent income of such an amount as would, after such deduction of tax as is authorised by the provisions of All Schedules Rules, r 20, be equal to the net amount received. The contention on behalf of the appellant was that the decision in Neumanns case was general, and was that the subsection on its true construction did not apply unless there was in fact such an amount received as could properly be called a “net” amount, the word “net” being there used in the same sense as in the Finance Act 1924, s 33. That section requires that a dividend warrant should be accompanied by a statement in writing showing (i) the gross amount which, after deduction of the income tax appropriate thereto, corresponds to the net amount actually paid, (ii) the rate and amount of such tax, and (iii) the net amount actually paid. This can apply only to cases where the deduction has been made, because under All Schedules Rules, r 20, the deduction is optional, not obligatory, and hence if the company in paying the dividend, does not choose to deduct the tax, the dividend so paid without

Page 771 of [1939] 3 All ER 761

deduction of tax cannot be a net amount, but must be a gross amount, and hence it was contended that a dividend so paid without deduction of tax is in substance, and not merely in words, a different matter from a dividend paid after deduction of tax or tax free, both of which expressions have the same meaning. For instance, if standard income tax were payable by the appellant on his dividend of £21,000, it would be in this case on a sum of £21,000, whereas if £21,000 had been paid tax-free or after deduction of tax, the gross sum, applying the computation just stated, would be £28,000. This instance shows clearly the different effect of declaring a dividend tax free and declaring a dividend without deduction of tax. In the former event the tax-free dividend does not represent income on which the standard tax is to be charged, but such sum of net income as would, if standard income tax were chargeable, leave a net sum of £21,000, the tax being, say, £7,000. On the other hand, an income of £21,000 without deduction of tax would only pay at 5s in the £, a tax of £5,250.

As I have come to the conclusion, after a careful consideration of the reports in Neumanns case, that this House did give a decision on the general construction of the subsection, and not a decision limited to the special facts of that case, it only here remains to decide if good reason is shown why the general construction of the subsection declared by this House should not be applied in the present case. It is not competent for your Lordships to reopen a previous decision of this House on a point of law, even if on reconsideration it should appear to be erroneous, which I am far from thinking could be said of the decision in Neumann. Nor is it open to the Court of Appeal or to a judge of first instance to go behind the decision. A judgment of the House on an issue of law, whether unanimous or by a majority, is different from a mere expression of opinion or matter of observation not necessary for the case. It fixes the law, which can then be changed only by parliament. All I intend, therefore, to do in this opinion is to explain briefly what was actually decided, and to examine the grounds which are relied on for the contentions that the decision was one limited to special facts, and that the actual facts of the present case are distinguishable, and necessitate a different conclusion. I shall therefore state first, in summary form, what I understand to have been the facts in Neumann, and the ruling of this House on the construction of the subsection.

In Neumann the Salisbury House Estate Ltd had declared a dividend in favour of Neumann, a shareholder in the form, “Gross amount of dividend £4,275, income tax appropriate nil, £4,275.” This dividend represented Neumanns share of a sum of £18,325, which the company had set aside to reserve out of profits, to await the decision in the case Fry v Salisbury House Estate Ltd. The company owned flats, and was taxed under Sched A; but the Sched A assessment came to much less than the actual rents collected. It was held by this House in Frys case, that the Sched A assessment exhausted the tax-

Page 772 of [1939] 3 All ER 761

able capacity of the rents, and that no further assessment to standard income tax was competent under Sched D in respect of the amount by which the rents exceeded the Sched A assessment. The company thereupon distributed in full to the shareholders the reserve fund of £18,325 as an interim dividend. The question then arose as to the position of Neumann as a shareholder. There were two questions, first, whether he was assessable to sur-tax at all on the £4,275, and, secondly, if he were, whether he was assessable at £4,275, or at £5,343 15s. This latter sum was the amount which would, after such deduction of tax as is authorised by r 20, have been equal to the net amount received. On the first point, this House held that the dividend was not directly or separately assessable to income tax in the shareholders hands, but was still chargeable to sur-tax, because it was income tax income which had been charged to tax. The assessment under Sched A had charged exhaustively the whole of the rents, so that the company were entitled under r 20 to deduct the tax appropriate thereto from the £18,325 if they had been minded to do so, though they had not, but had distributed the gross amount. On the second point this House held that the Finance Act 1931, s 7(2), did not apply, because on the true construction of the subsection it only applied to a net amount, whereas the £4,275 received by Neumann was a gross and not a net amount. The three Lords of Appeal who took part in the decision were unanimous, and their opinions agreed in substance in all respects. It will be enough here to quote the following passage from the opinion of Lord Tomlin, who gave the leading opinion. He said, at pp 230, 231:

The subsection in effect provides that it is the gross amount before deduction which is to be treated as the income for the purposes of the Acts. If a deduction from the gross sum was authorised but was not in fact made, as was the case here, there is in my opinion nothing in the language of the subsection which entitles the inland revenue to treat the gross sum us being greater than in fact it was.

Lord Warrington of Clyffe agreed. I may perhaps be permitted to quote from the speech which I delivered, a short passage, at p 243:

What was distributed, being £4,275, was in my judgment the gross amount: the company, though authorised to deduct tax from it, were not bound to deduct it and did not in fact do so. I cannot see any justification for describing the sum distributed as a “net amount” and hence I conclude that sect. 7(2) does not apply. I cannot treat the word “net” as mere surplusage or as simply meaning the actual amount, whether gross or net.

I must resist the temptation to develop the reasoning on which this conclusion was based. I may, however, add that s 7(2) is dealing with a conventional “grossing up,” as it is called, but when it comes to the amount received, that must necessarily be a fact. The subsection does not say that the amount received is to be deemed to be net whether or not in fact deduction has been made. If the purpose of the Act is to secure that the shareholder pays sur-tax by “grossing up” whatever amount he receives in fact, whether the company has deducted tax or not, they could effect this result by a simple change of language or by making it compulsory in every case for a company to

Page 773 of [1939] 3 All ER 761

deduct tax under r 20, and thus avoid payment of dividends without deduction of tax. It might seem that the framers of s 7(2) had overlooked the optional terms of r 20. However, I do not pursue the subject, as all that I am concerned to do at the moment, is to point out that the decision in Neumann was directly and expressly based on the construction of the language of the subsection. This House having in precise terms determined the construction, has fixed the law, which can only be changed by the legislature.

I shall now examine in a little more detail the contention strongly urged on behalf of the Crown that the decision in Neumann was not based on the general construction of the subsection, but on the special facts of the case. I find it difficult to see how that contention can be seriously maintained in view of the precise language quoted above from the opinions of the Lords, in which the crucial and decisive conclusion is finally stated. Now, it is true that the facts in Neumann were in some respects special. The directors were distributing £18,325 which had been specifically set aside as a reserve in case the company were held liable for the extra tax. In the event it was not required. The company might, in paying the amount, have deducted the tax when they distributed it, because it was paid out of charged profits. In that case they would have properly deducted the tax in Neumanns case from £4,275, not from £5,343 15s, because they were only distributing and paying £18,325 in all, of which £4,275 was Neumanns share. It is with this aspect in mind that Lord Tomlin says, at p 230:

Now I think it would be repellent to most minds that the appellant should be charged as a part of his income with a sum which not only has never come to him, but has never existed in fact. It is plain that the respondents cross appeal which seeks to treat the sum of £4,275 as a net sum, corresponding to a gross sum of £5,343 15s., assumes that the amount divisible by the company was something in excess of anything they ever had to divide.

Lord Warrington of Clyffe and I make similar observations. But it is clear on a perusal of the opinions that this matter was not the ratio decidendi. I said, at p 242:

yet however anomalous the claim it must receive effect if the actual language of the section so requires.

The final conclusion in all three opinions was based expressly on the actual language of the subsection. In every case, it is for the company to decide (subject no doubt to certain considerations of company law, and of policy) what sum they will set aside to declare and distribute by way of dividends. This becomes the divisible fund for this purpose. The company can also decide if the fund is to be distributed as gross or net. In Neumanns case it does not appear that the company had not adequate funds outside the £18,325, or that they might not, if so advised, have distributed £18,325 as a tax-free sum, or as a sum, after deduction of income tax, in which case the nominal amount of distribution would be the larger or gross sum necessary to represent a net sum of £18,325 after deduction of the appropriate tax. There is nothing

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peculiar in the facts in Neumann, except the particular circumstances and reasons which led to the setting aside of the fund, and made it natural to divide it in full. Though notionally they had paid tax on it, they had not done so in a business sense. In the opinions of this House, this aspect was merely emphasised to point the moral that dividends declared without deduction of tax may exhaust a special fund set aside to meet them. The peculiarity in Neumann was that the fund set aside had borne the tax only in a notional and not in a business sense. However, a company, in setting aside out of profits a sum for payment of dividends, can always, even if all the profits have been taxed in full, disregard that fact, and decide not to deduct tax under All Schedules Rules, r 20. If a declaration of dividend is made “without deduction of tax” as it may be under r 20, and if “gross” and “net” mean what they mean in the Finance Act 1923, s 33, the dividend is gross even though it is paid out of taxed profits, which in another sense may be called net, and there is no scope for “grossing up” (as it is called) what is already “gross.” That can only logically be done when the dividend is declared as a “net” dividend, that is, after deduction of tax or tax-free. It can then properly be “grossed up” to the larger amount as specified in s 7(2). It is true that the practice of declaring a gross dividend and then deducting the appropriate tax does not affect the sum which the shareholder receives. The same is true of a tax-free dividend as it is also indeed of a dividend without deduction of tax; but owing to the language of the Acts it does affect the sur-tax.

I can now pass to consider the case under appeal. The company in that case had made in the year of assessment large profits, which were not in that year liable to assessment. They did, however, set aside £99,114 as a reserve because these profits would be brought into computation and would attract tax in the following year. That left £559,374, which was carried on the balance sheet as a balance of net profit. It was the balance of profit and gains, though in fact it had paid no tax. Out of that sum various appropriations were made, in particular a sum of £105,000 to satisfy an interim dividend of 21s a share to be declared “without deduction of income tax.” The appellant having been assessed to supertax on the basis of a “gross” or “grossed up” dividend at the rate of 28s a share, succeeded in his appeal to the Commissioners for Special Purposes who held as follows:

In the case before us it is contended on behalf of the Crown that in the resolution of Mar. 13, 1934, the words “without deduction of income tax” should be read as after deduction of income tax and that the dividend is a “tax free” dividend. In our opinion the words without deduction of income tax qualify the words “be paid” and mean that no deduction on account of income tax is to be made on payment of the dividend of 21s. per share. Accordingly we hold that the dividend is not a “tax free” dividend, that no income tax has been deducted by the company and that no addition to the dividend should be made on account of income tax. We accordingly reduce the assessment by the sum of £7,000.

In my opinion the commissioners correctly applied to the facts of the case the law laid down by this House in Neumann. I cannot

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see any distinction in the facts which is material to the question. The companys profits for the year were not assessable to income tax because there had been no profits of the trading in the previous year, but they would be chargeable in another year, that is, the following year, so that under the Finance Act 1931, s 7(1), the company were authorised to deduct the tax, just as the directors might have deducted the tax, if so minded, in Neumanns case. The dividends were thus notionally charged to tax. It is not necessary or relevant to speculate why the directors did not deduct tax; it is enough that in fact they did not do so. For is it material that in Culls case the company had available profits of the year far in excess of the amount which they decided to distribute as dividend on the ordinary shares. The amount distributed in dividends may and generally will have no relation at all to the profits earned in the year; it may be taken in whole or in part from a reserve fund for the equalisation of dividends or from any profits which have been earned in previous years, and charged at a rate of tax different from the rate current when the dividend is declared; it may be a small proportion of the profits earned in the year. It is this want of correlation between the dividends and the profits of the year which has led to the provision of the Finance Act 1927, s 39, which (inter alia) provides that the deduction if made on account of income tax shall be at the standard rate of the year of declaration irrespective of the rate or rates at which the company paid tax on the profits which may have accrued in other years. These are some of the circumstances which have led to the rule now well established and finally affirmed in Neumanns case, that the shareholder is not taxed under Sched D in respect of that part of his income which consists of dividends. The profits have been charged to tax in the hands of the company and that fact is deemed to redound to his benefit. I have already explained why the special reason which induced the company in Neumanns case, to set aside the special reserve, does not affect the position any more than does the special reason which in any case influences a company in deciding what part of its profits it will set aside for paying dividends. The essential fact is that in Culls case, as in Neumanns, the company did not exercise its optional authority to deduct income tax, but paid without deduction.

It now becomes necessary to examine the reasons which induced Finlay J and the majority of the Court of Appeal to reverse the decision of the special commissioners. As Finlay J followed the decision of Lawrence J in Inland Revenue Comrs v Pearson, Inland Revenue Comrs v Pratt, these cases must first be considered. The companies in these cases had not deducted tax in paying the dividends, though the dividends were paid out of profits charged to tax. It is not material that in the former case they were paid out of accumulated profits. The special commissioners in each of these cases held, as they did in Culls case, that the dividends paid were gross sums, and that

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the Finance Act 1931, s 7(2), did not apply. The contention of the Attorney-General is summarised in the following terms:

Where the companys profits have been taxed as here and the company has power to deduct tax from the shareholders dividends, the sum paid is a net sum to which must be added for purposes of sur-tax the amount of tax appropriate to the profits distributed in dividend.

I may note that the same might be said of the facts in Neumanns case. Lawrence J acceded to the contention of the Attorney-General, and reversed the decision of the special commissioners. He seems to have been influenced by the consideration that if the decision of the commissioners were right, any company could ensure that its shareholders should be taxable to sur-tax only on the actual amount received in cash, by the simple process of declaring dividends without deduction of tax. That may be the result of the decision in Neumanns case, but it follows from the fact that the deduction of tax by a company in paying dividends is optional, not obligatory. He seeks to distinguish Neumanns case, because in that case the tax was not charged “pound for pound” on the profits distributed under Sched A, whereas in the cases before him it had been charged “pound for pound” under Sched D, at some time or another on the companys profits. However, that distinction is immaterial; all that is material under r 20 is that the profits should have at some time or other, duly borne the appropriate tax, whatever it was. This was equally true in Neumanns case. Lawrence J also sought to distinguish Neumann, because the dividends paid exhausted the specially segregated fund, whereas that was not so in the cases before him. I have commented on that point, which in my opinion is not a true basis of distinction. The judge further held that the cases before him were governed by the Ashton Gas Cos case, and not by Neumanns case at all. With the greatest respect for the judge, I am bound to say that I do not think that the Ashton Gas case throws any light at all on the problems now being considered. It was an entirely different case. It was not a tax case at all. The company there was a statutory undertaking, the special Act of which provided that the profits divisible in any year divided among the ordinary shareholders should not exceed a given rate. The company declared and paid a dividend at the full permitted rate without deducting tax, and in doing so obviously divided more of their profits than they would have done if they had paid the profits after deducting income tax, and exceeded the divisible rate. Buckley J put the question thus, at p 625:

The whole question is, Are the profits thus divided among the shareholders in excess of 10 per cent. on the capital? I think they are. It is exactly as if the company declared a dividend of 10 per cent., and the amount of the income tax, so that when the statutory deduction of the income tax is made the shareholder shall have a clear 10 per cent.

This decision was affirmed by the Court of Appeal and the House of Lords. The Earl of Halsbury LC said it was perfectly clear. The question was simply whether the company was dividing more of its

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profits in paying the dividends than it was permitted to do. It was held in effect that, in arriving at the permitted rate of dividend, the profits ought to be calculated as inclusive and not exclusive of the amount payable for the year in respect of the income tax on the profits proposed to be divided. It cost the company more profits to pay 10 per cent without deducting income tax than to pay 10 per cent less income tax. When Lord Wrenbury, in Bradbury v English Sewing Cotton Co, concisely, though not with all necessary qualifications, expressed the now accepted view of the immunity of a shareholder in regard to income tax in the words at p 766:

The corporator bore his share of the tax by the deduction of the appropriate share of the collective tax paid by the corporation from his dividend …

he showed no consciousness that he was contradicting what he had said in the Ashton Gas case. I cannot see how that case throws any light on the true construction of the Finance Act 1931, s 7(2). It was cited to this House in Neumanns case, but no member of the House thought fit to refer to it. I think that on such questions as have to be considered here, it should be disregarded once and for all. I observe that the Ashton Gas Co decision is not mentioned in any of the judgments in the Court of Appeal in the present case. With all deference to the judge, I cannot but think that the cases of Pearson and Pratt were wrongly decided. Finlay J followed the decision of Lawrence J. He attached importance to the Ashton Gas case, and seemed to emphasise expressions to be found in that case to the effect that the shareholder who gets 10 per cent on his share gets not merely £10 but an immunity from tax. That, I think, is inconsistent with the settled principle that a dividend is not directly assessable to tax on what the shareholder is paid. The actual amount which he is paid differs according as the company does or does not deduct tax in paying, but what is paid is in itself immune from standard tax in the shareholders hands. He needs no added immunity. Finlay J also finds himself unable to draw a distinction between the words “free of income tax” and the words “without deduction of tax.” I venture to think, however, that the distinction was clearly pointed out by the House of Lords in Neumann, in the sense which I have explained above. I cannot with respect assent to the reasoning of Finlay J any more than to that of Lawrence J, whose judgment he followed.

The judgment of Finlay J was affirmed by Sir Wilfrid Greene MR and MacKinnon LJ. Sir Wilfrid Greene MR is impressed by the far-reaching results of the decision in Neumann, which he says the legislature can scarcely have intended. I venture to repeat the comment on this contention which I made earlier in this opinion. The argument ab inconvenienti is no doubt of weight when the words of the Act are equally open to one or other of two constructions, but once the construction is settled, the argument becomes inadmissible. It is no doubt true that the purpose of the legislature may have been to

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bring into sur-tax by means of the shareholders dividends the profits of the company which in the hands of the company are not subject to sur-tax, but the steps taken to achieve that result have been opportunist and lacking in a clear or comprehensive scheme. I am almost tempted to say that the draftsmen may have overlooked that a dividend might be not merely tax-free or under deduction of tax, but without deduction of tax, that is, might be either gross or net, though in either case it is paid out of taxed profits of the company. If the consequences of the Neumann decision are so serious, it is for the legislature to change the law. Nor can I agree with the view of Sir Wilfrid Greene MR that the dividend is net whenever it is paid out of profits which have suffered payment of tax. This, I think, involves in another form the failure to distinguish between the companys profits and the tax on them on the one hand, and on the other hand the dividend and the sur-tax on it. A dividend paid out of net profits of the company (as it must generally be) can be either gross or net, according as it is paid tax-free or without deduction of tax. In such latter cases the question is between the shareholder and the revenue. The payment by the company of its income tax is a matter between the company and the revenue. A dividend is not net because it is not independently chargeable to standard tax. Nor do I agree with Sir Wilfrid Greene MR in his view that the language in Neumanns case was used with specific reference to the fact that to “gross up” the dividend in question would have involved the false assumption that the total fund of profits which the company had to distribute was greater than in fact it was. That fact, though naturally adverted to in opinions of this House, was, as I have explained, in truth irrelevant to the general construction of the subsection. Sir Wilfrid Greene MR further was of opinion that, as in the present case, the dividend paid amounted to far less than the total profits which the company had to distribute, there was no difficulty in regarding the amount received by the appellants as a net amount. With the utmost respect, the matter seems to me to be irrelevant. I cannot, as I have explained, hold that it is in any sense material to the question at issue whether the company distributed the whole or a greater or less proportion of its available fund of profits. All that is material is whether the company declared the dividend as with or without deduction of tax. I think the word “deduct” or “deduction” is used both in r 20 and in the material sections of the Finance Acts of 1927 and 1931, in its ordinary sense of a sum being declared, a sum taken away from it, and a smaller sum left to be paid. It is true that in the result the process only affects the sur-tax payer. If, however, there is no deduction under r 20, there is a case in fact to which by its terms s 7(2) does not apply. The judgment of MacKinnon LJ does not differ in substance from that of Sir Wilfrid Greene MR and accordingly I need not repeat what I have already said as to the reasons why, with all deference, I feel constrained to take a different view. It will also be apparent from what I have already said

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that while I agree with the conclusion of my noble and learned friend, Lord Romer, there are certain matters on which I do not see eye to eye with him.

I think the appeal should be allowed.

My noble and learned friend, Lord Porter, authorises me to say that he agrees with the opinions which have been delivered in this appeal.

Appeal allowed with costs.

Solicitors: Freshfields Leese & Munns (for the appellant); Solicitor of Inland Revenue (for the respondents).

Michael Marcus Esq   Barrister.

Pardy v Pardy

[1939] 3 All ER 779


Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        21, 28 JULY 1939        


Divorce Desertion Separation deed Husbands failure to perform covenant to pay Repudiation of deed Acceptance of repudiation by wife.

The petitioner was married to the respondent on 24 September 1928. They lived at the house of the husbands parents. The marriage was a failure almost from the commencement, the husband staying out at night and drinking heavily. In May 1932, the spouses executed a separation deed, and thereafter lived apart. Under the deed, the husband agreed to pay to the wife £1 5s per week for her maintenance. The husband made payments under the deed until September 1932, but after that date only £2 10s was paid in all, no payments being made from 1934 onwards. In 1933, the husband wrote two letters to the wife asking forgiveness and promising help, to which letters no answer was made. The parties met in 1937 in a spirit of neutrality to discuss the future, but without result:

Held (i) where the original separation was by mutual consent, desertion may supervene without the necessity of a resumption of cohabitation.

(ii) this can happen where on the part of the spouse alleged to be in desertion there is repudiation of the agreement under which separation takes place, no step taken towards the resumption of cohabitation in fact and, in addition to repudiation, the animus deserendi and on the part of the spouse alleging desertion there is not only no insistence on the terms of the separation agreement, but a bona fide willingness to resume cohabitation without regard to its terms.

(iii) whether or not these conditions exist during the relevant period is a question of fact in each case the answer to which depends upon the true inference to be drawn from the words and conduct of the parties.

(iv) once these conditions are fulfilled, all the elements necessary to constitute a state of desertion are present, namely, de facto separation, animus deserendi, and absence of consent on the part of the spouse alleging desertion.

(v) on the facts, these conditions were fulfilled in the present case, the desertion was proved, and a decree nisi should be granted.

Decision of Langton J ([1939] 2 All ER 258) reversed.

Notes

The enunciation of the doctrine of desertion in Fitzgerald v Fitzgerald, which was to a great extent adopted by the Court of Appeal in R v Leresche, has been much discussed for many years now. The recent extension of the grounds of divorce to include desertion for 3 years and upwards has given a greater importance to this discussion. In the present case the Court of Appeal

Page 780 of [1939] 3 All ER 779

have re-stated the conditions under which a finding of desertion can be made, and the old doctrine that desertion must bring to an end an existing state of cohabitation can now be regarded as finally overruled. All that is necessary to establish desertion is separation in fact accompanied by an intention to desert; and this intention may be formed at or after the commencement of the separation.

As to Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 654659, paras 963969; and for Cases, see Digest, Vol 27, pp 306319, Nos 28372977.

Cases referred to

Fitzgerald v Fitzgerald (1869) LR 1 P & D 694; 27 Digest 307, 2845, 38 LJ P & M 14, 19 LT 575, subsequent proceedings (1874) LR 3 P & D 136.

R v Leresche [1891] 2 QB 418; 27 Digest 313, 2910, 60 LJMC 153, 65 LT 602.

Pratt v Pratt [1939] 3 All ER 437; Digest Supp, 161 LT 49.

Moore v Moore, Chadwick & Griffiths (1887) 12 PD 193; 27 Digest 326, 3045, 56 LJP 104, 57 LT 568.

Smith v Smith [1915] P 288; 27 Digest 317, 2949, 85 LJP 16, 113 LT 1166.

Watson v Watson [1938] P 258, [1938] 3 All ER 770; Digest Supp, 107 LJP 160, 159 LT 523.

Starkey v Starkey [1938] 3 All ER 773; Digest Supp, 159 LT 490.

Tate v Tate [1938] 4 All ER 264; Digest Supp.

Crabb v Crabb (1868) LR 1 P & D 601; 27 Digest 228, 1992, 37 LJ P & M 42, 18 LT 153.

Pape v Pape (1887) 20 QBD 76; 27 Digest 317, 2945, 57 LJMC 3, 58 LT 399.

Hussey v Hussey (1913) 109 LT 192; 27 Digest 317, 2948.

Looker v Looker [1918] P 132; 27 Digest 317, 2951, 87 LJP 72, 118 LT 654.

Ratcliffe v Ratcliffe [1938] 3 All ER 41; Digest Supp.

Stockley v Stockley [1939] 2 All ER 707; Digest Supp.

Eaves v Eaves [1939] 2 All ER 789; Digest Supp, 161 LT 119.

Sifton v Sifton [1939] P 221, [1939] 1 All ER 109; Digest Supp.

Shaw v Shaw [1939] P 269, [1939] 2 All ER 381; Digest Supp, 161 LT 63.

Clark v Clark (No 2) [1939] P 257, [1939] 2 All ER 392; Digest Supp.

Mitchell v Mitchell [1931] SLT 484.

Herod v Herod [1939] P 11, [1938] 3 All ER 722; Digest Supp, 108 LJP 27, 159 LT 530.

Jordan v Jordan [1939] P 239, [1939] 2 All ER 29; Digest Supp, 160 LT 368.

Appeal

Appeal by the petitioner from an order of Langton J, dated 27 March 1939, and reported [1939] 2 All ER 258, dismissing her petition for divorce on the ground of desertion for a period of at least 3 years immediately preceding the presentation of the petition. The facts are fully stated in the judgment of Sir Wilfrid Greene MR.

D P Maxwell Fyfe KC, H B Durley Grazebrook KC and W R K Merrylees for the appellant.

The respondent was not represented and did not appear.

Maxwell Fyfe KC: The deed is not conclusive as to whether the parties separated under it and because of it. The authorities relied upon by Langton J in holding that he could not go behind the deed are

Page 781 of [1939] 3 All ER 779

cases in which it was held that the separation was either under the deed or by mutual consent. There is authority for saying that where there is a deed entered into bona fide, the court may go behind it and say that the separation was not under or because of the deed. If the conduct of one party was such that separation was inevitable, the court can say that that conduct was the cause, and that the parties were not really separated under the deed. Desertion begins as soon as a man has formed the intention of ending the matrimonial state. The vital point is that the husband should have formed the intention of terminating the matrimonial state. Where there are acts constituting constructive desertion, the husband cannot answer by producing a deed which he has repudiated, and the court will not seek to do so either. In the present case, the deed was entered into in 1932, and payments were made by the husband up to November 1934. Assuming that there was a repudiation, the husband could not be heard to say that the deed was a protection to him. There is evidence of acceptance of repudiation from the time of repudiation. On the facts of the case, there is proof of constructive desertion. Alternatively, there is sufficient evidence to show that the matter should be fully considered. The letters written by the husband do not bring the case within Pratt v Pratt. In Moore v Moore, Chadwick & Griffiths, it was held that the deed was not a bar to a claim for judicial separation on the ground of desertion, the necessary time having been completed before the deed was entered into. In Smith v Smith, there was a deed executed. The husband afterwards went abroad and ceased to make payments. The court decided that there had been desertion on the ground that the husband had threatened to break up the home, whereupon the wife agreed to leave him, and also that the husband, after making a few payments under the deed, repudiated it. Watson v Watson shows that the existence of a deed does not prevent the court from looking at antecedent circumstances and from holding that there may be desertion in spite of the deed. In Starkey v Starkey, it was held that the desertion had continued from the time of separation, notwithstanding a deed. These cases show that the court may consider what the facts are. Tate v Tate shows that the court looks at the facts and, if a deed is treated by a husband as though it were non-existent and it was the acts of the husband which caused the separation, desertion may be established. All the cases which have been decided under the Matrimonial Causes Act 1937, have been decided on their special facts. [Counsel also referred to Crabb v Crabb, Pape v Pape, Hussey v Hussey, Looker v Looker, Ratcliffe v Ratcliffe, Stockley v Stockley, Eaves v Eaves, Sifton v Sifton, Shaw v Shaw, Clark v Clark, Mitchell v Mitchell, Herod v Herod and Jordan v Jordan.]

D P Maxwell Fyfle KC, H B Durley Grazebrook KC and W R K Merrylees for the appellant.

The respondent was not represented and did not appear.

28 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. In this case the appellant sought dissolution of her marriage on the ground of desertion by her husband

Page 782 of [1939] 3 All ER 779

without cause since 5 November 1934. After less than four years of unhappy married life the spouses on 30 May 1932, executed a separation deed under which the respondent agreed to pay to the appellant the sum of £1 5s per week for her maintenance so long as she should lead a chaste life. Payments were made under this deed until a date in September 1932, when the respondent stopped payment. Some two years later he paid to the appellant 10s, in September 1934, and on 5 November 1934, he paid her £2, after which he made no further payments. These payments were not what the deed provided for.

In July 1935, and thereafter on several occasions, the appellant committed adultery, and the liability of the respondent to make payments under the deed would accordingly have ceased. Langton J would have felt no difficulty in exercising his discretion in her favour if he had thought that she was otherwise entitled to a decree, and I agree with the view which he took upon this matter. He held, however, that the continued separation of the spouses must be referred to the separation deed, and not to desertion by the respondent, and he accordingly refused to make a decree.

The argument for the appellant fell under two heads. First, it was said that in view of the respondents treatment of the appellant before the execution of the separation deed, she would have been justified in leaving him; that had she done so the case would have been one of constructive desertion; and that, notwithstanding the execution of the deed, the disruption of the matrimonial home must be attributed to an act of desertion by the husband. I am unable to accept this argument. The conduct of the respondent was, I think, such that, if the appellant had left him, there would have been constructive desertion. However, she did not leave him until the execution of the separation deed, and it is impossible to say that the separation was other than consensual. The second argument was that even though the separation was originally consensual and not due to an act of desertion on the part of the respondent, it subsequently changed its quality and became desertion. The date given in the petition as the beginning of desertion, was 5 November 1934, when the last payment of money by the respondent was made. It would, however, be sufficient for the purposes of the appellants case if desertion began at any time before 19 May 1935.

The first question which arises is whether or not it is possible in law for a separation, which began by being consensual, to acquire the character of desertion without a previous resumption of cohabitation. Looking at this question on principle and apart from authority, I can see no reason why the answer to it should not be in the affirmative. The word “desertion” may describe an act, or it may describe a state. For the act of desertion both the factum of separation and the animus deserendi are required. A de facto separation may take place without there being an animus deserendi, but if that animus supervenes, desertion will begin from that moment unless, of course, there is consent by the

Page 783 of [1939] 3 All ER 779

other spouse. Thus a husband who leaves his wife for a business voyage may nevertheless become guilty of desertion without the necessity of a previous return. All that is required to establish desertion in such a case is the presence of a supervening animus deserendi (a matter to be inferred from the words and conduct of the deserting spouse), a continuance of the de facto separation, and the absence of consent by the other spouse. I do not see why, in a case where the original separation was due to the agreement of both spouses to live apart, it should be impossible in law for a similar change in the quality of the separation to take place without there being any previous resumption of the common life. In such a case the burden of proving that the change has taken place may not be easy to discharge, but this is no reason for saying that the court must refuse to admit the possibility. It appears to me that the first question which the court ought to put to itself is “Was the separation which de facto existed during the relevant period attributable to the agreement under which the parties separated, or was it due to a supervening animus deserendi on the part of the respondent?” The existence of such an animus is a matter of inference from the facts of the case. If, for example, a husband who has left his wife under the terms of a separation deed subsequently repudiates the deed but continues to live apart from his wife, it would be easy to infer that his intention to live apart, which was originally based on the consent of both parties, had become an intention to desert. It is, however, on the side of the spouse alleging desertion that the practical difficulty arises in such a case, since, in order that a separation which began by being consensual may be changed into desertion, it must lose its consensual element on both sides. Thus, if the spouse alleging desertion has during the relevant period affirmed the continuing validity of a separation deed, for example, by suing for maintenance under it, there cannot be desertion, since the necessary lack of consent on his or her part cannot be shown. If, on the other hand, one spouse has repudiated the deed and the other can show that during the relevant period he or she has not had any intention of relying on the separation deed and was always ready and willing, in spite of it, to resume cohabitation, it appears to me that it would be completely unreal to say that he or she still consents to the separation. In such a case the separation is no longer due to the consensus of the parties. The one is willing to resume cohabitation, the other is not; the original consent to the separation was given on the footing that the separation deed would regulate the relations of the parties. Is one spouse to be held to that consent against his or her will, when the other spouse by repudiating the agreement, has destroyed the whole basis upon which the separation took place? I do not find myself forced to any such conclusion, since, in the case assumed, the separation deed has ceased to have any influence upon the mind of the conduct of either party, and has for all relevant purposes become a dead letter.

I here quote a passage from the judgment of Langton J which

Page 784 of [1939] 3 All ER 779

sums up his conclusions upon these matters. He says ([1939] 2 All ER at p 264):

… where spouses are living apart under a deed of separation, the relationship begun by consent cannot be changed into desertion by a mere refusal of one party to resume cohabitation or by a breach of the covenants of the deed. Such a metamorphosis could only, as I understand it, be effected by a complete repudiation by one party, which had been accepted as such by the other, in such circumstances that the proper inference to be drawn from all the facts of the case is that the spouse by whom the repudiation is being accepted is willing to return to cohabitation and is both in a position to insist on his or her conjugal rights and is in fact reasserting them.

I am prepared to accept this as an accurate statement of the law subject to certain qualifications. I agree that there must be a complete repudiation of the deed by one party if the word “complete” means no more than that the repudiation must be of the whole deed. The question whether or not the conduct of the party concerned ought to be treated as a repudiation falls to be answered in accordance with ordinary principles. Breach of a particular covenant by itself may not amount to repudiation; on the other hand, the breach may be so fundamental, or so persistent, or may have such a significance when regarded in the light of all the circumstances of the case as to justify the inference that repudiation is intended. This is the case with commercial contracts, and I see no reason for thinking that any different principle is applicable in relation to a separation deed. Passing to the attitude of the spouse alleging desertion, the judge says that the repudiation must have been accepted as such. It is true that an ordinary contract is not discharged by unilateral repudiation; the other party must “accept” the repudiation in the sense that by words or conduct he must bring it to the mind of the repudiating party that he elects to treat the repudiation as discharging the contract. I do not think, however, that this principle can be applied to the case of alleged desertion following upon a separation deed. It is true that if the party alleging desertion affirms the continued existence of the deed, for example, by suing under it or otherwise showing an intention to treat it as still on foot, he or she is necessarily consenting to the continuance of the separation. The significance of such a step is that it is evidence of continuing consent. However, in my opinion, the only thing required on the part of the spouse alleging desertion, is that he or she should not be a consenting party to the continuance of the separation. Whether or not he or she does remain a consenting party, must be a question of fact, and no doubt “acceptance” of the repudiation and, to take another phrase used by Langton J, “reassertion of conjugal rights” would be the strongest evidence of the absence of consent. I cannot, however, agree that without them the fact that consent has come to an end is in law incapable of proof. In considering whether or not the mental elements necessary to constitute a case of desertion are present in the case of both parties, the whole of their conduct and their words may be taken into account, and I am not prepared to accept the proposition that certain acts and certain words

Page 785 of [1939] 3 All ER 779

are a sine qua non. In the case of an ordinary contract, acceptance of repudiation is necessary for what may be called commercial reasons, since the party repudiating must be in a position to know whether or not the other party is holding him to the contract. In the cases with which we are concerned, the spouse who repudiates the separation deed does so in such circumstances as to show not that he repudiates the deed, in the sense that he regards himself as free to resume the cohabitation which the deed prohibits, but that he does not propose to resume cohabitation, that is, that he intends to desert, which is something more than mere repudiation. A person who repudiates a commercial contract indicates thereby that he does not propose to do the thing which he has agreed to do, or that he considers himself free to do that which he has agreed not to do. In the case of the repudiation of a separation deed, coupled with the animus deserendi, the repudiating party is showing that he proposes to do the very thing which under the deed he agreed to do, namely, live apart, but to do it of his own free will and not under the compulsion of his covenant. The conduct of the other spouse therefore cannot affect his conduct in any way so far as regards his intention to desertit is only important as affecting the question of the intention of the other spouse, which is a different matter altogether.

I do not find anything in the authorities which were cited to us which in any way conflicts with what I have said, except some much discussed passages in the judgment of Lord Penzance in Fitzgerald v Fitzgerald. He says, at page 697:

Desertion means abandonment, and implies an active withdrawal from a cohabitation that exists …

and again, at page 698:

No one can “desert” who does not actively and wilfully bring to an end an existing state of cohabitation. … But if the state of cohabitation has already ceased to exist, whether by the adverse act of husband or wife, or even by the mutual consent of both, “desertion,” in my judgment, becomes from that moment impossible to either, at least until their common life and home have been resumed.

These words of Lord Penzance have been critically examined more than once. In his judgment in the present case, Langton J refers to these criticisms, and adds some penetrating observations of his own, with which I find myself in agreement. I also agree with his comments upon the decision of this court in R v Leresche, in which the observations of Lord Penzance were referred to with approval. As already appears, my real criticism of the judgment of Langton J is that it does not go far enough.

I may summarise my opinion by saying (i) that where the original separation was by mutual consent, desertion may supervene without the necessity of a resumption of cohabitation; (ii) that this can happen where (a) on the part of the spouse alleged to be in desertion there is repudiation of the agreement under which separation took place, no

Page 786 of [1939] 3 All ER 779

step taken towards the resumption of cohabitation in fact and, in addition to repudiation, the animus deserendi and (b) on the part of the spouse alleging desertion there is not only no insistence on the terms of the separation agreement, but a bona fide willingness to resume cohabitation without regard to its termsin short, if it can be said that both parties are during the relevant period in truth regarding the agreement as a dead letter which no longer regulates their matrimonial relations; (iii) that whether or not these conditions exist during the relevant period is a question of fact in each case, the answer to which depends upon the true inference to be drawn from the words and conduct of the parties; (iv) that once these conditions are fulfilled all the elements necessary to constitute a state of desertion are present, namelyde facto separation, animus deserendi, and absence of consent on the part of the spouse alleging desertion.

The question then remains whether or not these conditions are fulfilled in the present case. Two subsidiary matters may be mentioned. The first is that in 1933, two letters were written by the respondent to the appellant asking her to return if he could find a job. To these letters she made no reply. This incident took place some two years before the commencement of the three year period, and in any event I do not regard it as having any real bearing on the question what was the state of affairs during the three years. However, in all the circumstances of the case, I think that the appellant was entitled to regard these requests as not made in good faith. The other matter is that the appellant herself was guilty of adultery, a fact unknown to the respondent. On this matter I agree with the judge that if he had known the true facts the respondent would not have behaved differently. The important facts which bear upon the main question are as follows. The husbands treatment of his wife during the period of cohabitation was calculated to drive her from the house and, as I have already said, would have led to constructive desertion if it had not been for the separation deed. The wife from the first regarded the separation deed as merely a temporary matter designed, so far as she was concerned, to “bring him to his senses,” and she made it clear at the time that if her husband would make a home for her she would join him, notwithstanding the deed. The husbands payments under the deed were continued for only a short period, and then stopped. After an interval of two years two further payments were made which were not in the amounts stipulated for in the deed, and should, I think, be regarded as casual, and not as covenanted, payments. Thereafter no payments were made, nor did the wife ask for any. On 5 July 1937, an incident took place which throws light upon the attitude of the parties in relation to the separation deed during the relevant period. The appellant had learnt that the respondent was again in practice, and thought that it might not be then too late for reconciliation. With this end in view she made an appointment with him and made it clear to him that she wanted him to provide a home

Page 787 of [1939] 3 All ER 779

for her, but he made no offer whatever. In my opinion it is permissible on these facts to infer, and I do infer, that the parties during the relevant period were both regarding the separation deed as a dead letter, and that the continuance of the separation was not in any way attributable to its existence. In the result the appeal is allowed and there will be a decree nisi.

MACKINNON LJ. I agree and have nothing to add.

SIR WILFRID GREENE MR. I have the authority of Finlay LJ to say he has read the judgment which I have just delivered, and agrees with it.

Appeal allowed and decree nisi granted.

Solicitors: Robbins Olivey & Lake (for the appellant).

W K Scrivener Esq   Barrister.

Skinner and Others v Attorney-General

(Re White, Skinner v Attorney-General)

[1939] 3 All ER 787


Categories:        TAXATION; Estate Duty        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD MACMILLAN, LORD WRIGHT, LORD PORTER        

Hearing Date(s):        12, 13, 15 JUNE, 25 JULY 1939        


Estate Duty Testator domiciled in Northern Ireland Annuity given to widow Property locally situate in Northern Ireland at testators death and duty paid there Part of property locally situate in England at widows death Liability to duty Whether exemption still applicable “Property upon which estate duty already paid” Finance Act 1894 (c 30), ss 2(1)(b), 5(2) Finance Act 1914 (c 10), s 14 Government of Ireland Act 1920 (c 67), ss 8, 61 Government of Ireland (Adaptation of Taxing Acts) Order 1922 (SR & O 1922, No 80).

The testator, who died on 27 July 1923, domiciled in Northern Ireland, had, by a testamentary disposition dated 2 December 1920, given an annuity of £7,500 to his wife. At the date of his death, only property to the value of £66 was locally situate in Great Britain, and no estate duty was then payable in Great Britain. Duty was, however, paid in Northern Ireland. On 6 February 1936, the testators widow died, and at that date the property charged with the payment of her annuity consisted in part of investments locally situate in England, in part of investments locally situate in Northern Ireland, and in part of property situate in the United States of America. A claim was put forward for estate duty in England in respect of the English investments as property deemed to pass on the death of the widow. It was contended (i) that the widow had no interests in these investments, but only a right to bring an administration action in Northern Ireland, and (ii) that, by the operation of the Finance Act 1894, s 5(2), no duty was payable on the death of the widow, as estate duty had been paid on the death of her husband:

Held (i) the annuity was an interest within the meaning of the Finance Act 1894, s 2, in the property situate in England, and it was therefore property which must be deemed included in property passing on her death.

(ii) the estate duty which was paid in Northern Ireland on the testators death was not “estate duty” within the meaning of the Finance Act 1894, s 5(2), and therefore no exemption from duty under

Page 788 of [1939] 3 All ER 787

the Finance Act 1914, s 14, was available in respect of the English investments deemed to pass on the death of the widow. Estate duty leviable in Northern Ireland and estate duty leviable in Great Britain are two separate and independent duties.

Decision of Court of Appeal ([1938] 2 All ER 691) affirmed.

Notes

The decision here, affirming the previous decisions in this case, settles quite definitely that an annuitant, whose annuity is charged upon residue, has an interest, for the purposes of death duties, in the different items which from time to time form the residuary estate. It also settles quite definitely that estate duty paid in Northern Ireland and that paid in Great Britain are, as from 22 November 1921, separate and distinct duties, so that an estate upon which duty has been paid in Northern Ireland cannot, for that reason, be said to be an estate upon which duty has been paid in answer to a claim for such duty in Great Britain.

As to the Scope of Death Duties in Great Britain, see Halsbury (Hailsham Edn), Vol 13, pp 226, 227, paras 211213; and for Cases, see Digest, Vol 21, p 17, Nos 8996.

Cases referred to

A-G v Watson [1917] 2 KB 427; 21 Digest 10, 37, 86 LJKB 1034, 117 LT 187.

Sudeley (Lord) v A-G [1897] AC 11; 21 Digest 122, 917, 66 LJQB 21, 75 LT 398, affg SC sub nom A-G v Sudeley (Lord) [1896] 1 QB 354.

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR, Scott and MacKinnon LJJ), dated 10 May 1938, and reported [1938] 2 All ER 691, affirming an order of Clauson LJ, dated 25 January 1938, and reported [1938] 1 All ER 378. The facts are fully set out in the opinion of Lord Russell of Killowen.

J M Whitaker KC and L C Curran for the appellants.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and J H Stamp for the respondent.

25 July 1939. The following opinions were delivered.

LORD ATKIN. My Lords, I have had an opportunity of reading the opinion which is about to be delivered by my noble and learned friend, Lord Russell of Killowen. I entirely agree with it, and I have nothing to add.

LORD RUSSELL OF KILLOWEN. My Lords, two questions were argued in this case. The first was whether estate duty was chargeable at all in England upon that part of the estate of John Campbell White (to whom I will refer as the testator) which at the death of his widow consisted of what were termed English securities. The second question was whether if estate duty was so chargeable, any relief could be claimed under the Finance Act 1894, s 5.

The testator died, domiciled in Northern Ireland, on 27 July 1923. By his will, dated 6 December 1918, he appointed the appellants, and one McMillan, now deceased, to be the executors thereof. He bequeathed sundry specific and pecuniary legacies including an annuity of £5,000 for her life to his wife, and (by cl 5) devised and bequeathed his property in the following terms:

I devise and bequeath all my property both real and personal and wheresoever

Page 789 of [1939] 3 All ER 787

situate not hereby otherwise disposed of unto my two nephews Edward John Skinner and Robert Skinner in equal shares subject to and charged with the payment of my debts funeral and testamentary expenses and all Crown duties and the legacies and annuities which are bequeathed by this my will.

By a codicil dated 2 December 1920, he increased the amount of his wifes annuity to £7,500. Probate of the will and codicil was granted to the four executors in Northern Ireland, and was subsequently resealed in England.

The testators estate at his death consisted of real and personal estate in Northern Ireland, personal estate in the Irish Free State, and real and personal estate in the United States of America. There was also a small amount of personal estate in England, but of such little value that no estate duty was payable here in respect thereof. From time to time during the lifetime of the testators wife, portions of the real and personal estate in the United States were sold, and the proceeds were invested by the executors. Except as hereinafter stated, all funeral and testamentary expenses, duties, debts and legacies were paid, and the balance (except a sum of £7,000 Belfast corporation stock) amounting to £231,713, was during the lifetime of the testators wife, invested in English securities, and still remained so invested at her death, which occurred on 6 February 1936. The estate had not, however, even then been fully administered. A claim for estate duty by the revenue authorities in the United States was still outstanding, and was not finally settled and paid until 23 September 1936. The legal costs incurred in connection therewith were subsequently paid. Some real and personal estate in the United States has not yet been got in, but is still outstanding.

In these circumstances, a claim has been made by the authorities here that estate duty became payable on the widows death under the Finance Act 1894, s 2(1)(b), in respect of the testators estate in so far as it was then represented by English securities, upon the ground that it was property in which the widow had an interest ceasing on her death, and was therefore property which must be deemed included in property passing on her death. That an annuitant such as the widow in this case has an interest in the residuary estate within the meaning of the section, was the subject of decision many years ago in A-G v Watson: and the interest is certainly not diminished where, as here, the entirety of the estate out of which the annuity is payable is expressed to be charged with the annuity. The appellants, however, contended that the widow had no interest in individual items forming part of the general estate, but that the only interest which she had, was an interest in the residuary estate as a totality, namely, a right to have that totality administered, and that since that totality was what was termed, “a Northern Ireland residuary estate,” it was not property in respect of which estate duty was payable in this country.

My Lords, I have throughout experienced great difficulty in appreciating this argument, which depended, it was said, for its efficacy upon the decision of this House in Sudeley v A-G. It appears to

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me to be beyond question that an annuitant, whose annuity is payable out of a testators estate, and who is therefore interested in the whole estate, is necessarily also interested in all the parts which compose the whole; and that her right to take proceedings (if necessary) to have the estate administered for the purpose of providing her annuity, is merely the right of enforcing or realising that interest which she has in the whole and its parts. Nor can I find any foundation for the appellants contention in Sudeley v A-G. That case was concerned with probate duty. The executors of the testators widow sought to escape probate duty (in respect of her one-fourth share of the residuary estate of the testator) to the extent of a one-fourth share of certain mortgages of real estate in New Zealand, upon which a portion of the testators residuary estate was invested. They sought to establish that the widow had a proprietary interest in, and was the owner of, a share of the mortgages, namely, of property situate in New Zealand in respect of which no probate duty would be payable here. They failed because the mortgages did not, nor did any share in them, constitute an asset of the widows estate. The testators estate had not been administered, nor had any appropriation to the widows share been made. The whole point of the decision was that the widow did not own any part of the mortgages. As Lord Herschell pointed out in his opinion, the whole fallacy of the argument of the widows executors rested on the assumption that she or they were entitled to any part of the mortgages as an assetshe in her own right or they as executors. He said, at p 18:

I do not think that they have any estate, right, or interest, legal or equitable, in these New Zealand mortgages so as to make them an asset of her estate.

My Lords, I emphasise the last ten words of that sentence, which show clearly that the interest which was being repudiated was a proprietary interest. The case is not in any way a decision that the widow or her executors had no interest in the mortgages, and it is certainly no authority against the view that an annuitant whose annuity is charged on the estate of a testator “has an interest” in the different items of which that estate from time to time consists. I feel no doubt that the appellants fail upon the first question.

The second question depends, I think, for its answer on an appreciation of the state of affairs which has resulted, in regard to estate duty, from the operation of the relevant sections of the Government of Ireland Act 1920, and the Government of Ireland (Adaptation of the Taxing Acts) Order 1922. The Act I will refer to as the Act of 1920. The order I will refer to as the order in council.

By the Act of 1920 a separate Parliament and a separate executive government were set up in Northern Ireland, and by s 20, an Exchequer and Consolidated Fund of Northern Ireland were established separate from those of the United Kingdom, all sums paid into that Exchequer forming the Consolidated Fund of Northern Ireland to be

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appropriated by Act of Parliament of Northern Ireland to the public service of Northern Ireland. By s 21 the proceeds of all taxes which the Parliament of Northern Ireland has power to impose (and these include death duties) must be paid into that Consolidated Fund. S 28 (to which I refer later) contains provisions in relief of death duties payable both in Northern Ireland and Great Britain on the same property. Ss 61 and 69 must be (so far as relevant) cited verbatim. They are in the following terms:

61. All existing laws, institutions, and authorities in Ireland, whether judicial, administrative, or ministerial, and all existing taxes in Ireland, shall, except as otherwise provided by this Act, continue as if this Act had not passed, but with the modifications necessary for adapting them to this Act, and subject, as respects matters within the powers of the Parliaments of Southern Ireland and Northern Ireland, and after the date of Irish Union within the powers of the Parliament of Ireland, to repeal, abolition, alteration, and adaptation in the manner and to the extent authorised by this Act.

69. His Majesty may, by orders in council (in this Act referred to as Irish Transfer orders), make such regulations as seem necessary or proper for setting in motion the Parliaments and Governments of Southern and Northern Ireland and when established the Parliament and Government of Ireland, and also for any other matter for which it seems to His Majesty necessary or proper to make provision for the purpose of bringing this Act into full operation or for giving full effect to any provisions of this Act or to any future transfer under or by virtue of this Act of a reserved service; and in particular His Majesty may by any such order in council

(a) make such adaptations of any enactments so far as they relate to Ireland as may appear to him necessary or proper in order to give effect to the provisions of this Act, and also make any adaptations of any enactments so far as they relate to England or Scotland, as may appear to him necessary or proper as a consequence of any change effected by the provisions of this Act …

The order in council was made on 31 January 1922. It recites (inter alia) s 69(a) of the Act of 1920, and that for the purposes of the provisions of that Act relating to the transfer of services, 22 November 1921, has been fixed as the appointed day as respects Northern Ireland in relation to the financial provisions of the Act, including taxation. It contains (amongst other provisions) the provision (s 2) that as from 22 November 1921, the enactments to which the several parts of the order apply, shall have effect subject to the adaptations and modifications set out in those parts respectively, save where inconsistent with the Act of 1920, or the provisions of any subsequent order in council under that Act, and subject as respect matters within the powers of the Parliament of Northern Ireland to repeal or alteration by Acts of that Parliament. Part III of the order consists of ss 12, 13 and 14, of which s 13 is a transitory provision, and may be disregarded. Ss 12 and 14, so far as relevant, run thus:

12. This Part of this Order applies to the Death Duties Acts, that is to say the Probate and Legacy Duties (Ireland) Act, 1814, the Probate Duty (Ireland) Act, 1816, the Succession Duty Act, 1853, Part III. of the Customs and Inland Revenue Act, 1881, Part II. of the Customs and Inland Revenue Act, 1889, and Part I. of the Finance Act, 1894, and the enactments amending those Acts or otherwise relating to death duties as defined in the Finance Act, 1894, s. 13.

14. As respects death duties leviable in Northern Ireland and in the rest of the United Kingdom respectively on or with reference to deaths occurring on or after the appointed day, the Death Duties Acts shall apply subject to the following adaptations:

(a) In those Acts, in their application to Northern Ireland

(i) references to the chief office of the Commissioners of Inland Revenue in London

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shall be construed as references to the chief office of the Minister of Finance for Northern Ireland for purposes of inland revenue:

(b) References to the United Kingdom in the Revenue (No. 2) Act, 1864, s. 4, in the Customs and Inland Revenue Act, 1881, ss. 28, 33(1), in the Finance Act, 1894, ss. 2(2), 7(2), (3), 20(3), and the Savings Bank Act, 1920, s. 8, shall, in the application of those provisions to Northern Ireland, be construed as references to Northern Ireland, and, in the application of those provisions to the rest of the United Kingdom, shall be construed as references to the United Kingdom exclusive of Northern Ireland:

(d) The Finance Act, 1894, s. 7(2), shall have effect as if for the words “in the foreign country or British possession” there were substituted the words “in the country”;

My Lords, it will thus be seen that estate duty became leviable both in Northern Ireland and in the rest of the United Kingdom (which I will call Great Britain) by two independent executives, the proceeds being applicable for two different public services. The further question remains whether the two executives levy one and the same tax in which each is or may be entitled to share, or whether each executive levies a separate tax, the power to levy which is vested in the executive of Northern Ireland under or by virtue of one law in force in and applying to Northern Ireland, and in the executive of Great Britain under or by virtue of another law applying to and in force in Great Britain. The importance of the difference becomes apparent when I explain how the appellants claim to exemption arises, which I now proceed to do.

By the Finance Act 1894, s 5(2), it is provided that if estate duty has already been paid in respect of any settled property since the date of the settlement, estate duty shall not be payable in respect thereof until the death of a person who was at the time of his death, or had been at any time during the continuance of the settlement, competent to dispose of such property. The relief afforded by this section was abolished by the Finance Act 1914, s 14, but not in the case where estate duty has been paid on the death of one of the parties to a marriage, so far as regards the payment of estate duty on the death of the other party to the marriage. If, therefore, the estate duty which is leviable and payable in Northern Ireland is one and the same as the estate duty which is leviable and payable in Great Britain, the exemption would apply in the present case as regards the English securities, except in so far as they represented proceeds of sale of real estate in the United States, in respect of which no estate duty had been levied or paid in Northern Ireland on the testators death. If, however, estate duty leviable in Northern Ireland and estate duty leviable in Great Britain are two separate taxes leviable under separate statutory provisions as before indicated, the exemption would not apply, because the estate duty paid in Northern Ireland on the death of the testator under the law in force in Northern Ireland would not be estate duty within the meaning of the Finance Act 1894, as adapted and applicable to Great Britain after the coming into operation of the Act of 1920.

For myself I feel no doubt that the true view as regards estate duty is that whereas before the Act of 1920 and the order in council, the

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six counties and Great Britain were parts of one country, which had power to levy one tax for the purpose of raising revenue for one set of public services, the effect of the Act of 1920 and the order in council was to split that country into two countries (namely, Northern Ireland and Great Britain) each with power to levy its own tax for the purpose of raising revenue for its own public services. In my opinion the effect of ss 12 and 14 of the order in council as regards the Finance Act 1894, is that with reference to deaths occurring on or after the appointed day estate duty becomes leviable in Northern Ireland under one set of statutory provisions, namely, the Finance Act 1894, as adapted and applicable to Northern Ireland, and in Great Britain under another set of statutory provisions, namely, the Finance Act 1894, as adapted and applicable to Great Britain. The different statutory provisions are made applicable severally to the two countries.

It was urged before us that because the order in council did not in terms refer to or in any way purport to adapt or modify the Finance Act 1894, s 5, the right to relief thereunder must remain unaffected. In my opinion no express reference to or adaption or modification of s 5 was necessary. All that was necessary was the modification of the specified subsections by altering the construction thereof as provided in the order in council. Everything else follows as of course. A separate estate duty became leviable by each country for its own purposes, the amount thereof in each case being arrived at after a different and separate aggregation of properties, and being ascertained in each case by reference to the principal value of a different and separate estate, the value being determined in each case by the valuation of a separate and independent authority.

Any other view leads to insoluble difficulties, of which two examples may be sufficient. S 28 of the Act of 1920 is in the following terms:

(1) Where the commissioners of inland revenue are satisfied that estate duty or any duty in the nature of estate duty is payable in Southern Ireland or Northern Ireland by reason of a death in respect of any property situated in Southern Ireland or Northern Ireland and passing on such death, they shall allow a sum equal to the amount of that duty to be deducted from the estate duty payable in Great Britain in respect of that property on the same death.

(2) Where the department of the Government of Southern Ireland or Northern Ireland corresponding to the commissioners of inland revenue are satisfied that estate duty is payable in Great Britain by reason of a death in respect of any property situate in Great Britain and passing on such death, they shall allow a sum equal to the amount of that duty to be deducted from the estate duty or duty in the nature of estate duty payable in Southern Ireland or Northern Ireland in respect of that property on the same death.

That section shows that estate duty is payable both in Great Britain and in Northern Ireland on the same property on the same death. It plainly contemplates two separate and possibly overlapping duties. I do not see how that can be reconciled with the Finance Act 1894, s 7(10), except upon the footing that the estate duty leviable in Northern Ireland and the estate duty leviable in Great Britain are two separate independent duties. Again, take s 4 of the last-mentioned Act.

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If there is only one estate duty leviable in the two countries, and not two separate duties leviable as to one in Northern Ireland and as to the other Great Britain, the property in both countries would have to be aggregated under that section in order to arrive at the rate payable in each.

In these circumstances, it is not, in my opinion, possible to hold that the estate duty which was paid in Northern Ireland on the death of the testator was estate duty within the meaning of the Finance Act 1894, s 5(2), as adapted and applicable to Great Britain after 22 November 1921. No relief can, therefore, be claimed by the appellants under that section, and the appeal should be discussed.

My Lords, my noble and learned friend, Lord Porter, has asked me to say that he agrees with the opinion which I have read.

LORD MACMILLAN. My lords, I concur.

LORD WRIGHT. My Lords, I also concur.

Appeal dismissed.

Solicitors: Russell & Arnholz (for the appellants); Solicitor of Inland Revenue (for the respondent).

Michael Marcus Esq   Barrister.

Hickman v Potts

[1939] 3 All ER 794


Categories:        LANDLORD AND TENANT; Rent: LOCAL GOVERNMENT        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        13, 14, 25 JULY 1939        


Distress Priority Distress for rent and distress for rates.

Rates and Rating Distress for rates Rent in arrear Claim by landlord for rent out of proceeds of distress Whether distress is an execution Landlord and Tenant Act 1709 (c 14), s 1.

The appellant was the owner of a house which was let on a quarterly tenancy. The tenant fell into arrears with her rent and the appellant obtained an order for leave to distrain. In the meantime the respondent, a bailiff for the corporation of Wolverhampton, had levied on the tenant under a warrant of distress for rates. The appellant claimed that the amount due for rent was a first charge on the proceeds of the sale of the distress, basing his claim on the Landlord and Tenant Act 1709, s 1. The respondent contended that the term “execution” in that section did not include a levy for rates:

Held the Act applies to all forms of execution, including a distress for rates.

Notes

The question here is whether a landlord is entitled to be paid his arrears of rent for a period up to one year out of the proceeds of a distress for rates. This turns upon the construction of the Landlord and Tenant Act 1709, s 1, the point being whether a distress for rates is an execution within the meaning of that section. Although that Act was passed 230 years ago, this point has never been raised before, but it is certainly one of the greatest importance both to landlords and to local authorities.

As to Provision for Payment of Rent on Execution, see Halsbury (Hailsham Edn), Vol 14, pp 63, 64, para 109; and for Cases, see Digest, Vol 21, pp 521524, Nos 963977.

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Cases referred to

Storey v Robinson (1795) 6 Term Rep 138; 18 Digest 443, 1796.

Simpson v Hartopp (1774) Willes 512; 18 Digest 288, 247.

Re Fanshaw & Yorston, Ex p Birmingham & Staffordshire Gas Light Co (1871) LR 11 Eq 615; 5 Digest 957, 7844.

R v Benn & Church (1795) 6 Term Rep 198; 18 Digest 403, 1431.

Harper v Carr (1797) 7 Term Rep 270; 18 Digest 398, 1390.

R v Speed (1702) 12 Mod Rep 328; 18 Digest 429, 1664.

Hutchins v Chambers (1758) 1 Burr 579; 18 Digest 358, 956, sub nom Hutchins v Whitaker 2 Keny 204.

Vinkinstone v Ebden (1698) Carth 357; 18 Digest 427, 1650.

Brandling v Barrington (1827) 6 B & C 467; 18 Digest 344, 802.

Isherwood v Oldknow (1815) 3 M & S 382; 31 Digest 422, 5681.

Swaffer v Mulcahy, Hooker v Mulcahy, Smith v Mulcahy [1934] 1 KB 608; Digest Supp, 103 LJKB 347, 150 LT 240.

Althams Case (1610) 8 Co Rep 150 b; 1 Digest 8, 50.

Henchett v Kimpson (1762) 2 Wils 140; 21 Digest 522, 965.

Greaves v DAcastro (1725) Bunb 194; 18 Digest 347, 840.

Dixon v Smith (1818) 1 Swan 457; 18 Digest 343, 792.

Taylor v Lanyon (1830) 6 Bing 536; 18 Digest 343, 793, 8 LJOS CP 180.

Manchester Corpn v Lyons (1882) 22 ChD 287; 33 Digest 551, 342, 47 LT 677.

Wimbledon Local Board v Underwood [1892] 1 QB 836; 7 Digest 151, 819, 61 LJQB 484, 67 LT 55.

Lee v Lopes (1812) 15 East 230; 5 Digest 829, 7041.

Seaman v Burley [1896] 2 QB 344; 18 Digest 422, 1603, 65 LJMC 208, 75 LT 91.

McCreagh v Cox & Ford (1923) 92 LJKB 855; 18 Digest 397, 1384, 120 LT 567.

Appeal

Appeal by the plaintiff from a decision of His Honour Judge Tibbs given at Wolverhampton county court and dated 27 January 1939. The facts of the case are fully set out in the judgment of the court which was delivered by Goddard LJ.

A T Denning KC and J C Whitehead for the appellant.

R M Montgomery KC and G E P Thorneycroft for the respondent.

Denning KC: The term “execution” includes the levy of a sum by seizure and sale of goods under a warrant or authority issued out of a court of law. It therefore includes a distress for rates. In 1700, Sir John Holt CJ said “when a statute says money shall be paid under a distress, that is an execution”: R v Speed. See also Hutchins v Chambers, Harper v Carr, R v Benn & Church and Swaffer v Mulcahy. The word “suit” in the section does not mean “action.” In 1700 one sued out an execution. It means an application to the court asking that execution should issue. See Coke on Littleton, Vol 2, p 289a, and Althams Case. The word “plaintiff” means the party at whose suit execution is sued out. It includes “defendant.” The statute should have a liberal interpretation. [Counsel referred to Henchett v Kimpson.] The words “execute his judgment” mean enforce the order which the court has pronounced in his favour. [Counsel

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referred to Greaves v DAcastro, Dixon v Smith and Brandling v Barrington.] Where the statute uses the word “extent,” it includes proceedings such as this. An extent at common law lay on a debt due under statute Merchant or statute Staple. A merchant took his debtor before the mayor and the debtor made a recognisance before the mayor, and if the debtor did not pay, the creditor could execute on his commodities; he could get a writ of extent. In the reign of Henry VIII an Act was passed allowing the Crown to use a writ of extent, and great use was made of this. See Comyns Digest, pp 295, 296; West on Extents (1817 Edn), pp 1, 14, 316; and Blackstones Commentaries (7th Edn), Vol 3, p 420. A distress for rates is indistinguishable from any other form of execution, and this appeal should be allowed.

Montgomery KC: This statute is 230 years old, but there has never yet been any attempt made to apply it to poor rate. That would make one think that the purpose of the Act, when it was passed, was so well known to lawyers that there was no doubt about it. No single case that has been cited relates to a levy for a rate or for a tax. The term execution has always been understood as not including the case where money is owing for rates. It applied to cases where one could recover money due on a debt. [Counsel referred to Taylor v Lanyon.] The third party has always been a party who could have sued on an indebitatus count; that cannot be done in the case of a poor rate; that is not a debt at all.

Clauson LJ: In the Bankruptcy Act 1913, s 33, rates are called a debt.

Montgomery KC: That may be so, but they are not a debt in the old sense of the word. The word “execution” in the Act only refers to debts due on an indebitatus count, and cannot apply to a sum of money that could not be sued for. A saving clause cannot be used to extend the meaning of an enactment: Manchester Corporation v Lyons. The question of whether distress was the equivalent of execution was considered in Wimbledon Local Board v Underwood; it was held that distress did not include execution for rates. [Counsel also referred to Lee v Lopes.] The purpose of this statute was to prevent a tenant from taking steps to prevent his landlord from recovering rent. This was very important for landlords, and if it covered distress for rates, one might expect a reference to that in the text books. But in the first edition of Chambers on Landlord and Tenant, which was published in 1823, although six pages (671676) are devoted to this statute, there is no suggestion that a landlord can claim priority. Proceedings to recover poor rate differ from execution: Seaman v Burley. The meaning of the word “debt” was considered in McCreagh v Cox & Ford. Execution does not include a distress under a justices warrant for poor rate. The section ends with the words “may proceed to execute his judgment”; in the case of a distress for rates, there is no judgment.

Denning KC in reply: It is said that there is no precedent, but the matter has never been disputed before, and there is nothing one way or

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the other. Bullen on Distress in 1842 does not refer to it either. Even if this be a criminal matter, it may still be execution.

A T Denning KC and J C Whitehead for the appellant.

R M Montgomery KC and G E P Thorneycroft for the respondent.

25 July 1939. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). The plaintiff in this case is the landlady of 366, Dudley Road, Wolverhampton, let on a quarterly tenancy to one Townsend at a rent of £5 7s per quarter. The tenant got into arrear with the rent, and, as the house is controlled under the Rent Restriction Acts, the plaintiff on 10 August 1938, applied to the county court under those Acts and obtained an order for leave to distrain, which order, however, was suspended so long as the tenant paid 15s per week off the arrears, and the rent as it became due. The tenant having made default, the plaintiff was on 29 September, in a position to distrain for a sum agreed at £15 11s. Meanwhile, on 20 September, the defendant, as bailiff for the corporation of Wolverhampton, levied on the tenant under a warrant of distress for rates, granted by a justice of the peace for the borough, on 11 August, pursuant to the Distress for Rates Act 1849. The plaintiffs solicitors on 4 October, gave notice to the defendant that their client claimed the amount due for rent as a first claim on the assets, by which was obviously meant the proceeds of the sale of the distress, and, as the defendants refused to recognise this claim, this action was brought. The plaintiffs claim was based on the Landlord and Tenant Act 1709, and the only point which falls to be determined, is whether the levying of a distress for rates under a justices warrant is an execution within s 1 of that Act. The county court judge has held it is not; hence this appeal.

S 1 of the Act is as follows:

For the more easy and effectual recovery of rents reserved on leases for life or lives, term of years, at will or otherwise; Be it enacted by the Queens most excellent Majesty, by and with the advice and consent of the lords spiritual and temporal and commons, in Parliament assembled, and by the authority of the same, That from and after May, 1, 1710, no goods or chattels whatsoever, lying or being in or upon any messuage, lands or tenements, which are or shall be leased for life or lives term of years at will or otherwise, shall be liable to be taken by virtue of any execution on any pretence whatsoever, unless the party at whose suit the said execution is sued out, shall before the removal of such goods from off the said premises by virtue of such execution or extent, pay to the landlord of the said premisses or his bailiff, all such sum or sums of money as are or shall be due for rent for the said premisses at the time of the taking such goods or chattels by virtue of such execution; Provided the said arrears of rent do not amount to more than one years rent, and in case the said arrears shall exceed one years rent, then the said party, at whose suit such execution is sued out, paying the said landlord or his bailiff, one years rent, may proceed to execute his judgment, as he might have done before the making of this act; and the sheriff or other officer is hereby impowered and required to levy and pay to the plaintiff as well the money so paid for rent, as the execution money.

Before considering the meaning of the section, it may perhaps be as well to mention that the lien thus given to the landlord has been the subject of certain subsequent enactments. The Execution Act 1844, s 67, limits the claim of a landlord in the case of weekly tenancies to four weeks rent, and in the case of other tenancies for a term of less than a year, as in the present case, to arrears accruing during four such terms or times of payment. The Bankruptcy Act 1914, s 35, modifies the

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Act of 1709 in certain respects where the goods of a debtor are concerned. These sections do not affect the present case.

The County Court Act 1888, s 160, provides that s 1 of the Act of 1709 shall not apply to goods taken in execution under the warrant of a county court, but the landlord may give the bailiff notice of rent in arrear, and the latter is then to distrain for the rent so claimed, as well as levy for the amount of the judgment, and out of the proceeds of sale is to pay the landlord four weeks rent in the case of a weekly tenancy, two terms of payment for any other term of less than a year, and one years rent in any other case. It seems clear, therefore, that execution in the Act of 1709, is not limited to the process of the superior courts, and levy by a county court bailiff would have been an execution within the Act of 1709, but for the provisions of this section, although at the time when the Act was passed the modern type of county court did not exist.

It is, indeed, remarkable that though the Act has been in force for 230 years, there is no trace of any case in which the question which now falls for decision has ever been raised. Moreover, as far as researches of counsel can find, no text writer on the law of landlord and tenant has considered or mentioned it. In recent editions of Stones Justices Manual, a work of the utmost value as a manual of practice, but not a work of authority on the branch of the law we are considering, the editors have expressed the opinion that the Act in question does not apply to a distress for rates, but no reasons or authorities are advanced in support of this opinion.

It thus becomes necessary to get a clear conception both of a distress and of an execution, the more so because, as will appear hereafter, the term “distress” has often been, and still is, applied to a process which is a distress in name only, and is in reality an execution. A distress is a remedy probably as old as the common law itself. From its earliest history it always had two peculiar elements: (i) it was a measure of self help, a remedy given by the law to the party, for the exercise of which he required no permission from any court; and (ii) that which was seized thereunder, had to be held by the distrainor as a pledge or security, and no right of sale or of using the property seized was given to him. It was not till 1690 that a right of sale of a distress for rent was conferred by the Distress Act 1689, while to this day animals distrained damage feasant cannot be sold to provide compensation for the distrainor. They can only be sold to recoup the distrainor for the cost of providing them with food and water, a duty which was laid upon him by the Cruelty to Animals Act 1849. Distress has been the subject of many statutes, both by way of extending the remedy in favour of landlords, and of limiting it in favour of tenants and of persons, for example, lodgers, whose property may be on demised premises. For the purpose of the present case it may be said that the most important enactments are those which have conferred exemptions from distress upon certain goods or

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chattels of the tenants. Thus, beasts of the plough were exempted unless no other sufficient distress could be taken, by the Act 51 Hen III, and by later legislation such things as wearing apparel, bedding, and tools have been protected, while at common law things in a mans actual uses such as a horse on which he is riding (Storey v Robinson), or a loom in use by a weaver (Simpson v Hartopp), cannot be distrained; whereas goods belonging to others but on the tenants land could, by the common law, be distrained (unless brought within certain definite exceptions in favour of trade), so that in modern times legislation has been passed to give protection to lodgers and others from the rigour of the law.

Now let us compare this state of things with an execution. While there is no protection from the sheriff for beasts of the plough or the horse which the debtor may be riding, the sheriff could never lawfully seize goods which did not belong to the debtor, though they might be in his house. An execution is essentially the process of a court; it is the final step in a cause, and proceeds from a judgment. A distress has been said to be neither an execution nor a legal process, as no legal process is necessary, and a landlord may distrain with his own hands. (See Re Fanshaw & Yorston, Ex p Birmingham & Staffordshire Gas Light Co.) In the case of a judgment of a superior court, execution is effected by a writ issued by the court which has given judgment, directed to the sheriff, and if he or the under-sheriff does not personally execute the writ, as in practice they never do, a warrant is issued by the sheriff to a bailiff to levy execution. It seems that the execution creditor may nominate to the sheriff a special bailiff to execute the writ, and in that case could nominate himself, but then he would levy by virtue of the sheriffs warrant, unlike the distrainor, who can, if he pleases, distrain by his own hand or by his appointed bailiff.

We have now to consider the nature of a distress for rates, which is a purely statutory proceeding. Now regulated by the Distress for Rent Act 1849, it had its origin in the Poor Law Relief Act 1601, which empowered the overseers to obtain a warrant from two justices of the peace authorising them to enforce payment of rates and arrears by distress and sale of the offenders goods, that is, the goods of those who had failed to contribute as they had been assessed. This is probably the first occasion on which justices were authorised to issue a warrant for the recovery of money, and also the first time when a power of sale was conferred by statute in the Case of what is called a distress. There the matter stood till the Act of 1849. The principal changes which that Act effected were that it enabled a warrant to be issued by one justice; it enabled the overseers to recover the costs of distraining; it provided for committal to prison for want of distress, and it prescribed the form of complaint, summons and warrant.

What we have to determine is whether in 1709, when the Landlord and Tenant Act was passed, the levying of a distress for rates would have been regarded by the lawyers of the day, and therefore presumably

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by Parliament, as an execution. The first thing to consider is, did the issue of the warrant result from a decision of a court? No doubt in the reign of Elizabeth, justices out of session acted far more as administrative and executive, than as judicial, officers, but Sir James Fitzjames Stephens has pointed out in his History of the Criminal Law that, from their first institution, a number of statutes have authorised, in some cases one justice, and in other cases two, to inflict penalties in a summary way on a great variety of offenders. So they must have been capable of forming a court of law. Then it was decided, in R v Benn & Church and in Harper v Carr, that the issue of a distress warrant for rates was a judicial and not a ministerial act. These cases were decided in 1795 and 1797 respectively, but, if in those years the issue of a warrant under the Poor Relief Act 1601, was a judicial act, it must equally have been so in 1709. Why, then, was the process in 1601 called a distress? One rather tempting argument that suggests itself is that the warrant was directed to the overseers themselves, and not to a sheriff or other officer, and so the execution of the warrant, being left to the party obtaining it, was in that respect analogous to a distress. Probably the true reason is to be found in R v Speed. Both in the argument, and in the judgment of Holt CJ it appears that the process issuing out of such courts as a court baron and a court leet, was called a distress. In the case of a court baron, it is said there was no power to sell, though in the case of a court leet there was, as it was a court of record. What therefore was more natural than that in giving power to an inferior court, not a court of record, the legislature should describe its process by the terms used for that of courts of similar standing? Moreover, in that case, decided only some ten years before the Act we are now considering was passed, and in which the Poor Relief Act 1601, was cited in argument, Holt CJ at p 330, lays down in terms that:

When a statute says money “shall be levied by distress” this is an execution …

Without going into deep research of old statutes, it is clear from that case that it was common to use the word “distress” in relation to sums of money to be recovered, even as penalties. The statute against deer stealing under consideration in Speeds case apparently provided for a years imprisonment in case of failure of distress to the value of thirty pounds. Even apart from the clear statement of Holt CJ it must be obvious that the levying of a penalty imposed by a court of criminal jurisdiction is a form of execution.

We come next to the case of Hutchins v Chambers, where the whole question was whether beasts of the plough were privileged from distress for a poor rate, and it was held they were not. Lord Mansfield cited the judgment of Holt CJ in Vinkinstone v Ebden, a case of distress for tolls, and quoted with approval a passage in 3 Salk, at p 136, as follows:

… the rule of the common law which exempts utensils, tools, instruments of

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husbandry, etc., from distress, holds only in distresses for rent-arrear, amerciaments, etc., but doth not extend to cases where a distress is given in the nature of an execution, by any particular statute; as for poors rates.

Therefore, adds Lord Mansfield, it is more analogous to an execution than to a distress at common law, and there (in cases of execution) averia caruœ may be distrained, although there may be other sufficient distress.

Now the Act of 1709 applies to any execution on any pretence whatsoever, and it is indeed difficult to see how a process can be for some purposes an execution and for others something different. It is true that the Act lays a duty on the party at whose suit the execution is sued out, and it is also true that it has been recently held in this court that no action lies at the suit of the rating authority to recover rates, and that the only remedy is that given by the statute. Why may not the rating authority be the party at whose suit the execution is sued out? To obtain the processto use a neutral wordproceedings have to be begun in the court of competent jurisdiction. The form of proceeding is prescribed in the Act of 1849. There is first a complaint by the overseers, for whom recent legislation has substituted the rating authority. A complaint is the appropriate method of starting proceedings before justices where an order and not a conviction is sought, just as proceedings in a county court are instituted by a plaint, and in the high court by a writ. The complaint is followed by a summons, so that the justices may hear the respondent, and act judicially, and if the summons results in the issue of a warrant, a levy takes place, which the cases just cited decide is an execution. That execution, it would seem to follow, was sued out at the suit of the rating authority. It is to be remembered that courts of summary jurisdiction make many orders for the recovery or payment of money, sometimes by way of penalty, sometimes by way of debt or damages. The Summary Jurisdiction Acts 1848 and 1879, contain a code of sections dealing with this, and always the process of execution is called distress. The statutory Summary Jurisdiction Rules 1915 and 1926, contain a schedule of forms, among them forms applicable to proceedings for the recovery of a civil debt. Form 80 is the complaint, Form 81 the summons, Form 83 is the judgment, which states that it is adjudged that the defendant pay a sum for debt or damages, and Form 86 is the distress warrant. It would be hardly possible to argue that process under that warrant was not an execution sued out at the suit of the complainant. The reality is that this process issuing from justices is distress in name only, and is in fact execution.

It is, however, necessary to say a word with regard to Brandling v Barrington, especially as the town clerk relied on this case in the correspondence before action, as showing that the Act did not apply. When properly understood, that case decided no more than that the Act did not apply to an execution levied by way of mesne process. The writ of pone ver vadios was the equivalent, in the Chancery Court of the County

Page 802 of [1939] 3 All ER 794

Palatine of Durham, to the writ of distringas in the courts at Westminster. It was a method of compelling appearance. The sheriff was commanded to put the defendant by gages and safe pledges that he be before the court to answer the plaintiffs claim. The sheriff obeyed the writ, as he did the writ of distringas, by attaching the defendants goods. If the latter appeared, the goods were at once released pending trial, but if he was in default the goods were forfeited, and no doubt the plaintiff thereby got satisfaction. But, as Littledale J put it [at p 478], the writ was not an execution, though in some cases it may have the effect of (that is, the same result as) an execution. The court held that the execution must be one following a judgment, and not one merely to compel appearance. That decision affords no assistance in the present case. The final decision of justices in a matter in which they have jurisdiction is as much a judgment as that of any other court. Having decided that the person summoned is liable to pay the rate, they issue their warrant for the execution of their judgment; the resulting process has none of the characteristics of distress; it is execution pure and simple.

It remains for us to deal with what was the main strength of the argument of counsel for the respondent, that this point has never been taken in the 230 years during which the Act has been in force. Now, this is not a case in which an appellate court is asked to reverse a decision of long standing on the faith of which persons have acquired rights and ordered their affairs. It is one in which we have to decide for the first time a question which might well have arisen before, but never has done so. It is fruitless to attempt an inquiry as to the reason for this silence, not only of decided cases, but of text writers. Certainly one would have thought that Hutchins v Chambers would have encouraged landlords to raise it, or text writers to discuss it. Even if we assume that those whose business it is to levy distress for rates have been long of opinion that the Act does not apply, this affords no ground for perpetuating the error. “Communis error facit jus” is a maxim of very limited application; it is truer to sayas was said by Lord Ellenborough CJ in Isherwood v Oldknow [at p 396]“communis opinio is evidence of what the law is,” but here there is no trace of a communis opinio among lawyers. And if there has been prevalent an erroneous view of the Act, it is clear that no one has acquired rights in consequence; the most that can be said is that landlords have perhaps been induced to refrain from exercising the right given them by the Act in the particular case of distress for rates. Whether it is desirable in modern conditions that the landlord should have a preference over the rating authority is a matter for the legislature, and not for the courts. We are bound to decide the case according to what we believe to be the true view of the law.

The result is that the appeal will be allowed with costs, and judgment entered for the plaintiff with costs on the same scale as were allowed by

Page 803 of [1939] 3 All ER 794

the county court judge at the hearing. The case is one of obvious importance and novelty, and if the defendants so desire, leave to appeal to the House of Lords will be given.

Appeal allowed with costs. Leave to appeal to the House of Lords.

Solicitors: Simon Haynes Barlas & Ireland, agents for Feibusch & Wells, Wolverhampton (for the appellant); Sharpe Pritchard & Co agents for J Brock Allon, Town Clerk, Wolverhampton (for the respondent).

E Fuller Briscoe Esq   Barrister.

Barnes (Inspector of Taxes) v Hely Hutchinson

[1939] 3 All ER 803


Categories:        TAXATION; Double Taxation        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD MACMILLAN, LORD WRIGHT        

Hearing Date(s):        22, 23, 26 JUNE, 27 JULY 1939        


Income Tax Double taxation Relief Shares in English company held by Indian company Dividends of English company suffering tax Relief to preference shareholder in Indian company Income Tax Act 1918 (c 40), Sched D, Case V, r 1.

The respondent was a preference shareholder in an Indian company. The Indian company was a shareholder in two English companies, the profits of each of which had suffered United Kingdom taxation. The dividends received by the Indian company from the two English companies formed 44.12 per cent of the total profits of the Indian company, and the respondent contended that he was to be treated as having borne 44.12 per cent of the tax upon the dividends received by him from the Indian company:

Held as the principle against double taxation applies only to the payment of tax by the same person in respect of the same income, and as the respondent received the full dividend to which he was entitled on his preference shares, he was not entitled to the relief claimed.

Decision of Court of Appeal ([1938] 3 All ER 98) reversed.

Notes

In the courts below, the circumstances of this case were treated as within the principle of the decision in Gilbertson v Fergusson. Their Lordships have, however, decided that no question of double taxation arises in the present case, since the shares were preference shares, and the shareholder had received all that he was entitled to receive by way of dividend under the contract with the company. The question of the correctness of the decision in Gilbertson v Fergusson was not really in issue in the present appeal, but it would seem that that case may now be of limited application even in the case of ordinary shares.

As to Gilbertson v Fergusson Relief, see Halsbury (Hailsham Edn), Vol 17, p 195, para 399; and for Case, see Digest, Vol 28, p 79, No 431.

Cases referred to

Cull v Inland Revenue Comrs [1939] 3 All ER 761; Digest Supp.

Gilbertson v Fergusson (1881) 7 QBD 562; 28 Digest 79, 431, 46 LT 10, 1 Tax Cas 501.

Neumann v Inland Revenue Comrs [1934] AC 215; Digest Supp, 103 LJKB 210, 150 LT 481, 18 Tax Cas 332.

Bradbury v English Sewing Cotton Co [1923] AC 744; 28 Digest 81, 445, 92 LJKB 736, 129 LT 546; 8 Tax Cas 481.

London County Council v A-G [1901] AC 26; 28 Digest 73, 392, 70 LJQB 77, 83 LT 605, 4 Tax Cas 265, revsg SC sub nom A-G v London County Council [1900] 1 QB 192.

Page 804 of [1939] 3 All ER 803

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR, Scott and Clauson LJJ), dated 2 June 1938, and reported [1938] 3 All ER 98, dismissing an appeal by the appellant from an order of Lawrence J, dated 8 October 1937, and reported [1937] 4 All ER 286, whereby an appeal by the appellant upon a case stated by the Commissioners for the General Purposes of the Income Tax for the city of London was dismissed and the decision of the commissioners was affirmed. The facts and the arguments are fully set out in the opinions of Lord Atkin and Lord Wright.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the appellant.

Roland Burrows KC and Terence N Donovan for the respondent.

27 July 1939. The following opinions were delivered.

LORD ATKIN (read by Lord Russell of Killowen). My Lords, this is an appeal from the Court of Appeal affirming a decision of Lawrence J, who dismissed an appeal from the Commissioners for the General Purposes of the income tax for the city of London, who had allowed an appeal by the respondent against an assessment for income tax. It will thus be seen that the inspector of taxes has been held to be wrong all along the line. Nevertheless I venture to think that he is right and that his appeal should be allowed. The respondent is the holder of 525 preference shares of Rs 1,000 each in George Henderson & Co Ltd entitling the holder to a fixed cumulative dividend at the rate of 8 per cent per annum. The company is registered in Calcutta, and has also issued ordinary share capital. It is the holder of ordinary shares in two companies registered in England, the Barnagore Jute Factory Co Ltd, and the Hunwal Tea Co Ltd. The whole of the profits of these British companies were assessed to British income tax, and when they paid dividends to George Henderson & Co Ltd (the Indian company) they deducted the appropriate amount of tax according to All Schedules Rules, r 20. The Indian company also received income which had not suffered deduction for British income tax, and the proportion of taxed to untaxed income for the year in question was for this case agreed to be 44.12 to 55.88. The respondent on 22 June 1931, was paid as dividend upon his preference shares the sum of Rs 42,000. It was paid to him direct by the company and without any deduction for income tax. He was assessed under Case V, r 1 on the full amount of the dividend. He contended that such part of the dividend as was paid out of profits and gains which had already borne British income tax (namely, 44.12 per cent) could not again be subjected to British income tax and that is assessment should be reduced accordingly. It is this contention which has been successful in the courts below.

The position of a shareholder in a foreign company so far as income tax is concerned, is entirely different from that of a shareholder in a British company. So far as the latter is concerned, he is not liable to be charged or assessed for income tax on his dividends at all: though he

Page 805 of [1939] 3 All ER 803

is liable in respect of them for sur-tax. The position of such a shareholder has been discussed in the case recently heard of Cull v Inland Revenue Comrs, and need not here be further expounded. The shareholder in a foreign company is charged under Schedule D, namely, in respect of the annual profits or gains arising to any person residing in the United Kingdom from any property whatever, whether situate in the United Kingdom or elsewhere, and specifically under Case V which relates to “Tax in respect of income arising from possessions out of the United Kingdom.” Case V, r 1, provides as follows:

The tax in respect of income arising from stocks, shares or rents in any place out of the United Kingdom shall be computed on the full amount thereof on an average of the three preceding years, as directed in Case I, whether the income has been or will be received in the United Kingdom or not. …

The provision as to the three years average has been altered by the Finance Act 1926, s 29, by substituting the amount of the preceding year. It is obvious, therefore, that as far as the statute is concerned the respondent was chargeable on the whole dividend received: and it is not suggested that his claim to an abatement rests upon any statutory provision. His case depends upon a decision of the Court of Appeal in Gilbertson v Fergusson. In that case the persons charged were members of the English committee of the board of directors of the Imperial Ottoman Bank, a Turkish corporation which carried on business in this country and abroad. The management of this business in this country was entrusted to the English members of the general committee of management, who would correspond to the board of directors. The bank earned profits both in this country and abroad and on the profits made in this country the bank was charged with income tax through the English committee, who were in fact the parties assessed. Dividends were declared out of the total profits of the bank: and the dividends due to British shareholders were paid to them by the English committee. In respect of dividends so paid, the English committee were assessed to income tax under the provisions of the Income Tax Act 1842, s 2, and the Act of 1853, s 10, which provided that all persons entrusted with the payment of dividends, were to pay the duties on the dividend on behalf of the persons entitled to the same out of the moneys in their hands. In respect of this last assessment the London committee complained that they should not be assessed upon the whole of the dividends paid by them to the English shareholders, but only on a proportionate part, namely, the proportion that the profits made abroad bore to the profits made in England: for they said that, on the profits made in England, tax had already been paid to the Crown. I have omitted other subsidiary issues which do not bear upon the point in question. The majority in the Exchequer Division, Huddleston and Pollock BB, Kelly CB dissenting, and the Court of Appeal, Bramwell, Brett and Cotton LJJ accepted the view of the London committee that the assessment should be proportionately reduced.

Page 806 of [1939] 3 All ER 803

The reason for the decision appears from the judgment of Brett LJ at p 570:

By the statute the government are entitled to receive the income tax upon all the profits made in respect of the business carried on in England, and also beyond that on all dividends paid in England, whether in respect of profits made in England or in Turkey. Now it may be true that there are no specific words in this statute which point out that the government are not to receive the tax twice over, but it would be so clearly unjust and obviously contrary to the meaning of the statute that the government should have the tax payable twice over by the same person in respect of the same thing, that I should say it was a necessary implication that that could not be right.

Cotton LJ says, at p 572:

It must be conceded that if there are any shareholders who reside in England and receive dividends there they are chargeable under the Act, and are bound to make a return and pay the tax on what they so receive. There is no exception in their case in respect of so much of their dividends as is attributable to or arising in respect of profits made in England, but I take it there would be this implied exception, that when duty is charged as against the person in one part of the Act he is not to be charged again under another part applying no doubt in terms to him, but intended to include those who have not been charged under the preceding part.

It will be seen that there, as in the present case, the shareholders were liable to pay tax on foreign dividends, though in that case the tax was paid “on behalf of them” by the persons entrusted with money to pay the dividends. As far as the company had been taxed on its profits made in England, it seems to me plain that the reasoning proceeded on the theory then prevailing, that the company paid tax on its profits on behalf of its shareholders, a theory which, as was pointed out in Culls case, can no longer be maintained. It seems equally plain, however, that the exception which the courts were able to imply was based upon this very ground, the injustice that would prevail if the tax were payable twice over by the same person in respect of the same thing. Whatever the grounds of the decision, it has stood to the present day, and the Attorney-General did not seek to dispute its validity in facts such as those found in that case. There has been much legislation in income tax matters since the date of its decision, and this House would hesitate long in these circumstances, before infringing a decision of such long standing, and so often acted upon. But does the decision affect the present case? In that case, no doubt, as in this, the shareholder was being charged in respect of dividends in a foreign company. In that case the foreign company had been directly charged with income tax on its English profits. In the present case the foreign company had not been, and could not be, charged with income tax on its dividends derived from the British companies. The fund out of which profits had been declared by the British company, had no doubt been diminished by the incidence of the British tax: and the Indian company had suffered the deduction from their dividends in respect of “tax” which the British companies were entitled to make if they chose, the nature of which I have mentioned in Culls case. I think that this distinction makes it difficult to apply the decision in Gilbertson v Fergusson, now to the case of ordinary shareholders in the Indian company. Where

Page 807 of [1939] 3 All ER 803

does the inquiry end in the case of a shareholder in a foreign company? If he can inquire which of the dividends received by that company had suffered British tax, can he go on to inquire what proportion of those dividends were derived from income that had suffered tax and so ad infinitum: and what fraction of a fraction of a fraction has eventually to be calculated and verified?

Even if the implied exception could be adopted for the ordinary shareholder, I am at a loss to understand any reasons for its applying to a preference shareholder, or in what possible sense it can be said that to him an injustice has been done of making tax “payable twice over by the same person in respect of the same thing.” The preference shareholder who receives his full dividend, has suffered nothing directly or indirectly. That a larger sum of profits out of which he receives his dividend is diminished by tax is nothing to him, as long as there is sufficient left to pay him the sum which the company has contracted to pay. I can see nothing either unjust or contrary to the statute in exacting tax for the first time from him; and I think that his claim for a proportionate abatement fails.

I should add that I am not myself prepared to accept the view that some implied exception arises where a “fund” is taxed, a principle which appears to have found favour in the Court of Appeal, and was much pressed before us on behalf of the respondent. Funds are not taxed; the analogy of one or more bags into which the Inland Revenue inserts its fingers seems to me, with respect, to be inaccurate. Persons are charged in respect of profits: and if they are to have the benefit of an implied relief from the plain words of the statute, it appears to me that it must be shown to be unjust for those persons to be taxed, in other words that either directly or perhaps indirectly they are being taxed twice. In the present case I think that the respondent on his full assessment will only be taxed once. I think, therefore, that the orders of the Court of Appeal and of Lawrence J and the determination of the Commissioners for General Purposes should be set aside and that the original assessment in the sum of £6,045 should be restored. In accordance with the terms imposed when the Court of Appeal gave leave to appeal to your Lordships House, the appellants should pay the costs here as between solicitor and client.

LORD RUSSELL OF KILLOWEN. My Lords, I have been given the opportunity of considering the opinion which I have just read, and also the opinion about to be delivered by my noble and learned friend, Lord Wright. They indicate exactly the views which I entertain on the subject of this appeal. It is merely from a desire to avoid repetition, and not from any want of respect for the courts from which we are differing, that I content myself with concurring in the motion proposed, without recording any separate opinion of my own.

LORD MACMILLAN. My Lords, I also concur.

Page 808 of [1939] 3 All ER 803

LORD WRIGHT. My Lords, the respondent, a British taxpayer, has received Rs 42,000, or £3,150, remitted to him from India as dividends on 525 8 per cent preference shares of Rs 1,000 each in an Indian company named George Henderson & Co Ltd, resident and carrying on business in India. The companys profits for the year were as to 44.12 per cent derived from dividends paid to the company by two British companies in which it was a shareholder. The profits of these companies had borne British income tax. The question in the appeal is whether the respondent is entitled to relief to the extent of 44.12 per cent in respect of British income tax on the sum which he has actually received from India. He has succeeded in that contention before the revenue judge and the Court of Appeal. It would certainly seem strange that the respondent, who has received his 8 per cent in full without any deduction either in England or in India, should not bear the same tax on this piece of income as any other taxpayer who is subject to British income tax. It is not suggested that there is any express statutory provision which reduces his liability. On the contrary, the words of Sched D, Case V, seem to provide specifically to the contrary effect. Case V deals with tax in respect of income arising from possessions out of the United Kingdom. The preference shares in the Indian company are beyond question foreign possessions, and the dividends are income arising from them. Hence under Case V, r 1, the tax in respect of that income is to be computed on the full amount thereof. It is not suggested that any deduction is permissible under Case IV, r 1, in respect of income tax in the place where the income has arisen, or on any other ground. The contention which has found favour with the courts below is that as the income of the Indian company has borne British income tax to the extent of 44.12 per cent, in the sense that dividends in these companies were paid under deduction of British income tax, the preference dividends received by the respondent must be held to have borne British income tax in the same proportion; otherwise, it is said that, if it is now taxed in full, it will be doubly taxed in the hands of the same person. The analogy is invoked of a shareholder in a British company, who, according to the principle now well settled, is not taxed separately on his dividend to standard income tax. The dividend is deemed to have already borne tax, because tax has been paid on the companys profits as a whole. This rule is explained in Neumann v Inland Revenue Comrs. Reliance is also placed on behalf of the respondent on Gilbertson v Fergusson.

I do not think, for several reasons, that the analogy of dividends of an English company applies, and I see no sufficient ground in a case like the present for relieving the respondent from what is expressed to be his liability under Case V. I think the dividends in question are properly to be regarded as individual pieces of income, received by him in this country. I apply here the words of Lord Phillimore in Bradbury v English Sewing Cotton Co, which seem to me to describe accurately, at least in a case like this, the position of a British taxpayer who receives

Page 809 of [1939] 3 All ER 803

annual sums from foreign possessions, whether the foreign possessions are land or goods or shares in a foreign company. Lord Phillimore said as to the dividends, at p 770:

The periodic sums which are so remitted to him must be entered by him in his return, and are liable to assessment and taxation, not because they are dividends on shares in foreign companies, but simply because they are remittances from foreign sources. The officers of the Crown do not know and do not care what is the character of the sources from which the money comes.

I do not stop to enquire if this statement is universally applicable, but it is accurate at least in regard to preference dividends from a foreign company such as those in question here. I cannot see any sufficient ground to justify such exemption or abatement as the respondent claims. Preference dividends in an English company would generally be taxed by deduction under All Schedules Rules, r 20. The company is treated as having the right to deduct the appropriate tax because it is deemed to have franked the dividends in the hands of the shareholder, by paying the tax on the totality of its own profits. If the English company does deduct tax under r 20, as would be the case if the preference dividends were declared under deduction of tax or tax free, the dividends would be free of standard tax, and equally if the dividends were declared without deduction of tax. However the same rule or fiction cannot, in my opinion, be applied to the dividends on these preference shares in the Indian company, which are remitted in full to this country. It cannot be said that the Indian company has paid English tax on its profits or any part of them in such a way as to frank the preference dividends, in whole or in part, in the hands of the English recipient. The rule or fiction has never been, nor can it be, extended so far. It is said, however, that the total fund of the Indian companys profits has been reduced because the dividends from its shares in the two British companies have been paid under deduction of British tax. That is true, but that does not mean that the actual dividends paid to the respondent were affected. All it means is that the divisible profits of the Indian company were proportionately less on that account. The Indian company did not directly pay any British tax or deduct anything on that account from the sums paid to the respondent. All these matters seem to me to be entirely irrelevant to him. He got the full amount of the dividends just as if the dividends from the two British companies had not been paid under deduction of tax. If, as a result of the deduction of British tax on the dividends received from the British companies by the Indian company, the latters net profits had been reduced so as not to suffice to pay the respondent his 8 per cent dividends in full, the amount of the foreign remittances sent to him would or might be so much less. In that event his liability for income tax under Case V would be proportionately reduced. It is contended that he is affected because the fund out of which his dividends are drawn is reduced to the extent that the Indian companys dividends on the shares in the British company were reduced by the deduction of British income tax; but the tax assessed on the respondent is

Page 810 of [1939] 3 All ER 803

not levied on the Indian companys fund of profits but on the foreign income arising from them to the respondent. That income is, in the facts of this case, completely unaffected. In truth, at least in a case like the present, the analogy of an English company is misleading; but, even when what is being considered is the taxation of the dividends of an English company, it is not correct to say that it is anything but the shareholders income as represented by the dividends which is taxed. The English company is taxed on the balance of its profits or gains, that is, on its income; the shareholder is taxed on his own income. The shareholder is never taxed on the companys fund of profits, but only on the dividend which comes to him in payment of the debt which is created when the company declares the dividend. The tax is in every case on the individuals income, not on a fund possessed by another person, the company, even though it is the fund of profits of that company, from which the individuals income or part of it will be paid. The effect of All Schedules Rules, rr 19, 20 and 21, is in no way inconsistent with this fundamental principle, nor is the rule according to which English dividends are not separately assessable to standard income tax. This principle must not be obscured by reason of the circumstance that, in the way already noted, the dividend is treated as franked by the tax paid by the company. The fund which is taxed in the hands of the company, and the dividend which is declared by the company and paid to the shareholder, are separate items for taxation law. It is only the latter which is the shareholders income. Notwithstanding the elaborate reasoning in the court below, I cannot see any sufficient ground why the respondent should escape the full tax on these preference dividends.

The case of Gilbertson v Fergusson has been much relied on in argument. I do not desire to express any final opinion on the exact decision in that case, which differed from the present, because it dealt not with preference, but with ordinary, shares, and also because the Ottoman Bank, which was the foreign company, had been trading in England and had been directly taxed on the profits of its English trading. The claim in the action was two-fold, first a claim against the company represented by its London agency in respect of the profits of its English trading, and secondly a claim also against the London agency, in respect of the moneys entrusted to them to distribute as dividends to English shareholders. In the latter claim, the agency was in truth assessed as representing the English shareholders. It was held that the latter assessment should be reduced in respect of so much of the dividends as represented profits arising within the United Kingdom. However, in that case the dividends were ordinary, and not preference, dividends, so that the amount of the ordinary dividends might, in fact or in theory, have been reduced by the English taxation. There was the further difference that the Indian company, unlike the Ottoman Bank, was not carrying on business in England and was not directly assessable or assessed

Page 811 of [1939] 3 All ER 803

in England. Its contribution to British taxation was indirect, in the sense that there had been the deduction made by the two British companies in paying their dividends to the Indian company. Thus it may be said that the Indian company occupied the same position for this purpose as did the English shareholders in the Ottoman Bank case, whereas the respondent is one stage more remote. The Indian company is interposed between the respondent and any question of British taxation on the Indian companys income. Logically the process of tracing back profits of a foreign company to ascertain if they have, however remotely, indirectly borne British tax, should not stop at a single stage, but I need not point out the practical difficulties of going back beyond the simple stage at which the foreign company has directly borne British tax. It is not, however, necessary here to examine Gilbertsons case in principle or in detail. It raises questions perhaps of great importance, but questions not material to this appeal. Your Lordships were told that it has been followed in practice, and it has certainly stood for many years. If it is ever after this lapse of time to be reconsidered, that should be done, when occasion arises where the facts are analogous. In the present case the circumstances are so different that a decision can be arrived at without finally exploring Gilbertsons case.

I may add in conclusion that I do not think this case involves any question of double taxation. In Lord Daveys words in London County Council v A-G, at p 43:

… the Crown … cannot demand the tax twice over on the same income.

Lord Davey illustrates the rule by instances such as those of mortgagee or annuitant, where the owner of the property and the annuitant are entitled to the income between them, and, if the Crown receives tax from the owner on the whole income, it has no further claim against the annuitant on whose account the owner is deemed to have paid as well as on his own. The same principle has been said, but, not accurately, to apply to the case of dividends of an English company, a matter to which I have adverted above. In Gilbertsons case, at p 570, Brett LJ said that it would be clearly unjust and obviously contrary to the meaning of the statute that the government should have the tax payable twice over by the same person in respect of the same thing. Whatever the precise scope of the rule against double taxation, it must at least involve that it is the same income, that it is the same person in respect of the same piece of income that is being doubly taxed whether directly or indirectly, and that the double taxation is by British assessment. In this case nothing of the sort can be predicated. The income in question is the amount of preference dividends received by the respondent. That income, which is the income of the respondent, has not been taxed in India. If it is now taxed in England there cannot, in my opinion, be said to be double taxation. The British tax, which the Indian company has indirectly

Page 812 of [1939] 3 All ER 803

borne on 44.12 per cent of its profits, has not, in my opinion, been borne by the respondent in any sense.

With all respect to the distinguished judges who have in this case taken a different view, I would allow the appeal.

Appeal allowed.

Solicitors: Solicitor of Inland Revenue (for the appellant); Sanderson Lee & Co (for the respondent).

Michael Marcus Esq   Barrister.

Paine & Co Ltd v St Neots Gas & Coke Co

[1939] 3 All ER 812


Categories:        ENVIRONMENTAL: LAND; Property Rights: TORTS; Nuisance        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, FINLAY AND LUXMOORE LJJ        

Hearing Date(s):        9, 12, 13 JUNE, 27 JULY 1939        


Easements Title to easement Licence granted by proprietors of common rights to sink a well on common Right of proprietors to make grant Inclosure Acts dealing with common Nuisance Pollution of water by third party Grantees right of action.

The plaintiffs were manufacturers of malt extract, and for that purpose they required a large supply of pure water. Their premises and those of the defendants adjoined a common, and on this common the plaintiffs had sunk a well, from which they carried water through a defined pipe to their mill. After they had been using this well for some years, the water supply became contaminated as a result of ammonia escaping from the defendants works, discharging into the gravel sub-soil, and, in the course of time, reaching the well on the common. The plaintiffs rested their right to the water on a so-called lease, granted in 1935 by five persons described as proprietors of common rights in, inter alia, the common upon which the well was situated. These five persons were not all the commoners entitled to rights over the common, but there had been a meeting of the commoners at which the request for the lease had been agreed to. The Acts relating to the common conferred no rights upon the commoners, or upon any person, to make wells or to allow other people to do so, or to lease rights in the soil to persons not commoners. Nor did they contain any provision giving a number power to act in the name of the whole. It was contended by the defendants that the alleged grant was no more than a licence, unenforceable by the licensees as against a third party, that it did not in law create an easement, as there was no dominant tenement, and, further, that the five grantors under the alleged lease had no power under the Inclosure Acts to make any such grant. It was also contended that the possession of the easement was sufficient to found a claim for disturbance:

Held (i) the plaintiffs had failed to prove that the grantors had power to make the grant under the deed of 1935.

(ii) per Scott LJ: there was no sufficient proof of possession to found the claim based thereon.

Per Luxmoore LJ: de facto possession of an easement is not sufficient to found a claim for disturbance. Such a right of necessity excluded the possibility of possession of the servient tenement.

Decision of Goddard LJ ([1938] 4 All ER 592) affirmed.

Notes

The action in respect of the disturbance of an easement is an action in nuisance, but it differs from an ordinary action of nuisance in that the existence of the easement has first to be proved. Where the title to the easement is a grant by deed, a necessary part of the proof is to show that the grantor in the

Page 813 of [1939] 3 All ER 812

deed had power to make the grant. A profit a prendre, on the other hand, includes the right to take something away from the servient tenement, and the dominant owner has such a possessory right as will enable him to sue in trespass or in nuisance. The defendant, therefore, cannot set up jus tertii; that is to say, he cannot set up the title of a third person unless he claims under such person.

As to Actions for Interference with Easements, see Halsbury (Hailsham Edn), Vol 11, pp 374, 375, para 659; and for Cases, see Digest, Vol 19, pp 184186, Nos 13401371.

Cases referred to

Chasemore v Richards(1859) 7 HLCas 349; 44 Digest 34, 252, 29 LJEx 81, 33 LTOS 350.

Ballard v Tomlinson (1885) 29 ChD 115; 44 Digest 5, 7, 54 LJCh 454, 52 LT 942, revsg (1884) 26 ChD 194.

Fitzgerald v Firbank [1897] 2 Ch 96; 19 Digest 196, 1497, 66 LJCh 529, 76 LT 584.

Holford v Bailey (1849) 13 QB 426; 19 Digest 208, 1592, 18 LJQB 109, 13 LTOS 261.

Nicholls v Ely Beet Sugar Factory [1931] 2 Ch 84; Digest Supp, 100 LJCh 259, 145 LT 113.

Race v Ward (1855) 4 E & B 702; 19 Digest 145, 997, 24 LJQB 153, 24 LTOS 270, subsequent proceedings (1857) 7 E & B 384.

Aldreds Case (1610) 9 Co Rep 57 b; 19 Digest 133, 904.

Higgins v Betts [1905] 2 Ch 210; 19 Digest 123, 829, 74 LJCh 621, 92 LT 850.

Holywell Union & Halkyn Parish v Halkyn Drainage Co [1895] AC 117; 19 Digest 17, 48, 64 LJMC 113, 71 LT 818.

Westminster Corpn v Southern Ry Co, Railway Assessment Authority & Smith & Son Ltd, Westminster Corpn & Kent Valuation Committee v Southern Railway Co; Railway Assessment Authority & Pullman Car Co Ltd [1936] AC 511, [1936] 2 All ER 322; Digest Supp, 105 LJKB 537.

Foster v Warblington Urban Council [1906] 1 KB 648; 19 Digest 57, 323, 75 LJKB 514, 94 LT 876.

Graham v Peat (1801) 1 East 244; 19 Digest 505, 3635.

Chambers v Donaldson (1809) 11 East 65; 43 Digest 408, 303.

Dyson v Collick (1822) 5 B & Ald 600; 43 Digest 388, 132.

Hastings Corpn v Ivall (1874) LR 19 Eq 558; 44 Digest 72, 532.

Tyler v Bennett (1836) 5 Ad & El 377; 19 Digest 145, 996.

Clore v Theatrical Properties Ltd & Westby & Co Ltd [1936] 3 All ER 483; Digest Supp.

Manning v Wasdale (1836) 5 Ad & El 758; 19 Digest 162, 1131, 6 LJKB 59.

Re Simeon & Isle of Wight Rural District Council [1937] Ch 525, [1937] 3 All ER 149; Digest Supp, 106 LJCh 335, 157 LT 473.

Dickinson v Shepley etc, Sewerage Board (1904) 68 JP 363; 44 Digest 16, 78.

Hill v Tupper (1863) 2 H & C 121; 19 Digest 23, 91, 32 LJEx 217, 8 LT 792.

Keppell v Bailey (1834) 2 My & K 517; 19 Digest 22, 89.

Jackson v Anglo-American Oil Co [1923] 2 KB 601; Digest Supp, 92 LJKB 1000, 129 LT 792.

Appeal

Appeal by the plaintiffs and cross-appeal by the defendants from a decision of Goddard LJ (sitting as an additional judge), dated 24 November 1938, and reported [1938] 4 All ER 592. The facts are fully

Page 814 of [1939] 3 All ER 812

stated in the judgment of Scott LJ. In so far as the appeal concerned Well No 1, the questions at issue turned upon the proper interpretation of certain correspondence between the parties, and the case is not reported on that point.

R M Montgomery KC and Arthur Capewell for the appellants.

Roland Burrows KC and H M Abrahams for the respondents.

Montgomery KC: When an easement is in relation to land, it is sufficient if one is in possession to give a right against anyone interfering with its enjoyment. Here there is occupation of so much of the land as is required for the well and pipes. The test is could anyone who had come on the common, and injured the well, have been sued in trespass? It is undoubted that the occupier of land can sue for trespass, and his title cannot be questioned. I submit likewise that one may be in possession for the purpose of enjoyment of an easement: Holywell Union & Halkyn Parish v Halkyn Drainage Co, Westminster Corpn v Southern Ry Co. [Counsel referred to Foster v Warblington Urban Council, Graham v Peat, Chambers v Donaldson, Dyson v Collick, Hastings Corpn v Ivall, Tyler v Bennett, Clore v Theatrical Properties Ltd, Gas Clauses Act 1847, s 21.]

Burrows KC: An easement is a right over anothers land. The appellants by their claim to an easement disclaim any right to the servient land. There can be no property in running water as such any more than there is property in the air. A person may appropriate water. While it is in his cistern no doubt it is his, but if it escapes he cannot sue anyone who takes it. It is well settled that there cannot be a profit a prendre of water. The right the appellants claim cannot be founded on mere possession. They must prove a definite title. They claim to derive their right from persons who had no power to grant it. The plaintiffs may be entitled to the water they have collected in the well, but they cannot complain of its condition at the time it came into the well. It is admitted that if there had been any evidence that the company had fouled the water after it had been appropriated, the appellants would have had a right of action. The appellants are not in possession of the land in any true sense. The well and the pipes are affixed to the soil and become the property of the owners of the freehold. The trial judge was right in holding there was no evidence of title. [Counsel referred to Manning v Wasdale, Re Simeon & Isle of Wight Rural District Council, Dickinson v Shepley, etc, Sewerage Board, Hill v Tupper, Keppell v Bailey.]

As to the cross-appeal, we could not admit the fact of pollution because of the danger of a penalty under the gas statutes. The judge was wrong in giving the unsuccessful plaintiffs costs on this issue. [Counsel referred to Jackson v Anglo-American Oil Co.]

R M Montgomery KC and Arthur Capewell for the appellants.

Roland Burrows KC and H M Abrahams for the respondents.

27 July 1939. The following judgments were delivered.

SCOTT LJ. In this case the appellants, plaintiffs below, are the owners of a factory and surrounding land at St Neots, in Huntingdon-

Page 815 of [1939] 3 All ER 812

shire, where they make malt extracts, and require for that purpose a considerable and regular supply of pure water. They and their predecessors have carried on the same business for 100 years. The defendants are the St Neots Gas Co, making gas, and operating under a local Act and the Gas Works Clauses Act 1847. Their premises lie immediately to the west of the plaintiffs land.

The appeal is by the plaintiffs, who by writ issued on 5 November 1937, had brought an action against the defendants for polluting their water supply, and claimed damages and an injunction. Goddard LJ (sitting as an additional judge of the Kings Bench Division), tried the case in November 1938. He found the issues of pollution in fact in favour of the plaintiffs, but gave judgment in favour of the defendants. This court is not concerned with the issues of fact as to pollution, for the respondents did not challenge the conclusions of Goddard LJ on them. From 1914 to 1929 the plaintiffs used town water, but in the latter year they were warned by the town authorities that their supply might have to be restricted, so they constructed a well (called in this litigation “well No 1”) on their own land in proximity to their factory, and drew from that source a supply of pure water till the early part of 1932. The water was then found to be polluted by chemicals from the defendants gas works; and as the defendants did not succeed in stopping the pollution, the plaintiffs, after waiting for a time to give the defendants a chance of effecting a remedy, during which they again resorted to the use of town water from the St Neots urban district council, at a considerable cost to themselves, set out to procure a new well at a distance from the gas works. To the west of the defendants land, separated only by a road running north and south, is an area of ancient common lands. This position the plaintiffs thought would ensure a permanent source of pure water safe from the defendants works. Therefore, from certain “proprietors of common rights”a description to which I shall returnthe plaintiffs obtained leave to make a well upon the common about 140 yds west of their land, and lay a pipe thence to their factory. They then promptly proceeded to construct the well (called in the litigation “well No 2”) and a pipe line, and duly obtained from that source a supply of pure water. This supply continued good till August 1937, when it, too, became polluted by the defendants works, and the present action was brought. Although Goddard LJ decided the issue of fact as to pollution in favour of the plaintiff company, he held that the plaintiff were not entitled to relief because they had never acquired any rights upon which to found a cause of action against third parties, nor were they able to sue on the footing of de facto possession.

The plaintiffs claims in respect of well No 2 stand on a very different footing from well No 1. In regard to well No 1, sunk in the land of which the plaintiffs owned the freehold, their rights are clear: they possessed and still possess, if not abandoned, the ordinary right of landowner A to use underground water which percolates through the strata

Page 816 of [1939] 3 All ER 812

and flows into any well he chooses to sink, and also if some neighbour B allows polluting matter to escape from the surface of his land into the water-bearing stratum underneath, so that it contaminates the percolating water to which A has access, to sue B for damages for nuisance and prima facie for an injunction: Chasemore v Richards and Ballard v Tomlinson. The same reasoning applies not only to the use of percolating water as an incident of As rights of property in his land, but also to an easement to a supply of water which A as the owner of tenement A1 may have had granted to him by B, the owner of tenement B1. I can see no reason why the owner, of an easement for the supply of water should not have a right of action for its pollution just as much as the owners of a fishery, although a fishery is profit à prendre, and a mere water right is not.

In the present case the plaintiffs claimed that they had obtained one or other of these alternative titles to use the water at well No 2 and were therefore entitled to sue for the pollution of that source of supply. The defendants reply was both in the court below and before us, that the plaintiffs may have honestly believed that they had obtained a good title on one or other of those two grounds, but that they were mistaken in their belief because the instruments which they regarded as their documents of title, two deeds called “leases,” executed in 1932 and 1935 by certain “proprietors of common rights,” were no more than licences, and did not even purport to confer any title to anything. The defendants also submitted that even if these deeds could be construed as leases, the commoners who purported to make the grant had themselves no title, which they could transfer, either at common law or under the Inclosure Acts of 1770 and 1774, by which their commonable rights were created and defined. In substance, Goddard LJ adopted the defendants arguments, and based his rejection of the plaintiffs claim on their submissions. An alternative basis of claim was also urged by the plaintiffs, namely, that actual possession even without proof of title is sufficient as against a third party who causes damage by nuisance, but has no title of his own on which to rely, just as in the case of trespass the trespasser is barred from setting up the jus tertii. Goddard LJ was, however, against the plaintiffs on this issue also, as he held, without discussing the question as to whether the plaintiffs had established possession in fact or not, that the plaintiffs could not sue without proof of some title. I am in agreement with his decision that the plaintiffs failed to show any title in respect of well No 2, and therefore that in so far as their claim depends on proof of a title they must fail in the action. In regard also to the issue of possession, I agree with his conclusion that the plaintiffs fail; but I do so because I cannot see that they ever established their case of possession in fact. That being so, I prefer to express no opinion on the question whether, if in any case possession could be proved, the jus tertii can be set up by the person who in fact pollutes except to say this, that it is not easy to picture a case where the facts are sufficient to establish real possession of a water supply, but do not at the same time disclose

Page 817 of [1939] 3 All ER 812

either a title of some sort to the soil of the well, or an easement, sufficient to confer a right of action based on title.

I confess that I reach the conclusion that the plaintiffs must fail, with some reluctance, as they evidently believed that they had made their position safe. Under the Act of 1774, provision was made for an annual meeting of “the proprietors of common rights,” as created or defined by the two Acts, and for the election of “a treasurer” for the ensuing year, who was to have certain powers of management. In 1932 and 1935, the then treasurer happened to be a solicitor. The plaintiffs no doubt thought that they could rely on him to keep them right on legal matters, and imagined that by the deeds of 1932 and 1935, both drawn by him after sanction at the annual meetings, they had obtained an enforceable right to an adequate supply of pure water, and my sympathy is with them. As far as I can see, they behaved all through very reasonably towards the defendants. For that reason I have perused with particular care the two old Inclosure Acts under which the common lands in question are still regulated, and have also considered the factapparently a chance coincidencethat Mr Rowley the first “proprietor of common rights” who executed the 1932 “lease” of the well, happened also to be the lord of the manor, and the further fact that his son (who had upon his fathers death in the meantime succeeded to the manor) was by his agent present at the statutory meeting of the commoners in 1935, when it was decided to grant the second “lease”; but I have failed to find any ground for drawing a conclusion that the plaintiffs ever got any title. In deference, however, to the arguments of counsel for the appellants, I will state shortly what they were, and my conclusion upon them.

In their statement of claim the plaintiffs claimed to be entitled to the water flowing into their No 2 well in virtue of the “lease,” dated 1 August 1935, executed by certain named “proprietors of common rights.” As causes of action they alleged alternatively negligence, nuisance, trespass and breach of statutory duty under the Gas Works Clauses Act 1847, s 21. The “lease” recited (a) the earlier “lease” of 28 July 1932, and (b) that the plaintiffs had agreed to surrender it, and that “the proprietors had agreed to accept the surrender and also to grant a new lease; and to this recited agreement the deed purported to give effect. The new “demise” was for a term of 11 years from 1 May 1935, thus in the result extending the original term by another 7 years, and it provided for the same rent of £5 5s a year. By the 1932 lease, the then grantors had purported to “grant and demise … the full and free liberty and privilege for the company … to make … and maintain the well,” it having in fact been already constructed pursuant to oral leave. The grant in the 1935 lease was in these words:

the proprietors do hereby severally and respectively so far as they lawfully may or can by these presents grant and demise first full and exclusive right and liberty to and for the company to take and use for the purposes of the undertaking of the company all the water which from time to time may be in the said well marked “A” on the plan annexed hereto through the covered pipe leading from the said well

Page 818 of [1939] 3 All ER 812

to the companys mill aforesaid, which pipe is coloured blue on the said plan and secondly for the purpose of exercising and enjoying the right and liberty aforesaid full right and power for the company their servants and agents at any time or times to come upon the said common for the purpose of repairing and cleansing and maintaining the said well and covered pipe therefrom and the two manholes constructed upon the course of the said pipe.

Both deeds contained a covenant by the company to maintain the well, and a covenant for quiet enjoyment by “the proprietors.” The first point to notice is that the parties executing the two deeds were not all the same. The grantors of the first deed were G F Rowley, R. Maddy, W Freshwater and A Cambers. They were described as “proprietors of common rights over the Islands Common Islands Meadow and Hawkesden Leys common,” these being different parts of the common land within which the well and pipe-line lay. In the 1935 deed there were five grantors described in the same terms as the grantors in the 1932 deed. Of the grantors in the earlier deed R Maddy and A Cambers were party also to the second deed, but Rowley and Freshwater were not. In their place were A F Towgood, J R Smith and C Maddy. G F Rowley owned 27 of the “common rights” created by the two Acts and the award of the inclosure commissioners in 1771, and as such owner was just as much a commoner as the other signatories. However, counsel for the appellants relied on the fact that he also was lord of the manor of St Neots, and therefore presumably owned the freehold of all common lands within the manor. He contended that for this reason the deed should be treated as effecting a demise of the well by the lord of the manor, and submitted that as the parties to the second deed did not include all the parties to the first, particularly the lord of the manor, it could not operate as a surrender of the demise which, he argued, had been effected by the first.

The statement of claim did not mention the first deed at all, and as it was not pleaded, counsel for the respondents submitted that we were not entitled to consider it. Counsel for the appellants, however, pointed out that it was before Goddard LJ as part of the evidence tendered by the plaintiffs, and was recited in the second deed. On both these grounds I think it must be treated as being before the court below as part of the plaintiffs case. Counsel for the appellants asked us to construe it as a lease by the lord of the manor of the ground where the well was already situate, urging that the words “lease,” “demise” and “rent” imported a true demise, but he wholly failed to account for the expressions which pointed the other way, namely, that the so-called “rent” was payable to the commoners and not to the lord of the manor, and that the words describing the parcels, namely, “the right and privilege to make and maintain a well” are inappropriate language to express a lease of land. They are, however, quite appropriate to a license by commoners, in the sense of an undertaking which would bind them personally not to interfere with the grantees, and I think that this is the correct construction of them. It is noticeable that the deed prefaced the so-called “grant and demise” by the limiting words “so far as they lawfully may or can”;

Page 819 of [1939] 3 All ER 812

and I therefore, without hesitation, agree in the conclusion of Goddard LJ that these deeds conferred no title on the plaintiffs.

Counsel for the appellants, however, put forward a rather indefinite contention that under the Acts of 1770 and 1774 “the proprietors of common rights” had authority to give the plaintiffs an easement for the supply of water, or at least to put them and maintain them in actual possession of the supply. I am not sure that I have fully understood the argument, and therefore in deference to him, will state why I have come to the conclusion that the Acts in question could have no such intention. The common land which contains the site of the well is a part of what was a rather larger area of common land used as such in conjunction with arable land. The history no doubt goes back several centuries. The total area with which the legislation of 1770 and 1774 dealt was just under 1,400 acres, but the commons with which alone this appeal is concerned were only a comparatively small part of this whole. I gather from the Act of 1774 that previously the arable lands had been cultivated on the old English open field system of strip cultivation in three courses, with common lands attached to the arable fields for the supplementary common pasturing of stock. It is irrelevant for present purposes to investigate the legal nature of the old rights of the “strip” owners, who might own either in freehold or copyhold. The common field system is explained in Professor Holdsworths History of English Law, Bk II, pp 56 et seq, and in the books cited in the footnote on page 56. The Inclosure Act of 1770 was passed (I think, in a form common to such Acts) in order to get rid of the common field system and re-divide the strip lands in severalty. It recited that Lord Sandwich the lord of the manor of St Neots was

proprietor of great part of the open fields within the said parish and that various other named persons were seised or possessed of the residue …

and that

several persons in respect of their cottages and homesteads were entitled to right of common in upon and over the said open and common fields, common pastures and other communable grounds at certain times of the year

and then proceeded to appoint a commission which was to make a survey of the said lands, to deal with tithes, to preserve to the proprietors of cottages and homesteads their strictly commonable rights of pasture over “the islands, and the Hawkesden Leys” and also “the Islands Meadow” (somewhere in which lies the site of the plaintiffs No 2 well)and finally by an award, to re-divide the strip lands at their discretion in accordance with previous proportions of quantity and quality, the new holdings to be freehold or copyhold according to the nature of the previous tenure. There were supplementary provisions for certain conversions of commonable rights into several ownerships, but they do not affect the common lands where the well is situate, which remain common lands as before the Act. This Act at any rate conferred on the commoners no such powers of dealing with the freehold as counsel for

Page 820 of [1939] 3 All ER 812

the appellants needs. By their award made in 1771, after referring to the statutory survey, the commissioners divided up the strip lands amongst named persons in severalty; set out a series of roads and paths; and then dealt with

“the proprietors of common rights” in upon and over the commons in question called Hawkesden Leys and the Islands Meadow [I think “the Islands” must have been omitted here by a clerical error] and found that there were “164 common rights or shares of common” belonging in varying numbers to the various persons in their listto the Earl of Sandwich 27, to Elizabeth Reynolds 5 and so on, the majority only getting one “right.”

This explains the phrase in the two leases “proprietors of common rights,” which are in substance only commoners rights of pasture.

The Act of 1774 was passed to explain and amend the Act of 1771, and

for regulating the usage of the commonable lands and commons in St. Neots.

It directed that the several proprietors of common rights (that is, as determined by the award) should meet on the first Wednesday in April every year and appoint a treasurer for the purpose of collecting a rate (out of which the expenses of administration of the common would be paid) and

of putting the rules and orders contained in the said award and this Act and also such rules and orders as shall be made at the said meeting into execution.

It contained various provisions for regulating the pasturing rights of the proprietors and also authorised the treasurer to dig sand, gravel, mould and earth off the common and sell it to the inhabitants of St Neots, but it said nothing about selling water or granting water rights; indeed, water was not mentioned in either Act, except from the point of view of fair distribution of springs and streams as between the various “proprietors of common rights,” which was to be dealt with by the commissioners in their award. No express provision was made in regard to water which “the proprietors of common rights” might from time to time in their annual meeting consider surplus to the requirements of the proprietors either generally or in some particular locality. It is thus quite clear that there are no statutory provisions in this Act which would entitled the “proprietors of common rights” either in a body or by representatives to grant any easement of water, and much less any title in the soil round the well owned by the lord of the manor. In short, there is no justification for the plaintiffs argument on the Acts.

There remains the question of de facto possession. The reason why I reject the contention that the plaintiffs ever came into such actual possession as might raise the question of law into which I have refused to enter, is that “possession” of percolating water which is ever flowing in and out of a well is in truth only a metaphor. Possession of the ground surrounding the sides of the well is possible, and through that possession it may be possible to speak of possession of the water, but I cannot see that either constructing the well or keeping a pipe in the water of the

Page 821 of [1939] 3 All ER 812

well through which a pump sucks it out is the same thing as having possession of the ground round the well. And there is the additional objection that the commoners could not hand over possession of the ground below the surface for the simple reason that they never had it.

For the reasons I have given, I agree with Finlay and Luxmoore LJJ that the appeal as to well No 2 must be dismissed, and I do not think it necessary to refer to any of the numerous cases which were cited to us. With regard to the cross-appeal also, I agree with the decision of Finlay and Luxmoore LJJ.

FINLAY LJ. I think that both the appeal and the cross-appeal fail here.

LUXMOORE LJ. The plaintiffs instituted this action against the defendants for an injunction to restrain them from causing or permitting certain chemical substances to pollute the water in certain wells situate at St Neots in Huntingdonshire, and for damages for pollution. Goddard LJ dismissed the action, and the plaintiffs have appealed to this court.

It is necessary to consider the claim in respect of well No 2. Goddard LJ has held that the plaintiffs have established that the water coming to this well has been contaminated by the defendants, but he refused to give any relief, because the plaintiffs had failed to prove that they had any legal title to take the water from well No 2. The plaintiffs contend that relief ought to have been granted, because they were de facto in enjoyment of the water from well No 2, or, alternatively, were de jure entitled to that enjoyment.

Well No 2 was constructed by the plaintiffs in 1932, at the time when the question already referred to arose with regard to the pollution of well No 1. Well No 2 is not on property belonging to the plaintiffs, but on a site some 100 yds to the west thereof, and the water from it is carried by a pipe-line to the western boundary of the plaintiffs premises, and from thence by a continuation of the pipe-line to the plaintiffs works. It is situate on common land, and was sunk by the plaintiffs in contemplation of the execution of a deed of 28 July 1932, expressed to be made between four persons, C F Rowley, R Maddy, W Freshwater and A Cambers, who are together described in the deed as being

the proprietors of common rights or rights of common or pasturage in upon and over the Islands Commons Islands Meadow and Hawkesden Leys common and the several ways and roads leading to and from the same in St. Neots in the county of Huntingdon of the one part and the plaintiff company of the other part.

It is described as a lease, and it recites that the plaintiffs are desirous of constructing a well upon “the said common” and of laying a pipe from the said well to their mill in Bedford St.

which the proprietors have agreed to allow them to do upon the terms and subject to the conditions following.

Page 822 of [1939] 3 All ER 812

This recital is followed by the operative part of the deed which is contained in seven numbered clauses. Cl 1 contains a grant or demise by the proprietors for a term of seven years from 1 May 1932, to the plaintiff company of

the full and free liberty and privilege for the company and their agents servants and workmen from time to time to make and construct and afterwards repair cleanse and maintain a well at the point marked A on the plan annexed hereto, and a covered pipe-line from the said well along the line coloured blue on the said plan to the eastern edge of the common,

and certain other works. A yearly rent of £5 5s payable on 1 May in each year during the term is reserved by the same clause. Cl 2 contains a number of covenants by the plaintiffs, including a covenant at the expiration or sooner determination of the term to fill in the well and remove the pipe-line if required by the proprietors so to do. Cl 5 contains a covenant by the proprietors for quiet enjoyment by the plaintiffs of “the liberties and privileges hereby granted.” Cl 6 empowers the plaintiffs to determine “this present lease” by three calendar months previous notice in writing.

On 1 August 1935, the plaintiffs entered into a second deed with five persons, who are again described as being the proprietors of common rights in precisely the same words as are used in the earlier deed. The second deed is also described as a lease. The proprietors who executed it are five in number: of these only two, R Maddy and A Cambers executed the first deed, the three other persons being A F Towgood, J R Smith and G Maddy. Neither G F Rowley nor W Freshwater, who executed the first deed executed the second deed. The second deed contains a recital to the effect that the plaintiffs had under and by virtue of the first deed constructed a well upon the common and had laid a pipeline therefrom to their mill in Bedford St, and also a further recital that the proprietors had at the request of the plaintiffs agreed

to accept the surrender of the said lease [that is, the first deed] and to grant a new lease to the company for the term and upon the conditions hereinafter appearing.

The operative part of the second deed is contained in eight clauses. By cl 1 the proprietors

“so far as they lawfully may or can “grant and demise” first full and exclusive right and liberty to the plaintiff company to take and use for the purposes of the undertaking of the company all the water which from time to time may be in the said wellthrough the covered pipe leading from the said well to the companys mill aforesaid … and secondly for the purpose of exercising and enjoying the right and liberty aforesaid full right and power for the company their servants and agents at any time or times to come upon the said common for the purpose of repairing and cleansing and maintaining the said well and covered pipe therefrom and the two manholes constructed upon the course of the said pipe to hold and enjoy the said rights and liberties hereinbefore expressed to be hereby demised unto the company during the term of eleven years from May 1, 1935.”

A rent of £5 5s payable on 1 May in each year of the term is reserved, and the rest of the deed is in substance in the same form as is the first deed.

The plaintiffs did not attempt to prove at the trial on what particular common or part thereof well No 2 and the pipe-line and other works

Page 823 of [1939] 3 All ER 812

are constructed and placed, nor did they attempt to prove in whom the soil of the land in which the same are situate was vested at the date of either deed, nor to establish that the persons described therein as the proprietors had any legal right to grant any easement or other right to sink place and maintain a well and its accessories upon or to take water from any common land in which the proprietors were interested. They contended that it was not necessary to prove any of these facts or to establish any legal right in the proprietors to grant any of the rights claimed, and argued first that they were in actual possession of some part of the land in which well No 2 was sunk and the pipe-line and other works were laid and constructed. In support of this argument, reliance was placed upon certain cases relating to the liability of water companies for rates in respect of wells and pipe-lines used in connection with their undertakings, but in my judgment none of these cases has any bearing on the questions to be determined in this case. Counsel for the appellant also relied upon the decision in Fitzgerald v Firbank. In that case it was held that one in actual enjoyment of a profit à prendre can maintain an action of trespass against a person who disturbed his enjoyment. The basis of the decision is the fact that a profit à prendre is an interest capable of being assigned and dealt with according to the ordinary rules of property, being of a possessory nature and capable of existing in gross. Its owner can bring an action for trespass at common law for its infringement: see also Holford v Bailey, Nicholls v Ely Beet Sugar Factory. I agree with Goddard LJ that this argument has no application to the present case, for it is well settled that a right to take water cannot be the subject of a profit à prendre: see Race v Ward. What, then, is the nature of the grant made by the material deed of 1 August, 1935? Plainly it is not a grant or demise of any land, nor of any profit à prendre. It must, therefore, purport to grant either an easement or a licence. If it be a licence, it is admitted that the plaintiffs cannot sue the defendants for any interference. Having regard to the fact that the purpose of the deed is to enable the plaintiffs to take water from well No 2 through the pipe-line to their mill for the purposes of the business carried on there, I agree with Goddard LJ that the better view is that the deed in question purports to grant an easement for a limited period, for there is a dominant tenement, namely, the mill, and a servient tenement, namely, the common land in which well No 2 has been sunk, and the pipe-line and other works have been laid and constructed. An easement differs from a profit à prendre, although both may be classed under the head of servitudes in that the owner of an easement cannot maintain trespass, the only remedies available to him for disturbance being by abatement or by an action for nuisance. In an action for nuisance the owner of the easement must plead that he is entitled, so that if his title to the easement alleged to be interfered with is put in issue (as in this case), he must establish that title, for he is asserting a right which of necessity excludes the possibility of possession of the servient tenement,

Page 824 of [1939] 3 All ER 812

or any part of it: see Aldreds case, Higgins v Betts. To establish the grant of a valid easement under the deed of 1 August 1935, the plaintiffs must prove that the five persons described therein as the proprietors who purported to make the grant, had power to do so. Our attention was called to the existence of two Inclosure Acts of 1770 and 1774, and the award made under the earlier Act; but our attention was not called to, nor was it suggested that there was conferred on the proprietors of the common rights, either together or acting by any of their number, by those Acts or either of them, any express powers to grant easements in respect of any of the common lands.

It was suggested before us that the fact that G F Rowley was the lord of the manor at the date of the first deed, and that he executed it, would itself be sufficient to validate the grant of the easement claimed. It is a sufficient answer to this argument to say that there is no evidence to prove that G F Rowley was then, or has since been, the owner of the soil over which the easement is claimed; and that no claim is in fact made by the plaintiffs under the first deed. The only claim is under the second deed to which admittedly the then lord of the manor was not a party. I am satisfied that no title to any easement has been established in the plaintiffs in respect of well No 2, and I am of opinion that Goddard LJ was right in also dismissing the action in respect of well No 1. Although I have expressed my opinion in my own words, I respectfully agree with the judgment of Goddard LJ and the reasons he has given for it. I think the plaintiffs appeal should be dismissed with costs.

The defendants gave notice of a cross-appeal, asking that so much of the order made by Goddard LJ as adjudged that they should pay to the plaintiffs the costs of the issue whether the pollution of the water alleged in the action was due to the defendants works, should be varied, and that the plaintiffs should not have these costs, but that they should be ordered to pay to the defendants all their costs in the said action. No leave to appeal was given, but counsel for the defendants urged that different considerations applied to an application by way of cross-appeal to vary the order of a judge with regard to costs in the court below, and that no leave was necessary in such a case. It is, I think, unnecessary to consider this question, for it is plain that Goddard LJ was entitled to treat the costs with regard to pollution as a separate issue, and to order those costs to be paid by the defendants. There is no ground on which it can be said that the discretion was wrongly exercised. The cross-appeal must be dismissed with costs. There will be the usual set-off.

Appeal and cross-appeal dismissed with costs. Leave to appeal to the House of Lords refused.

Solicitors: Lovell White & King (for the appellants); Crossman Block & Co, agents for Wade-Gery & Brackenbury, St Neots (for the respondents).

C St J Nicholson Esq   Barrister.


Williams v Williams (by his Guardian)

[1939] 3 All ER 825


Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        19, 20, 28 JULY 1939        


Divorce Desertion Insanity Certification of deserting respondent Statutory period interrupted Matrimonial Causes Act 1937 (c 57), s 2.

The respondent deserted his wife in 1933. In 1934 he was certified as a person of unsound mind, and put under restraint, and from that time remained continuously under restraint. On 21 January 1938, the appellant filed a petition for divorce on the ground of desertion for a period of 3 years immediately preceding the presentation of the petition. It was contended that the supervening insanity interrupted the period of desertion:

Held (i) the existence of an intention to desert or of an intention to return to cohabitation cannot be disproved without some definite step on the part of the deserting spouse, and in the case of a person of unsound mind there is, generally speaking, no capacity to form the necessary intention to take such a step or to give it the quality of volition required to produce a legal result. The necessary period of desertion could not, in the circumstances of this case, be proved and no decree could be granted.

(ii) (MacKinnon LJ dubitante) the court will not draw an inference as to what the conduct of the lunatic would have been if he, or she, had remained of sound mind, as by so doing, the court would be proceeding upon the basis of an assumed fact the existence of which is impossible in law.

(iii) per Finlay LJ: s 2(b) of the Act of 1937 has reference to normal persons and not to lunatics. Lunacy is dealt with in another subsection.

Decision of Langton J ([1939] 2 All ER 13) affirmed.

Notes

The question here is whether the supervening insanity during the period of the 3 years desertion required by the 1937 Act prevents the continuance of that desertion. Desertion is a question of intention, and necessitates an exercise of the will, and it is therefore held that, on a person becoming of unsound mind, the continuance of the desertion ceases. MacKinnon LJ points out that this may lead to an almost impossible result in the extreme case where, after a long period of desertion, a deserting spouse becomes insane a short time before the presentation of the petition. It would seem that the case of Herod v Herod may be some authority for drawing an inference that the attitude of the deserting spouse towards the deserted spouse remains unaltered.

As to Divorce on the Ground of Desertion, see Halsbury, Supp, Divorce, para 971; and for Cases, see Digest, Vol 27, p 319, Nos 29742977.

Cases referred to

Pratt v Pratt [1939] 3 All ER 437; Digest Supp, 161 LT 49.

Bowron v Bowron [1925] P 187; 27 Digest 561, 6168, 94 LJP 33, 132 LT 773.

Drew v Drew (1888) 13 PD 97; 27 Digest 319, 2975, 57 LJP 64, 58 LT 923.

R v Leresche [1891] 2 QB 418; 27 Digest 313, 2910, 60 LJMC 153, 65 LT 602.

Wynne v Wynne [1898] P 18; 27 Digest 310, 2879, 67 LJP 5, subsequent proceedings 78 LT 796.

Bennett v Bennett [1939] 2 All ER 387; Digest Supp.

Herod v Herod [1939] P 11, [1938] 3 All ER 722; Digest Supp, 108 LJP 27, 159 LT 530.

Page 826 of [1939] 3 All ER 825

Jones v Newtown & Llanidloes Guardians [1920] 3 KB 381; 27 Digest 202, 1735, 89 LJKB 1161, 124 LT 23.

Frowd v Frowd [1904] P 177; 27 Digest 556, 6106, 73 LJP 60, 90 LT 175.

Townsend v Townsend (1873) LR 3 P & D 129; 27 Digest 311, 2892, 42 LJP & M 71, 29 LT 254.

Brookes v Brookes (1858) 1 Sw & Tr 326; 27 Digest 315, 2929, 28 LJP & M 38, 32 LTOS 228.

Parker v Parker [1926] SC 574.

Thomas v Thomas [1924] P 194; 27 Digest 315, 2925, 93 LJP 61, 130 LT 716.

Astrope v Astrope (1859) 29 LJP & M 27; 27 Digest 319, 2974.

Jordan v Jordan [1939] P 239, [1939] 2 All ER 29; Digest Supp, 160 LT 368.

Appeal

Appeal by the petitioner from an order of Langton J, dated 9 March 1939, and reported [1939] 2 All ER 13, where the facts are fully stated.

J L A Gradwell for the appellant.

J Boland Adams for the respondent.

Gradwell: The decision in the present case has been followed in Bennett v Bennett. The matrimonial offence of desertion is complete as soon as one of the spouses has left the other spouse wilfully and without cause. In Frowd v Frowd it was stated that desertion under the Summary Jurisdiction Acts was the same as desertion under the Matrimonial Causes Acts. The petitioner has discharged the onus resting upon her by proving that the offence has been committed. The husband, by deserting his wife, commits a matrimonial offence. He is given 3 years in which to put the matter right and the onus is upon him to prove that he has done so. Jones v Newtown & Llanidloes Guardians was decided by the Kings Bench Divisional Court without any reference to Drew v Drew, Townsend v Townsend and Wynne v Wynne, which were decided in the Probate and Divorce Division. Pratt v Pratt supports my argument as regards the onus of proof. [Counsel also referred to Brookes v Brookes, Parker v Parker, Thomas v Thomas and Astrope v Astrope.]

Adams: The essential difference between the present case and Drew v Drew, is stated by Langton J in his judgment. There is no authority directly in point, as desertion is not defined. It is, therefore, for the court to say whether or not the respondent has been guilty of conduct which entitles the petitioner to relief. If desertion is a continuing offence, it cannot be said that an insane person is responsible, because it is necessary for the petitioner to prove a continuing intention. In the present case, no intention can be imputed to the respondent by reason of his insanity. In Bennett v Bennett, Bucknill J deals with the shifting of the burden of proof. He says that, desertion having once commenced, the onus is upon the respondent to show that the desertion has terminated. In the case of lunatics, however, the onus shifts back to the petitioner. In the present case, the court is entitled to say that desertion for the necessary period was not completed, because

Page 827 of [1939] 3 All ER 825

desertion requires the exercise of the will. [Counsel also referred to Pratt v Pratt and Jones v Newtown & Llanidloes Guardians.]

Gradwell in reply: Drew v Drew and Wynne v Wynne can only be justified if they say that desertion happens when a man deserts his wife and does not return. It is for the husband to show why he did not return and if, for some cause, he is unable to do so, it is his misfortune. A lunatic can do neither of the things necessary to end desertion. A prisoner can do one of the things necessary, namely, think of returning. In Wynne v Wynne, Wynne could not make any offer to return by reason of the allegation of crime against him. An act of bad luck should not be allowed to help a man to the prejudice of an innocent party. I rely upon Drew v Drew and Wynne v Wynne. The view I have put forward is consistent with the argument in Parker v Parker and Pratt v Pratt. [Counsel also referred to Jordan v Jordan.]

J L A Gradwell for the appellant.

J Boland Adams for the respondent.

28 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This appeal raises a novel and difficult question of far-reaching importance. The facts are stated in the judgment of Langton J and I need not repeat them. The question of law which falls for decision depends upon the true meaning and effect of the Matrimonial Causes Act 1937, s 2, and may be thus stated: Where a petition for divorce is based upon alleged desertion without cause for a period of at least three years immediately preceding its presentation, and the respondent, who before the beginning of that period has deserted the petitioner, is during the whole or part of the period of unsound mind and incapable of exercising volition, can the petitioner succeed? Langton J answered this question in the negative; and, after anxious consideration I have, with hesitation and (I may add) regret, come to the conclusion that his decision is correct.

The decided cases upon the matter of desertion do not present a very illuminating body of jurisprudence. There are, however, some matters which appear reasonably clear. The act of desertion requires two elements on the side of the deserting spouse, namely, the factum of separation and the animus deserendi; and on the side of the deserted spouse one element, namely, the absence of consent. The ensuing state of desertion continues until it is terminated. Termination may take place in various ways. It may take place by the factum of return, or by a supervening animus revertendi, coupled with a bona fide approach to the deserted spouse, with a view to the resumption of life together (Pratt v Pratt); or by a supervening consensus, for example, under a separation agreement bona fide made. It cannot, however, be terminated by a mere animus revertendi unaccompanied by some notification to the deserted spouse. It might be argued from this last proposition that as the animus revertendi cannot by itself terminate the state of desertion, the continuance of that state cannot depend upon the continued existence of the animus deserendi, and that accordingly incapacity to have either

Page 828 of [1939] 3 All ER 825

one animus or the other is an irrelevant consideration in determining whether the state of desertion exists during a particular period. In my opinion such an argument is fallacious. The statements (a) that the mere formation of an animus revertendi does not of itself terminate the state of desertion, and (b) that the presence of an animus deserendi is essential for the continuance of that state, may at first sight appear to be logically incompatible. They are, however, not really so, since a deserting spouse who merely forms the intention to return, but takes no step to communicate it or to put it into execution, and so leaves the fact of separation unaffected, cannot be heard to say in any relevant sense that the animus deserendi no longer exists. The de facto severance of the marital relationship necessarily persists in the absence of some step directed to its restoration. The authorities cited by Langton J appear to me to establish the necessity for the continuing existence of the animus deserendi in the sense already mentioned. In the ordinary case its existence will be inferred, but it cannot be disproved without some definite step on the part of the deserting spouse: see Pratt v Pratt, per Lord Romer [p 443]. I may add to those authorities a reference to the statement of Scrutton LJ in Bowron v Bowron, at p 195:

The intention is presumed to continue, unless the husband proves genuine repentance and sincere and reasonable attempts to get his wife back.

In the case of a person of unsound mind, quite apart from the impossibility of taking any such step in facta matter which by itself might be disregarded, as it may be in the case of a convict (Drew v Drew)there is, generally speaking, no capacity to have the animus necessary to take such a step, or to give to it the quality of volition required to produce a legal result.

During the course of the argument, I thought at one time that the court might be at liberty, upon the facts of a particular case, to draw an inference as to what the conduct of the lunatic would have been, if he or she had remained of sound mind. If it were permissible to draw such an inference, the question whether in any particular case it ought to be drawn would not present any insuperable difficulty. However, I do not think that this is a permissible solution. What must be proved is desertion for the necessary period. If I am right in what I have said as to the necessity for the animus deserendi, and the impossibility of its existence in the case of a person who by reason of lunacy is incapable of having it, that proof can never be given. In drawing the suggested inference, the court would be proceeding upon the basis of an assumed fact, the existence of which is ex hypothesi impossible in law, namely, that the lunatic is capable of having the animus deserendi; for it would be saying that if the lunatic had been capable, he would have acted in a particular way. The result of the conclusion to which I find myself compelled to arrive must in many cases amount to grievous hardship. It will mean, for instance, that lunacy supervening the day before the presentation of the petition, will deprive the deserted spouse of his or

Page 829 of [1939] 3 All ER 825

her chance of release under this particular clause. Instances of a similar capricious operation of the clause might be multiplied, but this is a matter which, in my opinion, can only be put right by legislation. The judgment of Langton J was, in my opinion, perfectly right, and his reasoning unassailable. The appeal must accordingly be dismissed.

MACKINNON LJ. Having regard to the authorities that were cited to us, and having still more regard to the opinion of my brethren, I am not prepared to dissent from their conclusion that this appeal fails. I confess, however, that my unaided consideration of the principles involved would not lead me to the conclusion that if a respondent is proved to have deserted the petitioner more than three years before the presentation of the petition, and has never returned, or evinced any genuine desire to return, the petitioners right to a decree under the Matrimonial Causes Act 1937, s 2(b), will be barred if for any part of the three years the respondent has been certified as insane.

The verb “desert” is defined by the Oxford English Dictionary thus

(1) To abandon, forsake, relinquish; to depart from. (2) To forsake … a person, having moral or legal claims on one.

It is not without interest that in the illustrative quotations is a sentence of Lopes LJ in R v Leresche, at p 420:

A husband deserts his wife if he wilfully absents himself from the society of his wife in spite of her wish.

There is no doubt that, within these definitions, the husband in this case “deserted” his wife in May 1933, nearly 5 years before the presentation of her petition in January 1938. At that date he wilfully absented himself from her society in spite of her wish. In fact, he has never rejoined her, or expressed any desire to do so. S 2(b) of the Act of 1937 says:

[if the respondent] has deserted the petitioner without cause for a period of at least three years …

The language is natural, but not precise. “To desert,” as I have pointed out, means the act of forsaking. “To desert for three years” really means “To commit the act of desertion which causes separation, and to remain in that state of separation for three years.” There being no question that the respondent did commit the act of desertion in May 1933, the only question must be whether he has ever since remained in the state of separation. In fact he has done so, and the question must, therefore, be whether he has done so “without cause.”

He deserted her nearly 5 years before the petition, and has never returned. It is true that for three years before the petition he was in a lunatic asylum, and, therefore, was physically prevented from returning to the wife. That physical inability to return would appear not to be a cause excusing his absence. If he had been in a prison, instead of a lunatic asylum, he could be held to have been continuing “without

Page 830 of [1939] 3 All ER 825

cause” the state created by his previous act of desertion: Drew v Drew and Wynne v Wynne.

It is said, however, that the continuance of the state of absence, originally created by his act of desertion, has not been “without cause,” by reason of his mental condition. Desertion, it is said, must be wilful, and the continuance of the state of separation created by desertion must also be wilful. However, as the respondent since June 1934, has been without powers of mind or will, his continued absence, quite apart from the obstacle of his incarceration, cannot be said to be wilful. The principle involved must, I think, be that to establish desertion without cause for 3 years, it must be shown that the respondent was of sane mind for every part of that period. The petitioner presenting her petition in January 1938, would equally have failed if the man remained sane but obdurate until December 1937, and had then been certified for one month or one week. She must equally have failed if, by reason of temporary insanity, he had been in the asylum for a week or a month in February 1935, and had then been discharged cured. Indeed, I see no logical reason why she should not have failed if there were proof that during the three years the man had fractured his skull in an accident, and had lain for some time unconscious in hospital.

Moreover, the same principle must apply however ancient was the original “act” of desertion. In this case, that was nearly 5 years before the petition. However, in Bennett v Bennett, decided in the same way by Bucknill J, the act of desertion was 35 years before the date of the petition, and the respondent was only certified 16 months before that date. The “wilfulness” of desertion suggested, if not conclusively proved, by the obstinate persistence of half a century, might be nullified by insanity during the final month of the three years, or by temporary insanity for a month at the beginning of those three years.

I gravely doubt whether a principle leading to such possible results can be correct. It is clear that the continuance in the state of desertion must be wilful. And it must be a question of fact in each case whether the continuance of the state, created by an original act of desertion, has been wilful. The mental condition of the deserter during any part of the material period must doubtless be one of the facts to be considered. I confess that, apart from authority, I should not think there was any reason why the court, taking account of the doings of the party when sane, might not draw an inference therefrom as to what is likely to have been his attitude during the period of his insanity, if it had not occurred. In Herod v Herod, the court was held to be entitled to infer from the rest of the conduct of the respondent that, if she had known of the adultery of the petitioner, her attitude towards him would have remained unaltered. That is to infer that a fact would not have altered the respondents conduct if he had it in mind. I do not think it is a very different thing to make such an inference, not if she had something in mind, but if she had a mind to have it in.

Page 831 of [1939] 3 All ER 825

If, as in Bennett v Bennett, the respondent had been in a state of obstinate desertion for 35 years it would not, if this principle were applied, be difficult to infer that she would not have repented in the last few months. So also, if the respondent had been insane for a short period at the beginning of the three years, and after recovery had persisted in desertion for the rest of it. In the present case the dates and times are less extreme, and it may be a nice question if any such inference should be drawn. That, however, is not material to the question of principle. The authority containing the clearest statement of the proposition relied on by the respondent is Jones v Newtown & Llanidloes Guardians. I agree that the remarks of the Earl of Reading LCJ are very much in point. I may observe, however, that the question in that case was whether an order for maintenance could properly be made against a husband under the Poor Law Amendment Act 1850, s 5. In fact, there is nothing whatever in that section about “desertion”; and I do not understand very well how the question of “desertion” arose.

FINLAY LJ (read by Mackinnon LJ). I agree with Sir Wilfrid Greene MR. In my opinion Langton J arrived at the right conclusion in this case. By s 2 of the Act of 1937, a petition may be presented on the ground that the respondent:

has deserted the petitioner without cause for a period of at least three years immediately preceding the presentation of the petition …

It appears that up to 1858, the only remedy for desertion was a suit for restitution of conjugal rights. It is impossible, I think, to imagine that an order for restitution could ever have been made against a lunatic. By the Act of 1857, “desertion without cause for two years and upwards” was made a ground for judicial separation; and, if coupled with adultery, “desertion without reasonable excuse for two years or upwards” was made a ground for divorce. I do not know the reason for the variation of the language, but it does not seem to me to make any difference. My view rests really upon what I conceive to be the real meaning and quality of desertion. It is not a crime, but it is a wrong. The words “matrimonial offence” do not, so far as I have observed, occur in any of the Acts, but they are used with reference to desertion in more than one judgment. There is a moral quality about desertion. Itand in this it resembles a crimeis largely a matter of intent. One man is absent from his wife for 6 months, but he has a “reasonable excuse”, for example, he is working in some place where she cannot well live. That is not desertion. Another man is absent for the same period intending to desert. His intention makes it desertion. It is the mind of the manjudged, of course, as mind must be, by acts and statementswhich has to be judged.

By the Summary Jurisdiction Acts, relief may be given by a court of summary jurisdiction to a wife whose husband has deserted her. I cannot conceive that a summons could be issued against a lunatic, but

Page 832 of [1939] 3 All ER 825

I do not know why not, if the present respondent has, during the 3 years, been deserting his wife.

I do not think there is any authority really in point. The imprisonment casesDrew v Drew is the best exampleappear at first sight to favour the appellant, but I think they are distinguishable, and exactly on the ground taken by Langton J. The very recent decision of the House of Lords in Pratt v Pratt may perhaps now be considered the leading authority on desertion. In the opinion of Lord Macmillan, clear support is to be obtained for the view which I take, particularly where he says ([1939] 3 All ER 438):

The deserting spouse must be shown to have persisted in the intention to desert throughout the whole period.

However, I see nothing in the opinion of Lord Romer inconsistent with my view. It is true that the wife there, having deserted, would no doubt be treated as still in the same state of mind unless she manifested some change of mind. In Pratt v Pratt, the wife did manifest a changed mind and thereby, as the House of Lords held, did determine the desertion, although of course physically she remained away from her husband just the same. However, Lord Romers reference to the “active step,” seems to me to have no application at all to a lunatic who cannot take any active step, partly no doubt, because he is under physical restraint, but mainlyand this is, I think, the fundamental reasonbecause, being mindless, he is unable to think any thought, to form any intent, or to take any reasoned action.

My view that the desertion subsection has reference to normal persons, and not to lunatics, is, I think, strengthened by the fact that lunacy is dealt with in another subsection and, as Langton J points out, the wife may probably, at a not very distant date, be able to take advantage of the appropriate provisions in that behalf. I agree that the judgment of Langton J was in all respects correct, and should be affirmed.

Appeal dismissed.

Solicitors: Field Roscoe & Co, agents for Berkson & Berkson, Birkenhead (for the appellant): Lightbounds Jones & Co, agents for Owen Dawson & Wynn-Evans, Liverpool (for the respondent).

W K Scrivener Esq   Barrister.


Whittaker v Whittaker

[1939] 3 All ER 833


Categories:        FAMILY; Family Proceedings        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P AND HENN COLLINS J        

Hearing Date(s):        20 JULY 1939        


Divorce Summary jurisdiction Maintenance order Allegation of wifes adultery Previous finding of adultery in county court in action to enforce separation agreement Res judicata Summary Jurisdiction (Married Women) Act 1895 (c 39), s 6.

The parties separated under an agreement whereby the appellant covenanted to pay his wife maintenance at a certain rate, so long as she remained chaste. Payments later fell into arrears, and the respondent then took proceedings in the county court for their recovery. The appellant pleaded as a defence that his wife had committed adultery, and the county court judge, finding the adultery proved, gave judgment in his favour. Subsequently the respondent brought proceedings before justices in a court of summary jurisdiction, alleging wilful neglect to maintain. As a defence, the husband relied upon the judgment of the county court judge, but the justices held that they were not bound by this decision, and also that in view of the proviso to the Summary Jurisdiction (Married Women) Act 1895, s 6, the issue tried by the justices was not identical with that tried by the county court judge:

Held (i) as there was in this case no question of any condonation, connivance or conduct conducing the issues in both proceedings were the same, namely, whether or not the wife had committed adultery.

(ii) the matter was res judicata and the justices were bound by the decision of the county court judge.

Notes

It would seem that findings of adultery in ordinary civil proceedings are not necessarily binding upon the Divorce Court as matters of res judicata, but it is here shown that a finding of adultery by the county court in proceedings to recover arrears of maintenance under a separation agreement is binding upon magistrates when an application is made to them for a maintenance order under the Summary Jurisdiction (Separation and Maintenance) Acts 18951925.

As to Res Judicata and Divorce, see Halsbury (Hailsham Edn), Vol 10, pp 670, 671, paras 991, 992; and for Cases, see Digest, Vol 27, pp 324326, Nos 30263051.

Cases referred to

Ord v Ord [1923] 2 KB 432; 27 Digest 237, 2080, 92 LJKB 859, 129 LT 605.

Kingstons (Duchess) Case (1776) 1 Leach 146; 27 Digest 554, 6080.

Harriman v Harriman [1909] P 123; 27 Digest 321, 2995, 78 LJP 62, 100 LT 557.

Appeal

Appeal from a decision of the justices for the city of Colchester whereby they found that the appellant had wilfully neglected to provide reasonable maintenance for his wife, and ordered him to pay 10s per week for her maintenance. The facts are fully stated in the judgment of Sir Boyd Merriman P.

P T Miller for the appellant.

G A Hopper for the respondent.

20 July 1939. The following judgments were delivered.

SIR BOYD MERRIMAN P. This appeal raises a curious and not unimportant point. The wife took out a complaint before the Colchester

Page 834 of [1939] 3 All ER 833

justices on the ground that her husband had been guilty of wilful neglect to maintain her, and on 26 April last, the Colchester justices held that that complaint was proved.

There is no dispute about the facts. At the material dates the husband was not, in fact, maintaining his wife, but his defence was that he was not bound to do so having regard to the fact that she had committed adultery. It is necessary, in order to appreciate the points raised by this appeal, to go rather further back in the matrimonial history. Some date before 2 December 1933, the wife had given birth to a child, the paternity of which appears to have been in issue; at any rate, on 2 December 1933, the wife was party to two agreements in writing, one of them being an agreement between herself, her mother and a man, whereby the mother undertook the care and control of this child, and the man undertook the financial responsibility for it. On the same date the wife was also party to an agreement of separation between herself and her husband, under which her husband agreed to pay maintenance at a certain rate so long and only so long as the wife remained chaste. I ought to observe, in passing, that the deed of separation itself remains in force. The provisions whereby the agreement itself was to be terminated admittedly have not come into effect, but the question whether the husband was bound to pay the agreed maintenance depended solelyshort of the agreement coming to an endon the question of whether the wife remained chaste.

In those circumstances, at the end of 1938 the husband declined to make any further payments. At the time, there was outstanding the sum of £13 4s, and, for this sum, the wife brought proceedings in the Colchester county court before His Honour Judge Hildesley. The amount was particularised as an amount, and there is no dispute about the fact that it was unpaid by the due date in accordance with the agreement, but the husband, in answer to this claim, pleaded that his wife was no longer chaste, and he particularised the allegation of adultery by reference to two incidents in April and July of 1937 respectively. In support of this answer he gave evidence and called a witness. We know nothing about the details of the evidence, save that we have been told that there is evidence and that the witness purported to prove, and prove conclusively and directly, that there was adultery on the date in question. However, as in the county court and elsewhere, the issue is not whether or not on a particular date adultery is committed. Particulars, are, of course, designed to give the opposite party full notice of what is going to be alleged, in order that he or she may be prepared to make a proper defence, but, finally, in the county court, as elsewhere, the issue is whether or not adultery has been committed. In other words, whether it is proved to the satisfaction of the tribunal, that the party charged has committed adultery. As juries have frequently been directed, if all the particulars go by the board, of course the charge itself goes, but neither this court itself, nor a jury sitting in

Page 835 of [1939] 3 All ER 833

this court, is asked to find aye or no with regard to each one of several particulars. The issue from first to last is whether it is proved that the spouse charged has committed adultery. The county court judge, having heard evidence on each side, found the wife had committed adultery, and therefore within the terms of the agreement to which I have referred, the husband was not liable for the amount claimed, all of which had accrued due after the alleged adultery. That finding was made, and that judgment given on 15 March 1939.

It was in those circumstances that the wife then proceeded before the Colchester justices, to complain that her husband was guilty of wilful neglect to maintain. The case came on twice before the justices. On the first occasion the judgment of the county court judge was, so to speak, put before them and the matter was left there. Apparently the clerk to the justices took the view that this was not enough, and the case was adjourned, no doubt to enable the husband to consider how, if at all, he would amplify the evidence that he was prepared to put before the court. It is only right to say that I think that on both occasions, certainly on the second occasion, the wife herself gave evidence positively denying that she had committed adultery. When the case came before the Colchester justices on the second occasion, the husband still contented himself with relying on the judgment of the county court judge, but he did not merely hand in the judgment: he gave evidence about it. He did not repeat the evidence of fact which he had given before the county court, but he gave evidence proving the county court judgment, and proving the circumstances in which it had been given, and again relied upon that judgment as entitling him to resist the wifes complaint that he was wilfully neglecting to maintain her. By a majority the justices made an order for payment of 10s per week maintenance and costs, the amount of which they fixed. They were asked to give their reasons, which they gave as follows:

The justices found from the evidence of the wife that the husband had wilfully neglected to provide reasonable maintenance for his wife and infant child Frederick Anthony Russell Whittaker. The justices held they were not bound by the decision of the county court judge as to adultery having been committed, and, in view of the proviso to the Summary Jurisdiction (Married Women) Act, 1895, s. 6, the issue to be tried by the justices was not identical with that tried by the county court judge. The justices further found that commission of adultery was not proved to their satisfaction.

I ought to say at once, to get one possible difficulty out of the way, that this case has been fought only on what appears on the face of it to be a maintenance order in favour of the wife. I do not understand that any separate order was made for the wife on behalf of the child, which may raise different considerations; we are dealing only with an order which purports to be made in favour of the wife.

It appears from the reasons which I have just read, that the justices had decided as a matter of law that they could not be bound by the decision of the county court judge that the wife had committed adultery, and they therefore decided the matter upon their own view of the

Page 836 of [1939] 3 All ER 833

evidence before them, the only direct evidence before them, apart from the production of the county court judges judgment being, as I have said, the explicit denial on the part of the wife. They have also made it clear that they consider that they are not bound by the judgment of the county court judge because of the wording of the Summary Jurisdiction (Married Women) Act, 1895, s 6. That section reads:

No orders shall be made under this Act on the application of a married woman [the allusion, of course, being to orders being made on the various grounds set out in sect. 4, one of which is wilful neglect to provide reasonable maintenance] if it shall be proved that such married woman has committed an act of adultery; Provided that the husband has not condoned, or connived at, or by his wilful neglect or misconduct conduced to such act of adultery.

Now it is perfectly true that that proviso marks a difference between the statutory right to obtain maintenance for a wife under the Summary Jurisdiction Act and the common law liability of a husband to maintain his wife. It reduces the conditions upon which the wife may obtain maintenance under the statute, although she might be unable to enforce the common law right, but, although those words appear in the proviso to the section, it is common ground in this case, and it cannot be disputed, that none of the issues raised by that proviso could possibly have entered into the decision before the county court judge, nor, which is more important, could they have entered into any such decision before the: magistrates. The parties had never seen each other for practical purposes from the date when they parted under the agreement on 2 December 1933, until after the incident in regard to which adultery in 1937 was charged in the county court. Therefore there could not possibly be any question of connivance, nor could there possibly be any question of condonation, nor could it be alleged, nor was it alleged, that there was any neglect or misconduct which conduced to the adultery. No such issue could possibly be raised or was even hinted at before the justices. To draw the distinction between the finding of the county court judge, and the finding that they were asked to make in this matter on the ground of the section which contains this proviso, is really beside the mark. It is really now very faintly disputed, if it is disputed at all, that the issue before the justices and the issue before the county court judge were absolutely identical, namely, whether the wife had committed adultery since the execution of the agreement. That issue, and nothing else, was the issue in both cases. When once that has been ascertained, the question remains whether the justices were right in saying that they were not bound by the findings of the county court judge. I have rejected the reason that they gave for holding that they were not bound, but that is not conclusive of the matter, because counsel for the respondent has argued that it is essential that it shall be before it is proved that the woman has committed adultery. He says that you do not prove a thing of that sort by putting in a judgment of a county court judge to that effect. “Proof” means that it must be proved by oral evidence given before, and accepted as conclusive by, the justices

Page 837 of [1939] 3 All ER 833

themselves. I agree that it is necessary that facts should be proved before the justices, but the question is whether it is not proved and proved conclusively by the production of a judgment of a court of competent jurisdiction deciding that very matter between the same parties. In my opinion the justices were wrong in holding that they were not bound by the county court judges decision. I am not going to attempt to elaborate the view of the law of estoppel per res judicata, I am content to refer to the very useful view of this branch of the law by Lush J in Ord v Ord, where, quoting from the notes of the Duchess of Kingstons case in Smiths Leading Cases, he said, at p 439:

As is said in the notes to the Duchess of Kingstons case, if the truth has been ascertained, the party against whom it has been ascertained, is taken as admitting it. This is what the learned author says: “An estoppel, therefore, is an admission or something which the law treats as equivalent to an admission, of an extremely high and conclusive natureso high and so conclusive, that the party whom it affects is not permitted to aver against it or offer evidence to controvert it.”

Then he continues, at p 440:

The litigant must admit that which has been judicially declared to be the truth with regard to the dispute that he raised. In order to see what the fact is that he must admit the truth of one has always to see what is the precise question, the precise fact that has been disputed and decided. This has constantly been stated to be the law.

Then, on the same page, he quotes from Stephens Digest of the Law of Evidence (10th Edn), this passage:

Every judgment is conclusive proof as against parties and privies of facts directly in issue in the case, actually decided by the court, and appearing from the judgment itself to be the ground on which it was based.

I am not going to multiply opinions. In my opinion every word of that passage applies to this particular case and to the section on which counsel for the respondent has relied. The judgment was between the same parties; the fact of adultery was directly in issue before the county court judge. It was actually decided by him, and quite clearly appeared to be the ground for the decision, for it was the only ground on which the judgment could be based. That being so, the moment that judgment was produced and proved to be in full force and effect, and proved to be given by a court of competent jurisdiction on these issues, in my opinion there was an end of the matter so far as the justices were concerned. That judgment was itself not merely proof, but conclusive proof, so far as the justices were concerned, that the wife had committed adultery. I say so far as the justices are concerned, because that is all that we have to deal with. It will, however, be apparent, that the situation thus raised might be an extremely unfortunate one if this were a conclusive estoppel in all circumstances. Whereas I am satisfied that it is conclusive between these parties in a court of summary jurisdiction, let me make plain at once, as has been conceded in the course of the argument, that it would not be conclusive if the matter were litigated in this division in a matrimonial suit between these parties. It is

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important to bear that fact in mind. Curiously enough, the very same word “proved” on which counsel for the respondent has laid so much stress, appears not merely in the Matrimonial Causes Act 1857, but it also occurs in the revised version of the Judicature Act 1925, s 176, which is re-enacted with modifications, by the Matrimonial Causes Act 1937. With regard to proof in this court, I need do no more than refer, without reading it, to the well-known passage in the judgment of Fletcher Moulton LJ in the full Court of Appeal in Harriman v Harriman. However binding the estoppel may be elsewhere, it is not binding on this court when this court has to satisfy itself that the facts are proved. In other words, a court of summary jurisdiction is bound by the decision of an inferior court of record, but this court is bound by the decision neither of a county court judge, nor of a court of summary jurisdiction, great as the evidential value, as Fletcher Moulton LJ said [p 142], may be of a decision of either of those tribunals. Of course, it is precisely that aspect of the matter which is reflected in the Matrimonial Causes Act 1937, s 6(2), dealing with decisions of courts of summary jurisdiction. Therefore, in fact, the parties need not be left finally in the unfortunate situation that one court finds that adultery has been committed and another court says that it is not satisfied that the adultery has been committed. The wife could put the matter to proof by asking the county court judge to rehear and re-determine the matter on new material. A county court judge, unlike other tribunals, has that jurisdiction by statute. She could also get leave to appeal out of time from the county court judges decision, if the Court of Appeal were minded to give such leave, or the matter could be tested in this court afresh on some appropriate proceeding taken by the wife to enforce her conjugal rights, whatever they might be. However, as the matter stands before us now, sitting as a divisional court of this Division on appeal from the decision of the Colchester justices that they were not bound by this decision of the county court judge, we are bound to hold that they were so bound, and that they ought to have given effect to it. I only want to add one other word. In their first reason they found that the husband had wilfully neglected to provide reasonable maintenance. That he had not provided it is, as I have said, common ground, but wilful neglect means more than that, it means that there has been some wrongful default. Now this matter has not been argued out to the full. Suffice it to say that there is authority that a reasonable belief in the wifes adultery may afford a defence to a charge of wilful neglect. Here on the face of it, and again without going into the matter because it was not gone into before the justices, the refusal to maintain her was based on an existing judgment of a court of competent jurisdiction. In those circumstances it might, in any view, be a little difficult to establish that a refusal so based was wilful, or amounted to a wilful neglect, but that aspect of the matter, as counsel for the appellant frankly admits, does not appear to have been presented to the justices,

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and was not dealt with by them. I only mention it to show that in any view of the matter it has not been overlooked.

For these reasons this appeal must be allowed.

HENN COLLINS J. I agree, and I have nothing to add.

Appeal allowed.

Solicitors: Iliffe Sweet & Co, agents for Ellison & Co, Dovercourt (for the appellant); Speechly Mumford & Craig, agents for Jones & Son, Colchester (for the respondent).

J F Compton Miller Esq   Barrister.

Urban Housing Co Ltd v The Mayor, Aldermen and Citizens of the City of Oxford and Charles Richard Fox

[1939] 3 All ER 839


Categories:        ENVIRONMENTAL: HEALTH; Public health        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        20, 21, 24, 25 JULY 1939        


Public Health Streets Strips between two streets running in same direction not made up Sewers Buildings over sewers Walls When removable by local authority Public Health Act 1875 (c 55), s 26.

By a conveyance dated 27 July 1933, the plaintiffs bought from the defendant council part of a farm, of an area of 20½ acres. The conveyance provided for a right of way to the plaintiffs over the strip of land lying between the land conveyed and the main road, but reserved no right of way to the defendant over the plaintiffs land to the main road. It also provided for full and free rights of road way, sewerage and drainage to and for the plaintiffs over and along and in and under the whole length and breadth of two proposed new roads marked on the plan. The purchasers were obliged to level, curb, pave, metal, sewer, drain, flag, channel and light all the roads to be constructed within the area as well as certain streets. Buildings were to conform to a building line and no building or erection of any kind except a fence or other enclosure and a gate or gates were to be erected on the sites of the proposed roads. (Covenant 7.) No building was to be erected on the land other than a private dwelling house with suitable offices and outbuildings and with or without garage accommodation and sixteen garages. (Covenant 9.) The plaintiffs were also prevented from gaining any easement of light over the land retained by the defendants and bordering on the land which they sold to the plaintiffs. The plaintiffs could not make any addition to or alteration in the character of any building on the land without the approval of the defendant council or their estates surveyor or erect thereon any hut, shed or other outbuilding without their previous consent in writing. The estate plan was submitted and approved on 31 July 1933, and plans for the construction of new roads were approved. In September 1934, the plaintiffs notified the defendant council that they were going to retain the roads as private roads and enclose the whole estate in a ring fence by building a wall across two of the roads, and towards the end of 1934 the plaintiffs erected two walls, 7 ft high and 9 ins thick, and strengthened at intervals by buttresses on the roads, and barring entrance to the plaintiffs housing estate. On 20 January 1936, the defendant council sought to obtain confirmation from the Minister of Transport for a compulsory purchase order affecting the walls and land on which the walls were built, but after an inquiry the Minister declined to confirm the order,

Page 840 of [1939] 3 All ER 839

having regard to the offer by the plaintiffs of land for a footway. On 20 September 1937, the defendant council called upon the plaintiffs to remove the walls and make good the surface of the roads within 21 days pursuant to the Public Health Act 1875, s 26, which provides for the removal of buildings built over sewers. The defendant council, however, took no steps to enforce the rights they claimed under that Act. On 7 February 1938, the defendant council adopted the Private Street Works Act 1892, and later they declared the roads in question to be highways repairable by the inhabitants at large. On 7 June 1938, in accordance with a resolution of the defendant council, some officers of the council went to the locus in quo, and, with the assistance of some police and a steam roller, pulled down the two walls:

Held (i) the two strips of land on which the walls stood were not “streets” and therefore the walls were not illegal obstructions.

(ii) the walls were not “buildings” within the meaning of the Public Health Act 1875, s 26, but in any case to which the section applies the councils power must be exercised judicially and after giving the party affected an opportunity to be heard. The walls, being in no way injurious to the sewers beneath them, could not be removed under that section.

(iii) the walls were “fences” within the meaning of covenant 7, but not “buildings” within the meaning of covenant 9, and there had, therefore, been no infringement of the restrictive covenants in the conveyance.

Notes

The principal point of interest in this case is the question of the buildings upon land under which public sewers have been laid. Such buildings in order to be removable under the Public Health Acts must be injurious, by reason of their weight or otherwise, to the sewers. The question of what is a street will be of interest to builders, who wish to separate one locality from what is in their view a less desirable one.

As to Buildings over Sewers, see Halsbury (Hailsham Edn), Vol 30, p 27, paras 48, 49; and for Cases, see Digest, Vol 38, pp 184187, Nos 242259.

Cases referred to

Hopkins v Smethwick Local Board of Health (1890) 24 QBD 712; 26 Digest 564, 2584, 59 LJQB 250, 62 LT 783.

Cooper v Wandsworth Board of Works (1863) 14 CBNS 180; 26 Digest 518, 2202, 32 LJCP 185, 8 LT 278.

Action

Action for an injunction against both defendants to restrain them from interfering with and/or preventing the plaintiffs, their servants and agents from re-erecting certain walls, the property of the plaintiffs erected by the plaintiffs in December 1934, upon land belonging to the plaintiffs adjoining Wentworth Road and Carlton Road in the city of Oxford, which walls the plaintiffs alleged were illegally demolished by the first named defendants on 7 June 1938, and against the first named defendants for a declaration that the plaintiffs were entitled to erect and maintain the walls and an injunction to restrain the first named defendants from demolishing or otherwise interfering with the walls when so re-erected and damages for trespass. The first defendants alleged in their defence that the walls were illegally erected to block certain public highways. They further alleged breaches of the bye-laws and the obligations of the plaintiffs in a conveyance of 19 September 1933, made

Page 841 of [1939] 3 All ER 839

between the plaintiffs and the first defendants. The facts are fully set out in the judgment.

Erskine Simes and C E Scholefield for the plaintiffs.

Hon Sir Stafford Cripps KC and Wilfrid M Hunt for the defendants.

25 July 1939. The following judgment was delivered.

BENNETT J. The events out of which this action arises began at the end of the year 1925, when the defendant council purchased a farm on the outskirts of Oxford, known, I think, as Summertown Farm, which lies on the east side of the highroad leading from Oxford to Banbury. On 27 July 1933, the plaintiffs entered into a contract to buy from the defendant council a part of this farm, the area of which part was 20½ acres, for £6,867 10s. The contract provided for the purchase to be completed on 16 September 1933. It was completed three days later by a conveyance dated 19 September 1933. The transaction was completed by the deed, the whole of which is necessary to be considered. It is made between the mayor, aldermen and citizens of Oxford, called the “vendors,” of the one part and Urban Housing Co Ltd, called the “purchasers,” of the other part. It recites that the vendors were seised in fee simple in possession free from incumbrances of the land thereinafter described and intended to be thereby conveyed and had agreed to sell the same to the purchasers for the sum of £6,867 10s, subject to the covenants, stipulations and restrictions thereinafter contained. The deed proceeds as follows:

Now this deed witnesseth that in pursuance of the said agreement and in consideration of the sum of £6,867 10s. to the vendors paid by the purchasers on or before the execution of these presents (the receipt whereof the vendors hereby acknowledge) and of the covenants by the purchasers hereinafter contained the vendors as beneficial owners do hereby convey unto the purchasers all that piece of land being part of certain land conveyed to the vendors by a conveyance dated Dec. 3, 1925, and made between John Edmund Sawyer of the first part Elizabeth Isabel Sawyer and Frank Cecil Jones of the second part and the vendors of the third part which piece of land hereby conveyed contains an area of 20½ acres or thereabouts situate east of Banbury Road in the city of Oxford formerly in the parish of Water Eaton (detached) in the county of Oxford shewn on the plan annexed hereto and thereon coloured pink and surrounded by a red line together with full and free rights of road way, sewerage and drainage to and for the purchasers and the persons deriving title under them (in common with the vendors and the persons deriving title under them) over and along and in and under the whole length and breadth of the two proposed new roads lying between the points A to B and C to D and coloured yellow on the said plan To hold the same unto the purchasers their successors and assigns The purchasers hereby covenant with the vendors and the persons deriving title under them that they the purchasers and the persons deriving title under them will henceforth at all times hereafter observe and perform all and singular the restrictions and stipulations contained in the schedule hereto provided that the purchases and the persons deriving title under them shall as regards any of the aforesaid restrictions and stipulations which are restrictive of the user of the same be liable only in respect of breaches which occur while they shall respectively be owner or owners of the premises or the part thereof in respect of which any breach occurs provided also that the purchasers and the persons deriving title under them shall not be or become entitled to any right of access of light or air to buildings to be erected on the land hereby conveyed which will or in any way may prejudicially affect the free and unrestricted user by the vendors and the persons deriving title under them of any adjoining or neighbouring property belonging to the vendors for building or other purposes Provided further that if and whenever the vendors or the persons deriving title under them shall sell a plot of land (being other part of the said land then remaining vested in them) the right to enforce the covenants hereinbefore contained in respect of the plot of land so sold shall not pass to the

Page 842 of [1939] 3 All ER 839

purchaser thereof unless it shall be expressly assigned or declared in the conveyance that it is intended to pass thereby and nothing herein contained shall operate to prevent the vendors and the persons deriving title under them selling or leasing any such plot of land either subject to such covenants restrictions and stipulations as the vendors and the persons deriving title under them may in their absolute discretion think fit or free from any restrictions or stipulations whatsoever. The vendors hereby covenant with the purchasers and the persons deriving title under them as follows: (1) To lay out or cause to be laid out the two roads coloured yellow on the said plan from the points A to B and C to D marked thereon within twelve calendar months from the date of the execution of this conveyance and without expense to the purchasers (2) To erect good and sufficient fences of close boarded deal with oak posts and rails six ft. six ins. in height on the north and west boundaries of the land hereby conveyed and upon such fences being erected the vendors shall for ever thereafter at their own expense maintain and keep in repair the same except the portion of the fence on the west boundary of the land hereby conveyed between the points marked X and Y on the said plan which shall for ever hereafter be maintained and kept in repair by the purchasers or the persons deriving title under them at their own expense and the vendors shall pay to the purchasers a sum of £50 in respect of such portion of the fence and the vendors hereby acknowledge the right of the purchasers to production of the said conveyance dated Dec. 31, 1925, the possession of which is retained by the vendors and to delivery of copies thereof and hereby undertakes for the safe custody thereof.

The schedule above referred to, which contains covenants by the purchasers with the vendors, is as follows:

(1) The purchasers on demand shall pay to the vendors one-half of the cost (with a maximum of £190) of the erection of the said close boarded deal fence with oak posts and rails six ft. six ins. in height on the north and west boundaries of the land hereby conveyed (2) The height of all fences next to any road shall be measured to the level of the footway to such road taken to the nearest point (3) The purchasers shall not be entitled to require the vendors to erect any fences or enclosures except the fences on the north and west boundaries of the land hereby conveyed (4) The purchasers shall forthwith lay out and on being required by the vendors shall level curb pave metal sewer drain flag channel and light all the roads to be constructed within the area of the land hereby conveyed and coloured pink on the said plan the two continuation streets of the width of 40 ft. in respect of the continuation of the said two streets coloured yellow on the said plan the street parallel with but nearer to Banbury Road of the width of 36 ft. the street parallel with but further from the Banbury Road and the circular street at the southerly end of the estate of the width of 30 ft. and the four small island sites of the width of 26 ft. to be constructed on the said land in a manner and to the satisfaction in all respects of the vendors as the local authority and in accordance with the building byelaws as to new streets and the provisions of Local and Public Acts and will pay the whole cost of same (5) The purchasers shall only erect on the land hereby conveyed detached or semi-detached houses and two blocks of eight garages each for the use only of owners or occupiers of houses erected on the said land in accordance with the estate plan hereinafter referred to with a density of not more than twelve to the acre including the acreage of any roads to be constructed thereon within the area coloured pink on the said plan and not more than 246 houses shall be erected on the whole of the said land (6) No house or other building shall be erected so that its principal front shall face otherwise than towards the said roads (7) The front or flank walls of any house or building to be erected on any part of the land hereby conveyed shall range or be in line with the building line or lines to be shown on the estate plan of the purchasers hereinafter referred to and to be approved by the vendors estates surveyor and no building or erection of any kind except a fence or other enclosure and a gate or gates shall be erected on any part of the said piece or plot of land which lies between the said building lines and the road or on the sites of the proposed roads marked on the said estate plan (8) The erection shall not be commenced of any house or other buildings on any part of the land hereby conveyed until and then only in accordance with an estate plan showing the proposed lay out and also plans and drawings of such house or other building showing the intended elevations and sections and specifications thereof have been submitted to and approved by the vendors or their surveyor for the time being the purchasers submitting the said estate plan and plans elevations sections and specifications as often as called upon by the vendors estates surveyor so to do until the same shall be finally approved and signed by the vendors estates surveyor and if required leaving with him for reference copies of such approved estate plan plans elevations sections and specifications and a copy of

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such drawings has been deposited by the purchasers with the vendors in respect of each house or building (9) No building shall be erected on the said piece of land or on any plot forming part thereof other than a private dwelling-house with suitable offices and outbuildings and with or without garage accommodation and the said sixteen garages (10) The dwelling-house to be erected on each plot of land forming part of the land hereby conveyed shall be of the value of at least £650 and the said value shall be taken to be the net first cost of the dwelling-house in materials and labour of construction only calculated at the rate of one shilling per foot cubic contents measured from the top of the footings to half way up to the roof or two ft. above any flat roof and exclusive of the cost of fences and land and any detached outbuilding or motor garage (11) Except with the consent in writing of the vendors first obtained no ale beer porter or spirituous liquors shall be sold in or upon the land or any house or building to be erected thereon nor shall any licence for the sale thereof be applied for in respect thereof (12) No portion of the land shall be used as a road or way or as part of a road or way from or to any land adjoining or adjacent to the said land other than the roads shown on the said plan without the consent in writing of the vendors first obtained (13) The purchasers shall not make any addition to or alteration in the character of any building on the land hereby conveyed which may be erected hereunder without the approval of the vendors or their estates surveyor or erect thereon any hut shed or other outbuilding without the previous consent in writing of the vendors (14) The purchasers shall not get or work gravel or clay in or on the land hereby conveyed or carry on or permit to be carried on any trade manufacture or business of any description nor expose or permit to be exposed any advertisement (other than a notice to let or sell) or sign board on the land hereby conveyed or on any part thereof or on any buildings thereon nor use such buildings nor permit the same to be used otherwise than as a private dwelling-house (15) The purchasers shall not place or permit to be placed goods for exhibition or sale in front of or on the land hereby conveyed (16) The vendors may from time to time alter the plotting of any land which for the time being remains unsold and may vary the position of any intended roads leading from the roads to be constructed on the said land in accordance with the estate plan of the purchasers and approved by the vendors (17) If any dispute as to the site or measurements shall arise between the vendors and the purchasers or between one purchaser and another purchaser it shall be settled by the vendors city estate surveyor and the purchasers surveyor and if they shall be unable to agree by a surveyor appointed by the President for the time being of the Surveyors Institute and his decision shall be final and conclusive and may be made a rule of His Majestys High Court of Justice (18) The scheme of roads building lines and other matters as shown on the said estate plan and the building and other restrictions imposed upon purchasers shall not be binding upon the vendors who shall be at liberty to vary or alter the same from time to time as regards any other portions of the vendors adjoining land without reference to the owners or occupiers of any plot or plots which may have been previously sold or otherwise disposed of (19) In this schedule where the context so admits (1) the expression “the purchasers” includes their successors in title (2) the expression “the vendors” includes their successors in title owners for the time being of the unsold portion of the said estate and any person to whom the benefit of the covenants by the purchasers in these presents shall be expressly assigned.

The plan annexed to the conveyance shows the area of land conveyed coloured pink and surrounded with a red line. Between it and the Banbury Road is shown a strip of land some 200 ft in width extending along the whole of the western boundary of the land conveyed and over that strip there are the sites of two roads shown coloured yellow. The plan of the land conveyed shows those two roads continuing in an easterly direction, running parallel with one another, across the land conveyed and connecting with two roads upon the land (on the eastern side of that conveyed) retained by the defendant council and described on the plan as the Cutteslowe housing estate. The plan also shows on the land conveyed two roads, running from north to south across the land conveyed, parallel with one another, and some island sites, which are referred to in the conveyance, at the southerly end of it.

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Before the conveyance was executed, the estate plan referred to in condition 8 had been submitted by the plaintiffs surveyor or by the plaintiffs to the city council and had been approved by them on 31 July 1933. An extract from the minutes of the defendant council shows that on that day they adopted a recommendation of their highways, sewers and lighting committee, as follows:

(a) That plans submitted by Mr. W. H. Smith on behalf of the Urban Housing Co. for the construction of five new roads on the Summertown farm estate be approved, subject to the materials, construction and workmanship being to the satisfaction of the city engineer. Two of the roads will run eastwards from Banbury Road and connect with the roads on the Cutteslowe No. 2 housing estate; there are two other intersecting roads and a crescent at the south end of the estate. (b) That the city engineer be authorised to construct the roads and sewers on the above estate for the Urban Housing Co. and also the two entrance roads to the Banbury Road for the estates sub-committee on the basis of payment of actual cost plus 7½ per cent.

After that recommendation had been adopted by the council and, as I understand it, before the conveyance had actually been executed, the plaintiffs took possession and the construction of the roads began. Matters went on without a hitch until some time in the autumn of 1933 when the question of the naming of the roads arose. As I understand it, the roads running from east to west, beginning at the Banbury Road, were made in sections and work was done on part of the land on the east, retained by the city council, at the same time as work was going on on the land purchased by the plaintiffs. When the trouble arose about the naming of the roads, the defendant council apparently wished that the name to be given to the more southerly of the two cross roads should be Aldrich Road, and the name to be given to the more northerly of the two should be Wolsey Road. The plaintiffs seem to have desired that, so far as the roads in course of construction on their property were concerned, the southerly one should be given the name of Wentworth Road, and the northerly one the name of Carlton Road.

The correspondence in regard to that matter becomes a little acrimonious with a letter written on 4 December 1933, by the city engineer to the plaintiffs, in which the city engineer says:

With further reference to your letter of the 10th ultimo I beg to inform you that the question of the names to be given to the roads of the above estate now being developed by you were considered by the street names sub-committee and afterwards confirmed by the highways committee at meetings held on Friday last. It has been decided to recommend to council that the roads be named as follows:Road No. 1 [that is the most southerly of the two cross roads] Aldrich Road; Road No. 2 Southdale Road; Road No. 3, Cavendish Road; Road No. 4 [the most northerly of the cross roads] Wolsey Road; Road No. 5, Salisbury Crescent. As explained to you over the telephone, the names for Roads Nos. 1 and 4 were adopted by reason of the fact that these roads form a continuation of those already constructed and in course of construction on the corporation housing estate adjoining.

The answer to that letter was made on 6 December 1933, and is written by Mr Clive Saxton, a director of the plaintiffs. He acknowledges receipt of the letter and says:

As previously mentioned to you, we always understood that we had the right to name the streets, subject, of course, to the councils byelaw which gives them

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power to alter the name of a street at any time. In the ordinary course my directors would have agreed to almost any suitable name for the roads, but they cannot see any reason whatever why this particular estate should be linked up with the corporation housing scheme, and the names suggested for Roads Nos. 1 and 4 will most certainly prove extremely detrimental to us.

There are other matters in the letter dealing with the roads which it is not necessary for me to read. The correspondence ends, so far as the defendant council is concerned, with a letter of 19 January, written by the city engineer to the plaintiffs, in which he says:

that at a meeting of the highways committee held this morning the following extract from the report of the street names sub-committee was adopted: “That the continuation of Wolsey Road on the Summertown farm estate, constructed by the Urban Housing Co., Ltd., be named Cardinal Road, and the extension of Aldrich Road on the same estate be named Sawyer Road.” I think you will agree that the highways committee have met the point raised by you and as soon as these names have been confirmed by the city council, I will arrange for the necessary name plates to be ordered and erected as part of the works now being carried out by the council on your behalf.

That proposal did not meet with the approval of the plaintiffs, who themselves named Cardinal Road, “Carlton Road,” and Sawyer Road, “Wentworth Road,” and there the matter of the names rested.

Friction next broke out in September 1934, and on 22 September, the plaintiffs wrote to the town clerk of the first defendants a letter in these terms:

Dear Sir, Summertown Farm Estate. In response to extreme pressure brought to bear upon us by our tenants, we feel that we ought to retain the roads on the above estate as private roads and not to open them to the public, and to enclose the whole estate in a ring-fence by building a wall across the roads numbered 1 and 4 where they meet those of the city No. 2 Cutteslowe housing scheme. [Those two roads numbered 1 and 4 are Cardinal Road and Sawyer Road as named by the defendants, or Carlton Road and Wentworth Road as named by the plaintiffs. We realise that it may be necessary to make private arrangements or to enter into a contract with your council for the cleaning and lighting of the streets, and we shall be glad if the council will consider this and arrange to open negotiations. The whole of the difficulty seems to lie in the fact that slum clearance tenants have been introduced into the district, yet when we negotiated for the purchase of the land from your council we were definitely informed that all the houses were being built under the 1924 Housing Act and none under the 1930 Housing Act.

and then the writer goes on to deal with that matter. The town clerk replied to this letter on 29 October, as follows:

… the city council have considered your letter of the 22nd ultimo and a petition from residents on the Cutteslowe housing estate of the corporation protesting against the retention by your company of the barriers erected across two new streets named by the council “Cardinal Road” and “Sawyer Road” at the Summertown farm estate. I am instructed by the council to require your company to open the east ends of the said new streets from the ground upwards to the full width of such streets in accordance with the provisions of the byelaws with respect of new streets and buildings. I shall be glad to hear that this will be done.

Correspondence followed and, so far from the obstructions across the eastern end of Cardinal Road (otherwise Carlton Road) and Sawyer Road (otherwise Wentworth Road) being removed by the end of the year the plaintiffs erected upon land bought by them from the defendant council, two walls, some 7 ft high, 9 ins thick, and strengthened at intervals by buttresses. Those two walls completely blocked up the eastern ends of the two roads and effectively barred any entrance from

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the Cutteslowe housing estate on to the plaintiffs property from the eastern side of the plaintiffs property. For some time there seems to have been nothing but talk. The walls stood until January 1936.

On 20 January 1936, the defendant council, at a meeting held on that date, adopted a recommendation of the general purposes committee in these terms:

(1) That a compulsory purchase order be made under the Public Works Facilities Act, 1930, s. 2, for the acquisition of (a) that part of Cardinal Road (called by the Urban Housing Co., Ltd., “Carlton Road”) and the land forming the site and subsoil thereof and the road works therein, situated on the estate of the said company at Summertown, in the city of Oxford, as lies between the easterly end of such part of Cardinal Road (near Wolsey Road on the adjoining housing estate of the Oxford city council) and its junction at its westerly end with the remaining part of Cardinal Road, (b) the wall and the land forming the site and subsoil thereof situated at the easterly end of Cardinal Road; (c) that part of Sawyer Road (called by the said company “Wentworth Road”) and the land forming the site and subsoil thereof and the road works therein, situated on the estate of the said company at Summertown in the city of Oxford, as lies between the easterly end of such part of Sawyer Road (near Aldrich Road on the adjoining housing estate of the city council) and its junction at its westerly end with the remaining part of Sawyer Road; (d) the wall and the land forming the site and subsoil thereof situated at the easterly end of Sawyer Road. (2) That the seal of the corporation be affixed to the order. (3) That the order be advertised and submitted to the Minister of Transport for confirmation. (4) That the necessary proceedings be taken and notices served to give effect to the order. (5) That the said roads and land when purchased be dedicated as public highways.

The order made by the council required confirmation by the Minister of Transport, who caused an inquiry to be held, and, as a result of it, on 18 November 1936, the following communication was addressed by the Ministry of Transport to the town clerk of the defendant council:

Sir, Public Works Facilities Act, 1930. The Cardinal Road and Sawyer Road (Compulsory Purchase) Order, 1936. I am directed by the Minister of Transport to refer to the public local inquiry held on July 9 in connection with the above named order and to state that, after giving careful consideration to the objections to this order, the representations made at the inquiry and the report of the inspector holding that inquiry, the Minister has decided not to confirm the order. I am to add that the Minister is of the opinion that the provision of a footway between Aldrich Road and Islip Road would overcome many of the difficulties referred to at the inquiry by witnesses on behalf of the corporation, and in this connection he has noted the offer made by the Urban Housing Co. of land for the provision of such a footway.

There the matter rested for a time.

On 20 September 1937, very nearly a year later, the town clerk of the defendant council wrote to the plaintiffs in these terms:

Dear Sirs, Cutteslowe Estate. Notwithstanding previous requests to you to remove the buildings you have erected and which constitute a barrier across the eastern end of Cardinal Road and Sawyer Road on the Summertown farm estate the same are still subsisting. The city council considered the question at their meeting to-day, when an opinion of counsel obtained on their behalf was put forward for their consideration. The council has been advised that your acts constitute a breach of the covenants contained in the conveyance to you of Sept. 19, 1933, and also of the councils byelaws with respect to new streets and buildings. The council are further advised that your acts constitute a breach of the provisions of the Public Health Act, 1875, s. 26. Under these circumstances the council have instructed me to call upon you to remove the buildings you have erected and to make good the surface of the roads upon which the same were erected within 21 days from the date hereof, failing which the council have authorised me to take all necessary steps to secure their removal and such reinstatement at the earliest possible moment. I enclose herewith a notice pursuant to the provisions of the Public Health Act, 1875, s. 26.

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The notice enclosed was addressed to the plaintiffs and was as follows:

Take notice that the buildings erected by you across the eastern end of Cardinal Road and Sawyer Road on the Summertown farm estate in the city of Oxford constitute a breach of the provisions of the Public Health Act, 1875, s. 26, and that from henceforth until their removal you are liable to the daily penalties payable under the said section.

The notice was dated 20 September 1937, and to it the common seal of the defendant council was affixed in the presence of the mayor and the town clerk.

The plaintiffs did nothing as a result of that notice; neither did the defendant council; they took no steps to enforce the rights that they claimed that they had under the Public Health Act 1875, s 26, and the matter rested as it was until the beginning of 1938.

On 7 February 1938, the defendant council adopted the Private Street Works Act and, by the terms of the resolution adopting it, it was provided that the resolution should come into operation on 31 March 1938.

On 16 May 1938, the defendant council passed this resolution:

Resolved “That whereas the undermentioned streets within the city of Oxford are streets within the meaning of the Private Street Works Act, 1892, and have been sewered, levelled, paved, metalled, flagged, channelled and made good and provided with proper means of lighting to the satisfaction of the council of the said city. And whereas we the council of the said city being the sanitary authority for the said city are of opinion that the said streets ought to become highways repairable by the inhabitants at large Therefore under and by virtue of the powers conferred upon us by the said Act we do hereby in the case of each of the said streets declare the whole street to be a highway repairable by the inhabitants at large from the date of the notice in relation to such street hereinafter mentioned and that the city engineer and surveyor be and is hereby instructed and authorised to sign and affix in the case of each of such streets all necessary notices in accordance with the provisions of the said Act to give effect to this resolution.” Names of streets above referred to: Cardinal Road (also known as Carlton Road) from its junction with Banbury Road to its junction with Wolsey Road; Sawyer Road (also known as Wentworth Road) from its junction with Banbury Road to its junction with Aldrich Road; Cavendish Road, Southdale Road; Salisbury Crescent.

Before that resolution was passed there had been a meeting of the parliamentary committee of the council held on 9 May 1938. The minute of the meeting held on that day is in these terms:

Cutteslowe Walls. The chairman informed the committee of a consultation with Sir Stafford Cripps, K.C., and Mr. W. Hunt, junior counsel, on the 3rd instant. Resolved: (a) That this committee be informed of the advice given by counsel on the 3rd instant. The chairman then informed the committee of such advice and the procedure to be followed thereon. (b) That the council be not recommended to confer further powers on the committee as per the following draft recommendation read by the chairman: “That the council confer on the parliamentary committee full powers to take any action advised by counsel in the matter of the Cutteslowe walls.” (c) That a special meeting of this committee be held on Tuesday June 7 next at 5 p.m. to take action on counsels advice and that the mayor be specially invited to attend. (d) That the committee ask the council at the ordinary meeting of the council to be held on June 20 next, to ratify any action taken by or instructions given by the committee at its meeting on June 7 next and that meanwhile any risk involved be accepted.

Then there is this minute of the meeting of the same committee on 7 June:

The following draft resolutions were considered: (1) That, in accordance with the opinion of counsel, the city engineer be and he is hereby instructed to remove

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forthwith the walls erected by the Urban Housing Co., Ltd., across Cardinal Road (also known as Carlton Road) and across Sawyer Road (also known as Wentworth Road). (2) That the chief constable be and he is hereby requested to provide such police assistance as may be necessary to enable the city engineer to remove the walls without interference and to prevent the re-erection of the walls. (3) That the council be recommended to ratify the above instructions and action taken by the committee against the officers and workmen of the corporation against all actions proceedings, claims, damages, costs and expenses arising out of the removal of the walls. Resolved: That the draft resolutions be adopted with the exception of No. 2 [the one referring to the request to the chief constable to provide police assistance] which was not considered necessary.

Having passed that resolution, some officers of the defendant council went on 7 June 1938, to the locus in quo and, with the assistance of a steam roller belonging to the defendant council, pulled down the two walls.

On the next day, the defendant council met, and passed the following resolution affecting the roads on their Cutteslowe estate which as originally constructed had been connected with the roads passing over the plaintiffs land and leading to the Banbury Road:

Resolved: “That whereas the undermentioned streets within the city of Oxford are streets within the meaning of the Private Street Works Act, 1892, and have been sewered, levelled, paved, metalled, flagged, channelled and made good and provided with proper means of lighting …”

The resolution then proceeds to the effect that the roads ought to be highways repairable by the inhabitants at large, the roads in question being:

Wolsey Road from its junction with Cardinal Road (also known as Carlton Road) to its junction with Wren Road; Aldrich Road from its junction with Sawyer Road (also known as Wentworth Road) to its junction with Wren Road.

That is all that it is necessary to read of that resolution.

I think that I have now stated all the material facts for the purpose of considering the legal rights of the parties, except these: first, on the evidence, in my judgment, there always was a break on the surfacing of the two roads in question at the points where Sawyer Road (or Wentworth Road) and Cardinal Road (or Carlton Road) respectively joined up with Aldrich Road and Wolsey Road. At all material times while the roads were being constructed there had been across the eastern end of those roads, where they were on the plaintiffs land, a barrier which had prevented the steam roller, used for rolling in the surface material, passing from the plaintiffs land on to the defendants housing estate, and so rolling the surface material in, and the surface material which had been put down at those points had been rammed in by hand and not rolled in, with the consequence that there was not a continuous surface. That, in my judgment, is the outcome of the evidence, though I do not think that it is of the least importance. The second matter of fact is that the defendants have called no evidence, that the walls or either of them were or was dangerous to the sewer underneath it, or that the walls or either of them interfered with access being had to the sewer. The last point of fact is that the cost of re-erecting the walls, will, in my judgment, be £180.

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The defendant council has taken three grounds of defence. The first ground was that, as a result of the adoption by the council of the Private Street Works Act, and of the two resolutions passed, the one on 16 May 1938, and the other on 8 June 1938, the whole of the two roads, Cardinal Road and Wolsey Road on the north, Sawyer Road and Aldrich Road on the south, leading from the Banbury Road across the plaintiffs land to the defendant councils housing estate, became highways repairable by the inhabitants at large, and that to erect the walls upon those highways, the whole surface of which would be vested in them under the Public Health Act, would be an illegal obstruction.

The second ground of defence was based upon the Public Health Act, 1875, s 26, which provides that any person who, in any urban district, without the written consent of the urban authority, causes any building to be newly erected over any sewer of the urban authority, shall forfeit to the urban authority the sum of £5 and a further sum of 40s for every day during which the offence is continued after written notice in this behalf from the urban authority, and the urban authority may cause any building erected or constructed in contravention of this section to be pulled down or otherwise dealt with as they may think fit, and may recover in a summary manner any expenses incurred by them in so doing from the offender. The point taken was that, under the two roads in question, there were sewers vested in the city council as the urban authority, and that the walls were, within the section, buildings newly erected without their consent and so violated the provisions of the section. The third ground of defence taken was that what the plaintiffs had done was in breach of the restrictive covenants into which they had entered by the conveyance of 19 September 1933.

Dealing with the three points in their order, the first depends, in my judgment, upon whether it is possible to maintain the view that, on 16 May 1938, those parts of Cardinal Road and Sawyer Road upon which the two walls were erected were or could be regarded as streets. It is only possible, in my judgment, for the resolution of 16 May, to have affected the two strips covered by the walls, if it could be said of them that they were streets. You cannot by misdescribing something make it a street and, in my judgment, it is impossible either to describe or define the two strips of land upon which these walls stood on 16 May 1938, as streets. They were not, and, therefore, in my judgment, neither the resolution of 16 May, nor the resolution of 8 June, extended to or affected the soil upon which on 7 June the two walls were standing. On that ground I reject the first line of defence set up by the defendant council.

The second ground of defence, as I have said, is based on the Public Health Act, 1875, s 26. There is no question but that the two walls were newly erected, within the meaning of the section, over the sewers of the urban authority. There are sewers vested in the urban authority lying under the strips of ground upon which the two walls were built.

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The question is, in my judgment, whether, upon a proper construction of the section, the walls were buildings within the meaning of it. They may be. I do not think that anybody has doubted that they may be. On the other hand, it is equally clear that they need not necessarily be. The question is whether they are within the mischief aimed at by the section which, in my judgment, is this: a building to be within the section must be one which, by reason of its weight or otherwise, may cause an injury to the sewer over which it has been built, or one which, by reason of its size or otherwise, prevents access being gained to the sewer. The defendants have called no evidence to show that these walls either affected or are likely to affect the sewers which lie beneath them, or that they render access to the sewers difficult, and, although there is no evidence of it, I cannot bring myself to think that these walls in any degree affect or are likely to injure the two sewersthere may be more sewers which go under the wallsor prevent access to them.

I will further add this: s 26 confers a power upon the local authority which is to be exercised judicially. The power of removing a building which somebody else has erected, so it has been held, ought not to be exercised without giving the person who has erected the building an opportunity of being heard. Dealing with the Public Health Act 1876, s 158, which confers upon the local authority like powers, Wills J, with regard to the notice which ought to be given by a local authority before it exercises such powers as are conferred upon it by s 26, said, in giving judgment in the case of Hopkins v Smethwick Local Board of Health, at pp 714, 715:

The only material question is, whether the principle of Cooper v. Wandsworth District Board of Works applies to the Public Health Act, 1875, as well as to the Metropolis Management Act; if so, the principle there laid down has not been satisfied. In condemning a man to have his house pulled down, a judicial act is as much implied as in fining him £5; and as the local board is the only tribunal that can make such an order its act must be a judicial act, and the party to be affected should have a notice given him; and there is no notice, unless notice is given of time when, and place at which the party may appear and show cause.

In this case, in the notice which was sent by the defendant council to the plaintiffs on 20 September 1937, neither a time when, nor place where the plaintiffs could show cause, was fixed. I think that that is all that it is necessary for me to say, to reject the argument on behalf of the defendant council based on the Public Health Act 1875, s 26.

There remains what seems to me to be the more difficult question, based upon the restrictive covenants entered into by the plaintiffs with the defendant council in the conveyance of 19 September 1933. Before considering the terms of the covenants there are perhaps three matters which ought to be noticed with regard to the conveyance. The first is that it grants an express right of way to the plaintiffs over the strip of land which lay between the land conveyed to them by the defendant council and the road leading from Oxford to Banbury. The second is that it contains no reservation whatever in favour of the defendant council of any right of way, from their land on the east side of the land

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which they conveyed to the plaintiffs, over that land to the Banbury Road. The last point is that the conveyance contains a provision for the purpose of preventing the plaintiffs from gaining any easement of light over the land retained by the defendants and bordering that which they sold to the plaintiffs.

The first ground taken by the defendant council was that, if one looks at the covenants as a whole, and also the plan annexed to the conveyance, and sees from that plan proposed roads leading from the Banbury Road over the land conveyed to the plaintiffs and connecting that land on the east side of that conveyed to the plaintiffs and retained by the defendant council, as a matter of implication it ought to be held that the roads so shown were through roads. The short answer to that, in my judgment, is that it is not necessary to imply any such right. If they had wanted it, the defendant council, in my judgment, should have stipulated for it and not have left it as a matter to be implied from the general terms of the document and the plan annexed to it.

The second ground was that the plaintiffs had expressly covenanted not to build across the roads in question. That depends upon the true meaning and interpretation of, I think, three covenants, or possibly four; and there is one which may assist the argument of the defendant council. The four covenants which may be relevant are the fifth, the seventh, the eighth and the ninth. In my judgment the fifth covenant is really nothing to do with the matter. In my view, its object was to limit the number of houses and buildings to be erected on an acre of land, and nothing else. The seventh covenant in terms enables the plaintiffs to erect a fence or other enclosure between the building lines shown on the plan and the road, or on the sites of the proposed roads marked on the plan.

The first question, I think, is whether a wall made of brick can properly be said to be “a fence” within the meaning of that covenant. I see no reason why I should not hold a wall to be a fence. If one looks at the definition of a fence which is to be found in the Oxford Dictionary, a wall is one of the things which the authors of that dictionary include amongst the meanings of the word “fence.” Then the second question is whether, although it is a fence, it is a building which by covenant No 9 the plaintiffs have bound themselves not to erect. The ninth covenant is:

No building shall be erected on the said piece of land or on any plot forming part thereof other than a private dwelling-house with suitable offices and outbuildings and with or without garage accommodation and the said sixteen garages.

If the wall be “a fence” within the meaning of covenant No 7, in my judgment it cannot be a “building” within the meaning of covenant No 9.

The conclusion that I have come to upon what I regard as the real point of the case is that the defendant council have failed to establish that the restrictive covenants into which the plaintiffs entered with

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them in the deed of 19 September 1933, have been or will be infringed by the erection by the plaintiffs across the eastern end of the two roads in question of the walls which were standing there on 7 June 1938. Therefore, in my judgment, all the grounds of defence taken on behalf of the defendant council fail.

Judgment for plaintiffs against first defendants with costs. Liberty to apply. Action dismissed without costs against second defendant.

Solicitors: Hancock & Scott (for the plaintiffs); Sharpe Pritchard & Co, agents for Arthur Holt, Town Clerk, Oxford (for the defendants).

Maurice Share Esq   Barrister.

Re Wolson, Wolson v Jackson and Others

[1939] 3 All ER 852


Categories:        SUCCESSION; Gifts        

Court:        CHANCERY DIVISION        

Lord(s):        CROSSMAN J        

Hearing Date(s):        21, 22, 23 JUNE 1939        


Wills Lapse Gift contingent on attaining age of twenty-five Death of legatee in lifetime of testator under twenty-five Legatee would have attained twenty-five had she died immediately after the testator Wills Act 1837 (c 26), s 33.

The testator, by a will declared (inter alia) that one-quarter of his residuary estate should be divided between his three children as and when they respectively attained the age of twenty-five years. A daughter died in the lifetime of the testator aged twenty-four. The testator died over a year later, by which time the deceased daughter would have attained the age of twenty-five. The daughter had issue one child. It was contended that the gift was not one determinable on the death of the daughter, and that by virtue of the Wills Act 1837, s 33, the daughter must be deemed to have died immediately after the testator, and that, as she would then have attained twenty-five years, the gift to her did not fail:

Held (i) this was a gift bequeathed for an interest determinable on the death of the daughter.

(ii) the only purpose of the section was to provide against the effect of the death of a child in the lifetime of the testator, and not against the effect of death without attaining an age the attainment of which is a condition of the bequest.

(iii) the gift therefore failed and there was an intestacy with regard to the share in question.

Notes

The statutory exception from lapse in the Wills Act 1837, s 33, only applies to gifts for any estate or interest not determinable at or before the death of the beneficiary. The gift here was contingent on the attainment of a certain age, and the beneficiary had died under the age. The section, however, says that the gift shall take effect as if the beneficiary had died immediately after the testator, and, at that time, in the circumstances of this case, the beneficiary would have attained the stated age. It is, however, held that these circumstances are not enough, upon the proper construction of the section, to save the gift.

As to Statutory Exceptions from Lapse, see Halsbury (1st Edn), Vol 28, Wills, pp 610612, paras 11951198; and for Cases, see Digest, Vol 44, pp 502507, Nos 32183256.

Originating Summons

Originating summons to determine (inter alia) whether, upon a true construction of the will of Solomon Wolson dated 21 September 1928, and in the events which have happened, Ethel Preisss one-third interest in

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reversion of the remaining one-quarter of the residuary estate of the testator had taken effect in manner provided by the Wills Act 1837, s 33, or whether there was an intestacy in respect of such interest, or how such interest devolved.

G C Dunbar for the plaintiff.

J Neville Gray KC for the defendant Lena Mary Jackson.

Hon Denys Buckley for the defendant Dina Scorman.

A L Ungoed-Thomas for the defendants George O Preiss and Chloe Tamara Preiss.

E Ronald Haylor for the defendant Joseph Gregory Wolson.

Quentin B Hurst for the defendant Hilda Martine.

23 June 1939. The following judgment was delivered.

CROSSMAN J. By his will, as I have construed it, dated 21 September 1928, the testator, Solomon Wolson, declared that on the death or remarriage of his wife, one-quarter of his residuary estate should be divided between his three children as and when they respectively attained the age of twenty-five years. The testator died on 1 April 1933. His daughter Ethel married the defendant G O Preiss on 10 November 1930, and had issue one child, C T Preiss, born in September 1931. Ethel Preiss died on 1 November 1931, aged 24. I have already made a declaration which involves the conclusion that the bequest to Ethel Preiss was contingent on her attaining twenty-five years. Counsel on behalf of G O Preiss and C T Preiss has argued that the Wills Act 1837, s 33, applies to a contingent interest and that, although Ethel Preiss died under the age of twenty-five, the bequest to her of the share in question has taken effect in the manner provided by that section. The section provides as follows:

And be it further enacted, that where any person being a child or other issue of the testator to whom any real or personal estate shall be devised or bequeathed for any estate or interest not determinable at or before the death of such person shall die in the lifetime of the testator leaving issue, and any such issue of such person shall be living at the time of the death of the testator, such devise or bequest shall not lapse, but shall take effect as if the death of such person had happened immediately after the death of the testator, unless a contrary intention shall appear by the will.

It was argued that the share was bequeathed to Ethel Preiss for an interest not determinable at or before her death. It was argued that it was necessary, under the section, to assume that her death had happened immediately after the testators death, and, if she had died then, she would have attained twenty-five, and the bequest must therefore take effect in the manner provided by the section. Counsel for the parties interested in opposing this conclusion contended that s 33 does not apply to save a contingent interest which had already failed. In my judgment that contention is right. This is entirely a question of the construction of the section. In the first place I think the bequest to Ethel Preiss which was contingent on her attaining 25, was a bequest to her for an interest determinable at her death within the meaning of the section. Consequently, in my view, the section does not apply to the interest at all. In the second place I think the use in the section

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of the words “shall not lapse” shows that the purpose of the section was to provide against the effect of the death of a child in the lifetime of the testator, and not against the effect of death without attaining the age, the attainment of which was a condition of the bequest. There is, therefore, an intestacy in regard to the share in question.

Declaration accordingly.

Solicitors: Crump Sprott & Co (for the plaintiff); W A G Davidson & Co (for the defendants Lena Mary Jackson, Dina Scorman, George O Preiss and Chloe Tamara Preiss); Wm Easton & Sons (for the defendant Joseph Gregory Wolson); Greenwood & Knocker (for the defendant Hilda Martine).

Charles Shelley Esq   Barrister.

Lathall v A Joyce & Son and Others

[1939] 3 All ER 854


Categories:        ANIMALS: TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        OLIVER J        

Hearing Date(s):        21 JULY 1939        


Animals Liability of owner Negligence ordinary consequences of negligence Scienter Bullock being unloaded from lorry escaping on to highway Deliberate attack on human being.

A bullock, having been transported in the lorry of the first defendants, was being delivered at the premises of H, a butcher. The intention was to drive the bullock out of the lorry into a dark passageway leading to a yard at the back of the premises. The lorry could not be brought right up to the entrance of the passageway, and to prevent the bullock from escaping into the street there were two wing gates on the lorry. These, however, did not nearly reach the mouth of the passage, and in the gap on one side H placed himself and in the gap on the other side an employee of H was placed in order to prevent the escape of the bullock into the street. The animal, however, broke past the employee and dashed down the street and ran straight at the plaintiff, knocking him off the bicycle which he was riding and injuring him. There was no proof of scienter:

Held the facts did not establish such negligence on the part of the defendants as would render them liable in damages, apart from proof of scienter.

Notes

The owner of a domestic animal is only liable for injury caused by reason of his negligence where the injury is one which may be reasonably expected to result from that negligence. A deliberate attack upon a human being is not to be reasonably expected in the case of a domestic animal, unless it can be shown that the animal had previously exhibited such a tendencythat is, unless there is proof of scienter.

As to Negligence in Relation to Domestic Animals, see Halsbury (Hailsham Edn), Vol 1, p 542, para 932; and for Cases, see Digest, Vol 2, pp 229233, Nos 201220.

Cases referred to

Haynes v Harwood [1935] 1 KB 146; Digest Supp, 104 LJKB 63, 152 LT 121.

Deen v Davies [1935] 2 KB 282; Digest Supp, 104 LJKB 540, 153 LT 90.

Turner v Coates [1917] 1 KB 670; 2 Digest 235, 230, 86 LJKB 321, 115 LT 766.

Page 855 of [1939] 3 All ER 854

Manton v Brocklebank [1923] 2 KB 212; Digest Supp, 92 LJKB 624, 129 LT 135.

Action

Action for damages for injuries sustained through being knocked down and injured by a bullock, which had escaped owing to the alleged negligence of the defendants. The facts are fully set out in the judgment.

R C Vaughan for the plaintiff.

S H Granville-Smith for the defendants A Joyce & Son.

M D Van Oss for the executors of T G Harris deceased.

21 July 1939. The following judgment was delivered.

OLIVER J. In this case the plaintiff sued A Joyce & Son, a firm of transport contractors, and also the executors of one T G Harris deceased. He claimed damages on the ground that on 4 April 1938, while riding his bicycle along St Johns St, Newport Pagnell, he was knocked down and injured by a bullock which had escaped owing to the alleged negligence of the defendants or their agents. I am using the word “defendants” to cover the representatives of T G Harris who would have been a defendant had he lived. Damages, if liability was established, were agreed at £325. The first-named defendants were on the date in question engaged in delivering a bullock (which they had collected and transported in their lorry) at the premises of the late T G Harris, who had a butchers business in High Street, Newport Pagnell. The lorry arrived outside these premises at about 8 am. The premises are in the middle of a busy street, though at that time in the morning there were not very many people about. The lorry was driven by one Joyce, a servant of the first-named defendants. There was no evidence to suggest that the animal in question was other than an ordinary quiet beast, and it had given no trouble on being loaded into the lorry. On arrival at the deceaseds premises, L T Harris, the deceaseds son and agent, and a servant of the deceased, named Clark, were in attendance for the purpose of taking delivery of the animal on behalf of the deceased. The process of delivering involved the lowering of a landing board from the back of the lorry, and the driving of the bullock into a long, narrow and dark passageway leading to a yard at the back of the premises. For the guidance of the animal into the passage, 9-in guide boards and two wing gates were provided on the lorry. There was evidence that the owner of the lorry had been to the place on previous occasions and knew it well. The wing gates did not nearly reach to the mouth of the passage, but left a space on either side of the entrance through which the bullock, if so minded, could escape into the street. For the purpose of preventing such escape, on the morning in question Clark stood on one side of the opening and L T Harris on the other side. I find accordingly that the business of unloading the animal was the joint adventure of the first defendants and the deceased. Upon the van being backed into position opposite the entry, there was evidence that from sounds within the lorry the bullock was in a very restless condition. According to two witnesses it could be heard jumping about, and

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according to the evidence of a third it was in “a rummish condition” when it appeared. When the gate at the back of the lorry was opened, the creature rushed down the landing board, broke past Clark, and made good its escape. Upon the evidence, I am clear that there was negligence on the part of all the defendants. The entry itself was described by witnesses as a singular place, a difficult place into which to persuade a restive animal to enter. There was further evidence, which I accept, that a solitary beast in a lorry is more likely to be restive than when more than one are carried together, and that the instinct of such an animal is to make for the light and to avoid such a thing as a dark entrance. I further find that the beast was in fact restless, and I find that the short wing gates were quite inadequate for safety. They should have been supplemented (as they have been since) by auxiliary wings from the entry itself, making one continuous passageway. The standard of duty in such cases must be fixed having regard to all the circumstances of the case, and particularly to the fact that the operation was taking place in the middle of a populous place. The authority for that proposition is to be found in Haynes v Harwood, at p 146, and in Deen v Davies, at p 282.

I proceed next to consider the evidence of what happened after the bullock escaped, for the purpose of determining whether in the circumstances the plaintiff can succeed. As I have indicated, the evidence negatives scienter, and the defendants can only be responsible in law for the results which naturally flow from their breach of duty. A bullock is in the ordinary sense a tame animal, and not prone to attack mankind. There was in the present case a body of evidence from witnesses of great experience to the effect that they had never before known of a case of such an animal attacking human beings. On the other hand, it is obvious that a frightened bullock may blunder about and run into people and injure them without any mens rea, if such a phrase can aptly be applied to such a creature. As I understand the law, the defendants would be liable in the latter state of facts, but not liable in the former. As to what happened on the bullock leaving the lorry, the following facts were proved to my satisfaction. In the first instance, the beast charged past Clark, who was guarding the gap. This might, I think, be fairly set down to fright and to the desire to escape. After it had passed Clark, a witness named Brown, a bystander, tried to stop it. The bullock charged at Brown who sought safety in flight. I think even this might be treated as being part of the ordinary effort to escape. It next turned into the London Road, and some 200 yds distant met the plaintiff on his bicycle. Police Sergeant Hulls, who was cycling behind the plaintiff, going in the same direction, described what happened in these words:

The plaintiff was attacked by a bullock who ran across the road straight at him, and knocked him off his bicycle.

He then proceeded to describe how the animal stood over the plaintiff

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with its forefeet on a low brick wall. The police sergeant got off his bicycle and went to the plaintiffs assistance. The bullock thereupon

took its feet off the wall, put its head down and came for me.

The police sergeant, whose equipment and training did not qualify him as a toreador, beat a hasty but excusable retreat. The bullock was eventually rounded up and destroyed. I accept unhesitatingly the evidence of this officer, and, indeed, there was nothing to displace it, and conclude that the attack on the plaintiff was deliberate. In this connection it is interesting to observe that the expression used in para 2 of the statement of claim is:

A bullock charged the plaintiff.

I am forced to the conclusion that on this occasion this particular animal showed a viciousness which was quite out of keeping with the nature of its kind, and, as I have already said, the evidence negatives scienter. The case is quite different from Turner v Coates, where a young unbroken colt loose on the highway in the dark, being frightened by the light of the plaintiffs bicycle, ran across the road and knocked him down. If in that case the colt had deliberately attacked the plaintiff with its teeth, the defendant would not have been liable. On the view which I have formed of the facts, to hold the defendants liable would be, to quote the words of Atkin LJ in Manton v Brocklebank, at p 230:

[to] impose the same liability upon the owner of a tiger and of a cow. …

Although I have the utmost sympathy for the plaintiff, in the circumstances, I am forced to hold that he has not made out his case, and, therefore, there must be judgment for the defendants.

Judgment for the defendants with costs.

Solicitors: Dennis Faulkner & Alsop (for the plaintiff); Sharman & Trethewy (for the defendants A Joyce & Son); Ernest Marchant (for the executors of T G Harris decd.).

Charles Newton Esq   Barrister.

London & Provincial Leather Processes Ltd v Hudson

[1939] 3 All ER 857


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        GODDARD LJ SITTING AS ADDITIONAL JUDGE        

Hearing Date(s):        25 JULY 1939        


Insurance Property insurance All-risk policy Goods sent to Germany for treatment Insolvency of German firm Goods irrecoverable from administrator of insolvent firm Accident or fortuitous casualty.

Following their usual course of business, the plaintiffs sent a large quantity of undressed skins to P & Co, in Berlin, to be processed, and insured them under a Lloyds all-risk policy during carriage, and while in Germany, against “all and every risk whatsoever.” P & Co became insolvent, and their affairs were taken over by an administrator according to German law. Part of the consignment was in the hands

Page 858 of [1939] 3 All ER 857

of M & D, another German firm which was under a subcontract with P & Co. M & D set up a claim of general lien on the plaintiffs goods in respect of debts due to them from P & Co, to which they were not entitled by German law, and with regard to the rest of the skins no effective satisfaction could be got from the administrator by either the plaintiffs or the insurers solicitors. The plaintiffs made a claim under the policy for the value of the goods detained:

Held the plaintiffs were entitled to recover the loss as it was of an accidental or fortuitous character.

Notes

Property may be insured against loss or damage generally and then the precise nature of the casualty causing the loss is immaterial. To constitute a loss, the property need not have been actually destroyed: there may be a loss though the property still exists if the assured has been deprived of it as the result of some casualty. The decision in this case is as to the precise meaning of the term “casualty” in such cases.

As to Insurance of Property against General Loss or Damage, see Halsbury (Hailsham Edn), Vol 18, pp 516, 517, paras 811, 812; and for Cases, see Digest, Vol 29, pp 420, 421, Nos 32803282.

Case referred to

British & Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41; 29 Digest 95, 527, 90 LJKB 801, 125 LT 491.

Action

Action on a Lloyds all-risk policy on goods sent to Germany for treatment. The material words of the policy were as follow:

At and from any port or ports, place or places in Germany and while there for not exceeding 3 months for processing and thence to any port or ports, place or places in the United Kingdom. This insurance is against all and every risk whatsoever however arising. Including War risks and Strike risks. Subject to the Institute cargo clauses (Nos. 8 and 9 deleted) as far as applicable including confiscation, or prohibition of re-export other than loss arising out of War or process.

Evidence of German law was called to show that even if a successful action had been brought in that country for damages, the goods having been sold by the administrator, any damages awarded would have been paid only in “blocked” marks. The effect was claimed, was that the goods, or their value, were lost. The facts and arguments are fully stated in the judgment.

R F Levy KC and Harold Simmons for the plaintiffs.

A T Miller KC and C N Shawcross for the defendant.

25 July 1939. The following judgment was delivered.

GODDARD LJ. This is a claim against Lloyds underwriters under an all-risk policy. The policy is dated 25 March 1938. It was taken out by the plaintiffs, the London & Provincial Leather Processes Ltd, a firm of leather merchants and manufacturers in England, who are in the habit of importing skins from North Africa and of having them sent direct for dressing to Germany. When the process of dressing the skins has been completed, the goods are sent by the people in Germany who treat the skins to people in the United Kingdom. The policy is on goods “at and from any port or ports, place or places in Germany and whilst there for not exceeding three months (or held covered at a premium to be arranged) for processing and thence to any port or ports, place or places in the United Kingdom.” It is the widest possible policy,

Page 859 of [1939] 3 All ER 857

so far as risks are concerned, because it is upon skins valued at £4,000 against all and every risk whatsoever, however arising.

What happened was this. The firm which the plaintiffs employed to dress these lamb skins was Alfred Popper Lederfabrik of Berlin. It seems that they sub-contracted part of the work which they had to do for the plaintiffs to another firm called Moebis & Dieter. It so happened that in April the managing director of the plaintiffs, Mr Larholt, was in Germany, and he saw all the skins which form the subject of this action, some of them actually in the hands of Popper, and some of them actually in the hands of Moebis & Dieter. He had no objection to Moebis & Dieter being employed as sub-contractors, but there is no pretence for saying, and it has not been contended, that there was any contractual relationship between Moebis & Dieter and the plaintiffs. The contractual relationship with regard to these skins was between the plaintiffs and Popper, and if the latter chose to have some of the work done by sub-contractors that, of course, would not establish any relationship between the sub-contractors and the plaintiffs. Unfortunately, though the plaintiffs did not know it, the firm of Popper was in difficulties, and on 6 May 1938, information reached the plaintiffs from Popper that Moebis & Dieter were claiming a lien on these skins belonging to the plaintiffs, because they did not obtain payment from Popper. The next thing that happened was that the plaintiffs wrote to Moebis & Dieter protesting against their withholding their goods, and on 10 May, Moebis & Dieter wrote to the plaintiffs as follows:

We have received your letter of the 6th inst. and would inform you in the first place that we have no knowledge of any goods of the firm of Alfred Popper stored here belonging to you. We will freely release the goods immediately the invoices are met and our charges paid. It may well be that your relationship with Alfred Popper is such that you can pay us direct. We presume that you will communicate with the firm Alfred Popper, and we will then release your goods.

So far as those goods are concerned, which were of the value of £615 15s 1d, Moebis & Dieter later enlarged their claim. Not only did they claim that they had a lien on these particular goods for the work which was done on them, but they also claimed something in the nature of a general lien against Popper, because they said that they proposed to hold all the goods which Popper had sent to them. Apparently he had sent them goods of his own as well as those of the plaintiffs, and they were claiming to hold the whole of the goods until they were paid their account. Both by German law and English law that would be an inadmissible claim. Of course, it is German law which governs this matter, and I am satisfied from the evidence of Dr Cohn that German law and English law on this point are identicalthat is, that a subcontractor who is owed money by the principal contractor has no right to hold the goods of a third person which have been entrusted to the contractor, because the contractor may owe the sub-contractor money. There is no pretence for saying that there was any contractual relationship, or any implied authority in Popper to entrust the goods to Moebis

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& Dieter. It is one thing to give authority; it is another thing not to take objection when you find he is a sub-contractor. Moebis & Dieter had no right whatever to assert a lien on these goods against the plaintiffs.

Popper became bankrupt, and the administrator, who is substantially the equivalent of the trustee in bankruptcy in English law, took possession of the goods which he found at Poppers place of business, including skins belonging to the plaintiffs to the amount of £942 15s 2d. Though it is no part of my duty to criticise the performances of an officer of a foreign court, it does not seem to me that he behaved in a way which is calculated to be very satisfactory to a person who had entrusted goods to Popper, because what happened was this. He sent a notice to the plaintiffs announcing the bankruptcy, and his appointment as administrator, and claiming payment of some moneys which he alleged the plaintiffs owed to Popper. We have not been into it, and I do not think it is very material, but it does not seem to me to be denied that there was some money due from the plaintiffs to Popper. Popper had all the plaintiffs goods. The plaintiffs at once wrote back and told the administrator what the state of affairs was. They wrote him on 13 June and set it out fully. They set out exactly the goods which were theirs, they specified them and gave reference members, and so forth. They did in fact trade under other names as well as the London & Provincial Leather Processes Ltd, for well understood purposes. They also called themselves the Yeovil Leather Co and the Hermes Leather Co. There were some goods there in the names of those two companies. They set out all those and, having sent that to the administrator in Berlin, the administrator did nothing and he did not answer their letters. In spite of everything they could do, they got no satisfaction from him until a very late stage in this case, on 19 November, when the administrator wrote to the solicitors whom the plaintiffs had instructed saying:

I beg to inform you that I am not in a position to release the lamb skins sent by them to Messrs. Alfred Popper Lederfabrik Berlin as per the following working instructions.

He then sets out the working instructions which shows that he knew exactly what goods they were, and also that they were for working on. He also adds:

With reference to the raw skins contained in your working instructions … Messrs. Moebis & Dieter as before still refuse to release these goods and I am not in a position to lift this prohibition to return and export your goods.

Whether he was not in a position at that time to release and export the goods because they were already sold I do not know. There is no evidence before the court as to when the lamb skins were sold. That they have been sold by the administrator is proved by one of the affidavits, though the deponent does not say when, nor do I think it very much matters. I ought to say this, that at a very early stage of the case, as soon as the plaintiffs had information about the attitude that Moebis & Dieter were taking up, they communicated with the underwriters

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and gave them information about it. Then the underwriters instructed their solicitors. Their solicitors proceeded to make their investigations and get information from Germany. It is abundantly clear that the underwriters could get no satisfaction. They could not get the goods. It appears that they got a report sent over and they could not get them. On 18 June they got a letter from a Dr Pernutz, solicitor to Moebis & Dieter, which shows perfectly clearly that Moebis & Dieter were holding these goods and would not give them up. The underwriters made no attempt to take proceedings in Germany any more than the plaintiffs did, and now the underwriters say there has been no loss to the plaintiffs under the policy.

I am of opinion that there has been a loss under the policy. The policy insures against all and every risk whatsoever, however arising. Counsel for the underwriter has argued that, before a claim can attach on a policy of insurance, there must be a loss of an accidental or fortuitous character, there must be in some form or another a casualty. There is no doubt that that is a general statement of the law. The difficulty at times is to find out in these cases what interpretation one has to put upon the words so often used“accident or fortuitous casualty.” It is quite clear that the word has a wider meaning than something in the nature of an accidental fire of a destruction of the goods by the forces of nature, such as a flood or a hurricane; because it cannot be denied that theft of the goods would be a loss coming within the policy, and that theft is a conscious and wilful act of another person. There is nothing fortuitous and nothing accidental about that. It is accidental and fortuitous in the sense that the assured is deprived by some unexpected acts of his property in the goods or of his possession of the goods. The same is true with regard to embezzlement by an agent. I think one gets considerable assistance as to what the true interpretation of the words “accident or casualty,” or the meaning of what is a risk in an all risk policy, by referring to the opinion of Lord Sumner in British and Foreign Marine Insurance Co v Gaunt. The passages to which I am going to refer to are on pp 57, 58. The case is an exceedingly well-known one in insurance law, and one from which I think great assistance can be obtained. The question in that case was that some wool, having arrived in this country, and being covered by an all risk policy, had suffered damage on the way. Rowlatt J had held that the circumstances were consistent with natural forces acting on the wool, which would not have been a risk within the policy because there would be nothing there accidental or fortuitousno extraordinary force of nature but the ordinary force of nature acting on the goods, atmospheric conditions or weather, causing some deterioration. It was necessary for the shipper to negative that and to prove some definite cause within the policy. What was meant by a casualty I think is to be found in the opinion of Lord Sumner, at p 57:

There are, of course, limits to “all risks.” They are risks and risks insured

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against. Accordingly the expression does not cover inherent vice or mere wear and tear or British capture. It covers a risk, not a certainty; it is something, which happens to the subject-matter from without, not the natural behaviour of that subject-matter, being what it is, in the circumstances under which it is carried. Nor is it a loss which the assured brings about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself.

The underwriter is not insuring against the shipper destroying his own goods. I need not read the next passage, but I go on to the next page, p 58, where he says:

When he [the assured who is seeking to recover] avers loss by some risk coming within “all risks,” as used in this policy, he need only give evidence reasonably showing that the loss was due to a casualty, not to a certainty or to inherent vice or to wear and tear.

I do not think that Lord Sumner, in using those words, was using them in an exhaustive sense in saying that anything which could be shown to be not a certainty or not to be inherent vice must necessarily be one of the things not coming within the policy. He had already mentioned British capture and also instances caused by the assureds own acts. I think it shows quite clearly the nature of the happening which the court must bear in mind or have regard to when it is construing what is a risk upon an all-risk policy. Here we have the fact that the plaintiffs have been deprived of their goods. They have suffered a loss in the sense that they cannot get their goods. With regard to the Moebis & Dieter goods, it seems clear that Moebis & Dieter converted these goods. They committed the wrong or tort which, in English law, we should call conversion, because, having a demand made upon them to deliver up the goods, they refused to do so, and have asserted a right to retain the goods which was bad in law, a right which they had no right to enforce against the goods. Therefore that was a conversion. For my part I am unable to see why, if goods which are insured against all risks are converted so that the true owner, the assured, is deprived of the possession of the goods, he is any the less entitled to recover under the policy than he would be if the goods were stolen. He is deprived of the possession in one case by theft; he is deprived under circumstances which would render the spoliator liable to the criminal law. It is a matter of the state of mind, whether there was a felonious mind. In the case of conversion he is equally deprived of his goods and equally wrongfully deprived, but wrongfully only in the sense that a civil tort is committed and not a criminal wrong. It seems to me, therefore, that with regard to the goods which came into Moebis & Dieters hands which amount to £615 15s 1d. there cannot be any doubt that the plaintiffs are entitled to recover. The most that can be said is: “Well, if you had gone out to Germany and contested this matter in the German courts you would have got your goods back.” I do not think that is the right way to look at the case at all. The underwriters having paid and subrogated could go and get the goods back if they could, or they could have got the goods back, if they could, when notice was given to them; but they could not get them back. I do not think it lies in the underwriters

Page 863 of [1939] 3 All ER 857

mouth to say, when a loss has happened: “The goods still remain intact and if you like to go out and take your risk of going to the German courts you may be able to get the goods back.” The plain fact of the matter is that, when Moebis & Dieter refused to hand over those goods, the plaintiffs lost the possession of those goods. Since they lost that possession by a wrongful claim set up by Moebis & Dieter, I think they are clearly entitled to recover. The other goods were still in the hands of the administrator, and the matter there is not quite so plain, but I think the same principles apply. The administrator made a claim on the plaintiffs for money. They supplied him with evidence that these goods were their goods. They sent him out their working instructions so that he could turn up the documents in the office and find out the facts. That he must have done so I think seems clear from the letter in November 1938, to which I referred, because he sets them all out and quotes the goods and the numbers. I have listened to Dr Cohns evidence, and I think that here the administrator has had evidence supplied to him, and having refused to deal with these goods in any way recognising the plaintiffs title in the goods, there was also a conversion of these goods. He seems to have acted in a manner which seems to English ideas unsatisfactory. He simply took no notice when the claim was made upon him; he retained the goods and at some time he sold them. The administrator sold them at some time, and the act of selling would relate back to the time when he seized the goods which were not the debtors goods and which ought not to have formed part of the debtors estate. I think the same considerations apply to the act of the administrator here. Undoubtedly the goods were lost to the plaintiffs by a happening not analogous to theft, but just as much unexpected, if that be a test to apply, as a theft. I think the circumstances show that the loss fairly falls within the expressions “a fortuitous occurrence,” “accidental loss” or “casualty” in the sense, as I have explained earlier in this judgment, in which they have been used in so many insurance cases. The result is that in my judgment the plaintiffs are entitled to judgment for the amount claimed with costs.

Judgment for the plaintiffs with costs.

Solicitors: Leader Plunkett & Leader (for the plaintiffs); William Charles Crocker (for the defendant).

C St J Nicholson Esq   Barrister.


Walsall Wood Colliery Co Ltds Application

[1939] 3 All ER 864


Categories:        ADMINISTRATION OF JUSTICE; Tribunals: ENVIRONMENTAL        

Court:        RAILWAY AND CANAL COMMISSION        

Lord(s):        WROTTESLEY J, SIR FRANCIS TAYLOR KC AND SIR FRANCIS DUNNELL        

Hearing Date(s):        20 JULY 1939        


Mines and Mining Jurisdiction of tribunal Coal mines Restrictions on working Rights of pre-emption Coal under and extending for 100 yards back from turnpike road Inclosure Act 1845 (c 118) Mines (Working Facilities and Support) Act 1923 (c 20), ss 1, 4 Mining Industry Act 1926 (c 28), s 13.

The applicants desired to mine certain coal lying under land belonging to their lessor. The coal lay under or near a former turnpike road, which traversed a common, enclosed in 1876. The lessors predecessor was party to an agreement incorporated in an award made under the Inclosure Act 1845, by virtue of which (i) he was restrained from working coal under the turnpike road, and (ii) certain allotment owners were given a right of pre-emption in respect of coal extending for 100 yds back from the turnpike road. The coal in question amounted to about 570,000 tons, and the applicants were the only company that could work it. They therefore applied to the tribunal for the right to work the coal free from the restrictions and rights of pre-emption binding on their lessor:

Held (i) the case was clearly within the Mines (Working Facilities and Support) Act 1923, s 1, as there was a danger of the minerals being left unworked owing to the restriction upon the land.

(ii) the case was also within s 4(1)(c) of the 1923 Act, as the applicants lessor had not the necessary powers of disposition.

(iii) the case was also within the Mining Industry Act 1926, s 13(2), in view of the limitations imposed by the award made under the Inclosure Act 1845.

(iv) the case was also within s 4(1)(a), (b) of the 1923 Act, owing to the numerous interests having rights of pre-emption and the difficulty which existed of ascertaining who were the interested persons.

(v) the tribunal had therefore power to grant the rights sought, and being satisfied by the evidence that it would be in the national interest so to do, made the order required.

Notes

The argument in this case was that the inclosure award gave statutory effect to the agreement to leave the coal unworked, and that the Commission had no jurisdiction to remove those statutory restrictions. In support of this argument it was contended that the statute giving the Commission its jurisdiction would not be construed as repealing the earlier statute unless such repeal was expressly provided for. It is held, however, that the Commission has jurisdiction.

As to Jurisdiction of Railway and Canal Commission, see Halsbury (Hailsham Edn), Vol 22, pp 692694, paras 14731479; and for Cases see Digest, Vol 34, pp 635, 636, Nos 321327.

Cases referred to

Re Tilmanstone (Kent) Collieries Ltd [1928] 1 KB 599; Digest Supp, 97 LJKB 169, 138 LT 452, 19 Ry & Can Tr Cas 26.

Blackpool Corpn v Starr Estate Co [1922] 1 AC 27; 42 Digest 770, 1974, 91 LJKB 202, 126 LT 258.

Cato v Thompson (1882) 9 QBD 616; 40 Digest 138, 1090, 47 LT 491.

Application

Application for the right to work certain coal, ironstone, and iron ore freed from certain restrictions and rights of pre-emption. The facts of the case are fully set out in the judgments.

H V Rabagliati KC and P G Roberts for the applicants.

P Gordon Bamber for the objector, the Earl of Bradford.

Page 865 of [1939] 3 All ER 864

20 July 1939. The following judgments were delivered.

WROTTESLEY J. This is an application by the Walsall Wood Colliery Co Ltd, for the right to work coal, ironstone and iron ore, freed from certain restrictions and rights of pre-emption which are binding on the applicants and on their lessor, the Earl of Bradford. They ask us to confer these powers upon them under the Mines (Working Facilities and Support) Act 1923, s 1, or else to grant them such powers under the Mining Industry Act 1926, s 13.

The coal in question lies either under or near a former turnpike road which traverses a common which was inclosed in 1876, and was then part of the Manor of Walsall Wood. The applicants, had the right to work all the coal around the coal in question, having obtained that, for the most part, I think, by a lease from the Earl of Bradford, but he cannot grant the company the right to work the coal the subject of the application because, although he is the owner of it, he, or rather his predecessors, were party to an agreement, subsequently incorporated in a provisional order promoted and confirmed under the Inclosure Act 1845, and an Inclosure award made under that order. By virtue of those provisions the then Earl of Bradford derived various advantages with regard to his minerals, including a right to work, subject to the restrictions specified in those provisions, and those restrictions firstly, forbade him to work or let to be worked, the coal under the turnpike road and, secondly, provided that owners of allotments made under the award or already existing there, should have a right of pre-emption in respect of coal extending for 100 yds back from the turnpike road. It appears that the company, in 1881, gave the notices which had to precede the working of this coal, which I call the pre-emption coal. They must, in doing so, have acted, of course, on behalf of the Earl of Bradford, but since omnia praesumuntur rite esse acta, and since we are told that the coal in two seams was worked out under the highway, including the pre-emption coal, the allotment holders, apparently, were unwilling, at that date, to exercise their right of preemption. Now, nearly 60 years later, the company is anxious to work four seams of this coal. If they leave them unworked, about 570,000 tons of coal will be lost to the only company which can work it, and so to the country. The coal in the pillar left supporting the road is alone about 142,000 tons. The difficulties involved in the stoppage of the faces and in heading through the pillar, assuming that were possible, would increase the loss of coal by amounts which cannot be calculated at the present moment, but, at any rate, productive work in this part of the mine would be stopped entirely for six months while heading takes place, and partially, for another six months, while the necessary opening out takes place at the far end of the headings. In terms of wasted capital this is estimated to be a clear loss of about £10,000. Moreover, if the restrictions placed by the award upon working through the pillar are to be observed, then the headings will be of dimensions which we are told modern coal mining legislation, and regulations made under that legislation, make not only undesirable, but probably unlawful. At any rate,

Page 866 of [1939] 3 All ER 864

it will make it impossible to carry out certain operations which are to be carried out nowadays in the driving of such headings in order to ensure the safety of those engaged in winning and getting coal. Therefore, it is difficult to imagine a case which should fall more clearly within the mischief which s 1 of the Act of 1923, and, later, s 13 of the Act of 1926, was directed to remedy. It is not only that we have coal which is in danger of being left permanently unworked, but we have coal the working of which, whether economically and efficiently or at all, is impeded by restrictions contained in a mining lease and, apart from that lease, by restrictions binding upon the applicants by reason of the terms contained in the provisional order and the award. Moreover, the matters to which I have alluded, make it clear that it is in the national interest that the Commission should, if they have the power, grant the right to the applicants to work the coal.

As regards the pillar provided for the support of the highway, it is clear to-day, as it was not, apparently, in 1866 or 1876, that the leaving of a pillar of 60 ft is not so much a provision which is of no use, but one which is positively disastrous. I am satisfied that the special provisions which have been agreed with the highway authorities, which are submitted for our approval, are far more beneficial to the public than were the provisions of the provisional order and the award. I think that the commission has power to make the order under s 1 of the Act of 1923. There is a danger here of the minerals being left permanently unworked, by reason of the minerals being comprised in or lying under land which is subject to an exception or restriction, and so not capable of being worked without the concurrence of two or more persons. For this purpose, it appears to me that the highway authority, who succeeded the turnpike trustees, are persons whose concurrence would be necessary in order that the coal might be worked. In addition, I think the case falls quite clearly within the provisions of s 4(1)(c) of the same Act, it being a case where the persons from whom the right must be obtained have not the necessary powers of disposition, whether by reason of defect in title, or otherwise. For this purpose, I think it can be said that the Earl of Bradford has a defect in his title. The commission, sitting as a court, construing Acts of Parliament under which its acts, is not, as I understand it, to be astute to try to minimise the powers which are conferred upon it by the various Acts of Parliament which have clothed it with its powers. This is a beneficial Act of Parliament and to be construed, of course, like other Acts of Parliament, as a whole. In addition, I think the case falls within s 13(2) of the act of 1926, especially having regard to the limitations imposed by the award on the size of the headings which would, without our order, have to be driven through the road pillar, unless, indeed, the coal south of the road were to be abandoned, at any rate, for the present, and possibly for ever. As regards the right of preemption, this again seems to fall precisely under s 1 of the act of 1923. It is coal under land subject to an exception or reservation and, on that

Page 867 of [1939] 3 All ER 864

account, is not capable of being worked without the concurrence of at least two persons. For this purpose, I think that the somewhat shadowy persons in whom there may reside to-day a right of pre-emption, are persons whose concurrence would be necessary. The case appears to me to fall also under s 4(1)(a), seeing that there are, as I say, on the plan submitted, 30 or 40 interests, all of which would have to be gone into in order that the rights of pre-emption might be either exercised or declined. It seems to me also to fall within the provisions of s 4(1)(b), there being, I gather, at least a difficulty in ascertaining to-day who the persons interested are. As regards the owner, the Earl of Bradford, it seems to me also to fall within the terms of s 4(1)(c), taking the view, as I do, that he is a person who has not the necessary power of disposition, either by reason of a defect in title or otherwise. I am applying the words “or otherwise” there to a defect which appears to me to be ejusdem generis. It also appears to me to be a case to which the more general words of s 13(2) of the Act of 1926 apply, for it appears to me that not only the lease but also the award are at present binding on the applicants. Here again, as in the case of the pillar necessary to support the road, as it was thought in former days, the order, if given effect to, will result not only in the winning of a vast amount of coal which otherwise will not be won at all, but it will also mean far less damage to the premises on the surface than would be occasioned if the coal, the subject of the application, were left unworked and if, therefore, the working stopped at the point at which it would otherwise be stopped.

It is for these reasons that I think, in the peculiar circumstances of this case, the compensation provisions to be applied should be not those commonly applied in this court in ordinary cases, but the same provisions as are provided in the award and provisional order.

SIR FRANCIS TAYLOR KC. I agree with Wrottesley J on the question of national interest, on the grounds which he has stated. If this order is not made, over half a million tons of coal will be sterilised; also the roads, as has been stated in evidence, are impracticable for haulage and ventilation, and the use of modern machinery will be impeded, and it is in the national interest that that coal shall be got and that modern machinery shall be used.

With regard to the rest of the case, on the point of law and the jurisdiction of this court, I should like to add this. The inclosure award of 1876 incorporated, and gave statutory effect to, an agreement which, speaking generally, gave the Earl of Bradfords predecessor in title the right to work all the minerals under the inclosed land except in the prohibited area. That deals with the minerals under the Lichfield Road, and it seems to me that that is a case which does come within the provisions of the Mining Facilities Act 1923, s 1(a), which gave power to this court to grant a right to work coal under copyhold land and under lands subject to an exception or reservation. In my opinion, this agreed statutory

Page 868 of [1939] 3 All ER 864

prohibition is an exception or reservation within the meaning of the language of that section and the subsection. That power, which the court was given with regard to that category of coal, was extended by the Mining Industry Act 1926, s 13, which empowered the court to give the right to any person to work any coal subject to the conditions imposed by the Act of 1923 and, of course, subject to the question of national interest. It is an extension and enlargement of the area of the coal specified in the Act of 1923 to “any coal.” When the two Acts are combined, the general effect, in my opinion, enables the rights now applied for to be granted, even though the exception as to a prohibited area is statutory, and, provided that we do not go outside the conditions of the Act, we are, in the somewhat figurative language of the lords justices in Re Tilmanstone (Kent) Collieries Ltd, exercising, in effect, Parliamentary powers delegated to the court by the legislature. Something was said by counsel for the Earl of Bradford about the case of the Blackpool Corpn v Starr Estate Co. That was a case in which there was a bargain between two corporations, on the basis of which Parliament passed an Act in 1917. Viscount Haldane lays down this principle, that where such is the basis of a preceding Act of Parliament, that is is say, where, in an earlier Act, Parliament directs its attention to an individual case and provides for it unambiguously, the presumption is that a subsequent general Act is not intended to rip up what the legislature provided for an individual. That is really a rule or canon of construction to guide courts of law in reconciling conflicting sections or provisions of Acts, but it appears to me to have no relevance to the orders of this court which are, as I have said, exercised extensively under enlarged powers to give a right to any person to work any coal.

With regard to the question of whether we are brought within the powers and conditions of the Act, in my opinion, s 4(1)(c) of the Act of 1923 has been complied with because, in my opinion, the statutory prohibition constitutes a defect in title. That seems to be the result of the decisions of courts of equity in such cases as Cato v Thompson, to which counsel for the applicants referred, and also the statement in Halsburys Laws of England (Hailsham Edn), Vol 29, p 269, para 344.

With reference to the minerals over which there is a right of preemption, I think that that right of pre-emption comes within the language of s 13(2) of the Act of 1926, where the working of any coal is impeded by restrictions, terms or conditions contained in the mining lease, or otherwise binding on the persons entitled to work the coal. It seems to me that, under those provisions of the two Acts, we are authorised to grant this application. As I have said, I am satisfied that it is in the national interest and I am also satisfied with regard to the terms of compensation.

I agree entirely with what Wrottesley J has said.

SIR FRANCIS DUNNELL. I am in entire agreement with the judgments delivered by Wrottesley J and Sir Francis Taylor. The evidence

Page 869 of [1939] 3 All ER 864

has satisfied me that it is in the national interest that this coal shall be worked. I am also satisfied (in fact, there is no dispute on the point) that the working is impeded at the present time. The only point that has been raised at all is the point which counsel for the Earl of Bradford has discussed, as to whether this court has jurisdiction to make the order. Sir Francis Taylor, in the concluding part of his judgment, has really said what I was going to say, with regard to s 13(2) of the Act of 1926, which states:

Where the working of any coal, or the working of any coal in the most efficient and economical manner, is impeded by any restrictions terms or conditions contained in a mining sense, or otherwise binding on the person entitled to work the coal, a right to work the coal freed wholly or partially from such restrictions or conditions, or to work the coal on other terms and conditions, may, on an application for the purpose being made and referred to the Railway and Canal Commission under the principal Act, be granted by the Commission in any case where the Commission consider that it is expedient in the national interest that the right applied for should be granted to the applicant.

This is a case in which, as I have already stated, it is in the national interest that that shall be done.

I am quite satisfied in my own mind, that this order should be made.

Solicitors: Ward Bowie & Co, agents for Nicklin & Cotterell, Walsall (for the applicants); Meaby & Co, agents for E G Potter, Walsall (for the objector).

W J Alderman Esq   Barrister.

Hughes and Falconer v Newton

[1939] 3 All ER 869


Categories:        BANKRUPTCY        

Court:        KINGS BENCH DIVISION        

Lord(s):        CHARLES J        

Hearing Date(s):        21, 24 JULY 1939        


Bankruptcy Deed of arrangement Composition with creditors Receipt stating terms of oral agreement Whether receipt should have been registered Deeds of Arrangement Act 1914 (c 47), s 1.

On 26 June 1937, the plaintiffs obtained judgment against the defendant for £7,448 with £7 7s 6d costs. At the time of the issue of the writ in the present action £1,863 16s 10d had been paid under an oral agreement made between the plaintiffs, four other creditors of the defendant, and the defendant, whereby the plaintiffs and the other creditors agreed to accept a composition of 5s in the £ on the amount of their respective debts in full satisfaction thereof. At the instance of a third party, who in fact provided the money paid under the composition agreement, the plaintiffs gave the defendant a receipt for the £1,863 16s 10d stating that the same was a payment of 5s in the £ on the amount of their claim and that they accepted it in full satisfaction and discharge of that claim in consideration of all the defendants other creditors accepting a similar composition upon the amounts respectively due to them. The plaintiffs now sued for the balance of their claim with interest and costs, alleging that the receipt was a document which under the Deeds of Arrangement Act 1914, s 1, should have been filed and that in default thereof the composition agreement was void:

Held (i) the receipt was not an instrument which ought to have been registered under the Act because, although it reproduced the terms of the oral agreement, it was not intended to be a legal record of that agreement and only came into being at the request of a third party.

(ii) the plaintiffs were entitled to interest on the judgment debt at 4 per cent, as this item was not covered by the composition agreement.

Page 870 of [1939] 3 All ER 869

Notes

The only question arising here is whether a receipt stating the terms of a composition agreement is a deed of arrangement within the Act and requires registration. This is held not to be so; but it is to be noted that a prior oral agreement is found to have been concluded.

As to What is a Deed of Arrangement, see Halsbury (Hailsham Edn), Vol 2, pp 432, 433, para 588; and for Cases, see Digest, Vol 5, pp 1072, 1073, Nos 87738782.

Action

Action for the recovery (i) of £5,591 10s 8d being the amount outstanding on a judgment debt of £7,448 with £7 7s 6d costs after the payment of a sum of £1,863 16s 10d (ii) of interest on the judgment debt at rate of 4 per cent per annum. The facts are fully stated in the judgment.

Eric Sachs KC and Hon Quintin M Hogg for the plaintiffs.

G D Roberts KC and Maurice Lyell for the defendant.

24 July 1939. The following judgment was delivered.

CHARLES J. The defendant says, and testimony has been called to substantiate it, that on 9 November four letters were written to the four principal creditors of Colonel Newton inviting them to come to a creditors meeting. A petition in bankruptcy had been lodged against Colonel Newton. Sir Louis Newton, his father, was very desirous that that petition should be withdrawn, but obviously it could not be withdrawn unless some composition acceptable to the creditors was put forward and accepted. Sir Louis Newton had indicated to the solicitor acting for Colonel Newton and not for Sir Louis Newton, that he would find enough money to pay 5s in the £. At one time he envisaged £4,000 as the limit of the amount payable, but finding that was not enoughthe amount of the debts at that moment were a little difficult to decide upon, inasmuch as the debts due to the banks, Barclays Bank and Lloyds Bank, were partly covered by securitieshe said ultimately, when the exact amount was ascertained, that he would advance to his son, Colonel Newton, for the creditors sufficient to pay 5s in the £. On 16 November 1937, in response to the letter of 9 November to which I have referred, there was a meeting of these creditors. For the plaintiffs there was Mr Nordon and his client, and there were present Mr Poore for Messrs Jay, representatives of Lloyds Bank and Barclays Bank, and the defendants solicitor. “There and then at that meeting,” the defendants solicitor said: “I made an offer to pay 5s in the £ on the judgment debt.” The money was coming from Sir Louis Newton, but he was no party to any agreement from first to last in these proceedings, and so I find. I heard from Mr Nordon that at that meeting they were all perfectly well aware that Colonel Newton had not got 6d, and it must have been a complete surprise that they were going to get a quarter of their judgment debt. Barclays Bank and Jays accepted straight away, and on 30 November the plaintiffs agreed to accept, and through Mr Nordon they asked that the money should be paid as soon as possible, and said that, if that was paid, or if they were satisfied that they would be paid, they would withdraw the petition. They acted upon that agreement and trusted to that

Page 871 of [1939] 3 All ER 869

agreement, and the petition was withdrawn. It was a term that all the four creditors should come in. There were some smaller creditors but they were to be satisfied by another member of the family. On 23 December, the last of the four came in; that was Lloyds Bank. Therefore, by that date they had all accepted, and only one thing then remained and that was to pay the money over. On 26 January the money was paid over; it was accepted in accordance with the agreement which I find was made orally on 30 November.

The point then was taken that the receipt which was signed was in fact a record of the agreement, and because of that the document had to be registered under the Deeds of Arrangement Act 1914, s 1. That section reads as follows:

A deed of arrangement to which this Act applies shall include any instrument of the classes hereinafter mentioned whether under seal or not … (b) made by, for or in respect of the affairs of a debtor who was insolvent at the date of the execution of the instrument for the benefit of any three or more of his creditors.

Counsel for the plaintiffs tells me that although there are a great many cases analogous to this to be found under the Bills of Sale Act, this particular point in relation to a transaction of this sort has not yet been the subject of a decision. The point is put in this way. It is said that the receipt was to be worded so as to show that there was a full discharge, and a letter written by the defendants solicitor is quoted which says that Sir Louis would not take any assignment of the debt but would only pay a composition, and the receipt was to be worded to show that the composition was paid in full discharge. I have found that there was an oral agreement, which could have been sued upon, and I have to find whether or not the receipt, upon which so much turns, is a receipt such as it was necessary to register under the Deeds of Arrangement Act. The receipt was in this form:

Received of Mr. Edgar Henry Newton the sum of one thousand eight hundred and sixty-three pounds sixteen shillings and tenpence being five shillings in the £ on the amount of our claim against him amounting to seven thousand four hundred and fifty-five pounds seven shillings and sixpence which we agree to accept in full satisfaction and discharge of that claim in consideration of all of his other creditors agreeing to accept a similar composition upon the amounts respectively due to them.

It is said that that receipt is a record of an oral agreement, and if it is a record of the oral agreement, then it ought to have been registered under the Deeds of Arrangement Act. It is pointed out, however, that, in the letter I have already read and in some of the other letters, it is not the defendant who for one moment requires the receipt to be given either in any particular form or at all. The agreement had been made orally. The money has been found, the money has been paid over, and the money has been accepted in accordance with the oral agreement to take 5s in the £ on the judgment debt. It was only because Sir Louis, who was not party to the action was putting up the money, advancing it to his son, that he said to his son: “I want a receipt in that form.” The son passed that on and said specifically: “That is what Sir Louis requires.

Page 872 of [1939] 3 All ER 869

Will you sign it? I am afraid if you do not sign it Sir Louis may make a fuss about paying the money.” They said: “Very well, then we will sign it” and they did sign it. It correctly and accurately reproduces at the request of Sir Louis, the terms of the oral agreement which was made as far back as 30 November, but it is not a legal record of that agreement. The creditors got these very substantial sums when they expected nothing. I am quite unable to find that this is a document which ought to have been registered. It is a totally unnecessary document. It was not intended to be a record of the oral agreement so far as the plaintiffs and the defendant were concerned. It was a document which came into being at the request of somebody who was not a party to the action, and if it had not been signed, satisfaction would have been complete, the money would have been paid, the oral agreement would have been implemented, and there would have been an end of the matter. I cannot see that in these circumstances it is open to the plaintiffs to reopen the whole of this matter or to treat the receipt as a record of a transaction which required a record. The parties accepted 5s in the £, they acted on that oral agreement, they have taken the 5s in the £, and they have implemented their part of the agreement and withdrawn the petition in bankruptcy. Therefore, I find that the plaintiffs fail on the first limb of their claim.

They also claim sums for interest. It is quite plain that although there was that oral agreement, which I have found to be a true and binding agreement, there were discussions afterwards as to costs and interest. Mr Nordon quite rightly tried to do the best for his clients, but the defendant could not get any more money from Sir Louis or anybody else to pay the interest and they had to look to him. The 5s in the £ was simply and solely on the judgment debt. There is by statute a right to interest at 4 per cent, and there must be judgment for the plaintiffs against the defendant Newton for £160 19d 1d.

Judgment for the plaintiffs for £160 19s 1d: defendant to have the costs of the action except those occasioned by the claim for £160 19s 1d.

Solicitors: Nordon & Co (for the plaintiffs); Nash Field & Co (for the defendant).

Charles Shelley Esq   Barrister.

Atkins v Atkins

[1939] 3 All ER 872


Categories:        FAMILY; Ancillary Finance and Property, Children        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HODSON J        

Hearing Date(s):        12 JULY 1939        


Divorce Ancillary relief Settlement of wifes property for benefit of children Children wards of court in custody and care of mother Jurisdiction.

On 15 November 1929, the husband made a settlement on his two daughters, producing about £90 per annum. In 1934, an order was made in the Chancery Division of the High Court that the children should reside with and be under the care of the mother and that the father should pay

Page 873 of [1939] 3 All ER 872

£3 per week towards their education and maintenance and their proper medical and dental expenses. On 2 May 1938, the husband obtained a decree of divorce on the ground of his wifes desertion, which decree had been made absolute. The income of the father was about £750 per annum subject to a deduction of £240 per annum payable in monthly instalments in respect of a judgment debt due to the wife of £1,800. The wife had an income of £364 per annum. The father asked that the mother be ordered to settle £100 per annum on the children:

Held the circumstances were not such as to require the court to make an order for the settlement of any part of the mothers property upon the children.

Notes

The Chancery Court would have no jurisdiction to order any part of the mothers income to be applied for the maintenance of the child, but it is agreed in this case that the Divorce Court has that power, but that the circumstances are not those in which that court will exercise the jurisdiction.

As to Settlement of Wifes Property, see Halsbury (Hailsham Edn), Vol 10, p 797, para 1265; and for Cases, see Digest, Vol 27, pp 514517, Nos 55415575.

Application

Application by the husband for a settlement of the property of the respondent wife for the benefit of the children. The facts are fully stated in the judgment.

Noel Middleton KC and J Roland Adams for the petitioner.

W A Fearnley-Whittingstall for the respondent.

12 July 1939. The following judgment was delivered.

HODSON J. This is an application made against a wife respondent for settlement of her property under the Judicature Act 1925, s 191(1), as amended by the Matrimonial Causes Act 1937, s 10(3). The parties were married in 1912, and there are two children, both girls, aged 14 and 11 respectively. The application is made by the husband, who has asked for a settlement not on himself, but only on the children. On 15 November 1929, a settlement was made by the husband on the children. This settlement produces an annual income of approximately £90.

On 10 November 1933, proceedings having been brought by the wife against the husband on the ground of his alleged cruelty, the petition was dismissed by Bateson J. Proceedings were instituted by the wife in the Chancery Division, and on 6 June 1934, Clauson J ordered that the children should reside with and be under the care of the wife until further order, and that the husband should pay to the wife £3 per week, to be applied towards the education and maintenance of the children, except during such periods as they might be under his care, and that he should pay their proper medical and dental expenses. This order is still subsisting. The husband states that the medical and dental expenses incurred during the three years ending 9 May 1939, when he swore his last affidavit, have averaged over £100 per year. The last order made against him in the Chancery Division in respect of medical expenses was dated 19 December 1938, when he was ordered to pay £43 12s 6d. I have seen the masters report, which shows that on that occasion he complained to the master that over a period of four years he had to pay about £150 in all for dentists and doctors. This appears to be incon-

Page 874 of [1939] 3 All ER 872

sistent with the figure put forward in his affidavit sworn in these proceedings. Meanwhile, on 2 May 1938, the husband obtained a decree of divorce from the wife on the ground of desertion, but no order was made on this petition affecting the care and control of the children, who are still with the wife under the order of the Chancery Court. This decree has been made absolute.

The position being as I have stated, it was somewhat startling that an application should be made by the husband against the wife that she should be ordered to make a settlement on the children, who are, and have been for some time past, under her care and control. It was, however, sought to justify the application on the following grounds. The income of the husband was said to be £750 per annum, derived from his occupation as a property dealer, but to be subject to a deduction of £20 per month by reason of an order made by Farwell J in December 1937, which directed him to satisfy a judgment obtained by the wife against him to a total amount, including costs, of over £1,800. It was not contended that this payment would increase the income of the wife, except in so far as it restored her capital. The payment of £3 per week to which I have already referred is also a deduction from the husbands income. The wife, on the other hand, has an income from trustees of £364 per annum gross, and is in receipt, for the purpose of the maintenance of the children, of £90 per annum from the settlement.

It was urged on behalf of the husband, in view of the provision he had already made, and of the fact that the wife had broken up the home, and that she had investments, whereas he had none, that the wife should make a settlement upon the children of £100 per annum, or less, for the period of their minority or until each of them should marry, at least, and it was further asked that the capital should be settled for the benefit of each of the children for their lives, with resulting trusts for their issue.

The husband by his counsel stated that the children now having arrived at boarding-school age, he intended to make application to the Chancery Division with a view to the children being sent to a boarding-school, and also for an abatement of the order by which he was directed to pay £3 per week. It was argued that under the Guardianship of Infants Act 1925, there is power to make an order against a father for maintenance, but no corresponding power to make an order against a mother; therefore, the children would be unlikely, having regard to the means of the husband, to be sent to a boarding-school by the chancery judge unless recourse be had to the wifes money. I am unable to accept this contention. It is quite true that the Chancery Court cannot, under the power conferred by the Guardianship of Infants Act, order a mother to make a payment.

It seems to me plain that the court will be in a position, if and when an application is made for any purpose in connection with the maintenance and education of these children, to take into account not only the settlement from which the £90 is derived, and the additional contribution

Page 875 of [1939] 3 All ER 872

which the husband is able to make, but also the means of the wife. It seems to me that this application is in the nature of a tactical move in order to strengthen the hands of the husband in his proposed application to the Chancery Court. Notwithstanding this, if I thought it was right in the interests of these children that I should direct the wife to settle some of her property, I should be ready to accede to the application, but I am not so satisfied. There is no evidence that the wife is making away with her capital, or is likely to do so, to the detriment of the children, who are under her care, and I see no reason to interfere with the registrars report, which I therefore confirm.

Solicitors: Kenneth Brown Baker Baker (for the petitioner); J & P J F Chapman-Walker (for the respondent).

J F Compton Miller Esq   Barrister.

Re Payne, Poplett & Another v Attorney-General

[1939] 3 All ER 875


Categories:        TAXATION; Estate Duty        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        14 JUNE, 3, 6, 7, 26 JULY 1939        


Estate Duty Gift inter vivos Gift by way of settlement Value of settled fund increased before death of deceased Customs and Inland Revenue Act 1881 (c 12), s 38 Customs and Inland Revenue Act 1889 (c 7), s 11 Finance Act 1894 (c 30), ss 2(1)(c), 5, 7 Finance (190910) Act 1910 (c 8), s 59 Administration of Justice (Miscellaneous Provisions) Act 1933 (c 36), s 3.

Estate Duty Aggregation Gift inter vivos Finance Act 1894 (c 30), s 2(1)(c).

In January 1936, the settlor, by a declaration of trust, settled £10,000 and an option to acquire shares in a company in which he was interested, upon trust to hold the same for the benefit of certain members of his family. The option was exercised by the trustees of the fund and certain investments were made by them in the exercise of the powers conferred upon them, with the result that, at the time of the settlors death, which occurred within three years from the date of the declaration of trust, the value of the fund had greatly appreciated. The question then arose whether the “property” assessable for the payment of estate duty was the sum of £10,000 and the option, ie, the property as it had existed at the time of the establishment of the fund, or whether it was the property as it existed at the time of the settlors death, ie, after the exercise of the option and the acquisition of, and the increase in value of, the investments. The second question was whether the corpus of the settled property was aggregable with the free estate of the settlor so as to form one estate for the purpose of determining the rate of duty:

Held (i) the property assessable for estate duty was the fund in the form in which it existed at the time of the testators death, and not as it had existed at the time of its inception, and consequently, estate duty was payable on the increased value of the fund at the time of the deceaseds death.

(ii) the corpus of the settled property was aggregable with the free estate of the settlor so as to form one estate for the purpose of determining the rate of duty.

Notes

The question here decided for the first time is one that has been the subject of discussion for some years. A gift inter vivos attracts estate duty if the donor dies within three years of the date of the gift, and the principal

Page 876 of [1939] 3 All ER 875

question arising upon that is whether the property, the subject-matter of the gift, is to be valued at the date of the gift or at the date of the death. The matter is, perhaps, carried a step further here since there had been a change in the investment of a settled fund, and the question may be asked in this rather different form: is duty payable on the property as it existed at the date of the settlementhere the gift was by way of a voluntary settlementor as it existed at the date of the death? The question is answered that the material date is the date of the death, and, further, that such property must be aggregated with the free estate.

As to Estate Duty on Gifts inter vivos, see Halsbury (Hailsham Edn), Vol 13, pp 269273, paras 272280; and for Cases, see Digest, Vol 21, pp 24, 25, Nos 133137.

Cases referred to

Strathcona, Lord, v Inland Revenue Comrs [1929] SC 800; Digest Supp.

Re Hodsons Settlement, Brooks v A-G [1939] Ch 343, [1939] 1 All ER 196; Digest Supp, 108 LJCh 200, 160 LT 193.

Originating Summons

Originating summons taken out by trustees of a voluntary settlement under the Administration of Justice (Miscellaneous Provisions) Act 1933, to determine whether estate duty was payable on the property as it existed at the time of the establishment of the settlement or as it existed at the time of the settlors death. The same question arose with regard to a second summons, the facts being, mutatis mutandis, identical. The second question was whether the subject-matter of the voluntary settlement was aggregable with the free estate of the settlor so as to form one estate for the purpose of determining the rate of duty. The facts and arguments are fully set out in the judgment.

Cyril King KC and Frederick Grant for the plaintiffs the trustees of the settlement.

J H Stamp for the defendant the Attorney-General.

26 July 1939. The following judgment was delivered.

SIMONDS J. In January 1936, Matt Payne was the sole registered proprietor of a number of patents and was the joint registered proprietor with his brother, William A Payne, of other patents. He was at the same time a director of the British Thermostat Co Ltd, in which he had a large interest. In the same month, an agreement was made between that company and Matt Payne and his brother for the purchase of all the patents for £13,883 in cash, with an option to acquire 8,000 £1 ordinary shares in the company at 35s per share. On 29 January 1936, Matt Payne, to whom I will refer as the settlor, executed a declaration of trust by which, after reciting the position in regard to the patents, and that, as part of a family arrangement for making some provision for his parents, his wife and issue and other members of his family, he was desirous of settling his interest in the patents and the proceeds of sale thereof, he declared that he and the trustees of that declaration, to be appointed as thereinafter provided, would hold the same upon trust to permit the same to remain as invested or to sell and convert the same into money and invest the proceeds in the names of the settlor and his brother as therein mentioned. He then directed that the trustees should stand possessed of the trust fund upon certain beneficial

Page 877 of [1939] 3 All ER 875

trusts therein set out. It is unnecessary to refer to them in detail. On the same day, in part fulfilment of the agreement already made, the settlor in consideration of £10,000 then paid to him by the British Thermostat Co Ltd, which I will call the company, assigned to the company the patents, or (as the case might be) his share and interest in the patents, referred to in the schedules to the assignment. It appears that the sum of £10,000 was in fact paid by the company to the settlor by a cheque drawn in his favour which he then paid into an account opened with the Westminster Bank in the names of himself and his brother as trustees. Also on 29 January 1936, by a further assignment, to which the settlor, his brother, W A Payne, and the company were parties, after recitals whereby it appeared that the settlor desired to give to his brother the benefit of the patents mentioned in the first schedule thereto and the interest of the settlor in the patents mentioned in the second schedule thereto, and that his brother had agreed to sell the same to the company for £3,883, the settlor in consideration of £3,883, paid by the company to his brother, assigned to the company the patents, or (as the case might be) the interest of the settlor in the patents, mentioned in the first and second schedules thereto. The sum of £3,883 was duly paid to W A Payne. In neither assignment was anything said about the option to take shares in the company, but I assume that this option was in fact part of the consideration for the transfer of patents or patent rights, and that it became exercisable by the trustees and W A Payne in the proportion which £10,000 bore to £3,883. On 30 January 1936, the trustees exercised the option so far as they had funds available, paying £10,000 to the company and becoming entitled to 5,714 and 10/35ths £1 shares, and on the same day W A Payne paid £3,883 to the company and acknowledged himself indebted to the company in the further sum of £117 by way of subscription for 2,285 and 25/35ths £1 shares and requested the company to issue 2,000 of such shares to him and the remaining 285 and 25/35ths shares to the settlor and him as trustees of the declaration of trust. This was duly done, so that the trustees had allotted to them 6,000 ordinary shares of £1 each of which 285 and 25/35ths shares were in effect settled by W A Payne, the remaining 5,714 and 10/35ths being the investment of the sum of £10,000 settled by the settlor.

On 6 February 1937, the settlor died and on 6 May 1937, W A Payne died. In each case less than three years elapsed between the date of settlement and death, so that claims arose for estate duty under the Finance Act 1894, s 2(1)(c), as varied by the Finance (190910) Act 1910. Certain further facts must be stated before the nature of these claims and the questions that arise on them are examined. The financial arrangements of the company are not very clearly stated in the evidence, but it appears that the capital prior to 18 January 1936, was £50,000, divided into 25,000 preference shares of £1 each and 25,000 ordinary shares of £1 each, and that on that day it was increased to £150,000

Page 878 of [1939] 3 All ER 875

by the creation of 100,000 further ordinary shares of £1 each. It further appears, though somewhat obscurely, that, at or about the same time that an option was given to the settlor and his brother to take up 8,000 shares at 35s each, the directors of the company were authorised to issue 10,000 ordinary shares at the price of 30s per share to existing shareholders and had placed at their disposal a further 1,385 similar shares to issue at the same price as they might consider in the best interests of the company. I mention this fact because some importance was attached to it by the plaintiffs, but there is no evidence that any shares were in fact issued for 30s. Further alterations were from time to time made in the capital structure of the company. In April 1936, bonus shares at the rate of one share for every share held were issued to the ordinary shareholders. In May 1936, the preference shares were converted into ordinary shares and each share was divided into four shares of 5s each, and at the same time 48,000 shares resulting from the subdivision of certain shares were called “founders shares” and given certain special rights, 16,000 of these shares being given to the trustees. At the same time the company was converted into a public company and adopted new articles of association. It was exceedingly prosperous, with the result that the ordinary shares of 5s each were quoted at a high figure on the Stock Exchange. Of this fact the trustees took some advantage, realising some of the ordinary shares before the settlors death, at which date the trust funds consisted of 15,000 ordinary 5s shares and 16,000 founders 5s shares of the company, £911 8s advanced on mortgage, 500 £1 shares in De Havilland Aircraft Co Ltd, 65 £5 shares in Legal & General Assurance Co Ltd, £100 of stock in the British Electric Traction Co Ltd, 500 shares of £1 each in the Assurance & Finance Trust Ltd, £3,500 2½ per cent Funding Loan and £740 5s 11d in cash. No distinction has been or can be made between the shares settled by W A Payne and those purchased by the trustees with the £10,000 settled by the settlor, and it has been assumed throughout that I may treat 20 twenty-first parts of the fund as originating with the settlement made by the settlor and the remaining twenty-first part as provided by W A Payne. It is on this basis that the Attorney-General claims that estate duty is exigible on the death of the settlor upon 20 twenty-first parts of the value as at the death of the settlor of the trust funds as they existed at that date. It is this claim which is in the first place challenged by the plaintiffs who are the present trustees of the declaration of trust.

The claim to estate duty arises under the Finance Act 1894, s 2(1), which provides that

Property passing on the death of the deceased shall be deemed to include the property following, that is to say … (c) Property which would be required on the death of the deceased to be included in an account under section 38 of the Customs & Inland Revenue Act, 1881, as amended by section 11 of the Customs & Inland Revenue Act, 1889, if those sections were herein enacted and extended to real property as well as personal property, and the words “voluntary” and “voluntarily” and reference to a “volunteer” were omitted therefrom …

Page 879 of [1939] 3 All ER 875

The Customs and Inland Revenue Act 1881, s 38, as so amended and re-enacted so far as is material for the present purpose reads as follows:

The personal property to be included in an account shall be property of the following descriptions, namely, (a) any property taken as a donatio mortis causa made by any person dying after Feb. 1, 1894, or taken under a disposition made by any person so dying purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made twelve months [now three years] before the death of the deceased.

I need not set out para (b). Para (c) provides as follows:

Any property passing under any past or future voluntary settlement made by any person dying on or after such day … whereby an interest in such property … is reserved … to the settlor.

The claim in this case arises under para (a); I set out para (c) only because counsel for the plaintiffs rely on the distinction between property taken under para (a) and property passing under para (c).

What then for the purpose of estate duty under the Finance Act 1894, s 2(1)(c), is this “property taken” under the declaration of trust of 26 January 1936, and how and as at what date is the value of such property to be ascertained? It is at least clear what the settlor settled. He had before executing the declaration of trust agreed to sell the patents and patent rights, the subject of that declaration; and upon the footing that the agreement was carried out, as in fact it was, he could and did settle nothing more than the sale price which the company had agreed to pay him, that is to say, the sum of £10,000 with an option to acquire ordinary shares of the company at 35s per share. That is clear, and this also is clear, that the only relevant date for the purpose of valuing property which passes on the death of the deceased is the date of his death: see Finance Act 1894, s 7(5), and see Strathcona, Lord, v Inland Revenue Comrs. The question of difficulty upon which the parties are at issue is what is the property of which the value has to be ascertained at the death of the deceased. The contention of the Attorney-General has already been stated: the property which passed on the death was the trust fund as it then existed. The plaintiffs on the other hand say that it is essential to see what was on 26 January 1936, taken under this disposition made on that date; it was the sum of £10,000 and an option, and it is that property so taken which must be valued at the death. Each side points to the hardships and anomalies which the other view involves. A gift of little value enormously appreciates by the date of death by reason of the skill and exertion of the donee. Is he to pay duty upon a value largely created by himself? A gift of great value becomes worthless by the date of death through no fault of the donee: is he to pay duty upon a value which would not in any case have existed at the death of the donor? The dull subject of duties has been agreeably illustrated by examples taken from the racecourse, such as the colt optimistically regarded as a Derby winner by donor

Page 880 of [1939] 3 All ER 875

and donee which proved to be the merest plater. This and other examples from animal life enliven the judgments given in the Court of Session in Strathconas case; but I think that that case does not afford any authority for determining the point which I have to decide. It does decide that the date of valuation is the date of death, but though I find much in the judgments to support any view as to the subject-matter of valuation, upon this point I cannot find any majority in favour of one view or another. I must form my own opinion without the assistance that I should have welcomed from the Court of Session.

The real problem is to reconcile the two elements: (a) property taken under a disposition made in (say) 1936, and (b) a valuation to be made in (say) 1939. Where, as under the Act of 1881, only an interval of three months between gift and death was in question, probably there was little difficulty; it is the enlargement of this interval to twelve months, and then to three years, that makes the problem so serious. It is surprising that the matter has not come up for judicial consideration, for since my early days at the Bar I have frequently heard it discussed; presumably a compromise between the Estate Duty Office and the subject has been reached whenever the question has been raised.

It is to be observed that the disposition may be by way of gift outright or by way of settlement. It is the latter class of case with which I have to deal, and I think it is the easier class of case. Where there is a settlement which persists to the date of death, it is not, I think, difficult to regard the trust property, in whatever state it may be at the death, as the same property as that which was taken under the disposition. The claim was thus formulated on behalf of the Attorney-General, namely, that the subject-matter of the gift is in each case the settled fund, that is, in this case the property originally made subject to the declaration of trust, subject to and with the benefit of the duties and powers vested in the trustees by the trust, including the power of investing money and varying investments, and that the settled fund as it actually existed at the death of the settlor is therefore the property deemed to be included in the property passing on death, and the valuation as at the date of death should relate to the investments and moneys representing the corpus of the trust fund at that date. In support of this contention, counsel for the Crown referred to other provisions of the Finance Acts in which a continuing identity is attached to the property from time to time subject to a settlement through all its changes of investment. In particular he relied on the Finance Act 1894, s 4(1), which dealt with the exemption of settled property which had borne duty from future estate duty where it passed to some person not competent to dispose of it. He pointed out that this exemption had always been interpreted as applying equally to cases where the settled property remained unchanged through the period of settlement, and to those in which it had been sold and the re-invested proceeds became subject to the settlement. It is indeed clear that if this interpretation is not

Page 881 of [1939] 3 All ER 875

right and the exemption is given only where the same property bears duty and then passes a second time, the obvious intention of the section would be largely defeated. Again, under the very section which I have to consider, it might well be, if the plaintiffs are right, that duty would be leviable both under para (a) upon the actual property which was the subject of the trust disposition, and under para (c) upon the settled property actually in existence at the death, for the Finance Act 1894, s 7(10), which provides that estate duty in respect of property passing on any death shall not be levied more than once on the same death can have no operation except in respect of the same property.

These are in my judgment cogent considerations in favour of the claim made by the Attorney-General. They reconcile, in a way which appears to be consistent with the general policy of the Act in dealing with settled property, the discordant elements to which I have referred. I am conscious that in isolating gifts by way of settlement from other forms of gift I am not solving all the difficulties which the section provides; nor should I be justified in thus isolating them if it was clear that, in the case of outright gifts, that which had to be valued at the death was the actual subject-matter of the gift regarded as in a hypothetical state of preservation in the condition in which it was given; for then it might well be said that the same principle must be applied to all kinds of disposition. However, in view of the difficultieswell nigh insoluble as I humbly thinkthat may arise in the case of outright gifts, it is permissible I think to adopt in regard to gifts by way of settlement a construction which is consistent with the policy of the Act, and does not appear to create any hardship to the subject or to cause any administrative inconvenience.

A further question has been raised, whether the corpus of the settled property in respect of which, as I hold, duty is payable under the Finance Act 1894, s 2(1)(c), is aggregable with other property of the settlor passing on his death so as to form one estate for the purpose of determining the rate of duty. It has been urged on behalf of the plaintiffs that it is saved from aggregation by the proviso to s 4 of the Act upon the ground that the settlor never had an interest in the actual property which was in existence at the date of his death. In a sense this proposition is true, but I cannot give effect to it consistently with the decision of the Court of Appeal in Re Hodsons Settlement, Brookes v A-G. In that case the question related to the aggregation of an accumulations fund which, as it was held, passed under s 1 of the Act, but every word of the judgment of the court on pp 369 to 371 ([1939] 1 All ER, pp 209211) is equally applicable to property the subject of a trust disposition which passes under s 2(1)(c). I must, therefore, hold that the settled fund is aggregable with the settlors free estate.

The same question is raised by another summons in regard to the estate duty payable upon the death of W A Payne upon the shares settled by him, that is to say, one twenty-first part of the property

Page 882 of [1939] 3 All ER 875

originally settled. The same answer must be given. The settled fund as at the death of the settlor Matt Payne must be regarded as divided in the ratio of 20 to 1. From the 20 parts settled by him the estate duty and any other payments chargeable against such parts must be deducted; the remaining part in the condition in which it was at the death of W A Payne must be valued at that date, and estate duty paid upon it at a rate determined by the aggregation of that one twenty-first part with his other estate.

Declarations accordingly. Plaintiffs to pay costs of the Attorney-General.

Solicitors: Wilkinson Howlett & Moorhouse (for the plaintiffs); Solicitor of Inland Revenue (for the defendant the Attorney-General).

T A Dillon Esq and F Honig Esq   Barristers.

Provender Millers (Winchester) Ltd v Southampton County Council

[1939] 3 All ER 882


Categories:        ADMINISTRATIVE: ENVIRONMENTAL        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        4, 5, 6, 7, 11, 12, 13, 14, 17, 18 JULY 1939        


Public Authorities Exercise of statutory powers Damage to riparian owner Possibility of alternative method Onus of proof.

Waters and Watercourses Riparian owners Interference with flow of water by works executed under statutory powers Reasonable steps to avoid interference Onus of proof.

The plaintiff company and their predecessors in business had for many years carried on the business of millers at a mill which was situated on a river and which derived its water power from that river. The defendant council was responsible for the upkeep of a bridge carrying the highway over a stream which ran parallel with the river, and for the protection of the bridge and acting under statutory powers, the defendant council rebuilt an existing culvert so as to give greater support to the road and to provide a means of outlet for flood water. It was stated in evidence that no skilled person would have expected that the work carried out would have affected the working of the plaintiffs mill, but the result of these works was to increase the flow of water in the stream and correspondingly and permanently to decrease the flow of water in the river so that the plaintiffs could not obtain a sufficient head of water to work their mill:

Held the onus was on the defendant council to show that there was no reasonably possible way of doing this other than the way which they in fact employed, and this onus they had failed to discharge.

Notes

Public authorities in the exercise of their statutory duties are bound to have regard to the rights of other parties unless the statute prescribes the method in which the duty is to be performed or expressly exempts them from the results of the interference with such rights. The point in the present case was that no one would have expected the works carried out by the defendant council to affect the plaintiffs mill, but the execution of the works having had that effect, the defendant council are liable to the plaintiffs.

As to Liability of Public Authorities, see Halsbury (Hailsham Edn), Vol 26, pp 261263, paras 574, 575; and for Cases, see Digest, Vol 38, pp 3850, Nos 225291.

Page 883 of [1939] 3 All ER 882

Cases referred to

Manchester Corpn v Farnworth [1930] AC 171; Digest Supp, 99 LJKB 83, 142 LT 145.

East Fremantle Corpn v Annois [1902] AC 213; 38 Digest 28, 158, 71 LJPC 39, 85 LT 732.

British Cast Plate Manufacturers (Governor & Co) v Meredith (1792) 4 Term Rep 794; 38 Digest 10, 43.

Boulton v Crowther (1824) 2 B & C 703; 38 Digest 28, 157, 2 LJOSKB 139.

Sutton v Clarke (1815) 6 Taunt 29; 38 Digest 22, 122.

Galloway v London Corpn (1864) 2 De GJ & Sm 213; 42 Digest 722, 1415, 10 LT 439, on appeal (1866) LR 1 HL 34.

Southwark & Vauxhall Water Co v Wandsworth District Board of Works (1898) 62 JP 519; 38 Digest 32, 178, revsd on other grounds [1898] 2 Ch 603.

Action

Action for an injunction restraining the defendants, their officers, workmen and agents, from doing any act which would in any way reduce the flow of water down the River Itchen to the plaintiffs mill; for a mandatory order forthwith to construct all necessary works and to take all necessary steps to restore the flow of water down the river to what it was before 1937, and for damages.

The plaintiffs were at all material times the owners in fee simple in possession and occupiers of Wharf Mill, Winchester, and their premises were situated by the main stream of the River Itchen, and comprised a mill which for over 100 years had been worked by water power derived from the River Itchen. This power had been adequate until the execution of the works by the defendant council of which the plaintiffs complained. These works were undertaken by reason of the fact that the disrepair of a culvert was a danger to the highway, and in times of flood there was an escape of flood water into the highroad. The defendant council, therefore, rebuilt the culvert and made slight alterations, including the easing of a bend, in that part of the stream immediately adjacent to the culvert. There was evidence that skilled professional men would not have expected these works, which were carried out in a stream running parallel with the River Itchen, would have affected the flow of water in that river. In fact, the flow in that river was appreciably diminished and was, after the completion of the works, insufficient for the purposes of the plaintiffs mill. It was proved that, during the time the old culvert was in use, there was not a free flow of water through it, and, in consequence, there was a holding up of the water at that point, which had the effect of increasing the flow in that part of the river passing the plaintiffs mill.

C E Harman KC and Wilfrid M Hunt for the plaintiffs.

J M Gover KC, Roger W Turnbull and G T Hesketh for the defendants.

18 July 1939. The following judgment was delivered.

FARWELL J. The plaintiffs have suffered from a diminution in the flow of the River Itchen as a result of works which have been done by

Page 884 of [1939] 3 All ER 882

the defendant council, and the problem which I have to solve is whether or not the plaintiffs have suffered any actionable wrong, and, if so, whether they can make the defendant council liable for that wrong. The rights of a riparian owner are not seriously in dispute. A riparian owner is entitled to have all the water coming down a natural watercourse so far as it has not been appropriated under some right by other riparian owners, whether above or below. There are certain purposes for which riparian owners are entitled to use the natural water in the river, and persons may acquire prescriptive rights to use the water, but, subject to any such rights as those, riparian owners are entitled to have the natural flow of a river down its natural watercourse, and the whole of it, without any interruption at all. Moreover, in my judgment, if that natural flow is interfered with by any person so as to affect the riparian owner, that riparian owner is entitled to have resort to the courts, and is entitled, if he can prove his case, to relief by way of an injunction, even though he may prove no damage. As was said in one of the cases, if he does not take any steps in the matter, and allows another to abstract water from the river, at the end of the necessary period that other person will have acquired a prescriptive right, and the first riparian owner will have no remedy at all. Therefore, the proof of actual damage is not a necessary ingredient in obtaining relief in such an action. Once the riparian owner can show that his rights have been prejudiced by something which another person has done, then he is entitled to relief by way of injunction. Of course, the extent to which he is affected must be appreciable. The mere abstraction of a very small quantity of water might not well be sufficient to entitle him to relief, on the principle of de minimis. However, if there is a sensible alteration in the natural flow of the water by reason of the acts of some third party, then the plaintiff is entitled to relief. If that be so, assuming that I am right in saying that the defendant council have, by the work they have done, affected the flow in the River Itchen to the prejudice of the plaintiff company, then the defendants are liable for the consequences of what they have done, unless they can satisfy the court that they are protected by some Act of Parliament which has justified them in doing that which they have done notwithstanding that there has been damage to third parties. If the defendants had been private people, there could be no question but that the plaintiffs, on the facts as I have found them, would be entitled to relief.

The defendant council have imposed upon them by Acts of Parliament duties of maintaining and keeping up the roads in this particular district, and in that connection they are bound to see that any supports of the road are kept sufficiently in a state of repair to prevent the road from subsiding or from otherwise becoming unsafe. The way in which they carry out that duty is wholly a matter for them, and is not to be found prescribed in any Act of Parliament. They must execute that duty in a proper way, and are bound to protect, so far as is possible, the rights

Page 885 of [1939] 3 All ER 882

of third parties. That is to say, their statutory obligations do not entitle them to invade other persons rights unless there is no way by which those statutory duties can be performed except a way which necessarily involves damage to other parties. There is a vast amount of authority on this matter. I think that the effect of all the authorities may be found stated by Viscount Dunedin in Manchester Corpn v Farnworth. I refer to that authority only for the purpose of citing from it a passage in the opinion of Viscount Dunedin, at p 183:

That brings me to say a word or two on what I conceive to be the well settled law on such matters. The cases are numerous; … I mention these [authorities] to show that I have carefully considered the question but I think it would be of no real service to analyse exactly what was decided in each actual case.

If I may, with the very greatest respect, I will adopt what Viscount Dunedin there says. The fact that I have not mentioned the cases in terms does not mean that I have not carefully considered them, but I do not think that any useful end would be served by my going through them. Then Viscount Dunedin continued, at p 183:

I believe their whole effect may be expressed in a very few sentences. When Parliament has authorised a certain thing to be made or done in a certain place, there can be no action for nuisance caused by the making or doing of that thing if the nuisance is the inevitable result of the making or doing so authorised. The onus of proving that the result is inevitable is on those who wish to escape liability for nuisance, but the criterion of inevitability is not what is theoretically possible but what is possible according to the state of scientific knowledge at the time having also in view a certain common sense appreciation, which cannot be rigidly defined, of practical feasibility in view of situation and of expense.

As I understand what is said there it is that, when Parliament imposes upon a body of persons duties which have to be carried out, it does not give them prima facie any right to invade other persons rights. It may be that there are cases where Parliament does authorise a particular thing to be done, and to be done in a way which will lead to invasion of other parties rights. In such cases as that, it is usual, though not universal, to provide for some compensation to the persons whose rights are so invaded. If, however, Parliament imposes duties on such people as the defendants in this case, but does not impose upon them the way or the time in which, or the method by which, those duties are to be performed, then in the performance of those duties the council have no right to invade other peoples rights, and such an invasion may render the council liable in damages, or liable to an injunction, unless they can show that the work which was done was reasonably necessary, that it was properly done in all respects, and that, if it results in damage, there was no way of doing the work which would not have so resulted. As Viscount Dunedin points out, a council in the position of the defendants here may have a defence if the only thing which can be shown is some fantastic method of doing some particular thing which is really quite unsuited to the object which is in view, although it may to some extent perform the duty which is required. The inevitableness of the damage must be considered in the light of scientific

Page 886 of [1939] 3 All ER 882

knowledge at the time, and what is practically feasible. Subject to those matters, however, as Viscount Dunedin points out, there is no right in a council in the position of the defendants to shelter themselves behind their statutory powers, and to damage other persons, unless they can show, not only that what they did was done in pursuance of the powers, and properly done in all respects, but also that they could not, in any reasonable use of the word, have achieved that end without doing the damage which has in fact been done. That passage, in my judgment, does sum up the effect of the earlier cases, and especially what Lord Blackburn said in more than one of the earlier cases. However, the difficulty, if there be a difficulty, which has been raised in my mind with regard to that passage in the speech is a judgment of Lord Macnaghten in East Fremantle Corpn v Annois. Any decision or any dictum of Lord Macnaghten is one which we all of us accept, and from which we should venture to differ with the utmost hesitation. Lord Macnaghten was not in the habit of making statements which were not carefully considered, and were not founded upon what he believed to be the legal position. Therefore, when I find in a judgment of his a statement of the law as he understood it which does not perhaps entirely accord with the statement made by Viscount Dunedin which I have just read, I naturally pause to consider how the two passages should be reconciled. Lord Macnaghten said in the East Fremantle case, at pp 217, 218:

The law has been settled for the last hundred years. If persons in the position of the appellants, acting in the execution of a public trust and for the public benefit, do an act which they are authorised by law to do, and do it in a proper manner though the act so done works a special injury to a particular individual, the individual injured cannot maintain an action. He is without remedy unless a remedy is provided by the statute. That was distinctly laid down by Lord Kenyon, C.J., and Buller, J. [in British Cast Plate Manufacturers (Governor & Co) v. Meredith], and their view was approved by Abbott, C.J., and the Court of Kings Bench [in Boulton v. Crowther]. At the same time Abbott, C.J., observed that if in doing the act authorised the trustees acted arbitrarily, carelessly, or oppressively, the law in his opinion had provided a remedy. Those words, “arbitrarily, carelessly, or oppressively,” were taken from the judgment of Gibbs, C.J., in Sutton v. Clarke, decided in 1815. As applied to the circumstances of a particular case, they probably create no difficulty. When they are used generally and at large, it is not perhaps very easy to form a conception of their precise scope and exact meaning. In simpler language Turner, L.J., observed in a somewhat similar case [Galloway v. London Corpn, at p. 229] that “such powers are at all times to be exercised bona fide and with judgment and discretion.” And in a recent case [Southwark & Vauxhall Water Co v. Wandsworth District Board of Works], where persons acting in the execution of a public trust were sued in respect of an injury likely to result from their act … Collins, L.J., observed [at p. 613] that “the only obligation on the defendants was to use reasonable care to do no unnecessary damage to the plaintiffs.” In a word, the only question is, Has the power been exceeded? Abuse is only one form of excess.

It is to be noticed that in that case Lord Macnaghten does not use any sort of expression about the onus of proving that there was no other way or anything of that sort which is to be found in the passage in the opinion of Viscount Dunedin which I have read. I think, however, that that opinion of Lord Macnaghten must be read, of course, as all judgments must be readnamely, in the light of the particular facts

Page 887 of [1939] 3 All ER 882

in that caseand I think that, when one looks at the facts there, it is quite obvious that the legislature had authorised the doing of the actual thing which was done, and that, that being so, unless the work was done improperly, or in some way which was not accepted and proper, the corporation could not be made liable for damage which the plaintiff in that case had suffered. He was not, I think, taking into consideration cases such as this, where the power given by statute to the defendant council is a general power of obligation to do certain things, without any sort of limitation to be found in the Act itself upon the method in which they are to do those things. In my judgment, it was not necessary for Lord Macnaghten to state the law with any greater precision than he did state it for the purpose of that case, and I do not think that he intended to be wholly exhaustive. So far as a more exhaustive statement of the law is concerned, I think that it is to be found in the passage in the opinion of Viscount Dunedin which I have just read. There are cases in which it has been said that a corporation or council of this sort cannot be liable for damage to other people if it can be shown that they have done the work properly and in a reasonable way, and not negligently. Wickens V-C many years ago now pointed out that the word “negligent” or “negligently” was not a very happy word to use in this connection, and so it seems to me, because negligence is not really what is meant in this sort of expression which one finds in many of the cases. For this purpose, negligence as used in those cases means adopting a method which does in fact result in damage to a third person, except in a case where there is no way of performing the statutory duty other than the way so adopted. It is in fact negligent to carry out work which results in damage unless it can be shown that that way, and that way only, was the way in which it could be performed. That, in my judgment, is the way in which the word “negligence” is used in many of these cases.

In the present case, if one takes that as the law, can it be said that the defendant council have done this work in a way which renders them liable to the plaintiffs for what they have done, or, rather, for the damage which they have caused them? That the work was necessary I have no doubt whatever. The evidence on behalf of the defendants has satisfied me that the highway over the bridge was in such a state that an early rebuilding of the culvert was necessary. Further, I am satisfied that it was necessary to provide a means whereby flood water could be carried off, and thus avoid the risk of flooding the highway. To that extent, I am completely satisfied. Moreover, I am completely satisfied that, from a purely engineering point of view, the work was done in a proper manner, and, apart from any injury which may have been done to other people, it was done in a proper way having regard to the small space in which the workmen had to work and the other circumstances of the case. However, I have still to be satisfied, if my view as to the law is correct, that there was no other way of doing it, and in that regard the

Page 888 of [1939] 3 All ER 882

onus is on the defendants. If the law be that the onus is on the defendants to show that there was no other way in which this work could be done, then, in my judgment, they have failed to discharge that onus. No attempt really has been made to proveand it may be that no attempt could be made to provethat there was no reasonably possible way of doing this, other than that which they adopted. I should point out that the way which they adopted was unnecessary to the extent that to prevent flooding, which was one of the things the defendants desired to achieve, it was unnecessary to widen or increase the space in the culvert itself, so long as they made some provision to carry off the extra water in times of flood. To that extent, the actual work which they did was unnecessary. However that may be, the position, in my judgment, is this. The plaintiffs have shown that their rights have been affected by the diminution of the flow of water which reaches their millthat is, by an appreciable diminution of the amount of waterand that, therefore, they are entitled to relief in this court. They are entitled to relief because their rights as riparian owners have been invaded. That state of affairs has been brought about, in my judgment, by the action of the defendant council. That act was done in pursuance of a statutory duty laid upon the defendant council, and no doubt they did their best to carry out their duty in a proper way. However, the fact that they have been unable to show the court that they could not have performed their duty in any other way prevents them from sheltering behind the Act of Parliament as a protection against the plaintiffs claim in this case.

I should add that I desire to impress upon the defendant council and other persons in that position the desirability, from their point of view, as well as from other peoples point of view, ofeven in comparatively small matters like thisgiving notice by advertisement or otherwise of what they are proposing to do, and, if possible, having plans available, so that, if people are going to object, or think that they are going to be damaged, they will have notice. If they think that they can properly intervene, they may be able to intervene before expense has been incurred in carrying out the work in question. That, of course, is not part of my business, except as a suggestion to the defendant council, and other councils in the same position, in order to avoid, if possible, the sort of action which we have all had to consider during these last ten days.

Solicitors: Sharpe Pritchard & Co, agents for Bell Pope Bridgwater & Hughes, Southampton (for the plaintiffs); Robbins Olivey & Lake, agents for F V Barber, Winchester (for the defendants).

Maurice Share Esq   Barrister.


Egerton v Jones

[1939] 3 All ER 889


Categories:        LAND; Mortgages        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        25 JULY 1939        


Landlord and Tenant Forfeiture Relief Lease mortgaged Relief of mortgagees Conditions of relief Full indemnity to landlord in respect of all costs in proceedings for breach of covenant and relief from forfeiture Law of Property Act 1925 (c 20), s 146(4).

A lessee committed a breach of covenant and the landlords thereupon brought an action for possession and obtained an order for possession and costs on 20 March 1939. The lessee then applied for relief under the Law of Property Act 1925, s 146, which was refused. The lessee appealed against such refusal to the Court of Appeal and the appeal was dismissed with costs on 15 May 1939. All these costs were said to be irrecoverable. The mortgagees of the lease on 4 April 1939, applied for relief under the above section and the master granted relief upon the terms that the mortgagees paid all the landlords costs in the above proceedings. The judge in chambers struck out that part of the order which imposed the term of paying the landlords costs. On appeal to the Court of Appeal, it was contended that the plaintiffs ought either to have made the mortgagees parties to the action or to have given them notice that there had been a breach of covenant, and also, that the lessors should have given notice to the mortgagees that the lessee was applying for relief:

Held (i) the action was properly constituted without making the mortgagees parties to it. In an action by lessors to recover possession, there is no obligation to join mortgagees by sub-demise as defendants.

(ii) the plaintiffs were under no obligation to give notice to the mortgagees of the proceedings brought by the lessee for relief against forfeiture, and the mortgagees ought only to have relief on the terms of indemnifying the plaintiffs against all the costs, as between solicitor and client, which they had incurred, subject to the plaintiffs transferring to the mortgagees, if the latter so required, the benefit of the judgment for costs.

(iii) it should be a term of the grant of the relief to the mortgagees that they should pay the costs of this appeal to the Court of Appeal, as between solicitor and client.

Rogers v Rice followed.

Notes

Relief against forfeiture is only given upon the terms that the lessor receives a full indemnity against costs. The indemnity extends to solicitor and client costs in all proceedings to which the lessor has been a party, both those for recovery of possession and those for relief against the forfeiture and all appeals in both proceedings. The mortgagee or underlessee obtaining such relief is entitled to the benefit of a judgment for costs obtained by the lessor against the lessee, but in many cases this will be valueless. The matter is one of considerable importance to mortgagees, particularly building societies, granting mortgages of leasehold property.

As to Relief of Underlessees, see Halsbury (Hailsham Edn), Vol 20, pp 263, 264, para 296; and for Cases, see Digest, Vol 31, pp 495, 496, Nos 64196426.

Cases referred to

Rogers v Rice [1892] 2 Ch 170; 31 Digest 489, 6362, 61 LJCh 573, 66 LT 640.

Cholmeley School, Highgate (Wardens, Etc) v Sewell [1894] 2 QB 906; 31 Digest 495, 6420, 63 LJQB 820, 71 LT 88.

Howard v Fanshawe [1895] 2 Ch 581; 31 Digest 482, 6311, 64 LJCh 666, 73 LT 77.

Page 890 of [1939] 3 All ER 889

Hyman v Rose [1912] AC 623; 31 Digest 488, 6356, 81 LJKB 1062, 106 LT 907.

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Appeal

Appeal of the plaintiffs from an order of Hilbery J, dated 30 June 1939, varying an order made by Master Horridge on the application of the respondents for relief against forfeiture. The facts are fully stated in the judgment of Sir Wilfrid Greene MR

G P Slade KC and Sir Shirley Worthington-Evans for the appellant.

A T Denning KC and M R C Overton for the respondents.

Slade KC: The effect of the Law of Property Act 1925, s 146(4), is to repose in the court a wide discretion. The discretion, however, is to be exercised upon clearly settled principles. The landlord is seeking a legal right and anyone who wishes to deprive him of it under the terms of s 146(4) is seeking an indulgence. If the indulgence is granted, the landlord should be placed, so far as possible, in the position in which he would have been had his right not been infringed. The statute should not be read as putting the landlord in a worse position than he would have been in if the matter had been dealt with in a court of equity. Cholmeleys School v Sewell seems to be the only case on this subsection in which the question of costs was substantially argued. [Counsel also referred to Howard v Fanshawe.]

Denning KC: The lessors had full knowledge of the existence of this mortgage as express notice was given to them. The discretion given to the court in any particular case should not be fettered by general rules: Hyman v Rose. The position between master and judge with regard to discretion is dealt with in Evans v Bartlam. In the present case, the landlord gave no notice of the proceedings to the mortgagees and if he had obtained possession before the mortgagees learned of the proceedings, the landlord would have been able to keep the premises beneficially free from the lease and the mortgage. The landlord should, therefore, not be allowed the costs as against the mortgagees. Moreover, if the mortgagees could have obtained possession at once under the terms of the mortgage deed, the right to apply under sub-s (4) would have come to an end. Unless the mortgagees had been joined as parties before the landlord actually entered, they would have been excluded, and that is a matter to be taken into consideration. The exercise of the judges discretion should not be overruled because the absence of any rule requiring notice would mean, in effect, that a landlord could squeeze out a mortgagee. [Counsel also referred to Croft v London and County Banking Co.]

Slade KC in reply.

The Law of Property Act 1925, s 146(4), provides as follows:

Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture under any covenant, proviso, or stipulation in a lease, or for non-

Page 891 of [1939] 3 All ER 889

payment of rent, the court may, on application by any person claiming as underlessee any estate or interest in the property comprised in the lease or any part thereof, either in the lessors action (if any) or in any action brought by such person for that purpose, make an order vesting, for the whole term of the lease or any less term, the property comprised in the lease or any part thereof in any person entitled as underlessee to any estate or interest in such property upon such conditions as to execution of any deed or other document, payment of rent, costs, expenses, damages, compensation, giving security, or otherwise, as the court in the circumstances of each case may think fit, but in no case shall any such underlessee be entitled to require a lease to be granted to him for any longer term than he had under his original sublease.

G P Slade KC and Sir Shirley Worthington-Evans for the appellant.

A T Denning KC and M R C Overton for the respondents.

25 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. The application out of which this appeal arises was an application by mortgagees by sub-demise for relief under the Law of Property Act 1925, s 146(4). The mortgagees applied ex parte for leave to appear in the action; and then applied in the action for relief. The master made an order granting relief to the mortgagees upon certain terms. Some of those are common form, and need not be dealt with here. The objection to the terms imposed by the masters order related to that part of it which imposed upon the mortgagees, as a condition of obtaining relief, liability in respect of certain costs. Those costs were the costs of the action by the plaintiffs against the lessee, who, of course, was the mortgagor, and the costs incurred by the plaintiffs in relation to certain applications in the action by that lessee for relief for herself.

The order for possession was made on 20 March 1939. At that time the lessee was the only defendant to the action. She applied for relief against forfeiture. She carried that application, unsuccessfully at each stage, as far as this court, which dismissed her appeal in relation to it on 15 May 1939. In the meanwhile, while those applications were pending, the mortgagees were informed by the lessee on 31 March, what had happened and what was happening. On 4 April 1939, they applied for leave to appear. It seems that the costs which the lessee was ordered to pay in the ejectment action and the costs of her unsuccessful attempts to obtain relief against forfeiture, are in all probability irrecoverable against her personally. Upon that basis, which is really not disputed, the master by his order imposed, as a term of granting relief to the mortgagees, the obligation to pay to the plaintiffs, the lessors, the amount of the costs to which they had been put in those proceedings. There is a point as to the costs being between solicitor and client, to which I will refer later. Hilbery J, on appeal, struck out from the masters order that part which imposed the term of paying to the plaintiffs those costs. From that order the present appeal is brought.

It has been contended that this is a case where the judge has exercised his discretion; and that this court should not interfere with that exercise except according to well-known principles, which, it is said, do not operate in the present case. It is quite certain, on the one hand, that the discretion of the court is not to be fettered by rules. The discretion is given by statute, and must be exercised according to the circumstances of each particular case. On the other hand, it is equally true that, when a matter

Page 892 of [1939] 3 All ER 889

involving discretion comes before a judge, there must be in every case a number of considerations which he ought to have in mind for the purpose of enabling him to exercise his discretion. If it appears that he has taken into consideration something which he ought not to have taken into consideration, or has omitted to take into consideration something which he ought to have taken into consideration, or if on all the facts this court is satisfied and convinced that the discretion has been wrongly exercised, it is the duty of this court to interfere.

In the present case the judge, I think, cannot have had in mind, when he made the order he did, the fact that, without apparent justification, he was by his order not putting the plaintiffs back into the position that they would have been in if the forfeiture had not occurred, a position in which, I think it is not putting it too strongly to say, they are prima facie entitled to be; nor do I think that he can have had in mind that the mortgagees, as sub-lessees, would have been by his order put into a better position than the actual lessee herself could ever have been in. In addition, it is said by counsel for the respondents that he must have had in mindI am not sure whether the point was referred to by him at all when the matter was before himthe circumstance that the plaintiffs, in taking these proceedings against the lessee, were really doing nothing more than endeavouring to shield themselves from criminal consequences under the Criminal Law Amendment Acts. We have listened to the argument upon that point; and it is sufficient to say with regard to that that if the judge had drawn any such inference, and had based an exercise of discretion upon it, he would, in my opinion, have been quite wrong in doing so.

This is not a case where the plaintiffs, the lessors, are seeking to enforce the special rights given by the Criminal Law Amendment Act in the case of brothels. They are merely, as lessors, enforcing the covenant in their lease, and the condition of forfeiture which they are directly entitled to do. The fact that by doing so effectively they may avoid the possibility of criminal liability, is in my opinion absolutely irrelevant to the question of the terms on which relief from forfeiture should be granted. Therefore, if, as it is suggested he did, the judge did take that matter into account, it would be sufficient, in my judgment, to allow the whole matter to be reviewed in this court.

The substantial point upon which counsel for the respondents said that the terms which the judge fixed were the right ones, was based upon the fact that when the plaintiffs began these proceedings, and during their continuance, they gave no notice to the mortgagees. Counsel said, and said truly, that if the ejectment action against the defendant had been carried to its conclusion, and the plaintiffs had re-entered, the mortgagees, as under-lessees, would have lost all right to apply for relief. That was settled as long ago as 1892, by a decision of this court, in Rogers v Rice. Notwithstanding that decision, the legislature did not think fit in 1925 to alter the law as there laid down. Accordingly, in the case of a mort-

Page 893 of [1939] 3 All ER 889

gagee by sub-demise, that mortgagee is always at the risk of the lessor obtaining re-entry for breach of covenant without the mortgagee knowing anything about it; in which case the mortgagee is completely shut out. Every mortgagee, therefore, knows that that is the risk he runs. If after taking a covenant from his mortgagor to observe the covenants in the lease, he takes no steps whatsoever to satisfy himself from time to time that no breach of covenant is taking place, he is always exposed to the risk that, behind his back and without his knowledge, the lessor will succeed in re-entering, and so determining the lease; with the result that all possibility of relief from forfeiture is lost to the mortgagee. That is one of the risks of the game.

It is said by counsel for the respondents that, notwithstanding that circumstance, the plaintiffs in the present case ought either to have made the mortgagees parties in the first instance, or ought to have given notice to them of the fact that there had been a breach of covenant. With regard to the first of those suggestions, in my opinion, it is misconceived. The action was perfectly properly constituted without the presence of the mortgagees as defendants. The judgement obtained in it was in no way defective through lack of parties; and it could have been enforced according to its terms. To say that there is some obligation upon the plaintiffs in such a case to join the mortgagees by sub-demise as defendants to an action to recover possession is quite wrong. There is no justification for it in practice or in principle. It is said here, however, that the fact that they did not join the mortgagees as defendants, ought to be made a ground for relieving the mortgagees of some of the terms which prima facie ought to be imposed upon them. I am quite unable to see how that can be so. The plaintiffs were doing what they were perfectly entitled to do; and the mortgagees must run the risk. They were fortunate enough in this case to discover what was happening before re-entry. Even assuming that the plaintiffs would have re-entered without giving them noticean assumption which I see no reason whatsoever for makingnothing could be said against them.

Then it is said (and a similar argument is based upon it) that notice ought to have been given of what was happening, but again, I can see no obligation in law or in propriety to give such a notice. What was happening in this case was that the plaintiffs, by a perfectly proper procedure, were pursuing their remedy. So long as the tenant was resisting, and attempting to get relief against forfeiture, they were bound to oppose her. They had no option save to oppose what she was doing. When that opposition came to an end, it so happened that the mortgagees had come on the scene; but it does not in the least follow that, after the plaintiffs had disposed of the lessee and her application, they would necessarily have taken possession without informing the mortgagees. I do not think that we should be right in making any such assumption. The necessity of giving notice to the mortgagees in order to affect the mind of the court in the matter of terms, is something which I cannot

Page 894 of [1939] 3 All ER 889

find exists. It seems to me the case is a perfectly plain and simple one. I cannot regard the conduct of the plaintiffs in not giving notice down to the time when the mortgagees came on the scene, as being anything in any way justifying the court in putting the plaintiffs in a position in which the mortgagees can obtain as against them relief without properly recouping the reasonable expenses to which they have been put in connection with this breach of covenant. The breach was committed by a person through whom the mortgagees derived title. The costs were incurred by the necessity of fighting that person. I cannot see how on principle it is right to say that the mortgagees ought to have relief except upon the terms prima facie of indemnifying the plaintiffs against the costs which they incurred.

I do not think there is any necessity to refer to any cases. They do not appear to me to throw any light upon the matter. In my judgment the judge can only have come to the conclusion that he did by taking into account matters which were not proper to be taken into account; or by putting a wrong construction on the action of the plaintiffs in not joining the mortgagees, or giving them notice. If that circumstance is viewed in its proper light, it is not one which in my opinion ought to affect the judgment of the court in exercising its discretion. Therefore, the case is one in which this court is perfectly entitled, and having come to the conclusion to which it has come, is indeed bound, to interfere with the discretion of the judge. The result, therefore, is that the appeal must be allowed and the order of the master restored.

I must now deal with two minor points which have been referred to. The first is that the judgment obtained against the lessee for costs ought to be assigned to the mortgagees. That, indeed, is not disputed; and, indeed, it was offered at an early stage in this litigation; and there is no objection to incorporating a provision to that effect in the order. Secondly, it is said that the costs in question, which are the plaintiffs costs in the proceedings against the lessee, ought only to be party and party costs, and not solicitor and client costs. I am satisfied that there is nothing in that point. Prima facie the principle is that the plaintiffs should be indemnified against proper expenses, reasonably incurred. They will not get that indemnity if all they obtain are the party and party costs which the lessee was ordered to pay.

MACKINNON LJ. I agree, and I do not think I need to add anything.

FINLAY LJ. I also agree, and I do not desire to add anything.

Appeal allowed with costs. Masters order restored subject to insertion therein of provision that plaintiffs transfer the benefit of the judgment, if the mortgagees so require. Costs of the appeal, as part of the terms of relief, to be as between solicitor and client, but otherwise as between party and party.

Solicitors: Trower Still & Keeling (for the appellants); Hewlett & Co (for the respondents).

W K Scrivener Esq   Barrister.


Chipchase v Chipchase

[1939] 3 All ER 895


Categories:        FAMILY; Family Proceedings        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P AND HENN COLLINS J        

Hearing Date(s):        21 JULY 1939        


Husband and Wife Proceedings before justices for desertion and maintenance Presumption of death of previous husband Not heard of for over seven years Banns of second marriage read in wifes maiden name Validity of second marriage Marriage Act 1823 (c 76), s 22.

The appellant had been married in 1915, but shortly afterwards her husband deserted her and she had not seen him or heard of him since 1916. In 1928, she married the respondent. For this wedding the banns were read in her maiden name, and she was married in that name. The present proceedings were summonses taken out against the respondent and based on charges of adultery, desertion and failure to maintain. The appellant gave evidence that she had disclosed to the respondent her previous marriage, and that, for at least two years before her second marriage, she had been commonly known by her maiden name. The justices held that, there being no evidence that the first husband was dead, the first marriage was still subsisting, and the second one invalid. They further held that the second marriage was void, because the appellant had given her wrong name intentionally and wilfully, and there had therefore been no due publication of the banns. The wife appealed to the Divisional Court:

Held (i) it was impossible to say that there was no evidence that the first husband was dead, having regard to the presumption of law that a person who had not been heard of for over seven years is dead.

(ii) in order to invalidate a marriage on the ground of want of due publication of banns, it is not sufficient to show that a party knowingly and consciously gave a wrong name. A wilful intention to conceal identity must be proved.

Notes

The absence of a person without being heard of for seven years raises a presumption that he or she is dead. This presumption is rebuttable by evidence that the person has been alive during that period or by proof that he or she is subsequently alive, but, until the presumption is rebutted, it must be taken as proved that that person is dead. Again, any person can acquire a name by reputation, and the acquisition of such a name can be proved only by proving that the person has consistently used that name, and has been known and addressed by that name by persons having dealings with him or her. This is a matter of evidence and the court has only to be reasonably satisfied that, at the material time, the person was known by the name contended for. In the case of banns of marriage, there is the further requirement, that publication in a false name, must be in a name false to the knowledge of both parties to the intended marriage and must be used with the intention of concealment. Unless both these facts are proved, the marriage is valid.

As to Presumption of Death, see Halsbury (Hailsham Edn), Vol 13, pp 629634, para 701; and for Cases, see Digest, Vol 22, pp 165, 166, Nos 14081422.

As to Publication of Banns, see Halsbury (Hailsham Edn), Vol 16, pp 572, 573, para 859; and for Cases, see Digest, Vol 27, pp 4649, Nos 246298.

Cases referred to

Re Phenes Trusts (1870) 5 Ch App 139; 22 Digest 164, 1402, 39 LJCh 316, 22 LT 111.

R v Tibshelf (Inhabitants) (1830) 1 B & Ad 190; 27 Digest 47, 261, 8 LJOSMC 120.

Page 896 of [1939] 3 All ER 895

R v Wroxton (Inhabitants) (1833) 4 B & Ad 640; 27 Digest 47, 254, 2 LJMC 64.

Wiltshire v Prince (1830) 3 Hag Ecc 332; 27 Digest 48, 262.

Orme v Holloway (falsely calling herself Orme) (1847) 5 Notes of Cases 267; 27 Digest 47, 259.

Midgeley (falsely called Wood) v Wood (1859) 4 Sw & Tr 267; 27 Digest 48, 269, 30 LJPM & A 57.

Small v Small & Furber (1923) 67 Sol Jo 277; 27 Digest 48, 276.

Appeal

Appeal by the wife against a decision of the Hendon justices whereby they dismissed a complaint based on charges of adultery, desertion, and failure to maintain. The facts of the case are fully set out in the judgments.

H J Phillimore for the appellant.

B Stuart Horner for the respondent.

21 July 1939. the following judgments were delivered.

SIR BOYD MERRIMAN P. This is an appeal from the Hendon justices who dismissed a complaint by a wife against her husband based on several charges of adultery, desertion and failure to maintain respectively, on the ground that the wife had failed to prove that there was an existing marriage. We have come to the conclusion that it is essential that this case should be re-heard by the justices, for we think that there are matters in connection with the two points, on which the justices gave their decision, to which they have not yet given proper or sufficient attention. I wish to say, however, that the justices decided this matter as one of law and expressed their willingness, on the face of their judgment, to do anything that they could to help if the matter were taken to a higher court. They have given us the benefit of a very full note and a very careful statement of their reasons, and it is only in order to help them when this matter is reconsidered that I think it necessary to go somewhat fully into the points that have arisen.

This wife had formerly been married to a man named Leetch, Without going into the details of her evidence, it is quite plain that, very soon after her marriage in 1915, he deserted her and, according to her evidence, she has never seen him or heard of him since January 1916, which was within a year of her marriage. The wife having given evidence on this point, and having given such evidence as she was able to give about the circumstances in which the husband left her, relied on the presumption that he was dead when, in 1928, she went through the ceremony of marriage with the man against whom she brought the present complaint. The justices have held that having married Leetch in 1915, and, there being no evidence that the marriage was not lawful or that it had been dissolved or set aside by process of law, about which point there is no dispute, and that there was no evidence that Leetch was dead and that, therefore, they were of opinion that the marriage with Leetch was a subsisting marriage and that the ceremony with the defendant, the respondent to this appeal, in August 1928, did not appear to them to constitute a valid and binding marriage. I am going to deal first with this point. On the face of the

Page 897 of [1939] 3 All ER 895

wifes evidence, she had not heard of her husband for more than seven years at the time when she went through the ceremony of marriage with the man whom she is now charging as her husband; in fact, 12 years or thereabouts had elapsed at the time of the second ceremony of marriage. It is quite true that she was asked questions about the nature of the inquiries she had made, opportunities she had of inquiring from his relatives, and so forth, but her evidence was that she had not heard of her husband from the moment to which I have already referred, at the beginning of 1916, and had no idea whether he was dead or alive. The justices had given their decision expressly on the ground that, there being no evidence that Leetch was dead, they were of opinion that the first marriage was still subsisting. It seems to me impossible to say that there was no evidence that Leetch was dead, having regard to the presumption which arises in circumstances of this kind. That presumptionI am taking the statement of it from the judgment of Sir G M Gifford LJ in Re Phenes Trusts, at p 144is that the law presumes a person who has not been heard of for over 7 years to be dead, but in the absence of special circumstances draws no presumption from that fact as to the particular period at which he died. I need not read for present purposes the rest of the statement of the legal doctrine. Once it is shown that the wife has not heard of her husband for 7 years that presumption arises. It is not, of course, an irrebuttable presumption, and it may take very little evidence to rebut it having regard to the particular circumstances of a particular case, but, if that proposition is established affirmatively to the satisfaction of the justices, then it is impossible to say there is no evidence of a husband having been dead. It is in that direction, in my opinion, that the question of the nature of any such inquiries that the wife has made arises. There is nothing in this statement of presumption which I have quoted, about reasonable belief or inquiries or probability of life or any of those things to which counsel for the respondent has referred us. However, if a person was given ground for supposing that the other party to the marriage was alive and deliberately turned a blind eye and refused to make obvious inquiries, it might very well be that the court would not accept it as proved that the party had not been heard of for 7 years. It seems to me that in discussing this question the reasonableness of inquiries that have been made in regard to the circumstances of the case, whatever they may be, should be ascertained. It is in this connection that that matter is important, but once it has been established to the satisfaction of the tribunal that the party has not been heard of for 7 years, then the presumption arises although, of course, it is a presumption which can be rebutted.

In this particular case the question is whether the wife was entitled to rely on that presumption. At the time when she went through the ceremony of marriage in 1928, not merely 7, but 12 years, had elapsed, but it goes without saying that the justices have got to judge of that

Page 898 of [1939] 3 All ER 895

question as it appears to them in 1939. The wife, on the one hand, is entitled to pray in aid the lapse of yet another 10 years, during which she says she has not heard of her husband. The husband, on the other hand, might be shown by some evidence, the nature of which we are unaware, but which it is suggested is in existence, actually to have been alive in 1928. In taking into account the further lapse of 10 years since the ceremony of marriage in 1928, it will, no doubt, be open to the justices to discount that further lapse of time in connection with the non-appearance of the husband, by reason of the fact that the second marriage did not take place in the name of Leetch, but in the wifes maiden name. To put the matter in another way, there was nothing in the nature of the second marriage itself to attract the attention of the first husband, if, in fact, he was alive. Those are all the circumstances which the justices will be able to take into account. At the end of it all the question remains: is it established that the husband had not been heard of for 12 years or so before the second ceremony of marriage, and is there anything in the evidence to rebut the presumption that he was dead? I do not feel that that approach to the matter has been considered by the justices at all. I want, before leaving this part of the case, to observe that it is very necessary to distinguish the consideration of the presumption which I have been discussing, and the considerations which apply to the Matrimonial Causes Act, 1937, s 8. Under the latter section, once the spouse has satisfied the court that there is reasonable ground for supposing the parts to be dead within the terms of the section, the marriage may be dissolved, and once the decree absolute has been pronounced, it is completely irrelevant whether the party is afterwards shown to have been alive at the material time or not. That, of course, is not the case in connection with the presumption that I am now discussing, for if it is shown that the husband is alive, this second marriage may be declared to be null and void at any time. In my opinion, therefore, the justices must re-hear the matter on the question of whether the wife had established that at the time when she went through the second marriage the husband must be presumed to have been dead, and unless there is anything which justifies them in refusing to find that the husband had not been heard of for the preceding period of 12 years, or which rebuts the presumption arising therefrom that he was dead, something in effect to show that he was alive after 1928, they ought, in my opinion, to say that she has established that the marriage was valid and subsisting in so far as that point is concerned, and decide the rest of the case accordingly.

The justices have also decided that the second marriage was not valid and subsisting on the ground that there was no due publication of the banns. They found that the wife gave her wrong name intentionally and wilfully, and that there was no due publication of banns. They therefore held that the marriage was void to all intents and purposes. It is quite true, that the wife, not having heard of her husband as she

Page 899 of [1939] 3 All ER 895

says for 12 years, and never having had any real home with him, was married in her maiden name. She says that she had disclosed to her second husband the fact that she had been married to Leetch and, therefore, both parties knew of the use of the false name. The question, however, is whether the misuse of her maiden name does bring about the result that there was no due publication of banns, and, therefore, nullity of the marriage to all intents and purposes. It may be that it does, but I am not satisfied on the material before us that the justices minds have been directed to the real question. Evidence was given that for 2 years at any rate before this marriage, the wife had been commonly known by her maiden name. Counsel for the wife assures us that he has in fact got evidence, which could be placed before the justices, and which carries that common use of her maiden name very much further back than that; some seven years, I think he told us, before the ceremony of marriage. I think it is quite clear that the justices have not had their minds directed to the established interpretation of the Marriage Act 1823, s 22, on which this question depends. The wording of the Act is:

Provided always, that if any persons shall … knowingly and wilfully inter-marry without due publication of banns or licence … the marriages of such persons shall be null and void to all intents and purposes whatsoever.

It is required by s 7 that the true christian name and surname shall be given to the parson for the purpose of publication of banns. Our attention has been called to R v Tibshelf (Inhabitants) and R v Wroxton (Inhabitants), which show quite plainly that the words “knowingly and wilfully” were deliberately introduced into s 22 of the Act of 1823 in order to mitigate the hardship which had arisen under the earlier Act and was exemplified by the case of R v Tibshelf (Inhabitants), that it was quite immaterial whether the falsity in the declaration had arisen by accident or design and whether such design be fraudulent or not. I am content for the purposes of directing the minds of the justices to the points they have to decide, to call attention to the fact that, in R v Wroxton (Inhabitants), Denman CJ cited with approval the case of Wiltshire v Prince decided in the Ecclesiastical Courts after the Act of 1823 had passed, in which Dr Lushington expressly founded his judgment of nullity on the fact that both the man and woman were aware that banns had been published in a manner calculated to conceal the identity of one of the parties. The same appears even more emphatically in the judgment of Sir H Jenner Fust in Orme v Holloway, where he says the construction of this Act is that, in order to set aside a marriage on the ground of undue publication of banns, it is necessary for both the parties to be cognisant of fraud; it is necessary first to prove that there has been a fraud and secondly that both parties were cognisant of the fraud and knowingly and wilfully entered into the marriage without due publication of banns. The other authorities, to which our attention has been called, such as Midgley (falsely called Wood) v Wood, are to the same effect. The object

Page 900 of [1939] 3 All ER 895

of this Act was to prevent clandestine marriages; there must be an element of intentional concealment of identity before it can be said that the marriage is void for undue publication of banns. I do not think that that element of the matter has been sufficiently considered by the justices. It is quite true that the case of Small v Small was cited. In that case unquestionably there was the element of deliberate concealment, and the motive was quite plain. It may be, of course, that this is such another case but, at any rate, the wife must have the opportunity of establishing, as her counsel says she is able to establish, that the name in which she was married was the name by which for years she had been commonly known, and that there was no intention to conceal her identity in the circumstances of this particular case.

I have dealt with the two points separately but, of course, there is a certain amount of connection between the two issues with which the justices have to deal. The more successful the wife is in proving that her husband had completely disappeared beyond her ken, the more likelihood is there, after the short history of the earlier marriage in 1915, in her reverting, and reverting notoriously, to her maiden name. If it is established to the satisfaction of the justices that her maiden name was the name by which she was commonly known, and which she was using amongst her friends and acquaintances, there would be the strongest possible evidence that it was not used for the purposes of concealment. The more completely the justices are satisfied that the husband has disappeared, the less is it likely that it would be used for the express purpose of concealing the particular marriage from him and his relations. However, these are all matters which will have to be considered by the justices, but considered from the point of view from which they have not hitherto been considered. If, of course, the justices come to the conclusion that the wife had established that it is a subsisting marriage, it will then be for them to deal with the merits of the case which have not hitherto been fully before them.

HENN COLLINS J. I am of the same opinion. The present appellant, the wife, took out summonses against the present respondent, her husband, which were grounded on the fact that he was the husband. His answer was: “I am not your husband,” and he based that contention on two grounds, first, that at the time when he went through a ceremony of marriage in 1928 with the present appellant she was a married woman, the wife of a living husband, and, secondly, that his own marriage had been celebrated without due publication of banns. The appellants answer to the first point was: “I have not heard of the man that I married in 1915 since the year 1916 or thereabouts, a lapse of more than 7 years, and I was entitled in 1928 to the presumption of law in my favour that my husband had died, and I can show that that presumption has not since been rebutted, down to the year 1939, when these proceedings were heard, because in that time no sign of him has been forthcoming.”

Page 901 of [1939] 3 All ER 895

Upon that matter we have the careful statement of the justices of the reasons for their contention. They have held that in those circumstances they have no evidence that William James Leetch is dead. That appears to have been a wrong approach to the matter. As soon as it was established, if it was established in fact, that the former husband, William James Leetch, had not been heard of for 7 years, then undoubtedly there was evidence for their consideration that he was dead, and it was more than evidence because it was a presumption and conclusive evidence until it was rebutted by evidence which showed, in fact, that he was alive. I am not for one moment going to trespass on the question of fact which is still for their determination: namely, whether she is or is not entitled to the benefit of that presumption, but because I feel that their approach is the wrong one, the case ought to go back to them for reconsideration of the whole matter.

As to the second point, namely, the undue publication of banns, the matter seems to me to rest thus. The justices seem to have thought that the fact that a party to a marriage knowingly and wilfully, in the sense cf consciously, used a name to which she or he is not by law entitled, is conclusive of the matter. Again I think that that is a wrong approach. I think the real question has been accurately propounded in Wiltshire v Prince, in which Dr Lushington founded his judgment on the facts that both the man and woman were aware that the banns had been published in a manner calculated to conceal the identity of one of the parties. I think the word “calculated” in that connection, taken along with the words “knowingly and wilfully,” is used in the sense of design to conceal the identity of the parties. It will, therefore, be for these justices to consider what I feel certain they have not had brought to their attention, namely, the question whether in giving her original maiden name, as the present appellant did, she intended wilfully to conceal her identity. That is a matter on which I form no opinion at all on the evidence; it is entirely for the justices, and I think that, on that ground also, the case should go back to them for re-hearing.

I think that Sir Boyd Merriman P has expressed himself conclusively about it; the question really is whether both spouses intended that her identity should be concealed.

Case remitted to the justices for re-hearing.

Solicitors: Wingfields Halse & Trustram (for the appellant); Edgar H Hiscocks (for the respondent).

J F Compton Miller Esq   Barrister.


Re Walker, Public Trustee v Walker

[1939] 3 All ER 902


Categories:        BANKRUPTCY        

Court:        CHANCERY DIVISION        

Lord(s):        LUXMOORE LJ, SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        28 JULY 1939        


Bankruptcy Forfeiture clause Annuity Discharge from bankruptcy operating after death of testator and before any payment of annuity due Whether forfeiture clause operates Bankruptcy Act 1914 (c 59), ss 26(9), 28(2), 29(2), 38(2)(a), 47(1).

The testator, who died on 16 November 1938, in his will directed his executor “to pay out of the income of my estate the sum of £250 per annum to my brother Leonard Unett Walker during his life until he shall assign charge or otherwise dispose of the said income or some part thereof or become bankrupt or do something whereby the said income if belonging to him or some part thereof would become payable to or vested in some other persons.” Leonard Unett Walker was adjudicated bankrupt on 29 September 1937. He applied for his discharge, and on 15 November 1938, it was ordered that he be discharged as from 15 December 1938:

Held the trustee in bankruptcys title to the annuity would, but for the forfeiture-clause, have taken effect as on 16 November 1938, on which date the annuity to Leonard Unett Walker would have vested in him. The forefeiture clause therefore operated to prevent the annuity vesting.

Notes

The question here is whether for the purposes of the operation of the forfeiture clause, the material date is the death of the testator, or the date at which the first instalment of the annuity became legally payable. The decision is in favour of the former date, it being held that the annuity vested at the date of the death.

As to Forfeiture Clauses, see Halsbury (Hailsham Edn), Vol 2, pp 199203, para 270; and for Cases, see Digest, Vol 5, pp 669673, Nos 59375956.

Cases referred to

White v Chitty (1866) LR 1 Eq 372; 5 Digest 664, 5898, 35 LJCh 343, 13 LT 750.

Re Forder, Forder v Forder [1927] 2 Ch 291; Digest Supp, 96 LJCh 314, 137 LT 538.

Ancona v Waddell (1878), 10 ChD 157; 5 Digest 669, 5935, 48 LJCh 116, 40 LT 31.

Re Evans, Public Trustee v Evans [1920] 2 Ch 304; Digest Supp, 89 LJCh 525, 123 LT 735.

Originating Summons

Originating summons to determine whether upon the true construction of the testators will the trust to pay out of the income of the testators estate the sum of £250 per annum to Leonard Unett Walker during his life until the happening of any of the events therein mentioned had failed or determined by reason of the bankruptcy of Leonard Unett Walker during the lifetime of the testator. The facts and arguments are fully set out in the judgment.

Sir Hugh Lucas Tooth for the Public Trustee, the plaintiff.

R Cozens Hardy Horne for the first defendant.

J A Wolfe for the second defendant.

Roger W Turnbull for the third and fourth defendants.

Page 903 of [1939] 3 All ER 902

28 July 1939. The following judgment was delivered.

LUXMOORE LJ. By his will, dated 28 December 1931, John Walker directed the Public Trustee (who was appointed executor and trustee of his will):

To pay out of the income of my estate the sum of £250 per annum to my brother Leonard Unett Walker during his life until he shall assign charge or otherwise dispose of the said income or some part thereof or become bankrupt or do something whereby the said income if belonging to him or some part thereof would become payable to or vested in some other persons whichever of the said events first happens and if the trusts hereinbefore declared shall fail in the lifetime of my said brother my trustee shall pay the said sum of £250 per annum to all the children of my said brother in equal shares during the lifetime of my said brother. And I declare that my trustee shall pay the sum of £250 to the personal representatives of my brother for one year after his death for the benefit of his family.

The testator died on 16 November 1938, and his will was proved by the Public Trustee on 14 March 1939. The testators brother, Leonard Unett Walker, survived him. He has had three children, namely, the defendants Marguerite Kathleen Iris Marshall, John Bryan Walker and Penelope Ann Walker. He was adjudicated bankrupt on 29 September 1937. He subsequently applied for his discharge in bankruptcy, and on 15 November 1938, the day before the testators death, an order was made in the county court of Kent, holden at Canterbury:

that the bankrupts discharge be suspended for one month and that he be discharged as from Dec. 15, 1938.

On 5 May 1939 the Public Trustee took out the originating summons, which is now before me, for the determination of the question whether upon the true construction of the will of the testator the trust to pay out of the income of the testators estate the sum of £250 per annum to Leonard Unett Walker during his life until the happening of any of the events therein mentioned has failed or determined by reason of the bankruptcy of Leonard Unett Walker during the lifetime of the testator. The defendants to the originating summons are Leonard Unett Walker and his three children. It is admitted that if there had been no discharge in the bankruptcy the forfeiture clause would have been effective notwithstanding the words of futurity in which it is couched, and the gift over to the children of Leonard Unett Walker would have taken effect. It is argued, however, that, as the discharge took effect before any payment in respect of the annuity had been made or could legally have been demanded, the court, in construing the provisions of the forfeiture clause, ought to stretch the words so as to confine their operation to the existence of a bankruptcy at the date when the first payment in respect of the annuity was made or could have been demanded legally.

In support of this argument, reliance was placed on a number of cases in which the material bankruptcy, though existing at the date when the gift became operative, had been annulled before any payment in respect of that gift had been made or could be demanded. The earliest of those cases is White v Chitty. In that case the material words of the clause of forfeiture were [at p 373]:

Provided always, and I hereby declare, that if my said sons or grandsons, or any or either of them, shall respectively be outlawed or declared bankrupt, or shall

Page 904 of [1939] 3 All ER 902

assign, charge, or incumber his or their respective life interest or life interests in the said trust premises respectively, or any part or parts thereof respectively, or shall do or suffer anything whereby the same or any part thereof respectively would through his or their act or default, or by operation or process of law, or otherwise if belonging absolutely to him or them, become vested in or payable to some other person or persons, then and thenceforth the rents to which, but for this provision, he or they respectively would be entitled, shall, during the remainder of his or their life interests therein respectively, from time to time sink into and be added to and form part of my general personal estate.

Before the testators death one of his sons had been adjudicated bankrupt. No creditors assignee had been appointed, but at the date of the testators death the bankrupt son had not obtained his discharge. Some four months after the testators death, the bankruptcy was annulled with the consent of the creditors. The question to be determined was whether the forfeiture clause had taken effect or not. Sir W Page Wood VC, after reading the forfeiture clause, said, at p 375:

Now, these words, certainly, so far as they go, would compel the court to hold … that this bankruptcy, though having taken place anterior to the date of the will, is such a bankruptcy as, if it were continuing, would authorise the court to declare that a forfeiture had taken place, … although the words of futurity in this case [that is, the case before him] are rather stronger than those which occurred …

in certain cases to which reference had been made in the argument before him. He added, at p 376:

The testators attention is clearly not directed to the declaration of bankruptcy, or to the period when the declaration may take place; but only to thisthat the property intended for the objects of his bounty shall not pass to a stranger. He does not wish that the gift shall be a benefit to be conferred upon creditors, or upon any one other than the devisee. The true intention of his will, therefore, requires that the words of futurity should be stretched so as to include a bankruptcy existing at the date of his death. In this case, the bankruptcy which existed at the death of the testator never proceeded beyond this. There was such an official assignee appointed as that the estate of Charles Chitty vested in him, but no creditors assignee was appointed; nothing more was done; the official assignee took no proceedings by ejectment or otherwise to recover possession; and he never was in possession, for before any rents had accrued, or could possibly accrue, the bankruptcy was annulled. I quite agree … that the annulment of the bankruptcy could not have affected the rights of the plaintiffs, if a forfeiture had already occurred. But the question is, has a forfeiture occurred, when, before any actual demand made, or possession taken by the official assignee before one sixpence had accrued to him, the bankrupt, by his diligence and activity obtained an annulment of the bankruptcy, so that at the time when the first rents accrued, there was no hand but his to receive them? That involves, to some degree, the question of the effect of annulment, and of what appears to be the state of the authorities on the subject.

After dealing with some of the earlier authorities, Sir W Page Wood VC continued at p 377:

But here the annulment was made with the consent of the creditors. Then I have to considerregard being had to all the authorities … whether or not this gentleman, having succeeded in getting the bankruptcy annulled before any part of the property was acquired under the forfeiture clause, must be regarded as having forfeited his rights, on the ground that, before the testator died, this adjudication took place. I think, having regard to those cases in which the courts have stretched the words of testators, by making expressions which sound in the future apply to the past, in order to effectuate the intent, and to prevent the fund going into other hands than those of the objects of his bounty, I am bound to hold that the act of forfeiture in this instance never occurred, because this gentleman has always been in possession and receipt of these rents, nobody else having been in a position to receive them.

Page 905 of [1939] 3 All ER 902

But it has, I think, been made plain by the later cases that, if any payment has been made or could have been demanded between the time when the gift takes effect and the date of the annulment, the fact of the annulment will not prevent the operation of the forfeiture clause.

I think it is sufficient to mention Re Forder. In that case, under the testators will (the testator having died in 1910) a beneficiary became entitled on the death of his mother to a share in the income of the residuary estate. He was also entitled under the will in expectancy upon the death of his sister to a further share of the income, and in the event of his becoming the longest liver of his sister and the other beneficiaries, to the entire income and capital of the testators estate. The will provided that, in the event of any beneficiary becoming bankrupt or assigning, charging or incumbering his or her share, such beneficiary should forfeit such share, which should thereupon devolve as thereinbefore provided in case of his or her death. The mother died on 14 December 1925 leaving the beneficiary, who was then an undischarged bankrupt, and his sister her surviving. The testators estate comprised a large number of freehold cottages, many of which yielded weekly rents, besides investments in stocks and shares and a sum outstanding on mortgage. It had been the custom of the trustees to state half-yearly accounts of income on 2 May and 2 November in each year. On 7 April 1926that is 4 months after the death of the motherthe bankruptcy was annulled. The summons was taken out to determine whether the forfeiture clause had taken effect or not, and when it came before Clauson J there was evidence that, after deducting outgoings from the gross amount of income received by the surviving trustee during the half-year ending 2 May 1926, there was in the trustees hands a net balance available for distribution; but there was no evidence that at any time between the death of the mother and the annulment of the beneficiarys bankruptcy the trustee had in his hands moneys immediately payable. Clauson J held that the forfeiture clause had not taken effect. The matter went to the Court of Appeal, where further evidence was admitted showing that for a number of years it had been the practice of the trustees after discharging current outgoings to prepare a half-yearly account on 2 May and 2 November in each year, of the rents and income received by them, and then divide and pay the undistributed balance of income amongst the beneficiaries. During the currency of the half-year their practice had been to make monthly payments of £20 to the mother on account of her ultimate share of the current half-years income, and one of such payments had been made to her on 1 November 1925 and another on 1 December 1925, immediately preceding her death. In the several months between the date of her death and 2 May 1926, the surviving trustee had at different times paid himself certain moneys on account of his share of income, indicating thereby that there was income then available for the other beneficiaries. It was held, reversing the decision of Clauson J that, upon the further evidence, it was clear that in the interval between the mothers death and

Page 906 of [1939] 3 All ER 902

the annulment of the bankruptcy there was in the hands of the surviving trustee actual income of the beneficiarys share, which could be treated as payable to or retained or appropriated for his benefit, and that although the balance payable on 2 May 1926 to the beneficiaries had not then been ascertained, there was money in the hands of the trustee which would have been payable to the beneficiarys trustee in bankruptcy unless the forfeiture clause operated, and that consequently the annulment was not in time to save the forfeiture, and that, upon the true construction of the forfeiture clause, the forfeiture enured to prevent any portion of the share, whether of income or capital, from passing to the beneficiary who had become bankrupt and to deprive him of all interest as a beneficiary under the will.

Lord Hanworth MR, after referring to White v Chitty, said, at p 308:

The best test whether the clause operates appears to be stated in Ancona v. Waddell, before Hall, V.C., where he says that one has not to see whether in fact the money had been paid over or how the money actually stood, but the test is whether “it could be said that there was any actual income of the share which could be treated as payable to, or retained for or appropriated for the benefit of this residuary legatee.”

In the present case there was no annulment of the bankruptcy, there was only a suspension of its discharge until a date after the testators death; that is, Leonard Unett Walker was a bankrupt at the testators death and remained a bankrupt until 15 December 1938, when the order for discharge became effective. The question is whether the decisions with regard to annulment apply to the case where, although there has been no annulment, there has been a discharge after the gift to be considered became effective. The effect of an annulment is not the same as that of a discharge; each depends upon the relevant provisions of the Bankruptcy Acts. Annulment is dealt with in s 29. Sub-s (1) confers powers upon the court to annul a bankruptcy. Sub-s (2) provides that:

Where an adjudication is annulled under this section, all sales and dispositions of property and payments duly made, and all acts theretofore done, by the official receiver, trustee, or other person acting under their authority, or by the court shall be valid, but the property of the debtor who was adjudged bankrupt shall vest in such person as the court may appoint, or, in default of any such appointment revert to the debtor for all his estate or interest therein on such terms and subject to such conditions, if any, as the court may declare by order.

So that where an annulment takes place, in the absence of any express direction to the contrary, there is an immediate revesting in the person whose bankruptcy is annulled of that persons property which remains in the trustees hands. The provisions with regard to discharge are to be found in the Bankruptcy Act 1914, s 26, as amended by the 1926 Act. This section gives power to the court to order the discharge of a bankrupt. Sub-s (9) provides that:

A discharged bankrupt shall, notwithstanding his discharge, give such assistance as the trustee may require in the realisation and distribution of such of his property as is vested in the trustee …

S 28 provides what is to be the effect of a discharge. Sub-s (1)

Page 907 of [1939] 3 All ER 902

states from what the bankrupt shall not be released. Sub-s (2) states that:

An order of discharge shall release the bankrupt from all other debts provable in bankruptcy.

It is to be observed that there is no provision, as in the case of annulment, for the revesting of any of the bankrupts property in the bankrupt on his discharge. It is necessary therefore to consider what became vested in the trustee in bankruptcy under consideration. S 38 is the section which enumerates the property of the bankrupt which vests in the trustee. I need not refer to it in detail. It is sufficient to state that it includes, under sub-s (2)(a):

All such property as may belong to or be vested in the bankrupt at the commencement of the bankruptcy, or may be acquired by or devolve on him before his discharge …

In the present case, therefore, the annuity of £250 given to Leonard Unett Walker, which took effect on the testators death, although nothing was legally payable in respect of it until the expiration of 12 months after the testators death, would but for the forfeiture clause have vested in the trustee in bankruptcy and would not have revested in Leonard Unett Walker when the discharge became effective. Assuming that there had been no forfeiture clause, it is true that if, before the trustee in bankruptcy had reduced the after-acquired property in possession by giving notice of his claim to the executors of the will, Leonard Unett Walker had been able to dispose of his interest therein to a third party, that third partys title would have prevailed against the trustee in bankruptcy; but this result would have been brought about by reason of the express provisions of s 47(1) of the Act, which provides that:

All transactions by a bankrupt with any person dealing with him bona fide and for value, in respect of property, whether real or personal, acquired by the bankrupt after the adjudication, shall, if completed before any intervention by the trustee, be valid against the trustee, and any estate or interest in such property which by virtue of this Act is vested in the trustee shall determine and pass in such manner and to such extent as may be required for giving effect to any such transaction.

Apart from this provision, and as between the trustee in bankruptcy and the bankrupt, the vesting of the after-acquired property is complete and cannot be affected by the order for discharge.

If any authority is required for the view which I have expressed, I think it is to be found in Re Evans, Public Trustee v Evans, where Lord Sterndale MR said, at pp 315, 316:

I may say that the son obtained his discharge some months after the testators death, but the bankruptcy was not annulled, and therefore any property coming to the bankrupt by a title which accrued before his discharge would vest to the trustee in bankruptcy.

It follows from what I have said that the decisions as to annulment of a bankruptcy are not applicable to the case of a discharge. In the present case the discharge only operated as from 15 November 1938. The trustee in bankruptcys title, but for the forfeiture clause, would have taken

Page 908 of [1939] 3 All ER 902

effect as on 16 November 1938, on which date the annuity given to Leonard Unett Walker would, apart from that clause, have vested in him.

In my judgment, the forfeiture clause operated to prevent the vesting and at the same time transferred the annuity to the children of Leonard Unett Walker. I therefore declare that, on the true construction of the testators will and in the events that have happened, the annuity of £250 directed to be paid to Leonard Unett Walker during his life until the happening of any of the events therein mentioned has failed and determined by reason of his bankruptcy subsisting at the death of the testator. I have come to this conclusion with some regret because one cannot help appreciating that it is a hardship on Mr Leonard Unett Walker that his discharge should have been applied for at so short a time before the testators death; but I am satisfied that it is impossible for me to put any other construction on the will. The costs of all parties as between solicitor and client must be paid out of the testators residuary estate.

Declaration accordingly.

Solicitors: Bennett Welch & Co (for all parties).

E Fuller Briscoe Esq   Barrister.

Papadimitriou v Henderson

[1939] 3 All ER 908


Categories:        INSURANCE: INTERNATIONAL; Law of the Sea: SHIPPING        

Court:        KINGS BENCH DIVISION        

Lord(s):        GODDARD LJ, SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        20, 21 JULY 1939        


Insurance Marine insurance War risk policy on hull and freight Vessel sequestrated by Spanish insurgents while on lawful contract voyage Documentation of vessel Loss of anticipated freight Insurable interest Marine Insurance Act 1906 (c 41), s 67 Institute Time Clauses (Freight) cl 5.

The plaintiff had insured his vessel for a certain period under a policy of insurance to cover war risks. The amount of the insurance included a specific sum of £3,500 in respect of freight and/or chartered freight and/or anticipated freight. The amount was greater than that for which charters had been arranged during the currency of the policy, but there was a short period covered by the policy for which no charter had been arranged. The vessel was chartered to agents of the Spanish Republican Government to carry from Odessa to Oran certain goods which were expressly allowed by the terms of the policy, but were in the nature of conditional contraband when consigned to a country at war. When the vessel was about 150 miles east of Malta, the master, as a result of an agreement between the owner and the consignees of the cargo, was ordered to put back to Piræus, the home port, but shortly after putting back the ship was overhauled, seized by an insurgent warship, taken to Palma, and eventually appropriated by the insurgent government. There was no evidence of formal prize court proceedings. At the time of the vessels capture the master did not have in his possession a copy of the charterparty which had been prepared in London and which did not reach him before sailing, and it was contended that the vessel was not properly documented, and had therefore invited condemnation. It was also contended that the loss of the ship was due to the wilful misconduct of the owner or master in proceeding on the voyage knowing that there was a risk of capture. On the question of the insurance of freight it

Page 909 of [1939] 3 All ER 908

was argued that the plaintiff could recover only in respect of freight actually earned, and that there was no insurable interest in problematical freight:

Held (i) an owner or master of a neutral ship proceeding on a contract voyage is not guilty of wilful misconduct which would avoid a policy simply because there is a risk of capture.

(ii) there was no evidence upon what ground the vessel was condemned, and no reason to suppose that she was condemned for having irregular papers.

(iii) in fact the vessel was properly documented.

(iv) the measure of indemnity in respect of freight had been fixed at £3,500, and the plaintiff was entitled to recover that amount.

(v) the plaintiff had an insurable interest in the anticipated freight.

Notes

Two questions of importance were argued in this case. In the first place, it was said that it was misconduct for a master to commence a voyage in which he knew there was a risk of capture, and, secondly, it was that there was no insurable interest in anticipated freight. Both these questions have been answered in the negative and the insured has been held entitled to recover.

As to Misconduct of Master, see Halsbury (Hailsham Edn), Vol 18, pp 297, 298, para 420; and for Cases, see Digest, Vol 29, p 207, Nos 16611669.

Cases referred to

Robertson v Petros M Nomikos Ltd [1939] 2 All ER 723; Digest Supp, 108 LJKB 433, 160 LT 542.

Forder v Great Western Ry Co [1905] 2 KB 532; 8 Digest 65, 442, 74 LJKB 871, 93 LT 344.

Trinder, Anderson & Co v Thames & Mersey Marine Insurance Co, Trinder, Anderson & Co v North Queensland Insurance Co, Trinder, Anderson & Co v Weston, Crocker & Co [1898] 2 QB 114; 29 Digest 196, 1562, 67 LJQB 666, 78 LT 485.

Bell v Carstairs (1811) 14 East 374; 29 Digest 196, 1561.

Thompson v Hopper (1858) EB & E 1038; 29 Digest 205, 1642, 27 LJQB 441, 32 LTOS 38.

Scottish Shire Line Ltd v London & Provincial Marine & General Insurance Co Ltd [1912] 3 KB 51; 29 Digest 173, 1300, 81 LJKB 1066, 107 LT 46.

Barclay v Cousins (1802) 2 East 544; 29 Digest 102, 598.

Action

Action against a Lloyds underwriter on a policy of insurance effected for the purpose of covering the plaintiffs ship Ellinico Vouno against war risks. The policy provided for an insurance of £18,500, being £15,000 on the hull and machinery, and £3,500 on the freight and/or chartered freight, and/or anticipated freight. The facts and arguments are fully set out in the judgment.

F A Sellers KC and A A Mocatta for the plaintiff.

Sir Robert Aske KC and A J Hodgson for the defendant.

Aske KC: The underwriter is liable only for a loss which was fortuitous, and a risk deliberately incurred is not fortuitous: Forder v Great Western Ry Co, Trinder, Anderson & Co v Thames & Mersey Marine Insurance Co, Bell v Carstairs, Thompson v Hopper. Loss may be recovered only in respect of freight actually at risk, not of anticipated freight; otherwise the insured would have no insurable

Page 910 of [1939] 3 All ER 908

interest: Scottish Shire Line Ltd v London Provincial Marine & General Insurance Co Ltd.

Sellers KC was only called on to argue the question of insurance of anticipated freight and referred to Barclay v Cousins.

F A Sellers KC and A A Mocatta for the plaintiff.

Sir Robert Aske KC and A J Hodgson for the defendant.

21 July 1939. The following judgment was delivered.

GODDARD LJ. This is an action brought by Mr Papadimitriou, a Greek shipowner, against a Lloyds underwriter on a policy of insurance effected on 3 June 1938 for the purpose of insuring his ship Ellinico Vouno against war risks during the period from 30 April 1938 to 30 July 1938. The plaintiff was contemplating a charter at this time for the purpose of carrying goods from Odessa to some port in the Western Mediterranean, the first port contemplated being Marseilles. The cargo was to be carried for the then Government of Spain, and was to consist of lorries and spare parts. A good deal of difficulty arose about the charter, because although Marseilles was the port to which the goods were to be carried, the Spanish Government desired to change the port of destination and substitute for Marseilles the port of Oran in Tunis, a port which is a French port. At the time when the ship got to Odessa to load, the matter was still being negotiated in London, and of course that took considerable time, because the London brokers had to communicate with Piræus where the plaintiff lived and had his business. At the time when the master was at Odessa, and the goods were about to be loaded, this question had not been settled, and the Russian export organisation, Inflot, then acting for the Russian Government, I suppose, were anxious to oblige the Spanish Government by shipping these goods to Oran. The master had to be given very considerable discretion, because in a letter dated 29 April, which was handed to him before the sailing from Piræus to Odessa, the plaintiff had told him this:

Port of discharge. They have not yet accepted the option for Oran with 2s. extra, which I have asked for with peage dues at Oran at their charge. If they accept it, then on signing the bill of lading, they will be obliged to declare to you for where you are destined. Knowing this you will wire to Candilli to get you ready the required quantity and you will fix then the date of arrival.

After some considerable trouble, the captain at last found that the bill of lading was made out to Oran, and at an interview which he had shortly before he actually sailed, the bill of lading was handed to him, and he signed it, but in fact at the moment he signed it, according to his evidence, the name of the port had not been written in, but it then was filled in for Oran, and the captain was willing to accept that under the discretion which had been given to him in the letter; and in point of fact an agreement was come to between the owners and the charterers, which was embodied in a memorandum, which was attached to the charterparty, under which Oran was substituted for Marseilles.

The captain sailed on 12 May and when he arrived in the Bosphorus an attempt was made by one of the agents, I think a man named Dabcovich, to stop him, telling him that he had some urgent orders for him, but not orders from the owners. The captain, I think reasonably

Page 911 of [1939] 3 All ER 908

thinking that there might be further trouble about the port of destination, which had then been settled, and it not being suggested to him that the message which it was sought to communicate to him came from the owners, refused to stop, and proceeded on his voyage. Thereafter, a great many cables and wires were exchanged between the various persons interested in this cargo and the owners, with the result that the first definite order which was given to the captain by his owners, the first order that he was bound to obey, reached him on 17 May. It was agreed with the persons interested in the cargo that the captain should be instructed to proceed to Malta for orders. The policy, as I have said, was a war policy. It was a policy to cover the whole risks, and it may well be that at this time the shippers of the Spanish Government, who were to be the receivers of the cargo, were anxious about its safety, because they may have known, and they probably would know, that insurgent warships were at large in the Western Mediterranean. However, it was not until then that they came to any agreement with the owners as to the ship proceeding to Malta for orders instead of going straight for Oran as the charterparty provided. Then the next thing that happened was that on 18 May the captain wirelessed his positionhe was able to keep the owners informed by wireless of his positionand I think that on that date the owners were requested to agree, and finally agreed, on terms, that the ship should return to Piræus. At the time that the captain got his orders to return, he had got to within about 160 miles east of Malta. The only information that had reached anybody at this time, was that trouble might be experienced off Cape Bon, which, of course, is quite near to Oran.

The captain obeyed these orders received from his owners. He put about in the afternoon, as soon as he got the orders, but shortly after that he was overhauled by one of the insurgent warships, the ship was seized, a prize crew was put on board and the ship was taken to Palma, which was then occupied by the insurgent forces. The captain and his crew were kept prisoners on the ship. Eventually, the ship was appropriated by the insurgent Government. Whether it was formally condemned, I have no evidence, except that the captain was told that she had been condemned in the Prize Court. I have no evidence as to whether or not there was a regularly constituted Prize Court at Palma, nor have I any evidence upon which I can find the ground upon which she was condemned. One may speculate on it as much as one likes; the fact was, of course, that the bills of lading clearly showed that the goods which were on board were destined for the Spanish Government. It was the buying organisation of the then Spanish Government who were the consignees of the goods, and the goods were certainly of the class which, when consigned to the government of a country then at war, would be regarded as contraband; they were in a class of what is commonly called conditional contraband, goods which might be of assistance to the army forces and which, if

Page 912 of [1939] 3 All ER 908

consigned to the government of the country, a Prize Court would probably have no difficulty in considering to be contraband. However, in the policy they were goods which were expressly allowed to be carried on the ship. The policy excluded the vessel from going to any Spanish port or Spanish possession in the Mediterranean. It warranted that no arms or ammunition or instruments of war or materials of a similar nature should be carried, but the warranty was not to exclude the carriage of cars or trucks, benzine, coal, coke or similar things. So the policy expressly allowed this cargo to be carried, albeit it was a cargo, as I have said, which was in the nature of conditional contraband, and it being consigned to a port so near to Spain as Oran, I have no doubt that, if it were considered by a Prize Court, no court would have any difficulty in applying the doctrine of continuous voyage. So it is at least likelyI do not say more than thatthat if this ship was brought into a Prize Court, that she was condemned because she was carrying a cargo of contraband. However that may be, the ship was condemned. The seizure was made on the high seas on 19 May and it became a constructive total loss to her owners.

Counsel for the underwriter has taken two main points. First, he said that this loss was caused by the wilful misconduct of the ownerI do not know whether of the master, but of the ownerin insisting on going on with the voyage when he had been warned against so doing. I certainly cannot hold here that there was any wilful misconduct at all or any sort of misconduct. The fact was that the vessel was proceeding upon its chartered voyage. It continued to proceed along its chartered voyage. The owner was under no obligation that I know of to divert his vessel from that voyage unless, of course, she was obviously running into danger. He would not want to lose his ship, and no doubt he would give instructions to his captain to avoid that if he could. The only definite warning that the owner or anybody had, was that some trouble, that is to say, some search or stoppage for the purpose of search, might be expected off Cape Bon; and when the owner was asked to order the ship to proceed to Malta for orders, as soon as terms were arranged under which she should proceed to Malta, where he was not bound to allow her to go, he gave those orders. As soon as he was requested, and the terms were arranged under which she should put about and go back to Piræus, she did, and there is no evidence before me to show that anybody was expecting that one of the Spanish warships belonging to the insurgent forces was lurking, to use a familiar expression, east of Malta. Even if there had been, I think it would be a very dangerous doctrine to lay down in the courts of this country that the captain of a neutral ship or the owner of a neutral ship or the owner of a ship belonging to a country at war, is guilty of wilful misconduct if he tries to proceed with his contract voyage, simply because there is a risk of capture, as there must always be a risk of capture during a war, which is the very reason why shipowners and merchants insure against war

Page 913 of [1939] 3 All ER 908

risks. Of course, if it was a case in which the shipowner got warning that blockade had been established at a particular port or that a ship was lying waiting at a particular point, and the shipowner deliberately sent his ship forward to that point to run the blockade, it may be that there would be, in certain cases, an inference to be drawn that he was not endeavouring to carry out the voyage, but was endeavouring to get his ship captured, and that, of course, would be wilful misconduct.

In the last war it would have been a serious thing for this country if it was said that every shipmaster who continued his contract voyage to this country, when it was known that there were submarines at large in the Channel or in the approaches to the Channel, was guilty of wilful misconduct, because there was a risk that his ship would be seized and sunk, whether it was a neutral ship or British ship. I certainly should be very sorry to lay down any such doctrine, that the shipowner who had dispatched his ship on what was to him a perfectly lawful voyage, should be held guilty of wilful misconduct, because he had continued on that voyage and was doing his best to fulfil it, more especially when one finds that when he was instructed to order the ship to return, he did order his ship to return. On that point I am quite clear. Then it is argued that the ship was not properly documented; it was not carrying proper documents, and this was an insurance against war risks. To send a ship to sea without proper documents is inviting condemnation if she is stopped and searched, because it is well known that if the searching vessel finds that a ships papers are not in order, or are in doubtful order, they will take her in, and if the Prize Court thinks she is carrying false papers, they may condemn her. There are two considerations which arise here. First, I have no evidence at all as to why the ship was condemned, if she ever was condemned. For all I know, she may simply have been seized and held by superior force, but even assuming that she was brought before a Prize Courtand the only evidence I have of that, as I have already said, is that the captain was told she had been before a Prize Court, but he was not present at any proceedings, and there is no evidence before me as to whether she was before a properly constituted Prize Court or what the decision of the Prize Court wasI do not know on what ground she was condemned, and there is no more reason to suppose that she was condemned for carrying irregular papers than that she was condemned for carrying contraband. In fact, was she not properly documented? She had put to sea without the master being in possession of the charterparty, on very understandable grounds; the charterparty had been fixed in London and at the time she put to sea, the charterparty had not reached Piræus, her home port, and it did not reach Piræus until after she had left for Odessa. The captain had been given a letter by his owner, showing the terms of the charterparty, which no doubt showed that her destination was Marseilles, as it was under the charterparty until the agreement was come to. The bills of lading were perfectly clear. There was no attempt to conceal anything.

Page 914 of [1939] 3 All ER 908

The bills of lading showed that the goods were shipped to Oran, and there was an indorsement:

Freight and all other conditions and exceptions as per charterparty dated [the date was left out, because at the time the bills of lading were signed, nobody knew what the date was] for the present voyage and agreement for Oran.

the present voyage being, according to the terms of the charterparty, to Marseilles, but there was an agreement for Oran.

Then it was saidI think the point was not much persisted inthat as the blanks in the charterparty are mostly filled in in typewriting, the document had a suspicious aspect, irregular on the face of it, because Oran is written in in ink. The suggestion is that that would raise a suspicion, because the searching officer would say to himself: “Oran has been written in at another time.” That argument, I think, would apply equally to any bill of lading, because any bill of lading is partly in printat all events, every bill of lading I have ever seen is partly in print with blanks which could be filled in at any timebut I have never heard it suggested that because the words are not printed in or typed in, that throws any suspicion upon the authenticity of the document; nor can I accept the argument that because most of the blanks were filled in in typewriting, this document is in any way suspicious or irregular because the word Oran is written in in ink. It shows perfectly clearly the way things were going on. It shows, and this is much more important from the point of view of the searching officer, who the consignees were, namely, the organisation of the Spanish Republican Government. As a matter of fact, no case has been called to my attention, and counsel for the underwriter has stated that he knows of no case, which decides exactly what documents are to be carried upon a ship. No doubt, ordinarily speaking, if the ship is under charter, there would be with the captain a charterparty; but there is no authority for saying that a charterparty must be carried in time of war. Of course, it is conceded, and everybody knows, that ships frequently have to go to sea without a copy of the charter-party in their possession, because, as happened in this case, the charter-party is fixed in London and the ship is in a foreign port at the time the charterparty is fixed, and the charterparty has not reached the master by the time he sails. In my opinion there is nothing in the second point.

The last point in the case is simply a question of the amount that is to be recovered. This point is perhaps one of some difficulty. It arises on the insurance of freight, and all cases which deal with freight insurance I think as a rule raise questions of difficulty. The policy states that there shall be insurance for £18,500, being £15,000 on the hull, machinery, etc, and £3,500 on the freight, and/or chartered freight and/or anticipated freight. Now this is a new expression, “anticipated freight,” which is brought into this policy. I say new, because it is an expression which, in spite of several cases which are reported of freight insurance, has not occurred in any case hitherto reported. The main question arises

Page 915 of [1939] 3 All ER 908

on cl 5 of the Institute Clauses, which are incorporated in the contract. Cl 5 of the Institute Time Clauses (Freight) provides this:

In the event of the total loss … of the steamer the amount underwritten by this policy … shall be paid in full, whether the steamer be fully or only partly loaded or in ballast, chartered or unchartered.

Now what has happened in this case is this. The freight for the particular voyage on which the ship was engaged at the time of seizure, has been paid, so no question arises about that. Then she had been fixed for charter from a port near Marseilles, Caronte, to Hamburg, and the amount of freight which she would have upon this voyage, was £2,842. The question which arises is whether the plaintiff can recover only the £2,842, or whether he can recover the £3,500 which is written in the policy. If one regarded this matter as merely a matter of construction, it would be difficult to sayI think impossible to saythat he is not entitled to recover the £3,500, because the Institute Clauses provide that if the ship becomes a total loss, the amount underwritten, which is £3,500, shall be paid in full. There cannot be clearer words than that, and if the parties have agreed that the sum of £3,500 is to be paid in full on the ship becoming a total loss, as a mere matter of construction, I see no reason why that should not be so. Of course this class of case is complicated by various rules that apply to contracts of insurance, rules with regard to indemnity and rules with regard to insurable interest. In my opinion I ought to give effect to the clear terms of the policy. The parties are saying by the policy, “I, the shipper, have a profit-earning ship, a ship with which I can earn profit, and I want to insure that, if this ship is seized during the time the policy is current and effective, I shall recover a certain sum which is anticipated”“anticipated freight” I think it means“because it is anticipated that I shall be able to earn at least that sum, if not more, during the period.” As I say, it is certain that she could have earned £2,842 upon one voyage, not a very great distance from Marseilles round to Hamburg, and there would have been time, of course, after that voyageI have not had any evidence as to the exact time that it would take, or might be anticipated to take, for a voyage from the South of France round to Hamburg, but it would not be very long, and thereafter the ship would have an opportunity of earning further freight.

It seems to me to be well settled by the cases to which counsel for the underwriter has referred me, that there can be no doubt as to the right to recover where a contract has been fixed and where the ship has started on a voyage in anticipation of a future voyage. I do get assistance from a recent case of Robertson v Petros M Nomikos Ltd, where Lord Wright considered this point. His opinion on this point is obiter, since it was not necessary for the decision in that case, because, though the ship had been chartered, all that it was sought to recover was the freight which had been actually chartered. Lord Wright, in the course of his opinion, stated his view of the true construction of cl 5. The

Page 916 of [1939] 3 All ER 908

reasons he gave, although obiter, I must say appear to me to be quite convincing. He said, at p 729:

The policy is a time policy, and the intention may be to secure that, even if the vessel at the time of the casualty has no cargo on board (that is, is in ballast) and has no charter, there shall be no question of insurable interest, though it is not likely that any underwriter would think of raising such a question in a case of this type. The intention may be to provide that the owners interest in the profit-earning capacity of his ship, which is certainly a good interest in a business sense, should be deemed a sufficient insurable interest for purposes of this policy. I should see no legal obstacle why this agreement should not receive effect. Cl 5 deals with actual, as well as with constructive, total loss.

My attention was also called to the Marine Insurance Act, 1906, s 67, which says:

(1) The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued policy to the full extent of the insurable value, or, in the case of a valued policy to the full extent of the value fixed by the policy, is called the measure of indemnity.

Now it seems to me that the measure of indemnity here is fixed in the same way as on an insurance of goods the amount of the insurance is fixed by valuation. It is fixed at £3,500. I think therefore that I am justified in holding that the plaintiff is entitled here to recover £3,500 in respect of freight, and having suffered a total loss, the result is that the judgment will be for £18,500 with costs.

Judgment for the plaintiff with costs.

Solicitors: Holman Fenwick & Willan (for the plaintiff); Ince Roscoe Wilson & Glover (for the defendant).

C St J Nicholson Esq   Barrister.

Gatti v Shoosmith

[1939] 3 All ER 916


Categories:        CIVIL PROCEDURE: PROFESSIONS; Lawyers        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND FINLAY LJJ        

Hearing Date(s):        24 JULY 1939        


Practice Time for appeal Appeal entered late Mistake of legal adviser Discretion of court to extend time RSC Ord 58, r 15, Ord 64, r 7.

Owing to a misreading of the rule, the applicant was a few days too late in entering an appeal. The intention to appeal had been notified to the respondents solicitors, by letter sent within the time specified by the rule. The applicant asked that the time might be extended on the ground that the failure to enter the appeal within the time limited was due to the mistake of a legal adviser:

Held (i) there is nothing in the nature of such a mistake to exclude it from being a proper ground for allowing the appeal to be effective though out of time; and whether the matter shall be so treated must depend on the facts of each case.

(ii) the facts of this case made it one where the discretion of the court ought to be exercised, and leave to appeal given.

Notes

The authorities in the exercise of the discretion of the Court of Appeal to extend the time for appealing were a little conflicting, and in some of the authorities it appeared that the alteration in the rule in 1909 had been overlooked. The matter is put beyond doubt in the present case.

As to Extension of Time for Appeal, see Halsbury (Hailsham Edn), Vol 26, pp 116118, paras 229, 230; and for Cases, see Digest, Practice, pp 805

Page 917 of [1939] 3 All ER 916

807, Nos 36823698. See also Yearly Practice of the Supreme Court 1939, pp 12821284.

Cases referred to

Re Coles & Ravenshear [1907] 1 KB 1; Digest, Practice 806, 3688, 76 LJKB 27, 95 LT 750.

Baker v Faber [1908] WN 9; Digest Practice 806, 3690.

Selwyn (AH) Ltd v Baker [1924] WN 195; Digest, Practice, 806, 3692.

Kevorkian v Burney [1937] WN 345 [1937] 4 All ER 97; Digest Supp, 157 LT 492.

Wood v Manchester Corpn, Yearly Practice of the Supreme Court 1939, p 1283; Digest, Practice 806, 3693.

Application

Application for leave to appeal notwithstanding that the time for entering an appeal had expired. The appeal was not entered in time owing to a misinterpretation of RSC Ord 58, r 15, by one of the appellants legal advisers. The respondents solicitors had, however, been advised by letter, written within the strict time, that an appeal would be entered.

Hon H L Parker for the appellant.

H O Danckwerts for the respondents.

Parker: The court has a completely unfettered discretion in cases of mistake. In 1909, RSC Ord 58, r 15, was altered and it was held that the court would not act so readily under Ord 58, r 15, as under Ord 64, r 7. The Yearly Practice 1939, sets out the authorities at pp 1282, 1283. The matter was fully argued, and the cases considered in Kevorkian v Burney where the appeal was allowed, and the time extended.

It was admittedly the settled practice that a blunder or a mistake was not a ground for the exercise of the discretion of the court, as Ord 58, r 15, stood before 1909, yet, in a proper case, it was always a ground for the exercise of discretion under Ord 64, r 7. Since 1909, by reason of the alteration then made in Ord 58, r 15, the court has had an unfettered discretion.

Danckwerts: Notwithstanding the alteration of Ord 58, r 15, the settled practice has been not to extend the time for appealing merely because there has been a misreading of the rule. On the facts of the present case, it would be unreasonable to give the plaintiff an indulgence. The case was a pure question of fact. Having regard to the circumstances of the case and the practice which has been consistently followed, the time for appeal should not be extended.

Hon H L Parker for the appellant.

H O Danckwerts for the respondent.

24 July 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. Before 1909, Ord 58, r 15, which is the order regulating the time for appeals to this court, was in a different form from that in which it is now cast. Under the order as it then stood, the power of this court to extend the time for appealing required some special reason, because the appeal could not be brought except by special leave of the Court of Appeal. Under the rule as it then stood, the case of Re Coles & Ravenshear was decided. That was a case

Page 918 of [1939] 3 All ER 916

where counsel had misconstrued the rule, and, as a result of the advice given, the appeal was out of time. It was there held that the fact that the delay was due to a mistake of a legal adviser, did not constitute a ground for giving the special leave which the rule required. It is right to point out that in that case, as in subsequent cases, this court very much disliked the imposition of a fetter upon its discretion, which compelled it to refuse leave in cases where some unfortunate slip, the rectifying of which could have done no harm to anybody, had taken place. Nevertheless, at that time there was a current of authority under which this court conceived that its discretion was fettered in that way. In 1908 Baker v Faber came before this court. That was a case where the matter in question was an application for a new trial, and the power of the court to extend the time with regard to that application was one which rested on Ord 64, r 7. Ord 64, r 7, was in different language from that of Ord 58, r 15, as it then stood, and under that rule, the necessity of some special leave (with the emphasis, so to speak, on the word “special”) did not exist. This court held in that case that a mistake by counsel in advising his client as to the time within which an appeal could be brought was a sufficient ground under Ord 64, r 7, to justify the court in extending the time. Cozens-Hardy LJ, as he then was, was party to the decision in Re Coles & Ravenshear, and so was Farwell LJ, and they both dealt with it under the special language of Ord 58, r 15, and, therefore, considerations were involved which did not apply where Ord 64, r 7, was the governing rule. Cozens-Hardy LJ there suggested that the matter might be brought to the attention of the Rule Committee. Apparently it was brought to the attention of the Rule Committee, because in May 1909 the rule was altered. The particular drafting machinery that was adopted, was to strike out the reference to “special leave of the court of appeal,” and to preface Ord 58, r 15, with the words:

Subject and without prejudice to the powers of the Court of Appeal under Ord 64, r 7.

That therefore puts the matter of enlarging the time under Ord 58, r 15, under Ord 64, r 7, as the governing rule. One would have thought that that change, coupled with the decision in Baker v Faber, would have been sufficient to enable this court to say that Re Coles and Ravenshear no longer held good, in so far as it had been considered to be an authority compelling this court, in cases where the delay was due to the slip of a legal adviser, to refuse to entertain an appeal which was out of time, and I cannot help thinking that that result would have taken place earlier had it not been for the fact that, in 1924, Selwyn (AH) Ltd v Baker came before this court. There the objection that the appeal was out of time was taken at the hearing of the appeal as a preliminary objection, and the explanation of the delay which was given by counsel for the appellants, was that the mistake was due to a misconstruction of the rule by the appellants solicitors. Sir Ernest Pollock MR and Warring

Page 919 of [1939] 3 All ER 916

ton and Sargant LJJ upheld the preliminary objection, and based their decision upon Re Coles & Ravenshear, which Sir Ernest Pollock MR, said made it quite clear that a mere mistake was not a sufficient ground for extending the time for appealing. Whether or not the omission to call the attention of the court on that occasion to the case of Baker v Faber, and the alteration of the rule, was due to the fact that, apparently, the objection was taken when the appeal was opened, I do not know, but the report does not show that those matters were brought to the attention of the court. I cannot help thinking that if they had been, the court would have regarded the alteration in the rule as restoring to it that freedom of discretion, the loss of which had been so much regretted. In a later case, Kevorkian v Burney, after a full argument of these matters (although the facts were not the same there as they are here) Scott LJ (by way, it is right to say, of dictum only) in reference to Re Cole and Ravenshear and the argument of counsel in the case before him that that case governed the Court of Appeal, said, at p 99:

… I notice that the change in the form of the rule and the subsequent decision reported in the Weekly Notes, 1908 [Baker v. Faber] were neither of them drawn to the attention of the court, and I cannot help feeling that, had the court had its attention directed to those cases, the very important change in the position caused by the change in the form of the rule would have led to a different decision of this court.

He thus said exactly what I said a moment ago, and I respectfully agree with the view which he there took.

Just to make the matter complete, there is mentioned in the 1939 Yearly Practice, at p 1283, Wood v Manchester Corpn. In that case, the Court of Appeal extended the time in a case where the applicants solicitor, on finding that his clients union was not prepared to take her case beyond the divisional court, had omitted to take his clients instructions as to appealing, and in that case Scrutton and Atkin LJJ said that the “vested interest” argument no longer carried the same weight as formerly, and that the time for appealing was now constantly extended in cases where 20 years ago it would not have been.

On consideration of the whole matter, in my opinion under the rule as it now stands, the fact that the omission to appeal in due time was due to a mistake on the part of a legal adviser, may be a sufficient cause to justify the court in exercising its discretion. I say “may be,” because it is not to be thought that it will necessarily be exercised in every set of facts. Under the law as it was conceived to be before the amendment, such a mistake was considered to be in no circumstances a sufficient ground. What I venture to think is the proper rule which this court must follow is: that there is nothing in the nature of such a mistake to exclude it from being a proper ground for allowing the appeal to be effective though out of time; and whether the matter shall be so treated must depend upon the facts of each individual case. There may be

Page 920 of [1939] 3 All ER 916

facts in a case which would make it unjust to allow the appellant to succeed upon that argument.

The discretion of the court being, as I conceive it, a perfectly free one, the only question is whether, upon the facts of this particular case, that discretion should be exercised. If ever there was a case in which it should be exercised, I should have thought it was this one. We are not, I think, concerned here with any question at all as to the merits of this case or the probability of success or otherwise. The reason for the appellants failure to institute his appeal in due time, was a mere misunderstanding, deposed to on affidavit by the managing clerk of the appellants solicitorsa misunderstanding which, to anyone who was reading the rule without having the authorities in mind, might very well have arisen. The period involved is a very short one, it is only a matter of a few days, and the appellants solicitors, within time, informed the respondents solicitors by letter of their clients intention to appeal. That was done within the strict time, and the fact that the notice of appeal was not served within the strict time, was due entirely to this misunderstanding. On the facts of this case, it appears to me that the case is one where the discretion of the court ought to be exercised, and, accordingly, leave will be given.

MACKINNON LJ. I agree.

FINLAY LJ. I also agree.

Leave to appeal given.

Solicitors: Gasquet Metcalfe & Walton (for the appellant); Walmsley & Stansbury, agents for E W Marshall Harvey & Dalton, Bournemouth (for the respondent).

W K Scrivener Esq   Barrister.

Re Brooks Settlement Trusts, Lloyds Bank Ltd v Tillard

[1939] 3 All ER 920


Categories:        SUCCESSION; Family Provision: TRUSTS        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        27 JUNE 1939        


Choses in Action Assignment Expectancy Voluntary settlement of interests under marriage settlement Sum appointed under special power in marriage settlement after voluntary settlement Trustee of voluntary and marriage settlements same person Whether trustee can be permitted to retain appointed sum when requested to hand it over to settlor of voluntary settlement.

A marriage settlement executed in 1904, gave the wife a special power of appointment among her children, and, in default of appointment, the settled funds were to be divided equally between the children of the marriage. In 1929, before any exercise of the power of appointment had been made, AJT, one of the children, executed a voluntary settlement of all his interests under the marriage settlement. In 1939, the wife exercised the special power of appointment in favour of AJT, appointing to him £3,517 and releasing all her rights in that sum, so that, but for the voluntary settlement, it would have become immediately

Page 921 of [1939] 3 All ER 920

payable to him. The plaintiff bank was, in 1939, the trustee of both settlements, and, in this summons, asked whether it ought to retain the sum of £3,517 as trustee of the voluntary settlement, or comply with a request of AJT and hand it over to him:

Held at the date of the voluntary settlement AJT had no interest in the appointed sum other than that of a mere expectancy, and, as an assignment of a mere expectancy was unenforceable in equity against a volunteer, the trustee ought not to be allowed to retain the appointed sum.

Notes

The courts will not specifically enforce a contract to assign an expectancy unless there is a valuable consideration for that contract. The voluntary assignment, so far as it related to an expectancy, operated as a contract to assign that interest if and when it fell into possession, and was, therefore, not enforceable. The judgment takes the matter one step further, and says that trustees cannot be permitted to retain monies in their hands in such a case, but will be ordered to pay such monies over to the person entitled thereto.

As to Assignment of Expectancies, see Halsbury (Hailsham Edn), Vol 4, pp 439, 440, para 807; and for Cases, see Digest, Vol 8, pp 496, 497, Nos 613621.

Cases referred to

Northumberland (Duke) v Inland Revenue Comrs [1911] 2 KB 343; 37 Digest 479, 764, 80 LJKB 866, 104 LT 506, on appeal [1911] 2 KB 1011.

Re Ellenborough, Towry Law v Burne [1903] 1 Ch 697; 8 Digest 497, 619, 72 LJCh 218, 87 LT 714.

Tailby v Official Receiver (1888) 13 App Cas 523; 20 Digest 334, 770, 58 LJQB 75, 60 LT 162.

Meek v Kettlewell (1843) 1 Ch 342; 8 Digest 496, 617, 13 LJCh 28, 2 LTOS 205.

Lovett v Lovett [1898] 1 Ch 82; 37 Digest 478, 760, 67 LJCh 20, 77 LT 650.

Adjourned Summons

Adjourned summons for the determination of the question whether the trustees of a voluntary settlement of all the settlors interest under a marriage settlement could be called upon to hand over to the settlor certain moneys in their hands which had been appointed to him under a special power of appointment in the marriage settlement.

On 14 November 1904 a settlement was made in contemplation of a marriage shortly thereafter solemnised between Arthur George Tillard and Emily Katherine Close Brooks. Under that settlement the trustees thereof were to hold certain stocks, funds and shares, called the settled fund, upon trust to pay the income thereof to the wife during her life without power of anticipation. The wife was then given a power of appointment under which she might appoint the income of the settled fund to her husband during his life if he should survive her. By cll 7 and 8 of the settlement the trustees were to hold the settled fund subject to the above trusts in trust for such issue of Emily Katherine Close Brooks by the then intended or any other marriage in such manner in all respects as she should by deed or will appoint and, in default of or so far as there might not be any such appointment, the trustees were to hold the settled fund in trust for all the children or any child of Emily Katherine Close Brooks

Page 922 of [1939] 3 All ER 920

by the then intended or any other marriage who, being sons should attain 21 years of age, or being daughters should attain that age or marry, in equal shares if more than one. The present trustees of the settlement were Lloyds Bank Ltd, the plaintiffs.

There were five children of the marriage, of whom Arthur James Tillard, born on 26 December 1906, was one, and he was a defendant to the summons. The husband, Arthur George Tillard, died on 20 October 1914 and Mrs Tillard has, since that date, remained a widow.

On 8 May 1929 a voluntary settlement, of which the plaintiffs were the trustees, was made by Arthur James Tillard of all his share and interest whether vested or contingent to which he was then, or might thereafter, become entitled, whether in default of appointment or under any appointment thereafter to be made or on failure of any such appointment, of and in the trust property which was then, or might at any time thereafter, become subject to the trusts of that settlement. The trustees of the voluntary settlement were to hold the income thereof upon protective trusts for the benefit of Arthur James Tillard during his life, and after his death the trustees were to stand possessed of the capital and future income of the trust fund upon certain trusts for his children or remoter issue, and, if there should be no such child who should attain a vested interest, the trustees were to stand possessed of the trust fund in trust for the settlor absolutely. There was also a provision for the settlor to appoint the income of the trust fund after his death for the benefit of any wife of his, and further powers for the raising of certain sums for this benefit or the benefit of any child or issue of his, but so that no exercise of these powers should have any effect during the lifetime of Mrs Tillard.

On 15 May 1939 Mrs Tillard by deed poll, in exercise of the power given to her by the settlement of 1904, irrevocably appointed, inter alia, a sum of £3,517 less the costs of raising that sum to Arthur James Tillard. By the same deed poll Mrs Tillard released her life interest in the sum so appointed, and also released that sum from the power given to her by the settlement to confer on any husband whom she might leave surviving her the right to receive any portion of the income of the property subject to the trusts of the settlement.

Notwithstanding the provisions of the voluntary settlement of 1929, the defendant claimed that the sum of £3,517 so appointed to him by the deed poll of 1939 should be paid over to him, and not held by the plaintiffs as the trustees of the voluntary settlement.

The defendant, on 6 November 1933, had married Dorothy Vera Hope-Falkner, but there had been no issue of the marriage. The only persons interested at the time of the summons under the trusts of the voluntary settlement were the defendant Arthur James Tillard and his wife, who was also made a defendant.

Herbert L A Hart for the plaintiffs.

Norman C Armitage for the defendant Arthur James Tillard.

Page 923 of [1939] 3 All ER 920

E G Eardley-Wilmot for the defendant Mrs Tillard and for unborn persons who might be interested under the voluntary settlement.

27 June 1939. The following judgment was delivered.

FARWELL J (His Lordship stated the terms of the documents). By the voluntary settlement of 8 May 1929, Arthur James Tillard assigned to the plaintiff bank:

All the part or share parts or shares and other interest whether vested or contingent to which the settlor is now or may hereafter become entitled whether in default of appointment or under any appointment hereafter to be made or on failure of any such appointment of and in the trust property which is now or may at any time hereafter become subject to the trusts of [the marriage settlement of Nov. 14, 1904].

These words show an intention that all interests under the settlement of 1904, which the son might then or thereafter have, should pass to the trustees of the voluntary settlement, and there is no doubt that, as a matter of construction of the voluntary settlement, the appointed sum was included in the property assigned to the trustees. Counsel on behalf of the wife of Arthur James Tillard, who also represents persons who may hereafter become interested, that is, the unborn children of his marriage, has argued that this should be conclusive of the matter; but the legal position of such a settlement has to be considered. The question which thus arises is how far an attempt to assign what is taken under a special power of appointment is operative. The following statement of the principle is to be found in Farwell on Powers (3rd Edn), p 310:

The exercise of a power of appointment divests (either wholly or partially according to the terms of the appointment) the estates limited in default of appointment and creates new estates, and that, too, whether the property be real or personal.

This statement was adopted by Hamilton J in Northumberland (Duke) v Inland Revenue Comrs. The exercise of the power of appointment divests pro tanto estates in default of appointment, and it is impossible to say that, until the appointment is made, the son has an interest under the marriage settlement other than that in default of appointment. The appointment, therefore, gave him an interest which he had not had before. No doubt the appointment must be read into the settlement, but that does not alter the position. The son had no more than a mere expectancy under the marriage settlement until the appointment was made. That being so, the son, when he assigned his interest under the settlement to the trustees of the voluntary settlement in the words I have quoted, was assigning, or purporting to assign, something to which he might become entitled in futuronot a contingent interest, but a mere expectancy. It is clear on the authorities that he cannot be compelled to allow the trustees to retain the appointed sum, and that he can call on the trustees to pay it over to him. In Re Ellenborough, Towry Law v Burne, Buckley J said, at p 700:

The question is whether a volunteer can enforce a contract made by deed to dispose of an expectancy. It cannot be and is not disputed that if the deed had been for value the trustees could have enforced it. If value be given, it is immaterial what is the form of assurance by which the disposition is made, or whether

Page 924 of [1939] 3 All ER 920

the subject of the disposition is capable of being thereby disposed of or not. An assignment for value binds the conscience of the assignor. A court of equity as against him will compel him to do that which ex hypothesi he has not yet effectually done. Future property, possibilities, and expectancies are all assignable in equity for value: Tailby v. Official Receiver. But when the assurance is not for value, a court of equity will not assist a volunteer.

Buckley J then cites a passage from Meek v Kettlewell and points out that that passage was not overruled when the case went to the Court of Appeal, and that the rule in that case is still binding.

I was also referred to Lovett v Lovett, where, on facts very similar to those here, Romer J based his decision partly on construction and partly on estoppel. That authority is nevertheless in favour of the view I have taken of this case. I regret to have to come to the conclusion to which the law forces me to come, as it is plainly contrary to the intention of the settlor at the time the voluntary settlement was executed, but the principle of law which I have stated makes it impossible to enforce the voluntary settlement, even to the extent of permitting the trustees of that settlement to retain, as subject thereto, the money in their hands. There must therefore be a declaration that the trustees ought to hand over to Arthur James Tillard the sum of £3,517 on the footing that the voluntary settlement did not operate as a valid assignment or declaration of trust in respect thereof.

Declaration accordingly. Costs of all parties as between solicitor and client to be paid out of the appointed sum.

Solicitors: Bird & Bird (for the plaintiffs); Dawson & Co (for the defendants).

Maurice Share Esq   Barrister.

Spira v Spira

[1939] 3 All ER 924


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, FINLAY AND DU PARCQ LJJ        

Hearing Date(s):        27 JULY 1939        


Practice Summons for judgment under RSC Ord 14, r 1 No attendance by defendants Judgment signed Negotiations Lapse of time for appealing Unsuccessful application to extend time for appealing Application under RSC Ord 27, r 15, to set aside judgment Whether judgment had been obtained “by default.”

The plaintiff in an action for money lent made an application for judgment under RSC Ord 14, r 1. Owing to a mistake, the defendants solicitor did not attend the summons, and judgment was signed. There ensued protracted negotiations, which proved unsuccessful. The defendants applied for leave to appeal out of time, but this was refused. They then applied under RSC Ord 27, r 15, for leave to set aside the judgment, and contended that it was a judgment obtained by default:

Held a judgment obtained under Ord 14, r 1, is not a judgment obtained on default, and Ord 27, r 15, had therefore no application to the present case.

Notes

The point here is simply whether or not the judgment obtained under RSC Ord 14, is a default judgment, and, therefore, one which could have been set aside on terms.

Page 925 of [1939] 3 All ER 924

As to Default Judgment, see Halsbury (Hailsham Edn), Vol 19, pp 263265, paras 562, 563; and for Cases, see Digest, Pleading, pp 160, 161, Nos 14231434. See also, Yearly Practice of the Supreme Court 1939, p 426.

Cases referred to

Evans v Bartlam [1937] AC 473 [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Haigh v Haigh (1885) 32 ChD 478; 18 Digest 250, 1939, 55 LJCh 190, 53 LT 863.

Hopton v Robertson (1884) 23 QBD 126, n; 21 Digest 418, 15.

Appeal

Appeal by the defendants from a decision of Hallett J, dated 13 July 1939, whereby he upheld a decision of Master Burnand refusing to set aside a judgment obtained by the plaintiff under RSC Ord 14, r 1.

The facts of the case are fully set out in the judgments.

G O Slade for the appellants.

P B Morle for the respondent.

Slade: It is submitted that it is wrong to say that Ord 27, r 15 does not apply to a judgment obtained under Ord 14. There are many examples where this procedure is applicable, for example, where a plaintiff has applied for judgment under Ord 31, r 21 because a defendant has failed to comply with an order for discovery or for interrogatories. Ord 27, r 15 says “any judgment by default may be set aside.” The default in this case was the failure to take steps under Ord 14, r 1 to prevent judgment being given. “Judgment by default” means anything short of an adjudication on the merits. The word default should not be construed narrowly. This court has power to revoke any judgment not obtained on a consideration of the merits of the case, or by consent. Evans v Bartlam. [Counsel also referred to Haigh v Haigh and Hopton v Robertson.] Here it was not inadvertence on the part of a party but on the part of the solicitor. The court can see to it that the plaintiff is not damnified, by putting the defendants upon terms.

Morle: The question here is, has Ord 27, r 15 any application. It does not confer upon the court power to set aside any judgment. It is the default of pleading rule. There are various other defaults that can be committed. The mere failure to attend a summons under Ord 14 is not a default; a defendant who has no defence will merely stay away, but that is not a default. A judgment under Ord 14 is an adjudication on the merits. The only remedy open to the defendants was to ask the judge to extend the time for appealing. That is a matter for the discretion of the judge, and there was ample ground for refusing that application.

(He was stopped by the court.)

G O Slade for the appellants.

P B Morle for the respondent.

27 July 1939. The following judgments were delivered.

SCOTT LJ. I propose to deal with this case shortly, although it was fully, forcibly, and clearly argued before us by counsel for the

Page 926 of [1939] 3 All ER 924

appellants, against whom an order for summary judgment was made on 12 April 1939 under RSC Ord 14, the summons for judgment having been originally taken out many months before, during 1938, upon a writ issued in July 1938. The proceedings were between the plaintiff and his two brothers, and the action was a claim on a specially indorsed writ for money lent and interest amounting to £1,500. After the issue of the writ, there were negotiations for settlement which lasted for many months. In the spring of 1939, these negotiations having failed, the plaintiff pressed for judgment upon an application of the usual type. By an accident, the defendants solicitor failed to put in any affidavit, or to appear at the hearing. Therefore judgment was entered against the defendants. Then there ensued a few days later a correspondence beginning with a letter from the plaintiffs solicitor enclosing a copy of the order for judgment, which brought to the mind of the defendants solicitor the fact that he had failed in his duty to his clients. He writes, in effect, expressing his regret and says that the defendants must appeal on the ground that if an account were taken nothing would be due from the defendants to the plaintiff. He also offered to pay personally all the costs thrown away by his failures to appeara very proper letter in the circumstances. The proper thing to have done was to have taken proceedings to set aside this judgment, but this he did not do. The time for appealing was allowed to go by, and after that further negotiations took place on the footing stated in the letter of 9 May to the effect that the plaintiff would undertake not to enforce the judgment if certain terms were carried out. All the terms were on the basis of the existing judgment and performance by agreement of the various terms with a view of avoiding the necessity of enforcing the judgment. Then, nothing further being done, and the further negotiations not being fruitful, on 1 June 1938 the plaintiffs solicitor writes that his client is not willing to accept less favourable terms. Then the proceedings taken by the defendants were to appeal to the judge to extend the time for appealing from the original order of the master. That appeal was dismissed. Then the defendants advisers applied under RSC Ord 27, r 15 to set aside the original judgment on the ground that it had been signed in default of appearance to the judgment summons. The master took the view that the RSC Ord 27, r 15, procedure was inappropriate. He said it was the practice in the Kings Bench Division not to use it thus. There was an appeal from that decision to Hallett J which was heard on 13 June 1939. The judge was disposed to take the same view that he had no power to set aside a judgment under RSC Ord 14 in proceedings which complied with the requirements of Ord 14 in that all the necessary evidence was before the court, and there had been no answer to the evidence of the plaintiff. The judge said that, in those circumstances, he did not think RSC Ord 27, r 15, applied, and he refused to allow the appeal. With regard to the question as to how far he dealt with the merits of the appeal before him, the gist of the matter

Page 927 of [1939] 3 All ER 924

was that it was contended that they were to some extent referred to. The judge used the expression at one stage that he was not dealing with merits but jurisdiction, but in the order the merits were restated.

Upon those facts we are asked to say (i) that there was a default in regard to the proceedings under RSC Ord 14, by reason of the omission of the defendants solicitor to take the necessary steps to appear at the hearing of the summons, and (ii) that, in the circumstances, the delay was due to the negotiations for a settlement, and that therefore, to do substantial justice to the parties, the judgment should be set aside.

In Evans v Bartlam Lord Atkin laid down the principles which should guide the court. Lord Atkin said in that case at p 480:

The principle obviously is that unless and until the court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure.

Lord Wright in the same case expressed similar views. Here I think the rules were strictly followed. Lord Wright expressed the view that default proceedings ought not to interfere with the performance of justice. Counsel for the appellants says that that did happen here. I cannot see that it did. It seems to me that the plaintiff obtained judgment in strict compliance with the requirements of Ord 14, and the fault lies with the defendants for not appealing in time. In so far as they did apply at a later date for an extension of time, that was a matter of pure discretion and the judge acted within his powers. After that an application was made on other lines of procedure under RSC Ord 27, r 15. I think the answer to that was that there had been no such default in the proceedings under RSC Ord 14, as is contemplated by RSC Ord 27, r 15, and that the matter is not one in which the discretion of the court should be exercised in favour of the defendants, who had complete knowledge of the situation, but negotiated, and, only when the negotiations ended, took the decision that they would like to vacate the judgment. They were then too late. For those reasons, the appeal ought to be dismissed.

DU PARCQ LJ. I am of the same opinion. The judge was right in the alternative view he took that, assuming he had jurisdiction under RSC Ord 27, r 15, to set aside the judgment, he ought not to have done so. Here the defendants found out that judgment had been signed against them in time to appeal against it. They could then have applied to set aside that judgment. Instead of doing that, they proceeded to negotiate. When there was a breakdown in the negotiations, then they sought to set the judgment aside, but it was very late in the day.

The other question is one of difficulty. Scott LJ, has said there was no default, and I am disposed to share that view. I think that when one looks at the terms of RSC Ord 27, r 15, what is contemplated there is a failure to do something that a litigant is directed to do either by RSC Ord 27, or by one of the other orders. When one looks

Page 928 of [1939] 3 All ER 924

at RSC Ord 14, r 1, far from finding any order that the defendant is to do anything, the rule only says that the judge can order that the plaintiff should sign judgment

unless the defendant shall satisfy him that he has a good defence to the action on the merits or shall disclose such facts as may be deemed sufficient to entitle him to defend the action generally. …

There is no direction to the defendant. And that is said is that if he does not satisfy the judge that he has a defence, judgment shall be signed against him. It seems to me conceivable that cases of hardship may arise. There is a special provision for a defendant who fails to appear at the trial, it may be through no fault of his own. In such a case the court can intervene and set aside the judgment, on terms, although nothing wrong had been done by the plaintiff. In RSC Ord 14, proceedings, the right of appeal to a judge will usually be a sufficient safeguard, but the time for appealing may go by, and it may be very hard if it were not open to this court to set aside the judgment.

I think that absence is not a default, but I think the point should be left open, and it is not desirable to decide it finally. It may be desirable that the rule should be made clear and the attention of the Rules Committee drawn to it.

I agree that the appeal should be dismissed with costs.

SCOTT LJ. I agree with the last remark, that the matter might be considered by the Rules Committee. It is not essential here to decide the full scope of the rule.

I am asked by Finlay LJ to say that he concurs with the judgments delivered.

Appeal dismissed with costs.

Solicitors: Lucien Fior (for the appellants); H M Lyell (for the respondent).

E Fuller Briscoe Esq   Barrister.

In the Goods of Knight

[1939] 3 All ER 928


Categories:        SUCCESSION; Administration of Estates, Intestacy        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HODSON J        

Hearing Date(s):        12, 19 JULY 1939        


Executors and Administrators Letters of administration Representation of deceased in action Grant to Official Solicitor Whether general grant or one limited to defending particular action Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 162 Administration of Justice Act 1928 (c 26), s 9 Law Reform (Miscellaneous Provisions) Act 1934 (c 41), s 1(1).

The intestate had been killed in a motor car accident. Two other persons, injured in the same accident, desired to bring an action against the estate of the deceased under the provisions of the Law Reform (Miscellaneous Provisions) Act 1934, s 1(1), and asked that the Official Solicitor might be granted letters of administration of the estate of

Page 929 of [1939] 3 All ER 928

the deceased. The Official Solicitor asked that the grant should be limited to his defending the proposed action:

Held the grant should be limited, as asked by the Official Solicitor, to his defending the proposed action.

Notes

The operation of the principle actio personalis moritur cum persona has in the past made it seldom necessary for the appointment of an administrator ad litem, but such appointments have been made where necessary. The provisions of RSC Ord 16, r 46, which provide an alternative course to such an appointment, have also tended to limit the number of such grants. The judge has, however, seen his way to make the appointment in a case where it is alleged that the deceased was the person responsible by his negligence for injuries sustained in a motor car accident. No action could have been brought in respect of those injuries before 1934, and the present matter illustrates the procedure in an action against the estate of the deceased.

As to Grant of Administration ad litem, see Halsbury (Hailsham Edn), Vol 14, pp 275, 276, paras 486, 487; and for Cases, see Digest, Vol 23, pp 209215, Nos 24842555.

Cases referred to

In the Estate of Simpson, In the Estate of Gunning [1936] P 40; Digest Supp, 105 LJP 7, 154 LT 136.

Pratt v London Passenger Transport Board, Green v Vandekar [1937] 1 All ER 473; Digest Supp, 156 LT 265.

Probate Motion

Probate motion for the grant of letters of administration of the estate of A F W Knight to the Official Solicitor in order that there might be representation of the estate of the deceased in an intended action in the Kings Bench Division. The deceased had sustained fatal injuries in a motor-car accident and had died intestate. The only estate was a policy of insurance against third-party risks. Two persons, injured in the accident in which the deceased met his death, desired to commence an action against the estate of the deceased in the Kings Bench Division claiming damages in respect of their injuries, and they now applied by motion for a grant of letters of administration to the Official Solicitor, the parties entitled in priority having failed to apply. The grant was asked for solely that the person appointed might act as defendant in the above action, which had been brought under the provisions of the Law Reform (Miscellaneous Provisions) Act 1934, s 1(1). The Official Solicitor desired the grant to be limited to appearing as defendant in the action.

Andrew Balfour for the applicants.

Theodore Turner for the Official Solicitor.

Balfour: In similar cases general grants have been made to nominees of the plaintiffs: In the Estate of Simpson, In the Estate of Gunning. There is, however, jurisdiction to make a grant to the Official Solicitor as administrator ad litem under the Supreme Court of Judicature (Consolidation) Act 1925, s 162, as amended by the Administration of Justice Act 1928, s 9.

Turner: The grant should be a grant ad litem only. There is power to make a representation order under RSC Ord 16, r 46: Pratt v London Passenger Transport Board, Green v Vandekar. The Official

Page 930 of [1939] 3 All ER 928

Solicitor does not desire to act otherwise than as defendant in the action. In the event of the action being successful and a judgment being obtained, the applicants would be entitled to a grant as creditors.

Andrew Balfour for the applicants.

Theodore Turner for the Official Solicitor.

19 July 1939. The following judgment was delivered.

HODSON J. I will make an order under the Supreme Court of Judicature (Consolidation) Act 1925, s 162, as amended by the Administration of Justice Act 1928, s 9, for a grant of letters of administration to the Official Solicitor limited to his defending the proposed action by the applicants against the estate of the deceased. The grant will cease on the conclusion of that action.

Solicitors: Pritchard Sons Partington & Holland, agents for Alan G Hawkins & Co, Kings Lynn (for the applicants); The Official Solicitor.

J F Compton Miller Esq   Barrister.

Montreal Trust Company and Another v Canadian National Railway Company

[1939] 3 All ER 930


Categories:        COMMONWEALTH; Commonwealth countries: TRANSPORT; Rail        

Court:        PRIVY COUNCIL        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT, LORD ROMER        

Hearing Date(s):        6, 7, 21 JULY 1939        


Privy Council Quebec Railways Contract Director directly or indirectly interested Lease of house for chairman of directors Railway Act of Canada (RSC 1927, c 170) s 121 Canadian National Railways Act (RSC 1927, c 172).

The Canadian National Railway Co is a company incorporated by a Dominion statute. It has no capital, stock or shareholders. Its corporators are its directors, who are all chosen by the Governor-General-in-Council, and it is subject to the provisions of the Railway Act of Canada 1927, excepting those provisions which are inconsistent with its own Act. The Railway Act of Canada, s 121 provides that no director shall enter into, or be directly or indirectly for his own use and benefit interested in, any contract with the company other than a contract which relates to the purchase of land necessary for the railway. In September 1929, the president and chairman of the railway company was serving in these capacities under an agreement which was due to expire in 1930. He was living, at his own expense, in a house in the city of Montreal. By an agreement of 23 September 1929, he was engaged to continue to serve as president and chairman for a period of 5 years, and a proposal was set on foot that (in addition to his salary) he should be provided with free residential quarters, and on 17 September 1929, a resolution was passed that a suitable and properly equipped residence should be leased for the use of the chairman. The house selected was that in which the president was then living, but a difficulty existed in that the owner would not further lease the property but would only sell, while the railway company would not buy but would only rent. Eventually one Decary, a director of the railway company, arranged with the appellant company to advance the money necessary to purchase the property and vest it in his nominee, one Séguin (the second appellant), the respondent company to lease the property for 10 years from Séguin, and this transaction was approved by a resolution of the directors of the railway company in August 1930. The chairman died in March 1933, and subsequently the legal advisers of the respondent railway company wrote to Séguin alleging that the lease was a nullity by reason of the part played by Decary in relation to

Page 931 of [1939] 3 All ER 930

the lease and purchase of the property, and of the provisions of s 121 of the Railway Act. The appellants thereupon instituted proceedings for the recovery of the rent due under the lease:

Held (i) in the circumstances the lease was a contract with the railway company in which a director, Decary, was directly or indirectly interested and the provision of a residence for an official of the company was not a purchase of land necessary to the railway within the meaning of the Act.

(ii) the contract was void and the rent irrecoverable.

Notes

Two points arise in this case. The first is whether the contract was one in which a director was directly or indirectly interested. The second is, assuming that to be so, was the contract a nullity or was the only effect that the directors interest in it avoided. It is decided that the director was indirectly interested in the contract and that, that being so, the contract was a nullity and of no effect.

As to Contracts in which Directors are Interested, see Halsbury (Hailsham Edn), Vol 5, pp 319323, paras 534, 535; and for Cases, see Digest, Vol 9, p 470, Nos 30753082.

Cases referred to

Foster v Oxford etc Ry Co (1853) 13 CB 200; 10 Digest 1148, 8125, 22 LJCP 99, 20 LTOS 224.

Macdonald v Riordon (1899) 30 SCR 619; 17 Digest 432, case c, affg QR 8 QB 555.

Re Express Engineering Works Ltd [1920] 1 Ch 466; 9 Digest 521, 3423, 89 LJCh 379, 122 LT 790.

Appeal

Appeal from a judgment of the Court of Kings Bench (Appeal Side) of the Province of Quebec [Letourneau, Bond, Galipeault, St Jacques, and Barclay JJ], dated 14 December 1938, confirming a judgment of the Superior Court [Delormier J], dated 20 September 1935. The judgment of their Lordships was delivered by Lord Russell of Killowen.

Cyril Radcliffe KC and W F Chipman KC for the appellants.

Louis S St Laurent KC and Hugh E ODonnell KC for the respondents.

Radcliffe KC: This was not Decarys contract. A lease is not a contract within the meaning of s 121, although a lease has got contractual elements. The effect of s 121 is not to avoid the transaction which is the contract, but is to avoid the interest of the director. The Court of Appeal held itself bound by the decision in MacDonald v Riordon, but the facts in that case have no relation to the facts in the present case. Decary was acting at the request of the board and was not doing so in order to make any profit out of the transaction. The statutory position in Quebec under s 121 is the same as that which is to be found in this country as exemplified in Foster v Oxford Railway Co.

Chipman KC: The plan to acquire the property was perfectly sound and it cannot be said to become invalid because an individual had to be found to purchase the property. Séguin in fact and in law was the owner and lessor of the property and the only contracting party

Page 932 of [1939] 3 All ER 930

with the railway company. S 121 was meant to provide protection for the corporators as against the directors, the directors here are the corporators and cannot have a different interest. The respondent has adopted the lease and cannot now repudiate it, and is estopped from setting up the invalidity of the lease against the appellants. [Counsel referred to Re Express Engineering Works Ltd.]

The respondents were not called upon.

Cyril Radcliffe KC and W F Chipman KC for the appellants.

Louis S St Laurent KC and Hugh E ODonnell KC for the respondents.

21 July 1939. The following judgments were delivered.

LORD RUSSELL OF KILLOWEN. In this case the Montreal Trust Co and one Séguin appeal from a judgment of the Court of Kings Bench (Appeal Side) of the Province of Quebec, which affirmed a judgment of the Superior Court. The judgment declared a lease by Séguin to the Canadian National Railway Co to be illegal and void, and dismissed with costs an action for rent thereunder brought by the Montreal Trust Co as transferee of Séguins rights under the lease. Séguin was summoned as mis-en-cause. The relevant facts which led up to the action must be stated, the Canadian National Railway Co being referred to as the railway company, and the Montreal Trust Co being referred to as the trust company. The railway company is a company incorporated by a Dominion statute, 9 and 10 Geo V, c 13, now represented by RSC 1927, c 172. It has no capital, stock or shareholders. Its corporators are its directors, who (from 5 to 15 in number) are all chosen by the Governor-General-in-Council. It is subject to the provisions of the Railway Act of Canada (RSC 1927, c 170), excepting those provisions which are inconsistent with its own Act.

In September 1929 the president and chairman of the railway company was Sir Henry Thornton. He had filled those offices for some 7 years. He was then serving in those capacities under an agreement with the railway company dated 2 September 1925, at a salary of $65,000.00 a year. That agreement was due to expire on 4 October 1930. He was living, at his own expense, in a house, 1415, Pine Avenue, in the city of Montreal, which he leased from a Mr Beardmore at a rent of $6,000.00. His tenure was, however, precarious, because Mr Beardmore was anxious to sell the house, and the lease contained a clause enabling Mr Beardmore to terminate the lease on three months notice.

By an agreement dated 23 September 1929 and made between the railway company and Sir Henry Thornton, he was engaged to continue to serve as president and chairman for a period of 5 years from 4 October 1928, and thereafter from year to year determinable by either party on 12 months notice, at a salary of $75,000.00 without any extra fees or remuneration of any description; and the agreement of 2 September 1925 was cancelled as from 4 October 1928. Apparently out of abundant caution, Sir Henry Thornton obtained an agreement (dated 25 October 1929) from the Crown to the same effect, the salary of $75,000.00 thereunder being expressed to be payable less the remuneration receivable under his agreement with the railway company. For some reason, not immediately

Page 933 of [1939] 3 All ER 930

apparent, a proposal was set on foot that the president should (in addition to his salary of $75,000.00) be provided with free residential quarters, and on 17 September 1929 the executive committee of the directors passed a resolution (which was approved by the board of directors on 23 September 1929), in the following terms:

Whereas in the opinion of the executive committee a suitable residence in Montreal for the chairman and president of the company is essential for the proper conduct of the companys business, it was unanimously resolved that the executive committee should undertake to lease a suitable and properly equipped residence for the use of the chairman and president of the company under such terms and conditions as the committee may subsequently deem proper.

Steps were then taken to provide the residence, the most obvious choice, if it were possible, being the house in Pine Avenue which was, and had for some time past been, Sir Henrys home. A difficulty, however, existed in the fact that Mr Beardmore would not lease but would only sell, while the railway company would not buy but would only rent. At this point Mr Decary becomes prominent in the story. He was president of the Title Guarantee and Trust Corpn, and a director of the railway company. He was also the head of a firm of notaries, Decary, Barlow & Joron. He was asked by his co-directors whether he could arrange the financing of a purchase of the Pine Avenue house. He said that the Title Guarantee and Trust Corpn would not finance it, but that he would try to get it financed elsewhere. Ultimately he did arrange with a Mr Donaldson, the manager of the trust company, that the trust company would advance the money necessary to purchase the property on the terms contained in two letters. The first letter was from Decary to Donaldson, dated 24 June 1930, as follows:

Referring to our conversation of the other day in connection with the Beardmore property on Pine Avenue, I, or my nominee subject to my personal guarantee, will purchase the above property for $185,000.00 cash, the property subsequently to be rented to the Canadian National Railways for ten years, at a price representing 8½ per cent. per year, net, outside of taxes of any kind, repairs and improvements.

You will make a loan for this amount of $185,000.00 for ten years, at 6½ per cent., the difference between the amount of interest paid and 8½ per cent. to be applied as a sinking fund on the amount of the loan. Your company will be given a first mortgage on the property and an absolute transfer of the Canadian National lease as guarantee for the loan.

We should be in a position to complete this transaction during the first days of the month of July. Will you please advise if this is convenient to you, and oblige.

The second letter was from Donaldson to Decary, dated 25 June 1930, as follows:

I have your letter of the 24th instant, in connection with the Beardmore property on Pine Avenue. The arrangement as outlined by you is quite satisfactory to us and we are prepared to make the loan for the amount stated, subject to satisfactory title.

Meanwhile Mr Beardmore and Sir Henry Thornton had already come to terms, under which Mr Beardmore agreed to accept and Sir Henry agreed to say $175,000.00 for the house and $10,000.00 for sundry furnishings therein; and the benefit of this contract was on 9 July

Page 934 of [1939] 3 All ER 930

1930, at the request of Mr Decary, assigned by Sir Henry Thornton to the mis-en-cause Séguin. Séguin was described by Mr Decary in this request, which was made by letter dated 4 July 1930, as “my nominee.” Séguin is himself a notary, and is in the employ of Mr Decarys firm.

On 16 June 1930 the executive committee had passed a resolution which was worded thus:

Resolved that the company rent from George H. Séguin for a term of ten (10) years, commencing on Aug. 1, 1930, and expiring on July 1, 1940, that certain house bearing No. 1415, Pine Avenue West, in the City of Montreal, for an annual rental of Fifteen Thousand Seven Hundred and Twenty-Five Dollars ($15,725.00) payable quarterly on Feb. 1, May 1, Aug. 1 and Nov. 1 of each year, the first payment to become due on Nov. 1, 1930, and subject to the following conditions on the part of the company, namely:

To keep the house in good order of repairs during the entire term of the lease;

To use the premises as a private residence only, and for no other purposes;

To pay all taxes and assessments, general or special, or of any nature whatsoever which may be imposed on said property during the term of the lease.

The sum of $15,725.00 is 8½ per cent on the total sum payable to Mr Beardmore for the house and furniture. This resolution was approved by the directors of the railway company on 19 August 1930.

On 8 August 1930 three notarial documents were executed and subsequently registered, namely, (i) a deed of sale by Mr Beardmore to Séguin of the house and its contents and furnishings, the price being stated to be $175,000.00 for the immovable properties and $10,000.00 for the contents and furnishings of the house; (ii) a lease by Séguin to the railway company for the term of 10 years from 1 August 1930, of the house in consideration of $157,250.00 payable by 40 quarterly instalments as therein mentioned; and (iii) a deed of loan between the trust company and Séguin by which the trust company lent $185,000.00 to Séguin, and Séguin bound himself to repay the loan on 1 August 1940 to pay interest at 6½ per cent in the meantime, and also to reduce the principal by annual repayments of 2 per cent of the amount of the loan. As security Séguin hypothecated in favour of the trust company the house in Pine Avenue, and transferred to it his rights under the lease to the railway company.

Subsequently Séguin as “owner” of the house entered into an agreement to make certain repairs thereto at a cost not to exceed $50,000.00. This fact need only be stated for the purpose of explaining the reference to that sum in the following letter. On 6 November 1930 Mr Decary wrote a letter to Sir Henry Thornton containing the following passage:

As you have asked me also, I hereby agree on behalf of the owner of property 1415, Pine Avenue, which you now occupy, to sell you this property at any time during the term of its lease to Canadian National Railways for the sum remaining due to us on the advances of $185,000.00 and $50,000.00. In order, however, not to encumber my estate in any way this option would have to be exercised within 6 months following my death should I die before the expiry of your lease.

On 20 November 1930 Sir Henry Thornton (by letter of that date) informed the Minister of Railways of this option to purchase, and stated that it was “of course assignable to any nominee of my own.”

Page 935 of [1939] 3 All ER 930

The rest of the story is soon told. Sir Henry Thornton died in March 1933; and on 27 April 1933 the legal advisers of the railway company wrote to Séguin alleging that “the lease executed on 8 August 1930 … between the railway and yourselfacting for the benefit of Mr Ernest Decaryis a nullity.” The present action was commenced on 13 October 1933, claiming payment of the instalments of rent due on 1 May 1933 and 1 August 1933 respectively.

The point of the case can now be stated. It is claimed by the railway company that the lease is a nullity by reason of the provision contained in s 121 of the Railway Act (RSC c 170) which enacts:

No person who is a director of the company shall enter into, or be directly or indirectly, for his own use and benefit, interested in any contract with the company other than a contract which relates to the purchase of land necessary for the railway, nor shall any such person be or become a partner of or surety for any contractor of the company.

It is said that by reason of the part played by Mr Decary in relation to the lease and the purchase of the property, the section operates to make the lease a nullity and of no effect. The trial judge and the appeal court have both taken this view, but as the result of different reasoning. Their Lordships also are of opinion that the action was rightly dismissed by reason of the section, but they prefer to base their view on a branch of the section different from that which found favour with the judges of the Court of Kings Bench. Their Lordships are not concerned with any question but the validity of the lease. No question can arise in this action (to which Mr Beardmore is not a party) in relation to the purchase from him and the conveyance by him to Séguin, or in relation to the hypothec by Séguin to the trust company. Indeed, by no stretch of the imagination can either transaction come within the section; they cannot in any sense be described as contracts with the railway company.

The case is otherwise with regard to the lease. To that document the railway company is a party, and by that document it enters into contractual relationship with Séguin. However, Séguin was admittedly, and to the knowledge of the railway company, merely the nominee of Mr Decary. Subject to the rights of the trust company under the deed of hypothec, Séguin would have to account to Mr Decary for the rent payable by the railway company under the lease. On the other hand, Mr Decary would be bound to indemnify Séguin and keep him harmless from all liability imposed upon him as a lessor by virtue of the lease. In these circumstances their Lordships feel no doubt that the lease was a contract with the railway company in which Mr Decary was directly or indirectly interested. So far the case falls directly within the words of the section. The appellants, however, contended that the whole transaction was not a profitable one, that Mr Decary only acted in the matter at the instance of the railway company, and with no expectation of profit, that Sir Henry Thorntons option to purchase existed for the benefit of the railway company, and that in these cir

Page 936 of [1939] 3 All ER 930

cumstances it could not be said that Mr Decary, if interested in a contract with the railway company, was interested therein “for his own use and benefit.” Their Lordships cannot accede to this contention. Mr Decary no doubt acted as he did at the request of the railway company and in order to achieve the result which was desired, namely, that a purchase by the railway company should be avoided and a lease from a purchaser should be obtained. This result was achieved by Mr Decary finding a purchaser in the shape of his nominee who granted the desired lease, with the inevitable consequence that Mr Decary became interested, and for his own use and benefit. Nor can the fact, if it be the fact, that the transaction is deemed unprofitable, affect the question. The lessor was Mr Decarys nominee, and Mr Decary represented no one but himself in procuring his nominee first to become the registered owner of the property, and then to execute the lease. Mr Decarys interest in the lease was an interest which enured for his own use and benefit, and for the use and benefit of no one else. Nor can the existence of an option to purchase affect the question, for unless and until the option is exercised the position remains unchanged. It was further contended by the appellants that the case fell within the words of exception contained in the section, namely, “other than a contract which relates to the purchase of land necessary for the railway.” Their Lordships will assume, without in any way indicating an opinion upon the point, that a lease of land is a contract which relates to the purchase of land. They are, however, of opinion that the land here in question was not “necessary to the railway” within the meaning of the section. “Railway” is defined by the Act (s 2(21)) in such a way as to restrict its meaning, unless the context otherwise requires, to the track and its physical appurtenances. Their Lordships are unable to conceive how providing a residence for an official of the company could be a purchase of land necessary for the railway as defined by the Act. The result is that the case falls exactly within that branch of the section which prohibits a director from being interested in any contract with the company. Their Lordships prefer to base their decision upon that branch of the section; as they feel that there might well be a difficulty in saying that the lease in this case, in fact entered into by Séguin, though chosen for that purpose by Mr Decary, was a contract “entered into” by Mr Decary.

The question then remains, what is the effect of the prohibition contained in the section? It was contended that the effect was not to invalidate the contract, but only to avoid the directors interest in it, and to give rise to penalties under s 444. It was said that the effect produced by s 121 was no different from that produced by ss 85 and 86 of our Companies Clauses Consolidation Act 1845, as exemplified by the case of Foster v Oxford, Etc, Ry Co, in which it was held that a contract between the company and a director was not avoided. The language of the two enactments is not, however, comparable and

Page 937 of [1939] 3 All ER 930

the courts in Quebec decided that the contract was a nullity, being bound, as they said, by the decision of the Supreme Court of Canada in the case of Macdonald v Riordon. That case was concerned with s 19(16) of the Consolidated Railway Act 1879, which was framed thus:

No person holding any office, place or employment in or being concerned or interested in any contracts under or with the company, shall be capable of being chosen as a director, or of holding the office of director, nor shall any person being a director of the company enter into, or be directly or indirectly, for his own use and benefit interested in any contract with the company, not relating to the purchase of land necessary for the railway, or be or become a partner of any contractor with the company.

In that case a director of a railway company had by agreements with the firm of contractors who were constructing the companys line, become entitled to a share of the payments made by the railway company to the contractors. He brought an action to recover his share against the contractors, who pleaded that the agreements were null and void because they were prohibited by s 19(16) of the above-mentioned Act. The trial judge allowed the claim, holding that making such contracts was merely a punishable offence which did not affect the civil rights of the parties. That judgment was reversed by the Court of Review (Montreal) on the ground that the contracts were prohibited by law and therefore void. The judgment of the Court of Review was affirmed on appeal by the Court of Queens Bench for Lower Canada (Appeal Side), whose judgment was in turn affirmed by the Supreme Court of Canada and for the reasons given in the Court of Queens Bench. It is sufficient, their Lordships think, to quote a passage from the judgment of Wurtele J in the Court of Queens Bench. After referring to the contracts which s 19(16) prohibited, he continued, at pp 574, 575:

… and the effect of such a prohibition is to render such a contract illegal and void, although the statute itself does not state that it is so and only imposes a penalty on the offender. Our civil code, in art. 14, declares that prohibitive laws import nullity although such nullity is not expressed. …

… In the present case the contracts were entered into in transgression of the provisions of the Consolidated Railway Act of 1879 which prohibited the appellant from entering into such contracts and which declared his act in becoming a party to them a misdemeanour and they are therefore void and without effect.

It is true that the contracts there in question were not contracts with the company, but contracts which made the director interested in a contract with the company. Their Lordships, however, agree with the principle there laid down, that prohibition of a contract by statute renders the contract void and of no effect.

Their Lordships are of opinion that in the present case, the railway company, in taking a lease in which to its knowledge one of its directors was interested, made a contract prohibited by s 121. That contract is accordingly void and of no effect, and the action to recover rent thereunder was rightly dismissed. This appeal should accordingly be dis-

Page 938 of [1939] 3 All ER 930

missed, and their Lordships will humbly advise His Majesty accordingly.

The appellants must pay the costs of the appeal.

Appeal dismissed with costs.

Solicitors: Lawrence Jones & Co (for the appellants); Freshfields Leese & Munns (for the respondents).

T A Dillon Esq   Barrister.

Barsby v Doncaster Amalgamated Collieries Ltd

[1939] 3 All ER 938


Categories:        EMPLOYMENT; Contract of service: ENVIRONMENTAL        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, FINLAY AND DU PARCQ LJJ        

Hearing Date(s):        26, 27 JULY 1939        


Mines Coalmine Contract of employment Winding times Necessity for workmen to be present in time to be taken down in cage Plaintiff present in time but not taken down Whether plaintiff an absentee Coal Mines Regulation Art 1908 (c 57), s 1.

The plaintiff was employed as a miner in the defendants coalmine. His shift started at 6 am and it was his duty to present himself by that time at the pit-head ready to be taken down. On 22 September 1938, he arrived at the colliery at about 5.35 am. He then had to change his clothes, fill his water bottle, get his safety lamp and have it tested. He arrived at the pit-head shortly before the close of the winding period, but owing to the crowd of other men, he was not able to get into the cage before the last cage went down at about 5.57½ am. The defendants claimed that he was an absentee and refused to pay him any wages in respect of that day. Thereupon, the present action was brought claiming one days wages. The defendants contended that it was the plaintiffs duty to present himself for work at such a time that he could be taken down in time to start his work by 6 am, irrespective of any other men who might also be waiting to be taken down:

Held (i) the plaintiffs duty was to present himself at the colliery at such a time as would enable him, having completed the necessary preliminaries, to be taken down in time, provided that the employers carried out their part of the contract, and this duty he had fulfilled.

(ii) the defendants were under a duty to make some reasonable arrangement to enable the plaintiff to be taken down within the prescribed time. This they had failed to do, although he was present within the time that they had notified him that he must be present.

(iii) it was not possible to read into the contract of employment any term to the effect that it was the duty of the men as a whole to spread their arrivals more or less evenly over the whole winding period.

Notes

The hours of labour in mines are regulated by statute, but the matter is very complicated. A miner cannot proceed to his work straight away as is the case with any ordinary employee. He has to go to the baths to change his clothes, he must then fill his water bottle, have his lamp tested, and be searched for matches, etc. After these matters are satisfactorily completed, he must wait his turn to go down. Obviously there is much here for discussion between the parties, and the views of the Court of Appeal on the time the miner should arrive at the colliery premises are of much interest to those engaged in the industry. The case was regarded as a test case, but the court have treated it rather as a pure question of fact.

As to Regulation of Hours in Mines, see Halsbury (Hailsham Edn), Vol 22, pp 762765, paras 15921595; and for Cases, see Digest, Vol 34, pp 729, 730, Nos 10891103.

Page 939 of [1939] 3 All ER 938

Appeal

Appeal by the defendants from a decision of His Honour Judge Hildyard at the Doncaster county court dated 1 April 1939.

The facts of the case are fully set out in the judgments.

Cyril J Radcliffe KC and J B Herbert for the appellants.

J Neal for the respondent.

Radcliffe KC: The burden of proof of a breach of contract was on the plaintiff. The judge found that there had been a breach, because the defendants had not taken the plaintiff down the shaft, although he had been on the premises in reasonable time. The obligation on the defendants is to provide proper winding facilities. No other construction can reasonably be put upon the contract. The obligation on the men is to get to their work at the pit bottom at the time when the shift begins. The plaintiff was disobedient in that he failed to avail himself of the facilities provided. Presentation at the end of a queue is not presentation for work.

Neal was not called on.

Cyril J Radcliffe KC and J B Herbert for the appellants.

J Neal for the respondent.

27 July 1939. The following judgments were delivered.

SCOTT LJ. A miner employed by the Doncaster Amalgamated Collieries Ltd, at the Brodsworth Main Colliery in Yorkshire, claimed a days wages in the following circumstances. He arrived at the pit-head at a time when there were a number of other workmen there in front of him, only a comparatively short time before the last cage on the morning winding down left the pit-head. By reason of other men being in front, he failed to get taken down before the winding period fixed under the Coal Mines Regulation Act 1908 (as amended by the Coal Mines Act 1919, s 1) expired. As he did not get down the pit, the colliery company treated him as missing the days work, and did not pay him for that day. No question arises as to the amount. The miner contended that he was there within the time which the statute and his contract required him to be there in order to be taken down. The colliery company said that he ought to have been there earlier, because he ought to have known that there would be other people waiting to go down, and to have made the necessary allowances so that he would be there early enough to get down. The county court judge, after hearing a considerable number of witnesses, found as a fact that the man was there in time, and that the defendants had no answer to the claim, and gave judgment in his favour for the amount of the days wages.

In truth, the real issue in the case raised by the six separate workmen who were claiming, and intended to be tried by the judge as a matter of principle for the mens guidance, was a question of the interpretation of their contract of employment, in the light of the statutory provisions affecting this question of the length of hours during which workmen in coal mines are allowed by statute to be underground on the normal shift, and the provisions for fixing the period of winding down and winding up on the return to the surface. In my view, on the facts of

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the case, the judges decision was inevitable, and no question of law seems to me to have been really put in issue by the way the case was presented and by the evidence which was given, and I see no ground for attempting to differ from the county court judge, as I think he decided it as a question of fact.

With that preliminary introduction, I go to the question of the contract and the legislation affecting it. Oddly enough, although this was an action on the contract, counsel for the plaintiff in the county court did not attempt to prove the contract of employment, treating it as a matter of fact which was probably common ground to both sides, and assuming that there was no particular term in the contract which affected the question as to what the terms of that contract were. We can say nothing beyond what appears from the judgment of the county court judge except this, that the carrying out of the contract of employment of a coal miner who is going to work underground has to be in accordance with the requirements of the Coal Mines Regulation Acts dealing with that topic.

The first Act is the Coal Mines Regulation Act 1908. S 1(1) of that Act says:

Subject to the provisions of this Act a workman shall not be below ground in a mine for the purpose of his work, and of going to and from his work, for more than eight hours [by the Coal Mines Act 1919, s. 1, altered to seven hours] during any consecutive twenty-four hours.

By the Coal Mines Act 1931, s 1, that period of 7 hours has become 7½ hours. Then sub-ss (2), (3), (4) are as follow:

(2) No contravention of the foregoing provisions shall be deemed to take place in the case of a workman working in a shift if the period between the times at which the last workman in the shift leaves the surface and the first workman in the shift returns to the surface does not exceed …

the statutory time. Particular attention must be given to the phrase “between the times at which the last workman in the shift leaves the surface,” that is to say, at the end of the winding period for winding the men down.

(3) The owner, agent or manager of every mine shall fix for each shift of workmen in the mine the time at which the lowering of the men to the mine is to commence and to be completed, and the time at which the raising of the men from the mine is to commence and to be completed, in such a manner that every workman shall have the opportunity of returning to the surface without contravention of the foregoing provisions of this section, and shall post and keep posted at the pit-head a conspicuous notice of the time so fixed, and shall make all arrangements necessary for the observance of those times in lowering and raising the men.

(4) The interval between the times fixed for the commencement and for the completion of the lowering and raising of each shift of workmen to and from the mine shall be such time as may for the time being be approved by the inspector as the time reasonably required for the purpose. …

The rest of sub-s (4) does not matter. I want to deal with the language of sub-s (3), and I omit the irrelevant words: “The manager shall fix for each shift the time at which the lowering of the men to the mine is to commence and to be completed and keep posted at the pit-head a conspicuous notice of the time so fixed.” It was proved in the court

Page 941 of [1939] 3 All ER 938

below that a notice in compliance with that subsection was so posted at the pit-head.

There were at this pit-head two shafts which took men on this date down to the Barnsley Seam where the first day shift, the shift in question, were to work. I should say that those two shafts were No 3 shaft and No 1 shaft, No 3 shaft working, I think, in three shifts, and No 1 shaft working in two day shifts, but not working a night shift as in the case of No 3. The first day shift for No 3 shaft is stated in the notice to have had for lowering or admission a period of 35 mins in all, starting at 5.25 am and ending at 6 am. No 1 shaft had a similar total period of 35 mins from 5.20 am to 5.55 am, thus beginning and ending five minutes earlier than the winding period for shaft No 3. The word “admission” I myself think refers to the lowering down for admission to the mine. I say that because the comparable column for bringing the men back to the surface is described as raising or return; but it does not matter for the purpose of the case whether the word “admission” there means admission to the cage or admission to the mine. That is the notice which was put up, and it is to be observed that under s 1(3) of the Act it is provided that the period to be fixed by the manager is to be so fixed that every workman shall have the opportunity of returning to the surface without contravention of the foregoing provisions of the section. That means that the two winding periods, one for lowering and the other for raising, must be strictly adhered to, so that the period below ground is not exceeded. The other provision in the subsection is that the manager shall make all arrangements necessary for the observance of those times of lowering and raising the men. The only arrangement proved in evidence was this notice, which was the statutory notice, of the lowering and raising period, and a notice which the plaintiff said he had never seen, but I will read it, because it was in fact proved as part of the arrangements made for the observance of the time of lowering and raising. It was dated 25 March 1938:

It has come to the notice of the management that a certain number of men and boys arc persistently presenting themselves late for work at the shaft tops. The banksmen have been given instructions that in future anyone who is employed at shift times who presents himself at Nos. 2 or 3 shafts after the hours of 6 a.m., 2 p.m. or 10 p.m. and at No 1 shaft after the hours of 5.55 a.m., 1.55 p.m. or 9.55 p.m. will be refused admittance to the pit, and the names of such persons will be sent to the Ministry of Labour as absentees.

That was never brought to the attention of the plaintiff. No other arrangements for the observance of the times in lowering the men were proved in evidence.

The position, therefore, was this, that, prima facie, if a man arrived at the pit-head ready to be wound down in a cage between the beginning of the winding and the completion of the winding, taking the case of shaft No 3, that is, between 5.25 am and 6 am, he was carrying out what must have been an implied term of the contract. He could not get to his work except by going down in the cage, and, therefore, it is obvious that that must have been an implied term of the contract of

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employment. There was a certain amount of evidence given in the case as to what a miner had to do on arriving at the colliery premises before he would be ready to go to the pit-head in order to be wound down. He had to call at the baths in order to change his clothes and put on his mining clothes; he had there to get water to fill his water bottle for drinking; he had to go from there to the lamp station and get his safety lamp, he had to go with that from there to the station where his lamp was tested to see that it was properly locked, and where one out of every ten men was searched to make sure they had not got any matches, and so on. It is obvious that men might be late because the colliery company had failed to be reasonably expeditious in performing their part of the function that had to be performed in those preliminaries; conversely, a man might be late at a particular place and be held up there. In the result, in this action, none of those preliminary questions affected the issue, because, on the findings of fact, into which I am not going, the judge disposed of them.

So the simple issue in the result was this. The man arrived at the pit-head, according to his evidence, very shortly before the close of the winding period, but he does not give the time at which he actually arrived. He formed up in the queue; he took his kale, as they call it, (that is, his place in the queue), at No 3 shaft; he could not tell the time. Shortly afterwards, but I do not know how many minutes afterwards, he heard the call of the banksman, the man who, under the Act, is in charge of the winding down: “No more this morning,” meaning that the last cage had gone and that no more men could be wound down, so that he did not get taken down. His case, as I have said, is that he was there in time and was not wound down, and therefore it was the fault of the colliery company that he lost his days work.

The only other evidence which is important in respect of No 3 shaft, is that with regard to the banksman, a man named Smeaton. The banksman is the title of the man whose duty it is under the Act to see to the winding down or up of the men. The cages here were double-decker cages, and this banksman was the banksman attending to the lower deck of the cage, there being another banksman attending to the men in the upper deck of the cage. He remembered the date, 22 September 1938. He said:

We began at 5.45, and there was no winding down before that. I arrived at 5.32.

He added that he would be getting ready 3 mins after arrival, that is to say, at 5.35 am. He started putting men in the cage at 5.43 am; that is, only 17 mins before 6 am. Then he gave orders to wind down, and there were six cages, that is to say, six consecutive windings, of which the first had three short of full complement, the next one two short, the next one two short, the next one one short, and the other two were full, the complement for each deck being 30 men; that is, 60 men to the whole cage. The last went down about 2½ mins to 6, at the end of

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the winding period. Then in cross-examination he said the buzzer (that is, the last buzzer) went just as the cage was coming up, and anyone who came after 2½ mins to 6 would have been refused. In re-examination he said there was no cage in fact available between 2½ mins to 6 and 6 am. Those are all the facts as regards No 3, and I do not think it is necessary to go into the question in relation to No 1, which was also used for winding men down on the same shift for the Barnsley Seam, and where the circumstances were similar.

Upon those facts, which I think are really the whole of the facts relevant to the issue, the colliery company raised this question. They said that it is the duty of their men to arrive at the pit-head in such time that there is room for the whole shift to get down in the period allowed, which means that it must be their duty as a whole to spread their arrivals more or less evenly over all possible windings during the winding period. The answer to that which appealed to the county court judge and appeals to me is this, that that might have been a very reasonable term to put in the contract; it might have been a reasonable arrangement for the employer to make by agreement with the representatives of the men under s 1(3) of the Act of 1908, but that, in the absence of any such general arrangement binding on the men and accepted by the men through the mens ordinary trade union representatives, it is impossible to read into the contract any such condition. The notice to which I referred, although the plaintiff in this particular action had not seen it, is a notice which seems to treat each man as a separate individual acting solely for himself, and without regard to the probability that if every one of the men of a shift act similarly for themselves there will be very few men at the pit-head at the beginning of the shift and a congestion of men towards the end of the shift, all having been anxious to have the maximum time for breakfast, and so on, at home, and not wanting to be unduly early. There was no evidence at all of any such arrangement having been made. The action was brought by the man on the simple ground that he had carried out the terms of the contract according to the pit-head notice as to winding times, had presented himself in sufficient time, and had not been taken down, and the judge accepted that argument. There was one cross issue which perhaps confused the discussion to some little extent. The man appears to have contended that as long as he arrived within the colliery premises so that he had time to go to the baths, to the lamp cabin, and so on, and get through the necessary preliminaries before he was qualified to ask for admission to the cage, he had done all as he was required to do under the contract. That, in my view, cannot be so. It must be a term of the contract of employment to which every man is a party that he will present himself at the pit-head at a time which will enable the company to wind him down in accordance with their duties under the statute, because they cannot exceed the winding times without committing an offence punishable by prosecution under the statute.

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Therefore I think the question in the case was simply and solely, was this man at the pit-head in accordance with the requirements of his contract, interpreting it in the light of the Coal Mines Regulation Act 1908? The judge decided that he was, and that, under the individual contract sued on, in the absence of any proof of a special term of the contract about arrangements in regard to others, he could not say that the defendants had shown any ground for escaping the conclusion that they had failed to make arrangements to enable this particular plaintiff to be wound down within the time required by the Act, although he had been present within the times that they had notified him he must be present in order to be wound down. Therefore, in my opinion, this appeal must be dismissed with costs.

In the course of the argument I raised the question as to whether any attempt had been made at this particular pit for the management to get the miners representatives, the trade union representatives, to consider this question of some rota or other method by which the arrivals at the pit-head could be distributed over the time so as to prevent this sort of happening. No doubt that question, my own question, and that of my colleagues, if they agree, may be duly considered in the future.

FINLAY LJ. I agree. In my view, the decision of the county court judge was here a decision on a question of fact, and a decision which there was ample evidence to support. The action was one to recover a sum, undisputed as to the amount, in respect of wages, and to that the answer that was made was that on the date in question the plaintiff neglected to comply with the rules of the colliery and to present himself for work as required. The county court judge, having heard the whole case, found this:

I find that the plaintiffs did present themselves for work at such a time as could reasonably be expected to bring them to the pit-head in time for such work, and that they did nothing to cause any delay, and, in my opinion, they thereby fulfilled their obligations under their contracts.

The evidence shows, as I think, perfectly clearly that the plaintiff was there in ample time, that he in no way was the cause of any delay, and, further, that he arrived at the pit-head in time to have been conveyed down, and that the reason, for which he was in no way responsible, why he did not get conveyed down, was that there was a great crowd of other men. In my opinion, it is simply impossible for us to say that the county court judge was in any way wrong in the conclusion of factfor it is a conclusion of fact and nothing elseat which he arrived. I am not going through the evidence; it would be a waste of time.

There are two other observations which I will make, and they are these. In the first place, it was admitted that there was a breach of contract or breach of duty by the company in that the banksman in charge of the cage at No 3 shaft was there too late, he only began lowering at 6.47 am, and he did not get there at all until later than he ought

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to have been there. It was contended by junior counsel for the appellants that, though that was true, none the less it could not have produced any effect, because the cages were not in fact full when he did begin to wind. With regard to that, it is essentially a question of fact. All I can say is this, that the county court judge who heard the whole thing said: “It is not possible to say what would have been the position if journeys had been made regularly from 5.25 am or even from 5.35 am, but certainly if 35 mins lowering had been provided even from 5.35 am, all the plaintiffs would have been taken down to the pit bottom.” I decline to say that that finding was wrong. The other matter about which I want to say a word is this, and it is following what Scott LJ has just said. It appears that there had been trouble, due, as one gathers, to men crowding, I suppose from the natural desire, as Scott LJ, has said, to have as long as possible for breakfast and only just get there in time. Probably it would be quite right that some arrangement should be made with regard to that. I can only think that it was unfortunate that instead of endeavouring by arrangements with the mens representatives to meet that situation, this somewhat arbitrary action was taken on this particular day, and it is no doubt still more unfortunate for the defendants that the arbitrary action, in my opinion, resulted in their breaking their contract with the plaintiff, a man who had not the slightest responsibility for the difficulties, if difficulties there were, which had arisen. I entirely agree with Scott LJ that this appeal fails.

DU PARCQ LJ. I am of the same opinion. In this case the first question is: What is the contract? It seems to be common ground that we should have derived no assistance from looking at such written memorandum as exists. As in many cases, this is a contract in which most of the terms are to be implied from the well-known circumstances of the employment. There is no doubt at all that the plaintiff was employed as a weekly servant, that he was entitled to be employed on the day in question and given work if he did not break his contract; perhaps it is more accurate to say if he showed himself to be ready and willing to do his work. What is said in effect is that he was not ready and willing, in a technical sense, to do his work. It has been contended, that it is for him so to act, whatever other people may do, subject only to the employers providing lifts, that he will be underground ready to begin work, that is to say that he will not miss at any rate the latest lift. I think that is a wrong view. The mans duty is to present himself, as the county court judge found, in such time as would be reasonably sufficient to enable him to equip himself for work, to receive the lamp, to go through the other necessary preliminaries, and to be taken down, provided that the employers carried out their part of the contract. It seems to me that the judge could hardly have come to any other conclusion than that the plaintiff did perform that duty. He says that he

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got into the queue in which it was necessary to stand in order to get a lamp at, as nearly as may be, 5.35 am. I say that because he says that he only had to go a few yards from the time office, where he particularly observed that the time was 5.35 am, in order to station himself in the queue. The question was asked of the manager, Mr Goode, whether that would be proper time at which to station himself in the queue for the lamp, and Mr Goode said 5.35 am in the queue is ample time. What happened on this occasion was that it turned out not to be ample time, by reason of circumstances over which the plaintiff had no control. It may be said that the employers had no control over those circumstances either. I think the answer to that is that, far from the employers being able to say that the plaintiff must make such arrangements as will prevent the action of others from making it difficult or impossible for him to take one of these lifts, it is for the employers, if anybody, to make such arrangements. The terms of the Coal Mines Regulation Act 1908, s 1(3), make it a duty of the employers to make all arrangements necessary for the observance of those times, that is to say, the times to be fixed as provided by the Act in lowering and raising men. I agree with what has been said by the other members of the court as to the desirability of some such arrangement (which I should have thought could be made in a perfectly friendly way and about which nobody could complain) being made. In these days labour is well organised, and I should have thought that this was a matter which it was in the highest degree desirable, from the point of view both of employers and workmen, should be made the object of some arrangement. I have no doubt that, apart from any such arrangements, the employers have a right, and indeed a duty, to make some reasonable arrangement which makes it possible for all the men to get taken down without a scramble, and it is to be hoped that such an arrangement will be made.

Appeal dismissed with costs.

Solicitors: Hosking & Berkeley, agents for Gichard & Co, Rotherham (for the appellants); Corbin Greener & Cook, agents for Raley & Sons, Barnsley (for the respondent).

E Fuller Briscoe Esq   Barrister.

Milbank v Milbank

[1939] 3 All ER 946


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P        

Hearing Date(s):        27 JULY 1939        


Divorce Desertion Husbands petition Collusive petition by wife within statutory period dismissed whether collusive petition interrupts period of desertion.

The petitioners wife deserted him in 1929. In April 1936, the wife, in collusion with the husband, presented a petition for divorce on the ground of his adultery, and this petition remained on the file until dismissed on the wifes application on 28 April 1937. On 26 August 1938,

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the husband presented the present petition for divorce on the ground of his wifes desertion for 3 years immediately preceding the presentation of this petition:

Held as the earlier petition had been presented in collusion with the husband, he was precluded from saying that a state of desertion continued during the period that that petition was on the file, and the present petition based on desertion must therefore be dismissed.

Notes

It has been decided that the prosecution of a petition during the statutory period interrupts the period of desertion. It was questioned in this case whether that was so in the case of a petition presented as the result of a collusive arrangement between the parties, and it is held that where the party asserting desertion is a party to the collusive bargain, the period of desertion is interrupted.

As to Effect of Petition on Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 658, 659, paras 968, 969; and for Cases, see Digest, Vol 27, pp 319321, Nos 29782999.

Cases referred to

Crewe v Crewe (1800) 3 Hag Ecc 123; 27 Digest 333, 3133.

Stevenson v Stevenson [1911] P 191; 27 Digest 320, 2986, 80 LJP 137, 105 LT 183.

Chapman v Chapman & Thomas [1938] P 93 [1938] 1 All ER 635; Digest Supp, 107 LJP 30, 158 LT 424.

Cohen v Cohen [1939] 2 All ER 596; Digest Supp.

Defended Petition

Defended Petition by the husband for divorce on the ground of his wifes desertion for 3 years immediately preceding the presentation of the petition. The petition was adjourned for argument by the Kings Proctor as to whether the fact of a previous petition for divorce having been presented against the husband by collusion between himself and his wife within the 3-year period prevented desertion from running against the deserting spouse for so long as that petition remained on the file. The facts are fully set out in the judgment.

Hon Victor Russell for the petitioner.

Theodore Turner for the Kings Proctor.

27 July 1939. The following judgment was delivered.

SIR BOYD MERRIMAN P. The parties were married on 25 July 1922. On 18 April 1929 the wife went to South Africa on the pretext of going for a holiday, but, without going into unnecessary detail, the subsequent history has made it perfectly plain that at the time when she left home she intended to desert her husband. I have no doubt that thenceforward, as she has said more than once in writing, she had no intention whatever, if she could help it, of setting up home with her husband again.

Under the Matrimonial Causes Act 1937, the husband is obliged not merely to prove that his wife was guilty of desertion in the inception, but that she was in desertion during the 3 years immediately preceding the presentation of the petition. It is in that connection that this difficulty arises. On 14 April 1936 the wife presented a petition for dissolution on the ground of the husbands adultery. That petition was first served on the husband on 20 May 1936. There were two subsequent amendments with which I need not deal in detail, except to observe that

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one was to correct the date of the alleged adultery, which was originally charged as being committed on 9 November 1934 and was subsequently amended to allege adultery committed on 9 March 1935. I mention that in passing, because, when I come to deal with the circumstances in which that petition was presented, it remains unexplained and unexplainable how any allegation of adultery in connection with 9 November 1934 ever came to be made at all. However, that petition which was served on 20 May 1936 came before me in its amended form as an undefended cause on 8 February 1937. There were circumstances about the presentation of the case which left me in the gravest possible doubt, which I need now only say was admitted to be amply justified, whether there was any substance in the case whatever. One of the things which caused me the very gravest disquietude about that case was the evidence of a partner in the firm acting for the wife who gave evidence before me of a kind that I did not regard as very convincing. However, I adjourned the case, referring the papers to the Kings Proctor for investigation. The result of that was that on 28 April 1937 the suit was dismissed on the wifes own application on the ground that it had been presented in collusion. The present petition, as I have already stated, was dated 26 August 1938. On that statement of dates it would follow that, assuming that the wife had deserted the husband and remained in a state of desertion until negotiations for this collusive petition began, and assuming that, after the petition was dismissed, she remained in a state of desertion, the husband cannot complete the 3 years necessary to establish his case. He must prove desertion for 3 years immediately preceding the presentation of the petition, without counting the whole time during which the petitionsubsequently dismissed on the grounds of collusionwas upon the file of the court. To be precise, the date, 14 April 1936, on which the petition was filed, was well within the 3 years, and that petition remained on the file of the court for rather over one year before it was dismissed. Accordingly counsel for the petitioner, in opening this petition, called my attention to the dates which I have just quoted before calling his evidence, and indicated precisely wherein the difficulty in this case lay. With his consent I adjourned the case without hearing the evidence of the petitioner in order that I might obtain the assistance of the Kings Proctor not merely on such law as might be involved after the facts had been ascertained, but also on the elucidation of the facts themselves in so far as they affected the question whether the period of desertion could run during the time when this admittedly collusive arrangement, and these admittedly collusive proceedings, were upon the file. The result is that to-days hearing has taken place with the advantage of my having the assistance of counsel for the Kings Proctor both on the question of fact and on the question of law.

I am not going to read the earlier letters in the correspondence because I am satisfied beyond any doubt whatever that the intention of the wife when she went to South Africa was, and a long time thereafter remained,

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an intention to desert her husband. However, the difficulties begin with proposals which were put forward by the husband in the year 1933. Again I do not propose to read the letters having regard to the husbands perfectly frank admission as to what the purpose of the transaction was. It was perfectly plain that, by June 1933, when correspondence was passing between the parties, he had told his wife that he desired to get married again; that he would do anything reasonable for her, although he was not prepared to go the length of assenting to the somewhat exorbitant terms which she herself had put forward, provided that she was prepared in some way or another to facilitate their obtaining their freedom. The wife, in a letter written on 8 November 1933, said that she was sorry the divorce affair was going to be so expensive in England, and that should the proposed Billwhich even then it was contemplated should be introduced into Parliamentfail, she was willing to forego half the sum that he had mentioned to her, in order that he should make some use of the law to effect his relief. There is a short silence in the correspondence but the gap is filled by the discretion statement which is put in by the husband. At some date in 1934, which has not been precisely ascertained, he received an invitation from a firm of solicitors, on the instructions of his wife, to call upon them. I have already referred to the fact that a partner in this firm gave evidence before me on the hearing of the wifes petition. In effect, it was proposed to the husband that if he was so anxious for a divorce as the previous letters had shown, he should provide the necessary evidence. The husbands version of the matterwhich I accept in every detailwas that he told the solicitors that he had always led a perfectly good life, and that he loathed the idea of anything connected with adultery, but that if it would help the case he would very unwillingly provide the evidence. He was asked how the expense would be provided for, and he undertook to pay all the costs. Then, as the husband had not a solicitor, these solicitors suggested the name of a firm which would act for him in the proceedings. The husband went to this firm and instructed them to do whatever was necessary, putting himself, as he phrases it, entirely in their hands. He told counsel for the Kings Proctor that, from the time it was realised in 1933 that the divorce would have to be in England, he was prepared to commit adultery or to appear to do so in order to get his freedom. When he found he could not get the divorce in South Africa, he had probably told his wife that he was ready to be divorced in England but that it would be expensive, and he was accordingly not surprised at being sent for by his wifes solicitors. Indeed, he said that it was he who wanted the divorce, and his wife was bringing the proceedings because he wanted her to do so. He added, in answer to a question by myself, that before he left his wifes solicitors it had been agreed (i) that he should provide the necessary evidence (ii) that he should go to the solicitor suggested by these solicitors in order to get the matter through smoothly and (iii) that he should pay all the costs. Everything, he added, that happened afterwards was

Page 950 of [1939] 3 All ER 946

done in accordance with that agreement. What happened afterwards was that it took him a very long time to overcome his almost unconquerable loathing of the procedure to which he was subjecting himself. However, eventually he brought himself to that point, and arranged to spend a week-end at the Bonnington Hotel with a woman whom he had picked up for the purpose. He telephoned to his solicitor when he was expecting to be there, his solicitor in turn telephoned or informed the wifes solicitors, and the inquiry agents were duly at that hotel ready to give the necessary evidence. These are the admitted facts. If ever there was a case which comes exactly within the words of Sir Willliam Scott in Crewe v Crewe, this is the case. He said, at pp 129, 130:

Collusion may exist without connivance, but connivance is (generally) collusion for a particular purpose. Collusion, as applied to this subject, is an agreement between the parties for one to commit, or appear to commit, a fact of adultery, in order that the other may obtain a remedy at law as for a real injury. Real injury there is none, where there is a common agreement between the parties to effect their object by fraud in a court of justice.

It is quite clear on this statement of the facts that it is impossible to escape the conclusion that for at least the whole of the period between the filing of that petition and the hearing before me, that petition was not merely presented, but prosecuted, in collusion, and it is with that case only that I am dealing. I say that advisedly because in the course of the argument it became quite plain, and I am not expressing any opinion about such a case, that it is possible, at any rate, that quite different considerations might apply if, for example, a petition innocently presented was, after the material date, prosecuted in collusion. Here, at any rate, it is undisputed and, indeed, undisputable, that between 14 April 1936 and 8 February 1937 at least, the parties, these spouses jointly, were engaged in presenting a collusive petition of the kind I have just described by reference to Sir William Scotts definition, and were both actively engaged in promoting that petition in fraud, of course, and by mutual agreement. I say at least during that period, because I have said sufficient about the earlier correspondence to make it clear that the agreement did not originate or collusion did not originate merely with the presentation of the petition. It had been contemplated and was maturing for a considerably longer period. It is unnecessary to go into detail on that point because the period to which I have alluded is all within the material 3 years.

The question of law which emerges from this statement of facts is whether it is possible for the husband to assert that during that period his wife was deserting him without cause. It is quite clear that, if the husband himself had presented that petition, it would be impossible for him to assert that, during its continuance on the file of the court, his wifes absence continued to have the quality of desertion. That is established by the decision of the Court of Appeal in Stevenson v Stevenson, where, delivering the judgment of the court, Sir H H Cozens-Hardy MR stated, at p 194:

The presentation of the petition [in that case after 18 months of desertion] and its

Page 951 of [1939] 3 All ER 946

continuance on the files of the court prevented the subsequent desertion from being without excuse. She was praying the court to require her husband to keep away.

However, this petition was not presented by the present petitioner, the husband, but by a deserting wife. If that petition, unsuccessful as it turned out to be, had been presented by the wife in invitum, the husband would not have been precluded on its dismissal, from counting the period during which that petition was on the file of the court as part of the necessary 3 years period. As I understand the law which was declared by Hodson J in Chapman v Chapman, leaving out the very peculiar circumstances of that case, which for the present purposes are immaterial, it is as follows. The deserting spouse against whom such an unsuccessful petition is brought may cross-charge desertion, and is not precluded from counting the period between the presentation of the petition and the presentation of the cross-charge by the fact that there was on the file of the court a petition the result of which would be no doubt for the time being that the deserting spouse could have got an order preventing her husband from attempting to resume cohabitation. The case also goes further in deciding that though it may be necessary to substitute further proceedings on the part of the deserting spouse to establish his or her rights, the interval between the presentation of the first cross-charge and any subsequent cross-charge is immaterial, having regard to the fact that the proceedings all the time were being prosecuted by the husband on his initiation. Of course, it goes without saying, and counsel for the Kings Proctor does not attempt to dispute this, that there being no obligation on a party to recriminate or make cross-charges, if the first petition is unsuccessful and is disposed of, the deserted spouse could subsequently bring proceedings for desertion to which the period during which that petition was on the file could establish no bar at all. It really comes to this, therefore, that this being neither the one case nor the other; neither the case of a deserting spouse having barred himself by presenting a petition during the crucial time and leaving it on the files of the court, nor the case in which the deserting spouse has brought a petition in invitum against the deserted spouse, under which heading does this case fall? And it is that which I propose to decide. It has been admitted in the plainest and most categorical terms in this case that this petition was instituted and prosecuted at the husbands instance, by his procurement, by his agreement, at his expense, agreed to in advance, and that every single thing which was done in order to enable his wife to get a divorce “as for a real injury,” to quote Sir William Scott again, was done by agreement between the parties that the husband should “commit or appear to commit a fact of adultery.” He has told me, and I believe him, that, in fact, no adultery was committed at all, for reasons which he has given. However, that refinement is unnecessary having regard to his admission about the arrangements which were made. I think that the point of the decision in Stevenson v Stevenson, followed as it has been recently by the Court of Appeal in Cohen v

Page 952 of [1939] 3 All ER 946

Cohen, is that whatever may be the continuing intention of the deserting spouse, the deserted spouse is precluded from saying that a state of desertion continues while he or she is praying the court by proceedings initiated by him or her to keep away, to require the other spouse to keep away. That was the effect of the wifes proceedings which, as I have said, would be no handicap to the husband if he had no part or lot in it. However, they were brought about by his procurement, by his agreement in the fullest sense of the word, and it seems to me to be impossible in law without ignoring the decision of the Court of Appeal in Stevenson v Stevensonand I may add, the various cases under the Matrimonial Causes Act 1937, in which judges of this Division, including myself, have followed and applied Stevenson v Stevenson to cases of desertion which have arisen under this Actto allow this husband to say that the 12 months, during which this collusive petition was being actively prosecuted, was a period during which his wife was deserting him without cause. He was paying her to pray the court to require him to keep away. In these circumstances I cannot hold as a matter of law that the husband has established that which he is bound to prove, namely, that his wife has deserted him without cause for the period of at least 3 years immediately preceding the presentation of the petition. The correspondence shows clearly that the petitioner was waiting with eager anticipation for the passing of the Acteven as long ago as 1933which, if he had been content to wait for it, would long ago have given him his freedom. However, he chose, however reluctantly, quite deliberately, to embark upon this conspiracy to impose a fraud on the court, and I am afraid he must take the consequences of what I am convinced is the legal result of that unfortunate decision on his part.

Petition dismissed.

Solicitors: Gedge Fiske & Co (for the petitioner); The Treasury Solicitor (for the Kings Proctor).

J F Compton Miller Esq   Barrister.

The People of the State of New York v Heirs of the Late John M Phillips and Others

[1939] 3 All ER 952


Categories:        CIVIL PROCEDURE: COMMONWEALTH; Commonwealth countries        

Court:        PRIVY COUNCIL        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT, LORD ROMER        

Hearing Date(s):        3, 4, 17 JULY 1939        


Privy Council Quebec Practice Concurrent findings of fact Dismissal of appeal.

Where there are concurrent findings of two courts on pure questions of fact, the Board does not interfere with the judgments, where the appeal is on a question of fact.

The appellants claimed from the first respondents, the heirs of one Phillips deceased, damages for an alleged conspiracy between Phillips, one Connolly and one Seely, to cheat and defraud the City of New York over the construction of sewers in the borough of Queens in the City

Page 953 of [1939] 3 All ER 952

of New York. Phillips before his death had deposited over $300,000 with the Montreal Safe Deposit Company the third respondent. This sum was seized by means of a conservatory attachment effected before judgment in July 1928, and the moneys by agreement were handed to the Crown Trust Co, the second respondent, pending the result of the litigation. The trial judge, after consideration of the evidence before him, was unable to find that the conspiracy was proved, and on appeal the judgments of the members of the court were similarly directed to the facts, each member of the court coming to the conclusion that the case was not proved:

Held there had been concurrent findings in favour of the defendants by two courts in Quebec, on pure questions of fact, and, as nothing was to be found in the conduct of the proceedings, or in the judgments of the courts to induce the Board to act otherwise, the Board adhered to the rule which it has laid down for itself, that is, not to interfere with concurrent findings of two courts on pure questions of fact.

Notes

There is a well-known rule of both the House of Lords and the Judicial Committee of the Privy Council that they will not overrule concurrent findings of fact in the courts below. It was argued that the present case did not come within this rule, but their Lordships have rejected this argument and stated the rule in general terms.

As to Principles Governing Jurisdiction of Judicial Committee, see Halsbury (Hailsham Edn), Vol 11, pp 230, 231, para 446; and for Cases, see Digest, Vol 16, pp 162164, Nos 650679.

Cases referred to

Moung Tha Hnyeen v Moung Pan Nyo (1900) LR 27 Ind App 166; 16 Digest 163, 653.

Robins v National Trust Co [1927] AC 515; Digest Supp, 96 LJPC 84, 137 LT 1.

Allen v Quebec Warehouse Co (1886) 12 App Cas 101; 16 Digest 163, 660, 56 LJPC 6, 56 LT 30.

Whitney v Joyce (1906) 75 LJPC 89; 16 Digest 163, 661, 95 LT 74.

St Francis Hydro Electric Co v R [1937] 2 All ER 541; Digest Supp.

Appeal

Appeal from a judgment of the Court of Kings Bench (Appeal Side), for the Province of Quebec [Bernier, Letourneau, Hall, Walsh, St Jacques JJ], dated 29 June 1938, dismissing an appeal from a judgment of the Superior Court [Mercier J] dated 23 November 1934. The facts are fully set out in the judgment of their Lordships delivered by Lord Atkin.

Aime Geoffrion KC and Ernest Bertrand KC for the appellants.

Louis S St Laurent KC and Hugh E ODonnell KC for the respondents the heirs of the late John M Phillips.

John T Hackett KC for the respondents, the Crown Trust Co and the heirs of the late Francis Phillips.

Geoffrion KC: The trial judge only saw some of the witnesses, the evidence of the others was taken on commission. Essential facts are matters of inference in the case, and the inferences here are irresistible. A jury in New York found these two men guilty, and this was affirmed by the higher courts. The reasons given by the judges for their finding of fact were wrong. The rule with regard to concurrent findings of the courts below not being interfered with by the Board, on a question of

Page 954 of [1939] 3 All ER 952

fact, is not an absolute one. [Counsel referred to: Robins v National Trust Co, Allen v Quebec Warehouse Co, Whitney v Joyce, St Francis Hydro Electric Co v R.]

Counsel for the respondents were not called upon.

Aime Geoffrion KC and Ernest Bertrand KC for the appellants.

Louis S St Laurent KC and Hugh E ODonnell KC for the respondents the heirs of the late John M Phillips.

John T Hackett KC for the respondents, the Crown Trust Co and the heirs of the late Francis Phillips.

17 July 1939. The following judgment was delivered.

LORD ATKIN. This is an appeal from the Court of Kings Bench (Appeal Side), Quebec, confirming a judgment of the Superior Court (Mercier J) in favour of the defendants, the present respondents. The action arises in unusual circumstances. The plaintiffs are the People of the State of New York and they sue the defendants, the heirs of the late John M Phillips, for damages for an alleged conspiracy between Phillips, one Connolly and one Seely to cheat and defraud the city of New York over the construction of sewers in the borough of Queens in the city of New York. The plaintiffs right of action is based upon ss 1222, 1224, 1225, 1226 and 1229 of the Civil Practice Act of the State of New York, art 76, the effect of which appears to be to vest in the People of the State any action which a public corporation in the State would have for wrongful dealing with its funds, and to secure that such action shall be commenced by the Attorney-General of the State. The jurisdiction of the courts of Quebec is derived from the fact that the plaintiffs found that Phillips before his death had deposited over $300,000 with the Montreal Safe Deposit Co, a sum which they allege to be part of the proceeds of the fraud, though for this purpose that is irrelevant. They seized this sum by means of a conservatory attachment, and thereby under Quebec procedure founded jurisdiction in the Quebec Courts to entertain the present action. No question as to the right of suit falls to be determined by their Lordships in the view they take of this case: for in their opinion there have been concurrent findings of fact in favour of the defendants by the two courts in Quebec, and nothing is to be found in the conduct of the proceedings or in the judgments of the courts to induce the Board to depart from its usual rule in such a case not to interfere with such concurrent findings. It is only necessary to state in outline the nature of the case before the Quebec courts. Connolly was president of the borough of Queens and as such had large powers over contracts for the borough both in determining specifications and in rejecting all tenders. He could only accept a tender which was not the lowest with the approval of a special board of the city. Seely was an assistant engineer in the employ of the city in charge of sewers in the borough of Queens. Phillips was originally a salesman of the Lock Joint Company, one of whose activities was the manufacture of concrete sewers. It appeared that at the time in question there were two forms of concrete sewers, monolithic where the sewer was cast in the trench in which it was to lie, and precast sewers which were cast by the side of the trench and then lowered into it. The Lock Joint Company specialised in the latter type. Phillips at the beginning of the history was, as stated, a salesman on commission. Later he bought the sewers

Page 955 of [1939] 3 All ER 952

from the Lock Joint Company and resold them to the contractors: and at a later stage he acquired from the company the plant necessary to produce the precast sewers in this borough, manufactured them himself and therefore sold his own product to the contractors. The substance of the conspiracy alleged was that Phillips induced Connolly to specify the lock joint type of sewers for sewer contracts in the borough, that, in concert with Phillips, Connolly took care that tenders only of contractors friendly to Phillips should be accepted, that, in concert with Seely, Connolly procured that the specifications should contain such onerous conditions as to the other, the monolithic, type, as to put it out of competition, and that all this was done to enable Phillips to charge the contractors and to procure the city to pay to the contractors extortionate prices for the sewersas was alleged, six or eight times as much as was charged for similar sewers in similar conditions in other parts of New York and elsewhere. In 1927 an inquiry was ordered by the Governor of New York into the affairs of the borough of Queens, and as a result in July 1928, an indictment was found against Connolly, Seely and Phillips for a conspiracy to defraud the city. Phillips died before arraignment: Connolly and Seely were tried and convicted. They were sentenced to fine and imprisonment: and their conviction was affirmed by the appellate Division and by the Court of Appeals of New York State.

The issue in this case was substantially the same as in the criminal proceedings in New York. The evidence had, of course, to be given afresh. Most of the witnesses were examined on commission in New York. The evidence was therefore not identical with that given in the criminal proceedings, and different counsel appeared for the parties. It was not, of course, suggested that the civil issue was determined by the conviction in New York of Phillipss alleged co-conspirators.

The trial judge, Mercier J, considered afresh the whole of the evidence. The only complaint made of his judgment in point of law is that he laid down that there was a heavy onus on the plaintiffs and that it was necessary for them to prove their case as clearly as they would have to prove it in a criminal proceeding. Their Lordships consider this criticism to be ill-founded. The proposition of the judge has been laid down time and again in the courts of this country: and it appears to be just and in strict accordance with the law. On the survey of the whole of the facts the judge was unable to find that the conspiracy was proved. It is unnecessary to consider in detail the judges comments on the facts. With some it might be difficult to agree: in particular their Lordships are clearly of opinion that no inference hostile to the plaintiffs case could be drawn from the fact that they did not call as their witnesses the two convicts Connolly and Seely. The judgment as a whole is, however, obviously directed to the right issues, and represents the judges judicial view of the facts. He says, as he was entitled to, that he was unfavourably impressed by the evidence of four of the plaintiffs witnesses

Page 956 of [1939] 3 All ER 952

whom he names: and on the whole concludes that the case is now made out. The judgments of the members of the Court of Appeal are similarly directed to the facts: and each of them comes to the conclusion that the case was not proved. Mr Geoffrion, for the plaintiffs, in his forcible argument, contended that in this or that particular they had formed a mistaken view of the evidence; but in turn they directed their minds to the right issue, they pointed out some respects in which the evidence did not bear out the pleaded case, and they dwelt upon the difficulties that arose from what they thought to be established, viz., that the so-called extortionate prices must have been known to many other persons in the employ of the city or the contractors other than the alleged parties to the fraudulent conspiracy. Their judgments are based on fact and cannot be impugned in point of law. In the words of the judgment of the Board in Moung Tha Hnyeen v Moung Pan Nyo, cited in the judgment of the Board delivered by Lord Dunedin in Robins v National Trust Co, at p 518:

There has been nothing to show that there has been a miscarriage of justice or that any principles of law or of procedure have been violated in the courts below.

In these circumstances their Lordships feel bound to adhere to what Lord Dunedin in the case just cited calls “the rule of conduct which the Board has laid down for itself,” viz, not to interfere with concurrent findings of two courts on pure questions of fact. The reasons for the rule are very obvious: and it may be remembered that the reasons apply with added force where the findings concurrently acquit a party accused of a crime, and where the claim is against a dead mans estate. It need only be observed in conclusion, as will be manifest from what has been said, that their Lordships have not felt at liberty to discuss the facts so as to determine whether the conclusion is right or wrong. In accordance with their rule the appeal on fact has proved to be unavailable. Their Lordships will humbly advise His Majesty that the appeal should be dismissed. The appellants must pay the costs of the appeal.

Appeal dismissed with costs.

Solicitors: Lawrence Jones & Co (for the appellants); Blake & Redden (for the respondents, the heirs of the late John M Phillips); Charles Russell & Co (for the respondents, the Crown Trust Company).

T A Dillon Esq   Barrister.


Kelner v Kelner

[1939] 3 All ER 957


Categories:        FAMILY; Ancillary Finance and Property, Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P        

Hearing Date(s):        27 JULY 1939        


Divorce Gift of money by wifes father in contemplation of marriage Joint account in names of husband and wife Marriage taking place and subsequently dissolved Whether gift made to parties jointly Married Womens Property Act 1882 (c 75), s 17.

The petitioners father had, in contemplation of his daughters marriage, placed £1,000 in an account in the joint names of himself, the petitioner and the respondent, his then prospective son-in-law, on the terms that it was to become the property of the petitioner and the respondent on their marriage taking place, but otherwise was to revert to the father. The marriage took place, and the father thereupon withdrew his name from the account, leaving it in the joint names of the petitioner and the respondent. The marriage was subsequently dissolved on the ground of the respondents desertion, and the petitioner thereupon claimed to be entitled to the whole of the money then standing to the credit of the joint account:

Held the money was a gift to the petitioner and respondent jointly, and the petitioner was entitled to half only of the amount remaining in the account.

Joseph v Joseph distinguished.

Notes

In Joseph v Joseph a somewhat similar payment was ordered to be given to the wife. The present case is, however, distinguished from that case on the ground that there the marriage was annulled, and here it has been dissolved. On the pronouncement of the decree of nullity, the purpose for which the money was provided failed ab initio, but here that is not the case.

As to Inquiries as to Ownership of Property, see Halsbury (Hailsham Edn), Vol 16, pp 740, 741, para 1211; and for Cases, see Digest, Vol 27, pp 260, 261, Nos 22962305.

Case referred to

Joseph v Joseph [1909] P 217; 27 Digest 260, 2298, 78 LJP 51, 100 LT 864.

Appeal

Appeal from a decision of Mr Registrar Long under the Married Womens Property Act 1882, s 17, whereby he decided that on the dissolution of the marriage between the parties on the ground of the husbands desertion the husband was entitled under the Act to a finding that half the sum of £593 standing in the joint names of himself and his wife must be paid to him. The following is the report of the registrar.

The parties were married on Jan. 15, 1933. The petitioner (wife) obtained a decree nisi for dissolution of the marriage on June 20, 1938, on ground of the respondents desertion.

The wifes father had saved, as a working tailor, some £1,000 and upwards. Of his savings he placed £1,000 in the joint names of himself, his daughter and his prospective son-in-law. This was to become the property of the daughter and son-in-law on the marriage taking place on Jan. 15, 1933; but if the marriage did not take place by the agreed date, the money was to be handed back to the wifes father. By agreement, certain sums were drawn out of the account before the marriage. The attached list (admitted) shows the drawings; and, on the marriage taking place, the father withdrew his name from the account leaving it as it now stands, in the joint names of the then husband and wife. There is practically no dispute as to the facts save that the father says (and I accept his evidence) that the suggestion that the respondents name should appear in the account jointly with his and his daughters came from the respondent.

Page 958 of [1939] 3 All ER 957

I have come, with the greatest reluctance, to the conclusion that I am bound to regard the payment of the sum of money as being an absolute gift. Joseph v. Joseph, to which my attention was directed, is in my view clearly distinguishable.

In my submission the money was a gift to the parties jointly and the respondent is entitled to half the present balance.

L J Acton Pile for the petitioner.

J Roland Adams for the respondent.

Pile: The case is governed by the decision in Joseph v Joseph. This decision was not based on nullity, but rather on an analogy to a variation of a settlement. The registrar obviously thought that, on the facts, the money ought in justice to be paid to the petitioner. The Married Womens Property Act 1882, s 17, enables the court to consider all the circumstances and to do justice between the parties. The money was provided by the father, originally for the petitioner, but the respondent persuaded her to let his name appear in the account. To that extent the money was in the joint names, but only for the purpose of the marriage. That is now at an end, and it is immaterial whether it has been ended by dissolution or nullity.

Adams was not called upon.

L J Acton Pile for the petitioner.

J Roland Adams for the respondent.

27 July 1939. The following judgment was delivered.

SIR BOYD MERRIMAN P. It has been argued on this appeal that the registrar was wrong in not holding that the case was covered by the authority of Joseph v Joseph, and that there was no such absolute control by the husband over the fund standing in joint names as would create a gift, and in failing to realise that the court had power to deal with the matter equitably as, between the parties. I emphasise that this is an application under the Married Womens Property Act 1882, s 17. Under that Act, after whatever inquiries the court may think it necessary to make, the question remains: Whose property is this? Is it the husbands or is it the wifes? or does it belong to them both jointly? It is wholly different from the procedure for variation of settlement which can be invoked on dissolution of marriage. That procedure assumes that certain sums belong to one spouse or the other, and that they are settled in a particular way, and invokes the peculiar jurisdiction of this court to alter the disposition and settlement of the property.

This is the case of a Jewish marriage in which, in accordance with custom, money was provided by the wifes father by way of dowry. The registrar states that the arrangement was that the money was to be placed in the joint names of the father, the husband and the wife before marriage upon the terms that it was to become the property of the husband and the wife on the marriage taking place before a specified date, or, if the marriage did not then take place, was to be handed back to the wifes father. The only matter which was in dispute in this case is whether the husband initiated the suggestion, as the registrar finds that he did, that his name should be one of those in whose the account stood. The registrar has found that it was an undisputed fact that, if the marriage took place by the agreed date, the money was to be the

Page 959 of [1939] 3 All ER 957

property of the wife and the husband. The marriage did take place by the appointed date, whereupon the father withdrew his name from the account, leaving it entirely at the disposition of the spouses. Though perhaps it is unnecessary to go into the details with which I have been provided, it was in fact drawn upon largely for purposes which, though primarily those of the husband, were no doubt also directly for the benefit of the spouses jointly. Five years later the marriage was dissolved, and there was then left a balance of some £583 odd in the account.

In those circumstances is the wife entitled to the whole of that money, or are they each entitled to half of it? The registrar has found that there is no escape from holding that each is entitled to half. In the course of the argument it became abundantly clear that the registrar was right, and that there was no escape from this conclusion. Perhaps foolishly I suggested that there might be another way of giving effect to the suggestion of counsel for the petitioner that justice should be done by invoking the procedure for variation of settlement. That I am not called upon to decide one way or the other, because he has withdrawn all claim for variation of settlement, and relies only on his original application under the Married Womens Property Act 1882, s 17, and that is the point which I am deciding. It is perfectly clear on the registrars findings, that there was no other conclusion to which he could possible come. The suggestion that he was bound to find the other way on the authority of Joseph v Joseph is based on a complete misconception of what that case decided. The whole point of Joseph v Joseph although there is no elaborate judgment by Sir John Bigham Pas appears on the registrars report is this: £400, the sum in dispute in that case, had been provided by the wifes relatives as joint property. Up to that point, the case resembles the present case, but it differs from the present case in that the marriage had been annulled, and in those circumstances the registrar in that case held that the money should be handed back to the wife, the purpose for which it was provided having failed ab initio. However, as appears on the face of the registrars report, had the marriage subsisted, the money would have been and continued to be joint property. That is precisely what the registrar has found is the effect of the corresponding arrangement in the present case. I think he was entirely right and that there is no escape from the conclusion that this appeal must be dismissed as hopeless. I need express no further opinion, as I am no longer asked to do so, on the propriety or otherwise, if this arrangement was a settlement, of varying it in accordance with what are the obvious dictates of common sense.

Solicitors: Edward Fail (for the petitioner); William Daybell (for the respondent).

J F Compton Miller Esq   Barrister.


Smith v Harris

[1939] 3 All ER 960


Categories:        CIVIL PROCEDURE: QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND DU PARCQ LJJ        

Hearing Date(s):        19, 20 JULY 1939        


Negligence Personal injuries Motor cyclists String of motor cyclists engaged on treasure-hunt Sudden braking by leading cyclist Injury to pillion rider on fourth motor cycle.

Practice Slip rule Damages awarded against two defendants Judgment entered as “each defendant liable for half judgment” Whether error can be corrected under slip rule.

The plaintiff was riding on the pillion seat of a motor cycle driven by the defendant H. This motor cycle was the fourth of a string of five, the drivers of which were engaged in a treasure hunt. The defendant P, who was leading the party, overshot a turning and braked hard. O, who was following P, swerved to his right, and stopped. M, who was next, swerved to his left, and stopped. H braked hard, but his cycle struck that of O, and the plaintiff was injured in consequence. At the trial, the county court judge found that both defendants had been negligent and awarded damages against both of them. By an error, the judgment was recorded as “Order that each defendant liable for half judgment and costs.” The plaintiff appealed in order to get the form of judgment rectified. The defendant P by cross-appeal, contended that the accident was due solely to the negligence of H, who had had time to avoid the consequences of any negligence on the part of P.

Held (i) there had been a concurrence in point of time of the negligence of both defendants, and they were both equally to blame.

(ii) the error in recording the judgment in the county court was one which might have been corrected under the slip rule.

Notes

The judgments in this case contain a careful consideration of the operation of the slip rule and of the application of the principles of the law on negligence to vehicles proceeding one behind the other. Both these matters are of considerable practical importance, but, at the same time, are matters in which each particular case falls to be decided on its own facts. The judgments must, therefore, be read as a guide to the proper method of the application of the law on these points, and not as an authority which will be binding even in a case where the facts are more or less similar to those here considered.

As to Negligence in respect of Vehicles on Highways, see Halsbury (Hailsham Edn), Vol 23, pp 637643, paras 894903; and for Cases, see Digest, Vol 36, pp 5962, Nos 366400.

As to Slip Rule, see Halsbury (Hailsham Edn), Vol 19, pp 261263, para 561; and for Cases, see Digest, Practice, pp 472477, Nos 15301580. See also Yearly Practice of the Supreme Court 1939, pp 440444.

Cases referred to

McLean v Bell (1932) 147 LT 262; Digest Supp.

The Eurymedon [1938] P 41 [1938] 1 All ER 122; Digest Supp, 107 LJP 81, 158 LT 445.

The Heranger [1939] AC 94; Digest Supp, 108 LJP 12, 160 LT 241.

Tidy v Battman [1934] 1 KB 319; Digest Supp, 103 LJKB 158, 150 LT 90.

Sharp v Avery & Kerwood [1938] 4 All ER 85; Digest Supp.

Admiralty Comrs v SS Volute [1922] 1 AC 129; 41 Digest 780, 6417, 91 LJP 38, 126 LT 425.

Singleton Abbey SS Owners v Paludina SS Owners, The Paludina [1927] AC 16; Digest Supp, 95 LJP 135.

Page 961 of [1939] 3 All ER 960

Appeal

Appeal by the plaintiff, and Cross-Appeal by the defendant Popplewell, from a decision of His Honour Judge Drucquer at the Brentford county court dated 16 February 1939. The facts and arguments are fully set out in the judgment of Scott LJ.

Edward Terrell for the appellant.

D P Maxwell Fyfe KC and F G Paterson for the respondent.

Upon the appeal the judgment of Du Parcq LJ, is the judgment of the court. The cross-appeal is dealt with in all the judgments.

Edward Terrell for the appellant.

D P Maxwell Fyfe KC and F G Paterson for the respondent.

20 July 1939. The following judgments were delivered.

SCOTT LJ. A party of people were engaged on a treasure hunt, each on a motor cycle or on the pillion seat attached to a motor cycle, in the neighbourhood of Hever in Kent. The essence of a treasure hunt is that clues are set in various places arranged beforehand, the first clue giving an indication as to where the second clue will be found, and the second where the third will be found, and so on. Popplewell, who was apparently clever at finding clues, was asked by the rest, tacitly or otherwise, to take the lead, and was leading. They were proceeding in single file along a road near Hever, and had reached the point where a road running north-west and south-east turns off to Hever Station. They were in this order: The first cycle was occupied by Popplewell, who is the second defendant, the second cycle was occupied by Oldacre, the third by Marsh, the fourth by Harris, who is the first defendant in the case, with the plaintiff as his passenger, and behind him was Tarrant. They were all proceeding in line at about 25 to 30 miles per hour at this time, according to the finding of the county court judge. Popplewell the leader, with the others each about 8 yds behind one another, found that he had over-run the turn to Hever, where he had been intending to lead the party. Seeing the signpost as he passed it, he realised he had overshot his turning point, and had to pull up short, in order to try and get round. Instead of swerving either to the left or the right in order to give those behind him a chance of avoiding him, he braked so suddenly and hard that Oldacre, who was on the second cycle, was spreadeagled on the ground on one side, Marsh did the same on the other side, and not unnaturally Harris following immediately behind Marsh, swerved out to avoid him, ran into Oldacre, who was on the ground, overturned, and the plaintiff was thrown off and suffered somewhat severe injuries.

The county court judge, who gave a carefully considered judgment, going into the facts closely, stated the facts as I have repeated them, and in regard to the stopping by Popplewell, said this:

Seeing the signpost he braked hard, and stopped suddenly without giving any warning whatever of his intention so to do. As a result of his action, Oldacre, who was next behind him, was spreadeagled to the right and managed to stop without colliding with Popplewells machine; Marsh, who was next, spreadeagled to the left and ended up on the grass verge. Marsh said he did this to enable him to turn more easily up the side road; I think he did it because he could not help it if he were to avoid colliding with Popplewells cycle. Harris also braked hard for some 30 feet, and tried to get to the right of Oldacre, but he struck Oldacres

Page 962 of [1939] 3 All ER 960

machine with his motorcycle, his cycle turned over, throwing the plaintiff to the ground. Tarrant, the last of the line, escaped by turning to his left on to the grass verge. In my opinion Popplewell was clearly negligent in the way he drew up. I think also that the defendant Harris was negligent in that he did not have proper control of his machine. It is difficult to say in the circumstances who was the more negligent, Popplewell or Harris. Their joint and several negligence was the cause of the accident.

Then at the end, on the application of counsel for Popplewell, the judge held that both defendants were liable to contribute equally. That was on an application for an apportionment under the Law Reform (Married Women and Tortfeasors) Act 1935, to which I will refer in a moment.

I read the whole of that part of the judgment because in my view this is a question of fact, and not of law, and I wanted to show that the judge so treated it. In this court, counsel for the appellant Popplewell contends that the judgment ought to have been, as a matter of law, against the defendant Harris, and against him only, and he submitted to us four propositions of principle in support of his argument as follows: (i) If As original fault has merely created the occasion for Bs injurious act to C, A will not be liable; (ii) If the new act be a new and independent act of volition, not automatic, reflex, or without consciousness of what the actor is doing, the chain of causation will be broken, and the original wrong-doer will be relieved of liability; (iii) It is immaterial that the intervening act is the probable consequence of the defendants own wrongful act; (iv) If the defendants negligence as opposed to the consequences of his negligence, continues so that two direct causes operate at the same time, and lead to a common result, then there is no novus actus, and each actor will be the cause of the damage done. I think I should read that as “a part cause of the damage done.”

The argument which was addressed to us was this: that on the facts as stated by the judge, first there was really time for Harris to avoid the consequences of the initial negligence of Popplewell, and secondly, there was a possibility of his making a new and independent act of volition, in other words, pulling up. The argument, as it seemed to me, was based essentially on the view that the inquiry into legal responsibility is identical with a mere inquiry into the chain of causation on an analysis of the sequence of events of a kind which, if you can say that as a mere matter of causation a new cause comes in, you must in law then say that the person who set the chain of causation moving is thereby freed from all legal responsibility. In my view, that is to take too narrow a view of legal responsibility for either land or sea collisions, and it is too narrow, because it is not only the result of taking too narrow a view of the factsthat is to say, not having all the facts sufficiently in mind at the same timebut it is misleading, because it tends when it is stated in those terms to draw away the attention of the judge or jury dealing with the issues of fact from what you might call the broad view of the circumstances of the case. In the present case, it appears to me obvious that there was a concurrence in point of time of the negligence of both

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defendants, and that the question of sequence of causes, which has been so much discussed, does not in one sense arise at all in the present case, and the concentration of attention upon the mere question as to whether or not Harris could have stopped takes the mind away from the joint or contributory operation of the original act of Popplewell.

To my mind, the broad view of the facts is this. Here is a string of people, all with their minds a good deal engaged on a treasure hunt. They are following each other at 20 to 25 miles per hour, which is not an unreasonably fast speed for a country road, but, if they are following each other, one close behind the other, the followers not knowing how or when the leader is going to turn, and following so closely that, if anything very sudden happens to any one of the party except the last one, there may be a collision between that one and the one behind, or more than the one behind, that fact of itself makes a great difference in the speed which is reasonable in the circumstances. The essence of a band of motor cycles in a line such as that is that the speed should be so limited as to make it quite certain that each one, with the interval at which he is in fact following, can stop in time to avoid a predecessor in the case of any breakdown or sudden stop of any sort. That is a duty which is continuing all the time; it is operating at the moment when one of those ahead suddenly stops or breaks down, and if that accident is caused by the negligence of that rider, then obviously his negligence is the cause of the difficulties in which all the followers find themselves. I cannot imagine any case more aptly illustrating the effects of that negligence, in the disconcerting effect upon those following, than the present one. In this case, the judge has found that Harris was so disconcerted by what happened that, even with the distance of the gap between him and Marsh, the one immediately in front of him, he was not able to stop in time. However, it is quite impossible, I think, for us sitting here as a Court of Appeal, in view of the judges appreciation of the facts, to interfere with a decision of his that the negligence of Popplewell was in fact a contributing cause at the time that Harris failed to pull up, and collided with Oldacre, the second in the line. Indeed, if I were a judge of fact, which I am not, I should certainly say that I saw no reason whatever to differ from the judges view on the facts, and, if it be necessary to imply a view to that effect as a proposition of fact on the ground that the judge has not sufficiently expressed it, I have no hesitation in reading it into the judges judgment, and expressing my own view that that is a necessary finding in the circumstances of this case. It is quite impossible where there is a line of people moving in that way, one after the other, all engaged upon the game, all thinking of that, and an accident of this sort happens, to say that, when a predecessor breaks down, and a successor finds himself in difficulties, the breakdown is not part of the cause.

It is quite true that in one sense the nautical phrase, “the agony of collision,” which excuses errors at the last moment, is inapplicable here, but in another sense it is applicable, because in my view the mental effect

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upon Harriss mind of so sudden and unexpected an event happening in that way must have been disconcerting. This principle cannot of itself justify the judges view that the negligence of Popplewell was in existence as a part cause of the total breakdown of the whole string of cyclists, so as to make it a continuing cause of negligence, and that at the same time Harriss act was a fresh act of contributory negligence. I use the word “contributory” in the purely causal sense for the moment.

In all these cases, it is necessary to bear in mind what Lord Wright said in the case of McLean v Bell, at p 264. I quoted it in a passage in a judgment delivered by myself in The Eurymedon, and I venture to read that passage, because it has, I think, a clear application to the facts before the court to-day, and expresses the view that I desire to express here. I said at p 58 ([1938] 1 All ER, pp 131, 132):

I confess to a feeling that much of the litigation which has taken place in the past upon this type of question has arisen through a tendency to substitute a too philosophical analysis of causation for a broad estimate of responsibility in the legal sense. I respectfully agree with a phrase of Lord Wright in McLean v. Bell, at p 264, “The decision, however, of the case must turn not simply on causation, but on responsibility.” When a solution of problems of this type is sought solely in terms of causation, it is difficult to avoid the temptation of concluding that the last act or omission in point of time is of necessity not only the last link in the chain of causations but the determining factor in the results since ex hypothesi but for that last link the result would never have happened. But legal responsibility does not necessarily depend only on the last link. This is especially so in maritime collisions. …

Then I deal with maritime collisions, and the difference between them and land collisions, in the essential difference of stopping by reversing engines of a ship at sea being different from the power of braking in a motor car. Still bearing on that aspect, I want to quote a small passage from Lord Wright in the case of The Heranger. That was a case of a collision in the Thames, an Admiralty appeal, and Lord Wright, on a question of whether one ship ought to have reversed or not, said at p 101:

I do not think that a question of this character can properly be treated as a question of law. The Court of Appeal recently held in Tidy v. Battman, a common law action for negligence in a motor-car collision, that it was not proper to set aside the finding of a jury by reference to a rule of conduct which it was said was a rule generally binding and a rule of law. I may venture to quote what I said in that case in the Court of Appeal [p. 322]: “It is unfortunate that questions which are questions of fact alone should be confused by importing into them as principles of law a course of reasoning which has no doubt properly been applied in deciding other cases on other sets of facts.” In all these cases of negligence, whether on sea or on land, the decision must be arrived at as a question of fact on all the circumstances of each case. Cases and precedents may perhaps help sometimes, but they are in truth a very doubtful guide at best in deciding any particular case.

In my view, this is par excellence one of those cases where the circumstances of the case are somewhat complex and essentially fall to be appreciated by the judge of facts. If he has expressed a final view on those facts then it is, even in the case of an appeal from a judge of the High Court alone to the Court of Appeal, one in which the Court of Appeal should be very slow to differ; still more so if it has been tried with a jury, and most slowly of all if it is an appeal from a county court judge, because the Act says in terms that appeals will be allowed on a question of law only.

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That is the answer, in my opinion, to the submission by counsel for the respondent that the case which he cited to us, Sharpe v Avery & Kerwood, has any application to this case. That was a case of a motor car collision; the facts were different, but have some similarity, and counsel for the respondent went into the facts with us in sufficient detail to show that there was a good deal of similarity. In truth, in the result, he was, in my opinion, submitting that we ought to decide the present case in the way he asked us to do because the facts of Sharpe v Avery & Kerwood were very similar, and we ought, therefore, to follow that decision. That is obviously a misuse of citations of other decisions for the purpose of an appeal. I know that counsel for the respondent will not think I am blaming him for calling our attention to that case, but I merely say that because it seems to me so important that issues of fact should be treated as issues of fact, and that the decisions upon them should not be cited in other cases, unless there is a real principle of law laid down, and it is the principle itself that is wanted for citation. I cannot think that the decision in Sharpe v Avery & Kerwood laid down any fresh principle.

The other two cases cited by counsel for the respondent were The Volute and The Singleton Abbey, two Admiralty appeals in collision cases, the former being the one in which Lord Birkenheads judgment was given upon questions of contributory negligence. That case has been frequently analysed, and neither in that case, nor in the opinion of Lord Blanesburgh in The Singleton Abbey, is there any rule laid down inconsistent with the view taken in this case by the county court judge that both negligences, Popplewells and Harriss, were in part the cause of the one disaster to the plaintiff. That being so, I think we ought to take the view, and take it very clearly and definitely, that the county court judge had evidence before him on which it was open to him to arrive at the conclusion at which he did, and that there is no ground in law for interfering with it. In my view the judges judgment was a very good judgment, and I agree with it.

The cross-appeal I think ought to be dismissed with costs.

CLAUSON LJ. I agree. I wish to express my personal indebtedness to counsel for the respondent for a most interesting and, so far as I was concerned, a most instructive argument, but he has entirely failed to satisfy me that there was any error of law in the judgment of the county court judge. As I understand it, the facts as found by the county court judge are these: (i) that Popplewell made a mistake in suddenly stopping his machine, and thus thrusting Oldacres machine into Harriss path; (ii) that Harris, immediately before and at the time of this collision was driving his machine without its being under proper control, and I understand the county court judge to have heldand for myself I cannot see how he could avoid holdingthat the fact that the lady was shot off her seat and injured was due to the combined effect of these two

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mistakes of Popplewell and Harris. That would seem inevitably to lead to the conclusion that the judge was right in holding the two defendants liable in damages to the plaintiff. It was suggested that the sum found for damages by the county court judge was such that this court would have jurisdiction in some way to interfere with it. In my view the court has no such jurisdiction in the facts of the present case.

DU PARCQ LJ. As the appeal is being allowed, I think it is only right to say that the judge himself was not guilty of error of any kind. In the plainest language he said that he awarded the plaintiff £250 against both defendants, and it is quite clear that he meant what he said, that that was to be a judgment against both of them. It followed, of course, that the plaintiff would be entitled to get £250, if she could not get a contribution from one defendant, entirely from the other defendant. Then the judge went on, as he is now empowered to do by law, to say what contribution should be made as between the two tortfeasors. Most unfortunately, by some slip, I suppose a misunderstanding due perhaps to inattention or due, perhaps, to something going wrong in the office of the county court, the judgment was recorded in this way:

Order each defendant liable for half judgment and costs.

I do not in the least criticise the advice which counsel for the appellants told us that he gave, that it was not possible to get that corrected under the slip rule, because I know from my recollection that the cases about the operation of the slip rule are not very easy to reconcile, and he may well have thought, as I gather he did think, that he might be throwing away the costs of an application to the county court if he did apply on behalf of his client under the slip rule, but I wish to say, speaking for myself, that I do feel strongly that this could have been rectified under the slip rule. It is plainly a case where the judge made no mistake at all; there was no desire to correct any error he had made. His manifest intention had been expressed by him, and had been erroneously interpreted by what must, I think, have been an accidental slip. Nobody would suggest that any official of the county court deliberately recorded something which was quite different from what the judge had said, and if it was not deliberately done, it seems to me that one may say it reasonably follows that it was accidentally done. I wish to say, because such a thing may occur again, that in my view it is quite open to a county court judge, if he finds that his clearly expressed judgment has been wrongly recorded in the books of the county court, to correct that as an accidental slip.

Now so far as the cross-appeal is concerned, there is very little that I wish to add. I asked counsel for the respondent in the course of the argument to be good enough to state shortly what he suggested would have been the proper direction to a jury, if there had been a jury in this case. I do feel that in cases of this kind, it is no bad test to consider how an

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argument would appear when put into the kind of language which it is necessary to use in addressing a jury. The common law of this country has been built up, not by the writings of logicians or learned jurists, but by the summings-up of judges of experience to juries consisting of plain men, not usually students of logic, not accustomed to subtle reasoning, but endowed, so far as my experience goes, as a general rule, with great common sense, and if an argument has to be put in terms which only a school-man could understand, then I am always very doubtful whether it can possibly be expressing the common law. In fairness to counsel for the respondent, I ought to say that he responded at once to my invitation, and put in clear language, if I may say so, what would have been a perfectly proper direction to the jury. It then appeared that one of the questions which he would have put to the jury would have been the question whether both these defendants were to blame, because in truth it was the negligence of each of them which contributed to cause the accident. That precise question was, obviously, as it appears to me, put to himself by the judge, and he has answered it categorically. He says: “Their joint and several negligence was the cause of the accident.” It would be pedantic perhaps to say that technically the negligence was not joint negligence; they probably were not joint tortfeasors in the technical sense, but what the judge means is obvious, that they were both guilty of separate acts of negligence, and that those separate acts of negligence in combination caused the injuries from which the plaintiff suffered, and caused her damage. That was precisely the point which he had to decide. He has answered the very question which ought to have been left to the jury if there had been a jury, and I will only add, though perhaps it is irrelevant to do so, that if I had to sum up this case to a jury, and they had given any answer other than that which the judge has given to the question, I should have received their verdict with the utmost respect, but with some little surprise. I agree that this appeal should be allowed, and the cross-appeal dismissed.

Solicitors: H N Robbins (for the appellant); William Hurd & Son (for the respondent).

E Fuller Briscoe Esq   Barrister.

Astle v Astle (by his Guardian)

[1939] 3 All ER 967


Categories:        FAMILY; Domestic Violence        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HENN COLLINS J        

Hearing Date(s):        28 JULY 1939        


Divorce Cruelty Respondent of unsound mind Test of legal responsibility Application of common law rule Matrimonial Causes Act 1937 (c 57), s 2.

The parties married in 1927, and shortly afterwards the husband committed violent assaults upon the petitioner, and also upon others, and in consequence he was in June 1927, certified and received into a mental hospital. He improved, and was discharged some months later, but his wife was afraid of him and did not live with him. During

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1931, he came to her house, and uttered such threats of violence that his wife, being apprehensive by reason of past experience, sought police protection. It was found as a fact that the respondent did not know the nature and quality of the acts which he committed in 1927, but that he did know in 1931 that he was uttering threats against his wife:

Held (i) the acts committed in 1927 did not amount to cruelty because the respondent, by reason of his mental state, did not appreciate the nature and quality of such acts, and the wife was not entitled in respect of those acts to a decree.

(ii) the respondent, knowing the nature and quality of his acts in 1931, was guilty of an act of cruelty, although he had been previously certified as of unsound mind.

(iii) although the isolated act of cruelty in 1931 was not, in itself, sufficient to entitle the petitioner to succeed, the earlier history must be taken into account as aggravating the consequences of the respondents act, and the petitioner was, in consequence, entitled to a decree nisi.

Notes

This case considers fully the defence of insanity to a charge of cruelty and how far the rule in MNaghtens case is applicable in such cases. It has been said that the remedy is the restraint of the insane party and not the release of the spouse. It was said, however, that acts of cruelty, against which the protection of the court could be shown, must be shown to proceed from malignity. It is, therefore, held that acts shown to have been committed at a time when the spouse was so insane as not to know the nature and quality of those acts are not in law acts of cruelty. They may, however, have been used to convert an isolated act of cruelty into one upon which a charge of cruelty may be successfully founded.

Cases referred to

Hanbury v Hanbury (1892) 8 TLR 559; Digest Supp, previous proceedings [1892] P 222.

Kirkman v Kirkman (1807) 1 Hag Con 409; 27 Digest 286, 2579.

MNaghtens Case (1843) 10 Cl & Fin 200; 14 Digest 56, 229, sub nom McNaughtons Case 4 State Tr NS 847.

Hall v Hall (1864) 3 Sw & Tr 347; 27 Digest 323, 3022, 33 LJPM & A 65, 9 LT 810.

Yarrow v YarrowI [1892] P 92; 27 Digest 324, 3025, 61 LJP 69, 66 LT 383.

Defended Petition

Defended petition by the wife for divorce on the ground of cruelty. The facts and arguments are fully set out in the judgment.

J Roland Adams for the petitioner.

Theodore Turner for the respondent.

28 July 1939. The following judgment was delivered.

HENN COLLINS J. This is a wifes petition for dissolution on the ground of cruelty. The answer puts in issue the allegations of cruelty, and by an amendment, for which I gave leave, alleges that at the time the acts of cruelty, if any, were committed, the respondent was of unsound mind, and did not know the nature and quality of the acts he was committing.

The parties were married on 12 April 1927 and had lived together as man and wife for some 3 weeks only, when the respondent began a series of violent, even murderous, assaults upon his wife, and, incidentally, upon others. On 16 June 1927 the respondent was certified as insane,

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and received into Cheadle Mental Hospital, suffering from acute mania. There he improved, and was allowed out on parole from time to time, and on one of these occasions told his wife that he had decided to kill her and to commit suicide. The petitioner was, of course, terribly alarmed, but with great presence of mind pretended to agree with him, and eventually persuaded him to go back to the hospital. From that institution he was discharged on 6 October 1927 but his wife did not live with him, as she was afraid to do so. In March 1931 while he was at liberty, and not under certificate, he came to the house in which his wife was living, and uttered threats of violence towards her and her family, which, in view of her past experience, caused the wife such real apprehension that she sought police protection. In October 1937 the respondent was again certified, and has been under restraint ever since.

In those circumstances, it was naturally conceded that the wife had been the victim of cruelty, if cruelty is to be judged only from the standpoint of the one who suffers from the acts complained of. If, on the other hand, intention on the part of the actor is a necessary element of cruelty in a matrimonial suit, there would be no cruelty if the state of the respondents mind was such that he did not know the nature and quality of his acts, and since I have come to the conclusion upon the facts that the respondent did not, by reason of disease of the mind, know, at the time he was committing them, the nature and quality of the acts which he committed in 1927, I have to decide which of these two contentions is right in respect of those acts.

The point is not, it seems to me, covered by direct authority, either as the law stood before the Matrimonial Causes Act 1937, came into force, or, if that Act affects the matter, as the law now stands, and in deciding the point I am aware that I am travelling where Sir Charles Butt P, in the case of Hanbury v Hanbury, would not tread.

The argument in favour of the view that a petitioner is entitled to relief in this court on the ground of cruelty, although the acts complained of were the outcome of insanity, runs thus: none of the accepted tests of cruelty in matrimonial causes tales account of anything but the effect upon the victim, or indicates that the acts must be knowingly or wilfully done. This is only to be expected, the argument runs, because the cases show that the primary, if not the only, ground upon which the court intervened in a case of cruelty was for the protection of the injured spouse. If, from the disposition and circumstances of the respondent, the petitioner was likely again to be exposed to similar treatment, unless the spouses were judicially separated, a separation was decreed without inquiring whether the respondents actions proceeded from malignity or other cause. Hence it came about that, if the respondents actions were caused by recurrent fits of insanity, with intervals during which there would be no excuse for non-cohabitation, a decree would be granted, but, if the insanity were such as to require permanent restraint, then, and then only, would a decree be refused,

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the Lunacy Laws being assumed to afford a sufficient protection. That is, I think, a not unfair summary of the cases, if it be added that no case was called to my attention in which a decree was refused on the ground of the respondents insanity. I do not pause to examine the cases in detail now, because their effect is reproduced in the charge of Sir Charles Butt P to the jury in Hanbury v Hanbury, to which I have already alluded. Then, the argument continues, there is nothing in the Matrimonial Causes Act 1937, to alter the quality of cruelty, the only alteration in this regard being the nature of the available relief. Where a discretionary remedy by judicial separation would have been afforded, a decree of dissolution, subject only to the discretionary bars, must now be granted. This is a formidable argument, and one which I confess I have found attractive, but I have come to the conclusion that I cannot accept it. To begin with, to do so would be to introduce, or, if that be not the right word, to establish in this court a measure of legal responsibility not applied in any other court. On the facts of this case the respondent could not be held answerable outside this court, either civilly or criminally, for his assaults, and it is therefore a very strong step to say that in this court, by those self-same acts, he has done something which, in this court, is not only an offence, but may, and, indeed, must, since divorce is not a discretionary remedy, alter his civil status.

The argument with which I am dealing proceeds upon the footing that, short, at any rate, of insanity of such a degree as leaves no hope of recovery, but necessitates permanent confinement, the divorce court has not taken cognisance of the state of the respondents mind. This doctrine has its most forcible expression in Sir William Scotts judgment in Kirkman v Kirkman where he says, at pp 409, 410:

The persons of both parties, however, must be protected from violence … If that safety is endangered by violent and disorderly affections of the mind, it is the same, in its effect, as if it proceeded from mere malignity alone; it cannot be necessary, that, in order to obtain the protection of the court it should be made to appear to proceed from malignity.

That is, I think, the high-water mark of the argument, but, neither in that case nor in Hanbury v Hanbury, nor in any other of the cases, is the test of legal responsibility which was established in MNaghtens case applied to the respondents state of mind. Possibly the evidence in those cases would have been differently marshalled if the test applied in MNaghtens case had been its focus, but taking the evidence as it is to be gathered from the reports, in no case am I satisfied that it was such as to establish that the respondent did not know the nature and quality of his or her acts.

I do not, therefore, regard those cases as authorities for the proposition that, in this court, there is no degree of insanity that will afford an answer. Why should Sir Charles Butt so carefully have guarded himself as he did in Hanbury v Hanbury if it were so, and how can one reconcile the judgment in Hall v Hall with such a view? If there be a degree

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of insanity which affords an answer to a matrimonial suit, how is it to be safely measured except by the test applied in all other courts? In Yarrow v Yarrow that test was, in fact, applied to the acts of the respondent, though it was doubted whether even that degree of insanity would afford an answer to a suit for divorce on the ground of adultery. No question of insanity in relation to adultery arises in this case, and I express no opinion on that matter.

There is one other consideration which points in the same direction. I have, after all, to deal with the statute law as it is to-day. The Matrimonial Causes Act 1937, s 2, on which this suit is based, is in these terms:

The following section shall be substituted for the Supreme Court of Judicature (Consolidation) Act, 1925, s. 176 [and then follows the section that is substituted]: “A petition for divorce may be presented to the High Court … either by the husband or the wife on the ground that the respondent … (c) has since the celebration of the marriage treated the petitioner with cruelty …”

I emphasise the word “treated,” because that seems to me to connote a conscious action, and appears to indicate an action of which the doer knows the nature and quality. The indication may not be strong, and is probably not strong enough to found upon it an exception to the general rule of law. However, the reverse is the case. The presumption is against the exception, and the indication points in the same direction.

I have said that my conclusion of fact is that the respondent did not know the nature and quality of the acts which he committed in the year 1927, and since in my judgment intention or malignity is an essential ingredient in cruelty, if those acts stood alone, the petitioner could not be granted relief. However, as I have indicated, there was a threat in March 1931. On that occasion he came to the house where his wife was living, and shouted that, though they might think themselves safe, neither his wife nor her family would live much longer. What was the respondents state of mind at that date? He had been at liberty since October 1927, and remained at liberty till October 1936, some 5½ years after this threat, and, so far as I am aware, was sufficiently master of himself to commit no violence during that time. On the occasion in question there was no superior force to prevent him carrying out his threat; nothing, in fact, but his own self-restraint. Of course, it does not follow from that that he knew he was uttering a threat, but it seems probable that he did. The medical evidence, which I accept, is to the same effect, and I find that he knew he was uttering threats against his wife. Upon that view of the facts, he was responsible in law for what he then did.

The next question is whether this act of cruelty, an isolated act so far as he was concerned, was of such gravity as to justify a decree in the petitioners favour. If I were to regard it as a single isolated act from the petitioners point of view, an act without any antecedent history, I should probably answer in the negative, but to do so would be, I think, to take an artificial and technical view, and to lose sight of the realities of the case. With her past experience in mind, the threat had

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for the petitioner a reality and force out of all proportion to that which it would have had, if he had not already made attempts upon her life. It was little wonder that she sought police protection. I think I must take the earlier history into account, not as aggravating the quality of his single act of cruelty, but as aggravating its consequences. For these consequences he is, in my opinion, responsible, although I have acquitted him of the acts which gave them their gravity. I think this case may be compared with those, not unfamiliar in the criminal courts, where far graver consequences than would have been anticipated have followed some slight assault owing to some physical infirmity of the victim. For these reasons I think the petitioner is entitled to the relief which she claims.

Decree nisi granted.

Solicitors: Haslewood Hare & Co (for the petitioner); The Official Solicitor (for the respondent).

J F Compton Miller Esq   Barrister.

Kellock v Kellock (by her Guardian)

[1939] 3 All ER 972


Categories:        FAMILY; Domestic Violence        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HENN COLLINS J        

Hearing Date(s):        28 JULY 1939        


Divorce Cruelty Respondent wife of unsound mind Acts of cruelty committed Acts proceeding from conscious malignity.

The parties were married in 1915, and soon afterwards the wife began, without any provocation, to commit acts dangerous to the life and health of the petitioner. She continued in such conduct until 1931, when she was certified as insane, and removed to a mental hospital. She suffered from a disease known as manic depressive insanity, and while the acts complained of were manifestations of that disease, medical evidence showed that at all material times she knew what she was doing, and that she was doing wrong:

Held the respondent had acted with a consciously wicked mind, and the disease from which she suffered was no answer to a charge of cruelty. The petitioner was therefore entitled to a decree nisi.

Notes

Insanity is only a defence to a charge of cruelty when the act is the unconscious act of the party charged. It used to be said that the remedy lay in the restraint of the insane party and not in the release of the spouse. The question is more fully reviewed in the judgment in Astle v Astle, p 967, ante.

As to Insanity as a Defence to Cruelty, see Halsbury (Hailsham Edn), Vol 10, pp 652, 653, para 958; and for Cases, see Digest, Vol 27, p 293, Nos 26832694.

Case referred to

Kirkman v Kirkman (1807) 1 Hag Con 409; 27 Digest 286, 2579.

Defended Petition

Defended petition by the husband for divorce on the ground of his wifes cruelty. The wife, being of unsound mind, appeared by the Official Solicitor as her guardian ad litem. The facts are fully set out in the judgment.

L J Acton Pile for the petitioner.

H J Phillmore for the respondent.

Page 973 of [1939] 3 All ER 972

28 July 1939. The following judgment was delivered.

HENN COLLINS J. This is a husbands petition for dissolution of marriage on the ground of his wifes cruelty. The wifes answer is a denial of the charges, and she further says that, if she did any of the acts alleged, she was at the time not of sound mind, and was incapable of understanding the nature and quality and probable results of such acts. The evidence satisfied me that, from time to time since almost the beginning of the married life in March 1915, the wife committed acts which caused danger to the life, limb and health of the petitioner, that no act of the petitioner justified the wifes conduct, and that in some instances the wifes acts were done without even colourable provocation. She continued the same course of conduct, with shorter intervals between her outbursts, until, in February 1931, she consulted a doctor, and was certified as insane and removed to a mental hospital. Since that date the spouses have not lived under the same roof. There has been no marital intercourse since 1923.

In April 1932 she was discharged from the hospital, but the husband was justifiably afraid to live with her, and did not do so. In December 1935 she was again certified and put under restraint in Cane Hill Mental Hospital, where she now is. The disease from which she suffers is, in medical terminology, manic depressive insanity. I am satisfied that the wifes acts, of which the husband complains, were at all material times manifestations of that disease of the mind, and in those circumstances the question was propounded, how far, if at all, insanity of the kind in question is an answer to a prayer for dissolution founded upon cruelty. The disease manifests itself by periods of deep depression, in which suicidal tendencies may, and in this case did, develop, and during which the mind is confused. These are followed by periods of inordinate elation, during which exaggerated and extreme reactions result from small stimuli. Slight restraint or fancied grievance may result, and did during the married life result, in homicidal tendencies, of which the husband was sometimes the object. Between these phases of depression and exaltation, came periods, of uncertain duration, during which the patient either was, or appeared to be, normal. I have no doubt that the acts of the wife of which complaint is made were the outcome of disease of the mind, a disease which probably had its inception before marriage. At the same time, the medical evidence compels me to find, as I would have inferred from the petitioners own evidence, that the wife at all material times knew what she was doing, and that what she was doing was wrong. I have been referred to a number of cases from which I was invited to deduce that insanity in some degree is an answer in a matrimonial suit, but having regard to what I find to be the facts, I do not think the question whether this is so, or what degree of insanity would afford an answer to a charge of cruelty, really arises in this case. It well may be that there is a degree of insanity which would afford an answer to a charge of cruelty, but I can find no colour in any of the cases for the view that a respondent, who has a

Page 974 of [1939] 3 All ER 972

consciously wicked mind, is not responsible. That was the case here. To borrow a phrase from Kirkman v Kirkman, at p 410, the acts of the respondent have been “made to appear to proceed from malignity.”

If the respondent had proved that which the pleader alleged on her behalf, the broader question would have arisen, but as it is, I do not think that it does.

The petitioner, therefore, is entitled to the relief he claims.

Decree nisi granted.

Solicitors: H W Airey (for the petitioner); The Official Solicitor (for the respondent).

J F Compton Miller Esq   Barrister.

Edmonds & Co Ltd v Fagin

[1939] 3 All ER 974


Categories:        CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        OLIVER J        

Hearing Date(s):        25 JULY 1939        


Contract Quantum meruit Contract to erect shop window Wifes premises apparently owned by husband Contract with husband partly guaranteed by wife Request by wife to complete work Whether wife liable for rest of contract price.

The plaintiffs agreed to erect a shop-window for F, the husband of the defendant, under the impression that he was the owner of the premises in question and a man of substance. The cost was to be £885, and was to be paid as follows: £200 with the order; £200 on completion; four quarterly payments of £100; and one payment of £85 plus the amount due for any alterations. The first payment of £200 was made, but the plaintiffs subsequently discovered that the premises in fact belonged to the defendant and were merely rented to F. They thereupon refused to proceed with the work, unless the defendant was prepared to guarantee the payments due under the contract. It was agreed that the defendant should guarantee the four quarterly payments of £100 and the one payment of £85. A considerable time afterwards the defendant wrote a letter to the plaintiffs in which she said that she had promised to guarantee the balance of £685. The plaintiffs, being unable to obtain any satisfaction from F, brought the present action:

Held (i) the letter written by the defendant was a sufficient memorandum in writing, and, although it wrongly mentioned the sum of £685, it was a sufficient memorandum in respect of the lesser amount of £485.

(ii) with regard to the balance of the amount due, the defendant was, in all the circumstances of the case, liable on a quantum meruit.

Notes

A contract to pay a reasonable sum for work done is implied where work is done at the request of a party, and, it is here decided that, although the position may be complicated by the fact that that party has entered into an express guarantee and is the wife of a contracting party, still the implication of a contract can be made.

As to Work Done at the Request of Another, see Halsbury (Hailsham Edn), Vol 7, pp 133, 134, paras 189, 190, and pp 144146, para 204; and for Cases, see Digest, Vol 12, pp 215218, Nos 17421780.

Action

Action to recover the balance alleged to be due from the defendant to the plaintiffs, payment of which had been guaranteed by the defendant; alternatively for work done at the request of the defendant for the benefit of her premises, or alternatively on a quantum meruit. The

Page 975 of [1939] 3 All ER 974

facts of the case and the arguments are fully set out in the judgment.

M Turner-Samuels and J Turner-Samuels for the plaintiffs.

F A Sellers KC and H Cedric Infield for the defendant.

25 July 1939. The following judgment was delivered.

OLIVER J. This is an action by Edmonds & Co Ltd, a firm of building contractors and shop fitters, against a Mrs Doris Fagin, a married woman, for the price of work done and materials supplied in erecting a certain shop-front at Nos 68, Station Road, Aldershot. They sue her first of all, as guarantor of her husbands debt, and, in the second place, they say that, if she did not guarantee her husbands debt, and/or to the extent to which she did not guarantee it, she is liable to pay on the implied contract known as a quantum meruit.

The matter arose in this way. After the husband had had a somewhat chequered financial career, during which he seems to have made little or nothing, and his wife in July 1936, paid his creditors, and bought his assets. She apparently fitted him out with some money, and he set up, for the third or fourth time, in the business of a radio and cycle shop at these premises, Nos 68, Station Road. The freehold premises, as did practically all other premises in which he carried on business during the last ten years, belonged to her. There is a document, which purports to be dated 23 March 1936 and records that on that day this defendant, the wife, had let to Jacob Fagin the ground floor, garages, outhouses, etc, at Nos 68, Station Road, Aldershot, at the sum of £4 per week. Only two weeks rent were paid under that agreement. Mr Fagin determined to embark upon the installation of a very elaborate and expensive shop-front. His wife, although she lived in the same house with him, apparently had no interest in it, although it was her own house, and she took no part in the business of ordering the shop-front, or any part in the discussions. Fagin got into touch with the plaintiffs and entered into an agreement, under which for the sum of £885, which might be increased in case armour plate was substituted for alabaster glass, and in respect of one or two other extras, they under took to erect a shop front. The payments were to be as follows: £200 with the orderand a cheque for £200 was handed over to Gould, the plaintiffs representative, on 7 July£200 on completion of the work, and the balance at the rate of four payments of £100 per quarter, and one payment of £85, or a larger amount if any alterations took place. Fagin had succeeded in conveying to the plaintiffs representatives, I hope not on purpose, that he was the freeholder of these premises. In those circumstances only were they prepared to deal with him. How far that was from the fact no one knew better than he and his wife, but that was the impression created. By 21 July the truth of the matter, or some part of the truth, had reached the head office of the plaintiff company. It was then agreed that the wife should guarantee the payments to be made by the husband. This was to be effected by the wife backing five bills to be given by the husband in respect of the payments after completion.

Page 976 of [1939] 3 All ER 974

If the matter stood there, and I had nothing to qualify it, I should hold myself entitled to look at the document which was written very many months afterwards, and is in these terms:

Soon after you accepted his order numerous arguments came up in order to put an end to them and get you to complete the work in the agreed time I promised to guarantee the balance of £685.

I should have held that that was completely in line with the contract which was made, that it was a perfectly valid memorandum, and that she was bound to the full extent of this contract to guarantee it. However, counsel for the defendant has satisfied me that that simple view, which I thought at one time could be taken, cannot now be taken, having regard to the contemporaneous documents. I am quite satisfied that, foolish as it must appear, because quite obviously the one thing the plaintiffs were concerned to do, having made the discovery that Fagin was a worthless person, was to get this well-off wife to guarantee the whole debt, yet they did not do it. For some reason or other, they appear to have overlooked, as far as the guarantee was concerned, that amount of the payment which was to consist of £200 on the completion of the work. I am driven to that conclusion, as I have said, with reluctance, because I find that Fagin and his wife in this matter had no merits at all. However, that does not make me do violence to facts which appear to be clearly established in evidence. On the question of whether this guarantee was at the time meant to cover the whole or any part of the debt, I am bound, I think, to come to the conclusion that it was intended at the time, through inadvertence, to cover only part of the debt. It was a guarantee of the bills, which had been made the medium of payment to the plaintiffs, in respect of the £485 to be paid after the completion of the work.

On this matter counsel for the defendant says: “There was on that correspondence never any undertaking to guarantee the debt. You must interpret it strictly as an undertaking to guarantee to back certain bills. Those bills were never presented to her. Therefore, she has never broken any undertaking.” That is how it is put, but I do not accede to that view. To my mind, the substance of the matter is that, on or about 21 July, this woman had undertaken and had guaranteed to cover the liability of her husband which followed the second £200, that is to say, the liability on the bills, the liability for the last £485 which was to be paid by bills. I think that that was the contract. The mere medium of the payment, the bills, were not of the essence of the contract at all. The contract was, as I find it, to guarantee the debt. It must be borne in mind, as I pointed out during the hearing of this case, that a contract to back a bill is not in the least inconsistent with a contract to guarantee a debt. In their essence they are similar things. They are, of course, not the same in their legal operation, but in their essence and conception they are the same.

Then the question arises whether there is, within the Statute of Frauds,

Page 977 of [1939] 3 All ER 974

any note or memorandum in writing which is of sufficient evidential value of the terms of this guarantee. I hold that the later letter written by the defendant, read with the earlier correspondence, is a memorandum or a note in writing showing that the defendant had undertaken to guarantee the balancebut what amount? The letter says £685, but for the reasons I have pointed out, I think that that is a mistake and should have been £485. At any rate I am not doing her any injustice if I hold that, and I do not see any reason why I cannot hold that the document, which would be a perfectly good note or memorandum in writing evidencing liability to pay £685, cannot a fortiori be made to cover that which is much less than £685, on the principle that the greater necessarily includes the less. I, therefore, hold that the plaintiffs are entitled, subject to other matters which have got to be considered, as against the defendant to the sum of £485 on a guarantee to pay Fagins liability for that amount.

The next matter that I have to consider is this. It is said by counsel for the plaintiffs that in the circumstances of this case there arises a liability to pay on a quantum meruit for the balance between £485, which I have held to be covered by the guarantee, and whatever may be found to be ultimately due under this contract. It is said by counsel for the defendant on the other hand that you cannot possibly have a quantum meruit in a case like this, because you can only have a quantum meruit arising where A and B have contracted, and for some reason or other the contract has failed; then you may have a quantum meruit, but only as arising between the same parties. I walk warily in the fields of law, but I cannot myself see why that should be. I cannot see any reason or any principle which should prevent persons making themselves liable upon a quantum meruit to pay a contractor merely because that contractor has a contract with someone else. Take the very facts of this case. Here there is a completely worthless purchaser, Fagin, who is not worth a penny. His wife could make him bankrupt to-morrow. He is living entirely upon her charity. He makes a contract, and he makes it in circumstances in which the contractors to him are under the impression that he is a person of substance and the freeholder of the premises on which the work is to be done. They find out he is not, and they sayand no one could disbelieve themthey have said it in writing: “We are not going to do another ounce of work on this place until you get us someone better than you.” In those circumstances, a lady comes along who is the owner of the premises, and evidently a woman of substantial means. What is there to prevent her making herself liable by saying to the contractors: “You go ahead with this work”? Then they do it. It is work for the benefit of her premises. Every pennyworth has gone on to her freehold property. I cannot see why she should not, side by side with the liability of her husband, the ostensible contractor, put herself in a position to be liable on a quantum meruit. Accordingly, I find, as often happens, that the plaintiffs have

Page 978 of [1939] 3 All ER 974

done work upon a request, because the letter written by the defendant says so. It is a request by the owner of the property to do work on that property, and the work was subsequently done by the contractors. Why should not she pay for it? In those circumstances I am going to hold that as far as the balance between the £485 (for which she is liable as a guarantor) and the amount which is going to be ultimately due is concerned, the plaintiffs are to succeed against her as on a quantum meruit.

Declaration that defendant liable to pay plaintiffs £485 on the guarantee and balance on a quantum meruit or alternatively the whole sum claimed on a quantum meruit, subject to inquiry as to damages by the Official Referee. Costs of inquiry reserved. Stay of execution on terms.

Solicitors: Barnett Janner (for the plaintiffs); Wm White & Co (for the defendant).

W J Alderman Esq   Barrister.

Broome and Another v Pardess Co-Operative Society of Orange Growers (established 1900) Limited

[1939] 3 All ER 978


Categories:        CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        HILBERY J        

Hearing Date(s):        20, 21 JULY 1939        


Contract Implied terms Business efficacy Brokers contract Sale of fruit by agent Advance to grower by agent Shipment unsound on arrival and unsaleable in market Implied term that fruit on arrival to be of merchantable quality.

The plaintiffs, a firm of London fruit brokers, entered into a contract with the defendants, who were producers of oranges in Palestine, to sell the defendants oranges in London, on the terms that in any event they should advance to the defendants 7s 6d per case, and that on sale their charges should be 6d plus 7½ per cent gross per case, all surplus on sale above 7s 6d per case to be remitted to the defendants. During the growing season covered by the contract the weather had been abnormally wet, with the result that the oranges, though apparently shipped in good condition, were, on arrival in London, to a large extent, unsaleable and, such as were saleable, required repacking. The plaintiffs were consequently unable to sell the oranges in the market, and being bound to pay the defendants the guaranteed advance, suffered a considerable loss. They thereupon brought this action for damages, and contended that there was an implied term in the contract that the goods would be of merchantable quality, so that they could be sold in the ordinary course of business. The defendants contended that the contract was complete in itself, and that no term could be implied to give business efficacy to it:

Held the parties were acting in a common interest for the purpose of selling the defendants goods, and there must be implied into the contract a term that the goods should be in such a condition as to be saleable in the London market.

Notes

The contract here is not one of sale and purchase and is therefore not within the Sale of Goods Act 1893. The contract was one between a grower and shipper in Palestine and a broker on the London market, and the question is not whether all the conditions and warranties of the Sale of Goods

Page 979 of [1939] 3 All ER 978

Act 1893, should be implied into such a contract, but simply whether, in this particular contract, there should be implied a term that the goods should reach London in a merchantable state. No doubt the decision is of some general application to similar brokers contracts, but it must be read as a decision on a particular contract and the generality of its application left for further consideration by the courts.

As to Brokers Contracts, see Halsbury (Hailsham Edn), Vol 29, pp 3842, paras 4248; and for Cases, see Digest, Vol 12, pp 610612, Nos 50445058.

Cases referred to

Livock v Pearson Brothers (1928) 33 Com Cas 188; Digest Supp.

The Moorcock (1889) 14 PD 64; 12 Digest 611, 5048, 58 LJP 73, 60 LT 654.

Hamlyn & Co v Wood & Co [1891] 2 QB 488; 12 Digest 610, 5042, 60 LJQB 734, 65 LT 286.

Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592; 12 Digest 611, 5052, 87 LJKB 724, 118 LT 479.

Re Comptoir Commercial Anversois & Power, Son & Co [1920] 1 KB 868; 12 Digest 608, 5032, 89 LJKB 849, 122 LT 567.

Beer v Walker (1877) 46 LJQB 677; 39 Digest 442, 714, 37 LT 278.

Ollett v Jordan [1918] 2 KB 41; 25 Digest 110, 336, 87 LJKB 934, 119 LT 50.

Action

Action for damages for breach of an implied term in a contract for the sale by the plaintiffs of the defendants goods in the London market that the goods should be of merchantable quality. The fact and arguments are fully set out in the judgment.

A T Miller KC and Neville Faulks for the plaintiffs.

Rt Hon Sir William Jowitt KC, B B Stenham and C D Aarvold for the defendants.

21 July 1939. The following judgment was delivered.

HILBERY J. The plaintiffs in this case are a well-known firm of Covent Garden fruit brokers. The defendants are a very large organisation of fruit growers and shippers in Palestine with a head office at Tel-Aviv, a branch office at Haifa and a London office. They are perhaps the largest shippers from Palestine of such fruits as oranges, grapefruit and other fruits now being grown in Palestine. They ship them for sale to a great extent in the United Kingdom, and in London apparently the principal places at which they entrust their goods to brokers for sale are in Spitalfields Market auctions and with the brokers in Covent Garden, who do business more particularly negotiating separate and private sales.

Prior to October 1936 the plaintiffs had had consignments of fruit from the defendants for sale, and they had sold them on the basis upon which business is very generally done by the fruit brokers in Covent Garden, receiving consignment goods from producers and shippers abroadnamely, sale on approved advances. They had acted as brokers for the defendants, on the terms that the defendants would ship and, after shipment, would draw upon the plaintiffs for a certain sum per case of the oranges shipped, which would be an advance made by the brokers. The goods would then be sold after their arrival in

Page 980 of [1939] 3 All ER 978

London. The broker in London would first of all obtain delivery of the goods from the ship by paying the freight and would pay the duty and, out of such sum as he might have agreed with the defendants for charges, would meet any other expenses such as landing charges and haulage from the docks, and, after sale of the fruit, would account to his principals, the defendants, deducting from the amount he received on selling their goods first of all the amount of the charge which was allowed to him, 7½ per cent on the gross sales as brokerage, freight, duty, and then the advance and, in the case of an approved advance, if the sale price had realised enough to meet those outgoings and left a balance after meeting the approved advance or loan that had been made by the broker, the broker remitted the balance to the defendants. If, on the other hand, the total sale price did not give a surplus after meeting those outgoings but left the broker out of pocket, then the defendants had to remit the deficit to the broker. Those were terms quite well understood between the parties.

The defendants, so far as the market in oranges was concerned, marketed here three well-known brands of oranges. The first quality was an orange called Pardess; the second quality an orange called the Ophir brand, and I think the third quality was called Tabor. When the season for the shipment of oranges from Palestine was coming round, the defendants wrote to the plaintiffs a letter of 10 October 1936, in these terms, confirming a conversation of the previous day:

It was agreed to supply you during the season 193637 40,000 cases of Ophir oranges at the following terms: l. Quantity40,000 cases of oranges, Ophir brand. Approximate basis of shipment being 30 per cent. NovemberDecember and 70 per cent. JanuaryMarch. 2. Price——’

I pause to say that “price” was an inappropriate expression, because this was not a contract of sale and purchase; however, it is so put in the contract

Guaranteed advance of 7s. 6d. f.o.b., Palestine ports, for the entire season. All surpluses over and above this price will be remitted by you to our Head Office in Tel-Aviv. 3. Specification25 per cent. sizes 120/128, 60 per cent. sizes 140/150/160, 15 per cent. sizes 180 and smaller. 4. Charges6d. and 7½ per cent. gross per case. These charges will also cover the repacking expenses, as and when incurred by you. We shall let you have free consignments of grape fruit according to the market requirements. As informed we are letting you have 200 cases of grape fruit on the m/v Gerd which is due in London on or about the 16th instant. We trust that you will be able to obtain for us satisfactory prices and await your confirmation of the above arrangement.

In short, what happened was that the defendants began to make shipments on account of these 40,000 cases for sale by the plaintiffs on 23 November 1936, by the steamship Volturno. They went on shipping at intervals in ten different ships down to 23 January 1937 and the oranges came forward much as the parties contemplated they would, and were dealt with by the plaintiffs. No complaint was really made by the plaintiffs about those first supplies. The last of the first ten vessels bringing forward parcels of these goods which were satisfactory consignments was the steamship Olga, which loaded on the 23 January 1937

Page 981 of [1939] 3 All ER 978

and arrived in London on 10 February. Thereafter the consignments which came forward were, the plaintiffs complain, oranges that were, by the time of their arrival in London, unsaleable as Ophir brand oranges as they arrived, and were still unsaleable as Ophir brand oranges of a merchantable quality after any normal percentage of repacking had been done, and could only be made saleable to a certain extent as Ophir brand oranges of merchantable quality by an excessive amount of repacking, and only a small percentage could be made saleable as Ophir brand oranges even with that excessive amount of repacking, large numbers having to be sold as wet, wasty and slack, because their condition was such as to make it impossible to repack them. Upon that the plaintiffs say that there was a breach of the fundamental condition which must of necessity be implied in this contract, that they should be provided with oranges of the Ophir brand which, with a reasonable degree of repacking, would be saleable in London as merchantable oranges of the Ophir brand, and they say that that is a fundamental condition which has of necessity to be implied in the contract.

The defendants, on the other hand, contend in the first place that the contract leaves no room for any implication of a term. The parties had reduced into writing the terms upon which they agreed and those terms reduced into writing, in the surrounding circumstances in which they were reduced into writing, leave no room for the implication of such a term, the defendants contention being that no such term is necessarily to be implied in the nature of the contract which the parties had made in order to give the contract business efficacy. That gives rise to a question which, in my view, is a question of the utmost difficulty and, I suppose, of some importance. Cases where the court is invited to imply a term are always difficult. It is not difficult to find from the books clear and binding expositions of the principle of law which has to be applied, but, as is so often the case, while it is easy to state the principle in the abstract so that anybody academically interested in law might profit by that exposition, the practical lawyer finds that the individual case gives the greatest difficulty in the application of the principle.

I will refer to a recent case in which Branson J stated the effect of the authorities quite compendiously, and that is Livock v Pearson Brothers, where he said, at p 193:

It is necessary to consider for a moment the principle on which the courts have acted when asked to imply terms into contracts between parties. The principle has, I think, been quite definitely laid down, and it does not matter whether one refers to The Moorcock or Hamlyn v. Wood, or to the two cases quoted by Mr Jowitt, Reigate v. Union Manufacturing Co and Re Comptoir Commercial Anversois & Power, Son & Co. In some cases it is put from the affirmative side and in others from the negative side, but in either case the principle is that the implication is one which, as Bowen L.J., says in The Moorcock, the law draws, from what must obviously have been the intention of the parties, with the object of giving efficacy to the transaction. There you have the words “must obviously have been the intention of the parties.” Lord Esher M.R., uses very similar language in Hamlyn v. Wood, at p.491. He says: “I have for a long time understood that rule to be that the court has no right to imply in a written contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an

Page 982 of [1939] 3 All ER 978

implication necessarily arises that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense that I have mentioned.” Scrutton, L.J., uses language which means exactly the same thing in Comptoir Commercial Anversois & Power, Son & Co, at p 899: “they ought not to imply a term merely because it would be a reasonable term to includes if the parties had thought about the matter, or because one party, if he had thought about the matter, would not have made the contract unless the term was included; it must be such a necessary term that both parties must have intended that it should be a term of the contract, and have only not expressed it because its necessity was so obvious that it was taken for granted.”

That being the principle which I have to apply, it is necessary I think to see what were the surrounding circumstances germane to the matter the parties had to contract about at the time when they were making their contract. The defendants, on the one hand, are shippers of goods which were to be sold on the London market. They were known as first-class traders and as reliable people whose branded goods were known to be goods of a standard according to the grading given to them by the Pardess Company and were of a quality and saleability known in the London market. The plaintiffs, on the other hand, were brokers with experience of handling Pardess, goods. They knew, as of course both parties knew, certain other things. They knew that they were both contracting about a perishable fruit. They knew that the orange was one of the more perishable fruits; they knew that the keeping qualities of the orange were less if picked later in the season than if picked earlier; they knew that later picked oranges coming forward in the ordinary way would have a shorter life as oranges of the Ophir brand in good marketable and merchantable condition. As I say, the plaintiffs on their part, as brokers in the London market, having handled the Pardess goods for at least two seasons before they knew what the defendants knew. They knew what to expect on arrival in London of goods so far as wet or wasty oranges were concerned and oranges that would require repacking. The goods being perishable oranges shipped from Palestine had undergone a voyage, the normal duration of which was 16 to 19 days. Each of the parties knew that there must, in the ordinary course of events, be a number of oranges which on arrival would be found to have deteriorated, or at any rate have begun to go bad and would require to be extracted from one case and replaced by good oranges of the same brand taken from amongst the sound oranges in another. Whether that was done, where there were several oranges in a case obviously requiring replacement, by the process which was then called repacking, or whether it was done by the process called plugging where it was only one orange in a case that was bad and therefore a danger to the other oranges in the case and of course a detriment in the selling of the case, it was known to both parties that there was to be anticipated a certain amount of repacking. Those, in short, were the matters known to both parties save for this. I am satisfied that the plaintiffs knew that there was a rigorous Government inspection in Palestine of oranges which were for shipment to the London market. It was a rigorous

Page 983 of [1939] 3 All ER 978

inspection to ensure that articles which were being shipped were proper articles in a fit condition for shipment. The plaintiffs knew that there was such an organisation and inspection, although they were not aware of the details of such organisation and inspection.

Those are the surrounding circumstances in which the contract for this seasons goods was entered into, save for this, that, whereas in the previous season the business had been done on accommodation advance terms, in this season the parties agreed upon a different term with regard to the advance. This contract was the first one on which the plaintiffs gave what the contract calls a guaranteed advance. A guaranteed advance, as used in this contract, in my opinion meant, in contradistinction to an approved advance, that if there was at the end of the sale of the articles by the plaintiffs, owing to the market fluctuations, a deficit, not enough to meet the advance and those other payments and outgoings which the parties tacitly understood the plaintiffs would be called upon to make, then the plaintiffs should stand that loss and not be entitled to look to the defendants to remit it to them, as they would have to do if it were an approved advance. That was what I am satisfied these parties, as business men making this contract, meant by guaranteed advance. When I have said that, it does not by any means conclude the difficulty of the point that arises for decision here. It was because that was the meaning of guaranteed advance that in the next sentence the contract went on to say “all surpluses over and above this price will be remitted by you to our head office in Tel-Aviv.” It was because surpluses had to be provided for and what should be done with surpluses, and there was no need to stipulate what should happen in the case of a deficit that surpluses were provided for, and it was stipulated that surpluses over and above the price mentioned should be remitted to the head office in Tel-Aviv

It would perhaps be convenient, having stated those circumstances which surrounded the making of this contract, if I were now to proceed, first of all, to see what is the construction of the written contract in those circumstances which should be put upon it by the court. I approach this contract, and I think it is fundamental to approach this contract, as and for what it is. That sounds obvious, but it is very important, and, to my mind, it is the guide to the solution of the problem before me. I approach it, first of all, as a contract between a principal who wants his goods sold in a particular market and an agent who is undertaking to sell those goods for him. It is, in other words, what the business man calls a consignment contract. It is not a contract of purchase and sale. Though the word “price” appears in it, it is obviously not a contract in which any price is being paid in the ordinary way for an article. It is a contract of employment by a foreign shipper, a grower, of a London broker to act for him in the sale of his goods, when they arrive in London and can be made available by the ordinary processes for sale on the London market. The goods under it in my view remain

Page 984 of [1939] 3 All ER 978

the property and are intended to remain the property of the defendants, the shippers, passing, as of course the defendants do under the contract, sufficient special property to the broker in London to enable him to give a good title to his purchaser. Under it the defendants undertook to supply the broker during the season 193637 with 40,000 cases of Ophir oranges.

It is said that, inasmuch as what is stipulated for is 40,000 cases of oranges of the Ophir brand with a guaranteed advance of 7s 6d fob Palestine ports for the entire season, when the defendants put on board at the Palestine ports goods which were oranges of the Ophir brand they discharged their obligation; but I ask myself whether, having regard to the fundamental purpose of this contract, it can be so read. The broker makes an advance of 7s 6d on the express term, it is true, in the contract fob Palestine ports. If this were a contract of purchase and sale, I think it is conceded that the point at which the seller would have to deliver the goods in accordance with his contract is primarily on board the vessel, but it is pointed out that even if this were a direct purchase and sale contract, in the case of perishable goods coming forward from a distance and having to undergo a normal journey, the seller would be under an obligation which was in excess of the express obligation to put on board goods which, at that moment, were goods in accordance with the description in the contract. It is clear to my mind that, if this were a contract as between a buyer and seller, where the parties are supposed to contract at arms length and where the over-ruling principle is that of caveat emptor, it would not be right to say, having regard to the decisions, that these defendants would have discharged their obligation if they had merely put over the rail of the ship at the Palestinian port oranges which were oranges of the Ophir brand at that moment if those oranges put on board, though they were Ophir oranges at that moment, were in fact in a condition which meant that they were incapable of standing the voyage for which they were being shipped.

Beer v Walker was a case in which there was a sale of a perishable article, namely, rabbits intended for human consumption, and the wholesale provision dealer in London contracted to send them weekly from London by rail to a retail tradesman at Brighton, the cost of the railway carriage as well as the price of the rabbits being paid by the tradesman in Brighton. The railway was in those circumstances the agent of the purchaser, and it was argued that the warranty of merchantability of the rabbits only applied at the time of the delivery to the railway, for it was said the railway company were the agents of the tradesman in Brighton, and delivery to the railway company was the same as delivery to that tradesman; but the court held that there was an implied warranty which extended to the time at which, in the ordinary course of transit, the rabbits would reach the Brighton tradesman, and not only to that time, but that it continued until that Brighton tradesman

Page 985 of [1939] 3 All ER 978

had a reasonable opportunity of dealing with them in the ordinary course of business. That case was expressly approved by this court in Ollett v Jordan, in which Atkin J said at p 47:

As to that, I think that the effect of the decision in Beer v. Walker is that the condition that the goods must be merchantable means that they must be in that condition when appropriated to the contract and that they will continue so for a reasonable time. That does not necessarily mean that goods shall be merchantable on delivery if the vendee directs them to be sent by a long and unusual transit. It is, however, not necessary to decide that.

Those words seem to me to be strong to show that what is fundamental is that goods must be merchantable, and, where they are perishable goods and the contract contemplates that they have a transit to undergo, merchantable not merely at the beginning of the transit, though that would appear to be the place for delivery under the contract, but they must be merchantable in the sense that at the place for delivery under the contract they are in a suitable and fit condition for the transit normally to be expected.

Those cases, deciding that as between a vendor and a purchaser, where the overriding principle is that of caveat emptor and the parties are considered as making their bargain at arms length, appear to me to throw a good deal of light on the interpretation to be put on this contract. This contract is not one to which the principle of caveat emptor applies. The plaintiffs were not buying from the defendants. The plaintiffs were undertaking to act for the defendants. They were making common purpose with the defendants in the marketing of the defendants goods. The fundamental purpose of the contract here was the provision by the defendants in London of their goods for sale by the plaintiffs upon the terms of this contract, and the terms of this contract more particularly dealt with the number of cases with which the plaintiffs were to be supplied, the times at which that large quantity should be brought forwardthat is, 30 per cent NovemberDecember and 70 per cent JanuaryMarchand, when dealing with the guaranteed advance which the parties were agreeing on, that it should be 7s 6d per case and, when they said fob Palestine ports for the entire season, they did not mean as a matter of construction that, in those circumstances, the plaintiffs obtained their delivery, as they might have done under a purchase and sale contract, at the ship, but that they were to pay all the charges in connection with the fruit down to the time that it went over the ships rail and, having done that, as there was an advance being made by the plaintiffs, that would be the time for the advance to be made. No time is otherwise indicated in the contract as the time at which the advance falls to be made, and I find that the parties acted consistently with that view, for the advice of shipment comes forward and upon the same day there comes forward the advice of draft, and apparently sent forward is a sight draft presented at some time thereafter. It does not seem to me, at least it has not been demonstrated to me, that it is a date dependent on the arrival of the fruit, but it comes

Page 986 of [1939] 3 All ER 978

forward in the course of a few days and is then in the ordinary course of events met by the broker and in this case it did come forward and was met by the broker. It does not seem to me, therefore, that “fob Palestine ports,” even if one were considering this contract as a purchase and sale contract, would in the particular circumstances, having regard to the decisions to which I have referred, necessarily mean that the defendants have discharged their obligation by merely putting on board the steamship goods which were Ophir brand oranges at that moment. They would even then have had to put on board goods which were Ophir brand oranges in such a condition that they would continue so for a reasonable time; that is to say, in the light of the purpose of this contract, that they would continue in that condition for a time which would be a reasonable time in which to put them on the London market.

Now it is quite true that it was conceded here and agreed that “the oranges provided by the defendants for the plaintiffs were oranges from pickings made in the ordinary course of husbandry by the members of the defendant society from their 193637 crop and were oranges grown, graded, packed, despatched and shipped in the usual manner by the members and/or the defendants, and that the oranges provided by the defendants were fairly representative of the 193637 crop.” I am satisfied that the oranges, after the first ten shipments which were put on board, were in fact oranges which had been picked after an excessively wet season, or after excessive rains and exceptional weather in Palestine, and were oranges therefore overloaded with moisture to a very large extent. By “overloaded” I mean that they contained such a high percentage of moisture that they could not remain saleable Ophir brand oranges of merchantable quality after a reasonable time for transit and handling on the London market had elapsed. On account of the exceptional weather, large numbers of them were at the time of shipment oranges in such a condition that, at the expiration of the time which would necessarily elapse before they could be put on the London market, they would not be of a merchantable quality.

I have stated my views of the result of the words in the contract “guaranteed advance” and the reason for the inclusion of the expression “all surpluses over and above this price will be remitted by you to our head office in Tel-Aviv.” I need not say anything about the specification, and I come to the fourth paragraph which certainly gives more difficulty. There it is to be observed that the parties were specifically dealing with charges under the heading “Charges” and they provided that the chargesthat is, the charges of the plaintiff should be “6d. and 7½ per cent. gross per case.” “These charges will also cover the repacking expenses as and when incurred by you”that is to say, incurred by the plaintiffs. The parties were there clearly contemplating that some of the oranges might arrive in such a condition as to require repacking, but they were contemplating that in the light of experience

Page 987 of [1939] 3 All ER 978

and they were contracting in the light of experience and of what each of the parties then expected. Another way of stating that seems to me to be that these parties, having regard to the particular relationship which was being created between them, were contracting with reference to the normal and not with reference to the abnormal. They were contracting, as I have said, for putting on the London market the defendants goods, and they were contracting at all times primarily for the marketing of the defendants goods and the services of the plaintiffs towards the marketing of those goods in London. When they are dealing with charges and say “6d. per case” and “these charges will also cover the repacking expenses,” while it is true they were dealing expressly with the subject of repacking, it is to be observed that they were obviously dealing and intending to deal with the normal amount of repacking, because in that 6d there is to be included the payment for such things as haulage and dues, and the parties must have known approximately what was the ordinary amount that would be required per case reasonably to meet the normal charges.

In those circumstances, the contract having gone that far, and the season 193637 having turned out to be an abnormal season, when the goods came forward, something like 40 per cent were lost in repacking, or shot as useless, or sold as wet, slack and wasty and were only saleable in that way by reason of the abnormal circumstances of the season. When I find that that is the contract in its express terms, is it to be said that the contract excludes any implication of terms, or is the right view that the contract necessitates the implication of terms? The mere supervention of a bad season obviously is no ground for implying any term in the contract. That seems to me to be beyond doubt. The mere fact that the parties have in the result acted upon terms which have resulted in a catastrophe to one party is no ground for implying a term. The term is only to be implied if it is necessary to give business efficacy to the bargain. If this were a bargain of purchase and sale other considerations would arise, but when I look at this bargain and see that what the parties have intended all along is that the shippers shall have the services in London in the London market of the plaintiffs, and supply the plaintiffs with goods in the London market which the plaintiffs are to sell, it does appear to me that the contract cannot be given the sense which the parties intended it to have unless some term is implied making it plain that the goods of the defendants which they want to sell and which are to be sold in the London market, are oranges of the Ophir brand in saleable merchantable condition as such. What the parties appear to have contemplated was certainly the sale of Ophir oranges in the London market in saleable and merchantable condition, because they have arranged in the contract for a charge for some repacking, and some repacking is done in the normal way, and is expected to ensure that the oranges may be sold, not merely as oranges of Ophir brand, but as oranges of Ophir brand in a saleable and merchantable

Page 988 of [1939] 3 All ER 978

state. The very presence of some provision for repacking seems to me to indicate that the parties are intending to contract for the sale by the plaintiffs of oranges of the Ophir brand in a saleable and merchantable state in London, and, contracting as they do, in the light of some recognised custom, as the plaintiffs tell me (and it is not contradicted), it appears to me that what the parties would have to read into the contract if they had been asked about it, would be that they should supply during the season 40,000 cases of oranges Ophir brand fob Palestine in such a condition as to be saleable as Ophir brand oranges on the London market of merchantable quality save for the usual 5 per cent lost in repacking.

If no such term is implied, and if the defendants contention is right, then although the purpose of this contract is to market Ophir brand oranges of the defendants in London through the agency of the plaintiffs, if the defendants had put Ophir brand oranges in a then marketable state in the ship at the Palestine port, though they had put them in a condition such that they must of necessity be a rotten pulp when they arrived in London, nevertheless they would have performed their contract. That seems to me to show that the fundamental purpose of this contract was the marketing in London of saleable Ophir brand oranges of merchantable quality.

In the very exceptional circumstances of the case, I think it is a matter of necessity, in order to give effect to what the parties obviously intended to bring about by this contract, that the implied term which I have indicated should be written into it, save for the normal amount of repacking of 5 per cent. Each of the parties knew that repacking up to 5 per cent was the normal repacking and they bargained with that in view. Acting as they were in a common interest, it might very well be that neither party would think it necessary to put into this contract a term as to fruit which came forward the total of which that required repacking, or must be sold as wet or wasty, or shot as useless, would amount to anything like 40 per cent of the bulk. They would never have thought it necessary to write that in, since each knew that the whole purpose of the contract was to enable the broker in London to sell for the best possible price he could get for the goods of his principal, the defendants, and the desire of the defendants would be to maintain their own good name in the market and the good name of Ophir brand oranges, and each would, in those circumstances, in my view, regard it as a necessary term, which need not be written in because each of them would understand it.

In those circumstances, I think that the case for the plaintiffs is established in principle and the question of the amount of damages can be ascertained by the appropriate tribunal. I dare say there is no need for me to make an order about that because the parties will either agree on some reasonable figure or agree the tribunal to assess it. There must, therefore, be judgment for the plaintiffs, on the point of principle

Page 989 of [1939] 3 All ER 978

with costs and liberty to apply. If the parties do not agree the damages or agree the tribunal which shall decide them, I will appoint it.

Judgment for plaintiff with costs and liberty to apply.

Solicitors: Tanner & Worley (for the plaintiffs); Herbert Oppenheimer Nathan & Vandyk (for the defendants).

W J Alderman Esq   Barrister.

Swettenham v Swettenham

[1939] 3 All ER 989


Categories:        FAMILY; Ancillary Finance and Property        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND LUXMOORE LJJ AND MACNAGHTON J        

Hearing Date(s):        1, 2, 19 MAY 1939        


Divorce Maintenance Lunatic spouse Purchase of annuity out of patients capital Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 190 Matrimonial Causes Act 1937 (c 57), s 10(2).

The registrars report as to the maintenance of a lunatic wife recommended that the husband should covenant to pay an annuity of a stated amount during the joint lives of himself and the wife, and should secure a named sum for her benefit during her life, and that £1,500, being accumulations of the wifes capital in the hands of her receiver, should be expended in the purchase of an annuity for her benefit. The registrar added: “I have endeavoured to ensure that she shall have all the care and reasonable comforts and amusements that she has had for the last 8 years, or is likely to need; and have paid special regard to ensuring the continuation of this should the husband predecease her.” The husband was nearly 90 years of age and the wife nearly 80 years of age. It was held that the statement of principle by the registrar was the correct one to be followed in such cases, and that the court had power to order a receiver of the patient to expend moneys in his hands in the purchase of an annuity for the wife. The respondent appealed to the Court of Appeal. It was agreed by both parties that the order made below could not stand, as it exceeded the jurisdiction of the court in that it purported to bind the Master in Lunacy.

A form of order was agreed, and was approved by the Master in Lunacy. It provided (i) for a payment of £115 per annum free of tax payable monthly; (ii) that all the accumulations of the wife except for £350 should be used to purchase an annuity; (iii) that the husband should provide such sums as might from time to time be required to make the income of the respondent up to £750 per annum; and (iv) that these payments should be secured after the death of the husband by an irrevocable charge on the marriage settlement funds.

Notes

The previous order having, in some respects exceeded the jurisdiction of the court, the order here settled has been approved by the Court of Appeal and will be a guide in drafting similar orders in future.

As to Maintenance, see Halsbury (Hailsham Edn), Vol 10, pp 785788, paras 12441249; and for Cases, see Digest, Vol 27, pp 500510, Nos 53555480.

Case referred to

CL v CFW [1929] P 223; Digest Supp, 97 LJP 138.

Appeal

Appeal by the respondent from a decision of Henn Collins J, dated 21 December 1938 and reported [1939] 1 All ER 161, where the facts are fully set out.

Noel Middleton KC and William Latey for the appellant.

Melford Stevenson for the respondent.

Page 990 of [1939] 3 All ER 989

Middleton KC: It is submitted that the Divorce Division had no jurisdiction to make this order on the Master in Lunacy. The order made should have been larger and one that would have insured something being paid at the death of the petitioner. [Counsel referred to CL v CFW.] The sum now given is not enough to pay for the wifes daily needs. Before any change is made the assent of the Master in Lunacy should be obtained; he will deal with the matter on a proper basis. The fact that there has been a decree should not in any way affect the sum paid. The court has power under the Administration of Justice (Miscellaneous Provisions) Act 1938, s 14 (1)(b), to vary this order.

Stevenson: The real trouble is that a mistake was made when this order was drawn up. It ought to have avoided any imperative form. The petitioner was and is anxious to pay all he ought in order to provide for the reasonable comfort of the respondent. Any order made for maintenance must take into account the wifes fortune. An annuity is a particularly attractive investment for a woman of 80. The capital that she has is the result of overpayments by the husband. She has no near relations, and no testamentary capacity, and she has not made a will. There was never any intention of binding the Master in Lunacy to do anything. If she were not a lunatic, there is no question but that the court would have taken the sum of the accumulations into account. The order should be left as it is, save that the imperative words should be changed.

The case was adjoined in order that the parties could try and agree a form of order.

The following order was agreed between the parties and approved by the Master in Lunacy:

On reading the Notice of Appeal dated the 2nd day of February 1939 filed by the Appellant the Respondent by way of Appeal from the Order of Mr Justice Henn Collins dated the 21st day of December, 1938, and on hearing Counsel thereon on behalf of the Appellant and the Respondent and it having been ordered on the said 19th day of May 1939 that, subject to the approval of a Master in Lunacy of the Order hereinafter made, the appeal be allowed and the said Order made, and the said Order having been approved by a Master in Lunacy by Order dated the 14th day of June 1939 directing inter alia the Receiver to purchase at the price of £990 an Annuity in the name and for the life of the Respondent in the Commercial Union Assurance Co., Ltd., such sum to be varied and paid as is directed in the said Order, IT IS THEREFORE ORDERED on the 15th day of June 1939 that the said Appeal be allowed and that the said Order of the Judge dated the 21st day of December 1938 be discharged save in so far as it refers to costs.

AND IT IS BY CONSENT FURTHER ORDERED:

1. That the Petitioner do pay to the Respondent during their joint lives or until further Order for her maintenance such a sum as after deduction of income tax thereon shall amount to the sum of £115 per annum payable monthly the first monthly instalment to be paid on the 5th day of June 1939.

2. That the Petitioner do from the date of purchase of the said Annuity directed to be purchased under the said Order dated the 14th June 1939 pay to the Respondent during the joint lives of the Petitioner and the Respondent such further sums (if any) as shall be certified from time to time by the Master in Lunacy to be immediately required for the maintenance of the Respondent but not exceeding in the aggregate in any one year ending the 4th day of June such a sum as after deduction of income tax thereon shall together with the income from all sources of the Respondent for that year after deduction of income tax at the net rate payable by her thereon amount to £750.

Page 991 of [1939] 3 All ER 989

3. That the Petitioner do until the purchase of the said Annuity pay to the Respondent in addition to any payment made under the provision of paragraph (1) hereof all such sums (after expenditure of the sums representing income now standing to the credit of the accounts in Court intituled Dame Constance Sydney Holmes Swettenham 1930 No. 806 and Dame Constance Sydney Holmes Swettenham 1930 No. 806 Proceeds of Sale of Furniture or in the hands of Francis John Bryant the Receiver appointed on behalf of the Respondent) as shall be certified by the Master in Lunacy as being required for the maintenance of the Respondent until the purchase of the said Annuity.

4. That the Petitioner do at his own cost and expense in all things within 28 days of the date hereof irrevocably appoint that the Trustees of the Marriage Settlement made between the parties dated the 19th day of February 1878 shall henceforth hold the Policy of Insurance dated the 25th January 1878 together with the funds to be derived therefrom subject to the life interest therein of the Respondent upon trust to pay in the first place to the Respondent during her lifetime from and after the death of the Petitioner such sums as would have been payable by the Petitioner under paragraph (2) hereof if the Petitioner were then still living the Deed of Appointment to be settled by the Judge in case the parties differ;

5. The Respondents costs of the Appeal which are to include the costs of the Application on behalf of the Respondent before the Master in Lunacy for approval of this compromise and of obtaining the said Order of the 14th June 1939 including a Certificate for two Counsel upon such application before the Master in Lunacy are to be paid by the Petitioner.

Solicitors: Lowe & Co (for the appellant); Gordon Dadds & Co (for the respondent).

E Fuller Briscoe Esq   Barrister.

Canada Rice Mills Ltd v R

[1939] 3 All ER 991


Categories:        COMMONWEALTH; Commonwealth countries: COMPANY; Incorporation: TAXATION        

Court:        PRIVY COUNCIL        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT, LORD ROMER        

Hearing Date(s):        13, 14 JULY 1939        


Privy Council Canada Revenue Sales tax Sales company formed by manufacturing company Whether agents of manufacturing company Special War Revenue Act (RSC 1927, c 179), s 86(1), as amended by Statutes of Canada 1932, c 54, s 11.

The Special War Revenue Act 1915 (as amended in 1932), s 86(1), is as follows: “There shall be imposed, levied and collected a consumption of sales tax of six per cent on the sale price of all goods: (A) produced or manufactured in Canada, payable by the producer or manufacturer at the time of the delivery of such goods to the purchaser thereof.” The appellant company manufactured rice products and were liable to tax under the Act. In 1935 they had formed a sales company, which was an independent partnership, and which sold the products of the appellants to consumers or in the market. The sales company consisted of a partnership between all the shareholders in the appellant company, including the directors, and the partners were interested in the partnership in exactly the same proportions as those in which they held shares in the appellant company. The appellants paid sales tax on the prices at which the rice was transferred to the sales company, and the respondent claimed to be entitled to tax on the price obtained in the market from the purchasers. On a claim for the balance of tax, which the respondent maintained was due, it was held in both the Exchequer Court and the Supreme Court that when the appellant company sold to the sales company and the sales company sold to the market, the sales company were only selling in fact as agents for the appellant company. The appellants contended that there was no evidence to support these findings, that there were independent sales by the appellants to the sales company, and that they were liable to pay sales tax only upon the

Page 992 of [1939] 3 All ER 991

price paid to them by the sales company for the rice and not upon the price received by the sales company from its customers:

Held there was ample evidence upon which the courts could come to the conclusion that the transactions were in fact being conducted throughout by the sales company for and on behalf of the appellant company. The sales were, therefore, sales by the appellant company, and the price received was the sale price of the goods produced or manufactured by the appellants, and they were liable to pay the balance of the tax.

Notes

It was here attempted to prove that a selling company had been created which was operating as a company distinct from the manufacturing company. Such arrangements are common enough, but it is here held that, upon the arrangements here made, the selling company were not operating as a separate entity, but merely as agents of the manufacturing company. The matter is one of some importance in certain respects, and here, its importance arises upon a question of liability to tax.

As to Companies as Separate entities, see Halsbury (Hailsham Edn), Vol 5, pp 11, 12, para 1; and for Cases, see Digest, Vol 9, pp 3235, Nos 118.

Cases referred to

R v Colgate-Palmolive-Peet Co Ltd & Palmolive Manufacturing Co (Ontario) Ltd [1932] ExCR 120; Digest Supp, varied sub nom Palmolive Manufacturing Co (Ontario) Ltd v R & Colgate-Palmolive-Peet Co Ltd, R v Colgate-Palmolive-Peet Co Ltd & Palmolive Manufacturing Co (Ontario) Ltd [1933] SCR 131.

Rainham Chemical Works Ltd v Belvedere Fish Guano Co [1921] 2 AC 465; 9 Digest 35, 15, 90 LJKB 1252, 126 LT 70.

Gramophone & Typewriter Ltd v Stanley [1908] 2 KB 89; 9 Digest 35, 14, 77 LJKB 834, 99 LT 39.

R v BC Brick & Tile Co Ltd [1936] ExCR 71; Digest Supp.

Lapointe v J T Wait & Co & Crystal Products Co [1938] 4 DLR 418.

Appeal

Appeal by special leave from a judgment of the Supreme Court of Canada [Sir Lyman P, Duff CJ, Crocket, Davis, Kerwin, Hudson JJ], dated 20 February 1939, affirming a judgment of the Exchequer Court [Maclean J], dated 13 August 1938. The judgment of their Lordships was delivered by Lord Atkin.

Martin Griffin KC for the appellants.

F P Varcoe KC and Frank Gahan for the respondent.

Griffin KG: The sales company was not carrying on business for, or as agent of, the appellant company. It was an effective legal partnership entitled to be a buyer and was a buyer and not an agent. All that is required to constitute a sale is a real buyer and a real seller and an actual as opposed to fictitious transaction. The sales tax is payable on the “sale price” of the goods because s 86(1) of the Act so states. There is nothing suggested in this case of intentional evasion, bad faith, or fictitious sales. [Counsel referred to R v Colgate-Palmolive-Peet Co Ltd, Rainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd, Gramophone & Typewriter Ltd v Stanley, R v BC Brick and Tile Co Ltd, Lapointe v J T Wait & Co & Crystal Product & Co.]

Counsel for the respondent were not called upon.

Page 993 of [1939] 3 All ER 991

Martin Griffin KC for the appellants.

F P Varcoe KC and Frank Gahan for the respondent.

14 July 1939. The following judgment was delivered.

LORD ATKIN. This is an appeal from the Supreme Court of Canada who dismissed an appeal from the President of the Exchequer Court on a claim by the Crown for sales tax on transactions by the appellant company. The case has been disposed of, as it appeared to their Lordships, in both courts upon the footing that the sales in question had in fact been made by the appellant company, who will be referred to as the mills company. The tax is payable under the provisions of s 86 of the Special War Revenue Act, originally of 1915, which has been amended at different times. The relevant part of the section is as follows:

(1) There shall be imposed, levied and collected a consumption or sales tax of six per cent. on the sale price of all goods: (a) produced or manufactured in Canada payable by the producer or manufacturer at the time of the delivery of such goods to the purchaser thereof.

The mills company had been formed for some considerable time for the purpose of what is called manufacturing rice products, that is to say, they bought rice in the raw state, and they manufactured it into a finished product, and the tax was made eventually a tax which fell upon them. The defence of the company is that these particular sales in respect of which the balance of tax was claimed, were not made by them, but were made by the sales company, which was an independent partnership which was formed in 1935. What is said is: “We, the mills company, sold our product to the sales company and then the sales company sold it to the consumers or sold it in the market and we are only liable for the price which we received from our sales to the sales company.” The sales company was formed in circumstances which did throw some suspicion on its formation as being formed specially for the purpose of evading the tax, but it is not necessary to say that, because there is certainly evidence that it was in contemplation to form such an association at one time before the question of the tax came into existence. When it was formed it consisted of a partnership between all the shareholders in the mills company, including the directors, and the partners were interested in the partnership in exactly the same proportions as those in which they held shares in the mills company. It has been found by both courts in Canada that, when the mills company sold to the sales company and the sales company sold to the market, the sales company were only selling in fact as agents for the mills company. The Supreme Court came to the conclusion that that was the finding of the President of the Exchequer Court, and their Lordships think they rightly came to that conclusion; they themselves were of opinion that that was the correct view of the facts. It appears to their Lordships that there were ample grounds upon which both courts could come to that conclusion. In those circumstances, it would appear to their Lordships to be an ordinary case of two concurrent findings on a question of fact, but, inasmuch as the Board has listened to a forcible argument of counsel for the appellants on this matter, suggesting that there was no evidence to support the findings, they would mention some of the considerations which seem to afford

Page 994 of [1939] 3 All ER 991

evidence, taken together, upon which a court could very properly come to that conclusion.

To begin with, the transaction would be a very remarkable transaction, if in fact there were independent sales to the sales company, for it would mean that the mills company had sold their product to persons who were shareholders and who also included their own directors, at less than the market price. It seems to their Lordships very doubtful whether such a transaction could be within the powers of the company at all, even though the persons to whom they sold it were in fact the shareholders, and the whole of the shareholders in the company. When they come to consider whether or not there was here in fact a sale to the partners as an independent sale upon which the partners became personally liable to the mills company, on the one hand to accept delivery and become personally liable to the purchasers from them, on the other hand, to give delivery, there are very significant facts in the case. The partnership had no capital; it had no warehouse; the warehouse was the warehouse of the mills company; the offices were the offices of the mills company; and, what is rather significant for a company that on this footing must have been trading on a very large scale, it had no banking account; the only banking account was the banking account of the mills company. The servants who attended to the sales part of the business were in fact paid by the mills company, whose servants they had been before the partnership came into existence. The proceeds of the sales were all in fact received ultimately by the mills company, who are said to have accounted for the proceeds afterwards to this partnership. It was suggested that the property, when the goods were delivered to the sales company, there and then passed to the sales company from the mills company, so that, though the goods were sold on credit, the mills company were supposed to lose their hold upon the property as security for the unpaid amount.

The way in which the transaction was said to be carried out was that the books were kept at the office. No doubt it is true, as it was said, that they were kept by persons whose services were appropriated to the sales company, and in that sense they were servants of the sales company. The profits were ascertained on this part of the transaction, that is to say, the difference between the price at which the sales company had bought from the mills company and the price at which they had sold to the market, the difference having been in the hands of the mills company as part of the whole transaction. The profits would be the difference between those two prices less the cost of the wages of the different people who were employed in the selling part of the business, but neither the proceeds in gross nor the proceeds as so calculated were paid to the partnership as such, which is what might be expected if one were dealing with a real trading partnership selling rice; but apparently the division of the profits was calculated by the mills company, and cheques were sent to each of the partners in proportion to his holding in the partner-

Page 995 of [1939] 3 All ER 991

ship. In other words, exactly the same position was reached as is reached in regard to the profits of the mills company. They would divide their profits by declaring a dividend amongst the shareholders, which would be distributed in this way, and these profits derived from the so-called sales part of it were divided in exactly the same way.

All those facts put together appear to their Lordships to afford ample evidencethey deal with it because counsel for the appellants has suggested that there was no evidence upon which the courts could come to this conclusionupon which the courts could come to the conclusion to which they did come, namely, that these transactions were in fact being conducted throughout by the sales company for and on behalf of the mills company. The sales were, therefore, sales by the mills company, and the price received was the sale price of the goods produced or manufactured by the mills company. Therefore, the appellants were properly liable to pay the balance of this tax.

In those circumstances, their Lordships will humbly advise His Majesty that this appeal should be dismissed and the appellants must pay the costs of the appeal.

Appeal dismissed with costs.

Solicitors: William A Crump & Son (for the appellants); Charles Russell & Co (for the respondent).

T A Dillon Esq   Barrister.

Attorney-General (at the relation of Martin) v Mayor, Aldermen and Burgesses of the Metropolitan Borough of Finsbury

[1939] 3 All ER 995


Categories:        HOUSING: LOCAL GOVERNMENT        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        28 JULY 1939        


Public Health Housing Letting part of clearance site for air raid shelter Previous schemes refused approval by Ministers Lease to company constructing shelter Lease of shelter when constructed to authority Validity of scheme London Government Act 1899 (c 14), s 5(2), Sched II, Part II Housing Act 1936 (c 51), s 30 Air-Raid Precautions Act 1937 (c 6), ss 1(3), 7.

The defendant authority prepared a scheme for constructing underground air raid shelters, but the Secretary of State refused to approve it. They then resolved to construct a shelter within a clearance area and submitted plans thereof to the Minister of Health with a request for a loan for the estimated cost thereof. The Minister refused to approve the proposed expenditure. They then entered into an agreement with a company, whereby they agreed to lease to the company some land which was a part of a clearance site, the company agreeing to construct a shelter on this land, and to lease the shelter, when constructed, to the defendants, at a rental of £50 a year and interest at 5 7/8 per cent on the capital cost of the shelter and a 2½ per cent amortisation charge. The present action was brought by a ratepayer who claimed that the scheme was ultra vires the borough council on the grounds (i) that the letting to the company was not authorised by the Housing Act 1936, s 30, (ii) that this transaction was, in substance, the borrowing of money by the defendants for the purpose of

Page 996 of [1939] 3 All ER 995

expenditure under the Air-Raid Precautions Act 1937, which therefore required the consent of the Minister, and (iii) that the hiring agreement was unauthorised:

Held (i) this was a letting within the Housing Act 1936, s 30.

(ii) this was not a borrowing of money, but an agreement to pay a yearly sum, and as such did not require the consent of the Minister under the Air-Raid Precautions Act 1937.

(iii) it was the duty of the defendants to provide shelter for the inhabitants of the borough, and they were therefore justified, by virtue of the London Government Act 1899, s 5(2), in acquiring the land in question in the way which they deemed expedient.

(iv) the scheme was therefore not ultra vires the defendants, and the action failed.

Notes

The proposals of the authority having failed to receive approval by the Ministers concerned, the authority, admittedly for the purpose of avoiding such approval, devised a scheme whereby part of a clearance area was let to a company with an agreement for the letting back to the authority of a shelter to be erected on that land. The only question is whether the authority have kept within their statutory powers, and it is held that this result has been achieved.

As to Clearance Areas, see Halsbury (Hailsham Edn), Vol 26, pp 533543, paras 11341150.

Motion

Motion, treated as the trial of the action, by the Attorney-General at the relation of a ratepayer of the defendant borough council for an injunction restraining the defendant council from proceeding with a scheme for the provision of a deep air raid shelter, it being suggested that the scheme was ultra vires the defendant council. The facts and arguments are fully stated in the judgment.

R O Wilberforce for the plaintiff.

A M Trustram Eve KC, Erskine Simes and L M Jopling for the defendant council.

28 July 1939. The following judgment was delivered.

SIMONDS J. In this case the Attorney-General at the relation of Mr Martin, a ratepayer of the borough of Finsbury, moves to restrain the Mayor, Aldermen and Burgesses of the borough of Finsbury from entering into an agreement with a company called Shop Investments Ltd:

whereby (a) the defendants [the local authority] agree to demise a piece of land situated at Busaco Street within the borough of Finsbury, to Shop Investments, Ltd.; (b) Shop Investments, Ltd., agree to construct in or under the said piece of land an air raid shelter; and (c) Shop Investments, Ltd., agree to re-demise the said piece of land and shelter to the defendants at a rent of £7,400 per annum,

on the ground that it is ultra vires and void.

The genesis of the action is this. The Air-Raid Precautions Act 1937, s 1, imposed upon local authorities the duty of making provision as to arrangements to be made in their several areas for the protection of persons and property from injury or damage in the event of hostile attack from the air. It provided by s 1(3) for air raid precaution schemes being prepared by the local authorities and to be submitted to the Secretary of State for his approval. Pursuant to that obligation the defendant authority prepared a scheme for constructing 15 under

Page 997 of [1939] 3 All ER 995

ground air raid shelters, at a total cost of over £1,300,000, to afford protection for the residents and workers in its area. That scheme was submitted to the Secretary of State in accordance with the Act, and the Lord Privy Seal, on whom the duty laid on the Secretary of State by the Act fell, refused to approve it, for reasons which he gave. The defendant authority considered that refusal and the reasons given for it, and were not satisfied. They determined, notwithstanding the rejection of their proposals, to go on with it, if they could lawfully do so. So far, at any rate, as part of the scheme is concerned, they devisedand I use the word without any offencea scheme by which they could make, and have available for the inhabitants of their area, a deep shelter on a certain site in Busaco Street mentioned in the notice of motion. They resolved, if possible, to construct one of the shelters within the clearance area which was in the neighbourhood of Busaco Street. They submitted plans, specifications and bills of quantities to the Minister of Health, and requested him to authorise a loan for the estimated cost thereof under s 7(3) of the Air Raid Precautions Act 1937.

The financial provisions of the Air-Raid Precautions Act 1937, are contained in s 7 and the following sections. S 7(1) is as follows:

(1) Any local authority may incur expenditure for the purpose of making provision for the protection of persons and property from injury or damage in the event of hostile attack from the air, whether or not such expenditure is incurred in pursuance of an air-raid precaution scheme.

I call attention to those words. The power of the local authority is clear. It may incur expenditure for the protection of persons and property within its area, notwithstanding that such expenditure is not incurred in pursuance of an air raid precaution scheme. S 7(3) provides:

For the purpose of defraying any expenditure of a metropolitan borough council under this Act, the council may borrow money in accordance with and subject to the provisions of the Metropolis Management Acts, 1855 to 1893, as amended by the London Government Act, 1899: Provided that the Minister of Health shall, instead of the London County Council, be the authority for sanctioning the borrowing of any money under the powers conferred by this section,

with certain exceptions which are immaterial.

Accordingly, it was under that section that application was made to the Minister of Health to approve certain expenditure with regard to air raid shelters, which the local authority purported to consider necessary. That sanction was refused by the Minister of Health. The local authority, however, as they were entitled to do, still adhered to the view that their scheme was a proper one, and that it was their duty to carry it out, if they lawfully could, for the benefit of the inhabitants of Finsbury. Accordingly they embarked on this transaction, the validity of which is challenged by the plaintiff.

The scheme was this. They purported to enter into an agreement, if they could lawfully do so, with Shop Investments Ltd, under which they would grant to the company a parcel of land, part of a clearance

Page 998 of [1939] 3 All ER 995

site under the Housing Act 1936, with full right for the company to enter on it, with certain reservations which are not material, and the company would be bound forthwith to begin the excavation and construction under the land of a shelter. That shelter was to be erected in accordance with the directions and subject to the supervision at all points of the county council and the local authority. The building contract is described in the agreement, and its contents are prescribed. There is a provision in cl 22 as to what is to happen on the outbreak of war, a clause which, in effect, enables the local authority to re-enter on the land and authorises the company to stop work upon it. Cl 23 provides that if and when the shelter to be comprised in the leave shall have been entirely finished and completed in accordance with the provisions contained in the agreement, the council is to grant and the company is to take a lease, the form of lease being set out in the schedule to the agreement. It is provided that, upon the completion of the shelter, the company shall let and the council shall take on hire the shelter for a term of 38 years from the quarter-day immediately preceding the date certified as the date of the completion of the shelter in consideration of annual payments to be calculated in accordance with the provision thereinafter set out. The rent under the lease to be granted under this agreement by the council is £50 per annum and the term is to be for 40 years.

Contemporaneously, as I have said, with the grant of the lease there is to be what is called a hiring of the shelter to the council, and the terms of that are set out in the second schedule to the agreement. It is only material to observe that the payment was to be the rental of £50 per annum together with interest at the rate of 5 7/8 per cent per annum of the capital cost of the shelter to be constructed on the land, and the annual amount required for amortisation of the capital cost calculated upon interest at the rate of 2½ per cent per annum.

The validity of this agreement is challenged on numerous grounds. In the first place, it is said that the letting by the local authority to the company is not authorised by the Housing Act 1936, s 30, under which alone the defendant authority have purported to grant the lease. The Housing Act 1936, s 30, provides what a local authority may do when it has declared an area to be a clearance area within the meaning of Part III of the Act. It enacts as follows:

(1) A local authority who have under this Part of this Act purchased any land comprised in, or surrounded by, or adjoining, a clearance area shall, as soon as may be cause every building thereon to be vacated and, subject to compliance with any provision contained in a compulsory purchase order with respect to the carrying out of re-housing operations, shall deal with that land in one or other of the following ways, or partly in one of these ways and partly in the other of them, that is to say:

First, they are to demolish the buildings and thereupon one of two alternatives are open to them. They may either

sell or let the land, subject to such restrictions and conditions, if any, as they think fit, or may, subject to the approval of the Minister, and subject to the like restrictions as are contained in the Local Government Act 1933, s 163, with respect to the

Page 999 of [1939] 3 All ER 995

appropriation of land by local authorities under that section, appropriate the land for any purpose for which they are authorised to acquire land. …

What the local authority here propose to do is to let the land subject to such restrictions as they may think fit. It is a condition of the validity of such a lease that it is to be at the best rent which can reasonably be obtained having regard to any restriction or condition imposed.

I think that the simple question which I have to decide is whether the lease which, in pursuance of this agreement, if they can lawfully make it, the local authority propose to grant, is a letting within the Housing Act 1936, s 30. I do not find it possible to say that it is not. I think notwithstanding that the agreement provides, first, for a lease, and, secondly, for what is called a hiring of the shelter which is to be erected under the terms of the agreement, this is in substance, as it is in form, a letting of the clearance area, or so much of it as the local authority think fit to let. It is quite true that the letting itself is part of a larger transaction, and I shall have to investigate the validity of the other part of that transaction; but I think that this is in substance as it certainly is in form, a letting of the clearance area. Therefore, upon the first ground, the objection to the validity of that part of the agreement which consists in the agreement to let, so far as it goes, fails.

The next point which I have to consider is this. It will have been observed from the subsection to which I have already called attention that, if for the purposes of any expenditure under the Air-Raid Precautions Act 1937, s 7, it is necessary to borrow money, then the consent of the proper Minister has to be obtained. This transaction as a whole has been challenged on the ground that, although on the face of it the local authority will do no more than pay a rent under the hiring agreement, yet in substance what they are doing is to borrow money. In my view that objection also fails. What the local authority are doing is to bind themselves to pay a certain sum from year to year. That sum they will pay out of revenue, that is to say, out of rates or the rate fund. That is an obligation into which, as it appears to me, they are at liberty to enter. It is just as if they had agreed to purchase something for which they did not think fit to pay, or perhaps were not able to pay, in one year, and by agreement between themselves and the vendor agreed that the purchase price should be paid by instalments over a series of years. As I understand the law, there can be no objection to that. It is quite true that the district auditor may challenge such payment if for any reason he thinks that it is challengeable; but it is not a borrowing of money which requires for the safeguarding of the ratepayers the previous sanction of some other authority. Accordingly, although it is quite true that this is a financing by a third party of expenditure which the local authority have incurred, it cannot be said, in my view, that the local authority are borrowing so as to require the previous sanction of the Minister under the provisions of the Air-Raid

Page 1000 of [1939] 3 All ER 995

Precautions Act 1937. They are incurring expenditure which falls within that section and they are incurring that expenditure out of the rates this year and in future years, but they are doing so without borrowing money.

The third objection which was taken to this transaction is this. It is said that the hiring agreement, which is an integral part of the purchase agreement, that is to say, the agreement under which the local authority are to rent the shelter when it has been constructed, is unauthorised. On that the local authority can call in aid the London Government Act 1899, s 5(2), which provides:

As from the appointed day the powers of the London County Council under the enactments mentioned in Part II of the Second Schedule to this Act may, subject to the conditions mentioned in that Schedule, be exercised also by each borough council as respects their borough.

Part II of the Second Schedule so far as it is relevant to boroughs is that this power of the county council may be exercised by the borough council under powers contained in the Local Government Act 1888, s 65, which section relates to the acquisition of land; that is, an acquisition either by purchase or by lease. The condition of exercise prescribed by the same Part of the same Schedule is:

The power to be exercised only where the land is required for the purpose of any of the powers or duties of the borough council.

The power, if not the duty, of the borough council under the Air-Raid Precautions Act 1937, s 7, which I will read once again, is:

Any local authority may incur expenditure for the purpose of making provision for the protection of persons and property from injury or damage in the event of hostile attack from the air …

For the purpose of making that provision this local authority deem it expedient to acquire a certain shelter. Accordingly it seems to me that they must be justified, in order to make that provision, in acquiring the land in the way which they think expedient. They think it expedient to do so by taking a lease of or renting this particular shelter. It follows that they must pay the rent which, as a matter of bargain, has to be paid for the renting of this particular shelter, and it appears to me that in doing so they are acting within the powers of the London Government Act 1899, s 5, as applicable to this particular case.

Accordingly, I think that on all the points the objections taken on behalf of the plaintiff fail and that I must refuse this motion.

Motion refused. Motion to be treated as trial of the action.

Solicitors: F Basil Guedalla (for the plaintiff); J E Arnold James, Town Clerk, Finsbury (for the defendants).

F Honig Esq   Barrister.


Underwood v Underwood and Haigh (Pocock showing cause)

[1939] 3 All ER 1001


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HODSON J        

Hearing Date(s):        27 JULY 1939        


Divorce Costs Husbands petition alleging adultery with named co-respondent Decree nisi with costs Intervention by member of the public Issue resulting in finding of no adultery Whether order against co-respondent as to costs should stand.

A husband was granted a decree nisi on the ground of his wifes adultery, and was awarded damages and costs against the co-respondent. As a result of a subsequent intervention by a member of the public, it was found that adultery had not been committed, and the respondent then applied to have the decree rescinded, the petition dismissed, and the order against the co-respondent for damages and costs rescinded. The respondent and co-respondent had sworn by affidavit that their failure to defend the petition had been due to the fault of their then solicitor:

Held the decree nisi and order for damages would be rescinded and the petition dismissed, but the order for costs against the co-respondent must stand.

Notes

In general where a decree is rescinded the order for costs falls with it, but the whole matter of costs is one wholly in the discretion of the court, and in a proper case the order for costs may be allowed to stand.

As to Costs on Showing Cause, see Halsbury (Hailsham Edn), Vol 10, pp 773, 774, para 1222; and for Cases, see Digest, Vol 27, pp 485487, Nos 51605193.

Summons

Summons by the respondent to rescind a decree nisi of dissolution of marriage granted to her husband, the petitioner, and for rescission of the consequent orders against the co-respondent for payment of damages and costs. The petition was heard as an undefended suit in October 1938 and the petitioner was granted a decree nisi with costs and awarded £100 damages and costs against the co-respondent. In March 1939 the respondent and the co-respondent made an unsuccessful application to the Court of Appeal for leave to apply out of time for a new trial. Thereafter the respondents brother, William John Pocock, intervened in the suit as a member of the public to show cause why the decree nisi should not be made absolute on the ground that the respondent had not in fact committed adultery. In the result an issue was ordered to be tried on oral evidence as to whether or not the respondent and co-respondent had committed adultery. On the trial of this issue the respondents brother was the plaintiff and the petitioner the defendant. On 11 July 1939 Henn Collins J on the hearing of the issue found that adultery had not been committed, but intimated that he was not prepared at this stage to deal with the matter which arose to be determined in consequence of that finding, so that the matter fell to be dealt with on the present summons.

Earl of Drogheda (Hon Victor Russell with him) for the respondent in the suit, the applicant in these proceedings.

Page 1002 of [1939] 3 All ER 1001

J B Latey and J L S Hale for the petitioner in the suit, the respondent in these proceedings.

The co-respondent was not represented on the summons.

Earl of Drogheda: As a result of the judgment of Henn Collins J the decree granted to the petitioner should be rescinded and the petition dismissed. There being no finding of adultery against the respondent and co-respondent, the orders against the co-respondent for damages and costs should be rescinded also.

Latey: I cannot resist this application in so far as it relates to the rescission of the decree, the dismissal of the petition and the rescission of the order as to damages, but the order for costs should not be reversed. The petitioner has done nothing to which anyone could take objection. The petition and all subsequent process were properly served. The reason why the suit was undefended was, according to the affidavits, the negligence of the advisers of the wife and the co-respondent. It would be a great hardship on the petitioner, who is in no way at fault, if he has to bear the whole cost of these proceedings. There is no real ground upon which it can be said that these costs should be taken away from the petitioner. The co-respondent can take steps against those advising him, which are not open to the petitioner.

Earl of Drogheda (Hon Victor Russell with him) for the respondent in the suit, the applicant in these proceedings.

J B Latey and J L S Hale for the petitioner in the suit, the respondent in these proceedings.

27 July 1939. The following judgment was delivered.

HODSON J. I think the decree nisi must be rescinded and also the order for damages. The order for costs must stand and the co-respondent be left to his remedy, if any. There will be no order as to the costs of this application.

Solicitors: Piper Smith & Piper (for the respondent); T & N Blanco White (for the petitioner).

J F Compton Miller Esq   Barrister.

Volume 4


His Majestys Postmaster-General v Wadsworth

[1939] 4 All ER 1


Categories:        COMMUNICATIONS        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ AND MACNAGHTEN J        

Hearing Date(s):        4 OCTOBER 1939        


Telegraphs and Telephones Post-office telephone Account Certified account Whether conclusive evidence of amount owing Telegraph Act 1885 (c 58), s 2 Telephone Regulations 1936 (SR & O 1936, No 173) reg 18(2).

The appellant was a telephone subscriber against whom the Postmaster-General brought the present action claiming 6s 4d in respect of telephone service. The only evidence on behalf of the Postmaster-General was a duly certified account, and he relied upon the Telephone Regulations 1936, reg 18(2). The appellant contended that the regulation was ultra vires:

Held the regulation was intra vires and the certified account was conclusive evidence of the amount due.

Notes

Acting under his statutory powers, the Postmaster-General has made an order that a certified account should be conclusive upon the telephone subscriber as to the amount due from him for telephone service. It is held that not only is the order intra vires, but that, the contract for the service being subject to the rules, the subscriber was bound by those rules in any event.

As to Telephones, see Halsbury (Hailsham Edn), Vol 32, pp 30, 31, para 38; and for Cases, see Digest, Vol 42, pp 890, 891, Nos 30, 31.

Appeal

Appeal by the defendant from a decision of His Honour Judge A R Thomas, given at the Mayors and City of London Court on 2 March 1939 (and reported [1939] LJNCCR 180), whereby he dismissed an appeal by the defendant against a decision of the registrar ordering him to pay the plaintiff 6s 4d in respect of a telephone account.

N Ker Lindsay for the appellant.

J P Ashworth for the respondent.

Lindsay: The Telephone Regulations 1936, reg 18(2) is ultra vires because the statute gives the Postmaster-General no power to make so wide a rule. The Telegraph Act 1899, was a beneficial statute and no order properly made under it can have the effect of depriving a subject of his right of disputing an account in the courts.

Ashworth was not called on.

Page 2 of [1939] 4 All ER 1

N Ker Lindsay for the appellant.

J P Ashworth for the respondent.

4 October 1939. The following judgments were delivered.

SLESSER LJ. In this case the Postmaster-General brought an action against the appellant for the payment of 6s 4d alleged to be due to the Postmaster-General in respect of telephone service. On 7 December 1937, the appellant entered into an agreement with the Postmaster-General for the provision of a telephone service at a specific address and the agreement contained these words:

Subject to the Statutory Telephone Regulations from time to time in force and to my payment in advance of the appropriate connection or transfer charge.

The quarterly rental was then set out. The agreement was duly signed, and the telephone was duly provided. The Postmaster-General submitted to the appellant an account, and a certified account was before the registrar and the judge in the court below, and it is not disputed by the appellant that that account was properly certified. That account states on the credit side that there is a balance due to the Postmaster-General of 6s 4d, and that is the sum which the appellant refuses to pay, on the ground that he has not used the telephone in such a way as to give the Postmaster-General authority to charge that 6s 4d.

In the first place it is necessary to consider the regulations under which the Postmaster-General purports to rely upon the certified account. The regulation in question is No 18, cl 2, of the regulations called: The Telephone Regulations 1936, which are made under the authority of the Telegraph Acts 18631878, and particularly the Act of 1885 which amends those Acts.

The power to make regulations here relevant is contained in s 2 of the Act of 1885, which is as follows:

The Telegraph Act, 1868, s. 15, shall be repealed, and in place thereof be it enacted as follows: The Postmaster-General, with the consent of the Commissioners of her Majestys Treasury, may from time to time make regulations for determining the hours during which the offices appointed by him to be places for the receipt and despatch of telegrams shall be open for the transaction of telegraphic business, and for fixing the sums to be from time to time paid on account of the transmission of telegrams …

That is the fixing of scales. It may be mentioned that it is not disputed that it has been in fact decided that where the word “telegram” is here used, the word “telephone” may be substituted. Then there follow these material words:

and on account of services rendered in connection therewith, and on account of the use of any telegraphs by any persons, and for determining the conditions and purposes on which and for which such use may be permitted, and for the general conduct of telegraphic business.

It is said on behalf of the Postmaster-General that the words: “regulations for determining the conditions and purposes on which and for which such use”that is the use of the telephone“may be permitted” are apt words to include regulation No 18 (which, as I have said, is the regulation here relied upon) clause 2, and equally I think it must be said, clause 1. Clause 1 says this:

Except with the sanction of the Postmaster-General all fees and charges payable under these regulations shall be prepaid;

and I have no difficulty at all in coming to the conclusion that such a

Page 3 of [1939] 4 All ER 1

condition, namely, that the use may be permitted only in the circumstances that, except with the sanction of the Postmaster-General, all fees and charges shall be prepaid, is precisely within the powers given by s 2 in the words that the Postmaster-General may make regulations for determining the conditions upon which such use may be permitted. It may be observed that the legislature in s 2 of the Act of 1885, uses the phrase “conditions and purposes,” thus making it clear that the purpose is one thing and the condition is another thing, and “conditions,” I think, therefore, must be taken to extend beyond “purposes” in that connection. That being so, I am equally of opinion that clause 2, which provides that:

In any proceedings by or against the Postmaster-General in relation to any sum payable under an agreement or under these regulations the production of a certified account of such sum shall be conclusive evidence of the amount thereof and that liability for the payment of the subscription and charges specified therein has been incurred.

is equally a condition upon which the use of the telephone may be permitted. The regulations themselves are to be made in accordance with the earlier Act of 1868, which provides that they shall be laid before Parliament in the way which is familiar, and they seem to me to be entirely intra vires, and to apply to this particular case.

There is, however, another way in which the case may be put, which, I think, defeats this appeal. The agreement itself states that the telephone shall be provided “subject to the Statutory Telephone Regulations from time to time in force.” Now, it has been argued by counsel for the appellant that this regulation is not a statutory regulation, because it is ultra vires the Act of Parliament. I have already explained why in my opinion that argument is fallacious. Having once come to the conclusion that the regulation is intra vires, it is a statutory regulation. Therefore, by reason of this specific contract, the appellant has agreed that he will receive the telephone service on the basis that the language of reg No 18(2) shall apply, and that the production of a certified account shall be conclusive evidence of the amount thereof. Speaking for myself, more particularly as the judgment seems to have proceeded primarily upon that point, I am of opinion that, had he not included these words in the contract, he nevertheless would have been entitled to rely upon a valid regulation and to say: “The legislature, by permitting this regulation, has said that the Postmaster-General may rely on reg 18(2).” So that in my view, however the language of the contract might be against the Postmaster-General, in the sense that it might be drawn without those specific words there inserted, the force of the regulation is sufficient in itself, apart from the contract, to prevent the appellant from challenging the account. That question does not arise in the present case, because in fact he has in terms in his own agreement agreed to be bound by this provision, no doubt a salutary and useful provision for him, because otherwise it might be that the

Page 4 of [1939] 4 All ER 1

Postmaster-General would have required prepayment before he accepted the telephone calls.

For those reasons I am of opinion that this appeal fails and must be dismissed with costs.

LUXMOORE LJ. I agree, and I do not desire to add anything.

MACNAGHTEN J. I also agree.

Appeal dismissed with costs.

Solicitors: Alfred Slater & Co (for the appellant); The Solicitor, Post Office (for the respondent).

E Fuller Briscoe Esq   Barrister.

Davis v Foots and Another

[1939] 4 All ER 4


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant: CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND DU PARCQ LJJ AND BENNETT J        

Hearing Date(s):        5, 6 OCTOBER 1939        


Landlord and Tenant Fitness of premises Escape of gas Removal of gas-fire Fitting not required by tenant removed by landlord and previous occupier Whether contract to remove.

The appellants let an unfurnished flat to the respondents husband. After agreeing to take the premises the respondent or her husband stated that they did not require a gas-fire which was installed in one of the rooms. The appellants, who had been in occupation of the flat, thereupon stated that it would be taken away and it was removed by a son of the appellants, who, in doing so, removed the tap and failed to stop the pipe. At the time of such removal the gas was turned off at the main, but, upon the respondent and her husband moving in, it was turned on at their request by an employee of the gas company. The respondent and her husband slept in the room where the gas-fire had been and were rendered unconscious by gas poisoning, the respondents husband dying as a result of such poisoning:

Held (i) the appellants, as the landlords of the flat, were not liable in tort for damage caused by the defective gas supply.

(ii) the facts did not amount to a contract to remove the gas-fire and no claim could be made for breach of contract.

Notes

It is well-established that there is no liability in tort in the circumstances of this case, and the real issue is whether there was a liability in contract. The Court of Appeal, on this point, have reversed the judges decision and have held that no contract was proved.

As to Fitness of Premises, see Halsbury (Hailsham Edn), Vol 20, pp 202204, paras 220222; and for Cases, see Digest, Vol 31, pp 176181, Nos 30803160.

Cases referred to

Bottomley v Bannister [1932] 1 KB 458; Digest Supp, 101 LJKB 46, 146 LT 68.

Wilkinson v Coverdale (1793) 1 Esp 74; 12 Digest 223, 1849.

MAlister (or Donoghue) v Stevenson [1932] AC 562; Digest Supp, 101 LJPC 119, 147 LT 281.

Otto v Bolton & Norris [1936] 2 KB 46, [1936] 1 All ER 960; Digest Supp, 105 LJKB 602, 154 LT 717.

Page 5 of [1939] 4 All ER 4

Appeal

Appeal by the defendants from a judgment dated 4 March 1939, of Wrottesley J, sitting at Newcastle-upon-Tyne. The facts are fully set out in their Lordships judgments.

J Charlesworth for the appellants.

Cyril Salmon for the respondent.

Charlesworth: There was no duty on the landlord to see the gas fittings were in order. He owes no duty to the tenant: Bottomley v Bannister. [Counsel referred to Salmond on Torts, 9th Edn, pp 538, 541.] The judge was wrong in drawing an inference of fact that there was an express contract to remove the gas-fire. It belonged to the landlord and was removed in the ordinary course when the tenant said he did not want it. That was before the tenant took possession of the flat.

Salmon: The agreement for the letting was complete before the gas-fire was removed. The judge held as a fact that there was an undertaking to remove the stove. I rely on Wilkinson v Coverdale. Up to the time the contract was made, the premises were perfectly safe. None of the cases which have been cited deal with a defect which happened after the making of the contract as was the position here. In Bottomley v Bannister the court was not dealing with a case of misfeasance. It is clear from the judgment of Greer LJ, that the important moment is the date the contract is complete.

J Charlesworth for the appellants.

Cyril Salmon for the respondent.

6 October 1939. The following judgments were delivered.

MACKINNON LJ. The plaintiff, now a widow, in August last year was about to be married. She and her intended husband approached the defendants, who were then the owners and occupiers of a flat in Seaham Harbour. The defendants were proposing to leave those premises, and were willing to let them to the plaintiff and her husband. It was agreed between the plaintiff, the husband, and the defendants that the former should become tenants of the Foots at 13s per week as from Saturday, 4 September. On 26 August the furniture of the defendants was being moved out from the flat by young Foots, the son of the defendants, who was a ships carpenter. Among the furniture and other chattels belonging to the defendants, young Foots removed from its fixture in a grate a gas-fire, which was the property of the defendants. At that time the gas was turned off at the meter. Young Foots unscrewed the connection between the gas-fire and the pipe, which, when the gas was turned on, led the gas to the fire, and also removed the fireplace as a fireplace along with other chattels of the defendants.

The judge has found (and we accept his finding) that when young Foots so removed the gas-fire, he did not leave on the pipe which he disconnected any tap which could be turned off. The result was that, after the belongings of the defendants were removed from the house, there was the potential danger that if anybody came there and turned on the gas, without going to see that the various places to which the pipes went had their taps turned off, or had taps which were turned off, there would and could be an escape of gas.

Page 6 of [1939] 4 All ER 4

On 4 September the marriage of the plaintiff and her husband took place, and they went into occupation of the flat that they had taken from the defendants. They apparently arrived there late at night, and they went to bed in the room from which the gas-fire had been removed on 26 August by young Foots. On 4 September, in the morning at 11 oclock, the husband, just before going to his wedding, brought in the gas companys representative, who turned on the gas at the meter. Upon the facts as found by the judge (which we accept), gas must have been escaping from this disconnected pipe in this room ever since 11 oclock in the morning. So one would suppose that when they went there to go to bed late at night, there would have been an appalling smell of gas. The plaintiff says there was a smell in the room, but she thought it was due to their new furniture and linoleum. She herself had not had previous experience of gas, and did not recognise the smell. Unhappily they did go to bed in ignorance of the fact that the gas must have been pouring into the room. The result of it was that they became unconscious. They stayed there all through Sunday. It was only when some of their relations came on the Monday morning and broke into the flat that they were found unconscious. The husband died of gas poisoning. The plaintiff was very severely ill as a result, being three weeks in hospital.

As a result of this disaster the plaintiff brings this action against the defendants, alleging that they are liable to her for compensation by way of damages to her in respect of the loss of her husband. The judge has found in her favour, and awarded her £350 damages.

I have omitted one fact, which I shall mention in a moment: but, upon the facts as I have stated them, I think there can be no doubt that in law the defendants are not liable to the plaintiff. The law is stated by Scrutton LJ, in Bottomley v Bannister, at p 468, in a single sentence, which is all that I need cite:

Now it is at present well established English law that, in the absence of express contract, a landlord of an unfurnished house is not liable to his tenant … for defects in the house or land rendering it dangerous or unfit for occupation, even if he has constructed the defects himself, or is aware of their existence.

In other words the defendants, the landlords, let this house to the plaintiff. They let it, I will assume, with a pipe from which gas could escape when gas was turned on. That, of course, might be said to be a dangerous defect: but that being the principle which has been recognised over and over again, the defendants are not liable for that. It is the tenants business, when he takes possession of a house, to discover and remedy any danger that exists. In this case, quite obviously, it did not need the exercise of a great deal of care for somebody, who was turning on the gas in a house where it had been turned off for some time, to go round and see that the various pipes into which the gas would be admitted were safe, and were not leaking. Therefore, upon those facts, that the son of the defendant did remove this gas-fire, and left the end

Page 7 of [1939] 4 All ER 4

of the pipe without a tap turning off the possible entry of gas, I think that the defendants are not liable for the resultant disaster.

But there is one further fact which I should mention. Before 26 August, the day on which young Foots removed this gas-fire, along with other pieces of furniture, there was a simple conversation between the first defendant, Mrs Foots, and the plaintiff. Mrs Foots said, on going round the house with her: “Here is this gas-fire.” It was a chattel belonging to Mrs Foots. She asked the plaintiff if she and her husband would like to have it and make use of it. No doubt if the plaintiff had said: “Yes, they would,” Mrs Foots would have followed it up with an inquiry as to how much they would pay for it, or whether they would pay something in addition to the rent, or something of that sort: but no such further bargaining took place, because the plaintiff said they would not require it and did not want it. Conversation then happened; and this is the only evidence with regard to it. This is a question which comes in the evidence of the plaintiff:

Did Mrs. Foots say anything when you said you did not want it? (A) She said she would have it taken out.

Upon that simple piece of conversation there has been rested a contention, which has been accepted by the judge, that there was an undertaking by the defendants to do that work for the plaintiff; and that there was implied in that undertaking that they would do that work with reasonable care and skill. I do not think that there was any undertaking to do work for the plaintiff; and there was no undertaking to use reasonable care and skill in doing any work for the plaintiff. It was not doing any work for the plaintiff at all. The plaintiff had no interest, right or property in the gas-fire: it was a chattel belonging to the defendants. The remark of Mrs Foots: “Well, then I will have it taken out,” was merely a statement that, if Mrs Davis did not require this article, and, therefore, was not prepared to bargain as to terms, she should retain its possession. It was merely a statement by Mrs Foots: “Very well, then I will take away my chattel.” There was no undertaking to do any work, or do anything for the plaintiff in regard to any article in which the plaintiff had any interest or property at all. In those circumstances, I am unable to see that I can extract from that very simple conversation any contractual obligation by these defendants to exercise any care and skill with regard to the gas-fire, the breach of which undertaking would place any liability for its consequences upon the defendants to the plaintiff.

In the result, I think that the plaintiff has no cause of action, in respect of this very lamentable disaster, against the defendants; and that the judgment of the judge was wrong in awarding her damages. This appeal should be allowed, and judgment entered for the defendants.

DU PARCQ LJ. I have come to the same conclusion. The case as pleaded is not based on the undertaking or agreement on which the

Page 8 of [1939] 4 All ER 4

judge has founded his decision; but speaking for myself, if I had thought that the judges decision could be supported on that ground, I should have felt no difficulty in saying that the pleadings ought to be amended in order to enable us to give effect to the judges decision. I think, howeverand I have very little to add to what has been saidthat it is impossible on that ground, or on any ground, to support the decision to which the judge came.

The facts give rise to some difficulty. Undoubtedly some support is to be found for the learned judges decision in a statement of his view of the law by Sir John Salmond in his work on “Torts”: but I cannot find any authority binding on this court to support the judges view. On the contrary, the authorities seem to me to be against it.

It is beyond question that the relationship of landlord and tenant did not impose any liability on the landlord here. If a landlord lets premises in a dangerous condition, and that is the only fact to be relied upon, without more no liability rests upon the landlord for the consequences of that dangerous condition. I cannot find here any express contract to leave the premises in a safe condition. All that happened was that on some date before 26 August, which is not specified, the land lady said that, as the tenant would not require the gas-fire which was in the bedroom, she would remove it before the tenancy began. She would be bound to remove it in any case for her own purposes, and she was not undertaking to do any more than that which a contract of letting would impose upon her, that is, let the premises as they stood without the gas-fire to the tenant. As has been said already by my Lord, it is impossible to found any claim. On the authority of Wilkinson v Coverdale, a case which I think has long been regarded as quite accurately stating the law, if somebody chooses to undertake an obligation, even gratuitously, to do a service to another person, and does it negligently, he may well render himself liable. But hereI do not repeat the reasons which have been giventhere is no question of doing a service for the plaintiff or her husband at all.

The only remaining question is whether there is some liability in tort, and whether one can apply to this case the wide principle stated in MAlister (or Donoghue) v Stevenson. As to that, I would only say this. I think some assistance is to be derived from the careful judgment of Atkinson J, in Otto v Bolton & Norris. I think there may be other reasons why it is impossible to apply here the principle, as I have called it shortly, in MAlister (or Donoghue) v Stevenson, but one conclusive reason against applying it to such a case as this is to be found, I think, in that judgment in Otto v Bolton & Norris. I will only read a part of the head-note for the purpose of showing what I mean:

The principle laid down in Donoghues case is that there can be no duty cast upon the vendor without proximate relationship, of which the main test is whether there is reasonable opportunity for examination between the time of the sale or the doing of the work and the use or consumption of the article by the purchaser.

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Making the necessary changes in that sentence, one would ask here whether there was a reasonable opportunity for examination between the time when the work was done and the time when the premises were used and the gas turned on. It is at once apparent that there was ample opportunity. The fire was removed by Foots on 26 August. The keys were handed to the plaintiff or her husband on 28 August, although the landlady still retained one key, because she had some furniture which she wished to remove. On 30 August, the tenants went in and looked round the premises, although they did not immediately occupy them. This was not a latent defect. It was quite apparent on any examination, and one would think only too plainly apparent, as soon as the gas was turned on. One would have said it was inevitable that it should have been noticed. I therefore cannot find any ground on which the judgment of the judge can be supported, and I agree that this appeal should be allowed.

BENNETT J. I also agree. The only ground upon which the judge decided the case in favour of the plaintiff was the undertaking which one of the defendants, Mrs Foots, is said to have given to the plaintiff. My Lord has already referred to the question and answer of the plaintiff, which is the foundation of the judges conclusion that Mrs Foots did give an undertaking to the plaintiff. But for myself, I am unable to see or infer from the question and the answer any undertaking of any kind given by Mrs Foots to the plaintiff. For these reasons, it seems to me that the foundation for the judges judgment disappears, and, accordingly, I agree with my Lord and with Du Parcq LJ, that the appeal must be allowed and judgment entered for the defendants.

Appeal allowed. Leave to appeal to the House of Lords refused.

Solicitors: Maples Teesdale & Co, agents for Wright & Ellis, Seaham (for the appellants); Isadore Goldman & Son, agents for Lionel Wolfe & Hewitt, Sunderland (for the respondent).

C St J Nicholson Esq   Barrister.

The Ottoman Bank, Haifa v Clement Menni

The Ottoman Bank, Haifa v Anis Mansour

[1939] 4 All ER 9


Categories:        COMMONWEALTH; Commonwealth countries: CONTRACT: BANKING AND FINANCE        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, LORD FAIRFIELD, SIR LANCELOT SANDERSON        

Hearing Date(s):        27, 29, 30, JUNE, 21 JULY 1939        


Privy Council Palestine Money Currency Contract governed by Turkish law Pension based on salary Whether payable on a gold basis Unconditional receipts for “net amount payable” Release.

The respondent Menni entered the service of the appellant banking corporation in 1910, at Haifa, and in 1913 he became a member of the permanent staff there, and he signed a declaration of adherence to the pension regulations of the Bank, known as the “Caisse de pensions et de retraites,” the provisions of which were to form an integral part of

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the conditions of his engagement and their application of which was to be obligatory to him. He retired from the service of the Bank in 1933, when he admittedly became entitled to a pension. The respondent Mansour became a member of the permanent staff of the Bank in 1912 and signed a declaration of adherence to the pension regulations similar to that signed by the respondent Menni. He retired in 1933 and was placed on pension as from 1 January 1934. Both respondents claimed that, on a proper construction of the contract, their salary was payable in gold Turkish pounds only, and that their pensions were to be calculated accordingly. Prior to the British occupation of Palestine, the currency was the Turkish currency, and from May 1916, onwards the appellant paid the salaries of the respondents and its other employees in Turkish currency notes. After the British occupation, from January 1919, until May 1933, the “fixed-rate period,” the salaries were still expressed as sums of Turkish money, but were paid in the local currency at a fixed rate of exchange. A new currency was introduced into Palestine in November 1927, and from May 1933, onwards, the “Palestinian period,” the salaries were expressed as the sums of Palestinian money actually paid to the employees. It was established by the evidence that (i) although the Turkish gold pound was current at the date of the contract, the proper construction of the contract according to Ottoman law was that the pound Turkish referred to in the contract was unit of account and not a contract to pay Turkish gold pounds in the absence of an express provision to that effect, (ii) at all material times since 1914 the paper pound Turkish had been legal tender and the Turkish gold pound had disappeared from circulation, (iii) the practice of the bank of converting the amount of the employees salary at a fixed fate of conversion did not, in Turkish law, amount to an admission that the salary was payable on a gold basis, as the fixed rate was not based on the bullion content of the Turkish pound. the respondent Menni, in December 1932, on the pay sheet where the calculation of his salary was fully stated, had signed a receipt for the “net amount payable.” The calculation of that amount was inconsistent with his present claim:

Held (i) following the decision in Ottoman Bank of Nicosia v Chakarian, the contract was not one to pay the salary on a gold basis, but a contract to pay in whatever might be legal tender according to Turkish law at the material time.

(ii) the unconditional receipts given by the respondent Menni were an admission that he had received the correct amount due to him and, therefore, amounted to a release by which his claim was extinguished.

Notes

In the main the decision here follows that in Ottoman Bank of Nicosia v Chakarian. The matter is, however, carried a stage further in the consideration of the effect of the giving by the employee of an unconditional receipt for the “net amount due.”

As to Release, see Halsbury (Hailsham Edn), Vol 7, pp 250254, paras 344350; and for Cases, see Digest, Vol 12, pp 497515, Nos 40644272.

Cases referred to

Ottoman Bank of Nicosia v Chakarian [1938] AC 260, [1937] 4 All ER 570; Digest Supp, 107 LJPC 15, 158 LT 1.

Ottoman Bank of Nicosia v Dascalopoulos [1934] AC 354; Digest Supp, 103 LJPC 73, 151 LT 151.

Ottoman Bank v Chakarian [1930] AC 277; Digest Supp, 99 LJPC 97.

Introduction

Consolidated appeals from two judgments of the Supreme Court of Palestine sitting as a Court of Appeal [Manning and Copland JJ], dated 19 February 1937, reversing two judgments of the District Court of

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Haifa [Sherwell P, and Hubbard J], dated 5 February 1936 and 16 April 1936, respectively. By the judgment of the Supreme Court it was decided in substance that the former salaries and present pensions of the respondents were and are payable on a gold basis.

The judgment of their Lordships was delivered by Lord Thankerton.

Colin H Pearson and I W G Barry for the appellant banking corporation.

The respondents were not represented and the appeal was heard ex parte.

Pearson: The present cases are indistinguishable in principle from Ottoman Bank v Chakarian and are distinguishable on many grounds from Ottoman Bank v Dascalopoulos. At all times the respondents salaries under their contracts of service were expressed in money and payable in currency and not in gold or in terms of gold. The evidence goes to show that by Turkish law the Turkish pounds referred to in the Pension Regulations and the Pay Sheets were Turkish units of account payable in any form of currency which might be authorised as legal tender by the law of Turkey from time to time. During the “Turkish period” the salaries of the respondents wore in all respects sums of Turkish money which could lawfully be paid in Turkish currency notes at their face value. During the “fixed rate period” beginning about the end of the year 1918 and ending in May 1933, the appellant paid, and the respondents accepted payment of, their salaries in the currency of Palestine at the fixed rate, without regard to the varying relations of Turkish currency and the currency of Palestine to each other, or of the varying relation of either of them to gold. Under the provisions of the Mejelleh the signatures of both respondents to the Pay Sheets and the separate receipts given by the respondent Menni, constitute binding and conclusive admissions whereby they are precluded from claiming payment either of their salaries or of their pensions on a gold basis. Under the provisions of the Mejelleh a new contract formed by offer and acceptance of the fixed sums in the currency of Palestine, arrived at by applying the fixed rate to the salaries expressed as sums of Turkish money, would supersede any supposed previous contract for payment on a gold basis. [Counsel referred to: Ottoman Bank v Chakarian, Ottoman Bank v Chakarian, Ottoman Bank v Dascalopoulos.

Colin H Pearson and I W G Barry for the appellant banking corporation.

The respondents were not represented and the appeal was heard ex parte.

21 July 1939. The following judgments were delivered.

LORD THANKERTON. The appellant, originally established in 1863 as the Imperial Ottoman Bank, with its head office in Constantinople, now Istanbul, has many branches, most of which, including the Haifa branch, were formerly within the Turkish Empire. It had also branches outside the Empire, and the branch bank in Cyprus, which was formerly under lease to Great Britain, is carried on under the name of the Ottoman Bank of Nicosia.

The respondent Menni entered the service of the appellant in 1910 at

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Haifa, and he became a member of the permanent staff there on 16 June 1913, when he signed a declaration of adherence to the pension regulations of the Bank, known as the “Caisse de pensions et de retraites,” the whole provision of which was to form an integral part of the conditions of his engagement and the application of which was to be obligatory for him. He retired from the service of the bank on 30 November 1933, under notice of termination of his employment, when he admittedly became entitled to a pension.

The respondent Mansour entered the service of the Bank in June 1912, at Haifa, and became a member of the permanent staff on 12 December 1912, when he signed a declaration of adherence to the pension regulations similar to that signed by the respondent Menni. He remained in the service of the bank at Haifa until 31 December 1933, when he retired under notice from the bank, and was placed on pension as from 1 January 1934.

The amount of pension is provided for by the following articles of the pension regulations:

Article 14.The amount of the pension is calculated on the basis of the salary the employee was drawing on Dec. 31 of the year which preceded that in which he was put on pension.

Article 15.The amount of the pension will be calculated on the following basis: (1) For ten completed years of service, 30 per cent. of the fixed annual salary. (2) 2 per cent. for each succeeding year.

Article 16.In no case must the pension exceed three-quarters of the fixed annual salary. In no cases shall the pension be less than Ltq. 45 per year in the case of the clerical staff, and Ltq. 25 per year in the case of the subordinate staff.

It may now be taken as beyond dispute that, like the salary, the pension falls to be calculated in Turkish pounds, and that the fixed annual salary on the material date alone forms the basis; a claim by the respondent Menni that certain additional allowances should also be taken into account in calculation of the pension was rejected by both Courts below, and he has accepted the decision. But both respondents claim that, on a proper construction of the contract, their salary was payable in gold Turkish pounds only, and that their pensions are to be calculated accordingly. This contention is the same as has been dealt with in the previous decisions of the Board. In both cases, the appellant has maintained that the respondents are precluded by certain admissions from making the above contention, and, as their Lordships are of opinion that the respondent Menni is so precluded, they will first deal with the case of the respondent Mansour alone.

Until the British occupation of Palestine in the autumn of 1918, the law of Turkey was the governing law of Palestine. Haifa was occupied about the end of 1918. Up to that time, the salaries were paid in Turkish currency. From that time until 1927, Egyptian currency was mainly in use, but, in November 1927, a new Palestinian currency was introduced, and the salaries were thereafter paid in Palestinian currency. After the British occupation, the salaries of Turkish pounds, as shown in the pay-sheets, were converted at a fixed rate into the prevailing currency; up till May 1933, the first column expressed the fixed salary

Page 13 of [1939] 4 All ER 9

in Turkish pounds, but in that month this column was omitted from the pay-sheets, though it still formed the basis of calculation of the salary. Certain of the employees protested against this change. There is no doubt that the contract is to be construed according to the Turkish law, which, in the courts of Palestine, is now a question of fact. In the present case evidence has been led on three points, which in substance is identical with the evidence led in the last case before this Board, Ottoman Bank of Nicosia v Chakarian, the decision of which by this Board was delivered on 16 November 1937, about nine months after the decision of the Supreme Court, which is now under appeal. Their Lordships have no doubt that if the Supreme Court had had that decision of the Board before them, they would have found, in the evidence led in these cases, reasons for distinguishing them from the case of Ottoman Bank of Nicosia v Dascalopoulos. Manning J, states that it had been agreed by both parties that the proper law of the contract is the Ottoman law as it existed at the date when the contract was made.

The first of the three points established by the evidence is that, although the Turkish gold pound was current at the date of the contract, the proper construction of the contract, according to the Ottoman law, was that the pound Turkish referred to in the contract was a unit of account, and was not a contract to pay Turkish gold pounds, in the absence of an express provision to that effect; in other words, it was a contract to pay so many pounds Turkish in whatever might be legal tender in Turkey according to Turkish law at the material time.

The second point established by the evidence is that at all material times since the beginning of the war the paper pound Turkish has been legal tender, and that the Turkish gold pound gradually disappeared from circulation and ceased to be money, and became a mere commodity, with a price like any other merchandise.

The third point established by the evidence is that the practice“régime usité”of the Bank in converting the amount of pounds Turkish payable as salary to their employees in Palestine at a fixed rate of conversion, did not constitute any admission that the salary was only payable in Turkish gold pounds, as the fixed rate was not the equivalent in value of the bullion contents of the Turkish gold pound.

The first two points make clear that the basic salary of the respondent Mansour, which was Ltq 23 on 31 December 1933, as at which date his pension falls to be calculated, was payable by the Bank in pounds Turkish in the paper currency which was legal tender in Turkey at the time, and that the pension falls to be calculated on that basis, subject to an observation, which may be best expressed by citation of a passage in the judgment in Ottoman Bank of Nicosia v Chakarian, at p 272 ([1937] 4 All ER, at p 576):

So far this way of regarding the matter would appear to be conclusive against the respondents contention, and to dispose of the appeal in favour of the appellants. It is necessary, however, to examine with some care the practice of the appellants in paying their employees, and in particular the course which they adopted in

Page 14 of [1939] 4 All ER 9

Turkey in paying the respondent and other employees after the Turkish currency went off gold. Reliance is placed by the respondent on these facts as being, in a phrase which was used, exegetical of the contract, and something like the principle of contemporaneous exposition was invoked. It is obvious that if a contract is clear and unambiguous its true effect cannot be changed merely by the course of conduct adopted by the parties in acting under it. Such conduct, if it is clear and unambiguous, may in certain events raise the inference that the parties have agreed to modify their contract, but short of that such conduct cannot have the effect of changing the operation of an unambiguous agreement, though it might possibly in special cases support, along with other appropriate evidence, a claim for rectification. In addition, the practice seems to be only consistent, when properly understood, with the construction which their Lordships have just enunciated.

The third point established by the evidence in this case makes the last sentence of that passage directly applicable to the present case, and the first and second points here established bring the present case within the rest of the passage. There is nothing in the present case to suggest any ground for a claim of rectification. The appeal by the bank in the case of the respondent Mansour succeeds on the foregoing grounds, and it is unnecessary to consider the appellants contention that this respondent is precluded by admissions from maintaining his contentions as to the construction of the contract.

In the case of the respondent Menni, it is necessary to consider whether he is precluded by his admissions from claiming that he is entitled to his emoluments on a gold basis. After certain documentary evidence had been produced, and oral evidence had been led as to the additional allowances, which are no longer in question, the District Court made a provisional ruling on 22 January 1936, in the following terms:

Now as regards the question of estoppel which has been raised here, after considering the documentary and oral admissions of both parties, and the plaintiff relying upon the Law of Palestine which includes such provisions of the Mejelleh as have not yet been modified or repealed, and the defendants advocates neither raising any objection nor requesting leave to prove the contrary on the question of the law applicable here, we have come to the conclusion that prima facie the plaintiff is estopped in law from prosecuting any further the claim which is now before us. We think that the Mejelleh as before mentioned provides us with the law in regard to estoppel which is binding upon this court and that no other law applies here. Having regard, however, to the provisions of the Law of Evidence Amendment Ordinance, 1924, as amended and in particular to the interpretation which has been placed upon the meaning and intention of sect.12 in the Ordinance by the Court of Appeal, we consider that we are bound first to afford (if he so desires) the plaintiff the opportunity of giving evidence himself and/or of calling the defendants representative as his witness to prove any fact relevant to the issue of estoppel, subject of course to his right later on may be to recall either himself or the defendants representative to give further evidence which may be relevant generally to the issues herein if the court shall finally have decided the issue of estoppel in the plaintiffs favour.

In their judgment, delivered on 5 February 1936, the District Court decided that the respondent was precluded by his admissions, and they state that the respondent had decided not to avail himself of the opportunity of giving evidence, which had been afforded to him by the provisional ruling. This decision was reversed by the Supreme Court, and, though no further evidence had been led, they decided in the respondents favour on his claim to a gold basis. There is no record of any agreement to treat the evidence in the Mansour case as evidence in this case, and if their Lordships agreed with the Supreme Court that the

Page 15 of [1939] 4 All ER 9

respondent was not precluded by his admissions, it would be necessary that the case should be sent back in order that the parties might have the opportunity of leading further evidence. Their Lordships, however, agree with the decision of the District Court on this matter.

The claim of the respondent, which is at issue in the appeal, is for payment on a gold basis (a) of his pension, calculation of which is based on his fixed salary as at 31 December 1932, and (b) of his salary from 29 May 1933, to 30 November 1933, when he retired. Under art 46 of the Palestine Order in Council of 10 August 1922, the provisions of the Mejelleh are applicable in the courts of Palestine, and the appellant founds on certain articles, the translation of which by Grigsby (1895) is as follows:

Article 79.Each man is bound by his own admissions.

Article 1606.An admission by writing is equivalent to an admission made by word of mouth.

Article 1609.An admission of a debt which a person has written with his own hand or by means of another person, and, having signed or sealed it, has given it to another person, is equivalent to his admission by word of mouth, if it is regularly drawn up, i.e., in the accustomed manner, and the accustomed forms of receipt have the same validity.

As regards the claim in respect of salary, the appellant further founds on the following articles:

Article 1536.Ibrai, freeing one from an obligation, payment, abandonment, acquitment. These are of two kinds, of which the first is called ibrai-iskat, and the second ibrai-istafa. Ibrai-iskat, freeing, abandoning a debt, is where a person freed another from the obligation, abandoning the whole or part of his claim. This is the release (ibrai) of which mention will be made in this book. Ibrai-istafa, recovery, is where a person declares that he received his claim from another, thus, this is a kind of admission.

Article 1562.If anyone release another from his claim his claim is extinguished, he can no longer renew it.

The Supreme Court rejected the appellants contention mainly on their view of the proper inference to be drawn from the signed pay-sheets and receipts given by the respondent, and, apparently, it was for that reason that they held that arts. 1536 and 1562 were not relevant to the circumstances of the case. But their Lordships do not agree with the Supreme Court nor with their view that art 1655 has a bearing on the case, in view of the fact, already noted, that the respondent did not attempt to give evidence to qualify the clear meaning of his signature to the pay-sheets and the receipts given by him.

On the pay-sheet for the respondents salary for December 1932, the calculation of his salary is fully stated, and the respondent signed for receipt of the “net amount payable” as stated in the last column. The calculation is inconsistent with his present claim, and their Lordships are of opinion that this constitutes a clear admission by the respondent that the net amount is correctly calculated, and infers a release from the debt due to him by the bank, it being the customary form of receipt taken by the bank. It follows that the respondent is now bound by this admission as to the correct amount of his salary at the date material for the calculation of his pension. As regards his claim in respect of salary from May to November 1933, the case is equally

Page 16 of [1939] 4 All ER 9

clear. In May 1933, when the Bank dropped the first column from the pay-sheet, the respondent wrote a letter dated 29 May in which he protested against the change, but he did not persist in his protest, but signed unconditional receipts during the succeeding months, the last of which, dated 21 December 1933, is for “the sum of Palestine pounds twenty-five and 381 mils onlyfor balance of my salaries from February 1933, until end of November 1933.” This is clearly a release, by which his claim was extinguished, and he can no longer renew it.

Their Lordships are therefore of opinion that the respondent Mennis claim also fails, and that the District Court were right in dismissing his suit. Their Lordships will, accordingly, humbly advise His Majesty that the judgment of the Supreme Court dated 19 February 1937, which related to both cases, should be set aside, and that the judgments of the District Court in Mennis case dated 5 February 1936, and in Mansours case dated 16 April 1936, should be restored. The respondents will pay to the appellant the costs of this appeal, and will respectively pay to the appellant the latters costs in their respective cases before the Supreme Court.

Appeals allowed with costs.

Solicitors: Bischoff Coxe & Co (for the appellants).

T A Dillon Esq   Barrister.

Ellinger v Guinness, Mahon & Co, Frankfurter Bank A-G, and Metall Gesellschaft A-G

[1939] 4 All ER 16


Categories:        CIVIL PROCEDURE        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        28 JULY, 6 OCTOBER 1939        


Practice Service out of jurisdiction Action properly brought against defendant within jurisdiction Real defendant to action Discretion of court Non-disclosure not amounting to attempt to deceive court RSC, Ord 11, r 1(g).

An issue of gold mortgage bonds was made in Germany by a German bank to the defendants GM & Co, who issued them to the ultimate holders. GM & Co, who were an English firm, then established a register of the holders and by a deed of covenant covenanted with the holders whose names were entered upon that register to receive all principal sums and interest payable in respect of such bonds and to distribute the sums so received among such holders. In 1932 the plaintiff, being then domiciled in Germany, purchased such bonds to the value of 20,000 gold marks through the defendants Metall Gesellschaft A-G, and these bonds were entered upon the register in the name of Frankfurter Bank or its nominees and the interest was received by Metall Gesellschaft and duly credited to the plaintiff. It was not suggested that the Frankfurter Bank or Metall Gesellschaft had any beneficial interest in the bonds. In 1936 the plaintiff was deprived of his employment in Germany and came to England. He obtained a release of a part of his foreign securities in consideration of his relinquishing his rights to the remainder. He now claimed to be entitled to an order that his name should be entered on the register kept by the defendants GM & Co. It was assumed that, as between the plaintiff and the Frankfurter Bank and the Metall Gesellshaft, the matter was governed by German law, and the matter was by agreement sub-

Page 17 of [1939] 4 All ER 16

ject to the exclusive jurisdiction of the German courts. The defendants GM & Co having been duly served within the jurisdiction, an order was made for the service of notice of writ out of the jurisdiction on Metall Gesellschaft A-G, and the Frankfurter Bank A-G. This motion was brought to set aside that order:

Held (i) although it could not be said that the action was bound to succeed against GM & Co, there was a real issue to be tried and it was “properly brought” against them within the meaning of RSC, Ord 11, r 1(g);

(ii) GM & Co were not subsidiary defendants in the action, but were the real defendants;

(iii) this was not a case where the court, in the exercise of its discretion, ought to refuse to allow notice of the writ to be served on the defendants out of the jurisdiction. Non-disclosure of a material fact on the ex parte application is not in itself sufficient ground for setting the order aside. There must be an attempt to deceive the court.

Notes

The person to be served out of the jurisdiction must be a necessary or proper party, but that person need not be both a necessary and a proper party. In the present case the parties outside the jurisdiction claimed no beneficial interest in the property, and asserted that any claim against them had to be determined in the German courts. It is held, however, that the order for service was properly made. The case also considers the other limb of the rule which requires that the action shall be “properly brought” against the defendant within the jurisdiction. This does not mean that the action must be seen to be one which can be prosecuted to success by the plaintiff, but there must be an issue between the plaintiff and the defendant within the jurisdiction.

As to Service out of the Jurisdiction, see Halsbury (Hailsham Edn), Vol 26, pp 3135, paras 4450; and for Cases, see Digest, Practice, pp 355362, Nos 690745. See also Yearly Practice of the Supreme Court 1939, pp 9497.

Cases referred to

Rosler v Hilbery [1925] 1 Ch 250; Digest, Practice 353, 679, 94 LJCh 257, 132 LT 463.

Re Schintz, Shintz v Warr [1926] Ch 710; Digest, Practice 358, 716, 95 LJCh 393, 135 LT 350.

Introduction

Motion to set aside an order for service of notice of the writ on defendants out of the jurisdiction. The facts and arguments are fully stated in the judgment.

RSC, Ord 11, r 1, provides as follows:

1. Service out of the jurisdiction of a writ of summons or notice of a writ of summons may be allowed by the court or a judge whenever. …

(g) Any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction.

Andrew Clark for the applicants, the second and third defendants.

John G Foster for the respondent, the plaintiff.

6 October 1939. The following judgment was delivered.

MORTON J. The plaintiff in this action is of Jewish birth. He was born in Germany and was professor in ordinary for pharmacology and director in the Pharmacological Institute of the Medical Academy in Dusseldorf, Germany, until 1933. In that year he was dismissed from his posts by reason of his Jewish birth, and in 1936 he left Germany and came to England. He was appointed to a registered fellowship at

Page 18 of [1939] 4 All ER 16

the Lister Institute for Preventive Medicine. In July 1939, he became a naturalised British subject, and it is his intention to make his permanent home in England. He brings this action against Guinness, Mahon & Co, a firm carrying on business in London; Frankfurter Bank A-G, a German Bank, hereinafter referred to as the Bank, and Metall Gesellschaft A-G, a German company carrying on business as bankers, hereinafter referred to as Metall.

The plaintiff claims against Guinness, Mahon & Co, a declaration that he is entitled to be registered as the holder of an interest, of the nominal amount of 20,000 gold marks, in certain 6½ per cent gold mortgage bonds of the Bavarian Mortgage and Exchange Bank, under the provisions of a deed of covenant dated 18 July 1927, and that he is entitled to be issued a certificate by Guinness, Mahon & Co, in respect of that interest. The plaintiff also claims as against Guinness, Mahon & Co, an order that these defendants register the plaintiff as the holder of that interest and issue to the plaintiff a certificate in respect thereof. The plaintiff further claims against Guinness, Mahon & Co an injunction and further or other relief. As against the Bank the plaintiff claims (i) a declaration that the plaintiff is entitled to the certificate above referred to, (ii) an order that the Bank transfer to the plaintiff the benefit or interest of the nominal amount of 20,000 gold marks in respect of the bonds, (iii) an injunction to restrain these defendants from parting with or otherwise dealing with the certificates registered in their names with Guinness, Mahon & Co, unless and until a certificate for the nominal amount of 20,000 gold marks is issued to the plaintiff, and (iv) further or other relief. As against Metall the plaintiff claims (i) a declaration that Metall is the holder of or is entitled to a certificate of the nominal amount of 20,000 gold marks in respect of 6½ per cent Gold Mortgage Bonds of the Bavarian Mortgage & Exchange Bank as agents on behalf of the plaintiff, (ii) an order that Metall transfer to the plaintiff the benefit or interest of the nominal amount of 20,000 gold marks in respect of those bonds, and (iii) further or other relief.

It is important to bear in mind that the plaintiff is resident in England and he wishes to be registered as the holder of an interest of the nominal amount of 20,000 gold marks in a register kept in England by Guinness, Mahon & Co, an English firm. That is the primary object of this action. The relief claimed against the Bank and Metall is subsidiary to the plaintiffs claim to be so registered. He has found it necessary to make the Bank and Metall defendants in this action for reasons which will appear later.

On 26 April 1939, I gave leave to the plaintiff to serve notice of the writ in this action on the Bank and Metall out of the jurisdiction, under the provisions of RSC, Ord 11. In support of the application for leave to serve out of the jurisdiction there was filed, on 17 April 1939, an affidavit of Mr D H Phillips, a member of the firm of solicitors acting for the plaintiff. On 7 June 1939, the Bank and Metall obtained leave

Page 19 of [1939] 4 All ER 16

to enter conditional appearances, and on 26 June 1939, the Bank and Metall gave notice of motion to discharge the order of 26 April 1939. The notice of motion also asks that the notice in lieu of service of the writ given to the Bank and Metall, and also subsequent proceedings in this action as against those two defendants, may be set aside. The hearing of the motion came to an end on 28 July, just before the close of the Trinity sittings, and I then dismissed the motion with costs and stated that I would give my reasons at a later date. Since 28 July, war has broken out between this country and Germany, but no event happening after 28 July has any bearing upon this matter.

On 18 July 1927, the partners in the firm of Guinness, Mahon & Co executed a deed of covenant. After recitals to the effect that Guinness, Mahon & Co had entered into an agreement whereby 15,000,000 gold marks nominal amount of 6½ per cent gold mortgage bonds of the Bavarian Mortgage and Exchange Bank were to be issued in Germany to Guinness, Mahon & Co or their agents in that country and wore to be deposited with the Royal Bank of Scotland or its agents in Germany, Guinness, Mahon & Co covenanted with each and all the persons who for the time being should be registered in the register therein mentioned, and all other, if any, the persons entitled pursuant to the provisions thereof or by any act in the law to enforce the rights of persons so registered, to observe and perform the provisions hereinafter expressed. Clause 1 of the deed provides for the deposit by Guinness, Mahon & Co of the bonds above referred to with the Royal Bank of Scotland or its agents in Germany. Clause 2 is as follows:

Guinness Mahon & Co. shall receive all payments to be or which shall be made in respect of the bonds or under the said agreement for principal interest or otherwise and shall reasonably endeavour to obtain prompt payment of all sums so payable but shall not be under any obligation to take proceedings to enforce payment of any sums payable for amortisation sinking fund principal or interest unless they shall think fit, and subject to any indemnity against costs charges expenses and liabilities which they may require.

Clause 3 provides, inter alia, as follows:

Every sum received by Guinness Mahon & Co. as owners of the bonds in respect of interest due thereon shall be paid and distributed by Guinness Mahon & Co. on the dates hereinafter mentioned amongst the persons entered on the register on the date appointed for the closing of the same as hereinafter mentioned pari passu and rateably in proportion to the nominal amounts of their registered holdings respectively on the said date.

By cl 4(a):

Every such payment shall be made in sterling at London bankers current buying rate for sight drafts on Berlin at the time at which such conversion shall actually be made provided that any registered holder shall be entitled on giving notice in writing to Guinness Mahon & Co. in manner hereinafter provided to receive payment of any sum so payable to him and due for distribution on or after Mar. 15, 1928, in German Reichs standard currency.

It is to be noted that the register is to be kept in London and that payments are to be made in sterling unless the registered holder gives notice to the contrary. It is also to be noted that under the deed Guinness,

Page 20 of [1939] 4 All ER 16

Mahon & Co are not merely bare trustees. They have active duties to perform, and certain discretions are given to them.

In the year 1932 the plaintiff, being then domiciled in Germany, was minded to purchase 20,000 gold marks nominal of the bonds subject to the provisions of the deed of covenant, and he did this through Metall. On 1 October 1932, Metall wrote a letter to the plaintiff of which the translation is as follows:

We give you below details of the securities assigned to you [here follow particulars of the cost and value of the 20,000 gold marks] with which we are debiting your account.

It is said on behalf of Metall, and for the purposes of this motion I accept it, that the transaction between Metall and the plaintiff was governed by the general terms of business of Metall as then in force. I have carefully considered a translation of Metalls general terms of business, but I need only quote a portion of cl 17 and the whole of cl 18. By cl 17 it is provided inter alia as follows:

Unless otherwise agreed upon for individual transactions our business offices constitute the place of fulfilment for both parties. In respect of our entire legal relations and any disputes between our customer and us, customers submit to German law and the competency of the District Court, Frankfort-on-Main and/or of the Provincial Court, Frankfort-on-Main, without prejudice to the right accruing to us to have recourse to the jurisdiction of another legally admissible court.

Clause 18 is as follows:

We are entitled to amend or supplement the foregoing terms of business at any time. Any such amendment or supplement cancels previous arrangements in conflict therewith. Such amendments or supplements are deemed to have been approved unless opposition is raised within one week by customers residing in the country or within a period of one month for foreign customers counting from the receipt of the communication or if the business relationship is continued with us without opposition. Declarations of the customer which are in conflict with the general terms of business are not binding upon the Bank unless the latter declares itself in agreement therewith in writing.

Following upon this transaction a scrip certificate was issued by Guinness, Mahon & Co either to the Bank or to two nominees of the bankthe evidence is not quite clear upon this point. This was done on the instructions of Metall, and the Bank or its nominees hold the scrip certificate as bankers for Metall. The interest on the 20,000 gold marks was received by Metall and was duly credited to the plaintiff for some years. It is not disputed that the marks were bought with the plaintiffs money nor is it suggested that either Metall or the Bank has any beneficial interest therein.

In the month of August 1936, the plaintiff, having been deprived of his employment, left Germany and came to England. About that time he instructed his lawyer to endeavour to obtain the release of his foreign securities. After some negotiations the plaintiff succeeded in getting a release of approximately one-third of his foreign securities on condition that he signed the following document, which he did on 12 July 1937:

I, Professor Philipp Ellinger, hereby undertake, notwithstanding my emigration to subject the securities [then follows a list, including the 20,000 marks] to all

Page 21 of [1939] 4 All ER 16

embargoes and restrictions which exist or may be issued for similar securities in the possession of a national. I undertake, moreover at the request of the Deutsche Golddiskontbank to assign these securities to the latter for sale for my account abroad, the reichmark value of the proceeds achieved being credited to me in Emigrants Blocked Account. In like manner, I will deliver up the proceeds of such securities to the Reichbank; I likewise request that their equivalent value be credited to Emigrants Blocked Account.

The plaintiffs present position is that he is not receiving the interest on the 20,000 gold marks in question and that he is not in a position to deal in any way with these gold marks, since the bank or its nominees is or are entered as the holder or holders thereof in the register kept by Guinness, Mahon & Co.

In December 1937, Metall altered its general terms of business and these terms now provide (by cl 26) as follows:

The business premises of the Banks offices at which the account is kept are the place of fulfilment for both parties. German law is applicable to all legal relations between the customer and the Bank even in cases where an action is conducted abroad. The Bank can only be sued before a court at the place of fulfilment.

For the purposes of this motion I assume (without deciding the point) that this provision became binding upon the plaintiff.

Being dissatisfied with the present situation the plaintiff issued his writ on 6 April 1939, and on the same date the solicitors of Guinness, Mahon & Co wrote to the plaintiffs solicitors as follows:

Our clients Messrs. Guinness, Mahon & Co. have handed us the writ of summons served upon them to-day. We shall have to consider the matter, but in the meantime you may accept this letter as an assurance that our clients will not pass any transfers which will have the effect of reducing the holding of the Frankfurter Bank A.-G., below 20,000 gold marks without giving you notice so as to enable your client to apply for an injunction, if so advised.

On 17 May 1939, Metall wrote two letters, one addressed to the Chief Finance President at Dusseldorf and the other addressed to the plaintiff in London. In the former letter Metall referred to the plaintiffs claim in the present action and stated:

We are applying herewith for a devisen permit to fulfil plaintiffs claim against us.

By the latter letter Metall protested against the issue of the writ in the present action, reminded the plaintiff of the document which he signed on 12 July 1937, and stated:

We have had to-day another opportunity of talking to the Foreign Exchange Board, Dusseldorf, in this matter and understand that they are determined to effect the confiscation of your property situate in Germany and/or your deprivation of German nationality mentioned in the last paragraph of our letter of the 4th instant unless at an early date it is certain that in accordance with the position of the matter you withdraw your unjustified threats of a writ.

In reply to the former letter the Chief Finance President at Dusseldorf wrote a long letter, the effect of which was that Metall was not given any permission to accede to the plaintiffs claim, and the letter concludes with the following paragraph:

As Professor Ellinger has long since used the securities released by me abroad,

Page 22 of [1939] 4 All ER 16

it must be expected of him that he should abide by the voluntarily undertaken obligations and in particular for the assignment of the securities to the Deutsche Golddiskontbank. These undertakings are governed by private law in accordance with the declaration of July 12, 1937, since they contain inter alia an offer of sale to the Deutsche Golddiskontbank. Straightforward behaviour must be expected in an exceedingly generous way. Likewise from the standpoint of other emigrants, the attitude of Professor Ellinger is reprehensible, as he is endeavouring to secure unjustified special advantages for himself.

It may be a matter for discussion hereafter whether the document of 12 July 1937, signed by Professor Ellinger, can aptly be described as a “voluntarily undertaken obligation.” However this may be, Professor Ellinger does not seem to think it “exceedingly generous” of the German Government to release to him one third of his own securities on condition that he relinquished control over the remaining two thirds, and he appears, so far, to be unmoved by the fact that the Chief Finance President at Dusseldorf thinks his attitude reprehensible.

In these circumstances counsel for the two German defendants contends that I ought to discharge the order of 26 April 1939, for several reasons. In the first place he says that this action is not “properly brought” against Guinness, Mahon & Co within the meaning of RSC, Ord 11, r 1(g). He says that no action could properly be brought by the plaintiff against Guinness, Mahon & Co and he relies upon the deed of covenant. In my judgment this argument is ill-founded. The result which the plaintiff desires to achieve in this action is that ho shall be entered on the register kept by Guinness, Mahon & Co in England. In order to achieve this result he was bound to bring an action, and Guinness, Mahon & Co was, in my view, a proper defendant to the action. I do not think it is part of the function of the court, in considering whether an action is “properly brought” against a party within the jurisdiction, to arrive at a conclusion as to whether the plaintiff will or will not succeed against that party. It is enough if the court is satisfied that there is a real issue between the plaintiff and that party which the plaintiff may reasonably ask the court to try.

Counsel for the two German defendants further submits that Guinness, Mahon & Co are really only “subsidiary defendants,” and he relies on the cases of Rosler v Hilbery and Re Schintz, Schintz v Warr. In my view, Guinness, Mahon & Co are the principal defendants in the present case. They are the persons who keep the register and they have certain active duties to perform in regard to the gold marks in question. As I have already pointed out, the whole object of this action is to enable the plaintiff to be registered as the holder of these marks which were bought with his money. For this purpose he has brought this action against Guinness, Mahon & Co, who keep the register. By reason of the facts which I have stated it was necessary to make the two German parties defendants, but they are not parties who claim any beneficial interest in the subject-matter of the action. In my judgment the primary relief claimed is relief which is claimed against Guinness,

Page 23 of [1939] 4 All ER 16

Mahon & Co and the facts of the present case clearly distinguish it from Rosler v Hilbery and Re Schintz, Schintz v Warr.

For these reasons I think that so far the argument of counsel for the applicants fails, but he then points out rightly that the court has a discretion under RSC, Ord 11, r 1. If, contrary to his contentions, the action is “properly brought” against Guinness, Mahon & Co he does not dispute that the two German defendants are necessary or proper parties to that action, but he argues that the court ought not to allow service out of the jurisdiction on these parties for certain further reasons which I shall now consider.

Counsel argues that there has been in the present case a submission to the exclusive jurisdiction of the German courts, by virtue of the terms of business under which the plaintiff carried through the transaction with Metall, as varied in the month of December 1937. I think counsel is right in saying that there was in the present case an agreement that all disputes between the plaintiff and Metall should be subject to the exclusive jurisdiction of the German court at Frankfurt; but in my judgment this fact affords no good ground for setting aside the order of 26 April 1939. I arrive at this conclusion for two reasons.

In the first place, as I have already pointed out, none of the parties, other than the plaintiff, claim any beneficial interest in the gold marks in question. This is not a case of a contest between two parties each of whom claims to be beneficially entitled to certain property vested in a trustee. In such a case, if one claimant has agreed with the other claimant that all disputes between them shall be determined according to the law of Germany, the court would, I think, incline to refer the parties to Germany for the decision of the dispute, in the absence of some strong reason to the contrary. In the present case, as I have said, the primary remedy which the plaintiff seeks is against Guinness, Mahon & Co. He wants to get on their register in London and he says that he is the beneficial owner of the gold marks. In order to decide this claim it is necessary for the two German defendants to be given the opportunity of putting their views before the court. There is not, however, a contest as to ownership between the plaintiff and Metall, or between the plaintiff and the Bank. The submission to the exclusive jurisdiction of the German courts is a submission only as between the plaintiff and Metall.

In the second place, I have before me evidence as to the probable fate of the plaintiff if he pursues his claim in Germany. Paras 10 and 11 of the plaintiffs affidavit filed on 24 July 1939, are as follows:

(10) As regards the contention that I should sue the defendants in Germany, I say that being a Jew I would have grave difficulty in getting represented especially in a case which would be regarded as injuring German financial interests. (11) If I were compelled to bring proceedings in Germany I would be unable to obtain any justice from a German court. Quite apart from any legal difficulty the German court cannot be expected to give judgment which would involve the release of foreign securities. Innumerable discriminatory measures taken by the present German regime against the Jews would greatly prejudice my position. It would be impossible for me to go to Germany because there would be grave danger of my

Page 24 of [1939] 4 All ER 16

being sent to prison or to a concentration camp. In this connection I would like to refer to the letters from the Foreign Exchange Board and Metall dated May 3, May 4 and May 17, 1939. Although in view of my recent naturalisation in this country deprivation of my nationality would not affect me, the fact that such a step has been threatened shows what my position would be if I were forced to go to a German court. If I were compelled to institute proceedings in the court at Frankfurt A.M. my position would be particularly prejudiced in view of the fact that Metall has recently been taken over by a new management and that one of the Chief Directors is the son-in-law of the local leader (Gauleiter) of the Nazi Party.

The difficulties which would face the plaintiff if he had pursued his case in Germany are further explained in paras 9 and 10 of the affidavit of Dr Friedrich Alexander Mann, who is a fully qualified German lawyer and a Doctor of Laws of the Universities of Berlin and London, and: who practises as a consultant on German law in London. I need not read these paragraphs at length. At the moment this evidence is not contradicted. In these circumstances it would in my judgment be wrong to refuse the plaintiff the opportunity of having this case determined by the courts in England. If it is to be so determined, the German defendants must be given an opportunity of defending it.

Counsel for the applicants next relies upon the fact that the plaintiff in his action seeks to compel two foreign corporations to do something which would render them subject to serious penal consequences in their own country. He says that in these circumstances I ought, in the exercise of my discretion, to refuse to allow these parties to be served with notice of the writ. It may be that when this action comes to be tried the court will decline to order either of the German defendants to do any act which would result in their becoming subject to the penal laws of their own country; but I do not think that on this ground I ought to discharge the order of 26 April 1939, thinking as I do that this action is properly brought against Guinness, Mahon & Co and that the German defendants are necessary parties to that action. The judge who tries the action will determine what relief (if any) is to be granted against these defendants. I am only deciding that they are parties who l ought properly to be served with notice of the writ.

Counsel for the applicants indicated that he would contend at the trial that the rights of the parties were governed by German law and that in German law there is no cause of action, but he very fairly stated that he could not press that argument at the present stage, in view of the dispute as to German law which appears in the evidence.

The only other point taken by counsel for the applicants is that there was in the present case a failure to disclose material facts to the court, at the time when the order of 26 April 1939, was made. He has strongly criticised the affidavits of Mr Phillips. Counsel for the applicants says, and I agree with him, that the ex parte application under Order 11 is one upon which the utmost good faith must be observed by an applicant. He says further that certain facts were not disclosed which ought to have been disclosed, and he says finally that, if these facts had been disclosed, I would not have given leave for service out of the jurisdiction.

Page 25 of [1939] 4 All ER 16

I now know all the material facts. I think that this is a proper case in which to give leave for service out of the jurisdiction under RSC, Ord 11, r 1(g). In these circumstances, I do not think that the order giving such leave ought to be set aside unless that order was obtained by something which amounts to an attempt to deceive the court. Counsel for the applicants does not suggest that Mr Phillips deliberately intended to deceive the court, but he argues that certain facts ought to have been stated in Mr Phillips affidavit which were not stated. I do not propose to refer to these facts in detail, but I think that Mr Phillips first affidavit does err on the side of brevity. I think it would have been a better affidavit if it had stated the facts in more detail, and in particular had made it clear that the transactions between the plaintiff on the one hand and Metall on the other hand took place at a time when the plaintiff was a German national domiciled in Germany, and that the terms of business provided that German law was to apply and the German courts were to have exclusive jurisdiction. Counsel for the plaintiff has stated that although Mr Phillips had not a copy of the actual terms of business he was instructed by German experts as to the general nature of the terms of business under which the transaction must have been carried out. Mr Phillips second affidavit is directed to stating his reasons for omitting to state certain facts in his first affidavit. After careful consideration of the matter I do not think that there are sufficient grounds for setting aside my order of 26 April 1939. A number of authorities have been cited on this branch of the case, but I have not been referred to any case in which a judge, being satisfied that there has been no intention to deceive the court, and being satisfied also, after considering all the relevant facts, that leave ought to be given for service out of the jurisdiction, has discharged a previous order giving such leave merely because certain relevant facts were not disclosed when such previous order was made. Counsel for the applicants has very properly pressed upon me certain observations of Lord Hanworth MR, and Warrington LJ, in the case of Re Schintz, Schintz v Warr at pp 716, 717 and pp 723, 724. He argues that, if there has been non-disclosure of any material fact on the ex parte application, the ex parte order ought to be set aside, even if the judge, on being fully informed of the facts, thinks that the case is a proper one for allowing service of notice of the writ out of the jurisdiction. In my judgment that argument cannot succeed. In the absence of any attempt to deceive the court I do not think it would be right for a judge to take this course. The only result would be to put the applicant to the expense of making a further application under RSC, Ord 11, r 1, which would be bound to succeed. This point did not arise for decision in Re Schintz, Schintz v Warr, since the Court of Appeal came to the conclusion that the case did not come within RSC, Ord 11, r 1(g) at all. It follows that any observations of the Court of Appeal on the point which I now have to decide were obiter, and I must decide it as I think right.

Page 26 of [1939] 4 All ER 16

For the reasons which I have stated I came to the conclusion on 28 July that this motion should be dismissed with costs.

Motion dismissed with costs.

Solicitors: Mayo Elder & Co (for the appellants, the second and third defendants); Swann Hardman & Co (for the respondent, the plaintiff).

F Honig and Maurice Share Esqs   Barristers.

DUrso v Sanson

[1939] 4 All ER 26


Categories:        TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        SIMONDS J (SITTING AS AN ADDITIONAL JUDGE)        

Hearing Date(s):        5 OCTOBER 1939        


Negligence Defence Volenti non fit injuria Watchman returning to burning premises.

The plaintiffs husband was burnt to death in a fire which originated through the negligent manner in which the defendants business was conducted. His duties were those of a night watchman, and it was proved that, after the fire had started, he made his way out of the building and, having given the alarm, ran back into the factory. Shortly afterwards he came out again when his clothes were burning fiercely. He later died from his injuries. It was not proved why he went back into the burning building, and it was contended that his injuries were the result of a voluntary act on his part, that it, his returning to a place of danger:

Held his duty was to guard the premises even in case of fire, and, in going back into the burning premises, he was acting in the course of his employment. The widow was, therefore, entitled to recover damages.

Notes

The argument in this case is based on two well-known legal principles, those of novus actus interveniens and volenti non fit injuria. The point taken is that the returning into the burning building was a voluntary incurring of danger by the deceased, and that his death was due to this voluntary act and not to the negligence of the plaintiff. This argument is rejected on the ground that it was the duty of a night watchman to protect his employers premises, and it was to be inferred that he returned to the premises for this purpose, unless it was shown that he returned for some private purpose of his own.

As to Volenti non fit injuria, see Halsbury (Hailsham Edn), Vol 23, pp 715719, paras 10061009; and for Cases, see Digest, Vol 36, pp 9297, Nos 608649.

Action

Action for damages for negligence causing death brought under the provisions of the Fatal Accidents Act 1846, and also under the Law Reform (Miscellaneous Provisions) Act 1934, s 1. The facts are fully stated in the judgment.

R T Monier-Williams and L B Schapiro for the plaintiff.

Gilbert J Paull KC for the defendant.

5 October 1939. The following judgment was delivered.

SIMONDS J. In this case the plaintiff, Honora Ellen DUrso, the widow and administratrix of the estate of Andrew DUrso, deceased, sues Jacob Sanson, who trades as J Woolf, claiming damages both under Lord Campbells Act and under the recent Law Reform Act in respect

Page 27 of [1939] 4 All ER 26

of the death of her husband, Andrew DUrso. That event took place in these circumstances. He was employed as a skin dresser by the defendant at his workroom at 34, Love Lane, Stepney. On 22 May 1933, at about 9.30 pm, being then on duty with the defendant, he was burnt to death at the defendants premises which I have named. Many of the events which led to that unfortunate event necessarily rest upon guesswork and speculation, but this at least we know from an observer, Mr Cole, who was passing the defendants premises that night. As he was passing the deceased ran out of the gate of the factory and shouted out to him “Fire! Fire!” Mr Cole saw through the window of the factory a red glow, indicating that a substantial fire had started. He was unable, owing to the accident of the gate having closed and being only capable of being opened from the inside, to go to the assistance of the deceased, who ran back into the factory. However, a third party, hearing the cry, went to the fire alarm. The fire brigade arrived within a short time; but, in the meantime, the deceased, having gone into the factory, came out again, having caught fire. He was described by the observer as being like a torch of flame. Every possible effort was made to quench the flames, but without avail and he was taken to the hospital, where in a short time he died. The question is whether in respect of his death a claim is maintainable by the plaintiff. For the purpose of investigating that question it is necessary to see whether the deceased suffered his death by reason of the negligence of the defendant.

Now the negligence of the defendant is laid in this, that he provided so faulty a system in his factory that that amounted to negligence. That I must now deal with. The factory is one in which the business of dressing skins is carried on. There is in the factory a boiler or a furnace which is used for drying skins in the ultimate stage of their preparation, but in the meantime the pelt or underside of the skin is prepared with a special grease. Having been so prepared, it is put in a machine which is called a kicker, where some process of stripping takes place. It is then put into a revolving drum, together with a quantity of saw-dust for the purpose of taking out the grease with which the skins had formerly been impregnated. The skin is then taken out of the revolving drum and submitted to further treatment which I need not describe, but the saw-dust which has been impregnated with grease in the course of this treatment is then used as fuel for the boiler which stands within the same factory building as I have mentioned. The position and nature of that boiler in the immediate proximity of this highly combustible material has been described by counsel for the plaintiff as scandalous, and I do not think that he goes beyond the mark. By the expert witness who was called for the plaintiff, who was not contradicted by any evidence called for the defendant and indeed upon this point not seriously challenged in cross-examination, the plant was described as something such as in all his experience he had never seen before. In fact, the boiler was so

Page 28 of [1939] 4 All ER 26

constructed that it had a very large space between the head of the fire and the crown of the boilerpeculiarly apt, therefore, to create what is called the blow-back, and that was unguarded in the immediate proximity of a large quantity of highly combustible material. No special safeguards were installed for the protection of the factory. No special instructions were given in regard to the stoking of the furnace; and, in my view, it is not going too far to say that the whole system of installation was one of really scandalous negligence. The fact was that not only did theory point to the possibility of blow-backs and of fire, but practice coincided with theory, for the experience of the witnesses who were called before me was that there had been frequent blow-backs, and on the very day on which this fatal accident occurred there had been no less than three. By “blow-back” I mean a blow-back through the grating or grate of the furnace, which caused sparks to be emitted into the building where this highly combustible material was lying about at no great distance from the mouth of the furnace. Those blow-backs occurred both when stoking was taking place and when stoking was not taking place. It was apt, indeed, to occur whenever there was a sufficient generation of gases in the open space which lay between the top of the fire and the crown of the boiler, and there being no plate over the opening at all, it was natural that the explosion of generated gases should find the easiest access, which might well be, in normal cases, not the flue, but the open hole of the grate.

Now on the very day upon which the fatal accident took place, there were no less than three such incidents, one when the fire was being stoked, and two when it was not. The deceased came on duty at about 8 pm on that Sunday. The fire had been made up at about 5.30 pm with a certain quantity of saw-dust and I think chips. It appears that the workman, in so tending the fire, did so in what might be described as a careless way. He appears to have fed it by holding the sack of saw-dust or chips over the mouth of the grate and pouring out the contents of the sack into the furnacethat is a possibility, of courseand that in so doing a spark was caused and that that spark was emitted and was somehow caught in the sack which had been held over the opening of the furnace. He observed no such thing. The sack was thrown down in the near proximity of the furnace and there it lay until its remnants were discovered after the fire. It is suggested that the fire was due to some such act of his, to a spark smouldering in the sack and ultimately bursting into flame. That I mention, because it is the only possibility which is suggested as an alternative to that which theory pointed to as likely and which experience had shown to happen with sufficient frequency in the past, namely a blow-back, followed by sparks being emitted and a smouldering which had to be put out. As I say, in the unfortunate absence of the deceased, there can be no absolute certainty as to the cause of the fire, but I think I should be flying in the face of all the facts, if I did not say I felt a certainty

Page 29 of [1939] 4 All ER 26

amounting to conviction that the fire was due, not to the fortuitous presence of those sacks, but to the existence of a faulty and scandalously negligent system of firing, which had in the past resulted in the emission of sparks and which was at any time likely to have that result. I accordingly find as a fact that the fire was due to a scandalously negligent system introduced by the defendant in his works and I find that the plaintiff suffered his death by reason of a fire so occurring.

It is said, however, that, even though the deceased met his death in that way, yet the defendant is not liable, for he died, not as a result of the defendants negligence, but by reason of some act of his own. That is put in two ways, first, on the footing of novus actus interveniens, and secondly on the footing that he suffered that injury voluntarily; he was a volunteer. Now that demands a little examination. As I see it, the deceased was on the defendants premises on that night of 22 May, for the purpose of watching the premises in the defendants interest. It is put that he also had the dutyand I daresay he was glad so to occupy his timeof greasing certain skins, but I cannot doubt that a part, and a substantial, if not the major, part of his duty in premises of this kind, where a fire was kept going all night, was to watch the premises and to see that they were preserved from the danger of fire. The inference which I draw is that it was part of his duty to be a night-watchman guarding the premises from the danger, amongst other things, of fire. Now what course exactly he took when he observed the outbreak of fire, or what he did, we never can know with certainty, but it appears to me that whatever course he took he was acting within the scope of his employment, doing that which he could legitimately regard as his duty, and which indeed I think was his duty, having come out of the premises, whether or not he had already made some attempt to extinguish the fire, and having summoned aid, to go back again and to see what he could do in the course of his duty to preserve his employers premises. Now it is said that that is a wrong view to take, that the true view is that he was no more than a passer-by who thought fit to enter upon a strangers premises and do what he could to avert a calamity of fire. It may well beit is not necessary for me to pronounce upon itthat the development of our law, which has led to the doctrine of volenti non fit injuria not being applied to the case where on a highway a man takes reasonable steps to prevent danger to the life of another, has no application where the act taken is for the protection not of life but only of property. Upon that it is unnecessary for me to pronounce, but it appears to me that that has no reference whatever to the case where the actor is a person who does what he does in pursuance of the duty which his employment imposes upon him. It is unnecessary, in my view, to consider with any nicety whether, if he had abstained from doing that which he did, an action could have been brought against him for damages for breach of his duty. It is sufficient, I think, to say that a person who is employed, as this man was, to watch the premises

Page 30 of [1939] 4 All ER 26

and to guard them from fire, performs his duty, if, having gone out of those premises and placed himself in a position of safety, he yet returns again to that which was at all times part of his duty, to save the premises from fire. It is impossible, in my view, to postulate that, in doing that, he was doing something which went altogether beyond the scope of his duty so as to treat him as a volunteer. He was not a volunteer. He was doing that which was part of his duty and he was doing so as merely part of the single transaction which consisted of discovering the fire, taking some steps (it may be) to put it out, going out of the premises and calling for aid, and returning to do what more he could to save these premises. It has indeed been suggested that when, having put himself in a place of safety, he yet returned to the defendants premises, he was doing that not for the sake of putting out the fire, but for the sake of recovering, it may be, some of his own possessions. I do not think that is a proper inference that I can draw. It seems to me the proper inference to draw is that he went to try, it may be once more, to put out the fire.

Upon that statement of facts, once the negligence of the defendant is found, there is no room either for the rule of novus actus interveniens or for the application of the doctrine volenti non fit injuria. In my view, the action must succeed and the plaintiff is entitled to recover the damage which is due to her.

Judgment for the plaintiff for £800 under the Law Reform (Miscellaneous Provisions) Act 1934, and £800 under the Fatal Accidents Act 1846.

Solicitors: Walter J Lark & Co (for the plaintiff); Davies Arnold & Co (for the defendant).

Maurice Share Esq   Barrister.

Nelson v Cookson and Another

[1939] 4 All ER 30


Categories:        LOCAL GOVERNMENT: TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        5 OCTOBER 1939        


Public Authorities Limitation of actions Alleged negligence of medical officers of county hospital Action against officers Whether entitled to protection of Act Public Authorities Protection Act 1893 (c 61), s 1.

The two defendants were assistant medical officers at the West Middlesex County Hospital. It was alleged that they had negligently conducted an operation upon the infant plaintiff. This action was brought more than six months after the date of the alleged negligence and the defendants claimed the protection of the Public Authorities Protection Act 1893. For the plaintiff it was contended that the defendants were independent contractors and not a public authority acting in pursuance of a public or statutory duty:

Held as the duty imposed upon the public authority was one which could only be performed by individuals, these officers of a public authority were performing a public duty imposed upon the authority and entitled to the protection of the Act.

Notes

This case formally decides a point which has long been assumed to be the law. There are many public duties imposed upon public

Page 31 of [1939] 4 All ER 30

authorities which can only be performed by its proper officers acting as the servants or agents of the authority, and the protection extends to those servants or agents, even when the action is brought against them personally and not against the authority.

As to Persons Protected by the Public Authorities Protection Act 1893, see Halsbury (Hailsham Edn), Vol 26, pp 290293, para 610; and for Cases, see Digest, Vol 38, pp 102106, Nos 732760.

Cases referred to

Greenwell v Howell [1900] 1 QB 535; 38 Digest 105, 751, 69 LJQB 461, 82 LT 183.

Freeborn v Leeming [1926] 1 KB 160; 38 Digest 130, 955, 95 LJKB 114, 134 LT 117.

Venn v Tedesco [1926] 2 KB 227; 36 Digest 131, 871, 95 LJKB 866, 135 LT 108.

Tilling (T) Ltd v Dick Kerr & Co [1905] 1 KB 562; 38 Digest 103, 737, 74 LJKB 359, 92 LT 731.

Introduction

Preliminary point of law ordered to be tried before the trial of the action. The facts and the statement of the point of law fully appear in the judgment.

S H Noakes for the plaintiff (respondent).

H C Dickens for the first defendant (applicant).

A A Pereira for the second defendant (applicant).

5 October 1939. The following judgment was delivered.

ATKINSON J. This is an action brought by an infant, Evelyn Muriel Nelson, by her next friend, claiming damages for personal injury. There are two defendants and they were both assistant medical officers employed at the West Middlesex County Hospital. The allegation is that they, or one of them, conducted an operation upon the infant plaintiff negligently, causing her some form of injury. The operation was apparently the removal of the tonsils, nothing very important perhaps in itself, but it was said that a gag, which was far too hot, was put in the childs mouth, which caused a serious burn on her face and left a scar which will be permanent. The defendants deny negligence, and among the defences raised was one claiming the benefit of the Public Authorities Protection Act. The action was not brought for more than six months after the alleged negligence and the defendants claim to be entitled to the benefit of that Act which bars all actions commenced more than six months after the accident complained of.

It was admitted that the West Middlesex County Hospital, where the operation was performed, had been transferred to the Middlesex County Council by the Poor Law Guardians in 1930, under the Local Government Act and that ultimately, with the sanction of the Ministry of Health, the hospital was appropriated for public health purposes, and that the council was empowered by the Local Government Act 1888, as amended by the Act of 1929, to provide hospitals for that purpose. It was admitted that the hospital was being still maintained at the time of the alleged negligence. It was also admitted that the two defendants were assistant medical officers receiving a salary of £400 per annum each

Page 32 of [1939] 4 All ER 30

from the authorities, but there was one fact which had not been admitted and that was that the operation was being performed in pursuance of their duties as servants or agents of a public authority. Defendants to-day tendered certain evidence to deal with that point. It did not seem to me that apart from consent I had any power to deal with disputed questions of fact, but ultimately counsel for the plaintiff very wisely, and I think very properly, agreed to the calling of this evidence and said that, if that evidence satisfied him on the points which he required to be elucidated, he would be content. The evidence was called and he was satisfied, and the matter then continued on the basis that that fourth fact which the plaintiff had been called upon to admit was admitted.

The matter comes before me in this way, that the point raised had been ordered to be set down for trial as a preliminary point, because if the defendants were right about it, it looked as if the action would be finally disposed of without all the expenses of a trial. The relevant words are contained in the Public Authorities Protection Act 1893, s 1:

Where, after the commencement of this Act, any action, prosecution, or other proceeding is commenced in the United Kingdom against any person for any act done in pursuance, or execution, or intended execution of any Act of Parliament, or of any public duty or authority, or in respect of any alleged neglect or default in the execution of any such Act, duty, or authority …

certain provisions shall have effect, the relevant one being that no action shall lie unless it is commenced within six months of the neglect complained of. The defendants claim to be entitled to the benefit of that provision, but the plaintiff denies this. It is curious that the precise point never seems to have been argued before. It has been recognised, I think, as law for a long time that if a public duty, or an act done in pursuance of a public authority, is being carried out by a public authority through some servant or agent, that servant or agent has the same right to the benefit of this section as the public authority would have. That certainly, I think, has been recognised as the law for some time. It was treated as good law in Greenwell v Howell. I think common sense would indicate that that must be the position. Every public authority has to act by an agent or delegate or servant, and it would be idle merely to protect the public authority itself if the party complaining could bring an action against the actual person who had performed the act complained of. I do not gather that it is challenged in this case that that as a general principle is undoubted law; but it is said that it is equally clear law that local authorities or hospital authorities under a county council are not responsible in law for the negligence of their medical officers and that, therefore, as the authority could not be sued, the medical officers as individuals can. It is agreed that if the authority could be sued for the alleged act, the medical officer also could be sued. But it is said that, where you get cases of acts done by servants or agents or delegates, whatever they are, in circumstances which would not render the authority liable to any action,

Page 33 of [1939] 4 All ER 30

the person acting cannot claim the benefit of this statute. That, I think, would be quite an interesting point to discuss, and I do not know that one might not have been disposed to give some weight to that argument if it were not that the contrary seems to have been recognised as law in quite a number of cases. I need only refer to two of them, both reported in the year 1926. There is, first, Freeborn v Leeming, where a plaintiff alleged that he had been negligently treated by a medical officer in a workhouse infirmary and sued the doctor more than six months after the termination of his attendance there. The question arose there as to whether the six months started when he began to suffer from that treatment or whether the six months started from the negligence alleged. That was the only point argued and, on p 161, I find this:

It was admitted that so far as his status and position were concerned he was so entitled,

that is, to the protection of this Act. I see that Mr Edgar Dale was counsel for the plaintiff and the case went to the Divisional Court and then to the Court of Appeal, and as far as I can see nobody from first to last threw any doubt upon the soundness of that admission. Then there is the case of Venn v Tedesco. There again there was an action being brought by a widow in respect of the death of her husband, and she sued the medical officers of the Croydon Borough Hospital alleging that their negligence was responsible for his death. He had died within six months of the negligence, but she had not brought her action until long after the six months expired, and the point argued in the case was whether the time during which she could claim was governed by Lord Campbells Act, or by the Public Authorities Protection Act 1893. McCardie J, decided that she had the time given to her by Lord Campbells Act. It would have been such a simple answer in that case to say . “Well, the Act does not apply to the medical officers of health,” but in the judgment of McCardie J, I find again, at p 228:

It is conceded that the defendants are within the class of individuals covered by the Public Authorities Protection Act, 1893.

Then when I look to see who conceded it, it was Mr Neilson KC, and Mr Carthew and, knowing McCardie J, as we all do, a lawyer, if ever there was one, learned in case law and appreciative of principle, one is perfectly satisfied that he would not have accepted an admission of that kind unless he thought it right. It is very difficult to ask a court of first instance, in view of all this, to take a different view. I quite agree the matter has not been argued and made the point of a decision. It is still open to be dealt with, but when one finds that for quite a long time a certain rule has been accepted as law, it would take a great deal to convince one that it was wrong, and I am not satisfied that it is wrong. I think it is right. It seems to me that these two gentlemen were exercising what was really a public authority. It was an authority given to the Middlesex County Council to provide and conduct this hospital

Page 34 of [1939] 4 All ER 30

and to maintain medical services. Of course, they cannot do it with their own hands. The county council has not got its own hands. It has to act through other people, and this particular authority was being exercised by these two different men. It seems to me, therefore, that it is idle to say that they were not in fact acting in pursuance of a public duty or authority conferred on the Middlesex County Council. They were; they were performing this public duty or public authority, whichever you like to call it, as agents for, or as delegates for and on behalf of, the council, and I think they are entitled to the benefit of the Act. It seems to me hopeless to regard them, as I am asked to do, as independent contractors. The case relied upon for that proposition is Tilling (T) Ltd v Dick Kerr & Co, where the independent contractors were held not to be entitled to the benefit of the Act. In the judgment of Warrington J, at p 570, there is this passage:

It has been held that the protection of the Act extends to the officers of a public body and to persons acting under their direct mandate: Greenwell v. Howell; but there is no case deciding that it extends to independent contractors.

It seems to me really almost an absurdity to ask me to regard them as independent contractors. They are not; they are officers of a public body performing a public duty imposed upon the county council, a duty which can only be performed through and by individuals. I think that what was conceded in those two cases is good law; at any rate, it has been regarded as good law for so long that it must take a higher court than this to alter it. Therefore, I decide the point in favour of the defendants, and it seems to me that that finally disposes of the case and, therefore, under the rules I ought to give judgment for the defendants.

Judgment for defendants with costs as between solicitor and client.

Solicitors: Batchelor Foord & North (for the plaintiff (respondent)); Hempsons (for the first defendant (applicant)); Le Brasseur & Oakley (for the second defendant (applicant)).

W J Alderman Esq   Barrister.

Selwood v Towneley Coal & Fireclay Co Ltd

[1939] 4 All ER 34


Categories:        EMPLOYMENT; Other Employment        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        9 OCTOBER 1939        


Workmens Compensation Alternative remedies Election between two remedies Receipt of compensation Knowledge of workman Workmens Compensation Act 1925 (c 84), s 29.

The plaintiff, a surface hand employed by the defendants, met with an accident, in consequence of which he was removed to hospital, where he remained for some months. While he was there, the defendants each week sent him money, which he received knowing that they had sent it as representing half his wages and as compensation under the Workmens Compensation Act. After having received these weekly payments for some time, and, while still gravely incapacitated, he,

Page 35 of [1939] 4 All ER 34

acting under legal advice, informed the defendants that he did not wish to receive any further compensation, and shortly afterwards he made a claim at common law against them for damages for negligence causing the injuries which he had suffered and for breach of statutory duty. There was no evidence that the plaintiff at any time made a claim to receive compensation, neither was there any evidence that he knew what had caused his injuries or any of the facts which were subsequently investigated, beyond the fact that he was crushed by a tub:

Held the fact that in the present case no claim for compensation had been made by the workman was not sufficient to distinguish it from Perkins v Stevenson. Following that decision, the court therefore held that as the employer had paid compensation under the Act, he was not liable to a claim for damages at common law.

Decision of Croom-Johnson J [1939] 2 All ER 132, reversed.

Notes

In this case the Court of Appeal have held that they are bound by the decision of the Court of Appeal in Perkins v Stevenson. It will be remembered that, in Perkins v Stevenson, the whole amount of the compensation had, at the time the case was decided, been paid. In the present case it would appear that only a small part of that liability had been met, but it is held that the result is the same.

As to Alternative Remedies, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 195, 196, paras 430, 431; and for Cases, see Digest, Vol 34, pp 490492, Nos 40634071. See also Williss Workmens Compensation, 31st Edn, pp 478483.

Case referred to

Perkins v Stevenson [1939] 3 All ER 697; Digest Supp.

Appeal

Appeal by the defendants from a verdict and judgment of Croom-Johnson J, and a common jury at the Manchester Winter Assizes dated 20 March 1939, and reported [1939] 2 All ER 132, where the facts are fully stated.

F A Sellers KC and Ivan Horniman for the appellants.

D P Maxwell Fyfe KC and C N Shawcross for the respondent.

Sellers KC: There is a preliminary point. Since judgment was given in this case, Perkins v Stevenson has been decided in the Court of Appeal. That case is completely decisive of the point at issue here.

Fyfe KC: The liability of an employer, both at common law and under the Workmens Compensation Act, arises at the time of the accident. The exclusion of that liability arises when the employer is found liable to pay. All that Perkins v Stevenson decided was that, if a workman has gone so far as to make a claim, and the employer has paid, then the matter is concluded. There must, however, have been a claim. If the employer offers payments and the man accepts, there has been no claim.

F A Sellers KC and Ivan Horniman for the appellants.

D P Maxwell Fyfe KC and C N Shawcross for the respondents.

9 October 1939. The following judgments were delivered.

SLESSER LJ. In this case judgment was given against the employers of a miner who was seriously injured as the result of an accident in a colliery, the details of which it is not necessary here to discuss; but the jury in assessing the damages gave him £3,086 5s 6d, which considerable sum indicates their view of the gravity of the injuries

Page 36 of [1939] 4 All ER 34

which he had sustained. The employers, however, take on this appeal a preliminary objection, apart from other matters which they might have urged against the damages which were awarded in this case, that it was not competent for those damages to be awarded by reason of the Workmens Compensation Act 1925, s 29. Sub-s (1) of that section provides:

When the injury was caused by the personal negligence or wilful act of the employer or of some person for whose act or default the employer is responsible nothing in this Act shall affect any civil liability of the employer, but in that case the workman may, at his option, either claim compensation under this Act or take proceedings independently of this Act; but the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act. …

In the present case the judge tells us in his judgment that, whilst this unfortunate man was in hospital,

somebody on behalf of his employers, the defendants, sent money to him each week, which he apparently received in the hospital and handed over to his wife. This money he received well knowing and understanding that it was sent to him by his employers as representing half his wages based on the average of the 12 months preceding the accident, and that the money was sent to him as compensation under the Workmens Compensation Act. At some time in or about the month of July 1938, somewhere after the 22nd of that month when the plaintiff was still gravely incapacitated, he stopped taking these weekly payments and sent his wife to the colliery to say that he did not want any more compensation. That was because his solicitor told him so to do, or as he puts it, “Our solicitor informed us that we were to cease drawing this money.”

In the evidence which was given by Harold Selwood, the plaintiff, he was asked by the judge:

Did you know that these payments which you had been receiving up to then were being paid to you under the Workmens Compensation Act?

and the answer was:

“I understood so, sir.”

It is quite clear on the evidence and on the finding of the judge that this man was paid the compensation by the employers in respect of this accident and accepted the compensation upon the basis that it was compensation under the Workmens Compensation Act.

Now there has been in this court, since the decision of Croom-Johnson J, in this case, the decision in Perkins v Stevenson. In that case there was a similar claim to damages for negligence and breach of statutory duty by a man who had applied for and had been paid compensation under the Workmens Compensation Act until October 1938, by which date he had recovered from his injuries; and it was there contended that, by reason of the fact that he had so received compensation after making a claim for it, he had barred any further claim at common law in accordance with s 29 of the Act. As is pointed out by Sir Wilfrid Greene MR, at p 703, the workman in that case said:

“At the time when I made that claim and received those payments I knew nothing about my option under the sub-section, and, therefore, it cannot be said that I exercised that option at all. The first part of the sub-section, therefore, does not affect me.”

but Sir Wilfrid Greene MR, comes to the conclusion that not-

Page 37 of [1939] 4 All ER 34

withstanding that the workman did not know what the effect of his claim would be in barring his right of action at common law, yet, at the same time, the effect of the statute was to preclude him from proceeding successfully at common law. He says this at p 702:

The effect of the second limb of the sub-section is to exempt the employer from liability to pay compensation both under the Act and outside the Act.

MacKinnon LJ, at p 706, similarly says that in his opinion one of the difficulties would be this:

If the present action had been allowed to proceed and succeed and the plaintiff had been awarded damages at common law, I can think of no legal ground on which the defendants could claim to deduct from the amount of those damages the £81 they had paid to him by those weekly payments.

Finlay LJ, says:

… I think that this particular case can be decided upon the ground upon which indeed the judge below decided itthat is, on what has been called the second limb of sect. 29 (1), which is as follows: “the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act. …”

Counsel for the workman, who has said everything which it is possible to urge in this case on behalf of the workman upon this head, has pointed out to us (and it is the fact) that there is this distinction between Perkins v Stevenson, and the present case: in Perkins v Stevenson the workman had made a claim, albeit he did not know what the effect of the claim would be on his rights at common law, whereas here the employers had brought the man the payment in the first instance and he had accepted it by way of compensation. In my opinion, while that may make some distinction with regard to the first limb of s 29(1) in the sense that that section dealing with claims or taking of proceedings does not apply to the case where the employer has offered, without any claim being made, to pay compensation and the workman has received it as compensation, it does not make any difference with regard to the second limb. If the contention of counsel for the workman were correct, the employer would be made liable to pay compensation to a workman injured by accident arising out of and in the course of the employment independently and also under the Actthe very thing which this statute says shall not be done. The mere fact that instead of waiting for the claim the employer pays the money and then it is taken by the workman as compensationthe immateriality, as was decided in Perkins v Stevenson, of the fact of the claimdoes not seem to me to distinguish it from the case where a claim is first made and compensation is afterwards paid, both of them being cases where the employer has paid compensation for injury to a workman and both being cases where, having paid that compensation, it is expressly stated that he shall not be liable to any proceedings independently of this Act. I would point out in conclusion the extraordinary result that would arise if the argument on behalf of the workman were correct. An employer, who was sufficiently generous to offer the compensation before there was any claim

Page 38 of [1939] 4 All ER 34

made upon him which was subsequently received as compensation by the workman, would be liable, notwithstanding his generosity, to an action against him at common law, whereas the employer, who waited until such time as the workman made his claim and then paid, would be exempt from any such action. If that were the effect of the legislation I agree we should have to give effect to it; but, in my opinion, no such dilemma arises. As I think Finlay LJ, pointed out in the Perkins case, the language of the second limb of s 29(1) covers both the cases where there is liability to pay compensation, whether that liability is discharged by payment after a claim, or whether it is discharged before a claim and acknowledged as compensation by the workman. Of course, if the workman does not receive the money as compensation under the Workmens Compensation Act, different considerations arise. If it is presented to him as a gift and he declines to take it that is another matter. Here this workman states quite frankly that he did so receive it under the statute as compensation.

In my view, therefore, the case of Perkins v Stevenson must apply in principle to this case equally as to the case of a claim and this appeal succeeds on this point.

MACKINNON LJ. I agree. I think the principle that this court laid down in Perkins v Stevenson must apply to the facts of the present case. It is quite impossible for counsel for the workman to suggest any real distinction between the two cases. If Perkins v Stevenson was rightly decided, as I have to assume that it was, it is conclusive of the appeal in this case I agree, therefore, that the appeal should be allowed.

DU PARCQ LJ. I have come to the same conclusion. The material words of the Act are:

… the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act.

The reasoning adopted by this court in Perkins v Stevenson, I understand to be this. An employer who has paid compensation under the Act, if judgment is given against him for damages in a common law action in respect of the same accident, will thereby be rendered liable to pay compensation both independently of and also under the Act. In such circumstances a judgment for damages in a common law action will necessarily contravene the second limb of s 29(1) and, therefore, no such judgment can lawfully be given. That was, it occurs to me, clearly the ratio decidendi of Perkins v Stevenson. Counsel for the workman in this appeal was driven to argue that that case was decided in this court on the first limb of the subsection and not on the second limb. The judgments of MacKinnon and Finlay LJJ, deal entirely with that second limb and it forms a great part of the judgment of Sir Wilfrid Greene MR.

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Having said that, I only desire to add this. Speaking for myself, I am not at all sure that if I had not had the advantage of that authority I should have very readily seen that this result follows from the words of the Act of Parliament. The position here is that a workman, who did not even know or is not proved to have known that there were any facts which gave him a right to an action for damages at common law, has accepted, knowing it to be paid as compensation under the Act, a sum of money so paid. I think myself, to use the words which were used by Sir Wilfrid Greene MR, that the legislature clearly meant that the employer should not be made to pay twice over. I cannot help feeling some doubt whether the legislature has meant that, where the facts are such as I have summarisedthat is, where a workman has taken a comparatively small sum in part payment of compensationthen, even though he may be prepared to account for it or return it, he is not to be permitted to bring his action for damages at common law. I say that in justice to the judge, because I sympathise with his difficulties and I feel that I might, in the absence of the authority which is before us, have come to the same conclusion as that to which he came. I agree that that authority is conclusive, that we are bound by it, and that the appeal must be allowed.

Appeal allowed with costs.

Solicitors: Gregory Rowcliffe & Co, agents for Peace & Ellis, Wigan (for the appellants); Robinson & Bradley, agents for Oddie & Roebuck, Blackburn (for the respondent).

E Fuller Briscoe Esq   Barrister.

Griggs v Petts

[1939] 4 All ER 39


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        10 OCTOBER 1939        


Practice Costs Payment of money into court with denial of liability Money left in court until day of trial Application for leave to take money out of court Whether defendant entitled to his costs after date of payment in RSC, Ord 22, r 3.

The defendant paid sums of money into court with a denial of liability. The plaintiffs left the money in court until the case came on for hearing. They then applied for leave to take the money out in satisfaction of their claims. Leave was given and no order as to costs after the date of payment in was made. The defendant appealed, claiming that he should have been awarded costs after the date of payment in. The respondents contended that this was merely an order as to costs and that the Court of Appeal had therefore no jurisdiction in the matter:

Held (i) the order appealed was not one as to costs only, but one authorising the payment out of money in court. The Court of Appeal, therefore, had jurisdiction to entertain the appeal.

(ii) although costs are primarily a matter for the discretion of the judge, the present order was one which would cause injustice to the defendant, and was, therefore, one which the Court of Appeal had power to vary.

Page 40 of [1939] 4 All ER 39

(iii) the respondents should only have been given leave to take the money out of court on the condition that they paid the appellants costs incurred after the payment in. The case must, therefore, be sent back for trial.

Notes

This case considers again the power of the Court of Appeal to vary an order of a lower court where the only question, in effect, is one of costs. Generally speaking, costs are so much a question for the discretion of the judge at the trial that the Court of Appeal will seldom interfere, but it has the power to do so where injustice would be caused.

As to Costs where Payment in is made, see Halsbury (Hailsham Edn), Vol 26, pp 62, 63, paras 100104; and for Cases, see Digest, Practice, pp 874, 875, Nos 41574162. See also Yearly Practice of the Supreme Court 1939, p 371.

Cases referred to

Campbell (Donald) & Co v Pollak [1927] AC 732; Digest, Practice, 861, 4061, 96 LJKB 1132, 137 LT 656.

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Wagstaffe v Bentley [1902] 1 KB 124; Digest, Practice 490, 1672, 71 LJKB 55, 57, 85 LT 744.

Brown v New Empress Saloons Ltd [1937] 2 All ER 133; Digest Supp, 106 LJKB 331, 156 LT 427.

Appeal

Appeal by the defendant from a decision of Humphreys J, given at the Norwich Assizes and dated 14 February 1939.

The facts of the case are fully stated in the judgment of Slesser LJ.

Tristram Beresford KC and Gordon Alchin (for H E R Boileau) for the appellant.

Charles Doughty KC, Greer Jackson and R A B Powell for the respondents.

Beresford KC: This order should never have been made. It strikes at the whole root of the present system of paying money into court. The judge had no power to give judgment against the defendant without hearing evidence. The order should have been that the plaintiffs pay the defendants costs from after the date of the payment in.

Doughty KC: Costs are entirely a matter of discretion. This was an order as to costs, and this court has no jurisdiction to interfere with it. [Counsel referred to Wagstaffe v Bentley and Brown v New Empress Saloons].

Tristram Beresford KC and Gordon Alchin (for H E R Boileau) for the appellant.

Charles Doughty KC, Greer Jackson and R A B Powell for the respondents.

10 October 1939. The following judgments were delivered.

SLESSER LJ. In this case Lewis James Griggs and Hilda Mary Griggs sued one Charles Petts for damages for injuries sustained by reason of the negligent driving by the defendant of a motor car near Kings Lynn on 29 May 1938. The statement of claim was delivered on 17 August 1938, and contained particulars of negligence and alleged serious injuries to the two plaintiffs and gave particulars of loss. The defendant in a defence delivered on 26 October 1938, denied the negligence and said that the accident was caused by a skid and that he could not by the exercise of reasonable care have foreseen or prevented the skid.

Page 41 of [1939] 4 All ER 39

He also refused to admit that the plaintiffs had suffered damages. Then on 12 January 1939, by notice served upon the plaintiffs the defendant stated that he had paid into court £700, apportioned as to £100 to satisfy the plaintiff Lewis James Griggs claim and as to £600 to satisfy the claim of Hilda Mary Griggs, but denying liability. In the ordinary course of events the trial would have taken place at the assizes at Norwich but the actual trial in fact was postponed and took place upon 14 February 1939, having been postponed from Commission Day, 25 January 1939. The case then came on before Humphrey J, and, according to the shorthand note, counsel for the plaintiff then stated that his Lordship would not be troubled with the case, that he would take out the money which was in court, and asked for the usual order. That was a reference to RSC, Ord 22, r 3, which provides that if the whole money in court is not taken out under r 2that is within 7 days of payment inthe money remaining in court shall not be paid out except in satisfaction of the claim in respect of which it was paid in and in pursuance of an order of the court which may be made at any time before, at, or after trial. Counsel went on to say: that the costs were subject to the judges discretion. Discussion then took place between the judge, and counsel on each side, and, as I read it, it is quite clear to my mind that counsel for the defendant was raising quite specifically the point that, so far as the costs were concerned, he was entitled, to quote counsels own words, “to apply to your Lordship to give me the costs from the date of payment in, to be taxed. I am going to ask your Lordship to make that order here.” It was on that basis and that basis only that counsel for the defendant took no objection to the judge making an order under RSC, Ord 22, r 3, as I have indicated; but in fact the judge drew up the order in such a form that it did not give to the defendant that for which counsel had asked. The order as drawn up read thus:

It is this day adjudged that the male plaintiff recover against the defendant £100 and the female plaintiff recover from the defendant £600 and costs to be taxed up to the date of payment in, thereafter no order as to costs.

From that order the defendant appeals and he asks either that the trial between the parties should continue or that there should be a new trial, or, alternatively, that an order be made by this court giving him the costs after payment in. The first objection that counsel for the plaintiff takes to the argument of counsel for the defendant is this. He says that this court has no jurisdiction; he relies upon the well-known judgment in Campbell v Pollak and on the statutory provisions which say, by the Supreme Court of Judicature (Consolidation) Act 1925, s 31(1)(h), that no appeal shall lie without the leave of the court in a case as to costs only which are left by law to the discretion of the court, and he also relies on the rules made thereunder giving the court such discretion. In my view the order here appealed was not an order as to costs only which by law are left in the discretion of the judge.

Page 42 of [1939] 4 All ER 39

The order which was sought by counsel for the plaintiff in the court below was an order of the judge authorising money which had been paid into court and had remained there more than 7 days to be paid out, and that is the order of which complaint is made in the present case. It is not an order as to costs only and, therefore, does not, in my opinion, fall within the ambit of the section which I have just read, s 31 of the Act of 1925, nor within the Rules of the Supreme Court dealing with discretion as to costs.

That being so, this question appears to me to arise, that this is a case where prima facie the judge has a discretion as the rule indicates, but that discretion is subject to appeal, and (as has recently been pointed out by Lord Atkin in the case of Evans v Bartlam, at p 480, it is a mistake to think that the Court of Appeal has no power to interfere with the exercise of that discretion unless they think he acted upon some wrong principle of law. Lord Atkin points out that while the Court of Appeal normally will not interfere with the exercise of the judges discretion except on grounds of law, yet, if it sees that on other grounds the decision will result in injustice being done, it has both the power and the duty to remedy it. Then the question is this: is this order which I have read saying that no order should be made as to costs, one which would cause injustice to be done? In my opinion it would. The costs which the defendant has incurred after the payment in, which may be very great in certain cases, in other cases may be smallthat is a matter for the taxing masterare costs which he need not have incurred had the money paid in been taken out before he incurred those expenses. They seem to me to be expenses wholly attributable to the failure of the plaintiffs to take out the money at an earlier date, or to apply to the court, if the time were over 7 days, for leave to take out those moneys which, as RSC, Ord 22, r 3, provides, is an application which may be made at any time before, at or after the trial. That was not done and the result is that the defendant has incurred expenses caused by the plaintiffs for which the order has given no remedy. In my view, therefore, he has suffered an injustice, the discretion of the judge in this case was wrongly exercised, and leave should only have been given upon the basis that the defendant should not have suffered the injustice of having to pay those costs.

The result of that appears to me to be that the appellant is right when he asks that this matter be now tried. As the matter stands the judge made an order for payment out to the plaintiffs which he ought not to have made. In those circumstances, that order being, in my view, an order which cannot be maintained, the case is in precisely the same position as if no order at all had been made. In those circumstances I think that that part of the notice of appeal, which asks that the action be sent back to the next Norwich Assizes for trial, is a request which ought to be complied with and that this court should order that the action be sent back to the next Norwich Assizes.

Page 43 of [1939] 4 All ER 39

MACKINNON LJ. I agree, and I do not think I need add anything.

DU PARCQ LJ. I agree, and I also do not find it necessary to add anything.

Appeal allowed with costs.

Solicitors: Kenneth Brown Baker Baker (for the appellant, defendant); Metcalfe Copeman & Pettefar (for the respondents, plaintiffs).

E Fuller Briscoe   Barrister.

Tan Ma Shwe Zin and Others v Khoo Soo Chong and Others

[1939] 4 All ER 43


Categories:        COMMONWEALTH; Commonwealth countries: CONFLICT OF LAWS        

Court:        PRIVY COUNCIL        

Lord(s):        LORD RUSSELL OF KILLOWEN, SIR GEORGE RANKIN AND MR M R JAYAKAR        

Hearing Date(s):        16, 18, 19, 22 MAY, 22 JUNE 1939        


Privy Council Rangoon Conflict of laws Succession Buddhist Chinese Buddhist domiciled in Burma Burma Laws Act (xiii of 1898), s 13.

Khoo Boon Tin, a Chinaman who was a Buddhist, died in 1906 childless, and at the date of his death he was domiciled in Burma. His widow, Tan Ma Thin, entered into possession of his property, obtained letters of administration to his estate and carried on his business, and engaged in other business. She died in 1929 possessed of considerable estate and by her will she made a number of charitable and other bequests, but made no residuary bequest and part of her property was not disposed of by her will.

In 1934 the respondent Khoo Soo Chong (a nephew of Khoo Boon Tin) instituted proceedings claiming that he was the sole heir to both his uncle and his aunt, either (1) as their adopted son, or (2) as the formers nephew, on the footing that Chinese customary law governed inheritance and succession to Chinese Buddhists in Burma, and that in any case the widow had only a limited interest in her husbands estate and had no right to dispose of it. The High Court at Rangoon, and on appeal the Division Bench, held that the respondent had failed to prove that the alleged adoption of himself was in fact made. They further held that Chinese customary law governed the succession under which the respondent was entitled to take, but the trial judge was not satisfied that under the law a childless widow had no rights in her husbands estate or in her own personal estate acquired after her husbands death:

Held The law applicable in the circumstances of this case was the Burmese Buddhist law. The Burma Laws Act (xiii of 1898) applies, upon its proper construction, to all Buddhists in Burma and not only to those to whom Buddhist law is applicable in their country of origin.

Notes

It has been said that adherence to family usages is a strong oriental habit, and it has been recognised by the reported cases that such family usages are carried beyond their country of origin by migrating families. Such matters, however, require special consideration of the particular circumstances of the case and of the character and nature of the usages of the country of origin.

As to Law to be Applied in Cases of Succession, see Halsbury (Hailsham Edn), Vol 6, pp 240246, paras 294299; and for Cases, see Digest, Vol 11, pp 362369, Nos 436491.

Page 44 of [1939] 4 All ER 43

Cases referred to

Tan Ma Shwe Zin v Tan Ma Ngwe Zin (1932) ILR 10 Ran 97; Digest Supp.

Hong Ku v Ma Thin (1881) LB Select Judgments, Vol 1, p 135.

Fone Lan v Ma Gyee (1903) 2 LBR 95.

Apana v Ma Shwe Nu (1907) 4 LBR 124.

Man Han v RMAL Firm (1926) ILR 4 Ran 110.

Ma Yin Mya v Tan Yauk Pu (1927) ILR 5 Ran 406.

Chan Pyv v Saw Sin (1928) ILR 6 Ran 623; Digest Supp.

Phan Tiyok v Lim Kyin Kauk (1930) ILR 8 Ran 57; Digest Supp.

Deedar Hossein (Rajah) v Zuhoor-Oon Nissa (Ranee) (1841) 2 Moo Ind App 441; 16 Digest 147, 475.

Rutcheputty Dutt Iha v Rajunder Narain Rae (1839) 2 Moo Ind App 132.

Surendra Nath Roy v Hiramani Barmani (1868) 12 Moo Ind App 81.

Parbati Kumari Debi v Jagadis Chunder Dhabal (1902) ILR Cal 433.

Balwant Rao v Baji Rao (1921) ILR 48 Cal 30.

Munshee Buzloor Ruheem v Shumsoon-nissa Begum (1867) 11 Moo Ind App 551.

Rahim at bae v Hadji Jussap & ors (1847) Perrys Oriental Cases 110.

Abraham v Abraham (1863) 9 Moo Ind App 199.

Jowala Baksh v Dharum Singh (1866) 10 Moo Ind App 511.

Ma Tin v Doop Raj Bavna, Chan-Toon LC on Buddhist Law, Vol 1, p 370.

Mohammad Ibrahim Rowther v Sheik Ibrahim Rowther (1922) ILR 45 Mad 308.

Mailathi Anni v Subbaraya Mudaliar (1901) ILR 24 Mad 650.

Khatubai v Mahomed Haji Abu (1922) LR 50 Ind App 108.

Abdurahim v Halimabai (1915) LR 43 Ind App 35.

Appeal

Appeal from a judgment of the High Court of Judicature at Rangoon [Roberts CJ, Leach J], dated 1 March 1937, which reversed a judgment of the same Court in its original jurisdiction [Sen J], dated 3 June 1936.

The judgment of their Lordships was delivered by Sir George Rankin.

A M Dunne KC and A P Pennell for the appellants.

W Wallach for the respondents

22 June 1939. The following judgments were delivered.

SIR GEORGE RANKIN. The suit out of which this appeal has arisen was brought on 7 March 1934, by the first respondent, Khoo Soo Chong, in the High Court at Rangoon in its original civil jurisdiction. The purpose of the suit was to establish that the plaintiff is the sole heir to the estates of his uncle, Khoo Boon Tin, and of Tan Ma Thin, this uncles widow, either (i) as their adopted son, or (ii) as the formers nephew. It has been held in the High Court, both at first instance and on appeal, that the plaintiff failed to prove that the alleged adoption was in fact made, and, though this issue has been raised again before the Board, their Lordships see no reason to disturb the concurrent findings on this point.

The facts which bear upon the plaintiffs claim as nephew may be shortly stated. His uncle, Khoo Boon Tin, was the eldest of four sons

Page 45 of [1939] 4 All ER 43

of a Chinaman who lived in Burma. The family professed the Buddhist religion, and Khoo Boon Tin married Tan Ma Thin, also a Chinese and a Buddhist. He died in 1906 childless. Of his three brothers, the second son had predeceased him leaving no children. The third, Khoo Htwa Khan, survived till 1917, and died leaving 3 sons, of whom the plaintiff is the eldest, having been born on 31 March 1905. The fourth son, Khoo Hine Htow, was alive at the time of the present suit, and gave evidence at the trial for the plaintiff. On the death of Khoo Boon Tin in 1906, his widow, Tan Ma Thin, entered into possession of his property, obtained letters of administration to his estate from the Chief Court, carried on his business, and engaged in other business. She died on 14 April 1929, having made a will dated 29 June 1927. Her estate was sworn at over two lakhs of rupees. Probate of the will was obtained from the High Court on 24 August 1929. By it she had made a number of charitable and other bequests, including a legacy of Rs2,000 to the plaintiff, but she had made no residuary bequest, and part of her property was not disposed of by her will. If the Indian Succession Act applied to her will, the charitable bequests were invalid under s 118 thereof, as the will had not been deposited in accordance with the terms of that section. On 24 November 1930, her sister, the first appellant, sued on the Original Side of the High Court for administration of her estate, claiming that the present appellantsthat is herself, her sister and her brotherwere the only heirs, and that the charitable bequests were invalid. The present plaintiff was not impleaded, and the suit proceeded against the other sister of the testatrix, her brother and her executors. The trial judge upheld the charitable bequests on the ground that the will was governed by English law and not by the Indian Succession Act, but, on appeal, Page CJ, and Cunliffe J, in Tan Ma Shwe Zin v Tan Ma Ngwe Zin, held that the law to be applied to “Chinese Buddhists” was Chinese customary law, and remanded the case. On remand, it was held by Sen J, on 11 July 1933, that the charitable bequests were valid and that each of the present appellants was entitled to one-third of the property not disposed of by the will.

Thereafter, on 7 March 1934, some 28 years after the death of his uncle, and about 5 years after the death of his aunt, the respondent by his plaint in the present suit claimed that he was sole heir to both, on the footing that Chinese customary law governed inheritance and succession to Chinese Buddhists in Burma, and that in any case the widow had only a limited interest in her husbands estate, and had no right to dispose of it. In the High Court, both the trial judge (Sen J), and the Division Bench (Robert CJ and Leach J), on appeal from him held that Chinese customary law governed the case. The trial judge, however, was not satisfied that under that law a childless widow had no rights in her husbands estate, or in her own personal estate acquired after the death of her husband. By his decree, dated 3 June 1930, he dismissed the suit. The Division Bench, however, proceeding largely

Page 46 of [1939] 4 All ER 43

upon Jamiesons Chinese Family and Commercial Law, held, in favour of the plaintiff, that, on the death of his uncle, the plaintiff should have been adopted by the agnates, and was entitled to the inheritance, that a wife is entitled to no estate of her own, as all she brings to her husband or receives vests in her husbands family, but that, as she is entitled to be in control of the inheritance during her life, time did not run against the plaintiff till the death of Tan Ma Thin in 1929. The result of this decision was an order that an account be taken to ascertain that to which the plaintiff was entitled, with a direction that the only property to be excluded as property of Tan Ma Thin to which the plaintiff was not entitled was:

… ornaments and jewellery and valuables of the like nature together with silk stuffs and all property of whatever kind as [sic] may have been given by her husband to her in his lifetime.

The plaintiff can maintain this decree only if he establishes (i) that Chinese customary law governs the succession, (ii) that under it the eldest son of the younger brother of the propositus takes in preference to his widow if he died childless, and (iii) that in her lifetime the widow is entitled to possession of the estate, so that her possession is not adverse to the nephew. By this appeal the two sisters and the brother of the widow, challenge each of these propositions.

The first question is as to the law to be applied by the High Court at Rangoon to determine the person or persons entitled to succeed to the property in Burma of a Chinaman who was a Buddhist and who was domiciled in Burma at the date of his death. This question depends upon the true construction and effect of the Burma Laws Act (No 13 of 1898), s 13, which provides as follows:

(1) Where in any suit or other proceeding in Burma it is necessary for the court to decide any question regarding succession, inheritance, marriage or caste, or any religious usage or institution, (a) the Buddhist law in cases where the parties are Buddhists. (b) the Muhammadan law in cases where the parties are Muhammadans and (c) the Hindu law in the cases where the parties are Hindus, shall form the rule of decision, except in so far as such law has by enactment been altered or abolished or is opposed to any custom having the force of law. (2) Subject to the provisions of subsect. (1) and of any other enactment for the time being in force, all questions arising in civil cases instituted in the courts of Rangoon shall be dealt with and determined according to the law for the time being administered by the High Court of Judicature at Fort William in Bengal in the exercise of its ordinary original civil jurisdiction. (3) In cases not provided for by subsect. (1) or subsect. (2), or by any other enactment for the time being in force, the decision shall be according to justice, equity and good conscience.

This section is in similar terms to those of ss 6 and 7 of the Act No 7 of 1872, ss 4 and 5 of the Act No 17 of 1875, and s 4 of the Act No 11 of 1889. These enactments introduced into Burma a distinction which arose in Bengal as regards the law applied to Indians (i) throughout the province by the companys courts and (ii) within the town of Calcutta by the Supreme Court. Sub-ss (1) and (3) of s 13 above set forth correspond to the provision first made by Warren Hastings in 1772, later incorporated in s 15 of Regulation IV of 1793, and now to be found in the Bengal, Agra and Assam Civil Courts Act,

Page 47 of [1939] 4 All ER 43

1887, s 37. This prescribed the law to be applied by the civil courts throughout the province of Bengal. It had special reference to what may be called family law and religious institutions, leaving other matters to the general principles of justice. It contemplated two classes onlynamely, Mahomedans and Hindus. In applying it to Burma, the Indian legislature put Buddhists on the same footing as Mahomedans and Hindus, and “the Buddhist law” on the same level as the Mahomedan and Hindu laws. It introduced at the same time an express saving for custom which the Bengal enactments had never contained. Sub-s (2) above cited points to the provision made by the East India Company Act 1780, s 17, whereby jurisdiction within Calcutta was given or confirmed to the Supreme Court over Indians, but the law of England, which would otherwise have been the general rule of decision applied by the court within Calcutta, was excluded in favour of the Hindu or Mahomedan law so far as regards the matters mentioned in the section. This provision, when re-enacted in 1915 in the Government of India Act 1915, s 112, was generalised, and is not now limited by any specific reference to particular races or religions. It was never at any time confined to family and religious matters. It included “all matters of contract and dealing between party and party.”

That these two different methods should have existed side by side for so long and should from 1872 have been applied to Burma is a remarkable fact, only in part explained by the consideration that over a wide field express legislation has in the interval superseded both, statutory codes like the Indian Contract Act and the Transfer of Property Act having provided for many matters a law common to all races and religions. As the present suit was instituted in the High Court, if not concluded by the provisions of sub-s (1), it will fall to be decided, if possible, under sub-s (2).

In the application of s 13(1) above cited, difficulty has arisen out of the immigration into Burma of Chinamen some of whom profess the Buddhist faith. It does not appear that there is any Chinese form of Buddhist law, and, as regards succession and inheritance, the Chinaman who is a Buddhist is in China governed by customs or laws which are not connected with the religious beliefs of Buddhists and are applied equally to Chinamen who are not Buddhists. This is referred to as Chinese customary law, though it would seem that in or about 1930 a new code was introduced in China, and that parts of the “customary law” have from of old been codified. For a number of years the courts in Burma have been in doubt as to the effect to be given to sub-s (1) in these circumstances. In 1881, the difficulty was noticed by Sir John Jardine in Hong Ku v Ma Thin, at p 144:

We all know that the courts apply different systems of both Hindu and Mahomedan law to people belonging to different races, countries or sects. I doubt, therefore, whether it is obligatory on our courts here to apply the Burman Buddhist law to Buddhists from Ceylon or China.

In Fone Lan v Ma Gyee, Sir Charles Fox considered that by the

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words “Mahomedan law” and “Hindu law” the legislature meant “the laws applicable to such Mahomedan and Hindu parties, whencesoever such laws may be derived,” and that:

… the terms Buddhist law in the section must be read in the same waynamely, as meaning the law of succession, inheritance, marriage, etc., applicable to the Buddhist parties in the case. The personal law is left to all who are exempted from the operation of the Indian Succession Act.

Accordingly, he applied the chinese customary law to the claim of the plaintiff to be an adopted daughter and to succeed to the estate of a Chinese Buddhist. This view was followed in a considerable number of cases, though it had been dissented from in Apana v Ma Shwe Nu. In Ma Hans case, Chari J, considered that Chinese customary law had been applied as equity under sub-s (3). He doubted the equity of this, but agreed that Burmese Buddhist law should not be held applicable, and said, at p 114:

The provision of the Burma Laws Act that Buddhist law shall apply in cases where the parties are Buddhist presupposes the existence of a Buddhist law applicable to the particular class of Buddhist before the court.

In Ma Yin Mya v Tan Yauk Pu, Maung Ba J, referred to a full bench the question of the law to be applied to marriages in Burma between Chinese Buddhists. The question seems to have related to the form or ceremonial of marriage, and the discussion was to some extent clogged with questions as to mixed marriages between Chinamen and Burmese women. It was held that the Burmese Buddhist law was applicable as the lex loci contractus, and that to escape from it a Chinaman must prove a custom contrary thereto. Thereafter the Division Bench which dealt with Man Hans case on appeal applied Burmese Buddhist law to the question whether or not a judgment creditor of a Chinese Buddhist could levy execution on the wifes share of their joint property.

In Chan Pyv v Saw Sin, Pratt J, regarded the full bench decision as applicable to the “law of marriage” only, and not to the “law of inheritance,” and agreed with what Sir Charles Fox had said in Fone Lans case, which he regarded as settled law. Cunliffe J, disagreed with the full bench decision, but thought it binding, though only as to marriage. He appears to have considered that “Buddhist law” could not mean Burmese Buddhist law unless the meaning of the word “Buddhists” was confined to Burmese Buddhists. Thereupon, in Phan Tiyok v Lim Kyin Kauk, there was referred to a full bench the question: Does Burmese Buddhist law govern the succession to the estate of a Chinese Buddhist who was born in China but who was domiciled and died in Burma? All 5 members of the full bench answered this question in the negative, but they varied in opinion as to the law which does govern such succession. The suit in that case had been brought in the District Court of Amherst. Otter J, considered that Chinese customary law was to be applied, though a Chinese Buddhist was just as much a Buddhist as a Burmese Buddhist. Heald ACJ, and Chari J, thought that Chinese Buddhists were not Buddhists

Page 49 of [1939] 4 All ER 43

within the meaning of the section or of the exceptions to the Indian Succession Act, and that the Indian Succession Act applied to them proprio vigore. Maung Ba J, and Brown J, thought that the Chinese Buddhist was a Buddhist within the section, but that the provisions of the Indian Succession Act applied to him as a matter of justice, equity and good conscience under sub-s (3).

In 1932 as already mentioned, Tan Ma Shwe Zin v Tan Ma Ngwe Zin, the suit brought by the first appellant in the High Court to administer the estate of her sister Tan Ma Thin, came before Page CJ, and Cunliffe J. The appeal was from a judgment of Dunkley J, who had held that English law must govern the succession as a matter of justice, equity and good conscience under sub-s (3). The Division Bench did not regard itself as bound by the full bench decision in Phan Tiyoks case to apply the English law or the rules of the Indian Succession Act, as the only question referred to the full bench had been the question whether or not Burmese Buddhist law applied. Page CJ, with whom Cunliffe J, agreed, held that a Chinese Buddhist is a Buddhist within the meaning of the Burma Laws Act and the Indian Succession Act, and that the case fell accordingly within s 13(1). Applying sub-s (1), he proceeded on the ground that it was a fundamental principle of British policy that the particular habits and customs of the various communities under British rule should be recognised and respected. He continued, at p 103:

But the language in which the section is couched is unfortunate for there is no law by which all Hindus or all Mahomedans are governed, and in the strict sense of the term no Buddhist law at all. The system of law applicable to Sunni Mahomedans differs from that to which Shiah Mahomedans are subject; Hindus who follow the Bonares school are governed by the Mitakshara, those who follow the Bengal school by the Dayabhaga; while in the religious system known as Buddhism no rules of law concerning secular matters are laid down or prescribed. Bearing in mind the object that the legislature had in view, however, the meaning and effect of the expressions “Buddhist law,” “Mahomedan law,” and “Hindu law” in sect. 13, in my opinion, is plain, and sect. 13 (1) must be construed as laying down that in “any question regarding succession, inheritance, marriage or caste or any religious usage or institution” where the parties profess the Buddhist or Mahomedan or Hindu religion the rule of decision shall be the personal law that governs the community or religious denomination to which the parties belong, except in so far as their personal law in Burma “has by enactment been altered or abolished or is opposed to any custom having the force of law.” In my opinion it would be neither reasonable nor feasable to construe the section in any other sense.

This decision was regarded by both of the tribunals in India who dealt with the present case as settling the law in the sense that Chinese customary law must in Burma govern the succession to a Chinese Buddhist. Had there in fact been a settled course of judicial decision in Burma upon the question, their Lordships would have been loath to disturb it, but, from their review of the decisions, it is abundantly clear that the important question now before the Board cannot be answered upon the mere principle of stare decisis. At the highest, it may be said that there is a substantial preponderance of opinion against applying Burmese Buddhist law to the case of a Chinaman who is a Buddhist.

Page 50 of [1939] 4 All ER 43

As to the consequences of this opinionthe choice between Chinese customary law and the principles of English law or the Indian Succession Actthe decisions are not settled but conflicting. The matter must now be determined upon the words of s 13 as a question of construction.

Their Lordships are in agreement with Page CJ, that a Chinaman who is a Buddhist comes within the term “Buddhists” in s 13(1)(a), and cannot be excluded therefrom either on the ground that he is not a Burmese Buddhist or on the ground that the law which governs him in China is not a specifically Buddhist, or even a religious, law. The same is true of the word “Buddhist” in the Indian Succession Act 1865, and in the present Act of 1925. It follows from this view, as Page CJ, noticed, that sub-s (1) must be applied to such a case as the present. There would be little difficulty, were it shown that different schools of Buddhist law obtained in different places or among different peoples, in applying to Buddhist law the principle that in each case the appropriate school of law is that to which the propositus or the persons concerned owned allegiance. As regards Hindu law, indeed, this principle has never been in doubt. Ample authority for it is to be found in decisions of the Boardas regards Mahomedan law, in Deedar Hossein (Rajah) v Zuhoor-Oon Nissa (Ranee); as regards Hindu law, in Rutcheputty Dutt Iha v Rajunder Narain Rae, Surendra Nath Roy v Hiramani Barmani, Parbati Kumari Debi v Jagadis Chunder Dhabal and Balwant Rao v Baji Rao. This principle, however, does not justify the court in applying as Buddhist law a law which is not Buddhist at all, merely because it is applied generally in China to Chinamen without any special exception for Buddhists. The law which is described in the statute as “the Buddhist law” is, like the Hindu and Mahomedan law, intended to be applied by the court as a law known to the court, and administered by the court of its own skill and competence. If the phrase lex fori be used in this sense, the Buddhist law, as Sir John Jardine observed in Hong Kus case, at p 143, becomes under the Act one of several leges fori. It cannot be confounded or identified with a foreign law which has to be proved as matter of fact in each case by the appropriate evidence. It is doubtless true of the provisions made for Buddhists, Hindus and Mahomedans by the subsection, as it was of the parallel provisions for Hindus and Mahomedans previously in force in Bengal, that the general intention of the legislature is that persons coming within these classes shall be governed by their own law. That is the intention which has always been attributed to Regulation IV of 1793, and to the Civil Courts Acts which took its place. It was never, perhaps, better stated than by Sir William Jones advocating the passing of such a regulation. In Lord Teignmouths Life of Jones, it is stated as follows, at p 106:

Nothing could be more obviously just than to determine private contests according to those laws, which the parties themselves had ever considered as the rules of

Page 51 of [1939] 4 All ER 43

their conduct and engagements in civil life: nor could anything be wiser than, by a legislative Act, to assure the Hindu and Mussulman subjects of Great Britain, that the private laws which they severally hold sacred, and violation of which they would have thought the most grievous oppression, should not be suppressed by a new system, of which they could have no knowledge, and which they must have considered as imposed on them by a spirit of rigour and intolerance.

Moreover, in Munshee Buzloor Ruheem v Shumsoon-nissa Begum, this Board said; at p 614:

They can conceive nothing more likely to give just alarm to the Mahomedan community than to learn by a judicial decision that their law, the application of which has been thus secured to them, is to be over-ridden upon a question which so materially concerns their domestic relations.

The same principle is at the root of the decisions already referred to applying to Hindus and Mahomedans the school of law applicable to their particular family or sect. In the Rutcheputty case, a Hindu case, Parke B, based this construction of s 15 of Regulation IV of 1793 on the consideration that [p 167]:

… the law of succession of the Hindoos partakes greatly of their religious opinions and is part of their system.

In Deedar Hossein (Rajah) v Zuhoor-Oon Nissa (Ranee), a Mahomedan case, he said, at p 477:

Such is the natural construction of this regulation, and it accords with the just and equitable principle upon which it was founded, and gives effect to the usages of each religion, which it was evidently its object to preserve unchanged.

The principle was most succinctly stated by Sir Erskine Perry in the well-known Cutchi Memon case with reference to similar provisions in the East India Act 1797, s 13, establishing a Supreme Court at Bombay and Madras as “the principle of uti possidetis.”

However, while the policy or general purpose of the legislature in prescribing “the Buddhist law in cases where the parties are Buddhists” is not in doubt, and has full effect upon the general population of Burma, it is not open to the courts to adopt some other law for particular classes of Buddhists by reason of the fact that the prescribed method will not in such cases attain the desired result. The statute has made such exceptions to the enforcement of Buddhist law as were considered necessary, including a highly important saving as to custom, and it does not admit of being interpreted in such a sense that Buddhist law is only to be applied to Buddhists if it be the law prevailing in the country of their origin. The historical considerations to which their Lordships have alluded do not suggest that the intention of the subsection is to prescribe for each Buddhist, whatever law is found to govern him, but rather that all Buddhists shall be governed by a religious law which is deemed to be theirs as Buddhists. This assumption may be in some respects ill-founded. The influx of Chinese into Burma may not have been expected, or the relation between religion and law in China may have been imperfectly understood, in 1872, when the rule now contained in the Statute of 1898 was first introduced, or in 1865, when Buddhists were excepted from certain provisions of the Indian Succession Act.

Page 52 of [1939] 4 All ER 43

There may be difficulty and inconvenience in applying to Chinese Buddhists a law different from that which is applicable to them in China. It may therefore be that there is something here for reconsideration by the legislature. However, it is a problem de lege ferenda, and is not to be solved by interpreting the section in a sense of which it does not admit. Nor is a true construction of the section advanced by entertaining doubt whether the Buddhist law as it obtains in Burma really deserves so to be described, in view of its Indian origin and the indirectness of the influence of Buddhism thereon.

Some assistance is to be derived from the view taken by the Board in Abraham v Abraham, which was distinguished in Jowala Baksh v Dharum Singh. In the former case, before the Indian Succession Act 1865, a Hindu family converted to Christianity had no law of inheritance imposed on them by statute, and, as a matter of equity and good conscience, its members were held to be governed by the law and usages which they had either retained or adopted. It was held in the later case, however, that this reasoning did not apply to a Hindu family which had embraced Islam, because [p 537]:

… the written law of India has prescribed broadly that in questions of succession and inheritance the Hindoo law is to be applied to Hindoos and the Mahomedan law to the Mahomedans.

Hence Hindu law could not be applied to them save on proof of special usage controlling the Mahomedan law, which was not in that case forthcoming.

Their Lordships find themselves in agreement with the view which was taken by the Judicial Commissioner, Mr Burgess, in Ma Tin v Doop Raj Bavna Chan Toon, a case of a Buddhist native of Chittagong who had settled in Burma:

… Prima facie as a Buddhist deceased would come under the Buddhist law of the country at large, and the burthen of proving any special custom or usage varying the ordinary Buddhist rules of inheritance would be on the person asserting the variance.

In Fone Lans case, Sir Charles Fox cited these words, and added, at p 97:

If by the words “country at large” he meant “the province of Burma” I venture to doubt the proposition. …

Their Lordships think, however, that the proposition is well founded. As a question of construction, this view is greatly to be preferred to the view that there is really no such law as Buddhist law, but only Burmese Buddhist law, and the consequences which it entails are not less reasonable or convenient than those arrived at by applying to a Chinese Buddhist in the name of justice, equity and good conscience those English principles of succession from which the Indian Succession Act exempted Buddhists.

To what extent and on what conditions the provision as to custom may enable a Chinaman who is a Buddhist to retain the usages of his country

Page 53 of [1939] 4 All ER 43

of origin as regards matters mentioned in the subsection are questions of considerable moment upon this construction of sub-s (1). As observed by Sir Lawrence Jenkins, delivering the judgment of the Board in Mohammad Ibrahim Rowther v Sheik Ibrahim Rowther, at p 314, a case under the very similar provision of the Madras Civil Courts Act 1873 (No 3 of 1873), s 16:

In India custom plays a large part in modifying the ordinary law.

The importance of kulachar or family custom in the case of Hindus has given rise to a line of decisions by British Indian courts applicable to migrating families. Some of these have already been mentioned in this judgment, and Mailathi Anni v Subbaraya Mudaliar, may be added as an instance of migration from without into British India. There are, moreover, cases of Hindu converts to Islam where it has been held [per Lord Dunedin in Khatubai v Mahomed Haji Abu, at p 112], that Hindu law “had been engrafted as a custom on the Mahomedan law,” and the effect of migration as to these was considered by the Board in Abdurahim v Halimabai, at p 41. Such matters require special consideration of the individual facts of each case as well as of the nature and character of the laws or usages of the country of origin. The tenacity of customs of succession even under the strain of migration has been repeatedly recognised. As Sir James Colvile said in Surendra Nath Roy v Hiramani Barmani, at p 96:

An adherence to family usages is a strong Oriental habit: it is in most places not a weak one.

In the present case, it is not in dispute that the propositus Khoo Boon Tin and his wife Tan Ma Thin were Chinese Buddhists, and that, unless the plaintiff can show that the law applicable in Burma to them in questions of succession is Chinese customary law, his suit cannot succeed. Their Lordships are of opinion that the Burmese Buddhist law is the law applicable to them, and it is not contended that, according to that law, the plaintiff has any claim to be the heir of either. Their Lordships are further of opinion that, on the evidence adduced in the present case, it is not proved that, according to Chinese customary law, the plaintiff, as nephew, would be entitled, although not in fact adopted, to succeed as heir of Khoo Boon Tin in preference to the widow. No reliable expert witness was called to speak to this question, and, though the book relied on by the Division Bench may have been admissible under s 60 of the Indian Evidence Act, the conclusion drawn from its contents is drawn precariously, and from material both obscure and inadequate. The order of succession which is essential to the plaintiffs case is not established by the evidence either as matter of foreign law or as a custom, and his suit must fail. Their Lordships will humbly advise His Majesty that this appeal should be allowed, that the decree of the Division Bench should be set aside and that the decree of the trial judge, including his direction as to costs, should be restored. The

Page 54 of [1939] 4 All ER 43

plaintiff will pay the appellants costs of the appeal to the Division Bench and of this appeal.

Appeal allowed with costs.

Solicitors: Lambert & White (for the appellants); Gard, Lyell & Co (for the respondents).

T A Dillon Esq   Barrister.

Wells and Son Ltd v Sidery

[1939] 4 All ER 54


Categories:        CRIMINAL; Road Traffic        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREYS JJ        

Hearing Date(s):        4, 13 OCTOBER 1939        


Street Traffic Motor vehicle constructed to carry goods Persons not to drive for continuous period of more than five hours and one half Driver only actually driving for part of period of employment Road Traffic Act 1930 (c 43), s 19.

The appellants were road transport contractors who employed a driver for the purpose of driving a motor lorry. The activities of the driver were divided as follows. He commenced work at 7 am; from 8 am until 8.5 am he drove the lorry from the appellants premises to a wharf where the lorry was loaded without him taking part in the actual loading; from 11.30 am until 12.5 pm he drove the lorry from the wharf to a warehouse where it was unloaded from 12.5 pm until 2.10 pm, the driver again taking no part in the actual work of unloading. From 2.10 pm until 2.30 pm, the driver drove the lorry back to the appellants premises where he was immediately released from duty. The actual time of driving occupied little less than one hour, and on these facts the appellants were convicted for having permitted their driver to “drive for a continuous period of more than five hours and one half,” contrary to the road Traffic Act 1930, s 19, the magistrate including the time the driver had been standing by while the lorry was being loaded. On behalf of the appellants it was contended that the time spent by the driver in standing by was not time spent in “driving.” On behalf of the respondent it was contended that the driver was employed in “driving” within the meaning of the Road Traffic Act 1930, s 19, for a period of seven hours and one half:

Held the driver was not employed in “driving” while standing by, and therefore was not so employed for a continuous period of more than five hours and one half.

Notes

The question here concerns the method of computing the time spent in driving a motor vehicle. The Act provides that time spent on other work in connection with a vehicle or the load carried by it shall be included in the time spent in driving, but it is here held that the time during which the driver is merely standing by waiting for the loading or other work to be done by other workmen is not to be included.

As to Hours of Duty, see Halsbury (Hailsham Edn), Vol 31, pp 745, 746, para 1156; and for Cases, see Digest, Supp, Street and Aerial Traffic, Nos 232k232q.

Appeal

Appeal by way of case stated from a decision of the metropolitan magistrate, sitting at Tower Bridge Police Court, convicting the appellants of having permitted a driver to drive a goods motor vehicle for a continuous period of more than five hours and one half, contrary to

Page 55 of [1939] 4 All ER 54

the Road Traffic Act 1930, s 19(1), (4). The facts and arguments are fully set out in the judgment.

Rt Hon Sir William Jowitt KC and David Karmel for the appellants.

Valentine Holmes for the respondent.

13 October 1939. The following judgments were delivered.

HUMPHREYS J [reading the judgment of the court]. The relevant facts of this case, which is one stated by a metropolitan magistrate, are in a very narrow compass. The appellants, who are road transport contractors, were summoned for and convicted of an offence against the Road Traffic Act 1930, s 19(1)(i), in that they

on Apr. 23, 1938, at Canon Beck Road, Rotherhithe, in the county of London, did permit a person to wit W. Aimes employed by them to drive a motor vehicle, index mark and registration number X.W.5428, constructed to carry goods other than the effects of passengers for a continuous period of more than five hours and one half to wit six hours and thirty minutes.

The material words of the subsection are these:

With a view to protecting the public against the risks which arise in cases where the drivers of motor vehicles are suffering from excessive fatigue, it is hereby enacted that it shall not be lawful in the case of … (c) any motor vehicle constructed to carry goods other than the effects of passengers; for any person to drive or cause or permit any person employed by him or subject to his orders to drive(i) for any continuous period of more than five hours and one half; or (ii) for continuous periods amounting in the aggregate to more than eleven hours in any period of twenty-four hours commencing two hours after midnight; or (iii) so that the driver has not at least ten consecutive hours for rest in any period of twenty-four hours calculated from the commencement of any period of driving.

Then there follows a proviso which is not material to this case. The only question raised by the case is whether Aimes did on 23 April 1938, drive a lorry belonging to the appellants for any continuous period of more than 5½ hours. It appears from the findings in the case that Aimes was responsible for and in charge of that lorry on the day in question from 8.5 am to 2.30 pm. During that time he was “driving,” using that word in its ordinary connotation, for a total period of not more than 90 minutes. Counsel for the respondent, however, has argued that “driving” in this section is equivalent to “being employed as, and earning his wages as, the driver of the lorry,” and he relied upon the language of s 19(2). The subsection is as follows:

(2) For the purposes of this section … (b) any time spent by a driver on other work in connection with a vehicle or the load carried thereby … shall be reckoned as time spent in driving.

Now, in our opinion, it must be to a great extent a question of fact in each case whether a driver, though not actually driving, can properly be said to be spending his time on other work in connection with the vehicle or its load so that the time so spent by him in other work may be reckoned as time spent in driving. What happened in this case is described by the magistrate as set out in the case in para 4, sub-para x. The magistrate in the earlier paragraphs had stated that Aimes commenced work at 7 am and at 8 am drove the lorry which arrived at Essex wharf about 8.5 am, and then the case continues:

(x) That the said lorry and trailer were loaded at Essex wharf by the said Bennett and that the said loading continued until about 11.30 a.m. (xi) That while the

Page 56 of [1939] 4 All ER 54

said lorry and trailer were being loaded as aforesaid the said Aimes stood by, that he spent part of the time at a coffee shop in the vicinity of the wharf, that he spent the remainder of the time in the company of other drivers watching the loading or in idleness and that at no time during the said loading did he do any work in connection with the said lorry and trailer or with the load which was being put upon the said lorry and trailer. (xii) That at about 11.30 a.m. the said Aimes drove the said lorry and trailer from Essex wharf to a warehouse in Canning Town and that the journey lasted just over half an hour. (xiii) That from 12.5 p.m. until 2.10 p.m. the said lorry and trailer were being unloaded at the said warehouse, and that the said unloading was done by a warehouseman and an assistant, but the said driver was in attendance and was responsible for his lorry. (xiv) That while the said lorry and trailer were being unloaded us aforesaid the said Aimes stood by, that during part of the time the said Aimes ate his dinner at a distance from the said lorry and trailer, and that at no time during the said unloading did he do any actual work in connection with the said lorry and trailer or with the load which was being taken off the said lorry and trailer. (xv) That the said Aimes finished his work at 2.30 p.m.

Whether those statements are regarded as findings of fact or as expressions of opinion, this court is not prepared to dissent from them, and those statements appear to us to be conclusive upon the point raised in the case. It is not to be forgotten that s 19 is expressed to protect the public against the dangers which may arise if drivers are suffering from excessive fatigue, and para (i) of sub-s (1) deals with one of the ways in which excessive fatigue may be brought about, other ways indicated being the matters prohibited in paras (ii) and (iii) of that same subsection.

There is, therefore, no ground for giving a strained or unnatural meaning to the word “work” in sub-s (2)(b) so as to include watching other men at work or “eating his dinner at a distance from the lorry.” Counsel for the respondent also referred to and appeared to rely upon s 19(2). That subsection provides as follows:

For the purposes of this section(a) any two or more periods of time shall be deemed to be a continuous period unless separated by an interval of not less than half-an-hour in which the driver is able to obtain rest and refreshment.

In our opinion that provision only comes into operation when there are found to be periods of driving which in the aggregate total more than 5½ hours. In this case we find there were not. It follows that, in our judgment, the magistrate, in holding, as he appears to have done, that for the purpose of s 19 Aimes responsibility for the lorry was equivalent to spending his time on other work in connection with it, came to a wrong determination in point of law, and the question asked of us in para 9 of the case, which is, “whether, upon the above statement of facts, I came to a correct determination and decision in point of law,” must be answered in the negative. The appeal is allowed and the conviction quashed.

Appeal allowed with costs. Conviction quashed.

Solicitors: Mawby Barrie & Letts (for the appellants); The Treasury Solicitor (for the respondent).

F Honig Esq   Barrister.


Nugent v Phillips

[1939] 4 All ER 57


Categories:        TRANSPORT; Road        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREY JJ        

Hearing Date(s):        16 OCTOBER 1939        


Street Traffic Licensing of vehicles Goods vehicle used to carry horse for hire or reward Whether training of racehorses treatment in the course of trade or business Road and Rail Traffic Act 1933 (c 53), ss 1(5)(b), 9(1).

The appellant, who carried on business as a licensed racehorse trainer, held a private carriers licence in respect of a motor horse-box, which licence was subject to the condition that the horse-box would not be used to carry goods for hire or reward. The appellant had a number of racehorses in training, including a horse owned by a Mrs K, which was entered, and had been trained by the appellant, to run at Warwick races on 23 November 1938. for this purpose the horse was carried in the horse-box to and from Warwick races for the sum of £5 5s, which Mrs K agreed to pay the appellant. The appellant was charged with having unlawfully failed to comply with the condition in that he used the horse-box, being an authorised vehicle under the licence, for the carriage of goods for hire or reward contrary to the Road and Rail Traffic Act 1933, s 9(1). On behalf of the appellant it was contended that the training of racehorses is treatment within the meaning of the Road and Rail Traffic Act 1933 s 1(5)(b), which provides that the delivery or collection by a person of goods which have been or are to be subjected to a process or treatment in the course of a trade or business carried on by him shall not be deemed to constitute a carrying of goods for hire or reward; that, as the horse had been trained by the appellant immediately prior to its conveyance to Warwick races, and was to undergo further training on its return, the horse-box was being used to deliver and collect the horse in circumstances which did not constitute a carrying of goods for hire or reward. The respondent denied that the running of races by horses is treatment within the meaning of s 1(5)(b) of the Act of 1933:

Held the motor vehicle was used for hire or reward, and the horse was not the subject of a process or treatment within the meaning of s 1(5)(b) of the Act of 1933.

Notes

The case stated in the present matter is one which was stated by agreement between the parties for the purpose of deciding the question which form of licence was required in such a case. Some uncertainty has been felt upon the matter, which is set at rest by the decision herein.

As to Classes of Licences, see Halsbury (Hailsham Edn), Vol 31, pp 799, 800, para 1255; and for Case, see Digest, Supp, Street and Aerial Traffic, No 76aa.

Appeal

Appeal by way of case stated from a decision of the justices for the county of Berks, sitting at Abingdon. The facts are fully stated in the judgment.

David Karmel for the appellant.

H P J Milmo for the respondent.

16 October 1939. The following judgments were delivered.

LORD HEWART LCJ. The provisions of Part I of the Road and Rail Traffic Act 1933, are, I think, perfectly precise. By s 2(4) it is provided:

A private carriers licence (in this Part of this Act referred to as “a C licence”) shall entitle the holder thereof to use the authorised vehicles for the carriage of goods for or in connection with any trade or business carried on by him, subject

Page 58 of [1939] 4 All ER 57

to the condition that no vehicle which is for the time being an authorised vehicle shall be used for the carriage of goods for hire or reward.

In this case the justices had to deal with a private carriers “C” licence, which was subject to the conditions already named, and the justices came to the conclusion that on this occasion the vehicle so licensed “was being used for the carriage of goods for hire or reward.” They held, therefore, that an offence had been committed. The facts of the case are to the effect that the appellant, at the material time, had various racehorses in training, including a horse owned by a Mrs King. That horse had been trained by the appellant to run in a particular race at Warwick on 23 November 1938, and the case finds that:

Mrs. King instructed the appellant to send the said horse to Warwick races aforesaid by horse-box … Mrs. King agreed to pay the sum of £5 5s. to the appellant for the carriage of the said horse by horse-box to and from Warwick races aforesaid.

Accordingly the appellant caused the horse to be placed in that horse-box, and the horse-box was then driven by the person employed by the appellant to Warwick. In those circumstances it seems to me quite impossible to contend that this was not a use of that motor vehicle for hire and reward. Counsel for the appellant apparently seeks to dwell upon s 1(5)(b). That subsection states that certain things are not to be deemed to constitute a carrying of goods for hire or reward. It refers to:

the delivery or collection by a person of goods which have been, or are to be, subjected to a process or treatment in the course of a trade or business carried on by him …

The suggestion, therefore, is that we are to regard this horse, for the purposes of this section, as “goods which have been or are to be subjected to a process or treatment in the course of a trade or business carried on by” the trainer. That, I think is an argument which nobody would dream of putting forward, except for the purpose of maintaining a controversial position. I think it is a contention which answers itself and that these justices were manifestly right. I think, therefore, that this appeal ought to be dismissed.

CHARLES J. I agree.

HUMPHREYS J. I agree.

Appeal dismissed.

Solicitors: Peacock & Goddard, agents for A W Taylor Son & Corpe, Bristol (for the appellant); Treasury Solicitor (for the respondent).

Michael Marcus Esq   Barrister.


Clark v Smith

[1939] 4 All ER 59


Categories:        BANKRUPTCY        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        10, 11 OCTOBER 1939        


Bankruptcy Bankrupts business carried on by trustee in bankruptcy Guarantee against loss given by defendant Loss incurred Action by trustee to recover loss Whether action maintainable Public policy Illegal contract Consideration Bankruptcy Act 1914 (c 59), s 56(1).

J, who ran an eating-house, was adjudicated bankrupt on 13 November 1937. At the request of the defendant, the trustee in bankruptcy carried on the business, and the defendant entered into a guarantee to secure the estate against loss. The business was run at a loss, and the present action was brought by the trustee on the guarantee:

Held (i) the trustee in bankruptcy was not merely carrying on the business so far as was necessary for its beneficial winding up, and was therefore carrying it on contrary to the provisions of the Bankruptcy Act 1914, s 56(1).

(ii) this was no defence to the guarantor, as it was only a creditor who could impeach the transition.

(iii) the contract of guarantee was not void as being contrary to public policy.

(iv) there was sufficient consideration moving from the trustee to support the contract, because, if the business were carried on, a profit might be made.

(v) the guarantee was therefore enforceable, and the action succeeded.

Notes

Du Parcq LJ, has not found it possible to dissent here, but he has expressed some doubt on the view taken by the majority. He takes the view that, if it is plain that it is against the interests of the creditors to carry on the business for the purpose of its beneficial winding up, then the existence of a guarantee is of no assistance to the trustee. On the other hand, where the continuance of the business for a period may possibly be of advantage to the creditors, the existence of a guarantee may turn the scale and justify the continuance as a beneficial winding up.

As to Carrying on Business by Trustee in Bankruptcy, see Halsbury (Hailsham Edn), Vol 2, p 168, para 221; and for Cases, see Digest, Vol 4, pp 212, 213, Nos 19751979.

Cases referred to

Re Batey Ex p Emmanuel (1881) 17 ChD 35; 4 Digest 213, 1976, 50 LJCh 305, 44 LT 832.

Re Branson Ex p Trustee [1914] 2 KB 701; 5 Digest 987, 8075, 83 LJKB 1316, 110 LT 940.

Lee v Sangster (1857) 2 CBNS 1; 5 Digest 979, 8019, 26 LJCP 151, 29 LTOS 93.

Appeal

Appeal by the plaintiff from a decision of Charles J, at the Lewes Assizes dated 28 March 1939. The facts of the case and the arguments are fully set out in the judgments.

Linton Thorp KC and C J T Pensotti for the appellant.

Harold J Brown for the respondent.

11 October 1939. The following judgments were delivered.

SLESSER LJ. In this case an action was brought by Leslie Colbatch Clark, who was at all material times trustee in bankruptcy of William Thomas James, against Agnes May Smith, on a guarantee dated 12 January

Page 60 of [1939] 4 All ER 59

1938. The amount due on the guarantee everybody admits is £138 15s 3d. The material facts of the case are these. William Thomas James had an eating-house at Brighton, which was unsuccessful. On 13 November 1937, he was adjudicated bankrupt; and Clark, the plaintiff, was appointed the trustee. There was a committee of inspection, which met on 31 December 1937, and reported a loss. At that time the defendant entered into a guarantee, not the guarantee now sued upon, but an earlier guarantee, the language of which is not now material. This earlier guarantee was given not to Clark, but to the Official Receiver. It was only for a limited time, namely, until the first meeting of creditors had been held, and nothing now turns upon it.

Thereafter there was a creditors meeting; and a new guarantee was subsequently given in the following circumstances. The committee of inspection met on 9 December 1937, and the following entry appears. After some discussion the trustee stated the gross takings of the cafe for the period during which it was carried on by the Official Receiver and for the three weeks to 28 December. He estimated the charges for rent, rates, lighting, heating and other amounts. After charging this figure, the loss made during the official receivership period of trading was approximately £27. He thought that this would be made up over the Christmas period, although definite figures were not yet available. There was no doubt that the hotel would not pay its way during the winter; but it was anticipated that there would be a considerable profit during the summer. The trustee stated that an offer of £200 for the stock, furniture, fixtures and fittings had been received from E Tully. Then it appeared that if this offer were accepted, there would not be sufficient to pay the preferential creditors and there could not be any dividend to the unsecured creditors. Consequently, it was resolved that the hotel should be carried on for the present, and that the defendant should be asked to renew the guarantee which she had given to the Official Receiver. Mrs Smith agreed; and gave the guarantee which is the subject-matter of this action.

It is said, now that the guarantee is sought to be enforced, that the evidence shows that this business was being carried on contrary to the provisions of the Bankruptcy Act 1914, which provides by s 56:

The trustee may, with the permission of the committee of inspection, do all or any of the following things: (1) Carry on the business of the bankrupt, so far as may be necessary for the beneficial winding up of the same …

The judge in his judgment has come to the conclusion that the business was not being carried on by the trustee as required by that subsection. He says:

The only question is whether the conduct of the Trustee in Bankruptcy is so irregular as to force me to the conclusion that he was not carrying on the business for the beneficial winding-up of the business. I have no doubt from his own evidence that he [the trustee] was intervening for another purpose. He was involved with the defendant who came and told him over and over again that the only purpose of her guarantee was that James [the bankrupt] should be able to go on in that business, not that the estate should benefit, not that there should be a beneficial

Page 61 of [1939] 4 All ER 59

winding up of the estate. £200 was offered and the trustee in bankruptcy could have accepted it. Instead of that, I find upon the evidence that at the behest of the defendant he was in fact influenced and biased in the action which he took in carrying on this business by, as he has sworn to me, his desire to help Mr. James in his difficulties.

The evidence in my judgment amply supports the conclusion at which the judge arrived. It is not necessary, I think, here to consider that part of the history of the case which showed how the defendant orally withdrew her guarantee and then orally again renewed it. But it is clear to my mind that Clark, although he says in cross-examination that what he did was solely for the purpose of the beneficial winding up of the business, did in fact accept the guarantee and agree to carry on the business for other purposes. For instance, on p 3 of the evidence he said that the defendant was a friend of James, and that, so long as the business continued, James would be manager of it, and consequently would have a job. Then he says:

I explained to her that it was extremely improbable that it could make any profit during the winter. … The position was rather this, that I could carry on the business if I had a guarantee, and if the Committee approved. … I asked her into my private office, and she said that she wished the guarantee to remain or rather, that she wished the business to be carried on. She explained that she had seen James, and they had kept it open; and in view of the continuance of the guarantee, I was quite agreeable to that.

There are other passages which to my mind support the conclusion of the judge that this business, though no doubt in part it was carried on for what was conceived to be the ultimate benefit of the creditors, was in part carried on at the request of the defendant to assist James, and also in order that the business might go on generally.

Another reason why I have come to the conclusion that the judge was right, is afforded by Re Batey, Ex parte Emmanuel. In that case it was held:

The creditors of a bankrupt trader have no power to authorise the trustee to carry on a business of the bankrupt, except so far as may be necessary for the beneficial winding-up of the business.

In that case, as appears particularly from the judgment of Cotton LJ, at p 43, the creditors who had passed a resolution authorising the trustees to carry on the business for such further period or periods from time to time as the creditors in general meeting shall determine, had as their object “to obtain a profit by carrying on the business during the thirsty season of the year.” Cotton LJ, continues:

As the Act does not give any power to use the assets in such a speculation, it is our duty to say that the resolutions are ultra vires, and that they cannot stand.

James LJ, at p 39, having quoted the resolution which I have just mentioned, went on to say that that had the effect of giving themselves

power to determine from time to time indefinitely how long the business should be carried on.

When the language of the resolution in the present case of 9 December 1937, which I have already referred to, is read, that also appears to be a

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resolution involving that the committee of inspection will decide from time to time how long the business is to be carried on. It is not to be carried on for such time as would be necessary for the purpose of a beneficial winding upit is to be carried on for the present. I therefore come to the conclusion that it is impossible to disturb the finding of the judge, that the conduct of the trustee in carrying on this business was contrary to the Bankruptcy Act 1914, s 56(1).

That being so, it is argued that as a consequence of that, this guarantee cannot be enforced, being, as the judge appears to find, a guarantee based upon an illegal act. I find myself unable to agree with the judge in that conclusion. As I say, I will assume that this business was carried on otherwise than in accordance with the provisions of the Bankruptcy Act 1914, s 56(1). What is the consequence of that? The legal effects, not of this particular subsection perhaps so much as of the second subsection, have been considered in two cases, one of which turns upon an earlier Act, which seemed to indicate that any objection to the carrying on of the business of the bankrupt, except so far as may be necessary for the beneficial winding up of the same, could only be taken to be on the basis that the provision for the protection of the estate had been offended against. The actual decision is based upon sub-s (2), or similar words included in the Act of 1883, which are that the trustee must obtain the sanction of the committee of inspection “before bringing instituting or defending legal proceedings.” In Re Branson, it was decided that those provisions were for the protection of the estate as between the trustee and the estate, and afforded no defence to any proceeding which the trustee, without such sanction, might institute against other parties. A decision similar to Re Branson is Lee v Sangster. That was a case where, under the Bankruptcy Law Consolidation Act 1849, s 153, a party had been summoned, and there was reliance placed upon an earlier Bankruptcy Act, which provided that the assignees could only, with the leave of the court first obtained, upon application to such court but not otherwise, “commence, prosecute or defend any action at law.” Williams J, in giving the judgment of the court, said, at p 6:

It was contended that the right of the assignees to sue, being a thing created by the Act alone, must be taken with the qualification annexed to it by the Act, namely, that they shall not have the right to sue, unless they shall have obtained the leave of the Court of Bankruptcy. … On consideration, however, we are satisfied that the statute intended to make the obtaining of the requisite leave a matter only between the assignees and the Court of Bankruptcy, and not at all between the assignees and the other party to the suit.

Finally on this head the case to which I have already referred, Ex p Emmanuel, appears to me to indicate that it is only upon motion of the persons interested in the estate that resolutions which offend against s 56(1) (being, as I have said, for the benefit of the estate) can be impeached and held to be invalid. In other words, as against the world, the carrying on of the business by the trustee can create

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legal relations between him and third parties, either as debtor or creditor, incurred in the carrying on of the business, notwithstanding that it is carried on otherwise than solely for the beneficial winding up of the estate.

The case seems to me to be entirely different from that of a company, which, as a corporation, has power under its articles, memorandum or otherwise, to do certain acts only, purports to make ultra vires contracts. The reference to ultra vires by Cotton LJ, in Ex p Emmanuel seems to me only to refer to matters as between persons interested in the disposal of the estate.

In this particular case what has happened is that this guarantee, as I read it, has been given without qualification by the defendant “in consideration of your allowing James to carry on the business of the eating-house.” I cannot see why those words, being entirely unqualified, can here be said to constitute a guarantee which is not enforceable, by reason of the mere fact that some creditor might have complained of the continued carrying on of the business. The business was continued to be carried on. The loss contemplated in the guarantee was incurred. All the conditions of the guarantee seem to me to have been satisfied, and the liability to be completed. I do not think it can be said that it is void on any basis of public policy, because the trustee is, in my opinion, competent to carry on the business and create legal liabilities as between himself and persons with whom he carries on business, whether he does or does not do so for the purpose of the beneficial winding up of the estate.

Once that conclusion is arrived at, which, I think, is supported by the authorities, it follows that it cannot be said that this carrying on of the business is illegal in the sense in which the judge has used the word; nor that it is contrary to public policy. Nor do I think can it be said that there was no consideration moving from the trustee in this matter. It follows, therefore, if the guarantee had not been given and there had been a failure to carry on the business, the defendant would not have achieved her object of keeping James in possession of his eating-house. It follows equally, by reason of this guarantee, that James did go on with his eating-house. There was a chance that the trustee might have made profits by the continued conduct of that eating-house. Consequently, there is consideration supporting this guarantee in both parties. In my opinion the judge was wrong in his conclusion that it was unenforceable; and I think that there should be judgment on the guarantee against the defendant for £138 15s 3d.

MACKINNON LJ. I agree. Upon the terms of the written document of 12 January 1938, signed by the defendant and addressed to Clark as trustee in bankruptcy of the estate of William Thomas James, there is no doubt whatever that she was liable for this £138. But it is suggested that Clark cannot enforce that patent liability of the defendant

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because this agreement is in some way tainted with illegality. It is a guarantee addressed to Clark as trustee of the estate of James, as he was. A trustee of the estate, under s 56, may carry on the business of the bankrupt so far as may be necessary for the beneficial winding up of the estate. By s 79 it is provided:

(1) Subject to the provisions of this Act, the trustees shall, in the administration of the property of the bankrupt … have regard to any directions that may be given by resolution of the creditors at any general meeting, or by the committee of inspection …

On 31 December the committee of inspection decided that this business should be carried on, if the defendant would renew the guarantee she had already given to the Official Receiver. There cannot be the slightest doubt that the committee of inspection thought that was within the powers of Clark as trustee; and that Clark, as trustee, thought it was within his powers under s 56. I think they made a mistake about the law with regard to that. In view of the decision in Ex p Emmanuel, if some creditor or some dissatisfied member of the committee of inspection had intervened and had applied to the court saying: “This is not really within s 56; you are carrying it on indefinitely and not for the purposes of the beneficial winding up of the estate,” I think, on the authority of Ex p Emmanuel, that the creditor would probably have succeeded.

That means that Clark and the committee of inspection were making a venial, understandable and intelligible mistake as to a very obscure branch of the law; but there is no turpitude in it, there is no illegality in it. I am at a loss to understand why, because, as between creditors, one of them might object to the carrying on of this business, that should afford the defendant any defence whatever on the plain contract into which she had entered. If authority be needed for that proposition, I think it is supplied by Re Branson. In both of those cases a person who had contracted with the trustee sought to set up in denial of his liability that there was some irregularity in the action of the trustee in exercising his powers under the Bankruptcy Act. In one case he had not the leave of the court to bring the action, and in the other case the position was somewhat similar. The courts there decided that, as between the trustee and the creditors, it may be that he had acted irregularly, but that does not afford any defence to you who have made, a clear contract with the trustee. It seems to me that, if this business having been carried on in this way, a customer who had eaten a pork chop in the restaurant refused to pay, and when sued in the county court, said that he need not pay because Clark was not properly authorised under the Bankruptcy Act 1914, s 56, to carry on the business and supply him with the chop, quite clearly the customer would have had no defence. Equally I think the defendant has no defence here to her clear liability upon the terms of the written contract into which she entered. That being so, I agree with my Lord that this appeal should succeed.

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DU PARCQ LJ. I do not dissent from the proposed order; but I am bound to say that I entertain much more doubt about the matter than the other members of the court; and I think that I ought to explain briefly why I doubt, and why I do not dissent.

In this case I have no doubt at all that the judge was entitled to find that the trustee in bankruptcy was not carrying on the business of the bankrupt in conditions which justified his carrying it on according to the terms of s 56. S 56(1) empowers the trustee, with the permission of the committee of inspection, to carry on the business of the bankrupt “so far as may be necessary for the beneficial winding up of the same.” I agree with what has been said already, that if a creditor had come to the court to object, the resolution passed by the committee of inspection would have been rescinded. It seems to me plain enough that the committee of inspection were really going beyond their authority; and it follows that the trustee in bankruptcy went beyond his authority. As I understand the matter, creditors are not entitled to indulge in the speculation of carrying on the bankrupts business in the hope that, if they carry it on for some time, waiting perhaps for conditions to improve, it may be possible to carry it on at a profit. Everybody knows that, if you do carry on a business hoping to make a profit, you run the risk of carrying it on at a loss. It was not the policy of the Bankruptcy Act that insolvent businesses of bankrupts should be carried on in an attempt to get them into a more prosperous condition.

I think that Ex p Emmanuel puts the matter plainly, and makes it really beyond question in this case that, to say the least of it, Clark would have had a very great difficulty in justifying to the court what he had done. So far I think we are all agreed; and I feel no doubt about it.

Further, I have no doubt about this. It is very difficult sometimes, as Brett LJ, said in Ex p Emmanuel, to decide in what circumstances the court can say that creditors have exceeded their authority. That, said Brett LJ, was, to his mind, a very difficult matter. Supposing that the committee of inspection and the trustee act bona fide, and think they are carrying on the business in a manner necessary for the beneficial winding-up of the business, I have no doubt at all that, however wrong they may be, they will be liable for any obligations they incur. It would be absurd, and indeed would lead to fantastic consequences, as MacKinnon LJ, has just pointed out, to say that, if anybody enters into a contract, he must ascertain whether the committee or trustee were right in the view they entertained, that they were carrying on the business within their powers. I think so far as that point goes, that the case of In re Branson (to which I need not refer in any detail for the moment) is an authority for saying that the question whether the trustee and the committee of inspection are right or not is one between them and the creditors. Whenever that

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very difficult question has to be considered, the court must decide it. This court cannot possibly say that obligations entered into by a trustee in bankruptcy, doing what he believes he has power to do, though mistakenly, need not be carried out by himI put that side of the case because there may well be a case where the whole of the facts would be known to the creditorsor, conversely, that he may not carry out his obligations to a person who, knowing the facts, became a creditor.

My difficulty arises on the other point which was taken by counsel for the respondent as to the legality of this matter. Suppose, to take facts similar to this in Re Branson, one would have a case where the trustee in bankruptcy had said: “I am not entitled I know to bring a legal proceeding relating to the property of the bankrupt unless I get the permission of the committee of inspection, and I know perfectly well that the committee of inspection never would permit it, but if you a third party are prepared to say that if I do bring these proceedings without permission you will indemnify me in respect of the costs, then I will bring them.” I feel grave doubtI do not put it any higheras to whether in such a case that contract of indemnity could be enforced, because it would be clear that the consideration, to the knowledge of both parties, was the doing of something which the trustee had certainly no authority, and perhaps no right to do; and which, I think one may add, it was contrary to the policy of the law that he should do. I do not express any final opinion about that; but I feel a great doubt whether in such a case the indemnity could be enforced.

When one considers the facts of the present case, I am strongly inclined to think that they establish clearly that the trustee in bankruptcy and his committee knew quite well that what they were doing in carrying on the business of the bankrupt was not necessarily being done for the beneficial winding up of the same when they agreed to do it. Speaking of the trustee in bankruptcy, I think that, if the trustee in bankruptcy agreed to do it for a consideration, then that contract could not be enforced. I say that because it does seem to me to be clear enough that, although no doubt in a sense it is a domestic matter between the creditors and the trustee in bankruptcy, still the plain policy of the Act is that these insolvent businesses should not be carried on. If a man knows that he has no power to do something that he is doing, something which he is not permitted to so, something which I think I may say he is forbidden by law to do, and does it for a consideration, then that consideration may well be said to be an illegal consideration.

In this case the judge came to the conclusion, as I understand his judgment, that the trustee in bankruptcy was, as he puts it, intervening in the business not for the beneficial winding up of the same, but for another purpose altogether. The judge says:

He was involved with Mrs. Smith [that is the defendant] who came and told him over and over again that the only purpose of her guarantee was that James should be able to go on in that business, not that the estate should benefit, not that there should be a beneficial winding up of the estate. £200 was offered and

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the trustee in bankruptcy could have accepted it. Instead of that, I find upon the evidence that, at the behest of the defendant, he was in fact influenced and biased in the action which he took in carrying on this business by, as he has sworn to me, his desire to help James in his difficulties.

It is quite true, of course, that on the face of it, this guarantee is a perfectly lawful document: but there is, I think, no doubt at all that an agreement, which is on the face of it perfectly legal in its terms, will be void if it is made for an illegal purpose. If I were completely satisfied that there was really no doubt that the purpose for which this guarantee was given was an illegal purpose, then I should dissent and say that I thought the appeal ought to be dismissed. That is a point about which I have felt considerable doubt. I think the carrying on of the business merely to make a profit, coupled with a desire to oblige the defendant or James, probably would beit is not necessary that I should in these circumstances express a final opinionan illegal purpose. I am impressed by the findings of the judge: but it is a serious thing and a strong thing to say that people who may have been doing what they thought right, and may have been honestly endeavouring to carry out the Act, have been guilty of illegality; and I am necessarily impressed by the strong view taken by MacKinnon LJ, that there is nothing at all here to show that these people were not honestly trying to carry out the terms of the section. It may be that they misinterpreted it, and misunderstood their duties. It may be possible that they thought the best thing they could do for the beneficial winding up of the estate was to carry on the business a little longer. I am not prepared to say that they are not entitled in those circumstances to take into account the fact that a guarantee had been given against loss. In other words, there is a clear distinction between saying: “You are doing something which you ought not to do, because you have a guarantee,” and, on the other hand, saying: “It may be a doubtful and delicate question whether this is the best thing to do, but the guarantee thrown into the scale just tilts it in favour of thinking it is the right thing to do for the beneficial winding up of the estate.”

Having those doubts and reservations in my mind, which I have thought it proper to express, for the reasons I have given I do not dissent; and I am prepared to agree that the appeal should be allowed.

Appeal allowed with costs. Leave to enforce judgment given under the Courts (Emergency Powers) Act 1939, s 1.

Solicitors: Lovell Son & Pitfield, agents for F J P Veale, Brighton (for the appellant); Gordon Gardiner Carpenter & Co, agents for F H Carpenter, Brighton (for the respondent).

E Fuller Briscoe Esq   Barrister.


Crane v Hegeman-Harris Co Inc

[1939] 4 All ER 68


Categories:        CONTRACT: ADMINISTRATION OF JUSTICE; Arbitration        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        4, 5 OCTOBER 1939        


Mistake Rectification Agreement containing arbitration clause Parties proceeding to arbitration and award made Claim for rectification of agreement in action to enforce award Estoppel.

By a building agreement dated 16 July 1935, the defendants agreed to construct for the EC Co Ltd, the EC exhibition buildings. The contract price was to be divided into two clear partsnamely, (a) the actual cost of labour and materials, and (b) a fixed sum of £140,000, which was to cover and include the defendants profit, the cost and expenses of plans, specifications and architectural drawings, the salaries of architect and engineer, and general overhead expenses. It was also provided that the total liability of the EC Co Ltd, should not exceed £1,209,250, and that, should the total cost exceed that amount, the defendants should assume responsibility for, and pay for, any such excess, called the over-run. It was agreed that the sum of £140,000 should be divided into two equal parts, and that the first £70,000 should represent the defendants expenses and the second £70,000 the job profit, subject, however, to the over-run. By an agreement, dated 23 October 1935, made between the plaintiff and the defendants, and expressed to be supplemental to the building agreement of 16 July 1935, the plaintiff was to be the architect for the job, and was to be paid a minimum fee of £13,000, and “such a further amount (not exceeding £20,000 in all) as shall be equal to two equal seventh parts of the amount which the company shall under the terms of the building agreement” receive and retain “in respect of the fixed fee of £140,000 payable thereunder to the company.” No sum under this provision was to be payable to the architect until the company, the defendants, had “received and retained £70,000 on account of the fixed fee payable to them but as and when any sum in excess of £70,000 shall be received and retained by the company in respect of the fixed fee the company shall pay over to the architect an amount equal to two equal seventh parts thereof.” A dispute arose over the meaning of the words “and retain,” the defendants contending that it had been part of the bargain between the parties that from the £70,000 in respect of which the plaintiff was to get his two-sevenths there must first be deducted any sum which the defendants had to pay by way of over-run. On a submission to arbitration being made, the arbitrator decided against the construction contended for by the defendants. The plaintiff brought an action to enforce the arbitrators award, and the defendants then contended that the submission was no real submission, because it was based upon a fundamental mistake of fact and did not express the real agreement between the parties. They also counterclaimed for rectification of the agreement. The plaintiff contended that the defendants were not entitled to put forward the plea after a submission to an arbitration in which an award had been made:

Held (i) the claim for rectification was outside the actual submission that was before the arbitrator and the question could not have been raised before him without some further agreement by both parties.

(ii) the respondents were not estopped from raising the issue of rectification by reason of their having proceeded with the issue before the arbitrator until its conclusion as rectification of the agreement was an issue outside the jurisdiction of the arbitrator.

Decision of Simonds J ([1939] 1 All ER 662) affirmed.

Notes

The point here is quite a short one, such a complication as there is being purely one of the facts. The point is whether, in an action to enforce the award of an arbitrator, the defendants can ask for the rectification of the con-

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tract containing the arbitration clause. The matter not being covered by authority, the plaintiff, in answer to such a claim, pleaded estoppel, but it is held that the award is not, in this respect, in the same position as that of a judgment of the court, and that the defendants were, therefore, not too late in their claim for rectification. Assuming a proper case for rectification, it follows that the agreement submitted to the arbitrator was not the agreement of the parties, and since an action to enforce an award is essentially an action to enforce the agreement, it is only right that, in that action, a claim for rectification of the agreement should be allowed.

As to Time for Rectification, see Halsbury (Hailsham Edn), Vol 23, p 160, para 232; and for Cases, see Digest, Vol 35, 142144, Nos 408419.

Case referred to

Printing Machinery Co Ltd v Linotype & Machinery Ltd [1912] 1 Ch 566; 2 Digest 373, 385, 81 LJCh 422, 106 LT 743.

Appeal

Appeal from a judgment of Simonds J, dated 9 February 1939, reported [1939] 1 All ER 662, in an action to enforce an award made by an arbitrator upon a submission to arbitration.

Philip Vos KC and E J Rimmer for the appellant.

H U Willink KC and Eustace W Roskill (for John Megaw, serving with H M forces) for the respondents.

Vos KC: It was not until the appellant sought to enforce the award that the respondents set up the defence that the written agreement did not state the true agreement made between the parties. The point was not taken before the arbitrator nor before either the Divisional Court or the Court of Appeal. The conduct of the respondents amounts to an estoppel. The respondents knew what the Divisional Court and the Court of Appeal said and the appellant continued to incur expense in seeking to enforce the award.

Counsel for the respondents were not called upon.

Philip Vos KC and E J Rimmer for the appellant.

H U Willink KC and Eustace W Roskill (for John Megaw, serving with HM Forces) for the respondents.

5 October 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. In the action out of which this appeal arises, the appellant was seeking to enforce an award of an arbitrator in his favour. The respondents were resisting that claim and themselves counterclaiming in the action for rectification of the agreement between the parties out of which the claim arose, and under which the reference to the arbitrator had taken place.

The appellant was employed as an architect by the respondents in connection with works at Earls Court which the respondents had contracted to carry out on behalf of a company called Earls Court Limited. Under the agreement between those two parties, which I need not refer to in detail, the substance of the matter was that the respondents were to manage and supervise the whole of the work and be responsible for its execution, but the actual work itself was to be done by sub-contractors. The remuneration of the respondents under that agreement, which is dated 16 July 1935, was to be obtained by payment by the building owners of a fixed fee of £140,000 which was to cover the respondents expenses as contractors including architectural expenses and their profit.

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There is only one other clause which I need refer to, and that is article 11, under which the respondents guaranteed the maximum cost for the work at a figure of £1,209,250 which was inclusive of the £140,000 payable to them as I have mentioned. The clause contained an undertaking by the contractors to bear any excess over that figure and they were to have no claim against the building owners in respect of any such excess. The amount by which that figure might be exceeded has been referred to in the course of these proceedings as the over-run and it is in connection with that over-run that the substance of the present dispute arises. The agreement between the appellant and the respondents was made after he, the appellant, had been working for some time as an architect in connection with these works, and it is dated 23 October 1935. It was expressed to be supplemental to the building agreement, and the only matter which I need refer to in it (I do not propose to read any part of it at length) is the provision for remuneration. In short, the appellant was to be entitled to a minimum fee of £13,000, and that he got and kept in any event whatever his own expenses might be. He was also to be entitled to a further amount not exceeding £20,000 equal to 2/7ths of the amount which the respondents should under the terms of the building agreement receive and retain in respect of the fixed fee of £140,000. But the appellant was not to receive anything under that provision until the respondents had received £70,000 on account of the fee. It was only when a sum in excess of that was received and retained by the company that the appellant was to be entitled to receive his 2/7ths.

The appellant claimed that when sums in respect of that £140,000 were received by the respondents he was entitled to his percentage without reference to the possibility that, by the operation of the clause relating to over-run, the respondents might be called upon to sacrifice what would otherwise have been part of their profit in order to implement the guarantee under the over-run clause. The respondents claimed that they were entitled to await the final settlement of the account and to await the operation of the over-run clause should it actually in the future come into operation. As the result of the dispute which so arose as to the meaning of the remuneration clause in the agreement between the parties an arbitration took place pursuant to an arbitration clause in the contract, or I should say, in purported pursuance of that clause. For the purpose of getting the arbitration on foot, the parties entered into a submission agreement dated 19 April 1937, which recited that questions or differences have arisen and are now pending between the parties hereto touching the construction of the agreement and touching also the rights, duties and liabilities of the respective parties thereunder within the meaning of cl 4 of the agreement. It recites an agreement to refer the said matter to arbitration, and then in the operative part it was agreed:

That all such disputes questions and matters of difference between the parties hereto and all other matters in difference between the parties arising out of or relating to the said agreement or the subject matter thereof or as to the rights

Page 71 of [1939] 4 All ER 68

duties or liabilities of either of the parties in connection with the premises are hereby referred to the award and final determination of Mr. Roland Oliver.

The arbitration proceeded and at the outset the arbitrator was confronted with what was the dispute between the parties at that time, a dispute as to the true meaning and effect of the remuneration clause contained in the agreement and he stated a consultative case which wended its way to the Divisional Court and finally, to this court, and, as a result of those proceedings, it was held that the contention of the present appellant on the matter of construction was correct. That decision, of course, is binding upon us but the feeling of difficulty which one at any rate of the judges had in having the matter put before him without the surrounding circumstances being ascertained has, I think, not been without justification in the result, but, of course, that decision is binding and cannot be questioned, and it is the basis of what afterwards took place.

The matter went back to the arbitrator and he made an award based upon that decision of this court on the consultative case. When the appellant sought to enforce that award in a summary manner the respondents raised, and raised for the first time, a claim that the agreement did not embody the true intention of the parties common to both of them and ought to be rectified. This court on that claim being set up refused to allow the award to be enforced in a summary manner and the present proceedings were thereupon instituted by writ.

Two arguments on behalf of the present appellant were before Simonds J, and these arguments are before us. They were these. First, that upon the facts of the case no case for rectification had been made out: secondly, that the matter in question, namely, the issue between the parties as to whether or not the agreement ought to be rectified was a matter which fell within the terms of the arbitration submission, which could have been raised before the arbitrator, and ought to have been raised before him, and could not be raised after he had issued his award and was functus officio. There was a further argument based on some sort of estoppel, or to use Mr Voss word in his argument in the present appeal, quiescence. Simonds J, in a judgment of conspicuous clarity, rejected the appellants argument on both points. He found that the facts brought to his mind that high degree of conviction which unquestionably is to be insisted upon in rectification cases. The other matter which was argued before Simonds J, and was also argued before us, relates to the terms of the submission agreement. It was said by Mr Vos that it was open to the respondents, under the terms of this submission, to raise the question of rectification before the arbitrator and that had they done so the arbitrator would have been entitled, and bound, to deal with that issue and that accordingly it is not competent to the court afterwards to listen to a case which falls within the terms of the submission. It is sufficient in answer to that argument to say that, in my opinion, it is based upon a misconstruction of the terms of

Page 72 of [1939] 4 All ER 68

the submission itself. The submission relates to disputes which had arisen at its date with regard to a particular written document specified and identified in it, and the jurisdiction of the arbitrator under that submission was, in my opinion, confined to whatever matters relating to that document as an agreement between the parties fell within the description in the submission.

The issue raised by the claim for rectification is an issue of a totally different description. It is an issue of fact which does not arise out of the particular written agreement in question, but which seeks to substitute for that particular document another agreement in terms different from those set out in the written document. Once that fact is appreciated, it appears to me to be clear, beyond argument, that any attempt by the respondents in the proceedings before the learned arbitrator to raise the issue of rectification could not have been successful without some further agreement by both parties to submit that particular matter of dispute, which lay outside the actual submission that was before him. That conclusion appears to me to follow quite clearly from the clear language of the submission itself, but I am fortified in the view that I take and the reasons adopted when I find that Warrington J, as he then was, in the case of the Printing Machinery Co Ltd v The Linotype & Machinery Ltd, adopted similar reasoning in a case before him, I do not propose to read the passage which begins at the bottom of p 572 but it is based upon the view that the references in the submission there to the agreement and so forth were references to the particular written document unrectified, and not to a different document which might result from a successful claim for rectification.

The only other point is the point that I have before mentioned, a suggestion that there was some sort of estoppel or quiescence by the respondents which deprives them of the right at this stage to raise the point. Mr Vos contended that a party in circumstances such as these was not entitled to take two bites at a cherry. I think it is sufficient to say that nobody in the wildest flight of metaphor would say that a person was bound to take one bite at two cherries. The issue of rectification is a totally different issue. The only issue before the arbitrator related to the actual document, and there was nothing in the world to prevent the respondents from proceeding with that issue which was submitted until its conclusion, and then to raise a different issue altogether which was entirely outside the jurisdiction of the arbitrator. The case is no doubt one of importance to the parties and for that reason I have thought proper to put in my own language my reasons for saying that this appeal should be dismissed, but I might have been content to say that the judgment of Simonds J, both on law and on fact, is one with which I am in entire agreement. The result is that the appeal must be dismissed with costs.

CLAUSON LJ. Taking as I do precisely the same view as that

Page 73 of [1939] 4 All ER 68

which has been expressed by the Master of the Rolls, I find it unnecessary to add anything. I agree.

GODDARD LJ. I agree.

Appeal dismissed with costs.

Solicitors: William Charles Crocker (for the appellant); Slaughter & May (for the respondents).

W K Scrivener Esq   Barrister.

Rushbrook v Rushbrook (by her Guardian)

[1939] 4 All ER 73


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        LANGTON J        

Hearing Date(s):        11 OCTOBER 1939        


Divorce Desertion Supervening insanity of deserting respondent Animus deserendi of certified lunatic Presumption Matrimonial Causes Act 1937 (c 57), s 2.

The husband petitioner for divorce relied upon the desertion of the respondent without cause for at least three years immediately preceding the presentation of the petition. On 21 January 1931, the respondent deserted her husband without cause, and on 7 March 1937, just more than a year before the presentation of the petition, she was certified as a lunatic, and she so remained until the presentation of the petition. Her condition deteriorated in August 1938, and at the time of the hearing she was still certified and with little hope of recovery. It was contended that evidence could be given to show that during the period of certified lunacy the respondent was able to exercise such a rational judgment upon the question of her relations with her husband as to complete a continuous animus deserendi over the necessary period, her separation and desertion at the outset being proved. For the respondent it was contended that, in the case of a certified lunatic, the presumption of incapacity to form or to have an animus deserendi was irrebuttable, and that the statutory period of desertion of necessity ceased to run at certification:

Held it is not possible to draw an inference as to the animus of a person certified as a lunatic, and therefore no animus deserendi can be found to exist after certification, and the necessary period of desertion was not proved.

Notes

This case discusses the question whether the presumption that an insane spouse can form no intention to desert is a rebuttable or an irrebuttable one. It seems that in so far as Bennett v Bennett may be thought to decide the contrary it is overruled by Williams v Williams. The position, however, is not altogether clear, having regard to the judgment of MacKinnon LJ, in Williams v Williams.

As to Divorce on the Ground of Desertion, see Halsbury, Supp, Divorce, para 971; and for Cases, see Digest, Vol 27, p 319, Nos 29742977.

Cases referred to

Williams v Williams [1939] 3 All ER 825; Digest Supp, 161 LT 202.

Bennett v Bennett [1939] P 274, [1939] 2 All ER 387; Digest Supp, 161 LT 96.

Petition

Petition by husband for divorce on the ground of desertion. The

Page 74 of [1939] 4 All ER 73

relevant facts are fully stated in the judgment, and the case is only reported on the divergence of views expressed in the decided cases.

R J A Temple for the petitioner.

E Holroyd Pearce for the respondent.

11 October 1939. The following judgment was delivered.

LANGTON J. This is not an easy case, and, from the petitioners point of view, it is a hard case, but, in my view, both on the aspect of the facts and the law the case is reasonably clear. The important dates in the matter are first, that the parties were married on 4 August 1930; secondly, that on 21 January 1931, the respondent undoubtedly deserted her husband without cause; and thirdly, that on 7 March 1937, a period of just more than a year before the presentation of this petition on 20 April 1938, the respondent was certified as a lunatic. During the whole of that succeeding year until the presentation of the petition she remained a certified lunatic, and in August 1938, her condition, which up to that time was described by the doctor as an ascertainable condition of dementia prœcox, the form of lunacy being the schizophrenic type, took a considerable turn for the worse, and the respondent to-day is still a certified lunatic, and it now appears that there is little hope of recovery.

The case as presented by counsel for the petitioner was that, in spite of the fact that the respondent had been, during the period of 13 months of the period prescribed by the Act as the last three years before the petition was presented, a certified lunatic, there was ground for argument that she was, during that period, able to exercise a sufficiently rational judgment upon the question of her relations with her husband to enable me to infer that she had a continuing animus deserendi. This question of the position of lunatics vis-à-vis desertion has lately received considerable illumination from the judgment of the Court of Appeal in Williams v Williams. Epitomising the judgment of Sir Wilfrid Greene MR, he says in terms that the act of desertion requires two elements on the side of the deserting spousenamely, the factum of separation and the animus deserendiand on the side of the deserted spouse one elementnamely, the absence of consent.

In this case there is no doubt at all about the factum of separation, and the factum of desertion is amply established by the petitioners witness. The wife did desert the husband on 21 January 1931. It becomes then a question whether this animus deserendi can be said to have been continuing over the necessary periodnamely, the last three years before the presentation of the petition in April 1938. I have had, on behalf of the petitioner, some very careful, and, I think, very fair evidence from the doctor in charge of the institution where the respondent was for a very considerable period. She is not under his charge now, but during the material periodnamely, from March 1937, until April 1938she was continuously under the charge of Dr Banbury, the medical superintendent at the Ipswich Mental Hospital.

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In law, the matter as left by the Court of Appeal in Williams v Williams seems to me to stand in this way. Where a person is proved to be a lunatic accepted in law by certification as a lunatic, it is, in the words of Sir Wilfrid Greene MR, impossible to make any inference at all that the lunatic is capable of having the animus deserendi. Counsel for the respondent has argued that that is not the meaning of the judgment in Williams v Williams in the Court of Appeal, and has argued that the passage in the judgment of Bucknill J, in Bennett v Bennett, at p 280, is the proper and still standing statement of the law on this subjectnamely, that these are cases in which there is a rebuttable presumption. The rebuttable presumption is that, if a person is a lunatic, he is incapable of forming a rational judgment on this question, but, if medical evidence establishes that, in spite of his acknowledged weakness, it is possible for any individual lunatic to form a judgment upon this matter, that evidence can be admitted.

This decision of Bucknill J, was before the Court of Appeal and considered by them before their judgment was delivered in Williams v Williams, and, although the case is mentioned on more than one occasion in the judgment which fell from MacKinnon LJ, I do not understand any of the judgments of the Court of Appeal to accept the principle laid down by Bucknill J. It is true that in that case Bucknill J, decided as a matter of fact that the presumption was not rebuttable, and, therefore, there was no reason why the Court of Appeal should desire to overrule a judgment with which they no doubt would agree, but I do not understand myself that they left this matter, where a person is once an accepted, certified lunatic, as being open to argument at all. I read the judgment of Sir Wilfrid Greene MR, as meaning that it is not possible to make any inferences at all concerning people who are certified lunatics, and upon that ruling it seems to me that this case is unarguable; and the first thing I have to say about it is that it is established in law that this unfortunate woman was a certified lunatic during at least one year of the necessary time, and that being so there is no more to be said about it than that in law it is impossible to argue that she was capable of any animus deserendi, and it is impossible, therefore, that the petitioner should succeed.

[His Lordship then dealt with the facts and decided against the petitioner.] For the reasons I have stated, I do not think that the proper reading of the judgment of the Court of Appeal in Williams v Williams allows such questions of fact to be entered into at all; but, if it does, I still cannot help the petitioner.

Petition dismissed.

Solicitors: Worthington Evans Dauney & Co (for the appellant); The Official Solicitor (for the respondent).

J F Compton Miller Esq   Barrister.


Stovell v Jameson

[1939] 4 All ER 76


Categories:        LEISURE AND LICENSING        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREYS JJ        

Hearing Date(s):        12, 13 OCTOBER 1939        


Gaming Betting Football pool Premises used to “effect” betting transactions Meaning of “effect” Coupons accepted at premises other than those of respondent Betting and Lotteries Act 1934 (c 58), s 3(2).

The respondent, who was a tobacconist in Croydon, acted as collector for a firm of football pool promoters carrying on business in Edinburgh. Persons desirous of placing bets with the promoters came to the respondents shop where they handed him the completed coupons which were forwarded by him to the promoters in Edinburgh. The promoters were at liberty either to reject or to accept bets so forwarded by the respondent. The information against the respondent having been dismissed by the justices, it was contended on behalf of the appellant, an inspector of police, that the bets had been “effected” at the respondents premises. On behalf of the respondent it was contended that the bets had been “effected” in Edinburgh and not in Croydon where the respondents premises were situate:

Held the bets had been “effected” at the respondents premises within the meaning of the Betting and Lotteries Act 1934, s 3(2), and in order to constitute an offence under that section it was not necessary for the transaction to have been actually completed at the respondents premises.

Notes

It is a common practice for the promoters of football pools to allow tradesmen to supply coupons, and receive completed coupons and payments for previous entries. It was contended that, as the coupons might be rejected by the promoters, the transaction was not effected at the tradesmens premises, but this argument is rejected, and a tradesman so acting commits an offence under the Betting and Lotteries Act 1934, s 3(2).

As to Football Betting, see Halsbury (Hailsham Edn), Vol 15, pp 509, 510, para 916; and for Cases, see Digest, Vol 25, pp 463, 464, Nos 496501.

Cases referred to

Stoddart v Hawks [1902] 1 KB 353; 25 Digest 447, 403, 71 LJKB 133, 85 LT 687.

Lennox v Stoddart, Davis v Stoddart [1902] 2 KB 21; 25 Digest 407, 108, 71 LJKB 747, 87 LT 283.

Dunning v Swetman [1909] 1 KB 774; 25 Digest 434, 318, 78 LJKB 359, 100 LT 604.

Samuel v Adelaide Club Ltd [1934] 2 KB 69; Digest Supp, 103 LJKB 561, 151 LT 116.

Milne v The Commissioner of Police [1939] 3 All ER 399; Digest Supp.

Appeal

Appeal by way of case stated from the decision of the Croydon Borough Petty Sessional Court dismissing an information against the respondent under the Betting and Lotteries Act 1934, s 3(2). The facts and arguments are fully stated in the judgment.

G B McClure for the appellant

Gilbert Beyfus KC and D Grant (acting for John C Maude, serving with H M forces) for the respondent.

13 October 1939. The following judgments were delivered.

LORD HEWART LCJ. The respondent, it appears, was at all relevant times a tobacconist carrying on business in Croydon; and

Page 77 of [1939] 4 All ER 76

in September of last year he w as appointed a collector for an organisation or institution called Strangs Pools. On various days in October of last year persons resorted to that tobacconists shop for the purpose of obtaining football pool coupons, which Strang had supplied to the tobacconist. On certain days also in October and November last, persons resorted to the premises for the purpose of handing to the respondent completed Strangs Football Pool coupons and money owing to Strang on the previous weeks coupons, in order that the respondent might despatch by post the completed coupons and the money to Mr Strangs offices, which happen to be not in Croydon but in Edinburgh. Having received the coupons and the money, the tobacconist sent on both by post to Mr Strang in Edinburgh, having in the meantime taken the precaution of deducting commission at the rate of 5s in the pound on some pools and at 3s in the pound on others. Those coupons were connected with entry forms which contain a series of conditions. To those conditions, or what are regarded as the most material of them, counsel for the respondent has directed our attention. Upon those conditions, as the case finds, and as the conditions assert, Mr Strang might receive and accept or, on the other hand, might reject the coupons as entries. Finally, it is found as a fact that persons other than defaulters were notified or caused to be notified by Strang in the event of their coupons not being accepted. The coupons of defaulters, that is to say, persons who had not paid up, were treated as automatically rejected.

The first rule indorsed on these coupons provides that the coupon

is an entry form containing the conditions on which it may be completed and submitted to me [Strang] and on which alone I am prepared to receive and, if I think fit, to accept it as an entry.

Then there is a rule, No 7, whereby clients and collectors are debarred from calling at his premises; and it is provided that business must be done by post only; the coupon must be sent in a sealed envelope duly stamped, “and must arrive here” at a certain time in relation to the playing of the matches. Then there is a condition, No 9, about payments from clients and in particular

payment of stake to anyone on my behalf will not be regarded as payment to me,

The payer takes the risk of the payment reaching him at its proper time. Finally, there is a long series of disqualifications.

In that state of facts, it was contended for the appellant that in the vocabulary which the legislature has used, pool betting transactions were effected by the respondent. It was contended for the respondent that no pool betting transactions were effected at the respondents premises, but that the betting transactions were effected in Edinburgh, if and when such coupons were accepted by Strang; and the justices upon the evidence and the law came to the conclusion that the offence charged had not been committed.

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In the course of this discussion we have had an interesting resume of part, at least, of the voluminous law relating to the topic of betting. We have listened with interested attention to the arguments of counsel on each side. I cannot help thinking, as the conclusion of the whole matter, that the point is, I do not say a point of no parts and no magnitude as some points are, but is, if I may again repeat the almost sacramental phrase, within a very narrow compass. The Betting and Lotteries Act 1934, s 3(2) provides as follows:

Save as is permitted by the preceding sub-section, no person shall use any premises whether situate on a track or not … as a place where persons resorting thereto may effect pari mutuel or pool betting transactions.

Every art and every science, presumably, is entitled, or more or less entitled, to some vocabulary of its own, and the vocabulary of the legislature in this case is the expression “may effect pool betting transactions.” The mischief of it is a place where persons resorting thereto may effect betting transactions, or, in plain and simple English, may bet.

What is meant by this expression “may effect betting transactions”? There is no magic about the word “pool.” There is no magic about the interpolation of words about “pari mutuel”; it is: “may effect betting transactions.” Of course, before this Act of 1934 was enacted, many Acts had been passed and much had been written and said on the topic of betting. In particular, to mention only three out of the labyrinth of cases more or less relevant and material, in 1902 in Stoddart v Hawke at p 359, Lord Alverstone LCJ, had spoken of that which was done in that case as being “an essential part of the system.” In like manner Vaughan Williams LJ, in Lennox v Stoddart, at p 33, spoke of “a material and necessary step for the purpose of the receipt of the money”; and not to multiply citations, in Dunning v Swetman, at p 774, Lord Alverstone LCJ, spoke of doing “that which was a substantial part of the business of betting.”

The argument of counsel for the respondent really turns upon this. He says there are, or may be, all kinds of tentative steps in the prolonged task of effecting a betting transaction, and it is not true to say that the betting transaction is effected unless and until it is in every respect and to all intents and purposes completed. He has used various words, to each of which I suppose a meaning is to be applied: “till the transactions are brought about,” “accomplished,” “concluded” and “completed.” All those things, he says, are to be found latent in this word “effected,” or, to vary the metaphor, the building is not completed until the coping stone, as Walter Besant said, was put upon it. I cannot think that that is the fair meaning of this subsection, whether one looks at it by itself, or looks at it in relation to all that had gone before. Of course, the draftsman had to use some verb if he were going to use a word like “transactions,” and perhaps an obvious verb was “effect,” but what does this expression “may effect pool betting transactions”

Page 79 of [1939] 4 All ER 76

mean? Does it mean, carry out the process of making the transaction to the last possible step, so that it is a complete, rounded, accomplished whole? I do not think the mind of the legislature was directed to any such point. The mischief was, places where persons resorting thereto might come and bet, or make bets, and I think it is only another way of saying what had been said again and again in various antecedent cases, “where a substantial part of the business of betting is done,” “where an essential part of the system is carried out,” “where a material and necessary step for the purpose is completed.”

Here, not to repeat these rules, it is quite obvious that subject to certain exceptions, as in the case of a defaulter or in the case of an infant, the moneys paid to the tobacconist were automatically received and passed on to Edinburgh. This was a mere apparatus for the collection of moneys to be paid for the purposes of betting; and I think it is really artificial and fantastic, with all due respect to counsel for the respondent, to seek to extract out of these words, “may effect betting transactions,” something more comprehensive on the one hand, more detailed on the other hand, than one would gain from the use of an ordinary simple verb.

In a part of his argument, counsel for the respondent laid great stress on the word “where” in s 3(2) “as a place where persons resorting thereto may effect,” etc. Let it be conceded that it is as if the word had been written “as a place in which,” or “as a place within the four walls of which persons resorting thereto may effect transactions.” That does not increase or diminish any difficulty there may be. The important words, in my opinion, are the words “may effect betting transactions.” What do they mean, and is it true to say that a betting transaction is not, within the meaning of this section, effected unless and until every step is completed and the bet which is offered has been formally and authoritatively received? In my opinion, the plain meaning of these words is different from that, and the offence is committed, the mischief arises, if that which is done is a substantial part of the business of betting. I think, therefore, that these justices came to a wrong conclusion in point of law, and that this appeal ought to be allowed, and the case go back to the justices with a direction that the offence which was charged was proved.

CHARLES J. I agree and I have very little to add. This s 3(2) contains the words “may effect pool betting transactions.” It is urged upon us that that is not the same as betting, but that the true meaning of those words is that every single thing connected with the bet shall be completed and ended. It is very difficult to understand why effecting a betting transaction should be regarded as meaning anything other than betting. The words are different, but I cannot see anything in the words to justify the conclusion we are asked to draw, that those words were put into that section to distinguish it from betting, to

Page 80 of [1939] 4 All ER 76

elucidate the word “betting,” and to introduce a meaning which case law has found the word “betting” did not comprise. It is quite clear that, unless counsel for the respondent can induce us to suppose that to effect a betting transaction was not to make a completed bet there and then, his case really fails, because a long chain of authority on the word “betting” shows that, as was contended in Samuel v Adelaide Club Ltd, which was approved in Milne v The Commissioner of PoliceI quote from the judgment of Atkinson J, at p 74:

the club room is not being used and cannot be used for the purpose of betting unless the contract involved in a bet is actually made in the room, and that in law the contract is made where the bookmaker receives and accepts the offernamely, in his own office. Now the section does not say [this is under the old Act of 1853] that the place shall not be used by the forbidden person, but that it shall not be used for the purpose of the forbidden person betting with persons resorting thereto.

Atkinson J, narrows it down, so as to make the matter almost an absurdity, by supposing that there were adjoining houses and the bookmaker was in one house and his agent was in the other, doing everything or a substantial part of it in house A and the actual betting transaction completed and finished in house B; and he indicates that the evil aimed at by the section is precisely the same, as if he were present in person with the backers, although he is in house B. It seems to me, I say again, to be straining the interpretation of that section to say that to effect betting transactions means, as Atkinson J, said in the Adelaide Club case, that the betting must be a completed transaction in one and the same room to which the person was resorting. I do not think it means anything like it. It is quite clear that a substantial part of this betting transaction did take place in this tobacconists shop. I think the magistrates were wrong in their decision, as my Lord has said.

HUMPHREYS J. I am of the same opinion. We are called upon to construe the Betting and Lotteries Act 1934, s 3. In my view, the most important words for that purpose are the first words of the section, which indicate what it is that it prohibits. The section enacts that no pool betting business shall be carried on except on an approved horse racecourse or on a licensed dog racecourse, and then continues:

save as is permitted by the preceding sub-section, no person shall use any premises … as a place where persons resorting thereto may effect … betting transactions.

I cannot myself doubt that those words“may effect betting transactions”have no wider or different meaning than saying that no person may use his premises for the purpose of the betting business, the prohibition of which is to be found in that section. I entirely agree with what has been said by the other members of the court, and that the case should be remitted.

Appeal allowed with costs. Case remitted to justices with direction that the offence charged was proved.

Solicitors: The Solicitor, Metropolitan Police (for the appellant); Vardon & Corfield (for the respondent).

F Honig Esq   Barrister.


Re An Arbitration between Compagnie Primera de Navagaziona de Panama and Compania Arrendataria de Monopolio de Petroleos S.A.

The Yolanda

[1939] 4 All ER 81


Categories:        SHIPPING        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        12, 13 OCTOBER 1939        


Shipping Charterparty Charterparty to remain in force for two consecutive voyages Deviation in first voyage Whether charterers bound to make second voyage.

By a charterparty dated 30 December 1937, the Yolanda was chartered to go to Istanbul and from there, as ordered, to proceed to Constantza, or to a safe port in the Black Sea, and there to load oil in bulk and take it to a Mediterranean port between Cartagena and Barcelona, inclusive. The vessel was at liberty to call at any ports in any order, to tow and assist vessels in distress, to deviate for the purpose of saving life, and to call at any port or ports for bunker supplies. The charterparty was to remain in force for two consecutive voyages upon the same terms and conditions. The Yolanda loaded oil at Constantza for Valencia. On leaving Constantza, the captain set his course for Zonguldak, which is about 150 miles east of the Bosphorus, and is not a port on the ordinary route from Constantza through the Bosphorus. Later, owing to weather conditions, he altered his course, and went to Istanbul. From Istanbul, he sailed for Algiers, but put into Bona, a North African port, about 30 miles off his course, when he still had sufficient bunkers to reach Algiers. It was contended that these were deviations under the charterparty, and that the charterers were entitled to refuse to implement the contract with regard to the second voyage:

Held the deviation in the first voyage relieved the charterers of the performance of the charterparty and of the necessity for giving orders for the second voyage, as the contract was an entire contract for the two voyages.

Decision of Branson J ([1939] 2 All ER 240) reversed.

Notes

The point here is the short one, whether the deviation during the first voyage entitled the charterers to repudiate the contract in respect of the second voyage, the charterparty providing for two consecutive voyages. This is a matter not covered by previous authority, and it is decided that the contract for the two voyages is an entire one and, therefore, the provisions relating to the second voyage fall with those for the first. The matter, however, is treated as one of the construction of the particular document.

As to Effect of Deviation, see Halsbury (Hailsham Edn), Vol 30, pp 293297, paras 487489; and for Cases, see Digest, Vol 41, pp 487490, Nos 31823195.

Cases referred to

Hain SS Co Ltd v Tate & Lyle Ltd [1936] 2 All ER 597; Digest Supp, 155 LT 177.

Mersey Steel & Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434; 12 Digest 339, 2835, 53 LJQB 497, 51 LT 637.

Appeal

Appeal by the Compania Arrendataria de Monopolio de Petroleos SA from a judgment of Branson J, given on 15 March 1939, and reported [1939] 2 All ER 240, where the facts are fully set out. There was a question whether the deviation had been waived, but both Branson J, and the Court of Appeal have held that there was not a sufficient statement of his findings by the arbitrator to test the proper inference to be

Page 82 of [1939] 4 All ER 81

drawn upon this question, and, on this point, the matter was referred back to the arbitrator. The case is only reported upon the point of the severability of the contract in respect of the two voyages.

A T Miller KC and Sir John Forster for the appellants.

Sir Robert Aske KC and R Colinvaux (for A A Mocatta serving with HM forces) for the respondents.

13 October 1939. The following judgments were delivered.

SLESSER LJ. This is an appeal from the judgment of Branson J, on an appeal to him by way of special case stated from the decision of an umpire in a commercial arbitration between the owners and the charterers of a ship called the Yolanda. The arbitrator has found as a fact in this case that, as regards the first voyage which the charterparty contemplates, there has been at least one, and I think two, deviations from that contract voyage, which would justify the charterers in repudiating the contract. These two deviations are mentioned by Branson J, in his judgment. They are, first of all, that the ship, instead of proceeding directly from the port of loading to the contemplated port, deviated, for the purpose of bunkering, to a port called Zonguldak instead of going directly to Istanbul. Then there is found a second deviation, to a port called Bona, at a time when it was not necessary, in the view of the arbitrator, for the purpose of bunkering, to deviate there.

So far no question and no difficulty arises, and it is conceded that if this charterparty was one for this one voyage only, there was found such deviation as would enable the charterer to repudiate the whole of the contract in accordance with the authorities which have laid down such stringent rules on this matter, and more particularly the recent case of Hain S S Co v Tate & Lyle.

The difficulty in this case arises, however, from the fact that this charterparty contemplates a second voyage. After providing, in the first place, that the vessel

shall, as ordered on arrival at Istanbul, with all convenient despatch, sail and proceed to Constantza or a safe port in the Russian Black Sea [and then proceed, as may be directed] to one port Spanish Mediterranean, Cartagena-Barcelona range, both inclusive.

There is added by cl 32:

This charterparty is to remain in force for two consecutive voyages at the same rate of freight and on the same terms and conditions as herein provided.

That is to be read in this way, that the first voyage being completed, the ship must again arrive at Istanbul, and, as ordered, proceed to Constantza or a safe port in the Russian Black Sea, and go, as directed “to one port Spanish Mediterranean, Cartagena-Barcelona range, both inclusive.”

What is said by counsel for the respondentand this argument has found favour with the judgeis that there are two such voyages, that the mere fact that there has been a deviation on the first voyage does

Page 83 of [1939] 4 All ER 81

not enable the charterer to do what he purported to do, namely, to repudiate the whole contract, but that the obligations on the second voyage still stand, though it may be that damages may be obtainable for the wrong done by the deviation on the first voyage. He is really seeking to import into this contract the principle which is so familiar in the cases of contracts for the sale of goods by instalments, such as the well-known case of Mersey Steel & Iron Co v Naylor, Benzon & Co.

The question really, in my opinion, depends, and depends entirely, upon the construction of the particular charterparty into which these charterers and owners have entered, which will indicate what was in the contemplation of the parties, and what they agreed to do. In my view, each of these cases depending entirely on the particular agreement which had been entered into, this was one indivisible contract for the purposes of the two voyages.

I come to that conclusion for many different reasons. In the first place, there is no indication whatever, to my mind, that this contract is to be regarded as anything but one contract for the purpose of one voyage in a certain prescribed way, followed immediately by what is aptly described as a consecutive voyage. When one looks, for example, at cl 22, which is dealing with the loading date, it is provided in terms:

Should vessel not be ready to load by Jan. 25, 1938, charterers to have the option of cancelling this charter.

not “this voyage,” but “this charter,” so that so far it is clear that if the vessel be not in the port on 25 January, both voyages are not to be performed. It is to be noted that there is no loading date stated with regard to the second voyage. The second voyage to be on the same terms as the first, but that cannot be applied to cl 22, which is dealing with the date of 25 January. It can only be applicable to the first voyage, and, therefore, all that can be said is this: that at the end of the first voyage, there is an obligation, within a reasonable time, to be at Istanbul in order to receive the directions which are to be given under cl 1 in the case of both voyages, as to where the ship is to sail, and proceed to, and receive directions as to the final destination.

I come to the conclusion that this contract is indivisible for another reason. It is provided in cl 32 that

the irrevocable credit for the freight on the second voyage is to be established before vessel sails from last discharging port on her first voyage,

Clause 26, which deals with irrevocable credit, says:

Charterers undertake to establish irrevocable credit for the freight on the first voyage under this charterparty within 5 days of signing this charterparty.

That, of course, cannot be applicable to the second voyage, and, in substitution therefor, it is said that the date for providing the irrevocable credit of the second voyage is to be before the ship sails from last discharging port on her first voyage. This indicates to my mind that this contract is one, and contemplates the second voyage as beginning, in

Page 84 of [1939] 4 All ER 81

a sense, at the termination of the first voyage, the irrevocable credit for the second voyage is to be made before the vessel sails from the last discharging port on her first voyage, showing that some of the obligations on the second voyage are dependent on the obligations of the first voyage being discharged. I see no reason, therefore, to come to the conclusion that this contract is in any way divisible.

Another reason which occurs to my mind is this. It is provided that the freight shall be at the same rate on the second voyage as on the first voyage. I think it may reasonably be assumed that, in coming to that conclusion, the parties had in mind that the first contract was going to be performed, and performed in such a way that it could not be repudiated without deviation, and it might well be that, if the first contract was not performed, the whole market conditions might change; and the whole of the freight seems to be fixed on the assumption that the whole of this contract is going to be carried out. For these reasons I find myself regretfully differing from the judge, who took the view, as I have said, that there was nothing in this deviation which prevented the obligations arising under the second voyage.

MACKINNON LJ. I agree. There was apparently considerable discussion before Branson J, as to whether putting into the port of Bona was a deviation, or whether it was a deviation permitted by the terms of the charterparty. I think it is quite unnecessary to go into that. There is no doubt that, on the voyage from Constantza towards Istanbul there was an undoubted deviation, as has been found by the arbitrator. In the lamentably obscure statement of the facts, I am able to gather that the charterers knew of the deviation at a later date than when they did know about putting into Bona. If that was so, whether putting into Bona was a second deviation is quite immaterial, because there was undoubtedly a deviation by going off to Zonguldak. For that reason I express no opinion on the question whether there was a second deviation by putting into Bona. Under this contract between these parties there is this provision:

Should vessel not be ready to load by Jan. 25, 1938, charterers to have the option of cancelling this charter.

Those words are incapable of any doubt; if the vessel did not arrive at Constantza and be ready to load by 25 January, the charterers could cancel both voyages and cancel the whole contract. In addition to that express provision in the charterparty, there is also an implied term in this charterparty, as in all charterparties. That implied term is that the shipowner shall prosecute the voyage or voyages without deviation. The nature of that implied term has often been stated in the courts, and nowhere more clearly, or with more emphasis, than in the comparatively recent case of Hain S S Co v Tate & Lyle, where, at p 601, Lord Atkin says:

I venture to think that the true view is that the departure from the voyage contracted to be made is a breach by the shipowner of his contract, but a breach of

Page 85 of [1939] 4 All ER 81

such a serious character that however slight the deviation the other party to the contract is entitled to treat it as going to the root of the contract, and to declare himself as no longer bound by any of its terms.

And similar language is used by Lord Wright, at p 607. I think that the effect of deviation, which is the breach of that implied term in the contract, is accurately stated in Scrutton on Charterparties, 14th Edn, p 310, and I will read the passage with more satisfaction because I have satisfied myself that it was written by Lord Porter and not by myself:

An owner whose ship deviates in the sense defined above thereby commits a fundamental breach of his contract of carriage. The other party to such contract, on becoming aware of the deviation, can either treat the breach as a repudiation bringing the contract to an end, or elect to waive the deviation as a final repudiation and treat the contract as still subsisting, reserving his right to damages.

I think that is a correct interpretation of the law. If the implied term was written out in the contract, as the cancelling cl 22 is, it would be something to this effect: the shipper shall proceed on the agreed voyage or voyages without deviation except to save life or avoid danger to ship or cargo; if the shipowner breaks this undertaking the charterer, on becoming aware of it, may cancel this charterparty.

DU PARCQ LJ. I agree, and I do not think I can usefully add anything.

Appeal allowed on first point and case remitted to arbitrator.

Solicitors: Middleton Lewis & Clarke (for the appellants); Holman Fenwick & Willan (for the respondents).

E Fuller Briscoe Esq   Barrister.

Hall and Another v Wilson and Another

[1939] 4 All ER 85


Categories:        TORTS; Negligence: CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        OLIVER J        

Hearing Date(s):        12, 13 OCTOBER 1939        


Negligence Negligence causing death Damages Possibility of death in war as combatant or as civilian.

In assessing damages under the Fatal Accidents Act 1846, it is proper to take into account the possibility of the man being killed in the war, as a member of the fighting forces if he is of military age, or as a result of air raids. The deduction is to be made although the man was killed before the commencement of the war.

Notes

Though this case deals solely with the question of damages, which are usually to be assessed upon the particular facts of each case, it is of importance as showing how damages may be reduced by reason of the war. At the present time it is of greater importance, since, in many cases, damages will be agreed out of court, and it is essential that those doing so should have all the relevant facts in mind.

As to Damages under Lord Cambells Act, see Halsbury (Hailsham Edn), Vol 23, pp 698, 699, para 986; and for Cases, see Digest, Vol 36, pp 138141, Nos 916944.

Page 86 of [1939] 4 All ER 85

Action

Action for damages for negligence causing death brought under the provisions of the Law Reform (Miscellaneous Provisions) Act 1934, and the Fatal Accidents Act 1846. The injuries were suffered in a motor-car accident and negligence was admitted.

John Flowers KC and C N Shawcross for the plaintiffs.

R Armstrong-Jones for the defendants.

13 October 1939. The following judgment was delivered.

OLIVER J. This action is framed in two ways. First, it is said the plaintiff is entitled to damages under Lord Campbells Act; that is, damages for the pecuniary loss to herself and to her family brought about by the death of her husband; and in assessing that sum (because liability is admitted in this case) one has to take a severely practical line, to rule out questions of sentiment, and to give credit for any pecuniary benefit which she has received by reason of the death of her husband, and to offset that against any loss she has suffered. The second way in which the action is put is under the Law Reform (Miscellaneous Provisions) Act 1934, which entitles the personal representative of the deceased to recover, as a part of his estate, the pecuniary value to him of his expectation of life. Why this form of action should almost invariably be joined with an action under Lord Campbells Act I never quite understand, because unless the sum awarded for the loss of expectation of life is in excess of that which would be awarded under Lord Campbells Act, the matter, so far as I can see, from any practical point of view, becomes sheer waste of time. The Court of Appeal have laid it down quite recently that, when you are assessing the damages under Lord Campbells Act, you have to take into account any benefit which comes to the estate by reason of the death of the deceased person, and in such a case as this there comes as a benefit to the estate that which it is said he has lost, namely, the value of his expectation of life. This comes as a benefit to the widow, and must, thereforeI am not speaking with mathematical exactitude, but for practical purposesbe deducted from the sum given under Lord Campbells Act. In addition to that, from the point of view of the widow, the sum, if any, awarded under the Law Reform Act must necessarily bear estate duty, whereas that under Lord Campbells Act, as I understand the Act, would not. However, in this case we need not trouble about that, because it has been agreed that the damages should be assessed under Lord Campbells Act only, and the other cause of action not proceeded with.

What is the pecuniary loss which this household has suffered by reason of the death of the deceased? He was a man of 31 years of age, in good health, and he had had a fine career. He had started as an apprentice to chemists, and had, at the early age of 31, worked himself up not only to be a manager of one of the stores of Boots, the chemists, but had actually had promotion a year or two ago to a better position, not necessarily pecuniarily very much better, but obviously a better position. At any rate, this is an illustration of how much better

Page 87 of [1939] 4 All ER 85

it was. In his new position he had eight or ten people under him, and in his former position only about two. His earnings at the time of his death were, as near as makes no difference, £350 a year, and I am quite satisfied from the evidence which has been given that he had not only some prospect, but more than a good prospect, within a year or two, of rising to something like £500 or £600. He had some chance of doing better than that. I quite agree that that kind of speculation is rather treacherous, because there are no less than 300 branch shops and only about 10 of these better positions; but he was in the running for a position which might have brought him £1,000 a year. Now, it is quite obvious, having stated that much, that the pecuniary loss to this family of a man like that is very substantial. One has, on the other hand, to discount this sum by various considerations. I do not pretend to be exhaustively enumerating them, but they are such considerations as this, that he might have been killed in an accident, as anyone might, and that he might, particularly now, have been killed in a war, either as the result of going to fight in it, or as the result, possibly, of air raids which might have terminated his life. Upon reflection, I have come to the conclusion, although with a little doubt, that it would be safer to assume that that additional war risk does apply to this case, although at the moment he died it did not. I have, therefore, discounted the sum which I would have given by making some allowance in respect of that. Necessarily, any figure one fixes must be highly speculative; that is a disadvantage which must necessarily accompany every effort to put into money that which is not assessable in money. Although this lady is now quite firmly of opinion, and perhaps quite rightly of opinion, that she will never marry again, she is an attractive young woman who might marry again; one cannot ignore the possibility that she may marry again, and I take that into consideration. The sum which I have come to the conclusion, in all the circumstances, should be the right one under Lord Campbells Act is the sum of £3,000, and, inasmuch as the duty is cast upon me of saying how that sum is to be divided, I think it should be divided in these proportions: The widow should have £2,250, the boy £500, and the little girl £250. I am taking into account that although she is younger than her brother, her education will be obviously much less costly. In the ordinary way she will be living with her mother and be looked after by her family. I give judgment for that sum, to be divided in those proportions.

Solicitors: Adam Burn & Son (for the plaintiffs); L Bingham & Co (for the first defendant); Hewitt Woollacott & Chown (for the second defendant).

W J Alderman Esq   Barrister.


Oulo Osakayetio of Oulu, Finland v Arnold Laver & Co Ltd and Others

[1939] 4 All ER 88


Categories:        INSURANCE: SHIPPING: CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        6, 17 OCTOBER 1939        


Sale of Goods Cif contract Insurance Increased premium due to war risk Goods shipped on ship of belligerent state.

Contracts for the purchase of timber to be shipped from Finland to Hull were entered into in October 1938, the shipment to be made in November 1938. The contracts were cif contracts and provided for insurance of the goods, including the risks covered by Institute war and strike clauses in force at time of attachment of insurance, any increase of premium for covering such risks beyond the rates ruling of 26 September 1935, to be for buyers account. The rate for covering such war risks was on 26 September 1935, 3d per £100; on 29 October 1938, 2s 6d per £100, and that remained the schedule rate at all material times. From 2 November 1938, when a Spanish Government vessel was sunk by enemy action, the rates on Spanish Government vessels rose rapidly. The cover note for the goods here in question stated that the goods were covered at the schedule rate for sailing on or before 5 November, but subject to 48 hours notice of cancellation unless sailing on or before 28 November 1938. The ship in which the goods were shipped was a Spanish Government vessel, which sailed on 12 November 1938, and on 7 November 1938, the shippers agents informed the buyers that the rate of insurance had been fixed between the sellers and the insurers at £5 per £100. The buyers contended that the sellers were not entitled to charter a ship belonging to a belligerent notoriously weaker at sea than his enemy, and to insure the goods at a premium to be fixed at the discretion of the underwriters on an unknown date of sailing:

Held the sellers were not entitled to ship the goods on such a ship, and the buyers were only liable to pay for insurance at the schedule rate.

Notes

It is implied in a cif contract that the shippers shall act reasonably in taking steps which impose a burden on the other contracting party, and that they shall take all reasonable steps to mitigate the expense to which that party may be put. It is not reasonable to ship goods on a ship belonging to a state actually at war, more especially when the naval forces of that state are weaker than those of its enemy.

As to Insurance Under CIF Contracts, see Halsbury (Hailsham Edn), Vol 29, pp 216, 217, para 288; and for Cases, see Digest, Vol 39, pp 582, 583, Nos 18441853.

Case stated

Case stated by an arbitrator to determine the liability of the buyers as to payment in respect of increased insurance premium. The facts and arguments are fully stated in the judgment.

R E Gething for the appellants, the buyers.

H G Robertson for the respondents, the sellers.

17 October 1939. The following judgment was delivered.

ATKINSON J. This is a case stated by an arbitrator, raising the question as to the liability of certain buyers of timber to pay premiums for covering cargo against war risks. The claimants are shippers in Finland, and there are three respondents. Each of them entered into a cif contract for the purchase of timber to be shipped by steamer during November 1938, from Pateniemi to Hull. The dates of the contracts

Page 89 of [1939] 4 All ER 88

were 6 October, 7 October, and 8 October 1938. The contracts were in the same form, and the relevant clause is cl 6, which is as follows:

Before or as soon as tonnage is secured the marine insurance of cargo at f.o.b. invoice value plus 10 per cent. and of freight advance to be covered by sellers with a first-class company or underwriters as per Lloyds form of policy, together with federation clauses printed in margin, losses payable in London and including the risks covered by the Institute war and strike clauses in force at the time of attachment of the insurance. Any increase in premium payable for covering the whole of such war risks and such strike risks in respect of the country of destination in excess of the rates ruling at Sept. 26, 1935, to be for buyers account. Sellers obligation under this contract to insure against war and/or strike risks is subject to the proviso that such insurance can be covered. Should it not be possible to cover such insurance, or should insurance be cancelled by underwriters, sellers shall give prompt telegraphic advice to buyers who shall thereupon have the option of cancelling the contract.

There was an agreed statement of facts for the arbitrator, and from this statement it appears that the shippers agents on 18 October, chartered a steamer belonging to the Spanish Government for the shipment of the timber. On 26 October, copies of the charterparty were sent to the several buyers. On 29 October, the shippers, through their agents, entered into an agreement with Lloyds underwriters for insurance to cover war risks on the timber.

The relevant part of the cover note is this:

Wood goods in and over including freight advance, if any, per “El Neptuno” to Hull including war etc. risks at 3s. 6d. per £100 sailing on or before Nov. 5, 1938, held covered thereafter at schedule rate on date of sailing but subject to 48 hours notice of cancelment unless sailing on or before Nov. 28, 1938.

Agreed minimum rates for insuring against war and strike risks are fixed by the Rates Committee of Company and Lloyds Underwriters, but from 6 October 1937, Spanish and Greek steamers were excluded from these fixed rates, and premiums on cargoes carried in ships were left to underwriters discretion. The war risk rate on cargo from Baltic ports to the United Kingdom on 26 September 1935, was 3d per £100. On 29 October 1938, the schedule rate was 2s 6d per £100, and that remained the schedule rate at all material dates. The true meaning and effect of the cover note is disputed. The buyers contend that there was an agreement to cover after 5 November at the schedule or general rate on the date of sailing, that is the rate fixed by the committee. The sellers contend that all that it meant was at the rate at which the particular underwriters were covering cargoes on Spanish ships on the date of sailing, in other words, at such rate as the underwriters chose to fix at their discretion.

Clauses 5, 6 and 7 of the agreed statement of facts are as follows:

(5) On Nov. 2, 1938, the s.s. Cantabria a cargo boat owned by the Spanish Government was attacked by a Spanish Insurgent auxiliary cruiser and sunk by gun fire about 6 miles off Cromer. As a result thereof war risk insurance premiums on Spanish Government vessels (of which the “El Neptuno” was one) rose substantially. (6) On Saturday Nov. 5, 1938, the “El Neptuno” not having yet sailed, the schedule rate referred to in the cover note became applicable. The shippers agents on the advice of their insurance brokers who feared that this rate was likely to

Page 90 of [1939] 4 All ER 88

increase considerably by the date of sailing, communicated with the underwriters through the insurance brokers by telephone and fixed the premium at £5 per £100. The said wood goods wore accordingly held covered at that rate until the vessel sailed which was on Nov. 12, 1938. Between Nov. 6 and Nov. 12 the rate for Spanish vessels in the North Sea rose to 10 guineas. (7) On Monday Nov. 7, 1938 the shippers agents informed the buyers by telephone of the rate of insurance so fixed as aforesaid. The buyers stated they would not pay any such rate.

When the documents were presented, the buyers refused to pay the £5 per £100, and it was then agreed that the amount to be paid by them for covering the timber against war risks should be left to arbitration.

The arbitrator has stated his award in the form of a special case, expressing his view that the respondents to the arbitration, that is the appellants here, the buyers, are liable to pay the full £5. The question is whether that view is right, whether the sellers were entitled to charter a ship belonging to a belligerent who was notoriously much weaker at sea than his enemy, and to insure the goods at a premium to be fixed at the discretion of the underwriters on an unknown date of sailing. The shippers contended before me that they were entitled to ship by any steamer they liked. They said the contract contains no limitation whatever upon their choice of steamers.

I have a vivid recollection of seeing one of General Francos destroyers patrolling outside the breakwater at Gibraltar, waiting to sink a ship belonging to the Spanish Government, which was just inside the break-water, if and when she came out. I asked Mr Robertson whether, in similar circumstances, he contended that the shippers would have been entitled to charter the ship within the breakwater. He said they would have been so entitled, although, of course, no underwriters would insure at less than £100 per £100 worth of goods, or thereabouts. I think there must be a flaw in an argument which leads inevitably to such a result. I doubt very much whether the shippers were entitled to ship by a steamer actually belonging to a belligerent or by any steamer which, by reason of circumstances peculiar to itself or its flag, made the burden of insurance against war risks heavy beyond the ordinary schedule rates, or, at any rate, to select such a ship except at their own cost as to excess premiums. It is implicit in the contract that the shippers should act reasonably where they are to take a step which will impose a burden upon their contracting party. I think they were bound to take all reasonable steps to make that burden as light as they properly could. I do not think that it was reasonable to charter a ship which belonged to a state actually at war.

It is said that the buyers were sent the charterparty and never objected to it. There is no evidence that they knew anything about the insurance of cargoes carried on Spanish ships. It is also said that there is no evidence that the shippers could have chartered any other ship. It is equally true that there is no evidence that they could not. If this was a relevant consideration, I think it was for the shippers to justify a choice which was so adverse to the interests of the buyers.

Page 91 of [1939] 4 All ER 88

In my view, there is a greater difficulty in the claimants way. What was their obligation as to insuring? As soon as tonnage was secured, insurance of cargo was to be covered by them with underwriters. Any increase of premium payable for cover in excess of rates ruling on 26 September 1935, was to be for buyers account. It is true that a fixed premium is not essential to a valid policy, but the question is what was the meaning of that obligation. I think that this obligation contemplates an insurance effected on or about 18 October at a premium to be then fixed, and fixed by reference to schedule rates then payable.

No point is made by the buyers as to the delay in covering, but, be that as it may, certainly in my view it did not contemplate or permit insurance at a premium not then fixed but which was to be left to the discretion of the underwriters on the date of sailing. Such a bargain would defeat the whole purpose of the obligation to insure as soon as tonnage was obtained. It would be a gamble at the buyers risk, the very thing, as I think, which the buyers were seeking and the sellers contracting to avoid. And in this case the gamble was in connection with a belligerent ship for which war risks might vary from day to day, according to the ups and downs of the war. An interpretation which permitted such a bargain would be giving no effect, in my view, to the words “payable for covering.” I think that means “payable at the time of obtaining cover and in consideration of the cover.” If it was not possible to obtain cover at an agreed premium, the final words of the clause require the seller to give notice to the buyer, who then has the option of cancelling.

Then this question arises. What was the effect of the cover in fact obtained? Here the claimants are in a dilemma. If, as the buyers say, the cover note meant what it said, the underwriters thereby agreed to cover after 5 November at the schedule rate on date of sailing, and if the shippers had held the underwriters to their bargain only 2s 6d would have been payable. I think that the agreed statement of facts makes it clear that there was only one schedule. That is the schedule agreed by the rating committee. And on the agreed statement of facts Spanish steamers were left to underwriters discretion. There was no such thing as a special schedule applicable to Spanish ships, but, of course, there was nothing to prevent the underwriters agreeing to insure them at the general schedule rates, and the buyers contend that that is what the sellers in fact did. If the buyers are right in this contention, the claimants must fail to recover more than 2s 6d, and I think the same result follows if the shippers are right in their contention as to the meaning of the cover note. They say “schedule rate” did not refer to the one and only schedule, namely that fixed by the rating committee, but that it meant the rate underwriters were in fact asking, at their discretion, on the date of sailing. I repeat that, if they are right in this contention, one upon which their agents and underwriters acted, doubtless as to the underwriters with considerable satisfaction, I think

Page 92 of [1939] 4 All ER 88

that the cover effected was not authorised by the contract, even if they were entitled to ship by a Spanish ship.

Question answered accordingly, the appellants to have the costs of this hearing.

Solicitors: Pritchard Sons Partington & Holland, agents for Andrew M Jackson & Co, Hull (for the appellants); Slaughter & May (for the respondents).

W J Alderman Esq   Barrister.

Morley v Staffordshire County Council

[1939] 4 All ER 92


Categories:        TORTS; Negligence        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND DU PARCQ LJJ AND BENNETT J        

Hearing Date(s):        4, 5 OCTOBER 1939        


Negligence Children Allurement Child injuring itself upon obvious danger not part of the allurement.

The defendants, a highway authority, for the purpose of repairing a highway, had roped off a portion of it, and had there stacked a quantity of the steel lattice work which is used for reinforcing the concrete bed of the road. Near this stack of metal was a heap of sand, with which children had been allowed to play. A child, six years of age, who had been playing with the sand, passed over a very rough part of the road and injured himself by colliding with the stack of metal. It was contended that the heap of sand was an allurement to children and that there was a causal connection between that and the injury received from the stack of metal:

Held assuming the child to have been a licensee, the metal was not a trap, and such allurement as there was in the sand had no causal connection with the accident. The defendants were, therefore, not liable.

Notes

This case is of importance as an unsuccessful attempt to extend the doctrine of allurement. It was sought to be said that the child had been allured into a place of danger, but it is held that this will not avail an infant plaintiff who runs into what is an obvious danger.

As to Allurement, see Halsbury (Hailsham Edn), Vol 23, pp 584586, para 836; and for Cases, see Digest, Vol 36, pp 69, 70, Nos 445453.

Cases referred to

Liddle v North Riding of Yorkshire County Council [1934] 2 KB 101; Digest Supp, 103 LJKB 527, 151 LT 202.

Appeal

Appeal by the defendants from a decision of Hawke J, dated 2 March 1939. The facts are fully set out in the judgments.

P E Sandlands KC and Kenelm Preedy for the appellants.

J Bourke for the respondents.

5 October 1939. The following judgments were delivered.

MACKINNON LJ. The Staffordshire County Council in 1938 were engaged in reconstructing a road. They were taking out the old roadway, and replacing it by a concrete road. From Milton to Leek they had stopped the thoroughfare, as they were entitled to do, by putting a barrier at the northern end right across the road, and a barrier at the

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southern end half-way across the road, with a rope, sometimes put up and sometimes left down, across the remaining part of the road. There were notices at either end of this portion of the road where the barriers were, stating that the road was closed. There were also some ropes roping off the metalled part of the road which was being renewed, leaving inside the ropes, up against the hedges, a footpath for people to get to the houses along there. There were heaps of sand in various parts of these works, and there was, in particular, one heap of sand outside the southern barrier on the side of the road.

There was evidence that, notwithstanding the stopping of the highway, children, without any interference from the defendants workmen, were allowed to play with this sand in this heap and in other heaps, in the portion of the road which was being renewed. The infant plaintiff had been playing with this sand. Having done so, he walked into the closed part of the roadway, at a place where the road had been excavated and where a very rough state of the surface existed. There was a hole dug in the roadway. There were various planks and other things lying about. Altogether it was quite clearly a part of the roadway that certainly no vehicle could use and no pedestrian could use except with considerable care.

On the afternoon of 24 May, in the course of supplying material for this roadmaking, the defendants servants had, at the lower end, unloaded a number of sheets of metal, or rather, not sheets but nets, as it were, of metal, which were to be used as the steel reinforcement of the concrete roadway. They were light steel nets, of very large mesh, with projecting pieces of wire and metal coming out of the edges. They were piled up there by the road. When the infant plaintiff was walking or proceeding through this very rough part of the highway, or what once had been the highway, he, in some way as to which there is no evidence, and as to which nothing is known, caused one of his eyes to come in contact with some part of one of these metal sheets or nets, resulting in a very severe injury to his eye.

The question is whether in those circumstances the defendant county council is liable to pay compensation to the child and his father for the expenses incurred with regard to this accident to the child. That involves two questions. First of all it was suggested by counsel for the appellants that the child was a trespasser when he was in this piece of roadway which was proximate to this stack of metal. We have had considerable argument upon the question whether the child was a trespasser or a licensee. While I have very grave doubt as to the proper answer to thatthe evidence is left in considerable confusionit is perfectly manifest that this roadway had been closed as a highway. It is also manifest that side paths had been arranged for pedestrians which did not seem to include this particular part where the boy must have been when he hit this metal. There is, however, some evidence that, notwithstanding these notices and the closing of the highway, and the

Page 94 of [1939] 4 All ER 92

provision of these roped-off footpaths, some people did use this little piece of excavated roadway. I think it is quite likely that they did so, because people living on the east side of the roadway, if they wished to go towards Milton by the footpath which had been roped off and theoretically maintained by the county council, would have to go a long way in the opposite direction across the road, and then turn back on their path. As I say, I have very great doubt whether the proper answer to that first question is not that the child was a trespasser; but I do not think it necessary to make a definite finding about that because, even if the child was a licensee at this spot, I think the defendants are not liable. I will assume when the child was at this spot in the proximity of this metal heap, he was there as a licensee.

If that be so, what is the duty of the county council to a child upon its premises, upon its highway, who is in the status of a licensee? I think the nature and extent of it is expressed quite succinctly and quite accurately in one paragraph in the judgment of Scrutton LJ, in Liddle v Yorkshire (North Riding) County Council, at p 112:

In my opinion to make the landowner liable for injury to a child on his land, it must be proved that he expressly or impliedly invited children on to his land, and either did an act which caused damage with knowledge that it might injure the children, or knowingly permitted the existence on his land of a hidden danger or trap. The invitation might be implied from knowledge that children frequented the land without interference. For obvious dangers, such as unguarded water, natural or artificial, he will not be liable.

There is, perhaps, only one slight addition which ought to be made to the statement in that paragraph, that is, that he will be liable if, in addition to permitting the child upon the land, he has, in regard to a particular object upon the land, an object which has in it a hidden danger, allured the infant plaintiff by putting an object which has, in the words of Hamilton LJ, the two qualities of fascination and fatality.

Assuming, as I have said, that this child was in the neighbourhood of this metal, with the leave and licence of the county council, I am unable to see, upon the facts, that there was any allurement. The evidence does not suggest that there was, in this heap of metal, any allurement. It is said that the father of the child was allured to it, because he was interested in its bright appearance. It was not as rusty as such metal usually is. He was so allured by that fact that he went to examine it, I suppose, to see whether it was aluminium or new steel, or what it was. But it is not suggested that there was any allurement to the child at all, because there is no evidence of it attracting him in any way. Consequently I think there is no trap in that. There is nothing in the nature of a trap. It was not like the turntable in one of the cases, a thing which would be set in motion by a child, and, when set in motion, would be dangerous. There was no movement about this heap of metal; it was entirely static. Thirdly, I think there was no concealed danger about it. It was as much, or as little, dangerous as any other obstacle on which a human being might hurt himself or hurt herself by violently impinging himself against

Page 95 of [1939] 4 All ER 92

it. It was as much, or as little, dangerous as barbed wire along a fence. It is just, I think, as impossible to suggest that if a landowner gave a licence to children to go into his close, and there was some barbed wire in the fence round that close, he would be liable to the child who ran into the barbed wire and out himself or injured his eye. So here, I think it is impossible to say, this being a manifestly spiky piece of iron put there, and manifestly dangerous if you run into it, that there was any concealed danger about it. “For obvious dangers,” as Scrutton LJ, said in the last sentence in the paragraph I quoted, “such as unguarded water, natural or artificial, he will not be liable.” This, I think, was an obvious danger, in so far as it was a danger at all; just as obvious as the fact that there were pieces of wood and other obstacles which would be dangerous if somebody tripped over them, and fell and broke their arm.

The result, assuming, as I have said, that this child was there as a licensee, is that the defendants are not liable for this disastrous accident to the child; because, in so far as this metal was a danger, it was an obvious danger; and, therefore, not one for which the landowner is liable even to a child. For these reasons, I think that this case was wrongly decided, that the appeal should be allowed, and judgment entered for the defendant council with costs.

DU PARCQ LJ. I agree; and I add a few words of my own only because we are differing from the judge. I agree that there may be some doubt as to whether this child was a trespasser or a licensee. I should not be prepared to disagree with the finding of the judge that he was a licensee. I think that there was evidence that members of the public were permitted by the defendants to walk upon the part of the road on which this heap of metal was placed.

It seems to me, however, that all the discussion that took place about the heap of sand, as to how far it was scattered, is really a little beside the point. I do not think the heap of sand has very much importance in this case. It is true that, if it had not been for the heap of sand, the child would not have been in this neighbourhood at all; but there is not enough to show any causal connection between the fact that the child had played with the heap of sand and afterwards injured himself on this metal stack. The fact is that the child was walking or running upon the roadway near the stack of metal. As I say, I will assume that he was there as a licensee. I accept the finding of the judge that the child suffered his injuries not when he was clambering on to the stack but, to use his own expression: “I was going round the corner of the iron things, and one went in my eye”I am there quoting from the judgment in the court below.

If so, the question is simply this. The child, who is a licensee walking along the road, runs into a stationary object which has been left there. Anybody of age to understand danger at all, with the most rudimentary knowledge of what objects are dangerous, knows that if you run into a

Page 96 of [1939] 4 All ER 92

hard stationary object, the part of your body which collides with it will be hurt, and may be more or less seriously injured. In those circumstances, if the owner or occupier of the land leaves a stationary object that will injure anybody who runs into it, is he liable for the injury caused to a child of six who does run into it? I think the answer to that question must be No. As has been said, it was not a trap; it was not a concealed danger. The important distinction between the cases of children and the cases of grown-up persons, when one is considering the position of a licensee and the question of what is a trap, is this. You may well have something which to a child constitutes a temptation, whereas to a grown-up person it would not constitute a temptation at all. No grown-up person is very likely to be tempted to get on to a turntable, and play about on it; but a child is very likely to be so tempted; and everybody knows it. But that point does not arise in this case at all. The question of allurement goes when one understands that it was an unhappy accident which might have occurred to a very careless, blind, or short-sighted grown-up person. I think it is quite impossible to sayand it would be contrary to all the decisions to saythat an occupier of land is bound in respect of a licensee, whether a child or an adult, to make his land absolutely safe, and to secure that there are no objects upon it with which a child, from whom one must not expect too much care, may collide, or by which he may injure himself if he does collide. One has only to state the proposition to see that such a burden could not possibly be imposed upon any owner or occupier of land. In some cases it is right to say that a child is of such tender years that the invitation or licence cannot be taken to extend to it unless accompanied by a grown-up person who does understand danger, but, in this case, it would be idle to say, with regard to that child of six, accustomed to play by himself, and not, I should think, a delicately nurtured child, but accustomed to take some responsibility, however tender one may think his age, that he did not know perfectly well that: if you run into a sharp object, you will hurt yourself. No blame, therefore, attaches to the defendants; and they were not under any duty to the plaintiff which they have failed to perform. I agree that this appeal must be allowed.

BENNETT J. I also agree. I think the case should be decided upon the assumption that the  plaintiff was a licensee. Upon that footing the law to be applied is to be found in the judgment of Scrutton LJ, in Liddle v Yorkshire (North Riding) County Council, at p 112.

It seems to me to be plain that this heap of lattice-work was not a trap. On the question of whether, in any real sense of the term, it could be regarded as dangerous, one can only say that there is nothing with which a child cannot hurt itself. It can hurt itself, put its eye out, by falling into a hedge, if it happens to collide with or strike its eye against a sharp piece of wood. I, myself, would say in this heap

Page 97 of [1939] 4 All ER 92

of lattice-work there was really nothing dangerous in the sense in which that term has been used in the cases applying to children.

Appeal allowed with costs.

Solicitors: Sharpe Pritchard & Co (agents for H L Underwood, Stafford, clerk to the Staffordshire County Council (for the appellants); Abberley & Walker, Burslem (for the respondent).

C St J Nicholson Esq   Barrister.

Hagan and Ors v Effuah Adum and Ors

Hagan and Ors v Araba Tanuah

[1939] 4 All ER 97


Categories:        COMMONWEALTH; Commonwealth countries: SUCCESSION; Administration of Estates: ADMINISTRATION OF JUSTICE; Courts        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, LORD ALNESS, LORD FAIRFIELD        

Hearing Date(s):        13, 15 JUNE, 7 JULY 1939        


Privy Council West Africa Succession Jurisdiction of Native Tribunal Native Administration Ordinance 1928, c iii, s 43.

Under the Native Administration Ordinance 1928, the Native Tribunal have jurisdiction to try suits and matters relating to the succession to the property of a deceased native who had, at the time of his death, a fixed place of abode within the state, and such jurisdiction includes the valuation and distribution of the estate. The jurisdiction is not precluded by a grant of letters of administration to the estate of the deceased by the Divisional Court, nor by the fact that the share of the estate in dispute exceeds £100 in value.

Notes

The decision in this appeal decides points in the administration of the law of succession in the colony, which have been debated for some time. It is confined to the estates of natives resident in the colony at the time of their death.

As to West African Courts, see Halsbury (Hailsham Edn), Vol 11, p 203, para 386; and for Cases, see Digest, Vol 17, pp 452, 453, Nos 212216.

Cases referred to

Connecticut Fire Insurance Co v Kavanagh [1892] AC 473; 16 Digest 155, 551, 61 LJPC 50, 67 LT 508.

Introduction

Consolidated appeals from two judgments of the West African Court of Appeal, Gold Coast Session (Sir Donald Kingdon CJ (Nigeria), Webber CJ (Sierra Leone), and Woolhouse Bannerman J), dated 19 December and 21 December 1935. By the judgment, dated 19 December 1935, the Court of Appeal dismissed the appeal of the appellants from a judgment of the Court of the Provincial Commissioner of the Central Province of the Gold Coast Colony, dated 12 July 1935; and by their judgment, dated 21 December 1935, the Court of Appeal allowed the appeal of the respondent Araba Tanuah from a judgment of the Divisional Court, Cape Coast (Strother-Stewart J) dated 25 March 1935. The judgment of their Lordships was delivered by Lord Thankerton.

Roger Pezzani for the appellants.

Hon C R R Romer KC and Alan Orr for the respondents.

Page 98 of [1939] 4 All ER 97

7 July 1939. The following judgments were delivered.

LORD THANKERTON. These are two appeals, consolidated by order of the Board, against two judgments of the West African Court of Appeal, dated respectively 19 December, and 21 December 1935, in two suits relating to the estate of the late Thomas Hagan, a native, who died at Winneba in the Central Province of the Gold Coast Colony on 9 July 1931. The appellants, brothers and sister of the deceased, were granted letters of administration of his personal estate by the Divisional Court of the Province on 22 February 1932. The respondents Effuah Adum and her children claim to be interested in the estate, both real and personal, as the domestic “slave-wife” and children of the deceased. The respondent Araba Tanuah claims to be interested in the estate as head of the family of the deceased. It is common ground that the succession to the estate falls to be determined according to native customary law. The first suit, which may be referred to as suit A, was initiated by the issue of a summons in the Native Tribunal of Winneba on 21 November 1933, by the respondent Adum, on behalf of herself and her children, calling on the present appellants to declare the value of the estate of the deceased, and to show cause why her share, and that of her children, in the estate should not be designated.

On 28 November 1933, the appellants applied to the Court of the Provincial Commissioner of the Central Province for the transfer of the suit to the Divisional Court on the ground that the Native Tribunal had no jurisdiction to try it, and the Native Tribunal thereupon suspended the hearing. On 2 February 1934, the Court of the Provincial Commissioner dismissed the application, finding as a fact that the deceased had lived and died at Winneba, and holding that the Native Tribunal had jurisdiction. The appellants appealed to the Divisional Court of the Province, but withdrew the appeal by leave of the Court on 27 October 1934, with a view to reaching an amicable settlement. On 21 December 1934, hearing notices in suit A were issued, and on 3 January 1935, the Tribunal granted an ex parte motion by the respondent Araba, as head of the family of the deceased, to be joined as co-plaintiff. On 8 January 1935, the hearing before the Native Tribunal was resumed. The appellants again objected to the jurisdiction of the Tribunal, but this objection was over-ruled, in view of the decision of the Provincial Commissioners Court on the motion for transfer. The appellants thereafter refused to cross-examine or give any statement before the Tribunal, and, after hearing evidence, the Native Tribunal held that the value of the personal estate had been proved to be about £15,000, and gave judgment in favour of the respondent Adum and her children for one-fourth of the £15,000, which was £3,750, plus one-fourth of the immovable properties, and the remaining three-fourths of the amount of the personal estate and the immovable properties were to be under the control of the respondent Araba Tanuah, the head of the family of the deceased.

The appellants appealed to the Court of the Provincial Commissioner, but, at the hearing of the appeal on 12 July 1935, the court sustained

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an objection by the respondents that the appeal was not competent in that court, and dismissed the appeal. On an appeal, this decision was affirmed by the West African Court of Appeal on 19 December 1935. This judgment is the first of the two judgments against which this appeal is taken.

Turning now to the second suit, which may be called suit B, the writ was issued in the Divisional Court of the Central Province on 6 February 1936, by the respondent Araba Tanuah against the appellants, claiming as head of the family for herself and on behalf of other members of the family, of which she stated the appellants were members, that account should be taken of all the personal estate of the deceased, which had come into the possession of and under the control of the appellants prior to and since the grant of letters of administration by the court to the appellants, and for an administration order to be made in regard to the estate. By judgment dated 25 March 1935, the Divisional Court (Strother-Stewart J) gave judgment for the present appellants. The judge was satisfied that the respondent Araba Tanuah was head of the family to which the appellants belong, but he held that she had not established such an interest as would entitle her to call the appellants to account, as it had not been proved that she or the members of the family, other than the appellants, were entitled to any portion of it. The judge disregarded the decision of the Native Tribunal in suit A, although it had been submitted to him that that judgment constituted res judicata. On an appeal by the respondent Araba Tanuah, the West African Court of Appeal on 21 December 1935, set aside the judgment of the Divisional Court, and granted the respondent the relief claimed by her. This judgment is the second judgment here appealed against. The Court of Appeal agreed with the finding of the Divisional Court that the respondent was head of the family, but they held that the question whether the property was self-acquired or whether the respondent had any interest in it was decided by the Native Tribunal in the respondents favour and was binding.

In the first place, an attempt by the appellants to found on an alleged arbitration award, prior in date to the decision of the Native Tribunal, may be disposed of. It is perhaps enough to say that the contention that there was a binding award, which precluded the respondent Adum from suing on anything but the award, appeared for the first time in the body of the appellants case in this appeal, but it does not appear among the reasons of appeal. Further, although some of the arbitrators gave evidence as to it at the hearing before the Native Tribunal, its date is not proved, and the evidence was quite insufficient to prove that the award was accepted as final and binding by the parties. It is not surprising, therefore, to find the present appellants pleader, at the hearing before the Divisional Court on 20 February 1935, maintaining that the arbitration did not eventuate into an award. Their Lordships, in these circumstances, are not prepared to entertain, at this late stage,

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such a contention, as they are not satisfied that the evidence establishes beyond doubt that the facts, if fully investigated, would have supported the new plea. Connecticut Fire Insurance Co v Kavanagh, at p 480.

The appellants main contentions challenge the jurisdiction of the Native Tribunal over the subject matter of suit A. Suit A relates to the whole estate of the deceased, both real and personal, while suit B relates only to the personal estate, but the judgment against the appellants in suit B assumes the validity of the judgment of the Native Tribunal. The jurisdiction of a Paramount Chiefs Tribunal at the material date, was conferred by s 43 of the Native Administration Ordinance 1928, c iii, which provided as follows:

43.(1) A Paramount Chiefs Tribunal shall have and may exercise within the state of such Paramount Chief civil jurisdiction for the hearing and determination of the causes and matters hereinafter mentioned in which all parties are natives and the defendant was at the time when the cause of action arose within such state or in which any party not being a native consents in writing to his case being tried by such Paramount Chiefs Tribunal.

Provided always that a Paramount Chiefs Tribunal shall not, unless the parties shall agree thereto, have any jurisdiction in any cause or matter where it appears either from express contract or from the nature of the transactions out of which such cause or matter shall have arisen that the parties expressly or by implication agreed that their obligations in connection with such transactions should be regulated substantially according to the provisions of some law or laws other than native customary law, or where otherwise some other such law or laws as aforesaid is or are properly applicable thereto.

(2) The causes and matters hereinabove in this section referred to are the following:

(a) Suits to establish the paternity of children, other than suits in which some question affecting rights arising out of any Christian marriage is or may be involved;

(b) Suits relating to the custody of children, other than suits in which some question affecting the rights arising out of any Christian marriage is or may be involved:

(c) Suits relating to the ownership, possession, or occupation, of lands situated within the state of such Paramount Chief;

(d) Suits for divorce and other matrimonial causes between natives married under native customary law;

(e) Personal suits in which the debt, damage, or demand does not exceed one hundred pounds;

(f) Suits and matters relating to the succession to the property of any deceased native who had at the time of his death a fixed place of abode within the state; and

(g) Any other causes and matters by this ordinance expressly assigned to a Paramount Chiefs Tribunal or to a Divisional Chiefs Tribunal.

In the first place, the appellants maintained that it had not been established that the appellants were “at the time when the cause of action arose within such state.” This question of fact, however, was decided against the appellants on their motion for transfer of suit A by the judgment of the Provincial Commissioners Court dated 2 February 1934, the appeal against which was withdrawn by the appellants, and their Lordships are not prepared to entertain this contention now.

In the second place, the appellants submitted that the letters of administration having been granted by the Divisional Court of the Province, suit A should have been instituted in that court, which, if it had so desired, could have referred any question relating to native customary law to a Native Tribunal under s 59(1) of the Ordinance.

Page 101 of [1939] 4 All ER 97

They further suggested that, by her part in suggesting that the appellants should be the parties to apply for the letters of administration, the respondent Araba Tanuah had elected to proceed in that court; and, lastly, that a writ to have the estate valued and a share declared was not within the head (f) of s 43(2). These points really all turn on the proper construction of head (f). Counsel for the appellants submitted that this head only included suits as to the right to succeed, and did not include such matters as valuation of the estate, a declaration as to the amount of the share to which a successor was entitled, or the distribution of the estate. Their Lordships see no reason for such a narrow construction of the words “suits and matters relating to the succession to the property,” as, in their opinion, distribution of the estate naturally comes within the meaning of these words, and valuation of the estate is necessarily incidental to ascertainment of the shares for the purpose of distribution. They agree with the view expressed by both the courts in suit A that that suit is a suit relating to the succession to the property of the deceased within the meaning of head (f) of s 43(2). If this be so, there can be no reason why letters of administration should not be obtained in one court, and proceedings relating to the distribution of the estate should be dealt with by another court. There can be no reason for rendering nugatory the jurisdiction conferred by head (f), and none of the courts below have felt any practical difficulty in the matter. Accordingly the application for letters of administration in the Divisional Court cannot preclude any party from instituting proceedings relative to distribution before the Native Tribunal.

The appellants maintained, thirdly, that suit A was a personal suit for more than £100, and that the jurisdiction of the Native Tribunal was excluded by the terms of head (e) of s 43(2), and, fourthly, it being admitted that two houses which formed part of the succession were not situated within the state, that jurisdiction was excluded by the terms of head (c) of s 43(2). Both these contentions are based on a construction of s 43(2) which their Lordships do not accept. In their opinion, while each of the heads (a) to (g) is subject to the provisions of sub-s (1) of s 43, each head in sub-s (2) affords a self-contained subject of jurisdiction, which is independent of the other heads, and it is illegitimate to import the qualifications or conditions expressed in one of the heads into any of the other heads. From this it follows that as suit A falls within head (f) and satisfies the provisions of sub-s (1), heads (c) and (e) of sub-s (2) are irrelevant on the question of jurisdiction. Both courts below took the same view. Their Lordships are therefore of opinion that the Native Tribunal had jurisdiction to deal with suit A.

Lastly, the appellants sought to have the judgment of the Native Tribunal reviewed on the merits by this Board, but their Lordships agree with the West African Court of Appeal that the judgment of the

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Native Tribunal is now final and binding on the appellants. That judgment was given on 8 January 1935, and the appellants appealed to the Court of the Provincial Commissioner, leave to appeal being granted on 4 May 1935. That appeal was dismissed on the ground that suit A was a suit relating to the succession of property, in regard to which the only right of appeal lay to the Court of the District Commissioner under s 74 of the Ordinance, and was not a suit or matter relating to the ownership, possession or occupation of any lands, an appeal in which would lie to the Court of the Provincial Commissioner under s 75 of the Ordinance. As already pointed out, this judgment, the reasons for which are in conformity with the views expressed by their Lordships, is final and binding on the appellants. Under s 76 of the Ordinance, no appeal lies under s 74 unless notice of appeal is given within four months from the date of a decision by a Paramount Chiefs Tribunal. The appellants did not give notice of an appeal under s 74 within the period so prescribed, and the fact that under s 29 of the Commissioners Ordinance, c 23, 1928, every Provincial Commissioner is ex officio a District Commissioner cannot avail to remedy this omission on the part of the appellants. The judgment of the Native Tribunal is therefore final and binding on the appellants, and it follows that the Court of Appeal were right in setting aside the judgment of the Divisional Court in suit B, and in holding that the respondent Araba Tanuah had sufficient interest to entitle her to an accounting by the appellants, and in granting her the relief claimed by her.

The appeal, accordingly, fails as regards both suits, and their Lordships will humbly advise His Majesty that the appeal should be dismissed and that the judgments appealed against should be affirmed. The appellants will pay to the respondents their costs in the appeal.

Appeal dismissed with costs.

Solicitors: A L Bryden & Co (for the appellants); Linklaters & Paines (for the respondents).

T A Dillon Esq   Barrister.

R v Army Council, Ex parte Sandford

[1939] 4 All ER 102


Categories:        CONSTITUTIONAL; Armed Forces        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREYS JJ        

Hearing Date(s):        19 OCTOBER 1939        


Royal Forces Army Applicant convicted on five charges by court-martial Convictions on four charges quashed by Army Council, but conviction on remaining charge confirmed Whether Army Council bound to mitigate, remit or commute sentence Army Act, ss 57(1), 70(1), (2) Rules of Procedure 1926 (SR & O, 1926, No 989), r 54(a), (b), (c).

The applicant was convicted on five charges of felony before a court-martial and sentence of dismissal from the service was promulgated on 5 March 1934. In May 1934, the Army Council, having reviewed the proceedings at the applicants request, quashed the convictions on four of the charges, but did not mitigate, remit or commute the sentence

Page 103 of [1939] 4 All ER 102

in view of the serious nature of the remaining chargeuttering a forged documentin respect of which the conviction was confirmed. The applicant applied for an order that the Army Council do mitigate, remit or commute the sentence so passed upon him, and contended that, upon a true construction of Rules of Procedure 1926, r 54, made under s 70 of the Army Act, it was the statutory duty of the Army Council so to mitigate, remit or commute the sentence as some of the convictions had been quashed:

Held upon a true construction of r 54, it did not necessarily follow that, because the convictions on four charges were quashed, the maximum sentence could not stand with reference to the remaining conviction.

Notes

The construction of the rules governing the procedure in respect of army offences have a particular importance at the present time, which makes this decision upon the powers of the Army Council, when reviewing the findings of a court-martial, of more than usual importance. The question that arises upon the construction of the rule is the familiar one whether the word “shall” used therein is imperative or merely permissive.

As to Confirmation of Sentences of Courts-martial, see Halsbury (Hailsham Edn), Vol 28, pp 597, 598, paras 12251227; and for Cases, see Digest, Vol 39, pp 341, 342, Nos 271277.

Introduction

Motion for a writ of mandamus that the Army Council be commanded according to law to mitigate, remit or commute a sentence promulgated on 5 March 1934, whereby the applicant, Herbert Ronald Sandford, was dismissed the service of H M Army in India. The facts and the arguments are set out in the judgment of Lord Hewart LCJ.

D N Pritt KC and S A Kyffin for the applicant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Valentine Holmes for the respondents.

19 October 1939. The following judgments were delivered.

LORD HEWART LCJ. The grounds of this application are set forth in the statement served with the application for leave to issue notice of motion. By para 3 of that statement, over the hand of the applicant, it appears that the grounds are:

that the said applicant having been charged before a court-martial with five charges of felony and having been convicted on all the said five charges, which findings were duly confirmed and sentence promulgated of dismissal of the applicant from the service, the army council having reviewed the proceedings before the said court-martial and having quashed the convictions on four of the said charges did not mitigate remit or commute the said sentence as it was their statutory duty to do in accordance with the Rule of Procedure 54 (B) made under sect. 70 of the Army Act.

There is included among the papers, which are before the court, an affidavit sworn by the applicant on 19 April 1939. It appears from that affidavit that between 8 January and 29 January 1934, the applicant was tried by a general court-martial held at Quetta and Karachi on five charges of offences under s 41 of the Army Act. The affidavit states:

The said charges were two charges of forging documents with intent to defraud and three charges of uttering forged documents knowing the same to be forged with intent to defraud. … I was found guilty on all the said charges, these findings were duly confirmed and by sentence promulgated on Mar. 5, 1934, I was dismissed from the service.

Page 104 of [1939] 4 All ER 102

The affidavit goes on to recite that in May 1934, a petition was made to the Army Council to review the proceedings, and that the Army Council did review the proceedings, and a decision was given, as appears by letter dated 19 July 1934. The letter is written by command of the Army Council, and the writer of this letter from the War Office states:

As a result of this consideration the Secretary of State for War has been advised that the convictions on the first, second, fourth and fifth charges shall be quashed and the council have therefore directed that all record of the convictions on those charges is to be erased from relevant documents and that you are to be relieved of the consequences of the said convictions. In view of the nature of the third charge upon which the conviction stands, the Army Council can see no ground for interfering with the sentence passed by the court and the necessary notification will be published in the London Gazette of Aug. 3, 1934.

It has been conceded at the bar, and it appears from this affidavit, that the third charge in this document was a charge of uttering a forged document. It is clear, therefore, that the applicant for this rule was convicted of uttering a forged document; that he was thereupon dismissed the service of His Majesty, and that, upon petition to the Army Council, the conviction and the sentence were ordered to stand, and the necessary notification was duly published in the Gazette.

It is in those circumstances that now, in 1939, a writ of mandamus is sought from this court to order that the Army council do mitigate, remit or commute the sentence so passed upon the applicant. We have had an argument in support of the application, an argument turning upon the construction of the Army Act and of certain of the Rules of Procedure 1926, made under the Army Act; and the counsel for the applicant permitted himself to say, among other things, that there was no escape from the construction of the Rules of Procedure for which he was contending. In my opinion, the argument so made was entirely misconceived, and I agree entirely with the observations which the Attorney-General has been good enough to make; and I entirely fail to discover in those observations or any part of them any fallacy such as is suggested by counsel for the applicant, or any other fallacy.

The root of the matter apparently derives from a misreading of the Rules of Procedure 1926, r 54. By that rule it is provided as follows:

(A) Where a sentence has been awarded by court-martial in respect of offences in several charges, and the confirming authority confirms the finding on some but not on all of those charges, that authority shall take into consideration the fact of such non-confirmation, and shall mitigate, remit, or commute the punishment awarded as may seem just, having regard to the offences in the charges the findings on which are confirmed. (B) Where a sentence has been awarded by a court-martial in respect of offences in several charges and has been confirmed, and any one of those charges or the finding thereon is found to be invalid, the authority having power to mitigate, remit or commute the punishment awarded by the sentence shall take into consideration the fact of such invalidity, and mitigate, remit, or commute the punishment awarded according as may seem just, having regard to the offences in the charges which with the findings thereon are not invalid, and the punishment as so modified shall be as valid as if it had been originally awarded only in respect of those offences. (C) Where a sentence passed by a court-martial has been confirmed, and is found from any reason to be invalid, the authority who would have had power to commute the punishment awarded by the sentence if it had been valid may pass a valid sentence, and the sentence so passed shall have the

Page 105 of [1939] 4 All ER 102

same effect as if passed by the court-martial, but the punishment awarded by that sentence shall not be higher in the scale of punishments than the punishment awarded by the invalid sentence, nor, in the opinion of the said authority, be in excess of the last-mentioned punishment.

The argument which is put forward is that, because under that rule it is provided that the authority, having power to mitigate, remit or commute the punishment awarded by the sentence, shall take into consideration in this case the fact that some of the charges wore not supported, were not finally sustained, therefore there must of necessity be a mitigation, remission or commutation of the punishment awarded in this third charge relating to forgery. If that were the true construction of the rule, the result would be, I think, a manifest absurdity. It would really mean, as the Attorney-General has pointed out, that a series of absurd results, whether looked at from the point of view of the greatest punishment, or from the point of view of the lightest punishment, might follow. In my opinion, the important words here are the words “according as may seem just.” It is to be remembered that these Rules of Procedure are made under and with reference to the Army Act itself, and by s 57 of the Army Act there are the clearest possible provisions with regard to commutation and remission of sentences. It is provided by s 57(1):

The confirming authority may, when confirming the sentence of any court-martial, mitigate or remit the punishment thereby awarded, or commute such punishment for any less punishment or punishments to which the offender might have been sentenced by the said court-martial, or if such punishment is death awarded for the offence of murder, then for penal servitude or such less punishment as in this Act mentioned, or, if such punishment is cashiering awarded for an offence under sect. 16 of this Act, then for dismissal from His Majestys service or such less punishment as is in this Act mentioned. The confirming authority may also suspend for such time as seems expedient the execution of a sentence.

The argument is adduced with apparent seriousness, that, where more charges than one are made and one of those convictions is quashed, it necessarily follows that the maximum sentence cannot stand with reference to any other charge, it necessarily follows that the sentence passed with reference to the offence which is confirmed, where the conviction is confirmed, must be modified. I see no such provision in the Army Act. I see no such provision in the Rules of Procedure 1926, and the result would be manifestly absurd. If the Rules of Procedure 1926, were in this respect, on the true construction of them, or in any respect inconsistent with the provisions of the Army Act, it is quite clear that the Rules would be pro tanto superseded by the provisions of the Army Act. S 70(2) of the Army Act contains this proviso:

Provided always, that no such rules shall contain anything contrary to or inconsistent with the provisions of this Act.

The conception of a sentence, which has been adduced in the argument of the applicant, is that it is, and is of necessity, a composite whole

Page 106 of [1939] 4 All ER 102

made up of several distinguishable parts, and that, if in any respect a sentence is modified, it follows that some part of the punishment must necessarily disappear, be remitted or commuted. I see no support for that remarkable contention. There is no reason at all, in my opinion, under these rules or otherwise, why a sentence passed in respect of one offence may not remain unimpaired and of full force and effect, notwithstanding that, upon review, some other convictions may at the same time have been found to be unsustainable.

In my opinion it is perfectly obvious that this application for a writ of mandamus is wholly misconceived. It depends upon fundamental errors of construction, and, I think, therefore, the motion must be dismissed.

CHARLES J. I agree. The question involved in this motion really is: is r 54 mandatory? It does not, in my view, in any way conflict with the Army Act, and, if it be not mandatory, the Army Council appears to have followed meticulously the rule that was laid down for their guidance.

It has been argued that the presence of the word “shall” in r 54 must of necessity import a mandate. In my opinion that is quite fallacious. You must look at the whole rule in order to come to the proper conclusion whether or no the word “shall” imports a mandate, or whether, having read the whole rule, it becomes permissive in spite of the word “shall.” I will read the words of r 54(B), although my Lord has read them because there are certain other words, in addition to those which my Lord has referred to, which, in my view, are of importance:

Where a sentence has been awarded by a court-martial in respect of offences in several charges and has been confirmed, and any one of those charges or the finding thereon is found to be invalid, the authority having power to mitigate, remit or commute the punishment awarded by the sentence shall take into consideration the fact of such invalidity, and mitigate, remit, or commute the punishment awarded.

and then come these words:

according as may seem just, having regard to the offences in the charges which with the findings thereon are not invalid, and the punishment as so modified shall be as valid as if it had been originally awarded only in respect of those offences.

In this case, the matter coming before the Army Council, was considered by them, and as a result of their consideration, following, as I say, meticulously the duties put upon them by the rule, the following letter was written:

The Secretary of State for War has been advised that the convictions on the first, second, fourth and fifth charges shall be quashed, and the council have therefore directed that all record of the convictions on those charges is to be erased from relevant documents and that you are to be relieved of the consequences of the said convictions.

Now refer to the words of the rule in order to see whether they have

Page 107 of [1939] 4 All ER 102

acted properly and in accordance with the rule or not. They have to act:

according as may seem just, having regard to the offences in the charges which with the findings thereon are not invalid.

The letter goes on:

in view of the nature of the third charge upon which the conviction stands, the Army Council can see no ground for interfering with the sentence passed by the court.

They are then correctly applying their minds to the rule which directs their conduct. Having considered the whole matter, having regard, as they say, to the nature of the third charge, which is a matter that they have to regard under the rule, and looking at the justice of the matter“according as may seem just”they have come to the conclusion that the sentence, which was one of dismissal, should stand. I am quite unable to see that this motion has any solid foundation, and I agree with my Lord that it should be dismissed.

HUMPHREYS J. I am of the same opinion, and I have nothing to add.

Application dismissed with costs.

Solicitors: Henry Massop & Syms (for the applicant); Treasury Solicitor (for the respondents).

Michael Marcus Esq   Barrister.

Goodbarne v Buck and Another

[1939] 4 All ER 107


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        HILBERY J        

Hearing Date(s):        9 OCTOBER 1939        


Insurance Motor insurance Third party risks Policy issued upon proposal form containing false statements Policy subsequently avoided by court “Causing or permitting” an uninsured car to be driven Road Traffic Act 1930 (c 43), s 35(1).

The defendant W.E.B, with the knowledge of the defendant H.A.B, signed a proposal form for a policy to satisfy the Road Traffic Act 1930, in the name of the defendant H.A.B as proposer and registered owner of the van, the vehicle to be driven by W.E.B. The purchase price of the van had been lent to W.E.B by H.A.B, but thereafter H.A.B had no concern with the user of the van which was employed by W.E.B in his business. On 26 August 1938, the plaintiffs husband was fatally injured by the negligent driving of the van by W.E.B. On 12 May 1938, at the suit of the insurance company, the policy was avoided by reason of misrepresentation in the proposal form. This action was subsequently brought against W.E.B whose negligence was not denied, and against H.A.B on the ground (i) that he was the owner of the van and ceased or permitted it to be used when there was not in force a policy of insurance or such a security in respect of third party risks as complied with the Road Traffic Act 1930, Part II, and (ii) that if not the owner, he caused or permitted the user of the car in breach of s 35(1) of that Act:

Held (i) H.A.B was not the owner of the van and could not, therefore, have caused or permitted the driving of it.

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(ii) until the policy was declared void by the court, there was for the purposes of this action, a subsisting policy of insurance in respect of the van.

Notes

There is a well-settled distinction between a voidable and a void contract. It is here decided that where a policy of insurance is avoided at the suit of the insurance company after an accident has happened, it is not possible to say that there was not in existence at the time of the accident a subsisting policy with respect to the motor vehicle concerned.

As to Duty to Insure, see Halsbury (Hailsham Edn), Vol 18, pp 561563, paras 908912; and for Cases, see Digest, Supp, Insurance, Nos 3217r3217ee.

Case referred to

Monk v Warbey [1935] 1 KB 75; Digest Supp, 104 LJKB 153, 152 LT 194.

Action

Action for damages for negligence causing death. The action was brought against two defendants. W E Buck, the first defendant, negligently drove a van and caused the death of the plaintiffs husband. As against him negligence was admitted and judgment recovered, but, as he was in poor financial circumstances, the case proceeded against the second defendant H A Buck, brother of the first defendant, on the ground that he had knowingly caused or allowed the defendant to drive the van at a time when there was not in force in relation to the van a proper policy of insurance. Having regard to certain statements in the proposal, it had been declared in an action brought by the insurance company that the company were entitled to avoid the policy. The present report only deals with the claim against the defendant H A Buck. The facts and arguments of the claim are fully set out in the judgment.

C M Picciotto KC and D McIntyre for the plaintiff.

W A L Raeburn for the defendants.

9 October 1939. The following judgment was delivered.

HILBERY J. On 26 August 1938, about 9.30 pm, the plaintiffs husband was knocked down and very seriously injured by a Ford van, then driven and controlled by the defendant William Edward Buck.

The claim is put against the defendant Henry Albert Buck, in this way. It is alleged that Henry Albert Buck was in truth the owner of the van, and that he caused or permitted the user of that van on the road on the occasion in question when there was not in force in relation to the user of that vehicle, by him or by his brother who was using it, such a policy of insurance in respect of third party risks as complied with the requirements of the Road Traffic Act 1930. In the alternative, if it was not his vehicle, if he was not the owner, none the less he was the person who caused or permitted the user of that vehicle on the road on the occasion in question when there was not in force in relation to that user such a policy of insurance. It is said that William Edward Buck had signed a proposal for an insurance of this vehicle, putting in the name of Henry Albert Buck as the proposer and as the registered owner of the vehicle, and had obtained a policy on the vehicle on the

Page 109 of [1939] 4 All ER 107

basis that Henry Albert Buck was the proposer and the person insured in respect of the vehicle, the vehicle to be driven by the driver named in the proposal, namely, William Edward Buck.

It is proved that in an action which was instituted by the insurance company who issued the policy based upon that proposal, Branson J, on 12 May 1939, declared that that policy was avoided at the suit of the insurance company; and it is said that, as the policy was avoided in law at the suit of the insurance company, the parties were for all purposes in the position of there never having been an insurance in respect of this vehicle, either at the time when it was being driven and the accident occurred, or since it was acquired. Then it is said that Henry Albert Buck, in the circumstances, even whether he became the owner or did not become the owner, by what he did and is shown to have done, caused or permitted the user of this vehicle on the road by his brother, when there was not in force in relation to it and its user, either by him or by his brother, a policy of insurance complying with the requirements of the Road Traffic Act 1930.

Now first of all as to whether the vehicle, on the facts shown before me, was the property or not of Henry Albert Buck, I had better say what I find as a matter of fact in that connection. William Edward Buck, was impecuniousthere is no doubt about that. He had not a van for the purposes of his business. Henry Albert Buck was apparently in a better financial position than his brother. I have not any reason to doubt that his brother, William Edward Buck, went to Henry Albert Buck and asked for a loan to enable him to buy a van, and he got it. Loose phrases are used in a statement that was taken and signed by Henry Albert Buck, in which he said: “I bought the van, and it is registered in my name”; but be it observed that he says: “My own vehicles are insured by the Motor Union” two lines after saying that very thing, and drawing a distinction, I think, between what were his own vehicles, and this van, which he realised was not his own vehicle. These brothers were quite ready to act together, I think unscrupulously, so as to prevent this van being available in the case of an execution put in by the creditors of William Edward Buck and so as, if possible, to safeguard it as some sort of security for Henry Albert Buck for the loan which he had made. I think that is the common-sense inference to be drawn from what they did.

In the suit brought by the insurance company, Branson J, found as a fact:

that William Edward Buck and his brother arranged that the motor van should be registered and insured against third party risks in the name of H. A. Buck and not in the name of W. E. Buck. The scheme was that it should be registered in the name of H. A. Buck, insured in the name of H. A. Buck but should be driven by W. E. Buck in the course of and for the purposes of W. E. Bucks greengrocery business.

I entirely concur and come to the same conclusion of fact. Branson J, later in his judgment, said:

H. A. Bucks only connection with this matter, so far as the evidence before me

Page 110 of [1939] 4 All ER 107

discloses it, is that he had lent his brother the money with which to purchase the van. It is quite plain on the evidence that the van was the brothers van, was to be used in the brothers business and that H. A. Buck had nothing whatever to do with it.

Again, I have not the least hesitation in saying that I come to the same conclusion of fact. H A Buck was not in fact the owner of the van

Now how does that affect the situation? Of course, when the owner of a motor vehicle which, if it is to be used on the road, has to be covered by an insurance which will satisfy the requirements of the Road Traffic Act, allows it to be used on the road (he being the person having the right to prevent it from being used) by another person who is not insured, he breaks one of the statutory duties imposed upon him under the Road Traffic Act 1930, s 35(1), and it has been held in Monk v Warbey that where an owner causes or permits a motor car to be driven uninsured, and the person allowed to drive it, in the course of the driving which is permitted by the owner, tortiously causes damage to another person so that that person suffers damages, and it is then shown that because the tortfeasor was allowed to drive and was uninsured, those damages are lost to and irrecoverable by the sufferer from the tort, then the sufferer can recover a like sum as the measure of what he has been unable to recover, as a result of the breach of the statutory duty which the owner of the car was under not to allow its user uninsured.

Here, the first point to observe is that in fact it is clear that Henry Albert Buck was never the owner, and it was not, therefore, for him to prevent William Edward Buck, to whom he had advanced money to enable him to buy the van, from driving the vehicle. I find nothing on the facts to show that he could, once he had lent the money and William Edward Buck had bought the vehicle, prevent William Edward Buck from driving it on the road. To say that he had lent him the money to buy it and therefore caused him to drive it, seems to me to give an entirely false meaning to the word “caused.” To lend the money and thus enable a person to have a vehicle which he may or may not insure is one thing. It is quite another thing to say that by enabling him to have a vehicle which he might not insure he caused him to drive it uninsured when he did so drive it. There is in that, to my mind, a complete non sequitur. An act which merely enables a person to be in a position to do something which is illegal is not an act which of itself causes a person to do the illegal act. I should have thought that was too plain for words. It was not, therefore, as in Monk v Warbey, as an owner that he was causing or permitting this van to be driven on the occasion in question.

It is, however, said that he none the less caused or permitted it to be driven on that occasion without a valid insurance satisfying the requirements of the Road Traffic Act, because he himself, on the statement that he has made, is shown to have lent himself to an attempt by his brother to insure it in his name, and he must have known that the result of allowing his brother to do that, when it was not really his car, was to

Page 111 of [1939] 4 All ER 107

enable his brother to take out a policy which, it is said, was void. I am not satisfied at all that either of these brothers thought that they were obtaining a policy which was invalid. I think they thought they could validly do what they were doing. Even if I assume that they must be taken to have known that what they did in entering these answers on the proposal would produce only a policy which was a voidable policy, that seems to me to be a wholly different thing from saying that what they were doing was to bring about a state of affairs where there was a policy which the company would avoid and which would mean that they were driving the car from the start uninsured. It appears to me first of all that this policy, from the time when the proposal form was filled up, and incorrectly filled up, was voidable; but that does not mean the same thing as void. If the insurance company never elected to avoid it, it was a valid and subsisting policy. The insurance company was not bound to come to the court and elect to avoid it. I gave the example, in the course of the argument, of the set of circumstances where one might quite rightly suppose that an insurance company, with a policy which it saw it could avoid, and which a court would have to declare void if it came to the court, might still elect to pay the claim rather than go to the expense and bother of a law suit in order to get a declaration that they were entitled to avoid the policya small claim in the last week of the year of life of the policy. The result is that the car was being driven with a valid insurance upon it at the time of the accident, notwithstanding that it was a voidable one; and the answer here seems to be that this was a voidable policy but not a void one. As between the immediate parties to it, and in considering the rights and liabilities which it purported to create, when once there has been a declaration of avoidance by the court it is, of course, as though the risk had not been written between the parties. None the less, although that is the situation created with regard to the rights and liabilities as between the parties to what purported to be that contract, it does not necessarily mean that, as regards the Road Traffic Act 1930, s 35(1), that policy must be regarded as never having been in existence at all.

The question that has to be determined under the section is whether, at the time when the accident happened, and the motor vehicle in question was being used, some person caused the user by another person of that motor vehicle on the road when there was not in force in relation to the user of the vehicle by that person or that other person, such a policy of insurance or such a security in respect of third party risks as complied with the requirements of this part of the Act. Well, first of all, it is to be observed that the words are “unless there is in force in relation to the user of the vehicle, a policy which satisfies the requirements of the Act.” Therefore, what has to be looked at is this: was there at the time of the user of the vehicle a policy which was then in force? The fact that the rights which were created by that contract of insurance

Page 112 of [1939] 4 All ER 107

were subsequently successfully avoided so far as the immediate parties to it were concerned, does not, it seems to me, prevent there having been a policy in force at the time of the user of the vehicle which is in question, when, as I have said, one remembers that, at that time, there had been no avoidance of it, and might never have been any avoidance at all if the insurance company had chosen to abide by it.

Therefore, looking at the time when the tortious act and the user in question occurred, it seems to me that it follows that there was in fact at that time a policy in respect of the car which was a policy which complied then with the terms of the Act in question, and indeed I think that to hold otherwise would have a very far-reaching effect. For example, this man, I suppose, would be liable and would have no answer to a summons in respect of every day on which it could be shown that he had driven that vehicle, when he had a certificate of insurance of the vehicle which was issued to him because of this voidable policy being in existence; and he would have no answer to a conviction in respect of every day. Moreover, I suppose the result would be, if that contention of the plaintiff here were right, that any owner to-day, who has a policy and has not the least conception that there is any ground on which the company might avoid it but none the less there exists a ground on which the company might avoid it, would find himself in the situation that equally he would, when the company did avoid it, be liable to prosecution in respect of every day that he drove the car, with that certificate in his pocket which appeared to comply with the requirements of the Act. He would be liable as well to pay out of his own pocket the damages of some third party if he quite properly had delegated the driving or let the car be driven by another person with his authority.

I am satisfied that for these reasons the claim fails as against Henry Albert Buck. It is not contended that he had any liability as the superior of William Edward :Buck; it is only contended that his liability arises by reason of the fact that William Edward Buck had no valid insurance under the Act because it had been declared void, and he is impecunious, and, it is said, was caused or permitted by Henry Albert Buck to drive on this occasion. As I have said, I do not think Henry Albert Buck was the owner. I do not think that he, as owner, had caused or permitted the driving of the vehicle. I do not think he caused or permitted the driving of the vehicle because I do not think he was in any position, in relation to the vehicle, which gave him any power or right to prevent the driving of the vehicle, and the vehicle was not being driven because he had given any necessary permission, nor, in my view, can he be sensibly or logically said to have caused the user of the vehicle by William Edward Buck.

Judgment for the defendant H A Buck.

Solicitors: Evill & Coleman (for the plaintiff); W T Donovan (for the defendants).

W J Alderman Esq   Barrister.


David Allen & Sons Billposting Ltd v Drysdale

[1939] 4 All ER 113


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        LEWIS J        

Hearing Date(s):        12, 13, 16, 17 OCTOBER 1939        


Insurance Accident insurance Subsidence or collapse of building Construction of policy Meaning of “subsidence” and “collapse.”

The plaintiffs were owners of a building in London and had insured it under a Lloyds policy against loss or damage caused by subsidence and/or collapse. The currency of the policy was from 20 December 1937, to 19 December 1938. As the result of a dangerous structure notice served on the plaintiffs by the London County Council on 7 October 1938, it became reasonable, if not incumbent, on the plaintiffs to demolish, and they did demolish, the building. The question then arose (i) what was meant in the policy by the words subsidence and collapse and (ii) whether “collapse,” could include demolition in obedience to an order of the London County Council:

Held (i) “subsidence” means primarily sinking in a vertical direction, but may also include settlement ie, movement in a lateral direction.

(ii) “collapse” denotes falling, shrinking together, breaking down or giving way through external pressure, or loss of rigidity or support.

(iii) “collapse” cannot cover intentional demolition, and, as the demolition was in fact due to a settlement which occurred before the commencement of the period covered by the policy, there was no subsidence within that period.

Notes

The insurance of buildings in common commercial practice, but reported cases as to the scope of such policies are few. The judgment in this case examines the extent of the cover provided by a standard form of policy, but the facts of the case rather narrow the scope of its application.

As to Accident Insurance, see Halsbury (Hailsham Edn), Vol 18, pp 542544, paras 862865; and for Cases, see Digest, Vol 29, pp 403, 404, Nos 31913194.

Action

Action against a Lloyds underwriter, sued both for his own share and as representative of the underwriters who subscribed to the policy, on a policy of insurance effected to cover in a sum not exceeding £21,000 loss or damage caused by the subsidence and/or collapse of a building. The £21,000 was apportioned £15,000 on the buildings, £4,000 on the contents of the buildings and premises, and £2,000 twelve months rent subject to a rent clause attached. The action was in respect of insurance on the buildings and rent only. The facts and arguments are fully set out in the judgment.

W T Creswell KC and Frank Soskice for the plaintiffs.

H U Willink KC and E W Roskill for the defendant.

17 October 1939. The following judgment was delivered.

LEWIS J. This is an action brought by David Allen & Sons Billposting Ltd, against Matthew Watt Drysdale, who is an underwriter at Lloyds, for loss under a Lloyds policy of insurance dated 4 January 1938, the defendant being sued both for his share and as representative of the underwriters who subscribed to the policy.

The policy covers the assured in a sum not exceeding £21,000 “against loss or damage caused by subsidence and/or collapse (but excluding loss or damage caused by fire and/or explosion)” in respect of a building

Page 114 of [1939] 4 All ER 113

known as 23, Buckingham Gate and 55a, Catherine Street. The £21,000 is apportioned as follows: £15,000 on the buildings, £4,000 on the contents of the buildings and premises, and £2,000, twelve months rent, subject to the rent clause attached. The rent clause reads:

The underwriters will not be liable for rent unless the said building be destroyed by or so much damaged by the perils insured against as to be rendered unfit for occupation, and then only for such a proportion of the amount of twelve months rent as may be equivalent to the time necessary for reinstating the damage sustained.

This claim extends only to the insurance on the buildings and the rent.

It is conceded that, before the plaintiffs can recover, they must show that subsidence and/or collapse occurred during the currency of the policy, namely, between 20 December 1937, and 19 December 1938, and that, by reason of such subsidence and/or collapse, the plaintiffs have suffered loss or damage. The plaintiffs have undoubtedly lost their building as, in consequence of a dangerous structure notice dated 7 October 1938, served upon them by the London County Council, it was, as is frankly admitted, reasonable to demolish the building, and it has been demolished. Since then, the site has been sold by the plaintiffs.

The perils insured against are two: “subsidence and/or collapse,” and I have to construe the meaning of those words. “Subsidence” means sinking, that is to say, movement in a vertical direction as opposed to “settlement,” which means movement in a lateral direction, but I am of opinion that the word “subsidence” in this policy covers both subsidence in the sense in which I have defined it, and also settlement. If, therefore, any subsidence in the above-mentioned sense occurred between the relevant dates, and if that subsidence caused loss or damage to the plaintiffs, they are entitled to recover such loss or damage.

With regard to the word “collapse,” there has been a good deal of discussion. Put shortly, it was argued on behalf of the plaintiffs that, whatever else it may or may not include, it certainly included demolition in obedience to an order of the London County Council. The defendants, on the other hand, say that “collapse” is not an apt word to describe the intentional demolition of a building. “Collapse” in its primary meaning denotes falling or shrinking together or breaking down or giving way through external pressure or loss of rigidity or support, and I am unable to take the view that in this policy the word covers the intentional destruction or demolition of a building by housebreakers. No authority was cited to me (indeed, I was told that there was none) to assist me in considering the word when it occurs in such a document as the present policy. The plaintiffs, therefore, are unable to bring themselves within the meaning of the word “collapse” in this policy, and it remains to consider whether, on the facts of this case, it is true to say that the loss, if any, incurred by the plaintiffs was caused by subsidence to the building, such subsidence happening during the currency of the policy.

The building was an old building, a nice example of Georgian eighteenth

Page 115 of [1939] 4 All ER 113

century architecture, standing in a row of more or less contemporary buildings in Buckingham Gate. A surveyor who inspected it somewhat cursorily in May 1927, when the parent company of the plaintiffs purchased it, drew attention to the fact that, although it was structurally in a reasonable state of repair, there was evidence of long-standing settlement. In 1933 ties were put in owing, no doubt, to signs of defects in the structure, and again in 1935 work was done, such work principally consisting of bonding the party wall between Nos 23 and 24 to the rear wall of the buildings. I am satisfied that, until this bonding took place, no bonding of any sort had ever been done. A letter, dated 29 May 1935, from the district surveyor, was produced in which he drew attention to the defective condition of the rear wall of the premises.

In the beginning of 1938, the owners of No 24 were minded to demolish their building and erect another on the site, and, arising out of this, the question of the party wall as between the building owners of No 24 and those of No 23, the plaintiffs, became of importance. Surveyors were appointed under the London Building Acts. Operations on the party wall disclosed, by the month of May, serious defects in that wall. Amongst other things, it was found that the wall was nine inches out of plumb at the back and five and a quarter inches out of plumb at the front and contained very serious cracks of old standing, which showed that there had been very considerable settlement.

Some years before, a storey had been added to No 23. A portion of the party wall which had been built upon the old party wall when a new storey was added, was in excellent condition and showed no signs of settlement, thus indicating that the party wall was out of plumb when the additional storey was built. With regard to one particular very serious crack in this party wall, it was abundantly clear that it had existed for many years and before the plaster on the No 23 side of the wall had been put on the wall, this plaster showing no crack at all, although, when it was stripped off at a later date, this serious crack was found behind it in the brickwork. The conditions exposed by the work on the party wall were such that the surveyor of the London County Council deemed it right to serve a dangerous structure notice dated 13 May 1938, upon the plaintiffs with regard to the party wall. The surveyors of the owners of No 24 were of opinion that the condition of the party wall was such as to require complete rebuilding, but maintained that the defects discovered were of long standing.

As the work of demolition of No 24 proceeded it became evident that No 24 was in a precarious condition, so much so that by 7 October 1938, after a warning to the owners of No 24 that very considerable shoring would be necessary to uphold the building whilst the party wall was rebuilt, a further dangerous structure notice was served in respect of, inter alia, the main external walls of No 23. By this time, many defects had been discovered, so that it was reasonable, if not incumbent upon the plaintiffs, to demolish the building.

Page 116 of [1939] 4 All ER 113

The question for me is whether the plaintiffs can satisfy me that the obvious signs of subsidence or settlement which were discovered during the currency of the policy showed that settlement or subsidence occurred during that period or whether or not they were signs of long standing settlement or subsidence, occurring long before the period of the policy, but which only became apparent when the process of demolition of No 24 and the repair of the party wall was undertaken.

I feel that this evidence is such as to leave me entirely unconvinced by the plaintiffs that there was any subsidence within the period of the policy.

Counsel for the plaintiffs, has argued that some subsidence must have occurred between the date of the first dangerous structure notice and the second dangerous structure notice, because, said he, the surveyor to the London County Council would not have served a second notice unless that was so; but in view of the evidence I see no reason to draw this inference. It may be and, indeed, it was the fact that evidence of subsidence was discovered in that interval, but I am not satisfied that that evidence was evidence of fresh subsidence and that it was not evidence of longstanding subsidence and settlement. I am not satisfied that there was any subsidence within the period of the currency of the policy. Nor am I satisfied that, even if there were any slight subsidence, that subsidence was the proximate cause of the loss of the building.

Judgment for the defendant with costs.

Solicitors: Nicholson Freeland & Shepherd (for the plaintiffs); Hair & Co (for the defendant).

Charles Shelley Esq   Barrister.

Smith, Stone and Knight Ltd v Lord Mayor, Aldermen and Citizens of the City of Birmingham

[1939] 4 All ER 116


Categories:        TOWN AND COUNTRY PLANNING        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        4, 5, 19 OCTOBER 1939        


Compulsory Purchase Acquisition of premises on which business of subsidiary company carried on Right of parent company to claim compensation for disturbance and removal Lands Clauses Consolidation Act 1845 (c 18), s 121.

A company acquired a partnership concern and, having registered it as a company, continued to carry on the acquired business as a subsidiary company. The parent company held all the shares except five which its directors held in their respective names in trust for the company. The profits of the new company were treated as profits of the parent company, which appointed the persons who conducted the business and were in effectual and constant control. The defendant corporation compulsorily acquired the premises upon which the business of the subsidiary company was carried on, and the parent company claimed compensation in respect of removal and disturbance, but the respondents contended that the proper claimants were the subsidiary company, that being a separate legal entity:

Held possession by a separate legal entity was not conclusive on the question of the right to claim, and as the subsidiary company

Page 117 of [1939] 4 All ER 116

was not operating on its own behalf but on behalf of the parent company, the parent company was the party to claim compensation.

Notes

The question in this case is whether a subsidiary company has such an interest in the property upon which its business is conducted that it is entitled to receive compensation upon compulsory purchase. It would seem that in the ordinary case, there is no such right to compensation, but the question is one of fact in each case, depending upon the arrangements made between the parent and the subsidiary company.

As to Persons entitled to Compensation, see Halsbury (Hailsham Edn), Vol 6, pp 3941, para 36; and for Cases, see Digest, Vol 11, pp 123, 124, Nos 148155.

Cases referred to

Saloman v Saloman & Co, Salomon & Co v Salomon [1897] AC 22; 9 Digest 34, 11, 66 LJCh 35, 75 LT 426, revsg SC sub nom Broderip v Salomon [1895] 2 Ch 323.

Gramophone & Typewriter Ltd v Stanley [1908] 2 KB 89; 9 Digest 35, 14, 77 LJKB 834, 99 LT 39, 5 Tax Cas 358.

Inland Revenue Comrs v Sansom [1921] 2 KB 492; 28 Digest 101, 612, 90 LJKB 627, 125 LT 37, 8 Tax Cas 20.

San Paulo (Brazilian) Ry Co v Carter [1896] AC 31; 28 Digest 27, 142, 65 LJQB 161, 73 LT 538, 3 Tax Cas 407.

Apthorpe v Peter Schoenhofen Brewing Co Ltd (1899), 80 LT 395; 28 Digest 29, 150, 4 Tax Cas 41.

Jones (Frank) Brewing Co v Apthorpe (1898) 4 Tax Cas 6; 28 Digest 26, 138.

St Louis Breweries Ltd v Apthorpe (1898) 79 LT 551; 28 Digest 29, 149, 4 Tax Cas 111.

Introduction

Motion to set aside an award on the ground of technical misconduct of the arbitrator. By consent the judge decided the matter upon which the consultative opinion had been unsuccessfully sought.

The facts are fully set out in the judgment.

G Russell Vick KC and Arthur Ward for the applicants (claimants).

A S Comyns Carr KC and F G Bonnella for the respondents.

19 October 1939. The following judgment was delivered.

ATKINSON J. This is a motion by a firm of Smith, Stone & Knight Ltd, whom I shall call the company, to set aside an interim award on somewhat unusual grounds. The company was the owner of a factory and a number of small houses in Moland St, Birmingham. They were paper manufacturers and carried on their business on some premises other than those in Moland St. The corporation of Birmingham desired to purchase under their compulsory powers this factory, land and cottages in Moland St, in order to build a technical college, and on 16 February 1935, they served on the company a notice to treat. On 20 February the company lodged a claim, and described themselves as of “84, Colmore Row, Birmingham, paper makers, waste paper merchants and dealers.” They described the property, and under heading 7, where they had to specify the names of occupiers and various details, they said:

Factory and offices let to Birmingham Waste Co., Ltd., as yearly tenants at £90 a year.

Page 118 of [1939] 4 All ER 116

Then they gave particulars of their claim, the value of the land and premises, compensation for removal £3,000, and disturbancethe disturbance was partly the estimated additional cost of cartage of material to and from the new factory to which they would have to goand ended with these words:

The claim under paragraph (B) [the second part of the claim for removal and disturbance] is by the Birmingham Waste Co., Ltd., which is a subsidiary of Smith, Stone & Knight, Ltd.

On 29 April 1937, an amended claim was put in, and under the first particular they added to their original description:

and which business embodies their subsidiary company, the Birmingham Waste Co., Ltd.

Under heading 7, they said:

Factory and offices nominally let to the Birmingham Waste Co., Ltd., which said company is a subsidiary company of Smith, Stone & Knight, Ltd., carrying on this business for and on behalf of Smith, Stone & Knight, Ltd., which said company owns the whole of the capital and takes the whole of the profits of the said subsidiary company. The subsidiary company occupies the said premises and carries on its trade as a separate department of and as agents for Smith, Stone & Knight, Ltd. The said rent was and is arranged as an inter-departmental charge and is merely a book-keeping entry.

They added to that final note, or at any rate, in its final form it read:

These two items of damage will accrue to Smith, Stone & Knight, Ltd., who are the principals of the Birmingham Waste Co., Ltd. The said loss will fall upon Smith, Stone & Knight, Ltd.

The parties were unable to come to terms and finally the matter was referred to arbitration. A preliminary point was at once raised, which was whether, as a matter of law, the company could claim compensation for disturbance of the business which was carried on on these premises, or whether, in law, that claim must be made by the Waste company itself. In the latter event, the corporation would escape paying compensation altogether, by virtue of Lands Clauses Consolidation Act 1845, s 121. That section enables purchasers to get rid of occupiers with no greater interest than a tenancy not exceeding one year, because they can give them notice and thereby terminate their tenancy, and escape paying anything to them.

The question has been put during the hearing in various ways. Was the loss which was incurred by the business which was being carried on on the premises the direct loss of the claimants, or was it, as the corporation say, a loss which they suffered merely in their capacity of shareholders in the Waste company? Again, to whom did the business in truth belong? Again, was the Waste company merely the agent of the claimants for the carrying on of the business? Were the claimants in fact carrying on the business, albeit in the name of the Waste company? All these questions were discussed during the argument.

The facts were these, and I do not think there was any dispute about them, except, possibly, as to one of them. Before January 1913, the com-

Page 119 of [1939] 4 All ER 116

pany had been carrying on their business as manufacturers. In January 1913, a business was being carried on on these premises by the Waste company (which was then not a limited company, but a partnership) and the business which was being carried on was that of dealers in waste. In that month the claimants bought from the Waste company the premises and the business as a going concern, and there is no question about it that this business became vested in and became the property of the claimants. They altered and enlarged the factory and carried on the business. On 13 March, the claimants caused this new company, the Birmingham Waste Co Ltd, to be registered. It was a company with a subscribed capital of £502, the claimants holding 497 shares. They found all the money, and they had 497 shares registered in their own name, the other five being registered one in the name of each of the five directors. There were five directors of the Waste company and they were all directors of the claimants, and they all executed a declaration of trust for the share which they held, stating they held them in trust for the claimants. At no time did the board get any remuneration from the Waste company. The new company purported to carry on the Waste business in this sense, that their name was placed upon the premises, and on the note-paper, invoices, etc. It was an apparent carrying on by the Waste company. I think that these two facts are of the greatest importance. There was no agreement of any kind made between the two companies, and the business was never assigned to the Waste company. There was no suggestion that anything was done to transfer the beneficial ownership of it to the Waste company. A manager was appointed, doubtless by the company, but there was no staff. The books and accounts were all kept by the claimants; the Waste company had no books at all and the manager, it is found, know nothing at all about what was in the books, and had no access to them. There is no doubt that the claimants had complete control of the operations of the Waste company. Then other businesses were bought by the claimants, but they were not assigned to the Waste company; the Waste company just carried them on. There was no tenancy agreement of any sort with the company; they were just there in name. No rent was paid. Apart from the name, it was really as if the manager was managing a department of the company. Six months after the incorporation there was a report to the shareholders that the business was under the supervision and control of the claimants and that the profits would be credited to that company in the books, as is very often done with departments. A proportion of the overheads was debited to the Waste company and this rent, which has been referred to in the first claim of £90, was a book entry, debiting the company with that sum. There was a question as to why the company was ever formed. The functions of buying and sorting waste are different from the function of manufacturing paper, and, according to the evidence which is part of the case before me, it was thought better to have these different functions performed in a

Page 120 of [1939] 4 All ER 116

different name. The arbitrator has said in his case and in his affidavit that the reason was that the carrying on of this business would be something outside the powers of the company. He is obviously wrong about that, because the memorandum is wide enough to cover such a business, and is just as wide as that of the Waste company. It is quite clear that there was no evidence to support what he said, and I cannot think that I am bound by a finding which is shown to be wrong by the material which the arbitrator himself brings before the court.

At the end of each year the accounts were made up by the company, and if the accounts showed a profit, the claimants allocated the profit to the different mills belonging to the company, exhausting the paper profit in that way and making the profit part of the companys own profit, because allocating this profit to their different departments or different mills would have the effect of increasing their own profit by a precisely similar sum. The Waste company never declared a dividend; they never thought of such a thing, and their profit was in fact treated as the claimants profit.

Those being the facts, the corporation rest their contention on Salomons case, and their argument is that the Waste company was a distinct legal entity. It was in occupation of the premises, the business was being carried on in its name and the claimants only interest in law was that of holders of the shares. It is well settled that the mere fact that a man holds all the shares in a company does not make the business carried on by that company his business, nor does it make the company his agents for the carrying on of the business. That proposition is just as true if the shareholder is itself a limited company. It is also well settled that there may be such an arrangement between the shareholders and a company as will constitute the company the shareholders agent for the purpose of carrying on the business and make the business the business of the shareholders. In Gramophone & Typewriter Ltd v Stanley Cozens-Hardy MR, said, at pp 95, 96:

The fact that an individual by himself or his nominees holds practically all the shares in a company may give him the control of the company in the sense that it may enable him by exercising his voting powers to turn out the directors and to enforce his own views as to policy, but it does not in any way diminish the rights or powers of the directors, or make the property or assets of the company his, as distinct from the corporations. Nor does it make any difference if he acquires not practically the whole, but absolutely the whole, of the shares. The business of the company does not thereby become his business. He is still entitled to receive dividends on his shares, but no more. I do not doubt that a person in that position may cause such an arrangement to be entered into between himself and the company as will suffice to constitute the company his agent for the purpose of carrying on the business, and thereupon the business will become, for all taxing purposes, his business. Whether this consequence follows is in each case a matter of fact. In the present case I am unable to discover anything in addition to the holding of the shares which in any way supports this conclusion.

Then Fletcher Moulton LJ, said the same thing on pp 100 and 101. Then in Inland Revenue Comrs v Sansom Lord Sterndale said, at p 503:

There may, as has been said by Lord Cozens-Hardy, M.R., be a position such

Page 121 of [1939] 4 All ER 116

that although there is a legal entity within the principle of Salomon v Salomon & Co., that legal entity may be acting as the agent of an individual and may really be doing his business and not its own at all. Apart from the technical question of agency it is difficult to see how that could be, but it is conceivable. Therefore the more fact that the case is one which falls within Salomon v Salomon & Co. is not of itself conclusive.

It seems therefore to be a question of fact in each case, and those cases indicate that the question is whether the subsidiary was carrying on the business as the companys business or as its own. I have looked at a number of casesthey are all revenue casesto see what the courts regarded as of importance for determining that question. There is San Paulo Brazilian Ry Co v Carter, Apthorpe v Peter Schoenhofen Brewery Co Ltd, p 41; Frank Jones Brewing Co v Apthorpe, St Louis Breweries v Apthorpe, and I find six points which were deemed relevant for the determination of the question: Who was really carrying on the business? In all the cases, the question was whether the company, an English company here, could be taxed in respect of all the profits made by some other company, a subsidiary company, being carried on elsewhere. The first point was: Were the profits treated as the profits of the company?when I say “the company” I mean the parent companysecondly, were the person conducting the business appointed by the parent company? Thirdly was the company the head and the brain of the trading venture? Fourthly, did the company govern the adventure, decide what should be done and what capital should be embarked on the venture? Fifthly, did the company make the profits by its skill and direction? Sixthly, was the company in effectual and constant control? Now if the judgments; in those cases are analysed, it will be found that all those matters were deemed relevant for consideration in determining the main question, and it seems to me that every one of those questions must be answered in favour of the claimants. Indeed, if ever one company can be said to be the agent or employee, or tool or simulacrum of another, I think the Waste company was in this case a legal entity, because that is all it was. There was nothing to prevent the claimants at any moment saying: “We will carry on this business in our own name.” They had but to paint out the Waste companys name on the premises, change their business paper and form, and the thing would have been done. I am satisfied that the business belonged to the claimants; they were, in my view, the real occupiers of the premises. If either physically or technically the Waste company was in occupation, it was for the purposes of the service it was rendering to the claimants, such occupation was necessary for that service, and I think that those facts would make that occupation in law the occupation of the claimants. An analogous position would be where servants occupy cottages or rooms for the purposes of their business, and it is well settled that if they have to occupy those premises for the purposes of the business, their occupation is the occupation of their principal. I have no doubt the business was the companys business

Page 122 of [1939] 4 All ER 116

and was being carried on under their direction, and I answer the question in favour of the claimants.

Award set aside with costs of this motion.

Solicitors: Nash Field & Co, agents for Reynolds & Co, Birmingham (for the applicants); Sharpe Pritchard & Co, agents for Sir Frank Wiltshire, Town Clerk, Birmingham (for the respondents).

W J Alderman Esq   Barrister.

R v George Albert Gillingham

[1939] 4 All ER 122


Categories:        CRIMINAL; Criminal Evidence        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREYS JJ        

Hearing Date(s):        10 OCTOBER 1939        


Criminal Law Evidence Admissibility Indecent postcards found in possession of prisoner charged with gross indecency.

In a case of gross indecency postcards found in the possession of the accused may be admitted in evidence as things which a man intending to commit such an offence might well have about him, and might use as an adjunct to assist him in the commission of the offence. They are not admissible merely to show that he had a dirty mind.

Notes

Evidence of articles found in possession of the accused is generally admissible, but it is essential that there shall be a nexus between the article found and the offence charged.

As to Evidence of Character, see Halsbury (Hailsham Edn), Vol 9, p 188, para 270; and for Cases, see Digest, Vol 14, pp 401403, Nos 42164233.

Case referred to

R v Twiss [1918] 2 KB 853; 14 Digest 403, 4232, 88 LJKB 20, 119 LT 680, 13 Cr App Rep 177.

Appeal

Appeal from a conviction at Poole Quarter Sessions on the ground of misdirection, and wrongful admission of evidence. The facts are fully stated in the judgment.

J T Molony for the appellant.

W M Walker for the Crown.

10 October 1939. The following judgments were delivered.

CHARLES J [delivering the judgment of the court]. In this case, George Albert Gillingham was, together with a man named Victor Farr, convicted at the Poole Quarter Sessions of attempted buggery and gross indecency, and he was sentenced to 6 months imprisonment with hard labour, and he now appeals by leave of the court against his conviction.

The circumstances of the case are such that I need not deal with them in detail. They were found guilty of the charges alleged against them, and the charges carried their own description without my further describing what these offences were.

Evidence was admitted of postcards, depicting dirty sexual acts, which were found on Gillingham and which it is said would show that

Page 123 of [1939] 4 All ER 122

he is a homo-sexual, and it is submitted that the recorder had no right to admit that evidence at all. The recorder considered this case with great care. Having adjourned it so that he might consider it overnight, he said:

Evidence of their possession is not admissible, in my opinion, merely to indicate the fact that he had a dirty mind; but if I can properly come to the conclusion that they are the sort of things which might well be used by a person who is guilty of such an offence as this, as an adjunct, some assistance in the commission of that offence, then I think that under the doctrine laid down by Darling, J., in R v. Twiss, they would be admissible here. In my view, these are things which a man who was guilty of an offence like this might well have about him, and might well use as an adjunct to assist him in the commission of this crime. How? By using them to inflame the passions of the person with whom he intended, designed, to commit this crime, or to rouse his own passions for such a purpose.

It appears to the court that the recorder, when he gave his considered view, came to a perfectly correct conclusion, in the circumstances, in law. The postcards were admissible, and were admissible for the reason he indicated.

Appeal dismissed.

Solicitors: Peacock & Goddard, agents for Leslie C Marrow, Poole (for the appellant); Director of Public Prosecutions (for the Crown).

W J Alderman Esq   Barrister.

Herschthal v Stewart & Ardern Ltd

[1939] 4 All ER 123


Categories:        TORTS; Negligence, Statutory Duty        

Court:        KINGS BENCH DIVISION        

Lord(s):        TUCKER J        

Hearing Date(s):        20, 23 OCTOBER 1939        


Negligence Dangerous goods Liability of supplier Sale of reconditioned car Accident due to defective condition of car Opportunity for examination of car No expectation that opportunity would be used.

The plaintiff, who was a director of, and had a controlling interest in, a company known as U P Ltd, acquired on its behalf a reconditioned motor car from a company known as S & A Services Ltd. the latter company acquired the car from the defendants for the purpose of hiring it out on hire-purchase terms to U P Ltd. The defendants knew that the car was going to be used chiefly by the plaintiff, and they knew that it was going to be so used immediately. On the morning after the delivery of the car, before it had been driven more than a few miles, and while it was being driven by the plaintiff, the near side rear wheel came off, whereby the plaintiff suffered damage. There was no evidence that anything had happened between the time when the car was delivered by the defendants and the time of the accident. At the time of delivery the plaintiff had signed for an on behalf of U P Ltd, a form of receipt stating that the car was accepted as being in good condition and as seen, tried and approved:

Held (i) the form of receipt did not protect the defendants in a claim of negligence by the plaintiff, however it might affect their contractual liability with U P Ltd.

(ii) the defendants were liable in negligence under the rule in MAlister (or Donoghue) v Stevenson, because, although the plaintiff was given an opportunity to examine the car for the purpose of discovering any defects, yet the defendants never anticipated that there would be any such examination.

Page 124 of [1939] 4 All ER 123

Notes

The question here discussed is whether in applying the rule in MAlister (or Donoghue) v Stevenson it is a sufficient defence that there was an opportunity for intermediate examination of the property or goods sold or whether, in addition to the opportunity, it is also essential that the parties anticipated that there would be such examination. It is held that, where there was no such expectation, the plaintiff can succeed despite the fact that there was an opportunity for examination.

As to Principle in MAlister (or Donoghue) v Stevenson, see Halsbury (Hailsham Edn), Vol 23, pp 632634, para 887; and for Cases, see Digest, Supp. Negligence, Nos 361a364l.

Cases referred to

Phillips v Britannia Hygienic Laundry Co [1923] 1 KB 539; 36 Digest 61, 385, 92 LJKB 389, 128 LT 690, on appeal [1923] 2 KB 832.

MAlister (or Donoghue) v Stevenson [1932] AC 562; Digest Supp, 101 LJPC 119, 147 LT 281.

Heaven v Pender (1883) 11 QBD 503; 36 Digest 8, 9, 52 LJQB 702, 49 LT 357.

Farr v Butters Bros & Co [1932] 2 KB 606; Digest Supp, 101 LJKB 768, 147 LT 427.

Malfroot v Noxal Ltd (1935) 51 TLR 551; Digest Supp.

MacPherson v Buick Motor Co (1916) 217 NY 382.

Stennett v Hancock and Peters [1939] 2 All ER 578; Digest Supp.

Earl v Lubbock [1905] 1 KB 253; 36 Digest 63, 408, 74 LJKB 121, 91 LT 830.

Kubach v Hollands [1937] 3 All ER 907; Digest Supp.

Dransfield v British Insulated Cables Ltd [1937] 4 All ER 382; Digest Supp.

Brown v Cotterill (1934) 51 TLR 21; Digest Supp.

Grant v Australian Knitting Mills Ltd [1936] AC 85; Digest Supp, 105 LJPC 6, 154 LT 18.

Action

Action for damages (i) for negligence of the defendants in the reconditioning of a motor car whereby the plaintiff suffered injury, loss and damage, (ii) for negligence and/or breach of statutory duty in handing to the plaintiff in a dangerous and unroadworthy condition a car which had been reconditioned by the defendants for the express purpose of being driven on the highway, the defendants then well knowing that the same would forthwith be driven by the plaintiff, and that the plaintiff would continue to drive the same on the highway, whereby the plaintiff suffered injury, loss and damage. The facts are fully set out in the judgment.

R E Borneman for the plaintiff.

Gilbert H Beyfus KC and W H Moresby for the defendants.

Borneman: The fact that the wheel came off shows negligence in reconditioning, and so the plaintiff is entitled to recover: MAlister (or Donoghue) v Stevenson and Stennett v Hancock and Peters. Alternatively, there was a breach of statutory duty: Motor Vehicles (Construction and Use) Regulations, 1937, reg 67.

Beyfus KC: I refer to MAlister (or Donoghue) v Stevenson, Earl v Lubbock and Dransfield v British Insulated Cables Ltd. MAlister (or Donoghue) v Stevenson applies only if there is no

Page 125 of [1939] 4 All ER 123

reasonable possibility of examining the goods. It does not say that there must be a reasonable probability that they will be examined.

R E Borneman for the plaintiff.

Gilbert H Beyfus KC and W H Moresby for the defendants.

23 October 1939. The following judgment was delivered.

TUCKER J. The defendants are a well-known firm of motor car engineers and distributors, and on 11 July 1938, they supplied to a company called Utility Products Ltd, a reconditioned Morris car. The man who actually took delivery of the Morris car was the plaintiff, Mr Herschthal, who was a director of, and had a controlling interest in, Utility Products Ltd. The car was supplied pursuant to an order form signed by the plaintiff on behalf of Utility Products Ltd, in which he requested the defendants to supply, or procure to be supplied, a Morris car as described in that order form which was stated to have been:

… seen, tried and approved by me on the usual hire-purchase agreement of the terms of which I am aware.

That was an application to be supplied on hire-purchase terms with a Morris motor car, signed by the plaintiff for and on behalf of Utility Products Ltd. This motor car was subsequently supplied through hire-purchase arrangementsthat is to say, through a company called S & A Services Ltd, which acquired the motor car from Stewart & Ardern Ltd, and hired it out on hire-purchase terms to Utility Products Ltd. Before taking delivery of this motor car, as he did on behalf of the company on 11 July, the plaintiff had seen it and discussed the price, and he had, I am satisfied, two trial runs in the car, on one of which there had been some question with regard to the plugs needing attention. That matter was apparently rectified, there was some adjustment made in the price, and eventually, as I have said, he took delivery on 11 July. In taking delivery, the plaintiff signed a receipt for the car, describing it and stating that it was in good condition and that it had been seen, tried and approved. That was again signed on behalf of Utility Products Ltd, by the plaintiff.

On the occasion when the plaintiff took delivery of it, a servant of the defendant company actually drove him from Golders Green, where the car was supplied, to the plaintiffs fiat, which was some two or three miles distant. That was in the afternoon or evening of 11 July. The car was driven by the defendant companys servant, and there is no evidence that on that trip there was anything to arouse suspicion with regard to the condition of the car, or to cause any anxiety to anybody at all. The car was left by the plaintiff in the courtyard outside the block of flats until next morning (this was summer), and at about 7 am next morning he took it out to go out on business, I think. He was intending to use the car very largely in connection with his business as a director of this company, Utility Products Ltd, and I find that the defendants, when they supplied this car to Utility Products Ltd, knew that the car was going to be used, and largely used, by the plaintiff, and knew that it was going to be used by him forthwith. He took the car out at 7 am,

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and, after going quite a few miles, he had occasion to turn round, and, after doing so, the near rear wheel of the car came off. He managed to steer the car in such a way that he did not actually run into anything, and eventually he came to a standstill with the hub of the car resting on the kerb of the road. The accident was actually seen by a gentleman with some experience of these matters, who is now employed as an aircraft inspector, and he said the car was quite slowly turning a corner at about 10 to 12 miles an hour, and half-way round the corner the wheel came off. The car went zigzagging, nearly hit a “Keep left” standard, and appeared to be coming towards him. He had to jump out of the car in which he was and go and pick up the wheel. Then he examined the nuts, and the threads were stripped, and he came to the conclusion, from his inspection, that the nuts had not been tightened up properly for some time, and that this was apparent from the condition of the threads, the nuts and the wheel.

First of all, it is clear that the claim for breach of warranty must fail, because there was no contract between the defendants and the plaintiff, and counsel for the plaintiff very early in the case abandoned that branch of the claim. However, for similar reasons I do not think that the defendants can place any reliance on the form of receipt which was signed by the plaintiff on behalf of Utility Products Ltd, stating that he received it in good condition and as seen, tried and approved. I think that the effect that that might have had on any contractual liability as between Utility Products Ltd, and the defendants is another matter, but I do not think that it can protect the defendants from a claim founded in negligence by the plaintiff, provided that he can establish that the defendants owed him a duty and that they had been negligent in the performance of that duty. Counsel for the plaintiff put his case in two ways with regard to negligence. He had included in his claim a claim based upon breach of a statutory duty which he said arose under the Road Traffic Act 1934, s 8, and the Motor Vehicles (Construction and Use) Regulations 1937, reg 67. In his argument, he conceded that, unless there was negligence, he could not rely solely on the breach of statutory duty. I am afraid I have failed to appreciate that part of his argument. It seems to me that, if he can establish negligenceand that presupposes the existence of a duty by the defendants to the plaintiffthen he is entitled to succeed, and that his case cannot be made any worse or any better by coupling with that part of his claim an allegation that there has been a breach of this regulation or section. If, on the other hand, there is no duty owed, then he will be thrown back upon this section and these regulations, and, in that event, he concedes that he cannot succeed in view of the decision in Phillips v Britannia Hygienic Laundry Co. I am afraid I have not followed that part of this argument, and in my view this case rests upon the question of negligence alone. The sole question is whether or not the plaintiff can bring this case within the four corners of the

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decision of the House of Lords in MAlister (or Donoghue) v Stevenson.

Before dealing with that case and other cases that have been decided subsequently, I should have to say that I am satisfied that, if there was any duty owed in law by the defendants to the plaintiff, then, on the facts of this case, there has clearly been a breach of that duty. The facts that I have described have not been contradicted by any evidence called by the defendants, and I think it followed from the evidence either that this wheel must have been fixed in a negligent way or that there had been negligent failure properly to overhaul the car in the process of reconditioning. I think the facts of the case really speak for themselves. If the wheel of a car comes off at 7 am and it is found in the condition in which this one was found, it must follow that there has been negligence somewhere in the servants of the firm who sent it out the evening before, when it should have been safe and fit for the road.

I am also satisfied that, when the defendants supplied the car to the plaintiff, the last thing they ever contemplated was that there was going to be any such examination of this car by the plaintiff or by anybody else as would be likely to reveal a defect of this kind before 7 am the next morning. In my view, the fact that there had been trial runs earlier throws no light on the matter at all. There had never been any examination of the kind that would reveal a defect of this sort, and it did not become apparent on any of the trial runs, nor when the car was being driven to the plaintiffs flat on the occasion of delivery. I am satisfied that no intermediate examination was ever within the contemplation of the parties. On the other hand, there did exist opportunity for examination if anybody had desired to make such examination. Instead of sleeping in his bed that night, the plaintiff might have spent the night in overhauling the motor car, and in that sense there was opportunity for examination. Similarly, he might conceivably have handed it over to another firm of engineers to test. However, although there was that opportunity for examination, I am satisfied that such examination was never contemplated by the defendants or by the plaintiff himself. That is to say, it was never contemplated that there would be any intermediate examination between the time of delivery and the time when the accident actually happened. Totally different considerations would arise in the case of an accident happening after a lapse of weeks or months, or after the car had been driven a considerable mileage. That is not the case with which I have to deal.

Put shortly, therefore, it seems to me that the real issue in the case is thisis the proper test to be applied in a case of this kind whether there was an opportunity for an intermediate examination, or is the test whether any intermediate examination could reasonably be anticipated by the defendants? If the defendants are excused from that liability by the mere fact that an intermediate examination could have taken place, then, on the facts of this case, they should succeed. If,

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on the other hand, I hold that they could not and would not reasonably anticipate any intermediate examination, if that is the test, then I think that the plaintiff is clearly entitled to succeed.

Which is the right test? When one looks at MAlister (or Donoghue) v Stevenson itself, one has to remember that it is the principle laid down by the case that one has to observe, and any actual words used which were not strictly applicable to the facts of the case and the discussion should not limit the interpretation to be put upon the principle which appears to lie at the root of the case. The statement of the law by Lord Atkin and Lord Macmillan has been so often referred to that I need hardly refer to that, but I do once again refer to the general proposition of Lord Atkin, at p 580:

You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to bepersons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

That is not intended to be an exhaustive definition, and has to be interpreted in the light of the facts to which Lord Atkin was referring. Then, at pp 581, 582, when he is referring to circumstances in which one man becomes the neighbour of another man so as to owe him a duty, referring to what Lord Esher MR, had said in Heaven v Pender, he quotes his words, and towards the end of the quotation Lord Esher MR, had stated, at p 510:

It would exclude a case in which the goods are supplied under circumstances in which it would be a chance by whom they would be used or whether they would be used or not, or whether they would be used before there would probably be means of observing any defect, or where the goods would be of such a nature that a want of care or skill as to their condition or the manner of supplying them would not probably produce danger or injury to person or property.

Then Lord Atkin goes on, at p 582:

I draw particular attention to the fact that Lord Esher, M.R., emphasises the necessity of goods having to be “used immediately” and “used at once before a reasonable opportunity of inspection.” This is obviously to exclude the possibility of goods having their condition altered by lapse of time, and to call attention to the proximate relationship, which may be too remote where inspection even of the person using, certainly of an intermediate person, may reasonably be interposed. With this necessary qualification of proximate relationship … I think the judgment of Lord Esher, M.R., expresses the law of England.

Later in his opinion, he says, at p 599:

… if your Lordships accept the view that this pleading discloses a relevant cause of action you will be affirming the proposition that by Scots and English law alike a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumers life or property, owes a duty to the consumer to take that reasonable care.

It is to be observed that, when he was quoting from Lord Esher MR, with approval, the words were “… used at once before a reasonable opportunity of inspection,” and, when he quoted those words with

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approval, at p 582, in dealing with the proximate relationship, he went on to use the words:

… which may be too remote where inspection even of the person using, certainly of an intermediate person, may reasonably be interposed.

Those are slightly different words from the “reasonable opportunity for inspection,” and in the concluding part of his opinion he talks about no reasonable possibility of intermediate examination. In Donoghues case, it was not necessary for the House of Lords to draw any distinction between the reasonable possibility of intermediate examination and the possibility that the defendants would reasonably anticipate that there would be such intermediate examination. The matter did not arise. It was obvious on the face of the casean opaque ginger-beer bottle put on the market by the defendantsthat there would not be any intermediate examination, nor would the defendants ever have supposed that there would be. It was not, therefore, in the least necessary for any of their Lordships in that case to apply their minds to that particular distinction, which might possibly arise in other cases. They were laying down the general principle about liability. They were pointing out the necessity for the existence of this proximate relationship and referring to the way in which the chain might in different cases be broken. In that particular case it was only expressed to apply to the manufacturer of goods. In subsequent cases, it has been held to cover also the case of people who were not manufacturers but were in one or more instances suppliers or repairers of goods.

I think I need not read from the opinion of Lord Macmillan. In the well-known passage which has been read to me by counsel for the defendants, he states the position as he found it. I think that it is my duty to endeavour to ascertain what I consider to be the principle laid down in this case. I do not find it helpful to take the literal words used by Lord Atkin in one passage“no reasonable probability of intermediate examination”and say that, because he used those words in a case where it was not necessary to distinguish between opportunity for examination and reasonable anticipation that examination would take place, one should regard those words as exhaustive. I think that that would be putting too narrow an interpretation upon the decision in that case. I feel fortified in that view by reference to what Greer LJ, said in Farr v Butters Bros & Co. In that case it seems to me that it was clear that the plaintiff could not possibly have succeeded, because the injured man, who lost his life, had in fact discovered the existence of the defect before he suffered his injury, but in that case Donoghues case was discussed and considered by the Lords Justices, and it is to be observed, and given the greatest weight to, that Scrutton LJ, does seem to have taken the view that Donoghues case proceeded on the basis of the absence of opportunity of examination. However, once again it was not necessary for the decision in Farr v Butters Bros & Co to come to a conclusion upon that point,

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because it was clear that in any event the claim could not be brought within the four corners of MAlister (or Donoghue) v Stevenson. In considering the danger of taking isolated sentences in a judgment and building upon them, it is helpful to see the way in which Greer LJ, put it, at p 619:

As I read the judgment of the House of Lords, the fact that in that case the defect was not discoverable by such a reasonable examination as ought to be anticipated distinguishes the case from this one.

There he is carefully stating the way in which he reads the decision of the House of Lords, and he is describing it as being based upon the defect of not being discoverable by such reasonable examination as ought to be anticipated. Having used those words, after quoting Lord Atkin, he goes on to say, at p 620:

That is the principle on which he based his judgment. I understand him to mean that if the manufacturer had left a reasonable possibility of examination, either through an intermediate person or by its use, there would be no liability, because there would be no duty.

Thus in succeeding pages he is putting the decision in two rather different ways. In one case he is basing it on the possibility of intermediate examination, and in the other he is talking about the defect not being discoverable by a reasonable examination that ought to be anticipated. That is the particular point I have to decide in this case, which of those is the proper test, and it shows, to my mind, how dangerous it is to fasten upon a sentence of that kind in this particular judgment, and similarly in the opinion of Lord Atkin, when the framer was not applying his mind to the precise question. It seems to me that in this case I have to decide which was the right way of stating the decisionthat stated by Greer LJ, at p 619, or that stated by him at p 620.

There have been one or two decisions by courts of first instance that assist this matter. First of all, I should refer to Malfroot v Noxal Ltd, a decision of Lewis J. In that case, the male plaintiff was the owner of a motor cycle to which a few days previously the defendants had fitted a sidecar. He was driving the combination along a public road and the sidecar became detached from the motor cycle. Both the male plaintiff and the female plaintiff, who was the passenger in the sidecar, sustained personal injuries, and the headnote states, at p 551:

Held, that the defendants were guilty of negligence in fitting the sidecar to the motor cycle, that they were liable to the male plaintiff in contract and in tort, and to the female plaintiff in tort.

Then MAlisters case was considered. In the statement of facts, it appears that:

… in the middle of May, 1934, the defendant fitted a side-car to Mr. Syers motor-cycle, and on May 20, Mr. Syer was driving the combination at Snells Corner, Petersfield, Hants, with Mrs. Malfroot as a passenger in the side-car, the side-car came away from the motor-cycle and both the plaintiffs were injured.

In giving judgment, Lewis J, said that the case was an extremely

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difficult one, and he was satisfied that the male plaintiff had a claim for breach of warranty, and that, on the authority of MAlisters case, the defendant owed a duty to the passenger in the sidecar. According to the report in the Times Law Reports, Lewis J, is stated to have said that “he adopted the words of Lord Macmillan,” which are therein set out. When one looks at the report of MAlister (or Donoghue) v Stevenson, it appears that the words quoted by Lewis J, were not the words of Lord Macmillan himself, but were a quotation by Lord Macmillan from the judgment of Cardozo J, in the American Buick case, which Lord Macmillan set out as part of the history of these cases without saying whether or not he expressly approved of it. Lewis J, went on to say that in his view the sidecar was to be used without new tests, and he found that it was not properly fitted. There Lewis J, was not invited to distinguish between opportunity for examination and reasonable expectation that there would be an examination, but he deals with the matter by the phrase that the sidecar was to be used without new tests. Although he was not applying his mind, apparently, to the possible distinction, I think it must have been a case in which there would have been opportunity for intermediate examination, and I cannot help thinking that, although he was not, as I have said, applying his mind to this possible distinction, those words, on the facts of this case, are more consistent with there having been no reasonable anticipation that there would be examination than with the fact that the judge could have held that there might in fact have been an opportunity for such examination. However, the case is one in which the judge found that the principle of MAlister (or Donoghue) v Stevenson applies to the repairer of an article, and is not confined solely to the manufacturer.

Then there has been a recent decision of Branson J, in Stennett v Hancock and Peters. That was also a case of repair. The headnote is as follows:

The owner of a motor lorry took the wheel of the lorry, the flange of which had come off, to a motor repairer, with instructions to re-assemble it. The repairers assistants re-assembled it and replaced it on the lorry, and the lorry-owners servant drove the lorry away. An hour or two later, the flange came off while the lorry was being driven on the highway by the lorry-owners servant, and, bowling along the road, it mounted the pavement and hit the female plaintiff, injuring her. There was no evidence that anything had happened between the time when the lorry was taken out of the garage and the time of the accident which might have caused the wheel to become dislodged:

Held: (i) following Phillips v. Britannia Hygienic Laundry Co., the lorry-owner having entrusted the repair of the lorry to a competent repairer, he was not liable for either negligence or nuisance to a person who suffered injury upon the road by reason of the competent repairer having been negligent.

(ii) the lorry-owner, or the person who was going to take the vehicle on the road, was not under a duty to ascertain for himself, in so far as his capabilities allowed him to do so, whether the competent repairer had competently repaired the lorry.

(iii) following MAlister (or Donoghue) v. Stevenson, and distinguishing Earl v. Lubbock, the repairer was liable to the person who suffered injury on the road as a result of his negligence, as he was in the same position as that of the manufacturer of an article sold by a distributor in circumstances which prevented the distributor or ultimate purchaser or consumer from discovering by inspection any defect in the article.

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On the facts of that case as set out in the judgment of Branson J, at p 582, it appears that the lorry had been driven away, that there was a dispute as to whether it was driven directly from the garage to the place where the accident happened or whether, before it got to the place where the accident happened, it had been driven around the town for an hour or so. In the view of Branson J, that was really immaterial. It would appear, therefore, that this was a case where it was possible that the owner of the lorry might have examined the wheel after the repair had been carried out before putting the vehicle on the road. There was nothing to prevent his doing it, but it was not to be anticipated by any reasonable person that he would do any such thing. In giving judgment on that part of the case, Branson J, at p 582, refers to Donoghues case, and he summarises his view of Donoghues case by saying, at pp 582, 583:

In that case, the manufacturer of an article which was sold by him to a distributor, in circumstances which prevented the distributor or the ultimate purchaser or consumer from discovering by inspection any defect in the article, was held to be under a legal duty to the ultimate purchaser or consumer to take reasonable care that the article was free from defect likely to cause injury.

He puts it, therefore, as being “in circumstances which prevented the distributor or the ultimate purchaser from discovering by inspection.” There, again, he must have been using words which could not have been taken quite literally, because there was nothing which the repairers did in the case with which he was dealing which would have prevented the owner of the lorry from discovering any defects by inspection. However, he does go on to say that the repairersthat is to say, the defendantsknew that the lorry was being repaired for the purpose of being used on the road. They knew that, if it was not repaired with due care, in all probability somebody would be injured, and the judge states that the first defendant knew the second defendant was not going to take the wheel off or submit it to any scrutiny to see whether the work had been properly done. I think that that sentence probably meant no more than that he knew that the second defendant could not reasonably be expected to examine the wheel or to submit it to any scrutiny. There may have been some particular evidence that the second defendant was not going to, or stated that he was not, but I can find no trace of that in the case, and I think that the words are more likely to mean that the defendant could not reasonably expect that the second defendant was going to make any examination. The judge goes on to explain his reasons for finding the defendant liable, and he also distinguishes this case from Earl v Lubbock. I will refer to that matter at a later stage. Those two cases show the view taken by Lewis J, and by Branson J, and I respectfully agree that the decision in Donoghues case is not intended to be limited only to manufacturers of goods, and that it applies in a proper case to the repairer of an article, subject to this question which I have to decide as to the intermediate examination. I do not think, as I have said, that either of those two cases deals expressly with

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the points with which I have to deal. I think the point arises only inferentially, in that I think that in both those cases there must have existed the possibility of intermediate examination, though in neither case do I think that the defendant could reasonably have anticipated that there would be such intermediate examination.

The two cases which throw some light upon the matter which I have to decide at present are, in my view, Kubach v Hollands and Dransfield v British Insulated Cables Ltd. In Kubachs case, the facts are that a little girl had been injured during a science lesson at a school by the explosion of some chemicals. Those chemicals had been improperly compounded, and that was the cause of her accident, as a result of which she either lost her eye or suffered some serious injury to one of her eyes. She brought the action against the headmistress of the school for breach of contract and negligence, and against the retail chemist who supplied the school with those chemicals. Against the headmistress the action failed, on the ground that there had been no breach of contract or negligence, because it could not be expected that the headmistress would analyse, or cause to be analysed or inspected, chemicals which she purchased from reputable chemists; but there had been an interval of time during which it would have been perfectly possible for her to have caused an examination or an analysis of these powders to have been made. The claim succeeded against the second defendantnamely, the retail chemistson the basis of Donoghues case, that is to say, on the basis that, although they were not manufacturers, they were people who had put upon the market dangerous goods, goods which had become dangerous owing to their mixture, and they were liable to a third partynamely, a little girl who was injured thereby. It is to be observed, however, that there was, as I have said, ample intervening opportunity for examination after the supply of the chemicals by the retail chemists to the headmistress of the school. None the less, although that point was not discussed, the whole case proceeded upon the basis that they were liable if they had been careless: MAlister (or Donoghue) v Stevenson. I think that, if Lord Hewart LCJ, had taken a different view of Donoghues case, he would never have allowed the case against the second defendant to go to the jury. This case is actually reported in the Times Law Reports on the part of the case in which the second defendant claimed over by way of third-party proceedings against the wholesale chemists who had supplied them with these chemicals, and, in giving his judgment, Lord Hewart LCJ, deals with the main claim by the plaintiff against the first two defendants only as part of the history of the matter. Curiously enough, in considering the case as between the second defendants and the third parties, Lord Hewart LCJ, did have to consider MAlister (or Donoghue) v Stevenson, but he does not expressly in this judgment give any opinion with regard to the applicability of Donoghues case to the plaintiffs claim against the second defendants. That had been disposed of some days earlier

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before a jury. If Lord Hewart LCJ, had thought that the existence of the opportunity of examination by the headmistress had broken the chain or nexus between the retail chemists and the little girl and was sufficient to exclude them from liability, he could never have allowed the case to go to the jury; but, of course, it was a case where nobody could reasonably have expected the headmistress to make this examination, and the retail chemists no doubt could not reasonably have thought that any such intermediate examination would take place. On that view of the case, the decision is quite easy to follow and understand.

As against that, we have Dransfields case, where Hawke J, had to decide this very pointnamely, whether the test was the opportunity for examination or the reasonable anticipation that examination would take placeand he, having considered Donoghues case and the more recent cases, came to the conclusion that the proper view was that the defendants were excused from liability, because there was an opportunity of intermediate examination of the bull-ring by the corporation before user by their employee, and that tests could have been made by the corporation which would have disclosed the defect, and he considered that the defendants were not liable. In that particular case, the bull-ring, which had been made by the defendants, and which the judge said had been negligently made, assuming there was a duty, had been in the possession of the Bournemouth Corporation for some twelve months before the accident, and the corporation had in their possession certain implements which would have been suitable for testing the bull-ring, but nobody suggested that the defendants or the reputable makers of these bull-rings would in fact have expected the corporation to make any test. However, the judge came to the conclusion that the existence of the possibility of intermediate examination broke the chain or prevented that existing proximity which would impose a duty upon the defendants. It is to be observed that in giving judgment he said, at p 387

It was submitted that certain more recent casesBrown v. Cotterill, Malfroot v. Noxal, Ltd., and Kubach v. Hollandsin some way showed that the decision in MAlister (or Donoghue) v. Stevenson had been modified so as to show that Mr. Tuckers contention was right in law. If those cases are inconsistent with my view of MAlister (or Donoghue) v. Stevenson, I must not accept them. I must decide this case on my view of what MAlister (or Donoghue) v. Stevenson decides.

It seems to me that in the present case I have to do exactly what Hawke J, had to do in Dransfields case. That is to say, taking all the assistance that I can obtain from such subsequent decisions, I have to apply my view of the decision in MAlister (or Donoghue) v Stevenson to the facts of the case before me. Frankly, I find it difficult to reconcile the results of Dransfields case with Kubachs case, because, in Kubachs case, there was ample opportunity for intermediate examination, in the same way as there was in Dransfields case, but in neither case would any reasonable person have expected such intermediate examination to take place before the accident in

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question. I prefer what I think was essential to the result of Kubachs casethat is to say, that the mere existence of the opportunity for examination is not sufficient to break the chain or destroy the proximate relationship. I think that Donoghues case ought not to be so limited as to be confined only to the precise words used by Lord Atkin in the concluding part of his opinion, which I have already pointed out were not necessary for the decision in that particular case. I think that one has to look at the whole basis of the judgment and apply it to the facts of the particular case.

In this case, in my view, the defendants were the plaintiffs neighbour in law within the definition by Lord Atkin. I think that they were very immediate neighbours. They were supplying a dangerous article to a person with whom they were in actual contact. He was not some ultimate person or user who might have been envisaged. He was an actual man, with whom they were dealing in flesh and blood, so to speak. They were supplying his company, through him, with a dangerous vehicle, knowing that it was going to be used forthwith by that particular man. In my view, there was a very close proximity or relationship existing between the plaintiff and the defendants, which imposed a duty upon the defendants to take reasonable care to see that the article which they were delivering to the plaintiff, knowing that he was going to put it immediately on the road, was not in such a condition that a wheel might rapidly fly off, possibly causing very severe and grave damage.

I have taken a very long time in leading up to that decision, but, in my view, the case is a very difficult one, because it is clearly not my duty to extend the law in any way whatever. My duty is merely to decide what I think is the law as already laid down in previous cases. In reviewing the cases, there is one case to which I have not referred, and that is Grant v Australian Knitting Mills Ltd, which came before the Privy Council. It will be remembered that that was a case where a man had purchased some underpants from retailers, and as a result of wearing them he suffered some illness, and he sued the manufacturer. In that case, there was some discussion as to whether or not there had been some intervening facts which would prelude the defendants from liability in any event. That is to say, it was clear that the plaintiff might have washed these pants before wearing them and that thereby the defendants might have been absolved from liability. I think that it was even suggested that he had been guilty of negligence in not so doing. In considering that case in relation to the present case, I think that it is to be observed that on those factsnamely, the admitted fact that the pants might have been washed before userthat was a case where, although intermediate examination could not perhaps have taken place, or could not have been said reasonably to have been expected, there was, at any rate, ample opportunity for something to happen which would have resulted either in the discovery of the defect

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or in something which would have prevented the injury. I think that, when one looks at Grants case, it tends to support my view that it would be putting a narrow interpretation on Donoghues case to say that it applies only where there can be no possible intermediate examination. I think that the whole trend of Grants case is contrary to that very limited view of Donoghues case. In Grants case, the defect, of course, could no more be seen by the naked eye than apparently the snail could be seen in the opaque ginger-beer bottle, but there was no kind of difficulty in applying to the pants a process which would not have destroyed them, but which would have prevented the accident from happening. None the less, the defendants in that case were held to be liable.

Accordingly, I think that the defendants are liable in this case, and I think that they are liable on the basis that they were the plaintiffs neighbours in law and were supplying this dangerous article for his user when, and in circumstances in which, they did not anticipate and could not reasonably have anticipated, that there would be any such intermediate examination as would be likely to reveal a defect such as existed in this motor car.

Judgment for the plaintiff for £88 5s.

Solicitors: Oscar Mason & Co (for the plaintiff); Goulden Mesquita & Co (for the defendants).

Charles Shelley Esq   Barrister.

Madeleine Vionnet et Cie v Wills

[1939] 4 All ER 136


Categories:        BANKING AND FINANCE        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND DU PARCQ LJJ        

Hearing Date(s):        24, 25 JULY, 12 OCTOBER 1939        


Money Currency Rate of exchange Payment for goods sold Distinction between payment in foreign country and payment into court in this country.

In September 1936, the defendant became liable to pay the plaintiffs the sum of 8,100 francs for goods supplied in Paris. At that time the equivalent in English currency was £105 6s 4d. On 1 December 1938, the plaintiff issued a writ in respect of that debt, claiming the sum of £105 6s 4d. The defendant paid into court the sum of £65 6s 5d, the equivalent in English currency of 8,100 francs at the date of the writ:

Held the plaintiffs were entitled to £105 6s 4d, the English equivalent of the debt at the time the debt became payable.

Notes

This case considers the curious position of a person sued in this country for a debt due in a foreign country. The debtor can apparently make payment in the foreign country by paying the amount of the debt in that currency. If, however, he chooses to satisfy the demand by payment into court in this country, he must pay the equivalent amount in English currency calculated at the rate prevailing on the day the debt became payable.

As to Rate of Exchange, see Halsbury (Hailsham Edn), Vol 23, pp 173, 174, para 251; and for Cases, see Digest, Vol 35, pp 172176, Nos 3163.

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Cases referred to

Société des Hôtels Le Touquet-Paris-Plage v Cummings [1922] 1 KB 451; 35 Digest 173, 36, 91 LJKB 288, 126 LT 513.

Deutsche Bank Filiale Nurnberg v Humphrey (1926) 272 US Rep 517.

SS Celia v SS Volturno [1921] 2 AC 544; 35 Digest 174, 39, 90 LJP 385, 126 LT 1.

Di Ferdinando v Simon, Smite & Co Ltd [1920] 3 KB 409; 35 Digest 175, 52, 89 LJKB 1039, 124 LT 117.

Re British American Continental Bank Ltd, Goldzieher & Pensos Claim [1922] 2 Ch 575; 35 Digest 175, 53, 91 LJCh 760.

Re British American Continental Bank Ltd, Lisser & Rosenkranzs Claim [1923] 1 Ch 276; 35 Digest 175, 54, 92 LJCh 241, 128 LT 727.

Re British American Continental Bank Ltd, Credit General Liegeois Claim [1922] 2 Ch 589; 35 Digest 174, 46, 91 LJCh 765, 127 LT 284.

Peyrae v Wilkinson [1924] 2 KB 166; 35 Digest 174, 48, 93 LJKB 121, 130 LT 511.

Re Chestermans Trusts, Mott v Browning [1923] 2 Ch 466; 35 Digest 169, 12, 93 LJCh 263, 130 LT 109.

Manners v Pearson & Son [1898] 1 Ch 581; 35 Digest 176, 57, 67 LJCh 304, 78 LT 432.

Appeal

Appeal by the plaintiffs, a firm of French dressmakers carrying on business in Paris, from an order of His Honour Judge Dumas in the Westminster County Court, dated 23 March 1939.

H Wynn Parry KC and P R Hollins for the appellants.

G Thompson for the respondent.

12 October 1939. The following judgments were delivered.

CLAUSON LJ (delivering the judgment of the court). In September 1936, the defendant became liable to pay to the plaintiff firm, a French firm carrying on business in Paris, the sum of 8,100 francs for clothes supplied to the defendant in Paris. At the time when, by agreement of the parties, the debt was treated as becoming duenamely, 24 September 1936the rate of exchange between Paris and London was such that the equivalent of 8,100 francs was £105 6s 4d in British currency. Notwithstanding repeated demands, the defendant failed to pay. On 1 December 1938, the plaintiffs sued the defendant in the High Court. On 19 December 1938, the defendant paid into court £65 6s 5d, which was supposed to be the equivalent of 8,100 francs at the rate of exchange ruling at the date of the writ. However, owing to a miscalculation, this sum was in fact somewhat greater than the exchange value of 8,100 francs, both at the date of the writ and at the date of the payment into court and at the date (31 January 1939) when the master ordered payment out of that sum to the plaintiffs. When the £65 6s 5d was ordered to be paid out to the plaintiffs, it appears that the plaintiffs insisted that they were entitled to the larger sum of £105 6s 4d, and accordingly the action was remitted to the county court judge to deal with this contention.

The action was tried in the county court on 22 March 1939, when the county court judge took the view that the £65 6s 5d, which was treated as the sum which at the date of payment out was sufficient, and, indeed, more than sufficient, to buy at the time 8,100 francs, satisfied the debt,

Page 138 of [1939] 4 All ER 136

and that nothing further was due to the plaintiffs. Accordingly, he gave judgment for the defendant with costs. From this decision the plaintiffs appealed.

It was not disputed that the contract which gave rise to the defendants obligation was one to which the law of France applied, nor that under it the defendant became bound to pay the plaintiffs 8,100 francs in Paris on 24 September 1936. On behalf of the defendant, it was contended that, if, before payment in the action, the defendant had paid 8,100 francs to the plaintiffs in French currency, that would have put an end to the plaintiffs claim for the debt. It is clear that at all events in this court that contention must be treated as correct, in view of this courts decision in Société des Hôtels Le Touquet-Paris-Plage v Cummings, and, indeed, the contrary was not argued.

On behalf of the defendant, it was sought to support the decision of the county court judge by arguing that the payment to the plaintiffs in England of the equivalent, on the exchange at the date of payment, of 8,100 francs ought in fairness and reason to have the same operation with regard to satisfying the debt as a payment of 8,100 francs in France on the same day would have had. We feel the force of the argument, and we are not unmindful of the fact that precisely the same argument seems to have been accepted by the majority (five out of nine) of the judges of the Supreme Court of the United States of America in Deutsche Bank Filiale Nurnberg v Humphrey. We are of opinion, however, that, as the authorities in our courts stand, this argument should be rejected, and that this court ought, in agreement with the opinion of the four dissenting judges in the Deutsche Bank case, to hold that a creditor in respect of a debt incurred in a foreign currency is entitled, in a suit in our courts, to recover the equivalent of the debt in our currency calculated according to the rate of exchange prevailing at the date when the debt became payable. Our reasons for this opinion are as follow.

Since the decision of the House of Lords in S S Celia v S S Volturno, following and approving the decision of this court in Di Ferdinando v Simon, Smits & Co Ltd, it has been settled law in this country (a) that, in the Case of a claim for damages for breach of contract, or in the case of a claim in tort for fixed and definite damage due to conditions determined at a particular date, the amount of damage has to be assessed, in the case of contract, by reference to the date of breach, and, in the case of tort mentioned above, by reference to the particular date for determination of the damage, and (b) that, where in any such case the damages are primarily assessed in a foreign currency, the relief given by a court in this country, which must express its judgment in sterling, must be calculated on the rate of exchange prevailing at the material datenamely, in the case of contract, the date of breach.

If this be the position, the only question open in this court would seem to be whether or not any distinction can in principle be drawn

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between the case of a claim in respect of breach of contract which results in relief by way of damages and a like claim which results in relief by way of judgment for a fixed sum. We can find no logical ground for such a distinction either in reason or in any principle which can be deduced from the decided cases. Indeed, counsel supporting the judgment below was not able to formulate any such principle, still less to point to any decided cases from which any such principle could be deduced.

It was agreed, in our view correctly, that on the precise point there is no decision binding this court. It is the fact that Lord Sumner, speaking in the House of Lords on 28 July 1921, was careful to state the reasons given for his opinion in S S Celia v S S Volturno in terms which cover only the case of a claim for damages and do not expressly deal with a claim for a debt. It is also the fact that in Société des Hôtels Le Touquet-Paris-Plage v Cummings, at p 465, Atkin LJ, sitting in this court on 20 December 1921, was careful to keep open the precise point which it now falls to us to determine.

It is the fact, however, that in 1921 the precise point was decided in favour of the appellants contention by an opinion which must now, we think, be treated as deciding the matter conclusively so far as a court of first instance is concerned. On 15 March 1921, P O Lawrence J, delivered two judgments, both in the matter of the liquidation of the British American Continental Bank. In the first caseRe British American Continental Bank Ltd, Goldzieher & Pensos Claimhe had to deal with a claim for damages for breach of contract to deliver foreign currency, and in that case, as in the subsequent similar case, in the same liquidationRe British American Continental Bank Ltd, Lisser & Rosenkranzs Claimhe had no difficulty in applying the principle enunciated in S S Celia v S S Volturno, to the case of a contract to deliver foreign currency; and in each case his decision was affirmed in this court. The second judgment which P O Lawrence J, delivered on that dayRe British American Continental Bank Ltd, Credit General Liegeois Claimdealt with the exact point which is now before us, and is a clear decision that a claim in debt is on the same footing for the present purpose as is a claim for damages for breach of contract. That case was not taken to the Court of Appeal, but the same conclusion was reached in Peyrae v Wilkinson, and the decision of P O Lawrence J, was mentioned in this court in Re Chestermans Trusts, Mott v Browning, at p 485, without any indication of disapproval, and, indeed, in a connection which suggests that Warrington LJ, felt no doubt as to the construction of the principle on which it proceeded, a principle supported by the well-known dictum of Vaughan Williams LJ, in Manners v Pearson & Son, at p 592.

The exact point is one which must arise almost daily in commercial practice, and there is no indication to be found in the books that, during

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the seventeen years since the decision of P O Lawrence J, it has been regarded as open to question. In these circumstances, we should not be prepared to overrule that decision, even if we thought, which we do not, that any other conclusion could be reached consistently with the decision of the House of Lords in S S Celia v S S Volturno.

In these circumstances, we propose to follow the decision of P O Lawrence J, in the case cited, and the appeal will be allowed. There will be judgment for the plaintiffs for the difference between the sum of £65 6s 5d and the sum of £105 6s 4d, and for the costs below. The defendant must pay the costs of this appeal, and there will be leave to appeal to the House of Lords.

Solicitors: Rowe & Maw (for the appellants); Winter & Co (for the respondent).

E Fuller Briscoe Esq   Barrister.

Re Cawstons Conveyance, St Luke, Bromley Common (Vicar and Churchwardens) v Cawston

[1939] 4 All ER 140


Categories:        EDUCATION        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        18, 19 OCTOBER 1939        


Education School Conveyance under School Sites Acts Reverter on cesser of use of school Conveyance by owner in fee simple for full value Enrolment Charitable Uses Act 1735 (c 36) School Sites Act 1841 (c 38), s 2 School Sites Act 1844 (c 37), s 3 School Sites Act 1849 (c 49), s 4 Public Parks, Schools, and Museums Act 1871 (c 13), ss 3, 4.

By a conveyance dated 20 August 1883, a piece of land was conveyed in fee simple in consideration of £250, the full value, to the vicar and churchwardens of a parish for the purposes of a school under the School Sites Act 1841. In 1938, the school erected thereon ceased to be used as such, having become redundant by reason of the erection of large modern schools in the neighbourhood. The conveyance of 1883 was not enrolled:

Held (i) the provisions of the School Sites Act 1841, as to reverter applied to a grant by an owner in fee simple.

(ii) it was putting too narrow a construction upon s 2 of the Act to say that it had no application unless the land conveyed had previously formed part of a large estate.

(iii) the Public Parks, Schools and Museums Act 1871, ss 3, 4, applied to this grant, as being one of a school-house for an elementary school, and therefore the conveyance of 1883 did not require to be enrolled.

(iv) in the result, the reverter under the School Sites Act 1841, s 2, took effect.

Decision of Simonds J ([1939] 3 All ER 1) affirmed.

Notes

The question of reverter in the case of a voluntary grant was considered in Dennis v Malcolm. The present decision extends that decision to a grant for full consideration. There is, however, an additional point, in that it is decided that the conveyance was within the Public Parks, Schools and Museums Act 1871, and thus exempt from the restrictions placed upon conveyances by the Statutes of Mortmain.

Page 141 of [1939] 4 All ER 140

As to the School Sites Acts, see Halsbury (Hailsham Edn), Vol 12, p 131, para 279; and for Cases, see Digest, Vol 19, p 597, Nos 258, 259.

Cases referred to

Dennis v Malcolm [1934] Ch 244; Digest Supp, 103 LJCh 140, sub nom. Re Cheam Common School, Dennis v Malcolm 150 LT 394.

Cotter v Layer [1731] 2 P Wms 623; 37 Digest 500, 928.

Appeal

Appeal by the plaintiffs from an order of Simonds J, dated 10 May 1939, and reported [1939] 3 All ER 1, where the facts are fully set out.

T K Wigan and A Newman Hall for the appellants.

J V Nesbitt for the respondent.

Wigan: The matter depends upon the effect of the School Sites Act 1841, s 2. There is never a reverter when the conveyance is made by an absolute owner in fee simple for his own benefit. The Act says that the land should revert as if the Act had not been passed, and in the present case it would not have reverted if the Act had not been passed. The decision of Clauson J, as he then was, in Dennis v Malcolm was wrong, but Simonds J, was bound by that decision. My second point is that there is no reverter where the conveyance is made by an owner in fee simple absolute for value or the grantor is expressed to convey as beneficial owner. Where the conveyance is made by an owner in fee simple, the proviso in s 2 has no application, because the grant is not made under that section. A grantor ought not to be assumed to be granting under s 2 when the grantor is the absolute owner conveying for value, because in such a case he must be assumed to be conveying by the best title he has: Cotter v Layer. My third point is that there can be no reverter in the present case, because the Act provides that, when reverter takes place, the site is to became a portion of the estate of which it formerly was a part. In the present case, the site never formed part of any estate. My last point is that the School Sites Act 1841, does not exempt conveyances from enrolment as required by the Mortmain and Charitable Uses Acts. In the present case, as the conveyance was never enrolled, the grant was void ab initio, and as the appellants have been in possession ever since, they have acquired a title by possession. The rights of the respondent are, therefore, barred.

Counsel for the respondent was not called upon.

T K Wigan and A Newman Hall for the appellants.

J V Nesbitt for the respondent.

19 October 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This is an appeal from an order of Simonds J, made upon an originating summons, which raised a question in relation to the operation of the School Sites Act 1841. That Act (the title of which describes it as “an Act to afford further facilities for the conveyance and endowment of sites for schools,” an object which the preamble declares to be expedient) repeals an earlier Act, and the crucial section, namely, s 2, is as follows:

Any person, being seised in fee simple, fee tail, or fee life, of and in any manor of lands of freehold, copyhold, or customary tenure, and having the bene-

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ficial interest therein … may grant, convey, or enfranchise by way of gift, sale, or exchange, in fee simple or for a term of years, any quantity not exceeding one acre of such land, as a site for a school for the education of poor persons, or for the residence of the schoolmaster or schoolmistress, or otherwise for the purposes of the education of such poor persons in religious and useful knowledge …

Then there is a provision to meet the case of a limited owner or the lord of a manor, and then comes this further proviso:

… that upon the said land so granted as aforesaid, or any part thereof, ceasing to be used for the purposes in this Act mentioned, the same shall thereupon immediately revert to and become a portion of the said estate held in fee simple or otherwise, or of any manor or land as aforesaid, as fully to all intents and purposes as if this Act had not been passed, anything herein contained to the contrary notwithstanding.

Then there are provisions dealing with the possessions of the Duchies of Lancaster and Cornwall, and various other provisions to which I need not refer; and in cl 7, which is of general application, and is not limited to grants made under the powers in the Act, a provision is made, for obvious reasons of convenience, under which, to take the case which is relevant to the present argument, that of a minister and churchwardens, a grant to such minister and churchwardens is to have the special effect of causing the land granted to vest in the minister and churchwardens for the time being. Then s 10 sets out a specimen form of grant, and provides, among other things, that more than one witness to the execution by each party shall not be requisite. Those, I think, are the only sections to which I need call special attention.

It is worth noticing at the outset one or two things about that Act of Parliament. First of all, it is directed to providing greater facilities for the erection of schools, and it does so in a variety of ways. It does so by conferring upon limited owners or persons whose interests would not entitle them to make the dispositions contemplated, extended powers to effect what the Act desires to have effected; and it provides that a result will follow from conveyances made under those powers which could not have followed by any means other than the operation of some statutory power, because the rule against perpetuities would have prohibited it, namely, that, upon the land ceasing to be used for the stated purposes, a school site, or a schoolmasters house, it is to revert to the estate from which it originally came. That was a thing which by no device could have been effected apart from statutory power. Another method in which the statutory power enables the existing law to be overridden is in the nature of the donees or grantees under any such grant. Taking the particular case of minister and churchwardens, a conveyance by s 7 is to have the operation of vesting the land in the minister and churchwardens for the time being. That is a thing which could not have been effected apart from statute, because the minister and churchwardens are not a corporation. It is important to bear those considerations in mind in view of the arguments that have been raised on behalf of the appellants. One can see that the provision with regard to reverter would have been, and no doubt was, considered

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by the legislature to be a very useful encouragement to charitably-minded persons, particularly if they were the owners of an estate, or life tenants of a settled estate, to make grants for purposes such as these, because such persons might very well be satisfied to have the village school built upon the family estate, but would strongly object to the site on which such a school had been built being diverted later on to other purposes. Therefore, as I have said, that proviso as to reverter must have been a very valuable encouragement, because land-owners by reason of it were thus enabled to ensure that the site should be used in perpetuity for school purposes, or, if it ceased to be used for school purposes, that they would get it back. The common sense of that is obvious.

On 20 August 1883, one Samuel Cawston, living at Bromley in the county of Kent, conveyed to the minister and churchwardens of the parish of Holy Trinity, Bromley Common, a piece of land on which a school had then recently been erected. Cawston appears to have been a landowner in the neighbourhood, but this particular piece of land was not part of his estate, and, indeed, appears to have been an isolated purchase. I may say, before looking further at the deed, that the minister and churchwardens of the parish of Holy Trinity, Bromley Common, are now replaced by the vicar and churchwardens of St Luke, Bromley Common, by reason of a rearrangement in the matter of parish boundaries, or something of that kind, but that is a mere circumstance of history, and does not affect the questions which we have to decide.

The conveyance, after reciting the acquisition of the piece of land by Cawston and the erection of the school, witnessed that under the authority of (giving it the short title) the School Sites Act 1841, and of an Act of 1844, explaining the same, and in consideration of the sum of £250 paid to Cawston by the minister and churchwardens, who are described as the trustees, Cawston as beneficial owner conveyed unto the trustees and their successors the piece of land in question together with the school built thereon:

To hold unto and to the use of the said trustees and their successors in fee simple for the purposes of the said Act and upon trust subject nevertheless to the proviso hereinafter contained to permit the said premises and all buildings thereon now or hereafter erected to be for ever hereafter appropriated and used as and for a school for the education of children and adults or children only of the labouring manufacturing and other poorer class in the Parish of Holy Trinity Bromley Common aforesaid or of any new district which may hereafter be assigned therefrom and as a residence for the teacher or teachers of the said school and for no other purpose which said school shall always be in union with and conducted upon the principles and in furtherance of the ends and designs of the incorporated National Society for promoting the education of the poor in the principles of the Established Church.

Then there is a provision under which the trustees are empowered at the request of the National Society, but not otherwise, to convey for educational purposes to any body corporate or persons authorised by law their estate or interest thereby vested in them. Then there is a

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provision as to the management of the school, and certain provisions as to restrictive covenants, with which we are not concerned.

If there is one thing which is to my mind clear beyond possibility of controversy, whatever the effect of it may be, it is that the intention of Cawston, when he executed this conveyance, was to execute a conveyance which would operate by virtue of the provisions of the Act and would carry with it all the consequences for which the Act provides. Cawston purports to convey under the authority of that Act and under no other authority, and he conveys to trustees for the purposes of the Act, and, therefore, merely looking at the construction of this document, it is perfectly clear that it is to be referred to the statutory power which Cawston had by virtue of the Act of 1841. One would have thought that on that basis the necessary result would be that all the consequences laid down in the Act would follow. The result of this conveyance was that, by virtue of s 7 of the Act, and not by virtue of any power outside that section, the land conveyed vested in the minister and churchwardens for the time being, and, further, by virtue of the provisions of the Act, it was intended as clearly as anything could be that, once the condition was fulfilled under which the reverter proviso in s 2 of the Act was to come into operation, reverter should take place. In point of fact, the circumstances which that proviso contemplates have in this particular case come into operation, and hence arises the controversy between Cawstons representative and the vicar and churchwardens of the present parish of St Luke, the former saying that the reverter clause has an application in his favour and the latter saying that it has no application in the present case. There could be no question whatever, in my judgment, if the case had been one of a limited owner. A tenant for life could not have suggested for one moment that the deed could have effect according to its terms apart from the statutory power conferred by the Act of 1841, which would necessarily carry the statutory consequences. The only colour of plausibility which can be given to the main argument of the present appellants is due to the circumstance that Cawston was the absolute owner of this land. By way of a background, counsel for the appellants suggested that the real matter with which s 2 was concerned was the case of limited owners or persons like the lords of manors who had not full power of disposition. I am unable to regard that argument as one which carries any result, because, although no doubt those cases were very typical cases, and might well have been the most common cases, especially at that date, nevertheless s 2 provides, as clearly as any section could provide, for the case of the absolute owner, and accordingly I do not find that there is anything in that suggestion which in any way assists the argument of counsel for the appellants.

Now, however, he says that Cawston, being an absolute owner, had the power to convey this piece of land to trustees for charitable purposes, subject, of course (if indeed it applied), to the law relating to

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mortmain and charitable uses, and he says that the conveyance must be given an operation by virtue of his absolute ownership, and not by virtue of some power in the Act which really was not necessary to make the conveyance effective. I cannot accept that argument. As I have already pointed out, there are two things which could not be effected by a conveyance by an absolute owner outside the Act. One was the introduction into the consequences of the transaction of the provision as to reverter. That it was the intention that that provision should operate is clear on the face of this document, in spite of the fact that, quite naturally, no express reference is made to it. The other respect in which the result quite clearly intended and contemplated could not have been effected was the vesting in the minister and churchwardens for the time being. It appears to me that, as a pure matter of construction of this document, the references to the powers of the Act of Parliament mean that the document is to be construed as one which is intended to have those two consequences. Those two consequences were consequences which, as I have said, Cawston as absolute owner could not possibly have effected apart from the power conferred upon him by the statute. In connection with this argument, counsel for the appellants relied upon the phrase in s 2, that the land granted should revert to, and become a portion of, the said estate, namely, the estate out of which it was carved, as fully to all intents and purposes as if this Act had not been passed. He says that, if the Act had not been passed then in the case of a conveyance by an absolute owner there never would have been any reverter, and, therefore, there cannot in such a case be a reverter under the terms of the proviso. However, in my opinion, that argument really will not bear examination. It is based upon a construction of this proviso, which appears to me to be quite hopelessly narrow. The words

revert as fully to all intents and purposes as if this Act had not been passed.

in relation to any conveyance which is made under the Act, are really a quite inaccurate expression to begin with, because, if the Act had not been passed, the conveyance, so far as it required the Act to give it validity, would never have been made, and, therefore, there would never have been any question of the land leaving the grantor. In fact, what it means, it appears to me, is merely that, in the circumstances stated, the land is to come back and join up again with the estate from which it was derived as though the transaction carried out under the powers of the Act had never taken place.

I have endeavoured to express on this part of the argument in my own language my reasons for thinking that the argument cannot prevail. In point of fact the precise point on this part of the argument has already been dealt with in a decision of Clauson J, in Dennis v Malcolm. He there decided the point against the party who was then putting it forward, and decided it, if I appreciate his reasons rightly, on grounds similar to those which I have expressed, although perhaps not stated

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with the fullness with which I have thought it right to state them in order to put the matter in my own language.

With regard to the next two points which counsel for the appellants took, the first of them was that no reverter will take place where the conveyance is by an absolute owner for his own benefit who either conveys for value or is expressed to convey as beneficial owner. That appears to me to be quite unfounded. The section itself contemplates the grant by way of sale, and the fact that certain covenants are now implied where the grantor conveys as beneficial owner does not appear to me in any way to take away the perfectly clear operation of the conveyance, which was made (as I have already said) with the intention of executing and in pursuance of the powers conferred by the Act of 1841, and with the intention that the statutory scheme laid down in the Act should apply.

Then came the next point, which was not taken below, that reverter cannot take place in the present case because this piece of land was a piece of land by itself and never formed part of any estate. It is sufficient to say that that construction of the section would make it impossible for anyone who merely held one acre or less to grant it for the purposes indicated, whereas a person who had an acre-and-a-quarter and conveyed an acre and kept the quarter would apparently get the benefit of reverter. That argument, in my judgment, is putting much too narrow a construction on the language of the proviso.

The next and the last point is this. It is said that the Act of 1841 does not exempt conveyances made under it from the provisions of the Mortmain and Charitable Uses Acts in force at the relevant time, that when this conveyance was made, enrolment under those Acts was necessary, that no such enrolment took place, that the conveyance accordingly was void, and that, in the result, the present appellants have acquired a title under the Statute of Limitations. I do not pause to inquire whether, if the first of these propositions was right, the consequence stated would follow. There are obvious points which would have to be carefully considered if we ever got to that stage, but, in my opinion, the argument fails at an earlier stage. In my opinion, the Act of 1841 is a code in itself with regard to the particular subject-matter with which it deals, and conveyances made under it are not conveyances to which the Charitable Uses Act 1735, the relevant Act then in force, applied. When I look at that Act, I find (stating it quite shortly) that no land should be granted in trust for any charitable uses unless certain things were complied with, among others enrolment within six calendar months and execution (except in the case, I think I am right in saying, of conveyances for value) not less than twelve months before the death of the grantor. When I look at the Act of 1841, I find that it says in terms in s 2 that a particular kind of conveyance to charitable uses may be made, thereby contradicting and making an exemption from the general statutory prohibition in relation to grants for charitable

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uses which the Charitable Uses Act 1735, imposed. In my opinion, the particular and special provisions of the Act of 1841 had the effect of exempting from the general provisions of the Charitable Uses Act 1735, a conveyance made in accordance with the Act of 1841. The only grounds which might be relied upon as pointing in the opposite direction are grounds which, before Simonds J, led counsel for the respondent not to argue to the contrary, and Simonds J, assumed, without deciding, that the provisions of the Charitable Uses Act 1735, would have applied. Those grounds are, first, in the Act itself the reference in s 10 to the provision that not more than one witness shall be necessary (the Mortmain Acts provided for two witnesses). It is said that that is an indication that, subject to that modification, the other provisions of the Mortmain Acts are to remain in operation. I do not find this point convincing.

The next ground suggested is that in the School Sites Act 1844, s 3, there is an express enactment that conveyances made under s 2 of the Act of 1841 are to be valid although the donor shall die within twelve calendar months from the execution thereof. It is said that, if the Mortmain Acts had not applied, that provision would have been quite unnecessary. I think I am right in saying that there is another exception, namely, s 4 of the Act of 1849, which gives very extended powers of grants for school purposes, going very far beyond what the Act of 1841 provided for, and it is provided, in terms in that section that such grants shall be valid even if the grantor dies within twelve calendar months. It is to be observed that the Act of 1844 is not an Act described as an Act to amend the Act of 1841, but in the long title, which is the only title at that date, the Act is described as an Act to explain the Act of 1841, and there are similar words in the title to the Act of 1849. We are all of us familiar with the case where an ingenious point of doubt is raised, and, if the statute is one of far-reaching and general application, an indulgent legislature prefers to set the doubt at rest rather than leave it a subject of controversy, and perhaps of litigation. The fact that the provision to which I have referred comes in by way of explanation, leads me strongly to think that that was the origin of those particular sections in the Acts of 1844 and of 1849, but, however that may be, the presence of those sections in the later legislation does not lead me to construe the Act of 1841 in a way other than that which I have indicated, namely, that it is a code outside the Mortmain Act. If I am wrong in the view which I have formed that conveyances under the Act of 1841 did originally require enrolment, still I agree with the conclusion of Simonds J, who held that at the relevant date, namely, 20 August 1883, the date of the conveyance, the necessity for complying with the formalities of the Mortmain Acts had, in regard to this transaction, been removed by an Act passed in 1871, the short title of which is:

the Public Parks, Schools, and Museums Act, 1871.

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That Act provides by sect 4 that assurances of land for the purposes only of a school-house for an elementary school shall be valid notwithstanding the Charitable Uses Act 1735, and other statutes commonly known as the Statutes of Mortmain. Accordingly, if this conveyance is a conveyance for the purposes only of a school-house for an elementary school, there was no need for any enrolment. S 3 of the Act of 1871 defines the words “elementary school” as meaning

… a school or department of a school at which elementary education is the principal part of the education there given, and shall not include any school or department of a school at which the ordinary payments in respect of the instruction from each scholar exceed ninepence a week …

No question, I may say in passing, arises as to any relevance in those latter words about the ninepence a week. The word “school-house” is defined as including the teachers dwelling-house and the playground. The question therefore is: is this conveyance one of that character? The purposes for which the grant is made by the conveyance are, as I have already read, to permit the premises to be for ever hereafter appropriated and used as and for a school for the education of children and adults or children only of the labouring, manufacturing and other poorer class in the parish, with a reference to the principles of the National Society. That, of course, must be read in the light of the circumstance that the conveyance is a conveyance which purports to be made under the powers conferred in the Act of 1841, and the habendum is, in terms, described as

for the purposes of the said Act.

Accordingly, on ordinary accepted principles, it would not be proper to construe the purposes set out in this document as extending beyond those contemplated by the Act unless by clear language we were forced to do so. I therefore construe the purposes in this document by reference to the permissible purposes under s 2 of the Act, and I limit them within the four corners of the purposes so stated, and those purposes are

… a school for the education of poor persons, or for the residence of the schoolmaster or schoolmistress, or otherwise for the purposes of the education of such poor persons in religious and useful knowledge.

An education of that character in relation to the poor persons indicated in 1841 can, in my opinion, only have meant, and been understood as meaning, what now in more modern phraseology is called elementary education, or, at any rate, did not extend beyond it. It is to be noticed that there is no definition of “elementary education” in the Act of 1871 to which I have referred, nor, so far as I am aware, is there in any other Act of Parliament any statutory definition of it. In point of fact, “elementary education” is anything that is not secondary or higher education, and what that has come to mean is a matter that has been developed in practice. Looking back to the Act passed in these terms in 1841, I have no hesitation in holding that the education which is there contemplated is the same thing as is comprised within the phrase “elementary education” in the Act of 1871.

Page 149 of [1939] 4 All ER 140

On all those grounds, I am of opinion that this argument with regard to the Mortmain Acts fails. Counsel for the appellants has failed to persuade me that the decision of the judge was in any respect wrong, and the consequence is that the appeal must be dismissed.

CLAUSON LJ. I agree.

GODDARD LJ. I agree.

Appeal dismissed with costs.

Solicitors: Day & Son (for the appellant); Dennes & Co (for the respondent).

W K Scrivener Esq   Barrister.

Minister of National Revenue v Trusts and Guarantee Co Ltd

[1939] 4 All ER 149


Categories:        COMMONWEALTH; Commonwealth countries: TAXATION; Income Tax: CHARITIES        

Court:        PRIVY COUNCIL        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        10, 11 JULY, 12 OCTOBER 1939        


Privy Council Canada Income Tax Income accumulating in Canada in trust for unascertained persons Charitable institution Liability for interest on unpaid tax Income War Tax Act (RSC 1927, c 97), ss 4(e), 11(2), 48, 49, 66 Statutes of Canada 1934 (c 55), s 7.

By a settlement made in 1918 the settlor transferred certain of his assets to the respondents, who were the trustees of the settlement. These assets were to be converted and the net proceeds to constitute a trust fund, which was to carry interest at 5¼ per cent per annum, such interest being provided by the respondents. The interest was made the subject of a discretionary trust. The respondents were to pay to the settlor during his life such sums as they might think proper for his living expenses, and were permitted to pay a sum of $150 per annum to such charitable purposes as the settlor might request. The surplus of the interest was to be paid into an investment account, to carry interest at 5¼ per cent per annum, and to become a part of the corpus. This accumulation was to go on until the expiration of 21 years from the death of the settlor, when the whole fund was to be paid by the respondents to the municipal council of Colne in Lancashire, England, for the benefit of the aged and deserving poor of that town. The settlor died in 1927. The appellant was not aware until 1935 that the income was being accumulated in Canada, and in that year he served notices of assessment to income tax on the respondents in respect of each of the years 1919 to 1934:

Held (i) the words “unascertained persons” in the Income War Tax Act 1927, s 11(2), are not confined in their meaning to persons having merely contingent interests, but include “the aged and deserving poor” of a municipality.

(ii) the trust was a charitable trust, but not a charitable institution, within the meaning of the Income War Tax Act 1927, s 4(e).

(iii) the respondents were chargeable with the interest under s 48 and 49 of that Act, and the court had no discretionary power under s 66 of the Act to waive the payment of that interest.

Notes

It was sought in the present appeal to limit the meaning of the expression “unascertained persons” so as to include only those who, though unascertainable at the moment, would ultimately take a vested interest in the

Page 150 of [1939] 4 All ER 149

property, the subsection in a later part of the same sentence using the words “persons with contingent interests.” It was said that unborn issue was an example of such a class of persons. Under the present trust, no particular person can be said to have any beneficial interest in the fund. For this reason, it had been held in the courts below that the poor of a municipality were not unascertained persons within the meaning of the subsection. This view did not find favour with their Lordships, who adopted a much wider view of the meaning of the words in question.

As to Meaning of Charity for Income Tax Purposes, see Halsbury (Hailsham Edn), Vol 17, pp 310314, paras 617621; and for Cases, see Digest, Vol 28, pp 8284, Nos 469483.

Cases referred to

McLeod v Customs & Excise Minister [1926] SCR 457; Digest Supp.

Minister of National Revenue v Royal Trust Co [1931] SCR 485; Digest Supp.

Holden v Minister of National Renenue [1933] AC 526; Digest Supp, 102 LJPC 115, 149 LT 315.

Re Douglas, Obert v Barrow (1887) 35 ChD 472; 8 Digest 258, 205, 56 LJCh 913, 56 LT 786.

Adamson v Melbourne & Metropolitan Board of Works [1929] AC 142; Digest Supp, 98 LJPC 20, 140 LT 107.

Manchester Corpn v McAdam [1896] AC 500; 28 Digest 14, 66, 65 LJQB 672, 75 LT 229, 3 Tax Cas 491.

Mills v Farmer (1815) 1 Mer 55; 8 Digest 348, 1423.

Re Willis, Shaw v Willis [1921] 1 Ch 44; 8 Digest 349, 1431, 90 LJCh 94, 124 LT 290.

Verge v Somerville [1924] AC 496; Digest Supp, 93 LJPC 173, 131 LT 107.

National Trust Co v Minister of National Revenue [1935] ExCR 167; Digest Supp [1936] 1 DLR 129.

Appeal

Appeal from a judgment of the Supreme Court of Canada (Sir Lyman P Duff CJ, Davis, Crocket and Hudson JJ, Kerwin J, dissenting), dated 19 December 1938, reversing the judgment of the Exchequer Court of Canada (McLean J), dated 4 January 1938. The judgment of their Lordships was delivered by Lord Romer.

John Jennings KC and Frank Gahan for the appellant.

S Casey Wood KC and G M Jarvis for the respondents.

Jennings KC: The income of this trust, in respect of which it is sought to tax the respondents, was accumulating in Canada, in trust, for the benefit of unascertained persons. Income so accumulating is taxable under s 11(2) of the Act in the hands of the trustees. The Act provided for the charging of interest on arrears of income tax, and the Exchequer Court had not any power to disallow such interest. [Counsel referred to McLeod v Customs & Excise Minister, Minister of National Revenue v Royal Trust Co, Holden v Minister of National Revenue, Re Douglas, Obert v Barrow, Adamson v Melbourne and Metropolitan Board of Works, Manchester Corpn v McAdam, and to Halsbury, Hailsham Edn, Vol 4, p 336, para 567.]

Casey Wood KC: S 11(2) of the Act deals with private trusts. Holden v Minister of National Revenue and other cases are all private

Page 151 of [1939] 4 All ER 149

trusts. The settlor has created a charitable trust, and the gift does not at any time vest beneficially in any particular person or persons. The aged and deserving poor cannot be regarded otherwise than as a class in the community. To regard them otherwise is to destroy the character of what is obviously a charitable trust. The settlor by the execution of the indenture brought into being a charitable trust and a charitable institution organised for carrying out his charitable intention, and the income of the charitable institution is, by the terms of the Act, exempt from taxation. [Counsel referred to Mills v Farmer, Re Willis, Shaw v Willis, Verge v Somerville, and to Lewin on Trusts, 13th Edn, p 16.]

Jarvis: In National Trust Co v Minister of National Revenue, interest was disallowed on a portion of the tax which the Minister had elected not to assess for some years.

Jennings KC, in reply.

John Jennings KC and Frank Gahan for the appellant.

S Casey Wood KC and G M Jarvis for the respondents.

12 October 1939. The following judgments were delivered.

LORD ROMER. This is an appeal by the Minister of National Revenue from a judgment of the Supreme Court of Canada, dated 19 December 1938, reversing by a majority a judgment of the Exchequer Court of Canada given in his favour on 4 January 1938. The question to be determined on the appeal is whether the respondents, a Canadian company, are, as the trustees of an indenture of 27 May 1918, liable to be assessed to income tax in respect of the income accumulated by them during the years 1919 to 1934 inclusive, pursuant to the trust for accumulation contained in that indenture.

The indenture, which was made between one Peter Birtwistle, therein called the settlor, of the one part and the respondents of the other part, is of a somewhat unusual nature, and is by no means clearly worded. The effect of it, however, would seem to be as follows. Various assets of the settlor which had already been, or were thereby, transferred to the respondents were to be converted and got in by them, and the net proceeds, together with the net income of the assets pending conversion after deduction of expenses, were to be transferred to an investment account. The money so transferred constituted the capital of the trust fund, and was to carry interest at the rate of 5¼ per cent per annum, such interest being provided by the respondents. Out of this interest the respondents were to pay to the settlor during his life such sums as they might think fitting and proper for him to expend on his “living expenses,” which expression, however, was not to be deemed to include any obligations incurred by the settlor by speculation. The respondents were also permitted to pay out of the income $150 per annum to such charitable purposes as the settlor might request. The surplus of such interest was to be paid into the investment account on 1 January in each year, and added to and become part of the corpus, and itself carry interest at 5¼ per cent. This accumulation of interest was to go on until the expiration of 21 years from the death of the

Page 152 of [1939] 4 All ER 149

settlor, when the whole fund, with the accumulations, was to be paid by the respondents to the municipal council of the town of Colne in Lancashire, England:

… to be used by the said council for the benefit of the aged and deserving poor of the said town of Colne in such manner and without restriction of any kind, as shall be deemed prudent to the said council …

In the meantime, the respondents might invest the fund and its accumulations standing to the credit of the investment account in the purchase of or loan upon such securities as they thought fit. Any such investments, however, were to be at the risk of the respondents, who guaranteed the eventual payment to the municipal council of the corpus of the fund, together with the accumulations of the interest at the rate of 5¼ per cent. It was on the other hand provided that, by way of remuneration for such guarantee and for their management of the trust, the respondents should be entitled to retain for their own use and benefit:

… the surplus of interest or profit, if any, resulting from the investment or loaning of the said investment account over and above the rate of interest (5¼ per cent.).

It was further provided that, upon the payment over to the municipality of Colne at the expiration of the period of 21 years from the settlors death of the guaranteed sum, the securities then held by the respondents in respect of the investment account should become the property of the respondents freed from the trusts thereby created.

In each of the years from 1919 to 1934 inclusive, the respondents reported to the appellant, on the regular form required to be filed by trustees and others acting in a fiduciary capacity, the amounts of the income received by them under their trust. The purpose of this return is for information, and not for taxation, inasmuch as the Dominion income tax legislation does not, speaking generally, provide for taxation by deduction at source of trust income in the hands of trustees, but imposes the tax directly upon the beneficiaries who are entitled to receive that income. The return to be made by the trustees must, therefore, give the names and addresses of the beneficiaries who are so entitled. In the present case, accordingly, the respondents, after stating in each return the income of the trust for the year in question (which presumably was the surplus for that year of the interest that they had guaranteed), added the following words:

Income accrues to the municipal council of Colne, England, for the benefit of aged and deserving poor.

Had the income been applied each year for the benefit of such aged and deserving poor, instead of being subject to the trust for accumulation, the income would not have been liable to taxation under the income tax legislation of the Dominion, one sufficient reason being that the beneficiaries under the trust were not resident in Canada. However, the Income War Tax Act 1920, contained a section which

Page 153 of [1939] 4 All ER 149

was deemed to have come into force at the commencement of the 1917 taxation period, and which was reproduced verbatim as s 11(2) of the Revised Statutes of 1927, c 97:

Income accumulating in trust for the benefit of unascertained persons, or persons with contingent interests shall be taxable in the hands of the trustee or other like person acting in a fiduciary capacity, as if such income were income of an unmarried person.

The section was repealed by an amending Act in 1934 (Statutes of Canada 1934, c 55, s 7), but re-enacted in the same form, except that for the concluding words “an unmarried person” there were substituted the words “a person other than a corporation,” followed by a proviso which is not material for the present purpose.

It appears that the appellant, and the officials administering the Income War Tax Act under him, failed to realise that the income referred to in the respondents returns was being accumulated by the respondents in Canada. He says that he or his officials first became aware of this fact in 1935 in consequence of certain proceedings relating to the trust taken in that year in the Supreme Court of the Province of Ontario. He therefore caused notices of assessment to income tax to be served upon the respondents in respect of each of the years 1919 to 1934. The total amount claimed, including interest, was $36,053.25. The respondents appealed to the Minister against the assessments. They contended that the income was being accumulated either for the benefit of the municipal corporation of Colne or for the benefit of the aged and deserving poor of the town, and that neither the municipal corporation nor the aged and deserving poor were unascertained persons within the meaning of the Act. They contended, alternatively, that the income in question was the income of a charitable institution, and, as such, exempted from taxation by virtue of the Income War Tax Act, s 4(e), which exempts:

… the income of any religious, charitable, agricultural and educational institution, boards of trade and chambers of commerce.

Peter Birtwistle, the settlor, had died in 1927.

The appeal was dismissed by the Minister, the present appellant, who affirmed the assessments. The respondents thereupon gave notice of dissatisfaction in accordance with the provisions of s 60 of the Act, and the matter in due course came on for hearing in the Exchequer Court before Maclean J. The judge affirmed the Ministers decision. He held that the income was being accumulated, not for the benefit of the town of Colne, but for the benefit of a class of which the members are presently unascertainable and will always be fluctuating. He held further that neither the respondents nor the municipal council of Colne nor the town of Colne nor the trust fund itself were charitable institutions. He also decided that interest on the income tax had been properly charged, a matter that will be dealt with more fully later on. By judgment dated 4 January 1938, the respondents appeal was dismissed without costs.

Page 154 of [1939] 4 All ER 149

The respondents thereupon appealed to the Supreme Court of Canada, where the case was heard by Sir Lyman P Duff CJ, and Crocket, Davis, Hudson and Kerwin JJ. The appeal was allowed with costs there and below (Kerwin J, dissenting), and the assessments were discharged. Davis J, in whose judgment Sir Lyman P Duff CJ, and Crocket J, concurred, was of opinion that s 11(2) of the Act of 1927 had in contemplation income that would vest in, and ultimately pass to, persons for the time being unascertainable, such, for instance, as unborn issue, or to persons whose rights were for the time being merely contingent interests. However, under the trust now in question, he said, no particular person will ever acquire a right to demand and receive the beneficial interest in the income from the fund or any part thereof. He held, therefore, that the subsection did not apply. Hudson J, also thought that the persons referred to in the subsection were persons who might become entitled to specific portions of the fund.

Their Lordships are unable to take this view of the matter. They can find no warrant for introducing into the subsection a qualification that is not there. In their Lordships opinion, the subsection applies in every case where income is being accumulated in trust for the benefit of unascertained persons, whether or not those persons will ultimately take a vested interest in such income, and whether or not they will ever become entitled to specific portions of it. In the present case; the accumulated interest in the hands of the respondents as trustees will, in 1948, have to be handed over to the municipal council of Colne as trustees in trust to be applied for the benefit of the aged and deserving poor of that town. Such aged and deserving poor are, without any question, persons, and, equally without question, they are unascertained. The case, therefore, seems to fall within the very words of the subsection. This was the view of the matter that commended itself to Kerwin J.

It is moreover to be observed that in an earlier decision of the Supreme Court the subsection was held to be applicable to a case in which it was possible that no person would ever acquire a vested right in any specific portion of the income that was being accumulated. This was in McLeod v Customs & Excise Minister. In that case, income of a residuary fund was being accumulated for 21 years from the death of a testator, at the end of which time the whole fund was to be conveyed to his three children, but so that, if any child were then dead, his share was to be divided by the trustees of the will amongst the testators grandchildren, if any, as the trustees might think best. Not only, therefore, were the persons for whom the interest was being accumulated unascertained, but, in the event of one of the testators children dying before the expiration of the 21 years, it could not be said, at the end of that period, of any grandchild that he was entitled to receive any specified portion of the trust fund any more than in the present case it will be possible

Page 155 of [1939] 4 All ER 149

to say it of any of the aged and deserving poor in the town of Colne in 1948.

In view of the construction put by the majority of the Supreme Court upon s 11(2) of the Act, it was not necessary for them to express any opinion upon the question whether the respondents could succeed upon the ground that the income in question was exempted from taxation as being income of a charitable institution, or upon the question whether interest was properly chargeable upon the tax prior to the date of assessment. Kerwin J, however, dealt with both of those questions, and decided both of them adversely to the respondents. In their Lordships opinion, he was right in so doing.

As to the first of these questions, it would appear from the judgment of Maclean J, that the respondents had contended before him that the respondents themselves or the municipal council of Colne or the town of Colne were charitable institutions. Any such contention is obviously absurd, and was very properly omitted from the argument on behalf of the respondents before this Board. It was, however, strenuously urged before their Lordships that the trust regarded as a whole was a charitable institution. That it is a charitable trust no one can doubt, but their Lordships are unable to agree that it is a charitable institution such as is contemplated by s 4(e) of the Act. It is by no means easy to give a definition of the word “institution” that will cover every use of it. Its meaning must always depend upon the context in which it is found. It seems plain, for instance, from the context in which it is found in the subsection in question that the word is intended to connote something more than a mere trust. Had the Dominion legislature intended to exempt from taxation the income of every charitable trust, nothing would have been easier than to say so. In view of the language that has in fact been used, it seems to their Lordships that the charitable institutions exempted are those which are institutions in the sense in which boards of trade and chambers of commerce are institutions, such, for example, as a charity organisation society, or a society for the prevention of cruelty to children. The trust with which the present appeal is concerned is an ordinary trust for charity. It can be regarded as a charitable institution within the meaning of the subsection only if every such trust is to be so regarded, and this, in their Lordships opinion, is impossible. An ordinary trust for charity is, indeed, only a charitable institution in the sense that a farm is an agricultural institution. It is not in that sense that the word “institution” is used in the subsection.

It only remains to deal with the question of the interest charged upon the tax prior to the date of assessment. The question turns upon ss 48, 49 and 66 of the Act. S 48 provides as follows:

Every person liable to pay any tax under this Act shall send with the return of the income upon which such tax is payable not less than one-quarter of the amount of such tax, and may pay the balance, if any, of such tax, in not more than three equal bi-monthly instalments thereafter, together with interest at the

Page 156 of [1939] 4 All ER 149

rate of six per centum per annum upon each instalment from the last day prescribed for making such return to the time payment is made.

S 49 provides as follows:

If any person liable to pay any tax under this Act pays as any instalments less than one-quarter of the tax as estimated by him, or should he fail to make any payment at the time of filing his return or at the time when any instalment should be paid, he shall pay, in addition to the interest at the rate of six per centum per annum provided for by the last preceding section, additional interest at the rate of four per centum per annum upon the deficiency from the date of default to the date of payment.

In each of the years 1919 to 1934 the respondents failed to make any payment at the time of filing their returns, or at the time when subsequent instalments under s 48 should have been paid. They became, therefore, chargeable with the additional interest prescribed by s 49 in addition to the interest mentioned in s 48. This they do not deny. Their contention that, in the circumstances, the interest should not be charged is based upon s 66, which provides as follows:

Subject to the provisions of this Act, the Exchequer Court shall have exclusive jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this Act and in delivering judgment may make any order as to payment of any tax, interest or penalty or as to costs as to the said court may seem right and proper.

It is contended that this provision gives to the court a discretion to determine whether interest shall or shall not be exacted from the taxpayer. Their Lordships cannot accede to this contention. The powers given to the court by the section are in terms given subject to the provisions of the Act, and, therefore, subject to the provisions of ss 48 and 49. The court has no more power under the sections to waive the payment of the interest than it has to waive the payment of any tax imposed by the Act, or to impose a greater rate of interest or a larger amount of tax than the Act provides. The section is merely an enactment conferring upon the Exchequer Court exclusively the jurisdiction of dealing with disputes arising in connection with assessments made under the Act, and, as regards tax, interest and penalties, its powers are confined to seeing that they are only charged in strict accordance with the Act. As regards costs, the court has no doubt a complete discretion.

For these reasons, their Lordships are of opinion, and will humbly advise His Majesty, that the appeal should be allowed, that the judgment of the Supreme Court of 19 December 1938, should be discharged, and the judgment of the Exchequer Court of 4 January 1938, restored. The respondents must pay the appellants costs of this appeal and of the appeal to the Supreme Court.

Appeal allowed with costs.

Solicitors: Charles Russell & Co (for the appellants); Blake & Redden (for the respondents).

T A Dillon Esq   Barrister.


Provender Millers (Winchester) Ltd v Southampton County Council

[1939] 4 All ER 157


Categories:        LOCAL GOVERNMENT: ENVIRONMENTAL        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        23, 24, 25, 26 OCTOBER 1939        


Public Authorities Exercise of statutory powers Damage to riparian owners Possibility of alternative method Onus of proof.

Waters and Watercourses Riparian owners Interference with flow of water by works executed under statutory powers Reasonable steps to avoid interference Onus of proof.

The respondent company and their predecessors in business had for many years carried on the business of millers at a mill which was situated on a river and which derived its water power from that river. The appellant council were responsible for the upkeep of a bridge carrying the highway over a stream which ran parallel to the river, and for the protection of the bridge, and, acting under statutory powers, the appellant council rebuilt an existing culvert so as to give greater support to the road, and also made an entirely new culvert, so as to provide a means of outlet for flood water:

Held (i) the appellants had failed to show that, for the purpose of protecting themselves against flooding, it was necessary to effect a permanent diminution in the quantity of water going to the respondents mill.

(ii) in carrying out works of protection, it is not legitimate to alter the alveus of the stream.

(iii) the making of a new watercourse is a different matter from the mere removal of an obstruction.

(iv) the appellants failed to discharge the onus resting upon them of showing that the repairing of the bridge and the protecting of the highway against flooding could not have been done without permanently altering the normal flow of the river to the prejudice of persons interested in that flow.

Decision of Farwell J ([1939] 3 All ER 882) affirmed.

Notes

Public authorities in the exercise of their statutory duties are bound to have regard to the rights of other parties, unless, without negligence, they have followed the method in which the statute prescribes that the duty is to be performed, or expressly exempts them from the results of the interference with such rights. The point in the present case was that no one would have expected the works carried out by the appellant council to affect the respondents mill, but, the execution of the works having had that effect, the appellant council are liable to the respondents.

As to Liability of Public Authorities, see Halsbury (Hailsham Edn), Vol 26, pp 261263, paras 574, 575; and for Cases, see Digest, Vol 38, pp 3850, Nos 225291.

Cases referred to

East Fremantle Corpn v Annois [1902] AC 213; 38 Digest 28, 158, 71 LJPC 39, 85 LT 732.

Manchester Corpn v Farnworth [1930] AC 171; Digest Supp, 99 LJKB 83, 142 LT 145.

Mason v Shrewsbury & Hereford Ry Co (1871) LR 6 QB 578; 38 Digest 413, 1026, 40 LJQB 293, 25 LT 239.

Gerrard v Crowe [1921] 1 AC 395; 44 Digest 84, 652, 90 LJPC 42, 124 LT 486.

Lagan Navigation Co v Lambeg Bleaching, Dyeing & Finishing Co [1927] AC 226; 38 Digest 398, 919, 96 LJPC 25, 136 LT 417.

Page 158 of [1939] 4 All ER 157

Great Central Ry Co v Hewlett [1916] 2 AC 511; 38 Digest 354, 594, 85 LJKB 1705, 115 LT 349.

Sandgate Urban District Council v Kent County Council (1898) 79 LT 425; 26 Digest 265, 65.

Sharpness New Docks and Gloucester & Birmingham Navigation Co v A-G [1915] AC 654; 26 Digest 581, 2716, 84 LJKB 907, 112 LT 826, revsg [1914] 3 KB 1.

Appeal

Appeal by the defendants from an order of Farwell J, dated 18 July 1939, and reported [1939] 3 All ER 882, where the facts are fully set out.

J M Gover KC, Roger W Turnbull and G T Hesketh for the appellants.

C E Harman KC and Wilfrid M Hunt for the respondents.

Gover KC: The effect of the rebuilding of the bridge was appreciably to diminish the flow of water to the respondents mill. Apart from their being a statutory body, performing a statutory duty, the council, as ordinary riparian owners, were legally entitled to do what they in fact did, in order to avoid interference with their property by floods, notwithstanding that by so doing they might interfere with the rights of a third person to some extent. The flow from the old bridges or culverts was not the natural flow of the stream, but it was artificially restricted and held up by the structure of the old bridges for the purposes of the bridge authority as riparian owners. Regarded as riparian owners, the council were entitled to remove that restriction or obstruction, and were under no obligation to continue it for the benefit of the respondents, whom it had, in fact, benefited. The respondents do not claim, and never have claimed, an easement. The statute authorises the reconstruction of a bridge of any proper dimensions, even though it alters the flow of the stream. The statute authorises a local authority to remove a bridge. The work done by the council was done by them in the execution of a public trust and for the public benefit, in pursuance of statutory duties and powers. If the work was done in a reasonable and proper manner, it could not be actionable at the suit of a third person. In ordinary circumstances, a riparian owner is entitled to guard himself against floods by putting up a wall on his own land, even though the result may be to direct the water on to the land of a lower riparian owner. The present is the converse casenamely, the removing of walls farther back, thereby avoiding the results of flooding. A riparian owner is entitled to do that notwithstanding that it causes damage to other riparian owners. A riparian owner is entitled to remove his dam. If, as dominant owners, the council decide to remove the obstruction, they may do so. The respondents say that they are entitled by prescription to a continuance of the holding up of the water. The answer is that the respondents, as servient owners, cannot require the council to maintain something which was erected for the councils purposes. Mason v Shrewsbury & Hereford Ry Co is an authority for saying that discontinuance by the council was not a cause of com-

Page 159 of [1939] 4 All ER 157

plaint. As regards the position of the council as a statutory authority, the council have a statutory power to remove a bridge entirely. In any event, the council have acted within the principle stated by Lord Macnaghten in East Fremantle Corpn v Annois. That case shows the limit of the liability of statutory bodies, in that they are not liable for damage caused if the work they have done under their statutory powers has been done properly. In the present case, the evidence shows that there was no other reasonably practicable way of doing the work, in the circumstances. [Counsel referred to Manchester Corpn v Farnworth, Gerrard v Crowe, Lagan Navigation Co v Lambeg Bleaching, Dyeing & Finishing Co, Great Central Ry Co v Hewlett, Sandgate Urban District Council v Kent County Council and Sharpness New Docks and Gloucester & Birmingham Navigation Co v A-G.]

Counsel for the respondent company was not called upon.

J M Gover KC, Roger W Turnbull and G T Hesketh for the appellants.

C E Harman KC and Wilfrid M Hunt for the respondents.

26 October 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. The points that were taken before us fall into two categories. The first category deals with the matter apart from any statutory rights or duties, and the second category deals with the matter in the light of the statutory obligations and the statutory powers which the appellants admittedly have. I must say a word or two about both those matters. I shall say a little more about the first than about the second, because, with regard to the first, Farwell J has not gone into details of the argument, but has merely rejected it. In my opinion, he rightly rejected that branch of the argument. Before I come to deal with it, there is one matter on which I should say a word or two. The case made out in the statement of claim with regard to the nature of the Abbey Mill Stream was that it was a natural stream. In the defence, that allegation was contested, and it was asserted that it was an artificial stream. The respondents, who were the plaintiffs below, certainly at one stage in the case quite definitely accepted the new that the stream was an artificial one, and that acceptance was not commented upon, so far as I understand, in any way by counsel for the present appellants, for the very good reason that, on the case that he was presenting to the court, it was quite immaterial whether the stream was artificial or natural. He was not putting before the court an alternative argument based on the view, which in any case would have been inconsistent with his pleading, that the stream was a natural one. At one time I thought the question whether the stream was a natural or an artificial one might be a matter of importance, but I am now satisfied that the answer to this branch of the appellants argument is the same on either hypothesis.

The argument is broadly of this nature. The appellants are treated, and I think for this purpose may properly be treated, as riparian owners, and it is said, first, that as riparian owners they are entitled to protect themselves against the flooding of their land, and that the work which

Page 160 of [1939] 4 All ER 157

they have carried out is that of protecting their land from flood water. Secondly, it is said that, apart from the question of flooding, every riparian owner, whether the stream be artificial or whether it be natural, is entitled to remove an artificial obstruction which is placed in the watercourse. In the case of an artificial stream, of course, that must be subject to the facts that the right to the water in an artificial stream depends either upon the scope of the grant or upon the quantity of water which has in fact been enjoyed during a period of prescription, and that the removal of any obstruction can be carried out only if it does not give to the person concerned a greater flow of water than that to which he is entitled. Subject to that qualification, I am prepared to accept the proposition that an artificial obstruction can properly be removed.

When one looks at the matter from the point of view of protection against flood, the first point to notice is that what the defendants have done is something far more than protecting themselves against flood. That is a point which comes into prominence very particularly in dealing with the second category of argument which was presented, because there it becomes of great materiality. It is sufficient in this context to say that, assuming that the appellants are entitled to protect themselves against flooding, that does not mean that they are entitled to execute works which not merely protect them against flooding but also increase the daily flow of the water in the watercourse to the prejudice of another person who has interests in the water. That applies to every stream, whether it be natural or whether it be artificial, and, as will appear later, the appellants have entirely failed to show that, for the purpose of protecting themselves against flooding, it was necessary to effect a permanent diminution in the quantity of water going to the respondents mill. That reason alone appears to me to dispose of that particular argument, but there is another reason, which is equally cogent, to my mind. It is that, accepting the proposition that a riparian owner, whether on a natural or on an artificial stream, is entitled to protect himself against flooding, his right in that respect does not extend, and no authority was cited which suggests that it possibly could extend, to an alteration in the alveus of the stream, at any rate, an alteration which affects the normal flow. True it is that the building of walls and embankments may be legitimate in protecting land against floods, even if the effect of building them is to throw flood water on to your neighbours land, but the one thing which the authorities appear to be quite clear is that, in carrying out works of protection, it is not legitimate to alter the alveus of the stream. What has been done here is precisely that. The appellants have not only increased the size of the alveus of that portion of the stream which comes down from Buskett Lane but they have also made an entirely new alveus to carry the water of the Hants and Dorset Stream, which had previously run into the Buskett Lane Stream towards the north side of the Broadway. That water is

Page 161 of [1939] 4 All ER 157

now carried by a new and separate culvert parallel to the culvert carrying the Buskett Lane water into the Abbey Mill Stream on the south side of the Broadway. That, as I have said, is an entirely new alveus, made where, so far as the evidence goes, no water had ever flowed before, and having the effect not merely of protecting the appellants land from flooding but also of performing a function which goes far beyond that and was unnecessary for that purposenamely, of permanently diminishing the flow of water in the main stream of the River Itchen. Whether the stream be natural or whether it be artificial, it appears to me that what the appellants have done cannot be justified on any principle of law which entitles riparian owners to protect themselves against flooding.

Then it is said that what they have done is to remove an artificial obstruction which in fact interfered with the natural flow of the water in those two branches of the Abbey Mill Stream. If the stream be an artificial stream, there is no evidence that the watercourse was at any stage larger than it was before the old culvert was constructed. So far as any evidence goes, the culvert, or something of the same dimensions, may have been there all along, and, if the stream was an artificial one, of course, the measure of the water rights would be determined by the capacity of the artificial work. Therefore, if it be an artificial stream, I cannot accept the proposition that the so-called removal of obstruction would be legitimate in the absence of proof that that was an obstruction which interfered with the water rights of those interested in the artificial stream. If the stream be a natural stream, again there is no evidence as to what the dimensions of that natural stream were before the culvert, or some previous work, was made. It may be that the stream at that point was a narrow stream, and did not allow the water to pass freely. Counsel for the appellants invited us to speculate as to what the situation might have been in remote antiquity, but there is no evidence about it, and I do not think it would be legitimate for this court to draw any inferences as to what the natural bed of the stream, if it were natural at that point, was before the culvert was built. I put that aside, because, in my view, it is not necessary to enter into that question, in view of the fact that what the appellants have done cannot with any accuracy of language be described as the removal of an obstruction. This is not like a case where the piers of a bridge in a river have been removed and a new bridge with a single span and no piers has been thrown across the river, as counsel for the appellants suggested that it was. It is something of a quite different character. No doubt the construction which covered the watercourse was technically a bridge. In point of fact, from another and perhaps more accurate physical point of view, there was merely a covered watercourse. What the appellants have done, as I have already said, is not merely to substitute a new cover of that watercourse for the old one, but to make a new watercourse in the way which I have already described. That, in my judgment, cannot by

Page 162 of [1939] 4 All ER 157

any stretch of language be described as the removal of an obstruction in a watercourse. It is something of quite a different character.

I have dealt at some length with this branch of the argument in deference to what was put before us by counsel for the appellants, and particularly in view of the fact that Farwell J did not accept it, and did not give reasons for taking that course. In my judgment, he was right in taking the course which he did, and, if he did not go fully into the matter, it was no doubt for the reason, with which I entirely sympathise, that the argument, when developed, will not really bear examination.

The other branch of the argument dealt with the point of statutory duty. It was suggested that Farwell J had misdirected himself and that he had taken a view of the evidence which could not be supported. On this branch of the case, without attempting to put my language with exact precision, the position may be stated thus. The appellants, being under a statutory duty to repair bridges carried by county highways and to keep the county highway in repair, and in particular to protect it against flooding, set themselves to perform that task, which was admittedly necessary. That being the task, what they have actually done is something beyond what their duty imposed upon them, because they have not only rebuilt the bridgethat is rightthey have not only protected the highway against flood waterthat is rightbut they have also gone further and effected a permanent alteration in the natural flow of the stream. Having, therefore, done something which goes beyond their duty, it is for them, and admittedly it is for them, to justify that excess. If the statutory duty could only have been performed (and when I say that I mean from a reasonable point of view, and without calling in the aid of extravagant devices, or anything of that kind) by going to that excess, the appellants would have been under no liability, because then they could truly have said that what they had done was the only reasonable thing that they could have done in the performance of their duty, and that, if, in order to perform that duty, they had at the same time to go beyond its exact limits, that would be a matter of which the respondents could not complain. Farwell J, in my opinion, correctly stated the law, and appreciated the facts correctly. He found that the appellants had really made no attempt to discharge the burden upon them of showing that the statutory object of repairing the bridge and protecting the highway against flooding could not reasonably have been achieved without going to the further point of permanently altering the normal flow of the river to the prejudice of persons interested in the water flowing down the River Itchen. If any complaint could be made against the judgment of Farwell J on this part of the case, speaking for myself, I should have thought that it would be that he had not really put the matter high enough. I say this because, not merely was no real attempt made to prove that point, but it seems to me that the evidence of the experts,

Page 163 of [1939] 4 All ER 157

when properly considered, shows that it would have been possible and easy so to lay out the work as to afford the requisite protection against flood water without at the same time affecting the normal flow in normal times. The real fact of the matter was, as Farwell J points out, that the existence of any such problem was never present to the minds of those concerned with the preparation and execution of this work. It never occurred to them that in carrying out the work they must consider whether or not it would alter the flow of water in the River Itchen going to the respondents mill, or whether that could be avoided without at the same time interfering with the legitimate work required for protecting the highway against flooding. They never thought that such a problem existed, and accordingly they never set their minds to the solution of it, and, when the evidence came to be given, it is evidence which I must confess would have satisfied me, not merely that the burden of proof was not discharged, but also that the contrary was established. However, it is not necessary to go as far as that. Farwell J, not being satisfied that the burden had been discharged, quite rightly took the view that the appellants on this argument were in the wrong.

I do not think that there is any other matter to which I need refer. Certain authorities were referred to, and the fact that I do not mention them or examine them does not mean that I did not very carefully attend to them when they were being read. In my judgment, they do not assist the arguments put forward by the appellants, nor in any way do they impugn the statements of law contained in the judgment of Farwell J. The appeal fails, and must be dismissed with costs.

CLAUSON LJ. I agree with the judgment which has just been delivered by Sir Wilfrid Greene MR. In this court, we have pursued the matter on the footing that the case may properly be examined on the two alternative views (i) that the Abbey Stream is an artificial stream, and (ii) that it is a natural stream. Farwell J based his judgment upon the view that the stream was an artificial stream, and I would say merely that I think that, in view of the form of the pleadings and of the way the case was debated, Farwell J was quite within his rights in treating it as common ground that the stream was artificial, and dealing with it on that footing. As Sir Wilfrid Greene MR has explained, and I am in entire agreement with him, as a matter of law the difference in the present case does not appear to be material.

The other thing I wish to say is that it was suggested in the court below that there was some inconsistency between the statement of the law by Lord Macnaghten in East Fremantle Corpn v Annois in the Privy Council and the statement of the law by Lord Dunedin in Manchester Corpn v Farnworth in the House of Lords. In my view, there is no inconsistency at all in those two statements. I agree entirely with the way in which Farwell J has put itnamely, that

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Lord Macnaghten was dealing with a different case, which did not involve considering the proposition which was fully stated by Lord Dunedin in Manchester Corpn v Farnworthand I am content to say that I agree entirely in the view of the law so carefully expressed by Farwell J, in the court below.

GODDARD LJ. I agree, and do not desire to add anything.

Appeal dismissed with costs.

Solicitors: Robbins Olivey & Lake, agents for F V Barber, clerk to the County Council, Winchester (for the appellants); Sharpe Pritchard & Co, agents for Bell Pope Bridgwater & Hughes, Southampton (for the respondents).

W K Scrivener Esq   Barrister.

R v Winfield

[1939] 4 All ER 164


Categories:        CRIMINAL; Criminal Evidence        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        LORD HEWART LCJ, CHARLES AND HUMPHREYS JJ        

Hearing Date(s):        10 OCTOBER 1939        


Criminal Law Evidence Character of accused Accused calling evidence restricted to his character in regard to women Evidence of general bad character admissible.

A prisoner, charged with indecent assault upon a woman, called evidence as to his character in relation to women. The prosecution then gave evidence of his general character, which was bad. It was contended that the evidence as to his general character was improperly admitted:

Held the evidence was properly admitted, since the accused, by calling such evidence, puts his whole character in issue.

Notes

The point of this decision is aptly summed up in the words of the judgment: “There is no such thing known to our procedure as putting half your character in issue.”

As to Evidence of Character, see Halsbury (Hailsham Edn), Vol 9, pp 188190, paras 271273; and for Cases, see Digest, Vol 14, pp 361364, Nos 38183856.

Appeal

Appeal from a conviction at the Middlesex Sessions of indecent assault upon a woman. The accused called evidence of his good character in relation to women, whereupon the court allowed him to be cross-examined as to his general character. He was convicted, and appealed on the ground, inter alia, that he was improperly cross-examined as to his character.

J C Burge for the appellant.

G G Raphael for the Crown.

10 October 1939. The following judgment was delivered.

HUMPHREYS J (delivering the judgment of the court). This appellant, Albert George Winfield, was found guilty by a jury at the Middlesex Sessions of a charge of indecent assault upon a perfectly respectable married woman in her house. He now appeals against

Page 165 of [1939] 4 All ER 164

his conviction by leave of this court. Two points are taken by his counsel. The first is that his character, which was a bad one, was allowed to be introduced improperly during the course of the trial. In the opinion of this court, there is nothing in that. The prosecution did not seek to introduce his character in any shape or form. What happened was this. He insisted upon calling a witness, against the advice of the deputy chairman, to ask her about his character in regard to women. The deputy chairman knew, though probably the prisoner did not, that there is no such thing known to our procedure as putting half your character in issue and leaving out the other half. A man is not entitled to say, “Well, I may have a bad character as a dishonest rogue, but at all events nobody has ever said that I have acted indecently towards women.” That cannot be done. If a man who is accused chooses to put his character in issue, he must take the consequences. It is quite clear that this man did. He asked questions about his character quite apart from the facts of this case. The result was that he was properly cross-examined as to character.

The appeal was, however, allowed and conviction quashed on the ground of want of corroboration.

Solicitors: Registrar of the Court of Criminal Appeal (for the appellant); Legal Department, New Scotland Yard (for the Crown).

W J Alderman Esq   Barrister.

Holloway v Poplar Borough Council

[1939] 4 All ER 165


Categories:        LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        ASQUITH J        

Hearing Date(s):        24, 26 OCTOBER 1939        


Local Government Gratuity to employee dismissed on ground of ill-health Resolution to grant Enforceability by employee Resolution to pay gratuity in weekly instalments Whether ultra vires Poplar Borough Council Superannuation and Pensions Act 1911 (c cii), s 8(2).

The defendants were empowered by a local Act to grant a gratuity not exceeding twice the amount of his salary at the time of the determination of his employment (payable out of the general rate, and not out of the superannuation fund) to any employee losing his office by reason of ill-health. The defendants in pursuance of that power passed a resolution granting to the plaintiff a gratuity of £268 16s 10d, and the resolution continued: “the distribution thereof be at the rate of 10s per week, provided that, in the event of the decease before the total amount of the gratuity is paid, particulars of any dependents shall be reported to the Finance Committee for their consideration and direction.” The council made weekly payments amounting to £9 10s, and then the plaintiff claimed the immediate payment of the whole balance, contending that, upon the passing of the resolution, he acquired a legal right to the payment of the whole amount:

Held (i) the passing of the resolution in pursuance of the Act did not create a contract or impose any legal obligation on the defendants to pay either the lump sum or the instalments.

(ii) the terms of the Act did not prevent the defendants from granting a gratuity payable by instalments.

Page 166 of [1939] 4 All ER 165

Notes

It should be noted that the payment to be made to the employee in this case was a gratuity, not a superannuation payment. The local Act was, therefore, purely permissive, and the payment was in the nature of an ex gratia payment and not a contractual obligation. Upon that view, the plaintiff could not bring any action in respect of it, as it was a sum paid voluntarily by the council and not one which he had such a right to receive as could be enforced by the court.

As to Voluntary Obligations, see Halsbury (Hailsham Edn), Vol 7, p 136, para 195; and for Cases, see Digest, Vol 12, pp 5153, Nos 277298.

Case referred to

Marchant v Lee Conservancy Board (1874) LR 9 Exch 60; 13 Digest 350, 888, 43 LJEx 44, 30 LT 367.

Action

Action claiming £259 6s 10d from the defendant corporation. The facts are fully set out in the judgment.

Leonard Caplan for the plaintiff.

S G Turner KC and H F Bidder (for T G Talbot, serving with HM forces) for the defendants.

26 October 1939. The following judgment was delivered.

ASQUITH J. The plaintiff in this case was in the employ of the defendant corporation as a lavatory attendant, but was retired from his employment owing to ill-health. The Poplar Borough Council Superannuation and Pensions Act 1911, s 8(2), provides as follows:

In any such case of loss of office or employment as in this section mentioned the council may also if they see fit grant to an officer a gratuity not exceeding twice the amount of his salary or wages and emoluments during the year ending on the quarter day which immediately precedes the day on which he ceases to hold his office or employment but every such gratuity shall be paid out of the general rate and not out of the superannuation fund.

The words “such case of loss of office as in this section mentioned” refer to the previous subsection of this provision, and s 8(1)(c) refers to loss of office caused, inter alia, by ill-health. The plaintiffs loss of office was, therefore, such a loss of office as is contemplated in s 8(2).

Acting under that subsection, on 23 June 1938, the Poplar Borough Council passed a resolution to the following effect:

That a gratuity of £268 16s. 10d. be granted out of the general rate fund [to the plaintiff] and that the distribution thereof be at the rate of 10s. per week, provided that in the event of the decease before the total amount of the gratuity is paid, particulars of any dependants shall be reported to the Finance Committee for their consideration and direction.

The council, acting on their resolution, proceeded to pay the plaintiff 10s per week until they had paid in all £9 10s. At that stage, the plaintiff brought the present claim, whereby, subject to giving credit for the £9 10s already received, he claims immediate payment of the whole balance of the gratuitynamely, £259 6s 10d.

This claim necessarily implies that, under s 8(2), not only are the defendants empowered to grant gratuities out of the general rate, but also any grantee of the gratuity acquires, once the necessary resolution is passed, a legal right to proceed against them for payment thereof. If

Page 167 of [1939] 4 All ER 165

the plaintiff succeeds in showing this, he must go further and establish that the defendants have not satisfied their obligation by paying the 10s weekly in accordance with their resolution, but that they were bound in the first instance to pay the gratuity in a lump sum, and are still bound to pay the balance of it in that form. To succeed in this, again, the plaintiff must show that such parts, and such parts only, of the resolution as provided for the payment by 10s instalments are ultra vires s 8(2). If the resolution were bad as a whole, he could, of course, have no claim. Accordingly, he seeks to show that the resolution, so far as it provides “That a gratuity of £268 16s. 10d. be granted out of the general rate fund” to the plaintiff, is ultra vires, but that the succeeding wordsnamely, “that the distribution thereof be at the rate of 10s. per week,” etcare ultra vires, and that these parts of the resolution are mutually severable.

The first point is whether the subsection confers any legal right at all on the person to whom the defendants resolve that a gratuity shall be paid, or whether it merely empowers the defendants to pay a gratuity out of the general rate without imposing upon them any obligation. There must be many clauses in local and private Acts with wording substantially similar to that of s 8(2) of this Act, but counsel could not cite to me, nor could I discover any direct authority on the point in question. It is clear that there is no contract, if only because there is no consideration. The only authority cited by counsel on either side as having even an indirect bearing on the point was Marchant v Lee Conservancy Board. In this case, the board was empowered by the Lee River Navigation Improvement Act 1850, s 76:

… from time to time to pay and allow to any officer or servant of the trustees whose services may … be no longer required … such annuity or other allowance as … may, in the judgment of the trustees, be reasonable and proper; and the trustees may from time to time pay and allow such annuity or allowance out of the moneys which may come to their hands …

The trustees, acting under this section, by resolution not under seal, granted to a retired servant an annuity of £300 a year. The board subsequently passed a resolution reducing the amount by half, and paid £37 10s only for the next quarter, and the plaintiff sued for the balance. The court of first instance held that the annuity originally granted could not be reduced in amount. On appeal, the Exchequer Chamber reversed this decision, holding that the trustees were entitled to reduce the amount. The argument centred mainly on the validity or non-validity of the reducing resolution. The court decided that it was intra vires, and the reduction was, therefore, effective. The inference drawn from this by counsel for the plaintiff is that the court assumed that the section conferred rights on the plaintiff. Otherwise they would simply have said, “It matters not whether the second resolution was ultra vires. The plaintiff never had a legal right to his annuity at all, and the defendants could at any time not only reduce but abolish it.” This is admitted to be but an oblique inference from the language of the

Page 168 of [1939] 4 All ER 165

Exchequer Chamber, but it is noteworthy that that court did say in the course of its judgment, at p 63:

It is argued indeed that the resolution was binding as a grant … but from that construction of the section [sect. 76 of the 1850 Act] I entirely dissent; it conferred a power upon them, but it imposed no obligation.

The judge goes on to say that there was no contract and no consideration. He said at p 63:

The resolution conferred a mere bounty on the plaintiff; the elements of a contract are entirely wanting.

The court held that the section in that case imposed no obligation on the defendants. In other words, it gave the plaintiff no legal right to the annuity. I think that the same holds good of the subsection in the present case, and the authority cited is really an authority against the plaintiff. The resolution is not a grant. It does not create nor supply evidence of a contract. It imposes no obligation on the defendants. It merely empowers them to do what they could not otherwise have donethat is, draw on the general rate for a specific purpose.

If I am right in this, it disposes of the whole claim. If I am wrong, the question arises whether the plaintiffs construction of cl 8(2) can be maintained. He contends that it confers no power to provide that any gratuity granted shall be payable by instalments, and, in support of this submission, he argues, first, that to grant an annuity so payable is to grant several annuities, whereas the subsection speaks of “a” gratuity, meaning a single sum payable once and for all. The provision in the Interpretation Act 1889, that single words include the plural, is, I think, a sufficient answer to this point, though in my view a gratuity payable in instalments is not several gratuities. Secondly, he argues that, because the maximum that a gratuity must not exceed is expressed in terms of a lump sum, and not in terms of a periodical payment by the week or otherwise, therefore the gratuity itself must be payable in a lump sum, and not in weekly or other instalments. That seems to me a non sequitur.

Lastly, under this head the plaintiff says that a private or local Act prohibits that which it does not expressly or by necessary implication authorise, and that it does not expressly or by necessary implication in this case authorise payment of the gratuity in instalments. Hence, he argues, that part of the resolution which provides for the payment in instalments is ultra vires, and the resolution should be read without it. Whether or not the rule of construction relied upon has been accurately stated, and whether or not it applies to a corporation such as the defendants in this case, I do not think that it has any bearing on the issue I am considering, since I read the term “gratuity” as being wide enough to cover any money gratuitously granted or paid, whether it is paid in one sum or paid in instalments. Even if the argument were sound, the plaintiff might have difficulty in establishing that the two

Page 169 of [1939] 4 All ER 165

limbs of the resolution are mutually severable. For these reasons, the claim, though ingeniously argued, must be dismissed with costs.

Action dismissed with costs.

Solicitors: Kenneth Duthie & Co (for the plaintiff); W H Thompson (for the defendants).

W J Alderman Esq   Barrister.

A v B

[1939] 4 All ER 169


Categories:        CIVIL PROCEDURE: ADMINISTRATION OF JUSTICE; Courts        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, SLESSER, CLAUSON, MACKINNON, DU PARCQ AND GODDARD LJJ        

Hearing Date(s):        20, 23 OCTOBER, 6 NOVEMBER 1939        


Emergency Legislation Execution on judgment Discretion of court Principles on which discretion exercised Existence of other debts Courts (Emergency Powers) Act 1939 (c 67), s 1.

Execution Leave to issue Under Courts (Emergency Powers) Act 1939 Discretion of court Existence of other debts Courts (Emergency Powers) Act 1939 (c 67), s 1.

On 25 September 1939, the respondents signed judgment in default in respect of £836 14s 1d due from the appellant company on certain bills of exchange. On 26 September 1939, they issued a summons under the Courts (Emergency Powers) Act 1939, for leave to proceed to execution on, or otherwise to the enforcement of, that judgment. The appellants business was that of selling furniture, mainly upon hire-purchase terms and with the aid of loans from finance companies. This business had suffered very seriously by reason of the outbreak of war. There were a number of other creditors of the appellant company, and it was stated that, if any creditor was given leave to enforce a judgment against the appellant company, the result would be very harmful to the company and its shareholders:

Held (i) an application of this nature must be decided upon the particular facts of each case, and those facts must show that the resources of the applicant are insufficient to satisfy the judgment in question.

(ii) it is not sufficient to establish that the debtor has a sum of money available sufficient to pay the debt. The words “is unable immediately to do so by reason of circumstances directly or indirectly attributable to” the war must be construed in a reasonable and commonsense way, and the existence of other debts is not an irrelevant consideration.

(iii) on the other hand, the Act is not one passed for the benefit of creditors generally, and, in considering the relevance and importance of the existence of other debts, the court is not exercising a quasi-bankruptcy jurisdiction.

Notes

In normal times, a plaintiff who has secured a judgment in his favour may proceed to issue execution thereon. It has been thought necessary to protect a judgment debtor who has been adversely affected by the war. The provisions of the Act here in question are, therefore, directed primarily to the relief of the debtor, and are not intended to benefit the general body of the debtors creditors. In exercising its discretion to grant leave to issue execution, the court is not exercising a bankruptcy jurisdiction, in which the main consideration would be the equitable distribution of the debtors assets among the creditors, but is exercising a jurisdiction designed to prevent the infliction of hardship upon the debtor. At the same time, it is held that the existence of debts

Page 170 of [1939] 4 All ER 169

other than the judgment debt is a matter which the court may take into account in the discharge of its duty to consider all the circumstances of the case.

As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Case referred to

Tennants (Lancashire) Ltd v Wilson (C S) & Co Ltd [1917] AC 495; 12 Digest 396, 3216, 86 LJKB 1191, 116 LT 780, revsg SC sub nom Wilson & Co v Tennants (Lancashire) Ltd [1917] 1 KB 208.

Interlocutory Appeal

Interlocutory appeal by the defendants from an order of Oliver J, made in chambers on 17 October, reversing an order made by Master Jelf and giving leave to proceed to issue execution on a judgment obtained against the appellants. The appellants admitted that their assets were sufficient to satisfy the judgment, but stated that, if they had paid the judgment debt, their other creditors would have gone unpaid. The question for decision was whether, under the Courts (Emergency Powers) Act 1930, s 1(4), they were “unable immediately” to satisfy the judgment “by reason of circumstances directly or indirectly attributable” to the war.

Valentine Holmes for the appellants.

R F Levy KC and L Caplan for the respondents.

Holmes: The judge was wrong in refusing to exercise his discretion. If the appellants satisfied this judgment, they would have been unable to pay any of their other creditors. On a true construction of the statute, they were, therefore, “unable” to satisfy it. Otherwise the provision of the subsection is useless, for it would not begin to operate until the debtor was impecunious and execution was not worth while. Inability to pay must depend on the whole of the circumstances.

Levy KC: If the legislature had intended the result proposed by the appellants, it could easily have made the subsection apply to a person who was unable immediately to pay his debts.

Holmes in reply.

Valentine Holmes for the appellants.

R F Levy KC and L Caplan for the respondents.

6 November 1939. The following judgment was delivered.

SIR WILFRID GREENE MR (delivering the judgment of the court). This is an appeal by the defendants in the action from an order of Oliver J, allowing an appeal from a decision of Master Jelf upon an application by the plaintiffs under the Courts (Emergency Powers) Act 1939. The action was begun by specially indorsed writ, dated 13 September 1939, by which the respondents claimed against the appellants as acceptors the sum of £836 14s 1d due on certain bills of exchange which had been dishonoured. No appearance to the writ was entered, and on 25 September 1939, the respondents signed judgment in default.

On 26 September 1939, the respondents issued a summons under the Courts (Emergency Powers) Act 1939, for leave to proceed to execution on, or otherwise to the enforcement of, the judgment. By s 1(1) of that Act, no person is entitled, except with the leave of the appropriate court, to proceed to execution on, or otherwise to the enforcement of, any

Page 171 of [1939] 4 All ER 169

judgment or order of any court (whether given or made before or after the commencement of the Act) for the payment or recovery of a sum of money, with certain exceptions there mentioned, including in particular any judgment or order for the recovery of a debt becoming due by virtue of a contract made after the commencement of the Act. S 1(2) provides that no person shall be entitled, except with the leave of the appropriate court, to proceed to exercise any remedies which are available to him, such as the levying of distress, or the taking of possession, or the entry upon any land, or the institution of proceedings for foreclosure. To the provisions of this subsection also there are certain exceptions. S 1(3) provides that no person shall be entitled, except with the leave of the appropriate court, to proceed to execution on, or otherwise to the enforcement of, judgments or orders for the recovery of possession of land in default of payment of rent, with an exception in the case of contracts made after the commencement of the Act.

The crucial provisions are found in s 1(4), which provides as follows:

If, on any application for such leave as is required under this section for the exercise of any of the rights and remedies mentioned in subsects. (1), (2) and (3) of this section, the appropriate court is of opinion that the person liable to satisfy the judgment or order, or to pay the rent or other debt, or to perform the obligation in question is unable immediately to do so by reason of circumstances directly or indirectly attributable to any war in which His Majesty may be engaged, the court may refuse leave for the exercise of that right or remedy, or give leave therefor subject to such restrictions and conditions as the court thinks proper.

S 1(5) provides for the case of bankruptcy petitions and winding-up petitions presented against a company on the ground that it is unable to pay its debts. In such cases, if the debtor or company proves to the satisfaction of the court having jurisdiction in those matters that:

… his or its inability to pay his or its debts is due to circumstances directly or indirectly attributable to any war in which His Majesty is engaged, the court may at any time stay the proceedings under the petition. …

We need not refer to any of the other provisions of the Act.

It is clear that, where an application is made for leave to proceed to execution on, or otherwise to the enforcement of, a judgment of the kind mentioned, the burden of proving, first, that the defendant is unable immediately to satisfy the judgment, and, secondly, that that inability arises by reason of circumstances directly or indirectly attributable to the war, lies on the defendant. If he fails to establish these two facts, the discretionary power conferred upon the court by sub-s (4) never arises. The question, and the only question, which falls for decision upon this appeal is whether or not the appellants have discharged this burden. Master Jelf held that they had. Oliver J reversed his decision, and held that they had not.

It was suggested by counsel for the appellants that Oliver J really decided the matter, not by reference to the particular facts of this case, but according to some general principle which counsel maintained was bad in law. Counsel for the respondents did not accept this view as

Page 172 of [1939] 4 All ER 169

to the grounds of the decision of Oliver J. If, indeed, the decision of Oliver J was based on the grounds suggested by counsel for the appellants, we should not agree with it. However, we do not pause to consider this matter further, since, in our opinion, the only question which we in this court have to decide is whether or not the evidence put forward by the appellants in this particular case brings the case within the subsection. Counsel for the appellants endeavoured to treat the case as though it could be decided by reference to the bald and insufficient facts of an AB case. We decline so to approach the matter. In our view, nothing can be clearer than that each case which falls for decision under the subsection must be decided in relation to its own particular facts.

The only evidence put forward by the appellants consists of an affidavit sworn by their chairman and managing director. From that affidavit it appears that the appellants business is that of selling furniture, in the main on hire-purchase terms. It shows that the appellants business has suffered very seriously by reason of the outbreak of war. Receipts from hirers have fallen off. There has been a great decline in the volume of new business, and it cannot be doubted that the appellants have fallen into serious embarrassments. The appellants finance is conducted by means of loans from finance companies, and the situation can be summarised in three extracts from the affidavit. In para 11, it is stated that:

… the accumulated result of these matters is that the company finds itself without sufficient resources to enable it to discharge the claims of the plaintiffs and its other creditorsa position the company has not experienced since its incorporation.

In para 13, it is stated that:

… if any creditor is given leave to enforce a judgment against the company the result will be very harmful to the companys creditors and disastrous to its shareholders.

In para 15, it is submitted that the company is unable immediately to meet “its obligations,” by reason of circumstances directly attributable to the war.

In our opinion, these allegations, which summarise the position of the appellants in relation to their creditors, are quite insufficient to establish what sub-s (4) requires to be establishednamely, that they are unable immediately to satisfy this judgment. The affidavit makes no attempt to show that the resources of the appellants are insufficient to enable them to satisfy the judgment which the respondents have obtained against them. There is no exposition of the present actual financial position of the appellants, no statement of their assets, and a quite insufficient statement as to their liabilities.

In our opinion, as a general rule, in cases falling under these provisions of the Act, information of this character must be furnished, and the decision should be made in the light of all the facts. It is not to be thought from this that, if a judgment debtor is shown to have a sum of

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cash available to pay the debt, he thereby necessarily fails to establish that he is unable to satisfy it. So to hold would involve giving far too narrow a meaning to the word “unable,” which must be construed in a reasonable and commonsense way. Moreover, we must not be taken to be laying it down that the existence of other debts is an irrelevant consideration. On the contrary, it is a matter which may be properly taken into account, although the weight to be given to it may vary very much in different cases. Moreover, in considering the relevance and importance of the fact that other debts exist, it must always be remembered that, if and when another creditor obtains a judgment and seeks to enforce it, the position of the debtor, at the date when leave is sought, will have to be considered in relation to that judgment, and that, if and when that eventuality arises, the court will be able to deal with it in accordance with the directions laid down in the section, in the light of the circumstances then existing, which may be very different, in one direction or the other, from those which exist at the date of the application under consideration.

Counsel for the appellants sought to treat the Act as one passed for the benefit of creditors generally, with a view to securing an equal distribution among them of the debtors available assets, with the result that the court, in such a case as the present, would become involved in some sort of quasi-bankruptcy administration. As we read the section, its object is not that of the protection of creditors generally, but that of the protection of debtors against enforcement of judgments obtained against them, although, in exercising the jurisdiction, the matters to which we have referred must be taken into account and given proper weight.

In this connection, it is not without importance to observe the difference in language between sub-s (4) and sub-s (5). In sub-s (4), the fact which requires to be proved is inability to satisfy the judgment debt in respect of which the application is made. In sub-s (5), the phrase used is “inability to pay his or its debts.” Counsel for the appellants relied on Tennants (Lancashire) Ltd v C S Wilson & Co Ltd. That was a case of a commercial contract, upon the true construction of whichand, in particular, of the word “hindering”the decision turned, and we derive no assistance from it. Upon the facts which appear in the affidavit, therefore, we feel bound to hold that the appellants have not discharged the burden of proof. However, as this legislation is new, and the practice to be followed under it has not been settled, we think it right to give the appellants, if they desire it, an opportunity of putting in further and fuller evidence as to their financial position, as they may well have been under a misapprehension as to the sort of evidence required.

If the defendants desire to apply to have the matter sent back to the master in order to enable them to put in further evidence, we are prepared to give them the opportunity of doing so, but it would be necessary to

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frame the order so as to safeguard the respondents interests. It would be most undesirable to permit the defendants to gain time by putting in insufficient evidence and then fighting the question of its insufficiency to this court. If the appellants wish to have such an opportunity, the order will be as follows: Suspend the operation of the order of Oliver J, save as regards costs, for seven days. If during that period the appellants pay into court the amount of the judgment debt, and also a further £50 as a provision towards costs, discharge the order of Oliver J, save as regards costs, and refer the summons back to the master, with liberty to the respondents to apply to the master for leave to enforce the judgment, or, in the alternative, for payment to them of the amount of the judgment debt out of the fund in court, and liberty to the respondents to apply to the master for leave to file further evidence. Order respondents costs of this appeal to be paid by the appellants. The effect will be that, in default of payment into court within the time allowed, the order of Oliver J will be operative, and the respondents will be free to enforce their judgment.

Leave to the appellants to file further evidence.

Solicitors: Simmons & Simmons (for the appellants); Saunders Sobell & Greenbury (for the respondents).

Derek H Kitchin Esq   Barrister.

Kent and Porter v East Suffolk Rivers Catchment Board

[1939] 4 All ER 174


Categories:        ENVIRONMENTAL: TORTS; Negligence        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        17, 18 OCTOBER, 3 NOVEMBER 1939        


Land Drainage Catchment board River-wall Duty to repair Liability for misfeasance Negligent repair Land Drainage Act 1930 (c 44), s 34.

The plaintiffs were the owners of land protected by a wall from inundation by a tidal river. At a time when the height of a spring flood tide was increased by a northerly gale, the wall partly collapsed, leaving a breach 20 ft to 30 ft wide. As a result, the plaintiffs lands were flooded. The defendants, the catchment board for the area in which those lands were situated, attempted to repair the breach by running a dam straight across it. It was proved that this method of repair was impracticable and that the correct method was to construct a V-shaped dam. It was also proved that the defendants had attempted the work with an insufficient number of men:

Held (i) the Land Drainage Act 1930, s 34, does not place upon a catchment board an imperative duty to repair a breach in a drainage work. The power is purely a permissive one.

(ii) while the catchment board were not liable for non-feasance, they were liable of misfeasance.

(iii) on the facts, the board had undertaken the work of repairing the breach, and they had done that work negligently. They were therefore liable in damages for the ensuing injury to the plaintiffs land.

Per du Parcq LJ dissenting: the board was under no duty to do the work for the benefit of the plaintiffs with efficiency and despatch.

Decision of Hilbery J ([1939] 2 All ER 207) affirmed.

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Notes

It would appear to be now settled that the Land Drainage Act 1930, s 34, does not place upon a catchment board an imperative duty to repair a breach in a drainage work. The position arising where it in fact undertakes the repair of such a work has here given rise to a difference of opinion, the majority holding that, if it does undertake the work, then it must exercise reasonable care and skill in the performance of it.

As to Duties of Catchment Boards, see Halsbury (Hailsham Edn), Vol 30, pp 7679, paras 143148; and for Cases, see Digest, Supp, Sewers and Drains, No 399a et seq.

Cases referred to

Sheppard v Glossop Corpn [1921] 3 KB 132; 38 Digest 34, 207, 90 LJKB 994, 125 LT 520.

Smith v Cawdle Fen, Ely (Cambridge) Comrs [1938] 4 All ER 64; Digest Supp, 160 LT 61.

Gillett v Kent Rivers Catchment Board [1938] 4 All ER 810; Digest Supp.

Geddis v Bann Reservoir Proprietors (1878) 3 App Cas 430; 43 Digest 1075, 116.

Wilkinson v Coverdale (1793) 1 Esp 74; 12 Digest 223, 1849.

Appeal

Appeal by the defendants from a judgment of Hilbery J, dated 22 March 1939, and reported [1939] 2 All ER 207, where the facts are fully set out.

Gilbert Beyfus KC and F W Beney for the appellants.

G Russell Vick KC and Robert Fortune for the respondents.

3 November 1939. The following judgments were delivered.

SLESSER LJ. In this case, the judge had held, for the reasons contained in his judgment, that the defendants have caused damage to the plaintiffs by the negligent exercise of their powers to repair a sea-wall, powers which are conferred upon them by the Land Drainage Act 1930, s 34. As a result of such negligencenamely, the failure properly to repair the walla breach, which was made on 1 December 1936, was not filled so as to keep out the sea until 28 May 1937, a period of 178 days. It is not disputed that the prolonged incursion of sea-water very seriously affected the land as marsh pasturage. The judge is of opinion that by the exercise of reasonable skill the work could have been done and the flooding arrested in 14 days from the failure of the sea-wall. For the consequent injury to the marshlands by inundation for a further 164 days by salt water, ruinous to their use as marshland pasture, he has awarded damages to the owner and to the occupier-tenant of the farm.

On behalf of the appellants, reliance is placed upon s 34 of the 1930 Act, which says that the defendants, among other authorities, have power to repair or otherwise maintain the sea-walls, but have no duty so to do. It is argued that to make abortive and incompetent efforts before achieving the final successful result is no more than to delay the exercise of their power, and is a mere non-feasance, for which in law they are not liable. It is now beyond argument that a body having powers but no duties conferred by statute can be under no liability if damage arises to a person by the mere failure to exercise that power:

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Sheppard v Glossop Corpn, and the cases there cited, and Smith v Cawdle Fen, Ely (Cambridge) Comrs. It is elementary that actionable negligence cannot arise unless there is a duty. In the circumstances of this case, did the defendants by their conduct impose upon themselves such a duty?

There is no doubt that on 2 December the clerk to the defendants told the plaintiff Porter, in answer to a complaint by him of the incursion of the sea-water and of a breach in the wall 25 ft wide, that the boards attention had been directed to the matter. On 19 December, in answer to a letter from a Mr Smith of Blaxhall, who had previously looked after the wall, and sought re-employment thereon, the defendants said that it was decided that the work should be carried out by the boards own workmen. Complaints by Mr Porter were repeated on 18 December 1936, and 5 January 1937. By 30 January, the defendants, through their officer, admit that their work had been ineffective, and that the tide had twice washed away the piling since 11 January. Again on 3 March Mr Porter complained, and on 8 April Mr Kent, the owner, said that the breach was 30 yds wide. At all these timesindeed, until 28 MayI am satisfied that the defendants undertook and attempted to do the work under their powers, and were continuously upon the plaintiffs land for that purpose, a right having been expressly given them by s 34 of the 1930 Act to enter on the land for the purpose of maintaining existing works.

In my opinion, this case, on examination, resolves itself into a complaint, not of failure to exercise powers, but of damage done by their incompetent exercise. So far as minor damage is concernedthe strewing of bags and débris and piles upon the plaintiffs land, the making of holes by scouring, and the use of the plaintiffs existing wall to form material for the final successful curved wall made over the saltingsit is not disputed, apart from questions of absence of pleading, that the defendants might be liable as for a misfeasance, but it is argued that this does not apply to the far greater damage done by the defendants to the plaintiffs by their persistent user over a long period of an incompetent method, with consequent failure to fill the breach. This, it is said by the appellants, is but damage solely caused by delay in the exercise of powers, and, if so, is not actionable. This argument appears to me to be over-subtle. There was no delay in the initiation of the exercise of the powers. They were exercised early in December, when the defendants, in accordance with their statutory powers, entered upon the plaintiffs land and started the abortive work. As to the damage, had the powers not been so negligently exercised, it is reasonable to suppose that the plaintiffs would not impotently have stood by, seeing the damage develop unchecked, but themselves would have called in Mr Smith or some other expert, who would almost certainly have filled the gap by a competent method in some 14 days.

The crucial question arises, therefore, on all the facts, is it right to conclude that this damage was the result of the defendants delaying

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the exercise of their powers, or was it an exercising of their powers in a negligent manner so as to be actionable? In my opinion, it was the latter, and the damage was due to their negligence in that, after 19 December at the latest, the plaintiffs were induced, to their detriment, to rely upon the boards undertaking to do the work and themselves to abstain from doing it. Had the board done nothing, the plaintiffs could not have complained, but, once the board undertook to do, and did attempt to do, the work, and in the exercise of their powers entered upon the plaintiffs land, drove piles into it, and bungled the work, that negligence was a continuing negligent exercise of their powers, and not solely an abstention from the exercise of them. For these reasons, in my opinion, this appeal fails.

MACKINNON LJ. The plaintiff Porter is the owner in fee of a farm to the south of the River Deben in Suffolk. The plaintiff Kent is the tenant-occupier of the farm. The Deben, below Woodbridge, is a tidal estuary. Some 50 acres of the farm in question are marshland pasture. This marshland is lower than the bed of the riverthe result in part of alluvial deposit in the river, and in part of the secular drying up of the marsh. The marsh has for centuries been protected from the incursion of water from the river at high tide by a wall of earth. Until recently, no one was concerned to keep this wall in repair except the man who owned it, whose interest it was to maintain it in order to preserve his marshland from being flooded.

In 1926, Mr Porter employed Mr Smith, of Blaxhall, to put the wall in order and to repair a sluice. He paid him £546 for work upon his wall and £125 for the sluice. Smith, who gave evidence in the case, said that for many generations his family had been in business as marshmen and repairers of river-walls.

The Land Drainage Act 1930 created various public bodies called drainage boards and catchment boards. One of the catchment boards is that for the East Suffolk rivers, which include the Deben, and that board is the defendant here. By s 6, the powers conferred on drainage boards shall, so far as concerns the main river and the banks thereof, be exercisable solely by the catchment board, and by s 34 a drainage board is given power to maintain existing worksthat is to say, to cleanse, repair, or otherwise maintain in a due state of efficiency any existing watercourse or drainage work. A proviso enacts that nothing in this section authorises any person to enter on the land of any person except for the purpose of maintaining existing works.

There can be no question that this Act empowered the defendant board for the future to relieve Mr Porter of the task of keeping the river-wall in an efficient state of repair so as to prevent the marsh pasture from being flooded at high tide. A layman might well imagine that, when a public body had been set up with this power, and furnished with public funds (to be provided by the county council), it would be

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their duty to exercise that power, and that Mr Porter, or any other owner of part of the river-walls, would have grounds for complaint if they failed in such duty. The layman, however, would need to be instructed that it is well settled that a public authority that is empowered to do a thing, but not ordered to do it, may with impunity abstain from doing anything. In the catchwords of the doctrine, it is not liable for non-feasance.

On 1 December 1936, there was a very high tide in the Deben, and Mr Porters river-wall gave way. A breach of some 25 ft was created, and the water, which is almost undiluted sea-water, flooded the marshes. If this sea-water continued for a length of time to rush in at every high tide, the grass would be killed and the pasture ruined. It was imperative that the breach should be repaired as soon as possible, so that as soon as possible the water should drain off by the sluice and the pasture be more or less dried.

On the next day, 2 December, Mr Porter reported this disaster. By a venial error he wrote to the clerk of the River Deben (Lower) Drainage Board. He ended his letter as follows:

I must request your board to take immediate steps to repair the damage.

The error in the address was immaterial, for the clerk of the drainage board was also clerk of the catchment board. In the latter capacity, he replied on 3 December as follows:

The wall in question is a main wall, and comes under the jurisdiction of the catchment board, and I believe already has the attention of the boards surveyor.

This answer to Mr Porters request seems to me a clear intimation that the board were undertaking the task of repairing the wall, and an implied intimation that, under s 34(4) of the Act of 1930, they were proposing to enter upon the land of Mr Porter for the purpose of maintaining the existing worknamely, the wall.

The surveyor to the catchment board was Mr Clark. Apparently on 3 December, Mr Smith of Blaxhall, the man who had looked after the wall before, having seen this breach, wrote to the board in the hope of being employed to repair it. On 14 December, he had a reply from Mr Clark as follows:

In reply to your letter of 3rd instant, I placed this matter before my board on Tuesday last, when it was decided that the works should be carried out by the boards own workmen and not by contract.

One might suppose from the terms of this letter that the board had some sort of organisation for dealing with matters of this sort, and had its “own workmen.” In truth, as appeared from the evidence, they had neither the one nor the other. The man Studd, to whom Mr Clark entrusted the task of filling this breach, had been for eighteen months in the employment of the board, but he had had absolutely no experience of the work of stopping a breach. He had to get casual labourers, with no experience at all, from the local employment exchange, and he

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began work with two of them. He had one wheelbarrow, and later got another, or two more. He was given piles that were too short, and nothing to drive them with but a beetle. When he asked for a pile-driver, Mr Clark said that it was too expensive. These are all items from the evidence of Studd on behalf of the plaintiffs.

I do not propose to go in detail into the evidence. I think it is clear that the work of Studd and the casual labourers was entirely incompetent. It is not surprising that on 21 December Mr Porter sent to the surveyor a bitter letter of complaint, dated 18 December, from Mr Kent, the farmer:

You must know what a serious matter it is for both you and me, as the water has been on so long that the grass will be killed, therefore the marshes will be useless. … Just fancy, they only have about four men, and they want quite fifty, and these are off the dole. None of them seem to know how to start the job, and no sooner do they put something in than the next tide washes it away.

No reply being sent to this, Mr Porter wrote again on 5 January. Six days later, Mr Clark wrote to say that “your previous letter of Dec. 21 appears to have been mislaid by me.” He adds, “Unfortunately, owing to trouble with the men working on the job, I have had great difficulty,” and ends by hoping that “this work will be completed to everyones satisfaction at an early date.” This is written on 11 January, when the tide had been flooding the marshland ever since 1 December. On 30 January, Mr Clark wrote to say that since his letter of 11 January the tide had twice washed away the ineffective piling. On 3 March, Mr Porter wrote to the clerk to say that things were as bad as ever, and ended his letter by suggesting that Mr Smith of Blaxhall, who repaired the wall for him in 1926, “might be able to assist your surveyor in this matter.” Mr Porter presumably did not know that Smith had offered his services on 3 December, and that on 14 December the surveyor had replied that the board had decided that the work should be carried out by its “own workmen.”

On 8 April, solicitors for Mr Kent wrote to say that the breach was 30 yds wide, and “each tide floods the marshes with further salt water.” The clerk in reply said that the breach was 65 ft, and not 30 yds, a correction which, so far as concerns the opening for water, seems immaterial. On 29 April, Mr Kent wrote to say that things were as bad as ever, “in fact, this week there has been more water than ever on the marshes.” He adds the comment:

Fancy men working from eight in the morning till four in the afternoon on such an important job, either when the tide is in or out, and nothing done on Sundays.

The breach was not closed until 28 May, and then only by abandoning the futile efforts (thrice repeated with disaster) of rebuilding the wall on its old line, and by making a circular defence out on the saltings. The judge findsand there is ample evidence to support his findingthat, if the servants of the defendant board had started on this work with reasonable care and skill, they could have closed this breach in 14 days. In fact, owing to the negligent way in which they went about it, they took 178 days to close it.

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The judge has held that the defendants are liable to compensate the plaintiffs in damages for having caused or allowed the marshland to be flooded for 178 days, instead of stopping that flooding in 14 days, as by the exercise of reasonable skill and diligence they might have done. The defendants appeal from this decision. If the defendants are so liable, it must be because they owed a duty to the plaintiffs to exercise such skill and diligence. That they failed to exercise them, if the duty existed, there can be no question. Thus, the only question in this appeal is whether or not that duty did arise.

I confess that I think the case law as to the duty and liabilities of a statutory body to members of the public is in a state of lamentable obscurity and confusion. When one considers the diversity of objects with which such bodies have been created, perhaps that is not surprising. Particular utterances of various judges as regards street-lighting, or the running of a railway, may well be difficult of application to so different a matter as the upkeep of the banks of a tidal river. I do not propose to examine these cases, or attempt to reconcile them. I have considered many of them. I believe the rules of law to be as follow. If a body or corporation is by statute empowered to do certain things, but is not ordered to do them, a subject who suffers from their not being done has no cause of action against the body. He cannot say that it owed him any duty to do them. If, on the receipt of Mr Porters letter of 3 December, the board by their clerk had replied that they would not comply with his request to have the wall repaired, he would have had no ground of claim. He would have had to see his land ruined by the sea, or else get Smith of Blaxhall to repair it at his expense. The second rule, I think, is that, if the body does exercise its power to do certain acts, it owes a duty to any subject who, in his person or property, is affected by those acts to exercise reasonable care, and is liable to him in damages if he suffers by its breach of that duty. In the early days of railways, it was settled that, though a railway was not liable for damage to crops caused by sparks from an engine simpliciter, yet, if the sparks resulted from the fact that the engine was not constructed with reasonable care, so as to prevent sparks, it was liable for resulting damage. There seems the more reason to apply such a principle in a case where, as in this case, the act which is authorised is not merely to do something in the vicinity of the subjects land, but actually to enter upon his freehold and do work upon it, whereby he is debarred from doing such work for himself.

The appellants recognise the soundness of this second rule, but seek to apply it only to a limited extent. In the course of the maladroit efforts of Studd and the casual labourers, quantities of bags of earth were thrown into the breach. These the tide took in its stride and spread in dismal confusion over some two or three acres of the pasture. Counsel for the appellants agreed that for this damage to the plaintiffs land the defendants were liable as for a breach of duty to do their work

Page 181 of [1939] 4 All ER 174

with reasonable care, but he argued that for the larger damages, resulting from the pasture being flooded for 178 days instead of 14 days, they were not liable. This, he said, was only the result of non-feasance, of an abstention for this length of time from exercising their statutory power to mend the wall. It could not be called misfeasance (to repeat the catchwords of the cases)that is, the breach of a duty to exercise reasonable care in the exercise of those powers. I cannot accept this contention. If a plumber be summoned to mend a leak in a metal pipe, he need not obey the summons. He is under no duty to do so. If he does undertake the job, however, he must exercise the proper skill of a plumber in his work. If he repeatedly tries to stop the leak with putty instead of solder, and the force of the water repeatedly blows out the putty, and the house continues to be flooded, he will clearly be liable for a breach of duty. The appellants here intimated to Mr Porter that they were going to exercise their statutory power under the Act of 1930that is, to come upon his land and do work upon it. If Mr Porter had known all that which he now knows, it is possible that he would have said that he would rather do it himself, in which case, I suppose, the appellants could have got an injunction to prevent his interfering with their statutory powers. In any case, however, they chose to exercise their power, and undertook to do this work. The essential feature of the work was that it should be done as speedily as possible. If postponed till the flood had killed all the vegetation and ruined the pasture, it might as well not be done at all. When, therefore, the appellants elected to exercise their powers, and do work on the respondents land, I think that they assumed the duty of doing that work with as much expedition as was consistent with the exercise of reasonable skill, care and diligence. The judge has found that they did not fulfil this duty. There was ample evidence on which he could so find, and I agree with his findings. I therefore think that his judgment awarding damages to the respondents was right, and that this appeal should be dismissed with costs.

DU PARCQ LJ. In this case, the defendants are the East Suffolk Rivers Catchment Board, a body deriving its powers from the Land Drainage Act 1930. The plaintiff Porter is the owner, and the plaintiff Kent is the tenant, of certain marshlands adjoining the River Deben which are within the defendants catchment area. On 1 December 1936, the combination of a high tide and a fierce northerly gale caused a breach in the wall protecting this land. The defendants set to work to rebuild the wall. It was not until 28 May 1937 that they finally succeeded in keeping back the water from the marshlands. The judge has found that the defendants went to work in the wrong way, and that success would have been achieved in a much shorter time [p 225]:

… if the right method had been adopted, with efficient men, and sufficient numbers of men, and adequate materials …

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The principal question for our decision is whether or not, in these circumstances, the defendants are under any legal liability to the plaintiffs. The further question whether or not the evidence supported the judges findings of fact was also argued before us, but does not arise if the question of law is answered in favour of the defendants.

In order to deal with the point of law, it is not necessary to state the facts in any detail. The statement of claim alleged (i) that it was the duty of the defendants to repair the wall in question and to keep it in repair, and (ii) that, after the river had broken through the wall:

… the defendants as was their duty … commenced to repair the said wall but in breach of their duty to do the same efficiently and with the utmost expedition possible the defendants took no steps so to repair the said wall and failed and neglected to see that sufficient labour was employed or continuously employed or that proper or any supervision was given thereto or that proper or any adequate methods were adopted to mend the breach in the said wall and clear the said marshland of water within a reasonable time or at all in consequence whereof such flooding has continued for many months.

Lengthy particulars were delivered later, which stated the manner in which, according to the plaintiffs, the work should have been done, and included an estimate that the whole work could have been completed in six weeks. The judge rejected the contention that the defendants were under a duty to repair the wall, following and approving the view expressed by Stable J, in Gillett v Kent Rivers Catchment Board, at pp 813, 814. The plaintiffs did not contend before us that this part of the judges decision was wrong, and the argument on both sides went on the assumption that it was right. The position of a catchment board under the Land Drainage Act 1930, was stated thus by Stable J, in Gilletts case, at pp 813, 814:

When I say that it [the Act] does not impose a duty on the board at all, I mean that it does not impose on the catchment board a duty in relation to farmers who live inside the area, so as to create a right of action at the suit of those farmers if the duty is not discharged.

If these words are read according to the judges obvious intention, and for “farmers who live inside the area” one substitutes the words “individual members of the public,” I am of opinion that this is a precisely accurate statement. A board which fails to exercise its powers may be directed to exercise them by the Minister (see s 12 of the Act), and then, as Stable J pointed out, it does become “the duty” of the Board to comply with the Ministers directions. It is common ground in the present case that the defendants, at least until they began to do the work, were under no duty to the plaintiffs, and in my opinion the language of s 34 (which must be read in conjunction with s 81, the definition section) makes it plain that the view adopted by Hilbery J, and by Stable J, and not disputed at the bar, was so far correct. It is perhaps as well to add that, for the purposes of this case, s 34(3) of the Act, which gives a statutory right to compensation, may be disregarded as being irrelevant.

There remains the difficult question whether or not the fact that the defendants did exercise their powers, and, as the judge has found,

Page 183 of [1939] 4 All ER 174

did not exercise them with reasonable skill and diligence, puts them under a liability which they could have avoided by remaining passive. It is said, on the one hand, that, if they are under no duty to the plaintiffs to take any action at all to save the plaintiffs lands from damage, they cannot have come under a liability to the plaintiffs because they were too slow and not as efficient as they ought to have been in the action which they did take. The plaintiffs, on the other hand, contended that, if the defendants chose to exercise their statutory powers, and exercised them without due skill and care, they were liable for the consequences of their neglect to anybody who suffered by reason of it. In my opinion, the troublesome question which is raised by these contentions is best approached by considering what right, if any, is given to the individual landowner by the statute from which the public body which he sues derives its powers. If the statute confers no right on the landowner, or, in other words, imposes on the public body no duty towards the landowner, it follows that, unless the public body has infringed some common law right of the landowner, no action lies against it at his suit. Thus, a catchment board which, ex concessis, is under no statutory duty to landowners within its area, is never liable to one of them either for a total neglect to exercise its statutory powers or (if no more is proved) for exercising them with a lack of efficiency, or with too little zeal or dispatch. On the other hand, in so far as it is possible to exercise the statutory powers without inflicting injury on landowners or other members of the public, there is a common law duty on the board so to exercise them. In this respect, the board is in much the same position as an occupier of land, who may do what he likes with his own, provided that he does not wrongfully injure others. It must, so far as is reasonably possible, exercise its statutory powers in such a manner as not to inflict any injury on others. If it does to a member of the public, through lack of care or skill, some avoidable injury which he would not have suffered if it had remained passive, then it is liable to pay him damages. It is no less liable for a trespass, or any other invasion of a persons common law rights which the statute does not justify. On the other hand, it is not liable for damage suffered through failure to exercise its powers adequately, or at all, even though the damage might have been averted or lessened by the exercise of reasonable care and skill.

I believe this statement of the law to be consistent with, and to be supported by, the authorities. Unfortunately, it is difficult, and perhaps impossible, so to state the principle that the statement, if torn from its context, or not read secundum subjectam materiam, will be proof against misunderstanding. The well-known words of Lord Blackburn in Geddis v Bann Reservoir Proprietors, at p 456, which I need not repeat here, have been quoted before now to support a proposition to which in truth they give no supportnamely, that a public body owing no duty to render any service may become liable at the suit of an indi-

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vidual, if once it takes it upon itself to render some service, for failing to render reasonably adequate and efficient service: Sheppard v Glossop Corpn, per Scrutton LJ, at pp 145,146.

The law would perhaps be more satisfactory, or at any rate seem more satisfactory in some hard cases, if a body which chose to exercise its powers were regarded as being in exactly the same position as one upon which an Act of Parliament imposed a duty. On the other hand, it must be remembered that, when Parliament has left it to a public authority to decide which of its powers it shall exercise, and when and to what extent it shall exercise them, there will be some inconvenience in submitting to the subsequent decision of a jury, or judge of fact, the question whether the authority has acted reasonably, a question involving the consideration of matters of policy and sometimes the striking of a just balance between the rival claims of efficiency and thrift.

If I have stated the law correctly, it follows, in my opinion, that, on any possible view of the facts, the plaintiffs made out no case against the defendant board upon the cause of action pleaded. The judge has found that the board should have employed more and better workmen, and that the attempt to build a dam straight across the breach, instead of erecting a coffer dam, was foolish and foredoomed to failure. All this, however, amounts to “negligence” according to the legal connotation of the word only if the board were under a duty to the plaintiffs to do work intended for their benefit with efficiency and dispatch. In my view, they were under no such duty: Let it be granted that, in a time of great stress, their failure to mass sufficient forces of men and material at one breach out of many in the walls, or to adopt a safer method of damming the waters, is evidence of incompetence or folly. It still cannot be said that any common law right of the plaintiffs has been invaded. The defendant board were empowered by the Act to do the work, and to enter on the land of the plaintiffs in order to do it (s 34(4)). They have neither done anything which they owed the plaintiffs a duty not to do nor omitted to do anything which they owed them a duty to do. At most, it can be said that they have not exercised their powers so as to give them that speedy protection which they might well expect, but had no legal right to demand.

I may be allowed to add that Smith v Cawdle Fen, Ely (Cambridge), Comrs is, in my opinion, directly in point here. In that case (where earlier statutes had to be considered), the defendants, like this defendant board, were under no statutory duty to the plaintiffs. I was very ready to listen to any argument directed to persuade this court that the decision in that case was wrong, but it seemed to be conceded that it was right, and it was certainly approved by Stable J, in Gilletts case. If it was right, it is, I think, conclusive in the appellants favour.

It was further contended, however, that, but for the intermeddling of the defendant board, one or other of the plaintiffs would have done

Page 185 of [1939] 4 All ER 174

the necessary work himself, at his own expense, and done it much better than did the board. This may be true. Nobody, I think, can be certain about it, and the evidence is not, to my mind, conclusive. On the assumption that some cause of action could be based on the allegation that the plaintiffs were induced or compelled to abstain from helping themselves by the futile and misguided attempts of the defendant board to help the community, no such cause of action was pleaded or investigated at the trial, and in my opinion it is too late for the plaintiffs to seek to rely on it now. The measure of damages in such an action would be a matter for careful consideration. Then it was said that the defendants might well be liable on the well-known principle of Wilkinson v Coverdale. I understand that case to have decided that a person who undertakes to do work for another gratuitously may be liable in damages to that other if he does the work negligently. All that need be said on this point is that it was neither proved nor alleged that the defendants ever undertook any obligation to the plaintiffs. The defendants were acting, not for the plaintiffs, but, it must be assumed, for the common good. They never entered into any sort of contractual relationship with the plaintiffs, whether express or implied.

It remains to deal with one other matter which assumed some importance during the argument before us. It appeared from the evidence that, in doing the work which they undertook, the defendants, by carelessly constructing the dam, (i) caused the deepening of a hole or pool which the scouring of the water had already produced in the plaintiffs land, and (ii) caused a large number of sandbags to be deposited on the plaintiffs land. If the statement of claim had alleged that the defendants had done this positive injury to the plaintiffs, it is conceded by the defendants counsel that they would have had no answer to a claim for damages in respect of it. It would indeed have been difficult to find a better example of that class of case in which, if the view of the law which I have expressed be sound, a catchment board is liable to a landowner. Counsel for the defendants says that, if that claim had been pleaded, they would have paid into court a sum which might have satisfied it. When regard is paid to the small value of this marshland, it does not seem likely that the sum paid in need have been very large when compared with the damages which would be payable if the plaintiffs were entitled to succeed on their case as pleaded. In the circumstances, no application having been made to the judge at the trial to amend the pleadings, this court was unanimously of opinion that we ought not to allow such an amendment now. On the pleadings as they stand, I am satisfied that it is not open to the plaintiffs to use a comparatively trivial part of the evidence relating to the damage suffered in order to convert an action for failure to take proper steps to prevent flooding into an action for the infringement of a common law right. For the reasons which I have stated, I am of opinion that

Page 186 of [1939] 4 All ER 174

this appeal ought to be allowed and that judgment should be entered for the defendants, but, as the majority of the court have expressed the view that the judgment of the judge should be upheld, the appeal must, of course, be dismissed.

Appeal dismissed with costs.

Solicitors: Sharpe Pritchard & Co, agents for Cobbold Sons & Menneer, Ipswich (for the appellants); J R Welch Son & Algar, agents for Turner Martin & Symes, Ipswich (for the respondents).

Derek H Kitchin Esq   Barrister.

Stevens v Tirard

[1939] 4 All ER 186


Categories:        TAXATION; Income Tax, Relief        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        2 NOVEMBER 1939        


Income Tax Reliefs Childrens allowance Sums over £50 payable to guardian for maintenance of children Whether children entitled to such sums in their own right Finance Act 1920 (c 18), s 21.

By an order of the Divorce Court, the respondent was ordered to pay to his wife yearly sums of £90, £90, and £70 for the maintenance and education of the 3 children of the marriage respectively. It was contended for the Crown that the children were entitled to those sums in their own right, with the result that the respondent was not entitled to any childrens allowance in respect of those children:

Held the scheme of the order was not to create an income to which the children were in any way entitled, but was to increase the income of the wife so as to enable her to discharge the duty of maintenance laid upon her by the order of the court giving her the custody of the children. The respondent was, therefore, entitled to the childrens allowance.

Decision of Lawrence J ([1939] 3 All ER 154) affirmed.

Notes

Relief in respect of children is dependent upon the income of the child in its own right, and the question here is whether money paid to the guardian of an infant to be applied to its education and maintenance is income of the child in its own right. It is decided that the child has no interest in such money, and it is money paid upon a condition as to its application, and not money received by the guardian as a trustee for the child.

As to Child Allowance, see Halsbury (Hailsham Edn), Vol 17, p 304, para 602; and for Cases, see Digest, Vol 28, p 91, No 540.

Case referred to

Re Frame, Edwards v Taylor [1939] 2 All ER 865; Digest Supp, 160 LT 620.

Appeal

Appeal by the Crown from an order of Lawrence J, dated 26 May 1939, and reported [1939] 3 All ER 154. The facts are fully set out in the judgment of Clauson LJ.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the appellant.

Cyril L King KC and Frederick Grant for the respondent.

The Solicitor-General: The words “in his own right” in the Finance Act 1920, s 21(3), add nothing to the subsection, so far as the facts

Page 187 of [1939] 4 All ER 186

of this case go. The wife cannot be required to give an account of how the money is spent, so long as the child is in fact maintained. The order of the court under the Supreme Court of Judicature (Consolidation) Act 1925, s 193, created a trust, in favour of the children, of the sums paid by the father for their maintenance. [Counsel referred to Re Frame, Edwards v Taylor and Rayden and Mortimer on Divorce (3rd Edn), p 512.]

Counsel for the respondent was not called upon.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the appellant.

Cyril L King KC and Frederick Grant for the respondent.

2 November 1939. The following judgments were delivered.

SCOTT LJ. In this appeal, to speak for myself, I think that the argument for the appellant is not consistent with either the language of the order or that of the Supreme Court of Judicature (Consolidation) Act 1925, ss 190, 193. Quite shortly, I find myself in agreement with the judgment of Lawrence J, and I adopt it as my own, with the rider that I invite Clauson LJ to deal with the case from the point of view of the procedure of the Chancery side of the High Court, which has been implicitly invoked by the Solicitor-General.

CLAUSON LJ. I agree with Scott LJ that this appeal fails. We have been told by the Solicitor-General that the appeal has been brought in order that the law on the subject-matter of it should be clearly settled so far as this court is concerned, and that an arrangement has been made to deal with the costs of the matter below and the costs of the appeal, so that the individual whose actual circumstances have given rise to the question should not suffer. I venture to say that I think that it is most desirable that the matter should have been raised and should be settled, and I think it is most satisfactory that the Inland Revenue authorities have taken the course which counsel for the appellant explained to us.

The point is one of very considerable importance, and, I think, of very considerable interest. It arises in this way. A husband or wife commences a divorce suit, and, as a result of the suit, the marriage is dissolved. Under the Supreme Court of Judicature (Consolidation) Act 1925, ss 190, 193, an order is made by the Divorce Court in an exceedingly familiar form. Such orders are made with very great frequency. S 190 enables the court to make the husband provide for the wifes maintenance, and s 193 gives the court certain powers to make such provision as appears just with respect to the custody, maintenance and education of the children. There were three infant children in this case.

In this particular case, the order of the court is on the following lines. First it provides:

That during the joint lives of the petitioner and respondent until further order [the former husband is to pay the former wife £500 per annum less tax].

The second, third and fourth clauses of the order make provision in respect of the three children respectively. I take the first one as an example. The order is that, during the joint lives of the husband and

Page 188 of [1939] 4 All ER 186

wife, and until further order, the husband is to pay the wife for the maintenance and education of the child John, until he shall attain the age of 21 years or marry under that age, the sum of £90 per annum, less tax. There was a similar clause as regards Robert and as regards Ann. That order proceeded on the footing, of course, that the custody of the three children had been given to the former wife. I do not find any reference to the mother in this order. That is probably because there is some previous order as to custody, or it may be that no question was raised and the former spouses arranged between them that the wife should have the custody. That does not matter. The point is that the wife had the custody, and this provision is made.

The next thing that happens is that the husband must make his income tax return, and, under his income tax return, he will, of course, in some shape or form, find his liability to taxation diminished by reason of the fact that, under the order, these various sums have to be provided by him out of his income. With that it is not necessary to trouble. The former husband also finds, however, that, under the Finance Act 1920, s 21(1), he is entitled, if he proves that he has living at any time within the year of assessment any child who is under the age of 16 years, to have, in respect of any one such child, a deduction of £50, and, in respect of each subsequent child, a deduction of £40, in calculating the amount of his taxable income. It will be observed that that section says nothing whatever as to whether the child is being maintained at the expense of the claimant for deduction. He has to prove, and he has to prove only, that the child or the children in respect of whom he makes the claim is or are living at the material period. Accordingly, the taxpayer in the present case did make such a claim, and the claim was, in the ordinary course, passed. For reasons which will appear when one looks at the matter from the standpoint of the former wife, the Inland Revenue are now claiming a reconstruction of the assessment on the footing that he ought not to have that deduction. That claim is based upon this. The revenue authorities turn to s 21(3), which provides as follows:

No deduction shall be allowed under this section in respect of any child who is entitled in his own right to an income exceeding £50 a year.

The Inland Revenue contention is that the effect of the order which I have stated is to provide an income of, in the case of the son John, if I may take him as an example, £90 per annum, which, so they suggest, is an income to which, under the order, he becomes entitled in his own right. If that be the correct position, it follows that the deductions ought not to have been allowed, and the matter must now be readjusted.

I want to emphasise that the sole question which the court below had to decide, and which we have to decide now, is whether the effect of the order of the Divorce Court was to create in the child a title to an income of the sum specified.

Now I want to continue the story and consider the other side of the

Page 189 of [1939] 4 All ER 186

matter. The money having been paid to the wife in accordance with the order, the position is that one would not expect her to be entitled to claim any deduction from her income under sub-s (1), as the deduction has already been claimed by, and allowed to, the husband. It would seem very anomalous that two persons should be allowed a deduction, the basis of which would appear in equity to be that the deduction is allowed because of the child being a burden upon the financial position of the parents. It will be observed that the deduction has been allowed to the father, although in respect of the burden upon him he has obtained the benefit that the burden has been allowed of itself as a deduction from his taxable income.

If we go on to consider the position of the wife, if the correct view is that the order has made this sum of £90 per annum the income of John, she would be in a position as his guardian to claim on his behalf the return of the tax, on the footing that his income is below the taxable limit. That claim, it will be observed, would have to be made on his behalf. If she recoveredas she would, on the assumption I have made, recoverthe tax, what would be the position? It would be the boys own income. If the true construction of the order is that the boys own income has been given to the mother for his maintenance, then, of course, she would be entitled to keep that returned tax towards discharging the maintenance obligation.

Let us consider for a moment, however, what that involves. That involves the proposition that the effect of the order, which admittedly was made under s 193, has been to create an income belonging to the infant, and then to give directions as to the manner in which the income of the infant should be dealt withnamely, that it should be paid to the mother for the childs maintenance. To continue as regards the position of the wife, if the contrary view be the correct one, and if these sums which are ordered to be paid to her swell her income so as to enable her to meet the maintenance obligation placed upon her, there is the very anomalous result that it may be that this money, which does not really increase her own resources, since it is money which will have to be spent in substance in maintenance, may have the effect of putting up her income to, let us say, an excess over the sur-tax figure. That is certainly an exceedingly anomalous result. Having regard to the anomalies which hang round the operation of the material section in the case where there has been a divorce and orders have been made on the lines of that legislation with which we are now dealing, it is not astonishing that it has been considered desirable to ascertain with reasonable clearness the exact state of the law on the subject, with a view, no doubt, to putting these various anomalies right, if that be possible.

I return now to what is the point, and, in my view, the only point, in the case, and that is whether the effect of the Divorce Court order has been to create a title in the infant to the income of £90 there referred to. I feel that some apology is due for having gone into the matter at so much

Page 190 of [1939] 4 All ER 186

length, because, when one gets to the real point, it appears to me that there really can be no doubt whatever about it. As a matter of construction of this order, it appears to me abundantly clear that the scheme of the order is not at all to create an income to which the infant is in any way entitled. The scheme of the order is to increase the income of the mother so as to enable her to discharge the duty of maintenance laid upon her by the court in view of her having the infants custody. I feel very much fortified in construing the order in that way, because I should have the gravest doubts whether, under s 193, there would be any jurisdiction in the court at all to take income away from the father and make it the infants income, though the court has full jurisdiction to take money from the father and make it available for the benefit of the infant by putting it in the hands of the mother, in whom, under the whole scheme which is completed by this order, are vested the rights of custody and the duty of maintenance of the infant. For these reasons, which I have endeavoured to explain, it appears to me that the judges judgment was correct.

I should add only one further matter. It was suggested that the decision of Simonds J, in Re Frame, Edwards v Taylor has some bearing upon the matter. That decision, the correctness of which I must not be understood for one moment to impugn, has no bearing at all upon any matter we have to consider in the present case. There the testator by his will gave a legacy to a legatee in the following terms:

… all my money and insurance policies … on condition that she adopts my daughter Alma Edwards and also gives to my daughters Jessie Edwards and May Alice Edwards the sum of £5 each and a like sum of £5 to my son Alexander Edwards.

The difficulty arose there because, although the lady in question attempted to obtain an adoption order which would have put on her in substance the liability of maintaining Alma Edwards, she was not able to get such an order, and the question was whether, in those circumstances, there was any trust enforceable by the court in favour of Alma Edwards. Simonds J came to the conclusion on the construction of that will that the word “condition” was not used in a strict legal sense, but that the gift must be construed as a gift to the legatee on trust to do certain thingsnamely, to provide the two sums of £5 each for the two other daughters, and to do something in regard to Alma, the daughter as to whom the legatee failed to obtain an adoption order. On the construction of the words, Simonds J held that there was a trust, which the court could enforce, that the legatee should apply the legacy in maintaining Alma Edwards during her infancy. As I say, I do not for a moment suggest that the construction placed by the judge on that particular will was otherwise than correct, but the case appears to me to be of no assistance, simply because, for the reasons I have already stated, not only does it appear to me that, as a matter of construction, no trust is here created for the infant, but also, had I been able to spell such a trust out of the

Page 191 of [1939] 4 All ER 186

words of the order, I should feel the gravest doubts as to whether the creation of such a trust is envisaged or authorised by the Supreme Court of Judicature (Consolidation) Act 1925, s 193. If there were a doubt about that, that would throw a very considerable difficulty in the way of construing the order as creating such a trust.

Accordingly, in my view, the decision of Lawrence J, in this case was perfectly correct. He could come to no other decision. It does remain that there are the most serious anomalies in regard to the questions of income tax in cases such as the one we have had under review, but, of course, that is a matter with which it is not for us to deal, but which must be dealt with by the legislature. I agree, therefore, that the appeal must be dismissed.

GODDARD LJ. I am of the same opinion, but I should like to add a few words, especially because I appreciate to the full what a very unsatisfactory positionunsatisfactory from every point of viewarises. The reason why it arises is that, when this question of childrens allowances was first introduced into the Finance Acts, this particular situation was not envisaged. When the Divorce Court is dealing with the case of a petitioning wife, and there are children, it does two things, so far as maintenance of the wife is concerned. First of all, whether it acts under s 190(1) or s 190(2), it considers what is a proper sum for the woman to receive from her former husband for her life, quite irrespective of whether or not there are children. It fixes that sum. Then, if the custody of the children is given to the wife, it has to consider that the wife will be put to further expense owing to the fact that she has to maintain, educate and care for the children, and so it gives her another sum, irrespective of what it has already allowed to her for her own maintenance (which will last all her life). It allots to her a further sum (usually, I think, though I am not certain about this, until the children become 21, but not invariably), and, as each child becomes 21, under this order the money which is paid to the mother for the maintenance of that child will cease.

The Solicitor-General will not think that I mean any disrespect to his very courageous argument when I say that it seems to me that this point is unarguable. It is the mothers money, paid to her to enable her to fulfil a duty which the court has put upon her, and, if she does not fulfil that duty, the remedy against her is, not to ask for an account showing how she has spent the money which is given to her, but to remove her from being in the position of custodian of the child, and to give the custody of the child, together with the sum which the court thinks fit to give for its maintenance, to somebody else. I confess I do not see how it can possibly be argued that this money is the money of the child. It is the mothers money. She has the spending of it, and she is accountable to nobody for it. What she is accountable for is how she acts as guardian of the children. The position which results is, as I say, unsatisfactory,

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it seems to me, from every point of view, and I think that the attention of the legislature might well be called to it. In the first place, the husband can deduct from his income the money that he has to pay, not only to his wife for her own use, but also to his wife for the children, so he gets the advantage that, in finding out the income on which he has to be taxed, this money is deducted as a charge on his income. Then, because, and only because, this point was not thought of when the Finance Act 1920 was drawn, he is entitled again to claim a deduction for what is called the childrens allowance. Thus he gets a double benefit, which seems to me to be quite an excessive award to give to him for his failure to do his duty as a husband, and, to that extent, as a father. The mother can no longer claim, as she has done in this particular case, a personal allowance on behalf of the children, and reclaim tax on the ground that no tax is payable by the children. She will have to treat the money as part of her income, and in certain cases that may work great hardship on her, because, although it will not be so in this case, in certain cases, where larger sums are in question, it may well bring her income up to the sur-tax limit, so that she may have to pay sur-tax as well as income tax. At the same time, she is entitled under s 21, having the custody of the children, and they being her children, to claim the childrens allowances, and so, from the taxpayers point of view, it is equally unsatisfactory, because, in respect of the children of divorced parents, in these circumstances the result is that two childrens allowances are claimable. Therefore, I say that this is a matter which might well, I think, be brought to the attention of the legislature. The sections being what they are, however, it is useless to ask this court to put the matter right, because as I say, I think the case is really too clear for argument that the money is the mothers money, and not the childrens money.

Appeal dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellant); Reynolds Sons & Gorst (for the respondent).

C St J Nicholson Esq   Barrister.

Francis Day and Hunter Ltd v Twentieth Century Fox Corporation Ltd and Others

[1939] 4 All ER 192


Categories:        COMMONWEALTH; Commonwealth countries: INTELLECTUAL PROPERTY; Copyright        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT, LORD ROMER AND SIR LYMAN P DUFF        

Hearing Date(s):        17, 18 JULY, 12 OCTOBER 1939        


Privy Council Canada Copyright Title of song used as title of talkie film Infringement Performing right Literary copyright Passing off Copyright Act 1842 (c 45) Copyright (Musical Compositions) Act 1882 (c 40) Copyright Act 1911 (c 46) Canadian Copyright Act 1921 (RSC 1927, c 32) Canadian Copyright Amendment Act 1931 (c 8), ss 2(v), 3.

The appellant company for purposes of these proceedings were the owners of the copyright in a song entitled The Man who Broke the Bank

Page 193 of [1939] 4 All ER 192

at Monte Carlo, but they had not printed on each copy of the song the notice required by the Copyright (Musical Compositions) Act 1882. In 1935, a motion picture with that title was exhibited in Canada. The plot of the picture did not correspond with the theme of the song. The appellants brought an action against the distributors of the film in Canada and the exhibitors of it in cinematograph theatres in Canada. The appellants claimed damages for infringement of their copyright in the song by performance in public. The action was subsequently extended to include a claim for infringement of the literary copyright, and for passing off. The picture complained of was a talkie film, but no word of the song was used except the title, which was thrown on the screen at the outset. There was no audible reproduction of any part of the musical composition and no copying of the letterpress or musical notation except of the words of the title. It was contended that such use of these words, in actual production and in advertisements, constituted an infringement:

Held (i) though the claim was based upon the Imperial Copyright Act 1842, the requirements of the Copyright (Musical Compositions) Act 1882 applied, and, as there had been no publication of the notice required by that Act on each copy of the song, the appellants were not entitled to the protection claimed.

(ii) assuming that the right in respect of literary infringement depended upon the Imperial Copyright Act 1842, and was not subject to the requirements of any Canadian Act, the copying of the title was in this case so unsubstantial a matter as not to constitute an infringement.

(iii) the Canadian Copyright Act 1931, s 2(v), which added a definition of “work” as including the title thereof when such title is original and distinctive, made no change in the law.

(iv) there had been, on the facts, no passing off.

Notes

There can be little doubt that so famous a title as that here in question is a very valuable property from a commercial point of view, but that, of course, does not conclude the question whether its use in a given set of circumstances is an infringement of the rights of the owners of the copyright in the song. The legal question is here considered from every angle and there is not found, in the circumstances of this case, to have been any infringement of a legal right vested in those owners.

As to Copyright in Title of Work, see Halsbury (Hailsham Edn), Vol 7, p 525, para 826; and for Cases, see Digest, Vol 13, pp 177, 178, Nos 131142.

Cases referred to

Mansell v Star Printing & Publishing Co of Toronto Ltd [1937] AC 872, [1937] 3 All ER 912; Digest Supp, 106 LJPC 147, 157 LT 445.

Dicks v Yates (1881) 18 ChD 76; 13 Digest 178, 133, 50 LJCh 809, 44 LT 660.

Licensed Victuallers Newspaper Co v Bingham (1888) 38 ChD 139; 37 Digest 546, 80, 58 LJCh 36, 59 LT 187.

Weldon v Dicks (1878) 10 ChD 247; 13 Digest 177, 131, 48 LJCh 201, 39 LT 467.

Kantel v Grant, Nisbet & Auld Ltd, Watson & Dominion Battery Co Ltd [1933] Ex CR 84; Digest Supp.

Routledge v Low (1868) LR 3 HL 100; 13 Digest 181, 165, 37 LJCh 454, 18 LT 874, affg SC sub nom (1865) 1 Ch App 42.

Graves & Co Ltd v Gorrie [1903] AC 496; 13 Digest 163, 15, 72 LJPC 95, 89 LT 111.

Page 194 of [1939] 4 All ER 192

Canadian Performing Right Society v Famous Players Canadian Corpn [1929] AC 456; Digest Supp, 98 LJPC 70, 140 LT 657.

Spalding & Brothers v Gamage (A W) Ltd (1915) 84 LJCh 449; 43 Digest 264, 1018.

Samuelson v Producers Distributing Co Ltd [1932] 1 Ch 201; Digest Supp, 101 LJCh 168, 146 LT 37.

Appeal

Appeal from a judgment of the Court of Appeal for Ontario (Middleton, Masten and Henderson JJA), dated 13 June 1938, allowing an appeal from a judgment of the Supreme Court of Ontario (McEvoy J), dated 23 November 1937. The facts of the case are set out in the judgment of their Lordships delivered by Lord Wright.

K E Shelley KC and P Stuart Bevan for the appellants.

Arthur J Thomson KC and E J Macgillivray KC for the respondents.

Shelley KC referred to Mansell v Star Printing & Publishing Co of Toronto Ltd, Routledge v Low, Graves & Co Ltd v Gorrie, Canadian Performing Right Society v Famous Players Canadian Corpn and to Copingers Law of Copyright (7th Edn), p 56.

Stuart Bevan referred to Spalding & Brothers v Gamage (A W) Ltd and Samuelson v Producers Distributing Co Ltd.

Counsel for the respondents were not called upon.

K E Shelley KC and P Stuart Bevan for the appellants.

Arthur J Thomson KC and E J Macgillivray KC for the respondents.

12 October 1939. The following judgments were delivered.

LORD WRIGHT. In 1892, a song entitled The Man Who Broke the Bank at Monte Carlo was published in London. It consisted of three verses, with a chorus, and was written and composed by Fred Gilbert. Many people remember the original publication. Both words and music were of the most commonplace character, but the music went with a jaunty swing which gave it great vogue and popularity, especially when performed by Charles Coborn. The song, consisting of words and music, was duly registered at Stationers Hall in London, and acquired copyright under the Copyright Act 1842. The performing right, however, was not acquired, because of the failure to comply with the conditions imposed by the English Copyright (Musical compositions) Act 1882, which required that the proprietor of the copyright, if he desired to acquire and retain the right of public representation or performance, should print upon the title page of every published copy a notice to the effect that the right of public representation or performance was reserved.

In the song, the singer recounts how he went to Monte Carlo to raise his winters rent, but was so successful at the tables that he had lots of money, went to Paris, and swaggered about as a millionaire. The words of the title are repeated at the end of the chorus.

Gilbert, the writer and composer, died intestate in 1903. Under the then-existing law in England, the copyright would have expired in 1934, but under the Copyright Act 1911, the period was changed into one of 50 years from the authors deaththat is, until 1953. For the residue of this extended periodthat is, from 1934 to 1953the copyright vested, not in the assignees of the right, but in the author or his personal

Page 195 of [1939] 4 All ER 192

representatives. In the present case, these were two daughters. One of these in 1935 transferred one half of her right to the appellant company, whose title, so far as it goes, is not questioned in these proceedings.

Some time about 1935 there was exhibited in various theatres in Canada a motion picture entitled The Man Who Broke the Bank at Monte Carlo. The plot of that picture was based on a comedy in three acts by Ilia Surgutchoff and F A Swann entitled The Gamble, but also at different times called The Man Who Broke the Bank at Monte Carlo, Le Jeu, and other titles. The motion picture represented the plot of the comedy, which consisted of the story of an exiled Russian prince, working as a taxi-driver in Paris, who went to Monte Carlo to try his luck with money subscribed by his compatriots in Paris. He had a wonderful run of luck. Then followed an elaborate story of his love affair with a woman. He went back to Monte Carlo, was unsuccessful and lost all his money. He suspected that the object of his affection was guilty of double dealing. He returned to Paris and to his taxi cab. Eventually he and the girl settled their difficulties, and all ended happily.

To an unprejudiced observer, no two things could appear more dissimilar than this song and this elaborate motion picture, except for the bare fact that each bears the title The Man Who Broke the Bank at Monte Carlo. The appellants, however, in 1936 brought an action against the two respondents, the former of whom had distributed and rented the film in Canada, while the latter had exhibited it in its cinematograph theatres in Canada. The claim in the action was for damages for infringement of the appellants copyright in the song by performance in public, but without any formal amendment the scope of the action became extended, without objection, so as eventually to include also a claim for infringement of the literary copyright and for passing off.

In the Supreme Court of Ontario, McEvoy J, who tried the action, decided against the appellants in respect of the performing right, but decided in their favour and awarded damages for the use of the “title and theme” of the musical work. He said nothing on the issue of passing off. In the Appellate Division, the Court of Appeal agreed with McEvoy J, in rejecting the claim so far as regards the performing right, but reversed his decision in respect of the literary copyright, and held that there had been no infringement. The court also rejected the claim for passing off. It will be necessary in this appeal to discuss the three heads of claim independently.

The claim for infringement of the appellants performing right in the song fails, in their Lordships opinion, on grounds both of law and of fact. As to the law, the appellants claim was expressly based on the Imperial Act of 1842, which gave to the owner of copyright under that Act a right to protection in Canada. It was contended on behalf of the respondents, however, that, apart from difficulties arising from the course of Canadian copyright legislation, which need not here be discussed, the appellants, whose claim in the action was based solely on the

Page 196 of [1939] 4 All ER 192

Act of 1842, could not in any event claim the protection of that Act, because, as has been stated above, they and their predecessors in title had failed to publish on each copy of the song the printed notice required by the Copyright (Musical Compositions) Act 1882. It is true that the Act of 1882 did not in terms extend to Canada, but, in their Lordships judgment, it did so by necessary implication and effect. It was in the nature of an amendment to the Act of 1842, and had the effect of regulating the rights under that Act in respect of public performance. It imposed a new condition for the acquisition and retention of the performing right, whether in England or in any other place where the copyright was based upon, and derivative from, the English right. Thus the Act of 1842 cannot be relied on where performing right is in question according to its original bare terms, but only as qualified by the Act of 1882.

On this narrow ground of law, apart from other considerations, the appellants must fail, in their Lordships opinion. This agrees with the decision of McEvoy J, and the Court of Appeal. In truth, however, the appellants claim fails on the facts. There cannot be an infringement of performing right in a musical composition (assuming it to exist) unless there has been a public performance of the musical composition by the defendant. It is idle to suggest here, however, that by anything the respondents have done they have performed the song in any sense. The motion picture, it is true, is what is called a talkie film, but not a word of the song is repeated in any form, except that the title is thrown on the film at the outset. It will be considered later if that constituted an infringement of the literary copyright in the film. To say, however, that this bare fact constituted a public performance of a musical composition is abhorrent to common sense. A musical composition is performed by audible reproduction, by the voice or by musical instruments or by mechanical methods of reproduction. Nothing of the sort can be predicated here.

The claim for infringement of the literary copyright fails equally, but for other reasons. It is not claimed that there has been any copying of the letterpress or musical notation, except the words The Man Who Broke the Bank at Monte Carlo, which constituted the title of the song and appear as the title of the film. What is relied on as infringement is the use of these words as the title of the film. It is clear that they have been used by the respondents as the title of the film, both in the actual production and in the advertisements issued on behalf of the respondents. The respondents, however, say that the use of these words is too insubstantial a matter to constitute an infringement of copyright, and that there is no copyright in a title. They also rely on the recent decision of this Board in Mansell v Star Printing & Publishing Co of Toronto Ltd. That decision was by itself held fatal to the appellants claim by the Court of Appeal. That court held that the effect of the decision was that, under the Canadian Copyright Act 1921, which came into force in 1924, all rights of copyright existing in Canada in virtue of

Page 197 of [1939] 4 All ER 192

Imperial legislation might be converted into rights existing by virtue of Dominion legislation, but only by complying with the conditions under the Act of 1906, which was not done either in Mansells case or in the present case. In the words of Middleton JA:

It was Canadian rights only that were preserved. All inchoate rights existing by virtue of Imperial legislation came to an end.

Counsel for the appellants, however, sought to distinguish the decision in Mansells case, and contended that it did not apply in the present case. In Mansells case, it was contended, what was in question was copyright in pictures, to which no copyright attached under the Act of 1842. It was first granted in England under the Fine Arts Copyright Act 1862, but that Act did not apply to Canada. There could therefore be no copyright in such works in Canada under that Act. There was no copyright in such works until the passing of the Canadian Copyright Act 1906, and then subject only to the conditions imposed in that Act, which had not been complied with. In the present case, however, as the appellants contended, their only claim to copyright was based on the English Act of 1842, the rights under which did not depend on the performance of conditions under any Canadian Act. That copyright, it was said, subsisted at the date specified as the date of the commencement of the Act of 1921, and, by the terms of the Canadian Act of 1921, rights under that Act took the place of rights under the English Act of 1842, so that at the material dates these latter rights were vested in the appellants, in the circumstances stated above. In this way, it was said, the appellants did not rely upon, and did not need to rely upon, any Dominion copyright legislation, except in so far as the Act of 1921 gave a substituted copyright for the right existing under the Act of 1842.

Their Lordships do not think it necessary in the present appeal to determine this controversy, which raises questions of difficulty and importance on the law, because the appeal can, in their opinion, be decided on another ground. Assuming, but not deciding, that the appellant company is entitled to the copyright in Canada which it claims, it is, in their Lordships judgment, not entitled to succeed in its claim that the respondents have infringed that right. The copying which is complained of is the use of the title, and that is too unsubstantial on the facts of this case to constitute an infringement. The appellants contention was put as high as that copyright in a title is infringed by the application of that title to a work of a different character from that of the work to which it was originally applied. In the present case, the title was originally applied to a musical composition, whereas it has been applied by the respondents to a motion picture or a film. The argument of the appellant company would be the same, it seems, if the application of the title complained of had been to a picture or a statue. On this reasoning, it would be said that the title “Adam” applied to a work of statuary would be infringed if that title were used as that of a novel. These and other anomalous consequences justify

Page 198 of [1939] 4 All ER 192

the broad principle that in general a title is not by itself a proper subject-matter of copyright. As a rule, a title does not involve literary composition, and is not sufficiently substantial to justify a claim to protection. That statement does not mean that in particular cases a title may not be on so extensive a scale, and of so important a character, as to be a proper subject of protection against being copied. As Sir George Jessel MR said in Dicks v Yates, at p 89 (which, as Lindley LJ said in Licensed Victuallers Newspaper Co v Bingham, virtually overruled on this point Weldon v Dicks), there might be copyright in a title “as for instance a whole page of title, or something of that kind requiring invention.” This could not be said of the facts in the present case, however. There may have been a certain amount, though not a high degree, of originality in thinking of the theme of the song, and even in choosing the title, though it is of the most obvious. To “break the bank” is a hackneyed expression, and Monte Carlo is, or was, the most obvious place at which that achievement or accident might take place. The theme of the film is different from that of the song, and their Lordships see no ground in copyright law to justify the appellants claim to prevent the use by the respondents of these few obvious words, which are too unsubstantial to constitute an infringement, especially when used in so different a connection.

The appellants counsel, however, have strenuously contended that, though this might be the position under English or Canadian law before 1931, it was changed in Canada by an amendment in that year of the Canadian Act of 1921, which added a new definition to those contained in s 2 of the latter Actnamely, “(v) work shall include the title thereof when such title is original and distinctive.” It was in virtue of this definition that McEvoy J held that there was infringement, and he awarded damages to the appellant company. The Court of Appeal reversed that holding. Middleton JA did not think it necessary to decide whether the amendment applied to existing copyrights. “It is admitted,” he said, “that prior to this Act no such right existed.” He did not think that, for the purposes of this case, the Act of 1931 had changed the law.

Their Lordships are prepared to assume, for the purposes of this appeal, that the amendment applied to existing copyrights. They will likewise assume that the title was original in the sense that it had not been copied from another work. They are content, for the purposes of this appeal, to adopt the definition given by Maclean J, in Kantel v Grant, Nisbet & Auld Ltd, though they wish to reserve the question how far that definition can be accepted as sufficient in other cases. It is, however, difficult to define satisfactorily the word “distinctive,” since it cannot mean merely that the title is used to identify the particular work. In this connection, regard must be had to s 3 of the Act of 1921, which defines copyright as the “right to produce or reproduce the work or any substantial part thereof.” The definition (v) does not, in their

Page 199 of [1939] 4 All ER 192

Lordships judgment, mean that the title of a work is to be deemed to be a separate and independent “work.” Work is to include “the title thereof.” That is to say, the title is to be treated as part of the work, provided that it is original and distinctive, whatever those words may connote. When that definition is read with s 3, the result is that to copy the title constitutes infringement only when what is copied is a substantial part of the work. This view would agree in effect with what was said by Sir George Jessel MR, in Dicks v Yates in the words quoted above, and would apply to a case such as a title covering a whole page of original matter, or something of that nature, but would not justify such a wide extension of copyright as the appellant company has contended for, or the holding of McEvoy J on this point. It is said that so to construe the definition is to treat it as adding nothing to the law. The definition may have been inserted to settle doubts and to avoid its being said that in no circumstances could a title receive protection. In any event, their Lordships do not think that the new definition (v) entitles the appellants to succeed in this case.

There remains a third point which has been argued on behalf of the appellantsnamely, that the respondents have been passing off the exhibition of their motion picture as a performance of the song. This startling claim was not pleaded, and is dealt with only by the Court of Appeal, who disposed of it in summary fashion: “Certainly the moving picture was not represented as the copyright song. No one could be misled or defrauded by what was here done.” In these words Middleton JA dismissed the claim.

Their Lordships do not wish to be taken to say that in no circumstances can there be a passing off by the use of the same title for a literary, artistic or musical work, though it is difficult to imagine such a case where there are no circumstances calculated to mislead other than the mere title. A title may, however, be used in the case of a book or newspaper under such conditions that persons may be deceived into buying the defendants book or newspaper under the impression that they are buying that of the plaintiff. Similarity of name may be strengthened by similarity in make up and in subject-matter, and by other circumstances. Nor is such a claim limited to things sold, though it is commoner in that class of case. It is not impossible that there might be passing off of such a nature that persons might pay to go to a performance of the defendants work under the impression that they were going to witness the plaintiffs work. Such cases are perhaps not very likely to occur, but there may conceivably be the same element of likelihood of deception, whether designed or not, so as to involve an invasion of the plaintiffs common law rights and a disturbance of his business interests. In their Lordships opinion, it is enough to state these elementary principles to see how inapplicable they are to the subject-matter of this appeal. The member of the public who is supposed to be likely to be deceived must, to start with, be assumed to know

Page 200 of [1939] 4 All ER 192

what he was wanting to see or hear. Thus, in the present case he must be presumed to know that what he wanted was to hear the song The Man who Broke the Bank at Monte Carlo. It seems inconceivable that, when or if he bought a ticket for the motion picture, he imagined he was going to hear a performance of the familiar song. The two things are completely different, and incapable of comparison in any reasonable sense. The thing said to be passed off must resemble the thing for which it is passed off. A frying-pan cannot be passed off as a kettle. In Canada, what was advertised was the film. There was no hint that the song was going to be sung. Indeed, it was not sung at any performance. If it had been sung, it would presumably, on the assumptions made by their Lordships, have been an infringement of the performing right, but, if that were possible, it would have made the claim for passing off even more preposterous, because the assumed victim would have got what he desirednamely, a performance of the song.

On all these grounds, their Lordships will humbly advise His Majesty that the appeal should be dismissed. The appellants must pay the costs of the appeal.

Appeal dismissed with costs.

Solicitors: Syrett & Sons (for the appellants); Blake & Redden (for the respondents).

T A Dillon Esq   Barrister.

Tooke v T W Bennett & Co Ltd

[1939] 4 All ER 200


Categories:        BANKING AND FINANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        LEWIS J        

Hearing Date(s):        30, 31 OCTOBER, 1 NOVEMBER 1939        


Money and Moneylending Memorandum of loan agreement Loan secured by bill of sale Copy of bill of sale attached to memorandum Whether two documents can be read together Moneylenders Act 1927 (c 21), s 6.

The plaintiff had entered into a series of loan transactions with the defendants, a firm of registered moneylenders, the security for the loan in each case being a bill of sale over her furniture. The bill of sale contained a certain onerous clause, which was not set out in the memorandum, but the memorandum made reference to the bill of sale, giving its date and value, set out the terms of seizure referred to in the bill of sale, and stated that a copy of the bill of sale was attached to the memorandum. It was contended that, as the bill of sale contained an onerous condition, the bill of sale and memorandum could not be read together to form one document, and that the memorandum did not, therefore, contain all the terms of the contract:

Held the bill of sale and the memorandum were one document, and, as the onerous clause was clearly set out in the bill of sale, it therefore sufficiently appeared in the memorandum.

Notes

The judgment herein considers again the sufficiency of a memorandum of loan where the loan is secured by a bill of sale. It was decided in Mitchener v Equitable Investment Co Ltd that it was necessary to set out in the memorandum the terms of the power of seizure and sale contained in the bill

Page 201 of [1939] 4 All ER 200

of sale. This case was considered in Hoare v Adam Smith (London) Ltd [1938] 4 All ER 283; Digest Supp, and it was held that it was unnecessary to set out those details where the borrower received a copy of the bill of sale. In the present case, it is held that, where the bill of sale is attached to the memorandum, the two become one document. If this is so, it would seem that it would be sufficient merely to refer in the memorandum to the annexed bill of sale, and not specifically to any of its terms, but in fact the memorandum here did set out in terms the causes of seizure referred to in the bill of sale. The previous cases have left the position a little obscure, but it seems now to be clear that one is safe in referring in the memorandum to the seizure and sale clause in general terms in cases where a copy of the bill of sale is annexed to the memorandum.

As to Sufficiency of Memorandum, see Halsbury (Hailsham Edn), Vol 23, pp 190, 191, para 280; and for Cases, see Digest, Supp, Money and Moneylending, Nos 353a353dd.

Cases referred to

Westropp v Equitable Investment Co Ltd, Unreported.

Stewart-Naylor v London & Westminster Loan and Discount Co Ltd (1937) Unreported.

Mitchener v Equitable Investment Co Ltd [1938] 2 KB 559, [1938] 1 All ER 303; Digest Supp, 107 LJKB 316, 158 LT 176.

Reading Trust Ltd v Spero, Spero v Reading Trust Ltd [1930] 1 KB 492; Digest Supp, 99 LJKB 186, 142 LT 361.

Action

Action claiming (i) cancellation and delivery up of a bill of sale over furniture given by the plaintiff as security for a loan and (ii) an injunction to restrain the defendants from taking any steps under the bill of sale for seizure of the furniture on the ground that the memorandum of the loan did not set out all the terms of the contract. The plaintiff, a widow of some 60 years, had entered into a series of loan transactions with the defendants, a firm of registered moneylenders. The first transaction was a loan of £30, in May 1929, the plaintiff giving as security a bill of sale over her furniture, which was insured for £100, but was valued, for purposes of a knock-down sale, at £35. This loan, with interest, was repaid in 1930. In June 1931, the plaintiff obtained a second loan on the same security as in the prior case, and, after two renewals, this transaction was finally closed on 18 October 1934, by the plaintiff paying the whole of the principal and interest before the due date for repayment, the defendants allowing a discount of some £3. In August 1935, the plaintiff again approached the defendants, and borrowed another sum of £30 on the same security as in the previous cases. This loan was renewed on four occasions, the last renewal being on 26 May 1938.

R Castle-Miller for the plaintiff.

F Hallis for the defendants.

1 November 1939. The following judgment was delivered.

LEWIS J. It is said that all the terms of the contract in this case are not contained in the memorandum. I have not actually seen the memorandum in all the cases, but I have before me the memorandum of contract under the Moneylenders Act 1927, s 6, which purports to record the transaction of 26 May 1938, which was the last of the

Page 202 of [1939] 4 All ER 200

renewals. That memorandum states clearly that there was an advance of £35:

… being as to £28 15s. 4d. outstanding under a bill of sale dated Nov. 25, 1937 [the date of the last renewal before May 26, 1838], of which the undersigned was the grantor and the sum of £6 4s. 8d. now handed the undersigned.

Then there was interest, £14 6s, and it is set out quite clearly that the rate is 40 per cent per annum, being 8d per £ per month on the outstanding balances of principal. It goes on to say:

Amount payable for strictly regular monthly payments of £2 6s 8d will be £49 6s, commencing the 26th proximo. Security: bill of sale dated May 26, 1938 (as per copy attached), value £35, and the events specified as causes of seizure in the Bills of Sale Act (1878) Amendment Act, 1882, s. 7, are as appears on the back hereof. Signed and copy received before advance made. Jessie Tooke.

That is witnessed by Miss Oakley, who was the secretary of the defendant company, and who gave evidence before me. On the back of that memorandum there are set out the five causes of forfeiture, under the Bills of Sale Act, and also the clause which says that Miss Jessie Tooke:

… will during the continuance of the security keep the said chattels and things insured against loss or damage by fire in the sum of £100 at the least in some office to be approved of by the grantees and on failure by the grantor the grantees can insure and demand from the grantor all moneys in respect thereof.

On that piece of paper itself, which is headed “Memorandum of contract,” there is set out the clause which insists upon insurance, and also the matters which are referred to in one of the paragraphs of the bill of sale itself, which says:

Provided always that the chattels hereby assigned shall not be liable to seizure or to be taken possession of by the grantees for any cause other than those specified in the Bills of Sale Act (1878) Amendment Act, 1882, s. 7.

The moneylenders were careful to set out in quite plain terms what those causes were, and they set them out in the memorandum.

I was referred to Westropp v Equitable Investment Co Ltd, decided by Branson J, Stewart-Naylor v London & Westminster Loan and Discount Co Ltd, which came before me very shortly after the decision of Branson J, and also Mitchener v Equitable Investment Co Ltd, which was decided by Lawrence J, in which reference was made to Westropps case and Stewart-Naylors case. As I understand those decisions, one of which was mine, they amount to this. Where a memorandum makes no reference whatever to the causes of seizure which are referred to in the Bills of Sale Act (1878) Amendment Act 1882, it is true to say that the memorandum does not contain the whole of the terms of the contract.

In my view, those cases are not directly in point here, but what is said in this case is that one cannot have a memorandum in two documents, and great reliance is placed on the dicta of Scrutton LJ, in Reading Trust Ltd v Spero, a well-known case dealing with this matter. In that case, Scrutton LJ appears to have left open the question of whether or not a memorandum can be contained in two documents.

Page 203 of [1939] 4 All ER 200

Greer LJ, however, in the same case, was of the opinion that one could have a memorandum which was contained in two documents. It was argued by counsel for the plaintiff, and argued with considerable force, that it is possible to have a memorandum contained in two documents, unless the bill of sale, which is the second of the two documents, contains an onerous condition. As I understand his argument (and I hope I am doing justice to it), he said: “You may have cases in which a memorandum with a bill of sale attached to it represents the memorandum, but, if the bill of sale contains an onerous condition, then you cannot read the memorandum and the bill of sale together.” Personally, I do not accede to that argument. It seems to me that, where there is a memorandum of agreement which not only makes reference to the bill of sale, giving the date and also the value of the bill of sale, but also sets out in terms the causes of seizure referred to in the bill of sale, and also says that a copy of the bill of sale is attached to the memorandum, and, in this case, was in fact attached to the memorandum, it seems to me that the contention that the two documents cannot be read together is not valid. In my view, the memorandum and the bill of sale are one document, and the bill of sale clearly sets out the clause which gives rise to this pointnamely, the clause which provides as follows:

The grantor doth further agree and declare that she will duly pay to the grantees the principal sum aforesaid together with the interest then due by equal monthly payments of £2 6s. 8d. on June 26 next, and the like sum of £2 6s. 8d. on the 26th day of each and every succeeding month until the said principal sum together with the interest then due shall be fully paid and that in default of payment of any instalment she will pay interest at the rate aforesaid from the date when such instalment shall so fall into arrear until payment thereof upon such part of the said instalment as if such instalment had been punctually paid would have been applicable in reduction of the said principal sum.

Therefore, it is said, that is a clause making her pay a further 40 per cent on any default in payment of the instalments. That, undoubtedly, is an onerous clause, but, for the reasons which I have given, the contention that it does not appear in the memorandum, in the circumstances of this case, is not sound.

After other points had been dealt with, an order for an account was made.

Solicitors: Humphrey Razzall & Co (for the plaintiff); Webster Butcher & Sons (for the defendants).

W J Alderman Esq   Barrister.


Beacon Insurance Co Ltd v Langdale

[1939] 4 All ER 204


Categories:        INSURANCE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ AND ATKINSON J        

Hearing Date(s):        30 OCTOBER 1939        


Insurance Motor insurance Claim for damages Absolute conduct and control of proceedings Settlement without consulting insured Liability of insured for first £5 of sum paid in settlement.

The appellant was insured with the respondents against third-party risks in respect of a motor cycle. While riding the motor cycle, he collided with the rider of a bicycle, and the bicycle rider claimed damages from the appellant for negligence. The appellant, at the request of the respondents, filled up in his own writing a claim form, setting out the history of the accident. On 27 March, the appellant at their request sent to the respondents a copy of a statement made by him to the police. They then settled the claim by payment of a sum of money with denial of liability in pursuance of the authority given to them under the policy, which, after dealing with the prohibition of any admission, offer, promise, payment or indemnity on behalf of the insured without the written consent of the company, stated: “The company … shall be entitled, if it so desires, to take over and conduct in the name of the insured the defence or settlement of any claim or to prosecute in the name of the insured for its own benefit, any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings or in the settlement of any claim and the insured shall give all such information and assistance as the company may require.” The respondents called upon the appellant to pay the first £5 for which the claim was settled. The appellant contended (i) that the respondents were not entitled to settle the claim without notice to him, and (ii) that they had not acted reasonably in the exercise of their authority:

Held the policy gave the respondents power to settle the claim without consulting the appellant, and, where such a settlement included a payment of money, the appellant was liable to pay to the respondents the first £5 of that sum.

Groom v Crocker distinguished.

Notes

The effect of a clause giving the insurance company complete control over proceedings arising out of a policy has been much discussed by those interested in these matters, but has not often been before the courts. The question in the present case is whether the insurance company, having proceeded to settle a claim, not only without the express sanction of the insured but also against his view of the rights of the matterand they are entitled to do this under the usual clause giving them the exclusive conduct and control of proceedingscan then claim payment of the first £5 of the sum paid in settlement of the claim under the other usual condition to that effect, and it is held that the exercise of the full powers under the first provision does not in any way affect their rights under the second provision.

As to Conduct of Proceedings by Insurers, see Halsbury (Hailsham Edn), Vol 18, pp 549, 550, paras 876878; and for Cases, see Digest, Supp, Insurance, No 3217q.

Case referred to

Groom v Crocker [1939] 1 KB 194, [1938] 2 All ER 394; Digest Supp, 108 LJKB 296, 158 LT 477.

Appeal

Appeal by the defendant from a judgment of His Honour Judge Dumas, dated 26 June 1939, at the Westminster County Court. The facts are

Page 205 of [1939] 4 All ER 204

fully set out in the judgment of the Court of Appeal, delivered by Slesser LJ.

Hector Hughes KC and H H Harris for the appellant.

C N Shawcross for the respondents.

Hughes KC: The company were not entitled to settle this claim without notice to the insured, especially as they had notice from him that he denied liability and desired to claim against the third party. Secondly, the company were obliged to act reasonably, and they did not do so. Their settlement prejudiced the character of the appellant as an insured person, and they had no power to settle so as to impose liability upon him.

Shawcross was not called upon in reply.

Hector Hughes KC and H H Harris for the appellant.

C N Shawcross for the respondents.

30 October 1939. The following judgments were delivered.

SLESSER LJ. This appeal fails. In this case, the appellant was insured against what are called third-party risks by a motor cycle public liability policy with the respondents. The appellant, while riding a motor cycle, came into collision with the rider of a bicycle. This injured person claimed damages from the appellant for negligence. The solicitor for the appellant communicated with the insurance company, and on 1 March the company wrote to the appellant reminding him that it was essential to report an accident immediately it happened, and asking him to complete a claim form. That form he duly completed, setting out what he asserted to be the history of the accident. He filled it up in his own handwriting, and signed it as policy-holder on 2 March 1939. At the bottom of the claim appear these words:

Please read the conditions on your policy relating to claims. Failure to act in accordance therewith may cause inconvenience and delay.

Subsequently, to assist the respondents, on 27 March he sent them, at their request, a copy of a statement which he had made to the police. The respondents then proceeded to negotiate in the matter, as he had given them full authority to do under the second condition of his policy, which, after dealing with the prohibition of any admission, over, promise, payment or indemnity on behalf of the insured without the written consent of the company, provided as follows:

The company … shall be entitled, if it so desires, to take over and conduct in the name of the insured the defence or settlement of any claim or to prosecute in the name of the insured for its own benefit, any claim for indemnity or damages or otherwise. …

Then follow these words:

… and shall have full discretion in the conduct of any proceedings or in the settlement of any claim and the insured shall give all such information and assistance as the company may require.

It appears that the insured had himself complied with that condition, in so far as he had given them all such information and assistance as they might require.

Acting on that authority, under the conditions of the policy they

Page 206 of [1939] 4 All ER 204

proceeded to settle this claim, and on 14 April 1939, they wrote to the appellant as follows:

After giving the matter our careful consideration, we have decided that it would be best to make an offer of £45, which offer has been accepted. At this stage we would stress that the injuries received by the third party were severe having particular regard to his age. We would advise you that his out-of-pocket expenses will be quite £45, and we explained to the assessors that we were only making the offer with a strict denial of liability and solely with a view to avoiding litigation.

That settlement seems to have been completely within their powers. An attempt was made by counsel for the appellant to bring the case within the decision in Groom v Crocker. In my opinion, the facts of this case are entirely different from those in Groom v Crocker. In that case, the solicitors for a certain society delivered a defence on behalf of the respondent admitting negligence, and the respondent, who was in the position of the appellant here, was not notified of the delivery of the defence, and did not learn of it until after judgment had been given against him in his brothers action. In my opinion, this case, so far from being a case like Groom v Crocker, appears to have been one in which the insurance company behaved at all times with complete propriety. They drew the attention of the assured, on the claim form itself, to the forms of the contract. They made what they believed to be, in his interest and theirs, an advantageous settlement, and they were at pains to show that the settlement should be made with a denial of liability, so that thereafter no one could say that they had admitted any culpability whatever on his behalf. As Sir Wilfrid Greene MR says in Groom v Crocker (speaking, it is true, of the provision for the conduct of proceedings there set out, rather than of settlement), at p 203 ([1938] 2 All ER, at p 400):

The effect of the provisions in question is, I think, to give to the insurers the right to decide upon the proper tactics to pursue in the conduct of the action, provided that they do so in what they bona fide consider to be the common interest of themselves and their assured.

Those words seem to be entirely applicable to the present case.

The next question which arises is the matter which has given grounds for the present action. By a condition annexed to this insurance policy, the appellant agreed with the insurance company that he should:

… be liable to pay the first £5 (or any less amount for which the claim may be settled) of each claim arising under this policy [on or before a certain date], which expression “claim” shall mean a claim or series of claims arising out of one cause.

The appellant has refused to pay that first £5 “or any less amount for which the claim may be settled,” and he has been sued for the £5 by the insurance company in the county court. That suit was decided in favour of the insurance company, and it is from that judgment of £5 that the appellant appeals. In my opinion, the judge was perfectly right in coming to the conclusion, in the circumstances, that the appellant was liable to pay the £5. Once it is conceded, or found, that the respondents have the power to settle the claim, the event which is contemplated in this provision has arisen. There has been a settlement, and under the

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terms of the policy he is thereupon liable to pay the first £5 for which the claim has been settled. That seems to me to conclude the matter. There are three ways in which he may become liable to pay the £5. First, if the whole claim or settlement is less than £5, the appellant himself bears it. Secondly, if the case is settled in the appellants discretion, as provided in the contract, the appellant has to bear the first £5. Thirdly:

… it is further agreed that if the company shall make any payment in full of any such claim the insured will reimburse the company up to the aforementioned sum of £5.

That is not the present case. The present case is one in which the claim has been settled, and competently settled, by the respondents, and thereupon arises the necessary condition of liability on the appellant to pay the first £5. This appeal, therefore, fails, and must be dismissed with costs.

LUXMOORE LJ. I agree.

ATKINSON J. I agree.

Appeal dismissed with costs.

Solicitors: J S I Rabin (for the appellant); C V Young & Cowper (for the respondents).

Derek H Kitchin Esq   Barrister.

Tilley v Stevenson

[1939] 4 All ER 207


Categories:        TORTS; Negligence, Tortious Liability        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ AND ATKINSON J        

Hearing Date(s):        31 OCTOBER, 1 NOVEMBER 1939        


Negligence Water Frost Damage from burst pipe Defendant having good reason to believe that water turned off.

The defendant was given the key of a flat on 14 December 1938, but did not actually go into occupation until after 27 December 1938. From 24 December to 27 December water was escaping from a burst pipe in the defendants flat, causing damage to the flat below. It was proved that the defendant was working in the flat on 18 December, but it was also proved that he had good reason for supposing that the water was turned off at the main. The county court judge held that the defendant was negligent in taking no steps to ascertain definitely whether or not the water was laid on:

Held it was necessary for the plaintiff to prove that the defendant knew, or ought to have known, that the water was turned on, and, in the circumstances of this case, there was no evidence of negligence on the part of the defendant.

Notes

The liability in case of burst pipes in unoccupied premises has been much discussed, but is not a subject upon which a great deal of assistance from decided cases is available. The Court of Appeal here lay down quite clearly that it is first necessary that the person sought to be made liable must have known, or ought to have known, that the water was laid on to the pipe in question. Upon hearing of the likelihood of severe weather, he is under no liability if he believes the water is not turned on, although some party may have access to the premises.

As to Damage from Burst Water Pipes, see Halsbury (Hailsham Edn), Vol 23, pp 623, 624, para 873; and for Cases, see Digest, Vol 31, pp 98, 99, Nos 23742376.

Page 208 of [1939] 4 All ER 207

Cases referred to

Rylands v Fletcher (1868) LR 3 HL 330; 36 Digest 187, 311, 37 LJEx 161, 19 LT 220, affg (1866) LR 1 Exch 265, revsg (1865) 3 H & C 774.

Rickards v Lothian [1913] AC 263; 36 Digest 194, 353, 82 LJPC 42, 108 LT 225.

Miller v Addie (Robert) & Sons Collieries Ltd [1934] SC 150.

Appeal

Appeal by the defendant from a judgment of His Honour Judge Hargreaves given in the St Albans County Court on 27 June 1939, awarding the plaintiff £22 19s damages and costs. The plaintiff was the tenant of a flat into which water escaped from the flat immediately above and did damage. He claimed damages from the defendant on the ground that the latter, being the tenant of the upper flat, left it empty without taking all proper and necessary precautions to prevent the water pipes from bursting, having regard to the low temperatures then prevailing. The facts are stated in the judgment of Slesser LJ. The defendant admitted in evidence that, at the time the damage occurred, he was paying rent for the flat but was not in occupation. The judge found the defendant liable for the damage because he had taken no steps to ascertain whether or not the water was laid on, but had merely assumed “on very inadequate grounds” that it was not laid on. The defendant appealed.

Robert Fortune for the appellant.

C Hackforth-Jones for the respondent.

Fortune: There is no duty upon the tenant of a house to anticipate frost and turn water off so as to prevent the bursting of a pipe. Such a duty could hardly be fulfilled, because the conditions of the weather change so frequently that it would place an intolerable burden on the tenant. The judge was wrong in holding that there was any duty on the present defendant to ascertain whether the water was turned on or off. In any event, the principle of the decision in Rylands v Fletcher has no application to a case where water (Rickards v Lothian) or gas (Miller v Addie (Robert) & Sons Collieries, Ltd) is brought on to premises for the usual and natural user of such premises.

C Hackforth-Jones in reply.

Robert Fortune for the appellant.

C Hackforth-Jones for the respondent.

1 November 1939. The following judgments were delivered.

SLESSER LJ. This appeal succeeds. A claim was made by one Mr Tilley, who was the tenant of a flat, against a Mr Stevenson, who was, in a sense, in the occupation of the flat above. The complaint was that from 24 December 1938, until 27 December 1938, inclusive, by reason of the negligence of the defendant Stevenson in allowing some water to escape from the flat on the upper floor, injury occurred to the plaintiffs flat.

The facts are these. The owner and builder of the flats was a man named James Joseph Clark, and he gave the defendant Stevenson a key to the flat. He had two other keys, to enable the gas and water companies, and possibly also the electricity authorities, to go on to the premises, but he gave one key to a labourer and the other to a painter.

Page 209 of [1939] 4 All ER 207

The flat was being prepared for occupation. Mr Stevenson intended to marry and to live in the flat. For that purpose he went to see the flat first about 19 November. He saw Mr Clarks agent and told him that he was getting married in the middle of January, and in fact he was given the key of the flat on 14 December. He went in on 18 December to have a look round the flat and to stain the floors in order to prepare the matrimonial home. He took with him a kettle full of water, because he thought there would be no water. That means that he thought that the water had not yet been turned on. In that view he was apparently right, because Mr Clark, the owner of the flat, stated in his evidence that the water was turned off before Mr Stevenson went to the flat.

The position would therefore appear to be, on the evidence, that the water was turned off before Mr Stevenson went to the flat, and Mr Stevenson, whose evidence, I think, the judge accepts on this pointI have no reason to suppose that he does notsays he did not turn it on when he went in on 18 December. He did not go back to the flat until 27 December, when he heard that the water was leaking. We will assumethe evidence is not very clearthat the leakage was due to a frost which had caused bursting of the pipes. It must have been that somebody else, between the time when Mr Stevenson left the flat on 18 December and 27 Decemberpossibly the painter or the decorator, possibly an employee of the water company, at all events some person who had a key, we do not know whohad turned on the stopcock so that the water was in the pipes. Mr Stevenson told the judge that he did not turn the stopcock on, and the builder also says that he did not turn it on. The judge in his judgment, as I read itwe have to rely on the report of the local newspaper, but we are none the worse off for thatsaid that he had decided that liability must rest on the defendant, because it was clear that the defendant took no steps to ascertain whether the water was laid on to his flat. That seems to show that the judge accepted the defendants statement that he did not turn on the tap.

The only other evidence which is material in this case is that apparently the British Broadcasting Corporation, through their wireless apparatus, gave out some warning on some day unspecified that it was very cold and that pipes might freeze. The morning papersthe evidence does not state whether all of them or whichseem to have made a statement, which persons who are assiduous in reading these matters might or might not have read, to the same effect. We do not know what they said, and there is certainly no evidence that Mr Stevenson either heard of the matter on the wireless or read the newspapers.

In my opinion, the judge was clearly wrong in coming to the conclusion that Mr Stevenson was negligent in this matter. This is not a case where the principle of Rylands v Fletcher can possibly be applied. If I may quote the language of Lord Moulton in Rickards v Lothian, at p 280:

It is not every use to which land is put that brings into play that principle. It

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must be some special use bringing with it increased danger to others, and must not merely be the ordinary use of the land or such a use as is proper for the general benefit of the community.

The case, therefore, must be founded in negligence, and for there to be negligence there must be a duty. My Lords have asked counsel for the respondent what the duty was. The judge has stated that the negligence was that Mr Stevenson took no steps to ascertain whether or not the water was laid on to his flat. He had every reason to suppose that it was not laid on when he left, and there was no water laid on when he took the kettle in on 18 December. People are scarcely likely to take kettles into premises where they think that water is already laid on. Moreover, there is no reason to suppose that it was ever turned on before that day, and the owner tells us that it was not. There is a clear probability that it was turned on afterwards

Therefore, if there is a dutyand it is a very terrifying dutyon a person who wishes to occupy a flat, from the moment he first goes into occupation of a flat, even when he is not actually living there, to remain in the flat in order to see whether or not a workman or anybody else who comes into the flat turns on a stopcock, and if, having done that, he then has to observe the climatic conditions, and, if he thinks, or has reason to believe, either from a study of the newspapers, from the wireless, or from some other source of information, that there is likely to be a frost, he must take precautions to see that the pipes do not burst, and then, if any or all of these things are not done, apparently he is liable to the tenants living below him in lower flats for the resulting damage due to percolation of water. I cannot believe that there is any such duty imposed upon a tenant. It is elementary law that a man cannot be expected to take precautions against dangers which he cannot reasonably be expected to anticipate. I do not think that this man could reasonably have expected that anyone else would turn on this water, and certainly he could not reasonably have expected that, the water having been so turned on, it would freeze, and that, the water having frozen, the pipes would burst. Were this principle to apply, I do not think that any tenant of any flat would be safe from an action at law.

LUXMOORE LJ. I agree.

ATKINSON J. I agree. It seems to me that the plaintiff cannot succeed without first proving that the defendant knew, or ought to have known, that the water was turned on. All the evidence goes the other way. Mr Clark says that it was never turned on, and he had very good reason the last time he was there for thinking that it was not turned on. The only inference that can reasonably be drawn is that someone else turned it on. There is no evidence of negligence against the defendant.

Appeal allowed with costs.

Solicitors: Braund & Hill (for the appellant); Peacock & Goddard, agents for Asterley Jones & Waters, St Albans (for the respondent).

Derek H Kitchin Esq   Barrister.


Urban Housing Co Ltd v Mayor, Aldermen and Citizens of City of Oxford

[1939] 4 All ER 211


Categories:        HEALTH; Public health: ENVIRONMENTAL        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        26, 27, 30 OCTOBER 1939        


Public Health Streets Private streets Erection of walls at boundary of estate Demolition of walls by local authority Walls built over sewers Right of owner to opportunity of being heard before demolition Officer concerned with demolition Public Health Act 1875 (c 55), s 26 Public Health Act 1936 (c 49), s 25 Private Street Works Act 1892 (c 57), s 19.

In 1933 the plaintiff company purchased from the defendant council 20½ acres of land for development as a building estate. On the estate plan were marked two proposed new roads connecting with other roads on the adjoining land of the defendants. In 1934 the plaintiff company notified the council that they were going to retain the roads as private roads and soon after they enclosed the whole estate in a ring fence including the building of two walls 7 ft high and 9 ins thick across the roads. In 1937 the town clerk of the defendant council wrote to the plaintiff company stating that the walls constituted a breach of the provisions of the Public Health Act 1875, s 26 (dealing with buildings over sewers) and stated that he was authorised to take all necessary steps to secure their removal. In 1938 the council adopted the Private Street Works Act 1892, and later declared the roads to be highways repairable by the inhabitants at large. On 8 June 1938, in accordance with a resolution of the council, the walls were demolished. It was contended that the walls had been erected in breach of covenants contained in the conveyance of 1933, but it was held that, upon the proper construction of those covenants, that was not so. The council further contended that the erection of the walls was in breach of its bye-law providing that one end, and where practicable both ends, of a new street shall be open from the ground upwards to the full width of the road:

Held (i) the erection of the walls was not a breach of the bye-law.

(ii) the principle that a local authority in proceeding to demolish buildings is acting in a quasi-judicial capacity and must give the owner an opportunity of being heard on the matter is not confined to cases where the local authority is exercising its powers under a bye-law, but includes the present case. The letter of the town clerk was not sufficient notice as he was not the officer to deal with the actual demolition.

(iii) the Private Street Works Act 1892, s 19, does not extend to making the site on which a wall stands a highway repairable by the inhabitants at large, and a local authority cannot, acting under that section, remove the end wall of what is physically a cul-de-sac, thereby making it a continuous street with another on the other side of the boundary wall. The walls were rightfully there, and the resolution adopting the Act of 1892 did not make the land on which they stood part of the highway.

Decision of Bennett J ([1939] 3 All ER 839) affirmed.

Notes

In affirming the decision of Bennett J in the present case, the Court of Appeal has considered one or two matters not so fully touched upon in the court below. The position of the town clerk with reference to a notice of intended demolition is dealt with and it is shown that a notice from that officer is not one which would suggest that the actual demolition is being considered, but rather that the legal position as to the right to demolish is going to be contested in the courts. One would expect the notice of actual demolition to be sent by the city engineer or surveyor.

Page 212 of [1939] 4 All ER 211

As to Removal of Buildings improperly erected, see Halsbury (Hailsham Edn), Vol 16, pp 472, 473, para 687; and for Cases, see Digest, Vol 26, pp 558, 559, Nos 25322538.

Cases referred to

Hopkins v Smethwick Local Board of Health (1890) 24 QBD 712; 26 Digest 564, 2584, 59 LJQB 250, 62 LT 783.

Wood v Cooper [1894] 3 Ch 671; 31 Digest 164, 2975, 63 LJCh 845, 71 LT 222.

Stillwell v New Windsor Corpn [1932] 2 Ch 155; Digest Supp, 101 LJCh 342, 147 LT 306.

Tarrant v Woking Urban Council [1914] 3 KB 796; 26 Digest 555, 2503, 84 LJKB 314, 111 LT 800.

Cooper v Wandsworth Board of Works (1863) 14 CBNS 180; 26 Digest 518, 2202, 32 LJCP 185, 8 LT 278.

St James & St John, Clerkenwell, Vestry v Feary (1890) 24 QBD 703; 38 Digest 231, 610, 59 LJMC 82, 62 LT 697.

A-G v Hooper [1893] 3 Ch 483; 26 Digest 566, 2597, 63 LJCh 18, 69 LT 340.

Paddington Corpn v A-G [1906] AC 1; 33 Digest 50, 303, 75 LJCh 4, 93 LT 673, revsg SC sub nom Boyce v Paddington Borough Council [1903] 2 Ch 556.

Slaughter v Sunderland Corpn (1891) 60 LJMC 91; 38 Digest 184, 235, 65 LT 250.

Appeal

Appeal by the defendants from an order of Bennett J, dated 25 July 1939, and reported [1939] 3 All ER 839, where the facts are fully set out.

C E Harman KC and Wilfrid M Hunt for the appellants.

C Erskine Simes and C E Scholefield for the respondents.

Harman KC: The walls were built over sewers, and the Public Health Act 1875, s 26, gave the local authority control over sewers. In 1938, the appellant council adopted the Private Street Works Act 1892. The walls were not fences, and to build a wall was contrary to a covenant in the conveyance, which provided that no building, other than a fence, gate or other enclosure, should be erected on the roads. That exception cannot cover the walls in question, as such exception would not fit the context. In Wood v Cooper, it was held that a trelliswork screen was a building within the meaning of a covenant not to erect any building other than a stable and a coach-house. In the present case, it would be an abuse of language to say that these walls were not buildings or structures. They were substantial and permanent erections, and were built in breach of the covenant. The local authority had a right to remove the walls after the soil of the roads had vested in the authority, under the provisions of the Private Street Works Act 1892, s 19. In Stillwell v New Windsor Corpn, it was held that the corporation had a right to remove trees which had become a nuisance on the high-way, even assuming that the plaintiff had a property in the trees. It was said by Bennett J that, if the wall were a fence within the meaning of covenant 7 of the conveyance, it could not be a building within the meaning of covenant 9. It can be a fence, however, within the meaning of

Page 213 of [1939] 4 All ER 211

one covenant and a building within the meaning of another. [Counsel referred to Tarrant v Woking Urban Council, Cooper v Wandsworth Board of Works, Hopkins v Smethwick Local Board of Health, St James & St John, Clerkenwell, Vestry v Feary and A-G v Hooper, and to Lumleys Public Health (10th Edn), Vol 1, p 921.]

Simes: The respondent company asks for a declaration that it is entitled to erect a wall of a character similar to the wall which has been pulled down. As to whether or not the wall is a building within the meaning of the Public Health Act 1875, s 26, one must have regard to the purpose of that section. This particular wall was not a building to which the section applied. As regards the covenants, one has to consider the word “building” in regard to the purpose of the covenant. Covenant 9 cannot prohibit anything which is permitted by covenant 7. On the true construction of the document as a whole, the wall is not a building within the meaning of cl 8. Assuming, however, that it is, the council was not entitled to pull down the wall. One cannot adopt self-help as a means of remedying a breach of covenant. The council is an adjacent landowner, and sold to the respondent its piece of land. The council is entitled to disapprove the plans only upon the ground that the wall was not properly constructed. Assuming that the wall was a building under the Public Health Act 1875, s 26, the part of that section which deals with a building is repealed, as from 1 October 1937, by the Public Health Act 1936, s 25, which replaces it. If the council had waited 11 days before sending the notice dated 20 September 1937, the respondent company would have been thrown back on s 25(3), and have had to deal with the matter before justices under s 290. It has not been suggested by the council that the notice given in September 1937 was a notice which became a notice under s 25(3) of the 1936 Act. [Counsel referred to Paddington Corpn v A-G and Slaughter v Sunderland Corpn.]

C E Harman KC and Wilfrid M Hunt for the appellants.

C Erskine Simes and C E Scholefield for the respondents.

30 October 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This is an appeal by the mayor, aldermen and citizens of the city of Oxford against an order made by Bennett J, declaring that the respondents, the Urban Housing Co Ltd, were entitled to re-erect and maintain two walls which had been demolished by the appellants. I do not propose to go into the details of the history of this unfortunate controversy. They are fully stated in the judgment of the judge. I need only say, by way of preface to my judgment, that, when on 19 September 1933, the appellants, whom I will call the corporation, conveyed to the respondents, whom I will call the company, part of the corporations building estate, they omitted, whether by accident or by design, to reserve to themselves rights of way over certain roads, the sites of which were indicated on the relevant plans. Their omission to do so has led them to perform a variety of manoeuvres in seeking some possible expedient which would enable them to obtain, against the will of the company, the rights for which they had failed to

Page 214 of [1939] 4 All ER 211

stipulate. The last expedient which commended itself to the corporation consisted of a judicious combination of the provisions of the Private Street Works Act 1892, and the citys steam roller. To what extent this miserable performance can be reconciled with the dignity of a great and historic corporation is a question which may well be left to the more sober reflections of the city fathers. We are not concerned with it.

A variety of points were quite properly taken by counsel for the appellants, in order to persuade us to say that the judgment of Bennett J was wrong. I will deal with those points in what appears to be the most convenient order. The first points relate, and relate only, to the true construction of the conveyance, and there are two of them. The first is based upon the provisions of the conveyance with regard to roads. The other is based on the provisions of the conveyance with regard to buildings. By way of preface, I should say that it is admittedand, indeed, it could not have been otherwisethat the conveyance upon its true construction does not reserve to the corporation any right of way in respect of the roads in question. The object of the arguments based upon the construction of the conveyance is not to obtain what they would be quite insufficient to obtainnamely, a right of waybut to ensure that no obstruction in the shape of a fence or wall, or anything of that kind, should be placed at the companys boundary across these two roads. In other words, it is said that, upon its true construction, the conveyance prohibits the company from doing what, in the normal course, a landowner in the companys position might very well wish to donamely, fence his own land. It is to prevent the company from exercising such a common right that these arguments are brought forward. Be it observed that the arguments, if successful, would lead to the position that the companys boundaries, where they coincide with the sites of the roads, would perforce be left open, but nobody would be allowed to set foot upon the companys land. Neither the corporation nor its tenants would have a right of way, and, if anyone set foot across the imaginary dividing line, he would be a trespasser. Nevertheless, for reasons which will appear, the corporation consider that, if they can keep these roads open, unobstructed at the ends, it will put them in a position to exercise some statutory right, as the indirect result of which the right of way for which they omitted to stipulate, and in the absence of which the purchase price of the land was fixed, could be obtained.

I now turn shortly to the clauses in the schedule upon which reliance is placed. It will be remembered by those who have considered the statement of facts and the judgment of Bennett J, that the plan annexed to the conveyancethe estate plan which was agreed in accordance with the conveyance (it was in fact agreed beforehand)and the sewer plan all show continuous roads, starting at the Banbury Road on the west, running over a portion of land belonging to the corporation and retained by them, over which the company was given

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a right of way, thence up to the boundary of the land purchased by the company, and from that point continuing into the Cutteslowe Housing Estate, which was in process of development by the corporation. It will also be remembered that in the conveyance the corporation reserved to themselves a right which would enable them to move from the position indicated the portions of the continuing roads shown on the Cutteslowe Estate, so that there would be thereafter no continuation in fact, and, if the corporation were minded to exercise that power, the result would be that the roads shown on the plan as running up to and through the companys boundary would end in culs-de-sac at the eastern boundary of the companys land.

The clauses relied upon in relation to roads are cll 4, 12, 16 and 18 of the schedule, and it is said that those clauses, when considered and read in relation to the relevant plans, show that the parties were bargaining on the footing that the roads were through roads. I am not quite sure what that phrase means. If it means that they were to be roads over which there should be mutual or unilateral rights of way, it is incorrect, because there is nothing in the conveyance which gives any such rights. I apprehend, therefore, that all it means is that these clauses, on their true construction, show that the obligations of the company were to leave what would physically be a road running up to their boundary, and having there a junction with a road running through the corporations land. In other words, when the roads are spoken of as through roads, that refers merely to their physical layout on the ground. That they were not intending that that would necessarily be the result, however, is manifest from the fact to which I have already alludednamely, that the corporation have power so to lay out their estate that that state of affairs will not exist.

Under cl 4, the company covenants to lay out and sewer all the roads to be constructed within the area of the land conveyed, and then it specifies widths:

The two continuation streets of the width of 40 ft. in respect of the continuation of the said two streets coloured yellow on the said plan. …

All this was to be done in a manner and to the satisfaction in all respects of the vendors as the local authority, and in accordance with the building bye-laws as to new streets and the provisions of public and local Acts, and the purchasers were to pay the costs. Emphasis is there laid upon the word “continuation” in the phrase “the two continuation streets,” but it is clear to my mind that the word “continuation” there is used in reference to the fact that the two streets going across the companys land, which it was purchasing, were continuations, not of some roads upon the corporations housing estate on the east, but of the yellow roads shown on the plan, which were the roads over which, as I have said, the company were given the right of way at the Banbury Road end. However that may be, and giving such effect as can properly be given to the circumstance that, when the plans are examined, they show

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that the roads physically are continuing and joining the roads on the corporations estate to the east, I am quite unable to extract from this clause anything which imposes upon the purchasers the obligation of keeping that part of their estate open or prohibits them from fencing in their estate, if they are so minded. The real fact of the matter is that in this clause, and in the other clauses of this conveyance, no proper provision was made for that point. If the corporation had wished to prevent the purchasers from fencing their estate, and had wished, without reserving a right of way, to compel the purchasers to leave those points unfenced, they should have provided for that, but they did not, and now, not unnaturally, they seek to extract from the language of the deed phrases which will enable them to get something for which they did not expressly provide, and the necessity for which they apparently did not contemplate at the time.

There is one point on that clause which I have read which requires a word of special reference, and that is the provision that the construction of the roads and the other works mentioned is to be in accordance with the building bye-laws as to new streets. It is said that under that clauseor, indeed, without itthere is a bye-law under which the company was bound to leave the ends of those two roads open and unobstructed. The bye-law in question is No 10, which provides as follows:

Every person who shall lay out a new street shall provide that one end at least of such street, and where practicable both ends, shall be open from the ground upwards to the full width of such street.

If that bye-law were one which purported to deny to a landowner, who was minded to lay out a street on his land, the right to maintain a fence at his boundary and so leave the new street in the position of a cul-de-sac, I should be disposed to think, and very strongly disposed to think, that the bye-law was completely ultra vires, but, in my opinion, as a matter of construction of the bye-law, it does not purport to impose any such restriction upon the rights of a landowner. The words “where practicable both ends” can, I think, be construed in such a way as not to involve an interference with such a right, with the result that it could not be said, in a case where the owner of the land wished to maintain a fence in accordance with his ordinary rights, that it was practicable to leave that street open at both ends. That is the case here, and I cannot find in this bye-law, either as imported in to cl 4 of the schedule or as standing quite apart from the conveyance, anything which enables the corporation to complain of the erection of these two walls.

Clause 12 provides as follows:

No portion of the land shall be used as a road or way or as part of a road or way from or to any land adjoining or adjacent to the said land other than the roads shown on the said plan without the consent in writing of the vendors first obtained.

That, in my judgment, carries the matter no further, and cannot be construed, either alone or in combination with other clauses in the schedule

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or the plans, as depriving the purchasers of the right to do what they did. Then cl 16 is the clause to which I have referred under which the corporation were entitled to alter the plotting of any land unsold and to vary the position of any intended roads leading from the roads to be constructed on the land which the company was acquiring. That, again, so far from helping the corporation, appears to me to point in the opposite direction, because, in so far as the corporation exercised that right, the alleged scheme of through roads, if it ever existed, would cease to exist and could not thereafter be carried out. Clause 18 uses the phrase “the scheme of roads,” and perhaps I should read that clause, which provides as follows:

The scheme of roads building lines and other matters as shown on the said estate plan and the building and other restrictions imposed upon purchasers shall not be binding upon the vendors who shall be at liberty to vary or alter the same from time to time as regards any other portions of the vendors adjoining land without reference to the owners or occupiers of any plot or plots which may have been previously sold or otherwise disposed of.

That, again, gives a like power to the corporation with regard to altering the sites of intended roads on their retained land as shown on the plans. Emphasis was laid on the phrase “the scheme of roads,” but, in my judgment, that phrase does not really assist the argument at all. The real fact of the matter is, as I have said, that the conveyance did not provide for an obvious thing for which it could have provided, and it is impossible to spell out of these phrases some restriction upon the ordinary rights of a purchaser in the way suggested.

The other argument was based on the clauses relating to “building,” and those relied upon were cll 5, 7, 8 and 9. Clause 5 provides as follows:

The purchasers shall only erect on the land hereby conveyed detached or semi-detached houses and two blocks of eight garages each for the use only of owners or occupiers of houses erected on the said land in accordance with the estate plan.

Clause 6, I should have mentioned, provides as follows:

No house or other building shall be erected so that its principal front shall face otherwise than towards the said roads.

Clause 7 provides as follows:

The front or flank walls of any house or building to be erected on any part of the land hereby conveyed shall range or be in line with the building line or lines. …

Then comes this provision, which I must read at length:

… no building or erection of any kind except a fence or other enclosure and a gate or gates shall be erected on any part of the said piece or plot of land which lies between the said building lines and the road or on the sites of the proposed roads marked on the said estate plan.

Pausing there for a moment, that sentence which I have read bears, on the face of it, the traces of a rather curious origin, because the first part, which refers to “the said piece or plot of land,” and provides that the only thing which can be erected beyond the building line is a fence or other enclosure and a gate or gates, recalls a common type of

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provision in conveyances of a plot out of a building estate, in respect of which the building line is to be observed, but the power to fence the front garden of the house is reserved. Whether or not that be the origin of this clause, on to it there are grafted words relating to the sites of the proposed roads. It would be tempting, perhaps, if one were trying to look very carefully for something to help the corporation in view of what they have done, to do violence to this clause and say that the exception for the construction of a fence or other enclosure is confined to what I may call the front gardens of the proposed houses, and does not extend to the sites of the proposed roads, but I find myself quite unable to do such violence to the language of this sentence. It means, grammatically, as far as I can see, and means quite clearly, that the exception with regard to the construction of a fence or other enclosure and a gate or gates applies, not merely to the front gardens of the proposed houses, but also to the sites of the proposed roads. That being so, the clause in terms permits the erection of a fence or other enclosure on the sites of the proposed roads, and one can really see no reason why that should not be so. Of course, if the corporation had reserved a right of way, it would be impossible to construe it in that way, and some other construction would have to be found, but, no rights of way having been reserved, I cannot see any reason why the company should not have been givenin rather clumsy language, it is truethe power to build fences or obstructions across the roads if they wished. Now it is said that the phrase “fence or other enclosure” would not include a wall. I am quite unable to take that view, and I need say no more about that. Therefore, we reach the point that a wall, and this wall, was a thing permitted to be put up under cl 7. Clause 8 provides as follows:

The erection shall not be commenced of any house or other buildings on any part of the land hereby conveyed until and then only in accordance with an estate plan showing the proposed lay out and also plans and drawings of such house or other building showing the intended elevations and sections and specifications thereof have been submitted to and approved by the vendors or their surveyor for the time being the purchasers submitting the said estate plan and plans elevations sections and specifications as often as called upon by the vendors estates surveyor so to do until the same shall be finally approved and signed by the vendors estates surveyor and if required leaving with him for reference copies of such approved estate plan plans elevations sections and specifications and a copy of such drawings has been deposited by the purchasers with the vendors in respect of each house or building.

Clause 9 provides as follows:

No building shall be erected on the said piece of land or on any plot forming part thereof other than a private dwelling-house with suitable offices and out-buildings and with or without garage accommodation and the said sixteen garages.

The first point is whether or not this wall is a building within the meaning of the clauses which I have read. In my opinion, it is not a building within the meaning of those clauses at all. When those clauses are examined and the word “building” is looked at in its context, it appears to me to relate to matters in respect of which one would expect to find a requirement for the submission and approval of plans, a thing

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for which, in the case of a boundary fence or boundary wall, one would not expect to find a provision. I am confirmed in that view by the circumstance that, in the clause in which reference is made to a fence or other enclosure, the phrase is “no building or erection.” Accordingly, the parties here are using the phrase “an erection” as meaning something which is not necessarily a building, and into that category they appear to place such things as fences or other enclosures, which indeed strikes one as being in accordance with common sense. I therefore take the view that there was no obligation to submit plans, and that is really the point of the argument, once it is held that this is a fence or other enclosure. The point of the argument is that, before these walls were erected, plans should have been submitted under cl 8. Then it is said that, no plans having been submitted, the walls were built in breach of covenant, that they were wrongfully there, and that therefore their presence must be disregarded, and they could be removed by means of the citys steam-roller. It is perhaps desirable to state for the information of the appellants that the removal by force of something erected in breach of a covenant is not a thing which the law of England permits. This is not the case of the abatement of a nuisance, and, even if the argument were right, the only effect would be that the walls had been erected in breach of covenant. The idea that persons, whether local authorities or others, are entitled to secure the benefits of covenants into which they have entered by taking forceful means is one which need not be further commented upon by me. My own opinion is, as I have said, that these are not buildings, but, even if they were, the conduct of the appellants in waiting for three years or more after the erection of these walls, without suggesting at any time, either by correspondence or in their defence, that the vice of them lay in the failure to submit plans, makes it impossible for them now to turn round and say, “We are entitled to call for the removal of these walls upon the ground that plans were not submitted or approved.” In my opinion, they could not, in any event, be permitted to take up that attitude at this stage, and on that ground, as well as on the interpretation of the word “building,” I am of opinion that this branch of the argument has no solid foundation.

I now come to the other matters which were urged upon us. First of all, it was said that these walls were things which had been erected in contravention of the Public Health Act 1875, s 26, which was in force when they were erected. That section provided as follows:

Any person who in any urban district, without the written consent of the urban authority(1.) causes any building to be newly erected over any sewer of the urban authority; or, (2.) causes any vault arch or cellar to be newly built or constructed under the carriageway of any street, shall forfeit to the urban authority the sum of £5 and a further sum of 40s. for every day during which the offence is continued after written notice in this behalf from the urban authority; and the urban authority may cause any building vault arch or cellar erected or constructed in contravention of this section to be altered pulled down or otherwise dealt with as they may think fit [and then they may recover expenses].

The history of the appearance of that section on the scene is to be found

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in the correspondence and certain minutes, and it is desirable that I should refer to them. On 20 September 1937, the town clerk wrote to the company asserting that the acts of the company in erecting the two walls constituted, first, a breach of the covenants in the conveyance, and, secondly, a breach of the bye-lawsnamely, bye-law 10, which is the one to which I referred. Thirdly, he said:

The council are further advised that your acts constitute a breach of the provisions of the Public Health Act, 1875, s. 26. Under these circumstances the Council have instructed me to call upon you to remove the buildings you have erected and to make good the surface of the roads upon which the same were erected within 21 days from the date hereof, failing which the council have authorised me to take all necessary steps to secure their removal and such reinstatement at the earliest possible moment.

Then a notice was enclosed pursuant to the provisions of s 26. The notice was the notice which s 26 contemplates, which is to cause the running of the fine, and that was the only matter to which it related. It was said that the letter, from which I have read the relevant passage, was something morenamely, a notice by the corporation of their intention to exercise the power given by s 26 to remove the walls. In my opinion, the letter is nothing of the kind. It is to be observed that the writer of the letter is the town clerk, and he informs the recipient that the council had authorised him to take all necessary steps to secure their removalthat is, the removal of the walls. I apprehend that, even in the corporation of the city of Oxford, the task of physically removing obstructions of this kind is not committed to the town clerk. The proper person to pull down buildings, if buildings have to be pulled down, is the city engineer, or somebody of that character, and nobody receiving an intimation from the town clerk stating that he, the town clerk, had been authorised to take the necessary steps would for one moment imagine that that referred to anything more than the sort of steps which town clerks are commonly authorised to take, including, of course, the institution of legal proceedings. Therefore, I find it quite impossible to construe this letter as bringing to the mind of the recipient any idea that the corporation were intending to exercise their powers under s 26 without more ado. I am confirmed in that construction of the letter when I find that the resolution pursuant to which it was sentnamely, a resolution adopted by the council from the parliamentary committee on 20 September 1937provides that the company be called upon to remove the walls, which are there described as “buildings,” and “in default of compliance … the town clerk be authorised to commence and prosecute … proceedings,” which are there specified, and, after stating the matters which the council desire to have submitted to the decision of the courts, it ended up by saying “that the town clerk be further authorised to take such steps under such respective sections as he may be advised.” It is perfectly clear from that that at that time the council were not contemplating pulling down the walls without having recourse to the courts and having their rights in this dispute

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settled in a proper way. The importance of what I have been saying is its bearing upon the argument that, under s 26, what the corporation have done was justifiable, and in support of that argument reference was made, and necessarily made, to a matter which would destroy its forcenamely, the principle that a local authority exercising such a power of demolition as this, in coming to its decision to demolish, and thereby conferring upon itself the statutory power to demolish, is acting in a quasi-judicial capacity, and must give the person concerned either a notice that it intends to take this matter into its consideration with a view to coming to a decision, or, if it has come to a decision, that it proposes to act upon it, and give him an opportunity of showing cause why such steps should not be taken. That is a matter which has often come before the courts. I need not do more than refer to one case in which the principle is examined and statednamely, Hopkins v Smethwick Local Board of Health. An attempt was made by counsel for the appellants to limit the application of that most salutary principle to cases where the building which it is sought to demolish has been erected in contravention merely of a bye-law. I am unable to place any such limitation upon that doctrine. It is to be observed that the power to demolish, in this case as in the other cases which are relevant upon this matter, is a power contained in the statute itself. It was said that, assuming that this principle applied to the present case, a sufficient notice to satisfy it had been given, and that that notice was contained in the letter from the town clerk, to which I have alluded. I have explained why, in my opinion, the letter of the town clerk would not have operated as a sufficient notice to satisfy the principle of those authorities, and accordingly that point, in my opinion, is a bad one.

The Public Health Act 1875, s 26, was repealed by the Public Health Act 1936, so far as it deals with a building, and certain other provisions take its place. I shall have to say a word about those provisions when I come to mention the proper form of order of this court. For the moment, all I need say with regard to s 26 is that, if it had been material for the purpose of settling the form of order, or otherwise for the purposes of this case, to decide whether or not those particular walls were buildings within the meaning of the public Health Act 1875, s 26, I should have been disposed to take the view that they were, seeing that, although it is not suggested that the weight of these walls can injure the sewers, nevertheless there must be, on the face of it, some slight interference, or might be some slight interference, owing to their presence, with the facility of repairing or re-laying the sewers. However, as will appear, I do not think that, in view of what has happened, the order made by Bennett J requires any modification at all. That disposes, I think, of the arguments based on the Public Health Act 1875, s 26. There is another answer, however, which appears to me equally conclusive. The reliance placed upon the Public Health Act 1875, s 26, is, in my judgment, quite misplaced for what is perhaps a more

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fundamental reason, which goes to the root of the whole argument, and that is that the pulling down of these walls was quite clearly not carried out in exercise, or in purported exercise, of the powers conferred by s 26 at all. It is perfectly obvious that the reason why these walls were pulled down when they were pulled down had nothing to do with s 26. In deciding to pull them down at the time when they did pull them down, the corporation or their committee did not take into consideration the provisions of s 26 at all. They pulled down these walls in order to secure that that portion of the companys boundary should remain open and unfenced, and they did not pull down the walls in exercise of the statutory power conferred by s 26. One need only glance at three of the minutes in order to see that that is incontestably so. The parliamentary committee on 9 May 1938, resolved:

… to ask the council at the ordinary meeting of the council to be held on June 20 next to ratify any action taken by or instructions given by the committee at its meeting on June 7 next, and that meanwhile any risk involved be accepted.

It is to be noted that here is the parliamentary committee, having no authority to take action themselves, meeting on 9 May, contemplating that at their own meeting on 7 June they will be coming to some decision, or will be giving some instructions, which will involve some risk, and proposing at the council meeting on 20 June to have that decision of theirs and that action of theirs ratified by the council after it had taken place. On 7 June, the parliamentary committee met again, and they passed a resolution that:

… the city engineer [not the town clerk, be it observed] be and is hereby instructed to remove forthwith the walls.

It was proposed that the chief constable should provide police assistance in this precious affair, but that was not thought necessary, and accordingly it was not made part of the resolution. It was further resolved:

… that the council be recommended to ratify the above instructions and action taken by the committee and to indemnify the members of the committee and the officers and workmen of the corporation against all actions, proceedings, claims, damages, costs and expenses arising out of the removal of the walls.

On 8 June, the walls were removed. They were removed under the resolutions of a committee which had no authority to take any such action, and in the expectation that 13 days later, at its meeting, the council would ratify what they had done. To suggest that this performance was in execution of the powers conferred by the public Health Act 1875, s 26, is, to my mind, farcical, and that by itself is sufficient to get rid of any points based on that section.

The last point taken is one depending on the Private Street Works Act 1892. S 19 of that Act provides as follows:

Whenever all or any of the private street works in this Act mentioned have been executed in a street or part of a street, and the urban authority are of opinion that such street or part of a street ought to become a highway repairable by the

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inhabitants at large, they may by notice to be fixed up in such street or part of a street declare the whole of such street or part of a street to be a highway repairable by the inhabitants at large, and thereupon such street or part of a street as defined in the notice shall become a highway repairable by the inhabitants at large.

The two streets in question upon the companys land were streets upon which private street works within the meaning of the Act had been executed, and it was within the power of the corporation, who had adopted the Act, to put s 19 into operation with regard to the streets in question. It is to be observed, however, that, at the date when they passed the necessary resolution to put s 19 into effect, there were in existence upon these two streets the physical obstructions of the walls, and, accordingly, the physical condition of affairs at that date was that the powers under s 19 could be applicable to such portion only of the companys roads as were not covered by walls. That is, to my mind, incontestable. S 19 empowers local authorities to make streets repairable by the inhabitants at large. It does not extend to making the site on which a wall stands a highway repairable by the inhabitants at large, and the local authority cannot by this section take what is physically a cul-de-sac and remove the boundary wall, thereby throwing the street in question into connection with some other street at the other side of the wall. That, I should have thought, was quite clear on the reading of the section. It is said, however, that, if the two walls were not lawfully in position, and had no right to be there, the corporation were entitled to treat them as mere obstructions to the road, and that they could disregard them, and, having passed the necessary resolution, proceed to their demolition, and that, as I have said, was apparently the technique which they finally decided to adopt. The whole basis of the argument depends on the proposition that these walls were not rightfully there, and, in reliance on that proposition, it is said, and repeated here, that they were not rightfully there because they were there in breach of covenant. In my opinion, that is not so, for the reasons which I have already given. Even if it had been so, the method adopted by the corporation would have been quite illegitimate. The resolution purporting to put this section into operation would, in my opinion, even if these walls were there in breach of covenant, have been inoperative. The proper course, if the corporation had been right upon that point, would have been to secure the removal of the walls by proper procedure, and then proceed to put s 19 into operation. However, that is by the way. The real and substantial reason is that these walls were not erected in breach of covenant at all. They were not erected in breach of the bye-law, as I have said, and they were not erected in violation of the provisions in s 26, unless it be that they were buildings within the meaning of that section; and, even if that had been soand I will assume for this purpose that it was sothe corporation could not, by pulling them down under that section and then calling in aid the Private Street Works Act 1892, s 19, give them-

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selves the right to require that these roads should be left open for ever. The most that they could have done under s 26 would have been to produce a state of affairs in which the right of the company to erect a fence or other obstruction, or a wall, at that point would be limited so as not to obstruct access to the sewer or impose a weight upon ita thing which could quite easily have been doneat the same time preserving the rights of the company to keep their boundary properly and satisfactorily closed. Having regard to the fact that that was all that s 26 of the Act of 1875 could ever have enabled them to accomplish, it is quite manifest that to try to treat the whole road, including the site of the wall, as being an open street within the meaning of s 19 must be ill-founded. Accordingly, in my opinion, the argument based on the Private Street Works Act fails.

The order made by Bennett J, was one under which it was declared that the company were entitled to re-erect the walls as they had been before they were pulled down. It is to be noticed that the Public Health Act 1875, s 26, is repealed by the Public Health Act 1936. That Act came into operation, I think, on 1 October 1937, and under s 25 of that Act the law is modified. It is provided that, in cases where plans of buildings, or extensions of buildings, require the submission of plans in accordance with building bye-laws, then the authority is entitled to reject the plans if the building or extension goes over a sewer. Sub-s (3) provides for the case of a building which has been erected over a sewer without the consent required by s 26 of the Act of 1875, and enables the local authority to serve notice to pull down, and the provisions of the Act in relation to the service of notices and appeals, and so forth, would apply to any such notice. The walls were pulled down after this Act came into operation, but we are told that now they have been rebuilt in their previous form, in accordance with the declaration of Bennett J. The question as to the applicability, in those circumstances, of s 25(3) might have been an interesting one, and might have required discussion. With reference to the date of the pulling down of the walls, I can reinforce the argument as to the absence of any intention to pull down under the Public Health Act by pointing out that no attempt was made to serve any notice, such as would have been required under s 25(3) of the Act of 1936. However, that is in parenthesis. The walls have now been rebuilt. At the time when the judges order was made declaring the right to rebuild them, no point was taken on behalf of the corporation that, in view of s 25 of the Act of 1936, plans would require to be deposited. This being so, in my opinion the judge was right in not imposing any limitation in the order referring to the Public Health Act 1936, s 25. If the corporation had wished to take the point that the court ought not to declare a right to rebuild the walls without saving their rights under the section, the corporation could have taken that point then and there, and it would have been a matter for argument

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in the first place as to whether or not these walls were buildings or extensions of buildings in respect of which plans would require to be deposited in accordance with the local bye-laws. No such suggestion was made, and, in my opinion, in the light of that, it was right to assume, and I propose to assume, that the walls in question could not be described as buildings of that character, and that, accordingly, there is no objection under s 25 to their erection or their continuing existence. That being so, I do not see any necessity to do that which at one time it appeared we might have to donamely, impose some qualification on the order of Bennett J. The result is that the appeal fails, and must be dismissed with costs.

CLAUSON LJ. I agree, and I do not find it necessary to add anything.

GODDARD LJ. I agree.

Appeal dismissed with costs.

Solicitors: Sharpe Pritchard & Co, agents for Arthur Holt, Town Clerk, Oxford (for the appellants); Hancock & Scott (for the respondents).

W K Scrivener Esq   Barrister.

Stimson and Another v Standard Telephones & Cables Ltd

[1939] 4 All ER 225


Categories:        TORTS; Statutory Duty: EMPLOYMENT; Other Employment        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        1, 2 November 1939        


Factories and Workshops Statutory duty Dangerous machinery Breach of statutory duty cause of accident Onus of proof Factory and Workshop Act 1901 (c 22), s 10.

Workmens Compensation Alternative remedies Election Receipt of compensation Whether contract was for infants benefit Workmens Compensation Act 1925 (c 84), s 29.

The defendants were manufacturers of electrical apparatus, and employed the infant plaintiff in a room used for the production of blue prints and working drawings used for getting out specifications and for assembling the apparatus manufactured in the factory. On 15 April 1935, the infant plaintiff was injured while working a drying machine consisting of a large heated drum about 20 ins in diameter revolving at the rate of 1 in per second with a roller across its full width near the top, and similar rollers at the top and the rear of the machine. A canvas-like material passed round these rollers, making contact with the drum about 6 ins behind the front roller and leaving a gap of 2 ins between the front roller and the surface of the drum. The infant plaintiff was placing a wet blue print on the drum with her right hand and holding a packet of sweets in her left hand when her hand was caught between the canvas and the drum and her hand and arm were severely burnt. She was paid workmens compensation until March 1936, when the defendants proposed to reduce the payments. In May 1936, arbitration proceedings in respect of this reduction were threatened. In June 1937, an action at law was first threatened, and in July 1937, the present action was commenced:

Held (i) the machine was a dangerous machine, which the defendants were under a statutory duty to fence, and the plaintiff

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was injured by reason of the defendants failure to perform their statutory duty.

(ii) when the plaintiff had proved the breach of statutory duty and that the accident could have been caused by that breach of statutory duty, it was unnecessary for her to disprove other possible causes of the accident.

(iii) the plaintiff was not guilty of contributory negligence.

(iv) the acceptance of workmens compensation payments, in the circumstances, did not preclude the plaintiff from recovering damages at common law, as she was an infant, and the agreement to accept compensation was a contract which was not for her benefit.

Decision of Hilbery J ([1939] 2 All ER 441) reversed.

Notes

The main point of interest in this decision is the distinction drawn between this case and Perkins v Hugh Stevenson & Sons Ltd. This distinction is based upon the fact that in the present case the plaintiff was an infant at the time of the acceptance of the compensation payments, and she would therefore not be bound by that acceptance unless it could be shown to be for her benefit. The second point of interest is the application of the law as recently laid down in the House of Lords in Caswell v Powell Duffryn Associated Collieries Ltd, where the principles applicable in cases of death or injury due to breach of statutory duty in failing properly to fence dangerous machinery were fully considered. Attention must also be directed to the judgment of du Parcq LJ who points out that a paraphrase of the words of his judgment in the editorial note to Walker v Bletchley Flettons Ltd does not fully express the meaning of the words actually used by him in that judgment.

As to Contributory Negligence in Actions for Damages for Breach of Statutory Duty, see Halsbury (Hailsham Edn), Vol 23, p 686, para 969; and for Cases, see Digest, Vol 24, pp 908911, Nos 6281.

As to Alternative Remedies, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 195, 196, paras 430, 431; and for Cases, see Digest, Vol 34, pp 490492, Nos 40634071. See also Williss Workmens Compensation (31st Edn), pp 478483.

Cases referred to

Caswell v Powell Duffryn Associated Collieries Ltd [1939] 3 All ER 722; Digest Supp.

Perkins v Hugh Stevenson & Sons Ltd [1939] 3 All ER 697; Digest Supp, 161 LT 149.

Stephens v Dudbridge Ironworks Co [1904] 2 KB 225; 34 Digest 492, 4070, 73 LJKB 739, 90 LT 838, 6 WCC 48.

Murray v Schwachman Ltd [1938] 1 KB 130, [1937] 2 All ER 68; Digest Supp, 106 LJKB 354, 156 LT 407, 30 BWCC 466.

Selwood v Towneley Coal and Fireclay Co Ltd [1939] 2 All ER 132; Digest Supp, 32 BWCC 37, revsd [1939] 4 All ER 34.

Walker v Bletchley Flettons Ltd [1937] 1 All ER 170; Digest Supp.

Hindle v Birtwistle [1897] 1 QB 192; 24 Digest 909, 71, 66 LJQB 173, 76 LT 159.

Sutherland v James Mills Ltd, Executors [1938] 1 All ER 283; Digest Supp.

Higgins v Harrison (1932) 25 BWCC 113; Digest Supp.

Appeal

Appeal by the plaintiffs from a judgment of Hilbery J, dated 4 April 1939, and reported [1939] 2 All ER 441, where the facts are fully set out. The second plaintiff was the father of the infant plaintiff

Page 227 of [1939] 4 All ER 225

and had been joined for purpose of recovering special damages. The substantial appellant was the infant plaintiff.

A Aiken Watson for the appellants.

F A Sellers KC and Martin Jukes for the respondents.

Watson: The substantial point for decision, so far as the appellants case is concerned, is whether or not the infant appellant, who sustained injury while working the machine, is disentitled to recover damages because she failed to show how the accident occurred. The judge seems to have assumed that the appellant had to satisfy the court that the dangerous machine was the proximate cause of the accident. None of the decided cases, however, goes so far as that. If it is established that the dangerous character of the machinery materially contributed to the injury, it is for the employer to show that the injury was caused by the workmans own blameworthy conduct. The judge used words which amount to saying that the onus was upon the appellant in this case to disprove any possibility of contributory negligence. It is, however, for the employer to establish contributory negligence. It is sufficient, on behalf of a workman, to show a causal connection between a breach of statutory duty and the accident. In the present case, the statement of the infant appellant that she could not say how the accident happened is a statement that ought to be accepted. Caswell v Powell Duffryn Associated Collieries Ltd disposes of any question of law. The conditions laid down in that case are satisfied here.

Sellers KC: The judge came to the right conclusion, and gave good grounds for his decision. There are, however, further grounds upon which the respondents can rely. The infant appellant received workmens compensation for a period of 12 months. If that does not bar the appellants claim, it is open to the court to say whether or not the receipt of workmens compensation was for her benefit. It was for her benefit. Further, the machine was not a dangerous machine, and it did not require fencing. Even if there was a switch, there was no danger flowing from it. There was no breach of the Electricity Regulations 1908, reg 12. On behalf of the appellants, it has been argued that there was a breach of statutory duty. The infant appellant had failed to prove that her injury was caused by breach of a statutory duty. If the court should come to a different conclusion on that point, there was contributory negligence on the part of the infant appellant. In two recent cases, the Court of Appeal has given a decision on the position of an adult under the Workmens Compensation Act 1925, s 29, where payments of compensation have been made. The present case, however, concerns an infant. As I understand the decision in Perkins v Hugh Stevenson & Sons Ltd, the basis of the decision was not election, but the actual receipt of workmens compensation. The Workmens Compensation Act 1925 is for the benefit of workmen, and its terms apply to adults and infants alike. The receipt of workmens compensation concludes the matter. The doctrine of infancy is not applicable to workmens

Page 228 of [1939] 4 All ER 225

compensation. The point is sufficiently covered by Perkins case and by Selwood v Towneley Coal & Fireclay Co Ltd. There is no distinction between the case of an adult and an infant. In Higgins v Harrison, the judge held that there was a ground of action at common law, but he found that the agreement to accept workmens compensation was, in that case, for the infant plaintiffs benefit. There is no way in which the accident could have happened without intention or negligence on the part of the appellant. [Counsel referred to Murray v Schwachman Ltd and Stephens v Dudbridge Ironworks Co.]

Watson in reply.

A Aiken Watson for the appellants.

F A Sellers KC and Martin Jukes for the respondents.

2 November 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. In this case, I shall confine my remarks to those matters which have been argued before us, and I shall not rehearse the facts of this case, because they are for present purposes sufficiently stated in the judgment of the judge.

There is one matter which I can get rid of at oncenamely, the question whether or not the machine in question was a dangerous machine, so as to impose upon the employers a duty of fencing under the Factory and Workshop Act 1901, s 10. On that matter, the judge found in favour of the plaintiff. We have had various matters urged upon us by counsel for the respondents with a view to persuading us that that finding was wrong. It is sufficient for me to say that the reasoning of the judge on that point commends itself to my mind, and I think his finding was not only justified but also right. I therefore approach this appeal on the footing that the particular machine was a piece of dangerous machinery, which the employers were under a statutory obligation to fence. That statutory obligation they did not carry out. The plaintiff unquestionably suffered her injury through her hand being crushed between the stretched canvas and the drum of the machine. It is not disputed that, if the machine had been fenced, as it well could have been, the accident would not have taken place. On those matters, there is no dispute at all. The precise circumstances in which the hand came to be in that place were not established in such a way as to enable the judge to come to any definite finding upon that matter.

On that basis of fact, the judge held that, although there was negligence on the part of the employer in not providing the fence, it was not established to his satisfaction that the failure to provide the fence was the cause of the accident. In my opinion, the judge did not apply the true principle of law applicable to matters of this kind. When an employer places upon his premises for use in his factory a dangerous machine which is unfenced, he is by that act alone being negligent towards the employees in general, or towards such of them as may find themselves in the neighbourhood of the machine. However, that, so to speak, is negligence in the air, just as driving a motor car negligently on the road is negligence in the air. No right of action arises unless and until some person to whom a duty to take care is owed suffers some damage attributable to

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that negligence. In the present case, as I have said, the part of the machine which caused the injury was a dangerous part of the machine. The injury would not have been caused if the statutory duty had been performed. In my judgment, those two circumstances together are sufficient to establish the necessary causal connection between the negligence of the employer and the injury suffered by the plaintiff.

When that stage is reached, and not until that stage is reached, the further question arises, aye or no was the plaintiff guilty of contributory negligence in such a way as to deprive her of the right to recover? In my opinion, it is incorrect to treat the necessity of proving causal connection between the breach of duty and the accident as though that were the same thing as saying that the plaintiff must establish that the accident took place otherwise than by some intentional act on her part. The judge, in my view, went wrong in that respect.

I have put quite shortly in my own words what I understand to be the principles applicable on the facts of this case and I will cite one or two short passages from the opinions in the House of Lords in Caswell v Powell Duffryn Associated Collieries Ltd. Those passages, taken in their context, and in the light of the facts in that case, appear to me to be in accordance with what I have said, and to justify the proposition which I have advanced. First, I find this in the opinion of Lord Macmillan, at p 732:

The mere fact that at the time of an accident to a miner his employers can be shown to have been in breach of a statutory duty is clearly not enough in itself to impose liability on the employers. It must be shown that the accident was causally associated with the breach of statutory duty.

I take that to mean this. To adopt an example put by MacKinnon LJ, in the course of the argument, it would not be sufficient to show that a workman was found in the neighbourhood of a dangerous machine unconscious, with a wound upon him which might have been caused by the dangerous part of the machine, or might have been caused in some other way by the use of, for instance, a hand tool which the workman had to use. If that were all that appeared, then it would not be shownalthough the breach of statutory duty would be established owing to the failure to fence the machinethat that accident was causally associated with the breach of the statutory duty, because the facts would be equally consistent with its having been due to some other cause. Lord Macmillan proceeds thus, at p 733:

While the precise manner in which the deceased met his death remains unascertained because there was no eye-witness of the accident, it has been proved to demonstration that if it had not been for the respondents breach of their statutory duty the accident would not have happened. The respondents breach of duty was clearly a cause of the accident. Having thus causally connected the accident with the respondents breach of duty, I do not think that it was incumbent on the appellant to eliminate and disprove all conjectural possibilities that the deceased may himself have been in some way careless of his own safety.

Those passages show quite clearly what Lord Macmillan means by the causal association the establishment of which is sufficient to connect the

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accident with the breach of duty. Then Lord Wright says, at pp 734, 735:

It is in my opinion clear that if at the material time the machine had been fenced, the man could not have been killed, or even come to any serious harm. His death was caused by the absence of fencing. Merely to slip, unless in proximity to the unfenced machine, would have caused at most a bruising or by very bad luck perhaps a broken bone. The actual death was caused because the man was drawn into the open space, that is, it was caused by the want of fencing.

Then Lord Porter says, at p 743:

Undoubtedly the absence of the guard contributed to the injury which caused the death of the workman. Had the guard been in its place the accident would not have happened.

I have extracted from those opinions the view of the law applicable to the facts of this case, which I have shortly stated, and, therefore, I find myself unable to agree with the finding of Hilbery J on that matter.

The next matter which arises is that of contributory negligence. The burden of establishing contributory negligence is, of course, upon the defendants. In that respect, the judge was unable to find, on his view of the evidence, that contributory negligence had been established. Counsel for the defendants called our attention to several circumstances in the case from which, he said, the judge ought to have drawn the inference that the substantial cause of this injury was, not the breach of duty, but the actual contributory negligence of the plaintiff herself. I have carefully considered the various matters put before us by him, and I do not find myself able to differ from the conclusion to which the judge came upon that part of the case. It is perfectly true that the girl did not, although pressed, give an explanation of how the accident happened, and the judge took the view that she could have explained it if she had wished. That does not mean, however, that he was bound to draw an inference against her to the effect that she had been guilty of some act or other which was the substantial cause of the accident. After seeing her and weighing all the evidence, the judge came to the conclusion that contributory negligence was not established, and I cannot see my way to differ from that finding.

The only other questions which fall for decision are two which arise by reason of the circumstance that the plaintiff or her legal advisers and her father on her behalf applied for, received, and accepted as such, payments under the Workmens Compensation Act. It is clear, I think, that the advisers of the plaintiff (in which I include the solicitors and her father) did in fact claim those payments and receive them on her behalf, receiving them with the full knowledge that they were, and with the intention that they should be, Workmens Compensation Act payments. It is said that, once that circumstance is established, it follows from the decision of this court in Perkins v Hugh Stevenson & Sons Ltd that the plaintiff cannot thereafter resile, and demand damages at common law. It is contended that, once one finds that money has been paid under the Act for the purpose of discharging a liability under the Act,

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that is enough, and the fact that the recipient is an infant has nothing to do with the matter. In my opinion, the authority of Perkins case does not assist the respondents in this case. That was a case of an adult who had made a claim under the Act, and had accepted money under it. The question which we had to consider in that case is, I think, stated in my judgment as follows, at p 702:

What is to happen where the workman, having at the time of making his claim and receiving the money ex hypothesi no knowledge of his right of option, nevertheless receives and puts into his pocket money paid in pursuance of that claim and in liquidation of the employers statutory liability under the Act?

In other words, we were dealing there with a case where the quality of the payment made by the employers was between the parties irrevocably fixed as a payment under the Workmens Compensation Act in discharge of the employers liability. In my opinion, in order that a payment must have that quality, it is not sufficient that there should be a mere passing of money from the employer to the employed. Nor is it sufficient that the passing of that money should be accompanied by an intention in the mind of the employer alone that the payment should be a Workmens Compensation Act payment. In order that the payment may have the necessary quality to operate as a discharge of the liability of the employer, it must be paid as a Workmens Compensation Act payment, and it must be received also in that quality.

In the case of adults, no difficulty arises in dealing with that particular matter, but, in the case of an infant, once it is clear that, in order to find the requisite quality in the payment, a mental operation on the part of the recipient is required, the question at once arises whether or not it was for the infants benefit that that particular decision should be taken. If the payment is made under an agreement, if the parties rest, not merely on the statutory position, but also on a contractual position, it is clear that the question of the infants benefit becomes immediately relevant. That appears from Stephens v Dudbridge Ironworks Co and from Murray v Schwachman Ltd. In my judgment, quite apart from cases where there is an actual contract, where there is a mental operation of the infant, whether it is in the exercise of the option before receiving payment or whether it is looked at from the point of view of actual receipt of payment, the question must always be investigated, was it for the infants benefit that that payment should be made? I find nothing in the judgment in Perkins v Hugh Stevenson & Sons Ltd, or in the later case in this court in which that judgment was followed, which in any way supports the view put forward by counsel for the defendants.

That leaves one question only, which is whether or not it is shown that the decision to take these payments as payments under the Act, and accept them as such, was for the infants benefit. Questions of that kind are often difficult. The judge in the present case, although it was not necessary for him so to find, in view of his decision on the main part

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of the case, nevertheless took the view that it was not for the infants benefit. In my opinion, he was right upon that. The test must be applied, of course, at the relevant date. In this case, the relevant date was the date when the first payment was made in pursuance of the claim which had been put forward. That was very shortly after the accident, at a time when the full result of the accident was not apparent. That full result only became apparent some time later, and in point of fact has resulted in permanent incapacity, owing to the condition of the thumb. It has also resulted in a permanent disfigurement, which, to a young woman of that age, may be a source, not merely of annoyance, but also of substantial loss of happiness in life hereafter.

The task which the court has to perform in these cases is to put itself in the place of a hypothetical adviser who would be advising the infant, with knowledge of all the facts which were known at that time, and with a competent knowledge of the law. I think that that way of approaching the question is justified by what was said in this court in Murray v Schwachman Ltd in the judgment of Greer LJ, at p 146. With that view of the matter the other members of the court concurred.

Having put myself in that position as best I can, I would have to consider what the legal risks in the matter were, and what the chances of failure would have been in a claim at common law. The two matters in respect of which it is suggested there would have been doubt on legal questions are, first of all, the question of liability and the proof requisite in cases of breaches of statutory duty, and, secondly, the applicability or otherwise of the doctrine of contributory negligence to such cases. It is perfectly true that, at the relevant time, the House of Lords had not yet declared that the doctrine of contributory negligence applied to such cases, but it had been so held some years before by this court, and it was generally considered, I think, that that decision would be upheld if and when the House of Lords came to deal with the matter. I do not find there any legal problem which would have given a competent adviser any difficulty. On the other question, I am again unable to see that the hypothetical adviser would have found it impossible or difficult to give correct advice upon the matter.

When one looks at the factual aspect of the case, here was a young girl at the beginning of life, suffering what has turned out to be not merely a permanent incapacity, which would or might affect her earning power, but also an injury which would affect her appearance, and might affect her ability to play games and generally enjoy life in other respectsmatters which do not come into account in assessing compensation under the Workmens Compensation Act, but which can be taken into account in a claim at common law. Workmens compensation is based on the principle of earning capacity, and on that principle only, and has nothing to do with these other heads of damage. One must remember also that a workman who commences proceedings at common law does not thereby

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forfeit his right to compensation under the Act. If he fails to establish a case at common law, but establishes facts which would entitle him to compensation under the Act, he can obtain that compensation, subject to the risk of costs being deductible from the compensation assessed in his favour.

Taking all those considerations into account, and not attributing to the hypothetical adviser any extraordinary prescience or wisdom, I cannot help thinking that the proper and sound advice which should have been given to this infant at that time would have been that she had better take proceedings at common law, and not accept payment under the Workmens Compensation Act. These questions are always difficult, and different minds may take different views of the facts of any particular case. I have done my best to assess the various matters which I think it proper to take into account, and that is the conclusion to which I have come, after listening to the arguments, very careful in this respect as in all others, put before us by counsel for the defendants.

In the result, the appeal must be allowed, with costs here and below. No attack has been made upon the figure of damages assessed by the judge, and there must be judgment for the plaintiff for the figure which the judge assessed, subject to the fact that the plaintiff is willing to submit to deduction from that amount the sum received under the Workmens Compensation Act, a matter of £22 as against a figure of £767 assessed by the judge. That deduction of £22 is agreed to by counsel on behalf of the plaintiff, and, therefore, there is no necessity to enter into a discussion of the question, which might be an interesting one, whether or not, by any legal machinery, this plaintiff could be forced to repay that amount, or give credit for it in the action. That investigation we are freed from, in view of the fact, as I have said, that that is conceded here.

MACKINNON LJ. I agree. I do not wish to repeat anything which has been said by Sir Wilfrid Greene MR, but I am tempted to say a word about the very last matter to which he referred. This court, in Perkins v Hugh Stevenson & Sons Ltd and Selwood v Towneley Coal and Fireclay Co Ltd, came to the clear conclusion that, if an adult accepted payment under the Workmens Compensation Act of compensation paid as such and received as such, that debarred him, under s 29, from subsequently bringing any action at common law. So far as I was concerned, one of the reasons that seemed to me conclusively to lead to that result was the fact that the plaintiff there, who was making the claim, had received £81 in the guise of that compensation. If he had succeeded in the action which he was then bringing at common law, I could see no legal ground on which the employers could claim that money back. If that were so, the result appeared to me to be a clear breach of the provisions of s 29 of the Act of 1925, which says that an employer shall not be liable to pay compensation both

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independently and also under the Workmens Compensation Act, because he will then have paid compensation and will be called upon to pay again outside the Act.

There was also in existence the principle previously laid down by this court in Stephens v Dudbridge Ironworks Co and Murray v Schwachman Ltd, in both of which it was held that, where the claimant who had received compensation under the Act was not an adult but a minor, it was the duty of the court to consider whether or not the acceptance of compensation under the Act was for the benefit of the infant. If it was not for his benefit, then he would not be debarred, by reason of s 29, from bringing a common law action. In those cases, nobody raised the possible argument as to what was to happen to the money that the infant had been paid and had received as compensation under the Act. It would be unfair for him to keep that money as well as get damages at common law, but what is the legal ground on which he could be made to give credit for it? I am bound to say that I do not quite know what the answer to that point is. It is not necessary to investigate that further, because in this case, acting quite properly, of course, the plaintiff is content to give credit against the damages assessed by the judge in the common law action for the amount previously paid by way of workmens compensation.

I confess that I do feel some difficulty about the question how far the decisions in Stephens v Dudbridge Ironworks Co and Murray v Schwachman Ltd are precisely consistent, in all their implications and results, with the decisions in Perkins v Hugh Stevenson & Sons Ltd and Selwood v Towneley Coal and Fireclay Co Ltd, and what precisely is the line of reconciliation, if reconciliation be needed, between those two sets of authorities, but that really, as I say, does not arise in this case. With the result proposed by Sir Wilfrid Greene MR, I agree.

DU PARCQ LJ. I also agree, and I have little to add. If I may say so, I share the difficulty which has been expressed by MacKinnon LJ. I may add, perhaps, that it is to be hoped that Murray v Schwachman Ltd, on the one hand, and Perkins v Hugh Stevenson & Sons Ltd, on the other, may be considered some day by the House of Lords. I think I am right when I say that this court was disposed to give leave to appeal to the House of Lords in Selwood v Towneley Coal and Fireclay Co Ltd, but there was, as it happened, an insuperable bar to giving such leave, because the parties had bound themselves by an agreement not to appeal beyond the Court of Appeal.

There are only two other points upon which I have anything to say. I agree with everything that has been said by Sir Wilfrid Greene MR, on the other points, including those to which I am now about to refer.

With regard to the question whether this acceptance of money as compensation under the Workmens Compensation Act is shown to have

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been done for the benefit of the workman, I find it very difficult to see any answer to the point raised against counsel for the defendants in the fact that this money was accepted within a very short timein fact, a few days or a week or so after the accident happened. Apart from everything else which has been said, it seems to me quite impossible to say that it was for the infants benefit at that early stage to accept the money as compensation, so precluding herself from taking proceedings at common law. Any sagacious adviser, I think, when asked to advise what course should be taken, even if he did not at once say, “Bring an action for damages at common law,” would certainly have said, “One may as well wait and see what will happen about this injury till the six months available under the Act have nearly expired.”

The only other point about which I have reason to say a few words is whether or not this was a dangerous machine. Some part of the argument of counsel for the defendants was perhaps not unfamiliar to me, because it was a little reminiscent of what I heard from him in Walker v Bletchley Flettons Ltd. In that case also, counsel for the defendants properly referred to the well-known decision in Hindle v Birtwistle. I used a few words in Walker v Bletchley Flettons Ltd which have been cited, if I may respectfully say so, quite correctly by the judge. I think, however, that perhaps I was not quite correct in using the words which I did, because, although I think that they were really accurate, apparently they were open to some misconception. What I said with regard to Hindle v Birtwistle, paraphrasing it, was that, when one was considering whether the machinery was dangerous, it was necessary to assume, as Wills J had said, that the people who used it would sometimes be careless. I said that I thought it was not inconsistent with what Wills J had said in his judgment to say [p 175]:

… that a part of machinery is dangerous if it is a possible cause of injury to anybody acting in a way in which a human being may be reasonably expected to act in circumstances which may be reasonably expected to occur.

The headnote proper in the All England Law Reports accurately sets out what I said, but there is an editorial note which, purporting to state the effect of my judgment, says:

There must therefore be some criterion of danger apart from the mere happening of the accident, and it is stated that a part of a machine is dangerous if it can be a possible cause of injury to anyone acting reasonably.

That is not only not what I said, but, I think, almost exactly the opposite of what I said. As I am afraid some people do not read the whole of the judgmentperhaps it is too much to expect that they should read the whole of my judgmentbut are satisfied with the conclusions in the headnote, and, it may be, perhaps, concentrate even more on the editorial note than the headnote, I feel it desirable to take this opportunity to correct that misapprehension on the part of the editor.

With regard to Handle v Birtwistle, I would only like to add that that case has been cited very many times, sometimes in my hearing, in

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the Divisional Court. Rather than use any words of my own, I should like to quote a few lines from one of the many judgments in which Lord Hewart LCJ has had to refer to that case. The case to which I am going to refer, which is typical of many others, is Sutherland v James Mills Ltd, Executors. Lord Hewart LCJ says, at p 285:

The justices, apparently, followed the line of reasoning which had been suggestedthat they might regard this machinery as not dangerous in fact, because, in view of its history, persons might be reasonably led to think that it was not dangerous. The section is dealing with machinery which is dangerous in fact. I cannot help observing that the particular passage in the case of Hindle v. Birtwistle, the flying-shuttle case, has once more been adduced as having a relation to this case. The words of the judge which are so often referred to are to be read, in my opinion, with reference to the subject-matter of that case. That case turned upon an accident that had been caused by means of a flying shuttlethat is to say, by means of a part of the machinery which was doing something which it was never intended to do, and was not expected to do. It is very difficult usefully to apply observations made upon that case to cases where machinery is employed for the very purpose for which it is intended to be employed, and where the accident takes place by reason of the fact that a workmanit may be carelessly, it may be hurriedly, or it may be accidentally in the proper sense of the termbrings a part of his body into contact with a dangerous part of the machinery.

I think that those words may usefully be cited with the judgment in Hindle v Birtwistle whenever it is thought desirable to refer to Hindle v Birtwistle. I entirely agree that this appeal should be allowed, and with the result mentioned by Sir Wilfrid Greene MR.

Appeal allowed with costs in both courts. Judgment for the plaintiffs for £767, credit being given to the defendants (counsel for the infant plaintiff submitting) for £22.

Solicitors: Royds Rawstorne & Co (for the appellants); Carpenters (for the respondents).

W K Scrivener Esq   Barrister.

R v Bolton Recorder, Ex parte McVittie

[1939] 4 All ER 236


Categories:        HEALTH; Public health        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        10 NOVEMBER 1939        


Public Health Dangerous and dilapidated structure Order to repair or demolish Works of repair unspecified in order Whether order defective Public Health Act 1936 (c 49), s 58.

A cinema was damaged by fire, with the result that it became a dangerous or dilapidated building or structure. A complaint was made to the justices, who made an order under the Public Health Act 1936, s 58, calling upon the owner to execute works of repair or restoration, or, if he so elected, to take such steps by demolishing the structure and removing any rubbish resulting from the demolition as might be necessary for remedying the cause of complaint. The order was confirmed by general quarter sessions, whose decision was challenged by the applicant on the ground that it was defective and bad in law in that it purported to confirm the justices order, which did not specify the works of restoration or repair to be executed and/or things to be done for the remedy of the cause of complaint:

Held an order made under the Public Health Act 1936, s 58, since it must give the owner the alternatives of repairing or demolishing

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the building, need not specify the particular repairs necessary for remedying the cause of complaint.

Decision of Divisional Court ([1939] 2 All ER 334) affirmed.

Notes

Where orders for work to be done are made by a local authority under statutory authority, it is usually necessary for the requirements of the local authority to be stated with some particularity, but in the present case it is held that the matter is one for an order in general terms. In fact, the Act itself allows the owner to elect how he will deal with the ruinous or dilapidated building so that it may no longer be a detriment to the amenities of the neighbourhood.

As to Dilapidated Structures, see Halsbury (Hailsham Edn), Vol 26, pp 352354, paras 696, 697; and for Case, see Digest, Vol 38, p 209, No 436.

Appeal

Appeal by McVittie from an order of Lord Hewart LCJ, Macnaghten and Singleton JJ, sitting as a Divisional Court, dated 30 March 1939, and reported [1939] 2 All ER 334. The facts are fully set out in the judgment of Scott LJ.

R M Montgomery KC and J W Stansfield for the appellant.

W Gorman KC and W G Morris for the respondents.

Montgomery KC: This is a new section, but the words are in effect the same as the requirements of the Public Health Act 1875, ss 94, 95. A long series of authorities under these sections shows that the property owner is entitled to know exactly what he is required to do. Since the words are to the same effect, s 58 should be construed in a similar way to that in which the nuisance sections of the 1875 Act were construed.

R M Montgomery KC and J W Stansfield for the appellant.

W Gorman KC and W G Morris for the respondents.

10 November 1939. The following judgments were delivered.

SCOTT LJ. In this case, the owner of a piece of land in Bolton, on which, down to 1930, there was a cinematograph theatre which in that year was burned to the ground, although a large number of the steel pillars of the building were left untouched by the fire, was ordered, in 1937, to restore or repair the building or remove the ruinous structure and make the site presentable, so that it should no longer impair the amenities of the town of Bolton. From an order made by the magistrates, and confirmed by the deputy-recorder, there was an appeal to the Divisional Court by certiorari, asking that the order should be quashed. In March 1939, the Divisional Court discharged the rule nisi which had been granted, and upheld the validity of the order made. The owner appeals to this court, submitting that the Divisional Court ought not to have discharged the rule, but ought to have made it absolute. The proceedings were taken under the Public Health Act 1936, s 58(1), which provides as follows:

If it appears to a local authority that any building or structure, or part of a building or structure(a) is in such a condition … as to be dangerous … or (b) is by reason of its ruinous or dilapidated condition seriously detrimental to the amenities of the neighbourhood, the authority may apply to a court of summary jurisdiction, and the court may [in the first-mentioned case, deal with the danger, and] (ii) in the second-mentioned case, make an order requiring the owner of the building or structure to execute such works of repair or restoration or, if he so elects, to take such steps by demolishing the building or structure or any part thereof

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and removing any rubbish resulting from the demolition, as may be necessary for remedying the cause of complaint.

Then sub-s (2) provides as follows:

If the person on whom an order is made under subsect. (1) of this section for the execution of works, or the demolition of a building or structure or of any part of a building or structure, and the removal of any rubbish resulting from the demolition, fails to comply with the order within the time therein specified, the local authority may execute the order in such manner as they think fit and may recover the expenses reasonably incurred by them in so doing from the person in default, and without prejudice to the right of the authority to exercise those powers, he shall be liable to a fine …

The order made by the magistrates in this case was made in the precise words of the section, following a complaint lodged on behalf of the local authority, also in the precise words of the section. The complaint was made by the town clerk as follows:

… for that it appears to the council of the said county borough being the local authority within the meaning of the Public Health Act, 1936, that a certain structure situate in Tonge Moor Road in the said county borough formerly known as “Tonge Picturedrome” is by reason of its ruinous condition seriously detrimental to the amenities of the neighbourhood and the said local authority by the said complainant on their behalf intends to apply to the court of summary jurisdiction mentioned below for an order in accordance with the provisions of the Public Health Act, 1936, s. 58, requiring you the owner of the said structure …

Then follow the words of the section.

The order of the summary jurisdiction court, which was satisfied that the words of the complaint were well-founded, was precisely in those words, ordering:

… the owner of the said structure to execute such works of repair or restoration or if he so elects to take such steps by demolishing the structure or any part thereof and removing any rubbish resulting from the demolition as may be necessary for remedying the cause of complaint.

The ground upon which the motion for a rule nisi for certiorari was moved on behalf of the owner was that, under the section, an order in that form was not authorised. It was urged that the section ought to be interpreted as requiring the authority to specify the precise works of this restoration or repair which the local authority required, and that, as the order did not say that, it was necessarily bad, and not one that was authorised by the section. The Divisional Court, consisting of Lord Hewart LCJ, Macnaghten and Singleton JJ, did, on the showing of cause, discharge the order, and with that decision, and with everything that was said in the three judgments, I entirely agree, and think, therefore, that the appeal should be dismissed.

I add very little. The appellant has put before us photographs of the site in Bolton showing what it looks like from various points of view from the public street. They were exhibited in the original court and in each subsequent court, and it is obvious from those photographs that, ever since the theatre was burned down in 1930, it has been a dreadful eyesore in the street of Bolton where it is. Fortunately, since the Act of 1936 was passed, proceedings on the ground of injury

Page 239 of [1939] 4 All ER 236

to the amenity of a neighbourhood are now possible. It is said, as I have already mentioned, that details of what the owner is expected to do ought to be mentioned in the complaint and in the order, and the chief reason put forward for that interpretation of the section is that, in certain nuisance sections which appear in a different part of the Public Health Act 1936, there have been decisions on the wording of those later sections about nuisance under previous Acts which have been re-enacted in that other part of the Act of 1936 in which no option was given to the owner at all. He merely had to abate the nuisance, and it was held that there was an obligation on the prosecuting authority to give some information as to what the works should be.

In my view, the Divisional Court was absolutely right in refusing to have the interpretation of this very valuable new section cut down by decisions on a wholly different type of section, because the difference of the purpose and the difference of the language in the section were not in pari materia with this section which had to be construed. I can see no difficulty in the practical effect of the construction put upon this section by the Divisional Court, because, if the unsightly cause is a comparatively small thing, which may nevertheless be very unsightly, the words “restore or repair” give the owner an ample indication of what he has to do. In any case, he knows what his building was, and, if he wants to re-erect it after it has been practically destroyed, he can do so under the form of order made. On the other hand, however, if he recognises that it is not good business to re-erect that old building, then he is not entitled to keep the site disfiguring the neighbourhood, as it does, at the expense of the inhabitants of the town, in order that he may wait for some bid from somebody who may, perhaps, use some of the old steel uprights. The practical effect of the provisions is, of course, that, when a complaint is made on the lines of the section, an owner of disfiguring property knows that pressure can be put upon him if he does not act, and he always has the opportunity of going to the local authority and saying, “Now that I have got out plans to deal with this site, will you give me a little more time to put up a building?” These Public Health Acts must be worked with a reasonable spirit of appreciating their true object, and arrangements can be made in most cases so that they do not press unduly upon the person who is subjected, or will be subjected, to such an order. Here I adopt the judgment of Lord Hewart LCJ as my own, and add nothing. The appeal will be dismissed with costs.

CLAUSON LJ. I agree.

GODDARD LJ. I agree, and I am content to adopt the judgment of Macnaghten J as my own. However, in deference to the argument of counsel for the appellants, I would say one word. I do not think that this section has any true analogy with the nuisance section. The

Page 240 of [1939] 4 All ER 236

nuisance section does not give an option to the householder on whose premises the nuisance is. It requires him to abate a nuisance. There is, no doubt, a line of authority which shows that, when there is a nuisance, the householder may be entitled, in general, to be told what the local authority require to be done in order to abate the nuisance. If this s 58 which we are considering were a section which applied to any sort of building which offended against the amenities of a districtin other words, if it were a case dealing merely with the aesthetics of a buildingI think that very likely the owner might be entitled to say, “My ideas of art are different from yours. If you object to this building of mine as offending against the amenities of the district, tell me in what way you think it does offend. Otherwise I shall not know whether to repair it in neo-Gothic or bastard-Tudor style.” That, however, is not what the section says. The section deals only with a building which offends against the amenities of the neighbourhood because of its ruinous or dilapidated condition. Then the section says that the justices may order a man to repair, to restore or to pull down, and he can choose for himself what he will do. If it is a ruinous or dilapidated building, he can repair it if he likes. Whether there is any real difference between “repair” and “restore” I do not stay to inquire. For myself, I doubt whether there is. He can repair it or restore it or pull it down. He can please himself. I do not think that there is any warrant at all for saying that the justices must dictate or specify exactly what repairs are to be done. They have simply to say: “You have a ruinous or dilapidated building. Repair it or pull it down, whichever you please.” Whether or not there be any merits in this appeal, from what I see in these photographs, it is impossible to suppose for a moment that there are any merits in a lot of twisted iron stanchions standing by a residential road in Bolton on what is now a weed-overgrown site. Mr McVittie must have known perfectly well that all he was required to do was to clear away the rubbish, which is what the section says. If he had cleared away the rubbish, there would have been no trouble. He has chosen to keep this deplorable sight in existence ever since 1930, and now has fought this case up to the Court of Appeal.

Appeal dismissed with costs.

Solicitors: Peacock & Goddard, agents for Percy H Barker & Co, Manchester (for the appellants); Simmons & Simmons, agents for P S Rennison, Town Clerk, Bolton (for the respondents).

C St J Nicholson Esq   Barrister.


Wringe v Cohen

[1939] 4 All ER 241


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant: TORTS; Tortious Liability        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ AND ATKINSON J        

Hearing Date(s):        23, 24 OCTOBER, 8 NOVEMBER 1939        


Landlord and Tenant Want of repair Collapse of house on adjoining premises Landlord liable to do repairs Knowledge of landlord.

Nuisance House in disrepair Collapse of house on adjoining premises Owner liable to do repairs Knowledge of want of repair.

The plaintiff was the owner of a lock-up shop and the defendant the owner of the adjoining house, which was considerably higher than the plaintiffs shop. The wall next to the plaintiffs shop, which had been in bad repair for some time, collapsed and damaged the shop. The defendants house was let to a weekly tenant, but it was admitted that the defendant was liable to keep his premises in repair and that there was evidence upon which it could properly be found that, owing to want of repair, his house had become a nuisance. The defendant stated in evidence that the wall was in good repair so far as he knew, but he had not examined it. A builder stated that two years before the collapse he had examined the wall at the defendants request and that it then looked in a fair state of repair:

Held if, owing to want of repair, premises upon a highway become dangerous, and, therefore, a nuisance, and a passer-by or adjoining owner suffers damage by their collapse, the occupier, or the owner, if he has undertaken the duty of repair, is answerable, whether or not he knew, or ought to have known, of the danger. If the nuisance is created not by want of repair, but by the act of a trespasser or by a secret and unobservable process of nature, neither the occupier or an owner responsible for repair is answerable, unless with knowledge or means of knowledge he allows the danger to continue. The defendant, was, therefore, liable in damages to the plaintiff.

Notes

The point here dealt with is when it is necessary to prove knowledge of want of repair in an action for damages due to a defect in or the want of repair of premises when that action is based on nuisance. It is only where the danger arises from the act of a trespasser or an unobservable process of nature that the knowledge of the owner or occupier is material. In the case of neglect to repair, the owner or occupier is liable whether or not he knew of the want of repair.

As to Dangerous Property, see Halsbury (Hailsham Edn), Vol 24, p 49, para 85; and for Cases, see Digest, Vol 26, p 433, Nos 15171519.

Cases referred to

R v Watson (1703) 2 Ld Raym 856; 26 Digest 433, 1517, sub nom R v Watts 1 Salk 357.

R v Bradford Navigation Co (1865) 6 B & S 631; 38 Digest 42, 247, 34 LJQB 191.

A-G v Tod Heatley [1897] 1 Ch 560; 36 Digest 177, 221, 66 LJCh 275, 76 LT 174.

Rapier v London Tramways Co [1893] 2 Ch 588; 38 Digest 44, 258, 63 LJCh 36, 69 LT 361.

Payne v Rogers (1794) 2 Hy Bl 350, 31 Digest 344, 4867.

Quarman v Burnett (1840) M & W 499; 34 Digest 126, 966, 9 LJEx 308.

Todd v Flight (1860) 9 CBNS 377; 31 Digest 345, 4879, 30 LJCP 21, 3 LT 325.

Pretty v Bickmore (1873) LR 8 CP 401; 31 Digest 345, 4881, 28 LT 704.

Gwinnell v Eamer (1875) LR 10 CP 658; 31 Digest 345, 4882, 32 LT 835.

Page 242 of [1939] 4 All ER 241

Tarry v Ashton (1876) 1 QBD 314; 26 Digest 433, 1519, 45 LJQB 260, 34 LT 97.

Barker v Herbert [1911] 2 KB 633; 36 Digest 197, 374, 80 LJKB 1329, 105 LT 349.

Nelson v Liverpool Brewery Co (1877) 2 CPD 311; 31 Digest 344, 4869, 46 LJQB 675.

Harrold v Watney [1898] 2 QB 320; 36 Digest 69, 443, 67 LJQB 771, 78 LT 788.

Palmer v Bateman [1908] 2 IR 393; 36 Digest 25, case 125xi.

Pritchard v Peto [1917] 2 KB 173; 36 Digest 40, 244, 86 LJKB 1292, 117 LT 145.

Indermaur v Dames (1866) LR 1 CP 274; 36 Digest 35, 208, 35 LJCP 184, 14 LT 484, affd (1867) LR 2 CP 311.

Noble v Harrison [1926] 2 KB 332; 36 Digest 189, 316, 95 LJKB 813, 135 LT 325.

St Annes Well Brewery Co v Roberts (1928) 140 LT 1; Digest Supp.

Wilchick v Marks & Silverstone [1934] 2 KB 56; Digest Supp, 103 LJKB 372, 151 LT 60.

R v Pedly (1834) 1 Ad & El 822; 36 Digest 215, 582, 3 LJMC 119.

Morgan v Liverpool Corpn [1927] 2 KB 131; Digest Supp, 96 LJKB 234, 136 LT 622.

Mullan v Forrester [1921] 2 IR 412; 26 Digest 434, case f.

Wilkins v Leighton [1932] 2 Ch 106; Digest Supp, 101 LJCh 385, 147 LT 495.

Appeal

Appeal by the defendant from a judgment of His Honour Judge Essenhigh given in the Sheffield County Court and dated 31 May 1939. The facts are fully set out in the judgment of the court delivered by Atkinson J.

R T Monier-Williams for the appellant.

Denis H Robson for the respondent.

Monier-Williams: The duty to repair is on the occupier, except where the nuisance is caused by misfeasance or where the owner has expressly or impliedly authorised the occupier to commit the nuisance. [Counsel referred to Wilkins v Leighton.]

Robson: In spite of Barker v Herbert, the owner might be liable for a nuisance of which he had no knowledge.

Monier-Williams in reply.

R T Monier-Williams for the appellant.

Denis H Robson for the respondent.

8 November 1939. The following judgment was delivered.

ATKINSON J (delivering the judgment of the court). This is an appeal by the defendant from a judgment of the judge of the Sheffield County Court, holding the defendant liable for damages done to the plaintiffs shop by the collapse of part of a house belonging to the defendant. The plaintiff was the owner of a lock-up shop in Proctor Place, a street in Sheffield. The defendant was the owner of the adjoining house, the ground floor of which was used as a shop. The house was considerably higher than the plaintiffs shop. On 24 November 1938, the wall of the defendants house, constituting the gable-end next to and above the plaintiffs shop, fell on and destroyed the roof of the shop. There was evidence that the pointing of the gable-end was very bad,

Page 243 of [1939] 4 All ER 241

that the collaring was perished and the wall bulging, and that the wall had been in this defective state for 3 years.

The tenant of the defendants house was a Mrs Fairest. She was a weekly tenant, and had occupied the house for about 2 years, using her shop for the business of a florist. She was under no obligation, as between herself and the defendant, to repair. The defendant admitted that he was liable to repair, and had always done the repairs. The judge held that the wall was in a defective condition, and was a nuisance owing to want of repair, and that the defendant was liable to repair. By that he must have meant that the defendant was under an obligation, by agreement with the tenant, to repair. He further held that, in those circumstances, there was an absolute duty on the defendant towards the plaintiff to keep his house in such repair that it did not become a nuisance, and awarded the plaintiff £61 17s 1d damages, and costs. The defendant had given evidence that the wall was in good repair as far as he knew, but he did not suggest that he had examined it, or even looked at it. A builder gave evidence that 2 years ago the defendant asked him to look at the gable-end, and said that it then looked in a fair state of repair.

It was admitted that there was evidence upon which the judge could find that the defendant had agreed with the tenant to keep the premises in repair, and the appeal was argued on that footing. It was also conceded that there was evidence upon which the judge could properly hold that the wall of the gable-end of the house had, owing to want of repair, become a nuisancethat is, a danger to passers-by and adjoining owners. It is contended for the appellant, however, that these findings do not go far enough to establish his liability for the damage caused by the collapse of the wall. It is said that the defendant is liable only if it is found as a fact that he knew, or ought to have known, of the want of repair, that the judge did not so find, and that we ought to send the case back for a new trial. It is said that the judge was wrong in holding that the obligation to repair was absolute.

In our judgment, if, owing to want of repair, premises upon a highway become dangerous, and, therefore, a nuisance, and a passer-by or adjoining owner suffers damage by their collapse, the occupier, or the owner, if he has undertaken the duty of repair, is answerable, whether or not he knew, or ought to have known, of the danger. The undertaking to repair gives the owner control of the premises, and a right of access thereto for the purpose of maintaining them in a safe condition. On the other hand, if the nuisance is created, not by want of repair, but, for example, by the act of a trespasser, or by a secret and unobservable operation of nature, such as a subsidence under or near the foundations of the premises, neither an occupier nor an owner responsible for repair is answerable, unless with knowledge or means of knowledge he allows the danger to continue. In such a case, he has in no sense caused the nuisance by any act or breach of duty. I think that every case decided in the English courts is consistent with this view.

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By common law, it is an indictable offence for an occupier of premises upon a highway to permit them to get into a dangerous condition owing to non-repair. It was not and is not necessary in an indictment to aver knowledge or means of knowledge (see R v Watson). The indictment will be found in 3 Ld Raym 18 and in 1 Salk 357. In R v Bradford Navigation Co at p 651, Blackburn J laid it down as a general principle of law that persons who manage their property so as to be a public nuisance are indictable. In A-G v Tod Heatley it was clearly laid down that there is an absolute duty to prevent premises becoming a nuisance. In Rapier v London Tramways Co, Lindley LJ said, at p 600:

… if I am sued for a nuisance, and the nuisance is proved, it is no defence on my part to say, and to prove, that I have taken all reasonable care to prevent it.

The first case against the landlord to which I shall refer is Payne v Rogers. The headnote in that case is as follows, at p 350:

If the owner of a house is bound to repair it, he, and not the occupier, is liable to an action on the case for an injury sustained by a stranger from the want of repair.

The judgment of Eyre LCJ, was as follows [p 351]:

Evidence was given of repairs being actually done by the landlord. And I thought at the trial that though the tenant was prima facie bound to repair, and therefore liable, yet if he could show that the landlord was to repair, then that the landlord was liable.

In the same case, Buller J said, at p 351:

The direction of Eyre, L.C.J., was most clearly right. I agree that the tenant as occupier is prima facie liable to the public, whatever private agreement there may be between him and the landlord. But if he can show that the landlord is to repair, the landlord is liable for neglect to repair.

Again in the same case, Heath J said, at p 351:

If we were to hold that the tenant was liable in this case, we should encourage circuity of action, as the tenant would have his remedy over against the landlord.

The point of the decision seems to be this. Liability can be based on neglect to perform his covenant to repair. By his covenant he had retained the obligation to repair. That obligation had not been performed, and the question of knowledge did not enter into it.

In Quarman v Burnett, the question was whether the hirer of a carriage and pair and of the driver was liable for the negligence of the driver. Parke B said, at pp 510, 511:

The rule of law may be, that where a man is in possession of fixed property, he must take care that his property is so used or managed, that other persons are not injured; and that, whether his property be managed by his own immediate servants, or by contractors with them, or their servants. Such injuries are in the nature of nuisances: but the same principle which applies to the personal occupation of land or houses by a man or his family, does not apply to personal moveable chattels. …

Counsel before us referred to Todd v Flight, but it has no bearing upon the case before the court. It was an action against an owner who had demised, knowing that the premises were in a dangerous condition and without obtaining any covenant to repair.

Page 245 of [1939] 4 All ER 241

The next case to which I wish to refer is Pretty v Bickmore. The defendant, the owner, had let premises on a lease with a covenant by the lessee to keep them in repair. The flap over a coal-cellar under the footpath was, at the time of the demise, out of repair, so as to be dangerous. The plaintiff was injured by its giving way. It was held that the defendant was not liable, because the duty to repair rested upon the tenant. One would have expected to find some reference to the question of the defendants knowledge, if it was thought to be relevant. It was certainly not found that the defendant knew of the disrepair, and no reference was made to his knowledge one way or the other. However, Bovill, CJ, said, at p 404:

In all the cases where the landlord has been held to be responsible, it will be found that he has done some act authorising the continuance of the dangerous state of the premises. The ground of the decision in Todd v. Flight was, that the declaration contained an allegation that the defendant let the house when the chimneys were known by him to be ruinous and in danger of falling, and that he kept and maintained them in that state. …

Then Bovill CJ, at p 404, quotes Erle CJ, in Todds case, at p 390:

“… and thus he was guilty of the wrongful non-repair which led to the damage, and after the demise the fall appears to have arisen from no default of the lessee, but by the laws of nature.” That is wholly inapplicable to the present case. …

Therefore, it looks as if the defendant there was not being deemed guilty of negligence. The judgment of Bovill CJ in Pretty v Bickmore concluded with these words, at p 405:

If the duty of repairing had rested upon the landlord, no doubt he would have been liable.

The same thing was said by Keating J in that casenamely, that he would have been liable if he had retained the obligation to repair the premises. Both the judges seem to be stating that view quite regardless of any question of whether or not the landlord knew. Gwinnell v Eamer, which was referred to in argument, does not throw any light on this case. It was an action on the case, where the landlord had let with a covenant by the tenant to repair, and does not throw any light on the case before this court.

Perhaps the most important case for our consideration is Tarry v Ashton. It is necessary to examine this case with care, and particularly the judgment of Blackburn J. It is a case which, in our view, has been misunderstood in quite a number of later cases. The facts of that case were simple. The plaintiff was walking along the Strand in front of the defendants house in November 1874, when a large lamp suspended from the front of the house fell upon her and injured her. A man was blowing water out of the gas-pipes. He had placed his ladder against the lamp-bracket. It slipped, and the man fell. The lamp got shaken, and its fastenings broke. In August 1874, the defendant, who had only lately become the tenant of the house, knowing that the lamp and other fittings were of some age, employed an experienced fitter to examine

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them and put them in thorough repair. After the accident, examination showed that the breakage was caused by the general decay of the connections. The jury found that the defendant was not negligent, and had no knowledge of the want of repair, but that the fitter was negligent. Judgment was entered for the plaintiff, with leave to the defendant to move to enter a verdict for the defendant or for a non-suit. At the time of the accident in November, it is clear that the defendant had no knowledge whatever of the defective condition of the lamp. It could not be said, and it was not said, that he ought to have known, as a competent fitter had just been employed to make sure that the lamp was in thorough repair. At no time, even in August, did the defendant know of, or even suspect, disrepair. It was merely that, knowing the lamp was old and might want attention, he took the precaution of employing a fitter to examine it and do whatever might be necessary. In fact, the lamp was in a dangerous condition. It was a nuisance, and the defendant was held liable. Unfortunately, the headnote in the case is inaccurate. I will not read the first paragraph, but will come to what I think is the inaccuracy:

Held, that the plaintiff was entitled to the verdict. By Lush and Quain, JJ., on the ground, that if a person maintains a lamp projecting over the highway for his own purposes it is his duty to maintain it so as not to be dangerous to the passengers; and if it causes injury owing to want of repair, it is no answer on his part that he had employed a competent person to repair it. By Blackburn, J., on the ground that under the circumstances of the case, it was shown that defendant knew that the lamp wanted repair in August, and it was his duty, therefore, to put it in reasonable repair, and the person he employed having failed to do so, defendant was liable for the consequences of the breach of duty.

It is perfectly plain from the facts of the case that, so far from it being shown that the defendant knew that the lamp wanted repair in August, the contrary was the fact. Blackburn J, as he then was, said, at p 318:

It appears that the defendant came into occupation of a house with a lamp projecting from it over the public thoroughfare, which would do no harm so long as it was in good repair, but would become dangerous if allowed to get out of repair. It is therefore not a nuisance of itself. But if the defendant knowingly maintained it in a dangerous state he would then be indictable for the nuisance. This much is clearly decided by R. v. Watson. …

That statement would be true without the word “knowingly.” R v Watson is certainly not an authority for requiring the insertion of the word “knowingly.” Blackburn J continued, at p 319:

This much is clearly decided by R. v. Watson, for the defendant was there held liable for not repairing his house which was on a highway and was ruinous and like to fall down, on the ground that as occupier he was bound to keep the house so as not to be a nuisance. As I have said, I do not wish to decide more than is necessary; and if there were a latent defect in the premises, or something done to them without the knowledge of the owner or occupier by a wrongdoer, such as digging out the coals underneath and so leaving a house near the highway in a dangerous condition, I doubtat all events, I do not saywhether or not the occupier would be liable [foreshadowing the decision in Barker v. Herbert]. But if he did know of the defect, and neglected to put the premises in order, he would be liable.

That, of course, is referring to the kind of defect which he has just

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mentionednamely, a latent defect, or a defect due to somebody elses action. Blackburn J continues, at p 319:

He would be responsible to this extent, that as soon us he knew of the danger he would be bound to put the premises in repair or pull them down. So also the occupier would be bound to know that things like this lamp will ultimately get out of order, and, as occupier, there would be a duty cast upon him from time to time to investigate the state of the lamp. If he did investigate, and there were a latent defect which he could not discover, I doubt whether he would be liable; but if he discovers the defect and does not cure it, or if he did not discover what he ought on investigation to have discovered, then I think he would clearly be answerable for the consequences. Now in the present case there is ample evidence that in August the defendant was aware that the lamp might be getting out of repair, and it being his duty to put it in repair, he employs Chappell to do so. We must assume, I think, that Chappell was a proper person to employ, and I may observe that he was clearly not the defendants servant, as the jury say, but an independent contractor. But it was the defendants duty to make the lamp reasonably safe, the contractor failed to do that; and the defendant, having the duty, has trusted the fulfilment of that duty to another who has not done it. Therefore the defendant has not done his duty, and he is liable to the plaintiff for the consequences. It was his duty to have the lamp set right; it was not set right.

Why was it “the defendants duty to make the lamp safe”? Blackburn J does not say it was his duty because he was aware that the lamp might be getting out of repair, but merely “it being his duty to put it in repair.” Surely it was not his duty because he gave his mind to the question of the safety of his premises, and, wishing to ensure that safety, employed a contractor to examine them and do all that might be necessary. He could not be in a worse position than if he had not given the matter a thought, and, therefore, had not had anyone to examine the premises and do what was necessary. The judge must have meant that he was under a duty because, as an occupier, he was bound to keep his premises, including the lamp, from becoming unsafe for want of proper repair. That duty was not performed, and, therefore, he was liable, despite the absence of negligence or knowledge. The judge contrasted the position of a nuisance due to want of repair with that of a nuisance due to a latent defect or an act of trespass. Lush and Quain JJ rested their judgments on an absolute obligation to prevent ones property from becoming a nuisance. There is no question about that.

In Pollock on Torts (14th Edn), p 417, there is an interesting note on Tarry v Ashton. We are told in the preface that the late Sir Frederick Pollock had collected many notes for his next revision. The footnote by the editor is as follows:

On the modern view, Tarry v. Ashton is properly treated as a case of nuisance … Pollocks note proceeded: “The decision is right because there was no evidence that the defendant knew of the danger.”

The editor then adds that this would be more accurately expressed “that the defendant knew or ought to have known of the danger.” The note by Sir Frederick Pollock continues as follows:

I fail to see any real difference of opinion among the judgments in Tarry v. Ashton. Lush and Quain, JJ., were not considering the possibility of a latent defect.

We have there an opinion of great value that all the three judges in Tarry v Ashton decided that there was an absolute duty upon the

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occupier of premises adjoining the highway to keep them in sufficient repair to prevent their becoming a danger. Blackburn J further drew the distinction between want of repair and act of trespass or latent defect.

The next case was Nelson v Liverpool Brewery Co. That was an action against owners who had let a house to a tenant with no agreement on either side as to the repair of the main walls, roof and main timbers. Owing to want of repair, a chimney-pot fell and injured the plaintiff, a servant of the tenants, and it was held that the plaintiff was not entitled to recover against the owners, although they had ample notice of the want of repair. I refer to the case because of the following passage. The judgment of the court, which consisted of Denman and Lopes JJ, was delivered by Lopes J, who said, at p 313:

We think there are only two ways in which landlords or owners can be made liable, in the case of an injury to a stranger by the defective repair of premises let to a tenant, the occupier and the occupier alone being prima facie liable: first, in the case of a contract by the landlord to do repairs, where the tenant can sue him for not repairing; secondly, in the case of a misfeasance by the landlord, as, for instance, where he lets premises in a ruinous condition.

In the first case there mentioned, there is no suggestion at all of the necessity of proving knowledge, or means of knowledge, on the part of the landlord.

The next case was Harrold v Watney, where a fence round the defendants land adjoining the highway was in want of repair, and a child of 4 climbed on to it and fell. The fence was found to be defective. There was no finding that the owner knew, or ought to have known, of the defective condition of the fence. It was found to be a nuisance. The judgment in the court of first instance, I think, had been given for the defendant. The plaintiff appealed and succeeded. There was no suggestion there from first to last that the defendants knowledge had any relevance whatever to the question of his liability. The whole discussion was on whether or not the duty to maintain the fence in a safe condition extended to making it safe even if children climbed upon it for the purpose of looking over it. There was no suggestion whatever of the necessity of proving knowledge.

In Salmond on Torts (9th Edn), there is an interesting little note on this case, at p 512:

The occupier is liable of course for wilful or negligent acts of misfeasance whereby he obstructs the highway or renders it dangerous, and he is also liable for maintaining his adjoining premises in such a dangerous condition as to constitute a nuisance to the highway.

He cited Harrold v Watney. There, again, there is no suggestion that knowledge, or means of knowledge, has any relevance.

The next case, Palmer v Bateman, was an Irish case, and I think is the only case inconsistent with the view the court holds. The plaintiff was injured by a piece of the gutter from the roof of the defendants house falling on her as she was passing along the street. The action was

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against the occupier for damages, and it failed. It was based on negligence, and negligence was negatived by the jury. On appeal, it was sought to rest on nuisance, and reliance was placed upon Tarry v Ashton. The effect of Tarry v Ashton was completely misrepresented by counsel, who said that Blackburn J based his judgment on the defendants knowledge of the nuisance, and that this view was not dissented from by the other judges. Lord OBrien LCJ said, at p 399:

The point decided in [Tarry v. Ashton] was that the owner of a house which to his knowledge, was in a dangerous condition, could not free himself from responsibility by employing a contractor who was apparently competent, but failed to put things right.

It was actually said by Wright J, that the judgment of all three members of the court was that the defendant with knowledge of the defect could not escape liability by shifting the responsibility on to the shoulders of the contractor. Such a misrepresentation of what was said and decided in Tarry v Ashton must tend to reduce the valuein English courts, at any rateof the decision in Palmer v Bateman.

The next case referred to was Barker v Herbert. The defendant was the owner in possession of an empty house in a street with an area adjoining the highway. Some boys broke away a part of the railings guarding the area, with the result that the plaintiff, a child, fell into the area. He sued the owner for damages. The jury found that the area was, at the time of the accident, a nuisance, but that the defendant did not know that the rail had been moved, and that sufficient time had not elapsed to enable him to have known of it if he had used reasonable care. Judgment was given for the defendant. The plaintiff appealed. It was contended on behalf of the plaintiff that the defendants duty to have his premises safe was absolute and without any limitation. It would have been quite easy for the court to say, if they had so thought, that an occupier of premises could never be liable for the premises becoming a nuisance without proof of knowledge, or means of knowledge. However, all that was decided, in very carefully chosen language, was that he was not liable if the dangerous state of the premises was due to the act of a trespasser, and not to any default of the occupier, or those for whom he was responsible, unless he neglected to abate the danger for an undue time after he became, or ought to have become, aware of it. Vaughan Williams LJ, at p 637, recognised the duty of a person, where premises abut on the highway, to maintain them in such a condition as not to constitute a danger or nuisance. Fletcher Moulton LJ said, at p 642:

The possessor of land adjoining a highway may not cause his premises to be a nuisance. …

It is clear, I think, that the word “cause” as there used should be read as “cause or by breach of duty permit.” Fletcher Moulton LJ continued, at p 642:

In a case where the nuisance is created by the act of a trespasser, it is done

Page 250 of [1939] 4 All ER 241

without the permission of the owner and against his will, and he cannot in any sense be said to have caused the nuisance. …

He then went on to deal with a continuance of the nuisance when the occupier knows, or ought to know, of it. Farwell LJ, dealing with the contention that an occupier is under an absolute obligation at all times and in all circumstances to prevent a nuisance, said that a landowner was not liable for a nuisance caused, not by his own action, but by something done by another person against his will. I think it is clear that by the words “own action” Farwell LJ must have meant “own action or default.” He refers to Tarry v Ashton, sayingas I think, inaccuratelythat Blackburn J based his judgment on knowledge by the defendant that the lamp was out of repair. For all that, however, it seems to me that the decision in Barker v Herbert was in complete harmony with the views of Blackburn J. If the nuisance is due to the occupiers failure to keep in repair, there is liability. If it is due to the act of a trespasser, there is no liability without proof of subsequent culpable neglect.

In Pritchard v Peto, the plaintiff went to a house owned and occupied by the defendant to collect money due. While he was standing on the doorstep, a piece of cornice fell from the house on to his head. It was found that the defendant did not know of the defect, nor ought to have known of it. It was due to decay. The defendant was held not liable. In the course of his judgment, Bailhache J said that in Tarry v Ashton the court held that it was the defendants duty to make the lamp reasonably safe, and that he had not done his duty and was liable for the consequences. It was a nuisance case. Bailhache J held in the case before him that the plaintiff was in the position of an invitee, and that the duty was only the same as that owed to the plaintiff in Indermaur v Dames, which was to take reasonable care to keep ones house in such a state of repair as not to expose the plaintiff to any hidden danger of which she was aware, or ought to have been aware. He added these important words, at p 176:

… quite a different duty from that owed by the defendant to the plaintiff in Tarry v. Ashton.

In Noble v Harrison, a branch of a tree growing on the defendants land overhanging the highway 30 ft above the ground broke and fell upon the plaintiffs motor coach. The plaintiff claimed damages, but failed, because the fracture was due to a latent defect which was not discoverable by any reasonably careful inspection, and which was, of course, unknown to the defendant. The claim was based on nuisance. The county court judge had found for the plaintiff. The Divisional Court reversed the decision. Rowlatt J said, at p 338:

The result of [the cases] is that a person is liable for a nuisance constituted by the state of his property: (1.) if he causes it; (2.) if, by the neglect of some duty, he allowed it to arise; and (3.) if, when it has arisen without his own act or default, he omits to remedy it within a reasonable time after he did or ought to have become aware of it.

Page 251 of [1939] 4 All ER 241

He distinguished Tarry v Ashton by saying that in that case there was an absolute duty to maintain the lamp safely, but that there was no such duty with regard to a tree. In our opinion, this is a correct statement of the law.

In the present case, the defendant was under a duty to repair. Owing to neglect of that duty, the defendant allowed his house to become a nuisance, and therefore the defendant is liable. Wright J, as he then was, agreed. In dealing with Tarry v Ashton, he was, I venture to think, clearly mistaken in saying that the plaintiff was entitled to judgment on the ground of negligence because the defect was not observed owing to the negligence of the defendants servant employed to inspect it. Negligence was in fact negatived, and Blackburn J in terms said that the person employed was not a servant but a contractor. The judge went on to say, however, that Lush and Quain JJ had held that there was an absolute duty to keep the lamp in repair, and that Blackburn J thought that for a latent defect the occupier would not be liable. Adopting that view, confirmed by the principle laid down in Barker v Herbert, he held that the defect in the branch was clearly latent, and that the defendant was, therefore, not liable, in the absence of knowledge, or means of knowledge.

Much reliance was placed upon St Annes Well Brewery Co v Roberts by the appellant. The defendants were the owners, but not the occupiers, of part of the old city wall at Exeter, which fell on the plaintiffs inn. When they let the property, there was no reason to suppose that it was unsafeI think the wall had been there for some hundreds of yearsor that by any reasonable diligence the defendants could have ascertained that it was unsafe. They had not undertaken any obligation to repair. It was held by the Court of Appeal, overruling Acton J, that the plaintiffs had failed to bring their case within the principles of Todd v Flight, and that there was no liability. Scrutton LJ agreed that the wall was a nuisance, but went on to ask who the occupier was. After saying that the defendants were not the occupiers, he said, at p 7:

I think also it is clear law that the person liable for nuisance on premises is the occupier.

Then follows the passageonly obiterwhich has been relied upon so strongly by the appellant:

I think it has been established by authority binding on this courtI refer to Barker v. Herbert, which has been followed in other casesthat the occupier himself is not liable if he did not create the nuisance on the land which he occupies unless, perhaps not even then knowing of the nuisance or being in such a position that he ought with reasonable care to have known of the nuisance, he allows it to continue … if Wilson [the occupier] had been sued for nuisance, I think the question to be determined in his case would have been: Did you know that there was a nuisance? Ought you, with the exercise of reasonable care, to have known there was a nuisance? And if both these questions were answered in the negative, there would have been no liability on the occupier.

This passage, based as it is on Barker v Herbert, must, we think,

Page 252 of [1939] 4 All ER 241

be interpreted with reference to the facts of the case then before the court. The plaintiffs house came right up to the wall, and the plaintiff or his predecessors had excavated out of the city wall recesses for use as cupboards. It was found that that was partly responsible for the collapse, and that the other contributing cause was a gradual washing away of the soil under the foundations. The fall was due, to quote Scrutton LJ, at p 5:

to as latent a defect as you could expect any defect to be.

There was no want of repair of the wall itself, except to put right the excavations made either by the plaintiff himself or by his predecessors, and the case was typical of that contemplated by Blackburn J in Tarry v Ashton and by the court in Barker v Herbert. It was a nuisance due partly to the acts of a trespasser and partly to a latent defect under the foundations, and not to any want of repair. We are satisfied that Scrutton LJ was thinking only of the case with which he was dealing, and had no intention of laying down anything inconsistent with Tarry v Ashton and other cases dealing with nuisance due to want of repair.

In our view, the opinion expressed by Goddard J, in Wilchick v Marks & Silverstone is not accurate. It was unnecessary for the decision of the case before him, but, at p 66, he said this, and again this passagenaturally enough, of coursewas relied on by the appellant in the case before us. He referred to Payne v Rogers, and said that that case had been approved in R v Pedly, Todd v Flight, Pretty v Bickmore and Nelson v Liverpool Brewery Co, and that those cases established that, where a landlord has assumed an obligation to repair, he is liable to a person injured through disrepair, though to that must now be added that the plaintiff must prove that he had knowledge of the state of disrepair. The judge relied upon Morgan v Liverpool Corpn and St Annes Well Brewery Co v Roberts. That statement of law, in our view, is not in accordance with Tarry v Ashton and the other cases to which I have referred. Morgan v Liverpool Corpn was a case between tenant and landlord. It was based on breach of duty to repair, and it was held, in very carefully chosen language, that, as between the tenant and the landlord, the landlord was entitled to notice from the tenant of the disrepair complained of before he could be sued for breach of duty. That case has no bearing on the question between occupiers and owners who are under an obligation to repair and the public. I have already expressed the view that the passage in the judgment of Scrutton LJ, in the other case relied uponthe St Annes Well Brewery Co casehad no reference to cases of nuisance owing to want of repair.

There is only one other case to which I ought to refer, and that is the Irish case of Mullan v Forrester. The defendants were the owners of a dye-works in Belfast. In 1910, the works were closed down,

Page 253 of [1939] 4 All ER 241

and nothing in the way of repair was thereafter done. In 1920, notices were served on the defendants to take down such portions of the building as were dangerous. In consequence of such notices, the defendants took down the roof and the walls other than the street wall. This wall was then left without any support. It had lost the support it got from being bonded into the side walls and from the roof. In a storm, it fell and killed three people, and the action was for damages under Lord Campbells Act. The jury negatived negligence, and, although nuisance had been pleaded, the trial judge refused to put to the jury the question whether the wall was a nuisance, and gave judgment for the defendants. The plaintiffs applied to the Court of Appeal for a new trial, on the ground that, if the wall was a nuisance, they were entitled to judgment although the jury had found that the defendants did not know, or ought to have known, that it was dangerous. A new trial was ordered, Moore J dissenting. Pim J expressed the opinion that the evidence was altogether in favour of the view that the wall became a nuisance from the time the roof and side walls were removed (acts done by the defendants), and that the defendants knowledge of the danger was immaterial. It would seem consistent with this view that a nuisance caused, not by a positive act, but by neglecting to perform a positive duty, should impose a similar liability without proof of knowledge or means of knowledge. Gordon J took the same view. Indeed, he was prepared to enter judgment for the plaintiffs on the ground that the evidence was conclusive that the wall was made dangerous by the removal of the side walls and roof, and that the defendants knowledge was immaterial. Although Barker v Herbert was not cited, he pointed out that, if the wall became a nuisance owing to the act of a third party, or to some event which no one could foresee, knowledge would be material. Moore J dissented. He thought that the findings of the jury cleared the defendants of having done any act to cause the danger, that they were not, therefore, the authors or creators of the danger, and that they had not wrongfully suffered the wall to continue in a dangerous condition. He considered the question of the necessity of proving knowledge, and came to the conclusion that Blackburn J had decided in Tarry v Ashton that, where the defendant is sued as occupier of the land upon which a nuisance exists, and not as its original creator, if the subject-matter was not a nuisance originally, he ought not to be made liable for it unless he had knowledge and was in default. With the greatest respect to the judge, Blackburn J decided no such thing. Ashton had no knowledge, and had been cleared of all negligence. He was liable because his duty to keep in repair had not in fact been performed. Moore J also thought that the defect in the wall was latent. In our opinion, the view of the majority of the court was in accord with the English cases. The principle laid down by the majority of the court was that, if premises become dangerous as the result of something done by an occupier, and cause damage, the occupier is liable, although he did not know of the danger, and was not negligent

Page 254 of [1939] 4 All ER 241

in not knowing. That principle is in harmony with the principle laid down in Tarry v Ashton that, if premises become dangerous as a result of failure to repair, and cause damage, the occupier is liable, although he did not know of the danger, and was not negligent in not knowing. Positive acts of neglect of duty are thus placed on the same footing. On the other hand, if premises become dangerous, not by the occupiers act, nor neglect of duty, but as the result of the act of a third party, or of a latent defect, the occupier is not liable without proof of knowledge or means of knowledge and failure to abate it. In our view, the appeal fails, and must be dismissed with costs.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Hyman Stone & Co, Sheffield (for the appellant); Doyle Devonshire & Co, agents for Irwin Mitchell Kershaw & Co, Sheffield (for the respondent).

Charles Shelley Esq   Barrister.

Pioneer Laundry and Dry Cleaners Ltd v Minister of National Revenue

[1939] 4 All ER 254


Categories:        TAXATION; Income Tax, Capital Allowances        

Court:        PRIVY COUNCIL        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        11, 13 JULY, 13 OCTOBER 1939        


Privy Council Canada Income tax Allowances Depreciation General instructions governing allowances Exercise of discretion New company taking over business of company ceasing to exist Income War Tax Act (RSC 1927, c 97), ss 3, 5(a), (b), 58, 60, 63 Customs and Inland Revenue Act 1878 (c 15), s 12.

The appellant company was incorporated in 1932. Upon its formation, it acquired the machinery and equipment of a company of the same name which had then gone into voluntary liquidation. The appellant company in its statutory return claimed an allowance in respect of depreciation of that machinery and equipment calculated in accordance with the rates stated in certain circulars issued by the respondent to local officers of the department, and the appellant company contended that these circulars were to be treated by the respondent as an exercise in its favour of his statutory discretion as to depreciation conferred upon him by the Canadian Income War Tax Act:

Held (i) the taxpayer has a statutory right to an allowance in respect of depreciation during the accounting year on which the assessment in dispute is based.

(ii) the decision of the Minister is not purely administrative and final, and a dissatisfied taxpayer has a right of appeal.

(iii) the court would not, however, interfere with the Ministers decision unless it were manifestly against sound and fundamental principles.

(iv) the reason given by the respondent for his decision was not a proper ground for the exercise of his discretion, and, in the absence of fraud or improper conduct, he was not entitled to disregard the separate legal existence of the appellant company, and to inquire as to who its shareholders were, and its relation to its predecessors.

Page 255 of [1939] 4 All ER 254

Notes

The principal question in the present appeal was whether the issue of general instructions governing depreciation allowances is, in effect, the exercise of a discretion given by Parliament to the revenue authorities. It is decided that it is not. An important question was argued, but had not to be decided and this was whether a taxpayer who has already received in previous years allowances for depreciation amounting to 100 per cent of the book value of the assets is entitled to any further allowance.

As to Allowances for Depreciation, see Halsbury (Hailsham Edn), Vol 17, pp 165169, paras 337345; and for Cases, see Digest, Vol 28, pp 5254, Nos 266276.

Cases referred to

Re Addie & Sons (1875) 1 Tax Cas 1; 28 Digest 48, case 246i.

Forder v Handyside (1876) 1 Ex D 233; 28 Digest 52, 266, 45 LJQB 809, 35 LT 62, 1 Tax Cas 65.

Hall (John) Junior & Co v Rickman [1906] 1 KB 311; 28 Digest 53, 267, 75 LJKB 178, 94 LT 224.

Appeal

Appeal by special leave from a majority judgment of the Supreme Court of Canada (Crocket, Kerwin and Hudson JJ, Sir Lyman P Duff CJ, and Davis J, dissenting), dated 12 December 1938, affirming a judgment of the Exchequer Court of Canada (Angers J), dated 4 November 1937, which dismissed the appellants appeal from the decision of the respondent whereby he refused the appellants claim for an allowance for depreciation on machinery included in their income tax return for the year ending 31 March 1933. The judgment of their Lordships was delivered by Lord Thankerton.

Martin Griffin KC for the appellants.

F P Varcoe KC and Frank Gahan for the respondent.

Griffin KC: The machinery in question had been owned by a company which went into liquidation. The judgment of the Supreme Court is erroneous in deciding that it was the intention of the Canadian Parliament that there should be no depreciation allowance unless the Minister granted one, and that the Minister, in deciding whether or not to grant a depreciation allowance, was to be entitled to look beyond the established facts of ownership. The Canadian Income War Tax Act defines and limits the field within which the Ministers discretion must be exercised with regard to depreciation. There is no Canadian authority on the question whether purchasers of secondhand property are entitled to deduct depreciation if their vendor has been allowed it in full. Angers J found every fact entitling the appellants to judgment, and yet gave judgment against the appellants. The appellants rest their case on the dissenting judgment of Sir Lyman P Duff CJ and Davis J.

Varcoe KC: Depreciation has been described as expired capital outlay. A prudent business, although not obliged to do so, reserves out of its profits sufficient to make good that capital waste. The object of depreciation allowance is to secure the investment of the shareholders. The Customs and Inland Revenue Act 1878, s 12, contains provision respecting depreciation. The discretion of the commissioners under this

Page 256 of [1939] 4 All ER 254

Act in respect of depreciation is narrower than that contained in the Canadian Act. Deductions beyond 100 per cent are not reasonable in the case of a continuing company. This company, which had no new shareholders in it, had the shareholders interest in respect of capital fully protected, and 100 per cent depreciation had been allowed by the Minister. The new companys shareholders, which are the same, cannot seek further depreciation allowance by the Minister. If the Minister would have been right in refusing further relief to the old company, he was not guilty of any impropriety in refusing relief to the new company, which had merely duplicated the old company. [Counsel referred to Re Addie & Sons, Forder v Handyside and Hall (John) Junior & Co v Rickman.]

Gahan followed on the same side.

Griffin KC was not called upon in reply.

Martin Griffin KC for the appellants.

F P Varcoe KC and Frank Gahan for the respondent.

13 October 1939. The following judgments were delivered.

LORD THANKERTON. The question in this appeal relates to the disallowance by the respondent of certain allowances for depreciation claimed by the appellants. In the return filed by the appellants in July 1933, in compliance with the Income War Tax Act (RSC 1927, s 97), s 33, for the fiscal year ending 31 March 1933, the appellants disclosed gross earnings of $171,122.04, and claimed various deductions including allowances for depreciation as follows:


Depreciation:        Per cent.        $                

Machinery and Equipment        10        14,131.15        

Automobiles        20        2,935.08        

Horses        10        135.25        

Furniture and Fixtures        10        574.07        

               $17,775.55        


On 19 February, the Income Tax Commissioner sent to the appellants a notice of assessment, in which the appellants claim in respect of depreciation was disallowed except to the extent of $255.08 under the second item, in respect of two coupés and a truck body, which will be referred to later.

The appellants appealed to the respondent under s 58 of the Act, but the appeal was dismissed by the respondent, and, the appellants having filed a notice of dissatisfaction under s 60, the respondent transmitted the papers to the Exchequer Court in terms of s 63. Pleadings were ordered and filed, and, after trial, the appeal was dismissed by the Exchequer Court (Angers J) on 4 November 1937. On appeal to the Supreme Court of Canada, the case was heard before Sir Lyman P Duff CJ, Crocket, Davis, Kerwin and Hudson JJ, and on 12 December 1938, the court dismissed the appeal, Sir Lyman P Duff CJ, and Davis J, dissenting.

The relevant facts may be summarised as follows. The appellant company was incorporated on 23 March 1932, and it acquired the machinery and equipment, etc, in respect of which the claim for depreciation has been disallowed, from a company called the Home Service Co Ltd,

Page 257 of [1939] 4 All ER 254

at a price fixed by independent appraisal. The correctness of this valuation has not been challenged by the respondent. The three items in respect of which the claim was admitted were acquired from other sources. Home Service Co Ltd, was incorporated also on 23 March 1932, and on 1 April 1932, it acquired all the physical assets of seven companies, including the original Pioneer Laundry and Dry Cleaners Ltd, which had gone into voluntary liquidation on 30 March 1932. The machinery and equipment, etc, here in question were among the assets acquired by Home Service Co Ltd, from the original Pioneer Laundry and Dry Cleaners Ltd.

At this time, all the outstanding share capital of the seven companies above referred to was owned directly or through nominees by a company called Pioneer Investment Co Ltd, the assets of which were also acquired by Home Service Co Ltd, with the exception of (a) shares owned by the former companyie, the shares of the seven subsidiaries, which, by reason of the liquidation, became unsaleableand (b) amounts owing to the former company by its shareholders. Pioneer Investment Co Ltd went into voluntary liquidation on 7 April 1932. The machinery and equipment, etc, here in question were fully written off by depreciation while they were in the ownership of the original Pioneer Laundry and Dry Cleaners Ltd.

All the share capital of Home Service Co Ltd, except 40 shares out of 10,000 shares of par value of $100 each, was issued or sold to the liquidators of the operating subsidiary companies of Pioneer Investment Co Ltd, in consideration of the transfer of the assets of the operating companies to Home Service Co Ltd. On the winding up of the operating companies, these shares were distributed to the parent company, Pioneer Investment Co Ltd, and, on the winding up of that company, were distributed to its own shareholders, with the admitted result that the shareholders of Home Service Co Ltd, are the same as were the shareholders of Pioneer Investment Co Ltd, and their respective holdings in the new company are the same, or substantially the same, as were their respective holdings in the old company. The 40 shares referred to were allotted to Pioneer Investment Co Ltd, in part-payment of the assets acquired from that company.

It is further agreed that during the fiscal year ended 31 March 1933, the shareholders of the appellant company were as follow:


       Shares.        

Home Service Co., Ltd.        97        

Charles H. Wilson        1        

Mary E. Stewart        1        

Thomas H. Kirk        1        

       100        


It is also agreed that the three persons named were during such fiscal year shareholders of the Home Service Co Ltd.

The amount of depreciation claimed by the appellant company in their

Page 258 of [1939] 4 All ER 254

statutory return was in conformity with the rates stated in certain circulars issued by the respondent to local officers of the department, and the appellants sought, because of their being made available to the public, to have them treated as an exercise by the respondent of his statutory discretion as to depreciation. Their Lordships agree with the view of Crocket and Hudson JJ, that these departmental circulars are for the general guidance of the officers, and cannot be regarded as the exercise of his statutory discretion by the respondent in any particular case. The other judges of the Supreme Court express no opinion on this point. The trial judge had expressed a contrary view.

The main question in the appeal relates to the discretion conferred on the respondent as to allowances for depreciation by the Income War Tax Act (RSC 1927, c 97), ss 3, 5, 6, the material provisions of which are as follow:

3. For the purposes of this Act, “income” means the annual net profit or gain or gratuity, whether ascertained and capable of computation as being wages, salary or other fixed amount, or unascertained as being fees or emoluments, or as being profits from a trade or commercial or financial or other business or calling, directly or indirectly received by a person from any office or employment, or from any profession or calling, or from any trade, manufacture or business as the case may be, whether derived from sources within Canada or elsewhere. …

5. “Income” as hereinbefore defined shall for the purposes of this Act be subject to the following exemptions and deductions: (a) such reasonable amount as the Minister, in his discretion, may allow for depreciation, and the Minister in determining the income derived from mining, and from oil and gas wells and timber limits shall make such an allowance for the exhaustion of the mines, wells and timber limits as he may deem just and fair. …

6. In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of … (b) any outlay, loss or replacement of capital or any payment on account of capital or any depreciation, depletion or obsolescence except as otherwise provided in this Act …

In the first place, as to the nature of the discretion thus conferred on the Minister, Crocket and Hudson JJ state:

Reading these sections by themselves, and without reference to any outside authorities it would seem fairly plain that it was the intention of Parliament that there should be no depreciation allowance unless the Minister, in his sole discretion decided that there should be. There is nothing anywhere to indicate the principle or basis on which the depreciation allowance is to be ascertained. It might vary according to different accounting methods, different economic theories, different general business conditions in the country. Nor is there anything in the statute which denies a right in the Minister to look beyond the legal facade for the purpose of ascertaining the realities of ownership or the possibilities of schemes to avoid taxation, and it would seem to me that it was the intention of Parliament that the Minister, and he alone, could properly estimate these different factors.

The authorities cited on behalf of the appellants are mostly of statutes somewhat differently worded from ours, and in effect hold no more than that, where the statute gives a discretion to administrative officers, and provides an area in time or space for the exercise of such discretion, the commissioners must take that into account. In the present case, the Minister has exercised his discretion, and, as already stated, the statute does not define or limit the field for operation of such discretion.

A similar opinion was expressed by Kerwin J. Their Lordships are unable to agree with these views, and they agree with the opinion of Davis J, in which Sir Lyman P Duff CJ concurred, and in which he states:

The appellants were entitled to an exemption or deduction in “such reasonable amount as the Minister in his discretion, may allow for depreciation.” That

Page 259 of [1939] 4 All ER 254

involved, in my opinion, an administrative duty of a quasi-judicial charactera discretion to be exercised on proper legal principles.

In their Lordships opinion, the taxpayer has a statutory right to an allowance in respect of depreciation during the accounting year on which the assessment in dispute is based. The Minister has a duty to fix a reasonable amount in respect of that allowance, and, so far from the decision of the Minister being purely administrative and final, a right of appeal is conferred on a dissatisfied taxpayer. It is equally clear, however, that the court would not interfere with the decision, unless, as Davis J states, “it was manifestly against sound and fundamental principles.”

The decision of the Income Tax Commissioner in the present case, which is accepted by the respondent as his statutory decision, makes clear the point of principle which the appellants claim to have been thereby contravened. It is as follows:

The Hon. the Minister of National Revenue, having duly considered the facts as set forth in the notice of appeal and matters thereto relating, hereby affirms the said assessment on the ground that, while the company was incorporated and commenced operations during 1932, there was no actual change in ownership of the assets purchased or taken over from Pioneer Investment Co., Ltd., by Home Service Co., Ltd. (of which the taxpayer is a subsidiary), and set up in the books of the taxpayer at appreciated values, that, in the exercise of the statutory discretion, a reasonable amount has been allowed for depreciation, and that the assessment is properly levied under the provisions of the Income War Tax Act.

Their Lordships agree with Sir Lyman P Duff CJ and Davis J, that the reason given for the decision was not a proper ground for the exercise of the Ministers discretion, and that he was not entitled, in the absence of fraud or improper conduct, to disregard the separate legal existence of the appellant company and to inquire as to who its shareholders were and its relation to its predecessors. The taxpayer is the company, and not its shareholders. Their Lordships agree with the reasons given by these judges, and their application of the authorities cited by them, and it is unnecessary to repeat them. It follows that the assessment should be set aside, and the matter should be referred back to the respondent. It becomes unnecessary to consider a further question which was debatednamely, as to whether or not a taxpayer who has already received in previous tax years allowance for depreciation amounting to 100 per cent of the book value of the assets is entitled to any further allowances. Their Lordships will therefore humbly advise His Majesty that the decisions appealed from should be set aside, and that the assessment should be set aside and the matter referred back to the Minister. The appellants will have the costs of this appeal and the costs in the courts below.

Appeal allowed with costs.

Solicitors: William A Crump & Son (for the appellants); Charles Russell & Co (for the respondent).

T A Dillon Esq   Barrister.


Re Eaves, Eaves v Eaves

[1939] 4 All ER 260


Categories:        SUCCESSION; Gifts: FAMILY; Other Family        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        19, 20, 23 OCTOBER, 13 NOVEMBER 1939        


Mistake Determination of gift on marriage Marriage annulled on ground of husbands incapacity Wife waiting 12 years before taking proceedings Acquiescence Loss of right to restitution.

Will Construction Gift during widowhood Decree of nullity in respect of second marriage Whether gift restored.

By his will, the testator, who died in December 1919, gave his wife, inter alia, “during her life and widowhood,” the use of his house for the unexpired residue of the term for which it was held. In 1925, by agreement between the wife and the testators son, who were both the trustees of the will and the principal beneficiaries thereunder, the house was sold and the proceeds invested. On 24 September 1925, the widow remarried and the investments were thereupon transferred to the son (the latter being entitled to them under the will upon the determination of the widows interest), who converted them to his own use. On 24 May 1937, a decree nisi of nullity was pronounced of the widows marriage in 1925 on her own petition alleging the husbands incapacity, and this was duly made absolute. The widow contended that her life interest in the house had not determined in 1925, and claimed the appropriate relief:

Held (i) the appellants widowhood determined on her re-marriage.

(ii) the transfer was made, not under a mistake of fact, but under a composite mistake, partly of fact and partly of intention.

(iii) the fact that the fund was transferred by agreement, in contemplation of the re-marriage, and not after the ceremony, made no difference.

(iv) the claim could not be treated as one for money had and received. The fund had ceased to exist as a trust fund, and had been handed over to the defendant on a condition which had been fulfilled, and, if a party so acted that the fair inference to be drawn from his conduct was that he consented to the transaction, he could not subsequently question the legality of the transaction.

Decision of Farwell J ([1939] 3 All ER 500) affirmed.

Notes

It will be noted that the Court of Appeal rest their decision mainly upon the plea of acquiescence, and that the plaintiff had been party to a transaction which could not be re-opened. Goddard LJ expressly reserved the question whether a gift during widowhood is determined by a marriage which is subsequently annulled upon the ground of impotence, and it would appear that this question must be taken not to have been finally decided.

As to Effect of Nullity Decree, see Halsbury (Hailsham Edn), Vol 10, pp 640, 641, para 937; and for Cases, see Digest, Vol 27, pp 265, 266, Nos 23262345.

Cases referred to

Dodworth v Dale [1936] 2 KB 503, [1936] 2 All ER 440; Digest Supp, 105 LJKB 586, 155 LT 290, 20 Tax Cas 285.

Cairncross v Lorimer (1860) 3 LT 130; 21 Digest 328, 1227.

Sarat Chunder Dey v Gopal Chunder Laha (1892) ILR 20 Calc 296, LR 19 Ind App 203; 21 Digest 300, case 1082 iv.

A v A (sued as B) (1887) 19 LRIr 403; 27 Digest 266, case s.

G v G (falsely called K) (1908) 25 TLR 328; 27 Digest 268, 2360.

Re Wombwells Settlement, Clerke v Menzies [1922] 2 Ch 298; 27 Digest 457, 4752, 92 LJCh 18, 127 LT 295.

Turner v Thompson (1888) 13 PD 37; 11 Digest 332, 214, 58 LT 387.

Smith v Clay (1767) Amb 645; 20 Digest 524, 2490.

Page 261 of [1939] 4 All ER 260

Brooks v Muckleston [1909] 2 Ch 519; 20 Digest 525, 2497, 79 LJCh 12, 101 LT 343.

Newbould v A-G [1931] P 75; Digest Supp, 100 LJP 54, 144 LT 728.

G v M (1885) 10 App Cas 171; 27 Digest 351, 3339, 53 LT 398.

Henry v Hammond [1913] 2 KB 515; 32 Digest 504, 1649, 82 LJKB 575, 108 LT 729.

Fowke v Fowke [1938] Ch 774, [1938] 2 All ER 638; Digest Supp, 107 LJCh 350, 159 LT 8.

Rogers v Ingham (1876) 3 ChD 351; 35 Digest 93, 25, 35 LT 677.

Re Robinson, McLaren v Public Trustee [1911] 1 Ch 502; 32 Digest 518, 1761, 80 LJCh 381, 104 LT 331.

Baker v Courage & Co [1910] 1 KB 56; 32 Digest 337, 206, 79 LJKB 313, 101 LT 854.

Dunbar v Dunbar [1909] 2 Ch 639; 27 Digest 165, 1339, 79 LJCh 70, 101 LT 553.

Appeal

Appeal by the plaintiff from an order of Farwell J, dated 29 June 1939, and reported sub nom Eaves v Eaves [1939] 3 All ER 500, where the facts are fully set out.

C E Harman KC and E M Winterbotham (for Gerald R Upjohn on war service) for the appellant.

W P Spens KC and F Baden Fuller for the respondent.

Harman KC: It was said by Farwell J that the claim could not succeed because, having waited so long, the appellant was not now entitled to the money. The defence of delay was not pleaded, and the point was not taken in argument. Before a decree of nullity can be obtained, the court must be satisfied that the petitioner has not been guilty of unreasonable delay. The court has granted a decree, and must, therefore, be taken to have considered the matter. On the pleadings, no plea of laches, acquiescence or delay is open to the respondent. In Re Wombwells Settlement, Clerke v Menzies, a father was held to be absolutely entitled to funds settled upon his daughter on her marriage, upon that marriage being declared null and void. [Clauson LJ referred to the citation from Smith v Clay in Brooks v Muckleston.]

Harman KC continuing: Mere delay is not a bar, although laches or acquiescence may be. The two parties are not, and never have been, husband and wife, a decree of nullity having been pronounced. There was no less of the status of widowhood. There never was a valid marriage, and, therefore, Mrs Eaves did not lose the status of a widow, or, if she lost it for a time, she regained it. The words of the will are “during life and widowhood.” The appellant is alive, and is a widow, and, therefore, it cannot be said that her interest came to an end. It is said on behalf of the respondent that the matter is a concluded transaction. It cannot, however, be a concluded transaction so long as the appellant is alive and is the testators widow. The reasoning of Lawrence J in Dodworth v Dale could apply to that time only when she had another status. If the trust fund were intact, there is no doubt that the appellant would be entitled to the income from the

Page 262 of [1939] 4 All ER 260

time she recovered her status of widowhood. It was due to a misapprehension that she said that the trust was at an end. With regard to acquiescence, if time ran at all, it would commence to run only from the date the right of action accrued. As regards delay, it was never pleaded. Delay alone, however, is never an answer. [Counsel referred to Newbould v A-G, G v M, Henry v Hammond, Fowke v Fowke, Rogers v Ingham, Re Robinson, McLaren v Public Trustee and Baker v Courage & Co.]

Spens KC: The present case is entirely different from Re Wombwells Settlement, Clerke v Menzies. In the present case, the fund was settled on the second wife during life and widowhood, and, subject to that, it went to the son absolutely. The event happened which vested the absolute interest in the son. The marriage of the appellant was valid at the time it took place, and it brought her widowhood to an end. Therefore, the fund vested in the son, and there is a concluded transaction. The whole transaction is completed on the basis of the legal rights existing after the second marriage took place. The cases are summarised in Dodworth v Dale. Things which have been done during a marriage cannot be re-opened because the marriage has been declared null and void. In the present case, there are two individuals, both of whom are trustees and both of whom are beneficiaries. They have wound up the trust. At the time when that was done, no one could say that there was not a valid marriage. In the present case, the payment was not made under a mistake of fact. Turner v Thompson shows that a marriage voidable upon the grounds on which the marriage in the present case was annulled makes the lady a wife both de facto and de jure while the marriage subsists. [Counsel referred to G v M, Fowke v Fowke and Dunbar v Dunbar.]

C E Harman KC and E M Winterbotham (for Gerald R Upjohn on war service) for the appellant.

W P Spens KC and F Baden Fuller for the respondent.

13 November 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. The grounds upon which, in my opinion, this appeal ought to be dismissed are as follow.

(1) When the appellant went through the ceremony of marriage with Mr Powell in 1925, the respondent would have been entitled to call for the transfer of the trust fund to himself, upon the ground that, as the result of the ceremony, the appellants widowhood stood determined. If the appellant had declined to consent to the transfer, the respondent could have obtained an order of the court for the purpose. The appellant could not have been heard to say that she was entitled to have the transfer postponed in order to see (a) whether or not facts would appear which would entitle her to obtain a decree of nullity, and, if so, (b) whether or not she would decide to apply for such a decree.

(2) If an order of the court had been made directing a transfer of the fund to the respondent, it would have been impossible for the appellant to make the present claim. The transaction would have been one properly completed at a time when the marriage was a valid marriage, and it is well settled that such transactions cannot be reopened, not-

Page 263 of [1939] 4 All ER 260

withstanding the language in which the form of nullity decree in use is couched.

(3) If, instead of obtaining an order of the court, the transfer had been made after the ceremony by agreement, the same result would have followednamely, the transaction could not have been re-opened. To hold otherwise would mean that no one could safely act in any case of an interest determinable on widowhood without obtaining the protection of an order of the court.

(4) In the present case, the transfer was made and the trust wound up by agreement in contemplation of what in fact took placenamely, the remarriage of the appellantand not after the ceremony, but this makes no difference.

(5) The argument that the transfer can be set aside upon the ground that it was made under a mistake of fact does not bear examination. The transfer took place upon the footing that a marriage was about to take place which would give to the appellant the status of a married woman, which it in fact did. If, however, it be assumed that the understanding was that the marriage would not be annulled (an assumption which I am not prepared to make), the mistake would not have been a mistake of fact. It would have been, so to speak, a composite mistake, partly of fact and partly of intentionof fact in so far as it concerned the matters which gave rise to the right to have the marriage annulled, of intention in so far as the exercise of an option by the appellant was required before annulment could take place.

(6) There is no foundation for the suggestion that the claim can be treated as one for money had and received, or as analogous thereto.

CLAUSON LJ. In 1925, a sum of 5 per cent war stock stood in the names of the plaintiff and defendant, as trustees of the will of the plaintiffs deceased husband. The income of the fund was, by reason of the terms of the will, payable to the plaintiff during her life and widowhood. Subject to that interest of the plaintiff, the fund belonged beneficially to the defendant, her step-son. In 1925, the plaintiff was minded to remarry, and appreciated that her interest in the fund would terminate with her widowhood. The plaintiff and the defendant arranged to wind up the trust by selling the stock, and the proceeds were, as part of the arrangement, received by the defendant, he paying to the plaintiff interest up to the actual day of her remarriage, which took place on 24 September 1925. The defendant paid into his bank the proceeds so received, and they in fact seem to have gone to reduce his overdraft. At all events, he took and used the proceeds as his own, in precise accordance with the intentions of himself and of the plaintiff.

Twelve years passed, and on 15 November 1937, a decree absolute was pronounced annulling the plaintiffs second marriage on the ground of the incapacity of the intended husband. The decree was in the usual form declaring the marriage to be, and to have been, absolutely null

Page 264 of [1939] 4 All ER 260

and void, and the plaintiff to have been, and to be, free from all bond of marriage with the intended husband.

Thereafter the plaintiff brought the present action claiming against the defendant replacement of the trust fund and payment of the income from the date of the annulled marriage, or, alternatively, from the date of the decree absolute of annulment. The judge has dismissed the action. He was not prepared to hold that the solemnisation of the marriage, which was subsequently annulled, of itself terminated the plaintiffs interest in the fund in question. On the contrary, he held that, after the decree, the widowhood of the plaintiff must be considered to subsist. He, however, held that the fact that, with the knowledge and consent of the plaintiff, the trust fund had ceased to exist as a trust fund, and had been handed over to the defendant, made the plaintiffs claim one which a court of equity would refuse, in the circumstances, to admit, and he accordingly dismissed the action. In my judgment, he could not, without infringing well established principles, do otherwise than dismiss the action. In the first place, it is well settled that, until the decree absolute, the two parties to the marriage have the status of married peoplea status which must be treated as continuing during the period that the marriage remains unannulledwith the result that transactions which have been concluded, things which have been done, during that period on the footing of the existence of that status cannot be undone or reopened. It is unnecessary to set out the authorities on this point, since the whole matter is fully dealt with in the judgment of Lawrence J in Dodworth v Dale in terms with which I will venture to express my complete agreement. The material transaction in the present case was the handing over of the fund to the defendant as his own in anticipation that, on 24 September 1925, the lady would acquire the status of a married woman. On 24 September 1925, she acquired that status, and the transaction then became complete and effectual, and could not have been questioned in any court at any time before the decree of annulment, and the annulment cannot have the effect of undoing or reopening such a transaction. This ground alone suffices to justify the dismissal of the present action.

There is, however, a further ground which would, in my view, support the dismissal of the action. It is well settled that, if a party has so acted that the fair inference to be drawn from his conduct is that he consents to a transaction to which he might quite properly have objected, he cannot be heard to question the legality of the transaction as against persons who, on the faith of his conduct, have acted on the view that the transaction was legal: Cairncross v Lorimer. The principle applies even if the party whose conduct is in question was himself acting without full knowledge or in error: Sarat Chunder Dey v Gopal Chunder Laha. In the circumstances of the present case, the defendant was left by the plaintiff to act, and did in fact act, on the view that the winding up of the trust was a completely legal transaction, leaving the

Page 265 of [1939] 4 All ER 260

fund in his hands as his own for him to spend, and it appears to me to be contrary to all principle that the plaintiff should now be heard to question the legality of the transaction. It was argued that the claim could be treated, or ought to be treated, as an action for money had and received to which no Statute of Limitations had been pleaded. I have had some difficulty in appreciating what money it is which the defendant is to be treated as having received. It cannot be the fund, for that was never the plaintiffs. Nor can it be the income of the fund, since the fund ceased to exist as a fund even before the date of the marriage. The truth is that the claim can only be a claim for the replacement of a trust fund, and to such a claim the considerations which I have stated afford, in the circumstances, a complete defence. I am accordingly of opinion that the appeal should fail, and should be dismissed with costs.

GODDARD LJ. In my opinion, this appeal should be dismissed, though I base my judgment on grounds somewhat different from those on which I understand that Farwell J decided the case.

When Mrs Eaves went through the ceremony of marriage with Mr Powell in 1925, in my opinion, she ceased to be the widow of Mr Eaves, notwithstanding that subsequently the marriage proved to be voidable at her option. It is well established by authority that a marriage contracted by persons, one of whom is impotent, is valid unless and until the spouse who is entitled to complain has exercised the right of having the marriage annulled. Until this has happened, the spouses are man and wife. Were either of them to go through another ceremony of marriage, he or she would be guilty of bigamy, and it would be no defence to allege the impotence of the other party. No third party, either during the lifetime or after the death of either spouse, could be heard to say that the marriage was invalid. The marriage can be annulled only on the complaint of a party thereto and during the lifetime of both. I say of a party, because, though the rule is that only the injured spouse can complain, there have been cases of a wholly exceptional character where a petition has been admitted at the suit of the impotent party. Thus, where in Ireland a wife had petitioned the ecclesiastical tribunal of the Roman Catholic Church and obtained a sentence of nullity, which had no effect in municipal law, and had, while wholly repudiating the marriage, refused to apply to the courts for a declaration of nullity, the husband was allowed by Warren J, and by the Court of Appeal to present a petition alleging his own impotence to get rid of an otherwise intolerable situation brought about by the wife: A v A (sued as B), approved by the Court of Appeal in England in G v G (falsely called K). On Mrs Eaves marriage to Mr Powell, she thus became his wife de jure unless and until she elected to have the tie annulled. Consequently, she ceased to be the widow of her late husband, and one may well ask, supposing that the defendant had been merely

Page 266 of [1939] 4 All ER 260

trustee under the will and not also a beneficiary, what answer could he have had to a claim by the person entitled in remainder to have the capital sum paid over to him? It is said, however, that, as soon as the plaintiff had obtained her decree absolute, she reverted to the status of widowhood, and thereby once again became entitled to the benefit conferred upon her while she was the widow of Mr Eaves. On this point, I am content to adopt the reasoning of Lawrence J, in Dodworth v Dale. That was a case in which the Inland Revenue made a claim at least as unmeritorious as that in the present action. They claimed that, as a marriage had been annulled at the suit of a wife, the husband was liable to refund the tax on the marriage allowance which had been claimed by him and admitted during the period of the marriage. The claim deservedly failed, the judge holding that matters concluded during the period when the marriage stood could not be reopened after the wife had exercised her option to have the tie annulled. It can make no difference, in my opinion, that the transaction now called in question took place a month or so before the marriage was celebrated. The parties deliberately put an end to the trust on the footing that the marriage was about to take place, as it did, and, though the present defendant would no doubt have been liable to replace the fund had the ceremony not been performed, once it was, both the legal and equitable interest was vested in him, and, by the common consent of both parties interested therein, the trust was effectively wound up. The decision of Russell J in Re Wombwells Settlement, Clerke v Menzies also supports this view, for the judge says, at p 308:

It is quite true that no claim could be made by him [the settlor] for the return of the payments made by the trustees during the time when the validity of the marriage was not questioned, for, unless and until the wife intervened, all parties were bound to treat the marriage as valid and effectual.

It was also sought to support the plaintiffs claim on the ground that here there was a case of money had and received to the plaintiffs use. I can see no ground for such a contention. The fund never was the plaintiffs. During widowhood, she was beneficially entitled to the interest arising from it. That she surrendered when she was about to remarry, and it was entirely at her option whether or not she avoided the marriage. As Sir James Hannen P put it in Turner v Thompson, at p 41:

It is to be remembered that a marriage by the law of England, when one of the parties is incompetent, is not a marriage absolutely void, but only voidable at the instance of the injured party. If she had thought fit she might have remained a wife, enjoying all the advantages of a wife, save that of marital intercourse.

This case would hardly be arguable were it not that the form of the decree in these cases, whatever be the ground for annulling the marriage, pronounces that the petitioner is, and always has been, free of the bonds of matrimony. In truth, however, a successful petitioner on the ground of impotence has not always been free. What is true is that he or she has always been in a position to obtain freedom, but, until the necessary

Page 267 of [1939] 4 All ER 260

steps have been taken, the tie remains binding. The reason, I think, why the decree takes this form is that it follows the sentence formerly pronounced in the ecclesiastical courts, and, when the Divorce Act 1857 was passed, the courts set up by that Act, now represented by the Probate, Divorce and Admiralty Division of the Supreme Court, were directed by s 22 to act and give relief on principles and rules as nearly as might be conformable to the principles and rules on which the ecclesiastical courts had thitherto acted. Ecclesiastical jurisprudence was grounded on the canon law, which regards marriage as indissoluble. The sentence of divorce mensa et thoro was only a decree of judicial separation, while a sentence of divorce a vinculo matrimonii was not one granting a dissolution of the marriage, but was in effect a declaration that no marriage ever existed. The canon law, however, did grant relief when one of the parties was incapable of performing one of the purposes for which marriage was instituted. Therefore, as the marriage could not be dissolved, recourse was had to the same form of sentence as in the case of a marriage void on the ground of bigamy, consanguinity, non-age or undue celebration. In none of these cases is intervention of the court an absolute necessity, as it is in the case of impotence, to free the parties. The object and advantage of obtaining a decree in those circumstances is by obtaining a judgment in rem to put at rest for all time the question as to whether the parties were lawfully married and whether or not one is free to marry again during the lifetime of the other. It may be that it would be more logical to treat impotence as a ground of divorce, as it is in America, where the jurisdiction is not hampered by the rules of the canon law. Be that as it may, the marriage is valid until it is annulled by a decree of the court, and transactions which have taken place during the marriage on the footing that it is subsisting, or in direct contemplation of a marriage which afterwards takes place, cannot be affected by a subsequent decree of annulment. I need hardly add that quite different considerations would apply were the marriage void, and not merely voidable.

It remains to deal with the grounds on which the judge based his judgment in favour of the defendant. He found, as I read his judgment, that, though the plaintiff was the widow of the testator, she was disentitled to recover in the action by reason of her laches and acquiescence. I have already dealt with the question of the widowhood. So far as the judgment is founded on acquiescence, I think that it is on sure ground. It is because the plaintiff acquiesced and consented to the money being appropriated by the defendant that she cannot recover. In my opinion, however, lachesthat is, delay in bringing the action, or, at least, in notifying her claimraises a question of some considerable difficulty, and I am indisposed to base my judgment on that ground, apart from the fact that it was not pleaded. The main difficulty I feel is to say from what time or at what point the delay began, and how it affected the defendant. Laches is a part of the law of estoppel, and, as I understand

Page 268 of [1939] 4 All ER 260

the doctrine, it is that, if a person has stood by and allowed another to order his affairs on the footing that a certain state of things exists, or that a certain transaction is not questioned, he cannot thereafter be allowed to come in and assert the contrary to the detriment of the other party. Here, however, the detriment would arise at once. Having got the money, and having very likely spent it, the defendant might be equally prejudiced whether the plaintiff had made her claim 12 days or 12 years after the ceremony took place. When one considers the delicate and intimate nature of the matters involved where questions of impotence arise, it seems to me impossible to say at what particular time the plaintiff ought to have made a claim against, or disclosure to, the defendant. While delay is one of the discretionary bars to divorce, it is not so to a petition for nullity. Precipitate action in these cases ought to be discouraged. Patience and forbearance, at any rate in the case of young married people, may remove the ground of complaint, and, while the defendant is not affected by considerations affecting only the husband and wife, I find it very difficult to say that at any particular time the plaintiff was guilty of unreasonable delay in making her claim and thereby prejudiced the defendant. It is, I think, this very difficulty that lies at the root of the doctrine that transactions completed during the existence of the union cannot be re-opened after the decree of nullity has been obtained, and it is on that ground that I prefer to base my judgment.

I desire to add that I am not satisfied that it necessarily follows that, if a man leaves money to his wife during widowhood, or “while she remains my widow,” she can, after contracting a marriage which she subsequently avoids, say that she has reverted to the status of widow of her former husband, at any rate, for the purpose of retaking benefits under his will. I think that most testators would be surprised to learn that this result would follow, more especially when it is remembered that the plaintiff can now apply, under the Supreme Court of Judicature (Consolidation) Act 1925, s 190, for maintenance against the man whom I may call the second husband. It is unnecessary to decide this in the present case, and I desire to reserve my opinion upon it.

Appeal dismissed with costs.

Solicitors: Gisborne & Co (for the appellant); Ward Bowie & Co, agents for Lane Clutterbuck & Co, Birmingham (for the respondent).

W K Scrivener Esq   Barrister.


Appeal of Roberts, Re Postmaster-General

[1939] 4 All ER 269


Categories:        TAXATION; National Insurance        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        2 NOVEMBER 1939        


Work and Labour National health insurance Employment Sub-postmaster Remuneration by scale payment National Health Insurance Act 1936 (c 32), Sched I.

The applicant was a sub-postmaster remunerated by scale payment, that is, a sub-postmaster rendering on the average eighteen or more hours of personal service in each week in that capacity, and not mainly dependent for his livelihood on the earnings derived by him from any occupation other than his employment under the Postmaster-General. Regulations were provided for the guidance of sub-postmasters, who were required to observe with accuracy and promptitude all special instructions received from the head postmaster and to keep open the sub-offices for certain fixed hours for the transaction of post office business. These hours could not be varied without permission. Certain rules of conduct were prescribed. Sub-postmasters were permitted to make suitable provision for the performance of their duties by others under their supervision. It was one of the usual conditions of their employment that they should obtain a 6-months tenancy of the premises to be used as a sub-post office. On their signing a declaration that they were not mainly dependent for their livelihood on earnings derived from occupation other than post office employment, and that they rendered an average of not less than 18 hours personal service in each week in that employment, they were insured under the National Health Insurance Act:

Held the applicant was employed under a contract of service, and was insurable under the National Health Insurance Act 1936.

Notes

This is a test case upon the question whether or not sub-postmasters engaged upon the usual terms upon which such officers are engagedcommonly called remuneration by scale paymentare insurable under the National Health Insurance Act 1936. The principles which decide whether a person is a servant or an independent contractor are well-settled, and are not here called in question in any way. The position of these officers, however, had been rendered doubtful by decisions upon the exemption from rateability of sub-post offices. In the course of the judgments in those cases, certain statements had been made which suggested that these officers were independent contractors, and, if that were so, they would not be insurable under the Act. The present decision makes it clear that they are so insurable.

As to Persons Insured under the National Health Insurance Act, see Halsbury (1st Edn), Vol 28, Work and Labour, pp 905911, paras 16101614; and for Cases, see Digest, Vol 44, pp 13081311, Nos 140154.

Cases referred to

Williams v Neath Assessment Committee (1935) 154 LT 261; Digest Supp.

Frampton v Gillison [1927] 1 Ch 196; 40 Digest 323, 2729, 95 LJCh 555, 136 LT 600.

Case Stated

Case stated by the Minister of Health under the National Health Insurance Act 1936, s 161, and RSC Ord 55B, rr 4, 5. The facts are fully set out in the judgment.

A S Comyns Carr KC and L G H Horton-Smith for the National Federation of Sub-postmasters and the applicant.

Valentine Holmes for the Minister of Health.

J P Ashworth for the Postmaster-General.

Page 270 of [1939] 4 All ER 269

2 November 1939. The following judgment was delivered.

BRANSON J. The question which it is desired that I should decide is set out at the end of the case in the following words:

The Minister, being desirous that the question whether sub-postmasters remunerated by scale payment are employed under a contract of service by the Postmaster-General, and therefore insurable under the provisions of the Act, shall be determined by the court, has stated this case accordingly.

It appears to me to be clear that the question whether or not Sub-postmasters remunerated by scale payment come within the National Health Insurance Act must depend, in the first instance, upon the further question whether or not their employment is employment within the National Health Insurance Act 1936, Sched I, Part I. That enactment provides that employment in the United Kingdom under any contract of service shall bring the person so employed within the ambit of the Act. What I have to decide, therefore, is whether the sub-postmaster in question, William Stanley Roberts, is a person who is employed under a contract of service, and, incidentally, whether other persons employed under conditions similar to those under which William Stanley Roberts is employed will also come within that definition, and be persons employed under a contract of service.

I do not think that there is any real dispute as to what “employment under a contract of service” means. There can be no doubt that these sub-postmasters are employed. The only question is whether they are employed under a contract of service or whether they are employed to render services. The distinction between those two positions is not in doubt, and depends upon the amount of control which the employer exercises over the person whom he employs. I think that it may be stated thus. Where a man employs another to do work for him under his control so that he can direct the time when the work shall be done, the means to be adopted to bring about the end, and the method in which the work shall be carried on, then the contract is a contract of service. If, on the other hand, a man employs another to do certain work, but leaves it to that other to decide how that work shall be done, and what stops shall be taken to produce the desired effect, then it is a contract for services.

Having that distinction in mind, I turn to the facts of the present case, in order to see under which head this particular case, and other cases which will be substantially similar, should be held to fall. The case stated sets out as material the following facts. It states that on 26 November 1936, the applicant applied for the appointment of sub-postmaster at a certain post office in succession to his father, who had held the appointment, and a copy of his application is appended to the case. Before submitting his application, the applicant detached and retained that part of the form sent to him which contains particulars of the appointment, and that also is attached to the case. After that, he was notified of his appointment, and he acknowledged the receipt of a number of books of rules and instructions and agreed to be bound by the rules contained

Page 271 of [1939] 4 All ER 269

in those books of rules. He also signed a form which was sent to him, Form S 52, in connection with the question of his liability under the National Health Insurance Act, and certain declarations which were required in order to see whether he came within the ambit of the Act as interpreted by the Minister of Health and the Postmaster-General. I shall have to refer to those forms, but, taken together, they constitutes the contract under which this sub-postmaster was employed, and under which other sub-postmasters in similar positions are also employed.

I do not think that it is necessary to go into any further detail as to the facts of the case, but it is necessary to look at the documents constituting the contract between the parties. The first of these documents is the application for appointment to a vacant sub-postmastership. That is filled up by the applicant, and amongst other things, it asks in para 11(a):

Have you or has any member of your household ever held an appointment as sub-postmaster or been employed by the Post Office or any other government department?

In para 11(c), it says:

If you are in receipt of a pension in respect of such service, state amount.

There from the very beginning it appears that the people who are dealing with these forms regard the contract between the Postmaster-General and the sub-postmaster as a contract of service, and the same thing runs throughout the whole of the documents which have been produced before me as relating to this question. Attached to that form was another one, which the applicant for the position keeps. It sets out the nature of the employment into which he is proposing to enter, and there again it appears, amongst other things, that he is to undertake, if called upon to do so, any of a number of duties which are set forth in the document, or any other official duties which may be required. He will receive instructions in the duties, and will be supplied with books of rules for his guidance, with the contents of which he must make himself well acquainted. After his application has been received, he receives his appointment, and upon that he is called upon to sign the document Form S 52, to which I have already referred. It states that William Stanley Roberts has been appointed sub-postmaster, and so forth, on the usual conditions, and on the understanding that a 6-months tenancy of the premises is obtained. Then he acknowledges receipt of a number of books of rules, and copies of forms, instructions for telegraph service, a tape for measuring parcels, and all kinds of details showing how he is to conduct the duties of the office to which he is being appointed, and he is made to undertake that he will make proper provision for telegraph and telephone work, and provide for a continuous telephone service, if at any time required to do so, at the standard rate of payment, and so on. Then at the end this appears:

The question of insurance has been considered in connection with the rules relating to the application of the National Insurance Acts to Post Office service:

Page 272 of [1939] 4 All ER 269

He is being insured as he has signed Declarations A and C on Form P 409W and I think these declarations correctly represent his circumstancesE.S.R. for Head Postmaster.

Declaration A states as follows:

I am not mainly dependent for my livelihood on the earnings derived by me from occupation other than post office employment.

Declaration C states as follows:

I render on the average not less than 18 hours personal service each week in my employment as a sub-postmaster.

The reason for those declarations arose out of the making of an order under the power given by the National Health Insurance Act 1924, which are still in forcenamely, SR & O 1932, No 501. Sched I of the Act provides in Part I what employment shall be employment within the meaning of the Act, and Part II contains certain exceptions. Under part II, cl (m), there is excepted employment of any class which may be specified in the special order as being of such a nature that it is ordinarily adopted as subsidiary employment only, and not as the principal means of livelihood. Statutory Rules and Orders 1932, No 501, is a special order made to meet that provision, and, by virtue of that order, the employment as a sub-postmaster remunerated by scale payment, which this postmaster is, is excluded from being employment within the meaning of the Act, subject to the fact that persons engaged in that particular employment are included in the Act as engaged under the conditions mentioned in Sched II of the order. Sched II of the order mentions any person employed as a sub-postmaster remunerated by scale payment who renders on the average 18 or more hours of personal service in each week in that capacity, and is not mainly dependent for his livelihood on the earnings derived by him from any occupation other than his employment under the Postmaster-General. The effect of that order, so far as the contemplation of those who made the order is concerned, is to provide that a sub-postmaster who is able to make the two Declarations A and C in Form P 409W to which I have already referred is not excluded from the Act by virtue of the first words of the order excluding employment as a sub-postmaster remunerated by scale payment. I thought at one time that it was going to be argued that that order had the statutory effect of bringing this particular type of sub-postmaster within the Act, whether or not the persons in that class would otherwise have come within the first words of Sched I, Part I: “Employment in the United Kingdom under any contract of service.” However, that was a misapprehension on my part. The point which is relied upon is that it shows that those who had to deal with the matter had all been under the impression that this type of employment was employment under the Act, and made the holders of those posts insurable persons. The question whether or not they were right in that view is, of course, still open. I refer to it in order to explain these two declarations in the form in Appendix D.

Page 273 of [1939] 4 All ER 269

Then there are a number of rulesfor instance, in Appendix E, s A(1), general rulesto which I have been referred, and I think it is quite unnecessary for me to refer in any detail to the numerous provisions which those rules contain, showing the amount of control which is exercised by the Postmaster-General, and through the head postmasters in different districts, over the sub-postmasters and persons whom they employ to assist them. I will refer to a few. I take first of all, in the introductory rules in Appendix E, r 2, which refers to the Post Office Guide:

The rules are to be read in conjunction with the Post Office Guide (including supplements), a copy of which is supplied to every sub-postmaster on publication. The Guide must be regarded as a book of instructions for officers of the Post Office no less than as one of reference for the public.

Now what does that mean? Does it not indicate that here is the Postmaster-General providing a code of rules under which every step of the duties of the sub-postmaster is defined? The Post Office Guide says to the public, “You can do this, that and the other through a sub-post office,” and this rule says to the sub-postmaster, “I instruct you to do those things in that way, and, if I choose to alter it by a supplement, you shall do it in the way in which the supplement says it shall be done.” Then r 6(a) provides as follows:

The regulations provided for the guidance of sub-postmasters must be carefully studied and applied by them, and all special instructions received from the head postmaster should be carried out with accuracy and promptitude.

Provisions of that sort in the contract between the parties are very strong to indicate that the contract constitutes a contract of service. They are not saying to the sub-postmaster, “You are to carry letters which are handed to you, and the way in which you shall receive them and the way in which you shall carry them rest with you.” They are saying, “You shall do this, that and the other,” indicating step by step the times when, and the methods by which, the duties of the sub-postmaster are to be carried out. Another rule to which I might refer is r 25, which provides as follows:

The hours of business at sub-offices on week-days, Sundays and bank holidays are fixed by the head postmaster according to local circumstances, and are stated on the window notice supplied. (b) A sub-postmaster must not without permission vary the authorised hours of public business at his office or transact Post Office business with the public outside those hours, except that where possible attention should be given to call-office calls, at any rate in cases of emergency.

Then it is said that the hours of business are liable to be increased or altered by the department at any time, if circumstances require. That provides that the times during which this man shall work may be dictated by his superiors in the service of the Post Office, and may be altered without his consent, and he is bound to take those instructions, and abide by them.

Then there is a little fasciculus of sections, ss 59, 60, 61 and 62, which prescribe rules of conduct which he shall observe, and which have nothing directly to do with the duties which he is called upon to perform.

Page 274 of [1939] 4 All ER 269

He is not to bet or gamble, or play cards, except in the private apartments of resident officers, and there are rules about football and racing competitions, and he must not take a gratuity unless he is a postman. All that sort of thing indicates a contract of service, the rules of conduct of the service being prescribed for him, and seems to me to be very far indeed from the sort of thing which can be expected in a contract for services, where, so long as the contractor performs the service which he has contracted to perform, he is otherwise a free man, and can do what he likes. Then s 64 dictates to him the attitude he is to take up on political matters, and there again his actions are controlled by the rules of his employment. S 72, which is a section dealing with national insurance, seems to me to be a section which makes it perfectly plain that these parties in the contract are under the impression that they are entering into a contract of service, because it is only if this is a contract of service that any reference to national insurance finds a place in it at all. Here one has in the contract documents themselves a reference to the National Health Insurance Act, and that can only be upon the basis that these parties are entering, so far as their own minds are concerned, into a contract of service. That seems to me, really, conclusive of the matter. The relationship which the parties undertake towards each other must, as it seems to me, depend upon the volition of the parties, and, if they enter into a contract intending that it shall be a contract of service, the mere fact that it contains provisions which are not ordinarily found in a contract of service cannot, as it seems to me, change that which they are entering into with the intention that it shall be a contract of service into something which is not a contract of service. Apart from that, however, the matters which are relied upon by those who argue that this is not a contract of service do not seem to me to weigh at all appreciably against the mass of provisions which are consistent with this contract being a contract of service, and consistent with that only. It is said that the fact that a sub-postmaster may delegate his duties to assistants who are his servants, and not the servants of the Crown, shows that his service is not under a contract of service. It does not seem to me that that really carries the matter any further. The provision about delegation is contained in cl 24:

A sub-postmaster must either himself perform the duties of his office or otherwise make suitable provision for their proper performance. In any case he will be held responsible for the proper performance of all the duties of his office, and he is expected so far as possible to exercise personal supervision over them.

There it is said that this man need not give personal service. He may be only a man who is providing service for the Crown, but is not himself a party to a contract of service. I think that the answer to that is that people who come within the category in which this sub-postmaster stands are people who can sign the Declaration C in the form in the appendix to which I have already referred. If they can sign the

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Declaration C in that Appendix D, stating that they render on the average not less than 18 hours of personal service each week in their employment as a sub-postmaster, that disposes of the point that, under their contract, they are not liable to render personal service at all.

It is also said that, under r 30, a postmaster must provide, and pay for, any assistance required to conduct the indoor work of the sub-post office, and that the remuneration is intended to cover such cost. The fact that you may remunerate a servant upon a scale which is intended to enable him to hire help for himself in the performance of his duties does not, as it seems to me, prevent him from being a servant, or prevent the contract between you and him from being a contract of service. That point, again, in my opinion, fails. It is said also that he has to provide his own office fittings, or the premises upon which he is to perform his duties. Again, I ask, is there any reason why a contract of service should not include a provision that the servant should perform those duties which he is engaged to perform upon the premises provided by himself, or with tools which are his own tools? I can see none. For these reasons, I have come to the conclusion, without reference to any authority on the subject, that this contract is a contract of service, and that persons in the same category as this sub-postmaster are persons who are insurable under the National Health Insurance Act.

As I understand it, this reference to me has arisen, and has arisen only, by reason of a decision of the Divisional Court in Williams v Neath Assessment Committee, because, prior to the decision of that case, the view taken both by the Minister of Health and by the Postmaster-General, and by sub-postmasters employed under terms similar to those under which the present sub-postmaster is employed, has always been that such persons are within the National Health Insurance Act, and that they should be insured. The question is whether anything that was said in Williams v Neath Assessment Committee compels me to decide that the view which they have taken was wrong, and the opinion which, apart from authority, I have taken, is wrong, and I am driven to come to a different decision in the matter. I think that I ought to say that, looking at the peculiar position in which I, as the judge designated to deal with these cases, find myself, I think that the question as to how far, if at all, I am bound by decisions in the courts on matters which are not matters of the general law of the land is one which may be open to discussion. However, I do not think that it arises in the present case, because I think that Williams v Neath Assessment Committee is plainly distinguishable from the case with which I have to deal here. That case came before the Kings Bench Division as an appeal by case stated by the Neath Assessment Committee from a decision of the Glamorganshire Quarter Sessions, and the case raised the question of the exemption of sub-post offices from rateability. By the Rating and Valuation Act 1925, s 64(3), it is enacted as follows:

Where any hereditament is occupied by or on behalf of the Crown for public

Page 276 of [1939] 4 All ER 269

purposes (a) no gross value shall be determined or entered in the valuation list in respect of the hereditament …

In that case, the owner of certain premises, who was the respondent to the appeal, had a wife who was the sub-postmistress. The owner occupied certain premises, and allowed his wife to carry on the sub-postmistresss business in a part of those premises, and it was argued that, by reason of the fact that the sub-post office was carried on in a part of those premises, the owner was entitled to say that no gross value should be determined or entered in the valuation list in respect of that part of the premises. The ground was that it was being used as a sub-post office, and was, therefore, in the occupation of a servant or agent of the government. The point which the court had to determine was whether or not those premises were rateable. I have not to determine here whether or not premises upon which a sub-post office is being carried on are rateable. What I have to determine here is whether or not a sub-postmaster is under a contract of service with the Postmaster-General. It is true that, in giving his judgment reversing the decision of the Court of Quarter Sessions, Lord Hewart LCJ referred to the position of the sub-postmistress, saying that it was made plain by the documents appended to the case entitled “Instructions to the postmaster at Port Talbot” and “Post Office Rules.” He pointed out that it was her duty to provide suitable premises and suitable equipment for the carrying on of the post office business, and, subject to certain exceptions, she was entitled to carry on business other than postal business on the premises. The difficulty is created because Lord Hewart LCJ went on to say that the only possible conclusion was that the sub-postmistress was neither a servant nor an agent of the Postmaster-General, but was an independent contractor, who had agreed on certain terms to transact on her own premises certain business connected with the postal services. The case does not state which, if any, of the documents which are before me were before Lord Hewart LCJ in that case. I think that it would be quite wrong for me to assume for a moment that, if he had had before him the documents which I have had placed before me, he would have come to any such conclusion upon them. To think so would be the wildest guesswork. He was giving a decision upon a case stated, and the case stated did not raise the point with which I have to deal. It was quite immaterial in that case to decide whether or not Mrs Williams was under a contract of service with the Post Office, and, furthermore, even if she had been under a contract of service with the Post Office, it did not solve the question as to whether or not her husbands premises, upon which he allowed her to carry on this business, could properly be said to be a hereditament occupied by or on behalf of the Crown for public purposes. I think that I cannot regard myself as bound by that decision. The other two judges, who concurred that the appeal should be dismissed, put their judgments upon different grounds, in which the question

Page 277 of [1939] 4 All ER 269

whether or not the sub-postmistress was in the service of the Crown was not dealt with in any way. If one is to take notice of obiter expressions of that sort in previous cases, it is pointed out to me that there is another obiter decision, this time by the late Lord Hanworth MR, in the Court of Appeal, in Frampton v Gillison, at p 203. There, again, the question was not the question with which I have to deal. The question there was whether or not the carrying on of the business of a sub-post office upon certain premises where there was a restrictive covenant preventing trading on the premises constituted an infringement of that covenant, and Lord Hanworth MR said, at p 203:

Now looking at the covenant from that right perspective, the learned judge was quite correct in saying that the duties of the defendant are altogether outside the covenant. As sub-postmaster he is the servant of the Postmaster-General and he has duties which are well defined. … But whatever be his duties, it appears to be a stretching of words to say that he is “trading” on this land.

There, again, it was unnecessary to say in that case that the man in question was the servant of the Postmaster-General, just as it was unnecessary in the case before the Divisional Court.

I think that the proper course for me to take is to decide this case on the facts which are placed before me, facts which I cannot in the least be sure are the same as those before those two other tribunals, and to answer the question which is put by the Minister in para(4) of the special case by saying that sub-postmasters remunerated by scale payment under contracts similar to that which is now before me are under contracts of service with the Postmaster-General, and therefore insurable under the provisions of the Act.

Solicitors: Simpson Palmer & Winder (for the National Federation of Sub-postmasters and Roberts); The Solicitor, Ministry of Health (for the Minister of Health); The Solicitor, Post Office (for the Postmaster-General).

W J Alderman Esq   Barrister.

Appeal of Thompson, Re A Johnson (Hove) Ltd

[1939] 4 All ER 277


Categories:        TAXATION; National Insurance        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        2, 3 NOVEMBER 1939        


Work and Labour National health insurance Employment Bailee of motor car used for plying for hire Whether in employment of bailor National Health Insurance Act 1936 (c 32), Sched I, Part I, cl (e).

The respondents hired a motor car to the applicant, a taxi-cab driver, in consideration of certain weekly payments, it being the clear intention of both parties that the car was to be hired to the applicant in order that he should use it for plying for hire. It was contended that the applicant was employed by the respondent within the meaning of the National Health Insurance Act 1936, Sched I, Part I, cl (e):

Held (i) “employment” in the National Health Insurance Act 1936, Sched I, Part I, cl (e), connoted something being done under a contract, express or implied, with someone standing in the position of an employer.

Page 278 of [1939] 4 All ER 277

(ii) in the circumstances of this case, the applicant was employed by the respondents within the meaning of the National Health Insurance Act 1936, Sched I, Part I, cl (e), and was insurable under that Act.

Notes

This case is the first decision under the clause (e), which is peculiar, in that it speaks of employment by reference to a contract of bailment, and leaves a doubt as to how far the principles underlying the contract of master and servant have to be applied in cases within that clause.

As to Persons Compulsorily Insured, see Halsbury (1st Edn), Vol 28, Work and Labour, pp 905911, paras 16101614; and for Cases, see Digest, Vol 44, pp 13081311, Nos 140154.

Case Stated

Case stated by the Minister of Health under the National Health Insurance Act 1936, s 161. The facts are fully set out in the judgment. The National Health Insurance Act 1936, Sched I, Part I, cl (e), provides as follows:

Employment in the United Kingdom in plying for hire with any vehicle or vessel the use of which is obtained under any contract of bailment (or in Scotland any contract of letting to hire) in consideration of the payment of a fixed sum or a share in the earnings or otherwise, and the person from whom the use of the vehicle or vessel is so obtained shall be deemed to be the employer for the purposes of this Act.

G R Blanco White KC and A H Forbes for the applicant.

Valentine Holmes for the Minister of Health.

3 November 1939. The following judgment was delivered.

BRANSON J. This is a case stated by the Minister of Health under the provisions of the National Health Insurance Act 1936, s 161, and it raises a question as to whether one William Henry Thompson was employed under the National Health Insurance Act 1936, Sched I, Part I, cl (e), so as to bring him within the scope of that Act and cause him to be a person who ought to be insured.

There are really two steps in the consideration of this case. The first is to see exactly, if one can, the meaning to be applied to the word “employment” in Sched I, Part I, cl (e), and then the second question must arise as to whether or not, in the circumstances of this case, the applicant, William Henry Thompson, was employed within that meaning. I propose to deal with the two questions in that order.

It is said in the first place that “employment” simply relates to the mans occupation, just as one may say that a child was employed in making a sandcastle or a man was employed in reading a book. It is said, on the other hand, that the word “employment” connotes something being done under a contract, express or implied, with somebody who stands in the position of an employer. It is said that, if that meaning is adopted in this case, Thompson was not employed, because he had no contract with anybody to do anything material in the present case. I find it difficult to be certain that the opinion which I have formed is a correct one, but, having formed it, I feel I am obliged to state it. When one looks at the form of Sched I, one notices that it is headed “Employments within the meaning of the Act,” and, when one looks at each of the separate headings under (a), (b), (c), (d), (f) and (g), leaving

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out the one in question, every one of them relates to cases where there is a contract of some sort between the two parties involved in the matter. Clause (a) is perfectly clearemployment under a contract of serviceand cl (b) alsoemployment under a contract as master or a member of the crew of a ship. Clause (c) is employment as an outworker. There the parties involved are the person who is going to do the work and the person who gives out the work to be done, and, though it is obvious that they are not in the relation of master and servant, yet they are persons who are entering into mutual contracts under which the one gives out the work and the other takes it and does it. There the person giving out the work is deemed to be the employer. Clause (d) is “Employment in the United Kingdom under any local or other public authority. …” I cannot imagine that occurring without some contract between the person employed and the local authority. It need not be a contract of service. There must be something which the local authority has contracted that the other person shall do. Again, clause (f) deals with “Employment … by way of manual labour under a contract …” and cl (g) with “Employment as master or a member of the crew of any fishing or other vessel.” Is there any reason why the word “employment” in the critical cl (e) should have any meaning given to it different from the meaning which it bears in every other clause of Sched I? I find it very difficult to come to any conclusion other than that it should bear the same sort of meaning. I do not mean to say that I think it is necessary that one should be able to point to a concluded contract under which the one person is bound, at all events, to perform certain acts for the benefit of the other. It seems to me that it might well be possible to say that a person is employed by somebody in plying for hire if, on an examination of the contract between them, one finds that certain benefits are given to the person alleged to be employed in return for something which he has to do, if not by virtue of a contract, at least by virtue of the common intention of the parties that such things shall be done. To put the thing in a concrete form as near as possible to the present case, if one finds that a car is hired, or a bailment made of any goods, to a person who is to pay money for that bailment, and it is plain, when one looks at the relationship between the parties, that it is intended and contemplated that the article so bailed shall be used in a certain way, it seems to me that it would not be unfair to say that the employment of the bailee is to do that which it is contemplated that he will do, and without which the contract would never have been entered into and would be nugatory and futile.

With that as an explanation of the meaning which I think should be given to Sched I, Part I, cl (e), I turn to the facts of the present case. There is no dispute about them. They are set out in the case stated by the Minister, and I may sum them up shortly as follows. The applicant Thompson had for many years been the owner-driver of a taxi-cab in Brighton. In 1936, competition arose, and, in order

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to meet the competition, the applicant and a number of other taxi-cab drivers in Brighton in a similar position to that in which he was himself formed an association called the Streamline Association. That association approached various motor-car dealers with the object of ascertaining on what terms they would supply cars to the members of the association for the purpose of plying for hire to meet that competition. The respondents offered the most favourable terms, and consequently the applicant entered into an agreement with the respondents under which the respondents themselves entered into a hire-purchase agreement with third parties and proceeded to agree to bail this motor car to Thompson on the terms that he should pay them a certain sum per week. When one looks at the contract under which this car was bailed, it is quite clear that the parties contemplated that this vehicle was being bailed to the applicant, and was being accepted by him, in order that he should use it for plying for hire in the streets of Brighton. It is quite true that there is no express clause in the contract compelling him at certain times and seasons to be in the streets plying for hire. It is also plain that the respondents had no interest directly or by contract in the amount of the money that he should receive by hire, but it is plain that the plying for hire was the purpose for which the bailment was made. That was the employment which was in the contemplation of the parties. I think that that becomes very plain when one looks at cl 10 of the agreement, under which the applicant agrees that, in the event of the Streamline Association of motor-car drivers hiring cars under this agreement being formed, he is to become a member of that association. Although, in my opinion, it is necessary to find in the relationship between the parties something which can be called a contract between the one and the other, I think that in this case one has that relationship, and I think it is not unfair to say that, although Thompson was not employed to use this car as a servant under any express contract to do so, it was in the plain contemplation of the parties that he should ply for hire in the streets of Brighton. The consequence is that he comes within Sched I, Part I, cl (e), and the decision of the Minister that he had been employed within the meaning of Sched I, Part I, cl (e) is a correct one. That being so, of course it follows that the decision that he was employed by the respondents is also correct, and, therefore, the appeal is dismissed,

Appeal dismissed with costs.

Solicitors: Thomas Eggar & Son, agents for Nye & Donne, Brighton (for the applicant); The Solicitor, Ministry of Health (for the Minister of Health).

W J Alderman Esq   Barrister.


Petrie v Macfisheries Ltd

[1939] 4 All ER 281


Categories:        EMPLOYMENT; Contract of service        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND DU PARCQ LJJ, AND ATKINSON J        

Hearing Date(s):        16, 17 NOVEMBER 1939        


Master and Servant Remuneration Wages Illness Notice in place of employment that half-pay would be paid ex gratia during illness Employee accepting such payments Claim for full wages in respect of later illness Implied term in contract of employment.

The plaintiff entered the employment of the defendants in 1930 at a wage of £2 15s per week, which by July 1935, had been increased to £3 2s 6d per week. Before the period of his employment, a notice had been put up by the employers in the place where the man worked to the effect that half-pay up to a total of 21 days per annum would be allowed as an act of grace in respect of absence during sickness. The plaintiff was absent from work through illness for short periods in 1933, 1936 and 1937, and on each occasion received half-pay for the period of absence. He admitted that all he could get was an ex gratia payment of half-pay during 3 weeks of absence. In July 1938, he again became ill, and was absent from his employment from that date until February 1939. He claimed full wages in respect of this period, contending that he was entitled under the terms of his contract of employment to be paid full wages during illness:

Held (i) there was no evidence to support the plaintiffs contention.

(ii) having regard to the admission of the plaintiff and the facts of the case, it was clear that, at the time of the illness in question, he was employed under a contract the terms of which were that he had no claim as of right to wages during illness.

Notes

For some time it has been quite clear that there was an impression in some quarters that the right to wages during periods of illness had been altered by the decision in Marrison v Bell. That Marrison v Bell left the common law on this matter untouched could not be seriously doubted, but it is well that the Court of Appeal have had an opportunity of re-stating the position. At common law, a servant has a right to his full wages during illness, but this right may be, and, in practice, generally is, varied by express contract or by a practice in the particular employment well-known to the servant. Whether the practice is known to a particular employee and whether he contracted with reference and subject to it may be very difficult questions of fact in many cases, but the legal principles governing the matter have never been in any real doubt. Their application to particular cases, if dependent upon proof of a custom or practice, is, as has been stated above, extremely difficult, and employers will be well advised to ensure that the precise position is made plain to every employee at the time of his engagement.

As to Wages during Illness, see Halsbury (Hailsham Edn), Vol 22, p 134, para 222; and for Cases, see Digest, Vol 34, p 86, Nos 631640.

Cases referred to

Marrison v Bell [1939] 2 KB 187, [1939] 1 All ER 745; Digest Supp, 160 LT 276.

Cuckson v Stones (1858) 1 E & E 248; 34 Digest 71, 483, 28 LJQB 25, 32 LTOS 242.

Warburton v Co-operative Wholesale Society Ltd [1917] 1 KB 663; 12 Digest 378, 3122, 86 LJKB 529, 116 LT 107, 10 BWCC 93.

Niblett v Midland Ry Co (1907) 96 LT 462; 34 Digest 86, 639.

Sagar v Ridehalgh (H) & Son Ltd [1931] 1 Ch 310; Digest Supp, 100 LJCh 220, 144 LT 480.

Page 282 of [1939] 4 All ER 281

Browning v Crumlin Valley Collieries [1926] 1 KB 522; 34 Digest 730, 1106, 95 LJKB 711, 134 LT 603.

Cutler v Powell (1795) 6 Term Rep 320; 34 Digest 88, 649.

Appeal

Appeal by the defendants from an order of His Honour Judge Thomas in the Mayors and City of London Court, dated 15 May 1939. The facts are fully set out in the judgment of Slesser LJ.

A T Miller KC and R Mœlwyn Hughes for the appellants.

David Weitzman for the respondent.

17 November 1939. The following judgments were delivered.

SLESSER LJ. In this case, the plaintiff, Samuel George Petrie, who is by occupation what is known as a smoker of fish, working in a smoke-hole on a weekly wage, sued the defendant company, MacFisheries Ltd, for the sum of £82 17s 10d. Of that sum, £3 2s 6d is for a weeks wages in lieu of notice. In regard to the balancenamely, £79 15s 4dthat is attributed to wages from 20 July 1938 to 6 February 1939 less certain deductions. The basis upon which those wages are claimed is this. They are said to be wages due to this man for a period during which he was temporarily sick but still in the employment of MacFisheries Ltd and it is said that, being entitled during that period to his full wages, since he was in their employment and sick, he has in fact received a sum equal in amount to his half-wages for a limited period, and that, notwithstanding the fact that he had so received that sum which was paid to him ex gratia, he is entitled to wages during his period of sickness.

One has to see at the outset what the contract was between this man, and his employers. It is said that there is a general principle of law that, where a man is employed on a weekly service and is not paid in respect of specific work done, for the faithful service which he either performed, or would have performed but for his illness, he will be entitled during the period of incapacity to receive wages, and reliance is placed upon Marrison v Bell in particular. The headnote of the Law Reports states as follows:

Illness of a servant, which, while it lasts, incapacitates him for the performance of his duties, but is not so long-continued or so serious as to terminate the contract of service, does not at common law suspend his right to wages under the contract.

That headnote takes that form because in Marrison v Bell there was no question but that that was a case where the man was being remunerated for faithful service performed by doing his work when in health and by trying to get well when he was sick.

The other difficult questionnamely, whether or not, in Marrison v Bell, the contract was one where the right to wages may depend upon the specific work done, and other problemsdid not, strictly speaking, arise. As I read Marrison v Bell, it was assumed that it was a case of the kind which I have indicated, though there are many cases of servants working by the day and by the week, or for longer periods of remuneration, where it does not necessarily follow that they are entitled to wages during temporary sickness. That case turned

Page 283 of [1939] 4 All ER 281

entirely on the nature of the contract and the nature of the service. The real question in Marrison v Bell was whether or not, if during illness a servant receives benefit under the National Health Insurance Act, it deprives him of his right to wages under the contract of service while he is sick, assuming, as it was assumed, that he is entitled to them.

The error has crept into some peoples minds that, apart from this important question of the effect of the National Health Insurance Act, Marrison v Bell purported to lay down a new principle of law. In my opinion, it does nothing of the kind. Scott LJ, who gave the judgment of the court, cites Cuckson v Stones and the other authorities which deal with this particular class of service, and I find nothing in that judgmentwhich is directed to the difficult question of the effect of the National Health Insurance Actto suggest that it purports to, or does in fact, lay down any new principle of law at all.

It is said in the present case that this mans service was of the type contemplated in Marrison v Bell, and that therefore he was entitled to wages during temporary sickness. The case is not quite so simple as that. This man entered into the employment in 1930 at a wage of £2 15s per week. Before the period of his employment, a notice was put up by the employers in the place where the man worked, and, I suppose, in other places, to this effect:

Camden Town Staff. Allowance during absence due to sickness or accident. Commencing Apr. 24, 1926, the undermentioned allowances will be made when men are absent: 1. During sickness: half-pay commencing from the first days absence, up to a total of 21 days per annum. No allowance after. These allowances are purely an “act of grace” on the companys part, and cannot be claimed as a “right.” The above applies to men with over 6 months service with the company.

Had the evidence in this case been that this man, at the time when he entered into the employment in 1930, knew, and acquiesced in, these terms, I think that there could have been but little doubt that, whatever rights he may have had when no question of any term as to what was to happen when he was ill had been raised, he would in this case have disentitled himself to rely upon any such implication, because this notice, in its terms, seems to me to be inconsistent with a right to receive pay during sickness. True it is that it is stated that the allowances are an act of grace, and cannot be claimed as a right. If the man accepted the allowances on that basis, it would be a little difficult to reconcile that with his having agreed by implication to receive wages during sickness as a right. Of course, if there had been an express agreement, it would be quite different. One asks oneself whether this payment, made under an act of grace, would be set off against the wages, or whether, when he was ill, he would be in the fortunate position of getting his wages and half his wages again in the form of this ex gratia payment, or whether he was entitled to receive only half his wages. I think that the implication which one would be entitled to draw would be that this was in substitution of any right which he might otherwise have. However that may be, counsel for the respondent is perfectly right in saying that the

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evidence proves conclusivelyor at any rate satisfied the judgethat this man never had his attention drawn to this notice at all. He behaved at all times as if he knew of the notice, but it is true to say that the notice was never brought to his attention, and possibly was not even in existence at the time when he went into the work in 1930.

The facts of the case are these, so far as they are material. As I have said, he went into the work in 1930 at a wage of £2 15s per week. In February 1930, his wages were increased to £3 per week, and in July 1935 they were again increased to £3 2s 6d per week. During the period when he worked for the employers, he was on several occasions temporarily ill. He was ill in 1933, when he was away for 14 days. He was ill in October 1936, when he was away for 10 days, and he was away in April 1937 for 2 days. For those periods of absence he has modestly abstained from claiming any wages. In 1938 he was again ill. What was the position in 1933 with regard to his right to wages? The judge has held that in 1933 he said that he knew that he would get half-wages. Of course, that is not strictly accurate. What he meant was that he knew that he would get a sum of money equivalent to half his wages, and that he thought it was ex gratia. It is not very clear from the evidence whether or not he meant that he knew that before he was taken ill in 1933. When I look at the evidence, I am inclined to think that he meant to say that he knew of the matter before he was taken ill. He was asked in cross-examination by counsel for the appellants:

I want you to understand that I am not suggesting that there was this notice displayed in the smoke-hole at the time you were working there, but I am suggesting to you that you knew perfectly well that you and all the people who worked in the smoke-hole got half pay when they became ill.

That seems to have referred, not to this mans particular illness, but to the general custom prevailing in the place. Counsel for the appellants continued as follows:

You knew that, did you not?I knew that you would get half pay, but I did not know it was …

Then he was interrupted. Counsel for the appellants continued as follows:

You knew you would get half pay if you were ill?Well, I was told it, you know.

Then the judge asked:

You were what?I heard it going on among the men, you know. That is all. But I did not know.

How he did not know, if it was going on amongst the men and was being discussed, I do not quite appreciate. Then the judge repeated the words:

I heard among the men that the defendants paid half wages during illness.

I do not think it necessary here definitively to come to a conclusion on the state of this mans knowledge before his sickness. As I have said, in 1933 he was taken ill. He was away from work for two weeks, and

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during that period he did in fact receive this gratuity. He was asked these questions specifically as to his knowledge, not, I think, in regard to what happened in 1933, or, at any rate, not perhaps to conclude the matter:

In 1933?Yes. I was two weeks ill with the flu.

For the time that you were ill in 1933 you were paid half pay?I got two half-weeks pay for that.

That is a statement that he got the pay. However, the matter went farther, in this way. He was then asked:

You knew perfectly well, did you not, in 1933, that what you got for working in this smoke-hole, when you became ill, was half pay t

Judge Thomas: Not for working.

It was half pay?Yes, I got two weeks half pay.

From that time on at any rate, you had known that that was what you would get when you fell ill?Yes, but I thought it was from gratitude

I am not concerned with whether you thought it was gratitude. That was what you expected to get when you fell ill, was it not?Yes.

Not only did you expect to get half pay when you were ill, but you knew that you would get it, did you not?Well, I was told it by the foreman. He told me to go and get half pay.

You knew that you would get it when you fell ill?Yes.

You did, did you not?Yes.

As I have said, perhaps the matter in 1933 is not entirely conclusive. The critical answer appears to me to have been given in relation to the payment he got in 1936, when he once more, unfortunately, fell ill. He was asked these questions:

You got then, did you not, half pay?Yes.

And signed for it?Yes.

Which was what you expected to get?Well, I did. I got it before. I thought I would take all I could get.

And you expected to get it?Yes.

Then he said that in 1937 they again gave him half pay.

In my opinion, the evidence in this case being on this matter all one way, by his own evidence this man has stated that all that he could get, in his opinion, in 1933, in 1936 and in 1937, was half pay when he was ill. Whether he could get it as a legal right or whether he would get it ex gratia seems to me immaterial. If he had made an arrangement that, when he was ill, he was to take half pay, whether as of right or whether as gratitude, to use that expression, that seems to me to negative any presumption, if there be a presumption, that he was working upon the terms that he was to get full wages while he was temporarily sick. Of course, if there had been some specific term that he was to get those wages when temporarily sick, some other matter might have been urged. In the circumstances, however, I am unable to find, in this case, any evidence on which the judge could properly find that this man had made the contract which he must contend was the contract between himself and his employers if he is to support his claim.

I pass next to consider the judgment of the judge. He says this:

If it had been established that the position was that the defendants intended to contract with their employees in this particular part of their premises on those terms [that they should receive an ex gratia payment], and that that should be a

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binding contract, I think it might be possible to find that the plaintiff had accepted those terms, and I should have been very glad to have been able to find so. … But it has not been proved that it was intended by the defendants, even, to be a term of the contract.

That is to misconceive the position. The plaintiff says, “I am entitled to these wages by reason of an implied term in my contract that I should be paid during sickness.” His evidence is that he got all that he could get, not in the sense, as I read it, all that he could get if they would not give him morehe did not ask for more, and did not think to ask for morebut all that he was entitled to get in 1933, in 1936, in 1937 and in 1938, ex gratia, for 3 weeks.

I have come to the conclusion, as a matter of law, that there was no evidence on which the judge could find that a contract had been made between him and the employers so to remunerate him in 1938 as to entitle him to the wages during sickness. It may or may not be the case that the original contract did give him that implied right. I am quite satisfied that, by the time the contract was varied by the increase in wages in 1935, he had already, in 1933, agreed to this variation as regards the terms, and that in 1935 he was being paid £3 2s 6d per week on the terms which he himself, in his evidence, admits to be the case. For myself, I have the gravest doubt whether he ever entered into a contract that he was to be paid otherwise than on what I understand him to admit to be the general terms obtaining amongst the workers in a similar condition. I do not think it is necessary to pass judgment upon that point. It is sufficient to say that, under the contract on which he sues, which is the varied contract of 1935, when he was paid £3 2s 6d, upon his own admission, all he could get was an ex gratia payment of half pay during 3 weeks of sickness, and that such an admission on his part, with complete absence of evidence to the contrary, establishes that he could not rely upon any implied term which may or may not exist at common law. For these reasons, I think that this appeal should be allowed.

DU PARCQ LJ. I have come to the same conclusion, and, now that we have heard the matter fully argued, I have no doubt that the judges error was a mistake of law. I think that the judge formed a wrong opinion of the result of the decision in Marrison v Bell. There is a passage in the judges judgment, where he says:

What is the position so far? There was a contract of service, and it had not been terminated. The result of the decision in Samson v. Bell is that, unless the defendants can raise something else, the plaintiff is entitled to his wages, subject to deduction of what he already received.

The judge appears to have thought that, when once a contract of service is proved, one must assume, without more, that the workman will be entitled to his wages during temporary illness. It is interesting to see that the judge does say “subject to deduction of what he has already received” which means, I take it, subject to deduction of certain ex gratia payments. I say this parenthetically, because it shows that the

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judge did not think it possible to say that the workman was entitled to his full wages in addition to the gift, which on one view he has received, of a sum equivalent to half his wages. I thought at one time that counsel for the respondent was suggesting that the view put forward by his client, or on behalf of his client, and possibly by the judge, was that it might possibly have been the intention of the parties, or at any rate the intention of the plaintiff, that he should get his full wages in addition to those ex gratia payments. Those words of the judge, I think, enable one to dismiss that from ones mind.

I quite see, looking again at Marrison v Bell, and looking at Warburton v Co-operative Wholesale Society Ltd, which was there cited, that, if a reader of the report confines his attention to one sentence, and reads it divorced from its context and without relation to the subject-matter, he may come to a wrong conclusion as to what Marrison v Bell decided. It is quite true that Marrison v Bell adopted and approved the observations of Lord Cozens-Hardy MR in the Warburton case, which, when they were spoken by Lord Cozens-Hardy MR were, I think, merely dicta, and not binding upon the court. A single sentence was cited by Scott LJ from the judgment of Lord Cozens-Hardy MR in Warburtons case, at p 665:

It has been long settled that a contract of service is not terminated by incapacity to work by reason of temporary illness, and that on return to work the man can recover his wages during the period of his absence. …

In citing that, Scott LJ pointed out what was perfectly truenamely, that the words were unlimited and unqualified. It was quite right, if I may say so, to point out in Marrison v Bell that no qualification was introduced by Lord Cozens-Hardy MR, because, so far as Marrison v Bell was concerned, it was material to notice that no such qualification was introduced or suggested as would have prevented those words from applying to the particular facts of the case in Marrison v Bell. I venture to say, with great respect, that Lord Cozens-Hardy MR said nothing inaccurate in that statement so long as it is read by somebody who does not expect to find in a short sentence a complete statement of the whole law. Lord Cozens-Hardy MR, was stating a general proposition which, for myself, I believe to be accuratenamely, if one has a weekly hiring of the servant, without more, and with nothing in the terms of it, whether they are expressed or implied, to suggest that during temporary absence through illness he is not to be paid, then one may assume that he is to be paid, and that it was the intention of the parties that he should be paid. I only hope that, in saying that, I have not said something which, again taken from its context, may lend colour to arguments which I certainly do not intend my words to support. I think that the longer ones experience becomesand mine is shortof exercising appellate jurisdiction, the more one is impressed by the fact that a great deal of the difficulty is caused by a failure to read the whole of the judgment or to read it in relation to the surrounding circumstances,

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and the sometimes useful, but often only temporarily advantageous, method of taking one sentenceit may be from the judgment, it may be from the headnotein order by the skilful use of it to persuade a judge to do something which no judgment read as a whole can possibly support. Nobody can read that statement of Lord Cozens-Hardy MRand it would be a matter of distress to him if he thought they couldwithout realising that, like all other statements of a general rule, it is subject to exceptions.

The first thing to remember is that one must find out what the contract is. It is quite plain to anybody that Lord Cozens-Hardy MR, did not mean that every contract of service, whatever terms were contained in it, must result in a liability to pay a workman during the time when he is ill. The terms in the contract may be express or they may be implied. One may have a custom. Lord Phillimore once observed that there is a custom that agricultural labourers are not paid during the time they are off work through illness. Probably upon that matter the knowledge of every humble country labourer is greater than that of the most eminent lawyer. When a local farmer employs him as a weekly wage earner, he knows perfectly well what the custom, which he has known since he was a child, imports into the contract. It would be idle in such a case, if what I have said about custom is right, to say that Lord Cozens-Hardy MR said that, under a contract of service, the man must always be paid wages during his absence through illness. Apart from express terms or terms imported through some well-known custom, the terms may obviously have been implied in other ways. I do not dwell upon that, because in this case, when the whole of the facts are looked at, it seems to me plain, and I think that, if the judge had not attached undue importance to that isolated passage from Marrison v Bell as I think he must have done, he could have come to no other conclusion than that there was here, at the material time in 1938, a contract that, during his absence through illness, the workman was to have no right to any remuneration whatever. It is impossible, in my view, to draw any other conclusion from the facts.

Supposing that in 1938 what had happened was this. I will assume that down to that date the plaintiff had known nothing of the defendants intention to pay nothing except an ex gratia payment for a portion of the period during his absence through illness. Supposing that he knew nothing about it, and then, let us say, on a Monday, the employers, being under an obligation to employ him until the end of the week and thereafter, unless they gave him a weeks notice and the weeks notice came to an end, had said to him, “We do not pay you if you are away ill. If you are away ill, you shall not be paid anything.” He might at that stage have said: “I do not agree to that at all, and I will not work for you on those terms.” Then, if on Tuesday he had fallen ill, and had been away for a day or two, I do not think the employers would have been entitled to say: “We are going to deduct something from your wages

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in respect of those two days.” Of course, what they would have been entitled to say would be this: “If you are not prepared to work for us in the future upon these terms, we will give you a weeks notice.” Then, if he had said, “Very well, I agree. I quite understand that. I quite understand that, if I am ill, I have no right to remuneration at all,” and had gone on working for them, nobody could suggest, as it seems to me, that, because originally, when his employment began, no such term was introduced, that term had not become a part of the agreement.

In effect, when one looks at the facts, that is what happened, so far as the substance of it goes. If one assumes that this workman is a reasonable manand, if I do not assume that, I am quite unable to put any construction at all upon the conduct of the partieshe knew, and admits that he knew, long before 1938, that, if he were away ill, he would not be paid a penny as of right. It is not suggested that he thought, when he was paid ex gratia, that he was still entitled to wages over and above the ex gratia payment. He knew that it was the intention of the firm to pay him nothing whatever as of right, if he was ill, and he knew that it was on that footing that the defendants understood that they contracted with him, and that that was their view of the contract between them. Then, if, knowing that, he makes no objection, and makes no claim for wages, and goes back to work and accepts, as he later did, an increase in his wages, it is quite impossible for him to say that he did not agree to work for them on the footing that that was a term of the contract.

It is now quite impossible for us, as it seems to me it would have been quite impossible for the judge, had he correctly applied the law, to come to any other conclusion than that in 1938, at the material time, it was as much a term of the contract between the plaintiff and the defendants that he should have no right to remuneration during illness as though that term had been embodied in a written contract executed in solemn form by both parties.

I want to make it quite clear, in case any words of mine are misunderstood, that I do not rest that in any way upon the doctrine of estoppel. For reasons into which I do not think it necessary to go, I see many reasons against making any use here of the doctrine of estoppel against the workman. I simply say that the facts, proved or admitted, prove beyond doubt that at the material time it was a term of the contract that this workman should not be entitled to any payment during his absence through temporary illness. That does not mean that the employment terminated. It means no more than what I have said, and that is, of course, quite enough for the decision of this case. I agree that this appeal should be allowed.

ATKINSON J. I agree. In my opinion, the judge misdirected himself, and addressed his mind to the wrong question. I think that he began to go wrong when he said:

What is the position so far? There was a contract of service and it had not

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been terminated. The result of the decision in Marrison v. Bell is that, unless the defendants can raise something else, the plaintiff is entitled to his wages, subject to deduction of what he has already received.

Thereafter he dealt with the case, as I think, as if the plaintiff started as a matter of law with the right to wages during sickness, and as if he retained that right until he had given it up for some good consideration, and, as the ex gratia payment would not, in the view of the county court judge, amount to good consideration in law, the right remained. To quote his final words: “Nothing happened to do away with the plaintiffs legal rights.” I think that that explains why he dealt so fully with the question as to whether or not it had become a term of the contract that the plaintiff should have half wages during sickness as a right. He held, very properly, that the half wages were never more than an ex gratia payment, and that they never became a matter of contractual right. Of course they never did. The real question was whether or not it was a term of the contract of employment that his wages should be paid during sickness. The defendants said that it was a term of the contract that wages should not be paid during sickness, and, because it was a term, therefore they were ready, not as a matter of right, but ex gratia, to pay a man half wages for 21 days. I think his view was based on a misconception of the meaning of a passage in the judgment of Scott LJ in Marrison v Bell, at p 198 ([1939] 1 All ER at p 748):

… those cases say, in my opinion quite clearly, that, under a contract of service irrespective of the question of the length of notice provided by that contract, wages continue, through sickness and incapacity from sickness to do the work contracted for, until the contract is terminated by a notice by the employer in accordance with the terms of the contract.

It is quite true that that principle is laid down without any reference to, or any limitation depending on, the terms of the contract of employment, but it is quite obvious that there must be read into it some such words as “subject to any express or implied term in the contract to the contrary.” It cannot be thought that Scott LJ meant that statement to apply to a contract where there was an express term to the contrary, and his comments on Niblett v Midland Ry Co again show quite clearly that he was not excepting the case where there was an implied term to the contrary. It cannot be thought that that general statement was meant to apply to such contracts, for example, as those in the weaving industry, where the amount of wages payable depends on the quantity and quality of the work done, as, for example, in Sagar v Ridehalgh (H) & Son Ltd. It cannot be suggested that it was meant to apply to contracts where, by the custom of the industry, wages are payable only for services rendered, as with agricultural labourers, or as, apparently, in the milling industry, dealt with by Greer J in Browning v Crumlin Valley Collieries, where the judge said that the consideration for work is wages and the consideration for wages is work. Is it to be implied in the engagement that wages are to be paid where,

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through no fault of the employer, the work cannot be done? The question must depend, as indicated in Cutter v Powell, on the ascertaining and the construction of the terms of the contract. As was said in that case:

The right to wages depends upon whether the consideration therefor has been performed.

It is submitted in these notes, as I think rightly, that the question is this. It must be ascertained from the contract whether the consideration for the payment of wages is the actual performance of the work or the mere readiness and willingness to perform the work, if of ability to do so.

In my opinion Scott LJ has not said anything inconsistent with that submission. It must be remembered that that passage followed a reference to what the county court judge had said. He had said:

When off sick, in the absence of any express contract, no wages due.

I think that the court meant that the truer view was just the other way round, and that, where there is nothing in the contract, expressed or implied, to the contrary, the consideration for wages is not the actual doing of the work contracted for, but the readiness and willingness, if of ability, to do the work. If that view is right, the county court judge should have asked himself the comparatively simple question whether or not the terms upon which the plaintiff  was employed in 1938 excluded the right to wages if, through illness, no work was done. If he had asked himself that question, he could have answered it in only one way. Instead of dealing with that question, I repeat, he assumed the legal right, and said that it had never been given up. In truth, there was no such right. For years the plaintiff had known and assented to the terms upon which the defendants employed their men, and it never entered his head that he was employed on any other terms, or that he was entitled to be paid for work he had not done, until he heard of Marrison v Bell from somebody who misunderstood it.

I agree that the appeal should be allowed.

Appeal allowed. No order as to costs.

Solicitors: Simpson North Harley & Co (for the appellants); Fraser G Millward (for the respondent).

Derek H Kitchin Esq   Barrister.

Appeal of Sherwood, Re G F & A Brown & Sons Ltd

[1939] 4 All ER 291


Categories:        TAXATION; National Insurance        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        2, 3 NOVEMBER 1939        


Work and Labour National health insurance Remuneration in excess of £250 per annum Unpaid assistance of employees wife Whether value of such assistance may be deducted from remuneration National Health Insurance Act 1936 (c 32), Sched I, Part II, cl (k).

The applicants husband had been employed as manager of certain licensed premises under a written agreement providing for payment of a certain salary together with occupation of the residential parts of the

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licensed premises free of rent, rates and taxes, the combined value of the salary and free residence being in excess of £250 per annum. It was contended that the applicants husband had not been able to earn the whole of what was paid to him, as it had been necessary, in order to carry on the business, to have the assistance of his wife, and that this assistance, although she had actually been paid nothing, was worth not less than £78 per annum, which amount should be taken in reduction of his remuneration, and so bring it below £250 per annum:

Held although circumstances involving the payment of money in order to earn remuneration may be taken into consideration in reducing the amount of such remuneration, it cannot be said that because a man gets some unpaid help, therefore his employment is at a rate of remuneration less by the amount of the help he has obtained.

Notes

The remuneration of a person is sometimes fixed in the expectation that he will receive a certain amount of help from his wife or other member of his household. Unless there is an express provision that such help shall be paid for at a stated rate, this matter cannot be taken into account in deciding whether the employee is earning “not more than £250 per annum.”

As to Persons Compulsorily Insured, see Halsbury (1st Edn), Vol 28, Work and Labour, pp 905911, paras 16101614; and for Cases, see Digest, Vol 44, pp 13081311, Nos 140154.

Case Stated

Case stated by the Minister of Health under the National Health Insurance Act 1936, s 161. The facts are fully set out in the judgment.

H J Astell Burt for the applicant.

Valentine Holmes  for the Minister of Health.

3 November 1939. The following judgment was delivered.

BRANSON J. This is a case stated by the Minister of Health under the provisions of the National Health Insurance Act 1936, s 161, and it raises quite a short point in the following way. The applicant is the widow of one William James Sherwood, and Sherwood was appointed the manager of certain licensed premises. The agreement under which he was so appointed is before me. Under the agreement, he was to have a salary at the rate of £25 per calendar month, and to occupy the residential parts of the licensed premises free of rent, rates and taxes. The £25 was reduced in 1932 to £20 14s, but, notwithstanding that reduction, the remuneration in the agreement and the occupation of the residential parts of the licensed premises free of rent, rates and taxes, which were taken into consideration, were above the value of £250 per annum. What is said is that the Minister was wrong in holding that Sherwoods remuneration was over £250 per annum, so as to exclude him under the terms of the National Health Insurance Act 1936, Sched I, Part II, cl (k), because it is said that it was contemplated, when he was appointed at that salary, that he was a married man, and would have the assistance of his wife in running the business. It is said that, as a matter of fact, the wife did assist in running the business, and that the value of the services rendered by the wife in connection with the business is not less than £78 per annum. It said that, although Sherwood did not pay his wife anything, yet it should be considered that the value of her servicesnamely, the £78should be taken in reduction of the remuneration which was paid him by his employers, and that by those

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means the rate of remuneration paid to him should be held to be below £250. In arguing the case before me, counsel for the applicant has continually tried to read into cl (k) such words as “the earning power” or “the actual remuneration earned by him.” Those words are not in the statute at all. If Sherwood had had to pay out moneys from the £250 in order to earn the remuneration as a matter of agreement between him and his employers, completely different considerations would have arisen. What is said here is not that he has had to pay out sums of money which should be taken in reduction of the £250, but that he has not been able to earn the whole of what was paid to him because it was necessary, in order to carry on the business, that he should have the assistance of his wife. That is not what the statute says. The line to be drawn is laid down by the Act. It is quite true that circumstances which involve the payment of money in order to earn the remuneration may be taken into consideration in reducing the amount of the remuneration. To say that, because a man gets some unpaid help, and does not himself earn the whole remuneration, therefore his employment is at a rate of remuneration less by the amount of the help that he has obtained is quite a different matter. In my opinion, the decision of the Minister was right, and this appeal is dismissed.

Appeal dismissed with costs.

Solicitors: McKenna & Co (for the applicant); The Solicitor Ministry of Health (for the Minister of Health).

W J Alderman Esq   Barrister.

British & Argentine Meat Co Ltd v Randall and Others

[1939] 4 All ER 293


Categories:        ADMINISTRATION OF JUSTICE; Courts: LANDLORD AND TENANT; Rent, Tenancies        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        2, 3, 6, 7 NOVEMBER 1939        


Landlord and Tenant Compensation for goodwill Practice Admission of evidence on consideration of report by county court judge Whether or not proceedings before county court judge an appeal.

The tenants of premises let to them at a rent of £200 per annum applied for a new lease under the Landlord and Tenant Act 1927, s 5. The matter was referred to a referee for report, and his report came in due course before the county court judge. At this stage, the landlords tendered in evidence a letter from a co-operative society, written after the report had been made, containing an offer to lease the premises for 99 years at a rental of £400 per annum, the rent which the referee had found was the goodwill rent. The county court judge refused to admit this letter. From the figures mentioned in the report, it appeared that, at the material time, a butcher renting these premises at £200 per annum would have made a yearly profit of about £300:

Held (i) the county court judge was not entitled to treat the hearing before him as an appeal from the referee. He was sitting as a tribunal of first instance, and should have admitted the evidence tendered.

(ii) it being clear from the figures that there was here no goodwill in respect of which compensation could be claimed under the Act, it was

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unnecessary to send the case back for a new trial, and there being no right to compensation there was, therefore, no right to a new lease.

Notes

The question at issue here is as to the function of a county court judge is exercising when he is considering the report of a referee in a case under the Landlord and Tenant Act 1927. The question is whether he is sitting as a court of appeal or as a court of first instance. The procedure envisaged by the Act is for an application to be made to the court, which application can be, and in practice always is, referred to a referee for consideration and report. The position is, therefore, that the referee is not required to give any judgment from which an appeal may be made. The proceedings before the referee are only a part of the proceedings in the matter, and no order is made in the proceedings until the matter has again been placed before the judge upon the consideration of the report of the referee. The proceedings, therefore, up to the time when the county court judge makes an order upon the report of the referee, are all proceedings in a court of first instance, and at any time before the final order in those proceedings further evidence may be tendered and admitted on the same principles as those upon which further evidence is received at the trial of an action.

As to Tribunals for the Purposes of the Landlord and Tenant Act 1927, see Halsbury (Hailsham Edn), Vol 20, p 304, paras 351355; and for Cases, see Digest, Supp, Landlord and Tenant, Nos 2306a2306s.

Cases referred to

Whiteman Smith Motor Co Ltd v Chaplin [1934] 2 KB 35; Digest Supp, 103 LJKB 328, 150 LT 354.

Simpson v Charrington & Co Ltd [1934] 1 KB 64; Digest Supp, 103 LJKB 49, 150 LT 103, on appeal [1935] AC 325, 104 LJKB 226, 152 LT 469.

Appeal

Appeal by the landlords from an order of His Honour Judge Clements in the Rochester County Court, dated 14 July 1939. The facts are fully set out in the judgment of Slesser LJ.

M D Van Oss for the appellants, the landlords.

S P J Merlin for the respondents, the tenants.

Van 0ss: The county court judge treated the application by the landlord to reject or vary the referees report as an appeal, and held that the burden was on the landlord to show that the referee was wrong; whereas he should have held that the burden remained throughout on the tenants who were claiming the benefit of the Act. He was also wrong in rejecting without considering it the further evidence tendered before him by the landlord. By the Landlord and Tenant Act 1927, s 21, the county court is made the tribunal. Under the Act the parties are to be deemed to have consented to the reference. Provision is made by sub-s (2) for the reference, but this is not obligatory, as the words “unless otherwise prescribed” show, and the rules provide for a hearing by the judge. The procedure upon and after reference is regulated by the incorporation in the subsection of the County Courts Act 1919, s 6. Although the County Courts Act 1919, has been repealed, the Landlord and Tenant Act 1927, s 21, must still be construed in accordance with its terms, and the material county court rules are those made under the old Act. If this is not so, the County Courts Act 1934, and the rules made thereunder have substantially the same effect, so far as the point

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at issue is concerned. When the report comes before the judge for adoption or rejection or variation, he is bound to consider it and form his own judgment upon it: Simpson v Charrington, per Scrutton LJ at p 76. The matter is referred to a referee for convenience only, and the county court is bound to exercise its own judgment on all questions of law or fact: see per Greer LJ, at p 83.

As to the further evidence, the landlord had the right to tender such evidence as was relevant and admissible. The judge had power to consider it, and was bound to do so, particularly where, as in this case, the evidence had come into existence at a date subsequent to the report. Such a right could only be taken away by clear and precise enactment. There is nothing in the Act to suggest that such was the intention of Parliament. The evidence tendered by the landlords was clearly relevant and admissible, and, if it had stood unchallenged, would have been fatal to the tenants case in that it showed that a normal rent was being offered which was equal to, or in excess of, the goodwill rent found by the referee. If the judge had considered the report of the referee, he must have come to the conclusion that the report should be rejected. As it has been adopted, it must be treated as part of his judgment, and an appeal lies to this court on questions of mixed law and fact such as goodwill and reasonableness: Simpson v Charrington, at p 77. The referee found that the goodwill rent exceeded the normal rent. There was no evidence to support such a finding, and it is clear from the report that the referees calculations were on a wrong basis and that he ignored important matters. He cannot, by stating that he has applied the principles laid down by Maugham LJ in Whiteman Smith Motor Co Ltd v Chaplin, prevent the court from holding that he has in fact failed to apply those principles or has misapplied them. Before the tenant is entitled to a new lease under s 5 of the Act, he must show, among other things, that he would be entitled to compensation for goodwill under s 4. The referee calculated the goodwill rent by reference, among other things, to the profits of the tenants business. He took an average of those profits over a period of years; this was entirely wrong. The figures showed that since 1933 the profits, the turnover, and the percentage of profit on turnover had steadily declined and that the last years must have shown a loss if the goodwill rent had been the basis of calculation. In these circumstances no prudent butcher would consider paying more than the normal rent.

Merlin: The judge was right in adopting the report. This report fully conforms with the directions of this court in Whiteman Smith Motor Co Ltd v Chaplin, and with s 4 of the 1927 Act. The material evidence is set out, and the material findings of fact are all stated. He viewed the premises before and after his hearing, and viewed other comparable premises to which his attention had been drawn. The referee had ample evidence before him on which he could find as he has found with relation to normal rent and goodwill rent. The goodwill

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created here was exactly the type of goodwill which would increase the rental value to the landlord when he desired to relet the premises. The referees findings of fact were adopted by the judge in his judgment and are not subject to review by this court. By s 4(1)(d), situational value may be assessed only in favour of the landlord, not of the tenant. In disregarding the site value, the referee has complied with the Act. The judge had discretion to accept or reject the further evidence, and rejected it in the correct exercise of his discretion.

M D Van Oss for the appellants, the landlords.

S P J Merlin for the respondents, the tenants.

7 November 1939. The following judgments were delivered.

SLESSER LJ. The claim in this case was made on 29 August 1938 and the applicants applied for the grant of a new lease of the premises in question under the Landlord and Tenant Act 1927, s 5. They allegedas they had to allege, in order to satisfy s 5that they would be entitled to compensation under s 4, but that the sum which they would be likely to obtain by compensation would not compensate them for the loss of goodwill which they would suffer if they had to remove their business to other premises. This notional sum of compensation they placed at £1,000.

On 13 September 1938 the respondents, the landlords, denied that the applicants were entitled to a new lease, because, they said, no compensation was payable under s 4 of the Act, and in substance they said that, if the premises, which had been carried on since 1910 as a butchers shop, were let to a trader other than a butcher, they would actually attract a rent higher than that which would be attributable to a butcher who might wish to have the premises. It was not necessary for their purposes to say that it would attract a higher rent. It would have been sufficient to have said that it would attract the same rent. That was their case, and, if their case were well-founded, it was obvious that they ought in law to succeed. I do not think it necessary at this time once more to state what has been so clearly stated by Scrutton LJ and Maugham LJ, as he then was, in Whiteman Smith Motor Co Ltd v Chaplinnamely, that the two terminal considerations which affect the decisions in these cases are, in the first place, the ascertainment of the normal rent, and then the ascertainment of the goodwill rent within the meaning of the statute. The case here is simply this. The landlords say that, taking the definition of the normal rent laid down by Maugham LJ, at p 47, and taking the definition of goodwill rent, which he lays down at p 53, which, for the purposes of the present case, for the moment I abstain from repeating, there is no goodwill rent here over and above the normal rent, when the evidence is properly examined, and, therefore, there is no compensation attributable to the outgoing tenant, and, if there is no compensation, there is no right to a new lease. That, in substance, was the landlords case. The judge quite properly referred the matter, as he is required to do under the Landlord and Tenant Act 1927, s 21, to the consideration of the referee.

In so far as some argument in this case has depended upon the con-

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sideration of the respective obligations and powers of the county court judge and the tribunal in this matter, before I go into the particular facts of this case, it is convenient to state generally what I consider the constitutional position of these two authorities to be. The Landlord and Tenant Act 1927, s 21(1), provides as follows:

The tribunal for the purposes of Part I of this Act shall be the county court …

However, there is a proviso, first, that in certain cases the High Court may be the tribunal. With that matter we are not here immediately concerned, except to observe that, of course, in the case of the High Court, the references which have to be made under the Act will proceed according to the Rules of the Supreme Court, and not according to the Rules of the County Court. The principles, however, appear to me to be the same. That being the case, one turns to s 21(2) of the Act of 1927, where these further provisions are enacted:

Where proceedings are commenced in the county court in respect of any claim or application under Part I of this Act and are not transferred to the High Court, the matter shall, unless the parties otherwise agree, or it is otherwise prescribed, stand referred for inquiry and report to such one of the panel of referees appointed by the reference committee hereinafter mentioned as may be selected by the county court, as if with the consent of the parties the matter had been so referred to him in pursuance of the County Courts Act, 1919, s. 6.

In this case, the parties did not otherwise agree, and, although there is contained in the rules provisions giving power in suitable cases for the county court judge otherwise to prescribe, no other prescription was made in this case, and it is not necessary to consider, therefore, that limb of sub-s (2). However, the matter did stand referred for inquiry and report to a referee duly appointed by the reference committee, and the matter proceeded as if, with the consent of the parties, the matters had been so referred to him in pursuance of the County Courts Act 1919, s 6. The County Courts Act 1919, is no longer in force. It has now been consolidated into the County Courts Act 1934, which is expressed to be a consolidation Act, consolidating the Act of 1919 and certain other Acts. When one looks, however, at s 6 of the Act of 1919, which is referred to in s 21(2) of the Act of 1927, one reads this:

Subject to County Court Rules, the judge may in any case, with the consent of the parties, refer any action or matter or any question arising therein to the registrar or a referee for inquiry and report, and may direct how such reference shall be conducted, and may remit any report for further inquiry and report, and on consideration of any report or further report the judge may give such judgment or make such order in the action or matter as may be just, without prejudice to any right of appeal.

Substantially the same provision occurs in the County Courts Act 1934, s 90, but in both cases it is to be observed that it is clear beyond question that, the reference having been made on consideration of any report, the judge may give such judgment as may be just. That being the position, it is also clear beyond question that the tribunal which gives the judgment, and which therefore has to hear and determine the matter, is the county court judge, and not the referee. If there were any doubt

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upon that question, which I think there is not, it is made absolutely clear to my mind by Simpson v Charrington & Co Ltd, where Scrutton LJ says, at p 76

… each judge is at liberty to adopt, vary, or disregard a finding of the referee or to hear fresh evidence on any point. … The judgment is to be of the tribunal the county court judge, in a “cause or matter.”

He then goes on to point out that the first appeal is the appeal to the Divisional Court, as it was in those days. He says, at p 76:

In these circumstances the appeal is the ordinary appeal from a county court in which the appellate court is bound by the findings of fact of the county court judge. …

In the same case, Greer LJ says, at p 83:

It is only for convenience that the matter is referred in the first instance to a referee for inquiry and report, but on receiving the report, if the rules of practice have been complied with, the county court is bound to exercise its own judgments on all questions of law or fact, and though it would be in most cases unwise for the county court judge to arrive at a conclusion different from that of the referee on the question as to the weight to be attached to the evidence of witnesses who have been heard and seen by the referee and have not been seen or heard by the judge, still it is to the judgment of the latter on all questions of law or fact that the statute refers the action.

Finally, Eve J says, at p 94

As regards the relative positions of the judge and the referee, it is well settled that under a reference to inquire and report the court may adopt or partially adopt or may reject the report as it thinks right. It is the duty of the referee to set out sufficiently the facts to enable the court to form a judgment thereon; if he goes on to state the conclusions at which he has arrived, it is open to the court to disregard them.

Both under the Act of 1919 and the Act of 1934, rules were made by the competent rule committee dealing generally with the questions of a reference, remission, and variation of reports. We have heard some argument here to the effect that the county court judge is bound by rules made under the Act of 1919, and made under it only by reason of the fact that the County Courts Act 1919, s 6, is expressly mentioned in the Landlord and Tenant Act 1927, s 21(2), dealing with references which it is said are to be as if the matter had been referred “in pursuance of the County Courts Act 1919, s 6.” It is argued that one cannot introduce into that rules made under the County Courts Act 1934, because that would be to introduce into the legislation a matter which s 21 of the Act does not permit, and reliance is placed on the fact that the phrase “subject to the county court rules” must be read in those circumstances as meaning “county court rules made under the Act of 1919.” It is a fascinating question whether that argument be right or whether it be wrong. For myself, I do not pause upon the point, because I do not think it is necessary, for reasons I will mention in a moment. My inclination is that the argument is wrong. One of the reasons which impresses me against accepting that view of the subject is this. The same subsection which speaks of “as if with the consent of the parties the matter had been so referred to him in pursuance of the County Courts Act 1919, s 6,” speaks, in an earlier limb, of a reference being made by

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methods otherwise prescribed, and that other prescription could, I think, certainly be made under the consolidation Act. It is not limited in terms to s 6, and, therefore, rules made under the County Courts Act 1934, would be competentin fact, such rules have been madefor the purpose of prescribing references other than those under s 6 of the Act of 1919. I think that it is in the highest degree improbable that, if the same section dealt with the same subject-matter, one would be restricted to a rule-making power by the third limb, which would deal with matters which would not apply when the matter was otherwise prescribed. These are all matters to be gathered from the language used and from the intention of the legislature, and, for myself, I think it would be more reasonable, having regard to the time when this action was brought, to assume that the rules under the Act of 1934 were the rules in question. However, that does not matter, and for this reason. Whether one has regard to the rules made under the Act of 1934that is to say, rules made in conformity with s 90, dealing with references, in particular CCR Ord 19, r 2(1)(h)or whether one gives consideration to the rule which has been made under the Act of 1919namely, CCR Ord 20a, r 1(2)(g)in either case, the rules merely deal with the obligation to give notice, and add, in the case of CCR Ord 20a, r 1(2)(g), specific provisions that

… the judge may require any explanation or reasons … and may remit the … matter … for further consideration, or decide the question referred on the evidence taken before the registrar or referee, with or without additional evidence as the judge may direct. …

These provisions in terms do not appear to be expressed in the later rule. I think it is quite irrelevant and immaterial, because, although the judge has those powers, and similar powers are to be found in the Rules of the Supreme Court in dealing with a reference under the Supreme Court of Judicature (Consolidation) Act 1925, s 88, in any case there is nothing in those rules to limit the power of the judge as the judge of law and factand the power of the tribunal has been so stated in Simpson v Charrington & Co Ltdhimself to consider evidence tendered to him and to perform his duty as the judge hearing and determining the matter, to consider and receive evidence tendered to him, and adjudicate whether, by reason of its irrelevance, or for some other reason, he will not accept it. It is true, as counsel for the tenants said, that it may be he has a very considerable discretion, when the evidence is tendered to him, to decide whether or not he will accept it, and to decide what weight he will attach to it if he does accept it. The matter which is complained of here, however, is that he has never got to that stage, and that, on this material being tendered to him, on the request of counsel for the tenants, he refused even so much as to consider the matter at all. Counsel for the landlords says that in that he was not performing his obligations as the court. It is interesting to see from the report exactly what happened with regard to this matter. The evidence which was proposed to be tendered was this. It was the letter

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of 17 May 1939, on behalf of the Chatham and District Co-operative Society, addressed to the landlords, and it contained an offer for a 99-years lease of the premises in question at an annual rental of £400. That offer, of course, could not have been, if first then made, before the referee, by reason of the fact that it was only written after the report of the referee had been made. If it were a bona fide offer, and if the terms of it complied with all the requirementsit is a little obscure in certain matters, with regard to repairs, for exampleit would have been a complete answer to the tenants claim. The tenants, as I shall have to mention in a moment, succeeded in persuading the referee that the amount of the goodwill rent would have been £400 per annum. Here is an offer from a co-operative society. This letter, on the face of it, is a perfectly general offer by a member of the trading public at the very rent which is said here to be the rent which has been raised to that amount by reason of the goodwill created by the present tenant. It would, if it were true, show what it is said is the proper conclusion to draw from the evidence already before the judgenamely, that the normal rent is the same, or is at least as great a rent, as any prudent butcher would pay for these premises in the future. That being tendered on behalf of the appellants, counsel for the respondents objected, and took the pointI am paraphrasing for this purposesubstantially that the issues between the parties, to use his phrase, had been crystallised at the time when the matter went before the referee. I have already indicated why, in my opinion, that view is an erroneous one, and have said that nothing is decided until the matter comes back to the judge, when it is for him to adjudicate on all the proper material before him. On that, it is not very easy to understand exactly what attitude the judge intended finally to assume in this matter. He might have taken the view, acceding to the argument of counsel for the respondents, that he could not hear any new evidence at all. That would have been one way of dealing with the matter. He might, on the other hand, have said that he would consider the evidence proposed to be tendered on its merits. What he did, however, was this. He was careful to say that there might be cases where he would be prepared to consider fresh evidence, but that in this case he thought it very unusual. To quote his own language:

In this case, a report has been made, and I think it will be a very unsatisfactory thing for me now to hear further evidence.

Finally, he says that the question is whether or not he ought to exercise his discretion in reference to hearing that evidence. The complaint of counsel for the appellants is that he never got to the point of exercising his discretion, because he refused to look at the material upon which it was sought to ask that his discretion should be exercised, and that he really in fact refused to exercise his discretion. The judge said:

I am not going to admit this evidence. If I did so, I think it would be most unsatisfactory because it would open the door, if I may put it so, very wide.

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Counsel for the appellants points out, in his wisdom, that there are occasions when it may be very necessary to open the door very wide in order that justice may creep in. However that may be, it is quite clear to my mind that the judge, not for any reason connected with the evidence, but on general principles, has refused to consider whether or not this evidence should be considered by him, and, in so doing, he has abrogated his function as a judge, and has, in effect, treated the matter as if it were an appeal from the referee to him upon which he might be asked to consider on well-known principles of law whether or not he would accept new evidence. He has not sufficiently recognised that this was not an appeal, but that he was sitting as a tribunal of first instance, in which it was sought to put evidence before him. In my view, and the view which I say is confirmed, as I read it, by the judgment in Simpsons case, the judge was wrong in so doing.

Had the matter rested there, I should have thought that it would be necessary to have ordered a new trial for the reason that it may be that this letter has some qualities which counsel for the respondents might say would render it not reliable, or possibly valueless, as evidence. He may have said that it was obtained by an arrangement between the landlord and a third party. I do not say that he would do so, but, at any rate, we are not in a position to weigh the value of this matter as a decisive point in excluding the tenants claim. As I say, had the matter rested there, I, for one, would not have been inclined to determine this matter in this court, but I have come to the conclusion that, on the whole facts of this case as disclosed in the report of the refereewhich report, as Maugham LJ points out, must be treated as the judgment of the judge, since in effect the judgment says no more than that he does not wish to disturb it and will accept it, apart from this letter altogetherthe tenant fails to show that there is here any such additional rent by way of goodwill properly attributable under all the statutory considerations to the tenant as will entitle him either to compensation or, consequently, to any right to a new lease.

That brings me to a consideration of the report of the referee. As the referee points out, and on this point there is no complaint made, the various questions have to be taken into consideration. In para 12 of his report, he says that the first question which arose for decision was

… whether the applicants had proved under sect. 4 of the said Act that “by reason of the carrying on by them or their predecessors of their trade a goodwill had become attached to the premises by reason whereof the premises could be let at a higher rent than they would have realised had no such goodwill attached thereto.”

He then poses to himself this question: “What would the premises let for to-day to an ordinary trader other than a butcher?” He comes to the conclusion that the premises as a whole could be let to such a trader for £375 per annum, the tenant paying the rates and doing all usual repairs. Counsel for the appellants accepts that conclusion, although he had evidence which he wished to tender before the courtthe

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evidence of the firm of Grant Ltd, that they were prepared to pay £400but some point arose on that as to whether or not the referee believed Grant Ltd. I think it is sufficient, for this purpose, to bring this case within some manageable limits, to assume, against counsel for the appellants, that the referee was right when he came to the conclusion that a trader as a whole would give £375 per annum rent. It is very much more, of course, than this butcher had been paying, but the reasons which were developed during the reference made it clear why that was so. There had been a number of multiple shops put into this particular street, and the area in which this butchers shop was situated had become what I think is called a peak area, and had got a greatly enhanced economic value by reason of the presence of these shops. It is quite unnecessary to go into that. Suffice it to say that I can assume that the evidence of Grant Ltd, is to be disregarded, and, of course, as I have already said, I am disregarding the later evidence which was sought to be tendered, the evidence of the Co-operative Society, and I will assume that the referee was entitled to find, and the judge was entitled to adopt, the finding that £375 per annum was the sum for which the premises as a whole could be let to a trader, the tenant paying rates and doing all the usual repairs. Then, as counsel for the appellants says, perfectly correctly, he addresses his mind to the second questionnamely, “What would a butcher carrying on a similar business to the applicants give to step into the said premises with continuity in the trading?” After stating the facts on that, he comes to the conclusion that this hypothetical butcher would be prepared to pay something in the neighbourhood of £400 per annum. That is to say, the landlord has benefited by the goodwill, that part of the goodwill which may be regarded to the extent of £25 per annum. One looks anxiously to see what evidence there was before the referee which could enable him to come to such a conclusion, that a butcher would be willing to pay £25 more than any other trader for the privilege of occupying this position. The first thing at which the referee looked was the profits. There was put in before him a table showing the profits of this particular business. The effect of that table is, I think, quite clearnamely, that this business was slowly, but alas, surely, declining. The turnover kept decreasing, the profits kept decreasing, and the percentage of profit to turnover kept decreasing. It was described by counsel for the appellants as a wasting business, and it had got to such a state of anæmia that, had it not been for a slight revival at the beginning of the first seven weeks of 1939, it looked, if a graph had been drawn of its future business, as if it would shortly perish altogether.

Of course, in those profits which by 1938 had come down to £242, it must be assumed that the tenant had paid the £200 per annum rent and the rates attributable to an assessment on that figure. The profit was £242 in 1938, the last full accounting period. It occurs at once to the mind that if in 1938 the present butcher, or the son (whom counsel

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for the respondents asked us to regard, I do not know why, as the most likely successor to be put in his place and set up in business), was to start off with a rental of £400 per annum, together with increased rates attributable to the raising of the rent from £200 to £400 per annum, there would have been no profit at all, and in 1937 there would have been no profit, and that is excluding all considerations of interest upon capital. In 1936, the matter would be at least precarious. The only possible thing which can be said is that in the first seven weeks of 1939, which is a very short period by which to estimate the matter, there was an improvement, but we do not know how far in that case expenses and overheads have been necessarily met. It is all conjecture. It might have been, unless something extraordinary happened to this business, that in that year this adventurous butcher, I cannot call him prudent, would have escaped insolvency. The matter is more confused and difficult to understand, however, when we read in another part of the report that, in the opinion of the referee, the adverse conditions, the price of meat, and other matters, were going to continue. Had he told us that the adverse conditions would not continue, it might have been that he thought that some such revivalsome increase in meat-eating and a decrease in vegetarianism, or something elsehad happened in Chatham as would have altered the position, but what he tells us is this. He tells us that the adverse conditions are likely to continue.

How has he arrived at this extraordinary sum of rent to think that a prudent butcher, faced with a profit of £200 odd, would incur a rental which, on the face of it, with the rates, would certainly (giving every consideration to the fact that £200 of the rent is already involved in the present profitan extra £200 and the rates attributable thereby) have wiped out the whole of the profit for 1938? Why has he come to the conclusion that a prudent butcher would be so adventurous? He has done it, as he told us, by taking all the profits back to 1933, when the profit was, in that year, £882 on the turnover of £9,669that is to say, when the profit was only three times what it was in 1938and averaging that out and finding an average from 1933 to 1937, inclusive (not, it will be noticed, including 1938), of £700, which is nearly three times the profit which was actually made at the time when we have to consider what a prudent butcher would give for the premises. That seems to me a wholly fallacious way of approaching this problem. When the matter is properly considered, it appears evident that no butcher could reasonably be expected to offer a rental of £400 per annum for a business which appeared to be earning at the most, so far as one can tell, a profit of something like £300 per annum on a £200 per annum rent. That, as I say, is without regarding any increase in the extra rates attributable to the extra rent. The thing is absurd on the face of it, and I cannot accept the view of counsel for the respondents that this is a question of fact, and that the county court judge was powerless to deal with this matter as a matter of law, and that, in considering reasonableness, he

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could say that it was unreasonable to expect that a hypothetical butcher would pay a rent which was almost certain to bring about insolvency.

I come to the conclusion that the judge was wrong, and the referee was wrong in the way in which he ascertained these profits, and that he ought to have looked at the financial position of this business as at the time when the application was made for a new lease, and to have considered then, and not to have gone back to 1933, what the real substantial nature of this business was. Had he done that, it would have been impossible, I think, for him, or for the judge, if he dealt with the matter properly, to have come to any conclusion but that, whatever else was certain, it was certain that the butcher would not be able to pay more for these premises than any other tradernamely, £375 per annum. Whether or not in fact he would have been able to pay that we need not speculate, because, if the fact is that he would pay no more than any other trader would pay, it follows, without any reference to any authorities whatever, or any consideration of principles, that there was here in fact no goodwill rent at all, and, therefore, no right to compensation, and, therefore, no right to a new lease.

There are, I may say, several other matters of criticism which may be directed to this report, but, for the sake of economy, I think that it is unnecessary myself to deal with them. It is sufficient for me to say that the profits of this business, on the face of it, show that these premises attracted no goodwill rent, and that the landlords are right in saying that, if they are called upon now to grant this new lease, they are called upon to give a present to the present tenant, which the statute does not require. In my opinion, this appeal should be allowed.

LUXMOORE LJ. I agree that this appeal must be allowed, and it is unnecessary to remit the case back to the county court judge for further hearing and consideration. The county court judge has confirmed the report of the referee, to whom the case was, in the first instance, sent for inquiry and report in accordance with the provisions of the Landlord and Tenant Act 1927.

The two main points to which the reference was directed were (i) are the applicants entitled to any, and, if so, what, compensation in respect of the goodwill of the business of butchers carried on by them at No 189, High Street, Chatham, on the determination of the lease under which they hold the premises from the respondents, who are the owners of the property, and (ii) if the applicants are entitled to compensation, are they entitled to claim that a new lease of the premises be granted to them, and, if so, on what terms should such new lease be granted?

The referee reported that the applicants were entitled to compensation in respect of the goodwill to the extent of £375, and that they were entitled, in lieu of having that sum paid to them by way of compensation, to have a new lease of the premises for the term of 14 years, with a right to break the lease at the end of the seventh year, at an annual rental of

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£375, and subject to the usual repairing covenants, whatever that phrase may mean. The appellants have appealed from the order of the county court judge confirming the report, and they base their appeal on a number of different grounds. It is, I think, necessary to deal with only two of these objections. The first objection put forward is that the county court judge refused at the hearing before him to allow further evidence to be called with regard to an offer made by a third party, not a butcher, since the hearing before the referee. It was stated that this offer was at least equal to, if not better than, the rental reported by the referee, and accepted by the county court judge as being the rental any butcher would be willing to pay for the premises. The second point argued before this court was that, even if such evidence were properly excluded by the county court judge, the evidence upon which the referee reported, and the county court judge found, that the tenant was entitled to receive compensation to the extent of £375 did not support such a finding, and that, when the facts stated in the report were properly considered, the applicants were not legally entitled to any compensation whatever in respect of goodwill. As I have said, a number of other points were raised, but, having regard to the conclusion to which I have arrived, I need not deal with any of those points.

In order to ascertain what is the compensation to which a tenant is entitled under the Act, it is necessary to bear in mind that the goodwill referred to in the Act is not to be ascertained on the basis of the meaning usually attributed to the word “goodwill,” for, as has been pointed out in cases which have arisen under the Act, the word “goodwill” is used in the Act in a restricted sense. In no reported case is the meaning of the word, for the purposes of the Landlord and Tenant Act, more clearly explained than in the illuminating judgment of Maugham LJ in Whiteman Smith Motor Co Ltd v Chaplin. Maugham LJ pointed out that the limit of the tenants compensation is the addition to the value of the premises in the hands of the landlord at the end of the tenancy, but that that addition must be the direct result of the carrying on of the trade by the tenant or his predecessors, and that any value attributable exclusively to the situation of the premises must be excluded, as also must be excluded any value due to an increase in population, or to any change of trading conditions, or to a shortage of suitable premises, or to other like conditions. In other words, the only kind of goodwill which can be an addition to the value of the premises in the hands of the landlord is that kind which has become attached to the premises, irrespective of their position, and which could naturally be reflected in a higher rent payable by a person carrying on a similar business. Then Maugham LJ went on to point out that the profits due to the reputation of the proprietor or to the personal skill or ability of the persons or assistants employed in the business must be excluded, and he summed up the matter by saying, at p 49:

It follows that the real question to be answered is: What is the addition to the

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value of the premises in the hands of the landlord by reason of “the net adherent goodwill” [which Maugham, L.J., has defined]?

Then he goes on to say, at p 49:

This is in effect the same thing as saying that the compensation to which the tenant would be entitled is the difference, if any, between: (a) the value of the reversion if the landlord were to let the premises at the goodwill rent i.e., for the purpose of the same business as that which the tenant has carried on and (b) the value of the reversion if he let the premises at the normal rent.

The normal rent he had previously defined, at p 47, as being the rent which:

… “a willing lessee other than the tenant would agree to give and a willing lessor would agree to accept for the premises, having regard to the terms of the tenancy, but irrespective of any goodwill which may have become attached to the premises” by reason of the trade or business of the tenant or his predecessors.

In the present case, the referee has purported to arrive at the normal rent and at the goodwill, and to deduct one from the other. If he arrived at these two rentals on a proper basis, I think it is probable that no question will arise with regard to his findings. The question is, has he done so? He deals with this aspect in para 13 of his report. He finds that the normal rent is £375 per annum, and probably, on the evidence before him, no substantial fault can be found with that finding. On the evidence before him, I should be prepared to agree entirely. He then proceeds to find that the goodwill rent is £400 per annum. He rejects the evidence of certain witnesses who gave evidence before him as to the rent they thought a butcher would pay, and he proceeds to fix the goodwill rental by a reference to the profits alleged to have been earned in the business for 1936, 1937, 1938, and the first seven weeks of 1939. It seems to me to find that these profits, which are the whole profits earned in the business, include all profits, whether arising from the situation of the premises or due to an increase in population, for no deduction whatever is attempted to be made from these profits on either of these heads, nor is any deduction made in respect of the tenants reputation or the personal skill or ability of the employer in that business. The referee has merely taken an average of the profits stated, which, be it said, are ascertained without making any allowance in respect of the capital employed in the business. He states that he has arrived at the conclusion that a prudent butcher, who was considering leasing these premises, would agree to give an annual rental of £400 for the business, because the average profits, when the rental was £200 per annum, were, during the period to which I have referred, between £400 and £500 per annum. I can see no possible foundation for any such finding. First, the evidence shows that both the turnover and profits disclosed had fallen steadily year by year. In 1933, the turnover was £9,669 and the profit was £882, and, in 1938, the turnover was £7,262 and the profit was £242, a remarkably small rate of profit having regard to the turnover, and even smaller when it is remembered that no deduction is made in respect of the capital employed in the business.

Page 307 of [1939] 4 All ER 293

During the whole of the period under consideration, the rent was £200 per annum, and the rates were paid on a rateable value fixed at £122 per annum. If the rent had been £400 per annum, the profits would clearly have been lessened by at least the increased rent and by the rates, which would quite plainly have been increased if the rental value had in fact increased to that extent. Thus, in 1938 there would plainly have been a loss. The profits to be considered would also be considerably reduced if a proper provision had been made for interest on capital. I can see no justification whatever under the Act for fixing the goodwill rental at £400 per annum. I think it is obvious that no prudent butcher would pay such a rent, since, by reason of that payment, such profits as are shown to have been earned when the rent was £200 per annum would disappear entirely. It is only by fixing the rent in the manner stated that the referee has arrived at the conclusion that the tenant is entitled to compensation, for he has deducted the normal rent of £375 from the £400 and he has capitalised the differencenamely, £25, on the basis of a 15-years purchase. However, the rental of £400 has, in my judgment, been arrived at on the basis of the whole of the profits earned, without any attempt to distinguish between what is due to the situation or to personal skill, and it seems plain to me that the method adopted entirely disregards the principles enunciated by Maugham LJ, to which I have already referred. I am satisfied that, on the facts stated in the report, it is impossible to hold that any prudent butcher could be expected to give so large a rental as £375 per annum, and a fortiori £400 per annum, for the premises. If that is so, the whole foundation upon which the referee has built his argument topples to the ground, and the county court judge was not entitled to confirm the report. I am satisfied that the county court judge ought to have held that the applicants were not entitled to any compensation for goodwill, and he ought so to have found, and to have refused to direct the grant to the applicants of a new lease of the premises.

That would dispose of the case, but, as the question whether the county court judge ought to have allowed further evidence tendered by counsel for the respondents in the arbitration to be given, and to have considered it, was fully argued, and the question is one of general importance, I think it right to express my opinion with regard to it. In considering it, it is necessary to bear in mind the relationship of the referee and the judge. The judge is the tribunal, and though, in the large majority of cases, the Act provides that the matter shall be sent to a referee for inquiry and report, it is most important to remember that the referee has no power to determine anything. When the report comes before the county court judge, it comes before him as a new proceeding, and not as an appeal from the referee. Apart from any question under the Act, when judicial proceedings come for the first time before a court with authority to deal with the matters in question, it is the right of each party to submit to the court competent evidence germane to the

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issue to be determined, and the court has no power to exclude such evidence unless there is some statutory provision to the contrary. The Landlord and Tenant Act 1927, s 21, provides how proceedings in the county court are to be conducted. The tribunal is the county court. In sub-s (2), the proceedings in the county court, unless the parties otherwise agree, or it is otherwise prescribedthat means, according to the definition in s 24, prescribed by rules of the county court shall be referred. In sub-s (4), there is a limit on the number of expert witnesses who may be called before the referee, unless the referee or the county court judge otherwise directs, and in sub-s (5) there is power to make county court rules regulating the proceedings. An interesting question arose whether this limited the rules to those made under the County Court Act 1919, having regard to the verbiage of the Landlord and Tenant Act 1927, s 6, to the exclusion of those made under any subsequent County Court Act. Speaking for myself, I do not think it is necessary to decide this question, for, in my opinion, whichever set of rules is considered, the same answer must be given with regard to the right to submit further evidence at the hearing before the county court judge. Under the 1919 Act, the material rules are to be found in CCR Ord 20a. Under the 1934 Act, the rules are to be found in the present CCR Ord 19. Admittedly there is no express provision in any of the Acts or in any of the rules against further evidence being called when the matter is before the county court judge. One can see that there is an implied prohibition against any further evidence. I am entirely unable to appreciate that argument. For my part, I am satisfied that the inherent right of a litigant to submit relevant evidence to the court can only be taken from him by express statutory enactment or with express statutory authority. I can find no trace of either in the present case, and, if I had come to the conclusion contrary to that to which I have arrived on the first question, I should have had no hesitation in sending the matter back to the county court judge for the further evidence to be heard and considered, either by the county court judge, or, if he should in his discretion so decide, by the referee, whose report should in that case be remitted to him for further consideration, the final determination of the court still being, as it always must be in these cases, with the county court judge. I think this point has in fact been decided by this court in Simpson v Charrington & Co Ltd. In that case, Scrutton LJ deals with the relationship of the county court judge to the referee. He points out what that relationship is. He says, at p 76:

A motion to vary the report is necessary if it is to be challenged.

Counsel for the respondents has rightly pointed out that that is a slip, and that no motion is necessary, but, if one substitutes for the words “on such a motion” the words “on such hearing the judge is at liberty to adopt, vary or disregard a finding of the referee, or to hear fresh

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evidence on any point,” I can see no possible ground on which exception can be taken to the slip. Indeed, so far as this court is concerned, I am satisfied that we are bound by such a finding, or, at any rate, would be bound to follow it, even if we disagreed with it. That view of the court, I think, is plain if one reads what Greer LJ said, at p 83:

It is only for convenience that the matter is referred in the first instance to a referee for inquiry and report, but on receiving the report, if the rules of practice have been complied with, the county court is bound to exercise its own judgment on all questions of law or fact, and though it would be in most cases unwise for the county court judge to arrive at a conclusion different from that of the referee on the question as to the weight to be attached to the evidence of witnesses who have been heard and seen by the referee and have not been seen or heard by the judge still it is to the judgment of the latter on all questions of law or fact that the statute refers the action.

In those circumstances, I am satisfied that the county court judge had no warrant in refusing to accept or consider the new evidence tendered before him at the trial. If, as I have said, I had come to a different conclusion on the first point, I should have had no hesitation in remitting the matter to the county court judge for the further evidence to be heard and considered. I agree that the appeal succeeds, and that the report of the referee should be varied by holding that the applicants were not entitled to any compensation for goodwill under the Landlord and Tenant Act, and were not, therefore, entitled to any new lease.

ATKINSON J. I agree. With reference to the point of counsel for the respondents that the county court judge had no power to hear further evidence, I merely add this. He concedes under CCR Ord 37, that, if the county court judge had given judgment first, and then there had been an application for a new trial on the ground that further relevant evidence had come to light, the judge would have had jurisdiction to order a new trial, yet he would drive us to the situation that, when counsel for the appellants asked the county court judge to hear this evidence, the judge had only to say, “I am satisfied that justice cannot be done without hearing this evidence, but I must give judgment against you first, and in five minutes you can apply for a new trial, which I will promptly order, so that this evidence can be admitted.” I cannot think that the rules can really drive the court to such an absurd position.

On the main question, my difficulty is to see any justification whatever for the finding that the goodwill value was £400. There is no question now, I think, really, that there was evidence to support the finding that the ordinary market value of the rent was £375. There must be some evidence to justify a finding that the landlord could get more than that from a butcher. This report has to be dealt with as if it were the judges judgment, and, if there was no evidence to support the finding, this court has power to interfere. The tenant had been paying only £200 per annum, and a new would-be tenant, a butcher coming along, would certainly ask him, first of all, what profits had been made. He wants to ascertain what he may expect to get himself, and the first thing to guide

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him, I imagineand this is common groundis the figures of his predecessor in business. The first thing which he would see would be that in 5 years the turnover had fallen by 25 per cent steadily and continuously, and that the percentage of profit on the turnover had fallen from 9 per cent to 3½ per cent. That would not be very encouraging, but, when he was ascertaining the profits which his predecessor had been making, the first thing he would do (and this is quite apart from any question of law, but is merely what a business man would do) would be to discount those profits to some extent. He would know perfectly well that, when his predecessor had been there for 29 years, he could not hope to retain the whole business connection, and he would discount those profits, and in doing that he would quite admittedly be doing what Maugham LJ said in Whiteman Smith Motor Co Ltd v Chaplin, at p 50, had to be done:

The tenant naturally starts by giving evidence as to the profits which he has earned from the business during the term. It is obvious that these profits form a very slight guide to the value of the adherent goodwill, since they may depend largely or entirely on the skill, the reputation, or the personal qualifications of the person or persons who have carried on the business, or they may be attributable solely to the advantages of the site or to improved trade conditions. The preliminary questions for the referee are to determine on the evidence of surrounding circumstances and of exports whether there is any real goodwill, and what proportion, if any, of the profits [which the former man had made] may be expected to accrue to a new tenant, carrying on the same business, by reason of the trade with old customers who will continue (on the assumption of reasonably good management) to come to the premises, and who would not naturally come there but for their previous visits.

In a moment, I think, I can point out conclusively that the whole structure built by the referee has been on an assumed figure of the profits that the late tenant has made, without any discounting whatever, and he has never addressed his mind to the questions indicated there by Maugham LJ. When he had discounted the figures, as, I think, a business man would do, the next question he would ask is what capital he would want for running the business, and, of course, unless the profits which he could expect to make exceeded the 4 per cent or 5 per cent, there would be no goodwill about it, because he could get that by investing his money, without having to work for it. Those are the three problems, to my mind, to which any trader would address his mindnamely, see what the last man has done, and make up his mind to what extent that ought to be discounted, see what capital would be necessary for running the business, and then see what he could afford to pay. To what extent have those considerations entered into the finding of the referee? There is one other sentence I would like to point out in the judgment of Maugham LJ, at p 51:

This question must often be a very difficult one to answer otherwise than by an intelligent guess. When it has been answered by a finding, say, that profits of the extent of £X per annum may be expected to “adhere” …

I emphasise the words “may be expected.” Now, one does not expect without there being reasons for expectation, guesswork or assumption.

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It is very different, to my mind, from what was meant by Maugham LJ, when he used the expression “may be expected to adhere. ” What has the referee done when he has addressed his mind to this question? He first of all refers to Mr Kemsleys evidence. Mr Kemsleys evidence was that he would go to £400 per annum, or even £50 more, on the figures down to 1937. I think that the referee has found £400 on the figures arrived at with much more information than Mr Kemsley had. I should have thought that evidence was tendered against the finding of £400. The referee continues as follows:

The average for the last three completed years is £421.

I think there is a great deal of criticism, and justifiable criticism, to be levelled at taking an average where there is a steady fall and where the profits for the third of the three years were only a third of the first of the three years. At any rate, he says: “The average for the last three completed years is £421.” Then the referee says:

Suppose, as may well be, the profits remain for the future at about that average [which is what he wants].

Is the referee entitled to say, “Suppose, as may well be, the profits remain for the future at about that average”? That is on the average of what the last man has made, an average open to very serious criticism on my view, but, even apart from that, he has not proceeded to discount that £421, as Maugham LJ said that he ought to do. He has not directed his mind at all to the question of what proportion of that average, even if it were a fair average on which to work, was likely to be retained by the new tenant, and he does not say, “I find as a fact that they may be expected for this reason, for that reason or for the other reason.” He merely says, “Suppose, as may well be, the profits remain for the future at about that average,” and then he proceeds to give some very good reasons why they shouldnamely, that the trouble which had led to the fall had probably come to stay. Still I cannot get away from the fact that this figure of £421 which is taken as his basis (i) is open to the criticism that he has not discounted it as he ought to have done, and (ii) is a figure which without any justification whatever he has assumed will be a guide to the future. It seems to me that it is very far from saying, in the words of Maugham LJ, that that figure might be expected to adhere to these premises. If you look at the figures for 1937, a profit of £396 less the further £200 for rent is £196, and, with the extra rates and interest on capital to the extent to which there has been in this case, would there have been anything left in it on those figures? For the next yearwhich is the last available year, 1938there is obviously a hopeless loss. That was sought to be escaped from by saying that the first seven weeks of 1939 showed an increase, but no one took the trouble to compare the figures for the first seven weeks of this year with the corresponding period of last year or the year before. No real weight can be attached to those figures without a

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relative comparison. We do not know at all, and the referee did not know at all, what the figures were for the relevant period in the previous years.

It seems to me that I have said enough to indicate why I think the respondents fail in this case, because I think that there was no justification whatever for the assumption that the profits were going to average about £420 per annum, and that, upon that assumption, any would be butcher trader would be prepared to pay double the rent which his predecessor had been paying.

Appeal allowed with costs; order of the referee rejected and, ordered that no new tenancy be granted.

Solicitors: Wood McLellan & Williams (for the appellants); Wilfrid Ellis (for the respondents).

Derek Kitchin Esq   Barrister.

Smith v Smith

[1939] 4 All ER 312


Categories:        ENVIRONMENTAL: LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        HALLETT J        

Hearing Date(s):        3 NOVEMBER 1939        


Land Drainage Drainage rates Owners rate Lease in which tenant covenants to pay “all rates, taxes and outgoings” Owners rate paid by tenant Whether entitled to be recouped by landlord Land Drainage Act 1930 (c 44), ss 24(2), 26(4).

The plaintiff, in his capacity as the tenant of certain property, paid to certain drainage authorities certain owners drainage rates, and in this action sued to recover them from the owner, his landlord. The terms of the tenancy were that the tenant should pay all rates, taxes and outgoings in respect of the premises, except tithe rentcharge and landlords property tax. The tenancy agreement was dated 24 October 1924, and it was contended that the particular burdens referred to could not include a burden imposed after the date of the agreement, as such a burden could not have been within the contemplation of the parties:

Held the plaintiff was not entitled to be recouped in respect of the payment of these owners drainage rates, as they were included in the meaning of the words “rates, taxes and outgoings.”

Notes

It was sought in this case to rely upon the decision in Valpy v St Leonards Wharf Co Ltd, but it is pointed out that that case was not only followed in Lowther v Clifford, but also was expressly stated to be wrong. Therefore, the fact that these drainage rates were not in existence at the time when the tenancy agreement was made was no bar to holding that these owners drainage rates were included in the meaning of the words “all rates, taxes and outgoings.”

As to Incidence of Drainage Rates, see Halsbury (Hailsham Edn), Vol 30, pp 9093, paras 170172; and for Cases, see Digest, Supp, Sewers and Drains, Nos 469a469c.

Cases referred to

Brewster v Kidgell (1698) Carth 438; 31 Digest 297, 4421.

Stockdale v Ascherberg [1904] 1 KB 447; 31 Digest 305, 4489, 73 LJKB 206, 90 LT 111, affg [1903] 1 KB 873.

Mile End Old Town Vestry v Whitby (1898) 78 LT 80; 31 Digest 304, 4482.

Page 313 of [1939] 4 All ER 312

Valpy v St Leonards Wharf Co Ltd (1903) 67 JP 402; 31 Digest 303, 4477.

Lodge v Lancashire County Council (1934) 152 LT 167; Digest Supp.

Lowther v Clifford [1927] 1 KB 130; Digest Supp, 95 LJKB 576, 135 LT 200.

Harris v Hickman [1904] 1 KB 13; 31 Digest 303, 4475, 73 LJKB 31, 89 LT 722.

Action

Action claiming the sum of £102 4s 5d as being drainage rates paid by the plaintiff in respect of property which he holds or held as tenant of the defendant. The facts are fully set out in the judgment.

Eustace Brightman (for J Roland Adams, on war service) for the plaintiff.

Sydney G Turner KC and Gordon Alchin (for H E R Boileau, on war service) for the defendant.

3 November 1939. The following judgment was delivered.

HALLETT J. The basis of this claim is the Land Drainage Act 1930, s 26(4)(c). For the purposes of this case, it is admitted by the defendant that the plaintiff did, in his capacity as the tenant of the property in question, and having that tenancy under an agreement in writing, dated 24 October 1924, pay to certain drainage authorities what are conveniently called owners drainage rates to the amount set out in the statement of claim. Under the Land Drainage Act 1930, and by s 24 of that Act, a distinction is drawn between rates made by a drainage board which are therein described as “owners drainage rates” and rates made by a drainage board which are therein described as “occupiers drainage rates,” the distinction between the two being that owners drainage rates are rates:

… raised for the purposes of defraying expenses incurred in connection with new works or the improvement of existing works and charges in respect of contributions to be made by the board to a catchment board. …

Occupiers drainage rates are rates “raised for the purposes of defraying any other expenses or charges.” These is a proviso in s 24(2) which might conceivably be applicable to this case, but, in the view which I take on the rest of the matter, I do not think that I need consider that proviso.

As regards owners drainage rates, by s 26 of the same Act they are assessed, equally with occupiers rates, upon the occupier of the hereditament. That appears from s 26(4)(a) of the Act, and s 26(4)(b) provides “that they may be recovered by the drainage board from the occupier.” That is the machinery whereby owners drainage rates can be recovered. S 26(4)(c) provides as follows:

The occupier of any hereditament shall be entitled to recover from the owner thereof any amount paid by him on account of an owners drainage rate. …

It is that right of recovery, so given by that statutory provision, of which the plaintiff in the present action seeks to avail himself.

There are two observations which I think I should make before I leave the words of that provision. In the first place, it will be noticed that the occupier is given a right of recovery. He is not given, as he was by

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certain former Acts to which I shall have to refer, merely a right of deduction from rent. I think that perhaps that distinction is of some importance in connection with the point of estoppel upon which the defendant relies. The second observation I want to make about that provision is that there is nothing in that sub-section which expressly says that the right of recovery is to be enjoyed only in the absence of any agreement to the contrary. As I apprehend it, the principle is quite clear that any statutory right which is given to a person may be waived by him unless there is some statutory provision which prevents him from contracting out of the privileges conferred upon him, or unless there is in the statutory provision something of sufficient public importance to deprive him of the right of contracting out. Such provisions preventing him from contracting out can be found in various Acts of Parliament dealing with landlord and tenant. For instance, they exist in connection with the landlords property tax, and they can also be found in the legislation dealing with the restriction of rents, while a further example is in the Landlord and Tenant Act 1927. However, it is common ground in this case that there is nothing to be found, either in this Act of 1930 or in the preceding private Acts to which my attention has been drawn, which in any way deals with the question of contracting out so as to show that contracting out is prohibited and/or rendered nugatory. We therefore start with the position that, although by statute there is a right conferred upon the tenant to recover the amount of any owners drainage rates paid by him, there is nothing in the statutory provision, and nothing, as far as I can see, in any principle of law, which prevents an occupier depriving himself of that right by his contract with his landlord, if he so pleases.

The next point which arises is this. It is said on behalf of the defendant that the tenant, the plaintiff, being at liberty to part with the right conferred upon him by these statutory provisions, has in fact done so, and, therefore, cannot now rely upon that right for success in this action. It is said on behalf of the defendant that the tenant has parted with his rights in two ways. First of all, it is said that he has parted with them by virtue of the express terms of the tenancy agreement under which he holds these premises, and therefore I turn to the agreement, which is dated 24 October 1924. I turn, in particular, to cll 2, 3 and 4. In cl 3, it is said that the rent is to be £250 per annum. That clause does not contain anything with regard to the rent being free of deductions, but cl 4 is as follows:

The tenant to pay all rates taxes and outgoings due in respect to the said premises during the said tenancy except tithe rentcharge and landlords property tax.

In my opinion, these drainage rates, as a mere matter of English, clearly fall within the words “rates taxes and outgoings.” They are referred to as “rates” in the Act of 1930, and I think that that is the way in which these charges are usually referred to according to present-day

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practice. I observe that in the older Acts these drainage charges are referred to as “taxes,” for some reason. I do not think that they are taxes in the ordinary sense of the term, and my attention has been directed to Brewster v Kidgell, in which the true limitation of the word “taxes,” according to its ordinary acceptance, is explained in a very interesting way. At any rate, even if the word “rates” is not apt to cover such charges, as I think that it is, and even although the word “taxes” is not apt to cover such chargesand I do not think that it is so aptthere is still to be considered the word “outgoings,” a very large word indeed. I entertain no doubt whatever that drainage charges of this kind do fall within the words “all rates taxes and out-goings due in respect of the said premises” within the ordinary meaning of the English language.

Counsel for the plaintiff seeks to meet that difficulty by putting forward a contention that, although the words may be apt to include a particular burden, yet none the less they may not have the effect of imposing that burden if it can be shown that such a burden was not within the contemplation of the parties at the time they entered into the agreement in question. In support of that doctrine, he has drawn my attention to certain authorities. I feel bound to say that, before I had looked at any authorities at all, my own view of the matterwhich, of course, may always be wrongwas such as I have since found expressed in a very clear way by Sir Richard Henn Collins MR, in Stockdale v Ascherberg. The passage to which I refer is at p 450, where Sir Richard Henn Collins MR, puts it in the following way:

… if a tenant makes an agreement in perfectly clear and unambiguous terms that he will bear all outgoings, I do not see how we can throw aside the plain meaning of the language used, and introduce some limitation of that meaning, which it would be very difficult, if not impossible, to define.

I must say that I think myself that, where parties have recorded their mutual rights and obligations in plain and unambiguous language, it would be a very dangerous doctrine indeed to say that those rights and obligations should be construed in a different way by reference to what the court supposes to have been in the contemplation of the parties at the time when they chose to employ those words. However, counsel for the plaintiff strenuously argued that the doctrine had in fact been recognised, and he drew my attention to two cases, to which I shall refer shortly.

Before I leave the words of the clause, there is one further point to which I should draw attention, and it is this. The obligation “to pay all taxes rates and outgoings due in respect of the said premises during the said tenancy” is subject to an express exceptionnamely, “except tithe rentcharge and landlords property tax.” I think that, upon true principles of construction, where an obligation expressed in general terms is subject to an express exception, it is all the more difficult to imply a further exception beyond that which is expressed. The well-known

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maxim expressio unius appears to me to be very much in point in connection with such an attempt.

The first of the two cases to which counsel for the plaintiff has called my attention is Mile End Old Town Vestry v Whitby. Looking at that case, which is quite shortly reported, one finds that Wright J said, at p 80:

The defendant has agreed to bear all outgoings, but I should rather think that a rate of a new kind was not covered by a general agreement like that.

I do not think that I need read any more, because to my mind the crux of that decision is in those few words “a rate of a new kind.” I do not think that it is necessary for me to consider whether or not, having regard to certain later decisions to which I am going to refer, that decision should be followed to-day. It is sufficient to point out that it applies purely to a rate of a new kind. It may be that, if the Act which is now the subject of consideration contained an imposition of a new kind, as, for instance, to take the suppositious case which I suggested, the imposition of a window tax, a thing which there has not been for many years, a different result would follow. The other case to which counsel for the plaintiff called my attention was Valpy v St Leonards Wharf Co Ltd. That was a decision of Farwell J, sitting as an additional judge of the Kings Bench Division. In that case, this doctrine that an obligation which may fall within the wording of a covenant may none the less be excluded by a consideration of what the parties contemplated at the time the covenant was entered into undoubtedly was acted upon and received the approval of the judge. Valpy v St Leonards Wharf Co Ltd might, I think, be not unfairly described as the corner stone of the edifice which counsel for the plaintiff proceeded so clearly and skilfully to erect.

Dealing with the first of those cases, I am quite satisfied that the drainage charges which are the subject of the present action were not rates of a new kind at all. I should have been very surprised if they had been, but it is not necessary for me to speculate about it, because counsel for the defendant has clearly demonstrated to me that they are merely the successors of rates which had been imposed long ago under certain private Acts. With regard to the Middle Level rates, there appears to have been a series of Acts. Counsel for the defendant has taken me through the material sections, but in substance, having regard to the provisions of the Middle Level Act 1874, ss 35, 36, the four rates which at that time had been imposed were consolidated. In each case, the rates were, in the first instance, assessed upon, and payable by, the occupiers, just as all the rates are under the Land Drainage Act 1930, but the occupiers had the right to deduct them from the rent, as contrasted with the present right to recover them from the owner on whose behalf they have been paid. There are two distinctions between the old Acts and the present Act. One is that there is now a right of recovery, whereas formerly there was only a right of deduction. The other is that

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formerly the rates were assessed upon an acreage basis, and now they are assessed upon the basis of rateable value. The actual machinery for the drainage of these areas under the new Act is quite different from that in the old Act, but, in substance, these rates are the successors of the old rates, and to describe them as a new kind of rate is absolutely inaccurate. Indeed, it is not entirely irrelevant to remind oneself that the very title of the Land Drainage Act 1930, is “An Act to amend and consolidate the enactments relating to the drainage of land,” and not “An Act to provide for the drainage of land and the levying of rates in connection therewith.”

There is one case of some interest which counsel for the defendant has cited to me, Lodge v Lancashire County Council. I need not read any part of it, nor, indeed, refer to it, beyond saying that it affords further support for the view which, independently of such authority, I had already formednamely, that this is not a rate of a new kind.

Valpy v St Leonards Wharf Co Ltd, upon which he places so much reliance, has, however, been expressly disapproved of by the Court of Appeal. This doctrine (if one may so call it) of cutting down the meaning of the words by reference to the supposed contemplation of the parties appears to have been germinating over a considerable period, and at one time I confess that it looked as though a very lusty plant were going to spring from the seed planted in some of the earlier cases. However, just as the plant was beginning to show more promise, as in Valpy v St Leonards Wharf Co Ltd (which was decided in 1903), it was nipped by a frost, and the frost is to be found in 1904 in Stockdale v Ascherberg. In that case, the decision in Valpy v St Leonards Wharf Co Ltd was cited by counsel for the defendant, and counsel for the plaintiff was not called upon to argue. There is no mention of that decision in the short judgment of Sir Richard Henn Collins MR, but I should find it extremely difficult to reconcile that judgment with the continued subsistence of Valpy v St Leonards Wharf Co Ltd as an authority.

However that may be, the decision in Stockdale v Ascherberg has been followed since by a much more recent decision of the Court of Appeal in Lowther v Clifford. It says in the headnote of the report that Stockdale v Ascherberg was applied and that Valpy v St Leonards Wharf Co Ltd and Harris v Hickman were not followed. That is, no doubt, putting it quite correctly, but it hardly conveys the full extent of the blow which the doctrine in Valpy v St Leonards Wharf Co Ltd received, because in that case Scrutton LJ and also Sargant LJ, said in express terms that the decision in Valpy v St Leonards Wharf Co Ltd was wrong. Scrutton LJ says, at p 148:

In my view the decision of Farwell, J., in Valpy v. St. Leonards Wharf Co., Ltd., followed by Wright, J., in Harris v. Hickman to the contrary effect, was erroneous.

In the same case, Sargant LJ says, at p 149:

I may add that I agree with the learned judge his view that Valpy v. St.

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Leonards Wharf Co., Ltd. and Harris v. Hickman, which followed it, are contrary to the general current of authority and cannot be relied on.

I am not at liberty to follow Valpy v St Leonards Wharf Co Ltd even if I want to do so, and in fact I never have wanted to do so.

That deals with that part of the case. Then the other aspect of the case really becomes superfluous. The second point raised on behalf of the defendant was that, even if the claim were otherwise a good one, it was not open to the plaintiff to pursue it, by reason of the fact that there had been an earlier action between the same parties in which the present plaintiff was the defendant and the present defendant the plaintiff, which action was decided by Singleton J. I have had put before me the pleadings in that action and the transcript of the shorthand notes of the judgment delivered in that action by Singleton J. I do not propose to discuss that aspect of the matter at length, because it is immaterial, having regard to the view which I take on the first point, but, as the matter has been argued, perhaps it is right that I should express my view about it.

I am not satisfied that there is any estoppel in this case. The first action was an action in which the present defendant claimed rent, and, in order to succeed in that action, he had to show that the contractual rent in respect of the material period was £125 per annum, and not, as was urged by the plaintiff, £100 per annum. It was common ground that, if it was £125 per annum, to the extent of the difference between £125 and £100, less a small sum of £6, it had not been paid. Therefore, there was really only one issue in that casenamely, was the contractual rent over the material period £125 or £100? That issue was decided adversely to the defendant, the present plaintiff, by Singleton J, upon the evidence, and thereupon he gave judgment for the difference, with costs, and that was his decision. In the present case, there is made by the plaintiff a claim based upon the provision in the Act of 1930 to which I have already referred. He is not bound, under the present statutory provision, to make his claim merely by way of deduction. If he had made his claim by way of deduction, there would obviously have been difficulties in his way, but it is a separate and independent claim to be recouped that amount. In those circumstances, I do not think that the mere fact that he failed to set off that claim in the previous action estops him, by reason of any of the authorities to which I have been referred, from raising it now.

However, this question of whether or not the fact that a claim in a second action could have been the subject of a set-off in an earlier action prevents the second action being brought is one of general importance. I do not think it ought to be decided except upon a very full consideration of the argument, and, whilst I have thought it right to indicate my present view, I would rather not express a final opinion upon it, because I think that it is undesirable that I should purport to decide questions of general importance which are not really necessary for the decision

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of the present case. I prefer to decide this case upon the first point only, whilst expressing my news obiter upon the second point, which I find an extremely interesting one. There will be judgment for the defendant with costs.

Judgment for the defendant with costs.

Solicitors: Smiles & Co, agents for Welchman Dewing & Wace, Wisbech (for the plaintiff); Lee Ockerby & Co, agents for Whittome & Co, Wisbech (for the defendant).

W J Alderman Esq   Barrister.

Newstead v London Express Newspaper Ltd

[1939] 4 All ER 319


Categories:        TORTS; Defamation: CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        2, 3, 6, 7, 20 NOVEMBER 1939        


Libel True statement about existing person of same name as plaintiff Whether referable also to plaintiff.

Practice New trial When ordered Smallness of damages jury can possibly award.

The plaintiff, Harold Newstead, was a hairdresser at Camberwell. He was about 30 years of age and unmarried. The defendants published photographs of two women with a statement underneath that Harold Newstead, a 30-year-old Camberwell man, had been convicted of bigamy. The plaintiff contended that these statements were understood to refer to him, though in fact they referred to another man of the same name living in Camberwell. At the trial, the jury failed to agree on the first of 5 questions left to them, asking them whether reasonable persons would understand the words complained of to refer to the plaintiff. The jury returned written answers to the other 4 questions. It was contended that the evidence did not justify the jury in finding that reasonable persons would have understood the words complained of to refer to the plaintiff, as the words were not capable of such a meaning, and also that, assuming that the words were capable of a meaning defamatory of the plaintiff, the fact that they were true of another person afforded a good defence:

Held (per Sir Wilfrid Greene MR, and Du Parcq LJ) (i) the case was properly left to the jury.

(ii) the fact that certain words are true of one person does not in law make it impossible for them to be defamatory of another.

(per MacKinnon LJ): the appeal should be allowed by reason of the smallness of the damages which would have been awarded had the jury found for the respondent on the first question submitted to them.

Decision of Hawke J ([1939] 3 All ER 263) affirmed.

Notes

Apart from the subsidiary questions arising here upon the practice of trials by jury, the main discussion is upon the principle established in Hulton (E) & Co v Jones. The distinction between that case and the present is that there the person intended to be referred to was a fictitious person, while here the person intended to be referred to was an existing person, and the statements made, if they referred to him, were substantially true. It is found impossible to make any distinction on the facts, however, and the principle of the earlier cases is held to apply to the present. MacKinnon LJ has not found it necessary to dissent from the main point for decision, but expresses grave doubt upon it. He bases his decision upon the point that, having regard to the small amount of

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damages that a jury could properly award in this case, it ought not to be sent back for a new trial.

As to Necessity for Statement to refer to Plaintiff Personally, see Halsbury (Hailsham Edn), Vol 20, pp 395, 396, paras 483485; and for Cases, see Digest, Vol 32, pp 1517, Nos 4677.

Cases referred to

Hulton (E) & Co v Jones [1910] AC 20; 32 Digest 17, 77, 79 LJKB 198, 101 LT 831, affg [1909] 2 KB 444.

Derry v Peek (1889) 14 App Cas 337; 35 Digest 27, 185, 58 LJCh 864, 61 LT 265, revsg (1887) 37 ChD 541.

Poliakoff v News Chronicle Ltd [1939] 1 All ER 390; Digest Supp.

Neville v Fine Art & General Insurance Co [1897] AC 68; 32 Digest 72, 1010, 66 LJQB 195, 75 LT 606.

Cassidy v Daily Mirror Newspapers [1929] 2 KB 331; Digest Supp, 98 LJKB 595, 141 LT 404.

Watt v Watt [1905] AC 115; 32 Digest 166, 2020, 74 LJKB 438, 92 LT 480.

Marsh v Isaacs (1876) 45 LJQB 505; 30 Digest 249, 490.

Cooper v Oldham Chronicle (1931) Unreported, 1 December.

Bruce v Odhams Press Ltd [1936] 1 KB 697, [1936] 1 All ER 287; Digest Supp, 105 LJKB 318, 154 LT 423.

Thomson & Co v McNulty (1927) 71 Sol Jo 744; Digest Supp.

Shaw v London Express Newspaper Ltd (1925) 41 TLR 475; 32 Digest 15, 57.

Lord v Croydon Advertiser (1935) The Times, 2 March 1935.

Lee v Wilson & Mackinnon (1935) 51 CLR 276; Digest Supp.

Daines & Braddock v Hartley (1848) 3 Exch 200; 32 Digest 60, 883, 18 LJEx 81, sub nom Danes v Hartley 12 LTOS 271.

Youssoupoff v Metro-Goldwyn-Mayer Pictures Ltd (1934) 50 TLR 581; Digest Supp.

Sun Life Assurance Co of Canada v Smith (W H) & Son Ltd (1933) 150 LT 211; Digest Supp.

Capital & Counties Bank v Henty (1882) 7 App Cas 741; 32 Digest 21, 121, 52 LJQB 232, 47 LT 662.

Hanson v Globe Newspaper (1893) 159 Mass Rep 273.

Peck v Tribune Co (1909) 214 US 185.

Laroque v New York Herald (1917) 220 NY 632.

Washington Post v Kennedy (1925) 3 Fed (2nd) Rep 256.

Tolley v Fry (J S) & Sons Ltd [1931] AC 333; Digest Supp, 100 LJKB 328, 145 LT 1.

Application

Application by the defendants for judgment or new trial on appeal from a verdict and judgment at the trial before Hawke J and a common jury, dated 21 April 1939 and reported [1939] 3 All ER 263, where the facts are fully set out.

G O Slade for the appellants.

A T Denning KC and Roy M Wilson for the respondent.

Slade: The question involved is whether or not the decision in Hulton (E) & Co v Jones applies to a real as well as to a fictitious person. I rely upon the decision of Talbot J in Cooper v Oldham Chronicle and the judgment of Farwell LJ in Hulton (E) & Co v Jones. The appellants admit publication of the matter complained

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of, but they deny the innuendo. The words were published of an existing person, and they were intended to refer to him. The words did not refer to the respondent. There were witnesses who said that they believed the words referred to the respondent. It will be a question as to whether or not they were reasonable persons, and that is a question of law. In Hulton (E.) & Co v Jones, Farwell LJ said that the de facto intention required is a legal intention, and that what creates liability is the motive judged from the circumstances. There is a distinction between Cassidy v Daily Mirror Newspapers and the present case. In Cassidys case, the libel could have referred to no one but the plaintiffs husband. In the present case, there is nothing beyond the mere mention of a name. Where words are published which are true of an existing person, and are proved to be true of an existing person, no action will lie at the suit of another person, even if that other person does satisfy the jury that the words were reasonably understood to refer to him, because intention is the essential element in the law of libel. The intention need not be the de facto intention of the writer, and, indeed, the de facto intention of the writer makes no difference. The intention to be considered is legal intention, and that is to be found by a consideration of two thingsnamely, the words used, and the circumstances in which they were published. One can reconcile the decision of the House of Lords in Hulton (E) & Co v Jones to the judgment of Farwell LJ, by saying that, when the relevant circumstances are shown to include proof that the words complained of are true of an existing person of the name used, or corresponding to the description used, in the alleged libel, the legal intention to refer to the plaintiff is excluded. That is, the de facto intention is eliminated. Also, in the absence of recklessness on the part of the publisher of the libel complained of, a person is not liable to pay damages to a plaintiff in respect of a publication which is aimed at an existing person and proved to be true of that existing person, even though all the acquaintances of the plaintiff fit the cap upon him. No one can reasonably assume that the plaintiff is hit, unless there is some statement which particularly or directly points to the plaintiff. Bruce v Odhams Press Ltd shows that there must be something in the circumstances to connect the plaintiff with the alleged libel. Unless there is something in the true words which apply more particularly to the plaintiff than to the actual person, there is no case to go to the jury. Bruce v Odhams Press Ltd also shows that it is necessary to plead facts from which reasonable persons would believe that the words referred to the plaintiff. In the present case, no facts have been elicited which would justify the putting of the question: “What do you understand by the words used?” There is no reported case of a true statement having been held to constitute an actionable libel, so far as the English courts are concerned. In any event, there was no case to go to the jury upon the traverse. Also, there was no case to go to the jury upon the confession and avoidance,

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because the facts were admitted to be true. [Counsel referred to Thomson & Co v McNulty, Shaw v London Express Newspaper Ltd, Lord v Croydon Advertiser, Lee v Wilson and Mackinnon, Cassidy v Daily Mirror Newspapers, Bruce v Odhams Press Ltd and Daines & Braddock v Hartley.]

Denning KC: The words were capable of referring to the respondent, in the view of the persons who gave evidence. The matter was a question for the jury. Other newspapers contained a fair and accurate report. The appellants newspaper did not. The harm done to the respondent is the same whether or not the words are true of another. The appellants were entitled to publish a fair and accurate report, but they did not do so. It is not pleaded that this is a fair and accurate report. One must ascertain the meaning of the words and then say if the meaning is true. The question then arises: Is it the meaning which the writer intended, or the meaning as understood by the witnesses? A libel consists of the publication, without lawful excuse, of words which, in the meaning reasonably put upon them by some of the persons to whom they are published, have a tendency to lower the reputation of the person referred to, no matter whether or not that meaning was intended. The fact that the writer did not intend to refer to the person who suffers is by itself no excuse. Nor is the fact that the words are true of another person by itself any excuse. The logical consequence of Hulton (E) & Co v Jones is that a defendant is liable even though the words are true of a person other than the plaintiff. If a writer were given the address and the occupation of the person about whom he was writing, and those particulars were omitted, although the writer knew of the importance of identifying the man, the writer might know that the words might refer to others. The gist of a libel is the injury to the plaintiff. All the authorities seem to agree that negligence carries liability with it. [Counsel referred to Cassidy v Daily Mirror Newspapers, Youssoupoff v Metro-Goldwyn-Mayer Pictures Ltd, Sun Life Assurance Co of Canada v Smith (W H) & Son Ltd, Capital & Counties Bank v Henty, Hanson v Globe Newspaper, Peck v Tribune Co, Laroque v New York Herald, Washington Post v Kennedy, Lee v Wilson & Mackinnon and Tolley v Fry (J S) & Sons Ltd, and to Pollock on Torts (4th Edn), p 200, Winfield on Torts, pp 278, 281, 285287, Salmond on Torts (9th Edn), pp 402, 410, and Gatley on Libel and Slander (2nd Edn), pp 125, 126.]

Slade in reply: In Hulton (E) & Co v Jones, each of the Lords said that intention of some kind is material. They all eliminated de facto intention. The only other possible intention is assumed intention. The whole basis of the decision in Hulton (E) & Co v Jones is that one cannot cast firebrands about and then say that one has been speaking in levity, and thus escape liability if the plaintiff has been injured. Washington Post v Kennedy is the converse of the present case. Cooper v Oldham Chronicle was decided on the ground that the

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words complained of were not reasonably capable of a defamatory meaning. In the present case, the name and the age of the person referred to were not the same as the name and the age of the respondent. There was also the fact that he was described as a Camberwell man. It would not be the act of a reasonable person to put it higher than to say that he might be the man. However, as Lord Halsbury LC said in Nevill v Fine Art & General Insurance Co, it is not sufficient to say that the words might be understood by somebody in a defamatory sense. In the present case, there was no case to go to the jury, because the words complained of were incapable of being understood by reasonable persons to apply to the respondent. The appellants have published a true statement, and that cannot be the subject of an action for libel.

G O Slade for the appellants.

A T Denning KC and Roy M Wilson for the respondent.

20 November 1939. The following  judgments were delivered.

SIR WILFRID GREENE MR. I have read the judgment about to be delivered by Du Parcq LJ. Agreeing as I do with his conclusions, and the reasons which he has given for them, I do not think it necessary to deal at length with the case, but I wish to offer some observations of my own upon one crucial matter, which was much discussed before us.

Great reliance was placed by counsel for the appellants upon the language used by Farwell LJ in his judgment in Hulton (E) & Co v Jones. It is not surprising that he should have done so, in view of the fact that, when that case reached the House of Lords, two out of the four noble and learned Lords who heard the appeal (Lord Atkinson and Lord Gorell) expressed their “substantial concurrence” with that judgment. At the same time, Lord Atkinson and Lord Gorell expressed their concurrence with the opinion of Lord Loreburn LC, whose reasoning I find it impossible to reconcile with much of what was said by Farwell LJ. In these circumstances, I am constrained to regard the reasoning of Lord Loreburn LC, as representing the real ratio decidendi of the majority of the House, and the opinion of the other noble and learned Lord, Lord Shaw, does not differ from it in any important particular. It is to be observed that the opinions of the members of the House were not on that occasion considered opinions. If they had been, the language of Lord Atkinson and Lord Gorell in relation to the judgment of Farwell LJ would no doubt have been more explicit. I think it right to state my views upon this matter, as the expressions in question have given rise to much doubt and controversy.

There are two passages in the judgment of Farwell LJ, upon which counsel for the appellants strongly relied. One is at p 480, where Farwell LJ says:

But it is not enough for a plaintiff in libel to show that the defendant has made a libellous statement, and that the plaintiffs friends and acquaintances understand it to be written of him: he must also show that the defendant printed and published it of him; for if the defendant can prove that it was written truly of another person the plaintiff would fail.

The other passage is as follows, at p 481:

If the libel was true of another person and honestly aimed at and intended for him,

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and not for the plaintiff, the latter has no cause of action, although all his friends and acquaintances may fit the cap on him.

It is important to examine carefully the process of reasoning of which these passages form part. At p 480, Farwell LJ expresses his agreement with the view which had been expressed by Fletcher Moulton LJ as to the necessity of the presence of an intention on the part of the defendant to refer to the plaintiff. That view is summarised by Fletcher Moulton LJ, at p 464:

It is, therefore, to my mind, settled law that a defendant is not guilty of libel unless he wrote and published the defamatory words “of and concerning the plaintiff”in other words, unless he intended them to refer to the plaintiff.

Then Farwell LJ says that the point of difference between himself and Fletcher Moulton LJ lies in the meaning of the word “intended,” and statescorrectly, if I may respectfully say soat pp 480, 481:

… the inquiry is not what did the defendant mean in his own breast, but what did the words mean having regard to the relevant surrounding circumstances … So the intention to libel the plaintiff may be proved not only when the defendant knows and intends to injure the individual, but also when he has made a statement concerning a man by a description by which the plaintiff is recognised by his associates, if the description is made recklessly, careless whether it hold up the plaintiff to contempt and ridicule or not … The element of intention, which is as essential to an action of defamation as to an action of deceit, can be proved in the same way in both actions.

He had previously referred to the fact that fraud is committed where a representation is made [p 480]:

… recklessly, careless whether it be true or false, and although there was no intention to cheat or injure the person to whom the statement was madeDerry v. Peekand yet the fraudulent intent is of the essence of the action.

It would be affectation to say that in criticising the reasoning of so learned a judge I speak with hesitation, since my view upon the matter is clear. It appears to me that the analogy of the action of deceit is not a true analogy. In that action, the necessity for the presence of a fraudulent intention is satisfied if it be shown that the defendant made the statement in question recklessly, careless whether it were true or false. This recklessness and this carelessness, however, have nothing to do with the meaning of the statement. They are relevant only to the question of the fraudulent intent of the person making it. However, in applying the analogy to the case of libel, Farwell LJ applies the test of recklessness to the meaning of the words used, which is quite a different matter. If the words used, when read in the light of the relevant circumstances, are understood by reasonable persons to refer to the plaintiff, then refer to him they do for all relevant purposes. Their meaning cannot be affected by the recklessness or honesty of the writer.

I do not propose to refer to the authorities which establish this proposition, except to quote the words of Lord Loreburn LC in Hulton (E) & Co v Jones, at p 23:

What does the tort consist in? It consists in using language which others knowing the circumstances would reasonably think to be defamatory of the person complaining of and injured by it.

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In the case of libel, once it is held that the words are capable of referring to the plaintiff, it is, of course, for the jury to say whether or not they do so refer. Subject to this, the principle is in truth an illustration of the rule that the author of a written document is to be taken as having intended his words to have the meaning which they convey when understood in the light of the relevant surrounding circumstances. In the case of libel, the same words may reasonably convey a different meaning to each of a number of different persons or groups of persons, and so be held to be defamatory of more persons than one.

After giving careful consideration to the matter, I am unable to hold that the fact that defamatory words are true of A makes it as a matter of law impossible for them to be defamatory of B, which was in substance the main argument on behalf of the appellants. At first sight, this looks as though it would lead to great hardship, but the hardships are in practice not so serious as might appear, at any rate in the case of statements which are ex facie defamatory. Persons who make statements of this character may not unreasonably be expected, when describing the person of whom they are made, to identify that person so closely as to make it very unlikely that a judge would hold them to be reasonably capable of referring to someone else, or that a jury would hold that they did so refer. This is particularly so in the case of statements which purport to deal with actual facts. If there is a risk of coincidence, it ought, I think, in reason to be borne, not by the innocent party to whom the words are held to refer, but by the party who puts them into circulation. In matters of fiction, there is no doubt more room for hardship. Even in the case of matters of fact it is no doubt possible to construct imaginary facts which would lead to hardship. There may also be hardship if words, not on their faces defamatory, are true of A but are reasonably understood by some as referring to B, and, as applied to B, are defamatory. Such cases, however, must be rare. The law as I understand it is well settled, and can be altered only by legislation. The appeal must be dismissed with costs.

MACKINNON LJ. The arguments in this case have ranged over a wide field, and we have been referred to many authorities. I do not propose to examine those many cases, but I propose to state the conclusions as to the law as to which I have arrived after examining them.

First, if A publishes to another person or persons words which upon their reasonable meaning refer to B, then, if those words are defamatory as holding B up to hatred, ridicule, or contempt, and if the words so referring to B cannot be justified as true, A may be liable for damages to B. Secondly, the reasonable meaning of the words, upon the question whether they refer to B, must be tested objectively, and not subjectively. The question is what do the words mean as words, not what did A in his own mind mean by them or intend them to mean. Thirdly, A cannot plead as a defence that he was unaware, of Bs existence. Fourthly, A

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cannot plead as a defence that the words are, in their reasonable meaning, equally capable of referring to C, and that, when referring to C, they are true. Fifthly, there has been reference in some of the cases (notably by Farwell LJ in Hulton (E) & Co v Jones) to negligence or recklessness on the part of A in making the publication. If the words, on their reasonable meaning, do refer to B, I think it is immaterial whether A was either negligent or reckless in not ascertaining the existence of B, or guarding against the applicability to him of the words. If B establishes his claim, in assessing his damages the jury may take into account all the circumstances of the publication. The negligence or recklessness of A may well be among such circumstances. Further or otherwise, negligence or recklessness on the part of A is immaterial. It is hardly necessary to add, sixthly, the rule, which is elementarynamely, that it is the primary duty of the judge to decide whether the words complained of are capable of a meaning that is defamatory of B and only if he answers that question in the affirmative to leave to the jury the question whether or not they are in fact defamatory of B, and, if so, what damages he shall be awarded.

In a case in which there is no question that the words are defamatory of him, if they refer to B, and the contest is only whether they do so refer, this preliminary question for the judge must be: “Are these words on their reasonable meaning capable of referring to the plaintiff?” If the judge answers that affirmatively, I think that, properly, the first question to be left to the jury must be: “Could the words used by the defendant be reasonably interpreted by those to whom they were published as referring to the plaintiff?”

On the first questionnot exactly in that formthat was left to them the jury failed to agree. Counsel for the defendants submitted that there was no evidence fit to go to the jury on which they could properly answer this first question in the affirmative. The judge overruled this contention. He therefore said that the case must be left for trial by another jury, if the plaintiff chose to enter it again for trial. The defendants appeal from this ruling, though they also raise other contentions in law, some of which I have previously dealt with adversely to them. In my opinion, the question for us is whether the judge was right in ruling that there was evidence fit to be left to the jury on which they could reasonably answer “Yes” to the question: “Could the words used by the defendants be reasonably interpreted by those to whom they were published as referring to the plaintiff?” In form this may not be precisely the same as the preliminary question for the judges determinationnamely, “Are the words capable of being defamatory of the plaintiff?”but I think that the difference is one of form and not one of substance, for I think that truly the preliminary question for the judge is: “On the evidence, is it possible for a reasonable jury to answer the above question affirmatively?”

My brethren are of opinion that the judges ruling as to this was correct.

Page 327 of [1939] 4 All ER 319

I confess that I entertain grave doubt as to whether it was. That doubt is not sufficient to make me express an actual dissent, especially as I think there is another ground on which this appeal should be allowed, but I should like to indicate the reasons which make me doubt. In considering the judges preliminary question whether the words are capable of being defamatory, and whether he ought therefore to leave to the jury the question whether they are so, what type of mind or intelligence ought the judge to impute to the audience? Not, I think, that they are of the class who accept and act on the wickedest proverb that was ever inventednamely, “There is no smoke without fire.” On the other hand, perhaps he should not impute to them the charitable decency of gentlemen. I can only suppose that one must have recourse again to that elusive being “the reasonable man,” and assume that the audience consists of “reasonable people.” Secondly, in considering what is the reasonable meaning of words uttered, not merely the actual words, but also the circumstances of time and place must be taken into account, and also the constitution of the audience to whom they were addressed.

The audience of a general newspaper is the general public. Words in such a paper may have a meaning other than they may have in a local paper addressed to a local audience, and words in a letter addressed to a few people, or even to an individual, may have a still more special signification. I would suggest as the two extremes of generality and speciality (a) a paragraph in The Times, “John Smith of London was convicted at the Old Bailey of so-and-so,” and (b) a letter to a householder at his address, “I think it right to let you know that your gardener, AB, is stealing your vegetables and selling them to the local greengrocer.” It seems manifest that The Times could not be successfully sued by a John Smith who was not the convict, and equally manifest that, if the letter were untrue, the gardener could sue the writer.

If a newspaper printed the sentence, “A. L. Smith, a London man, was fined for drunkenness at Bow Street,” and a man of that name alleged these words to be defamatory of him, I think that clearly the judge ought not to let his case go to the jury. If, however, forty years ago, a man exhibited a poster at the gate of Balliol, or outside the Law Courts, bearing the words “A. L. Smith fined for drunkenness,” either of two distinguished people, if they cared to sue, should have had their cases left to the jury. The words published to the audiencesundergraduates of Balliol, or lawyers leaving the courtswould have a special meaning.

In Hulton (E) & Co v Jones, the nature of the audience may have had some minor importance. The plaintiff was a well-known barrister on the North Wales and Chester Circuit, and that is a region not far from Manchester. The sting of the words in that case, however, arose from his very unusual name. In all probability there was only one Artemus Jones in Great Britain, possibly in the world. If the paper

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had written of the doings at Dieppe of John Jones, I am clear that not one of the many men who struggle through life under the name John Jones ought to have had a claim left to the jury, and, if the article had said Jones simpliciter, neither Mr Artemus Jones nor any other Jones could have sued.

If the words may have a special significance to the audience by reason of some local or other circumstance, how far is the special knowledge of some members of that audience to be considered in estimating the reasonable meaning of the words to those members? If the audience be a local onefor example, if the words in this case had been printed in a Camberwell newspaperthe percentage of readers who knew of the existence of the plaintiff might have been much greater than the percentage of readers of the Manchester Guardian, if I may assume, solely for the sake of argument, that that austere journal could ever have printed this trash. In Hulton (E) & Co v Jones, every reader (except those who thought the name merely fictitious, or did not think about it at all) would reasonably think that the reference was to the plaintiff. It was in evidence in that case that the plaintiff was baptised Thomas Jones, and had only assumed the name Artemus when he came to years of discretion. If the position had been reversed, and he had dropped the name Artemus when a boy, and had sued Hulton, saying, “My real name is Artemus. I have not used that prœnomen for many years, but I can call one of my schoolfellows and an aunt who will say they once knew me as Artemus, and, being disagreeable and suspicious people, will say they thought this story of peccadillos at Dieppe referred to me,” I think he should have been non-suited.

There is implicit also this further consideration. If the special knowledge of a section of the audience consists only of their personal acquaintance with the plaintiff, and if he is a man of good character, he needs all the less any protection from any imputation on that character in their minds, if they are reasonable people. The better his character, the more likely are those who know of him (unless they are unreasonably uncharitable) to say, “As usual, when one knows anything of ones own knowledge, a newspaper gets it wrong.” Indeed, the smaller the percentage of the specially informed part of the audience, and the higher the character of the plaintiff, the more remote is the possibility of any real damage to him from the suggested defamation.

On the facts of this case, (a) the audience to whom the words were published was very widespread and numerous, while the percentage of it with special knowledgethat is to say, with acquaintance with the plaintiffwas infinitesimal, and (b) the name Harold Newstead is a very ordinary one, and may well be owned by more than one person. As the question is whether the few people who knew of the plaintiff would be acting as reasonable people in thinking, without further inquiry, that the words referred to the plaintiff, and at once holding him in ridicule, hatred, or contempt, I confess that, unassisted by the view of my

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brethren, I should be inclined to answer in the negative. I should be inclined to think that they could do so only if they were more stupid and more uncharitable than I hope reasonable people are.

There is, however, another and different ground on which I think this appeal should be allowed. We are encouraged and entitled to assume that any jury consists of twelve reasonable people, though, paradoxically, tradition forbids us to interfere when a jury has assessed damages at a figure that we all think extravagantly excessive. In this case, the jury did assess the damages, if the words did defame the plaintiff, at one farthing. It is true that they did not bring in a complete verdict, since they failed to agree on the first question, but they expressed their unanimous opinion as to the amount of damages. I suppose I am still entitled to regard them as twelve reasonable people, even if they failed to agree on a question which has virtually caused disagreement between my brethren and myself. I know, therefore, that twelve reasonable people have assessed the plaintiffs possible damages at one farthing, and, on the facts proved, I cannot conceive that any other twelve reasonable people would arrive at a larger figure.

It is said that we are bound to permit, if not to direct, a further trial of this case, and, if another jury disagrees, then yet another, and so on. That is in order that eventually some jury may answer the first question in the negative, or, answering it in the affirmative, may give the plaintiff the farthing upon which one jury has already agreed, and upon which I am satisfied any reasonable jury would agree. I do not think that we are constrained to adopt this course, for I think that we sit here to administer justice, and not to supervise a game of forensic dialectics. This ground, on which I would allow this appeal, is similar to that which was applied by this court in Poliakoff v News Chronicle Ltd, though with a slight, but, as I think, an immaterial, extension, for in that case the court was made aware of the fact that, the only conceivable damages being one farthing, the defendants had paid into court a sum in excess of that figure.

DU PARCQ LJ. The submissions upon which the appellants rely may be stated shortly as follows. (i) The evidence would not have justified a finding by the jury that reasonable persons would have understood the words complained of to refer to the plaintiff. The ground of this submission is that the words were not capable of such a meaning, (ii) Even assuming that the words were capable of a meaning defamatory of the plaintiff, the fact that they were true of another person affords a good defence to the appellants.

As to the first submission, there is a clear distinction between the question which a jury may have to answer and the preliminary question which is for the court. The question for the court is, to adopt the language of Lord Halsbury LC, in Nevill v Fine Art & General Insurance Co, at pp 76, 77, whether the words are

… susceptible of a libellous meaning in this sense, that a reasonable man could

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construe them unfavourably in such a sense as to make some imputation upon the person complaining.

If the judge holds the words to be susceptible of a defamatory meaning in that sense, the jury are the constitutional tribunal to decide whether the words in fact have that meaning. That is to say, it is for the jury to decide whether the reasonable man whom they may be supposed collectively to typify would (not could) so construct them. The question which the judge must put to himself involves the assumption that the hypothetical reasonable man is capable of forming what the jury (and perhaps the judge also) may think to be an unduly censorious or suspicious view. The judge must be careful not to answer in advance the question which is properly for the jury, and to observe the limitation imposed upon his proper function by the law. At the same time, he must not shrink from withdrawing the case from the jury if he is satisfied that no reasonable man could (not would) attach to them the defamatory meaning alleged.

I express no opinion as to the answer which the jury ought to have made to the first question left to them by Hawke J. I am clearly of opinion, however, that the judge was right to leave the question to the jury. There was evidence, in my opinion, which would justify a jury in finding, in the language of the statement of claim, that the description “Harold Newstead, 30-year-old Camberwell man” substantially fits the plaintiff. The plaintiff is known as a hairdressers assistant to a comparatively wide circle of customers and other acquaintances in Camberwell, where he has acquired a modest fame. A reasonable man who had some acquaintance with him might have been prudent enough, on reading the alleged libel, to say “This may refer to some other Harold Newstead,” but I am not satisfied that every reasonable man would necessarily have been so cautious. The man who believes no ill of his neighbour until the accusation is proved beyond doubt against him is without question a reasonable man, but it would be fallacious to argue that every reasonable man attains to that high standard of judicial fairness. Evidence proving the existence of another person to whom the words might have been taken to refer is only relevant to this first question because it proves the words to have been capable of more than one meaning, and of at least one meaning which would not be defamatory of the plaintiff. It cannot now be argued (in this court, at any rate) that, in the words of Scrutton LJ in Cassidy v Daily Mirror Newspapers at p 339:

… if words are capable of several meanings, some defamatory and some innocent, they should not be left to the jury.

The correct view is that, if the words are reasonably capable of two or more meanings, of which one is defamatory, it must be left to the jury to determine in which sense a reasonable man would understand them.

If I am right in rejecting the appellants first submission, it is necessary to come to a decision on the interesting and difficult question

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raised by the second. In my opinion, it is now settled law that, in the words of Russell LJ, in Cassidy v Daily Mirror Newspapers, at p 354:

Liability for libel does not depend on the intention of the defamer; but on the fact of defamation.

I quote these words of Russell LJ as conveniently summarising the effect of his own judgment, and of that of Scrutton LJ in Cassidys case, and as clearly stating the principle established by Hulton (E) & Co v Jones. It seems to me to be impossible, consistently with this principle, to make the defendants liability depend on the accuracy of his words in relation to some person other than the plaintiff at whom he says he meant to strike. Nor do I think, with the greatest respect for the view expressed by Farwell LJ in Hulton (E) & Co v Jones, that any doctrine which would make the defendants liability depend upon his state of mind, or the degree of care which he exercised is reconcilable with this principle. In the present case, and in any similar case in which a defendant says that he was only speaking the truth of another person, and not meaning to attack the plaintiff, it may well be right to direct the jury that a reasonable man must be aware of the possibility (it is for them to say in each case whether it amounts to a possibility) that in any district there may be more than one person of the same name, and that, in considering how a reasonable man would understand the words, they must assume that he will read them with such care as may fairly be expected of him, not ignoring any parts of the description which are inapplicable to the plaintiff. If a defendant has been careful and precise, he may by his care avoid the risk of a successful action, but he cannot, in my opinion, escape liability merely by showing that he was careful and that his intentions were good. Sir Wilfrid Greene MR has dealt fully with this part of the case, and I would add that I find myself in complete agreement with all his observations upon it.

If these two submissions on the part of the appellants are rejected, it follows, in my opinion, that the judge was right in holding that the case had yet to be tried. Counsel for the appellants suggested, however, that it would be proper to make an order limiting the trial to the issue of liability, and to treat the quantum of damages as having been already the subject of a decision. It is plain, I think, that we would have no power to take that course, even if it commended itself to us. This is not a case in which a new trial is being sought, or in which a verdict has been given on one issue. The answers of the jury do not amount to a verdict, so that there has been no verdict and no trial. When a jury has failed to agree on the question of liability, its opinion as to what the damages should have been can have no legal effect.

If this court were to say that such an assessment of damages must stand, it would in effect be adopting the jurys assessment of damages as its own, or, in other words, itself deciding what damages ought to be

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awarded, a decision which it has no power to make: Watt v Watt. It is hardly necessary to add that this case is clearly distinguishable from one in which the issues joined on different causes of action have been left to a jury, who have returned a verdict on one or more of them and been unable to agree as to the others: Marsh v Isaacs. It is equally plain that RSC Ord 39, r 7, has no application to a case where the court is not granting a new trial, but, on the contrary, is holding that there has not yet been a trial. In the circumstances, I prefer to express no view as to the adequacy of the amount assessed by the jury. I agree with Sir Wilfrid Greene MR, in thinking that the appeal should be dismissed, and it becomes unnecessary to decide the questions raised by the cross-appeal.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Shirley Woolmer & Co (for the appellants); Manches & Co (for the respondent).

W K Scrivener Esq   Barrister.

Re Morrisons Will Trusts, Walsingham v Blathwayt

[1939] 4 All ER 332


Categories:        SUCCESSION; Wills: TRUSTS        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        8, 9 NOVEMBER 1939        


Wills Legacy Forfeiture clause Life interest forfeited Interests of issue Severability of forfeiture clause Rule against perpetuities.

By her will, the testatrix left a legacy of £5,000 to the first defendant during her life, with a proviso that the same should be held in trust for all or any of her children who should attain the age of 21 years. There followed a clause the material part of which was as follows: “If either during my lifetime or after my death any legatee shall become a Roman Catholic then as from the occurrence of such event such legatee shall forfeit all benefits.” The first defendant, who became a Roman Catholic, had a daughter, the second defendant, who also became a Roman Catholic, and two sons, the third and fourth defendants, who did not become Roman Catholics. The question asked was whether any, and, if so, which, of the defendants, had forfeited his or her interest. One contention was that the forfeiture clause was void in its entirety, as it might operate outside the time-limit allowed by the rule against perpetuities. The other contention was that the forfeiture clause could be separated, and could operate in respect of some, but not in respect of all, of the defendants, as some of them might do the prohibited act at a point of time outside the time-limit allowed by the rule against perpetuities. Any forfeited legacies were to fall into and form part of the residuary estate. The estate was insufficient to pay the legacies in full:

Held (i) the interests of all the defendants were forfeited on the date the first defendant was received into the Roman Catholic Church.

(ii) it not being clear that the will intended the residuary legatees to take the forfeited shares as legatees, those shares ought not to be paid wholly to the residuary legatees, but must also be used in making further payments to the legatees not yet paid in full.

Notes

Where there is a time fixed at which a fund is to be divided into separate shares, and that time is not obnoxious to the rule against perpetuities,

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then each share stands separate from the others, and the limitation of each share takes effect or not according as the dispositions of that share do or do not violate the rule, and the valid gift of one share is not made void by the invalidity of the gift of another share.

As to Severability of Shares in respect of the Rule against Perpetuities, see Halsbury (Hailsham Edn), Vol 25, pp 140, 141, paras 233237; and for Cases, see Digest, Vol 37, pp 101, 102, Nos 359373.

Cases referred to

Re Russell, Dorrell v Dorrell [1895] 2 Ch 698; 37 Digest 102, 370, 64 LJCh 891, 73 LT 195.

Hodgson v Halford (1879) 11 ChD 959; 37 Digest 102, 372, 48 LJCh 548.

Adjourned Summons

Adjourned Summons to determine if any, and, if so, which, interests under the will of the testatrix had been forfeited. The facts and arguments are fully set out in the judgment.

Wilfrid M Hunt for the plaintiffs, the trustees.

E G Eardley-Wilmot for the first and second defendants.

Horace Freeman for the third and fourth defendants.

J A Reid and C L Fawell for other interested parties.

9 November 1939. The following judgment was delivered.

BENNETT J. Under the will, dated 3 June 1904, of Mrs Morrison, who died on 17 December 1909, there was given to the testatrixs great-niece, Elizabeth Helen de Grey, a legacy of £5,000. Elizabeth Helen de Grey married, and is now the first defendant, the Hon Elizabeth Helen Blathwayt. By cl 15 of her will the testatrix settled legacies to female legatees in the following terms:

I direct that my trustees shall retain the legacy (unless it be a specific legacy or a life interest only) to which any female legatee shall or if she shall not survive me would but for her not having survived me have become entitled under the provisions hereinbefore contained (but I do not include in this category the legacies to Alexandra Georgina Heathcot Amory and the Duchess of Somerset which I have given them wherewith if they survive me to buy some remembrance of me or the legacy to Lady Lawrence or the legacies to my godson Sidney Russell Cooke and my goddaughter Rose Mary Banbury) and shall invest such legacy and hold the same and the investments for the time being representing the same and the income thereon upon trust to pay such income to such legatee during her life and during any coverture without power of anticipation and after her death as to both capital and income in trust for all or any one or more exclusively of the others or other of her issue at such time and if more than one in such shares with such provisions for maintenance education and otherwise at the discretion of any person or persons and with such gifts over and generally in such manner for the benefit of such issue or some or one of them as she shall whether covert or sole by deed revocable or irrevocable or by will or codicil appoint and in default of and until and subject to any such appointment and also if she shall not survive me in trust for all or any her children or child who being sons or a son have or has attained or shall attain the age of 21 years or being daughters or a daughter have or has attained or shall attain that age or have or has married or shall marry and if more than one in equal shares.

Then there is a hotchpot clause. Clause 17 provides as follows:

If either during my lifetime or after my death any legatee under my will including any person who shall benefit under this present clause shall be or become a Roman Catholic or shall marry a Roman Catholic or shall give any promise or shall come under any obligation to bring up as a Roman Catholic any child of such legatee then and in every such case and as from the occurrence of such event such legatee shall absolutely forfeit and lose all benefits and powers given to him or her by my will including this present clause and so that if any such benefit be an annuity

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the annuity shall forthwith cease as if the legatee were dead and if any such benefit be a life interest the fund out of which such life interest is payable shall fall into and shall forthwith form part of my residuary estate and be held upon the trusts herein declared concerning the same and if any such benefit be an absolute interest the same shall also fall into my residuary estate and if the legatee be my residuary legatee my residuary estate shall be held in trust for such of his three brothers as shall survive me and shall not be or be married to a Roman Catholic and shall not have given any promise or have come under any obligation to bring up as a Roman Catholic any child of his and if there be more than one such brother of my residuary legatee the same shall be held in trust for them in equal shares provided always and I hereby direct that my trustees shall be protected in paying any principal sum to any person interested under my will if they shall have before making such payment obtained from the person to whom such payment is to be made a declaration that he or she as the case may be is not a Roman Catholic or the wife or husband of a Roman Catholic.

Mrs Blathwayt has three children, the defendants Christopher George Wynter Blathwayt, Justin Robert Wynter Blathwayt, and Elizabeth Henrietta Blathwayt. It has been admitted that Mrs Blathwayt has become a Roman Catholic, and that she was received into the Roman Catholic Church on 18 May 1934. The defendant Elizabeth Henrietta Blathwayt has also become a Roman Catholic. Neither of the two sons, the defendants Christopher Blathwayt and Justin Blathwayt, is a Roman Catholic.

The first question asked is as follows:

As to the said settled legacy of £5,000 whether on the true construction of the said will and in the events which have happened (a) the life interest of the first defendant in such legacy has been forfeited, and, if so, as from what date, (b) the interests of all or some and which of them the second, third and fourth defendants in the said legacy have been forfeited, and, if so, as from what date, (c) the whole or some and what share in or part of the capital of the funds representing the said legacy and the income thereof have fallen into and form part of the residuary estate of the said testatrix.

On behalf of Mrs Blathwayt and her daughter and her two sons, it has been argued, first of all, that the condition in cl 17 of the will is void because it may operate at a point of time outside the period of time allowed by the rule against perpetuities. That is to say, it may operate outside a period of time measured by a life or lives in being and the period of 21 years. On behalf of the two sons of Mrs Blathwayt, in addition to that argument being advanced, it has been argued that, so far as they are concerned, they are not affected by the fact that their mother has been received into the Roman Catholic Church, and that cl 17 operates only to forfeit her life interest in the fund. As regards that last argument, I think that there is nothing in it, with all respect to counsel for the third and fourth defendants, who advanced it. If the clause operates at all, in my judgment it operates to defeat the interests of all persons to whom the testatrix has given an interest in the settled legacy. The substantial question is whether or not the clause is void because it may come into operation outside the perpetuity period. For the purpose of deciding the question, I will assume that it applies to the three defendantsthe daughter of Mrs Blathwayt and the two sonson the ground that they are legatees under the testatrixs will within the meaning of cl 17. I assume that. I do not decide it, because, having

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regard to the view I have taken as to the operation of the clause, I do not think that it is necessary that it should be decided. The way it is put is this. It applies, so the argument goes, not merely to the legatee who, ascertained within the limits of perpetuity and within those limits, does the prohibited thing, but also to persons who may be ascertained within the limits but may do the thing outside the limit of the rule, and, therefore, as a whole the clause is bad, because it may defeat at a point of time outside the period fixed by the rule against perpetuities an interest then vested. The question is whether the clause must be construed and applied in that way, or whether it can be separated and applied to the interests of each person who becomes a legatee under the will, and, if the person to whom it is sought to apply it is a person who must do the act which brings about the result within the perpetuity period, then the question is whether, as regards that person, the condition is good, although, if applied to another legatee under the will, it may be bad, because that person may do the act which operates to defeat his or her interest outside the perpetuity period.

I think that the principle is settled in favour of those who have argued for the validity of the provision as applied to Mrs Blathwayt by the decision of the Court of Appeal in Re Russell, Dorrell v Dorrell. The headnote of that case is as follows:

A testator gave his residuary estate in trust, after the death of M. and her husband, for all the daughters of M. who should attain 21 or marry under that age; with a proviso that the share of any daughter should be held upon trust for her for life, and after her death upon similar trusts for her children as were thereinbefore declared for the children of M. M. had one daughter only, the plaintiff, who attained 21, and she was born in the lifetime of the testator.

It was held by the Court of Appeal, affirming the decision of Chitty J that:

… the proviso for resettlement of the shares must be construed as applicable to each share separately; and that although it would have been void for remoteness in the case of daughters born after the death of the testator, it was valid in the case of the plaintiff, and therefore she was only entitled to a life interest in the fund.

In the same case, Rigby LJ delivering the judgment of the Court of Appeal, said, at p 702:

It is suggested that the proviso for the settlement of the shares which I have read is void for remoteness, inasmuch as there might have been a daughter of Mary Dorrell born after the testators death who would live to take a vested interest, and whose children would not necessarily attain 21 within the period allowed by law for the postponement of the vesting of a benefit. No doubt, in the case of such a daughter the settlement over directed by the proviso would have been void but it would be perfectly good as to the interest taken by the plaintiff, who was alive at the testators death, unless the possible operation of the proviso with reference to the share of a daughter not in existence at the testators death make the whole proviso void. Looking at the state of things at his death, it was then clear that the plaintiff must take either the whole or a share, and other daughters of Mary Dorrell might come in and take shares. Assuming them to do so, yet the share of the plaintiff and the shares of such other daughters would be perfectly separate and distinct, and completely ascertained and separated within the limits of vesting allowed by the law. The proviso in no way mixes them up, but operates separately upon each share. The settlement of the plaintiffs share directed by it is perfectly legal, and would have been so even though there were other shares to which the proviso could not legally apply. If, indeed, there had been a proviso which could

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only operate upon all the possible shares, if it operated at all the case would have been different; but the settlement of the plaintiffs share is to take place, whether there are other shares or not, and it takes place as from the testators death in favour of the children of a person then living, and is quite unobjectionable. This is not the case of a gift over, which depends upon events so stated as to involve a possibility of its taking effect outside the permitted limits, or in favour of persons who might take interests vesting beyond those limits. No splitting of the clause is necessary, since it is so framed as to apply separately to the plaintiffs share.

I think that, upon the true construction of cl 17 of the testatrixs will, upon the hypothesis that the word “legatee” includes every person who takes a benefit in a legacy under the will, the clause is capable of being applied separately to the interests of that legatee, and, upon that footing, if he is one of the persons who has done the prohibited act, and can only have done it within the perpetuity period, then, as regards that person, it seems to me the condition is valid upon the same principles as those applied by Rigby LJ. Indeed, it seems to me that that must have been the footing upon which Hall V-C decided Hodgson v Halford as he did. The result, I think, is that, upon the facts proved, the interest of the first defendant has been forfeited from the date when she was received into the Roman Catholic Church. Under the terms of cl 17, it follows, in my judgment, that the interest of all the three children in the legacy has been forfeited and from the same date.

The terms of the clause provide that, if the benefit forfeited be a life interest, the fund out of which such life interest is payable shall fall into, and shall forthwith form part of, the testatrixs residuary estate. The further question is whether the persons named in the will as residuary legatees are to take the forfeited legacy or whether it is to be utilised for making further payments to the pecuniary legatees who have not yet received payment in full of the legacies which the testatrix directed to be given. In my judgment, it is a matter of principle. Unless it is made clear in a case such as this that the residuary legatee is to take as a legatee, and not as a residuary legatee, the forfeited legacy must be used in making further payments to those legatees who have not yet received that which the testatrix said that they were to receive, because it is not until they are satisfied that the residuary legatee is entitled to anything. I propose to answer the second question in favour of alternative (b).

Interests of first and second defendants forfeited, and to fall into residuary estate. Costs of all parties as between solicitor and client payable out of legacy.

Solicitors: Johnson Jecks & Colclough (for the plaintiffs); Thorold Brodie & Bonham-Carter and Woolley & Whitfield (for the defendants and other parties).

F Honig Esq   Barrister.


Re A Debtor, Ex parte Dunn Trust Ltd

[1939] 4 All ER 337


Categories:        ADMINISTRATION OF JUSTICE; Courts: BANKRUPTCY        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON AND FARWELL JJ        

Hearing Date(s):        9 NOVEMBER 1939        


Emergency Legislation Leave to enforce judgment or order Leave given in High Court Application to file bankruptcy petition in county court “Appropriate court” Courts (Emergency Powers) Act 1939 (c 67), s 1(1), (2)(a) Courts (Emergency Powers) Rules 1939 (SR & O 1939, No 995), rr 2, 4.

On 30 September 1939, the applicants applied in the High Court for, and were granted, leave to enforce a judgment for £100. They then applied in the Oxford County Court to file a bankruptcy petition founded on the failure of the debtor to comply with a bankruptcy notice founded on that judgment. The registrar refused to file the petition, on the ground that, under the Courts (Emergency Powers) Rules 1939, r 4, the applicants required the leave of the county court before the petition could be filed:

Held the leave given in the High Court enabled the applicants to enforce their judgment by bankruptcy proceedings in the county court, and the registrar should have filed the petition.

Notes

The question at issue here turns upon which is the appropriate court to give leave to enforce a judgment or order. It was contended that the Courts (Emergency Powers) Rules 1939, r 4(2), makes it necessary, where it is intended to enforce the judgment by bankruptcy proceedings in a county court, to obtain the leave of the county court. On the other hand, it was said that, under r 2, the High Court was the appropriate court to give leave, since it was the court by which the judgment had been given. The decision is in favour of the latter contention. The main difficulty would appear to lie in the construction of r 4(2). It is said by Morton J that this rule is applicable where the applicant requires to exercise one of the remedies referred to in s 1(2)(a) of the Act, which are remedies by distress, equitable execution and forfeiture. The rule, however, is not in its terms confined to such remedies.

As to Emergency Powers, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Appeal

Appeal from the refusal of the Registrar of the Oxford County Court to file a petition in bankruptcy. The applicants, Dunn Trust Ltd, commenced an action in the High Court by specially indorsed writ against the debtor in respect of £100 and interest due on a promissory note, and, upon taking proceedings under RSC Ord 14, obtained judgment for the principal sum of £100, but the action was ordered to proceed in respect of the interest. On 19 August 1939 the applicants served on the debtor a bankruptcy notice founded on this judgment. On 30 September 1939 they applied in the High Court for leave to proceed to enforce that judgment, such application being made under the provisions of the Courts (Emergency Powers) Act 1939. The High Court granted leave to proceed, and on 3 November 1939 the petitioning creditors, in pursuance of that leave, applied ex parte to the registrar of the Oxford County Court to file a bankruptcy petition against the debtor. The registrar refused to file the petition, on the ground that the leave to proceed obtained in the High Court allowed proceedings to be brought only in the High Court, and, if a petition were required to be filed in the county court, leave to proceed must be obtained in the county court.

Page 338 of [1939] 4 All ER 337

The Courts (Emergency Powers) Act 1939, s 1, provides as follows:

(1) Subject to the provisions of this section, a person shall not be entitled, except with the leave of the appropriate court, to proceed to execution on, or otherwise to the enforcement of, any judgment or order of any court (whether given or made before or after the commencement of this Act) for the payment or recovery of a sum of money. …

(2) Subject to the provisions of this section, a person shall not be entitled, except with the leave of the appropriate court:

(a) to proceed to exercise any remedy which is available to him by way of:

(i) the levying of distress;

(ii) the taking of possession of any property or the appointment of a receiver of any property;

(iii) re-entry upon any land;

(iv) the realisation of any security or the forfeiture of any deposit; or

(v) the serving of a demand under the Companies Act, 1929, s. 169(1) …

S 2(1) provides as follows:

The appropriate court for the purposes of any of the provisions of this Act shall be such court as may be designated by rules made by the Lord Chancellor under this Act, and such rules may designate different courts in relation to different classes of proceedings.

The Courts (Emergency Powers) Rules 1939, provide as follows:

1. The appropriate court for the giving of the leave required by sect. 1 shall be the court prescribed in rr. 2, 3, 4 and 5.

2. Under subsect. (1), for proceeding to execution of a judgment or order for the payment or recovery of a sum of money or for enforcing any such judgment or order otherwise than under the Debtors Act, 1869, the appropriate court shall be the court by which the judgment or order has been given or made, or in which the judgment or order is being sought, and for enforcing any such judgment or order, under the Debtors Act, 1869, the appropriate court shall be the court in which the enforcement is being sought.

4. (2) Where leave is required for the purpose of taking proceedings in a county court, the application for leave shall be made in the court where the proceedings are to be taken, and in any other case where the county court is the appropriate court, the application for leave shall be made in the county court for the district in which the respondent or one of the respondents resides or carries on business or the subject-matter of the application is situate:

4. (3) Where the High Court and the county court have concurrent jurisdiction under this rule, the application shall not be made to the High Court except under special circumstances.

4. (4) Where an application is made to the High Court and the court or judge is of opinion that it ought to have been made in the county court, the court or judge may order the matter to be transferred to the county court.

9. (1) Where no judgment or order has been given or made, an application under subsect. (1) or subsect. (3) for leave to proceed may be made at the time when the judgment or order is given or made in the presence of the defendant or respondent or his solicitor or counsel or on notice given in accordance with the provisions of the next succeeding paragraph. (2) The notice shall be to the effect of Form No. 3 and shall be served on the defendant or respondent not less than two clear days before the judgment or order is given or made, unless the court or judge otherwise orders.

10. Where a judgment or order has been given or made, an application under subsect. (1) or subsect (3) for leave to proceed may be made by summons in the proceedings.

Cyril B Salmon for the applicants.

9 November 1939. The following judgments were delivered.

MORTON J (His Lordship stated the facts and read the material parts of the Act and rules set out above). The section of the Act relevant to this case is s 1(1). The applicant is proceeding to enforce a judgment or order within the meaning of that sub-section, and the rules provide which is the appropriate court to which the applicant must apply

Page 339 of [1939] 4 All ER 337

for leave to proceed to such enforcement. It is clear from the Courts (Emergency Powers) Rules, 1930, r 2, that the appropriate court is that by which the judgment or order has been made. Rule 2 is the rule governing the present application. Rule 4, which was relied upon by the registrar, is applicable to persons proceeding under s 1(2)(a) of the Act, but it is not applicable to the present case. It is clear that the Act has been wrongly construed, and this view is supported by rr 9 and 10. The appeal must be allowed, and the matter must be sent back with a direction to file the petition.

FARWELL J. I agree. The intention of the enactment is to prevent anyone from enforcing a judgment or order without the leave of the court, but, once leave to proceed has been granted, the party so granted leave may take all proper steps to enforce the judgment or order, and is in the same position as that in which he would have been before the Act was passed.

Solicitors: Woolfe & Woolfe (for the applicants).

F Honig Esq   Barrister.

Haile and Others v West

[1939] 4 All ER 339


Categories:        ADMINISTRATION OF JUSTICE; Courts        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        30, 31 OCTOBER, 15 NOVEMBER 1939        


County Courts Costs Remitted action Payment into court Three plaintiffs Three separate sums paid into court Taxation in respect of each sum paid in Scale applicable County Courts Act 1934 (c 53), s 73.

In a remitted action, in which there were two adult plaintiffs and one infant one, the defendants paid in £25 in respect of one adult plaintiff, £35 in respect of the other, and £5 in respect of the infant. Upon an application, the judge granted leave to take these sums out of court and ordered the plaintiffs costs to be taxed on the High Court scale up to the time of remission to the county court and thereafter on Scale C down to the time of payment into court:

Held the judge was not entitled to aggregate these amounts into one sum which would carry costs on the higher scale, but the costs of the adult plaintiffs must be taxed on Scale B and the infants costs on the Lower Scale, Col 1, and the scale upon which these costs were to be taxed was not in the discretion of the county court judge.

Notes

The facilities given by the rules of court for the joinder of plaintiffs do not make three separate causes of action vested in three different plaintiffs one cause of action, and for that reason it is impossible in a case like the present to tax the costs of the three plaintiffs as for one aggregate sum, but the costs of each plaintiff must be dealt with separately.

As to Costs in Remitted Actions, see Halsbury (Hailsham Edn), Vol 8, p 357, para 758; and for Cases, see Digest, Vol 13, pp 490492, Nos 404420.

Cases referred to

Campbell (Donald) & Co v Pollak [1927] AC 732; Digest, Practice, 788, 3503, 96 LJKB 1132, 137 LT 656.

Page 340 of [1939] 4 All ER 339

Davies v Davies [1928] 1 KB 364; Digest Supp, 96 LJKB 1066, 137 LT 567.

Gallivan v Warman [1930] WN 96; Digest Supp.

Interlocutory Appeal

Interlocutory Appeal by the defendant from an order of His Honour Judge Konstam KC, made in the Lambeth County Court on 27 June 1939. In a running-down action, there were three co-plaintiffs, one of whom was an infant. The action was started in the High Court and remitted to the county court. The defendants paid in £25 in respect of one adult plaintiff, £35 in respect of the other, and £5 in respect of the infant. The plaintiffs applied to the judge for leave to take these sums out of court, and, in giving leave, the judge made an order that the defendant should pay the costs of the plaintiffs to be taxed on the High Court scale up to the time of remission to the county court, and thereafter on Scale C of the county court scales down to the time of payment into court. The defendant appealed, asking that the order be varied so that the defendant be ordered to pay the costs of the adult plaintiffs to be taxed on Scale B up to the date of remission, and also from the date of remission to the date of payment in, and the costs of the infant plaintiff to be taxed on Lower Scale, Col 1, of the county court scales from the date of remission up to the date of payment in, but no costs of the infant plaintiff up to the date of remission. He maintained that, upon the true construction of the County Courts Act 1934, ss 47, 73, and of CCR Ord 47, rr 1, 5, 6, 8, he had no jurisdiction or discretion to order as he did. In making the order, the judge proceeded on the footing that the sum paid in exceeded £50. The defendant maintained that the judge was not entitled to add the three sums together, but must deal with each of them separately.

J F F Platts Mills for the appellant.

S Parnell Kerr for the respondents.

15 November 1939. The following judgments were delivered.

SLESSER LJ. This is an action brought by three co-plaintiffs, Robert Haile, Frances Haile his wife, and Alan Haile, an infant suing by his next friend, Robert Haile, against one A H West for damages suffered by all these plaintiffs through the negligence of the defendant. The defendant was driving a motor car, and it is alleged that he drove it so unskilfully that it collided with the first plaintiffs motor cycle combination, while the first plaintiff was carrying with him on his motor cycle combination his wife and the infant.

The action was started in the High Court, but was remitted to the county court on the usual allegation of need for security, which was not given. On 1 June 1939 there were paid in certain sums in satisfaction of the claim. The sums were £25 as regards the father, £35 as regards the mother, and £5 as regards the child. It was necessary that the matter should come before the county court judge for two reasons. First, under CCR Ord 11, the time having elapsed for taking out the

Page 341 of [1939] 4 All ER 339

money, it was necessary for the leave of the county court judge to be obtained. Secondly, one of the persons in respect of whom the money had been paid in was an infant.

The question now before the court concerns the order for costs made by the county court judge in giving leave for this money to be paid out. The county court judge made an order, which is now complained of in one particular. The order was that the costs should be on the High Court scale down to the date of remission, and thereafter should be on Scale C. There is in this appeal no complaint of so much of that order as refers to the High Court scale of costs down to the date of remission, but it is complained that, in the circumstances, the judge had no power to award costs on Scale C in respect of those sums of £25, £35 and £5

I may say at the outset that this is not a case where the judge has purported to give costs on Scale C by reason of granting any certificate. Under the provisions of CCR Ord 47, r 13, there is power, in any proceeding in which the judge certifies on the termination of the proceedings that a question of law of importance was involved, for the judge to award costs on such scale as he thinks fit. In the present case, he has not purported to do that, nor is there any suggestion that his award of costs on Scale C can be supported on the basis of that rule. What the judge has done is this. He has had recourse to CCR Ord 47, r 5(2), and he has come to the conclusion that he was entitled to award costs on the basis that the sum paid in exceeded £50, in which case the scale applicable, in the absence of some special order, is to be Scale C. It is true that, if the amounts paid into court in respect of the father, the mother and the child be aggregated, the total sum is more than £50. It is equally true that, if it be not so aggregated, according to the scale of costs to which I have referred under Ord 47, neither the fathers nor the mothers nor the childs costs can be on the scale applicable if they exceed £50. The mother and the father are in the category exceeding £20 and not exceeding £50. The infant is in the category exceeding £2 and not exceeding £5, Lower Scale, Col 1. Therefore, this appeal revokes itself into one question, and into one question onlynamely, was the county court judge entitled to aggregate these amounts, so as to create a sum which would carry costs on the higher scale?

To my mind, this is not a case which can be dismissed merely by saying that it was a matter within the judges discretion. If he has exercised his discretion contrary to the rules, which have statutory sanction, then, according to Campbell v Pollak and other well-known authorities, this court has ample power to deal with the matter.

In my opinion, the judge has erred in law in aggregating these sums. These plaintiffs are in reality three separate complainants. They may, under RSC Ord 16, r 1and the rules of the High Court are the first to be looked at here, since it was in the High Court that this action was startedbe joined in one action as plaintiffs in whom any right to relief is alleged to exist in respect to the same transaction or series of

Page 342 of [1939] 4 All ER 339

transactions, whether jointly, severally, or in the alternative, and judgment may be given for such one or more of the plaintiffs as may be found to be entitled to relief. When the history of those procedure rules comes to be considered, it is quite clear that it is only by a process of procedure or machinery that these people are so to be joined together. As a matter of legal principle, each of them has a separate right. If several persons are each claiming for an accident, the eventual liability may vary, because in each case there is to be considered the question of the negligence of the defendant towards a particular plaintiff, together with the damage sustained by each injured person.

Counsel for the respondent is driven to admit that, if these three persons had elected to proceed separately in separate actions, and he had taken no steps to consolidate the actions, the judgment obtained against him in the three separate actions would have been unimpeachable. It is, indeed, more a matter of convenience for the purpose of pleading that the rules have now been so devised, and for the purpose of economy to encourage joinder and consolidation. The principle, however, remains unimpaired. Each of those persons, in my opinion, has, in the true sense of the word, a separate cause of action. If that be the case, the result which seems to follow is this. There is nothing in the rules, either of the High Court or of the county court, which permits the consideration of the fortuitous fact that, certain persons having separate causes of action, there is provision in the rules enabling them to join those causes of action together.

Counsel for the respondent says, in the first place, that what is to be regarded here is only the provision dealing with remitted actions, and that, under the County Courts Act 1934, s 73, which is s 12 of the old Act of 1919, where an action is ordered to be transferred from the High Court to the county court, the costs shall be in the discretion of the court to which the proceedings are transferred. On that assumption, he must equally argue, I think, that that discretion, which he argues to be a completely unfettered one, unfettered by any rules of the county court in cases where proceedings were started in the county court, must also apply where there has been a transfer from one county court to another county court. That argument has already been before the Divisional Court in Davies v Davies. Counsel for the respondent is perfectly entitled to say that this court sitting here to-day is not bound by that decision, though it is in fact a decision of two Lords Justices, Atkin and Lawrence LJJ, sitting as a Divisional Court. That was a case where a claim by the plaintiff had been remitted to the county court, and a contention, identical in principle with that which was raised here, was discussed, and the very argument which counsel for the respondent has presented to us here was presentednamely, that s 12 of the old Act of 1919, now the County Courts Act 1934, s 73, gave the judge an unfettered discretion in the case of a remitted action which possibly he would not have had under the provisions of CCR Ord 47

Page 343 of [1939] 4 All ER 339

r 5, dealing with scales of costs applicable in case of actions started in the county court.

As Atkinson J pointed out in the course of the argument, if that were the case where a case was transferred from one county court to another, a discretion would arise which would not arise if the case were started in the particular county court in which it was heard. That is a peculiar result, but one from which one would not flinch if it were the true view of the law. However, as Atkin LJ, points out with great clarity, that argument is not acceptable, because it was not intended to give to the county court judge larger or further powers than he would otherwise have had.

The object of the section [now sect. 73 of the Act of 1934] was to determine who was to exercise the discretion. … Take the case of a plaint filed in the wrong court. It would be anomalous that in such a case the Act should give a wider or larger discretion to the judge to whose court the action was transferred. It was not intended that the transferee should have a wider discretion as to costs.

Thus, Atkin LJ concludes that s 12 of the Act of 1919 has to be read in conjunction with the County Courts Act 1988, s 119, and that it follows that the discretion is limited as in that Act, which now finds expression in CCR Ord 47, r 13. Lawrence LJ gives judgment to the same effect.

In my view, Davies v Davies was perfectly correctly decided. If it were necessary to say so, I should have come to exactly the same conclusion myself, had that case been before this court for consideration. That being so, the discretion in this remitted action is no more and no less than it would have been if the action had been started in the High Court. One comes, therefore, to the question of whether or not it is right, having regard to the question of principle which I have mentioned as to the real nature of these causes of action, to aggregate them. It has already been decided in this court, again by two Lords Justices sitting as a Divisional Court, in Gallivan v Warman that such an aggregation, as I read the decision, is in principle improper. We are told that, both in the High Court and in the county court, the principle laid down by that decision has been adopted ever since, and that the kind of aggregation which has here been sought to be made by the county court judge is contrary to practice.

In Gallivan v Warman the facts are stated thus:

The plaintiffs, who were husband and wife, brought an action in the High Court against the defendant for damages for negligence in driving a motor car, whereby the wife was injured. The action was transferred to the county court, and the defendant paid into court £45 to meet the wifes claim and £5 to meet the husbands claim, which sums the plaintiffs accepted. The county court judge refused to make an order for High Court costs on the ground that the plaintiffs had recovered less than £50.

Thus the actual decision of the county court judge there was rather on the question of High Court costs than on the question of costs on Scale C in the county court, but the principle is the same. Scrutton LJ said, at p 96:

In the present case £45 and £5 had been paid in to meet the respective claims of

Page 344 of [1939] 4 All ER 339

the plaintiffs, and each had covered “less than £50,” so as to fall within the scope of sect. 11. It was argued by Mr. White that the two sums were to be added together. But there was no authority for that proposition, and the section appeared to refer to one judgment, namely, judgment for the amount recovered by one plaintiff.

I concurred in that judgment. The court decided that it was wrong in such a case to aggregate, and the reason must have been the reason which moves me to come to the same conclusion in the present casenamely, that, when the matter is considered in principle, there are three separate causes of action here. That seems to me to determine the matter.

The only question outstanding seems to be what scale ought, on the principles which I have suggested, to be applied. I have already indicated that, in my view, in respect of the £25 and the £35, the proper scale which should have been applied under CCR Ord 47, r 5, is costs on Scale B. With regard to the infant, the proper order ought to have been the Lower Scale, Col 1. This appeal, therefore, succeeds.

LUXMOORE LJ. I agree.

ATKINSON J. I agree. The county court judge has decided that the plaintiffs were entitled to an award of costs on Scale C. He took the view that, this action being a transferred action, he had complete discretion under s 73. If the action had been started in the county court, it is quite clear that he would have had no unfettered discretion. He could give costs on Scale C only if he certified under CCR Ord 47, r 13. Of course, it would have been impossible to give a certificate under that rule in a case of this sort, and no certificate was in fact given. The county court judge took the view, however, that, under s 73, he had an unfettered discretion. Davies v Davies was not called to his attention, but that case makes it perfectly clear that his discretion in a transferred action is precisely the same as the discretion which he would have had if the action had been started in the county court. I know it is open to us, if we think it wrong, to overrule Davies v Davies, but, speaking for myself, I think that it is absolutely right, and the argument of Atkin LJ, is quite unanswerable. I agree on the point indicated by Slesser LJ, that the appeal succeeds.

Appeal allowed with costs.

Solicitors: L Bingham & Co (for the appellant); Schultess-Young & Co (for the respondents).

Derek H Kitchin Esq   Barrister.


English v Western

[1939] 4 All ER 345


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        14 NOVEMBER 1939        


Insurance Policy Conditions Policy against third-party risks Exception “Member of the assureds household.”

A lad of 17 took out a policy of insurance against third-party risks in respect of a motorcar. The policy contained an exception of the “death or injury to any member of the assureds household” carried in or upon the car. A claim was made under the policy in respect of an accident to the sister of the insured:

Held upon the true construction of the policy, the sister was a member of the insureds household.

Notes

The decision in this case tests the extent of a common exception in motorcar policies, the word to be construed being the word “household.” The term “householder” is commonly used to denote an occupier of premises responsible for the rent and outgoings payable in respect of them, and it is suggested that only a householder can have a household. The term household is, however, here given a wider significance.

As to Construction of Policies, see Halsbury (Hailsham Edn), Vol 18, pp 426431, paras 613616; and for Cases, see Digest, Supp, Insurance, Nos 3217j3217t.

Special Case Stated

Special Case Stated to determine whether the sister of a man insured against certain risks in respect of his motorcar is a member of his household within the meaning of an exceptions clause in the policy. The facts are fully set out in the judgment.

B L A OMalley (for N A J Cohen, on war service) and J H C Goldie for the plaintiff.

C N Shawcross for the defendant.

14 November 1939. The following judgment was delivered.

BRANSON J. One Jack Kenneth English, who was then a lad of 17, took out a policy of insurance, which is called the British Standard Motorcar Policy, and is subscribed by Lloyds underwriters, to cover him for certain risks in respect of a motorcar. The policy was a valid and subsisting contract on 28 May 1938, when English had a very bad accident, the result of which was that a number of people were injured and his car became a total loss. The defendant, who was one of the underwriters, and is sued in a representative capacity, has settled all the claims arising out of the accident, or has indemnified English against them, excepting a claim which is made by Rita English, the sister of Jack English, the insured. The underwriters refuse to indemnify their insured against this claim, because they say that it comes within the exclusion in s 5 of the policy. S 5 of the policy provides that the underwriters shall pay all sums which the insured shall become legally liable to pay by way of compensation for death or bodily injury to any persons, including the passengers, occasioned by, or arising out of, the use of the car, but excluding:

… (b) death or injury to any member of the assureds household who is being carried in or upon the car.

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Those are the material words of the section, and it is said, on the one hand, that Miss English was a member of Jack Englishs household, and, on the other hand, that she was not, and that Jack English was an unmarried youth living at home with his father and having no household. Thus, the question is whether or not, upon the true construction of that clause in the policy, the sister was a member of the insureds household. I think, as has been said in argument, that the question largely turns upon the way in which the language used strikes one when one first reads the words. Approaching it from that point of view, I have come to the conclusion that the underwriters contention is correct. I think that the words “member of the assureds household” mean a member of the same household as that of which the insured is a member, just as one speaks of a member of a mans college, and a member of a mans club, and expressions of that type. The words are completely apt to cover that construction, and, indeed, to my mind, they seem more apt to cover that construction than to cover any other. One can see some reason for a limitation so framed, but it is very difficult to follow the reason for a limitation framed to cover a meaning such as that which the insured seeks to put upon the words. I think that one can see a reason for excluding from the benefits of a policy of this kind members of the insureds household in the sense of members of the family living in the same house, or members of the household, giving that word a meaning rather wider than that of “family,” because it must be envisaged by the underwriters that the members of a household in that sense would probably be very frequently at risk in the car, and would therefore be people who, if they were to be covered, would normally, one would think, require some addition to the premium to cover. There is another reason, which is not for one moment suggested to be operative in a case like the present, but it is that members of the same household may be expected perhaps to bring forward collusive claims if they are hurt in an accident, throwing the blame upon the insured in order that they may be able to recover, not from the insured, but from his insurers. That is a reasonable fear, as it seems to me. I am told that it operated with those who were settling this particular type of policy, and it gives an intelligible reason for the use of that language in the policy. I have come to the conclusion that the view taken by the underwriters is correct.

I think perhaps it is as well, as it has had its effect on my mind, to refer to the dictionary definitions of “household” which have been cited before me. Without reading them all, I may say that I have a list here of seven, and counsel for the defendant read me another one out of the Oxford English Dictionary, in all of which the word “household” is said to be used to signify “a family living together,” “those who dwell under the same roof and compose a family,” “inmates of a house collectively,” and so forth. In no sense does the dictionary confine the use of the word to people who are under the domestic governance of the pater familias, or of somebody in loco parentis. The

Page 347 of [1939] 4 All ER 345

result is that I answer the question put to me by saying that in my opinion Rita English was a member of the insureds household, and therefore is excluded by the particular clause in question from benefit under the policy.

Judgment for the defendant with costs.

Solicitors: Edward Betteley Smith & Stirling (for the plaintiff); William Charles Crocker (for the defendant).

W J Alderman Esq   Barrister.

G T Hodges & Sons v Hackbridge Park Residential Hotel Ltd

[1939] 4 All ER 347


Categories:        CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        13 NOVEMBER 1939        


Agency Commission Agent for sale of property Property purchased under compulsory powers Agent introducing official of authority exercising those powers.

The plaintiffs, who had been instructed to find a purchaser for the defendants property, were unsuccessful, and in 1934 the defendants terminated the agency. In 1936, the plaintiffs were approached by another firm of estate agents, who were in search of a site for military purposes. The plaintiffs communicated with the defendants and arranged an interview between them and the representative of the military authorities, but no agreement was reached, although an offer was made to purchase at a price higher than the amount of the compensation eventually paid. Later, the military authorities acquired the property under their compulsory powers at a price fixed by arbitration. The agents then claimed to be entitled to commission on the amount of the compensation awarded:

Held the contract between the plaintiffs and the defendants was that the plaintiffs would effect a voluntary sale of the property, and the compulsory acquisition which in fact did take place was not within the contract, and did not entitle the plaintiffs to commission.

Notes

Commission, in the case of an estate agent, can in general only be earned by the carrying out of the task with which the agent has been entrusted by his principal. There must be a contractual relationship as well as a causal one. Again, an agent who has contracted to find a purchaser does not fulfil that contract by the introduction of someone who acquires the property compulsorily. The judgments in the present case do not, perhaps, fully support this latter statement as a proposition of law, since the fact that the compensation awarded was much below the price mentioned in the contract for a voluntary sale affords another ground for saying that the agent had not carried out his mandate.

As to Scope of Agency, see Halsbury (Hailsham Edn), Vol 1, pp 259, 260, para 434; and for Cases, see Digest, Vol 1, pp 506508, Nos 17461752.

Cases referred to

Toulmin v Millar (1887) 12 App Cas 746; 1 Digest 505, 1739, 57 LJQB 301, 58 LT 96.

Thompson v British Berna Motor Lorries Ltd (1917) 33 TLR 187; 34 Digest 84, 623.

Keppel v Wheeler [1927] 1 KB 577; Digest Supp, 96 LJKB 433, 136 LT 203.

Page 348 of [1939] 4 All ER 347

Millar, Son & Co v Radford (1903) 19 TLR 575; 1 Digest 505, 1740.

Nightingale v Parsons [1914] 2 KB 621; 1 Digest 505, 1741, 83 LJKB 742, 110 LT 806.

Appeal

Appeal by the defendants from a judgment of Lewis J, dated 24 May 1939. The facts are fully set out in the judgment of Scott LJ.

B Mark Goodman for the appellants.

R A B Powell for the respondents.

Goodman: The original instructions to the plaintiffs to find a purchaser were cancelled. What happened subsequently did not amount to an employment of the plaintiffs. Further, the plaintiffs did not in fact effect the sale. A compulsory purchase at a price lower than that at which the defendants were willing to sell does not entitle the plaintiffs to any commission. [Counsel referred to Thompson v British Berna Motor Lorries Ltd, Keppel v Wheeler, Toulmin v Millar, Millar Son & Co v Radford and Nightingale v Parsons.]

Powell: No reliance is placed on the original instructions to find a purchaser, but the director of the defendant company accepted the plaintiffs services by negotiating with Colonel Cannon, and was unreasonable in not accepting the price he offered, which was higher than that which was eventually fixed by the arbitrator for the compulsory sale.

B Mark Goodman for the appellants.

R A B Powell for the respondents.

13 November 1939. The following judgments were delivered.

SCOTT LJ. In this case, Lewis J gave judgment in favour of the plaintiffs in an action for commission by a firm of house agents. In my view, the judge was wrong in the conclusion at which he arrived, because the sale of the property in respect of which the agent was claiming a commission was a compulsory sale, the government having requisitioned the property. The price was a sum of compensation awarded by the Official Arbitrator under the Acquisition of Land (Assessment of Compensation) Act 1919.

The origin, historically, of the relations between the plaintiffs and the managing director of the company against which the action was brought by the plaintiffs was that in 1933 the plaintiffs had been asked to find a purchaser at a minimum price of £8,750. That attempt to sell came to nothing, however, and in 1934, as is found by the judge, the relationship between the plaintiffs as commission agents for the purpose of selling and the defendants came to an end altogether. On 11 November 1936 another house agent, Whiteman, wrote to the plaintiffs as follows:

Referring to our conversation over the telephone, we have an inquiry from a Colonel Cannon for a site of about 4 acres for the purposes of erecting a hall with sports ground attached, and we shall be glad if you can let us have particulars of any sites available. … Our services are not being retained, and, in the event of business resulting, we would have to look to you for a moiety of your commission in the usual way.

That was written, of course, on the assumption that possibly Messrs Hodges might find a vendor who was willing to sell a suitable site and earn a commission from him on a sale to which he agreed. Then on

Page 349 of [1939] 4 All ER 347

18 November Messrs Hodges wrote to Whiteman giving the name of the premises in question, which were the subject-matter of the action, as the Hackbridge Park Hotel, with particulars.

After that, Mr Hodges went down to the site with Colonel Cannon and inspected the grounds, meeting the managing director of the private hotel company, the defendants in this action. In evidence Mr Hodges stated that, before this inspection, he had had a telephone conversation with the managing director of the defendant company, Mr Pendlebury, but the only thing said on the telephone was thus described by him:

I rang Mr. Pendlebury and told him I had an applicant. I asked him whether I could show him over the grounds and he said yes.

Three inspections took place altogether, and the price which Pendlebury was asking at that time was nearly twice what he had asked in 1933. It was £15,000. Colonel Cannon said that he was not going to buy at that price. He got Pendlebury to come down to £12,500, but he was not going to purchase at that price because he had learnt from Hodges that Pendleburys original figure had been £8,750.

Then the matter went off, and, so far as Hodges claim to bringing about a sale for Pendlebury is concerned, nothing further happened, because Colonel Cannon, who was really investigating directly or indirectly on behalf of the War Office, reported about the place to the War Office, with the result that the War Office requisitioned the whole estate under statutory powers, and an arbitration took place before the official arbitrator at which a price of between £7,000 and £8,000 was fixed by the arbitrator for the compulsory purchase.

On those facts, the plaintiffs have no evidence to show that they earned any commission, even if they have material upon which, had there been a voluntary sale, I think there would have been evidence of their being entitled to a commission. In the absence of a voluntary sale, however, there was no contractual relationship between what they did and the transfer of the estate under compulsion to the government as the purchaser. It makes the rule laid down by Lord Watson in Toulmin v Millar directly applicable. In that case, which was a claim for commission on the sale of an estate by the plaintiff, who was a London estate agent, Lord Watson says [58 LT, at p 96]:

It is impossible to affirm, in general terms, that A. is entitled to a commission if he can prove that he introduced to B. the person who afterwards purchased B.s estate and that his introduction became the cause of the sale. In order to found a legal claim for commission, there must not only be a causal, there must also be a contractual relation between the introduction and the ultimate transaction of sale.

It is just that gap which existed in the facts of this case. In a certain sense, Mr Hodges had been the causal connection between the defendant company and the War Office, the compulsory purchaser, but there was no contractual relationship between him and the defendant company which would entitle him to say: “According to the terms of my employment by you, I have found for you a ready and willing purchaser at a

Page 350 of [1939] 4 All ER 347

price which you have voluntarily accepted.” It is just those elements which are the elements necessary under the contract to entitle the plaintiff to his commission and which in this case were absent by reason of the facts.

The facts, quite shortly, were that Mr Pendlebury for the defendant company said: “I am not willing to sell for less than £12,500.” The next event in the transaction was, no doubt, that that figure was reported to the War Office, who said: “That is ridiculous. We are not going to pay that. We will give notice to treat under the compulsory powers in the Acquisition of Land Act.” That led to the fixing of the compensation. In my opinion, the judge erred in thinking that, because in effect Mr Hodges may have been the originating cause, he was therefore contractually entitled to commission. The appeal must be allowed with costs here and below.

CLAUSON LJ. I agree. Put at its highest, the relationship between the defendants and the plaintiffs was such that, if the plaintiffs had procured a purchaser for the defendants property at a price which the defendants were willing to accept, the defendants would have been bound to pay them a commission for selling it. What the plaintiffs in fact did was to start a train of causes which ultimately led to the defendants property being taken away from them against their will in exchange for compensation at a figure some £4,000 or more less than the price which the defendants were asking, and some £900 less than the lowest figure they had ever at any time contemplated accepting. How that can result in a liability upon the defendants to pay commission to the plaintiff I must confess I fail to understand.

GODDARD LJ. I agree. If you employ a house agent to undertake the sale of your property for you, the last thing you employ him to do is to find a person who requires you to sell your property to him at a price which you are not willing to accept. When Messrs Hodges were approached by Messrs Whiteman and were told that they had a client, a Colonel Cannon, who was looking for some land for the purpose of erecting a hall with a sports ground, and asked if they knew of any suitable property, they wrote back mentioning the defendants property, and, by arrangement with Messrs Whiteman, and with the defendants permission, Colonel Cannon was shown round the property by Messrs Hodges, and then Pendlebury mentioned a price which ultimately came down to £12,500, if Colonel Cannon had been willing to pay that price either out of his Territorial Associations funds, quite apart from the War Office, or out of his own pocket, I have no doubt that the plaintiffs would have been entitled to commission, because they would have introduced a person who was willing to pay the price asked by Pendlebury, and Pendlebury would have accepted that person as the purchaser, and thereby have taken advantage of their efforts.

Page 351 of [1939] 4 All ER 347

Unfortunately, however, that is not what happened at all. Colonel Cannon was not willing to pay the price asked, which was the only price at which Pendlebury was willing to sell at that time. Thereupon, the government intervened. In exercise of the statutory powers vested in the Secretary of State, they served a notice to treat on the defendant. Directly a notice to treat is served, however, although for certain purposes a notional contract is entered into between the undertakers and the person on whom the notice is served, there is no contract in the true sense at all, and any question of commission is removed from the scope of the transaction. From that moment, it becomes a question of the so-called purchaser being in a position to expropriate the owner, whether he likes it or not, on paying a price which used to be fixed by arbitration under the Lands Clauses Act and is now fixed under the Acquisition of Lands Act. That state of affairs, which ultimately came about, in one sense was due to the efforts of Hodges, but, as I have said, you do not employ a house agent to effect a transaction which is a disservice to you. You employ him to effect a transaction which is of service to you, and, in the circumstances, which ended in the defendants being expropriated from their premises and land and having to accept a price at which they were not willing to sell, it is impossible to say that the plaintiffs have earned a commission out of any employment which was conferred upon them by the defendants.

Appeal allowed with costs in both courts.

Solicitors: William Charles Crocker (for the appellants); Lees Smith Crab & Matthew (for the respondents).

C St J Nicholson Esq   Barrister.

Ayres v Moore

[1939] 4 All ER 351


Categories:        BANKING AND FINANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        HALLETT J        

Hearing Date(s):        14, 15, 16 NOVEMBER 1939        


Bills of Exchange Liability of parties Acceptor Acceptance under a mistake of fact Acceptance procured by fraud of third party Bill incomplete when accepted Bills of Exchange Act 1882 (c 61), s 29(i).

The plaintiff was the holder of bills of exchange which were incomplete when he received them, the name of the drawer not having been inserted. The defendant had accepted the bills upon a representation that the money was required to purchase patents in which both the defendant and one F were interested, but in fact the money was required in respect of personal loans to F. The defendant contended that he had given his acceptance under a mistake of fact, which, if true, would not have rendered him liable to accept the bills, but would merely have made it desirable that he should do so. He also contended that the acceptance was procured by fraud, and that the plaintiff was tainted with the fraud. The plaintiff alleged in reply that the defendant was precluded from setting up the fraud:

Held (i) the defendant could not rely on his mistake of fact, as, if it had been true, it would not have affected his liability to accept the bills, but merely have made it desirable that he should accept the bills.

Page 352 of [1939] 4 All ER 351

(ii) the plaintiff, not being a holder in due course, was affected by the fraud of the third party.

(iii) the plaintiff could not rely on the estoppel, as it was not pleaded.

Notes

The principles upon which money paid voluntarily under a mistake of fact can be recovered have been considered in a well-known line of decisions, and the present case is concerned with the application of those principles to the case of an acceptance of a bill of exchange under such a mistake of fact. In the result, it is held that the mistake must be one which, if true, would have affected the liability to accept the bill.

As to Liability of Acceptor of Bill of Exchange, see Halsbury (Hailsham Edn), Vol 2, pp 668670, paras 928932; and for Cases, see Digest, Vol 6, pp 299305, Nos 19962041.

Cases referred to

Aiken v Short (1856) 1 H & N 210; 35 Digest 148, 461, 25 LJEx 321, 27 LTOS 188.

Kelly v Solari (1841) 9 M & W 54; 35 Digest 151, 487, 11 LJEx 10.

Re Bodega Co Ltd [1904] 1 Ch 276; 35 Digest 147, 457, 73 LJCh 198, 89 LT 694.

Morgan v Ashcroft [1938] 1 KB 49, [1937] 3 All ER 92; Digest Supp, 106 LJKB 544, 157 LT 87.

Jones (R E) Ltd v Waring & Gillow Ltd [1926] AC 670; 35 Digest 149, 470, 95 LJKB 913, 135 LT 548.

Watson v Russell (1864) 5 B & S 968; 6 Digest 87, 643, 34 LJQB 93, 11 LT 641.

Action

Action on five bills of exchange brought by the payee and holder against the acceptor. The defendant was the acceptor of five bills of exchange each for £500 drawn by the plaintiff to his own order. The defendants acceptance had been procured by one Fisher, who had represented to the defendant that the bills were needed as security for money advanced by the plaintiff for the purchase of patents in which both the defendant and Fisher were interested. In fact, the money advanced by the plaintiff was in respect of personal loans to Fisher. The defendant discovered the true facts and accordingly dishonoured the bills on presentation. It was found that the plaintiff was not a holder in due course of the bills, both because he was an immediate party and because his name as drawer had not been inserted when he took the bills.

P L E Rawlins (for Maurice Lyell, on war service) for the plaintiff.

N L L Macaskie KC and B L A OMalley for the defendant.

16 November 1939. The following judgment was delivered.

HALLETT J. The grounds upon which the defendant has relied for avoiding his prima facie liability may be summarised as follows. In the first place, he says that there was no consideration entitling the plaintiff to sue upon these bills, and he has pointed to the fact that the consideration alleged in the further and better particulars of the reply was:

The said bills were taken in part satisfaction of the indebtedness of the said Fisher to the plaintiff and in consideration of the plaintiff forbearing to press the said Fisher for repayment of his said indebtedness during the currency of the said bills. The said terms were agreed orally between the said Fisher acting as agent of the defendant and on his own behalf and the plaintiff at some date in Mar.,

Page 353 of [1939] 4 All ER 351

1938, shortly before the delivery of the said bills to the plaintiff by the defendant which the plaintiff is unable to particularise.

I think it sufficiently appears from what I have already said that there is no evidence of any express agreement, oral or otherwise, between Fisher and the plaintiff that, in consideration of being given the bills, the plaintiff would forbear to press Fisher for repayment of his indebtedness to him during the currency of the bills, and the fact that there is no such evidence gives some colour, perhaps, to the first ground upon which the defendant relies. Nevertheless, in my judgment, there was a good and valid consideration operating in favour of the plaintiff for these bills. I do not think that the consideration which has prima facie to be presumed has been in any way displaced by anything which has been put before me.

Under the Bills of Exchange Act 1882, s 27, valuable consideration for a bill may be constituted by (a) any consideration sufficient to support a simple contract, or (b) an antecedent debt or liability. Here there is unquestionably, on the accepted facts, an antecedent debt or liability. There was an antecedent debt or liability to the plaintiff amounting to £3,780, and, although there may have been no express agreement to forbear, I think that, in the present state of the authorities, there can be no doubt that there was sufficient consideration for the giving of the bills. I think that the bills operated as a conditional payment of the past debt, and, therefore, without an express agreement, that point fails.

The next point on which the defendant relies is this. The defendant says that he gave these acceptances under a mistake of fact. I find, as a fact, that he did do so. He did give these acceptances, in my judgment, under a mistake of fact, and it has been contended on his behalf that, therefore, having now discovered the mistake, he can properly claim to be released from his liability on the acceptances. In my judgment, that ground also fails. The authorities to which I have been referred, and those which I have myself mentioned, are all, I think, with regard to this part of the matter, authorities where the claim was a claim for money had and received based upon an allegation that the money had been paid under a mistake of fact. As regards such a claim, it was decided by Bramwell B in Aiken v Short, at p 215:

In order to entitle a person to recover back money paid under a mistake of fact the mistake must be as to a fact which, if true, would make the person paying liable to pay the money; not where, if true, it would merely make it desirable that he should pay the money.

That statement seems to me to be in accord with what had been stated previously by Parke B in Kelly v Solari, at p 58:

I think that where money is paid to another under the influence of a mistake that is, upon the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue an action will lie to recover it back, and it is against conscience to retain it …

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The significant words there are “which would entitle the other to the money.”

Following upon Aiken v Short, there comes Re Bodega Co Ltd, where Farwell J at p 286, refers to what Bramwell B had said in Aiken v Short and treats it as being still good law.

However, the matter is really put beyond doubt by Morgan v Ashcroft, where the Court of Appeal, considering an appeal from a county court, reviewed these and other cases, and I read the judgments of Sir Wilfrid Greene MR and Scott LC as once more recognising the soundness of what was laid down in Aiken v Short, although Scott LJ does point out that the actual language used in Aiken v Short is not perhaps quite wide enough to cover all the cases where a mistake of fact will give rise to a right to recover the money paid as money had and received. Scott LJ, puts it in this way, at p 77 ([1937] 3 All ER, at p 105):

But I am in complete agreement with Sir Wilfrid Greene M.R., that there is a plain principle applicable to all those cases of payments in mistake of fact, and that is that the mistake must be in some aspect or another fundamental to the transaction. On the facts of this case there was no fundamental mistake.

I need not refer in detail to those judgments. There they are, to be read and profited from. Scott LJ, however, was considering a case where there was a mistake as to the nature of the transaction. In such a case, it may be that the language used in the earlier cases would not be entirely applicable, and yet the mistake would be of such a character as to entitle the person paying to recover the money back.

Another case to which I have been referred, and which has required my attention, is Jones (R E) Ltd v Waring & Gillow Ltd, but there again the claim was a claims to recover money paid, as it was said, under a mistake of fact, because in that case the cheque had been honoured, whereas in this case the bills of exchange, as I have said, had been dishonoured, and Lord Sumner, in particular, points out that there may be a distinction. He says, at p 695:

It is not necessary to decide whether Waring & Gillow Ltd., could have sued on the £5,000 cheque, as holders in due course, since the cheque was paid.

Then he goes on to discuss the question which he had to decide as to whether the money, having been paid without any obligation and under a mistake of fact, could be recovered back.

In the present case, in my judgment, the fact as to which the defendant was mistaken when giving his acceptances was not a fact affecting his liability within the meaning of the passages I have read from the earlier cases, such as Aiken v Short, nor a fact fundamental in the sense in which that word is used by Scott LJ, in Morgan v Ashcroft. As to liability, I do not think that there can really be any doubt, assuming that the plaintiff had advanced this money to Fisher for the purpose of acquiring patents or incurring expenses in connection with them even for the British Kanteb Co, which was the only one of all

Page 355 of [1939] 4 All ER 351

Fishers companies with which the defendant was connected. It is quite clear that the defendant was under no sort of liability, legal or even moral, to provide ways and means of repaying the plaintiffs loan. The distinction is put thus in Kerr on Fraud and Mistakes (6th Edn), p 636:

The mistake must be a mistake as to a fact which if true would make the person paying liable to pay the money, not where if true it would merely make it desirable that he should pay the money.

As regards the first half of that sentence, it may require some slight expansion. As regards the second half, it might make it desirable that the defendant should provide for the debt of Fisher to Ayres. The reason why the defendant was willing to do this, as I understand it, was that he himself had advanced considerable sums to Fisher for the purpose of acquiring the patent, and, unless the acquisition were completed, that money might very well be lost, and he therefore thought that it was in his own interest that he should assist Fisher to stave off the trouble with the plaintiff which might otherwise occur. That falls eminently within the second category of mistake, rather than within the first.

I have to observe very carefully that this is not an action by a person who has paid money to recover the money as having been paid under a mistake of fact. The person who would be the plaintiff in such an action is here the defendant resisting an action brought upon the contract to compel him to pay the money, andrather curiously, it seems to methe researches of counsel have not succeeded in bringing to my notice any case which provides me with an authority upon that aspect of the matter as distinct from authorities dealing with claims for money had and received.

I recognise that there are obvious distinctions between the two kinds of action, but, applying my mind to the matter as best I can, I think that, in a defence which seeks to repudiate liability upon a contract contained in a bill of exchange by reliance upon the allegation that such a contract was entered into under a mistake of fact, it is at least as necessary as in an action to recover back money paid as money had and received to show that the mistake was as to a fact affecting the liability, or, at any rate, fundamental in the sense in which Scott LJ, has, I think, used that term in Morgan v Ashcroft. I do not think that a repudiation of liability can be based upon an allegation of a mistake of the kind I find to have existed in the mind of the defendant in the present case.

The next question which arises is as to whether or not there is any other ground upon which the defendant can escape his prima facie liability. The third ground suggested is this. He says: “My acceptance was obtained by the fraud of Fisher, and that fact is sufficient to enable me to repudiate the contract into which I entered by means of that acceptance.” It is upon that aspect of the matter that the argu-

Page 356 of [1939] 4 All ER 351

ment has very largely turned. In my judgment, that contention is correct. There may be circumstances where the fact that a contract on a bill has been procured by fraud does not enure to the disadvantage of the holder of the bill. I need not examine or inquire into every possible set of circumstances. It is sufficient, I think, if I mention two. In the first place, it has been the policy of the legislature to protect by certain provisions the negotiability of certain classes of instrument, and, for business reasons which are quite obvious, protection has been given to those who have acquired under certain conditions negotiable instruments, although those negotiable instruments may, at some earlier stage in the transaction, have been tainted with fraud. Therefore, if a plaintiff in a case is what is called a holder in due course, his position may be very different. However, counsel for the plaintiff, after inquiry into this aspect of the matter, conceded that the plaintiff is not a holder in due course of these bills, and, in my view, that was a very proper concession. I need mention only two reasons why I say that. The first is that, as I have already pointed out, the bills, when taken by the plaintiff, were incomplete, inasmuch as there was no name of the drawer inserted therein, and the definition of a holder in due course which is to be found in the Bills of Exchange Act 1882, s 29(1), is as follows:

A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following condition. …

This bill was taken by the plaintiff when it was not complete. The second reason why I think counsel for the plaintiff was correct in making that concession was that, after a great deal of discussion and doubt, it has now been finally decided, it seems to me, that the original payee of a billin this case, the drawer, namely, the plaintiffcannot be a holder in due course. That appears, as it seems to me, from the decision in Jones (R E) Ltd v Waring & Gillow Ltd. There was some difference of opinion about it before, but I think that that case finally disposes of that point. The plaintiff, therefore, is not protected by being a holder in due course. Another set of circumstances which may protect the holder of a bill is that existing where there has been something in the conduct of the defendant which in point of law precludes the defendant from relying upon the defect which he alleges. In other words, there may be conduct on the part of the defendant which estops him from setting up a defenceat any rate, as against the plaintiffwhich would otherwise succeed.

If I may come to the details in Jones (R E) Ltd v Waring & Gillow Ltd, in that case the majority of their Lordshipsbecause the minority, Viscount Cave LC and Lord Atkinson differed from the majorityexpress their opinion in favour of the defendants on the ground that the plaintiff was estopped by reason of his conduct from recovering the money. In this case, I can see no ground for alleging that the defendant is estopped from setting up the defence based upon fraudulent representation which he desires to set up. I do not think

Page 357 of [1939] 4 All ER 351

I need examine the facts in detail, or compare them in detail with the facts in Jones (R E) Ltd v Waring & Gillow Ltd, but this I ought to say plainly, because it may be of importance. It has been sought by counsel for the defendant to suggest that Fisher should be regarded as the agent of the plaintiff. In my judgment, I think that that is quite wrong. I do not think he was his agent in fact or in law. I do not think that, if a creditor wants his debtor to produce the money owing to him, and the debtor goes to some third person and makes statements to him with a view to inducing him to provide the required security, it is right, either in law or as a matter of common sense, to say that the debtor is the agent of the creditor in making those statements to the third person. I think that this is quite a different case from the kind of case which was shown to exist, for instance, in Watson v Russell, where Keys was the agent to make the payment in question.

On the other side, it has been suggested by counsel for the plaintiff with a good deal of vigour that Fisher was the agent of the defendant, and of the two propositions I think that that one is plainly the more reasonable, because Fisher was to this extent entrusted by the defendant with the conduct of the matter, on the defendants story but not on the plaintiffs story, and the defendant did give the bills to Fisher to hand over to Ayres. Again, however, I do not think that in any real sense the defendant made Fisher his agent.

There are further difficulties in the way of the plaintiff. The plaintiff sought to rely on estoppel. If one assumes that the plaintiff desired to say that the defendant was estopped from relying upon this defence by his conduct, it was clearly necessary for the plaintiff to plead that estoppel with particularity. The plaintiff should have set out in his pleadings what was the actual conduct of the defendant which he relied on as constituting the representations made by the defendant to the plaintiff, and he should have gone on to plead what were the acts to the detriment of the plaintiff which the plaintiff did in reliance on the defendants representations.

At the invitation of counsel for the plaintiff, I re-read the amended reply, which was the first pleading delivered by the plaintiff, and I also re-read two sets of particulars delivered by the plaintiff, one on 16 March 1939 and the other on 21 July 1939 and, having re-read every word of those three documents, I cannot find any pleading which can be regarded as covering satisfactorily, or as covering at all, an allegation of estoppel. Secondly, if one assumes that an estoppel had been pleaded, it would then have been necessary for evidence to be given in support of that plea. It would have been necessary, for instance, for the plaintiff to establish by some evidence, not merely that the representations had been made to him by the conduct of the defendant, but also that he had relied upon those representations, and relied upon them to his detriment. However, as I have already pointed out, no such evidence has been forthcoming. I have had no evidence from the plaintiff, but it is only

Page 358 of [1939] 4 All ER 351

fair to counsel for the plaintiff to say that I do not think that, if the plaintiff had gone into the box, he would have been able to establish anything amounting to estoppel. It is sufficient to say that no estoppel has been pleaded, and, therefore, so far as estoppel is concerned, it seems to me that the defendant is not precluded from relying upon this defence.

There remains, I think, only one point for consideration. Again it is a point not entirely free from difficulty. It is strenuously contended that the fact that the acceptance was procured by the fraud of a third party is not sufficient to entitle the defendant to repudiate his obligation as against the plaintiff. The proposition of counsel for the plaintiff, if I correctly understood it, is that it must be shown that the plaintiff was actually or notionally guilty of complicity in the fraud before that fraud can operate against the plaintiff. The principal may be responsible for the fraud of his agent, although free from all moral complicity in what was said. If that were the position, if it were necessary for an immediate party to be personally tainted by the fraud in order that he might be deprived of his rights under the bill, then a great many of the provisions which the legislature have thought fit to enact, and a great deal of discussion and argument in the cases, would be superfluous.

In my view, it is precisely because a holder of a bill may be affected, although personally innocent of fraud, that there are those provisions for protecting a holder in due course. I do not think that the immediate party is likewise protected, and, in my judgment, although no very clear authority has been cited to me, he is not. I therefore come to the conclusion that, on the three grounds of defence raised on behalf of the defendant, two fail but one succeeds. I think that the defence of no consideration fails. I think that the defence that this obligation can be repudiated because it was entered into under a mistake of fact also fails, in so far as it is a separate ground from the ground based on fraud, but I think that, the acceptance having been obtained by fraudulent representation, and the obligation having been repudiated as soon as might be after the fraud was discovered, the defendant is entitled to judgment in this action, which I give him accordingly, with costs.

Judgment for the defendant with costs.

Solicitors: Wilberforce Allen & Bryant, agents for F S Collinge & Co, Colchester (for the plaintiff); Gibson & Weldon (for the defendant).

W J Alderman Esq   Barrister.

Goddard & Smith v Frew

[1939] 4 All ER 358


Categories:        INSURANCE        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        20 NOVEMBER 1939        


Insurance Indemnity policy “All losses” Loss due to embezzlement by employee.

The plaintiffs insured themselves with the defendant and other underwriters against “all losses, costs, charges and demands whatsoever by reason of any act, neglect, omission, misstatement or error

Page 359 of [1939] 4 All ER 358

whenever or wherever the same was or may have been done, committed or omitted or made or written or alleged to have been done, committed or omitted or made or written on the part of the firm or any person employed by the firm in or about the conduct of any business conducted by or on behalf of the firm in their professional capacity as auctioneers, house and estate agents.” An agent of the plaintiffs collected the rents of certain property belonging to a third party and embezzled them. The plaintiffs paid the amount of the defalcations and then claimed under the policy for that amount:

Held upon its proper construction, the policy was an indemnity policy, and not a fidelity policy, and a loss due to embezzlement by an employee was, therefore, not covered by the policy.

Notes

In this case, there was considerable argument upon the point whether the plaintiffs could insure themselves against the crime of a servant, various authorities being cited to show that this was against public policy. The Court of Appeal, however, have not found it necessary to consider this point, and base their decision upon the ground that, if the loss in question was to be covered, the policy must be, upon its proper construction, a fidelity policy. The court is clear that the policy was not, upon its proper construction, a fidelity policy.

As to Fidelity Insurance, see Halsbury (Hailsham Edn), Vol 18, pp 507, 508, paras 787, 788; and for Cases, see Digest, Vol 29, pp 409413, Nos 32183243.

Cases referred to

Haseldine v Hosken [1933] 1 KB 822; Digest Supp, 192 LJKB 441, 148 LT 510.

Lloyd v Grace, Smith & Co [1912] AC 716; 34 Digest 129, 991, 81 LJKB 1140, 107 LT 531, revsg [1911] 2 KB 489.

Appeal

Appeal by the plaintiffs from an order of His Honour C M Pitman KC, official referee, dated 17 May 1939. The facts are fully set out in the judgment of Scott LJ.

John W Morris KC and Colin H Pearson for the appellants.

Philip Vos KC and Frank Soskice for the respondent.

20 November 1939. The following judgments were delivered.

SCOTT LJ. This is a claim against an underwriter defending in a representative capacity on a Lloyds policy of insurance, dated 9 April 1937. It is an indemnity policy, and not a fidelity policy, and it is to be noted here that from the outset the policy was against losses caused to the assured by demands or actions made or brought against them when the circumstances in which the action was brought were such that the cause of action arose from various acts or omissions for which the firm themselves had been responsible, either personally or through a person employed by them acting in and about their business as estate agents.

Before looking at the terms of the policy, I may say that the facts were these. The plaintiff firm of Goddard & Smith had agreed as estate agents to collect the rents of properties at Mortlake on behalf of the Covent Garden Properties Co Ltd, and to pay the rents, as soon as they were collected, into the local branch of a London bank at Mortlake, and that the bank should at once cause the amounts received to the credit of that particular account to be transferred to an account at the head office of the bank in London kept by Goddard & Smith under

Page 360 of [1939] 4 All ER 358

the title of Account No 58 into which the rents collected by them for the Covent Garden Properties Co Ltd, and no other moneys at all were to be paid. It was an account which no doubt was a trust account for Covent Garden Properties Co Ltd. All went well for a time until one Reynolds, who had been employed by Messrs Goddard & Smith to live down at Mortlake for the express purpose of collecting these rents week by week and paying them into the local bank, instead of paying in the whole amount which he received in the course of some time, which does not appear, embezzled £2,700 odd. When this fact became known to the Covent Garden Properties Co Ltd, through their not receiving notice of the due payment of the rents into their head account in London, they made demand upon Messrs Goddard & Smith to pay over the amount which had been received by Reynolds, the rent collector of Goddard & Smith, and not accounted fornamely, the £2,700. Those, I think, are all the facts, except that, on looking into the matter, Messrs Goddard & Smith very properly at once paid out of their own pockets the amount of the defalcations to the landlords.

On 9 April 1937 they had taken out a policy at Lloyds for a year, which covered the time in question, known as an indemnity policy, of which there is only a small part that I think it necessary to read. There is a recital in the policy to this effect:

Whereas Messrs. Goddard & Smith have paid the amount of the premium to us the undersigned to insure them from all losses, costs, charges and expenses arising from all actions, proceedings, claims and demands whatsoever … by reason of any act, neglect, omission, misstatement or error whenever or wherever the same was or may have been done, committed or omitted or made or written or alleged to have been done, committed or omitted or made or written on the part of the firm … or any person … employed by the firm … in or about the conduct of any business conducted by or on behalf of the firm … in their professional capacity as auctioneers, house and estate agents.

I have omitted irrelevant words. That is the recital, and then the operative part continues as follows:

Now know ye that we, the underwriters, do hereby bind ourselves … to pay to the firm … all such losses, costs, charges and expenses arising from any cause as aforesaid, not exceeding the sum of £50,000.

That is the whole of the policy that is material.

The question in this case is, therefore, whether or not the facts that I have narrated fall within the words

… losses … arising from … demands … by reason of any act … omission … done, committed or omitted … on the part of the firm [or an employee of the kind specified].

It was argued below before the official referee, C M Pitman KC, that they were entitled to recover in an action brought which was referred to him for trial. He decided against the plaintiffs in favour of the underwriters, partly on the ground of public policy, that it was not right that the plaintiff should have the benefit in any way, directly or indirectly, of a criminal act of embezzlement by their servant. He quoted various cases about it, but I do not think it is necessary to consider his judg-

Page 361 of [1939] 4 All ER 358

ment in detail, because, in our view, the question of public policy does not arise at all. We think that the case depends entirely on the interpretation of the words of the policy itself, and I personally am satisfied that this policy does not cover the events I have narrated. The real cause of the loss of the firm was embezzlement by their servant. That was the true proximate cause of the loss, and, in my view, as this is not a fidelity policy, but only an indemnity policy against certain carefully described liabilities, the loss cannot be brought within this policy. If the landlords, the Covent Garden Properties Co Ltd, instead of having their demand met at once, had had to take legal proceedings, I am sure that, if counsel for the appellants had drawn the statement of claim or writ, he would have made it one for money had and received, and, on the facts of the case, I think that there would have been no answer. It would have been quite immaterial to the statement of claim to put in allegations about a fraud committed by the employee Reynolds. It would have been quite sufficient that the firm of Goddard & Smith had received the money through their employee and had not accounted for it, and judgment against them would necessarily follow on that, and on nothing else. Had they put up the defence that the money had been embezzled by Reynolds, that would have been demurrable, as wholly irrelevant to the cause of action, which would have depended solely on two factsnamely, (i) receipt of the money, and (ii) failure to hand it over. That being so, I do not think it possible to say that the insured have proved that they have suffered a loss, and that that loss arises from a demand brought against them, which demand, or which loss, has occurred by reason of the acts of their employee Reynolds, and, unless that can be established in this action, there is no claim on the policy. In my view, the words in this policy which I have read do not cover the facts here, for which a fidelity guarantee was needed, and for which an indemnity policy in these terms was no protection. For those reasons, I think that the appeal of the plaintiffs must be dismissed.

CLAUSON LJ. I agree.

GODDARD LJ. I agree, and I would like to add one word, because, although this case has not been fully argued, and we have not found it necessary to call on the respondent, I want to guard against its being supposed that I agree with the grounds upon which, as I understand it, this case was decided below. To my mind, the case is a very simple one, and depends entirely upon the question whether this is a fidelity policy or a policy to insure against negligence, and possibly other things. To my mind, it is perfectly clear that it is a policy of the second class. It does not insure the employer against losses which he may sustain by reason of the default of his servant. It insures him against losses which may be caused to him by reason of actions, proceedings, claims and demands brought by reason either of his own acts and defaults or of

Page 362 of [1939] 4 All ER 358

those of his servants. In this case, the demand which was made was simply because Messrs Goddard & Smith, having collected rents and given receipts in the ordinary way, so that the tenants would not have to pay them again, had moneys in their hands, or must be taken to have had moneys in their hands, for which they were liable to account, and for which they did not account, and it was no defence to say to the landlords, their principals: “Our servant has embezzled the money.” That is no defence at all. The demand was a demand to have paid over the money which had been collected, and the demand of the landlords did not arise by reason of any act, neglect or omission on the part of a servant at all. It was simply because they had not paid over the money which was in their hands.

The official referee dealt with this case on different lines, and he seems to have based his decision mainly on Haseldine v Hosken, because he said this:

If a person cannot inure himself against a claim by a third party in respect of a crime committed by himself in ignorance that it was criminal, nor can he, in my opinion, insure against a claim by a third party in respect of a crime committed by his agent carrying on his business on his behalf and acting within the scope of his authority.

Then he says that it is difficult to say that Reynolds, “in embezzling the rents, was doing an act within the scope of his authority.” With great respect, I cannot agree with that, because that would be to ignore entirely Lloyd v Grace Smith & Co and a great many other cases. He went on to say that the plaintiffs were in a dilemma:

If the person employed by them caused the loss by a criminal act which was entirely outside the scope of his authority, and outside their business of a house or land agent, then such loss would be outside the risk covered by the policy …

So far, I agree, but, of course, the act here was an act committed within the scope of his authority. He continues as follows:

… and, if the act were within the scope of his authority, then the true state of affairs is as originally pleaded, before the amendment of the statement of claim. That is to say, “the plaintiffs by the said Reynolds acting as aforesaid misappropriated the said sum.” If they so acted, they, just as the “innocent” plaintiff in Haseldine v. Hosken was, are precluded from recovering under this policy the sum so misappropriated by them through their agent.

If the official referee means to hold that one cannot insure oneself against consequences which may happen to one because ones servant embezzles money, I very respectfully disagree. I think that the official referee went much too far in laying down those propositions. Haseldine v Hosken follows a well-known line of cases which says that one cannot insure oneself against the commission of a crime by oneself, but, if the law be as stated by the official referee, it would follow in most cases that fidelity insurance would be quite illusory, and that cannot be right. If I insure myself against the defalcations of my servant, surely I am entitled to recover under the policy if he embezzles money for which I have to account to a principal. I should have thought that that was clear, and it is what so often happens in the case of a fidelity policy.

Page 363 of [1939] 4 All ER 358

I wanted to add what I have addedin my opinion, the case itself is a perfectly clear one on the ground which has been stated by Scott LJonly lest it should be thought that I was agreeing with all that the official referee had said. As at present advised, I emphatically do not.

Appeal dismissed with costs.

Solicitors: Lee Bolton & Lee (for the appellants); William Charles Crocker (for the respondent).

C St J Nicholson Esq   Barrister.

Schaffer v Ross

[1939] 4 All ER 363


Categories:        LANDLORD AND TENANT; Leases        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        21 NOVEMBER 1939        


Landlord and Tenant Rent restriction “A house or part of a house let” House not let before 1928 No registration of house as decontrolled Increase of Rent and Mortgage Interest (Restrictions) Act 1920 (c 17), s 12(2) Rent and Mortgage Interest Restrictions Act 1923 (c 32), s 2(1) Increase of Rent and Mortgage Interest (Restrictions) Act 1938 (c 26), s 4.

The plaintiff was owner of a house which was in the occupation of the owners from 1904 until 1928, when it was let for the first time since the passing of the Rent Restrictions Acts. In 1937, it was let to the defendant, and this tenancy was determined by notice to quit expiring on 6 May 1939. The rateable value was at all material times such as to bring the premises within the Acts. No application for registration under the Increase of Rent and Mortgage Interest (Restrictions) Act 1938, s 4(1), as a decontrolled house, had been made within the prescribed time. The defendant contended that the house was controlled:

Held (i) s 12(2) of the Act of 1920 should be read as if the word “let” governed the whole of a house as well as part of it.

(ii) there was nothing in the Act of 1920 to limit the application of s 12(2) to a house which was let as a separate dwelling at the time of the passing of the Act, and accordingly it would apply, apart from the provisions of the 1923 Act, to a house first let in 1928.

(iii) the word “landlord” in s 2(1) of the Act of 1923 does not necessarily imply the existence of a tenancy. The plaintiff therefore brought himself within s 2(1) of the Act of 1923 as being a landlord to whom the principal Act applied.

(iv) the plaintiff having, however, failed to register under, or bring himself within, the saving clauses of the Act of 1938, the house was a controlled house.

Notes

The substantial point argued here is whether the word “let” in s 12(2) of the Act of 1920 restricted the operation of the Act to houses then in fact let to tenants or whether houses not then in fact let but which are subsequently let are also subject to the Act. It is decided that the latter construction is the correct one. There is the further important question whether a house not let at the time of the passing of the decontrolling Act in 1923 is decontrolled by that Act, but this is held to have been implicitly, if not expressly, decided in Lloyd v Cook. Such a house is decontrolled by the Act of 1923 and is, therefore, subject to the later provisions regarding registration.

As to Properties to which the Acts apply, see Halsbury (Hailsham Edn), Vol 20, pp 312314, Nos 368, 369; and for Cases, see Digest, Vol 31, pp 557, 558, Nos 70427053.

Page 364 of [1939] 4 All ER 363

Cases referred to

Brooks v Brimecome [1937] 2 KB 675, [1937] 2 All ER 637; Digest Supp, 157 LT 417.

Lloyd v Cook, Goudge v Broughton, Simson v Miatt, Bartram v Brown, Barker v Hutson [1929] 1 KB 103; Digest Supp, 97 LJKB 657, 139 LT 452.

Appeal

Appeal by the defendant from an order of His Honour Judge Tudor Rees given at the Whitechapel County Court and dated 31 July 1939. The facts are fully set out in the judgment of Slesser LJ.

S N Bernstein for the appellant.

D Weitzman for the respondent.

21 November 1939. The following judgments were delivered.

SLESSER LJ. In this case, the plaintiff, Schaffer, claims possession of a dwelling-house, No 19, Head Street, Commercial Road, E1, which is held from him by the defendant, Mrs Ross, on a weekly tenancy of £1 8s per week. This tenancy was terminated by notice to quit in writing given by the plaintiff to the defendant on 27 April 1939, expiring on 6 May 1939. There is a claim of £8 8s arrears of rent from 6 May, with mesne profits at the rate of £1 8s per week. The defendant admits that she is in possession as a weekly tenant of the premises, but she denies that the plaintiff is entitled to possession of the premises. She says that the premises are controlled and subject to the Rent and Mortgage Interest (Restrictions) Acts. Then there is a counterclaim by her, because she says that, on the basis that the premises are so controlled and subject to the Acts, she has paid more rent than she can be required to pay in accordance with those Acts. She counter-claims in all for £31 8s 4d and claims to set off the arrears of her rent in diminution of her claim as therein set out. The judge in his judgment, as I read it, has come to the conclusion that this dwelling-house is not controlled at all. In the circumstances of the case, if that view be correct, as he says, the application of problems as to standard rent and the like does not arise.

The first question which arises for consideration in this court is whether the judge was right in coming to the conclusion that this house was not within the ambit of the Rent and Mortgage Interest (Restrictions) Acts at all. The material facts of the case are these. The premises were purchased in 1904 by one Cooperstein, who remained in them as occupier until his death in 1924. The plaintiff then bought the premises and occupied them until some time in 1928, and, as the judge finds, the premises were, therefore, occupied by the owners from 1904 until 1928, when they were let for the first time. They were let to the defendant in 1937. The rateable value on 6 April 1931 and apparently at all material times, was such as to bring the premises within the quantitative definition of the Rent and Mortgage Interest (Restrictions) Act, if they were otherwise within that Act for other reasons. The principal Act which deals with this matter is the Increase of Rent and Mortgage Interest (Restrictions) Act 1920. It is a consolidation of the earlier

Page 365 of [1939] 4 All ER 363

Acts, which are in substance repealed. That Act contains in s 12(2) a definition of a dwelling-house within the meaning of the Act:

This Act shall apply to a house or a part of a house let as a separate dwelling where either the annual amount of the standard rent or the rateable value does not exceed (a) in the metropolitan police district, including therein the City of London £105; (b) in Scotland, £90; and (c) elsewhere, £78; and every such house or part of a house shall be deemed to be a dwelling-house to which this Act applies …

By a curious coincidence, the word “dwelling-house” is stated in s 16(1) of the Act of 1933 to have the same meaning as in the principal Acts, and then follows a meaning which is different from that which is contained in the principal Acts:

… that is to say, a house let as a separate dwelling or a part of a house being a part so let.

A doubt was expressed in Brooks v Brimecome as to the effect of that definition in the 1933 Act on the earlier definition which I have cited in s 12(2) of the Act of 1920, but, if the matter has now to be considered, for myself, I am of the opinion that, having regard to that subsequent definition, and having regard, indeed, to the whole mischief to which the Acts are directed, s 12(2) of the Act of 1920 should be read as if the word “let” governed the whole house as well as part of it. In these circumstances, it would appear that in 1920 the Act would have applied to this house if it had been let. As we are told by the judge, in fact it was not let until 1928. If the matter had stood there, the proper view might well have been that, by reason of the fact that this house was not let until 1928, the Act of 1920 would not apply. There is an Act dealing with this matter in 1923, with which I shall deal hereafter, but for the moment I wish to eliminate the consideration of that Act and deal with this matter as if there were nothing in the Act of 1923 which affected the position and to ask myself whether or not, if a house to which the Act applies so far as the rateable value in 1920 is concerned, was first let in 1928 at a rent which would bring it within the Act of 1920, the Act of 1920 would apply to it. In my opinion, it would. I can find nothing in the Act of 1920 to limit the application of s 12(2) to a house which was let as a separate dwelling at the time of the passing of the Actnamely, on 2 July 1920. There are no words of limitation to say that the subsection shall not apply to a house which subsequently qualifies, and, when one contrasts the language of s 12(2) of the Act of 1920 with that, for example, of s 2(1) of the Act of 1923, or of s 2 of the Act of 1933, ones attention is immediately drawn to the fact that there is no limitation in that subsection of the Act of 1920 as there is in those provisions, as to what shall happen at the time of the passing of the Act. S 12(2) of the Act of 1920 is quite silent as to that matter, and I can see no ground for the limitation of the application of s 12(2) to any house which at any time, so long as that Act was in force and not amended, would fall within its provisions. Therefore, if there had been no further legislation after 1920, I should have come to the conclusion that in 1928,

Page 366 of [1939] 4 All ER 363

by reason of the fact that this house was then let, s 12(2) would apply the Act of 1920 to the house, and that thereafter it would be a house to which the Act of 1920 applied.

The next matter which has to be considered is the effect of s 2(1) of the Act of 1923. Of course, at that time, the house had not yet been let. That subsection provides as follows:

Where the landlord of a dwelling-house to which the principal Act applies is in possession of the whole of the dwelling-house at the passing of this Act, or comes into possession of the whole of the dwelling-house at any time after the passing of this Act, then from and after the passing of this Act, or from and after the date when the landlord subsequently comes into possession, as the case may be, the principal Act shall cease to apply to the dwelling-house …

In so far as the principal Act contemplates an Act applying to a dwelling-house which is let, it is clear that those words, read in their ordinary strict sense, give to the word “landlord” the meaning of one who is legally related to a tenant. If the “landlord” were in possession of the whole of the dwelling-house, normally he would not have a tenant, and the result would be that the subsection really would be entirely in-operative. This problem, however, has been very fully considered by this court in a decision which has never since been questioned in its totality, although certain observations of the judges have been commented uponnamely, Lloyd v Cook. The effect of that decision, compendiously stated, is that the word “landlord” in s 2(1) of the Act of 1923 does not necessarily imply the existence of a tenant, but that a freeholder who has never let a dwelling-house to a tenant may be a landlord within the meaning of the section. It is thus put by Scrutton LJ in the course of his judgment, at p 120:

The word “landlord” must be used either in the looser meaning of “owner,” or in the still looser meaning of a person who at a later stage is going to appear as a landlord contesting with a tenant the terms of his tenancy.

The other Lords Justices speak to the like effect. If one applies that test to the present case, this landlord in 1923 was a person who thereafternamely, in 1928was contesting, and is now contesting in this court, with a tenant the terms of the tenancy, and, therefore, is a landlord within the meaning of s 2(1) of the Act of 1923. It follows, therefore, that he was a landlord of a dwelling-house to which the principal Act applied, and the provision is that it “shall cease to apply to the dwelling-house.”

Were matters to rest there, the landlord would be triumphant, but, unfortunately for him, the legislature has thought fit once more to interfere in this difficult matter. By the Increase of Rent and Mortgage Interest (Restrictions) Act 1938, s 4(1), it is provided as follows:

If the landlord of any dwelling-house let as a separate dwelling immediately before the passing of this Act, being a dwelling-house of which the rateable value on the appointed day did not exceed the respective amount mentioned in sect. 2 of this Act, [the amount in the metropolitan police district is £35 rateable value on the appointed day, and the rateable value here did not exceed that amount] claiming that by virtue of the provisions of sect. 2 of the Act of 1923 the principal Acts had ceased to apply to the dwelling-house before the passing of this Act, he shall within 3 months after the passing of this Act make to the council of the county borough

Page 367 of [1939] 4 All ER 363

or county district in which the dwelling-house is situated application in the prescribed form for the registration of the dwelling-house …

In point of fact, he has made no such application, and there is a proviso in s 4(2) of the same Act in the following terms:

… if, on application to the county court of the district in which the house is situated, the court not later than one year from the passing of this Act [May 26, 1938] certifies that there was reasonable excuse for the failure to make application for the registration of the dwelling-house within the time aforesaid and application for registration is made within 7 days after the certificate has been granted, then, if the principal Acts had ceased to apply to the dwelling-house before the passing of this Act, sect. 2 of the Act of 1923 shall, notwithstanding anything in the last preceding section, apply to the dwelling-house as if the references in the said sect. 2 to the passing of that Act were references to the date on which the application for registration is made.

If this landlord could have brought himself within that proviso or within s 4, he being, as I have held, within s 2(1) of the Act of 1923, he might conceivably still have availed himself of that section, and have satisfied the county court judge that his house was not a controlled house. Counsel for the respondent wishes, notwithstanding the effluxion of time, to have an opportunity of arguing that he falls within the proviso to s 4(2) of the Act of 1938, which I have just read, and, in so far as I am of opinion that there must be a new trial in this case to determine, among other things, if this house is controlled, whether or not the standard rent has been paid, and what the effect of excess payment may be upon the counterclaim, I think that that point should be reserved to him also. As the case now stands, however, I am of opinion that he brings himself within s 2(1) of the 1923 Act as being a landlord to whom the principal Act applies, and has failed to bring himself within the saving clauses of the Act of 1938, and that the judge was wrong in coming to the conclusion that, under the principal Act of 1920, this house was not a controlled house. It follows, therefore, the house being a controlled house, and s 2(1) of the Act of 1923 applying to it, that the landlord may be able to say that the principal Act had ceased to apply to the dwelling-house in 1923 if he can avoid the consequences of the provisions of the Act of 1938, to which I have referred. Whether or not he can do so is a matter still to be determined. I am of opinion that there must be a new trial in this case, that this appeal succeeds, and that it should be allowed with costs. We will leave the costs of the first hearing to the discretion of the judge when he rehears this case, but the costs of this appeal must be the appellants

LUXMOORE LJ. I agree.

ATKINSON J. I agree. I add only one sentence, and that is that the interpretation which we have put upon s 12(2) of the Act of 1920 is implicit, I think, in the decision of Goudge v Broughton.

Appeal allowed with costs. New trial ordered.

Solicitors: S Seifert (for the appellant); T V Edwards (for the respondent).

Derek H Kitchin Esq   Barrister.


Mackay and Others v Forbes

[1939] 4 All ER 368


Categories:        COMMONWEALTH; Commonwealth countries: ADMINISTRATION OF JUSTICE; Courts        

Court:        PRIVY COUNCIL        

Lord(s):        LORD THANKERTON, SIR GEORGE RANKIN AND SIR PHILIP MACDONELL        

Hearing Date(s):        24, 26 OCTOBER, 10 NOVEMBER 1939        


Privy Council India Jurisdiction Appeals from High Court of India Case involving interpretation of Government of India Act 1935, or order made thereunder Certificate that case involves such interpretation Question not considered by High Court Government in India Act 1935 (c 42), ss 205, 293 Government of India (Adaptation of Indian Laws) Order 1937 (SR & O 1937, No 269).

The respondent in this appeal took the preliminary point that the case involved a substantial question of law as to the interpretation of an order in councilnamely, the Government of India (Adaptation of Indian Laws) Order in Council 1937made under the Government of India Act 1935, and that accordingly the High Court in India should have certified it as such, and that the appeal should have been to the Federal Court in India, and not to the Privy Council. By the Government of India Act 1935, s 205, the High Court should certify in each case whether any such question of interpretation arises, but in this case there was no record that the matter was ever considered by the High Court Bench. In fact, the High Court in its original jurisdiction had disposed of the case without reference to that order in council, but on appeal much of the original judgment was reversed on the authority of the order:

Held in the absence of any record that the certificate was withheld, the Privy Council had no jurisdiction to hear the appeal, but, if thereafter the High Court made an order withholding the certificate, the appeal would be restored.

Notes

The High Court in India in a matter involving the construction of the Government of India Act 1935, or any order made thereunder, has imposed upon it a duty to grant or withhold a certificate that such construction came in question. The court has to fulfil this duty of its own motion, whether or not the parties bring the question to its notice. Before an appeal can be brought in any such case, the matter must be considered by the High Court and a certificate granted or withheld.

As to Appeals from India, see Halsbury (Hailsham Edn), Vol 11, pp 221, 222, paras 425428; and for Cases, see Digest, Vol 17, pp 499501, Nos 630653.

Appeal

Appeal from a judgment and order of the High Court of Judicature at Fort William in Bengal, in its civil appellate jurisdiction, dated 11 April 1938, allowing in part the appeal of the respondent from the judgment and order of Panckridge J, dated 22 July 1937. The facts are fully set out in the judgment of their Lordships delivered by Lord Thankerton.

L P E Pugh KC and W W K Page for the appellants.

J Nissim for the respondent.

10 November 1939. The following judgment was delivered.

LORD THANKERTON. The respondent in this case raises a preliminary point as to the jurisdiction of this Board to entertain this appeal in view of the provisions of the Government of India Act 1935, s 205, which provides as follows:

(1) An appeal shall lie to the Federal Court from any judgment, decree or final order of a High Court in British India, if the High Court certifies that the case involves a substantial question of law as to the interpretation of this Act or any

Page 369 of [1939] 4 All ER 368

order in council made thereunder, and it shall be the duty of every High Court in British India to consider in every case whether or not any such question is involved and of its own motion to give or to withhold a certificate accordingly.

(2) Where such a certificate is given, any party in the case may appeal to the Federal Court on the ground that any such question as aforesaid has been wrongly decided and on any ground on which that party could have appealed without special leave to His Majesty in Council if no such certificate had been given, and, with the leave of the Federal Court, on any other ground, and no direct appeal shall lie to His Majesty in Council, either with or without special leave.

This section imposes on the High Court the duty of considering and determining in every case, as part of its judgment, decree or final order, the giving or withholding of the certificate. On such determination the jurisdiction to entertain an appeal from such judgment, decree or final order depends, and, manifestly, such determination, whether it involves the granting or withholding of a certificate, should be recorded, not only for the information of the parties, but alsoa matter of equal importancefor the certification of this Board and the Federal Court as to their jurisdiction to entertain an appeal. No such record appears in the present case, nor is there anything to suggest that the matter was considered by the High Court Bench which delivered the judgment and order of 11 April 1938. The same is true of the High Court Bench which certified this case as a fit one for appeal to His Majesty in Council on 15 June 1938, and which was differently constituted. However, as their Lordships have already indicated, the statutory duty fell to be discharged by the Bench which delivered the judgment and order of 11 April 1938.

In the present suit, the appellants seek an order for appointment of the Official Trustee of Bengal to be trustee of the estate of one Alexander John Forbes, deceased, under the provisions of the Official Trustees Act 1913 (Act II of 1913), s 10, or, alternatively, for appointment of the said Official Trustee under the Indian Trustees Act 1866, s 35. The estate of the deceased consisted partly of immovable property situate outside the Division of Bengal.

The Official Trustees Act 1913, was amended by the Government of India (Adaptation of Indian Laws) Order 1937, which was made by virtue of the Government of India Act 1935, s 293, and came into force on 1 April 1937. The present writ of summons was taken out on 5 May 1937. Panckridge J, who made the order of 22 July 1937, did not consider the order in council of 1937, but it was fully considered by the Appellate Bench (Costello and Lord-Williams JJ.), and it will be sufficient to quote some short passages from their judgment:

We are quite satisfied that, had the attention of the judge been drawn to the alteration effected by means of the order in council, his decision would in all probability have been otherwise than what it was. … The question whether the court can appoint the Official Trustee of Bengal as trustee over properties outside the province seems to depend upon the provisions of s. 3, as amended by the order in council and the Official Trustees Act, 1913, s. 10. … In other words, we think that, under the provisions of the Act as it now stands, this court is not entitled to stretch its arms, if I may use the expression, beyond the territorial limits of its jurisdiction. The result is that we think that the order made by Panckridge, J., cannot stand in so far as it relates to any property not lying or not situate within the territorial jurisdiction of the court. Mr. Banerji sought

Page 370 of [1939] 4 All ER 368

to argue that there is ample power in the court under the general provisions of the Indian Trustees Act. I do not think it necessary to consider that aspect of the matter. This petition was essentially and primarily concerned with the appointment of the Official Trustee as such, and the matter is one which quite clearly falls to be decided under the provisions of the Official Trustees Act, and that Act alone.

The Government of India Act 1935, s 205, is not referred to in the judgment. Counsel for the appellants suggests that the court may have considered this section and decided to withhold a certificate, though that decision is not expressed. The passages quoted above make this unlikely, and, in the absence of a certificate, their Lordships think that the appeal should be dismissed with costs. If, however, the High Court should hereafter make an order withholding a certificate under s 205, the appellants are to be at liberty to apply to His Majesty in Council to have the present appeal restored. Their Lordships will humbly advise His Majesty accordingly. With reference to the costs of a petition by the respondent, which, by the Boards order of 18 May 1939, were directed to be paid by him in any event, these will be taxed and set off against the costs that the appellants are by this judgment ordered to pay.

Appeal dismissed with costs, but with liberty for the appellants to apply to have the appeal restored if they obtain an order from the High Court withholding a certificate under the Government of India Act 1935, s 205.

Solicitors Morgan Price Marley & Rugg (for the appellants); Ashurst Morris Crisp & Co (for the respondent).

Charles Shelley Esq   Barrister.

Cockwell and Another v Romford Sanitary Steam Laundry Ltd

[1939] 4 All ER 370


Categories:        LANDLORD AND TENANT; Leases        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        1, 2, 22 NOVEMBER 1939        


Landlord and Tenant Option to purchase Interest on purchase money to be payable on expiration of notice Lease then determined liability of original lessees for rent.

On 8 March 1929, C, whose executors were the plaintiffs in this action, granted a lease of premises to the defendants, and included in the lease an option for the lessees to purchase the freehold of the premises. By the terms of the option clause, the lessees were at any time before 24 June 1938, to give the lessor 6 calendar months previous notice in writing of their desire to purchase, and the lessor was, upon the expiration of such notice, and upon payment of £2,000, together with interest at 5 per cent per annum from the expiration of such notice until the completion of the purchase, and of all rent reserved up to such completion, to convey the freehold of the premises to the lessees. The lease was originally granted to the defendants, but they assigned the lease on 15 February 1932. On 22 June 1938, the assignees duly gave notice to exercise the option. The assignees paid the rent due in June and September 1938, but, falling into financial difficulties, they did not pay that due in December 1938, discontinued the purchase of the property, and stated that they desired to give up possession.

Page 371 of [1939] 4 All ER 370

The plaintiffs then claimed from the defendants as original lessees the rent due on 25 December 1938, and rent subsequently falling due. The defendants contended that, the option having been exercised by the assignees, the relationship of landlord and tenant ceased on 25 December 1938, and was replaced by that of vendor and purchaser, and that, therefore, there could be no liability for rent after 25 December 1938:

Held provision for the payment of interest on the purchase money showed that the relationship of landlord and tenant was to cease on the expiration of the notice exercising the option. The lease was determined on 25 December 1938, and the defendants were not liable for rent after that date.

Notes

It is well known that the drafting of a clause in a lease giving an option to purchase the demised premises is a matter full of difficulties, but the particular difficulty which has arisen in this case is not one against which provision is usually made. It seems that this position may be avoided by providing that nothing shall operate to determine the lease and the liability thereunder until the purchase price payable under the option has been actually paid.

As to Effect of Exercise of Option to Purchase, see Halsbury (Hailsham Edn), Vol 20, pp 67, 68, para 72; and for Cases, see Digest, Vol 30, pp 473475, Nos 13631375.

Cases referred to

Weston v Collins (1865) 5 New Rep 345; 30 Digest 475, 1378, 34 LJCh 353, 12 LT 4.

Mills v Haywood (1877) 6 ChD 196; 30 Digest 477, 1391.

Doe d Gray v Stanion (1836) 1 M & W 695; 40 Digest 137, 1078, 5 LJEx 253.

Raffety v Schofield [1897] 1 Ch 937; 30 Digest 474, 1372, 66 LJCh 448, 76 LT 648.

Appeal

Appeal by the defendants from an order of His Honour Judge Thomas in the Mayors and City of London Court, dated 12 July 1939. The facts are fully set out in the judgment of the court delivered by Luxmoore LJ.

Arthur H Forbes and W Longley James for the appellants.

Robert Fortune for the respondents.

22 November 1939. The following judgment was delivered.

LUXMOORE LJ (delivering the judgment of the court). On 6 April 1939 the plaintiffs, as executors of one Annie Elizabeth Cockwell, issued a writ in the Kings Bench Division against the Romford Sanitary Steam Laundry Ltd, claiming payment of the sum of £60 in respect of two quarters rent due respectively on 25 December 1938 and 25 March 1939, under a lease, dated 8 March 1929 and made between Annie Elizabeth Cockwell as lessor and the laundry company as lessees, of No 203, High Street, Hornchurch. The action was remitted to the City of London Court. The laundry company admitted liability in respect of the quarters rent due on 25 December 1938, and paid into court the sum of £30 in respect of it, but denied liability in respect of the rent due on 25 March 1939. On July 12, 1939, His Honour Judge Thomas gave judgment for the plaintiffs for £60, and the costs of the action to be taxed on the county court Scale C down to the payment into court, and on Scale B thereafter, and, after stating that £30 had been paid, ordered the laundry

Page 372 of [1939] 4 All ER 370

company to pay the remaining £30 and the beforementioned costs. The laundry company appeal from this order so far as the claim for the £30 is concerned.

There is no dispute of fact. The question whether or not the laundry company are liable in respect of the £30 is a question of law. The laundry company claim that, on the true construction of the material documents, and on the admitted facts, all liability to pay rent in respect of the demised premises ceased on 26 December 1938. The lease of 8 March 1929 to the laundry company contained in cl 5 a provision in these terms:

Provided always and it is hereby agreed that if the lessees shall at any time before June 24, 1938, give to the lessor or leave at her last known place of abode in England 6 calendar months previous notice in writing of the desire of the lessees to purchase the fee simple of the said premises then the lessor shall upon the expiration of such notice and upon payment of the sum of £2,000 together with interest at the rate of 5 per cent. per annum from the expiration of such notice until the completion of the purchase and of all rent hereby reserved up to such expiration assure the said premises unto the lessees for an estate in fee simple free from incumbrances.

The lease contains a definition clause, whereby the lessor is defined as including the estate owner or estate owners for the time being of the reversion of the demised premises expectant on the term thereby granted, and all other persons for the time being entitled to receive and enforce payment of the rent thereby reserved, while the lessees are defined as including the laundry company, their successors and assigns, and all other persons deriving title under the lessee. The lease is for a term of 14 years from 25 December 1928 and the rent reserved is £120 per annum, payable by equal quarterly payments on the usual quarter days.

On 15 February 1932 the laundry company executed an assignment of the lease in favour of three persons, Charles Robb Jay, Albert Henry Deverell and George Macdonald Allan. This document contains an express assignment in favour of the assignees of the benefit of the option to purchase the demised premises contained in the lease. On 22 June 1938, some 6 months before the expiration of the option, the assignees gave notice to the plaintiffs, as executors of the lessor, in the following terms:

We hereby give you notice that we wish to exercise the option as contained in cl. 5 of the lease to purchase the freehold of No 203, High Street, Hornchurch, for the sum of £2,000 sterling.

After giving this notice, the assignees duly paid the rent falling due under the lease on 25 June and 29 September 1938, but they failed to pay the rent falling due on 25 December 1938.

On 2 December 1938 the plaintiffs solicitors, Messrs Hogan & Hughes, sent to Messrs Mullis & Peake, the solicitors for the assignees, the abstract of title to the demised premises. On 14 December 1938 Messrs Mullis & Peake wrote to Messrs Hogan & Hughes informing them that, since their clients had exercised their option to purchase the demised premises, they had called a meeting of their creditors, and that they were doubtful if their clients would be able to proceed with the matter.

Page 373 of [1939] 4 All ER 370

On 3 January 1939 Messrs Mullis & Peake again wrote to the plaintiffs solicitors, and stated that it was impossible for their clients to proceed with the purchase. The plaintiffs solicitors replied on 4 January and stated, among other things, that they would not advise their clients (that is, the plaintiffs) to release the assignees from their obligation to purchase. To this letter the assignees replied that, if the plaintiffs took proceedings to enforce the contract, such proceedings would not be defended. On 10 January 1939 the plaintiffs solicitors wrote to the laundry company as the original lessees in the following terms:

Re 203, High Street, Hornchurch.

We think it right that, as your company was the original lessee of the above property under a lease granted by Mrs. Annie Elizabeth Cockwell on Mar. 8, 1929, you should be informed of the present position as it effects this property. You are, of course, aware that the lease was assigned to Messrs. Jay and Deverell. That firm in June last exercised the option conferred by cl. 5 of the lease to purchase the freehold of the property for the sum of £2,000, and the sale should have been completed by the 25th ultimo. We have now, however, informed by Messrs. Jay & Deverells solicitors that they are unable to complete this purchase, and that they desire to give up occupation of the premises. The quarters rent due on the 25th ultimo has not been paid, and although this is more than covered by the existing liability for Sched. A tax, no receipt for the tax has yet been produced. We have, of course, advised our clients, Miss Cockwell and Mr. J. Cockwell, the present owners of the freehold interest, that the liability of your company for the rent and for performance of the covenants contained in the lease continues, and our clients feel, therefore, that you should know of the present position, and of the request which has been made by Messrs. Jay and Deverell to be allowed to give up occupation of the property. Our clients are having the property inspected with a view to ascertaining its present condition, and if the necessity arises a claim will also be made under the repairing covenants of the lease.

There was further correspondence, but there was no final determination on the part of the plaintiffs to accept the assignees conduct as a repudiation of the contract, and no steps were taken to obtain its rescission, either with or without the consent of the laundry company or by the court. As already stated, the plaintiffs issued the writ against the laundry company on 6 April 1939, claiming the rent due on 25 March 1939, as well as on 25 December 1938.

The laundry company contend that they are under no liability in respect of rent after 25 December 1938, because, on the true construction of cl 5 of the lease, on the expiration of 6 calendar months after the giving of the notice thereunder, the relationship between the plaintiffs and the assignees changed from that of lessors and lessees and became that of vendors and purchasers, and that, by reason of such change, the term granted by the lease terminated either upon the express terms of cl 5, or, alternatively, by operation of law.

The plaintiffs denied that this was the proper construction of the lease, or that there was any determination of the tenancy by operation of law. They contended that, upon the true construction of the clause in question, there was no contract for sale and purchase unless and until the sum of £2,000, with interest thereon from 25 December 1938, down to the date of payment, together with all rent due up to and including 25 December 1938, was in fact paid by the assignees to the plaintiffs. They further alleged that, if, contrary to their contention, a contract for sale and

Page 374 of [1939] 4 All ER 370

purchase came into existence on the giving of the notice to exercise the option, then the effect of such contract was not to determine the term granted by the lease on the expiration of 6 months from the date of the notice, but to suspend its operation pending the completion of the purchase so long as the contract remained in force, and that, at any rate before 25 March 1939 the contract ceased to be effective, and the term granted by the lease and the liability for the rent under the covenants contained in the lease revived, so that the lease remained in full force and exact, and the liability of the laundry company as original lessees and of the assignees respectively thereunder remained unimpaired, and still continued. The judge appears to have accepted both branches of the plaintiffs contention.

The first matter to be considered is the true construction of cl 5 of the lease. Is it a condition precedent to the constitution of any contract for sale and purchase between the plaintiffs and the assignees that the purchase price should be paid? The salient feature in the clause appears to be that, in the event of a notice of the desire of the assignees to purchase being given, the rent reserved by the lease is to cease on the expiration of 6 months notice from the date of the notice, and, in lieu of the liability to pay rent, a new and different liability is to come into existencenamely, the liability to pay interest at 5 per cent per annum on the fixed purchase price of £2,000. Further, it is to be observed that no actual date is fixed for completion. It is plain that the expiration of the 6 months from the date of the notice is not the date for completion of the purchase, because it is from that date that interest on the purchase price begins to run and continues so to do until the actual completion takes place. The obligation to assure the premises arises under the contract, but, of course, the assignees cannot call for any assurance until the purchase price is paid, together with the appropriate sum for interest, and all rent up to and including the expiration of the notice. It is, we think, reasonably plain that, if for any reason the purchase should not be completed until, say, after 25 March 1939, or any subsequent date, no liability to pay rent can arise, because a different obligationnamely, an obligation to pay interest on the purchase priceis substituted for the rent.

It is contended on behalf of the plaintiffs that the construction of this clause was governed by the decision in Weston v Collins. In that case, a lease was granted by one Collins to two lessees for a term of years. The lease contained a covenant that, if the lessees

… their executors administrators or assigns shall be desirous at the expiration of said term of purchasing the inheritance in fee simple of and in such portion of the said messuage or tenement hereditaments and premises as is freehold and the copyhold inheritance subject to a stinted fine … and shall give unto or leave at the last known or most usual place of abode of the said James Collins his heirs or assigns in England 6 calendar months notice in writing of such his or their desire and shall pay unto the said James Collins his heirs or assigns the sum of £2,000 sterling as and for the purchase thereof and also all arrears of the rent hereinbefore reserved he the said James Collins his heirs or assigns will at the expense [of the lessees] their executors administrators and assigns sell convey

Page 375 of [1939] 4 All ER 370

and surrender the said messuage or dwelling-house buildings and premises to the said [lessees] in fee simple as to the freehold part and the customary inheritance of the copyhold part subject as aforesaid free from incumbrances.

The covenant contained provisions imposing on the lessees the liability of paying for the preparation of the abstract, and other matters in connection with the making out of a good title to the lessees satisfaction, and the assurance of the property to the lessees. It was also expressly provided that the lessees accepted and approved Collins title. Lord Westbury held that there was no contract between the parties unless and until the purchase price was paid, and, in view of the actual words of the covenant, it is difficult to appreciate how he could have arrived at any other conclusion, for the covenant states in plain terms that it is upon payment of the purchase price that the lessor is to sell, a form of words which is totally different from the form of words used in the present case.

In our judgment, the words of cl 5 of the lease in the present case are, for all practical purposes, indistinguishable from those considered in Mills v Haywood. In that case, a lease granted to the plaintiff Mills contained a clause in the following terms, at p 197:

Mr. Mills to have the option at any time during the said term to purchase the above premises for £3,500 and such an amount as Mr. Austin shall pay for law and other expenses attendant upon the purchase and re-sale thereof; and upon payment thereof and of the other sums due under this agreement as hereinafter mentioned to Mr. Austin the said term of 10 years and the said rent of £1,000 per annum shall thereupon cease and the said Mr. Mills shall thereupon be entitled to an assignment of the leases.

It was held by the Court of Appeal, affirming the decision of Hall V-C on this point, that the giving of a notice under the option constituted a binding contract between Mills and the assignee of the reversion, and that the payment of the purchase price was not a condition precedent to the coming into existence of such a contract. We have no hesitation in holding that, on the true construction of cl 5 of the lease, a binding contract to purchase came into existence when the notice exercising it was given to the plaintiffs.

Counsel for the plaintiffs submitted that, even if a binding contract came into existence on the giving of the notice, the existence of such a contract could not operate as a surrender of the tenancy created by the lease of 8 March 1929, by operation of law, and he relied upon the decision in Doe d Gray v Stanion. The facts of that case are distinguishable from those of the present case. There the defendant Stanion occupied premises as a tenant from year to year of the landlord Gray. While the tenancy was still subsisting, Stanion entered into a separate agreement with Gray to purchase the property the subject of the tenancy agreement. The agreement for purchase not having been carried into effect, Gray demanded possession of the property. Stanion refused to give up possession, and Gray brought an action of ejectment against Stanion. Stanion alleged that he was tenant from year to year, and that, as notice

Page 376 of [1939] 4 All ER 370

to determine that tenancy had not been given, he could not be ejected. The landlord contended that the agreement for purchase operated at law as a surrender of the tenancy. The Court of Exchequer Chamber held that the tenancy was not determined by operation of law, because it was an implied term of the agreement for purchase that the landlord should make out a good title. Parke B, who gave the judgment of the court, said, at pp 700, 701:

On the argument on showing cause against the rule nisi for a new trial, it was insisted on the part of the plaintiff, that a notice to quit was unnecessary; and that on two grounds: first, that by the agreement of Sept. 2, 1831 a new tenancy at will was created, which put an end to the tenancy from year to year, and that such tenancy at will was determined by a simple demand of possession from the tenant, secondly, that if the tenancy from year to year was not so determined the defendants declaration on Oct. 2, to the agent of the lessor amounted to a disclaimer. We are of opinion that neither of these reasons is sufficient to dispense with the usual notice to quit. As to the first, there is no doubt but that if there be an agreement to purchase, and the intended purchaser is thereupon let into possession, such possession is lawful, and amounts at law, strictly speaking, to a bare tenancy at will. … It is not, however, the agreement, but the letting into possession, that creates such tenancy: for the person suffered so to occupy cannot, on the one hand, be considered as a trespasser when he enters, and, on the other hand, cannot have more than the interest of a tenant at will, the lowest estate known to the law. But where the purchaser is already in possession as tenant from year to year, it must depend upon the intention of the parties, to be collected from the agreement, whether a new tenancy at will is created or not, and from what time. In this case, if the true construction of the agreement be that, from the date of it (or any other certain time), the defendant was to be absolutely a debtor for the purchase money, paying interest on it, and to cease to payment as tenant from year to year, a tenancy at will would probably be created after that time; and the acceptance of such new demise at will would then operate as a surrender of the interest from year to year, by operation of law. But if the agreement is conditional to purchase only provided a good title should be made out and to pay the purchase money when that should have been done, and the estate conveyed, there is no room for implying any agreement to hold as tenant at will in the mean time; the effect of which would be absolutely to surrender the existing term, whilst it would be uncertain whether the purchase would be completed or not.

We think that the passage just read applies to cl 5 of the lease. If that clause is considered carefully, it becomes reasonably clear that, on the expiration of the 6 months after the date of the notice of his desire to purchase, it is provided that the person exercising the option is to become a debtor for the purchase money, and is from that date to pay interest on it instead of paying any rent as tenant under the lease. In other words, the clause provides that the relationship between the parties is to be changed from that of lessor and lessee to that of vendor and purchaser, the possession of the person exercising the option being, therefore, no longer attributable to the lease, but to the last-mentioned relationship. We think that it would be incorrect to say that the tenancy was surrendered by operation of law, for it was terminated under the express provision of the clause.

In our judgment, the judge was in error in holding, as a matter of construction, that the lease remained in full force, notwithstanding the coming into existence of the contract to purchase. This conclusion disposes of the case, but it is necessary to deal with the alternative argument of counsel for the respondentsnamely, that, pending the completion of the contract, the lease remained in suspense. Counsel

Page 377 of [1939] 4 All ER 370

for the respondents based this argument upon the decision of Romer J in Raffety v Schofield. In that case, Schofield had entered into an agreement with Raffety to erect certain buildings on the plaintiffs land on the terms that, when the buildings were erected, Schofield was to have a lease of the land and buildings erected thereon for 99 years. The agreement contained an option to Schofield to purchase the freehold. Schofield gave notice of his intention to exercise the option, but did not complete, or proceed with, the erection of the buildings in accordance with the terms of the building agreement. Raffety gave Schofield notice to determine the building agreement, and demanded possession of the property. On Schofields refusal to give up possession, Raffety brought his action for possession. It was held that, in the particular circumstances of that case, the plaintiff could not recover possession, because the contract for sale resulting from the notice to exercise the option was still subsisting. Romer J discussed the rights and position of Schofield in the interval between the date of the contract for purchase and its completion, and said, at p 942:

… I agree … that that contract did not in itself before completion put an end to what I may call the leasing parts of the building agreement … of course the contract of purchase might not be completed, and that from no fault of the purchaser; for it might (by way of example) be put an end to by the vendor under the provision of cl. 17 that if the purchaser made any requisition that the vendor was unable or unwilling to remove or comply with the latter might rescind the sale and it could not be within the contemplation of the building agreement that in such a case the purchaser should not only lose his purchase bargain, but also find himself deprived of all his rights under the other parts of the agreement.

It is to be observed that, at the date when the option was exercised, there was no lease in existence, the relationship between Raffety and Schofield under the building agreement being that Schofield was a tenant at will, and obviously the exercise of the option could not operate as a surrender of the right to a lease under the building agreement if the vendor was unable to make a title. That case can be no authority that, in the present case, the tenancy is to remain in existence but is to be treated as suspended, for, as has already been stated, on the true construction of cl 5, the parties agreed that the lease must be determined on the expiration of the 6 months from the exercise of the option.

In the result, we hold that the judge was in error in holding that any rent accrued due under the lease after 25 December 1938 and in ordering the laundry company to pay to the plaintiffs the sum of £30. This appeal must, therefore, be allowed. The order of the judge must be varied by striking out the order on the laundry company to pay to the plaintiffs the sum of £30. The direction that the laundry company are to pay the plaintiffs costs up to and including the date of payment into court will stand, except that those costs should be taxed on the B Scale and not on the C Scale. The order that the laundry company are to pay the costs from the date of the payment into court of the £30 will also be struck out, and the plaintiffs will be ordered to pay the costs of the laundry company from that date, such costs to be taxed on the B Scale.

Page 378 of [1939] 4 All ER 370

The plaintiffs must pay the laundry companys costs of this appeal. There will be the usual provision as to set off.

Solicitors: Forbes & Son (for the appellants); Hogan & Hughes (for the respondents).

Derek H Kitchin Esq   Barrister.

Reeves v Reeves

[1939] 4 All ER 378


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        BUCKNILL J        

Hearing Date(s):        15 NOVEMBER 1939        


Divorce Petition by wife Decree nisi Subsequent adultery Intervention by Kings Proctor Conduct of petitioner Principles to be applied.

The petitioner obtained a decree nisi on the ground of the adultery of her husband, who had left her to live with another woman. At the time the decree nisi was made, the petitioner was an innocent woman, but, subsequent thereto, she committed several acts of adultery, and on this ground the Kings Proctor intervened, asking that the decree nisi in her favour should not be made absolute:

Held (i) the object of the 6-months interval between the decree nisi and the decree absolute is to enable the Kings Proctor to make inquiries as to the bona fides of the petitioners case. It is not intended as a test of the morality of the petitioner.

(ii) public morality required that this particular marriage should be dissolved. The decree would, therefore, stand, but the intervention would be allowed.

Notes

As the marriage is not dissolved until the decree is made absolute, it follows that misconduct after the pronouncement of the decree nisi and before it is made absolute is adultery during the marriage. It is held, however, that such adultery will not necessarily prevent the decree being made absolute, the test to be applied as to the effect of such adultery being similar to that by which the court exercises its discretion in the case of adultery by a petitioner before the decree nisi.

As to Adultery Between Decree Nisi and Decree Absolute, see Halsbury (Hailsham Edn), Vol 10, p 690, para 1025; and for Cases, see Digest, Vol 27, p 481, Nos 5097, 5098.

Case referred to

Apted v Apted & Bliss [1930] P 246; Digest Supp, 99 LJP 73, 143 LT 353.

Intervention

Intervention by the Kings Proctor showing cause why a decree nisi granted in favour of the petitioner should not be made absolute, on the ground that, since the decree, the petitioner had admittedly committed adultery on three occasions with one Harden Jones.

E Holroyd Pearce for the Kings Proctor.

S E Karminski for the petitioner.

Sir George W H Jones for the respondent.

15 November, 1939. The following judgment was delivered.

BUCKNILL J. It does not seem to me that, in deciding this question, I must approach the matter from the point of view that this

Page 379 of [1939] 4 All ER 378

period of 6 months between the decree nisi and the decree absolute is in any way intended as a test of morality for the petitioner, or that it is right to impose a test of that kind. I think that the object of the 6 months interval is to enable the Kings Proctor to make inquiries as to the bona fides of the petitioners case. It sometimes works great hardship, this 6-months interval. One sometimes gets cases where a wife has been deserted by her husband 20 years ago, and has been left without any means, so that she has been almost compelled to live with another man, to all intents and purposes as his wife, has children by him, and then gets a decree nisi and is placed in the very difficult position that, if she leaves the man, she has no means whatever of living or of supporting her children. If the test to be applied were a test of morality, and one ought to refuse a decree in such a case because the woman, in those circumstances, continued to live with the man, it would, I think, be doing an intolerable injustice. I am sure that that is not the principle which I have to apply.

It is very much in favour of the petitioner that she came into court in the first instance as an innocent person. She was married to her husband in 1926, when she was 21 years old, and in 1935 her husband left her to live with another woman, and, as I understand, continued to live with that woman up to the date of the hearing of the petition, so that the petitioner kept nothing back from the court. She has, on the other hand, committed adultery as a married womanthere is no doubt about thatduring this interval between the decree nisi and a decree absolute.

What are the facts which are material to this case? I must approach this case, I think, very much on the lines laid down by Lord Merriman P in Apted v Apted & Bliss, and I must approach it as a case much less difficult than it would have been if what happened in August and September 1938, had happened before the decree nisi was granted. There are no children of the marriage, to start with. There is no hope of a reconciliation between husband and wife. I think to some extent Mrs Reeves was tricked by this man, who was a good deal older than herself, and who posed as a widower when in fact he was married, and cajoled her, I think, into living with him by a promise of marriage when she had got her decree. She had no means of her own. She was living entirely on an allowance from her husband, and I do not blame her for looking to the future and to the possibility of obtaining another husband. Unfortunately, she did one extremely foolish and extremely wrong thing. She gave a false reference, which has had the result that an honest landlady has been defrauded of her rent. I think that she may have come to that to some extent under the influence of this man, and I hope very much that she will very seriously consider, in order to clear her good name, that her duty, her strong duty, lies in seeing that that money is paid back. However, I am not trying that issue. It has nothing to do with me here. It only throws some light upon her general

Page 380 of [1939] 4 All ER 378

credibility. She seems to be a rather foolish person, rather foolishly clever, which is perhaps one of the most dangerous kinds of folly there is. I think, on the whole, however, that public morality requires this marriage to be dissolved. I see no useful purpose in its going on any longer than is absolutely necessary. That being so, I shall allow the intervention but let the decree stand.

Solicitors: The Kings Proctor; Bower Cotton & Bower (for the petitioner); Clifford Baron & Co (for the respondent).

J F Compton Miller Esq   Barrister.

Barrowford Holdings Ltd v Inland Revenue Commissioners

[1939] 4 All ER 380


Categories:        COMPANY; Incorporation: TAXATION; Other Taxation        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        30 OCTOBER 1939        


The court dismissed an appeal by Barrowford Holdings Ltd, from the decision of Lawrence J, dated 25 May 1939, and reported [1939] 3 All ER 319. The Lords Justices merely stated that they entirely agreed with the judgment of Lawrence J and with the reasons given by him.


Smith v Cammell Laird & Co Ltd

[1939] 4 All ER 381


Categories:        TORTS; Tortious Liability: HEALTH; Health and safety at work        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        13, 16, 17, 18 OCTOBER, 4 DECEMBER 1939        


Factories and Workshops Shipbuilding yard Vessel under construction Defective staging Occupier Occupation of part of a vessel Factory and Workshop Act 1901 (c 22), ss 79, 82, 104, 140, 141, 142, 149, 151 Shipbuilding Regulations 1931 (SR & O 1931, No 133), regs 11, 13.

The defendants were the owners of a shipbuilding yard, in which there was a ship which they had built but not completed. In the ship they had built a staging, which they permitted the C I Co to use in order to do certain work for the future owners of the vessel. Owing to a defect in the staging, the plaintiff fell, and sustained serious injuries. The plaintiff contended that, by virtue of the Factory and Workshop Act 1901, and the Shipbuilding Regulations 1931, the defendants were under a statutory duty, as occupiers of the shipbuilding yard, to make the staging safe. The defendants maintained that the occupier at the material time was not themselves but the C I Co:

Held (i) although the C I Co occupied the staging in the lower part of a hold, the defendants were the “occupiers” within the meaning of the Shipbuilding Regulations, because they occupied the hold, the ship as a whole, the dock in which the ship was lying, and the shipbuilding yard of which the dock was part. The plaintiff, therefore, had a cause of action against the defendants.

(ii) the present case did not fall within the Factory and Workshop Act 1901, s 104, which has no reference to the Shipbuilding Regulations 1931, or to the issues in this case, nor have those regulations any application to the notional factories constituted under that section.

(iii) the duty imposed by the regulations was an absolute one and not one to take reasonable care to maintain the staging or to maintain it only while the occupiers are themselves using it.

Order of Court of Appeal ([1938] 3 All ER 52) reversed.

Notes

The operations of building ships and constructing or repairing works or factories necessarily involve the employment of a large number of contractors, each of whom will be engaged upon the construction or installation of some particular part of the completed whole. Each contractor requires for his own purposes certain staging, scaffolding or works of that kind for the use of the men engaged on his job. In many cases, the regulations impose upon the “occupier” of such staging, etc, a statutory duty to see that it is in such a fit and proper state that the workmen will not be in danger of injury, and it therefore becomes necessary to define the meaning to be attached to the word “occupier” as used in such regulations. The Court of Appeal, by a majority, decided that the contractor responsible for the particular job for which the staging was at the time being used was the “occupier” of the staging. In a dissenting judgment in the Court of Appeal, Slesser LJ expressed the view that, in regulations made under the Factory and Workshop Act 1901, ss 79, 82, the term “occupier” must relate to the occupier of the whole factory, and not to the occupier of a part thereof. This view has been adopted by the House of Lords, except that Viscount Maugham, without actually dissenting, favours the conclusion of Greer and Clauson LJJ upon the main point discussed in the appeal. There is a subsidiary point discussed in nearly all the judgmentsnamely, that the duty imposed by the statutory regulations is an absolute duty. What is meant by this term absolute duty is explained by Lord Wright in Caswell v Powell Duffryn Associated Collieries Ltd [1939] 3 All ER, at p 739. The duty is not so absolute as to shut out the defence of contributory negligence, yet it would appear from the present case to limit the defence that the accident was due to the intervening act of a third party.

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As to “Occupier,” see Halsbury (Hailsham Edn), Vol 14, pp 619621, para 1174; and for Cases, see Digest, Vol 24, pp 916918, Nos 117126.

Cases referred to

Smith v Standard Steam Fishing Co, Burdon v Gregson & Co [1906] 2 KB 275; 24 Digest 917, 124, 75 LJKB 640, 95 LT 42.

Houlder Line Ltd v Griffin [1905] AC 220; 24 Digest 915, 104, 74 LJKB 466, 92 LT 580, revsg [1904] 1 KB 510.

Bartell v Gray (W) & Co [1902] 1 KB 225; 24 Digest 917, 122, 71 LJKB 115, 85 LT 658.

Weavings v Kirk & Randall [1904] 1 KB 213; 24 Digest 920, 145, 73 LJKB 77, 89 LT 577.

Mackey v Monks (Preston) [1918] AC 59; 24 Digest 919, 135, 87 LJPC 28, 118 LT 65.

Appeal

Appeal from an order of the Court of Appeal (Greer and Clauson LJJ, Slesser LJ dissenting), dated 12 April 1938, and reported [1938] 3 All ER 52, affirming a judgment in favour of the respondents given by Goddard J, at Liverpool Assizes on 20 April 1937. The facts and the arguments are set out in the opinions of their Lordships.

Hartley Shawcross KC and C N Shawcross for the appellant.

F A Sellers KC, Selwyn Lloyd and Guthrie Jones for the respondents.

4 December 1939. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, this is an appeal from the judgment of the Court of Appeal affirming (by a majority) the decision of the trial judge, Goddard J. The appellant was the plaintiff in the action. He had been employed by the Cork Insulation Co Ltd (who were not parties to the action), as a joiner to do work in connection with the construction of certain insulation chambers in a vessel named the Dunedin Star, and, in the course of doing that work, he suffered injuries for which he claimed damages in the action against the present respondents, who were the owners of the wet dock in which the work of finishing the vessel was being done. As appears from the above, the action was dismissed, and the question before your Lordships is whether this result is wrong, and the appellant ought to recover judgment for a sum of £760, which the judge fixed as the damages which he would have awarded if he had held that the appellant was entitled to maintain his claim against the respondents.

The work of finishing the vessel in the wet dock was done partly by the respondents and partly by other independent contractors, including the Cork Insulation Co and J & E Hall Ltd. Certain wooden staging had been erected by the respondents in No 2 hold and in other parts of the ship. Before the launching, the respondents had completed their work in No 2 hold, but they left the staging for the convenience of the Cork Insulation Co and other contractors, including J & E Hall Ltd, the refrigerating engineers, who used the staging before the Cork Insulation Co, and were going to use it again after the latter had completed the insulation. The respondents, how-

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ever, had a gang of men who were supervising all the staging in the ship, and who made frequent examinations of all the staging. The staging had been properly constructed. It extended over the width of the hold, and consisted of planks extending 18 ins or more beyond the inside edge of the thwarts or supports on which they rested in accordance with the regulations made by the Secretary of State under the Factory and Workshop Act 1901, s 79. The staging, as constructed, was lashed to the bearers, but the foreman of the Cork Insulation Co complained that the lashing caused his men to stumble, and it was removed. The result was that the planks were loose, in the sense that they could be moved or pushed lengthways. One of them was in fact moved away from the support of its bearer, with the result that it gave way beneath the appellant when he stepped on it, so that he suffered serious injury. It is the fact that a chargehand employed by the respondents had removed the lashing in question at the request of the foreman of the Cork Insulation Co

The shipbuilding regulations to which I have referred were directed to apply “to the construction and repair of ships in shipbuilding yards,” and these yards are defined in the Factory and Workshop Act 1901, Sched VI, Part II(25), as meaning “any premises in which any ships … are made, finished or repaired.” The respondents wet dock is within those words. The regulations provide that “it shall be the duty of the occupier to comply with Parts I to VIII of these regulations.” There is a proviso as regards ships which are being repaired in public dry dock to the effect that the person who contracts with the owner of the ship or his agent to execute the work of repair shall be deemed to be the occupier for the purposes of Parts I to VIII, and that it shall be his duty to comply with those parts, with some special and somewhat elaborate exceptions. There is no other guide to the meaning of the word “occupier” in the regulations. It is not, in my view, a sufficient guide to make it safe to rely upon it. The regulations as to staging are contained in Part II. Some of your Lordships will state the relevant sections in full, and for my purpose it will suffice to set out reg 11(b), which provides as follows:

All staging shall (i) be securely constructed of sound and substantial material and shall be maintained in such condition as to ensure the safety of all persons employed; (ii) be inspected at regular and frequent intervals by a competent person.

Apart from contentions which are not now relied on, the appellant based his claim on the ground that he had suffered his injuries by reason of the failure by the respondents to maintain the staging “in such condition as to ensure the safety of all persons employed.” The trial judge, Goddard J, found the following facts:

… (a) that the Cork Insulation Co. were independent contractors and in no sense subcontractors to the respondents, (b) that the respondents were under no duty contractual or otherwise, to provide a staging for the Cork Insulation Co., (c) that the staging was left by the respondents for the use of the Cork Insulation Co.s men as a matter of convenience, (d) that, at the time when the staging was left

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by the respondents for the use of the Cork Insulation Co.s men, it was properly constructed and perfectly safe, and, although the planks of the staging extended 18 ins. or more beyond the inside edge of the bearers on which they rested, the planks were lashed as an additional safeguard, (e) that it was the Cork Insulation Co. who caused the lashings to be removed, (f) that, because of the removal of the lashings, one of the planks became loose, and the appellant was caused to fall, (g) that the fact that the respondents men inspected the staging from time to time did not put the respondents under any duty to the Cork Insulation Co. to maintain the staging, (h) that the Cork Insulation Co., and not the respondents, were the occupiers of the staging, or of the part of the ship where the staging was, for the purpose of their work upon the insulation chambers. …

On these findings, which I accept, he came to the conclusion that the duty of maintaining the staging imposed by reg 11 was cast at the material time, not upon the respondents, but upon the Cork Insulation Co.

In the Court of Appeal, Greer and Clauson LJJ were in substance of the same opinion, and they did not agree with an argument, raised for the first time before them, that the respondents were responsible for compliance with the Shipbuilding Regulations simply as occupiers of the shipyard, notwithstanding that the Cork Insulation Co were in fact in actual occupation of the part of the ship where the staging in question was. Slesser LJ, however, was of a different opinion. He held that the word “occupier” in the regulations means the occupier of the whole dock, and that, save in special circumstances which do not apply in this case, there cannot, within the contemplation of the Factory Acts, be more than one occupier for one factory.

My Lords, I have not attempted to state in any detail the judgments of the Lords Justices because they are fully reported. I understand that your Lordships have formed the view that the appeal should succeed, and that leads me to make two observations. On the one hand, any remarks of mine would, in these circumstances, have little weight, and, on the other hand, I am happy to note that the Factory and Workshop Act 1901, no longer offends the eye of the lawyer in the statute book. I have read with care all the authorities bearing on the topic on which this appeal turns. No clear guide is to be found in them, and even the decisions of this House are almost impossible to reconcile. If anyone should doubt this, he has only to refer to Smith v Standard Steam Fishing Co, and to read the judgments of Sir Richard Henn Collins MR, and of Romer LJ. In any case, I do not think that the decision of this House in Houlder Line Ltd v Griffin assists us in the present appeal. For my part, I cannot think that a “factory” in the Act means a building which can have only one “occupier.” I think that “occupier” was intended to mean the person who runs any separate undertaking in any building, and who regulates and controls the work that is done. The Act contains no definition of the word “occupier,” and, moreover, the draftsman seems not to have appreciated that actions for damages would lie against the person who was responsible as “occupier” for non-compliance with any of the numerous requirements of the Act. The sanctions were fines imposed on the occupier under

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ss 135, 136 and 137, with provisions for exemption in certain conditions under ss 140, 141 and 142. With all respect to those who think otherwise, it seems to me that all these sections point to the conclusion that it was the person in actual control of the undertaking called the factory who was to be subject to penalties. Were it not for the contrary opinions of your Lordships, I should have thought that s 104(1) of the Act, which relates to docks, wharves, quays and warehouses, clumsily as it is worded, contains in the last four or five lines a provision that, for the purpose of enforcement of all the provisions as to (amongst other things) accidents, and regulations for dangerous trades, including, as I think, regulations made under s 79, the person having the actual use or occupation of a dock, wharf, quay, or warehouse, or of any premises within the same or forming part thereof, is “to be deemed to be the occupier of a factory,” and is, therefore, to be liable. The fact that the regulations were not made under s 104 does not persuade me that the word “occupier” in the case of a dock is intended to have a meaning other than that assigned by s 104(1). I can see that the language of the section is obscure. To give only one instance, it is doubtful whether the section applies to warehouses far removed from any dock or shipping. In my opinion, however, the draftsman of the Act intended, by the words used, that any regulations for dangerous trades made under s 79 should have effect as if “every dock, wharf,” and so on, were included in the word “factory,” and as if the last four or five lines of s 104(1) applied to such regulations. I must admit that the language of the section is not perfectly fitted to carry out that intention, but, unless the wider construction is accepted, I cannot myself see any real reason for a reference in s 104(1) to “regulations for dangerous trades.” It may be noted that in s 85 the words used are “if any occupier, owner or manager who is bound to observe any regulations under this Act,” and that this phrase is carelessly used to mean “any regulations made under the foregoing provisions of this Act”namely, regulations made by the Secretary of State. The correct words are used in ss 82, 83, 84 and 86, and, in view of this motiveless change of language, it does not seem very difficult to construe the words in s 104namely, “the provisions of this Act with respect to …”as including the regulations made under the powers conferred by the Act.

I find support for these views from a careful examination of all the sections of the Act of 1901, and also of those of the Factory and Workshop Act 1895 (including s 23 of that Act), bearing in mind that the later Act is mainly (though not exclusively) a consolidating Act. For I myself, I would place reliance on Bartell v Gray (W) & Co and Weavings v Kirk & Randall, which I think were rightly decided. I should therefore have been inclined to agree with the conclusions of Goddard J and Greer and Clauson LJJ and I regret that this House should have to arrive at a conclusion which seems to me unfortunate and unjust. On the other hand, I recognise the difficulties which arise

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on this construction, and, as your Lordships will state them, it would be waste of time for me to enumerate them, or, in the circumstances, to explain how I should answer them. Since your Lordships are agreed upon the point, I can place no reliance upon my view, but I have felt it my duty to indicate it. A number of other contentions were urged by the respondents on the appeal, and, in regard to those contentions, I need only say that I agree with your Lordships upon all of them. In the circumstances, the appeal must be allowed, with the consequences as to costs which Lord Atkin will indicate.

LORD ATKIN (read by Lord Wright). My Lords, this is an appeal from an order of the Court of Appeal, who by a majority dismissed as appeal from the judgment of Goddard J, as he then was, in favour of the defendants at the trial before him at the Liverpool Spring Assizes in April 1937. The plaintiff is a joiner, and his claim is for damages for personal injuries sustained while he was working for his employers, the Cork Insulation Co Ltd, on a ship which was being built by the respondents, Cammell Laird & Co Ltd, in their shipbuilding yard at Birkenhead. The action was founded on various causes of action involving allegations of negligence, but the only cause of action maintained in the Court of Appeal and before this House was based upon an alleged breach of a statutory duty imposed by the Shipbuilding Regulations 1931, in respect of the construction and repair of ships in shipbuilding yards. In 1935 the respondents were engaged under contract with the Blue Star Line in building in their yard the Dunedin Star. At the date of the accident to the plaintiff on 6 November 1935, she had already been launched, and was being fitted up in the wet dock or basin in the respondents yard. Some of the holds were to be refrigerated. The refrigerating machinery was being supplied by J & E Hall Ltd, under an independent contract with the Blue Star Line. The insulation was to be supplied by the plaintiffs employers, the Cork Insulation Co Ltd, a subsidiary of the Blue Star Line, also under an independent contract. For the purpose of construction, the respondents had erected staging throughout the ship in the various holds. In the hold in question, No 2 hold, they had completed their own work, but had left the staging there for the convenience of the Cork Insulation Co and of J & E Hall Ltd and had in fact lowered it to suit the Cork Insulation Cos requirements, so as to give them headroom for insulating the part of the deck immediately above No 2 lower hold. The staging extended over the whole width of the hold. As altered, it was at a height of about 16 ft from the tank tops below, and it consisted of planks about 21 ft to 22 ft in length laid fore and aft on timber bearings placed about 17 ft apart. There was thus an overhang of the planks over the bearers of at least 1 ft 6 ins. As originally constructed, the staging was secured by a plank placed over the platform across the bearers and lashed to the bearers. When the Cork Insulation Co came to use it, their foreman

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complained to the respondents that his workmen might trip over these cross-planks. They were therefore removed by the respondents men, with the result that play was afforded to the planks to move on the bearers. The plaintiff himself was a joiner engaged in fixing tongued and grooved boards so as to form receptacles for the cork insulating material which had to be placed between them. This material was conveyed to the staging in skip baskets, 6 ft by 8 ft, with two transverse binders or bearers along the bottom. It was apparently the practice of those of the Cork Insulation Cos labourers who dealt with the cork material to drag these skips along the staging to the required spot, with the result that from time to time the planks became displaced and lost the necessary overhang. The respondents stagers inspected this staging, together with the other staging in the other holds, twice a day, and, when they found a plank out of place, replaced it. As Peytler, the respondents chargehand over the staging, said, this was done practically every day. It was routine.

On the day of the accident, the plaintiff was engaged with another joiner in fixing the boards for the insulation of a fore-and-aft beam supporting the deck. He was returning from his midday meal, had gone to the after part of the staging to pick up his tools, and was walking to his job, when a plank on which he had placed his foot slipped from the bearing. He was thrown to the bottom, broke his right arm and his nose, and received other injuries. The judge, though he decided against the plaintiff on the question of liability, prudently assessed the damages in case the plaintiff eventually succeeded. As to the sum so awarded, £760, there is no dispute.

The question now arises whether the respondents are liable to pay this amount of damages to the plaintiff. Questions of negligence and contributory negligence were raised at the trial, but those have now disappeared, and the only question remaining is whether the plaintiff suffered his injuries by reason of a breach of statutory duty by the respondents. The duty is alleged to be imposed by the Shipbuilding Regulations 1931, dated 24 February 1931, made by the Secretary of State under the Factory and Workshop Act 1901, s 79, in respect of the construction and repair of ships in shipbuilding yards (SR & O 1931, No 133). The Factory and Workshop Act 1901, s 79, provides as follows:

Where the Secretary of State is satisfied that any manufacture, machinery plant, process or description of manual labour, used in factories or workshops, is dangerous or injurious to health or dangerous to life or limb, either generally or in the case of women, children or any other class of persons, he may certify that manufacture, machinery, plant, process or description of manual labour to be dangerous; and thereupon the Secretary of State may, subject to the provisions of this Act, make such regulations as appear to him to be reasonably practicable and to meet the necessity of the case.

This power only exists in reference to manufactures and so on “used in factories or workshops.” By s 149 and Sched VI, Part II, of the Act, there are included in the definition of “factories”:

… “shipbuilding yards,” that is to say any premises on which any ships, boats or vessels used in navigation are made, finished or repaired.

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It is true that it is a condition of a shipbuilding yard that steam, water or other mechanical power is used in aid of the manufacturing process carried on by them. Messrs Cammell Lairds yard complies with this condition.

It has been the practice of the Secretary of State for the time being, in making regulations under this section, to impose the duties of doing or forbearing to do the acts which he thinks it necessary to describe for the purpose of securing safety upon various persons concerned in the relevant processes, whether or not owners or occupiers of the factories. This practice was upheld by this House as intra vires in Mackey v Monks (Preston), where regulations had been made in connection with the processes of loading and unloading in docks. In the present case, the duties created by the regulations are specifically imposed upon two classes only:

It shall be the duty of the occupier to comply with Parts I to VIII of those regulations. … It shall be the duty of all persons employed to comply with Part IX of these regulations.

The obligation in question in this case comes under “Part II. Staging”:

11. (a) A sufficient supply of sound and substantial material shall be available in a convenient place or places for the construction of staging.

(b) All staging shall (i) be securely constructed of sound and substantial material and shall be maintained in such condition as to ensure the safety of all persons employed, (ii) be inspected at regular and frequent intervals by a competent person.

It is relevant to mention reg 13, which provides as follows:

All planks forming a rising stage at the bow end of the ship shall be securely fastened to prevent slipping and all planks forming other stages shall be so fastened unless they extend 18 in. or more beyond the inside edge of the thwart or support on which they rest.

The two questions that arise on reg 11(b) are (i) whether or not the duty to maintain the staging in such condition as to ensure the safety of all persons employed was imposed, in the circumstances, on Cammell Laird & Co, and (ii) if so, whether or not it was an absolute duty. On the first question, it appears to me that, if one seeks to inquire into the meaning of the word “occupier” in the sentence stating that it is the duty of the occupier to comply with Parts I to VIII by asking, “Occupier of what?” the only answer can be, “Occupier of that which alone has been previously mentioned in the regulations as capable of being occupiednamely, the shipbuilding yard which is the factory within which the regulations are to operate.” It is not the occupier of the “staging or that part of the ship” (Goddard J), “such part of the ship as was necessary for the work the Cork Insulation Co. had to do” (Greer LJ), “the place where the accident occurred,” or “the locus where the staging stood” (Clauson LJ). Nor is “occupier” the right word to describe the person controlling the work in doing which the accident happened, or the person using the machinery which gives rise to an accident, as was contended for by the respondents. We have not to consider here the question of separate manufacturing businesses being carried on by

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separate occupiers in the same building, or the case where, under s 149(2) with the approval of the chief inspector, a part of a factory may be taken for the purposes of the Act to be a separate factory. There is nothing in the Act or regulations which, in the present case, makes the hold or the staging a separate factory, and I can entertain no doubt that the duty under reg 11(b) is imposed upon the occupier of the only relevant factory, the shipbuilding yard, ie, upon Cammell Laird & Co.

I venture to think that some confusion has arisen in this case by introducing into its consideration the terms of s 104(1), which provides that, for the purpose of the enforcement of the provisions of the Act with respect to regulations for dangerous trades:

… the person having the actual use or occupation of a dock, wharf, quay or warehouse or of any premises within the same or forming part thereof … shall be deemed to be the occupier of a factory.

By that section, certain provisions of the act are applied to docks, including s 79, with respect to “regulations for dangerous trades,” and, for the enforcement of those provisions, certain persons shall be deemed to be the occupiers of a factory. Quite apart from the fact that these notional occupiers are only treated for the purpose of the enforcement of the provisions of the Act, nothing being said about the regulations made thereunder, it appears to me that s 104 has nothing to do with the present case. It gives power, amongst other things, to make regulations as to dangerous trades in connection with docks. The Secretary of State has made such regulations. They are the Docks Regulations 1934, in respect of the processes of loading, unloading, moving and handling goods, and the processes of loading, unloading, and coaling any ship in any dock. However, s 104, in my opinion, has nothing to do with the present regulations, which are made in respect of the construction and repair of ships in shipbuilding yards, which do not depend upon the creation of a “notional” factory by s 104, and in respect of which the terms and powers of s 104 have not been invoked and are quite irrelevant. None of the provisions of the Act applied by s 104 is sought to be enforced in the present case, and the definition of “occupier” in the section has no application. For this reason, also, the various cases cited in the judgments below and in the argument before us under the Workmens Compensation Act 1897, are of no assistance. In that Act, by s 7 the Act was only to apply to employment by undertakers in or about, inter alia, “a factory,” and “factory” included any dock to which any provision of the Factory Acts was applied by the Factory Act 1895, and “undertaker,” in the case of a dock, meant the occupier thereof within the meaning of the Factory Acts 1878 to 1895. As far as I can ascertain, the only reference to a dock in the Factory Acts is in s 104. In any case, it clearly applied, and much ingenuity was exercised, accordingly, in seeking to apply or not to apply the benefits of the Workmens Compensation Act to sailors

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or workmen in ships in dock, to which end the notional occupiers were frequently discussed. This branch of the law is now obsolete, and, in any case, being founded on s 104, has no relevance to the present case. I have only to add, on the present part of the case, that we were invited to say that, once a ship was afloat in a dock, she was no longer in a shipbuilding yard. This contention would, I should suppose, startle those shipbuilders whose yards include one or more basins where they complete the work of fitting up a ship after she has been launched. It would have the astonishing result of preventing the shipbuilding regulations from applying at all to work done after launching. It appears to me impossible to maintain.

If, then, the duty is imposed upon the only occupiers of this shipbuilding yard, namely, the respondents, is the duty so imposed an absolute one, or is it to be construed as limited to a duty to take reasonable care to maintain, or to maintain only while they are themselves using the staging? I can see no reason for not giving the words their ordinary meaning. Indeed, so far as I can see, all the judges in the courts below were of opinion that, upon whomsoever the duty lay, there was in fact a breach. The absolute duty in respect of acts and forbearances imposed by statutes for the protection of workmen is by this time a well-known feature of this class of legislation. It is to be found passim in such Acts as the Coal Mines Acts, and in the Factory Acts themselves. A striking example, as was pointed out by counsel for the appellant in his powerful reply, is to be found in the obligation to fence dangerous machinery, which, in the Act of 1901, is to be found in s 10. It is precisely in the absolute obligation imposed by statute to perform or forbear from performing a specified activity that a breach of statutory duty differs from the obligation imposed by common law, which is to take reasonable care to avoid injuring another. It was said that to construe this clause as imposing the absolute duty on the occupier in this case leads to such an unreasonable result as to throw doubt upon such a construction. My Lords, I cannot agree. The occupiers of a shipbuilding yard, as are the respondents in this case, have complete control over their yard, and can impose their own conditions upon those who enter the yard, and use either their own plant or that of the occupiers of the yard. They can insist upon the plant being constantly maintained in a safe condition, can terminate the licence to enter the premises or use the plant in case of breach, and can take any indemnities they think fit. In this particular case, the respondents constructed the staging. It appears that, for the use of their own men, they took the very precaution which was necessary to avoid the play of the planks by lashing them to the bearers. They could have refused the request of the Cork Insulation Co to abolish this precaution, and, when they found, as they did day by day, that the planks were being moved, they could, by simple devices, eg, bolting the planks to the bearers, have eliminated this particular danger. I therefore see no reason for refusing to give the words what

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I conceive to be their plain meaning of imposing an absolute duty upon the respondents.

The only other matter which I need discuss is the point taken by counsel for the respondents in his well-sustained argument that, if the regulations impose an absolute duty upon the occupier of the shipbuilding yard, they are ultra vires so far as the duty extends to persons other than those who are in fact carrying on the dangerous trade or using the dangerous plant. My Lords, this sounds a strange contention to apply to provisions of the Factory Acts, which again and again name the occupier as the person who has to observe the precautions specified. The point seems to me to be disposed of by the decision of this House in Mackey v Monks (Preston), where regulations had been made under the Factory Act 1901, ss 79, 104, dealing with the processes of loading and unloading a ship. There, indeed, the contention was the opposite to the present, and was that the regulations were ultra vires so far as they sought to impose duties on persons other than the occupiers. The majority of the House held that the Secretary of State had power to impose the duties on any person on whom, in the opinion of the Secretary of State, it was reasonably necessary to impose duties in order to secure the end in view. Lord Parker referred to what he called the second limitation to the power of the Secretary of Statenamely, the regulations are to be such “as appear to him to be reasonably practicable and to meet the necessity of the case.” He said, at p 85:

It should be observed that, with regard to the second limitation, the Secretary of State is constituted the sole judge, and if he has exercised a bona fide discretion his decision is final.

That statement seems to me, with respect, to be incontrovertible, and to dispose of this point. For my part, I cannot imagine a sphere in which the courts would be less likely to interfere than in debating the competency of regulations which the Secretary of State has made after publishing in advance his proposals, and after considering objections, if necessary, after an inquiry, and which have been submitted to Parliament without any disapproving resolution. These regulations appear to me to be intra vires the Secretary of State.

In the result, the action, which was described by the trial judge as misconceived, appears to have been founded upon a correct appreciation of the law, and I agree with the judgment given in the Court of Appeal by Slesser LJ. I think that the appeal should be allowed, that the judgment of Goddard J should be set aside, and that judgment should be entered for the plaintiff for £760 with costs. The present appellant should have the costs of the appeal to the Court of Appeal and such costs in this House as are appropriate to a paupers appeal.

LORD RUSSELL OF KILLOWEN. My Lords, the question which we have to answer may, I think with accuracy, be stated thusdid the Shipbuilding Regulations 1931, effectively impose an absolute duty on

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the respondents, as occupiers of their shipbuilding yard, to maintain the staging in the No 2 hold of the Dunedin star in such a condition as to ensure the safety of all persons employed? In order to answer this question, it is necessary to consider and determine a number of points debated before us. It is, however, unnecessary to repeat the relevant facts, which have already been stated by my noble and learned friend Lord Atkin.

The point which first arises is the true construction of the words in the regulations:

It shall be the duty of the occupier to comply with Parts I to VIII of these regulations.

Who is the occupier referred to? It is said that, because in the Factory and Workshop Act 1901, the words “the occupier of a factory” may indicate different persons in different sections, therefore the words “the occupier” in the regulations may be given an elastic reading, and that in each particular case the relevant occupier must be sought, and that upon him alone falls the duty of complying with the relevant regulation. Alternatively, it was argued that “the occupier” in the regulations means the person in occupation of the particular area in which the particular manufacture or process in question is being carried on. The result on either view would be, it was said, to cast the duty of observing the regulations in regard to the staging here in question on the Cork Insulation Co Ltd. I am unable to adopt either of these views. The question is not what the words “the occupier of a factory” mean in the Act, but what the words “the occupier” mean in the regulations. Incidentally, it may be observed that the word “factory” occurs nowhere in the regulations, which deal throughout with, and only with, the trade of one particular kind of factorynamely, “the construction and repair of ships in shipbuilding yards.” In my opinion, “the occupier” referred to in the regulations must prima facie refer to and mean the person who is in occupation of something which has already been mentioned, and which is capable of being the subject of occupation. Only one such thing has before been mentionednamely, “shipbuilding yards.” Therefore, “the occupier” must prima facie mean the occupier of a shipbuilding yard. Accordingly, I am of opinion that, upon the true construction of the regulations, the duty in regard to the staging was cast upon the respondents.

It was argued, however, that the case fell within s 104 of the Act, and that, by virtue of that section, the Cork Insulation Co Ltd (having the actual use or occupation of the dock or wet basin within which the ship lay, or of some premises within that dock), must be deemed to be the occupier of a factory, and was, therefore, “the occupier” within the meaning of the Shipbuilding Regulations 1931. The foundation of this argument is the view that s 104 operates to apply to the “notional factories” thereby created the provisions of the regulations made under s 79 in regard to the construction and repair of ships in shipbuilding

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yards. In other words, to quote from the judgment of Clauson LJ, at p 63 :

… nor the purpose of enforcement of regulations for dangerous trades (namely, the Shipbuilding Regulations, 1931), the person having the actual use or occupation of a dock, or of any premises within the same or forming part of a dock, shall be deemed to be the occupier of a factory.

My Lords, with all deference to those who hold this view, it appears to me to be based upon a misreading of s 104. That section does not purport to apply to its “notional factories” the provisions of any regulations. It applies to them certain “provisions of this Act”namely, (i) the provisions of s 17, (ii) the provisions of ss 1922, (iii) the provisions of ss 7986, (iv) the provisions of s 119, and (v) the provisions of s 136. As regards the last sentence of s 104(1), the “enforcement” which is referred to is not enforcement of regulations, but enforcement of “those provisions”namely, the sections of the Act to which I have referred. I may give two instances of the operation of this provision as to enforcement. Under it, the described person is to be deemed the occupier of a factory within s 19(4) and also within s 119(4). In my opinion, s 104 has no reference to the Shipbuilding Regulations 1931, nor have those regulations any application to notional factories constituted under s 104. For those notional factories, regulations, if required, can be made under s 79, because that section is, by s 104, made applicable to them, although they are not factories as defined by the Act. I understand that dock regulations have in fact been made, but this action is not brought in respect of any breach of a statutory duty thereunder, but in respect of an alleged breach of statutory duty under the Shipbuilding Regulations, which, as I have stated, have no application to any notional factory under s 104.

It was next argued that, if, upon the true construction of the Shipbuilding Regulations, “the occupier” means the occupier of the shipbuilding yard, the regulation which casts upon such occupier the duty of maintaining this staging in such condition as to ensure the safety ,of all persons employed is ultra vires the Secretary of State, under s 79. I had difficulty in following the exact grounds upon which this argument was based. It is, however, sufficient to say that the decision of your Lordships House in Mackey v Monks (Preston) and the opinions of Lord Finlay LC, Lord Atkinson and Lord Parker of Waddington constitute ample authority for the proposition that the Secretary of State has power under the section to impose upon the occupier of a shipyard the duty of complying with the regulations in every part thereof.

The duty being, as I think it is, effectively cast upon the respondents, is it an absolute duty, or can they excuse themselves by saying that, by competent inspection at regular and frequent intervals, they have done everything possible to discharge their duty? I think that the duty is

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an absolute one. The wording is too strong to justify the milder view. The words “all staging shall … be maintained” point, in my opinion, to an absolute, and not to a qualified, obligation.

Lastly, it was said that there was no breach of the regulation, and that, if there was a breach, no damage flowed from it. These contentions do not seem to have been argued below. Indeed, Clauson LJ in his judgment treats the breach as admitted. If, as I think it was, the duty was absolute, there was a clear breach, and, if there was a breach, I can see no intervening agency which would justify the view that the damage sustained by the appellant did not flow from that breach. For these reasons, I would answer the question which I formulated in the affirmative, and I would allow this appeal.

LORD WRIGHT. My Lords, Goddard J and the majority of the Court of Appeal (Slesser LJ dissenting) decided against the appellant, who was plaintiff in the action, on the ground that the claim was brought against the wrong defendants. The Cork Insulation Co Ltd, who were the appellants employers, were, it was held, the parties who should have been sued. The Cork Insulation Co, moreover, were not only the injured mans employers but were also executing the particular work in the course of which the accident occurred, and were doing so as independent contractors under contract with the building owner, and were in actual use of the staging from which he fell. On these grounds, it was held by the courts below that the Cork Insulation Co, and not the respondents, were occupiers of the particular hold or staging or part of the vessel, which, in the view of the courts below, was to be regarded as a separate factory. Slesser LJ, in dissenting, held that the premises of the respondents, in a part of which the vessel was being constructed or finished, constituted a single shipbuilding yard, of which. the respondents were the occupiers within the meaning of the Factory Act and the Shipbuilding Regulations 1931, and that, that being so, the respondents were, without more, responsible to the appellant for the damage he sustained owing to a breach of the regulations occurring within the shipbuilding premises.

I agree with the conclusion reached by Slesser LJ. The liabilities imposed by the Factory Act are imposed directly as a penal measure, and derivatively as a civil cause of action, in favour of an injured workman to whom, by construction of the common law, the statutory provisions create a duty, being intended to secure the health and safety of the workpeople. They are absolute, and do not depend on negligence. They are in most cases imposed on the “occupier” of the factory or workshop, whether or not he is actually in fault, though in some events he may have either a right over against an actual wrong-doer or a right of exoneration. This may appear somewhat out of the course of the common law, but the statute is remedial. It is for the protection of workpeople, and that object can bestperhaps can only

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be secured by fixing liability on a single person, and by defining the obligation in absolute and mandatory terms. In the present case, the particular liability relied upon is not based directly on the provisions of the Act, but on the provisions of the Shipbuilding Regulations 1931, made under s 79 of the Act. It has been contended, indeed, though not very strenuously, that these regulations are ultra vires if, or because, they fix liability on the respondents, who were not the mans employers, and were not actually carrying out the process in the course of which the breach occurred. It was said that such a provision could not advance the object of securing the mens safety, because this, it is said, must depend on the conduct of those who are actually executing the work, and cannot be promoted by imposing a vicarious liability on other persons. There are many possible answers to this argument, which seems to involve a misconception of the effect of the Act, both in point of law and in point of practical convenience. I think it is enough here, however, to say that this House in Mackey v Monks (Preston) held that regulations made, like the Shipbuilding Regulations 1931, under s 79, could not be held ultra vires if within the limits of the Act. Within those limits, the Secretary of State is given an absolute discretion to issue regulations which prescribe what, in his opinion, is proper and necessary in order to secure the objects intended. It was said in that case, as here, that the regulations imposed liability on the wrong person. That contention was rejected by this House. It would indeed be strange if a court of law could question the expediency or fairness of regulations which have been issued by the Secretary of State after the elaborate procedure required by ss 80 and 81 of the Act, and after they have been submitted to both Houses of Parliament under s 84. I reject it here, and hold that the Shipbuilding Regulations are valid. The arguments based on s 104, to which I refer later, do not go to the validity, but to the construction, of the regulations.

The regulations prescribe that it shall be the duty of the “occupier” to comply with Parts I to VIII. The breach complained of was a breach of reg 11(b), which provides that all staging shall be securely constructed of sound and substantial material, and shall be maintained in such condition as to ensure the safety of all persons employed. I think it is clear (as all the judges below seem to have taken it to be established) that the staging in the present case did not comply with the regulation. It had got loose, so that the appellant fell through into the bottom of the hold, and was injured in consequence. It is true there was no breach of reg 13, but that does not excuse the actual and unquestionable breach of reg 11(b) relied on. A failure to comply with reg 11(b) cannot, in my opinion, be excused on the ground that there was no failure to comply with reg 13. Reg 13 is of more limited scope. It does not follow that the staging is properly maintained simply because it is not obligatory to fasten the planks. The question, then, is, not whose neglect caused the breach, but who was the occupier, since it is the occupier on whom

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is placed the obligation to comply with the regulations. As the duty is absolute, he has failed to fulfil it if, for any reason, the staging was not maintainedthat is, continuously maintainedin such condition as to ensure the safety of all persons employed.

There are then two main questions, (i) what were the premises which, in the application of the regulations to the circumstances of this case, constituted the factory? and (ii) who were the occupiers of these premises? The accident occurred in No 2 lower hold of the vessel, which, subject to liens for instalments paid on account of the price, was the property of the respondents. The property in the vessel did not pass until its completion and delivery. The respondents had erected the staging some time previously, for the purpose of building the deck above, but, when that work was completed, had left the staging, in order to give the use of it to the Cork Insulation Co, who were building the wooden casing between which and the fabric of the vessel the insulating material was to be placed. The appellant was a joiner engaged on that piece of construction work, employed by the Cork Insulation Co, who were constructing the insulation under contract with the shipowners. Though the Cork Insulation Co had in this way the use of the staging with the consent of the respondents, the respondents still continued to inspect the staging twice a day. It was said that they did so as a matter of routine. If it were necessary, however, I should be prepared to hold, on the evidence, that they still retained sufficient control over the staging in order to see that the regulations were complied with. However, I do not think it necessary to decide that, because, in my opinion, neither the staging, nor No 2 lower hold, nor the work of constructing the insulation, constituted a separate factory. The shipbuilding yard of the respondents was the one and only factory within the definition contained in Sched VI, Part II(25), of the Act. The respondents yard included all the premises within its perimeter, including the fitting-out basin, or wet dock, in which the vessel was lying for the purpose of being completed. The work of fitting out a vessel after she is launched is often more lengthy and elaborate than the actual construction of the hull. In practice, it can only be done at a wet basin or fitting-out quay after the vessel is afloat, and hence such a basin or wharf is an essential and integral portion of the shipbuilding yard. The vessel itself is not a part of the factory, but is the chattel or article which the shipbuilders are constructing. It would be an anomalous position if each and every one of the numerous special contractors exercising special trades in the finishing and equipment of the vessel was to be deemed to be an occupier of a separate factory, each in its own limited compartment of the vessel, unless it had been specially provided by the Act or regulations, but it was not. If it is said that it is hard that the respondents should be held liable for the breach due to an independent contractors operations, the answer is that the respondents can impose any control and supervision which they think proper as a condition of the independent contractor

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being permitted to do the work. However that may be, I think that the principle of unity of responsibility is clearly established, apart from specific exceptions, in the Shipbuilding Regulations 1931. The “occupier” on whom the duties under Parts I to VIII are imposed is not defined, but it is, I think, clear that what is meant is the occupier of the yard as a whole, who are, in this case, the respondents. This is confirmed by the specific exception of the person who contracts to repair a vessel in a public dry dock. Such person is “deemed” to be the “occupier,” as contrasted with the person having the general management and control of the dock, and there are express provisions that certain duties should rest on that person, just as certain other duties are imposed also on the shipowners. It is thus manifest that special provisions are needed to shift the responsibility from the owner or letter of the dock, who would be the occupier of the dock if it were not a public dry dock. Apart from that provision, it is, I think, clear that, though the regulations do not define the occupier any more than does the Act, they contemplate one single occupier of the whole shipyard. Thus, for example, reg 45 requires the appointment of a supervisor or supervisors to enforce the observance of the regulations and secure the safe conduct of the work generally, and this can only refer to the premises as a unit. Similarly, reg 46, requiring the provision of ambulances and an ambulance room, is addressed to the single controlling person. Reg 42, which requires that all parts of a ship where work is being carried on shall be efficiently lighted, cannot be read distributively as addressed separately to every contractor who is doing particular work in any part of the ship. I construe the regulations as requiring that the respondents, in their capacity of occupiers of the whole shipbuilding yard, shall be responsible for the compliance with each and every duty imposed by Parts I to VIII. When I turn to the Act of 1901, I find in the same way that, apart from certain special cases, a factory is to have a single occupier. This is sufficiently indicated by s 149(2), which provides that a part of a factory or workshop may, with the approval of the chief inspector, be taken for purposes of the Act to be a separate factory or workshop, and by s 151, which provides that the Secretary of State may, by special order, direct, with respect to any class of factories or workshops, that different branches or departments of work carried on in the same factory or workshop may for any of the purposes of the Act be treated as if they were different factories or workshops. It is admitted that there was no such approval or order that the No 2 lower hold should be constituted a separate factory for the purposes of the operations of the Cork Insulation Co, or at all. There are also in the Act certain sections which deal with special modificationsfor instance, in the case of tenement factories. There may, it is true, be questions in certain cases whether a distinct portion of a larger area or building does not in fact constitute a separate factory in the particular case, but, in the present case, it seems to me to be clear that there was only one

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shipyardnamely, the whole of the premises occupied by the respondents in order to carry on their business.

Much reliance, however, has been placed by counsel for the respondents on s 104 of the Act, which is headed “Docks.” That section (which appeared as s 23 in the Act of 1895) constitutes what was called by this House in Mackeys case certain “notional” factories. That is to say, it provided that certain premises which were not factories within the definition of factories contained in s 149 and Sched VI, Part II should be treated, for the purpose of certain specified provisions of the Act, as if they were factories. The section goes on to provide that, for purposes of enforcing those provisions of the Act, the person having the actual use or occupation of a dock, wharf, quay or warehouse, or of any premises within the same or forming part thereof, and certain machinery shall be deemed to be the occupier of a factory. So far as I follow the argument advanced for the respondents, the effect of this section is to vary the general meaning of “occupier” in the Act, and extend it to the person having the actual use or occupation of any part of the premises within the respondents shipyard. I see several objections to this argument. The word “dock” is ambiguous. Its most familiar use is as meaning an enclosed area of water in which vessels may lie for loading or unloading, or when laid up, or waiting for their turn at the berth. This is something different from a dry dock and from a wet dock or basin used in a shipyard for purposes of the fitting out or repair of vessels, both of which may form parts of a shipyard. In these latter cases, there is not a “notional,” but an actual, factory, so that the special provisions of s 104 do not apply. However, without affirmatively deciding that point, I think that it is enough here to say that the claim in this action is brought under the Shipbuilding Regulations 1931, which are validly made under s 79 of the Act, and which apply to the whole premises of the shipyard, including the wet basin. It is not suggested, as I understand, that the provisions of s 104 apply exclusively to whatever may be called in any sense a dock, so that the respondents wet basin is excluded from the operation of the Shipbuilding Regulations. If, however, that were suggested, I should reject the suggestion. What I think is contended is that somehow s 104 qualifies in this particular application what would otherwise be the effect of the regulations, and gives a different meaning to the word “occupier” by importing that the person in actual use and occupation of the No 2 lower hold or the stagingthat is, the Cork Insulation Cois “deemed to be the occupier of a factory.” However, I find it impossible to bring s 104 into the Shipbuilding Regulations so as to affect their operation. These are made under the general provisions of s 79. S 104 does not provide that regulations made under s 79 are to have effect in the manner specially defined in s 104. All that it enacts is that the provisions of the Act with respect, inter alia, to regulations for dangerous trade are to have that effect. This

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means that the Secretary of State is to have the same powers under s 104 of making regulations as those given by s 79. The regulations in respect of which this action was brought, however, were not made in any sense under s 104. The Secretary of State has made regulations under s 104 dealing mainly with loading and unloading. He has made no regulations under s 104 dealing with shipbuilding yards. It is unnecessary to consider whether or not he could validly have done so. It is enough to say that he has not. In my opinion, s 104 is irrelevant to any question of the Shipbuilding Regulations 1931, and to the issues in this case.

I have sought to come to a decision of the appeal by considering the words of the Act and regulations, which is in general the correct method of ascertaining the effect of legislation. Moreover, this question is not one in which the House is either aided or embarrassed by a wealth of decided cases more or less in point, because I think the question raised in this appeal is res integra. I can deal shortly with some authorities which were discussed as pointing to a different conclusion. I am satisfied, after careful examination, that they do not affect the view which I have just expressed. These cases arose under the Workmens Compensation Act 1897, s 7(2), long since repealed, which had a curious provision that the word “factory” was to have the same meaning as it had in the Factory and Workshop Acts 1878 to 1895, including s 23 of the Act of 1895, and that the word “undertakers” in the case of a factory meant the occupier within the meaning of those Acts. S 23 of the Act of 1895 corresponded to s 104 of the Act of 1901. There was, it may be, a natural desire to give the benefits of compensation to the workman wherever possible. The courts, in applying these provisions, first asked whether the place where the man was working was a place to which provisions of the Factory Acts extended, and, if so, whether the defendant was an “occupier” under these Acts. It was held in various cases that, by virtue of s 23 of the Act of 1895 and s 104 and cognate sections of the Act of 1901, these requisites were fulfilled. Thus, in Weavings v Kirk & Randall, the injured man was employed in erecting pigeon-holes in a room at the top of a warehouse. There was no difficulty in applying to the words of the Workmens Compensation Act 1897, the precise terms of s 104. However, since, as I have already explained, s 104 has not, in my opinion, any materiality in this case, the authorities discussed seem to me to afford no assistance.

As, in my opinion, the appellant was injured in consequence of a breach of reg 11(b) committed in the shipyard of which the respondents were occupiers, I think that his claim is established, and I would allow the appeal.

LORD PORTER. My Lords, I agree that this appeal should be allowed. The appellant was employed by a company known as the Cork Insulation Co Ltd, and was injured while working in the No 2

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lower hold of an uncompleted vessel called the Dunedin Star. This vessel was being constructed by the respondents for the Blue Star Line Ltd, under a contract in writing, dated 27 March 1935. At the time at which the appellant was injured, she had been launched, and had been placed for finishing in a wet dock upon the respondents premises. This wet dock formed part of the shipbuilding yard at Birkenhead which was owned by, and in the general occupation of, the respondents. At the time when the plaintiff suffered his injury, the respondents were still engaged in completing the vessel, and had some 600 men at work upon her. At the same time, No 2 lower hold was being fitted with insulating material, and this work, which had been begun by a company known as Hall & Co Ltd, was being completed by the Cork Insulation Co Ltd.

Before any insulation was begun either by Hall & Co or by the Cork Insulation Co the respondents had erected some staging in the No 2 lower hold for the purposes of their own work. Once that work was finished, however, they no longer required the staging, and, in the normal course, it would then have been dismantled, had it not been that Hall & Co and the Cork Insulation Co required it for the purpose of their work. The respondents themselves were not in any way concerned with the insulation. That was done by both Hall & Co and the Cork Insulation Co by direct contract with the Blue Star Line, and, at the vital moment, the staging was being used solely by the Cork Insulation Co. There were, however, some few plumbers employed by the respondents at work in other parts of that hold, and a large number of their workmen occupied elsewhere in the ship. For their use, the respondents required other staging and equipment, and kept a gang of men whose duty was to go round the ship and see that all the staging and equipment was in order. It was convenient for those men to devote a small portion of their time to the examination, and, if necessary, repair, of the staging in the lower hold also. The respondents were, however, not under any obligation either to erect this staging or to supervise it or to keep it in repair, and evidence was given by the foreman of the gang that they took the additional work of examining the staging in No 2 lower holdto use his own words“in their stride.”

The injury to the appellant, and the quantum of damage, if recoverable, have already been determined by the judge who tried the case. The question with which this appeal is concerned is as to whether or not the respondents are liable for that injury and that damage. The case as pleaded was put in two ways. First, it was said that the respondents were negligent, and liable for their negligence. That claim has been abandoned. Secondly, however, it was said that, by the regulations in relation to shipbuilding yards made under the Factory and Workshop Act 1901, a statutory duty to maintain the staging in such a state of repair as to ensure the safety of the workmen using it was imposed upon the respondents. By these regulations it is provided

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that “it shall be the duty of the occupier to comply with Parts I to VIII of these regulations.” Part II contains, amongst others, the following provisions:

11. … (b) All staging shall (i) be securely constructed of sound and substantial material and shall be maintained in such condition as to ensure the safety of all persons employed; (ii) be inspected at regular and frequent intervals by a competent person. (c) All planks intended to be used for staging shall (i) be carefully examined before being taken into use, (ii) be re-examined before they are used again after the stages have been dismantled, by a person qualified to detect faults in timber.

13. All the planks forming a rising stage at the bow end of the ship shall be securely fastened to prevent slipping and all planks forming other stages shall be so fastened unless they extend eighteen inches or more beyond the inside edge of the thwart or support on which they rest.

These regulations are made under s 79 of the Act of 1901, and are stated to apply “to the construction and repair of ships in shipbuilding yards.”

The accident appears to have happened in the following way. The planks forming the platform of the staging ran fore and aft, and the bearers were placed athwart ship. These planks did not form a rising stage, and in fact extended more than 18 ins beyond the inside edge of the thwart on which they rested, so that reg 13 was complied with. Whilst the respondents were themselves using the staging, they had lashed the planks to the bearers so as to prevent them from moving from their position. When, however, the Cork Insulation Co began their work, at their request some general lowering of the staging was carried out by the respondents, and, in addition, probably because it was desired to drag the insulating cork which was being used across or along the planks in skips, and because the lashing was calculated to interfere with the skips so dragged, or to cause the men who were so dragging them to trip, that company requested the respondents men to remove the lashings, and this request was complied with. The result was that the planks were free to move, and did in fact move from time to time, probably as a result of the skips being dragged over them. The respondents evidence was that some complaint of this movement was made by the workmen who supervised the condition of the staging. They examined it, they said, twice daily, and, if the planks were found to have been moved, they were replaced in their proper position. On 6 November 1935 however, whilst the appellant was working on the insulation for the refrigerating machinery in No 2 lower hold, and for that purpose was using the staging, the accident the subject of these proceedings occurred. It was found by the judge to have been due to the fact that a plank resting upon one of the supports and forming part of the staging had moved, and had become so unstable as to be dislodged when the plaintiff trod upon it in the course of his duties. In these circumstances, prima facie, if the regulations which have been quoted, and those alone, applied, and if the respondents were occupiers, and were guilty of a failure to fulfil reg 11(b)(i), there would be no defence to this action. In making this statement, I have not forgotten the argument that the

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injury was not caused by the alleged breach of the statutory regulations, but was caused by the intervening act of the Cork Insulation Co Ltd, either in requesting the respondents to undo the lashing of the planks or in dragging the skips across the planks in their then condition. No doubt if the planks had not been unlashed, and probably if the skips had not been dragged across them, no accident would have happened, but at least one cause, and, indeed, an essential cause, of the injury was the fact that the plank was loose.

It is said, however, in the first place, that the regulations are ultra vires, on the ground that the persons alone concerned with the safety of these workmen were the Cork Insulation Co Ltd, and that regulations which imposed a duty of ensuring their safety upon other persons were outside the scope of the Act. It was, it was said, no more permissible to make regulations binding upon the owners of the shipbuilding yard in such a case than it would have been to make regulations binding upon some totally extraneous person. This argument has, I think,, already been rejected in your Lordships House in Mackey v Monks (Preston). It is true that the regulations must appear to the Secretary of State to be reasonably practicable and to meet the necessities of the case, and, therefore, as Lord Parker pointed out at p 84 of Mackeys case, must appear to him to be such as can be readily enforced without unduly interfering with the trades to which they relate, but, subject to this limitation, the widest possible discretion is given to the Secretary of State, and it is his discretion, though, of course, it must be honestly exercised. In Mackey v Monks (Preston), it was held that regulations might validly impose a duty upon the owner of the ship which was being discharged in dock though a stevedore was the occupier of the plant used in the process of unloading. The present case determines only that the regulations may impose that duty upon the general occupier of a shipbuilding yard though another person may be in occupation of a particular part of it. The question is not, as it was in Mackey v Monks (Preston), whether or not the duty can be imposed on a person other than the occupier, but whether or not it can be imposed upon a person other than the actual user of the portion of the factory of which complaint is made. In such a case, I do not see why the obligation should not be placed upon the general occupiers where the general occupation of a shipbuilding yard, and, indeed, of a ship under construction in it, remains in them. Nor do I see why the legislation should not impose a duty upon them to see to the safety of the men employed upon the ship, even though the particular work being done is done under a direct contract between the person for whom the ship is being built and an independent contractor. It must be remembered that, whatever liens may exist in favour of those for whom the ship is being constructed by reason of payments having been made in the course of the work, the ship still remains the property of the builders until she is completed and delivered, and that, as a rule, her

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completion and delivery are required before they have performed their contract or can obtain their final payment.

Taking the view, as I do, that the regulations are intra vires, the question still remains whether the respondents are occupiers within the meaning of these regulations. Round this point the principle argument on behalf of the respondent ranged. It was said that, in construing the word “occupier,” one must have regard, not only to s 79 together with s 149 and Sched VI, but also to s 104. S 79 gives the power to make the regulations, and s 149 and Sched VI include a shipbuilders yard amongst the premises which are declared to be factories for the purposes of the Act. S 104 provides as follows:

(1) The provisions of this Act with respect to (i) power to make orders as to dangerous machines (sect. 17); (ii) accidents; (iii) regulations for dangerous trades; (iv) powers of inspectors (sect. 119); and (v) fines in case of death or injury (sect. 136), shall have effect as if every dock, wharf, quay and warehouse and all machinery or plant used in the process of loading or unloading or coaling any ship in any dock harbour or canal were included in the word “factory,” and the purpose for which the machinery or plant is used were a manufacturing process; and as if the person who by himself, his agents or workmen uses any such machinery or plant for the before-mentioned purpose were the occupier of the premises; and for the purpose of the enforcement of those provisions the person having the actual use or occupation of a dock, wharf, quay or warehouse or of any premises within the same or forming part thereof and the person so using any such machinery or plant shall be deemed to be the occupier of a factory.

(2) For the purposes of this section the expression “plant” includes any gangway or ladder used by any person employed to load or unload or coal a ship, and the expressions “ship” and “harbour” have the same meaning as in the Merchant Shipping Act, 1894.

As I understand the argument, it was first claimed that the wet dock or basin in a shipbuilding yard was governed by the provisions of s 104, and, I suppose, thereby taken out of the category of a shipbuilding yard, or, at any rate, was to be regarded as a separate factory, though within its boundaries. This appears to me to neglect the definition of a shipbuilding yard contained in the Act in Sched VI, Part II(25):

… any premises in which any ships, boats, or vessels used in navigation are made, finished or repaired.

Also, it appears to me to neglect the fact that, if it is not a shipbuilding yard, the regulations would not apply at all. The wet basin in question was admittedly being used for the purpose of finishing a vessel, and appears to come directly under the terms of the Act and regulations. It may well be that a shipbuilding yard, like any other premises, can be divided into separate compartments, each occupied by a different person. In such a case, each compartment would be a different factory, and each separately occupied. For that contention, however, s 104 is not required.

An alternative argument, however, was presented, by which it was contended that the regulations applied, not only to factories as defined in sect 149 and Sched VI, but also to those included under s 104. It was maintained, therefore, that, where a dock forms part of a shipbuilding yard, the regulations apply to it, not merely as forming part of a shipbuilding yard but also as forming a dock, and that, consequently,

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the provisions of s 104, under which a dock is made a factory, and the person having the actual use or occupation of it or of any premises within the same or forming part thereof is to be deemed an occupier, were incorporated within the regulations. I do not think that this contention should be accepted.

By s 149 and Sched VI, a shipbuilding yard as a whole is declared to be a factory. All that s 104 does is to include amongst the premises which constitute a factory certain additional premises, one of which is a dock, and to define, in the case of such premises, who is to be regarded as the occupier of them in whole or in part. Where the premises as a whole are defined in Sched VI as a factory within the meaning of the Act, however, the provisions of s 104 are not required. The premises are already a factory, and there is no reason for making them a statutory factory under the last-mentioned section. Indeed, to judge by the collocation of the words, the primary object of s 104 was to deal with docks or other premises where loading or unloading took place, and the section is not concerned with the case where the dock forms part of a shipbuilding yard. Moreover, the regulations themselves are directed to apply to the construction and repair of ships in shipbuilding yards, a direction which is, I think, more consistent with an intention that the regulations should apply, and apply only, to shipbuilding yards as defined by the Act than with an intention to incorporate the provisions of s 104 so as to give a special meaning, in the case of docks, to the word “occupier” when it is found in the regulations.

If I am right in this view, the regulations only applied to the dock in question as part of the shipbuilding yard. It may be that separate occupation of the dock, or of premises within or forming part of it, distinct from that of the rest of the yard, could be shown by appropriate evidence, but, except in the sense that the Cork Insulation Co were alone using the staging, or, as he says, this part of the ship, I do not think that the judge finds any separate occupation on the part of that company. Nor do I think the respondents have adduced any such proof. I do not think that the Cork Insulation Co Ltd, were in occupation of either the staging or the hold in which their work was going on. They appear to me merely to have had the use of the staging, and to have carried on their work there. Certainly they were not in occupation of the ship, much less of the dock. The respondents were, I think, themselves occupiers of the yard, and, as such, liable for the performance of the provisions of the Act, and, if they did not fulfil them, for breach of statutory duty towards the appellant. Even if, however, s 104 applied, and the question were whether the Cork Insulation Co Ltd, could be regarded as in occupation of any premises within or forming part of the docknamely, the staging or the holdI still think that the respondents would not escape liability: Houlder Line Ltd v Griffin, where the decision of the majority of the House may be expressed in the words of Lord Macnaghten, at p 224, where he is speaking of

Page 405 of [1939] 4 All ER 381

s 23 of the Act of 1895, which, so far as it affected that decision, was in similar terms to those of s 104, and was in force at the time of the decision:

Now it seems to me to be pretty clear, upon the true construction of these somewhat singular provisions so curiously pieced together that the shipowner in the present case was not the occupier of the dock where his ship was lying afloat, or of any premises within the same or forming part thereof. It is, I think, plain that by the expression “dock” in the Factory Act, 1895, is meant the solid structure and body of the dock, not the waterspace within its limits. A corresponding meaning must be given to the word “premises.” I do not think that a ship lying in a dock, whether afloat or not, can be included in the description of “premises within the same or forming part thereof.”

In my view, therefore, whether the argument presented be that the dock and its contents were actually separately occupied or that they were notionally separately occupied under s 104, the contention fails.

There remains the question whether the respondents, assuming that they were in occupation of the hold or staging, were guilty of a breach of reg 11(b). This, I think, is a question of fact, and, unless there was no evidence to establish it, has been found against the respondents by the judge who tried the case. Indeed, it is stated by Clauson LJ, to have been conceded in argument upon the appeal. I doubt whether it is now open to the respondents to contend the contrary, and, whatever course the case may have taken below, I think your Lordships House must determine it on the basis of such finding and such assumption.

It was suggested that the only obligation under reg 11(b)(i) was that the staging should be constructed of sound and substantial material and that such material should be maintained in a sound and substantial condition, that this provision did not deal with the method of constructing the staging, but only with the material used, and that the provisions as regards inspection and construction were dealt with in reg 11(c) and reg 13. I do not think that this construction is possible. If it prevailed, there would be no obligation upon erectors who had used good material to do more than inspect the staging which was originally, and continued to be, negligently fastened. The obligation, in my view, is to maintain the staging in such a condition, as regards both material and manner of fastening, as to ensure the safety of persons employed. In determining whether or not there had been a breach, however, regard must be had, I think to the whole of the provisions of Part II of the regulations, and, in particular, to regs 11 and 13, and, inasmuch as it is contemplated under reg 13 that planks extending more than 18 ins beyond the inside edge of the support on which they rest need not be fastened, I find it difficult to say there is necessarily an absolute obligation to fasten them, lest those working upon the staging should knock them out of place. In the present case, however, the employees of the respondents knew, upon their own evidence, that work was being done which not only was likely to drive the planks out of place but also was actually continually doing so. In such a case, it may

Page 406 of [1939] 4 All ER 381

be that their duty was to insist upon relashing the planks, or to devise other fastenings for them, or to refuse permission for the Cork Insulation Co Ltd, to work in the hold unless they took steps to see that the planking was so maintained as to ensure the safety of their employees. The matter, however, is one that I do not think it necessary finally to determine in the present case, and I prefer to rest my decision on this part of the case on the findings of fact of the judge in the court of first instance, and the apparently unchallenged assumption of its accuracy in the Court of Appeal.

Appeal allowed. Judgment for plaintiff for £760 with costs.

Solicitors: Helder Roberts Giles & Co, agents for John A Behn Twyford & Reece, Liverpool (for the appellant); Layton & Co (for the respondents).

Michael Marcus Esq   Barrister.

Hunt Brothers (a firm) v Colwell

[1939] 4 All ER 406


Categories:        BANKRUPTCY        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        21 NOVEMBER 1939        


Bankruptcy Deed of arrangement Trustee Liability Order given as trustee.

The defendant, who was the trustee of a deed of arrangement, ordered certain materials to be supplied for the completion of dwelling-houses forming part of the debtors estate. The plaintiffs, who supplied these materials, were creditors, and attended the meeting of creditors at which it was agreed to appoint the defendant trustee of the debtors estate. They were not, however, members of the committee of inspection. In the orders for the materials here in question, the defendant was described as trustee, but in no other way was his liability limited:

Held the description of the defendant as trustee was not sufficient to restrict his liability under the orders to the funds that he held as trustee, but the defendant was personally liable for the price of the materials supplied.

Notes

Where a person signs a document for or on behalf of a principal, or in a representative capacity, he is not generally personally liable thereon, but the mere addition to his signature of words describing him as an agent or as filling a representative capacity does not exempt him from personal liability. In the present case, it is suggested in the judgment that a trustee of a deed of arrangement desiring to negative personal liability should use express words denoting that recourse is only to be had to the funds that he holds as trustee.

As to Liability of Trustee of Deed of Arrangement, see Halsbury (Hailsham Edn), Vol 2, pp 437440, paras 597599; and for Cases, see Digest, Vol 5, pp 11041108, Nos 90109030.

Case referred to

Muir v City of Glasgow Bank (1879) 4 App Cas 337; 43 Digest 736, 1713, 40 LT 339.

Appeal

Appeal by the plaintiffs from an order of His Honour Judge Thomas given at the Newport County Court on 20 July 1939. The facts are

Page 407 of [1939] 4 All ER 406

fully stated by Slesser LJ in the extracts which he quotes from the affidavit of the respondent.

Carey Evans for the appellants.

P H Thorold Rogers for the respondent.

21 November 1939. The following judgments were delivered.

SLESSER LJ. This is an appeal by Messrs Hunt Brothers, suing as a firm, against Colwell, a chartered accountant, who at all material times was the trustee of a deed of assignment executed on 20 February 1934 by Frank Austin Ayre, a builder. The claim is for £42 15s, being the balance due for the price of materials supplied to the order of the defendant. The facts, as stated in the affidavit sworn in the proceedings by Colwellan affidavit which is stated by the judge in his judgment to be accurateare these, so far as they are here material. At a meeting of the creditors of the debtor, which Colwell at the request of one Atkins, the solicitor who practised at Monmouth and had dealt with the affairs of Ayre, the debtor, duly attended:

… it was disclosed that the debtors main asset comprised 3 messuages or dwelling-houses then in the course of erection … and it was resolved by the creditors after they had considered the financial position of the debtor that he should execute a deed of assignment of his property to me this deponent as trustee for his creditors and that this deponent should as such trustee complete the erection of the dwelling-houses so that they might be realised to better advantage for the benefit of the said creditors and that the orders for the materials required for the completion of the dwelling-houses should as far as possible be given by me as such trustee as aforesaid to firms who were already creditors of the debtor.

One of the creditors was the plaintiff firm, Messrs Hunt Brothers, who attended the original meeting when it was agreed to appoint Colwell as trustee, but were not members of the committee of inspection. They subsequently received orders from Colwell, in respect of which their claim is now made. These orders appear in the correspondence, and have the common characteristic that, whenever Colwell acknowledges these orders for building material, he signs himself “trustee.” In the supplementary accounts following upon those orders, he is either referred to, or signs himself, as trustee. So far, there is no dispute. I do not think it necessary to read these letters or accounts in detail. As I say, they have that common characteristic.

It is not disputed that those goods were supplied. The value of the goods as claimed in the plaintiffs claim is not disputed either. What is said is that, in so far as Colwell has ordered those goods in his capacity as trustee, he is not liable for payment beyond the assets of the trust. Unfortunately, as appears in para 11 of the affidavit to which I have referred:

The assets of the estate of the debtor when realised proved insufficient to pay even the cost of the materials so ordered by me as such trustee as aforesaid in connection with the completion of the dwelling-houses and it was found that such assets were only sufficient to enable a sum of 5s. in the £ to be paid to the suppliers thereof on account of the price of such materials.

There is no doubtand it is really admitted by counsel in this casethat the mere facts that Colwell accepted these orders and dealt with

Page 408 of [1939] 4 All ER 406

the plaintiff describing himself as “trustee” would not by themselves limit his liability to the assets of the estate. That is made quite clear, if clarity be needed on such a matter, in Muir v City of Glasgow Bank, a Scots case, where the opinion of all their Lordships was that the mere words “as trust disponees” would not of itself exempt the trustees from the personal liability which had been undertaken by other shareholders in the bank. Perhaps the most material passage for this case is to be found in the opinion of Lord Blackburn, at p 389:

… if the trustees meant to limit their liability, it was for them to see that the words were sufficient to make that clear.

He had said, at p 388:

I have myself no doubt that if individuals enter into a contract because they are trustees, and for the benefit of the trust, it would be prudent in them to stipulate that, though they bind themselves to see that the trust funds are properly applied to fulfil that contract their contract shall extend no further, and that they will not be personally liable to make good the deficiency, if any, and if they express such a limitation with sufficient clearness, and the other contracting party (being sui juris) accepts such a limited engagement, he cannot call on the trustees to do more than to fulfil that limited engagement.

In the same case, Earl Cairns LC said, at p 355:

I know of no reason why an executor, either under English or Scotch law, entering into a contract for payment of money with a person who is free to make the contract in any form he pleases, should not stipulate by apt words that he will make the payment, not personally, but out of the assets of the testator. … I do not know that there is in this respect any difference in principle between English and Scotch law, although there may be a difference in the application of the principle.

It is therefore, I think, clear now beyond dispute that the mere addition of the word “trustee” by itself will not be sufficient to operate as a limitation of the liability which would otherwise arise on a person who, under a contract such as this, makes himself liable for the supply of material.

It is said, however, that there are circumstances in this case from which it ought properly to be inferred that the agreement between the parties was that the liability of the trustee should be limited to the assets of the estate. First, reliance is placed upon the factand it is a factthat the plaintiff in this case, suing under the contract, was himself a creditor of the debtor, and took part in the appointment of the trustee who is the trustee of the estate. For myself, I cannot see how that carries the matter any further. The plaintiff has two different capacities. First, he is a contractor in this particular matter, and, secondly, he is a creditor of the debtor. Argument has been adduced to us on the point whether the trustee may not have certain rights of indemnity, if he incurs liability beyond the assets, against the estate or against the creditors either collectively or individually. I am not inclined to enter into these difficult questions in the present case. They do not seem to me to be relevant. The material question here is whether or not the trustee, in making this contract, has limited his liability. He has not limited it by saying that he has done what he has done as a trustee, and the mere fact that Messrs Hunt Brothers are creditors does

Page 409 of [1939] 4 All ER 406

not seem to me in itself to justify any conclusion that a limitation of liability not otherwise provided for arose.

Then it is said that the effect of the evidence contained in the affidavit of Colwell, which he is now entitled under CCR Ord 20, r 4, to make in lieu of giving evidence orally, is to testify to the limitation of the liability of the trustee, and that the judge has found that the affidavit is accurate. When the affidavit is examined in this particular respect, however, I cannot see that it carries the matter any further. In para 12, it states, first, that the plaintiff firm were one of the creditors of the debtor (I have already dealt with that matter, and, as I say, I do not think that it affects the position at all), and, secondly, in para 12(f), that it was never the intention of the trustee to incur any personal liability. That I can well believe, and the probability is that he added the word “trustee” to his letter and to the accounts thinking that he was not incurring any personal liability. However, the affidavit goes on to say that it was never at any time the intention of the plaintiffs, in executing the orders, to hold him personally responsible for the price of the materials supplied, or any part thereof. The opinion of the defendant concerning that intention is borne out, he states in his affidavit, by “the circumstances, facts, letters and things set forth in the next succeeding ten paragraphs” of the affidavit, which in effect set forth the letters and accounts to which I have referred, in which the trustee is referred to as a trustee. It does not seem to me possible to infer from that somewhat nebulous evidence that, because Messrs Hunt Brothers were creditors, they therefore did not look to the trustee beyond a liability limited to the assets.. Beyond those two matters, I can find no ground on which, evidentially and properly, the trustee could speak or swear to the intention of the plaintiff firm.

In truth and in fact, there is no evidence whatever in this case that the plaintiff firm did not treat this as an ordinary contract for the supply of building material and did not look to Colwell in due course to pay for it. If the defendant has any rights against the creditors of this estate because he is a trustee, no doubt the plaintiff firm, among the other creditors, will be answerable for those rights. That possibility, however, has no relation to the problem here to be considered. In my view, there was no evidence on which the judge could find in this case that the trustee had limited his liability, and therefore it follows that the plaintiffs are entitled to judgment for the full sum which they claim. I think, therefore, that this appeal succeeds.

LUXMOORE LJ. I agree that this appeal succeeds. The only evidence in this case was given by affidavit. There were two affidavits by Colwell, the defendant. Counsel for the defendant has called our attention to those affidavits and to the exhibits which are referred to in them. Notwithstanding the assistance that he has offered to the court, I am quite unable to find any evidence in those affidavits that

Page 410 of [1939] 4 All ER 406

it was a bargain between the plaintiffs and the defendant that the defendant should not be personally liable for the orders that he had given. He states in the affidavit that, in giving the orders, he did not intend to incur any personal liability. I can find nowhere in the affidavit any suggestion that that intention was communicated to the plaintiffs. Certainly there is no evidence in the affidavit that the plaintiffs ever accepted the position that Colwell was not to be subject to personal liability, and that the assets of the debtors estate were to be the only source to which the plaintiffs were to look. That being so, I am satisfied that there was no evidence on which the judge was entitled to come to the conclusion to which he came. The inference he drew from the documents themselves was not justified, and, in these circumstances, I agree that the appeal must be allowed.

ATKINSON J. I agree, and I have a word to add on one point. Counsel for the defendant agrees that, if this particular creditor had not been a creditor of the estate, there would be nothing left for him to say, but he argued that, because the firm was a regular creditor, the trustee would have in some way a right of indemnity against it as one of the general body of the creditors, and that the firm might have a right to make the trustee pay it something which the trustee would have some right to get back under a claim for indemnity. It is really impossible, however, to suppose that a trustee has a right to indemnity against all the creditors, and especially against a creditor who was not on the committee of inspection, and who took no share in authorising the completion of these houses. It was always open to the trustee to contract on terms that he should not be personally liable. If the trustee is right when he says that the whole understanding was that he should not contract on terms that he was personally liable, how is it possible to say that he contracted on terms that he should get an indemnity from the creditors for a liability which ex hypothesi he was not to incur? I think that this right of indemnity is a myth, and that there is really nothing to be said to support it. I agree that the appeal must be allowed.

Appeal allowed with costs on Scale B.

Solicitors: Wrentmore & Son, agents for Thos John & Co, Cardiff (for the appellants); Robbins Olivey & Lake, agents for Frank Lewis & Son, Newport, Mon (for the respondent).

Derek H Kitchin Esq   Barrister.


Cooper v Luxor (Eastbourne) Ltd

[1939] 4 All ER 411


Categories:        CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        26, 27 OCTOBER, 4 DECEMBER 1939        


Agency Remuneration Commission Contract to pay commission on completion of sale of property Willing purchaser found Justification of refusal to complete Transaction carried through by sale of shares in company and not by sale of companys property.

The defendant companies wished to dispose of certain property, and agreed to pay the plaintiff a commission on the completion of the sale to any purchaser whom he could introduce. He did in fact introduce a willing and able purchaser, but the defendant companies then determined to effect the transaction they had in mind by a sale of the shares of the companies and not to proceed with the sale of the property. It was also contended that an arrangement whereby the plaintiff was to share his commission with an auditor of the companies was illegal since it was not disclosed to the companies and that the plaintiffs contract was thereby rendered unenforceable:

Held (i) there was not just excuse for the defendant companies refusal to complete the sale.

(ii) the work given to the auditor had nothing to do with his work as auditor and did not in any way affect the transaction here sued upon.

(iii) directors of a private company as well as those of a public company, owe a paramount duty to the company, which is a separate legal entity, of being disinterested in all their dealings in its affairs.

Decision of Branson J ([1939] 1 All ER 623) reversed.

Notes

The Court of Appeal have reached a different conclusion from that arrived at by Branson J. Perhaps the better view is that they have done so upon a different view of the facts, but, while the Court of Appeal do not suggest that the question of “just excuse” in this case is one of law, they would appear to hesitate to describe it as one of pure fact. For the purposes of this case it was not necessary to attempt a legal definition of “reasonable cause” or “just excuse,” for, upon the view of the facts which commended itself to the Court of Appeal, the acts of the defendants were equivalent to an arbitrary or capricious withdrawal from the negotiations.

As to Justification of Vendor in Refusing to Continue Negotiations, see Halsbury (Hailsham Edn), Vol 1, pp 261, 262, para 435; and for Cases, see Digest, Vol 1, pp 508512, Nos 17531769.

Cases referred to

Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436; Digest Supp, 103 LJKB 634, 152 LT 88.

Trollope (George) & Sons v Caplan [1936] 2 KB 382, [1936] 2 All ER 842; Digest Supp, 105 LJKB 819, 155 LT 365.

De Bernardy v Harding (1853) 8 Exch 822; 12 Digest 334, 2805, 22 LJ Ex 340, 21 LTOS 158.

Mackay v Dick (1881) 6 App Cas 251; 12 Digest 431, 3494.

Atkinson v Ritchie (1809) 10 East 530; 41 Digest 464, 2955.

Taylor v Caldwell (1863) 3 B & S 826; 12 Digest 371, 3093, 32 LJQB 164, 8 LT 356.

Prickett v Badger (1856) 1 CBNS 296; 1 Digest 509, 1754, 26 LJCP 33.

Appeal

Appeal by the plaintiff from a judgment of Branson J, dated 7 February 1939, and reported [1939] 1 All ER 623, where the facts are fully set out.

Cyril Miller for the appellant.

Page 412 of [1939] 4 All ER 411

H St John Field KC and F W Beney for the respondents.

Miller: The refusal to complete was unreasonable as the reason for non-completion did not concern the property to be sold, but what was to be done with the purchase money after it had been paid. The purchasers were always ready and able to complete.

Field KC: The matter was still in negotiation and the parties never arrived at a completed contract. The case is within Trollope (George) & Sons v Caplan, rather than Trollope (George) & Sons v Martyn Bros. The vendors were threatened with an action if they completed the sale and that is a just excuse for breaking off negotiations. There is only a limited obligation not to break off negotiations. An auditor of a company cannot receive any remuneration not voted at a general meeting and it is improper that he should receive a commission.

Miller in reply.

Cyril Miller for the appellant.

H St John Field KC and F W Beney for the respondents.

4 December 1939. The following judgments were delivered.

SCOTT LJ. In this case, the plaintiffs claim is for a lump sum commission of £10,000 which he alleges by his statement of claim that Luxor (Eastbourne) Ltd, and Regal (Hastings) Ltd, the two defendant companies, agreed to pay him in the event of his finding a suitable purchaser at a price of not less than £185,000 for two freehold cinema theatres at Eastbourne and Hastings, owned by the respective companies, and two leasehold theatres at Hastings to which the second defendant company was in a position to make title. He further says that he did in fact find a purchaser both ready and willing to buy at the defendants named pricenamely, another cinema company named London and Southern Super Cinemas, Ltd (the name was subsequently changed by omitting “Super”)and he claims payment of £5,000 from each defendant company. In the alternative, the plaintiff claims equivalent damages for breach of an implied term of the contract of employment that, in the event of the plaintiff finding such a purchaser:

… the defendant companies would each of them do nothing to prevent the satisfactory completion of the transaction so as to deprive the plaintiff of the commission which they had each of them agreed to pay [and that they did so prevent him].

The statement of claim also alleges in effect by para 3 that, by an agreement known and assented to by both defendant companies through their solicitor, a Mr Garton, who was the regular solicitor of both companies and acting for them and with their authority in this matter, the plaintiff had agreed to divide the commission, when paid, between himself and one Ewbank (who had been originally asked to find a purchaser) in the proportions of 60 per cent and 40 per cent. This was not a material allegation for the statement of claim, although it was relevant in evidence for the plaintiff as part of the history of the transaction, but it was made directly material as an issue by an amendment which the defendants introduced into their joint defences 3 months before the trial (para 9), stating that Ewbank was auditor of each company and

Page 413 of [1939] 4 All ER 411

alleging that the sharing agreement made between the plaintiff and him was:

… corrupt and illegal in that it was unknown to and concealed from the defendants and provided the said Ewbank with a secret profit for himself …

The defendants also stated in their joint defences that, by reason thereof, any promises of remuneration made to the plaintiff by Ewbank, if they were otherwise binding on the defendants (which is denied), were unforceable. On the appeal, counsel for the defendant companies asked leave to strike out the word “corrupt,” but that deletion, if made, would not alter the substantial nature of the allegation. The other defences were denials and a contention that the companies could not have contracted to employ the plaintiff, because no agreement was ever made with him by anybody who had authority to bind the companies.

At the trial, counsel for the plaintiff first called Ewbank to prove the contract of employment, so far as it was oral, and to establish various statements of fact appearing in the correspondence and prove the work done by the plaintiff and himself. Then he called one Burton, the chairman of the London and Southern Cinemas Co, to prove that the plaintiff did in truth find a purchaser who was both willing and ready to buy at the defendants price. Then he called the plaintiff himself, and, lastly, one Allwood, of whom as a witness to truth the judge spoke in high terms in his judgment. He was a son-in-law of one Walter Bentley, who had died on 11 September 1935, and had been the majority shareholder in the Hastings company and a substantial shareholder in the Eastbourne company, managing director of both, and, to quote Ewbanks expression, had “practically controlled the business.” The companies were private companies, with the same directors in each, the same auditor, Ewbank, and the same solicitor, Garton. In 1935, Walter Bentley was getting old, and, particularly in the summer of that year, was failing in health. He was anxious to get rid of his business interests. He had consequently asked Ewbank to get him an offer for the Regal and Luxor theatres, and promised him commission. Thereupon, in about June or July 1935, Ewbank saw Cooper, the plaintiff, whom he had known for two or three years in business, and who was a man interested, inter alia, in cinemas. In giving evidence, Ewbank called him his “client,” but that word is so often misused by business men as merely meaning a business friend that, in my view, no importance attaches to its use by Ewbank in such a context. For some time prior to Walter Bentleys death, Allwood had acted as general manager for him for all the companies he controlled, including the two defendant companies, and his evidence strongly supported the plaintiffs case. At its close, the defendants elected to call no evidence, which was somewhat surprising. Not only had the plaintiffs witnesses given evidence which, if accepted, in my view substantiated the plaintiffs case, but also the defence had specifically denied every allegation in the statement of claim, had definitely asserted that none of the persons who, according

Page 414 of [1939] 4 All ER 411

to the plaintiff, had purported to employ him, had authority on behalf of either company to do so, and had contained the late amendment alleging secrecy on the part of the plaintiff and complete ignorance on the part of the defendant companies, and had made a charge of illegality and corruption against their auditor Ewbank.

The judge stated early in his judgment what seemed to him “the result of the evidence with regard to the facts,” and, in doing so, made a series of findings, nearly all wholly in favour of the plaintiff, which should, in my opinion, have resulted in an award of damages on the plaintiffs alternative claim, which the judge held was the right way for the plaintiff to put his case. Indeed, the judge would have so decided had he not felt bound to hold, as he said, quoting certain expressions from the majority judgments of Greer and Maugham LJJ (as they then were), in Trollope (George) & Sons v Martyn Bros, that the defendants had, on the facts before him, a “just excuse” or a “reasonable cause” for not carrying through the transaction with the ready and willing purchaser whom the plaintiff had found for them. The actual decision of the court in that case was that, in the contract of employment of a “commission agent,” so called, there is implied a promise by the employer not to prevent the “agent” from earning his commission, and that decision is, of course, binding on us. Indeed, it was followed by the Court of Appeal in Trollope (George) & Sons v Caplan, but, in my view, the final decision of Branson J for the defendants was not, on the facts of the present case, warranted either by the decisions or by anything said in those cases, and I am unable to agree with it.

In order to explain the difference between his view and mine, I must summarise the facts in evidence in order to show what, in my view, the real position was at the time of, and in relation to, the “just excuse” which the judge thought operated here as a good defence. Fortunately, most of them appear in the judges own finding of fact. The gist of the findings was as follows. (1) The directors of the two defendant companies, each board having the same personnel, had made up their minds that the best way of getting rid of their interests was for the companies to sell the properties, although Branson J thought that the Bentley family favoured the method of getting rid of their shares. His reference to the Bentley family meant, first, Harry Bentley, who was joint administrator with his mother of the estate of his father (who had died intestate), and had become a director of each company in his fathers place, and, secondly, Allwood, who was, as he said himself, “the prime mover in everything that was done, so far as the family was concerned.” (2) Garton, the companies solicitor, had full authority from the directors at the material times (a) to negotiate for the sale of the properties, (b) to employ the plaintiff to find a purchaser at their fixed minimum price, and (c) to agree to pay him a “procuration fee.” (3) Garton first instructed Ewbank to find a purchaser. (4) Ewbank approached the plaintiff because the plaintiff was in touch with a Colonel

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Burton, who, as head of a group of cinemas under the heading of London and Southern Cinemas Ltd, was a likely purchaser. (5) According to Colonel Burtons own evidence, Ewbank and Cooper “jointly introduced the matter to him.” (6) All the directors of the defendant companies knew and assented to the figure of £10,000 for the commission to Cooper and Ewbank, subject to the stipulation that the defendant companies should get not less than their price of £175,000, and that money for the commission beyond that price should be found by the purchaser. This stipulation was agreed to by Colonel Burton, and his offer was, therefore, for £185,000. (7) The judge thought that what the contract of employment exactly was appeared clearly enough from the letter of 11 October 1935 from Garton to Ewbank, and he quoted from Gartons letter as follows:

… on completion of the sale of the two leasehold cinemas at Hastings, and the freehold cinemas at Hastings and Eastbourne, respectively, to the London and Southern Super Cinemas, Ltd., a procuration fee of £10,000 is to be paid to Mr. Norman Cooper, being £5,000 in respect of each of the freehold cinemas at Hastings and Eastbourne.

I cannot think that the judge intended to suggest that that letter contained the whole contract. In my opinion, it did not do more than confirm the fee payable to the plaintiff on completion. (8) The other directors of Regal (Hastings) Ltd, were in a position to require the transfer to that company of the two leasehold theatres at Hastings without payment, and were, therefore, in a position to sell them. (9) The proposed sale of the four theatres never took place, either to Colonel Burtons company or to any other purchaser.

These findings are, as a whole, favourable to the plaintiffs case, and I have no positive criticism to make on any but No 7, the contract of employment. With that, and with the extent to which the plaintiff had performed it, I will deal presently. There is, however, a comment which I will make now upon a passage in the judgment, at p 626, which bears upon what I have called his finding No 2:

A great contest has arisen as to whether Mr. Garton was ever authorised by the board of either company to employ Mr. Ewbank, or, through Mr. Ewbank, Mr. Cooper.

He reviews the evidence, finds that the directors had full knowledge of the steps taken by Garton, including the contract to pay to the plaintiff the procuration fee of £10,000, and concludes that Garton had their authority. With his conclusion, and with the reasoning which led him to it, I agree, and also with his criticism of the defendants for raising the contest of fact and then not calling either the directors or Garton. When, however, he said that neither side had thought right to help the court by producing any of the directors, or even Garton, I cannot help feeling that he was less than just to the plaintiffs side. Why should the plaintiff call the defendants witnesses? He had called Allwood, their managing director, who had corroborated much of the oral evidence already given, and that evidence, together with the correspondence and the minutes of

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the Regal companys board meeting of 2 October, made at the lowest a strong prima facie case calling for answer, if any answer was forthcoming.

I now come to the reason why the theatres were not sold in the end, and it is to be remembered that it was just this reason which the judge held was a “just cause” excusing the defendant companies from liability to the plaintiff. The plan as regards the sale to the London and Southern Super Cinemas, Ltd, was that the two freehold theatres should be conveyed direct by the respective defendant companies, but that the leases of the two leasehold theatres at Hastings should be acquired by a new company named Hastings Amalgamated Cinemas, Ltd, which the directors of Regal (Hastings) Ltd, had caused to be registered, and that the new company should join in the documents of sale and assign the leases to the purchasing company. At the time when that arrangement was devised, it was intended by the directors of Regal (Hastings) Ltd, that their company should apply for, and be allotted, all the shares in the new company, and an arrangement had been made by them that the Regal companys share of the £175,000 net purchase moneynamely, £92,500should be allocated in the documents of sale in a particular waynamely, £77,500 for the Regal Theatre, payable to that company, and £15,000 for the two leasehold theatres, payable to Hastings Amalgamated Cinemas, Ltd. In that case, the Regal company would get the £77,500 in cash and the £15,000 in the form of value added to their shares in the new company. Most of the above plan is recorded in the letter of 3 October 1935, from Messrs Bulcraig & Davis, solicitors, which was put to Allwood by counsel for the defendants in cross-examination.

The rest of the facts are to be found in the evidence of Allwood and Ewbank. The letter of 3 October was written on behalf of Harry Bentley, acting both as a director and as his fathers administrator on behalf of the family estatethat is, including Allwood himself. It was a protest addressed and sent to each of the other directors of the Regal company personally. It alleged what, if true, was a scandalous attempt by the directors, or some of them, to defraud their own company in order to benefit themselves. The device they were accused of adopting was, as a board, to reduce the Regal companys intended holding in the new company from all the shares5,000 £1 sharesdown to 2,000 shares (which that letter says had been allotted on 2 October, no others having been then allotted), and then to divide up the remaining 3,000 allotments amongst themselves in their personal capacity, the purpose and the result being that the Regal company would be deprived of 60 per cent of the value of the purchase price of £15,000 allocated to the new company for the two leasehold theatres, and the directors would get that 60 per cent in shares which they could then at once sell on the market at a large premium. That grave charge was plainly made in the letter. The evidence of Ewbank and Allwood for the plaintiff supports it, and the directors concerned did not come forward to deny the statements of fact,

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nor make any attempt to justify their conduct. It is the fact that the letter also protested against the size of the commission which the boards of the two companies had agreed to pay, but, after all, that agreement had been made, and was binding on the companies. By then, the plaintiff had wholly performed his part of the contract of employment, for he had found the purchaser who was ready and willing to pay the defendants minimum price of £175,000 plus the £10,000 more in order to cover the agreed commission, or £185,000 in all. That Colonel Burtons company was both ready and willing to carry the transaction through is, in my opinion, established by his oral evidence, and the correspondence is wholly consistent with that conclusion.

However, that is not the end of the evidence showing how wilful was the defendant companies breach of their contract with the plaintiff. The individual directors, on receipt of Messrs Bulcraig & Daviss letter, decided not to face the prospect of legal proceedings, and, for reasons known to themselves, but not explained in court (as they did not go into the witness-box), they decided, acting as the board of the Regal company, that that company should abandon the sale of the four theatres to Colonel Burtons company, although the latter company was ready and willing to buy at their figure, in order that they, the directors, acting in their private capacity as shareholders, might sell the shareholdings owned by themselves and certain friends, which carried control, to another company altogether, the Union Cinemas, Ltd. Then, acting as the board of the Luxor company, they made that company keep step with the Regal company in its treatment of the plaintiff, and then did the same with the shareholdings of themselves and their friends in that company.

In these circumstances, I am of opinion that the companies had no “just excuse” or “reasonable cause” which could justify their attempt to ignore their contract of employment of the plaintiff and to prevent his earning his commission. Indeed, I regard that attempted defence as a most unjust excuse. The defendant companies acted none the less arbitrarily in relation to Colonel Burtons company that, by reason of the “subject to contract” provision in the letters which contained the business terms of the bargain, they were within their legal rights in throwing that company over. In relation to the plaintiff, however, they acted both arbitrarily and also in breach of their promise to him which the judge, following the common law principles, reaffirmed by this court in Trollope (George) & Sons v Martyn Bros and Trollope (George) & Sons v Caplan, found implied in the contract of employment. It is clear from what the judge says that he would have given the plaintiff damages for that breach but for his thinking that what the majority of the court had said in those cases required him also to find “reasonable cause” or “just excuse” in the decision of the directors of the defendant companies to abandon the plan of selling the properties, and instead to sell the shareholdings of themselves and certain friends which carried

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control of the companies, and, therefore, of the companies undertakings, to another purchasernamely, the Union Cinemas, Ltdwho had made an offer for them through Allwood at the price of £175,000. It did not appear what majority of the shares the directors and their friends between them held, although it was evidently sufficient to give the purchaser control. The essential point, however, is that, so far as the plaintiffs contract was concerned, this volte-face by the boards from a sale by the companies of their properties to a sale by the directors as shareholders of their shares in my opinion could not in law be either a “just excuse” or a “reasonable cause” for throwing over the plaintiffs contract. The volte-face was apparently effected at the very board meeting at which Messrs Bulcraig & Daviss letter was received. It would seem also that Garton, the solicitorat least as legal adviserwas party to these proceedings of the directors, for it may reasonably be inferred that he was present on that very day, namely, 3 Octoberas he had been the day before, when the board of the Regal company is minuted as “accepting” the offer of Colonel Burtons company, for, on 24 October, there is a minute of the Luxor company in which his bill of costs of £251 10s for “negotiating fee on the sale of the companys undertakings for £82,500 and attendances” was passed by the board for payment. The bill itself shows dates for the attendances and the like from 2 October to 24 October. The word “undertaking” shows that the sale for the negotiating of which he was to be paid by the company was not of its theatre but of the control of the company through the transfer of shares, from which it would seem to be clear that he at least knew about that sale. As he did not give evidence, it would not be right to come to a final conclusion against him, but how he could have found it consistent with his conscience to write on behalf of the defendant companies on 8 October to the London and Southern Super Cinemas, Ltd, accepting their “subject to contract” offer to buy the theatres it is hard to conceive, and it is, if anything, even harder to imagine any explanation of his letter of 11 October to Ewbank in answer to the latters letter of 2 October enclosing Colonel Burtons offer from his company to buy the theatres.

The features of the evidence to which I have just called attention seem to me, not only to emphasise the deliberate and arbitrary character of the breach by the defendant companies of their contract with the plaintiff, but also to show how improper the conduct of the directors was towards their own company, to which they owed the paramount duty of being disinterested in all their dealings in its affairs, and, therefore, to exclude still further the defence of a “just cause.” In the case of private companies, it is of peculiar importance that business men acting as directors should never forget, as they sometimes do, that, in the eye of the law, the company they serve is an entirely separate person. They have no right to disregard that statutory persons right to single-eyed service, nor to ignore the machinery and rules of the Companies Act in order to further their private interests. The public policy upon which

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the privilege of limited liability is given to companies, private as well as public, is that the directors shall observe the trust which Parliament has reposed in them. It is the chief protection of creditors. It is just that disregard of their duty to their own company of which the directors here were guilty when they first tried to deprive Regal (Hastings) Ltd, of three-fifths of the purchase price of the leasehold theatres and then substituted a sale of their own shares for the sale of the companys theatre. Out of such conduct no “just excuse” could arise to answer the plaintiffs claim.

There is not much law in this case which needs consideration, but with such as there is I will now deal. After the full discussion of the law as to the implications of a contract of commission agency, and the detailed examination of all the more important previous decisions, which took place in this court in Trollope (George) & Sons v Martyn Bros and Trollope (George) & Sons v Caplan, it would be superfluousand, indeed, in this court, improperto embark on any general re-statement of the law upon which those decisions depended. However, there are certain features in the facts here which somewhat distinguish the case before us from both of those cases, making its solution simpler. (a) The contract of employment is not quite the same as in either of those cases. (b) The stage reached in the negotiations between the employer and the would-be purchaser found by the agent differs. In Martyns case, it was more advanced, for all the terms of the written contracts of sale had actually been passed by the solicitors on each side. In Caplans case, it was much less advanced, for the negotiations broke down at an early stage through a mistake by the employer in the information he had given to the agent concerning the actual pecuniary yield of the property he wished to sell. Let me contrast the position in the present case. (a) The contract of employment entered into by the defendants with the plaintiff was, in my opinion, quite simply this: “If you procure a purchaser ready and willing to buy the 4 theatres and to pay us £185,000 in cash for them, we will pay you out of the purchase money when received on completion £10,000.” It follows that, when, at the trial, the plaintiff established the fact, as I think he did, that Colonel Burtons company both wanted to buy and were ready to buy, because they had arranged, or were able to arrange, their finance, he proved complete performance by himself of his part of the contract of employment, although his right to demand payment according to its tenor would not then accrue due, for he had agreed to wait for his money until completion took place as between vendor and purchaser. However, if he had performed his part, and if the true reason why the sale fell through was the unwillingness of the boards of the defendant companies to carry out the deal, then there came into operation the implied promise of the defendant companies to do nothing to prevent the deal going through, so as to prevent the plaintiff from earning his commission after he had done all he had promised to do. In my opinion, this is exactly what the

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defendants did do, and, by their own action, they entitled the plaintiff, by way of damages for breach, to a sum approximating to the whole commission.

In Martyns case, the contract of employment at first was simply that of the ordinary house and estate agent “to find a purchaser,” meaning at a price and on terms satisfactory to the vendor. That type of commission agency contract, of course, leaves the employer free (i) to sell through another agent, (ii) to find a purchaser himself, or (iii) to say that the price and terms of the purchaser found by the agent do not satisfy him. In Martyns case, however, in the first letters exchanged between the plaintiffs and the defendant a minimum figure was named, and the condition “on completion” added, so that then the contract became similar to that which I think was the contract here from the start. There the fact that the terms of the contracts of sale were mutually approved afforded conclusive proof that the plaintiff had found a ready and willing purchaser. It followed, therefore, quite logically, that the plaintiffs were entitled to damages equal to the whole commission, since it was solely the fault of their employer that they failed to earn the scale commission which they claimed. Here, if Colonel Burtons evidence could be accepted quite at its face value, it would follow that the damages should equal the whole commission. In Caplans case, there was obvious room for doubt as to whether or not the purchaser there would have gone through with the transaction if the defendant vendor had never made the mistake he did, and so the court left it to the county court judge to estimate the chance. In the present case, there is much less doubt, but I cannot say that even Colonel Burtons evidence excludes all risk of breakdown of the final negotiations without blame to the vendor companies.

There is one other difference between this case and Martyns case and Caplans case. In both of those cases, the contract of employment was in writing. In Caplans case, it was in writing from the outset. In Martyns case, it was reduced to writing when the agent first wrote and the defendant replied by letter. Here, in my view, the contract was never wholly reduced to writing. “Implied terms” is an expression normally used in regard to the interpretation by the court of a written contract, but there can be no reason why the implication of a necessary term from the essential nature of the bargain made should not be made in the case of an oral contract, or contract partly oral and partly inferred as a fact from conduct. In De Bernardy v Harding, Alderson B said, at p 824:

Where one party has absolutely refused to perform, or has rendered himself incapable of performing, his part of the contract, he puts it in the power of the other party either to sue for a breach of it, or to rescind the contract and sue on a quantum meruit for the work actually done.

In Mackay v Dick, there are enunciations of a similar principle applicable to conditions precedent. It was a Scottish appeal, but I

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regard the principles expressed by Lord Watson, at pp 270, 271, as applicable to English law also:

The respondents were only entitled to receive payment of the price of the machine on the condition that it should be tried at a proper working face provided by the appellant, and that on trial it should excavate a certain amount of clay or other soft substance within a given time. They have been thwarted in the attempt to fulfil that condition by the neglect or refusal of the appellant to furnish the means of applying the stipulated test; and their failure being due to his fault, I am of opinion that, as in a question with him, they must be taken to have fulfilled the condition. The passage cited by Lord Shand from Bells Principles (§50) to the effect that, “If the debtor bound under a certain condition has impeded or prevented the event it is held as accomplished. If the creditor had done all that he can to fulfil a condition which is incumbent on himself, it is held sufficient implement,” expresses a doctrine, borrowed from the civil law, which has long been recognised in the law of Scotland, and I think it ought to be applied to the present case. … In the view which I have taken of the judgment under appeal, any general allegation by the appellant, to the effect that the machine would not conform to contract, is irrelevant, because, according to that view, the machine must be held to have satisfied the contract test, which was not applied, owing to the default of the appellant.

That primary principle of the law of contract applying to conditions is applicable here to the condition of payment “on completion.” The plaintiff had performed the whole of his part, but was still subject to the condition, and ran the risk of Colonel Burtons company failing to complete. It is impossible to ignore that risk, and, having regard to it, I think it right to make an allowance for the risk and to fix the figure of damages at £8,000.

I have now disposed of the main issues of fact and law in the case. There were, however, two particular defences raised upon which I agree with the judge in rejecting them. The first was that the directors had no power under the memorandum and articles to sell the companys chief property. Clause 3(b) of the memorandum, and arts 1 and 2 of the articles of association (as applying Table A and art 2, not excluding art 67 of Table A) are sufficient to dispose of that doubt. The second was that the directors could not employ a man who was the companys auditor to perform the work of, or to share the commission of, the plaintiff for finding a purchaser. The answer is that such work had nothing to do with his vouching, ex post facto, the correctness of the companys accounts, and I can see no reason why an honest auditor should not accept such an employment as was offered Ewbank here. I think that the judgment below should be set aside and that judgment should be entered for the appellant for £8,000 with costs here and below.

MACKINNON LJ. The plaintiff sues the defendant companies for breach of contract. He says they promised to pay him £10,000 if he carried out certain work for them. He admits that his task has not been accomplished, but he says that that was only due to the defendants having prevented its accomplishment. He therefore claims, not the promised remuneration, but damages for breach of contract, alleging that it was an implied term of his employment that the defendants should not do, or fail to do, anything necessary to the fulfilment of his task.

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The case, therefore, involves the consideration of an implied term in a contract, whether one is to be implied, and in what terms. This is a branch of the law in which there has been much discussion in modern times, and considerable development of the old common law. Nowhere is that development more remarkable than in the doctrine which may be referred to under the catchwords “frustration of contract.” In 1809, Lord Ellenborough CJ, in a classic judgment in Atkinson v Ritchie laid down, at p 533, that the rights and duties of the parties to a contract:

… are conclusively fixed by the terms of their own written contract. No exception which is not contained in the contract itself, can be engrafted upon it by implication as an excuse for its non-performance. … When the party by his own contract creates a duty or charge upon himself, he is bound to make it good … because he might have provided against it by his contract.

The first notable departure from the rigour of that doctrine was in 1863, when Taylor v Caldwell was decided by virtue of the sort of implication of which Lord Ellenborough CJ denied the possibility.

The particular contract in this case was an agreement by the defendants that they would pay the plaintiff £10,000 if he found a purchaser who would buy for £175,000 two freehold theatres and two leasehold theatres owned by the defendants. The plaintiff says that he found and introduced such a purchaser, able and willing so to purchase, and that the only reason why the purchase did not materialise was because the defendants refused to carry it out.

It was settled as long ago as 1856 in Prickett v Badger that, in such circumstances, the commission agent may sue the principal for remuneration. It was probably because of the comparative novelty at that date of the admission of implied terms that the judges there put their decision rather on the ground that the agent may sue on a quantum meruit, but I think that they do recognise the existence of the necessary implied term.

These considerations, however, are of only historical and academic interest, in view of two recent decisions in this court. In the present case, the offer by the purchaser found by the plaintiff was expressed to be “subject to contract.” That is not an offer which, by acceptance of the vendor, can create a contract. It is in truth an intimation of willingness to negotiate a contract, together with an intimation that, if such negotiations succeed, the purchaser is willing to pay a certain price. Until all the terms of a contract have been settled and the parties have signed, either side is at liberty to recede and abandon the project.

This was the nature of the offer procured by the agent in Trollope (George) & Sons v Martyn Bros, and in Trollope (George) & Sons v Caplan. In the former case, it was held by the majority of this court that it was an implied term of the contract with the agent that the principal would not exercise his right to refuse to go on with the negotiations “without just cause” or “without reasonable cause” (as it is put

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by Greer LJ, at p 452), or “without any reasonable ground” or “unless at any rate he has some just excuse” (as it is put by Maugham LJ, at p 456). In Trollope (George) & Sons v Martyn Bros, the full terms of the contract of sale had been agreed, and the purchaser had actually signed, when the vendor refused to go on. In those circumstances, it was held that the damages to which the agent was entitled for breach of the implied term were his full promised commission. In Trollope (George) & Sons v Caplan, the refusal of the principal was at an early stage of the negotiations. The county court judge, thinking he was following Trollope (George) & Sons v Martyn Bros, gave the agent his full commission, but the Court of Appeal held that the measure of his damages was the value of the chance that the negotiations, but for the act or default of the principals, would have resulted in a sale, and that as the county court judge had not considered this, the case must go back to him for a new trial.

As we are bound by the two decisions in Trollope (George) & Sons v Martyn Bros and Trollope (George) & Sons v Caplan, I think that the questions we have to consider are: (1) Did the defendants agree to pay the plaintiff £10,000 if he found a purchaser for the theatres at the price of £175,000? (2) Did the plaintiff find a purchaser who offered, “subject to contract,” so to purchase them? (3) Did the defendants, after receiving this offer, break off negotiations? (4) Had the defendants a just or reasonable cause, or just excuse, for so doing? (5) If all these questions are answered in favour of the plaintiff, what should be his damages?

The first question arises because counsel for the defendants says that, while the plaintiff avows that the alleged agreement was made with him by Garton, the solicitor to the defendants, he has not proved that Garton had any authority so to agree. Branson J decided this in the plaintiffs favour. It is enough to say that I agree with him. The second and third questions must clearly be answered in favour of the plaintiff. As to the fourth question, counsel for the defendants strenuously argued that the defendants had just or reasonable cause or excuse. In the first place, he said that the defendants received a better offer from another purchaser direct, and that a vendor who has employed an agent, even stipulating that he is to be his sole agent, may always sell to some one direct without breaking any express or implied agreement with the agent, and that, as they sold elsewhere at a better price, they clearly had just cause. I think this contention fails on the facts. The defendants did not sell the freehold and leasehold theatres at all. So far as I know, they still own them. What happened was that the shareholders in the defendant companies sold their shares to a purchasing company for £175,000. The assets of the defendant companies, the theatres, were not sold to anyone, however. Counsel for the defendants says that, from the point of view of the shareholders, this achieved a better result. They got £175,000, whereas, if the plaintiffs clients had bought the

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theatres, on the companies being wound up, they would have got only £175,000, less the costs of liquidation, and the like. The shareholders, however, are not the company. The fact remains that the defendant companies refused to go on with the negotiations for the sale to the plaintiffs friends because they decided not to sell at all.

Then it was contended that the defendants had just cause or excuse because one of the defendant companies, Regal (Hastings) Ltd, received a solicitors letter, dated 3 October 1935, threatening action against the company if they went on with this proposed sale. It was the Regal company who had the two leasehold theatres as well as one of the freeholds. They had not paid any premium for these leases. On 27 September 1935, the directors of Regal (Hastings) Ltd, formed a subsidiary company to which they assigned these leases. The directors, or some of them, took 3,000 shares in this subsidiary company, and the Regal company had 2,000 shares. In their negotiations with the plaintiffs clients, as appears by a letter dated 21 October, the directors of the two companies asked that the £175,000 price should be allocated so as to apportion £15,000 as the price of the two leaseholds. The result would be that, on the winding up of the subsidiary company, the directors, qua shareholders in it, would get three-fifths of the £15,000 and the Regal company only two-fifths. Thus the directors would get £9,000 for their £3,000-worth of shares in the subsidiary company, and the Regal company, who had owned the leaseholds, and its shareholders in its winding up, would get only £6,000. It was this scandalous manœuvre that upset the principal shareholder in Regal, on whose behalf the solicitors wrote the letter dated 3 October. In these circumstances, I do not think that the receipt of that letter, prompted by this action of the defendant companies directors, afforded the defendants just cause or excuse for refusing to continue the negotiations.

Then we come to the fifth question. On the question of damages, the question seems to be, what were the odds in favour of the negotiations ending in a completed sale, if the defendants had carried them on? I have considered this matter carefully. I agree that the chances in favour of a successful ending were such that the plaintiff should be awarded £8,000.

Counsel for the defendants took one further point on their behalf. Garton for the defendants originally asked Ewbank to find a purchaser. Ewbank enlisted the services of the plaintiff, and, subsequently, by a letter dated 2 October, stipulated that the commission of £10,000 should be promised to the plaintiff. This was done by Gartons letter to Ewbank, dated 11 October, and, as appears by a letter dated 12 October, the plaintiff had agreed that, on receiving the £10,000, he would give £4,000 of it to Ewbank. Now, Ewbank was auditor to the two defendant companies. Counsel for the defendants says that it was illegal for the auditor to do any other work for the companies and receive payment, and that, therefore, this claim by the plaintiff is upon an illegal and unenforceable contract.

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I think that there is nothing in this contention. An auditor, qua auditor, no doubt owes certain duties to the company, but to suggest that the company cannot lawfully employ him to do any service for them quite outside his duties as auditor seems to me unfounded. If, for example, the company employed the accountant, who happened to be their auditor, to go abroad and settle some disputed matters, and subsequently refused to pay his reasonable charges for that work, I cannot believe that they could successfully defend an action for those charges.

Lastly, I should perhaps mention that counsel for the defendants formally submitted that the dissentient judgment of Scrutton LJ in Trollope (George) & Sons v Martyn Bros was to be preferred to those of Greer and Maugham LJJ, but that question, however fit it may be (as Greene LJ said in Trollope (George) & Sons v Caplan) for examination elsewhere, is not one for us. I think that the appeal should be allowed and judgment entered for the plaintiff for £8,000 with costs here and below.

DU PARCQ LJ (read by MacKinnon LJ). I have come to the same conclusion as Scott and MacKinnon LJJ as to the order which this court should make, for substantially the same reasons. I desire to add some words of my own, first, on the question whether or not the defendants have broken the implied term of their contract with the plaintiff, and, secondly, as to the measure of damages.

In my opinion, Branson J was right in holding, as he did, that the words “on completion of the sale” contained in the letter of 11 October 1935, which purports to confirm the contract sued on, did in fact form part of that contract. Thus the agreement was to pay commission to the plaintiff “on completion of the sale” of the properties mentioned to a purchaser introduced by the plaintiff at a price named. The sale has not been completed, so that, according to the express terms of the contract, the commission is not payable. It has been settled law for a long timecertainly since Prickett v Badgerthat a would-be vendor who makes such a contract with an agent will not escape liability to the agent if it turns out that he has no interest in the land and so cannot sell. Although Prickett v Badger was not decided on the doctrine of an implied term, there is no difficulty about implying in such a contract with an agent a warranty by the principal that he is in a position to sell. Nor is it difficult to see that a term ought to be implied that the principal will not break a contract entered into with the purchaser introduced, and so be guilty of a wrongful act. In the present case, there is no doubt about the defendants capacity to sell, and it is clear that they have not broken any contract with the proposed purchasers. As the law stands, however, it is established that a term must be implied in the contract with the agent that, given a ready and willing purchaser, the principal will not withdraw from the transaction “without reasonable cause” or “without just excuse.” So far as the principals relations with the

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proposed purchaser are concerned, he needs no excuse, just or unjust, for withdrawing from the transaction, and I confess that I find great difficulty in coming to a conclusion as to the kind of excuse which ought to be considered just and reasonable as between principal and agent. It is plain on the authority of Trollope (George) & Sons v Martyn Bros, which we are, of course, bound to follow, that an arbitrary decision to break off the negotiationsin other words, a capricious change of mindis not a reasonable cause. Whether the question of what is a reasonable cause is in each case one of fact (to be left to the jury, if there is one) or whether there must be taken to be some guiding principle of law which has not yet been clearly formulated is, I think, left in doubt by the decisions. In a case like the present, where the purchase price is named in the contract of agency, and only one agent is employed, I think it may well be impossible to draw a line anywhere short of saying that there is to be implied a term that, so long as the purchaser introduced (who I assume satisfies all the express terms of the agency agreement) remains ready and willing to complete at the named price, the principal will not withdraw from the transaction. However that may be, there must, I think, be included in the implied term a promise by the principal that he will not cause the negotiations to break down by insisting on any unusual terms or covenants in the contract or conveyance, and this point is material when the damages come to be assessed. It is not necessary in this case to attempt the difficult task of defining “reasonable cause” with precision, and I am content to say that, for the reasons given by the other members of the court, the excuse put forward by the defendants does not commend itself to me, or appear to me to be any more just or reasonable than an arbitrary and capricious withdrawal would have been. Having said this much, I would add that I heartily agree with what was said by Greene LJ, in Trollope (George) & Sons v Caplan when he expressed the hope that one day the whole position might be reviewed by the House of Lords.

As for damages, if it were clearly established that, but for the withdrawal of the defendants, the contract with the prospective purchaser would certainly have been completed, I should have had no doubt that the plaintiff should recover the whole of the agreed commission. Where the payment of an agreed sum is made to depend on the fulfilment of a condition, and the party who is bound to pay has it in his sole power to prevent the condition from being fulfilled, it is clear that, if he does wrongfully prevent its fulfilment, he will be just as much liable as if it had been fulfilled. In the present case, however, even if the defendants had not withdrawn from the transaction, it does not follow, and it was not proved, that the proposed purchasers would certainly have completed. They were not bound to complete, and the negotiations might have broken down. What the plaintiff has lost through the defendants breach of the implied term in their contract with him is his chance (no doubt a good one) of earning the agreed commission. It is difficult to assess its

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value, but, for myself, I am content to accept the estimate arrived at by Scott and MacKinnon LJJ, and to agree that judgment should be entered for the plaintiff for the sum of £8,000.

Appeal allowed. Judgment for the plaintiff for £8,000 with costs in both courts. Leave to appeal to the House of Lords.

Solicitors: Mayo Elder & Co (for the appellant); H S Wright & Webb (for the respondents).

C St J Nicholson Esq   Barrister.

Halifax Building Society v Salisbury

[1939] 4 All ER 427


Categories:        BANKING AND FINANCE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        8, 9, 14, 15 NOVEMBER, 4 DECEMBER 1939        


Building Societies Advances Security upon which advances can be made Mortgage of freeholds Collateral charge on fund Pool agreement Validity Misrepresentation Building Societies Act 1874 (c 42), s 13.

The plaintiffs, a building society incorporated under the Building Society Acts, had advanced money on mortgage to the defendant in the usual way for the purchase of a house. The advance amounted to 95 per cent of the value of the house and land, and, in so far as it exceeded 75 per cent of the value (the usual limit of the societys advances), was further secured by a pool agreement whereby the builders personally guaranteed the excess of the advance and charged a fund with the payment of such excess. Appended to a letter stating that the society would make the advance were the words “Security: one freehold dwelling-house: Advance: £452 8s.” The mortgage recited that the loan was to be secured in manner thereinafter appearing, and no reference to the pool agreement was made in the operative part of the mortgage. It was contended that this advance was an advance upon a security other than land, and, therefore, that the mortgage was invalid as being in excess of the building societys statutory powers. It was also contended that the advance had been procured by misrepresentation:

Held (i) the mortgage was not ultra vires the society.

(ii) there was no false representation inducing the defendant to enter into the mortgage.

Notes

The pool agreement was before a court of first instance in the recent case of Bradford Third Equitable Benefit Building Society v Borders, and to some extent this case, upon the first point, might be considered to be an appeal from that decision, but it is understood that that decision will be before the Court of Appeal shortly. The decision herein in effect confirms the decision in the earlier case, and is not limited, as was the decision in the earlier case, to the transaction between the society and the mortgagee, since any question as to the validity of the pooling agreement itself has been settled by the recent Building Societies Act 1939.

As to Statutory Regulation of Building Society Mortgages, see Halsbury (Hailsham Edn), Vol 3, pp 410, 411, paras 775777; and for Cases, see Digest, Vol 7, pp 472, 473, Nos 112116.

Cases referred to

Sheffield & South Yorkshire Permanent Building Society v Aizlewood (1889) 44 ChD 412; 7 Digest 461, 37, 59 LJCh 34, 62 LT 678.

Page 428 of [1939] 4 All ER 427

Cullerne v London & Suburban General Permanent Building Society (1890) 25 QBD 485; 7 Digest 461, 38, 59 LJQB 525, 63 LT 511.

Bradford Third Equitable Benefit Building Society v Borders [1939] Ch 520, [1939] 1 All ER 481; Digest Supp, 108 LJCh 171, 160 LT 456.

Wenlock (Baroness) v River Dee Co (1883) 36 ChD 675 n; 13 Digest 367, 1002, 57 LT 402 n, affd (1885) 10 App Cas 354, subsequent proceedings (1887) 19 QBD 155, (1887) 36 ChD 674, affd (1888) 38 ChD 534.

A-G v Great Eastern Ry Co (1880) 5 App Cas 473; 13 Digest 367, 998, 49 LJCh 545, 42 LT 810.

Inland Revenue Comrs v Westminster (Duke) [1936] AC 1; Digest Supp, 104 LJKB 383, 153 LT 223, 19 Tax Cas 490.

Re Coltman, Coltman v Coltman (1881) 19 ChD 64; 25 Digest 317, 204, 51 LJCh 3, 45 LT 392.

Angus v Clifford [1891] 2 Ch 449; 35 Digest 54, 488, 60 LJCh 443, 65 LT 274.

Nocton v Ashburton (Lord) [1914] AC 932; 35 Digest 55, 493, 83 LJCh 784, 111 LT 641.

Amalgamated Society of Railway Servants v Osborne [1910] AC 87; 12 Digest 254, 2079, 79 LJCh 87, 101 LT 787.

Murray v Scott, Agnew v Murray, Brimelow v Murray (1884) 9 App Cas 519; 7 Digest 455, 5, 53 LJCh 745, 51 LT 462, varying SC sub nom Re Guardian Permanent Benefit Building Society (1882) 23 ChD 440.

Polhill v Walter (1832) 3 B & Ad 114; 35 Digest 40, 338, 1 LJKB 92.

Smith v Chadwick (1884) 9 App Cas 187; 35 Digest 18, 106, 53 LJCh 873, 50 LT 697.

Yorkshire Railway Wagon Co v Maclure (1882) 21 ChD 309; 26 Digest 17, 54, 51 LJCh 857, 47 LT 290.

A-G v Smethwick Corpn [1932] 1 Ch 562; Digest Supp, 101 LJCh 137, 146 LT 480.

Hayes Bridge Estate v Portman Building Society [1936] 2 All ER 1400; Digest Supp.

Ayers v South Australian Banking Co (1871) LR 3 PC 548, 7 Moo PCC 432; Digest Supp, sub nom Ayres v South Australian Banking Co 40 LJPC 22.

Taylor v Chichester & Midhurst Ry Co (Directors, etc) (1867) LR 2 Exch 356; 13 Digest 356, 929, 36 LJEx 201, 16 LT 703, revsd on other grounds (1870) LR 4 HL 628.

Clark v Smith [1939] 4 All ER 59; Digest Supp.

Cope v Rowlands (1836) 2 M & W 149; 12 Digest 273, 2232, 6 LJEx 63.

East Anglian Rys Co v Eastern Counties Ry Co (1851) 11 CB 775; 13 Digest 368, 1004, 21 LJCP 23, 18 LTOS 138.

Re Mahmoud & Ispahani [1921] 2 KB 716; 12 Digest 271, 2220, 90 LJKB 821, 125 LT 161.

Appeal

Appeal by the defendant from an order of His Honour Judge Drucquer, sitting in the Brentford County Court, dated 12 June 1939. The facts are fully set out in the judgment of Slesser LJ.

D N Pritt KC and R H T Whitty for the appellant.

A T Denning KC and Helenus P J Milmo for the respondents.

Pritt KC: There was ample evidence on which the judge could find the respondents guilty of fraud. His summing up contained all the ingredients of fraud, and he misdirected himself in law in holding that

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there was no fraud because the respondents made their misrepresentation from a good motive: Polhill v Walter. Under the Building Societies Act 1874, s 13, a building society may lend on real security. This society lent part of the loan on the security of a builders guarantee, which was a breach of the statute. The court must look at the substance of the matter. Otherwise a purely nominal transaction would be permissible.

Denning KC: There was no misrepresentation at all. The words “Security: one freehold dwelling-house” were not a representation that the house was the sole security, or by itself sufficient security. At most, this statement was ambiguous, and there was no evidence that the society or the plaintiff understood it in the sense alleged, or that the plaintiff acted on it. He had bound himself to the builders long before the statement was made. [Counsel referred to Smith v Chadwick, and on this point was stopped by the court]. The substance of the transaction is to be found only by looking at the deeds themselves: Inland Revenue Comrs v Westminster (Duke) and Yorkshire Railway Wagon Co v Maclure. On these deeds, the society lent £452 on the security of a freehold house, and took collateral security from the builders. The question is whether the transaction was within the powers conferred by the statute, or fairly incidental to or consequential upon those powers: A-G v Great Eastern Ry Co and A-G v Smethwick Corpn. The taking of collateral security is fairly incidental to the taking of primary security. The legislature have recognised this principle in the Housing Act 1925, s 92, and the Housing Act 1933, s 2. Those Acts assume that to take collateral security is within the powers of a building society, and the courts have taken the same view: Sheffield & South Yorkshire Permanent Building Society v Aizlewood, Hayes Bridge Estate v Portman Building Society, and Bradford Third Equitable Benefit Building Society v Borders. The Building Societies Act 1939, s 1, is declaratory of the position, and, notwithstanding s 17, can be considered in this case. Even if the transaction was ultra vires, it was not illegal. It was only unauthorised. The authorities show that in such a case the mortgage is good: Ayers v South Australian Banking Co. The society can sue a third person on the unauthorised transaction so long as this is not illegal: Street on Ultra Vires, pp 30-80, and Brice on Ultra Vires (3rd Edn), pp 653, 655, 701. [Counsel referred to Taylor v Chichester & Midhurst Ry Co (Directors etc), Re Coltman, Coltman v Coltman, Hayes Bridge Estate v Portman Building Society and Clark v Smith.]

Whitty in reply: An act may be made illegal by implication: Cope v Rowlands, East Anglian Rys Co v Eastern Counties Ry Co and Re Mahmoud & Ispahani. Where an act is ultra vires, only the corporation can raise the point: Street on Ultra Vires, p 30. By the authorities, where an act done by trustees is beyond their authority, but all the beneficiaries ratify it, then, if a beneficiary wishes to object

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to it, he can do so only under the exclusive equitable jurisdiction, and his remedy may be barred by various equitable rules: Taylor v Chichester & Midhurst Ry Co (Directors etc).

D N Pritt KC and R H T Whitty for the appellant.

A T Denning KC and Helenus P J Milmo for the respondents.

4 December 1939. The following judgments were delivered.

SLESSER LJ. In this case, the plaintiffs, a building society incorporated under the Building Societies Act, claim possession of a house and land in Feltham, Middlesex, the property of the defendant, under a mortgage to them of 29 September 1933, whereby the defendant, as mortgagor, among other matters, under cl 9 attorned tenant to the plaintiffs at a nominal rent. The defendant, who had taken shares in the society as a condition of an advance to him, failed to pay £40 2s, being subscriptions and fines covenanted to be paid under the mortgage, and on 5 July 1937, he was given one weeks notice to quit the premises. This sum of £40 2s is claimed in this action.

Subject to a defence of fraudulent misrepresentation, by which the defendant alleged that he was induced to enter into the mortgage, the defendants case is that in law the mortgage is void, and cannot be relied upon for any purpose by the plaintiffs, as being forbidden by the Building Societies Act 1874, s 13, and he counterclaims for a declaration that the mortgage is void. At the hearing, other defences were considered by the judge and negatived, and the defendant on this appeal concedes that he must fail unless he can establish that the mortgage is void, or that he was induced to enter into it by fraudulent misrepresentation.

The Building Societies Act 1874, s 13, provides as follows:

Any number of persons may establish a society under this Act … for the purpose of raising by the subscriptions of the members a stock or fund for making advances to members out of the funds of the society upon security of freehold, copyhold, or leasehold estate, by way of mortgage …

S 9 provides as follows:

Every society now subsisting or hereafter established shall upon receiving a certificate of incorporation under the Act, become a body corporate.

Before 1874, no provision existed in the earlier Acts providing for the incorporation of such societies.

In my opinion, the terms of s 13, defining, as they do, the purposes for which the society may be established and incorporated, constitute a restrictive and limiting definition, and, on general principle, acts not falling within the purposes there stated, or reasonably incidental thereto, would be beyond the powers of the society and void. In Sheffield & South Yorkshire Permanent Building Society v Aizlewood, it was decided that for a building society to secure the advantage of an inexpensive mode of recovering what is due by means of a personal guarantee of a third party, or by a charge on some readily available personal estate, was within the purposes of the building society as being incidental to the express power to make advances to members out of the funds of the society upon the security of freehold, copyhold or leasehold estate by way of mortgage, but, if the mortgage is secured otherwise than on the

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security of freehold, copyhold or leasehold estate at all, it is not valid: Cullerne v London & Suburban General Permanent Building Society, per Lindley LJ, at p 488. These principles are sufficient, in my judgment, to determine the matters raised in the first defence.

The material facts are these. In May 1933, the defendant negotiated with certain builders, New Ideal Homesteads Ltd, that they should sell to him a plot of land on a building estate known as the Hanworth Estate for £50, and build thereon a house for £425, a cost of £475 in all. On 20 May, he signed contracts with the building company for the purchase of the land and the erection of the house. The same day, he applied to the plaintiff building society for an advance upon the house, when constructed, of £452 8s. On 16 August, the plaintiffs valuers assessed the property at £475. No suggestion is here made that this was not an honest valuation.

The small difference between the advance and the total cost of the house and landnamely, 5 per cent of the valuewas to be paid to the builders by the defendant in cash. Thus, the application to the plaintiff society was for an advance amounting to 95 per cent of the value of the house and land as found by their valuers, a considerable, and perhaps by itself a precarious, accommodation. In reality, unknown to the defendant, the builders had agreed with the building society, in this case and in other cases on the estate, that the amount of the moneys advanced, not exceeding in the aggregate a sum equal to the difference between the sum advanced and 75 per cent of the value of the house and land, should be secured collaterally by the personal guarantee of two of the directors of the building company, and also that the building society should have a lien as security on a fund known as the “pool,” composed of payments paid into it in respect of every second house upon the estate and mortgaged, and later on every third house, and subsequently on other revised terms until the pool reached a certain sum. This is part of the normal procedure of such building societies, who are thus enabled with comparative safety to advance to the mortgagors far more than they would do without the collateral security of the builders. The evidence in this case, more particularly the plaintiff societys own agenda book, shows that their normal “lending limit,” to quote their own phraseology, is 75 per cent of the value of such a house and no more. In substance, therefore, the collateral security in such a case as this has induced them, not only to lend 75 per cent, as apparently they would have been willing to do without it, but also to lend another 20 per cent beyond that amount. The mortgage deed, which was entered into on 29 September 1938, contains no word which suggests that the advance is on any security other than that of freehold land. Indeed, it is stated in terms that the advance is upon the security of the property.

It is argued, however, for the defendant that, so far as the security is concerned, the entry in the mortgage deed is, by omission of the collateral security, falsa demonstratio, and it is argued that the court

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is entitled to go behind the words and ask whether in fact the plaintiffs, in making the advance, were not making itat any rate, as to £98, 20 per cent of the valueon security other than that of land. I agree that there may be cases where the advance is on a security merely nominal, or where the advance exceeds the value of the property, where it might be right to enter into such an inquiry, but the real question in the case is, whatever may have been the inducement to the plaintiffs to make so large an advance on the security of the value, whether it was not nevertheless an advance secured upon the freehold, and that notwithstanding, as appears to be the case, that without the collateral security the plaintiffs would have advanced only up to 75 per cent of the value.

If it be right, as I think it is, to hold that a collateral security for a certain sum which the plaintiffs might otherwise have hesitated to advance upon the security of land alone will not prevent that advance, if made upon the security of land with collateral security (even though such collateral security be the deciding factor in inducing the mortgagee to make the advance), being within their statutory powers, it is difficult to see why an advance of a sum beyond what the mortgagees would ordinarily lend because of a collateral security, limited in amount to the excess, is not equally an advance upon the security of the land, if, on the face of it, it purports to be such a security. The absence of knowledge of the mortgagor of the collateral security seems to me immaterial in considering the validity of the advance as regards the statutory power. Of course, if the advance upon the security of the land is not as stated, but is a mere cloak to enable the advance to be made upon personal security, it might be otherwise. However, that is not this case. There are some observations on this matter made obiter by Stirling J, in Sheffield & South Yorkshire Permanent Building Society v Aizlewood which call for consideration. Speaking of what is beyond the powers of a society under s 13 of the 1874 Act, he says, at p 451:

… the propriety of the transaction is to be tested as if no such ingredient [of personal security] entered into it. If there be no freehold, copyhold, or leasehold estate comprised in the security, or if the estate so comprised be merely nominal, or its value out of all proportion to the amount advanced, the transaction is beyond the powers of the society, and invalid; but where, as here, the borrower offers as security such estate to a substantial extent, an advance is within the powers conferred by the Act of 1874, and the question for the officers of the society to determine is what amount may properly be advanced, and that question they must decide having regard solely to the nature and value of the freehold, copyhold, or leasehold estate offered to them, and without reference to the solvency of the borrower or the worth of any personal estate he may be willing to throw in by way of security.

These words, if construed literally, might support the argument for the defendant here that, in considering what may properly be advanced, the society did not have regard solely to the value of the freeholdif they had, it is clear from their own admission that they would not have advanced the last £98but did consider what might be thrown in by way of security by the builders. However, such a test can only be properly implied, I think, as an element in considering whether the

Page 433 of [1939] 4 All ER 427

estate comprised is merely nominal, or whether its value is out of all proportion to the amount advanced. If it be taken to mean that the lender may not risk a greater advance on the security of the land than he would otherwise grant because of the collateral security, then respectfully I must comment that I can find nothing in s 13 of the 1874 Act which prevents an indulgent lender from lending up to the whole ascertained value of the land as sole security, nor to prevent a more hesitant lender from increasing his risk by reason of the presence of a further considerationnamely, a sufficient collateral security, again up to the full value, or any less amount. In this conclusion, I agree with the view expressed by Bennett J, in Bradford Third Equitable Benefit Building Society v Borders. The fact that, unknown to the defendant, the plaintiff society took a collateral security, albeit limited in amount, to cover their very considerable advance to him on the security of his freehold does not make that advance any the less one expressly authorised by the statute. I conclude, therefore, that this advance and mortgage were within the powers of the society, and were valid.

I pass, therefore, to the other defence to the enforcement of the plaintiffs rightsnamely, the plea that the defendant was induced by false and fraudulent misrepresentation of the plaintiffs to enter into the mortgage instrument. The representation here relied on is said in the particulars of defence to have been made by letter dated 22 August 1937, and to have been in truth and in fact false to the plaintiffs knowledge, the representation being that the dwelling-house and land were a sufficient security for an advance of £452 8s, and were worth in fact £475.

The facts proved at the trial were that on 26 May 1933, the defendant signed a form in the form of answers to printed questions in which he stated that the land cost £50 and the liability to the builders on the building contract was £425. He asked for an advance of £452 8s, to be repaid in 20 years. The security offered was the land and house. On 22 August, after the valuation which I have mentioned, came the letter relied upon by the defendant:

… the directors have granted to you [the defendant] the undermentioned advance subject to the title of the property offered as security being satisfactory and subject to the rules. Security: The freehold dwelling-house situate 71, Hounslow Road, Feltham, Middlesex: advance £452 8s. (five 8/10th shares) on the second C. Table, interest 5 per cent., term 18 years 10½ months, lunar monthly payments £2 18s.

The judge has held that this letter was a representation that the house was a sufficient security for the building society, but that the house was not. He says:

In my opinion, the building society would never have advanced that amount upon the security of the house. It was only because of the fact that they had good collateral security for the excess that they made the advance they did. I think there is in this letter a representation that the security was sufficient for the advance. It certainly was not sufficient, and it was known perfectly well to the society that it was not a sufficient security. I think that, if they had put that in with the intention of concealing it from the mortgagor, I should consider that the defendant had succeeded in this case, but I do not think that there was any intention to defraud at all. I think that the building society advanced the money on what

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they believed to be the true value of the propertynamely, £475and that the only reason they did not make a show of the collateral security which they were obtaining was that they thought it might be detrimental to business, in that the mortgagor would become careless, because he would say to himself: “It is all right. If I do not pay this, they have other security.” It was only £98, but that is the kind of thing which would get into the minds of some people who bought houses on estates of this kind, and for that reason it was not disclosed. I was inclined to think that there was a misrepresentation, but the collateral security was concealed for a good purpose, and not with the intention in any way of committing a fraud. In those circumstances, I do not think that the defendant is entitled to succeed.

In coming to this conclusion, the county court judge must be taken to have accepted the evidence of Bentley, the secretary of the society, that the society took the view that to inform the borrower about the collateral security might lead to slackness on his part. On this issue of deceit, the judge appears to have failed to give adequate consideration to the nature of the alleged representation of the society upon which reliance was placed. It will be remembered that on 20 May 1933, the defendant applied for an advance of £452 8s, and stated that the cost of the house and land would be £475. He asked, therefore, for an advance of 95 per cent of the cost, stating that the security would be the house and land. In fact, on 16 August, the plaintiffs valuers stated the house to be worth £475, and on 22 August the society wrote the letter said to contain the fraudulent representation, in which they stated that the security would be the house and land. That statement in fact was but a repetition of the security stated by the applicant himself. True it is that they did not tell him that they had collaterally secured themselves by the builders guarantees and lien, and for the reason, as the judge finds, that they feared it might have the effect of making the defendant less punctual with his payments, but how the omission of a reference to the collateral security could amount to a false representation to the defendant that the security which he offered was sufficient, or not worth in fact £475, I cannot appreciate. No false representation appears to me to have been made at all. There was merely an acceptance of the defendants own statement.

Moreover, even if the statement of the security in the letter of 22 August could be taken to be a false representation, I am unable to see in what way it can be said to have induced the defendant to act to his detriment. He had already agreed to buy the house and land for £475. He knew that the valuers had put that value upon the property, and he had applied to the plaintiff society for accommodation. The defendant alleges that this representation was to the effect that the house and land were a sufficient security for the advance of £452 8s, and that they were worth at least £475. The defendant had already agreed to pay the builders that sum, and it had no relation to his request for an advance. Nor can it possibly be said that, when he agreed to pay the builders £475, he relied upon any representation by the plaintiff society. As to the £452 8s, if it be assumed that he was led to believe by the plaintiff society that the house and land were sufficient security for that sum,

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in what way can it be said that he was induced to alter his position by taking an advance of that sum? Can it be argued that, if he had known the full facts, he would have refused the 95 per cent advance? There is no suggestion in the evidence to that effect.

The relevant evidence of the defendant on this head is as follows:

I heard about the collateral security for the first time in 1936. It amazed me. I wondered why they advanced so much money on such property. I concluded I had been caught. I did not know they were not lending everything apart from the deposit.

In cross-examination, he said:

I should have been told the house was not worth the money. I still consider there is fraud.

If this means anything, it is a complaint that the true value of the house was misrepresented to him. That, however, was a matter between him and the builders. He may well have thought that the plaintiff society were lending everything apart from the deposit, but there is no suggestion of conspiracy between them and the builders, and his liability to the builders was quite irrespective of his liability to the plaintiff society. For all these reasons, the defence founded upon deceit also fails. In my opinion, there was no false representation (even by omission) made to him by the plaintiff society, and, if there were, there is no evidence that he was induced by it in any way to alter his position to his detriment, or at all. In the result, this appeal fails, and must be dismissed with costs.

LUXMOORE LJ (read by Slesser LJ). The Halifax Building Society (hereinafter called “the society”) instituted proceedings in March 1938, in the Brentford County Court against Salisbury, a member of the society, for possession of a house formerly known as No 71, Finchley Road, Feltham, but now known as No 205, Hounslow Road, and for the sum of £40 2s for arrears of subscriptions and fines. The basis of the claim was a mortgage, dated 29 September 1933, under which the society advanced to Salisbury the sum of £452 8s upon the security of the house in question. The mortgage contained a provision under which Salisbury attorned tenant of the house to the society. The society claimed that it had terminated this tenancy by notice to quit, dated 15 July 1937. Salisbury put forward a number of defences. I need refer to only two of these. They are, first, that he was induced to enter into the mortgage by the fraudulent misrepresentations of the society, and, secondly, that the mortgage was ultra vires the society, because it was in breach of the Building Societies Act 1874, s 13, and was, therefore, unenforceable and void. It was further suggested that the mortgage was ultra vires the rules of the society, but I need not deal with this, because the rules cannot carry the case beyond the provisions of the section. By way of counterclaim, Salisbury sought to recover damages against the society for the alleged fraudulent misrepresentations, and

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claimed a declaration that the mortgage was void, an order for its delivery up for cancellation, repayment to him by the society of a sum of £132 4s 6d paid by him to the society under the mortgage, and an injunction to restrain the society from lending money otherwise than upon the freehold or leasehold property on the security of which such advances purport to be made, or from advancing upon the security of any premises in excess of those for which, in the bona fide opinion of the directors of the society, such premises are sufficient security. The society denied that any representations made by it were false or fraudulent to the knowledge of the society, or that Salisbury was induced to enter into the mortgage by the alleged representations, or any of them. The society also denied that the mortgage was either ultra vires or unenforceable. The action was heard by His Honour Judge Drucquer on 12 June 1939. After a prolonged hearing, the judge gave judgment for the society for possession and for the sum of £40 2s and costs, and dismissed the counterclaim with costs. Salisbury appeals against the order for possession and for payment of the £40 2s, and asks that the societys claim may be dismissed. On the counterclaim, he asks for judgment for the sum of £87 by way of damages in respect of the alleged fraudulent misrepresentations, for a declaration that the mortgage is ultra vires and void, and for its delivery up for cancellation, as well as for an order for the repayment to him by the society of the sum of £132 4s 6d. No relief is now asked by way of injunction.

As I have already said, there are two main questions to be considered. Each is separate and distinct from the other. Logically, the first point to be determined is whether the mortgage executed by Salisbury in favour of the society is ultra vires, and, therefore, unenforceable or void. If this question should be decided in favour of Salisbury, the question of misrepresentation and the relief based thereon would become of academic interest only, for counsel for the appellant admitted that, if he succeeded on this ground, any claim to damages in respect of the alleged misrepresentations would be merged in the relief obtained by reason of the cancellation of the mortgage. I will therefore deal first with the question whether or not the mortgage is ultra vires. Its solution is said to depend on a determination of what is the true construction of the Building Societies Act 1874, s 13. Before I refer to the Act, it is necessary to state the facts material to be considered. On 26 May 1933, Salisbury entered into two agreements with a company called New Ideal Homesteads Ltd (hereinafter called “the builders”), one being for the purchase for the sum of £50 of a plot of land on the Hanworth Park Estate, which was being developed as a building estate by the builders, and the other for the erection by the builders of a house on that plot for the sum of £425. The total cost to Salisbury of the house and land was £475. It was a term of the arrangements between the builders and Salisbury that he should make a small cash payment and that the balance of the purchase price should be obtained from the society on

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a mortgage of the house and land for the sum of £452 8s, repayable by monthly instalments in accordance with the rules of the society. The builders were enabled to offer these terms because they had already made an arrangement with the society that, in the case of every mortgage effected by the society in respect of houses on the Hanworth Park Estate where the amount secured was equal to 95 per cent of the value of the house and land mortgaged, the amount of the moneys advanced, not exceeding in the aggregate a sum equal to the difference between the sum actually advanced and 75 per cent of the value of the house and land mortgaged, should be collaterally secured by the personal guarantee of two men named Shepherd and Meyer, who were directors of the builders, together with a charge on a fund referred to in these proceedings as “the pool,” which was built up and fed by cash payments which decreased as the total amount in the pool increased. When the pool was started, £20 was paid into it in respect of every second house upon the estate mortgaged to the society. This was subsequently reduced to a like payment in respect of every third house, until the pool reached £5,000. Then payments into it were further reduced to the payment of the like deposit in respect of every fourth house. This was subsequently further reduced to a payment into the pool in respect of every fifth house. The mortgage in question was entered into on 29 September 1933. It is expressed to be made between Salisbury, who is described as a member of the society, of the one part and the society of the other part. The mortgage contains a recital that Salisbury had applied to the society for an advance of £452 8s, being the amount to which he was entitled according to the rules of the society in respect of five 8/10 shares held by him in the society, and that the society had agreed to advance that sum upon having the repayment of combined principal and interest thereon secured in manner thereinafter appearing. By cl 2, it was stated that the sum of £452 8s was advanced upon the terms of the societys second C Table, under which no profits are allowed in respect of the sum per share advance, and the sum advanced is repayable in 18 years 10½ months, to be computed from the monthly subscription meeting next preceding 29 September 1933, by payments of 10s every month for each share, such payments to be made at the monthly subscription meetings. These meetings are defined by the rules of the society, but I need not pause to explain what that definition is. By cl 3, Salisbury covenanted to pay the prescribed monthly payments on the appropriate days, together with such fines, fees and other moneys as might become payable by him to the society under its rules in respect of the shares for the time being held by him. By cl 4, Salisbury demised the house and land to the society for the term of 3,000 years from the date of the mortgage, subject to a proviso for cesser of the term upon payment of all moneys payable for the redemption of the mortgaged property in accordance with the rules of the society and the covenants entered into by him in the mortgage. I need not refer to any of the

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other provisions of the mortgage. It is sufficient to state that there is no reference in the deed to any collateral security, whether arising by reason of the guarantee given by Shepherd and Meyer or by reason of the charge on the pool.

If one looks at the mortgage deed alone, it appears to be a simple mortgage in one of the common forms usually adopted by building societies to secure the repayment of a loan with interest thereon by monthly instalments secured by a demise for the usual term of 3,000 years of freehold property. There is certainly nothing on the face of it to suggest that it is, or might be, ultra vires the society, or that it is, or might be, unenforceable. It is said, however, that it is ultra vires owing to the existence of the collateral security provided in accordance with the arrangement to which I have referred. This collateral security was afforded under a deed dated 29 September 1933, and made between Shepherd and Meyer of the one part and the society of the other part. It secured what are therein defined as “the excess advances”namely, the sum of £98, part of the £452 8s advanced to Salisbury at the request of Shepherd and Meyer in excess of the normal lending limit of the society, which was stated in evidence to be £355, together with interest on the said sum of £98 at the rate specified in the mortgage of 29 September 1933, from the date therein specified.

The argument is that, because the normal practice of the society was to advance not more than three-quarters of the value of any property charged to it in the absence of collateral security, the mortgage in the present case must in substance be treated as if the amount in excess of 75 per cent of the value of the property had been advanced on the security of the personal guarantee and charged on the pool, and not upon the security of the property mortgaged. The Building Societies Act 1874, s 13, provides as follows:

Any number of persons may establish a society under this Act, either terminating or permanent, for the purpose of raising by the subscriptions of the members a stock or fund for making advances to members out of the funds of the society upon security of freehold, copyhold, or leasehold estate, by way of mortgage; and any society under this Act shall, so far as is necessary for the said purpose, have power to hold land with the right of foreclosure, and may from time to time raise funds by the issue of shares of one or more denominations, either paid up in full or to be paid by periodical or other subscriptions, and with or without accumulating interest, and may repay such funds when no longer required for the purposes of the society. Provided always, that any land to which any such society may become absolutely entitled by foreclosure, or by surrender, or other extinguishment of the right of redemption, shall as soon afterwards as may be conveniently practicable be sold or converted into money.'

If one is to arrive at a proper conclusion as to the meaning of this section, it is necessary to understand with what object the Act was passed. Building societies had been in existence for many years before 1874. The earliest Act relating to them was passed in 1836. Its title is “An Act for the regulation of Benefit Building Societies.” The first recital in the preamble to the Act is not without interest in the present case:

Whereas certain societies commonly called building societies have been established

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in different parts of the kingdom principally amongst the industrious classes for the purpose of raising by small periodical subscriptions a fund to assist the members thereof in obtaining a small freehold or leasehold property, and it is expedient to afford encouragement and protection to such societies and the property obtained therewith. …

The Act provides (to quote the side note in the Kings Printers copy of the Act) that societies may be established for the purchase and erection of dwelling-houses. This is to be accomplished by raising by monthly or other subscriptions of members of the society:

… a stock or fund for the purpose of enabling each member thereof to receive out of the funds of such society the amount or value of his or her share or shares therein, to erect or purchase one or more dwelling-house or dwelling-houses, or other real or leasehold estate to be secured by way of mortgage to such society until the amount or value of his or her shares shall have been fully repaid to such society with the interest thereon, and all fines or other payments incurred in respect thereof. …

There is no provision limiting the amount to be advanced to any defined proportion of the purchase price or value of the property to be charged, nor is there any express prohibition against the giving by, or taking from, the mortgagor or any other person of collateral security for the moneys advanced to the member, whether the nature of the collateral security be real, chattel real, or purely personal. S 4 of the 1836 Act incorporates the provisions of the Friendly Societies Act 1829, and the Friendly Societies Act 1834, so far as the same or any part thereof might be applicable to the purpose of any benefit building society and to the framing, certifying, enrolling or altering the rules thereof:

… in such and the same manner as if the provisions of the said Acts had been herein expressly re-enacted.

There is no provision for the incorporation of building societies in the 1836 Act.

The Building Societies Act 1874, is intituled “An Act to consolidate and amend the laws relating to Building Societies.” By s 7 of this Act, the 1836 Act was repealed, but the section expressly provides that the repeal shall not affect any subsisting society certified under the 1836 Act until such society should have obtained a certificate of incorporation under the 1874 Act. S 9 provides as follows:

Every society now subsisting or hereafter established shall, upon receiving a certificate of incorporation under this Act, become a body corporate by its registered name, having perpetual succession, until terminated or dissolved in manner herein provided, and a common seal.

The society was incorporated under the 1874 Act. S 13, to which I have already referred in full, states the purpose for which building societies may be established. The words are not the same as those set out in the recital in the preamble of the 1836 Act already quoted, but in substance they show that the object of a building society under the 1874 Act was similar to the object recited in the earlier Actnamely, the setting up of a fund from subscriptions by members for the purpose of making advances to members on the security of freehold, leasehold

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or copyhold property. It is to be observed that the object, so far as advances are concerned, is limited to advances made to members, and there is no power in the section to advance the societys moneys on mortgage to persons other than members.

The 1874 Act contains in s 16 provisions with regard to the rules of a building society. The matters to be dealt with include the purposes to which the funds of such a society are to be applied and the manner in which they are to be invested, while s 25 provides for the investment of moneys of a building society not immediately required for its purposes. The classes of investment authorised do not include mortgages or charges upon pure personalty. The 1874 Act, like the 1836 Act, contains no provision limiting the amount to be advanced by a building society to one of its members to any definite proportion of the purchase price paid for, or the value of, the mortgaged property, nor is there any express provision prohibiting the giving by, or taking from, the mortgagor or any other person of collateral security for moneys advanced, whatever the nature of such collateral security may be. The object of the 1874 Act seems to have been to provide for the incorporation of building societies and the regulation of their business. Clause 13 defines such objects of the building society as would be expected to be found in the memorandum of association of a limited liability company if the building society were so constituted, while the rules to be framed under s 16 of the 1874 Act seem to correspond to the provisions usually to be found in the articles of association of such a company. It seems to me that, in considering the scope of the objects of a building society under s 13 of the 1874 Act, it is permissible to include in those objects all such powers as are not expressly prohibited, but can reasonably be said to be ancillary to the primary object. It was laid down in Wenlock (Baroness) v River Dee Co, per Lord Watson, at p 362:

Whenever a corporation is created by Act of Parliament, with reference to the purposes of the Act, and solely with a view to carrying these purposes into execution, I am of opinion not only that the objects which the corporation may legitimately pursue must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of those objects must either be expressly conferred or derived by reasonable implication from its provisions.

In addition to this, I would refer to what was said by Lord Selbourne LC, in A-G v Great Eastern Ry Co, at p 478:

… whatever may fairly be regarded as incidental to, or consequential upon, those things which the legislature has authorised, ought not (unless expressly prohibited) to be held, by judicial construction to be ultra vires.

There are many cases to the same effect. Apart from any express prohibition, there is nothing illegal in taking collateral security for a mortgage, and there can be little doubt but that, by taking such security, the primary object of a building societynamely, to lend to its members money on the security of land and houses, whatever be the tenure, for the purposes of enabling them to purchase such land or houses, or to

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build housesmay in all probability better be achieved. If this be so, the taking of such security would certainly appear properly to be ancillary to the primary object. In the absence of express authority to the contrary, on this aspect of the case I should have no hesitation in holding that the taking of collateral security in support of a mortgage to a building society is not ultra vires the society. It is not uninteresting to observe that the legislature appears to have recognised that a building society incorporated under the Building Societies Acts may take collateral security in support of a mortgage to any of its members. This recognition is to be found in the Housing Act 1925, s 92(b), which empowers local authorities to guarantee repayment to a building society incorporated under the Building Societies Acts 1874 to 1894, of advances made by the society to any of its members for the purpose of enabling them to build or acquire houses. It is also to be found in the Housing (Financial Provisions) Act 1933, s 2, which empowers the Minister of Health to reimburse to a local authority part of the losses sustained by it under guarantees given to building societies under the section of the 1925 Act to which I have just referred. Of course, if the taking of collateral security for, or its inclusion in a mortgage by, a member of a building society is made in such circumstances that, having regard to the nature and value of the security comprised therein, with reference to the value of the real or chattel real security, it could be demonstrated that the transaction was merely colourable in order to prevent the transaction falling outside the ambit of the primary object of the society, different considerations would apply. For example, an advance of £1,000 on the security of a few square feet of freehold land coupled with a collateral security charged upon consols to the market value of £1,500 would plainly be a colourable transaction, which would fall outside the scope of s 13, and would therefore be ultra vires. The fact that the margin of value over and above the amount advanced is small, and that consequently the society is unwilling to make the advance requested in the absence of collateral security, cannot, however, be the test to be applied in order to determine the question whether or not the mortgage is ultra vires. If this were so, the strange result would follow that, in all cases where collateral security was unnecessary, having regard to the margin of value existing in the mortgaged property, the taking of collateral security would be intra vires, but, in those cases where it was reasonable to require some collateral security owing to the smallness of the available margin of value, the mortgage would be held to be ultra vires, and the object of the Actnamely, to enable persons who are otherwise unable to provide a substantial part of the purchase price to borrow the money necessary for that purposewould thereby be frustrated. This aspect of the section was considered by Stirling J, in Sheffield & South Yorkshire Permanent Building Society v Aizlewood. There the question raised was whether or not the directors of a building society who had advanced moneys of their society on a mortgage of

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leasehold property, together with a second mortgage of a colliery business and a collateral security by way of charge upon certain beneficial interests under a trust of personal estate, were liable for losses which arose out of the transaction. It was argued that the existence of the collateral security vitiated the whole transaction and rendered the directors liable for the loss. Stirling J refused to accept this argument, and held that they were not so liable. He said, at p 451:

… it was contended that the inclusion of those interests [that is, the personal property] in the securities vitiated the whole transactionthat, in fact, the inclusion of any personal element in the security would vitiate such a transaction. If this contention were well-founded, then it would seem to follow that the inclusion in a building societys mortgage of a personal covenant by the mortgagor for repayment of the advance, and reliance placed by the officers of the society on the solvency of the mortgagor, might equally vitiate any transaction of which those were elements. Yet it was not disputed in argument, and in my judgment properly, that a building society making an advance to a member on the security of freehold, copyhold, or leasehold estate, might take from him a personal covenant for payment of what might be due from him to the society, and I think that the officers of the society might, to a certain extent, and for certain purposes, rely on the solvency of the mortgagor. For example, an action on the covenant of a solvent borrower affords an effectual and comparatively speedy and inexpensive mode of recovering what is due, and may be the means of avoiding the delay, costs, and liability incident to remedies (such as foreclosure, sale, or entry into possession) available only against the subject-matter of the security. If the circumstances of the borrower are such that his personal covenant is without value, the building society may, in my opinion, secure a like advantage by means of the personal guarantee of a third party or a charge on some readily available pure personal estate. The benefit so obtained must, however, be purely collateral, and the validity or propriety of the transaction is to be tested as if no such ingredient entered into it. If there be no freehold copyhold, or leasehold estate comprised in the security, or if the estate so comprised be merely nominal, or its value out of all proportion to the amount advanced, the transaction is beyond the powers of the society, and invalid; but where, as here, the borrower offers as security such estate to a substantial extent, an advance is within the powers conferred by the Act of 1874, and the question for the officers of the society to determine is what amount may properly be advanced, and that question they must decide having regard solely to the nature and value of the freehold, copyhold, or leasehold estate offered to them, and without reference to the solvency of the borrower or the worth of any personal estate he may be willing to throw in by way of security.

As I understand this passage, the test which the judge says should be applied in determining whether or not a mortgage in favour of a building society by one of its members is within the powers conferred by s 13 of the 1874 Act is that one must look at all the circumstances relating to the loan, and, if it should appear that the transaction is colourable by reason of the fact that the real and chattel real property comprised in the security is of nominal value, or of a value so small that it is out of all proportion to the amount advanced, the transaction is beyond the powers of the society. In the latter part of the passage I have quoted, the judge seems to suggest that the question of ultra vires may depend on the opinion of the directors as to the amount which may properly be advanced, and it was argued that the question of ultra vires in the present case depended on the decision of the directors that they would or would not lend more than the normal three-quarters of the value in the absence of the collateral security. In my judgment, this is not a fair reading of the passage in question. The judgment must be read as a whole. If this is done, the test laid down appears to be that the mortgage must be

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considered by itself, the question then being whether the freehold security is merely nominal or whether its value is out of all proportion to the amount advanced. In all cases where the advance is made on the security of property to be purchased in part out of the money advanced, the purchase price, if it accords with the value of the property, must afford the true criterion. If the amount of the advance is, in such a case, less than the amount of the purchase price, the transaction cannot be ultra vires. Bennett J applied the decision of Stirling J, in Sheffield & South Yorkshire Permanent Building Society v Aizlewood to the facts before him in Bradford Third Equitable Benefit Building Society v Borders, which are very similar to those of the present case. In so doing, he put the same construction on the passage I have quoted from the judgment of Stirling J as that which I have expressed above, for he summed up the case he had to consider by saying, at p 526 ([1939] 1 All ER, at p 496):

It is a mortgage of freehold estate. The security of the freehold estate is not merely nominal. As between the plaintiffs and the defendant the transaction is one of loan on the security of freehold property. It is not a case in which freehold land has been added to unauthorised security merely to make it appear that the transaction was one of loan on authorised security when the truth was otherwise.

Applying the same test to the facts of the present case, I come to the conclusion that the mortgage of 29 September 1933 was not ultra vires the society. It was said, however, that, if one looks at the agenda book of the society, it appears that the society were prepared to lend only £355 on the security of the freehold property, and that in truth and in fact £98 was lent on the security of the guarantee and charge given by Shepherd and Meyer. I am unable to follow this argument. The £98 was not secured solely or primarily on the security of the guarantee or charge. It was secured equally with the rest of the £452 8s, the whole of which was advanced primarily on the freehold property. If that property realised on the enforcement of the security more than sufficient to repay the £452 8s, no part of the collateral security would be liable to answer for any part of the advance. In such an event, it would be unnecessary to have recourse to the collateral security, and the position would be the same as it would be if no collateral security had in fact been taken. It is indeed difficult to understand how, in such a case, the transaction could be said to have been ultra vires from the moment the mortgage had been entered into. In ascertaining what is the real transaction between the parties, it is essential to consider the legal effect of the documents entered into: Inland Revenue Commissioners v Westminster (Duke), per Lord Tomlin, at pp 20, 21. The mortgage imposes on Salisbury the legal obligation of repaying the whole of the money advanced, and charges the whole of that money on the mortgaged property. As between himself and the society and its guarantors and the pool, the primary liability is placed on Salisbury and the mortgaged property. The guarantors and the pool are liable only secondarily. Indeed, at the time the mortgage was executed, Salisbury was ignorant

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of the existence of the guarantee and the pool. It is true that the society required the secondary security, but there is no substitution of the secondary security for that of the mortgage. It was suggested that the real transaction between the parties was that £355 should be secured on the freehold property and £98 by the guarantee and the charge on the pool. There would have been justification for this view if the value of the freehold property had not, to the knowledge of the society, exceeded £355, for in that case, although the £98 was in form charged with the other £355 upon the freehold property, there would have been no real prospect of recovering it from any source other than the guarantee and the charge on the pool. In such a case, the guarantee and the supporting charge could not properly be said to be a collateral security in the real sense of the term. The county court judge has held that the society were advised by a competent surveyor that the property was worth £475, and were entitled to believe, and in fact did believe, that this was the fact.

So far, I have dealt with the case on the footing that the giving of the collateral security was, as in Aizlewoods case, a term of the bargain between the society and the mortgagor, and as if the collateral security were included in the mortgage securing the advance. This, however, is not the fact, for here the transaction was carried out as the result of two separate agreements, one between the society and Salisbury and the other between the society and Shepherd and Meyer. The first agreement constituted the mortgage transaction between the mortgagor and mortgagee. The second constituted the collateral security for the mortgage. As I have already said, it is established that Salisbury had no knowledge of the existence of the second agreement. So far as he is concerned, the mortgage is in accord with the agreement into which he entered. If this agreement had stood alone, it could not have been held to be outside the scope of s 13 of the 1874 Act, although, having regard to the margin of the security, it may have been considered somewhat hazardous on the part of the society to enter into it. When the transaction is considered from this aspect, however, it must be remembered that the moneys advanced are repayable by monthly instalments of principal and interest, starting at the expiration of one month from the date of the mortgage. There is nothing in the 1874 Act to suggest that the taking of collateral security from a third party for a mortgage intra vires the society can itself be ultra vires. It is to be observed that no advance is made to the guarantors, and that what is charged on the pool is any ultimate loss accruing to the society under the mortgage, with a limitation on such loss to a sum not exceeding £98. Further, it is difficult to appreciate how a transaction within the powers of the society can become ultra vires by reason of an agreement between the society and the guarantors of which Salisbury was in complete ignorance, and which is in itself unobjectionable except upon the footing that the transaction treated as a whole was colourable, and

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entered into in order to enable the society to advance money in a manner not authorised by the Act of Parliamentnamely, on personal security. As I have already said, I am unable to come to the conclusion that this was the object of the transaction.

Our attention was called to the decision of this court in Cullerne v London & Suburban General Permanent Building Society, where Lindley LJ said, at p 488:

On looking carefully at the statutes by which these societies are governed, viz., the Building Societies Act, 1836, s 4, and the previous statutes there referred to, viz., Friendly Societies Act, 1829, ss 2, 13, 30 and 31, and the Friendly Societies Act, 1834, s 9, it certainly does appear that building societies can only advance money on the security of landed property, freehold, copyhold, or leasehold.

The Building Societies Act 1874, is to the same effect, except that public funds are added. In the case then under consideration, the advance was to a member of the society on the security of his shares in that society, and the point considered by Stirling J and Bennett J respectively, did not, therefore, arise. In my judgment, the decision in Cullernes case affords no assistance in the consideration of the present case.

I have no hesitation in holding that the mortgage of 29 September 1933, is not ultra vires the society. Since the hearing of this case in the county court, an Act has been passed which deals expressly with the future construction of s 13 of the 1874 Act. It is the Building Societies Act 1939. S 1 provides that, in determining the amount of any advance made before the commencement of this Actnamely, 4 August 1939upon the security of freehold, copyhold or leasehold estate, a building society shall be deemed always to have had power to take into account, besides the value of the freehold, copyhold or leasehold estate, the value of any additional security for the advance. There is, however, an express provision in s 17 of the Act to the effect that nothing in the Act shall deprive a party to any proceedings which were instituted in any court before 21 February 1939, of any relief to which the party would have been entitled in those proceedings if the Act had not been passed. The present proceedings were instituted in March 1938, and the Act has no application to them. It was argued by counsel for the respondents that this Act ought to be considered in construing s 13 of the 1874 Act. I am unable to accede to this argument. In my judgment, the 1939 Act leaves the question of the true construction of s 13 of the 1874 Act undisturbed, so far as this appeal is concerned.

An interesting argument was addressed to us on the difficult point whether or not, on the assumption that the mortgage was ultra vires the society, it was open to the defendant to raise by way of defence the question of ultra vires in order to avoid his own liability to the society. A large number of authorities were cited, including Re Coltman, Coltman v Coltman, a case not unlike the present, decided by the Court of Appeal in 1881. Having regard to the conclusion at which I have arrived that the mortgage of 29 September 1933 is not ultra vires, I find it

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unnecessary for me to deal with either of these points, and I refrain from expressing any opinion with regard to them.

The question whether the society made any misrepresentation to Salisbury which induced him to enter into the mortgage remains to be considered. The county court judge has dismissed the defendants counterclaim, but it is argued on his behalf that the judge in fact found that the society, although without intending to defraud him, made an untrue statement on which the defendant acted, and that, in these circumstances, the judgment ought to have been for him on this branch of his counterclaim.

It is, I think, material to understand what are the misrepresentations relied on in the pleadings. In para 2 of the particulars of defence and counterclaim, the defendant alleged that he was induced to enter into the mortgage of 29 September 1933, by the false and fraudulent representations of the society, their servants and agents. Particulars are given of the misrepresentations. It was said, first, that the dwelling-house was built in an efficient and workmanlike manner of proper materials and in compliance with the requirements of the local authority. The representation was made partly in a brochure issued by the builders with the authority of the society, and is partly to be implied from the societys conduct in having the property inspected by their surveyors at the defendants expense, and in accepting the surveyors report thereon on the defendants behalf. Secondly, it was said that the dwelling-house and land were a sufficient security for the advance of £452 8s, and were worth at least £475. The representation was made by letter dated 22 August 1933, and by the plaintiffs rules.

By para 3 of the particulars of the defence and counterclaim, it is alleged as follows:

… in truth and in fact the said representations were false to the societys knowledge.

By way of counterclaim, the defendant repeated paras 2 and 3 of the particulars of claim and counterclaim, and said that, by reason of the false and fraudulent representations, or, alternatively, by reason of the negligence of the societys surveyors, he was induced to enter into a contract to purchase the dwelling-house and land, and into the mortgage, whereby he had suffered damage. The county court judge has found that the society were in no way responsible for any misrepresentations made under subpara 2(1) of the particulars of the defence and counterclaim, that the society made no misrepresentation which induced the defendant to enter into the contract to purchase, and that there was no negligence on the part of the surveyors.

The defendant, as he was bound to do, has accepted these findings, and I need not deal with them further. The only question now raised is whether the execution of the mortgage by the defendant was induced by fraudulent misrepresentation. The circumstances are certainly peculiar, having, on 26 May 1933, entered into a contract with the

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builders for the purchase of the land and the erection of a house thereon by the builders at a total cost of £475, the defendant on the same date filled in a printed form supplied by the society, applying to it for an advance upon a mortgage of the land and house. The form contained a number of questions addressed to the defendant, which were answered by him or by some person on his behalf. These answers make it clear that the house to be mortgaged was in the course of construction, that the cost of the land was £50, and that the total amount of the building contract was for £425, making a total price of £475 for the land and the house to be erected on it.

The advance applied for by the defendant was £452 8s, the period of repayment asked being 20 years. The applicant was asked if he intended to occupy the property, to which he replied in the affirmative, and he was also asked to give the fullest details as to situation of the property to enable a surveyor to find the property. The surveyor referred to was obviously a surveyor to be employed by the society. The sole security offered by the defendant was the land and house.

Some time after this application, the society instructed a firm of surveyors, Messrs Gale, Heath & Sneath, to survey the defendants property and report on its value. A survey was made and a report sent to the society. On 22 August 1933, the general manager of the society wrote to the defendant as follows:

I am pleased to inform you that the directors have granted to you the under-mentioned advance subject to the title of the property offered as security being satisfactory and subject to the rules and to the completion date being approved by the society.

At the foot of this letter, it is stated that this advance is granted subject to the property being completed to the satisfaction of the societys surveyor, and the following information is stated:

Security: One freehold dwelling-house: Situate: 71, Hounslow Road, Feltham, Middlesex. Advance: £452 8s. (five 8/10th shares) on the second C. Table. Interest: 5 per cent. Term: 18 years 10½ months; lunar monthly payments £2 18s.

For all practical purposes, the information as to the security accords with that supplied by the defendant to the society in his application form.

It is difficult to see how an answer in the affirmative to a request for an advance can be said to be the inducement which caused the defendant to enter into the mortgage to secure the advance. The defendants counsel puts the case in this way. He says that the fact that the society agreed to make the advance after obtaining a surveyors report confirmed the defendant in the view that the price he had agreed to pay to the builders for the land and house was a proper price, and that the value of the property must substantially exceed that amount. He further argued that the statement that the security for the loan was to be the freehold house represented that this was the only security, and that, if he had been informed of the fact that the society had been

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given collateral security in addition to the security afforded by the house and land alone, he would have become suspicious, and would have taken steps to discover if he had any ground to set aside his contract to purchase the land and to build the house, his complaint being that, by reason of defective workmanship, the house was not in fact worth £475. Although I am clearly of opinion that it is expedient to inform a mortgagor, in a case like the present, that collateral security is being taken, I am of opinion that there was no duty on the society to disclose the fact that they had obtained collateral security, and I find it impossible to understand how an affirmative answer to an application to lend the sum asked on the security offered can be treated as a misrepresentation inducing the contract. As between the society and Salisbury, the society agreed to do precisely what Salisbury asked it to donamely, to lend him £452 8s on the security of a house and ground he was to acquire for a total expenditure of £475. The county court judge has found that the valuation obtained by the society was bona fide, and believed by the society to be a proper valuation, so that the society could not have known or suspected that the building was defective. Indeed, it was not completed at the date when the valuation was made.

I will assume, however, for the purposes of the defendants claim, that the offer to lend the money came from the society, and is contained in the letter of 22 August 1933. Is it possible to read into this letter the two statements which counsel for the defendant asks the court to donamely, first, that the house is worth a sum in excess of £475 sufficient to justify, on the basis of the normal three-quarters rule, a loan of £452, and, secondly, that it is the only security for the £452 8s to be advanced. It is a fact that £452 8s is to be advanced in respect of the house, which is to cost £475, and that, as between the society and Salisbury, the house is to be the sole security. The letter of 22 August 1933 is, to put it at its lowest, consonant with this state of facts, and was written, I think, without any improper purpose, and without any intention of making any false statement or concealment. The letter simply repeated what the society had already been told by the defendant in his application, and it was not intended by the society to do anything else. I am unable to read into the letter any statement which was false to the knowledge of the society, nor can I treat it as having been written with such carelessness as to constitute gross negligence sufficient to support an action for deceit, in which, of course, it is a necessary ingredient that an intention to deceive be found: Angus v Clifford. The county court judge deals with this letter as follows:

Then, coming to the second paragraph of the particulars, the plaintiffs are alleged to have represented that the dwelling-house and land were a sufficient security for the advance of £452 8s., and were worth at least £475. That, I think, rests upon the letter of Aug. 22, 1933, in which it is stated: “Security: One freehold dwelling-house situate at 71, Hounslow Road. Advance of £452 8s.” In my opinion, when one considers the class of people to whom that representation was made, a small householder, perfectly intelligent and respectable, but not a man used to dealing with large transactions and that kind of thing, I think that that is a representation that

Page 449 of [1939] 4 All ER 427

it is sufficient security. It was not sufficient security for the building society, and, in my opinion, the building society never would have advanced that amount upon the security of the house. It was only because of the fact that they had good collateral security for the excess that they made the advance they did. The danger of this collateral security business without disclosure to purchasers of houses in estates of this kind has been dealt with by Bennett, J., and I do not think that I need repeat what he has said. It is a happy feature to find that a building society such as the Halifax Building Society, a very good building society indeed, has acted immediately upon the observations of Bennett, J., and now discloses the collateral security to the mortgagor. Be that as it may, I think that there is in this letter a representation that the security was sufficient for the advance. It certainly was not sufficient, and it was known perfectly well to the society that it was not a sufficient security. I think that, if they had put that in with the intention of concealing it from the mortgagor, I should consider that the defendant had succeeded in this case, but I do not think there was any intention to defraud at all.

With all respect, I am unable to follow this conclusion. The defendant knew that he had agreed to pay the total sum of £475 for the house, and, if by “sufficient security” is meant that there was a substantial margin of value in the house over the value of the £452 8s being lent, it is difficult to see any justification for the view that, by agreeing to lend the amount advanced, there is any representation to the borrower applicant of the nature suggested.

The judge, after stating that he thought that in the societys letter of 22 August already referred to there was a representation that the security was sufficient for the advance, without in any way attempting to define what is meant by the word “sufficient,” proceeds as follows:

I think that, if they had put that in with the intention of concealing it [the collateral security] from the mortgagor, I should consider that the defendant had succeeded in this case, but I do not think that there was any intention to defraud at all.

I think that this is a finding that the letter was never intended by the society to have any other purpose than that expressed on its facenamely, that the society was willing to lend to the defendant the £452 8s he was asking them to lend because the surveyor had told the society that his house was worth the purchase pricenamely, £475. The judge goes on to state that the society advanced the money on what they believed to be the true value of the propertynamely, £475and that the only reason why they did not make a show of the collateral security (and I think this means generally, and does not refer to any failure to disclose it in the particular letter) was that the society thought that it might be detrimental to business, in that, the mortgagor would become careless and say to himself: “It is all right if I do not pay this. They have other security.” I must confess that I fail to appreciate the precise meaning of this sentence, but, reading it with the rest of the judgment, I am unable to read it as a finding that the society made any representation false to its knowledge, whether actively or by non-disclosure of the existence of the collateral security. The judge proceeds as follows:

I was inclined [at some time during the hearing but not at the moment of the judgment] to think that there was a misrepresentation, but the collateral security was concealed for a good purpose; and not with the intention in any way of committing a fraud.

Page 450 of [1939] 4 All ER 427

Of course, if the judge had found on proper material that there was an untrue representation, then, no matter with what purpose or intent it was made, the society would have been liable. However, as I have already pointed out, I do not think that the judge has so found, or intended so to find. If he had done so, I think that the finding, being one dependent entirely on the inferences to be drawn from the letter, would not have been justified. For the reasons I have stated, I think that the county court judge came to a correct conclusion with regard to the questions arising on both claim and counterclaim, and I agree, therefore, that this appeal against his order should be dismissed with costs.

ATKINSON J. This action arose out of a method of business adopted by building societies and builders for the last 10 years in the development of building estates. Building societies exist for the purpose of making advances to their members upon the security of land and houses to enable them to build or buy houses. Normally, societies will not lend more than 75 per cent of the value of a house, but experience has shown that many would-be purchasers are not in a position to find the remaining 25 per cent. To meet this difficulty, a system has grown up by which the building societies lend to the purchaser up to 95 per cent of the value of the house, taking, in addition to a mortgage on the house, collateral security from the builders to secure further the additional 20 per cent of the value advanced over and above their normal lending limit. The further security takes the form of a guarantee from the builders, supported by a charge upon a fund known as the pool, built up by contributions from the builders in the manner described by Luxmoore LJ. An arrangement was concluded in June 1932 between the society and a firm of builders, New Ideal Homesteads Ltd, for the development of the Hanworth Estate on these lines. There was one objectionable feature in the scheme (now forbidden by the Building Societies Act 1939). The purchaser was not informed of the giving of the further security. This concealment was of value both to the society and to the buildersto the society because they thought that, if the borrower knew that there was other security available, he might become slack in his payments, and to the builders because they were enabled to point to the fact that the building society were ready to advance 95 per cent of the cost of the house as evidence that the buyer was really getting value for his money, and could safely trust to the work being well done, without having any surveyor to act on his behalf.

The defendant visited the Hanworth Estate in May 1933. I need not go through the interview he had with the builders. He chose the type of house and his plot, and was told that the cost would be £475£50 for the land and £425 for the housethat the plaintiffs would lend £452 8s on mortgage of the house, and that he would have to pay a cash deposit of only £22 12s. When he talked about his own surveyor,

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he was successfully headed off in the way I have indicated. On 20 May 1933, he signed three documentsnamely, an agreement for the purchase of the land, an agreement for the erection by the builders of the house for £425, and an application to the plaintiff society for an advance of £452 8s upon the house. The house was built, and, as it neared completion, the plaintiff society instructed their surveyor to survey on their behalf. On 16 August, they reported that, after careful examination and consideration of the property, their valuation was £475. On 22 August 1933, the plaintiffs wrote to the defendant agreeing to make the advance requested. The relevant passages are as follow:

I am pleased to inform you that the directors have granted to you the under-mentioned advance subject to the title to the property offered as security being satisfactory. … This advance is granted subject to the property being completed to the satisfaction of the societys surveyor: Security one freehold dwelling-house situate at 71, Hounslow Road, Feltham, Middlesex.

The defendant read that letter as indicating that the only security for the advance was his house, and that that security was deemed sufficient by the society to justify an advance up to 95 per cent of the cost. It satisfied him that he could safely complete the transaction, and, relying upon it, he did so.

On 25 August, the valuers reported a further inspection, and stated that the proposed advance might then be made. On 29 September, the transaction was completed. The plaintiff society paid the sum of £452 8s on the written authority of the defendant, and the defendant executed a mortgage on his property securing repayment to the plaintiffs of that sum. The defendant went into possession. He soon found out that, metaphorically speaking, he had suffered a fate somewhat similar to that of the man who travelled from Jerusalem to Jericho. The house was disgracefully built. The workmanship was bad. The materials were bad. The bye-laws in many respects had been ignored. The county court judge has found that the cost of remedying the defects was nearer £110 than the £87 claimed. Unfortunately, the official employed by the local authority to inspect houses for the purpose of seeing whether the bye-laws had been complied with had, owing to his having too much to do, passed the house as complying with the bye-laws when it did not. The report of the surveyors for the plaintiffs (for which the defendant had to pay) was based on a misplaced confidence in the builders rather than upon any care or skill exercised by them. None of those matters, however, implicated the plaintiffs.

Three years after completion, the defendant, financially crippled by the expense to which he had been put, and by his wifes illness, which he attributed, rightly or wrongly, to the unhealthy condition of the house, began to get into arrears with his monthly payments to the plaintiff society. Then he learned of the existence of the scheme for further security, and learned that there had never been any real formulation for his belief that he could safely rely upon the house being

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well-built because the plaintiffs were advancing 95 per cent of the cost on the sole security of the house.

In this action, the plaintiffs are claiming possession because of the defendants failure to carry out the terms of the mortgage. It is admitted that they are entitled to judgment unless the defendant can establish either of the two defences raised. The first is that the defendant was induced to enter into the mortgage by the false representation, said to be contained in the letter of 22 August 1933, that the plaintiff society was advancing £452 8s on the sole security of the defendants house, thereby representing that the society deemed it well worth £475, and sufficient security for the advance of 95 per cent. This defence also forms the basis of a counterclaim for damages for fraud.

The county court judge has found that the letter could reasonably be read as a representation that the security was sufficient, and that the plaintiff society knew perfectly well that it was not sufficient. He has also found that the collateral security was intentionally not disclosed, though for what he calls a good purpose. However, he has negatived any intention to defraud. It is contended for the appellant that, on the judges findings, he is entitled to judgment on the plea of fraud, and that a good purpose does not prevent a representation knowingly untrue from being fraudulent. In order to maintain an action or a plea based on deceit, it is necessary to establish a conscious knowledge of the falsity of the argument upon which reliance is placed. It may be possibleI express no opinion about itreasonably to read the letter as representing that the house was the sole and sufficient security, but it is necessary to show that the writer knew that it might be read in that sense. Non-disclosure can support an action for deceit only if it causes that which is stated to give a wrong impression and if there is, on the part of the person making the representation, knowledge that the non-disclosure will cause that which is stated to mislead.

In Angus v Clifford, Bowen LJ said, at p 472:

It does not follow because a man uses language, that he is conscious of the way in which it will be understood by these who read it. Unless he is conscious that it will be understood in a different manner from that in which he is honestly though blunderingly using it, he is not fraudulent, he is not dishonest. An honest blunder in the use of language is not dishonest.

He had said, at p 471:

So far from saying that you cannot look into a mans mind, you must look into it if you are going to find fraud against him.

In Nocton v Ashburton, in every opinion it was said that the fraud proved must be actual fraud, and that there must be an intention to deceive.

The judge has not found that there was any knowledge, or even suspicion, that the letter might be read in any sense other than that of a mere assent to do that which the defendant had askednamely, advance to him £452 8s on his houseand I think that his finding that there was no intent to defraud means that he is satisfied that there

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was no such guilty knowledge. It is, therefore, impossible for this court to interfere with his judgment on that part of the case. It is unnecessary to consider whether it could possibly be held that the defendant acted in any way different from that in which he would have acted if he had been told of the further security. The appeal on the defence of fraud, therefore, fails.

The second defence is founded on the allegation that the mortgage which the plaintiffs are seeking to enforce was ultra vires the society, and, therefore, void. The power of the building society to lend money is conferred by the Building Societies Act 1874, s 13. It has been read by Slesser LJ. It is said in this appeal that the facts show that the society never did in fact lend the sum of £452 8s upon the security of freehold, copyhold or leasehold estate, but that, as to £98, part thereof, it was lent upon a security upon which the society had no power to lend.

There is, in my opinion, conclusive authority for the proposition that any transaction that is beyond and outside the power contained in s 13 of the Act is contrary to law and invalid: Cullerne v London & Suburban General Permanent Building Society, at p 488, Wenlock (Baroness) v River Dee Co, at p 362, and Amalgamated Society of Railway Servants v Osborne, at p 87. At the same time, it is well established that statutory powers must not be narrowly construed. It must be assumed that they are intended to be effective, and to include whatever may be derived by reasonable implication from the statutory provisions. However, that, in my view, marks the limit of what can be read into statutory provisions such as the Building Societies Act 1874, s 13.

In Amalgamated Society of Railway Servants v Osborne Lord Macnaghten was dealing with the broad principle, and he said, at p 94:

The principle, I think, is nowhere stated more clearly than it is by Lord Watson in Wenlock (Baroness) v. River Dee Co, in the following passage, at p 362: “Whenever a corporation is created by Act of Parliament, with reference to the purposes of the Act, and solely with a view to carrying those purposes into execution, I am of opinion not only that the objects which the corporation may legitimately pursue must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of these objects must either be expressly conferred or derived by reasonable implication from its provisions.”

I may point out that Lord Watson had used the same expressions in A-G  v Great Eastern Ry Co, at p 486. The expression he used there was “a fair implication.” Then Lord Macnaghten continued as follows, at p 97:

The learned counsel for the appellants did not, as I understood their argument, venture to contend that the power which they claimed could be derived by reasonable implication from the language of the legislature. They said it was a power “incidental,” “ancillary,” or “conducive” to the purposes of trade unions. If these rather loose expressions are meant to cover something beyond what may be found in the language which the legislature has used, all I can say is that, so far as I know, there is no foundation in principle or authority for the proposition involved in their use. Lord Selborne, L.C., no doubt did use the term “inci-

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dental” in a well-known passage in his judgment in A-G v. Great Eastern Ry. Co. But Lord Watson certainly understood him to use it as equivalent to what might be derived by reasonable implication from the language of the Act to which the company owed its constitution; and the Earl of Selborne, L.C., himself, to judge from his language in Murray v. Scott, could have meant nothing more.

The same test of “reasonable or fair implication” was adopted by Lord Atkinson.

In order to decide whether or not that which was done in this case came within the societys statutory powers, it is necessary to begin by ascertaining with some exactitude what was done, and what the precise question to be determined is. The judge has found that the transaction was carried out in pursuance of an ordinary business proposition by which the plaintiffs were to lend to a purchaser up to 95 per cent of the true value of the house to be built, taking, as regards 20 per cent of that value, collateral security from the builders. The history of the negotiations between the society and the builders shows that the latter were trying for some time to get the society to go beyond their usual limit of 75 per cent. They were not trying to force the society to do something it had no power to do, but were trying merely to force the society to do something which was not in accordance, perhaps, with a conservative policy, something which might involve a risk which the builders were ready to carry. On 30 June 1932, the builders gave the following undertaking to the society:

In consideration of the Halifax Building Society (hereinafter called “the society”) making advances in excess of the normal lending limit to sundry purchasers of houses from us or one of us, or from New Ideal Homesteads, Ltd., we Philip Edward Shepherd, of Bignores, Dartford, in the county of Kent, and Leo Henry Paul Meyer, of Ideal House, Harold Road, Erith, in the said county, hereby jointly and severally undertake that we will forthwith, upon being requested by the society so to do, purchase from the society for the amount owing under the mortgage plus all costs and expenses any properties mortgaged by such purchasers to the society which shall at any time hereafter come into the possession of the society.

By a letter of 26 May 1933, the defendant in his application form stated that the advance he required on the security of his house was £452 8s. By letter of 22 August, the society agreed to advance that sum on that property, having on 16 August had a report from their valuers that, after careful examination and consideration of the property, their valuation was £475.

The next relevant document is the agenda of a meeting of the board of the society, dated 6 September 1933. The particulars entered in the document, which is called the agenda book, are the name of the defendant, Joseph Salisbury, and columns with figures showing his shares. Then under the heading of “Advances,” is the sum of £452 8s, lending limit £355, value £475, and so on. Then underneath are these words:

Guarantee by Messrs. Shepherd and Meyer for £98, deposit £20 and lien on pool of £35,916.

The minute of the meeting shows that the transactions set out in the

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agenda were approved. On 29 September, three documents came into existence. There was first the charge given by the defendant to the society:

I hereby authorise and request you to draw the cheque for the amount of loan [£452 8s.] which you are to advance to me on the above property in favour of my solicitor …

The heading was 71, Hounslow Road, Feltham, Middlesex. There the words appear very clearly:

… of loan which [the society] are to advance to me on the above property …

Then there was a mortgage. There, again, it is perfectly clear from that document that the amount which was being advanced on the defendants house was £452 8s, as there is a recital that the mortgagor had applied for that advance, and the recital of an agreement to advance that sum. Then there followed the usual clauses of covenant to repay, and the clauses charging the loan on the house.

There was also signed that day, however, a document between the society and the builders called the charge. There, again, that document makes it quite clear, I think, that the amount being advanced upon this house was £452 8s. It is a printed document, and there is the following definition of the expression “contemporaneous mortgage.”

“Contemporaneous mortgage” shall mean a mortgage bearing even date with but executed before this deed, and made between Joseph Salisbury of the one part and the society of the other part, whereby in consideration of the sum of £452 8s. advanced or to be advanced by the society to the borrower in accordance with the rules of the society a dwelling house situate and known as 71, Hounslow Road, Feltham, in the county of Middlesex was demised by the borrower to the society …

Then follow numerous clauses under which the guarantors guarantee to the limit of the 20 per cent excess, and guarantee to charge the account known as the pool with the repayments of the whole sum with a limit of £98 excess.

It is argued for the appellant that the agenda and charge say that the £452 8s. was not in truth being advanced on the house, but that, as to £98 of it, it was advanced on the guarantee and the charge on the pool. It is said that the power to lend on the security of personal property, such as a pool, cannot be derived by reasonable implication from a statutory power to lend upon the security of freehold, copyhold or leasehold estates. While, as a bare proposition of law, I think that the latter contention may very well be right, this charge is far removed from a simple lending on the security of personal property. It was a charge given in support of a guarantee of repayment of money lent to someone elsethe defendanton the security of a mortgage of freehold property. The pool was charged with the repayment of any deficit arising by realisation of the mortgaged property, with a limit of £98. In my view, however, it is unnecessary to decide on this appeal the question of the legality of the charge. It is indisputably clear that there were two entirely separate contracts or transactions, which were between different parties. The defendant, party to the mortgage, was ignorant of the

Page 456 of [1939] 4 All ER 427

existence of the transaction between the society and the builders. It is equally clear that the full sum of £452 8s was in fact lent to the defendant, and that repayment of that sum was secured by a charge upon the property in question. It is, of course, equally clear that that sum would never have been advanced on the property if the builders had not provided other and further security.

The sole question in this case is the validity of the mortgage deed. Was the mortgage deed which was entered into between the society and the defendant valid or was it not? There can be no doubt that the defendant borrowed from the plaintiffs, and had the benefit of the full sum of £452 8s. There can be no doubt that he charged the property with the repayment of that sum. He knew that he was doing it. He intended to do it. The mortgage is in exact accord with the transaction which he had made, and as he understood it. That, and that alone, was the transaction between the plaintiff society and the defendant. That transaction was plainly within the powers of the society. Considered by itself, it may have been somewhat rash, but it is impossible to say that a mortgage for 95 per cent of the value of a property is something outside s 13 of the Act. I am unable to see how a transaction within the powers of the society can pass outside and beyond those powers because of some other bargain which in no way binds or affects the defendant, and of which he is in complete ignorance.

As I have said, it is unnecessary on this appeal to determine the question of the validity of the charge taken from the builders, but this dilemma may be pointed out. If it was valid, of course there is nothing more to be said. If it was invalid, the difficulty in the way of the defendant in saying that his mortgage can be affected by it is surely increased. How can an agreement between A and B, prima facie valid, be rendered invalid by an agreement between A and C which is itself invalid and of no effect? Sheffield & South Yorkshire Permanent Building Society v Aizlewood has been relied upon by both parties. It must be remembered that in that case the borrower was a party to the whole transaction. He gave both the primary and the collateral security. In a case of that kind, the approach is easy. The court can go behind the form of the transaction for the purpose of finding out what was the real bargain between the parties, and can then determine whether or not that bargain, comprising all the circumstances, is within the societys powers. Where, however, the mortgage of the property and the collateral security are the subject-matter of different agreements between different parties, the position is very different. The court can, of course, still go behind the form of the mortgage for the purpose of ascertaining whether it contained the true agreement, and the whole of the true agreement, between the parties to the mortgage. It can then declare whether or not that agreement was ultra vires the society, and the facts that the borrower did not know the limitation of the societys powers and that the transaction was ultra vires the society would be immaterial. Here,

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however, the court is being asked to go far beyond that. It is being asked to say that, although the mortgage contains the real and only bargain between the society and the defendanta bargain which was within the powers of the societythat bargain was or became ultra vires by reason of a contract between the society and a third party, of which the defendant was wholly ignorant, and which was itself void and of no effect.

There was a test laid down in Aizlewoods case, by Stirling J, which, if a good test in that case, must be a good test in this case. Speaking of a collateral benefit he said, at p 451:

The benefit so obtained must, however, be purely collateral, and the validity or propriety of the transaction is to be tested as if no such ingredient entered into it.

In my opinion, the further benefit was purely collateral. The main security was believed to be worth more than the sum advanced. But for the collateral security, the validity of the mortgage could not have been challenged. I am myself satisfied that the society entered into a legal and valid transaction with the defendant, and the fact that the society were induced to enter into that transaction by the giving of a further security by somebody else (which ex hypothesi was void) had no effect upon its validity. I agree that the appeal fails, and must be dismissed.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: William Sedley & Co (for the appellant); F B Brook (for the respondents).

Derek H Kitchin Esq   Barrister.

Cator v Newton and Bates

[1939] 4 All ER 457


Categories:        LAND; Land Registration        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND LUXMOORE LJJ, AND ATKINSON J        

Hearing Date(s):        20 NOVEMBER 1939        


Land Registration Notice Positive covenant noted on register Whether binding on subsequent purchaser Land Registration Act 1925 (c 21), s 20.

N was registered on the Land Register as the owner with an absolute title of certain land. There was also on the register an entry that the land was subject to a covenant by N to pay a fair share of the expense of maintaining certain roads. N conveyed the property to B by a transfer in the usual form, but containing no covenant of indemnity against the liability under Ns covenant. It was contended that, by reason of the entry on the register of notice of the covenant, the transferee was liable under the covenant:

Held the covenant, being a positive one, would not run with the land, and the fact that notice of the covenant was entered on the register did not affect the position. B was, therefore, not liable under the covenant.

Notes

The recent increase both in the amount of land becoming subject to compulsory registration and in the amount being voluntarily placed upon the register adds to the importance of this case. It is well established both that a positive covenant does not run with the land and that the entry on the

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register is notice to all the world of the covenant. It might be thought that these two propositions would justify an inference that a purchaser buying with notice of the covenant was affected by it, but this is held not to be so, and the liability in this respect under a positive covenant is the same in the case of registered land as it is in the case of unregistered land.

As to Effect of Entry of Notice on the Register, see Halsbury (Hailsham Edn), Vol 19, pp 541544, paras 12691279; and for Cases, see Digest, Vol 38, p 756, Nos 906, 907.

Appeal

Appeal by the defendant Newton from an order of His Honour Judge Sir Gerald Hurst KC, given at the Bromley County Court on 18 July 1939. The plaintiff claimed a proportion of the cost of maintaining roads on an estate which he owned. In 1919, the defendant Newton purchased the freehold of a property on the estate, and covenanted with the then estate owner to pay a fair share of the cost of maintaining certain roads. He became registered as owner with absolute title, and an entry in the register showed that the land was subject to this covenant. In 1928, he transferred his interest in the property to the defendant Bates, and the transfer referred to the entry in the register. The plaintiff sued Newton in the county court, and Newton joined Bates, claiming indemnity. The judge held that Newton was liable to the plaintiff under the covenant and had no ground for claiming an indemnity from Bates. The defendant Newton appealed. The facts and the argument arc fully set out in the judgment of Luxmoore LJ.

J V Nesbitt for the appellant.

R S Lazarus for the respondent Bates.

20 November 1939. The following judgments were delivered.

LUXMOORE LJ. The claim in this case was by the owner of an estate at Beckenham for the sum of £6 18s 1d, being a proportion of the maintenance charges for roads on that estate. It appears that there was originally a lease of the premises in question, but I need not refer to that, for on 19 November 1919, Newton purchased the freehold of the property in respect of which this charge is claimed. On that conveyance, Newton entered into a covenant with the then estate owner to the effect that he would repay to the owner for the time being of the estate at Beckenham a fair share of the expense of maintaining and keeping in good and substantial repair the whole of the divisions, roads, footpaths and water drains in connection with the estate to the east of a certain road which is mentioned in the covenant.

In due course, Newton sold the property, both the leasehold and the freehold interest, on 27 April 1928, to one Bates. At the time of the sale, Newton had been registered at the land registry as the owner with an absolute title of the land in question. The property was conveyed by Newton to Bates by a transfer in the common form, which referred to the registered title and stated that on 27 April 1928, in consideration of the purchase price paid by Bates, the receipt whereof was acknowledged, Newton, as beneficial owner, transferred to Bates

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the property comprised in the title. It appears from the land certificate, which was before the county court judge, that at some time or other an entry had been made stating that the land in question was subject to the covenant entered into on 19 November 1919, between the estate owner and Newton to which I have just referred.

That being so, Bates did not, in the transfer, enter into any covenant to indemnify Newton against his personal liability under the covenant in the deed executed on 10 November 1919, and therefore Newton remained liable without the benefit of any right to indemnification from Bates. Of course, if Newton or his advisers had thought of the matter, they would no doubt have inserted in the transfer, as they would have been entitled to do, an express covenant for indemnity, but, in the absence of an express covenant for indemnity, unless there is some provision in the Land Registration Act, there is no right of indemnity at all. It is to be observed that the covenant in question is a positive covenant, and is, therefore, one the benefit and the burden of which do not pass to the purchaser of the property except by express provision to that effect.

It is said that, under the Land Registration Act 1925, s 20, some liability is imposed on Bates by reason of the transfer from Newton. It is said that he has become liable, not to pay the estate owner the proportion of the charge, but to indemnify Newton in respect of it, and it is sought to obtain that implied indemnity from the provisions of the Land Registration Act 1925, s 20, which provides as follows:

(1) In the case of a freehold estate registered with an absolute title, a disposition of the registered land … for valuable consideration shall, when registered, confer on the transferee or grantee an estate in fee simple … together with all rights, privileges and appurtenances belonging or appurtenant thereto, including … the appropriate rights and interests which would under the Law of Property Act, 1925, have been transferred if the land had not been registered, subject (a) to the incumbrances and other entries, if any, appearing on the register …

It is said that there is an entry of this covenant on the register, and that, therefore, the mere reference to the fact that the estate is taken subject to that entry has imposed some liability on the transferee of the property. In my judgment, it is impossible to spell any such result out of the words of the covenant. All that it says is that the transferee shall take subject to the encumbrances and other entries. One looks at the entry and sees what its nature is. If it is an entry which simply refers to the existence of a positive covenant the burden of which has not been assigned, it is impossible to say that the transferee has been subjected to that burden by the mere fact that the section says that he takes subject to that entry. His legal liability is not affected. He is not in law liable to the estate owner in respect of the covenant, and, in the absence of any express covenant for indemnity, it is indeed, to my mind, impossible to see how he could have been subjected to such a liability.

Of course, when the case came before the county court judge, Newtons

Page 460 of [1939] 4 All ER 457

advisers admitted that he was liable on the personal covenant. Indeed, they could have done nothing else. It is quite a different step to say that, because there is a reference to the entry in s 20 of the Act, there is to be implied in this transfer a covenant for indemnity. As I have already said, Newton could have taken such a covenant if he had been so minded, but failed to do so. It may be open to him to get the transfer rectified by having such a covenant inserted in it, but that is not a matter which we have to determine, and I say nothing with regard to it. So far as the judgment of the county court judge is concerned, it is, to my mind, impossible to see how he could have come to any other conclusion than that to which in fact he camenamely, that there is nothing in the Land Registration Act 1925, to impose a burden on Bates to indemnify Newton in respect of the personal and affirmative covenant into which he entered. In those circumstances, I think that the judgment was right, and that this appeal fails, and must be dismissed, with the usual consequences.

SLESSER LJ. I agree.

ATKINSON J. I agree.

Appeal dismissed with costs.

Solicitors: W G Weller (for the appellant); Jutsum Jones Arthur & Light (for the respondent).

Derek H Kitchin Esq   Barrister.

Tomley and Others v Gower and McAdam

[1939] 4 All ER 460


Categories:        LAND; Mortgages: ADMINISTRATION OF JUSTICE; Courts        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        30 NOVEMBER 1939        


Emergency Legislation Foreclosure proceedings Leave to commence Parties to application Inability to pay due to war Onus of proof Courts (Emergency Powers) Act 1939 (c 67), s 1(2)(b), (4).

In an application for leave to institute foreclosure proceedings against G and A, it appeared that G had mortgaged to the plaintiffs certain property with a registered title. Subsequently G agreed to sell his equity of redemption to A on condition that G was released from his liability under the covenant in the mortgage. As between G and A the sale of the equity of redemption was completed, but the mortgagees refused to execute the release and to consent to the registration of A as registered owner, alleging that certain payments due under the mortgage had not been made. It was contended that G had been improperly added as a party to the application:

Held (i) G was properly made a party.

(ii) the onus of proving that the debtor would have been able to pay the debt but for the outbreak of war is upon the debtor, and he does not discharge that onus where it is a mere matter of speculation whether he would have been able to discharge the debt.

Notes

Where it is necessary to apply for leave to institute proceedings, all persons who will be parties to the proceedings must be made parties to the application, and this would appear to be so even where the parties might be merely nominal parties to the proceedings.

Page 461 of [1939] 4 All ER 460

As to Emergency Powers, see Halsbury (Hailsham Edn), Vol 23, pp 464, 465, para 683; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Motion

Motion to set aside an order made by the registrar of the Manchester District Registry giving leave to institute proceedings for foreclosure. The facts are fully set out in the judgment.

George Maddocks for the plaintiffs.

Hon Denys B Buckley for the first defendant.

The second defendant was not represented.

30 November 1939. The following judgment was delivered.

BENNETT J. This is a motion by Gower, one of two defendants, in proceedings brought against him and McAdam by the trustees of the Independent Order of Oddfellows Manchester Unity Friendly Society, to set aside an order made by the registrar of the Manchester District Registry on 7 November 1939, whereby leave was given to the plaintiffs to proceed to foreclosure or sale of the property comprised in a legal charge, dated 28 July 1938. The legal charge was a charge on certain property with a registered title situated in the county of Middlesex, and it was given to secure a sum of £14,400 and interest thereon at 5 per cent per annum. It was dated 28 July 1938. The borrower, the mortgagor, is the applicant in this motion. The charge provided for a payment of interest at the rate of 5 per cent per annum on 28 January and 28 July in each year, and for repayment of the principal sum of £14,400 by 60 equal half-yearly payments of £240 each, the first payment to be made on 28 January then next.

The summons upon which the district registrar made his order was issued by the applicants on 17 October 1939. The defendants are thus describednamely, the first defendant John Herbert Noel Gower as the mortgagor under the legal charge, and the second defendant, George Maisey McAdam, as a person interested in the equity of redemption under the legal charge. The relief sought was that the plaintiffs might be at liberty to institute proceedings to recover the debt and to enforce the legal charge by foreclosure or sale under the Courts (Emergency Powers) Act 1939. The application before the registrar was supported by an affidavit of one Andrews, the secretary of the plaintiffs, who deposed to the fact that the legal charge had been made. In para 3, he deposed to this fact:

By a transfer dated Jan. 6, 1939, the property comprised in the said legal charge was transferred by the defendant, John Herbert Noel Gower, to the defendant George Maisey McAdam, subject to the said legal charge.

In para 4, he deposed to the fact that there was owing to the plaintiffs upon the security of the charge a principal sum, together with arrears of interest, as follows:

Half-years interest, due Jan. 28, 1939, on £14,000 [the amount to which, by repayment of principal, the mortgage debt had then been reduced], £350, and half-years interest, due July 28, 1939, on £14,000 at 5 per cent., £350.

That makes a total arrears of interest on 28 July 1939, of £700, and

Page 462 of [1939] 4 All ER 460

accruing interest from that date. On 18 April, one Fisher had been appointed by the plaintiffs receiver out of court.

McAdam filed no evidence, but Gower, the present applicant, filed an affidavit stating as follows:

By a contract in writing between me this deponent and George Maisey McAdam my co-defendant in this matter dated Nov. 25, 1938, I agreed to sell to the said George Maisey McAdam the premises comprised in the legal charge referred to in the originating summons herein conditionally on his being accepted as the mortgagor by the mortgagees, the plaintiffs in this matter, and my being released by the said mortgagees from all liabilities under the said legal charge. On Jan. 6, 1939, as the result of a letter received by my solicitors from the plaintiffs solicitors, dated Dec. 20, 1938 … the said sale to my co-defendant was duly completed, and the proportion of interest due to the plaintiffs on Jan. 28, 1939, was allowed to the said George Maisey McAdam. I assumed, as I submit was not unreasonable, that the said George Maisey McAdam would have paid the said mortgage interest. Had the purchase not been so completed, the said mortgage interest would have been paid by me as it fell due. As appears from the said correspondence, the plaintiffs solicitor duly prepared the appropriate deed of release, which was returned to him duly executed by the said George Maisey McAdam. The plaintiffs have failed to send me the part of the said deed intended to be retained by me, and it appears that the said George Maisey McAdam has never been registered at H.M. Land Registry as the registered proprietor of the premises comprised in the said legal charge, as the plaintiffs declined to lodge their charge certificate to meet the transfer of the said land.

He then goes into questions of fact for the purpose of establishing that he was unable, owing to circumstances attributable directly or indirectly to the present war, to satisfy the obligations under the legal charge. He never took the point in that affidavit that he was not a necessary party to the proceedings.

Before the registrar, in addition to the two affidavits to which I have referred, there was a third affidavit made by Mr Blumberg, the solicitor for the plaintiffs, sworn on 6 November 1939, in which he refers to the affidavits of Andrews and of the defendant Gower. He exhibited some letters, and in para 3 he goes on to say:

There is nothing in such correspondence to support the allegation in such paragraph [para. 2 of Gowers affidavit] that the agreement for sale by that defendant to his co-defendant was conditional upon the latter being accepted by the plaintiffs as mortgagor, nor have the plaintiffs any knowledge of any such condition as alleged. As appears from the said correspondence, the proposed deed of release of the defendant John Herbert Noel Gower was never executed by the plaintiffs for the reasons that the interest and instalment of principal due on Jan. 28, 1939, were not paid, and that by reason of the delays which occurred the said deed, as drawn and engrossed, required alteration.

Then in para 4 of the same affidavit he says:

I am of my own knowledge able to state that, prior to the outbreak of the present war, neither of the defendants had made any offer or proposal whatsoever to the plaintiffs with a view to the payment of the arrears of interest amounting to £700 due as mentioned in para. 4 of the affidavit of Herbert Arthur Andrews or of the instalments of £240 and £240 due in reduction of principal on Jan. 28 and July 28, 1939.

I do not think that there is any further fact in that affidavit to which it is necessary to refer, but that was the evidence before the registrar. Upon that, he gave to the plaintiffs leave to proceed for foreclosure or sale, or, rather, liberty to institute proceedings to enforce the legal charge by foreclosure or sale. It is to discharge that order that the present motion is made.

Page 463 of [1939] 4 All ER 460

The first point taken by counsel for Gower is a point that was never taken before the registrar, and it is this. If one has regard to the fact that Gower, according to the evidence, has conveyed the equity of redemption to his co-defendant, McAdam, he is not a necessary party to an application under the Courts (Emergency Powers) Act 1939, for leave to commence proceedings to enforce the security by foreclosure or sale, because he has no longer any interest in the security at all. I am not satisfied about the relationship between Gower and McAdam. According to the evidence, the contract between Gower and McAdam was a conditional one, conditional upon Gower being released by the plaintiffs from liability upon his covenants in the legal charge, and he never has been. I am not satisfied that Gower may not still have some such interest in the security as makes him a necessary party to an action to enforce the security by foreclosure or sale. The fact that the point was never taken when the matter was before the registrar raises a doubt in my mind about the whole of the relationship between them, and I am not prepared on that ground to interfere with the order which the registrar has made.

That leaves the question whether the applicant has discharged the onus which rests upon him of satisfying the court that, by reason of circumstances directly or indirectly attributable to the war, he is unable to perform the obligation which would entitle the plaintiffs to institute these proceedings for foreclosure or sale. The applicant has supplemented the evidence which was before the registrar by a further affidavit, sworn by him on 15 November 1939, in which he enumerates the properties of which he was possessed, and of which, I suppose, he is still possessed, with a view to satisfying the court that, by reason of circumstances directly or indirectly attributable to the war, he was not, or is not, in a position to pay the debt. From that affidavit, it appears that he is the owner of certain parcels of freehold land, four of which are subject to substantial mortgages. The case he seeks to make is that, but for the war, he would have been able, out of the interests he has in those lands, to discharge the obligation which he undertook under the legal charge which the plaintiffs are seeking to enforce. I think that it is very largely a matter of speculation as to whether or not he would have been able, out of those properties, to have discharged the obligation which he undertook to the plaintiffs. The fact is that, before the war began, there was due from him to the plaintiffs two half-yearly payments of interest due under the mortgage, and two sums, each of £240, due from him in respect of principal, which ought to have been paid in January 1939, and in July 1939. The instalments of principal ought to have been paid in the same months, and were not. On the material before me, the applicant has not satisfied me that he was in a position, before the war began, to discharge his liability under the legal charge. Though no doubt his position is probably worse than it was, he has failed to satisfy me that his inability to perform the obligation is directly or indirectly attributable to circumstances arising out of the war. For these reasons,

Page 464 of [1939] 4 All ER 460

in my judgment, the applicant has failed to satisfy me that the order made by the registrar was wrong, and the motion is refused with costs.

Motion refused with costs.

Solicitors: Marco Blumberg, Manchester (for the plaintiffs); Timbrell Deighton & Nichols (for the first defendant).

F Honig Esq   Barrister.

Jennings and Another v Kelly

[1939] 4 All ER 464


Categories:        LEISURE AND LICENSING        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        10, 11 OCTOBER, 30 NOVEMBER 1939        


Intoxicating Liquors Licence New licence Increase of 25 per cent of population Whether increase relates to city or ward or district electoral division Government of Ireland Act 1920 (c 67), s 49(a)(b) Intoxicating Liquor Act (Northern Ireland) 1923 (c 12), s 9(c) Intoxicating Liquor and Licensing Act (Northern Ireland) 1927 (c 21), s 3(6)(iv).

An application for a new licence for the sale of intoxicating liquor for consumption on or off the premises produced a statutory certificate showing an increase of population of not less than 25 per cent in the ward of the city in which the premises were situate. The objectors contended that, under s 9(c) of the Act of 1923, it was a condition precedent to the granting of a licence that there should be an increase of not less than 25 per cent of the population of the city or town, but the applicant maintained that the requirements of the section were satisfied by such increase in population in the ward or district electoral division in which the premises for which the licence was sought were situate, and also that the appellants were not “persons aggrieved” by the decision of the Court of Appeal:

Held (i) the “increase of not less than 25 per cent of the population” required by s 9(c) of the Act of 1923 is an increase of population in the ward or district electoral division in which the premises sought to be licensed are situate.

(ii) the appeal was not incompetent, because the appellants were “persons aggrieved” by the decision of the Court of Appeal within the meaning of the statute.

Notes

The matters here considered are purely questions of construction of the particular statutory provisions in question. It has, however, been necessary in the course of the case to consider the proper function of a proviso, and its effect on the main provision of a section. The consideration of the meaning of the words “person aggrieved” is of importance, as these words so commonly occur in the statutory provisions relating to local government.

As to Grant of New Licence, see Halsbury (Hailsham Edn), Vol 19, pp 7073, paras 187191; and for Cases, see Digest, Vol 30, pp 2735, Nos 173274.

Cases referred to

R v Belfast Recorder [1938] NI 10.

West Derby Union v Metropolitan Life Assurance Society [1897] AC 647; 42 Digest 659, 680, 66 LJCh 726, 77 LT 284, affg SC sub nom West Derby Union Guardians v Metropolitan Life Assurance Society, West Derby Union Guardians v Priestman [1897] 1 Ch 335.

R v Loxdale (1758) 1 Burr 445; 42 Digest 663, 731.

Page 465 of [1939] 4 All ER 464

Goldsmiths Co v Wyatt [1907] 1 KB 95; 42 Digest 685, 992, 76 LJKB 166, 95 LT 855.

Boulter v Kent JJ [1897] AC 556; 30 Digest 69, 548, 66 LJQB 787, 77 LT 288, revsg SC sub nom R v Kent JJ [1896] 2 QB 306.

Sevenoaks Urban District Council v Twynam [1929] 2 KB 440; Digest Supp, 98 LJKB 537, 141 LT 566.

Appeal

Appeal from an order of the Court of Appeal in Northern Ireland, dated 20 June 1938, setting aside and discharging an order of the Kings Bench Division (Crown Side), dated 17 May 1938. The facts and the arguments are set out in the opinion of Viscount Maugham.

H J Wallington KC and L E Curran for the appellants.

Serjeant Sullivan KC, Thomas J Campbell KC, James McSparran and Cyril Nicholson for the respondents.

30 November 1939. The following opinions were delivered.

VISCOUNT MAUGUAM. My Lords, this is an appeal from an order of His Majestys Court of Appeal in Northern Ireland, dated 20 June 1938. The main point involved is the question of the true construction of a section of the Intoxicating Liquor Act (Northern Ireland) 1923which I shall call the Act of 1923a matter on which there has been in Northern Ireland a considerable difference of opinion, due, I think, to the unfortunate way in which the section is drafted. There was also raised before your Lordships the question whether an appeal to this House was competent in this case, the contention of the respondents being that the appellants were not “parties aggrieved” by the decision of the Court of Appeal. The dispute relates to the granting of a licence for the sale of intoxicating liquors in the city of Belfast. The facts are not in dispute, and may be shortly stated.

The appellant John Barnabas Jennings is a Methodist minister and the appellant Elijah Quincey is a retired merchant, and both the appellants are inhabitants of the parish of Knockbreda in the county of the city or county borough of Belfast in Northern Ireland. The respondent, James Kelly, is a licensed vintner residing and carrying on business in the county of the city of Belfast. He applied under s 9 of the Act of 1923 for a licence for certain premises in the Ormeau ward of the city or county. The application was heard by His Honour Judge Thompson, Recorder of Belfast, the licensing authority for the district. The appellants were present as objectors, and by their counsel opposed the application, on the ground that the conditions as to population required by the Act (which I shall state later) had not been complied with. An increase of not less than 25 per cent in the population of Ormeau ward was proved by the certificate of the Minister of Home Affairs for Northern Ireland, and in addition proof was given of the growth of the city of Belfast owing to such increase. The respondent admitted that the population of the city was, according to the census, 386,947 in 1911 (the year of the last census before the passing of the Act of 1923) and 415,161 in 1926an increase of less than 25 per centwhereupon the recorder

Page 466 of [1939] 4 All ER 464

stated that he was bound by the recent decision of the Kings Bench Division in R v Belfast Recorder to hold that it was necessary to prove an increase of 25 per cent in the population of the city. On 10 September 1937, the recorder, after delivering a reasoned judgment, made the following order:

It appearing that there has been an increase of population since the last census ascertained next before the passing of the Licensing Act, 1923, (a) of less than 25 per cent. in the case of city of Belfast, and (b) of more then 25 per cent. in the case of Ormeau ward in which the premises proposed to be licensed are situate, and such increase being insufficient in law to warrant the granting of a certificate for a licence, refuse the application on that ground.

It should be added that the recorder in his written judgment pointed out in very clear language the difficulties to which the decision of the Kings Bench Division gave rise. The respondent then applied to the Kings Bench Division for a conditional order for a writ of certiorari directed to the recorder to remove into the Kings Bench Division his orders and adjudications in the matter for the purpose of quashing the same. On 9 March 1938, this order was refused.

The respondent then appealed to the Court of Appeal of Northern Ireland seeking a conditional order to the effect above stated, and on 25 April 1938, the order of the Kings Bench Division was discharged and the conditional order granted. The condition included the words

… unless cause be shown to the contrary within 10 days after service of this order upon Samuel Henry, Esq., solicitor for [the appellants, and on certain officials].

The conditional order so granted was in its turn discharged by the Kings Bench Division on 17 May 1938. From that order there was again an appeal to the Court of Appeal, the notice of appeal being served on the solicitor for the appellants.

Upon the hearing of the appeal, the Court of Appeal (Andrews LCJ, and Best and Babington LJJ) made an order, dated 20 June 1938, allowing the appeal and setting aside and discharging the order of 17 May 1938, and making absolute the conditional order of certiorari, dated 25 April 1938, notwithstanding cause shown, and further ordering, inter alia, that a writ of certiorari do issue directed to the Recorder of Belfast to remove into the Kings Bench Division of the High Court of Justice in Northern Ireland for the purpose of being quashed, inter alia, all and singular orders and adjudications of the recorder made at Belfast on 10 September 1937, refusing the respondents application for a certificate. The appellants were ordered to pay the costs to the respondent. It is from that order that the present appeal is brought. Andrews LCJ, dissented from Best and Babington LJJ, and agreed with the decision of the Kings Bench Division.

It will be desirable to set out in full the terms of s 9(c) of the Act of 1923, though the whole section should be read, and it is desirable to bear in mind that the sectionwhich replaced, as regards Northern Ireland, with certain alterations, an earlier Act of 1902 relating to all

Page 467 of [1939] 4 All ER 464

Irelandcontained a prohibition of the granting of any fresh licences in Northern Ireland except in certain specified cases.

Where owing to an increase of not less than 25 per cent. of the population according to the last census, there is a growth or an extension of any city or town and the licensing authority is satisfied after hearing any evidence tendered to it by any resident or owner of property in such city or town that the restrictions in this section on the granting of licences may be relaxed, the licensing authority may grant a licence to any applicant notwithstanding that the same should be otherwise forbidden by this section.

Provided that such licence shall be granted only for premises situate in the ward or district electoral division in which such increase of population has taken place, and in substitution for at least two existing licences held in respect of premises situate within the city or town (as the case may be) comprising such ward or district electoral division.

A question arose as to how the required increase in population should be proved, and, accordingly, by the Northern Ireland Intoxicating Liquor and Licensing Act 1927, s 3(6)(iv), it was provided as follows:

The required increase of population shall be proved by means of a certificate of the Minister of Home Affairs that he is satisfied that there has been an increase of not less than 25 per cent. since the census ascertained next before the passing of the Act of 1923.

Two points have been argued upon the appeal. The respondent has contended that the appeal should be dismissed as incompetent on the ground that the appeal to this House can only be justified under the Government of Ireland Act 1920, s 49(a)(b), made applicable to Northern Ireland by the Irish Free State (Consequential Provisions) Act 1922, s 6(3), Sched I. The appellants, it was said, must therefore show that they are “persons aggrieved” by the decision of the Court of Appeal, and it was denied that they were. My Lords, I have found myself unable to accept this contention. Not only were the appellants persons who, in the various proceedings which I have above detailed, had been treated as objectors entitled to appear and be heard in the Kings Bench Division and in the Court of Appeal, but also they had been ordered to pay the costs of the proceedings by the order under appeal to this House. On this point, however, I have had the advantage of reading the judgment of my noble and learned friend Lord Wright, and I observe that he has completely dealt with it and with the arguments relied on by the respondent in support of it. I entirely agree with his view of this contention, and will therefore add nothing further of my own. The appeal, in my judgment, is a competent appeal.

The main point is that of the true construction of s 9(c), which I have set out above. It is clear from the words of the proviso that the licence can be granted only if there has been an increase of not less than 25 per cent of the population of the ward (I will omit the words “or district electoral division” for the sake of brevity) in which the application for a licence is being made. Is it also necessary that a second condition as to population should be satisfiednamely, that there must be an increase of not less than 25 per cent in the population of the city or town? The Court of Appeal has by a majority answered this question

Page 468 of [1939] 4 All ER 464

in the negative, and the recorder showed by his written judgment that he shared this view. However, as I have said, Andrews LCJ, and the judges of the Kings Bench Division were for answering it in the affirmative. The section is in several respects curiously framed. It begins by requiring that there should be a growth or an extension of the city or town owing to an increase of not less than 25 per cent of the population according to the last census. It is clear that such an increase requires a comparison between a previous and a subsequent number of the population, but this could not be ascertained merely by examining the last census before the Act of 1923. This difficulty is resolved by s 3 of the Act of 1927, which no doubt requires the Minister to make a comparison of the population ascertained at the last census before the Act of 1923, and of the existing population (presumably) at the date of the application for the licence. Plainly, from the words of the proviso, this certificate must apply to the increase in population of the ward, and the question is whether or not there must also be a certificate as to the increase in population of the city or town. Nor is it very easy to say what is meant by the words “a growth or an extension of any city or town.” “Extension” seems to point to an extension in area, and, if so, “growth” would appear to mean a growth in population. If this is correct, and if growth refers to an increase in population of the city or town, there would seem to be considerable force in the observation that this might easily have been expressed by saying: “Where, owing to an increase of not less than 25 per cent of the population of any city or town according to the last census or to its extension. …” Such an increase in population must obviously result in a growth (if not an extension) of the city or town. Why, then, provide that the growth or the extension must be due to the increase in population of the same area?

The licensing authority must also be satisfied by the evidence that the restrictions in the section on the granting of licences may be relaxed. The relaxation is, indeed, not of a very drastic character, since the total number of licences in the city or town will be reduced by one if the application is granted. It has been truly observed that, if the city or town has increased in population since the last census by not less than a quarter, there must necessarily be one or more wards in which there has been a similar increase. There might, however, be an enormous increase in population of a ward and yet an increase in population of the city by, say, only 20 per cent. It would seem strange, in a clause purporting to relax restrictions, to prohibit the granting of a fresh licence in such a ward, even though two licences were being given up in the rest of the city or town.

We must now come to the proviso, for there is, I think, no doubt that, in the construction of the section, the whole of it must be read, and a consistent meaning, if possible, given to every part of it. The words are:

… provided that such licence shall be granted only for premises situate in the

Page 469 of [1939] 4 All ER 464

ward or district electoral division in which such increase in population has taken place …

There seems to be no doubt that the words “such increase in population” refer to the increase of not less than 25 per cent of the population mentioned in the opening words of the section. If those words indicate an increase of not less than 25 per cent of the population of the city or town, then the required condition is that the population of the ward, if the words are given their ordinary meaning, must have increased by not less than one-quarter of the whole population of the city or town. This seems to me, as it seemed to the Lords Justices in the Court of Appeal, to reduce s 9 almost to a nullity, yet this is the construction which, as I understand it, found favour with the Kings Bench Division. I will add that, if Parliament had intended so strange and improbable an event, I think that very different language would have been used. The obvious way of drafting the section, if both these conditions as to population were to be requisite, would be to couple them together, for example, by providing: “Where there has been an increase of not less than 25 per cent. of the population of any city or town according to the last census, and where an increase of not less than 25 per cent. of the same population is found to have taken place in any ward …” Moreover, if so large an increase in the population of a ward in a city should take place, it is a little difficult to see the necessity for evidence by residents or owners to show that the granting of licences in that ward might be relaxed.

Counsel for the appellants felt the force of these considerations, and preferred to contend, as they seem to have contended in the Court of Appeal, that the words “such increase” might be construed to mean “such percentage of increase” or “a similar increase.” My Lords, this material change in the language used is very difficult to justify, and I can only say that I see no warrant for so altering the words. It is easy to understand that, if it is assumed as being beyond doubt that the introductory words in the section mean an increase of not less than 25 per cent of the population of the city or town, then there would be ground for endeavouring to give an artificial meaning to the words “such increase” in the proviso in order that the section should have some practical effect, but that is an assumption which I am unable to accept. The curious phrasing of the section and the reference to the necessity for “a growth or extension” of the city or town suggest the necessity for an explanatory clause, and, reading the whole section together, it seems to me far easier to accept the view that the increase in population mentioned in the first lines of the section is an increase in the population of the ward as indicated in the proviso by the words: “the ward … in which such increase in population has taken place.” No violence is done to the words by such a construction, and it is not a disadvantage to find that it seems to carry out a practice which has prevailed in Northern Ireland for a good many years.

Page 470 of [1939] 4 All ER 464

In coming to his conclusion, Andrews LCJ, was influenced by his view that the first part of the section was the operative portion of it, and that the proviso could not properly be used to explain the words as to increase of population in the operative part. He therefore relied on the principle of construction to be found in West Derby Union v Metropolitan Life Assurance Society. The principle is thus stated by Lord Watson, at p 652:

… I am perfectly clear that if the language of the enacting part of the statute does not contain the provisions which are said to occur in it, you cannot derive these provisions by implication from a proviso.

I am sure that none of your Lordships would desire to depart from this principle where it is applicablenamely, where the enacting part of the section is unambiguous and complete and is followed by a true proviso (that is, a qualification or an exception out of it). In my view, that is not the case here, and, as Lord Herschell pointed out in the West Derby Union case, at p 655:

Of course a proviso may be used to guide you in the selection of one or other of two possible constructions of the words to be found in the enactment, and show when there is doubt about its scope, when it may reasonably admit of doubt as to its having this scope or that, which is the proper view to take of it …

My Lords, that is precisely the method of construction which, in my view, is applicable in the present case. I will add that the words beginning “Provided that” are, in my opinion, additional and explanatory words, necessary for the purpose of giving a more definite meaning to the preceding wordsnamely, for the purpose of removing doubt as to its scopeand they might easily have been incorporated in the earlier part of the section, at the risk of making it rather more cumbrous than it is. We are not dealing here with a true proviso, or, at any rate, not with such a proviso as this House was considering in the West Derby Union case. It cannot, I think, be disputed that, in construing a section of an Act of Parliament, it is constantly necessary to explain the meaning of the words by an examination of the purport and effect of other sections in the same Act. A number of striking examples will be found in Maxwell On The Interpretation of Statutes (8th Edn), pp 27, 28. This principle is equally applicable in the case of different parts of a single section, and none the less so because the latter part is introduced by the words “provided that,” or like words. There can, I think, be no doubt that the view expressed in Kents Commentaries on American Law (12th Edn), Vol 1, p 463, n (cited with approval in Maxwell On The Interpretation of Statutes (8th Edn), p 140), is correct:

“The true principle undoubtedly is, that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause, and proviso, taken and construed together, is to prevail.”

My Lords, I have not thought it necessary to examine the sections of the earlier Act of 1902, because, if their construction is different from that of the Act of 1923, it is always possible, the words being different,

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that the later Act is intended to amend the earlier one. This, of course, is not to say that, if the later Act is exactly in pari materia with the earlier one, the two statutes may not have to be taken and construed together as one system and as explanatory of each other: per Lord Mansfield in R v Loxdale, at p 447, and Goldsmiths Co v Wyatt. Nor have I placed reliance on the amending Act of 1927 in construing s 9 of the Act of 1923. I may observe, however, that the draftsman of the Act of 1927 seems to have thought that a certificate as to the population of only a single area was needed, and I cannot help thinking that, if the legislature had considered that in every case there had to be two inquiries and a certificate or certificates as to two increases of population, different language would have been used. For these reasons, my Lords, I think the judgments of Best and Babington LJJ, and, I will add, the doubts expressed by the Recorder of Belfast, were correct, and this appeal must be dismissed.

LORD ATKIN. My Lords, I concur.

LORD RUSSELL OF KILLOWEN. My Lords, notwithstanding the division of judicial opinion which has existed in Northern Ireland, I have found the answer to the question in debate to be reasonably free from difficulty. The question is what is the true construction of the Intoxicating Liquor Act (Northern Ireland) 1923, s 9(c), and the answer depends upon the language used in that particular provision, which should, I think, be considered as it stands, and without reference to the Licensing (Ireland) Act 1902, or any other alleged legislative ancestor.

I do not agree with the contention of the appellants, which appears in the second reason in their case:

… it is not a right method of construction to use a proviso to control or alter the operative effect of the words preceding it.

That is frequently the very function of a provisonamely, to include within the scope of the preceding words something which prima facie would not fall within it, or to exclude something which prima facie would so fall. Although a proviso may well be incapable of putting upon preceding words a construction which they cannot possibly bear, it may without doubt operate to explain which of two or more possible meanings is the right one to attribute to them. S 9(c) seems to me a case in which the proviso tells you expressly in what sense you are to understand the preceding words: “an increase of not less than 25 per cent. of the population according to the last census.” Until the proviso is read, it is not clear where the increase is to take place. Must there be a 25 per cent increase in the population of the whole city or town, or will it suffice if there is a 25 per cent increase in the population of some defined part of the city or town? The words preceding the proviso would prima facie point to the former view. One must, however, read the whole clause before attempting to construe any portion

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of it, and a perusal of the proviso fixes the meaning of the words which precede it. It tells you where the increase of population has to take placenamely, in the ward or electoral division in which the premises proposed to be licensed are situate. The words “such increase of population” admit of no doubt. They are equivalent to “the increase of population above referred to”that is, “an increase of not less than 25 per cent. of the population according to the last census”and they establish that the population in question is the population of the relevant ward or electoral division. For these reasons, I agree that this appeal fails, and should be dismissed with costs.

I agree, too, that, in view of the facts that the present appellants or their solicitors were served with the order of 25 April 1938, and with the notice of appeal of 20 May 1938, and were ordered to pay the costs of that appeal, they were persons aggrieved by the order appealed from, and that an appeal lay to your Lordships House.

LORD WRIGHT. My Lords, the respondent James Kelly made application to His Honour Judge Thompson, Recorder of Belfast, as the licensing authority for the city of Belfast, that a new licence for certain premises in the Ormeau ward in the city should be granted to him. The recorder refused the grant of the licence, on the ground that he was bound to do so under R v Belfast Recorder, a decision of the High Court of Northern Ireland, though he indicated his personal disagreement with the reasoning of that decision. Before the recorder, the appellants appeared as objectors under the Excise Licences Amendment Act 1833, s 4, which gives a right to residents, inter alios, in the particular area to appear and object to the grant of a licence. The respondent then applied to the High Court for a conditional order for a writ of certiorari directed to the recorder to remove the order into the High Court. Notice of this application was served on the appellants. This application was refused by the High Court, but granted by the Court of Appeal, which ordered that, unless cause were shown to the contrary within 10 days after service of the order upon the solicitor for the appellants, the police, and the Clerk of the Crown and Peace for the county of Antrim, a writ of certiorari should issue to remove into the Kings Bench Division the order of the recorder for the purpose of being quashed on the ground of error in law. The appellants, having filed an affidavit, appeared by counsel in opposition to the granting of the writ before the Kings Bench Division, which discharged the conditional order with costs, to be paid by the respondent to the appellants. The respondent then appealed to the Court of Appeal, before whom the appellants appeared in support of the order in their favour, and were represented by counsel. The Court of Appeal by a majority, Andrews LCJ, dissenting, allowed the appeal, made the conditional order absolute, directed a writ of certiorari to issue to the recorder to remove his order into the Kings Bench Division for the purpose of being

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quashed, and ordered the appellants to pay the costs of the proceedings. The appellants appeal from this order to this House.

Before I deal with the substance of the appeal, it will be convenient first to dispose of the preliminary objection taken by the respondent, which is that the appeal is not competent. The right of appeal to this House from the Court of Appeal in Northern Ireland in proceedings by way of certiorari depends on the Government of Ireland Act 1920, s 49(a)(6), as applied to Northern Ireland under the Irish Free State (Consequential Provisions) Act 1922, s 6(3), Sched I. In effect, it is thereby provided that only a “person aggrieved” by the order of the Court of Appeal in the proceedings in certiorari, inter alia, can appeal. It has been contended on various grounds that the appellants are not persons aggrieved. It is said that they have no peculiar or individual right or interest or grievance in respect of the order made by the recorder or the order made by the Court of Appeal in the proceedings by way of certiorari, because they are merely in the position of any other residents in the city of Belfast. It is also said that, so far as the order against which they are appealing orders them to pay costs, that does not constitute a grievance within the meaning of the section, that, even if it were, the only appeal which is competent is an appeal limited to the question of costs, and, further, that this House will not entertain an appeal solely on a question of costs. In my opinion, all these objections are ill-founded. The proceedings in which the appeal is brought are the proceedings by way of certiorari, not the proceedings before the licensing authority. In these latter proceedings, there could be no appeal, as was held in England (and the same rule applies in Northern Ireland) in Boulter v Kent JJ. The question is, however, whether the appellants were persons aggrieved under and in respect of the decision in the proceedings by way of certiorari. In order to see if they were persons so aggrieved, it is necessary to consider what their position was. The Court of Appeal, in granting the conditional order for certiorari, had directed that the order was to issue unless, within 10 days of service on the appellants, cause was shown to the contrary. The appellants, being duly served, appeared before the Kings Bench Division and succeeded in showing cause to the contrary, and were awarded their costs. In appearing in these circumstances, they could not, in my opinion, be regarded as merely officious, quite apart from their right to object in the licensing proceedings under the Excise Licences Amendment Act 1833, s 4. Notice of appeal was then served upon them through their solicitor. They appeared, and were represented by counsel, before the Court of Appeal, but the appeal was allowed, and they were ordered to pay the costs of the proceedings, and the order of the Kings Bench Division awarding them costs was set aside. No objection throughout was taken to the appellants taking the steps which they did in the certiorari proceedings. It is not necessary here to decide whether the mere fact that they had a statutory right to object in the proceedings

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before the licensing authority would constitute them parties interested in the proceedings by way of certiorari. They were treated throughout, however, as competent parties in these proceedings. Notices were served upon them as being proper parties. Orders were made in their favour and against them. It would be strange indeed if, in these circumstances, they were debarred from seeking to have restored the order made in their favour by the Kings Bench Division, or to secure a reversal of the adverse order of the Court of Appeal. It would not, I think, be right to treat the matter simply from the standpoint of costs, but, even if it were so treated, I think that the appellants should succeed on the preliminary objection. In my opinion, the appellants were clearly aggrieved by being ordered to pay costs, and their right of appeal was complete merely on this limited ground. The section, be it noted, does not expressly specify the extent or nature of the grievance required, or limit in any way the scope of the right of appeal if the party is aggrieved, but, if the order as to costs constitutes a sufficient grievance, it is clear that the question as to costs could not be decided without deciding on the merits of the case, and the House could not stultify itself by an inability to give full effect to its decision if it held, on the appeal, that the decision of the Court of Appeal was wrong. Nor is there any rule of this House that it will not entertain an appeal which goes only to costs. In Boulters case, the quarter sessions had ordered the appellant to pay the costs of the hearing of the appeal to quarter sessions. He had objected before the justices, and the licence had been refused, but, on appeal, it was granted by quarter sessions, before which court he had not appeared. He applied for certiorari simply and solely in respect of the order to pay costs, and eventually, after failing in the Divisional Court and in the Court of Appeal, succeeded in this House, which held that quarter sessions had no power to order costs against Boulter.

Though Boulters case depended on jurisdiction, I think it is an authority that a person ordered to pay costs in a case before licensing justices in which he is an objector has sufficient interest to be entitled to apply for certiorari, though, as this House held in Boulters case, he was not a party in judicio in the licensing proceedings, there being no lis or controversy inter partes, and no question of a decision for or against him. After Boulter obtained the conditional order for certiorari, and failed in the lower courts, this House entertained his appeal, though the sole question was the validity of the order for costs. I think that that decision sufficiently disposes of the argument put forward on behalf of the respondentnamely, that an adverse order for costs is not sufficient to constitute the appellants “persons aggrieved” under s 49because I think that, if such an order is sufficient to justify an application for an order of certiorari, it is sufficient to justify a right of appeal under s 49. The same authority is sufficient to dispose of the contention that this House is debarred from entertaining an appeal which simply relates to costs, though no doubt in certain cases it may in its

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discretion refuse to do so. In the present appeal, however, it is clear that, if it is competent at all, it raises questions of principle of considerable difficulty and importance, on which the courts in Northern Ireland have differed.

There is no direct authority on the words of the Act now in question, and I do not find it very helpful to discuss in detail the various authorities under other Acts, in which the meaning in those Acts of the words “persons aggrieved” has been debated. Nor does any one of those cases deal with facts like the particular facts of the present ease, where the appellants appeared before the licensing authority and made an objection which they had a statutory right to make. Having succeeded in that objection, they were then served by order of the court in the certiorari proceedings, in which they at first succeeded, but failed in the Court of Appeal, which refused them an order for costs, and instead ordered them to pay costs. The case which is nearest in point appeared to me to be Sevenoaks Urban District Council v Twynam, in which a Divisional Court held that a ratepayer who had duly exercised a statutory right to object to a proposal made by the Sevenoaks Urban District Council to acquire land under the Public Health Act 1925, had a right of appeal as a person aggrieved under that statute, though he had no personal or peculiar interest, or any interest beyond what flows from the fact that he was a ratepayer and a member of the public who had given a notice of objection, which he was entitled to give, and had failed. I think this decision was right. The facts of the present case are stronger than those in the Sevenoaks case.

In my opinion, the preliminary objection fails, and I proceed to deal with the appeal. This involves the construction of the Intoxicating Liquor Act (Northern Ireland) 1923, s 9(c), which provides as follows:

Where, owing to an increase of not less than 25 per cent. of the population according to the last census, there is a growth or an extension of any city or town and the licensing authority is satisfied, after hearing any evidence tendered to it by any resident or owner of property in such city or town, that the restrictions in this section on the granting of licences may be relaxed, the licensing authority may grant a licence to any applicant notwithstanding that the same would be otherwise forbidden by this section: provided that such licence shall be granted only for premises situate in the ward or district electoral division in which such increase in population has taken place, and in substitution for at least two existing licences held in respect of premises situate within the city or town (as the case may be) comprising such ward or district electoral division.

With this must be read the Intoxicating Liquor and Licensing Act (Northern Ireland) 1927, s 3(6)(iv), which provides as follows:

The required increase of population shall be proved by means of a certificate of the Minister of Home Affairs that he is satisfied that there has been an increase of not less than 25 per cent. since the census ascertained next before the passing of the Act of 1923 …

The recorders order stated as follows both the facts which he found and his conclusion:

It appearing that there has been an increase of the population since the last census ascertained next before the Licensing Act, 1923, (a) of less than 25 per cent. in the

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case of the city of Belfast, and (b) of more than 25 per cent. in the case of the Ormeau ward in which the premises proposed to be licensed are situated, and such increase, being insufficient in law to warrant the granting of a certificate, for a licence, refuse the certificate on that ground.

As already stated, in so finding, the recorder followed the decision in Raineys case.

The question, therefore, is whether the “increase of not less than 25 per cent. of the population” is to be in the city, or in the ward or district electoral division, or in both. I agree with the opinion of Best and Babington LJJ, which was also the opinion of the recorder, apart from the authority of Raineys case, that the required increase of not less than 25 per cent in the population which is intended is an increase in the population of the ward or district electoral division. So far as concerns the city or town itself, the required condition is, in my opinion, that there should have been a growth or extension of the city or town owing to an increase of not less, than 25 per cent in population of a ward or district in which it is sought to secure the new licence. This latter condition was admittedly satisfied in the facts of the present case, and I do not further discuss it.

The difficulty which is undoubtedly involved in construing the section, and which led to the conclusion of Andrews LCJ, and of the Kings Bench Division in Raineys case, arises from the want of precision in the first part of s 9(c), which does not define what “the population” intended is. If the section stopped before the second part which is introduced by the word “provided,” it might well have been held, by way of supplying the want of definition, that it was “the population” of the city or town which was intended, because nothing else was mentioned in that part of the section. The crucial matter of debate has been whether the question can be so concluded. In my opinion, it cannot. The section must be construed as a whole. The second part of the section must be taken into account (whether or not it is properly called a proviso) in order to ascertain the true effect of the first part. If that is done, it follows, in my opinion, that the want of precision or the ambiguity which there is in the first part regarding the definition of “the population” is made good by the words in the second part: “the ward or district electoral division in which such increase of population has taken place.” The words “such increase” necessarily refer back to “the increase of not less than 25 per cent. of the population,” and define what is left undefined in the earlier words of the section. The ambiguity is thus cleared up. I question if any doubt on the point would have arisen if the paragraph introduced by “provided” had appeared simply as a second or supplementary subdivision of s 9(c). The first part, as it stands, is incomplete by itself, because it does not state the conditions and limitations which are contemplated as applying to the relaxation of the restrictions on the granting of the licence. The second part of the section condescends to particulars, and, in doing so, defines the precise meaning of the population in regard to which the

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increase is required. “Such increase in population” must refer back to something which has preceded, and that can only be “such increase” as already mentioned, and this is now defined. If it merely meant any increase of not less than 25 per cent, the joint effect of the two provisions might be that the required increase must be found both in the city or town and in the ward, or it might be that the increase of 25 per cent in the city, which, on this construction, is referred to in the first part, would have to be found in the ward or district. Either construction would be very difficult as a matter of words. Perhaps the latter, merely as a matter of words, is less difficult, but, as a matter of substance, it is practically inconceivable. In Belfast, there are 15 wards. There were in the city, according to the 1911 census, 386,947 inhabitants, and, in 1926, there were 415,151 inhabitants (these being the relevant dates for comparison). It would indeed be startling if a ward which showed an increase of 25 per cent on its own population were denied its claim to a further licence simply because it did not show an increase in its own population amounting to 25 per cent on the total population of the city at the 1911 censusthat is, an increase of more than 96,000 inhabitants. The manifest purpose of the section, which is to prevent an increase in the number of licensed premises, while satisfying the proper requirements of growing districts, is satisfied if the relaxation of the prohibition against new licences is based on the expanding population of the ward in question. This would not increase, but would in fact decrease, the number of actual licences, as two licences must be surrendered from the city or town before the grant of the new licence in the ward in which the increase has taken place.

The contrary construction favoured by Andrews LCJ, seems to be mainly based on a technical rule said to apply to the construction of a proviso. It is said that, where there is a proviso, the former part, which is described as the enacting part, must be construed without reference to the proviso. No doubt there may be cases in which the first part is so clear and unambiguous as not to admit in regard to the matters which are there clear any reference to any other part of the section. The proviso may simply be an exception out of what is clearly defined in the first part, or it may be some qualification not inconsistent with what is expressed in the first part. In the present case, however, not only is the first part of the section deficient in express definition, but also the second part is complementary and necessary in order to ascertain the full intention of the legislature. The proper course is to apply the broad general rule of construction, which is that a section or enactment must be construed as a whole, each portion throwing light, if need be, on the rest. I do not think that there is any other rule, even in the case of a proviso in the strictest or narrowest sense, and still less where, as here, the introduction of the second part by the word “provided” is, in a strict sense, inapt. I think that this construction is also in conformity with the provision in the later Act of 1927 which

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deals with proof of “the required increase in population,” though I do not seek to construe an earlier statute by a subsequent statute. The later Act, however, seems to contemplate a single increase, not a double increase, or two increases in population. A single increase is what, in my opinion, the 1923 Act requires, and, indeed, this is in accordance with what practical common sense would think that the situation required. I agree with the order of the Court of Appeal, which, in my opinion, should be affirmed, the appeal being dismissed with costs.

VISCOUNT MAUGHAM. My Lords, I am asked by my noble and learned friend Lord Porter to say that he concurs with the opinions which have been delivered.

Appeal dismissed with costs.

Solicitors: Russell & Arnholz agents for Samuel Henry, Belfast (for the appellants); C Grobel Son & Co, agents for Joseph Donnelly & Co, Belfast (for the respondent).

Michael Marcus Esq   Barrister.

Sowler v Potter and Others

[1939] 4 All ER 478


Categories:        LANDLORD AND TENANT; Leases: CONTRACT        

Court:        KINGS BENCH DIVISION        

Lord(s):        TUCKER J        

Hearing Date(s):        3, 6, 23 NOVEMBER 1939        


Landlord and Tenant Lease Mistake as to identity of lessee Fraudulent misrepresentation by lessee Lessors right to avoid lease.

Mistake Mistake as to identity of lessee Mistake induced by fraudulent misrepresentation by lessee Lessors right to avoid lease.

On 12 May 1938, the defendant, whose name was then Ann Robinson, was convicted of permitting disorderly conduct in a tea-room. On 4 July, by deed poll, she assumed the name of Ann Potter. However, on 16 June 1938, she had written to the plaintiffs agent under the name of Ann Potter, offering to take a lease of certain premises belonging to the plaintiff, and on 4 August 1938, the plaintiff purported to lease these premises to the defendant for use as a restaurant or tea-room. The plaintiff subsequently discovered that the defendant Ann Potter was in fact Ann Robinson, who had been convicted of permitting disorderly conduct in a tea-room, and she thereupon brought proceedings claiming possession of the premises, a declaration that the lease was void, and damages for trespass and/or use and occupation and fraudulent misrepresentation on the grounds that there had been a mistake as to the identity of the person with whom the lease was made, and that this mistake was brought about by the fraud of the defendant in concealing her identity and in fact representing that she was a person other than she really was:

Held (i) this was a case where the consideration of the identity of the person with whom the contract was made was a vital element in the contract.

(ii) there had been such a mistake as to render the contract void ab initio.

(iii) the mistake had in fact been brought about by the fraud of the defendant. Her change of name had been a mere device to deceive the landlord with whom she was proposing to enter into a contract.

Notes

It is well-settled that, to make a contract void by reason of a mistake in the identity of one of the parties, it must be shown that the contract

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would not have been entered into with that party had his true identity been known. In the present case, the identity of the contracting party was able to be hidden by a perfectly legitimate change of name, but it is still held that the contract is void ab initio.

For the Law on the Point, see Halsbury (Hailsham Edn), Vol 20, pp 224, 225, paras 245, 246; and for Cases, see Digest, Vol 31, pp 150, 151, Nos 28582864.

Cases referred to

Lake v Simmons [1927] AC 487; 35 Digest 97, 64, 96 LJKB 621, 137 LT 233.

Smith v Wheatcroft (1878) 9 ChD 223; 35 Digest 98, 71, 47 LJCh 745, 39 LT 103.

Phillips v Brooks Ltd [1919] 2 KB 243; 39 Digest 533, 1451, 88 LJKB 953, 121 LT 249.

Gordon v Street [1899] 2 QB 641; 35 Digest 44, 393, 69 LJQB 45, 81 LT 237.

Action

Action for possession of certain premises known as 74, Coleman Street, in the city of London, and mesne profits and damages on the basis of a breach of covenant in the tenancy agreement. The third defendant was not served. The pleadings were subsequently amended as the result of an application to strike out the statement of claim, and the action now claims a declaration that a lease entered into between the plaintiff and the first defendant, dated 4 August 1938, is void ab initio, and for damages for trespass and/or use and also claims against both defendants for damages for fraudulent misrepresentation.

G Granville Sharp for the plaintiff.

D Weitzman for the first and second defendants.

23 November 1939. The following judgment was delivered.

TUCKER J. In this case, Mrs Sowler acted throughout in this matter through her agents, Messrs Dron & Wright, house agents, and through them she came into touch with the defendant Ann Potter, as a result whereof she let, or purported to let, by means of a lease, dated 4 August 1938, these premises at Coleman Street for the purposes of being used by the defendant as a restaurant or tea-room in the basement of the premises.

It appears, and it is a factit is admitted on the pleadingsthat the defendant Ann Potter, whose name was then Ann Robinson, was on 12 May 1938, convicted at the Guildhall Police Court of permitting disorderly conduct in a café known as the Swan Café, Great Swan Alley, in the city of London, and was then fined therefor. When the plaintiffs agent got into touch with the defendant Ann Potter, the defendant wrote a letter, dated 16 June 1938, as follows:

Re my conversation with you on the telephone this morning, I am prepared to make an offer of £210 per annum for the basement in Coleman Street previously Axe Café. Will you please let me know as soon as possible.

That is written from “Stortford,” Cedars Close, Parsons Street, Hendon. At that time, Ann Potter was not the defendants name. Her name was Ann Robinson, but subsequently, by deed poll, dated 4 July 1938,

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she duly changed her name from Ann Robinson to Ann Potter. When it was discovered later that the defendant Ann Potter was in truth and in fact Ann Robinson, who had been convicted of allowing disorderly conduct in a tea-room in the city of London, these proceedings were taken to recover the premises and subsequently to have it declared that the lease is void. The way the case is put on behalf of the plaintiff is this. It is said that the plaintiff, through her agent, was mistaken with regard to the identity of the person with whom the lease was made. It is furthermore saidthough this would not be essential to that part of the casethat in fact that mistake was brought about by the fraud of the defendant Potter in concealing her identity and in fact representing that she was a different person from that which she was. Accordingly, it is said that the lease is void ab initio, and everything that has been done thereunder is also void, and that the defendant was at all times a trespasser and must be dealt with as such. That part of the case raises considerations which are not free from difficulty. I think that the law on the subject is to be found set out in the opinion of Viscount Haldane in Lake v Simmons, at p 501:

Jurists have laid down, as I think rightly, the text to be applied as to whether there is such a mistake as to the party as is fatal to there being any contract at all, or as to whether there is an intention to contract with a de facto physical individual, which constitutes a contract that may be induced by misrepresentation so as to be voidable but not void. It depends on a distinction to be looked for in what has really happened. Pothier (Trait des Obligationé, sect. 19), lays down the principle thus, in a passage adopted by Fry, J., in Smith v. Wheatcroft [p. 230]: “Does error in regard to the person with whom I contract destroy the consent and annul the agreement? I think that this question ought to be decided by a distinction. Whenever the consideration of the person with whom I am willing to contract enters as an element into the contract which I am willing to make, error with regard to the person destroys my consent and consequently annuls the contract … On the contrary, when the consideration of the person with whom I thought I was contracting does not enter at all into the contract, and I should have been equally willing to make the contract with any person whatever as with him with whom I thought I was contracting, the contract ought to stand.” In the careful judgment delivered by him in Phillips v. Brooks, Ltd. Horridge, J., decided that the alternative view secondly stated by Pothier applied to the case he was dealing with. A fraudulent person had entered a jewellers shop and looked at and selected certain jewels which the jeweller was prepared to sell to him individually as a casual customer who had entered the shop. All that remained to be subsequently arranged was payment of the price. The unknown customer, who drew a cheque pretending to be someone else, and signing it in a well-known name, was allowed in exchange for the cheque to take away one of the jewels, of which he disposed subsequently. Horridge, J., found, as a fact that though the jeweller believed the person to whom he handed the jewel was the person he pretended to be, yet he intended to sell to the person, whoever he was, who came into the shop and paid the price, and that the misrepresentation was only as to payment. There was therefore consensus with the person identified by sight and hearing, although the title to delivery was voidable as having been induced by misrepresentation. In the other type of case referred to by Pothier, where the belief of the contracting seller depends wholly on identity of character or capacity, there is, as Holmes, J., says at the beginning of the ninth lecture in his book on The Common Law, no contract, because there is really only one party.

I think it is clear that this case with which I am dealing is one where, in the words used by Viscount Haldane in Lakes case, at p 501:

… the consideration of the person with whom I am willing to contract entered as an element into the contract which I am willing to make …

It is to be distinguished from the type of case with which Horridge J,

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was dealing in Phillips v Brooks Ltd, where those considerations did not arise. I think that this case of landlord and tenant is clearly a case where the consideration of the person with whom the contract was made is a vital element in the contract, and that, therefore, if there is any mistake with regard to the identity of the person with whom one is contracting, the contract is void ab initio.

Here, I think, there was mistake in regard to the identity of the person, for the reason that the agent acting on behalf of the plaintiff said in his evidence that he remembered the case of Mrs Robinson having been reported in the newspapers. Therefore, he was aware that there was in existence a Mrs Ann Robinson, a convicted person, and he thought when he entered into this contract with the defendant Potter that he was entering into a contract with some person other than the Mrs Ann Robinson who had been convicted. I think it is quite immaterial to embark upon speculation as to whether or not, if she had called herself Mrs Robinson, he would have discovered who she was. I think that that is another matter altogether. He believed that, whoever it was with whom he was contracting, it was not the Mrs Ann Robinson who had been convicted of this offence a very short time beforehand. I think that the facts are, therefore, very similar to the facts in Gordon v Street. It is quite true that the decision of the three members of the court in that case was that the fraudulent concealment by the plaintiff of his identity as a person whose reputation in business was such that the defendant would not have dealt with him was material to the inducement which brought about the contract, which the defendant was, therefore, entitled to repudiate within a reasonable time after the discovery of the fraud. The headnote in that case shows that the decision of three Lords Justices was based upon the fact that the defendant was entitled to repudiate this contract on the ground of fraud, but A L Smith LJ, after quoting that passage from Smith v Wheatcroft which was referred to by Viscount Haldane in Lakes case, says, at p 647:

Now, the advertisement above-mentioned points out that George James Addison with whom the defendant thought he was contracting, was not as ordinary loan offices were, and that he traded at one-tenth of the interest charged elsewhere, and this appears to me to afford evidence that with a man trading as Addison said he did the defendant was willing to contract, and that the consideration of the person did enter into the contract, and upon this ground, apart from fraud, the contract ought not to stand.

It is to be observed in this case that the defendant was aware of the existence of a notorious moneylender named Gordon, and, when he made the contract with the plaintiff in the name of Addison, he thought he was not contracting with a known person called Gordon of whose existence he was aware. In those circumstances, there being the fraud as well, A L Smith LJ, based his decision on the ground that in any event the contract could not stand, because, apart from fraud, there was this element of mistake with regard to the identity of the person

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with whom the defendant was contracting. I think that that position is very similar to that in the present case, and, therefore, I think that in this case there was such mistake as to render this lease void ab initio. I furthermore hold, although it is not material to this part of the case, or not essential to this part of the case, that the mistake was in fact brought about by the fraud of the defendant Ann Potter. It is perfectly true that everyone is permitted in this country for innocent reasons to change his name, but it must all depend on the circumstances. I am satisfied here that this was a mere device on the part of the defendant to deceive the landlord with whom she was proposing to enter into a contract, and she in fact fraudulently misrepresented her identity both before and afterwards. That is to say, she described herself as Ann Potter at a time when she was not Ann Potter at all, and I think that, even if she had by that time changed her name by deed poll, it would not have made any difference, provided her intention was, as I hold it to have been, at all times to deceive the plaintiff for the purpose of inducing her to enter into a contract with her into which she well knew the plaintiff would not have entered had she known who the defendant really was. That is sufficient for the decision on the claim with regard to the lease. I think that the plaintiff is entitled to a declaration that this lease, dated 4 August 1938, of 74, Coleman Street, was void ab initio.

There is a further claim for damages for trespass and use and occupation. With regard to that, the evidence before me is not very satisfactory, but the defendant has sworn, and there is no proper evidence to the contrary, that she has in fact paid the rentor what would have been rent if there had been a valid agreementup to the time when she left these premises in March 1939. Of course, if she had not paid anything, she would have had to pay damages on the basis that she was a trespasser, and such damages would probably have been based upon a figure representing what would have been a fair rent for the premises. However, she has in fact paid that, and, therefore, under that head, I cannot see that the plaintiff can obtain any further damages on that basis, except for one small sum. Evidence has been given that a small sum of £8 is required to remedy the decorations in these premises. I think that that was brought about by the presence of the defendant Potter, who was in law a trespasser, and that that sum the plaintiff is entitled to recover.

There is a further claim on this heador rather, I suppose, based upon the fraudulent misrepresentationthat the plaintiff is entitled also to get the sum of £25 which she says is payable to the house agents who brought about this lease. With regard to that, I have found this lease to be void. It would, therefore, appear at any rate highly doubtful whether a house agent can get commission for bringing about a void letting. It is not necessary for me to decide that. All it is necessary for me to say is that no evidence has been given before me which shows that, in the circumstances of this casenamely, a void lease having

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been brought aboutthe house agents are entitled to any commission. It may be that they had some contract with the plaintiff of which I am not aware, and which was in such terms that they would be entitled to get the £25 for bringing about a lease which turned out to be void. If so, they will no doubt be able to recover the £25, but I have no evidence before me to show that, in the circumstances of this case, they are entitled to get the £25. There is some suggestion that part of the damages might also be something that had been paid to some detective to discover the defendants identity, but I am not satisfied with regard to that, and furthermore I think that the detective was employed principally for the purpose of discovering whether there had been any improper conduct in the premises after the defendant had gone in there. With regard to that, evidence was called before me the materiality of which I think was very doubtful at all times, although, I suppose, it might have thrown some light on the fraudulent intention of the defendant in taking these premises. However, it is not necessary for me to say more than that that evidence failed to satisfy me that there had in fact been any disorderly conduct in the premises after the defendant had gone there. The evidence was very vague and, I thought, unsatisfactory, especially having regard to the fact that I think the witnesses were all expecting to find something improper, knowing or suspecting who the defendant was, and what her past had been, and, therefore, were very liable to put the worst possible complexion on anything they saw happening in the basement. I am not satisfied that that was made out. So much for the case against the defendant Ann Potter.

With regard to the defendant Hopfenkopf, the position is this. He was referred to for a reference before this lease was granted. This was the letter that was sent to him by the house agents:

Mrs. A. Potter, of “Stortford,” Cedars Close, Parsons Street, Hendon, N.W.4, is negotiating with us for premises at a rental of £250 per annum inclusive, and she has given us your name to whom we may apply for a reference. We shall be glad, therefore, if you will kindly let us know for our clients information whether you consider she is likely to prove a respectable and desirable tenant and fully responsible for the rental named. We enclose herewith a stamped addressed envelope, and, as the matter is urgent, we shall be obliged if you will kindly let us have your reply by return of post.

Mr Hopfenkopfs reply, dated 14 July, was as follows:

In reply to your inquiry about Mrs. A. Potter, of “Stortford,” Cedars Close, Parsons Street, London, N.W.4, I have pleasure to inform you that I know this lady for at least 12 years, and have no hesitation in recommending her as a respectable and desirable tenant, and fully responsible for the rental named.

The fact is that, when Mr Hopfenkopf wrote that letter, he knew perfectly well that, two months before, this lady had been convicted of this offence, and I have no doubt whatever that he knew perfectly well that no landlord would regard her as either a respectable or a desirable tenant, that he deliberately wrote what he knew perfectly well to be untrue for the purpose of deceiving the person who received the letter, and that it had that effect. He now comes before me and says that,

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despite the conviction, he had accepted the ladys explanation that really all these things had been done without her knowledge at the tea-room, and that he thought she always was a respectable person. I cannot accept that explanation, and I think, however charitably minded he was towards the lady, whom he had known for 12 years, and in whose house he was living, he knew perfectly well that no landlord would regard her as either a respectable or a desirable tenant, and that was the thing which mattered. I think that he made a fraudulent misrepresentation, for which he is responsible if any damages have flowed from it. There again, however, he is in an extremely fortunate position in this case, because I am unable to find that any damage has flowed from that except with regard to this £8, which I think is damage which resulted from letting this Mrs Potter into the premises. I am unable to find any other damage which resulted from this misrepresentation. In arguing the case, counsel for the plaintiff has not contended that the plaintiff is entitled to any damages accruing after the date at which Mrs Potter went out of the premises in March.

Therefore, the result is that I make a declaration that the lease was void ab initio, and I award the plaintiff against the defendant Mrs Potter the sum of £8 for damages, on the basis of trespass and fraudulent misrepresentation, the one sum under both causes of action, and against the defendant Hopfenkopf, for fraudulent misrepresentation, the same sum of £8 damages.

Solicitors: Pinsent & Co (for the plaintiff); Bernard Simmonds & Co (for the first and second defendants).

W J Alderman Esq   Barrister.

Myers v Elman

[1939] 4 All ER 484


Categories:        PROFESSIONS; Lawyers        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD PORTER        

Hearing Date(s):        18, 19, 23, 24, 25, 26, 30 OCTOBER, 5 DECEMBER 1939        


Solicitor Alleged unprofessional conduct Conduct of case left to managing clerk Inadequate affidavits of documents False to knowledge of clerk Whether solicitor can be made personally responsible for costs.

The present respondent had been the solicitor on the record to one of the defendants. At the close of the case, the plaintiff made an application that the respondent should be ordered to pay the costs of the action, on the ground that he had been guilty of unprofessional conduct. It was proved that the respondent had left the conduct of the case in the hands of his managing clerk, who was not a solicitor. It was alleged that the respondent had been guilty of unprofessional conduct in that (i) he had filed a defence putting the plaintiff to the proof of her allegations, knowing that the defence was unlikely to succeed, and (ii) he had prepared affidavits of documents which no solicitor could help knowing were inadequate:

Held (i) (Lord Russell of Killowen dissenting) the respondents managing clerk had knowingly prepared affidavits of documents which were inadequate.

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(ii) in the circumstances, the respondent was guilty of misconduct, because, as a solicitor, and as an officer of the court, he could not escape his responsibility to the court for the proper discharge of his duties to the court by delegating them to a managing clerk who was not personally amenable to the jurisdiction exercised by the court over solicitors as its officers.

per Lord Atkin: the court is not concerning itself with a breach of duty to the other litigant, but with a breach of duty to itself. Its jurisdiction is punitive, and is exercised in appropriate cases and in appropriate measure where there has been no personal complicity by the solicitor charged.

Order of Court of Appeal ([1938] 3 All ER 498) reversed.

Notes

The Court of Appeal held by a majority that the punitive powers of the court over solicitors are only exercisable when the solicitor himself has been guilty of some misconduct, and that misconduct by a clerk which cannot be brought home to the solicitor himself, does not render the solicitor subject to the inherent jurisdiction of the court. This view has been unanimously reversed by the House of Lords, the opinion of Lord Russell of Killowen, so far as it dissents from the majority, being confined to a question of fact.

As to Liability of Solicitor to Pay Costs, see Halsbury (Hailsham Edn), Vol 31, pp 269272, paras 290, 291; and for Cases, see Digest, Vol 42, pp 337353, Nos 38104022.

Cases referred to

Re A Solicitor, Ex p Law Society [1912] 1 KB 302; 42 Digest 399, 4515, 81 LJKB 245, 105 LT 874.

Re Jones (1870) 6 Ch App 497; 42 Digest 352, 4010, sub nom Fielden v Northern Ry of Buenos Ayres Co Ltd, Re Jones 40 LJCh 113, 23 LT 655.

White v Washington (1738) Barnes 411, Cooke PR Cas 152; 42 Digest 352, 4006.

Fowke v Horabin (1739) Barnes 11.

Norton v Cooper, Re Manby & Hawksford, Ex p Bittleston (1856) 3 Sm & G 375; 42 Digest 342, 3864, 26 LJCh 313, 29 LTOS 378.

Dunkley v Farris (1851) 11 CB 457; 42 Digest 343, 3886.

Re Eyre, Palmer v Evans (1856) 1 CBNS 151; 42 Digest 353, 4017, 28 LTOS 125.

Stephens v Hill (1842) 10 M & W 28; 42 Digest 394, 4420, 11 LJEx 329.

Blundell v Blundell (1822) 5 B & Ald 533; 42 Digest 345, 3902.

Re Gray, Ex p Incorporated Law Society (1869) 20 LT 730; 42 Digest 403, 4569.

Re Davies (1898) 14 TLR 332; 42 Digest 404, 4593.

Brendon v Spiro [1938] 1 KB 176, [1937] 2 All ER 496; Digest Supp, 107 LJKB 481, 157 LT 265.

Re Ward (1862) 31 Beav 1; 42 Digest 351, 3993.

Yonge v Toynbee [1910] 1 KB 215; 42 Digest 335, 3785, 79 LJKB 208, 102 LT 57.

Simmons v Liberal Opinion Ltd, Re Dunn [1911] 1 KB 966; 42 Digest 343, 3874, 80 LJKB 617, 104 LT 264.

Appeal

Appeal by the applicant (the plaintiff in the action) from an order of the Court of Appeal (Greer and Slesser LJJ, MacKinnon LJ, dissenting), dated 11 July 1938, and reported, sub nom Myers v Rothfield [1938] 3 All ER 498, reversing an order of Singleton J, dated 13 May 1938, ordering the respondent to pay part of the costs

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of the action. The facts and the arguments are set out in the opinions of their Lordships.

R A Willes and G B Croasdell (for L H Gluckstein on war service) for the appellant.

T F Davis and T J F Nobley for the respondent.

5 December 1939. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, this is an appeal by the applicant (who was the plaintiff in the action) against a judgment of the Court of Appeal, dated 11 July 1938, allowing the appeal of the respondent (who was the solicitor on the record for two of the defendants in the actionnamely, Henry Isaac Rothfield and Nathaniel Rothfield) against an order of Singleton J, dated 13 May 1938, whereby the judge ordered the respondent to pay to the applicant one-third of the taxed costs of the action and also two-thirds of the costs of the application against the respondent and other solicitors, such costs to be taxed. The questions raised by the appeal are whether, in the circumstances, the respondent was guilty of professional misconduct, whether the judge misdirected himself in holding that the respondent was guilty of professional misconduct, and whether there was any jurisdiction to order the respondent to pay costs to parties for whom he was not acting as solicitor in so far as the conduct complained of was committed, not by him, but by his managing clerk, Osborn, who was not a solicitor.

The writ in the action was issued on 3 November 1936. The respondent accepted, on behalf of the defendants Henry Isaac Rothfield and Nathaniel Rothfield, service of the writ and of the statement of claim which was delivered therewith. The plaintiffs claim, as set out in the statement of claim, alleged that the defendants were conducting a systematic swindle by means of a bogus and fraudulent business carried on as Horwood & Co, and alleged that various fraudulent misrepresentations were made whereby the plaintiff had been defrauded of various sums and securities amounting to £9,560 2s. The details of the fraud will be stated by my noble and learned friend Lord Wright.

The defendants in addition to Henry Isaac Rothfield and Nathaniel Rothfield were Norman Baron Rothfield, a firm sued as Rothies, and, lastly, the firm of Horwood & Co The service of that firm resulted in the appearance of one Morser, who was served as a partner in that firm. Owing largely to difficulties with regard to discovery, the action could not be brought to trial until 7 March 1938. Though Norman Baron Rothfield was the only defendant who actually appeared and disputed the claim, the trial of the action lasted five full days. The jurys verdict in favour of the plaintiff awarded her £9,400 damages for fraudulent conspiracy, for which judgment was entered against all the defendants with the costs of the action. It is stated that nothing could be recovered from any of the defendants. Immediately after such judgment had been entered, counsel for the plaintiff invited the judge, in the light of the

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evidence and of the facts disclosed relating to the conduct of the solicitors appearing on the record for the respective defendants, to exercise the courts jurisdiction over its officers, and to order and direct such solicitors to pay the costs so recovered from their respective clients, on the ground that such solicitors and each of them had been guilty of professional misconduct as officers of the court in conducting the defences of their clients.

The judge directed notice to be served on the solicitors of the grounds of complaint against each of them respectively, and, this having been done, he re-heard the application, and, holding that there was not sufficient justification for an order against one of the solicitors concerned, directed an inquiry into the conduct of three other solicitors, one of whom was the present respondent, which, after further and elaborate particulars had been delivered, was specially fixed to be heard by the judge on the first day of the following sittings, 26 April 1938. The hearing lasted for five days. The judge, in addition to the evidence he had heard during the trial, heard the evidence of the plaintiffs solicitors managing clerk. He also heard the evidence of Elman (the respondent) and of Osborn, his managing clerk. He had before him a considerable correspondence between Elman and his clients which the appellants advisers had not previously seen. In his considered judgment, Singleton J held that Elman was not guilty of professional misconduct in filing defences which put in issue the charges of fraud made against his clients, but, finding that both Elman and his clerk, between whom he found himself unable to draw any distinction, “knew a good deal about the matters in question,” and that they had, “as the result of a deliberate policy adopted in Elmans office,” in the conduct of the defence, and in relation to discovery, “increased the plaintiffs difficulties, added to the expense, and obstructed the interests of justice,” he held Elman guilty of professional misconduct as a solicitor and an officer of the court, and he made the order stated above. The respondent appealed to the Court of Appeal against the order of Singleton J, and, by an order dated 11 July 1938, the Court of Appeal by a majority rescinded the order. Greer and Slesser LJJ, were in favour of allowing the appeal. MacKinnon LJ agreed with Singleton J, but expressed the view that his order erred on the side of leniency.

My Lords, as I understand the judgments of Greer and Slesser LJJ, they were of opinion that the jurisdiction of the court to order a solicitor to pay the costs of proceedings is a punitive power, resting on the personal misconduct of the solicitor, and precisely similar to the power of striking a solicitor off the rolls or suspending him from practice. If this is a correct view, no doubt it would follow that the solicitor ought not to be ordered to pay costs unless he has himself been guilty of disgraceful conduct, and it would follow that, however negligent or obstructive or improper his conduct of the proceedings as solicitor has seemed to be, whatever injury has been inflicted on the other party or parties to the

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litigation, he has only to show that he left the whole matter in the hands of a clerk and he will then escape the jurisdiction of the court in relation to costs. It would also seem to follow that, if, instead of a single solicitor, a firm with two or more members is acting for the client, it will be necessary in such a case to inquire into their several responsibilities, and an order can only be made against those partners who can be shown to be personally involved. I am unable to agree with the main proposition, for which, I may add, there seems to be no authority. The jurisdiction to strike off the rolls or to suspend a solicitor seems to me to be of a very different character. Apart from the statutory grounds, it is, of course, true that a solicitor may be struck off the rolls or suspended on the ground of “professional misconduct,” words which have been properly defined as conduct which would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency: Re A Solicitor, Ex p Law Society. Mere negligence, even of a serious character, will not suffice. The application is strictly personal, and related to the solicitor himself and his fitness to practise. In my opinion, the jurisdiction as to costs is quite different. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order. The primary object of the court is, not to punish the solicitor, but to protect the client who has suffered and to indemnify the party who has been injured. RSC Ord 65, r 11, provides the necessary machinery where the person injured is the client of the solicitor. It is a rule supplementary to the summary jurisdiction of the court. It is not limited to misconduct or default, but expressly extends to costs incurred improperly or without reasonable cause, or costs which have proved fruitless by reason of undue delay in proceeding under a judgment or order. The jurisdiction to order the solicitor to pay costs to the opposite party is exercised on similar grounds. The principle will be found clearly stated in Halsburys Laws of England (Hailsham Edn), Vol 31, p 271, where numerous authorities are cited. It will be found that many of these authorities depend, in cases where the order as to costs has been made, on the negligence or mistake of the solicitor, and in that sense only on his misconduct in the proceedings. Some of the cases are those where the solicitor has instituted an action without proper authority, and it may be that they can be supported on the ground that, in such cases, the solicitor has warranted that he has the authority of his client to act for him in the litigation, though it may be observed that that is not the ground stated by the court, and I think they rest on the jurisdiction of the court over its officers. I propose to select a few cases only for comment.

In Re Jones, Lord Hatherley LC laid down the rule with his usual clearness. It was a case where the solicitor had engaged to indemnify the plaintiff against the costs of a doubtful suit which failed. The defendants, failing to recover their costs from the plaintiff, applied by petition for (amongst other things) an order on the solicitor to pay

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their costs. Lord Hatherley LC began by laying down the general principle. He said, at p 499:

… I think it is the duty of the court to be equally anxious to see that solicitors not only perform their duty towards their own clients, but also towards all those against whom they are concerned …

He added that care should be taken to see that the litigation is the bona fide litigation of the client who instructs the solicitor, and not one carried on altogether on the solicitors account, a well-known proposition with which we are not concerned here. The solicitor was ordered to pay the costs. I cannot find that the proposition laid down by Lord Hatherley LC has ever been doubted, and the cases cited in Halsburys Laws of England certainly tend to support it. Nor is the proposition a modern invention. To go no further back than Sayer on Costs (2nd Edn), 1777, it will be found that he has a chapter (No 47) “Of the liability of an attorney in a cause to pay costs.” He cites there six cases, the first being thus described.

Many mistakes having been made by the plaintiffs attorney in the copy of a capias, a rule was made for him to show cause why he should not pay to both plaintiff and defendant the costs occasioned by those mistakes (White v. Washington.)

We are left to infer that the rule was made absolute, and the same observation applies to a statement of the case in Barnes Notes on Cases (3rd Edn), p 411. In Fowke v Horabin, another case cited in Sayer on Costs, a rule was made for the plaintiffs attorney, guilty merely of gross mistakes in a certain record which had to be amended, to pay the costs occasioned by the amendments (see the statement of the case in Barnes Notes (3rd Edn), p 11). These cases did not depend on disgraceful or dishonourable conduct by the solicitor, but depended on mere negligence of a serious character, the result of which was to occasion useless costs to the other parties.

If, then, as I think, the authorities show that the jurisdiction may be exercised where the solicitor is merely negligent, it would seem to follow that he cannot shelter himself behind a clerk, for whose actions within the scope of his authority he is liable. That a partner in a firm of solicitors cannot escape from such an order on the ground that he took no active part in the proceedings seems to me to be clear. If authority is needed, I think Norton v Cooper may be referred to. A firm of solicitors having instituted a suit without a satisfactory retainer, and the suit having failed, Sir John Stuart, V-C, ordered the firm to pay the costs incurred by the plaintiff in the suit. One partner alone was concerned in the suit, and the other partner contended that he was in no degree liable. Sir John Stuart, V-C, observed, at p 385:

The safety of the public, and the rules of court, are to be satisfied only by holding in a case of this kind, that, as long as Mr. Hawksford [the innocent partner] continued to appear as one of the solicitors of the plaintiff on the records of the court, he is responsible for what took place in the conduct of the cause.

If this is true of an innocent partner, it must be equally true if a person,

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being solicitor on the record in an action or other legal proceedings, chooses to leave the actual conduct of the matter to a managing clerk. The other parties have no means of knowing what particular part the solicitor, as distinguished from his clerk or his partner, has taken in the matter. If we rely on the principle laid down by Lord Hatherley LC, it is clear that the principle will be to a large extent useless if a solicitor on the record has merely to leave everything to a clerk. My conclusion is that Elman cannot dissociate himself from the acts and defaults of Osborn, and in what follows I shall generally omit any reference to him and shall treat his acts as being those of his principal.

My Lords, if we approach the facts on the footing that Elman, as an officer of the court, owed a duty to the court in the proceedings by Mrs Myers against Norman Baron Rothfield, Henry Isaac Rothfield, Nathaniel Rothfield, and the two firms, and that he was responsible in the performance or non-performance of that duty for the acts or defaults of his managing clerk, a good many of the difficulties disappear. However, although, in the view I take, it is not necessary to show that Elman has been guilty of conduct which would justify the punishment of striking him off the rolls or of suspending him from practice, I entirely agree with the contention that the jurisdiction in question ought to be exercised only when there has been established a serious dereliction of duty as a solicitor, either by himself or by his clerks. The findings of Singleton J, after a long and patient inquiry, and after hearing the evidence of Elman and his managing clerk, would seem to settle that question. The matter is undoubtedly one of great importance to Elman, however, and we have had the advantage of an elaborate hearing, in which the whole of the material correspondence and the evidence given on the inquiry before Singleton J, have been exhaustively considered. I am unable to come to any conclusion different from that of the judge, and I shall endeavour as briefly as possible to state my reasons, bearing in mind that Elman is in no way responsible for the frauds of which his two clients have been guilty.

The particulars given before the inquiry directed by Singleton J began included two matters, first, the filing of defences by his two clients which he knew to be false, and, secondly, that he prepared and advised and permitted his clients to make and file affidavits of documents which were wholly inadequate and false. On the first charge, the judge absolved Elman. On the second, he found that the charge was true. I think it useful to observe here that there is this plain distinction between defences which consistas they did hereof a denial of allegations and untrue affidavits of documents. The defences are not on oath, and they merely put the plaintiff to the proof of the allegations in the statement of claim. Moreover, as the judge pointed out, there is, in such a case as the present, a matter of damages which must be determined if the plaintiffs allegations are proved. On the other hand, in many actions, and in particular in such an action as Mrs Myers had brought,

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based on disgraceful frauds and on fraudulent conspiracy of the most shameless character, it is essential, in the interests of justice, that the defendants should be compelled to make full disclosure of all the documents bearing on the alleged frauds in the form of proper affidavits of documents. If the defendants are guilty of the alleged frauds, it is hardly to be expected that they will make adequate affidavits without considerable pressure. However guilty they may be, an honourable solicitor is perfectly justified in acting for them and doing his very best in their interests, with, however, the important qualification that he is not entitled to assist them in any way in dishonourable conduct in the course of the proceedings. The swearing of an untrue affidavit of documents is perhaps the most obvious example of conduct which his solicitor cannot knowingly permit. He must assist and advise his client as to the latters bounden duty in that matter, and, if the client should persist in omitting relevant documents from his affidavit, it seems to me plain that the solicitor should decline to act for him any further. He cannot properly, still less can he consistently with his duty to the court, prepare and place upon the file a perjured affidavit.

A further observation should be made here. Suppose that, in such a case, the client swears an affidavit of documents which discloses nothing relating to the frauds alleged in the statement of claim, and suppose that the solicitor has previously given his client full and proper advice in the matter, but has no good reason to suppose that the affidavit is untrue. It may be asked, what else ought the most punctilious solicitor to do? My answer is: Nothing, at that time. However, suppose that, before the action comes on for trial, facts come to the knowledge of the solicitor which show clearly that the original affidavit by his client as defendant was untrue, and that important documents were omitted from it. What then is the duty of the solicitor? I cannot doubt that his duty to the plaintiff, and to the court, is to inform his client that he, the solicitor, must inform the plaintiffs solicitor of the omitted documents, and, if this course is not assented to, he must cease to act for the client. He cannot honestly contemplate the plaintiff failing in the action owing to his clients false affidavit. That would, in effect, be to connive at a fraud, and to defeat the ends of justice. A solicitor who has innocently put on the file an affidavit by his client which he has subsequently discovered to be certainly false owes it to the court to put the matter right at the earliest date, if he continues to act as solicitor upon the record. The duty of the client is equally plain. I wish to say with emphasis that I reject the notion that it is justifiable in such a case to keep silence, and to wait and wait till the plaintiff succeeds, if he can, in obtaining an order for a further and better affidavit. To do so is, in the language of Singleton J , to obstruct the interests of justice, to occasion unnecessary costs, and, even if disclosure is ultimately obtained, to delay the hearing of the action in a case where an early hearing may be of great importance.

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The relationship of the three Rothfields, the dates of the events in this eventful story, and the early history of the fraudulent family, so far as it was known to Elman, are of first-rate importance in considering the circumstances proved as to the various affidavits of documents sworn by Elmans clients. It should be stated that the three Rothfields were the main defendants in the action. Henry Isaac Rothfield was the father of Norman Baron Rothfield and Nathaniel Rothfield. The first of these three was, to the knowledge of Elman, an undischarged bankrupt, having been so adjudicated in 1922 and again in 1928. Nathaniel was an infant when the writ was issued. He attained the age of 21 years on 17 May 1937, and he then adopted the defence filed on his behalf by Elman, acting for the guardian ad litem. Another material fact is that Henry Isaac Rothfield was arrested on 13 November 1936, and charged with the Horwood & Co frauds, including that practised on Mrs Myers. Elman obtained bail for him, and he was apparently at large till 7 September 1937, when he was convicted at the Old Bailey of all the frauds, including those the subject of Mrs Myers action, and sentenced to 4 years penal servitude. It is not surprising that he did not appear at the trial in March 1938. Nor did Nathaniel Rothfield, who had gone to the West Indies in January 1938, on the ground of ill-health.

Henry Isaac Rothfield and Nathaniel Rothfield were not strangers to Elman when he entered appearances for them in the Myers action on 6 November 1936. In March 1935, he had acted for Morser in the purchase of the business of Horwood & Co. In December 1935, on the instructions of Nathaniel Rothfield (aged 19), he acted in the incorporation of a private company called the Mushroom Farmers Association Ltd. In January 1936, he acted for that company in an action brought against it for passing off and breach of copyright. Nathaniel Rothfield was the sole director of the company. Elman knew that the father was an undischarged bankrupt, a circumstance which might explain his absence from the board. In March 1936, it is proved that Elman was giving advice to Henry Isaac Rothfield and Morser in relation to the formation of a limited company to take over the business of Horwood & Co. He appears to have opposed such a step, and it is plain that he must have known something of its activities to have been in a position to give that advice. In April 1936, and on subsequent dates up to June 1937, he acted for Nathaniel Rothfield in the purchase of a number of small properties, which were conveyed to Norman Baron Rothfield as trustee for Nathaniel, who, ostensibly at least, found the purchase moneys. On 19 June 1936, an action claiming damages for frauds of the share-pushing kind was commenced by Lady Chichele Plowden against one Thomas Livingstone, Henry Isaac Rothfield and Nathaniel Rothfield. Elman arranged that Norman Baron Rothfield should be guardian ad litem for his brother Nathaniel, and entered appearances for all three defendants. On 31 July 1936, one Still commenced a similar action, which (after amendment) claimed damages against Morser, Henry Isaac Rothfield and one

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McArthur. Morser and Henry Isaac Rothfield consulted Elman, who delivered the latters defence on 11 January 1937. Morser joined Henry Isaac Rothfield and Nathaniel Rothfield as third parties, and claimed to be entitled to be indemnified by them. Elman acted for them on this claim, which was afterwards dismissed on the ground that it was founded on a fraudulent conspiracy. The action succeeded on 25 May 1937. The Myers action began on 3 November 1936.

The degree of acquaintance between Elman and Henry Isaac Rothfield is to be surmised from a letter dated 15 March 1937, four months after the arrest of this client on a grave charge of fraud:

Dear Henry,

Re Myers, Still, &c.

I find from certain correspondence which has been supplied to me and which I have not heard of or seen before that your position as between H. Morser and yourself in the third-party proceedings and which proceedings are open and well known to the various plaintiffs, will require very careful explanation.

In order that you will understand my meaning, I enclose herewith copies of three letters and shall be glad to know exactly how you are proposing to deal with it.

It may be noted in passing that Highcroft Farm, where Henry Rothfield was residing, was one of the properties bought by Nathaniel Rothfield, and it may be surmised that the latter was on good terms with his father. The important points about the letter are, first, that Elman addressed his client in familiar fashion by his first name, and, secondly, that the three letters seemed to have caused Elman some perturbation of mind. My Lords, I am not surprised. The three letters, which the judge cited in full, seem to me to establish beyond reasonable doubt that Henry Isaac Rothfield was the virtual owner, and in any case the prime mover in the activities, of Horwood & Co, and that Morser, as he was contending in the Still action, was little more than a dummy. It should be added that Morser had been arrested in September 1936, as the presumed owner of the business of Horwood & Co, and that his release was followed by the arrest of Henry Isaac Rothfieldfacts which pointed in the same direction.

The close connection of Henry Isaac Rothfield with the business of Horwood & Co can scarcely have come to Elman as a complete surprise. On 20 August 1936, there had been an interview at Elmans office at the instance of some respectable brokers who had been innocently connected with the fraudulent sale by Horwood & Co of certain valuable shares belonging to Mrs Myers. Several persons were present, including Elman in person, a representative of the brokers, and one Barker, a clerk sent by Messrs Peacock and Goddard, the solicitors for Mrs Myers. (Her action, it will be remembered, began a fortnight later.) A letter to “Mr Horwood” by Mrs Myers relating to her shares was read aloud by Elman. The evidence given by Barker on the inquiry was that those present throughout referred to Rothfield as being Horwood, and the witness added that it was obvious that Elman knew that Rothfield was Horwood. It should also be stated that, when Elman was asked for copies of the letters addressed to, or coming from, the possession of

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Horwood & Co, he said he would “get into touch with Mr Rothfield,” and, subject to that, would supply the copies. Counsel for Elman, with, I think, admirable discretion, did not ask any questions in cross-examination on these points. There was, of course, to the knowledge of Elman, no “Mr Horwood” at this time, and he did not apparently think that any one really controlled Horwood & Co except Henry Isaac Rothfield. This person in fact had pretended to be Mr Horwood at a lunch he gave to Mrs Myers.

Elmans knowledge of Nathaniel Rothfield was perhaps not so intimate. As we have seen, he acted for him in the formation of a company and in the purchase of a number of properties. He knew that this precocious infant had at least one banking account, for on 10 August 1936, he received a cheque for £1,000 from him drawn on Nathaniels own account at Lloyds Bank, 222, Strand. On 17 August 1936, he delivered the defences of Henry Isaac Rothfield and Nathaniel Rothfield in this Lady Chichele Plowden action, presumably on instructions.

My Lords when the statement of claim in the Myers case was delivered, the knowledge already at the disposal of Elman was more than enough to put him on his guard. The case reeked with fraud. The charges made in the various proceedings against Henry Isaac Rothfield and Nathaniel Rothfield might, no doubt, be untrue, and the criminal proceedings against the father might break down, but the clouds seemed to be gathering, and care was necessary. The first affidavits of documents sworn by Henry Isaac Rothfield and Nathaniel Rothfield in the Myers action, dated 1 March 1937, disclosed nothing of the connection of either with Horwood & Co. I will assume that at that time Elman had nothing but suspicions as to the inadequacy of these affidavits. He was, however, warned by Messrs Peacock and Goddard, by a letter of 5 March, of the many documents which were undisclosed. This letter, and a number of subsequent letters, are set out in full in the judgment of Singleton J, and I cannot usefully transcribe them here. That Elman was under no illusions after he had obtained, in March 1937, the three letters above referred to seems to be clear from his letter to Nathaniel Rothfield on 5 May 1937, in which he told his client that there should be in his possession pass-books showing payments made by him in connection with his purchase of shares in Consolidated Gold Alluvials of British Columbia Ltd (a purchase which formed part of the fraud on Mrs Myers), and his transactions in connection therewith with Horwood & Co. Elman did nothing to compel the production of these documents, and it was left to Messrs Peacock and Goddard to obtain an order for further discovery. On 3 May 1937, a second affidavit of documents by Henry Isaac Rothfield was filed by Elman. A second affidavit by Nathaniel Rothfield was resisted, but an order was finally obtained.

Nathaniel Rothfields second affidavit was sworn on 29 May 1937. It disclosed a mass of documents, including correspondence between

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Nathaniel Rothfield and Horwood & Co relating to his transactions with that business in connection with Consolidated Gold Alluvials shares, and it also included a limited number of entries in Nathaniel Rothfields bank pass-book of his account at Lloyds Bank (Law Courts Branch). During inspection of the documents so disclosed on 8 June and 23 June 1937, the plaintiffs solicitors, while protesting against the inadequacy of the disclosures, pointed out to Elmans clerk that, even in the documents which were disclosed, there appeared references to other banking accounts which Nathaniel Rothfield had not disclosed. Osborn informed Singleton J at the inquiry that the Lloyds Bank pass-book had not been examined by him, and had been sealed up by Elmans clerks, in accordance with Nathaniel Rothfields instructions. When that pass-book was first produced to the plaintiffs solicitors, only certain debit items and four credit items were disclosed. The period covered by such items was 6 January to 18 August 1936. This pass-book was not completely disclosed to the plaintiffs solicitors till November 1937, though Osborn stated that in fact it had been in Elmans office for over a fortnight in June 1937. When it was examined by the judge, it appeared that upwards of £54,000 had passed through this account in a period of approximately 15 monthsAugust 1935, to November 1936and it also appeared that in that pass-book, on the same page as that on which an entry had been disclosed, there appeared, amongst the entries which had been concealed, an entry showing a payment in cash of £1,000 to Elman on 10 August 1936, and another showing a payment on the same day, simply “cash £1,000.”

My Lords, like Singleton J, I do not believe that Elman never looked at the pass-book. It was his duty to look at it, for I cannot think that, in the very peculiar circumstances of this case, it was right for Elman to leave it to his client to say what items in the account ought to be disclosed. Nor was it right to go on resisting discovery, and, in effect, as Singleton J, observed, to leave it to Nathaniel Rothfield to say what was relevant, and to be willing to act upon that, in so far as Elmans dealings with the plaintiffs solicitors were concerned. These were breaches of his duty to the court, in the circumstances of this case. It was not till 30 November 1937, after considerable expense and delay, that Nathaniel Rothfield, as the result of an order, was compelled to swear his third affidavit of documents. The case against him was then clear beyond doubt, for the Lloyds Bank account in full, and other banking accounts which he produced, made it clear that he had taken an important part in the Horwood & Co frauds. The details are contained in the judgment of Singleton J, and I cannot set them out here. It had thus taken from 28 January 1937, to 30 November 1937and three orders of the courtto obtain a satisfactory affidavit of documents from Nathaniel Rothfield. I will not deal with the application made in the name of Nathaniel Rothfield to postpone the hearing of the case in order that he might appear as a witness, except to say that I do not

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believe that he ever intended to enter the witness-box. As the result of the application, the action did not come on for trial till 7 March 1938. Neither solicitor nor counsel appeared for Henry Isaac Rothfield and Nathaniel Rothfield. It is not without significance that Elman never at any time sought to inspect any of the numerous documents disclosed by the plaintiff.

I think I have said enough to show why I agree with the findings of the judge, and why I think that his inferences, where the matters depended on inference, were fully justified. He had heard and seen the witnesses, and, in view of the knowledge which Elman admittedly possessed of the activities of the Rothfield family, and of his statements and those of his clerk in the witness-box, which I have read with care, and of the correspondence which was disclosed, it is my opinion that Singleton J was amply justified in concluding that Elman was guilty of professional misconduct in not insisting on his clients disclosing the relevant documents as soon as he knew that they were, or had been, in their possession, custody or power, and in preparing and putting on the file affidavits of documents which he knew to be very inadequate. It is clear that MacKinnon LJ was of the same opinion on the facts, and it seems probable that Greer and Slesser LJJ also agreed with their colleague as to the facts, and only disagreed on the question of law. My Lords, I think this appeal should be allowed, with costs here and below, and the order of Singleton J should be restored.

LORD ATKIN (read by Lord Wright). My Lords, this is an appeal from the Court of Appeal, who by a majority allowed an appeal from an order of Singleton J, who, after an inquiry lasting five days, had ordered the respondent, a solicitor who had acted for two of the defendants in an action of Myers v Rothfield, to pay part of the costs of the action of the successful plaintiff. The ground was that the solicitor had been guilty of misconduct. The misconduct found by the judge was that, in allowing certain affidavits of discovery to be sworn and put on the file, he was allowing something to be done which he knew to be wrong, and that, in resisting further discovery, he was obstructing the interests of justice and causing delay. The facts disclosed in the inquiry showed that, during the course of the action, the solicitor, Elman, was for some weeks at a time absent from his office, and that he had entrusted the conduct of the litigation generally to the charge of his managing clerk, Osborn, unadmitted but having a large experience of the conduct of litigation. The judge expressed himself as unable to draw any distinction between Elman and his managing clerk, for whom he was responsible. I think it fair to assume, as was done in the Court of Appeal, that such words indicate that the judge was not finding that Elman himself was personally a party to the misconduct found. The majority of the Court of Appeal (Greer and Slesser LJJ) were of opinion that the judge could not exercise his punitive jurisdiction over a solicitor unless the solicitor

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personally had been guilty of misconduct, and discharged the order. MacKinnon LJ dissented. My Lords, I believe that all your Lordships are of opinion that the view taken by the majority of the Court of Appeal was incorrect.

From time immemorial, judges have exercised over solicitors, using the phrase in its now extended form, a disciplinary jurisdiction in cases of misconduct. At times the misconduct is associated with the conduct of litigation proceeding in the court itself. Rules are disobeyed, false statements are made to the court or to the parties by which the course of justice is either perverted or delayed. The duty owed to the court to conduct litigation before it with due propriety is owed by the solicitors for the respective parties, whether they be carrying on the profession alone or as a firm. They cannot evade the consequences of breach of duty by showing that the performance of the particular duty of which breach is alleged was delegated by them to a clerk. Such delegation is inevitable, and there is no one in the profession, whether in practice or as a judge, who will not bear ungrudging tribute to the efficiency and integrity with which, in general, managing clerks, whether admitted or unadmitted, perform their duties. The machinery of justice would not work without them. Nevertheless, as far as the interests of the court and the other litigants are concerned, it is a matter of no moment whether the work is actually done by the solicitor on the record or by his servant or agent. If the court is deceived or the litigant is improperly delayed or put to unnecessary expense, the solicitor on the record will be held responsible, and will be admonished or visited with such pecuniary penalty as the court thinks necessary, in the circumstances of the case. Misconduct, of course, may be such as to indicate personal turpitude on the part of the person committing it, and to lead to the conclusion that the party committing it, if an officer of the court, is no longer fit to act as such. Over conduct such as that, punitive jurisdiction will be exercised, but it seems hardly necessary to state that no punishment based on personal misconduct will be inflicted unless the party visited is himself proved to be personally implicated. Some confusion has, I think, arisen from the fact that charges of personal misconduct have been generally brought by a special procedure, by a rule or order to answer allegations made in an affidavit, later by a report by the Discipline Committee of the Law Society, and now, since 1917, by proceedings before the society, who themselves determine the facts and the punishment. Such cases involve personal misdoing. They are rightly termed cases of professional misconduct, but the words “professional misconduct” themselves are not necessarily confined to cases where the solicitor himself is personally guilty. After all, they only mean misconduct in the exercise of the profession, and they cover cases where a duty is owed by the solicitor to the court and is not performed owing to the wrongdoing of the clerk to whom that duty has been entrusted. In Dunkley v Farris, the solicitors clerk had forged the seal of the court to the

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writ. In Re Eyre, Palmer v Evans, the solicitors clerk had falsely represented to the defendant that judgment had been signed and execution issued, whereby he had paid an unnecessary sum for costs. In neither case was the solicitor personally implicated, but in both he was ordered to pay the costs, and, in the latter case, to refund the excessive costs. In both cases, it may be observed, the application was to the full court that the solicitor should answer matters contained in an affidavit, upon which the court could proceed to attachment or to suspension or removal from the rolls. It seems to me quite incorrect to suppose that the cases in which solicitors have been ordered to pay costs where there has been no personal complicity are cases in which the court is exercising a kind of summary jurisdiction in contract or tort by way of awarding damages for breach of warranty of authority. The court is not concerning itself with a breach of duty to the other litigant, but with a breach of duty to itself. Its jurisdiction is punitive, and is exercised in appropriate cases and in appropriate measure where there has been no personal complicity by the solicitor charged.

The only question that remains is whether the judge was right in his finding that the managing clerk, Osborn, had been guilty of misconduct which justified the order against his principal to pay part of the costs of the action. It is to be noticed that the judge laid down for himself a standard which was perhaps too favourable to the solicitor:

By misconduct is meant something which would reasonably be regarded as disgraceful or dishonourable by solicitors of good reputefor example, wilfully misleading the court in the conduct of a case.

I think that this is too favourable, for it would appear from the cases that a breach of duty owed to the court committed by gross negligence may lead to the exercise of punitive jurisdiction. In the present case, however, it is right to accept the test laid down by the judge and ascertain whether, by that standard, misconduct was proved. I have had the opportunity of considering the survey of the facts made by Viscount Maugham and Lord Wright and, as I agree with their statement and with the conclusions they draw, I find it unnecessary to discuss the evidence at any length. The question is confined to the matter of discovery of documents. It is a subject which undoubtedly often presents difficulties to a solicitor, who in quite ordinary disputes finds it difficult to convince his client that business documents, as well as documents which the client considers private and confidential, must be disclosed. The difficulty is increased where the case involves a charge of dishonesty against the client, who may have every motive for concealing some, at any rate, of the relevant documents. What is the duty of the solicitor? He is at any early stage of the proceedings engaged in putting before the court, on the oath of his client, information which may afford evidence at the trial. Obviously he must explain to his client what is the meaning of relevance, and equally obviously he must not necessarily be satisfied by the statement of his client that he has no documents,

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or no more than he chooses to disclose. If he has reasonable ground for supposing that there are others, he must investigate the matter, but he need not go beyond taking reasonable steps to ascertain the truth. He is not the ultimate judge, and, if he reasonably decides to believe his client, criticism cannot be directed to him. I may add, however, that the duty is specially incumbent on the solicitor where there is a charge of fraud, for a wilful omission to perform his duty in such a case may well amount to conduct which is aiding and abetting a criminal in concealing his crime, and in preventing restitution.

I am myself satisfied that the judge had ample evidence on which to find that Osborn, in allowing the two earlier affidavits to be sworn and put on the file, was allowing something to be done which he knew to be wrong. In the discussion before us, little was said about Nathaniel Rothfields first affidavit, which was filed on 1 March 1937, the same day as Henry Rothfields, and about 14 weeks after the latter had been arrested on charges of fraud. In August 1936, Elman had had handed to him by Henry the documents passing between Mrs Myers, the plaintiff in the case, and Horwood & Co, for whom Henry was at any rate ostensibly manager. We know now that the worthless Canadian gold shares supplied to Mrs Myers had been purchased through Nathaniel, and that most of the proceeds of the valuable shares of which she had been defrauded had been paid into Nathaniels account. It seems almost certain that such reasonable inquiries addressed to Henry as through whom were the gold shares bought, how were they paid for, how were the valuable shares sold, where did the proceeds go, would either have elicited the truth or have satisfied the solicitor that concealment was being practised and that the solicitor could not honestly continue. In regard to the second affidavit of Nathaniel, filed on 29 May, however, the facts, as found by the judge in the documents disclosed in relation to it, appear to me conclusive of the misconduct of Osborn. The issue turns upon the disclosure by Nathaniel of his pass-book at Lloyds Bank in the Strand. It is described in Sched I, Part I, as “Pass-book, Lloyds Bank Ltd., 222, Strand, W.C., relevant entries only.” At the time when the affidavit was sworn and filed, the pass-book had not been produced to the solicitor, no entries had been identified as the relevant entries, and no part had been sealed up. The book itself was, or rather the sheets were, not taken by Nathaniel to Osborn, according to the latters account, until the morning of 8 June, the day upon which the plaintiffs solicitors were attending for inspection, and on that day Osborn, who had the sheets in his possession, directed his typist to seal up all the portions of the sheets except those which had been marked as relevant by Nathaniel himself. This procedure in itself seems to me highly irregular. By such a proceeding, no oath is taken by the party defining what is relevant, or therefore defining that which he may have in his possession but swears to be irrelevant, and, as far as the solicitor himself is concerned, it would be a grave breach of duty to leave the decision as to relevance to the oath of a boy just come of age, who,

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with his family, was charged with fraud, and who obviously had been guilty of a misstatement in his first affidavit. The charge is established, however, by two facts, (i) the judges finding that he does not accept Osborns statement that he did not see the whole contents of the pass-book, (ii) Osborns admission, which was obviously correct, that any experienced person who saw the whole pass-book and the large amount of receiptsnamely, £54,000 in about 12 monthswould recognise that the whole pass-book was relevant. On the judges finding, with which I entirely agree, Osborn must have seen the whole book. If so, he allowed the affidavit to take the form of having sworn to only a few relevant entries, and not to the whole.

It may be mentioned that, apart from this, an inspection of an alleged account between Horwood & Co and Nathaniel, which was in fact disclosed, reveals payments and receipts in addition to those actually disclosed, some of which undoubtedly appeared in the pass-book, and were thus in that document concealed. I need only refer to one itemnamely, the sale of £2,500 3½ per cent War Loanwhich is entered in the pass-book under 14 August 1937, the receipt of which from Horwood & Co is entered in the Horwood account a day or two previously. There are others equally relevant. I do not go into detail as to the correspondence, but I am also satisfied that the letters passing between the solicitors and the proceedings on the various summonses for further discovery well warrant the judges finding that, in resisting further discovery, the solicitor was obstructing the interests of justice, adding to the difficulties of the plaintiff, and causing delay where a speedy judgment was of great importance to the plaintiff. In coming to the conclusion that the appeal should be dismissed, I have tried to bear in mind the difficulties into which an honest member of the profession is put when he has to defend a client charged with dishonesty or any other crime. He is not to arrogate to himself the ultimate decision, which is to be the judges. He may be suspicious, but his suspicions may be misplaced. Every one has a right to have his defence put before the court. In such cases, however, it is specially incumbent upon solicitor and counsel alike to observe their obligations to the court. As Dr Johnson said, they are not to tell what they know to be a lie. It is because the rule of conduct was in this case gravely broken that I think that the salutary decision of Singleton J, should be restored.

LORD RUSSELL OF KILLOWEN. My Lords, assuming that the judge has rightly found that Osborn knowingly filed false affidavits of documents, the court was, in my opinion, entitled, in the exercise of its jurisdiction over its officers, to order Elman, who was the solicitor on the record for the deponent, and who acted by Osborn, as such solicitor, to pay such amount of the plaintiffs costs as the court deemed proper. It is, I think, immaterial that no professional misconduct is attributable to Elman personally. He would none the less have failed in the discharge

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of the duty which he owed to the court. I agree in all respects upon this point with the opinion of Viscount Maugham, which I have had the privilege of reading. Nevertheless, I would dismiss this appeal, because, although I differ from the reasons upon which the order of the court of Appeal is founded, I am of opinion that, upon the evidence before us, it is impossible to hold that any of the charges alleged against Osborn have been proved. If this view is correct, an order against Elman could not stand, for a fortiori no charge has been proved as against him.

Let me first state what were the charges which Elman was called upon to meet, and in regard to which his case, and the evidence in support of it, were presented at the hearing before Singleton J. It is essential to appreciate what the exact charges were, because the proceedings which were based upon them are in their nature penal, and the respondent was in the position of a person accused. In these circumstances, the accuser must be confined to the actual charges made, and it is not open to the tribunal to find that other charges are proved, and to impose a punishment accordingly. Nor was any notice ever given that other and additional charges would be made or considered. The actual charges which Elman was called upon to meet are clearly defined by the particulars. They were two in number, which I quote verbatim:

(1) Mr. Burnett L. Elman instructed counsel to draw and then filed defences which were to his knowledge false in respect of each and both of his clients, persisting in such conduct of the defence of these defendants notwithstanding that his client Henry Isaac Rothfield had been convicted and sentenced to penal servitude for the frauds, the subject of the plaintiffs claim. (2) In the light of the knowledge which the respective solicitors had of the business conducted by their clients and of the position and relationship of their clients and of the existence of material documents which were or had been in the power, possession or control of their several and respective clients, each of the solicitors were (sic) guilty of misconduct in preparing and advising or permitting their clients to make and file affidavits of documents which were wholly inadequate and obviously false.

The first charge I will allude to no more. The judge found no misconduct under that head. The second charge may, I think, be summarised as a charge of knowingly filing false affidavits of documents. That is the accusation, that and nothing else. Even as to this charge, however, it has, upon the judges findings, been confined before your Lordships House to a charge in relation to the affidavits of documents sworn by Nathaniel Rothfield. The judge makes no specific finding in relation to Henry Rothfields affidavits, nor was any case in respect of them opened before us. They are not even included in the books before us, and I have never seen them.

To understand with accuracy what the judge decided, it is necessary to read his judgment with some care, because the findings of fact are not formally or consecutively stated. They have to be picked out here and there. I will now state these findings and make my comments upon them. 1. The first finding is in relation to Osborns knowledge of the contents of the pass-book relating to Nathaniels account with Lloyds Bank. Osborns evidence was to the effect that it came into

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his possession for the first time on 8 June 1937, that Nathaniel brought it to the office and told Osborn that he had marked the only relevant entries, that he, Osborn, did not examine it because he had to leave the office to keep another appointment, and had therefore no time to examine it, but that, since the plaintiffs solicitors were due to come and inspect documents at noon, he handed the pass-book to a clerk with instructions to cover or seal up the unmarked entries. That was the only evidence upon this point, except that of the clerk who covered up the unmarked entries, and who corroborated the instructions given to her. The judges finding was as follows:

I cannot accept the explanation given to me by Osborn. … I feel sure that he examined the pass-book when it was handed to him. Even a cursory examination of it must have satisfied him how damaging it was to Nathaniel Rothfields case and, acting on the clients instructions, he determined to keep it back as long as he could, adopting the attitude shown by the letter of June 26, 1937, which I have already read.

My Lords, I have read and re-read the evidence in this case, and I can find nothing to support such a finding. I am in the dark as to the reason for the judges disbelieving Osborns explanation. The shorthand notes afford no clue. However, if the only witness to a material fact swears “Yes,” and the judge elects to disbelieve him, “No” is not thereby proved. There is still no evidence that Osborn did on that occasion examine the pass-book, which, I may observe, consisted of 36 pages. Still less is there any evidence of any instructions to Osborn to keep back the pass-book, or of any determination by Osborn to keep it back. As to the letter of 26 June 1937, I can see nothing wrong in its contents. Indeed, the plaintiffs solicitors never replied to it, and made no further move in relation to discovery until some four months had elapsed. I am of opinion that this finding is without any justification. In addition to this, however, the finding is irrelevant to the charge, for, even if it were true, any knowledge acquired by Osborn in June 1937, and any determination then formed to keep back the pass-book, could only establish the known falsity of an affidavit by Nathaniel subsequently filed, namely, Nathaniels third affidavit, which was sworn and filed on 30 November 1937. Of this affidavit, however, no complaint is made. By it, the whole pass-book was disclosed. 2. Later in his judgment, the judge, referring to this disclosure, says:

The failure to disclose the accounts, Lloyds Bank accounts in particular, at the proper time, added to the plaintiffs difficulties, added to the expense, and entailed delay. I am satisfied that it was a deliberate policy adopted in the office of Elman.

That is indeed a grave charge, but, for myself, I see no trace in the documents or evidence of any such policy, deliberate or otherwise, and no such charge is included in the indictment. 3. The judge also finds that the order for the third affidavit of Nathaniel was made notwithstanding the opposition of Osborn, and that, in resisting discovery

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of the Lloyds banking account, the solicitor was obstructing justice. He adds:

Hewhen I say “he,” I mean either the solicitor or his managing clerk, or bothknew the relevance of the banking account and the importance of it. He held it up as long as he could merely on the request of his client Nathaniel.

That Osborn knew the relevance of the Lloyds banking account when the order for the third affidavit was made is not in dispute, but there is no justification for the statement that the order was opposed. There is no evidence to that effect at all. It is the other way. Nor can I discover any foundation for the suggestion that the banking account was held up on the request of Nathaniel. I need not repeat the criticism of the irrelevance of such a finding in relation to the charge as regards the third affidavit. 4. The only finding of the judge which is strictly relevant to the charge made runs thus:

In allowing the two earlier affidavits to be put upon the file, I believe the solicitor was allowing something to be done which he knew to be wrong.

This I understand to be a finding that Osborn knew that Nathaniels first two affidavits were false, but it is a finding which appears to me to have no foundation on the evidence. I have read the correspondence between Osborn and Nathaniel and the evidence of Osborn, and I find nothing therein to justify a charge of this nature. The letters written by Osborn in the name of the firm appear to me proper in all respects. My Lords, I have an uneasy feeling that the judge may, in arriving at his findings of fact, have unconsciously transferred to a solicitor and his clerk the prejudice which properly attached to the rogues for whom they were acting, with the result that he has found Osborn guilty of conduct which was neither alleged nor proved. In my opinion, the only charge with which this House was concerned was unsupported by any evidence, and this appeal should be dismissed accordingly.

LORD WRIGHT. My Lords, the Court of Appeal, by a majority consisting of Greer and Slesser LJJ (MacKinnon LJ, dissenting), reversed the decision of Singleton J, who, by way of exercising the summary jurisdiction which the court has over solicitors as officers of the court, had directed payment to the appellant, the plaintiff in the action, of one-third of her costs of the action and two-thirds of the costs of the application in pursuance of which the order was made. The respondent had acted as solicitor for Nathaniel Rothfield, one of the defendants in the action. The judge made the order because he found that the respondent or his clerk had been guilty of professional misconduct in regard to discovery in the action. The Court of Appeal overruled his decision, because they held that misconduct was not established against the respondent personally, but, if at all, only against his clerk, and that the punitive powers of the court could only be exercised when the solicitor was guilty personally of misconduct. It is not clear whether they accepted that the evidence showed the deliberate

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obstruction to complete discovery on the part at least of the solicitors clerk which the judge found as a fact. Before this House, the respondent sought to support the judgment of the Court of Appeal, not only on the ground of law on which it was based, but also on the ground that the judges finding of fact that there was professional misconduct was not justified by the evidence. The House has accordingly heard an elaborate examination of the evidence before the judge.

The crucial issue in these proceedings concerns the conduct of the solicitor, or his clerk, in regard to discovery, but it will be convenient to give a meagre, but I hope sufficient, outline of the general facts of the case. The appellant, Mrs Myers, who was plaintiff in the action, brought her action against a number of defendants, Norman Baron Rothfield, Henry Isaac Rothfield, Nathaniel Rothfield, Rothies (sued as a firm) and Horwood & Co (sued as a firm). The writ was issued on 3 November 1936, and claimed £9,560 2s as money had and received by the defendants to the use of the plaintiff, or, in the alternative, damages for conspiracy and fraud. The allegations of the statement of claim were established at the trial, and the defendants, including Nathaniel Rothfield, were found guilty of conspiracy. The story was of a character unfortunately too common. The world is left uncertain whether to wonder more at the greed or at the credulity of the victims. Mrs Myers received a circular as from Horwood & Co inviting her to invest in what was called an Empire Produce Pool, which was to produce without any risk about 12½ per cent for three months, both capital and profit being guaranteed. She sent £50 as the purchase price of 5 units of £10 each in the Pool. This was on 10 June 1936. There was, of course, no pool, but a month or so later she was informed that the profits were £6 10s. She was persuaded then by Horwoods to buy 56 shares in Consolidated Gold Alluvials Ltd, at 20s per share, which Horwoods represented would soon be worth £2 or £3 per share. That would use up £56, leaving 10s, which was sent to her in settlement. This was the bait. She was next entertained at lunch at the Savoy Restaurant by Horwood, who turned out later to have been Henry I Rothfield, and was in the end induced to buy 7,500 shares in the Gold Alluvial company at the same price. She had not the money to pay for them, but was persuaded to deposit a number of valuable shares which she possessed, together with transfers in blank, to be used, so H I Rothfield said, to obtain a loan of the necessary cash to purchase the gold companys shares. The profits were to be realised in less than a month. The shares would then, it was said, be released from the charge, and she would get the balance of the profits. Nothing could be simpler or more attractive. Unfortunately, there were no profits, the gold shares were worthless, and the blank transfers given by the appellant were used by Rothfield in order to sell her shares and convert the sums so realised. The appellant seems soon to have become suspicious, or at least to have disclosed to her husband or friends what

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she had done. Her solicitors at once wrote to the Birmingham brokers who had put through the sale of the shares, explaining what had happened. The brokers applied to Horwood & Co. At their offices, they saw H I Rothfield, who at once consulted the respondent by telephone. The respondent was thus put in touch with the brokers solicitors, and had the file of papers sent to him for examination. On 20 August 1936 he had a full discussion with the brokers solicitors. On 3 November 1936 the writ was issued, the statement of claim being delivered with it. On 11 March 1938, after trial before Singleton J and a special jury, judgment was entered for the plaintiff against all the defendants for £9,400 16s 1d and costs. The trial was delayed largely owing to the obstructive policy in regard to discovery pursued by Nathaniel Rothfield. Nothing has been realised on the judgment.

Henry Isaac Rothfield, father of Norman Baron Rothfield and Nathaniel Rothfield, was at all material times an undischarged bankrupt. Nathaniel Rothfield was, at the date of the writ, an infant, but came of age on 17 May 1937, when he adopted the defence filed on his behalf by the respondent, who was acting, at that stage of the action, for both Nathaniel and his father. The respondent also acted for H I and Nathaniel Rothfield in an action brought in May 1936, by Lady Chichele Plowden, in which similar frauds were alleged, but it was never brought to trial. In yet another action of the same type, Still v Morser, he entered appearance, and delivered a defence on behalf of H I Rothfield, who was one of the defendants, though at a later date another solicitor, Garber, took over his defence in that action. On 13 November 1936, H I Rothfield was arrested on charges of fraud in connection with the sale of Consolidated Gold Alluvial shares, including the transactions with the appellant. The respondent at first acted for him in these proceedings, but was replaced by another solicitor before the date of the trial, which was in September 1937, when Rothfield was convicted and sentenced to 4 years penal servitude. I think it is clearly established that the respondent was at all material times aware that Horwood & Co, though one Morser was, up to a certain date, registered as proprietor under the Business Names Act, was in fact the business of H I Rothfield, and was merely a name or cover which he used for his dealings. I need not here detail my reasons for this conclusion, nor refer to the numerous third-party proceedings brought by Morser against the Rothfields, in which the respondent acted for the latter in the various actions brought against Morser alleging frauds such as those in the Still v Morser action or the appellants action. Morser had in fact obtained a letter of indemnity from Rothfield. The respondent seems to have been on terms of some intimacy with H I Rothfield, whom in one letter he addresses as “Dear Henry.” It appeared that during the material period large sums of money passed to him from Nathaniel Rothfield.

I think this brief and far from complete outline is sufficient to indicate

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the complicated web of affairs in which the respondent acted for the Rothfields, including Nathaniel, who has been established as a co-conspirator. It also shows how important discovery was in order to elicit the relationship of the different defendants, so as to establish the conspiracy, and, if possible, trace what had happened to the proceeds of the frauds, a large portion at least of which, it is now established, passed through Nathaniel Rothfields bank account. The disclosure of bank books and of accounts was in this respect particularly vital. In fact, as will appear, there was no proper disclosure until after two orders for further discovery had been made, and until after the third affidavit was sworn, which was not till 30 November 1937, the order for directions providing for an affidavit of documents within 10 days having been made as far back as January 1937. The documents disclosed under Nathaniel Rothfields third affidavit, in particular his pass-books, showed clearly enough that he had been receiving large sums of money, about £54,000 in all over a period of about 12 months, including many payments from Horwood & Co. It also disclosed documents showing purchases of the Gold Alluvial shares, as well as other dealings with that firm. There could be no possible doubt of Nathaniel Rothfields complicity in the fraud as soon as this discovery was made. However, when at last the case came on for trial and judgment was obtained, the cupboard was bare. Nathaniel Rothfield did not appear at the trial.

After judgment was given, an application was made to Singleton J, to exercise the summary jurisdiction of the court over the respondent as a solicitor and officer of the court in respect of his professional conduct in the case. A similar application was made in respect of the solicitors for the other defendants, but, as this failed, I do not discuss it further. The application was based on two separate grounds. The first was that the respondent had filed and persisted in a defence which he knew, or had reason to think, was false. Singleton J rejected the application, so far as based on this ground, and I agree with what he has said. There may, indeed, be circumstances in which a legal adviser has taken such action, or so comported himself on behalf of a client, as to go further than an honest advocate or solicitor could properly go. It is difficult, and perhaps impossible, to formulate any principle which would afford a general definition applicable to such cases. Singleton J wisely said:

Nothing ought to be said which may prevent, or tend to prevent, solicitor or counsel from doing his best for his client, so long as his duty to the court is borne in mind.

A client is entitled to have legal aid in order to put the other side to proof of the case against him, and to test and probe that case and the evidence adduced. Thus, the client is entitled to say that he denies the fraud or other matters charged, and to have that defence placed on the record. He is entitled to have professional aid in regard to the

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maintenance of that defence before and at the trial, and to plead matters in mitigation of, and in regard to, questions of damage. Whatever knowledge or suspicion the respondent may have had of the Rothfields, he did not pass the limits fixed by his duty as an officer of the court merely in filing, or persisting in, the defences. I agree with the opinion of Singleton J, that it is not sufficient evidence of misconduct, taken by itself, that a solicitor continued to act in the action notwithstanding that he was aware, or was put on inquiry, that the defendants were, or might be, raising false issues in it. The judges decision on this matter was not questioned in this House. The second complaint raised in the appellants application had reference to discovery. The general effect of the complaint, as stated in the application, and so far as here material, was that the respondent was guilty of misconduct, in the light of what he knew or might reasonably suspect of his clients business and of his relationship to the other defendants and of the existence of material documents, in preparing and advising or permitting Nathaniel Rothfield to make and file affidavits of documents which were wholly inadequate, and, as he knew, or was put on inquiry, were untrue. On this head of complaint, Singleton J decided against the respondent. He held that the original failure to disclose the accounts was a deliberate policy adopted in the respondents office, and that the respondent had held up discovery as long as he could merely on the request of his client, Nathaniel Rothfield:

His duty was to see that it [the banking account] was disclosed, and, if the client persisted in his refusal, the solicitor ought to have declined to act further for him. A solicitor is an officer of the court, and owes a duty to the court. He is a helper in the administration of justice. He owes a duty to his client, but, if he is asked or required by his client to do something which is inconsistent with his duty to the court, it is for him to point out that he cannot do it, and, if necessary, to cease to act.

In holding that, in regard to discovery, there was misconduct in a professional sense, he drew no distinction between the respondent and the managing clerk for whom he was responsible, though he said, having heard the evidence of both, that both knew a good deal about the matters in question. I think the judge meant that he drew no distinction either in fact or in law between them. Indeed, he was not asked to do so. The point on which his decision was reversed by the Court of Appeal was not raised before him. It was not raised until the hearing in that court. Similarly, the point that the judges decision was not justified by the evidence was not raised until the appeal to this House.

In order to deal with the point of law decided by the Court of Appeal, it is necessary to explain briefly the nature of the jurisdiction of the court which the appellant invoked. A solicitor (or, in former days, a solicitor or an attorney) was long ago held to be an officer of the court on the roll of which he was entered, and, as such, to be subject to the discipline of that court. The court might strike him off the roll or suspend him. For instance, the Court of Chancery might strike a

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solicitor off the roll of the court, and order a communication of that order to be made to the courts in Westminster Hall. There are many such instances in the books. By the Solicitors Act 1888, there was established the Disciplinary Committee appointed by the Master of the Rolls from members or past members of the Council of the Law Society. This committee were charged with the duty of investigating complaints against solicitors and reporting their decision to the court, which could then, if so minded, strike the solicitor off the roll or suspend him. It was not until 1919 that, by the Solicitors Act of that year, the Disciplinary Committee was itself given power to strike off the roll or to suspend or to order payment of costs by the solicitor, subject to an appeal to the court. The jurisdiction of the Master of the Rolls and any judge of the High Court over solicitors was expressly preserved, however, as it now is by the Solicitors Act 1932, s 5(1). Whether the court would now entertain an application to strike a solicitor off the roll or to suspend him instead of leaving the matter to the Disciplinary Committee may be doubted, but, alongside the jurisdiction to strike off the roll or to suspend, there existed in the court the jurisdiction to punish a solicitor or attorney by ordering him to pay costs, sometimes the costs of his own client, sometimes those of the opposite party, sometimes, it may be, of both. The ground of such an order was that the solicitor had been guilty of professional misconduct (as it is generally called), not, however, of so serious a character as to justify striking him off the roll or suspending him. This was a summary jurisdiction exercised by the court which had tried the case in the course of which the misconduct was committed. It was clearly preserved to the court by s 5(1). It was a summary jurisdiction, in which the intervention of the judge was invoked at the conclusion of the case either by motion in the Chancery Court or by a motion or application for a rule in the courts of common law. Though the proceedings were penal, no stereotyped forms were followed. Hence now the complaint is not treated like a charge in an indictment, or even as requiring the particularity of a pleading in a civil action. All that is necessary is that the judge should see that the solicitor has full and sufficient notice of the nature of the complaint made against him, and full and sufficient opportunity of answering it. Thus, formal amendments of the complaint are not necessary, so long as the variations of the charge are sufficiently defined and the solicitor is given sufficient liberty to make his answer. The summary jurisdiction thus involves a discretion both as to procedure and as to substantive relief, though there was, and is, an appeal.

The cases of the exercise of this jurisdiction to be found in the reports are numerous, and show how the courts were guided by their opinion as to the character of the conduct complained of. The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he

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is engaged professionally, as was said by Lord Abinger CB, in Stephens v Hill. The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitors duty to ascertain with accuracy may suffice. Thus, a solicitor may be held bound in certain events to satisfy himself that he has a retainer to act, or as to the accuracy of an affidavit which his client swears. It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term “professional misconduct” has often been used to describe the ground on which the court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the court and to realise his duty to aid in promoting, in his own sphere, the cause of justice. This summary procedure may often be invoked to save the expense of an action. Thus, it may, in proper cases, take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive, but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action.

I do not seek to recapitulate the authorities, but, as it has been held by the Court of Appeal that in this jurisdiction a solicitor is not liable to be penalised for the conduct of his agent, partner or clerk, I must refer to a few of the cases in which the contrary has been held. The justification for the rule embodied in these decisions may be that the jurisdiction is compensatory as well as penal, and that the solicitor may fairly be held answerable to make good losses caused by the act of an agent whom he has left to fulfil his duty, and though a solicitor may leave much to his qualified and experienced assistants, he sometimes may be held answerable on the ground of his failure to exercise proper supervision. In Norton v Cooper, Re Manby & Hawksford, Sir John Stuart V-C, put the rule on a positive basis. He said, at p 385:

The safety of the public, and the rules of court, are to be satisfied only by holding in a case of this kind, that, as long as Mr. Hawksford continued to appear as one of the solicitors of the plaintiff on the records of the court, he is responsible for what took place in the conduct of the cause.

Hawksford was not personally implicated. The fault was that of a partner who had used the name of the official assignee to bring an action against a mortgagee. Each individual partner was, it was held, prima facie liable for the misconduct, and was ordered to indemnify the official assignee against his costs. In Blundell v Blundell, the defendants attorney was personally ordered to pay the plaintiffs attorney his costs of opposing bail, where there had been a misrepresentation as to the

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respectability of the bail by the managing clerk of the defendants attorney, though the latter was not privy to the misconduct. The Court of Appeal in the present case referred to two authorities in order to distinguish them. One was Dunkley v Farris, where the solicitors clerk had forged the courts seal on a writ. The plaintiffs solicitor was ordered personally to repay the excessive costs of the proceedings and the costs of the rule, though no blame was imputed to him. The court held there that he was so far implicated as to make him responsible, as what was done was done in his office. The Court of Appeal distinguished that case, as I understand them, on the ground that it was not a case based on misconduct by the solicitor. With great respect, I cannot agree. I cannot see how the personal order that was made there against the solicitor could be justified except as made under the summary jurisdiction of the court. Greer LJ explains the decision as one depending on the lack of authority of the solicitor to act for the party named on the writ, and states that it depends on the doctrine of a breach of warranty of authority. It may be that in such cases an action might now be brought on that comparatively modern doctrine, but in Dunkley v Farris the court was exercising clearly, as it seems to me, its summary jurisdiction. Its order was not based on any privity or breach of actual or imputed authority. The ground was that the solicitor had committed a breach of his duty to the court. It has been said that it is the duty of the solicitor to make himself certain on the point of having a retainer before he issues a writ. The case presented merely a special instance of improper conduct. This is true also of Re Eyre, Palmer v Evans, where the court exercised its summary jurisdiction to order a solicitor to repay extortionate costs exacted by his clerk. There was improper conduct, though the solicitor was not personally implicated. Jervis CJ, thus sums up the position, at p 152:

… as it was done in his office, and by a person for whose acts he is responsible, and as he received the money, I think he is so far implicated as to make him responsible.

It is, no doubt, true that a solicitor will not be struck off the rolls or suspended unless he is personally implicated, but, with the greatest respect, I can find neither reason nor authority for the view of the Court of Appeal that the discretionary and remedial jurisdiction of the court to order reimbursement of costs or expenses thrown away owing to his improper conduct in a case cannot be exercised unless the solicitor is personally implicated. I agree on this point with the judgment of MacKinnon LJ, who upheld Singleton J.

I do not refer to any others of the numerous cases which illustrate the scope and variety of the jurisdiction, except to two which specifically refer to false affidavits. One is Re Gray, Ex p Incorporated Law Society, which was a case where a solicitor had allowed a client to make an affidavit in which he swore to a false date known to both parties to be false. Lord Romilly, in ordering the solicitor to be suspended,

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said that it was impossible for the court to proceed with safety were it not that the solicitors connected with the court should most carefully investigate, and, as far as possible, correct, such statements of their clients as to dates. Similarly, in Re Davies, the Court of Appeal suspended a solicitor for two years because, inter alia, he had allowed a client to swear an affidavit which both he and the client knew to be false. He had warned her it would be untrue, but she insisted on swearing it. The court said that he should have withdrawn from the case. These authorities, in so far as they relate to affidavits, have special relevance to this case, where Nathaniel Rothfield is held to have sworn affidavits of discovery which were false, and where the solicitor (which is the term which I shall use hereafter to include either the respondent or his managing clerk, Osborn, to whom to a large extent he left the conduct of the discovery) could not have allowed them to be sworn if he had done the duty which he owed to the court. The order of discovery requires the client to give information in writing and on oath of all documents which are or have been in his corporeal possession or power, whether he is bound to produce them or not. A client cannot be expected to realise the whole scope of that obligation without the aid and advice of his solicitor, who, therefore, has a peculiar duty in these matters, as an officer of the court, carefully to investigate the position, and, as far as possible, see that the order is complied with. A client left to himself could not know what is relevant, nor is he likely to realise that it is his obligation to disclose every relevant document, even a document which would establish, or go far to establish, against him his opponents case. The solicitor cannot simply allow the client to make whatever affidavit of documents he thinks fit, nor can he escape the responsibility of careful investigation or supervision. If the client will not give him the information he is entitled to require, or if he insists on swearing an affidavit which the solicitor knows to be imperfect, or which he has every reason to think is imperfect, then the solicitors proper course is to withdraw from the case. He does not discharge his duty in such a case by requesting the client to make a proper affidavit and then filing whatever affidavit the client thinks fit to swear to. That is the improper conduct which the judge has found to have been committed by the solicitor in this case, in his findings of fact which I have summarised above.

In my opinion, these findings were fully justified. The first affidavit sworn by Nathaniel Rothfield was a mere travesty of discovery. It contained in Sched I, Part I, nothing but letters between solicitors after action brought and the proceedings common to both parties. This elicited a very proper letter from the appellants solicitors, in which they said, after referring to the character of the action, that it must be clear that a large number of relevant documents had not been disclosed, and suggested that the solicitor should explain to his client the meaning and importance of the affidavit with a view to filing a further

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and better affidavit. This letter produced no effective result. The solicitor was satisfied with the mere denial of Nathaniel Rothfield. An application for a further and better affidavit was successfully opposed before the master. The judge in chambers, however, reversed the decision of the master, and on 23 April 1937, ordered a further affidavit to be sworn by Nathaniel Rothfield. It was not until 29 May 1937, that, under that order, the second affidavit was sworn, after repeated and urgent complaints of delay. Inspection was given on 8 June 1937. What happened in this connection is most significant. The affidavit included in the schedule Nathaniel Rothfields pass-book at Lloyds Bank, 222, Strand, “relevant entries only.” In the circumstances of the case, the irregular description “relevant entries only” should have roused the interest of the solicitor, unless he had actually prepared it. The entries disclosed in this way were about 30 in number. Some were marked with an asterisk, others had lines drawn in the margin against them. The rest of the account was scaled up. It is now clear that the entries disclosed had been selected with some skill, as dealing with receipts to, or payments by, the client, already disclosed in the discovery given by other defendants. The entries disclosed, however, would have been seen to be most inadequate if the slightest examination of the pass-book had been made. No one disputes now the truth of this. The solicitor admits that he must have seen the incompleteness of the discovery if he had looked at the pass-book. This part of the case rests on the evidence of Osborn, the clerk, as the respondent was away from the office about that time, owing to illness. Osborn seeks to excuse this manifest breach of duty on the grounds that the pass-book was not brought into the office until just before the time fixed for the appellants solicitor to come to inspect, that he had no opportunity to examine the book, and that he simply sent it to a typist to seal all the entries except those which were marked as being relevant. He said in evidence that he did not even look at the pass-book afterwards, when it was left some days in his office, and he could have done so. Singleton J, after hearing Osborns evidence, and after asking him a number of questions, said that he felt sure that Osborn did examine the pass-book when it was handed to him:

Even a cursory examination of it must have satisfied him how damaging it was to Nathaniel Rothfields case, and, acting on his clients instructions, he determined to keep it back as long as he could.

This finding of the judge has been strenuously attacked on the ground that it is not based on evidence, and that it is mere speculation, and not inference. It has been argued that the judge was not entitled to go behind the positive oath of Osborn that he did not examine the pass-book, because there is no direct evidence to the contrary. I am unable to accept this argument. The judges view is not based on speculation, but is a matter of inference, based on all the facts of the case and on the circumstantial evidence, which, according to ordinary experience and

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probability, make it incredible that Osborn, placed as he was, did not look at the pass-book. Where there is a denial on oath of the charge by a party charged, and no direct evidence to the contrary, a judge or jury may in certain events be entitled to refuse to believe that denial, and to act upon the circumstantial evidence in the case. The same is true in a case like this. I think the judge was entitled to find as he did on all the evidence. In my judgment, however, even if the judge were wrong in discrediting Osborns evidence that he did not examine the pass-book because he accepted his clients word that it contained no relevant entries, the order which the judge made would still be justified. It would be a gross breach of duty to the court in a matter of discovery like this for a solicitor to accept his clients bare word as to what was relevant, and not himself examine the documents, at least when regard is had to the general background of the case, and to all that the solicitor must have known of his clients character and surroundings. There is really a dilemma. Either Osborn examined the pass-book or he did not. If he did, he must have known that the affidavit was false. If he did not, he committed a gross breach of duty. He had no right to leave discovery to the decision of the client. In fact, when the appellant solicitors wrote pointing out that it was quite clear that there were material entries in the pass-book other than those disclosed, the solicitor still did no more than pass on the complaint to the client, and the appellants solicitors were compelled to make a further application to the court, which on 18 November 1937, ordered Nathaniel Rothfield to disclose the items sealed up in the Lloyds pass-book and in the pass-book of another bank account which he had, as well as to make a further and better affidavit. The third affidavit, which has been accepted as satisfactory, was eventually sworn under that order. Eventually, after further delays, the case was heard and judgment entered for the appellant against all the defendants on 11 March 1937. It is clear that the difficulties about discovery had increased the costs and so delayed the trial as to diminish or destroy any chance of recovering the fruits of the judgment. In my opinion, the order of Singleton J was right, and should be restored.

LORD PORTER. My Lords, I agree that this appeal should be allowed. The facts have already been stated, but a re-statement is, I think, necessary in order to make my views intelligible. The respondent is a solicitor who was retained in an action in the High Court of Justice entitled Myers v Rothfield. In that action, he represented Henry Isaac Rothfield and Nathaniel Rothfield. Of these defendants, Henry Isaac Rothfield, who was the father of Norman Baron Rothfield and Nathaniel Rothfield, was an undischarged bankrupt, and Nathaniel, at the time of the issue of the writ, was an infant. The firm of Rothies was in fact Norman Baron Rothfield, and the firm of Horwood & Co, which purported to be stock and share brokers, was completely under

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the control of Henry Isaac Rothfield, though one Morser was registered as the owner under the Business Names Act, and was retained as a nominal figurehead.

It is plain from the findings of the jury that the three Rothfields were engaged in carrying on a systematic swindle, using the firm of Horwood & Co for that purpose. The method employed was to invite investors to engage in a produce pool by subscribing for £10 units. They were then informed that the pool had been a success, and that they were entitled to considerable profits, and by this means were afterwards persuaded to sell, or to hand over to Horwood & Co for sale, such investments as they could be induced to part with, and persuaded to buy worthless shares in a company called Consolidated Gold Alluvials Ltd, shares which in due course were, or purported to be, transferred to the victims of the swindle. Amongst others who were so defrauded was the appellant Mrs Myers, who between 9 July and 15 July 1936, handed over cash and shares to the value, as the jury found, of £9,560. In her case, that sum was not even invested or re-invested in the shares of Consolidated Gold Alluvials Ltd, though the money with which she parted had in the main been obtained by representing that she would be wise to purchase such shares, which would shortly show a large profit.

This was not the first occasion on which the respondents firm had acted for Henry Isaac and Nathaniel Rothfield. On 12 December 1935, the respondent had been instrumental in incorporating a company known first as Mushroom and Fruit Growers Association Ltd, and later as Mushroom Farmers Association Ltd, a private company which was formed by Nathaniel Rothfield and of which he was the sole director. Before the issue of the writ in this action, he had also invested a sum of between £3,000 and £4,000 on behalf of the same defendant, whom he knew to be an infant. So far as Henry Isaac Rothfield is concerned, he knew him to be an undischarged bankrupt, and, as he said, believed him to be the manager of the firm of Horwood & Co, which he had been instructed to transfer from Horwood to Morser on 8 March 1935. These matters were within Elmans personal knowledge, but in litigation, as he alleged, he was represented by his clerk, Osborn, and it is clear that many at any rate of the details of litigation were conducted by this clerk, inasmuch as Elman, during a considerable portion of the period material to the present action, was ill, and unable to attend at his office.

Just before Mrs Myers had parted with her securities, a writ had been issued by Lady Mary Chichele Plowden against one Thomas Livingstone and against Henry Isaac and Nathaniel Rothfield in which she alleged that she also had been fraudulently induced to hand over valuable securities for shares in Consolidated Gold Alluvials Ltd. The allegations of fraud were similar to those which were afterwards alleged in the Myers case. In the Chichele Plowden case, the writ was issued

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on 19 June, the statement of claim delivered on 26 June, and in this case also appearance was entered for the defendants, the two Rothfields, by the respondent, and defences were delivered on 7 August, denying the allegations in the statement of claim. Again, on 31 July, just after Mrs Myers had parted with her securities, one William Henry Still issued a writ against Henry Morser, one Macarthur, and one Horwood, alleging similar frauds, and Elman appears originally to have entered appearance for Morser, but later another solicitor represented him. Eventually, Henry Isaac Rothfield was substituted as defendant instead of Horwood, and Morser instituted third-party proceedings against both Henry Isaac and Nathaniel Rothfield. In both Henry Isaac Rothfields defence and in the third-party proceedings, the respondent acted for the defendants. No doubt the details of these matters were attended to by Osborn, though Elman would, as he said, know generally that the action had been brought and that allegations of fraud had been made against his clients.

Whilst these actions were in progress, Mrs Myers appears to have realised that she had been defrauded, and to have confided in her husband. He thereupon consulted his solicitors, and they in turn communicated with certain Birmingham brokers, who had been employed to sell some of Mrs Myers shares, pointing out that the sale was made without Mrs Myers authority. The brokers through their solicitors wrote to Messrs Horwood & Co asking for an explanation. In answer to this letter, the solicitors were invited to call upon Messrs Horwood & Co, and their agents did visit that firm. As a result of the interview, they were referred to the respondent, and three files of documents relating to the Myers transactions were sent to him with instructions to see the brokers and to give them all possible facilities to investigate the matter. From one of these letters, dated 29 July 1936, it was apparent that Mrs Myers thought Henry Isaac Rothfield was Horwood. Elman did see the brokers solicitors on 20 August, and read over to them the documents which he had received, and at their request these documents were afterwards copied and sent to them.

During September, further steps were taken in the Still action, and Morser was arrested at Nottingham for fraud, but was afterwards discharged on the ground that he was merely the nominal head of Horwood & Co, whose business was really managed by Henry Isaac and Nathaniel Rothfield. It is fair to say that the respondent did not act for Morser in these proceedings, and it was not proved that the details were known to him. On 3 November the writ was issued in the Myers action, and on 6 November Elmans firm entered appearance for Henry Isaac and Nathaniel Rothfield. On 13 November, Henry Isaac Rothfield was arrested for fraud, and, on his first appearance before the magistrate, was represented by Elmans firm and bail obtained for him. Thereafter, however, Elman ceased to act in the criminal proceedings. In fact, Henry Isaac Rothfield was ultimately convicted and sentenced to 4 years penal servitude for

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fraud, including the frauds on Lady Chichele Plowden, Mr Still and Mrs Myers. The statement of claim in the Myers action had been delivered with the writ, and the defence was delivered on 12 December 1936, but previously Messrs Peacock and Goddard, in consenting to give further time for its delivery, wrote to Elman stating that the correspondence had already passed through his hands, and ending with the observation:

You will doubtless disclose the file of correspondence in your clients affidavit of documents with the books relating to the business.

The defences, when delivered, denied any connection with Horwood & Co on the part of Nathaniel Rothfield and a connection only as manager by Henry Isaac Rothfield, and in these circumstances the first affidavit of documents on behalf of the two defendants was delivered by Elmans firm on 1 March 1937. The affidavit of Nathaniel contained nothing save letters written after action brought. Neither the first nor a later affidavit of Henry Isaac Rothfield appears to have contained any of the letters or documents of Horwood & Co, but, as those affidavits have not been inserted in the appendix, it is not possible to determine what, if any, other documents were omitted. It is apparent that the judge who tried the case had before him both of these affidavits, but, as they have not been inserted in the documents provided for the use of your Lordships House, I do not propose to found any opinion upon them. After the delivery of these affidavits the appellants solicitors wrote to the respondent pointing out that neither the circulars issued by Horwood & Co, nor the banking account, books of account, or the correspondence between Horwood & Co and their clients had been disclosed, and that neither Henry Isaac nor Nathaniel Rothfield had disclosed any documents relating to their connection with Horwood & Co or any of their own banking accounts, and, further, that Morser had sworn he was merely a nominee of the three Rothfields. Elmans reply was that Henry Isaac had relinquished his managerial position with Horwood & Co, leaving the documents with that firm, and that Nathaniel had instructed him that he had nothing to do with the affairs of Horwood & Co.

On 8 January 1937, Morser, in the Myers proceedings, made the three Rothfields defendants to third-party proceedings. In the statement of claim in these proceedings, he alleged that they were the real principals, and set out three letters, dated respectively 24 February 1936, 25 February 1936, and 25 March 1936, which he said evidenced that an agreement whereby he should merely act as nominee of Henry Isaac and Nathaniel Rothfield had been come to at that time. On 13 March 1937, these letters were sent to Elmans firm, and he himself wrote to Henry Isaac Rothfield on 15 March, as follows:

Dear Henry,

Re Myers, Still, etc.

I find from certain correspondence which has been supplied to me and which I have not heard of or seen before that your position as between W. Morser and yourself in the third-party proceedings, and which proceedings are open and well-known to the various plaintiffs, will require very careful explanation.

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In order that you will understand my meaning I enclose herewith copies of three letters, and shall be glad to know exactly how you are proposing to deal with it.

Please treat the matter as urgent.

Yours truly,

Burnett L. Elman.

He said in evidence that, when he received these letters, he realised something was wrong. To this letter Henry Isaac Rothfield replied in effect that he had had the first letter written in his sons name, but without authority, that, notwithstanding that letter, he had continued to act as manager for Morser, and that the other two letters were evidence of that fact. Being unable to obtain a further affidavit of documents without an order of the court, the appellants solicitors applied on 18 March 1937, to the master, who ordered a further and better affidavit of documents by Henry Isaac Rothfield and Horwood & Co, but dismissed the application as far as concerned Norman Baron Rothfield and Nathaniel Rothfield. On 23 April 1937, however, the judge in chambers ordered a further and better affidavit by the three last-named parties. On the same day, Elman wrote to Nathaniel Rothfield asking immediately for all documents relating to the matter.

Osborn, having, as he said, difficulty in getting proper discovery from Nathaniel Rothfield, took him to counsels chambers, and on that occasion certain sheets of his banking account at Lloyds Bank, Law Courts Branch, were produced. It was then explained to Nathaniel Rothfield that all relevant entries must be disclosed, and he was told to go through the account carefully and disclose such items, but the decision as to what was relevant was left to him. No further discovery had been made by 24 May, and Messrs Peacock & Goddard wrote again to Elman demanding full disclosure of relevant documents and pointing out the necessity for the disclosure and inspection of counterfoil cheque books, bank books and pass-books, paying-in books or any other books of account, and sending an extract from a copy of the account of Horwood & Co at Lloyds Bank, Holborn Circus, showing numerous payments therefrom to Rothfield, and certain payments to Elman himself.

A further affidavit of Nathaniel Rothfield was sworn on 29 May 1937. It disclosed a large bundle of correspondence, including matters dealing with the purchase of Consolidated Gold Alluvial shares, and showed also an account between Nathaniel Rothfield and Horwood & Co and his pass-book at Lloyds Bank, 222, Strand, “relevant entries only.” The documents, when perused, showed that Nathaniel Rothfield had at least one other banking account, which had not been disclosed, but the main complaint with regard to the second affidavit is in regard to the items disclosed under the phrase “relevant entries only.”

According to Osborn, the matter was dealt with in this way. The documents were not seen by him until just before the affidavit was swornso late, indeed, that there was not time to put them into proper chronological order in the affidavit. The pass-book, he says, did not reach him until the very morning for which inspection had been arranged

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namely, 8 Juneand, on receiving the book, he observed that Nathaniel Rothfield had marked, either with an asterisk, a cross or by strokes, the items that were to be disclosed. He says that he had not himself time to examine the book, as he had another appointment, and he therefore instructed a clerk to cover up all items except those marked in the way described. He was not at all times clear as to the time during which the book was in his possession. In chief, he said that he had the book from about the end of May until about the middle of June, so far as he could recollect. On cross-examination, he repeated the same allegation, but, on the hearing before your Lordships house, we were told that the book was not received until the morning of 8 June, and, in support of this allegation, a letter of 7 June from Nathaniel Rothfield was produced. The last date may be correct, but it does not appear what was the exact date at which the pass-book was taken away by Nathaniel. Osborn said that, once the irrelevant items had been sealed up, he did not see the book again, but he told Nathaniel to make sure there were no relevant items undisclosed.

The appellants solicitors continued to press for further discovery, and in November Osborn, who said he was having difficulty in getting full discovery from Nathaniel, took him to see Elman himself. On that occasion, Nathaniel did inform Elman that he had six banking accounts, three, however, dealing with Mushroom Farmers Association Ltd, and two only being material. Four days later, an order for a further affidavit of documents was obtained by the appellants solicitors on 18 November 1937. A third affidavit was then sworn which gave full discovery, and no complaint was made of it. It is plain, however, from an inspection of the pass-book and the statement of account between Nathaniel Rothfield and Horwood & Co, that many items of importance were not disclosed in the second affidavit. The case was ultimately tried before Singleton J, and a jury, and a verdict and judgment given against all the defendants for the full sum claimed and costs. Before the trial, Nathaniel Rothfield had sailed for the West Indies, on the plea that he was suffering from a nervous breakdown, and an application was made to postpone the trial until his return. This application was supported by an affidavit by a doctor, and a short postponement was granted, but not such as to enable Nathaniel Rothfield to take part in the trial, even if he desired to do so. The only party represented at the trial was Norman Baron Rothfield, against whom the jury also found a verdict. At the end of the case, counsel for the appellant applied that the several solicitors representing the various defendants should be ordered to pay the plaintiffs costs of the proceedings. On this application, Singleton J gave leave to apply to fix a time at which the application should be heard, and gave instructions that notice should be given to those concerned of the facts relied upon as justifying the application, so that they might have an opportunity of meeting the case made against them. Such notice was duly given, and the particulars, so far as Elman was concerned, may

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be substantially summed up in the words of the judge in his judgment as (i) the filing of defences which Elman knew to be false, and persisting in those defences, and (ii) questions of discovery. Singleton J, absolved the respondent from any liability on the first ground, his short reasoning, with which I agree, being that, though a solicitor may suspect his clients, they are entitled to say, “I deny any fraud,” to have that defence placed on the record, and the fraud proved, and that, in any case, the quantum of damages must be ascertained. As to discovery, however, he found the respondent guilty of professional misconduct, and ordered him to pay one-third of the taxed costs of the action and two-thirds of the costs of the application. The misconduct alleged in the particulars supplied was as follows:

Discovery.

In the light of the knowledge which the respective solicitors had of the business conducted by their clients and of the position and relationship of their clients and of the existence of material documents which were or had been in the power, possession or control of their several and respective clients, each of the solicitors were guilty of misconduct in preparing and advising or permitting their clients to make and file affidavits of documents which were wholly inadequate and obviously false.

Upon this matter, the judges finding is expressed in these words:

In allowing the two earlier affidavits to be sworn and put on the file I believe the solicitor was allowing something to be done which he know to be wrong. In resisting further discovery, particularly in regard to the Lloyds Bank account he was obstructing the interests of justice, he was adding to the difficulties of the plaintiff, and he was causing delay in a case in which one must realise the importance of the plaintiffs getting judgment speedily, if she was entitled to judgment.

It does not appear clearly from the finding of the judge whether he imputes blame to both the solicitor and his clerk or whether the clerk only is censured and the solicitor punished for his servants misdeeds. In these circumstances, I think one must treat the solicitor as free from personal misconduct. This, indeed, was the view of a majority of the Court of Appeal, before whom the wrongdoing of the clerk is assumed, but it was held, nevertheless, that no liability was imposed upon the solicitor in the absence of personal misconduct. Before your Lordships House, not only was this view supported by counsel for the respondent, but it was also strenuously maintained that in any case no misconduct had been proved, even in the case of the clerk. So far as the first point is concerned, I agree with the opinion which all your Lordships have expressed. The courts of this country have for long exercised disciplinary jurisdiction over their officers, whether described as attorneys or as solicitors. Indeed, it was not until the Solicitors Act 1888, that a Committee of the Law Society was charged with investigating complaints against solicitors and reporting their decision to the court, nor until the Solicitors Act 1919, that the Law Society was given power to deal with the delinquencies of its own members. The court, however, continued to exercise a concurrent jurisdiction, which was preserved by the Solicitors Act 1932, s 5(1), and most lately asserted in Brendon v Spiro. That jurisdiction was exercised over the solicitor upon the

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record, and was not confined to cases of personal misconduct only, eg, in Norton v Cooper, Re Manby & Hawksford, Ex p Bittleston, Hawksford, a member of a film of solicitors, was held responsible to that court, though it was not suggested that he was guilty of personal misconduct or neglect of duty, and though his only knowledge of the case was that there was such a suit, which his partner Manby was conducting. In that case, the court was exercising its summary jurisdiction over its officers, and the argument was expressly presented and rejected that such jurisdiction extended to relief only in cases of personal misconduct and neglect of duty.

So, too, in Re Ward, a solicitor was ordered to make good the loss incurred by reason of his London agent having represented that a receiver had entered into the usual recognisances when in fact he had not done so. In this case also the court was asked to exercise, and did exercise, its summary jurisdiction over the country solicitor, though it was contended that it had no power to fix a solicitor with the consequences of professional misconduct except on the application of his client, and that the remedy, in any case, if there were one, was against the London agent. Whether one regards the liability of the solicitor as arising from a failure to exercise due supervision over his representatives or because he is responsible as the solicitor upon the record, the result is the same. It is misconduct in the way in which the work entrusted to his firm is carried on, not the personal misdoing of the individual, which gives rise to the exercise of the jurisdiction. No doubt the penalty imposed will vary according to the circumstances of the case, and it may be that the more serious cases, involving such personal misconduct as would result in the penalty of suspension or expulsion, would now be left to the jurisdiction of the Law Society, but the court still retains its summary jurisdiction, and will exercise it in appropriate circumstances. The majority of the Court of Appeal took the view that, unless personal misconduct was established, the courts only power under its summary jurisdiction to make the solicitor answerable for the costs of the other side was in cases where he had represented himself as having authority to act on behalf of a client when in fact he possessed no such authority, or in analogous cases. Yonge v Toynbee and Simmons v Liberal Opinion Ltd, Re Dunn are examples of the formers and Re Eyre, Palmer v Evans, where the client had paid an excessive sum for costs owing to the misrepresentation of the solicitors clerk, and Dunkley v Farris, where the clerk had forged the seal of the court to the writ, were said to be examples of the latter.

The occasion of the courts action in cases of this kind no doubt is the wrongful receipt of money or the breach of warranty of authority, but it is difficult to see how such acts would give the court any authority to make an order against the solicitor in the original action except by virtue of its summary jurisdiction over his conduct. He is no party to the action, nor is any claim being made against him by his own client.

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With all respect, I do not assent to the view of Greer LJ, as he then was, that the solicitor can himself be treated as a party to the action because he has misrepresented himself as authorised to act for one party to the action, and that he can therefore be made liable for the costs that have been incurred at the time when there was no defendant. I think the principle is more accurately stated by Swinfen Eady J, as he then was, in Yonge v Toynbee, at p 234:

… whatever the legal liability may be, the court, in exercising the authority which it possesses over its own officers, ought to proceed upon the footing that a solicitor assuming to act, in an action, for one of the parties to the action, warrants his authority.

In other words, the court is not enforcing a civil right, but is exercising its authority over the conduct of its officer.

Though in more recent cases the commonest occasion for imposing a liability for the payment of the costs of his opponent is in circumstances where he has assumed an authority which he did not possess, I cannot find that either principle or authority has confined the imposition of that obligation to such cases. However, though the solicitor be liable for the action of his clerk, the question still has to be determined whether the clerk himself was guilty of any professional misconduct. Of course, no question of misconduct relevant to the present case does, nor could, arise in reference to the proceedings in the cases brought by Lady Chichele Plowden or Still. Those proceedings are only material by way of a warning that discovery in the Myers action was of importance, and should be carefully considered.

I say nothing of Nathaniel Rothfields first affidavit, since it is possible, though unlikely, that, in spite of the letter of 24 February 1936, he had never had anything to do with Horwood & Co, never had any dealing with Gold Alluvials shares, and, therefore, had neither documents nor bank accounts which were relevant. Before the second affidavit was sworn, however, it had been ascertained that his denials of any connection were untrue, and that a mass of documents and accounts existed which were relevant and had not been disclosed. Indeed, apart from the discovery of the defectiveness of the first affidavit, there was ample warning of the need of care. Elman himself agreed that the decision whether the entries in a pass-book should be disclosed ought not to be left to a twenty-year-old client, but should be determined by a solicitor or his clerk, and had said that, after he received in April 1937, the letters disclosed in Morsers statement of claim in the third-party proceedings, he realised that something was wrong. Moreover, Osborn said that, if he had realised that £54,000 had passed through Nathaniels banking account in 16 months, he would probably have thought it material. It is plain that some sheets of the pass-book were examined with counsel, that the pass-book was in Osborns hands for about a fortnight, and that for months the opposing solicitors were pressing for further discovery, and yet until a further order was made in December nothing was done.

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The judges conclusion was that Osborn had examined the books and yet had failed to disclose the further relevant items. I cannot say that this conclusion was unjustified merely because Osborn denied the examination. The book was in his possession, he had had warning of the materiality of full disclosure, and ample opportunity of examining it, if he chose to avail himself of it. His excuse was that he meant to go through it later, and that meanwhile Nathaniel took away the book in order to see if there were any further material items. Possession of the book, opportunity, and warning of materiality and of the need of care, combined with a duty to ascertain that the client fully understood the obligation imposed upon him, seem to me to be enough to warrant the judges finding, arrived at after an opportunity of seeing the witness in the box. In any case, I do not consider that the solicitor or his clerk has fulfilled the obligation of supervising to the best of his ability the swearing of a full and complete affidavit of documents by permitting the client to disclose part of a pass-book and to withhold the rest by the use of the phrase “relevant entries only.” Until it is known to him what those relevant entries are, disclosure is not complete. It is still the duty of the clerk, in such circumstances, himself to examine the book and see that the relevant items have been disclosed. That indeed was, as I have indicated, Elmans own view. The two earlier affidavits of Nathaniel Rothfield were wholly inadequate, and the clerk in charge of the case must either have known the defectiveness of the second, as the judge has found, or have been grossly negligent in failing to acquire that knowledge. Either finding is, I think, enough to fix him and his employer with professional misconduct, and to justify the order made in the court of first instance.

Appeal allowed with costs. Order of Singleton J restored.

Solicitors; Peacock & Goddard, agents for Edge & Ellison, Birmingham (for the appellant); Burnett L Elman (for the respondent).

Michael Marcus Esq   Barrister.

Aldham v United Dairies (London) Ltd

[1939] 4 All ER 522


Categories:        ANIMALS: TORTS; Negligence        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND DU PARCQ LJJ        

Hearing Date(s):        24 NOVEMBER, 11 DECEMBER 1939        


Animals Liability of owner Negligence Ordinary consequences of negligence Scienter Horse left unattended attacking passer-by.

The plaintiff was attacked and injured by the defendants horse, which, attached to a milk-cart, had been left unattended for half-an-hour in a main thoroughfare. Evidence was given on behalf of the defendants that the horse was docile and quiet. The jury negatived scienter on the part of the defendants, but found them guilty of negligence in leaving the horse unattended, and awarded the plaintiff damages:

Held (i) there was an abundant evidence to support the jurys finding that the defendants were negligent in leaving the horse for so long unattended.

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(ii) the proper inference to be drawn from the facts was that the plaintiffs injuries were directly caused by that negligence of the defendants.

Cox v Burbidge distinguished.

Decision of Humphreys J ([1939] 3 All ER 478) reversed on the second point.

Notes

The Court of Appeal have agreed with Humphreys J on the point that the respondents were negligent in leaving the pony so long unattended. They have, however, reversed his decision on the question of liability. Where an animal, having no known vicious propensities, attacks a human being, the owner is, in general, not liable, but, where it can be shown that the attack is due to an act of negligence on the part of the owner, he does not escape liability by reason of the doctrine of scienter, as it is usually termed. If a horse is left unattended for a long time, and is shown to have become restless by reason of the length of time for which it has been so left, then injury due to that horses restlessness is caused by the negligence of the person so leaving it unattended.

As to Negligence in Relation to Domestic Animals, see Halsbury (Hailsham Edn), Vol 1, p 542, para 932; and for Cases, see Digest, Vol 2, p 229233, Nos 201220.

Cases referred to

Cox v Burbidge (1863) 13 CBNS 430; 2 Digest 233, 218, 32 LJCP 89.

Re Polemis & Furness, Withy & Co [1921] 3 KB 560; 36 Digest 29, 151, sub nom Polemis v Furness, Withy & Co 90 LJKB 1353, 126 LT 154.

Fardon v Harcourt-Rivington (1932) 146 LT 391; Digest Supp.

Sycamore v Ley (1932) 147 LT 342; Digest Supp.

Deen v Davies [1935] 2 KB 282; Digest Supp, 104 LJKB 540, 153 LT 90.

Rose v Collier (George Hurry) Ltd [1939] WN 19; Digest Supp.

Bradley v Wallaces Ltd [1913] 3 KB 629; 2 Digest 236, 236, 82 LJKB 1074, 109 LT 281, 6 BWCC 706.

Appeal

Appeal by the plaintiff from verdict and judgment at a trial before Humphreys J, and a common jury, dated 26 June 1939, and reported [1939] 3 All ER 478, where the facts are fully set out. The appellant applied for judgment to be entered in her favour or for a new trial.

Dudley Collard (Robert Fortune with him) for the appellant.

Cyril Salmon for the respondents.

Collard: One can claim against the owner of an animal in respect of injuries caused by it on two grounds: (i) that the animal was of a savage disposition and the owner was aware of the fact, and (ii) that the owner was negligent in the control of the animal. The present case belongs to the second class. The horse should not have been left without anyone in charge of it. The animal was perfectly docile, but there was negligence in that the animal was not properly looked after. The present case is in accordance with the line of cases of which the most recent is Rose v Collier (George Hurry) Ltd. The appellants injuries were the reasonable consequence of the negligence of the respondents servant in leaving the animal unattended. There was knowledge that the animal was liable to get on to the pavement. The jury have found negligence, and have found also that the injury to the appellant was the direct consequence of that negligence. The judge, however, relied upon Bradley v Wallaces

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Ltd and Cox v Burbidge, and entered judgment for the respondent company. Cox v Burbidge can be distinguished from the present case, because it was known in the present case that the horse was at the place in question and was likely to become restive.

Salmon: The animal put its feet on the pavement at this particular spot, but nobody could explain its reason for doing so. There was no evidence upon which a jury could reasonably find that there had been negligence. It was not negligent to leave the horse unattended, because 4 years experience had shown that it was not likely to be dangerous. Even if there were negligence, it is necessary to show that that negligence was the natural and direct cause of the injury complained of: Deen v Davies. If the possibility of danger is only a mere possibility, which would not occur to the mind of a reasonable man, there is no necessity to take precautions to guard against it: Fardon v Harcourt-Rivington. In the present case, the duty of the respondent company is not an absolute duty, but is a duty only to guard against that which is reasonably apparent. In the case of a domestic animal, the owner is liable only on proof of scienter, as it is not natural for a domestic animal to bite mankind. Prima facie, it is not the nature of a horse to bite a person. No evidence was called to show that a horse which thrusts out its head is likely to bite a person. Even if there has been negligence, Cox v Burbidge is authority for saying that the biting must be in consequence of that negligence. The fact that the horse had its feet on the pavement did not make it likely that the appellant would be bitten. [Counsel referred to Re Polemis & Furness, Withy & Co.]

Dudley Collard (Robert Fortune with him) for the appellant.

Cyril Salmon for the respondents.

11 December 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. I have read the judgment prepared by Du Parcq LJ. I am in entire agreement with it, but I think it desirable to express in my own language certain conclusions to which I have come.

To leave a horse and cart unattended on a highway is not, without more, an act of negligence. On the other hand, to leave a horse and cart upon a highway in circumstances in which the driver either knows, or, as a reasonable man, ought to know, that the horse is likely to injure a member of the public is unquestionably negligence. This the jury must be taken in effect to have found in the present case, the particular circumstance being the restiveness of the pony. The jury must, I think, have meant that, in view of the known habit of the pony, the driver ought to have known that it became restive, and a driver who knowingly leaves a restive pony unattended is justly held guilty of negligence.

Upon the question of remoteness of damage, the answer, upon the facts of this case, appears to me to be free from doubt. If the act of negligence consists in leaving unattended on the highway a pony known to become restive, the owner is liable for all damage attributable to its restiveness, whether such damage is due to a casual, mischievous or malevolent movement on the part of the pony. If, on the other hand,

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the movement is one which is not connected with the restiveness at all, the damage cannot be said to be caused by the negligence. In the present case, I think that the jurys findings necessarily imply that, in their opinion, the damage was caused by the act of negligence which I have described, and I agree that there was ample evidence to support such a conclusion.

Cox v Burbidge was a very different case. There the negligence alleged consisted merely in allowing the horse to escape. The only fact relied upon to establish this alleged negligence was the presence of the horse on the highway, and, as this was equally consistent with due care on the part of the defendant, the action failed. Erle CJ, said further that, even if the negligence alleged were to be taken as established, the damage could not be referred to the act of negligence. It is important to observe that the negligence alleged was not the act of allowing a horse to escape in such circumstances that a reasonable man ought to have anticipated that it would cause injury to a person on the highway. It was the act of allowing it to escape simpliciter. Accordingly, the action of the horse in kicking the child fell to be considered, not in connection with the existence of negligence at all (for the probability of its kicking was not a relevant consideration in regard to the negligence alleged), but in connection with the question of remoteness of damage. If the case had been one where the negligence alleged had consisted in (a) leaving a horse and cart unattended on the highwayan act not per se negligent(b) in such circumstances that a reasonable person ought to have foreseen that it might kick a passer-by, the act of kicking would have been the direct consequence of the negligence. As it was, the act of kicking was not due to the alleged negligence, although that negligence (on the assumption that it existed) gave the horse the opportunity of kickingan altogether different thing.

In dealing with questions relating to animals, it must be borne in mind that an animal is capable of spontaneous action. If a man negligently relaxes his hold on an inanimate object, he is liable for the damage which it causes, since that damage is the consequence of the act of negligence. If, however, a man negligently relaxes his hold on an animal, it does not necessarily follow that he is liable for the damage caused by the animal in its state of freedom, for that damage may be due to a spontaneous act of the animal for which the want of care gives the opportunity, but of which it is not the cause. Thus, if a man leading a spirited horse in a country lane negligently allows it to escape from his control, and it breaks into a gallop and knocks a person down as it rounds the next corner, the damage may truly be said to be caused by the negligence, for it is natural for such a horse to gallop away, and a free galloping horse is likely to knock a person down in such circumstances. The damage in such a case is not too remote. If, on the other hand, the horse, having no known vicious propensities, celebrates its freedom by biting a passer-by, the position is quite different. It is true that, if it had not been allowed

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to go free, it would never have bitten the passer-by, but, as there is no probability that such a horse will bite a passer-by merely because it is set free, the damage is attributable, not to the act of negligence in allowing the horse to go free, but to a spontaneous act of its own for which the act of negligence merely gave the opportunity. Cox v Burbidge, on the assumption that the defendant there was negligent in allowing the horse to escape, was a case of this class. The appeal is allowed.

MACKINNON LJ. I have had the advantage of reading the judgment that has just been read by Sir Wilfrid Greene MR, and the judgment of Du Parcq LJ, which I am about to read, and I do not think I can usefully add anything to what they have said.

DU PARCQ LJ (read by MacKinnon LJ). In this case, the plaintiff, Miss Aldham, claimed damages for negligence against the defendants, who were the owners of a pony which, while unattended on the highway, had so behaved as to cause her injury. She said that, as she walked past it on the pavement, it “jabbed out” at her, bit her face, caught her by the coat and dragged her down, and then “pawed her with its feet.” The action was tried by Humphreys J, and a common jury. The judge left specific questions to the jury. By their answers to the first two questions, the jury accepted the plaintiffs account of the occurrence. The remaining questions and answers were as follow:

Had the defendants any knowledge of any propensity on the part of the horse to attack human beings?No.

In the circumstances of the case, were the defendants negligent in leaving the horse unattended?Yes, knowing that the horse had a habit of straying on to the foot pavement. Damages, £300.

The judge, after hearing argument, directed that judgment should be entered for the defendants, and against this decision the plaintiff appeals.

Evidence, which the jury must be taken to have believed, showed that the pony which injured the plaintiff had been left in the roadway, attached to a milk-cart and unattended, for about half-an-hour, while the defendants roundsman was delivering milk. It was the usual practice of the defendants servants so to leave it, and there was evidence that it was the ponys habit to become restive, to put his forefeet on the pavement, and to behave in a way which, to some persons at least, was alarming. One witness, a governess, said that she had “many times” noticed that the pony was “restive and difficult,” and had seen him “get his two paws across the path, which made it tiresome to get by, and, in fact, fearful.” “He has,” she said, “a way of scraping the pavement or the ground with one foot and moving his jaw about.” The plaintiff herself had noticed the pony on previous occasions, and said: “If it is restless, it just jabs out. It gets tired of waiting.” The ponys habit of putting its forefeet on the pavement was known to,

Page 527 of [1939] 4 All ER 522

and admitted by, the defendants servants, but they gave the pony a good character, and attributed to it a docility amounting to stolidity.

It may now be regarded as elementary law that, in an action for negligence, the plaintiff must prove, first, that the defendant as a reasonable man ought to have foreseen that the act or omission complained of might cause damage, and, secondly, that the negligent act or omission directly caused the damage suffered by the plaintiff. If negligence is proved, the defendant is liable for damage caused by his negligence, even though he could not have been expected to foresee the exact kind or the “type” of damage which was caused in fact: Re Polemis & Furness, Withy & Co, per Bankes LJ, at pp 571, 572, and per Scrutton LJ, at pp 576, 577.

These general principles are no less applicable to a case in which the negligence alleged is failure to control a horse than to one in which the negligence is in the management of a motor car or of any other inanimate object. They must, however, be applied with proper regard to the limitations which the common law has placed on the liability of the owner of an animal mansuetae naturae, such as a horse. Where it is sought to impute liability to a defendant for the conduct of a living creature, capable of spontaneous action, it has been found necessary to lay down rules which prevent a jury from attributing to the reasonable man a degree of foresight which would anticipate every mischievous act of which an animal, hitherto docile, might conceivably be guilty, or from regarding the release of such an animal from custody or control, without more, as the direct cause of any violent departure from its accustomed docility which may ensue. Everyone knows that even a well-behaved animal may conceivably be guilty of such a sudden lapse, but, if everyone were obliged to be constantly vigilant through his fear of such a misfortune, which the experience of mankind shows to be most improbable, it would hardly be safe ever to let a horse out of its stable.

For the purpose of this case, the established rules may be stated as follow. (1) Negligence cannot be established merely by proof that a defendant has failed to provide against the possibility that a tame animal of mild disposition will do something contrary to its ordinary nature. (2) Even if a defendants omission to control or secure his horse is negligent, an act on the part of the horse which is contrary to its ordinary nature cannot be regarded, in the absence of special circumstances, as being directly caused by such negligence.

Authority for these propositions is to be found in the judgments of the Court of Common Pleas in Cox v Burbidge. It was argued on behalf of the respondents that the decision in Cox v Burbidge went further, and that, whatever negligence there might be in leaving a horse unattended in the circumstances of a particular case, the fact that it had hitherto been well-behaved would always make it impossible to hold that its owner was responsible for damage due to such mischievous acts as biting or kicking. This contention appears to me to give no

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weight to the last two words of a sentence in the judgment of Erle CJ, at p 437, which was much relied on:

It reduces itself to the question whether the owner of a horse is liable for a sudden act of a fierce and violent nature which is altogether contrary to the usual habits of the horse, without more.

It is also to be observed that in Cox v Burbidge the horse had kicked the plaintiff, in the words of Erle CJ, [p 438] “without anything to account for it.” In such cases as this, it is always necessary to remember that, in the words of Lord Atkin in Fardon v Harcourt-Rivington, at p 392:

… quite apart from the liability imposed upon the owner of animals or the person having control of them by reason of knowledge of their propensities, there is the ordinary duty of a person to take care either that his animal or his chattel is not put to such a use as is likely to injure his neighbour …

See Sycamore v Ley, per Greer LJ, at p 345, Deen v Davies, per Slesser LJ, at p 288, and the recent decision of this court in Rose v George Hurry Collier Ltd. The judgments in Deen v Davies all emphasise the importance of giving due weight to the precise circumstances of the particular case, especially the judgment of Singleton J, at pp 297299.

In the case before us, the judge was of opinion that there was evidence to support the jurys finding of negligence. The respondents counsel contended that the judges decision was wrong in this respect, but, in my view, it was clearly right. Speaking of the relevant answer of the jury, the judge said, at p 481:

I think that what the jury meant by that was that that was an indication at least that the horse was getting tired, restive, and restless.

This is, in my opinion, a fair view of the jurys meaning, and, on that view, there was abundant evidence to support their finding. A horses temper, however equable, may break down under a strain, and it may well be negligent to put an undue strain upon its patience.

The only question left is whether, in all the circumstances, the plaintiffs injuries can be said to have been directly caused by the defendants negligence. It is true that no specific question was left to the jury as to this, but it is conceded (and no doubt rightly conceded) that the jurys verdict, with its award of damages, was intended to include a finding that the injuries were so caused. It was contended by counsel for the respondents that there was no evidence to support such a finding. In my viewand in this respect I am unable to agree with Humphreys Jthere was ample evidence to support it. The facts here were very different from those in Cox v Burbidge. If a horse is not likely to bite or kick when it is at liberty in a field, it is impossible to say “without more” that it will be likely to bite or kick if it strays from the field on to a road. When a horse has been left unattended for so long that it has become restless and irritable, a jury may well think that an injury which it does to a foot-passenger in its nervousness or annoyance is

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directly caused by the negligence of those who have failed to take proper care of it. The facts of the present case, in my opinion, fully justified the inference that the plaintiffs injuries were directly called by the negligence of the defendants servant in leaving an impatient horse unattended for too long a time. It follows, in my opinion, that, on the jurys answers, the plaintiff was entitled to judgment, and I think that her appeal should be allowed, that the judgment entered for the defendants should be set aside, and that judgment should be entered for the plaintiff for the sum of £300 with costs. The plaintiff should also have the costs of this appeal.

Judgment for the plaintiff for £300 with costs in both courts.

Solicitors: W T Iggulden (for the appellant); Blount Petre & Co (for the respondents).

W K Scrivener Esq   Barrister.

Campbell v Campbell

[1939] 4 All ER 529


Categories:        FAMILY; Divorce: CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, SCOTT AND MACKINNON LJJ        

Hearing Date(s):        1 DECEMBER 1939        


Divorce Discovery Conduct conducing Documents relating to association of husband with named women Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 198.

The husband petitioned for dissolution of the marriage on the ground of adultery, and the wife cross-petitioned. The wife, in her answer, admitted acts of adultery with one of the co-respondents, but alleged, inter alia, that the petitioner had conduced to her adultery by consistently neglecting her and by habitual association with certain named women in spite of her protests. The husband did not disclose, in his affidavit of documents, any documents bearing on his association with the women. The wife disclosed several such documents in her possession, and asked for a further and better affidavit by the husband. The registrar ordered such disclosure in relation to three classes of documents concerned with that association: (a) correspondence with the women, (b) invoices and cheques, and (c) correspondence with and payments to one of the women. The judge limited this order to such of the documents as were disclosed in the wifes affidavit on the ground that no document, which had not come to the knowledge of the wife, was relevant to the issue of conduct conducing. The cross-petition did not allege adultery with any of the women mentioned in the allegation of conduct conducing:

Held the essence of the plea was association, and not adultery, with the women in question, and the fundamental fact to be proved was the existence of that association. The registrars order was, therefore, the right one and ought to be restored.

Notes

It is, of course, clear that, in proceedings instituted in consequence of adultery, no one is to be asked any question tending to prove he or she has committed adultery unless he or she has already given evidence in the same proceedings in disproof of the alleged adultery. It was said that to allow the discovery here asked for would be in contravention of the spirit of the above statutory enactment. The contention, however, has been rejected by the Court of Appeal, because the acts of the husband complained of as conducing to the

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wifes adultery were not adultery, but association, with the women. The complaint is that the existence of this association caused the husband to neglect the wife.

As to Discovery in Divorce, see Halsbury (Hailsham Edn), Vol 10, pp 727, 728, para 1116; and for Cases, see Digest, Vol 27, p 425, Nos 43084315.

Cases referred to

Cavendish v Cavendish [1926] P 10; 27 Digest 425, 4313.

Redfern v Redfern [1891] P 139; 27 Digest 263, 2317, 60 LJP 9, 64 LT 68.

King v King (1850) 2 Rob Eccl 153; 27 Digest 426, 4324.

Appeal

Appeal by the respondent from an order of Henn Collins J, dated 23 October 1939. The facts are fully set out in the judgment of Sir Wilfrid Greene MR.

R F Levy KC, R Bush James KC and Ifor Lloyd for the appellant.

W Latey for the respondent.

Levy KC: The petitioners affidavit contains no reference to any documents which have passed between the petitioner and the women. The respondent herself was in possession of a considerable number of letters and other documents which had been written by or to these women. They included invoices for jewellery and receipts. These documents appeared in the affidavit. It seems, however, that other documents of a similar nature were in existence. Accordingly, the wife took out a summons asking for an affidavit of specific documents. They are (a) letters, and copies of letters, which passed between the petitioner and the women referred to, (b) invoices and receipts relating to gifts made by the petitioner to those women, and (c) cheques and the petitioners pass-book showing payments relating to one of these women. The wife is entitled to all documents which passed between the petitioner and these women and which relate to the petitioners association with any of them. A matter in the suit is whether or not the petitioner associated with these women. It appears that the judge took the view that, unless the wife had seen the letters, they could not have conduced to her adultery. The first thing the wife has to establish, however, is the association, and the letters have a bearing upon that, whether or not she saw them. It is not suggested that she was induced by the letters, but it is suggested that she was induced by the husbands conduct. It is an issue quite separate from the issue of adultery. The wife alleges a course of conduct which conduced to her adultery. The association may have been perfectly innocent, but it continued for a long time, and there was neglect of the wife by the petitioner; [Counsel referred to Redfern v Redfern.]

Latey: The order asked for would be contrary, not only to the letter, but also to the spirit, of the Supreme Court of Judicature (Consolidation) Act 1925, s 198. That section followed a long history of the law of divorce, which is set out in Redfern v Redfern. No question can be asked of a party or of a witness, in proceedings instituted in consequence of adultery, which would tend to prove his own adultery. It is not

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merely that the witness is not bound to answer, but that no such question shall be asked. It is a rule derived from the practice of the Ecclesiastical Court. The issue upon which discovery in the present case is sought is an integral part of proceedings instituted in consequence of adultery. Where there is an answer alleging adultery, as is frequently the case, the section refers to the answer just as much as it does to the petition. The cross-petition cannot be severed from the petition. The actions have been consolidated, and will be heard together. One cannot sever the charge of conduct conducing from the counter-charge of adultery. It would be oppressive to make an order with regard to paras (b) and (c), because the matters referred to cover a period of 10 or 12 years. It would be unreasonable to require the petitioner to go through his records for so long a time to see if he has paid for presents to friends. [Counsel referred to Cavendish v Cavendish and King v King.]

R F Levy KC, R Bush James KC and Ifor Lloyd for the appellant.

W Latey for the respondent.

1 December 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This is a case where the husband is petitioning for the dissolution of his marriage on the ground of adultery by the wife, and the wife, in her turn, has presented a cross-petition. The wife, in her answer to the husbands petition, while admitting acts of adultery with one of the co-respondents, alleged, among other things, that the petitioner by his conduct conduced to such adultery, and in the particulars of the conduct conducing she made the following allegation:

The petitioner has consistently neglected the respondent and has been in the habit of associating with the following women in spite of the protest of the respondent …

Then there are set out particulars of the women referred to. The common form of order for discovery was made against the petitioner for discovery of documents relating to the matters in question in this cause save as to any issue of his adultery. When he came to make his affidavit, he did not disclose any documents bearing on his association with any of the women mentioned in the wifes answer. In her affidavit, the wife disclosed a number of documents bearing upon that association which she happened to have, or to have had, in her possession, and, in view of the absence of any documents of that kind in the husbands affidavit of documents, she made an application under RSC Ord 31, r 19A(3), which gives the court power to order a party to state by affidavit whether or not any particular documents or classes of documents are, or have been, in the possession of that party. On that summons, the registrar made an order in relation to three out of four classes of documents in respect of which the application was made. The first class, lettered (a), consisted of correspondence between the petitioner and the women in question. The second class, lettered (b), consisted of invoices, cheques, pass-book entries, and so forth, referring to purchases made by the husband by way of gifts to these women. The third class, lettered (c), consisted of particular correspondence relating to one of them,

Page 532 of [1939] 4 All ER 529

and other documents relating to payments in connection with that one. Those were the three matters in respect of which the registrar ordered an affidavit to be made. On appeal, Henn Collins J, varied the registrars order by limiting the affidavit which the petitioner was to have made to such of the documents specified as were disclosed in the wifes own affidavit. In other words, she would get disclosure only in relation to documents which she already had, or had had, in her possession. The grounds on which the judge imported that limitation are not quite clear. It is suggested that he took the view that, on the issue as to conduct conducing, no document could be relevant unless it had come to the knowledge of the person alleging such conduct, because, if it did not so come to her knowledge, it could not have been conducing. I cannot help thinking that the judge could not really have taken that view, because it seems to me, as the allegation is not that the conduct conducing consisted in bringing certain letters to her notice, the mere fact that letters evidencing an association existed, whether or not they were brought to her notice, would be relevant on the fundamental issue which has in the first case to be establishednamely, the existence of the association. The effect of that association in conducing to her conduct must, of course, depend upon the extent to which, and the form in which, the existence of that association came to her mind and influenced it. That might have come by letter or it might have come by other ways, but the existence of that association is a relevant matter, and I can see no ground for that reason for limiting the order in the way in which the judge limited it.

The ground on which counsel for the husband argued that the order of the registrar should not be restored was that the discovery of these documents would be contrary to the spirit, if not the language, of the Supreme Court of Judicature (Consolidation) Act 1925, s 198, which provides that a witness shall not be liable to be asked, or be bound to answer, any question tending to show that he or she has been guilty of adultery (except in the circumstances stated) in proceedings instituted in consequence of the allegation of adultery. I need not read the section, because it is a very familiar one. He says that, although this particular issue is put up by way of defence, and is not the issue of adultery which is raised in the cross-petition of the respondent, the wife, because the adultery alleged in that cross-petition was not adultery with any of the women named in her answer, the petitioner is not to be asked to disclose documents which tend to show that he has committed adultery, and it is said that disclosure of these documents will tend to show that.

It is to be observed that the allegation is not an allegation of adultery with any of these women, but is one of association with them, and I certainly cannot accept the view that association with other women, which does not amount to adulterous association, is irrelevant on the question of conduct conducing. That cannot be so. Accordingly, the allegation is not, on the face of it, an allegation of adultery, nor is it

Page 533 of [1939] 4 All ER 529

necessary that it should be so. That being so, I cannot myself see any ground whatever for saying that s 198 has anything to do with the case. The matter has not even got to a point where the petitioner has sworn on oath that the discovery of these things will tend to show that he has been guilty of adultery. What the effect would have been if he had done so is neither here nor there, and I say nothing about it, but, unless and until such an affidavit was sworn, it would be impossible for this court to say that the production of these letters would tend to show that he was guilty of adultery.

Cavendish v Cavendish, where the application was to discharge a subpœna duces tecum relating to documents in the possession of the respondent, was relied upon. The only issue in that case was adultery or no adultery, and, accordingly, either those documents were irrelevant to the case altogether or they were relevant to the issue of adultery, and, on that basis, the production of them would have been contrary to the section. In the present case, the allegation not being an allegation of adultery with these women, it is quite impossible for this court to treat it as if it were.

There was one other point that counsel for the respondent took. He suggested that the discovery was oppressive, at any rate with regard to classes (b) and (c). In my opinion, there is nothing in that, and, in the result, the appeal must be allowed and the order of the registrar restored.

SCOTT LJ. I agree.

MACKINNON LJ. I agree.

Appeal allowed with costs in both courts.

Solicitors: L A Hart (for the appellant); Kenneth Brown Baker Baker (for the respondent).

W K Scrivener Esq   Barrister.

Smith v Smith

[1939] 4 All ER 533


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P        

Hearing Date(s):        16, 27 OCTOBER 1939        


Divorce Desertion Parties continuing to live in separate parts of same house Husband refusing suggestion of reconciliation Matrimonial Causes Act 1937 (c 57), s 2.

The petitioner was married to the respondent in 1922, but subsequently, owing to quarrels between them, the husband withdrew from cohabitation with the petitioner, but continued to live with his mother in another part of the same house. There was no physical separation between these two parts of the house. In 1933, while the parties were still living in this way, though the husbands mother had died in the meantime, the petitioner issued a summons against the respondent complaining of wilful failure to maintain. This summons was dismissed, but the parties, at the suggestion of the magistrates, went before the probation officer, who made attempts to effect a reconciliation. The

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wife was willing to be reconciled, but the husband rebuffed all such attempts, and continued to live apart from his wife, though still in the same house. It was contended on behalf of the petitioner that this refusal, coupled with the earlier history, afforded a starting point for a charge of desertion:

Held (i) the petitioner had made out a case for desertion.

(ii) she was not precluded from asserting desertion by the mere fact that the parties were residing in the same house, even though there was no physical separation between the different parts in which they were living.

Notes

It has been settled since Powell v Powell that desertion could exist although both parties were living under the same roof, but in that case they lived in two physically separated tenements. It is here decided that there can be desertion although the parties do not inhabit physically separated tenements. The question in each case is whether in fact the parties have been living together as husband and wife, and residence under the same roof raises no more than a rebuttable presumption of this fact.

As to How Far it is necessary for Spouses to Live Apart, see Halsbury (Hailsham Edn), Vol 10, p 656, para 965; and for Cases, see Digest, Vol 27, pp 308, 309, Nos 28552867.

Cases referred to

Wily v Wily [1918] P 1; 27 Digest 276, 2460, 87 LJP 31, 117 LT 703.

Powell v Powell [1922] P 278; 27 Digest 309, 2860, 92 LJP 6, 128 LT 26.

Jackson v Jackson [1924] P 19; 27 Digest 308, 2852.

Driver v Driver Unreported.

Petition

Petition by wife for divorce on the ground of desertion for at least 3 years immediately preceding the presentation of the petition. The facts are fully set out in the judgment.

B Stuart Horner for the petitioner.

S E Karminski for the Kings Proctor.

27 October 1939. The following judgment was delivered.

SIR BOYD MERRIMAN P. I think perhaps I ought to say a word about this case, because it was one about which I felt some difficulty when the case came on in the first instance, and for that reason I adjourned it to enable the papers to be sent to the Kings Proctor in order that he might investigate the matter and assist the court. The result of that has been that, not for the first time by any means, the Kings Proctor has been of the greatest possible assistance, and the facts have been fully investigated. I am now satisfied I have been informed of every material fact, and, in addition to that, I have been greatly assisted by the argument of counsel for the Kings Proctor on the law affecting the matter.

The parties were married in 1922, but, owing to quarrels which broke out between them (which, for the purposes of this case, I am quite prepared to assume were not caused by the fault of the husband alone), there came a moment when the quarrels became so acute that the husband withdrew from co-habitation with his wife. At that time, they were living in a house which belonged, I understand, to the husband, the whole basement of which was occupied by the husbands mother.

Page 535 of [1939] 4 All ER 533

After this particular quarrel, when matters came to a head, the husband left his wifes bedroom and actually made his home with his mother. That is to say, he lived in the basement, though he slept with his son, the son of the first marriage, as I understand it, on the first floor, leaving his wife in possession of the ground floor. There was no physical separation between these parts of the house, but from that time onwards it was impossible in any real sense of the word to describe the husband as living with his wife. The truth of the matter was that he was living with his mother, who inhabited the basement of the house. He neither expected nor desired, according to his own evidence, any services from his wife, but did allow her, and continued to pay for over 8 years thereafter, the sum of £1 per week. It is said that he was in desertion during that time, and that allegation was based on the fact that, after this quarrel, the respective mothers intervened, and the wife said she was prepared to give him another chance, and the husband said that he had finished with her, and thereupon went, as I have already said, to live in his mothers part of the house.

If the matter stood there, I should doubt whether it could fairly be said, having regard to the way in which this arrangement went on without intervention for over 8 years, that the wife had made out a charge of desertion during that time. However that may be, I am not called upon to decide that. It is indisputable that the circumstances in which that state of things came about are relevant in considering the real point I have to decidenamely, whether or not there was desertion for the 3 years immediately preceding the presentation of the petition.

I now come to the point which really was raised, and to the difficulty which has now been satisfactorily explained. For some reason or another, which is not very clear, in the summer of 1933 the husband suddenly stopped these payments which had been going on for over 8 years. Thereupon the wife, not unnaturally, took out a summons against him for wilful neglect to maintain. This came on before the magistrates, and the wife was examined and cross-examined. The husband made out a case that he had withheld the payment because in effect his wife was rendering him no services for it. The magistrates dismissed the case on the merits. That unquestionably was an awkward fact, having regard to the wifes present case that thereafter her husband was deserting her. I need say no more about the magistrates decision than that the husband now admits that there never was any arrangement whatever that the wife should render services for this money. The only thing that had happened was that his mother had died at the end of 1932, and it pleased him to think that, after that, although the wife was engaged in keeping herself and earning her living, she should come and look after him and minister to him for this same £1 per week, and he did not make any suggestion whatever that she should be paid anything additional for her services. He admitted in the witness-box that it never occurred to him that she had a point of view in the matter. How-

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ever, the magistrates dismissed the case, and there is no more to be said about it.

If the matter had stood there, it would obviously be very difficult for her to maintain this case of desertion, having regard to that finding. However, it is now common ground that, after they had disposed of the case, the magistrates suggested, very wisely, that it should be possible for these people to be reconciled, and, therefore, they both went, at the magistrates suggestion, to see the probation officer. The wife gave some evidence about that last timenot very fulland it was left in some doubt how the matter really stood, but, as the result of the investigations which have since taken place, it is now quite clear that what happened was this. The probation officer tried to effect a reconciliation. The wife said that she was ready and willing to make a fresh start, but the husband made it equally clear that he was not willing to take his wife back. He said that he said to the probation officer, as he said to me, that it would be no good at all, and he made it clear that he was not willing to make a fresh start. The probation officer was not satisfied with this, and tried to persuade him that he ought to make an effort. The matter was finally left on the husbands saying that he would think it over and would telephone to the probation officer next day. He never did telephone, and in effect maintained, as he maintains now, that no good would have come of attempting a reconciliation, and persisted in withholding from cohabitation with his wife. That, counsel for the petitioner says, and I think says truly, coupled with the earlier history, does afford a starting-point for this charge of desertion. It is true that after this abortive interview with the probation officer things went on, so far as the living accommodation was concerned, exactly as they had been before, save only that, the husbands mother being dead, there was no question of his living with her. Equally, however, he continued to live in the same circumstances. That is to say, he continued to live in the part of the house which had been occupied by the mother, and the wife continued to occupy the ground floor of the house by herself.

I am satisfied also by the wifes evidence that, though payments on a different basis were made and continued right up to the filing of this petition, there was no agreement or arrangement for the separation. He just announced that he was going to give her 5s or 10s, as the case might be, and put that money on some place where she could pick it up without any word being said between them, and she just had to take it or leave it. She had no option in the matter. I entirely accept her evidence in that respect. That being so, it seems to me that she makes out a case for desertion, provided that the physical circumstances in which they were living were not such as to preclude her from saying that her husband had deserted her. I have considered Wily v Wily, Powell v Powell and Jackson v Jackson, to which counsel for the Kings Proctor has called my attention. To take them in their

Page 537 of [1939] 4 All ER 533

order, Wily v Wily was a restitution suit in which the husband by letter had refused to give his wife any more in the way of matrimonial co-habitation than the husband has afforded in this case. He said in terms that though he would give the shelter and protection of his home he would not under any circumstances co-habit on the terms of their earlier married life. She might have her room without the slightest molestation, but he must be immune from any molestation from her. In the witness-box he went much further. He said he was willing to live with the petitioner and treat her as his wife, though he had no affection for her. It goes without saying that no order of the court could compel the rendering of marital rights. Hill J, drew the plainest possible distinction between the state of things which the husband was offering in the witness-box and that which he had offered by letter. That which had been offered by letter was, he thought, a refusal of conjugal rights. Therefore, he made a decree for restitution. When one turns to Jackson v Jackson, to which I need not refer in detail beyond saying that it is a case in which Henry Duke P, described the parties as living together in every other sense of the word except that the husband had refused conjugal rights. Hill J, in recalling his decision in Wily v Wily, referred also to Driver v Driver. That case, I think, is interesting and helpful in deciding the present case. It was a case in which it was necessary to prove desertion for the whole period of 2 years, for only 1 year and 10 months of which had the husband actually lived away from his wife in circumstances which plainly amounted to desertion. It was shown, however, that in the first 2 months of the material 2 years he had insisted on sleeping in a separate room, had never spoken to the wife, had never answered her when she spoke to him, and, when she had asked why she was being so treated, had knocked her down. In those circumstances, Hill J, found no difficulty in holding that, although they were in one sense of the word living together during those 2 months, that period could be counted as part of the material period of 2 years.

At the other end of the scale one has Powell v Powell. In that case, though the parties were living actually under the same roof, they were living physically in separate tenements with separate entrances, and the husband was threatening to set up a separate establishment with another woman in the part of the house into which he had separated himself in the fullest sense of the word from his wife. That particular element is lacking in this case. On the one hand, it is quite impossible to describe these people as living together in the sense in which Sir Henry Duke P, used that phrase in Jackson v Jacksonnamely, in every respect except for the withdrawing of sexual intercourse. On the other hand, as I have said, there is not the element that they were living in establishments which were physically separate.

I have come to the conclusion that this case is on what I may call the Powell side of the line rather than the Jackson side of the line,

Page 538 of [1939] 4 All ER 533

and that, in circumstances in which it is impossible to describe the parties as living togetherindeed, where the only element of living together is that they were actually existing in one house, though there was no physical separation between the parts of the house in which they were livingthe case is one of desertion, and is not one in which the wife is precluded from asserting desertion by the mere fact that they were residing in the same house. It is only because the mother had died in 1932 that at the material time it ceased to be true to say that the husband was living with the mother and not with the wife. In all other essential respects, he was living separate and apart from his wife in 1936, 1937 and 1938, as he had been doing before his mother died. For these reasons, I think that the wife has made out her case, and I pronounce a decree nisi.

Decree nisi granted.

Solicitors: Edgar H Hiscocks (for the petitioner); The Kings Proctor.

J F Compton Miller Esq   Barrister.

Hancock v BSA Tools Ltd

[1939] 4 All ER 538


Categories:        COMPANY; Charges        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        11 DECEMBER 1939        


Master and Servant Remuneration Wages during illness Employee engaged at weekly wage fixed upon hourly basis Trade custom.

The plaintiff was employed as a driller at 39s per week plus a national bonus of 16s 6d for a 47-hour week. A notice was conspicuously displayed at the works that such engagement was on an hourly basis. Evidence was also given that it was the custom of the trade that the employees in the work which the plaintiff was engaged to do received no pay when no work was done, whether that was by reason of sickness or by reason of a public holiday. The plaintiff was incapacitated by illness, and claimed wages for the period of such illness:

Held where there is an engagement upon the terms that only work done shall be paid for, an employee is not entitled to wages during sickness.

Marrison v Bell explained.

Notes

This was a test case to test the position of employees paid by the hour and engaged in occupations where it has not been the custom to pay during periods of sickness or periods when for any reason there is no work for the employee. It has been thought that such employees could, after the decision in Marrison v Bell, claim to be paid during periods of sickness, but it is here explained that this is based upon a misapprehension of the decision in that case. Where the consideration for the wages is the work done, there is no implied term for payment during sickness. The implication can only arise where payment is made for a week or some longer period of service irrespective of whether there is full work, or, indeed, any work, performed by the employee. That is not to say that such implication will be made only in the latter case. It may still be shown that there was a custom or express agreement to the contrary.

As to Wages during Sickness, see Halsbury (Hailsham Edn), Vol 22, p 134, para 222; and for Cases, see Digest, Vol 34, p 86, Nos 631640.

Page 539 of [1939] 4 All ER 538

Cases referred to

Marrison v Bell [1939] 2 KB 187, [1939] 1 All ER 745; Digest Supp, 160 LT 276.

Petrie v MacFisheries Ltd [1939] 4 All ER 281; Digest Supp.

Cutter v Powell (1795) 6 Term Rep 320; 34 Digest 88, 649.

Action

Action for arrears of wages alleged to be due for a period when the plaintiff was incapacitated by sickness. The defence relied upon the fact that the plaintiff was engaged by the hour and was to be paid at an hourly rate, and that, by the custom of the trade, employees engaged upon the terms upon which the plaintiff was employed were not entitled to wages during sickness and were only paid for the hours actually worked.

The plaintiff entered the service of the defendants as a radial driller on 2 September 1937. He was paid a weekly wage of 39s with a national bonus of 16s 6d per week, which payments were based on a 47-hour week. It was given in evidence that employees engaged upon the same work as the plaintiff did not receive payment for public holidays or for periods of sickness. The plaintiff claimed wages in respect of two periods of sickness for which he had received no payment. A notice in the following terms was conspicuously displayed at the works:

Terms of Employment.

Employees (other than staff) are engaged on an hourly basis. Employment may be terminated either by the company or the employee on giving one hours notice.

The plaintiff was, in fact, employed on piece-work all the time he was with the defendants, except the first two or three days. All remuneration was fixed in the following way. At the end of the week his piece-work earnings were calculated. If the total exceeded what he would have earned at time rates plus overtime, he was paid the excess; but he always received at least what he would have received at time rates.

A J Long KC and P B Morle for the plaintiff.

W H Cartwright Sharp KC and Eric Blain for the defendants.

11 December 1939. The following judgment was delivered.

ATKINSON J. This is an action which has been brought, I think, through a misunderstanding of what was decided in Marrison v Bell. There have been two lines of cases running side by side from time immemorial. One line of cases consists of those in which an employee has been held to be entitled to be paid even while he is away ill, and the bulk of the cases in which that has been decided are cases where a man has perhaps been employed at so much a year or so much a month, or something of that sort, and where the consideration for the salary has been the readiness and willingness to work if of ability to do so. On the other hand, side by side with that line of cases, there have been existing cases where it has been held that the pay is the consideration for the work done, and, if work is not done, the wages have not been earned. The question in every case must be: What were the terms of the employment? Under the contract of employment, was the consideration to be work actually done, or was it to be a readiness and willingness to do

Page 540 of [1939] 4 All ER 538

work if of ability to do it? I repeat what I said the other day in Petrie v MacFisheries Ltdnamely, that the law is correctly stated in Smiths Leading Cases, pp 48, 49, in the note to Cutter v Powell. If one looks at the judgment of Du Parcq LJ, in Petrie v MacFisheries Ltdand I refer to that because Du Parcq LJ, was a member of the court that approved the decision in Marrison v Bellit will be seen that he makes it very clear that in every case it is a question of ascertaining what the real terms of the contract are. The only point that had to be decided in Marrison v Bell was whether or not the position was affected by the National Health Insurance Act. They said that it was not. The mere fact that a man was getting National Health Insurance did not deprive him of his right to be paid while he was away ill if he had that right under his contract. There were passages, however, which, picked out and looked at merely apart from contracts, did seem to lay down that it was a question of law, and that, as a matter of law, a man was entitled to be paid while he was away ill, when in truth that is not the case. It is a question of fact as to what is the meaning of the contract.

The position here is really too clear for words. The plaintiff himself has been in the engineering industry for 40 years, and he was quite frank about what the position was. He said:

I have always understood that you got no pay while you were away ill.

For 40 years that has been his understanding of the positionno work, no pay. When he went and applied for work at the defendants works in Birmingham, he was employed on terms which I think may be fairly described as terms with an hourly basis. That means that his pay was based on so much per hour. It was a well-recognised rate. It worked out at so many shillings per week of so many hours, but it was all on an hourly basis, and this hourly basis had to be ascertained and known for the purpose of calculating overtime. The rules as to how overtime was calculated were perfectly well known to the plaintiff. Each of the first 2 hours counted as an hour-and-a-third, and so on, but that an hourly basis was at the bottom of it is perfectly clear.

I have had other witnesses from the defendants, namely, Addicott and Grove, people who have been with the defendants for many years. They say that the terms of employment are perfectly clear and perfectly well understood by everybody, and that they have never heard a man suggest that he was entitled to pay while he was away ill. Sir Alexander Ramsay, the director of the Federation of Engineering and Allied Employers, has been in the trade for 40 years, I think he said, the last 18 years on the employers side, to adopt the expression of counsel for the plaintiff. He has never heard of such a claim. Then Ellis, for 27 years in this particular firm, told me that at all times an average of 15 to 20 men were away ill, and said that he had never heard anyone suggest that he was entitled to be paid while he was away ill.

Page 541 of [1939] 4 All ER 538

It seems to me really too clear for argument. It is perfectly plain that it was a term of this mans employment that he should only be paid for the work he did. I am satisfied that that is the custom of the whole of this particular trade or industry, on the evidence which I have had, and that the plaintiff understood it, as he frankly admits, as well as anybody. Then comes the decision which leads him or somebody to suggest or to think: “I find now that all these 40 years that I have been in the trade I have been wrong. That is a matter of law. I have been entitled to something, and now I am going to claim it.” Whoever so advised him must have misunderstood what the law is. It is not a matter of law at all. It is a question of fact. In every case, one has to get at what the terms are, and I am quite satisfied that the terms here were that he was only to be paid for work he had actually done. Therefore, there will be judgment for the defendants. They take up a very kindly attitude on the question of costs. They wanted the matter determined in the High Court, and I see there are letters in which they agreed that they would even pay the plaintiffs own costs if the action came to the High Court. There is an undertaking as to that, so I merely give judgment for the defendants.

Solicitors: T D Jones & Co agents for Lyon Clark & Co, Smethwick (for the plaintiff); Joynson-Hicks & Co, agents for S J Grey & Willcox, Birmingham (for the defendants).

C St J Nicholson Esq   Barrister.

Briton Ferry Steel Co Ltd v Barry

[1939] 4 All ER 541


Categories:        TAXATION; Income Tax, Trade        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, SCOTT AND CLAUSON LJJ        

Hearing Date(s):        6, 7 DECEMBER 1939        


Income Tax Trade Succession to trade Division of manufacture One process carried on by subsidiary companies Remaining process carried on by parent company Sales effected by another subsidiary company Merger of manufacturing companies but not of selling company Finance Act 1926 (c 22), s 32(2) Income Tax Act 1918 (c 40), Sched D, Cases I & II, r 11(2).

The appellant company until 1934 was mainly concerned with the manufacture of steel bars, and the conversion of these bars into tinplate was carried out by 6 subsidiary companies. The whole share capital of these subsidiary companies was owned by the appellant company. Another subsidiary company carried through the sale of the plates manufactured by the subsidiary companies. In 1934, the subsidiary manufacturing companies were wound up, the whole of their undertakings being transferred to the appellant company, but the plates made by the appellant company were sold through the selling company as before. The appellant company was then assessed in respect of a new trade under Sched D, Cases I and II, r 11(2). It was contended, on behalf of the appellant company, that it had not succeeded to a trade which could be identified, as the additional processes, after the merger, expanded the work of the appellant company:

Held the appellant company had continued to carry on the trades

Page 542 of [1939] 4 All ER 541

formerly carried on by the subsidiary companies, and there was a succession to those trades.

Judgment of Macnaghten J ([1938] 4 All ER 429) affirmed.

Laycock v Freeman, Hardy & Willis Ltd distinguished.

Notes

This case is distinguished from that of Laycock v Freeman, Hardy & Willis Ltd by reason of the fact that there a wholesale manufacturing business ceased, and the parent company, after the reconstruction, carried on a retail manufacturing business. In the present case, the selling company, although a subsidiary of the appellant company, has to be treated in law as a separate entity, and, therefore, the appellant company is not concerned with the selling of the manufactured article. It is therefore said that, after the reconstruction, the appellant company carried on, in addition to its former trade, the precise trade carried on by the six subsidiary companies.

As to Succession to a Business, see Halsbury (Hailsham Edn), Vol 17, pp 111113, para 209; and for Cases, see Digest, Vol 28, pp 4042, Nos 208214.

Cases referred to

Laycock v Freeman, Hardy & Willis Ltd [1939] 2 KB 1, [1938] 4 All ER 609; Digest Supp, 108 LJKB 270, 160 LT 41.

Bell v National Provincial Bank of England [1904] 1 KB 149; 28 Digest 41, 211, 73 LJKB 142, 90 LT 2, 5 Tax Cas 1.

Appeal

Appeal by the taxpayer from an order of Macnaghten J, dated 4 November 1938, and reported [1938] 4 All ER 429, where the facts are fully set out.

Cyril L King KC and Frederick Grant for the appellants.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondent.

King KC: The appellant company never succeeded at all to a trade which can be identified, since the additional processes, after the merger, merely expanded the work of the appellant company. The Crowns contention is that, before 1934, the profits derived from the separate trades were arrived at on the basis that there had been purchases and sales and that the profits of the subsidiary companies were profits derived from the making of tinplate. The continuation of that state of things is implicit in there being a succession. The suggestion of succession can only be maintained by supposing, contrary to the facts, that there had been purchases by the subsidiaries. There was nothing in the evidence to justify the commissioners in coming to the conclusion to which they came. After 7 April 1934, there were no purchases by the subsidiary companies. They ceased. The underlying assumption of the case for the Crown is that there had been notional sales of material. In this respect, however, there is no real difference between the present case and that of Laycock v Freeman, Hardy & Willis Ltd. The trade of each of the subsidiaries, in the present case, was the purchase of bars. After the merger, the trade cannot be found. The commissioners are wrong in law, in that they have failed to give effect to the decision in Laycock v Freeman, Hardy & Willis Ltd. There was an existing trade, commencing with the purchase of steel bars. That particular trade ceased to exist.

Page 543 of [1939] 4 All ER 541

Grant: One cannot arrive at the profits of the appellant companys old trade without assuming a notional sale of bars from the bar-making trade to the various tinplate trades. After the change, one trade only was being carried on. The trade of the subsidiaries was merged in the trade of the appellant company, and its trade is one trade. To say that the appellant company, after the change, was carrying on the trade of making bars and also part of six other trades is an artificial conception, which there is no evidence to support. Although, as a result of the change, the appellant company has lost customers for bars, it has not lost any outlet for bars. The activities are the same, and the physical destination of the product is the same. Notionally, those activities are split up into an old trade and part of six other trades. That is a completely artificial view, and is not a reasonable one. The reasonable view is that the trade of the appellant company is one trade which has been expanded. In Bell v National Provincial Bank of England, the court found that the trade acquired was carried on as a separate trade after the succession. In the present case, there was one trade only after the merger.

The Attorney-General: When a man acquires a new business with the intention of carrying it on, there is no reason why he should, in that year, pay income tax as though he had not that additional source of income. The words of the rule apply whether or not the person who acquired the business was already carrying on a similar business. The application of the present method of computation must always involve the splitting up of the activities of what is really one business as though that business were in fact two. In Bell v National Provincial Bank of England, the profits were not separately ascertained. The present case is concluded in favour of the Crown by the finding of the commissioners. No difficulty arises from the decision in Laycock v Freeman, Hardy & Willis Ltd when the business to which succession is alleged is acquired by the suppliers of the raw material to that business. All that it is necessary to find is that the business succeeded to was a separate business before its acquisition, and that it was carried on afterwards. The only point to consider is whether or not the business is still being carried on. If it is being carried on, succession is established.

King KC in reply.

7 December 1939. The following judgments were delivered.

SIR WILFRID GREENE MR. This appeal arises out of assessments to income tax made upon the appellants in respect of the years ending 5 April 1935, and 5 April 1936, respectively. The assessments were made upon the basis that on 7 April 1934, the appellants succeeded to the businesses previously carried on by 6 companies which were what is commonly called “wholly-owned” subsidiary companies of the appellants. Before 7 April 1934, when the businesses of the subsidiaries were transferred to the appellants, the subsidiaries having been put into liquidation (which date, for convenience, I will call “the amalgamation

Page 544 of [1939] 4 All ER 541

date”), the business activities of the appellants consisted of making steel bars, which they sold in part to the subsidiaries and in part to outside purchasers, and part of their production they themselves used for the purpose of making what is known as blackplate in a factory of their own. Steel bars are produced by two processesnamely, (i) the smelting of pig iron or scrap iron and casting it into ingots, and (ii) the heating and the rolling of the ingots to turn them into steel bars. Those were the commodities which they sold to their subsidiaries. The business of the subsidiaries consisted in making from those steel bars tinplate which they sold. The further processes necessary for making the tinplate consist of cutting the bars, rolling them into thin sheets which are called blackplate, and then dipping the blackplate into a bath of molten tin and passing it through rollers, which turns it into tinplate. Those processes were the processes carried on by the subsidiary companies, and their profits were, of course, ascertained by reference to the price which they paid to the appellant company for the bars and the profits that they made out of selling the ultimate product, the tinplate. There is one thing that arises in the course of these operationsnamely, scrapwith which I will not deal now, but I will mention later a particular argument that was founded upon it.

After the amalgamation date, what I may call the original activities of the appellant company underwent a change, because, as Clauson LJ, put it in the course of the argument, they had lost 6 customersnamely, the 6 subsidiary companiesand the steel bars which previously they would have disposed of by sale to those companies they now no longer sold as steel bars at all. Those changes, therefore, have taken place as the result of the amalgamation in the business activities of the appellants. If one looks at the business activities of the subsidiary companies, and treats them for the moment as being held apart from the activities of the appellants after the amalgamation, the only difference in those activities is that, whereas the steel bars required for the production of the tinplate had previously been acquired by purchase from a separate entitynamely, the appellant companythey are now produced by the same entity as is producing the tinplate, and, so far as the tinplate part of the business is concerned (by which I mean the part concerned with the operation of turning steel bars into tinplate), the only difference which has occurred in that part is that the raw material of those activities now enters that branch of the business, not by reason of a purchase from an outside person, but by coming from the appellant company itself, and being used by itself in the tinplate business. Those are, in my view, the main and crucial facts which it is necessary to bear in mind in considering the problem raised by this appeal. The other details are to be found in the original stated case and in the supplement to the case.

In that state of affairs, the Crown took the view that the profits of the appellants for the two years in question fell to be dealt with in

Page 545 of [1939] 4 All ER 541

accordance with the provisions of the Finance Act 1926, s 32(2). That section substitutes the rule there set out in the place of Sched D, Cases I and II, r 11. Rule 11(2) deals with successions to businesses other than those specifically dealt with in r 11(1), which deals with the special case of partnerships, and it provides as follows:

If at any time after the said Apr. 5 [1928] any person succeeds to any trade … which until that time was carried on by another person and the case is not one to which para. (1) of this rule applies the tax payable for all years of assessment by the person succeeding as aforesaid shall be computed as if he had set up or commenced the trade … at that time. …

The Crown claimed that, on the facts of this case, the appellants had on 7 April 1934, succeeded to the trades theretofore carried on by the 6 subsidiary companies, and they claimed that, accordingly, in assessing the appellant company to income tax for the years in question, the appellant company must be treated as though it had set up the trades to which it had so succeeded on 7 April 1934, and that the profits of the appellant company referable to those branches of their activities must be computed as the rule directs.

The matter came before the special commissioners, who held originally that the appellants had succeeded to those businesses, and they upheld the assessments, subject to certain agreed amendments of figures. The appellants appealed first to the Kings Bench Division, and Macnaghten J, upheld the decision of the commissioners. From his decision an appeal was brought to this court, and, after the case had been opened, or while it was in the course of being opened, the court, as then constituted, took the view that, in view of Laycock v Freeman, Hardy & Willis Ltd, a decision of this court which had not been made public, although I think it had been delivered at the time when the matter was before the commissionersa decision which the commissioners had not got before them when they came to the decision to which they cameit was desirable that the matter should be referred back to the commissioners, in order that they might have an opportunity to reconsider their conclusions both of fact and of law in the light of the decision of this court in that case.

At this stage I think it is convenient to say a word or two of a general character with regard to the effect of the subrule in question. The subrule is expressed in language which is easily applicable to the simple case of a person who has not previously carried on a business acquiring a business from somebody who has carried it on and continuing to carry it on thereafter. Indisputably, however, the subrule is not limited to that simple class of matter. It extends to much more complicated transactions, of which the present is an example, and it involves, and necessarily involves, a large measure of artificiality in its application. It is obvious that, where somebody, be it an individual or a company, who is already carrying on a business, acquires a business from somebody else and continues to carry it on, difficult questions must arise, because, in the ordinary course of business, if the business acquired is

Page 546 of [1939] 4 All ER 541

carried on, it becomes, to a greater or less extent, merged in fact in the old business of the company. It may alter its character, and the reality of the matter is that, as from the date of such an acquisition, there is one business, and one business onlynamely, the business of the person who is carrying it on. I disregard cases where the business acquired is of a totally different character from that previously carried on. That is the fact of the matternamely, that one company is carrying on one business. However, the subrule directs us to regard the position in a different light. We are not entitled, and the assessing authority is not entitled, to treat such a state of affairs as merely an expansion of the business of the acquiring company. The subrule directs that the business acquired shall, for the particular purposes mentioned, be held, so to speak, apart from the activities of the acquiring company, and, for those purposes, regarded in a different light. Where the company carrying on a manufacturing business acquires the business of a company which carries on a retail business, or vice versa, it is obvious that the artificiality of this conception is great. Nevertheless, so far as the subrule directs this artificial conception to be applied, we are bound to apply it. It is obvious that at one end of the scale there may be a case where there can be no doubt as to the continuing identity of the acquired business. At the other end of the scale, there may be a case where it is impossible for a reasonable person to say as a matter of fact that the acquired business is being carried on any longer in any indentifiable form. Whether or not a particular case falls within either of those two types of case is, as I view it, a question of law. With regard to the area that lies between those two extremes, as I view it, it is a matter of fact for the commissioners to say whether or not there is a succession within the meaning of the subrule and whether or not there are profits derived from the business to which the succession has taken place. That is one general observation with regard to the subrule.

There is another general observation which I think it desirable to make in view of an argument put forward by the Attorney-General, which I shall have to mention later. The subrule does not suggest that the taxable fund upon which the taxpayer is ultimately assessed is anything but the real profits which he, as a taxpayer, has earned. It is not legitimate, in my view, to apply the subrule in such a way as to introduce some element of notional profit, with the result of charging the taxpayer in respect of a profit which he has never realised. The object of the subrule is to ensure that, in cases where there is the transfer of a business, the person acquiring it shall be treated as having started a new business. If that principle had not been adopted, the result would have been, so to speak, that the business would have been treated as the person to be taxed, and not the taxpayer himself, because the acquiring taxpayer would then have found himself charged, in the first year after he acquired the business, with tax measured by the profits earned by the business at the time when his predecessor owned it. That principle has not been

Page 547 of [1939] 4 All ER 541

adopted by the legislature, and instead the acquiring person is treated as having started a new business. In some cases, that may work to his advantage. In other cases, it may work to his disadvantage. That, however, is the principle.

The third point to which I wish to refer upon this subrule is that the direction as to the manner in which tax is to be computednamely, that it shall be computed as if the trade had been commenced at the relevant timeonly operates, of course, so long as that basis of computation is a relevant matter, and the basis of computation based on the hypothesis that the trade is a new trade lasts for so long only as the provisions of the Act in relation to the setting up of new trades persist. I say that because it was argued on behalf of the appellants that the effect of holding that, in the present case, there had been a succession would be that for ever afterwards the appellants must be treated, for income tax purposes, as carrying on, not one trade, but sevennamely, the six trades of their subsidiaries and their own original trade. I cannot take that view. It seems to me quite clear, upon the construction of the subrule, that this artificial treatment of what, in this case at any rate, is in truth one business is to endure for the purposes of computation only so long as the setting up of a new business is a relevant matter, and it ceases to be a relevant matter, I think I am right in saying, in the fourth year after the date of setting up.

Having made those general observations, I think that the next thing which it is convenient to do at this stage is to say a word or two about the decision in Laycock v Freeman, Hardy & Willis Ltd, because it is upon that decision that the argument of the appellants is mainly based. That was a case where a company carrying on a retail business had acquired the businesses of two subsidiaries of its own, which had manufactured the articles sold by the parent company in its retail shops and sold them wholesale to the parent company. After the acquisition of those manufacturing wholesale businesses, the parent company continued to sell in its retail shops articles produced in the factories which it had acquired from the subsidiaries which it had absorbed. Physically, so to speak, the lay-out of these operations remained the same, but there was one vital change in the situation. The business of the subsidiary companies, which the Crown alleged was the thing to which there had been a succession, had, as was found by the commissioners, been that of manufacturing wholesalers. That implied that their profits were earned, not by the mere act of manufacture, but by realising on sale wholesale the products which they had manufactured. After the amalgamation, there was no longer in existence a manufacturing wholesale business at all. No profits were being realised by sales wholesale. That essential activity of the subsidiary companies had disappeared altogether, and it was an essential activity in making the profits which would be charged with tax. All that was left of the activity of the subsidiary companies was the actual manufacturing, a thing which by itself

Page 548 of [1939] 4 All ER 541

produces no profits. On that basis, this court held that, on the special facts of that case, there had been no succession.

There was one argument advanced in that case to which I must refer, because much play has been made with it by the appellants in the present case. It was the argument put forward by the Crown to the effect that there ought to be assumed, for the purposes of applying the subrule, a sale on wholesale terms from the factory to the retail side of the companys activities. That had a certain colour of plausibility in the fact that the company in its own departmental accounts had treated the matter as though there had been sales from the factory to the retail warehouse, and a subsequent retail sale in the shops. That, of course, as was pointed out, was a pure matter of convenience in accounting, and did not reflect any actual transactions at all. However, the use which counsel for the Crown endeavoured to make of it in argument was this. It was said: “It is not correct to treat the business of manufacturing wholesalers as having come to an end, because, although in fact there are no sales wholesale at all, there must be deemed to be sales wholesale as between the factory and the retail warehouse.” In other words, the argument involved setting up an imaginary sale in order to produce what was an essential element, the existence of which was necessary before any identity between the business before amalgamation and the business after amalgamation could be establishednamely, the making of sales wholesale. That was the object of the argument, and it was held by this court that it was not legitimate to introduce something so completely unreal and to invent a sale which never had, in fact, taken place, in order to keep alive, for the purposes of the subrule, a business which had, in fact, ceased to exist. In view of that case, this court, as I have said, sent the present case back to the commissioners, and it is from their finding that the present appeal originates.

The finding of the commissioners is to be found in para 3 of the supplement to the case:

… the appellant company did succeed to the trades of bar rolling and plating formerly carried on by each of the subsidiaries on Apr. 7, 1934, and has continued to carry on such trades.

That is their finding, and, in so far as it is a finding of fact, it could not be interfered with by this court unless this court came to the conclusion that there was no evidence upon which it could be based. The commissioners then go on to explain how it was that they came to that conclusion. They put to themselves a question formulated by me in my judgment in Laycock v Freeman, Hardy & Willis Ltd, at p 614:

… whether or not it is true and fair to say that the business in respect of which the successor is said to be making profits is the business to which he succeeded.

The commissioners go on as follows:

We do not think that the fact that a purchaser of a trade chooses to amalgamate that trade as a department with his own prevents a succession if in other respects

Page 549 of [1939] 4 All ER 541

the identity of the trade acquired is preserved. In the present case we find that the identity of the trades formerly carried on by the subsidiaries has been preserved. As we understand it, we see no necessity for imputing any notional profit or expense either to the steel works or to the plate works. The appellant company produces these steel bars, not for re-sale, but for the purpose of its plate department. The profits of the plate works of the appellant company is the actual profit on the sale of platenamely, the difference between the actual sale price of plate and the actual cost of producing plate through each process.

Subject to one comment which I shall have to make later, I cannot find anything to quarrel with in the method of approach to the question which the commissioners there set out. It seems to me that they have properly directed themselves, and have come to a conclusion to which the evidence before them justified them in coming. It is said, however, that there was really no evidence upon which they could come to the conclusion to which they did come with regard to the succession to, and the carrying on of, these businesses. It was said that, in order to arrive at that conclusion, it was an essential element in the logical process involved to assume at one stage a notional sale of the steel bars out of which the tinplate was ultimately made. It was said that the business of the subsidiary companies could not be said to have persisted in a form identifiable for the purposes of the subrule, because, it was said, the businesses of the subsidiary companies had consisted in buying steel bars, subjecting them to the necessary processes, and thereby producing tinplate. It was said, therefore:

There is no longer within the four corners of what was acquired any purchase of steel bars at all, and, that essential element in the businesses acquired having disappeared, it is impossible to say that those businesses any longer exist, even for the artificial purposes of the subrule, and the only method of getting these businesses back into a state of existence is by assuming the continuance of the missing part of their operationsnamely, purchase of the steel bars.

I must confess that, if that argument had been a tenable one, and if the result flowed from the premises, it would have been a very attractive one, because it would have meant that the subrule could only be applied to the facts of the present case by assuming at the relevant stage a transaction which never in fact existednamely, a purchase of steel bars. On that basis, it was attempted to say that the observations made in Laycock v Freeman, Hardy & Willis Ltd on the subject of notional sales applied equally to the present case. In my opinion, that argument cannot be sustained. It is based on a proposition which I do not think is an accurate onenamely, that the businesses acquired consisted of buying steel bars and then processing them in order to produce the finished article. In my opinion, that is a misleading description of the business. The way in which the business of the subsidiary companies was being carried on was, no doubt, by purchasing the half-finished material, which was the raw material of their own businesses. There would have been no difference in their business in any relevant sense if, instead of buying their steel bars, they had decided to start making them for themselves. It would merely have been a change in the method of providing themselves with the raw material out of which they

Page 550 of [1939] 4 All ER 541

manufactured the tinplates. On the facts of the present case, the steel bars are, of course, made by the appellant company, which is now the same company which turns them into plates. I myself see no difficulty in obeying the directions of the subrule without introducing at any stage any notional sale. The business with which the subrule is concerned is the business carried on by the predecessor. If one examines the facts of the present case, one finds that the appellants, who are the alleged successors, are doing every single thing which the subsidiary companies had previously done, from the steel-bar stage, and, from the point when the steel bar enters the tinplate branch of the business, the operations which take place are precisely the same, and the profits are ultimately made by the sale of the finished product. The only difference lies in the fact that the steel bar gets into the tinplate department, not by a purchase from an outside body, but by a delivery from a different department of the appellants worksnamely, the department which makes steel bars.

If the provisions of the section are to be carried out, and if the continued existence and identity of the businesses exist, what is the way in which the whole matter works out? Here it is important to bear in mind what I said earliernamely, that the rule does not have the result of taxing profits which have never in fact been realised. The problem, therefore, is to arrive at the taxpayers profit in accordance with the section, and anything in the shape of a notional sale must be rejected, if that would involve ascribing to the taxpayer a profit which he has never earned. If a notional sale is to be assumed, it would work in that way. The problem being to ascertain the taxable profits of this taxpayer, a certain part of his profits falls to be dealt with in the artificial way provided by the subrule, and the rest of his profits falls to be dealt with in the ordinary way. If we are to say that the matter must be treated as though the appellant company had sold to the tinplate part of its business the steel bars which it makes in the steel-bar part of its business at a profit, the result in practice would be that the part of the profits referable to the businesses acquired would be ascertained on the footing that those parts of the business had acquired their raw material at a particular price, which in fact, of course, they had not. With regard to the rest of the profits of the appellant company, they would fall to be treated as though the appellant company had sold at a profit productsnamely, their steel barsto their own tin plate departments, which, of course, they had not, and, if that were the basis upon which the thing worked, the result would be to bring into charge to tax profits which had not been earned at all.

The solution, in my judgment, is along different lines. It seems to me that the businesses acquired may properly, for the purposes of the subrule, be treated, and should be treated, as beginning at the steel-bar stagenamely, the stage when those branches of the business procure for themselves a steel bar. Obviously, in order to arrive at profits of

Page 551 of [1939] 4 All ER 541

those branches of the business on that basis, some figure must be brought into account to represent the cost of the steel bar. If that figure is based on an imaginary sale price at a profit, it is an unreal figure. If, on the other hand, it is brought in at the actual cost of producing that steel bar, it is a real figure, and, if we treatas we are bound by the rule to dothe two parts of what is in truth one business as though they were held apart, the only way in which, in my judgment, that direction can logically be carried out is the way that I have indicated of bringing in the raw materialnamely, the steel barat the actual cost of production. If that is done, it fits in exactly with the fact that, by reason of the amalgamation, the appellant company has lost 6 customers, because, whereas it had previously been manufacturing with a view to selling to 6 customers, it is now manufacturing with a view to passing on to its tinplate department, without any profit to itself, something which it has manufactured in the other part of its concern.

It seems to me that that solution of the difficulty is the proper solution. It is in accordance with the language of the subrule, and it involves no assumption of a notional sale. However, it does involve ascertaining the cost of making the steel bars for these various acquired businesses. With regard to that, there appears to me to be no difficulty whatsoever in principle. There may be very serious difficulties in ascertaining the proper figure but those are matters with which accountants are familiar, and with which they have to deal every day. Something was said about that class of operation in my judgment in Laycock v Freeman, Hardy & Willis Ltd. The accountants task would be to ascertain by proper methods and proper apportionment what the cost of production of the bars was, including, of course, overheads, and all other things which have to be apportioned. The effect of that operation is not to invent some artificial or unreal process, such as a sale, but to ascertain what is a realitynamely, the cost of producing a particular articlewrapped up though that reality may be in a number of difficult problems of accountancy. Nevertheless, the figure at cost of the article down to that stage is a real figure, and can be ascertained. There is nothing notional, imaginary or fictitious about it.

There is another way of arriving at precisely the same result, and it is this. It may be said that the appellant company should be regarded as carrying on the businesses acquired, but as having modified them or altered them by substituting for a purchase of the raw material a manufacture of it for themselves. That, as I have said, leads to precisely the same result. Speaking for myself, I prefer the other method of arriving at the result, for the reason that this latter method is one which involves the consideration of a problem of fact of a rather different character, because it is necessary to treat the business carried on after the amalgamation as a business of producing steel bars and turning them into tinplate. Such a business is arrived at at the expense, so to speak, of the original business of the company, which, on that basis, must be

Page 552 of [1939] 4 All ER 541

treated as having given up pro tanto that particular branch of its activities. It seems to me that whether or not, in a given case, the commissioners would come to a conclusion of fact on the identity of the business might present more difficult problems in future cases on that way of looking at it than if the matter be approached in the way that I first indicatednamely, by treating the original business as continuing, but as not making profit out of those steel bars which it passes on to the branches which represent the businesses acquired.

The Attorney-General suggested, but did not really strenuously argue, that the proper method was to ascertain the profits on the basis of a notional sale. When the matter was discussed in the course of argument, he did not wish to press that argument, and I think that the reasons why, in my judgment, it is not sustainable sufficiently appear from what I have already said.

There is only one further matter to which I need refer, and that is the question of scrap. That arises in this way. Before the amalgamation, the subsidiary companies used to sell back to the appellant company the scrap which came into existence in the process of cutting and rolling out the steel bars into blackplate. The subsidiary companies sold that scrap back. It was used by the appellant company in the same way as the other scrap that it bought. In other words, the scrap went back into the mill and emerged finally in the form of other steel bars. As the result of the amalgamation, the businesses acquired no longer conduct the activity of selling scrap. That particular activity has come to an end. The effect of that happening, however, is not one which must necessarily have the result of forcing the commissioners to say that the business of the subsidiary companies has come to an end. The sale of that scrap was a subsidiary part of those businesses, and the fact that it is no longer done cannot, in my judgment, affect the question as to whether or not there is a succession. Another argument raised in connection with the scrap is that, whatever be the case with regard to the other inter-departmental transactions, in the case of the scrap one must assume a notional sale. Otherwise one never can arrive at any proper result in figures at all. I listened carefully to that argument, and I hope that I understood it, but I am afraid that I cannot accept it. It seems to me that the position of the scrap is perfectly simple, and falls into line exactly with what I have already said on the main matters in the case. Since the amalgamation, the tinplate branches of the appellants business produce, each of them, in the course of their operations, what may be called a by-productnamely, scrap. That scrap is something which has a value. Previously the subsidiary companies sold it. Now it is not sold. Nevertheless, it is a valuable thing produced in the course of their operations. What in fact happens to it is that, together with the scrap produced by the other branches, representing businesses which have been acquired and other raw material bought outside by the appellant company, it goes back, so to speak, into a common pot, and out of that common pot

Page 553 of [1939] 4 All ER 541

further steel bars are produced which find their way to the tinplate branches of the business. The proper method of dealing with that scrap so produced, in the light of those facts, appears to me to be quite a simple matter, and it seems to me a perfectly simple matter to ascertain, on the basis which the subrule directs, the profits of these acquired businesses without introducing any element of notional sale of scrap at all. In other words, the existence of that scrap has the result of reducing the cost of producing the next lot of steel bars, and that reduction of cost would be reflected in the cost price of the next lot of steel bars. I see no difficulty in the matter at all.

The only thing which remains for me to say is this. I have indicated what, in my opinion, is the strict method of applying this section to a case like the present, which does not involve any notional sale at all, or any notional profit realised inter-departmentally. It is right to say, however, that I understand that, in the present case, the figures have been agreed on the basis that the profits of these businesses taken over are, for the purposes of the subrule, to be ascertained as a matter of figures on the basis of the inter-departmental sales, which, for their own convenience, the appellants treat in their accounts as having taken place. In many cases, it may be very convenient, both for the Crown and for the taxpayer, to adopt some such rough-and-ready method as that for arriving at the result, and nothing that I say must be taken as in any way precluding the parties from arriving at an agreed result without going through what may, in many cases, be an expensive and difficult process raising, perhaps, matters of controversynamely, of ascertaining the sum which should be treated as being the cost of the steel bar, as it is in this case, or whatever else it may be in other cases. Sensible people will, no doubt, endeavour to avoid unnecessary expense if, by so doing, they can reach a satisfactory and just result. It was essential, for the purposes of this judgment, to ascertain the true and proper course under the subrule, because that is a necessary step in the whole process of reasoning which must be gone through in order to appreciate the proper application of the subrule to facts such as these. In the result, the appeal fails, and must be dismissed with costs.

SCOTT LJ. I agree.

CLAUSON LJ. I agree.

Appeal dismissed with costs. Leave to appeal to the House of Lords refused.

Solicitors: Ingledew Sons & Brown, agents for Crawfords, Swansea (for the appellants); Solicitor of Inland Revenue (for the respondent).

W K Scrivener Esq   Barrister.


Re Capon, Trustee in Bankruptcy v Knight (RC) & Sons

Same v Woodward & Woodward

[1939] 4 All ER 554


Categories:        TOWN AND COUNTRY PLANNING        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL AND MORTON JJ        

Hearing Date(s):        30 OCTOBER, 20 NOVEMBER 1939        


Sale of Goods Transfer of property Ascertained goods Purchase price provided by auctioneers Bankruptcy of purchaser Whether property in goods in purchaser or auctioneers Sale of Goods Act 1893 (c 71), s 17(1).

Both the respondents were auctioneers, and from time to time each of them had advanced money to a farmer whereby the latter was enabled to acquire pigs at their respective auctions. In each case, the farmer, before removing the pigs to his farm, signed notes acknowledging that the pigs were the property of the respondents and that they could be removed and sold by them at any time. In the usual course of business, such pigs were later resold by the auctioneers, the farmer receiving the profit on the whole transaction less auctioneers commission. On 23 February 1938, the farmer executed a deed of assignment and in March 1938, was made bankrupt. On 23 February 1938, the respondents entered the farm, seized the pigs and re-sold them. The appellant, the farmers trustee in bankruptcy, claimed the proceeds of sale of the pigs, on the ground that the arrangements made between the respondents and the debtor were ineffectual attempts to obtain security for the money advanced to the debtor, while the respondents contended that the debtor had bought the pigs as their agent, and that at all material times the pigs were their property:

Held the property in the pigs had passed from the vendor to the debtor and the subsequent seizure and sale of the pigs by the respondents were wrongful. The trustee in bankruptcy was, therefore, entitled to the proceeds of sale of the pigs seized.

Notes

The Sale of Goods Act 1893, s 17(1), provides that, on a sale, the property is transferred to the buyer at such time as the parties intend. That refers to the parties to the contract of sale, and, if there is an ascertained buyer, an auctioneer would not be a party to the contract. Upon this ground, it is held that the pigs passed to the farmer, and not to the auctioneer. This, in its turn, in the present case depends upon a finding of fact that the farmer was not an agent of the auctioneers when bidding at the auction.

As to Transfer of Property in Specific Goods, see Halsbury (Hailsham Edn), Vol 29, pp 83, 84, paras 9799; and for Cases, see Digest, Vol 39, pp 501, 502, Nos 11871205.

Appeal

Appeal by the trustee in bankruptcy against the decision of His Honour Judge Hildesley KC, given at the Ipswich County Court on 5 July 1939, whereby it was ordered that the appellants motions be dismissed and the costs paid by the appellant. In two motions, the trustee in bankruptcy had asked for an order on the respondents, who were both firms of auctioneers, to pay him £4,408 2s 3d, being the proceeds of sale of certain pigs. In the first, R C Knight and Sons were the respondents and, in the second, Woodward and Woodward. By order of the county court dated 5 April 1939, these two motions were consolidated, and both in the county court and in this appeal were dealt with together. The proceedings in the county court are

Page 555 of [1939] 4 All ER 554

reported [1939] LJNCCR 275. The facts are fully set out in the judgment of the court.

Charles E Harman KC and C L Henderson for the appellant.

J B Blagden for the respondents.

20 November 1939. The following judgment was delivered.

FARWELL J (delivering the judgment of the court). The debtor is a farmer, and down to 1938 carried on business at Kenton Hall and elsewhere in the county of Suffolk. According to his evidence, he began farming on his own account in or about 1906 and continued to carry on that business down to 1918. In 1922 he began farming again, but in 1927 he executed a deed of assignment for the benefit of his creditors. At that time, his liabilities were estimated at £67,000. By an arrangement between the larger creditors, 15s in the £ was paid to the smaller creditors. In 1934 he began business as a pig-farmer, but on 24 February 1938 he again executed a deed of assignment for the benefit of his creditors. On 14 March 1938 a receiving order was made against him, and on 18 March 1938 he was adjudicated bankrupt, and the appellant was appointed trustee in his bankruptcy.

The appellant seeks from this court an order on the respondents to pay to him £4,408 2s 3d, being the proceeds of sale of certain pigs, and an order for the costs of the proceedings here and in the court below. Between 1934 and 1938, the debtor from time to time acquired various lots of pigs at auction sales held by the respondents respectively, both of whom carry on business as auctioneers in Suffolk. The pigs so acquired by the debtor were taken by him to his farm and there fattened and subsequently sold. Immediately before the execution of the deed of assignment of 1938, the debtor had at his farm some 600 odd pigs. The respondents, acting together without the debtors consent, entered on his farm on 23 February 1938 and removed some of the pigs. On the following day, they again entered forcibly on his farm and removed the remainder of the pigs. They subsequently sold all the pigs, and it is the proceeds of sale of those pigs which the appellant now claims as assets in the bankruptcy. That claim was rejected by the county court judge, and this is an appeal from that rejection.

It appears from the evidence that between 1934 and 1938 the debtor was not in a position to pay for the pigs which he bought, and that these transactions were carried out under the following arrangements made between himself and the respondents respectively. The debtor from time to time attended auction sales held by one or other of the respondents, selected the pigs which he desired to buy, and bid for them. If they were knocked down to him, he received a bought note in the usual form, stating the lots bought, their price, and the amount due. The auctioneer in every case himself provided the purchase price. The pigs were taken by the debtor to his farm and there fattened and then resold, and out of the proceeds of sale the auctioneers were repaid the moneys which they had advanced. The resales were for the most part

Page 556 of [1939] 4 All ER 554

at auctions held by the respondents, at whose auctions the pigs had originally been bought, in which the auctioneer credited himself with the usual auctioneers commission. If, however, the pigs were sold elsewhere, the debtor paid to the auctioneer 5 per cent on the purchase price in lieu of commission. In each case, before the pigs were removed by the debtor from the auction, he signed a note addressed to the auctioneer in which he acknowledged the receipt of the pigs, and that note contained a statement by the debtor that the pigs were the auctioneers property, and could be removed and sold by him at any time.

On the occasion of the first transaction with the respondent Woodward, a letter, dated 18 December 1934, was written by Gordon Woodward, a member of the respondent firm, to the debtor and answered by him on 21 December. Those letters contain what has been called an agistment agreement. No such letters passed between the debtor and the respondent Knight, although apparently a similar arrangement was made between the debtor and this respondent. The appellant contends that the arrangement made between the respondents and the debtor was an ineffectual attempt by the respondents to obtain some security for the money which they had advanced to the debtor, that the pigs never became the respondents property, but remained at all times the debtors property, that subsequently the seizure and sale of the pigs by the respondents were wrongful, and that the respondents are bound to account to the appellant for the proceeds of sale. On the other hand, the respondents contend that at all the auctions at which the debtor bought pigs he was acting as the agent of the auctioneers, and that the pigs were at all material times their property, and were placed by them on the debtors farm under agistment agreements, that they were accordingly entitled at any time to remove and sell the pigs, and that the proceeds of sale of the pigs seized and sold by them were and are their property. The county court judge accepted the respondents contention and we have to determine the correctness of that decision. It is not open to this court to review the facts as found by the county court judge, but, so far as his decision rests on inference to be drawn from the facts and documents in the case, it is open to this court to draw inferences other than those drawn by him. In the present case, as we understand it, the judges decision rests wholly on the inference which he thought should be drawn from the facts and documents, and it is, therefore, open to us to review it.

In our judgment, the county court judges decision is erroneous. The arrangements between the debtor and the respondents were in each case for all practical purposes the same, although the language of the documents differs somewhat, and they were treated by the judge as being on the same footing in all respects. He appears to have taken the view that, when the debtor bid for pigs at various sales, he did so as agent for the auctioneers in each case, and that, when the pigs were knocked down to him, the property in them passed to the auctioneers, and not to the

Page 557 of [1939] 4 All ER 554

debtor. The judge referred to the Sale of Goods Act 1893, s 17(1), which provides that the property shall be transferred at such time as the parties to the contract intend it to be transferred, and he then said that the evidence taken as a whole negatived an intention to transfer the property to the debtor. In our judgment, this is a misconception of the meaning of that section. The contract there referred to is the contract for sale between the vendor and the purchaser. In the present case, it has never been suggested by anyone that the original vendor knew anything whatever of any arrangement between the debtor and the auctioneers. The only parties to the contract, so far as the vendor was concerned, were the vendor himself and the debtor. The vendor clearly intended that the property in the goods, when sold, should pass to the debtor, and, as between them, there can, in our judgment, be no doubt but that, as the result of the auction sales, the property in the goods passed to the debtor. If he was in fact the agent of the auctioneers, he may have acquired the property as trustee for them, but, as between himself and the vendor, the property in the pigs passed to him. As we understand the county court judges judgment, his decision is based on what is, in our view, a misconception of the effect of the Sale of Goods Act, because he considered that the result of the arrangements made between the debtor and the auctioneers was that the property in the pigs passed to the auctioneers and remained in them so that the pigs were their property and they were entitled to deal with them as they thought fit. If, however, the true view be that the property in the pigs passed to the debtor, and was never in the auctioneers, then the whole basis of the decision goes. In our judgment, the result of the auction sales was that the property in the pigs passed to the debtor, and, whatever may have been the result of the arrangements between the debtor and the auctioneers, those arrangements never operated to pass the property in the goods to the auctioneers. They are extremely equivocal, and open to more than one interpretation, but, in our judgment, the arrangements did not constitute the debtor the auctioneers agent, but were intended to give the auctioneers some charge on the pigs to secure the moneys which they advanced from time to time. Any such charge, not being registered as a bill of sale, is admittedly invalid as against the appellant, and consequently, in our judgment, the pigs on the farm on 23 February 1938 and 24 February 1938, were the property of the debtor, and became part of his assets in the bankruptcy, with the result that the respondents were not entitled to seize or sell them, and they must accordingly account to the appellant for the proceeds of sale.

Appeal allowed. Respondents to pay appellant the proceeds of sale of the pigs, with costs in both courts. Leave to appeal to the Court of Appeal.

Solicitors: Herbert Smith, agent for Westhorp Cobbold & Ward, Ipswich (for the appellant); Field Roscoe & Co, agents for Gotelee Goldsmith, Ipswich (for the respondents).

F Honig Esq   Barrister.


Dover Navigation Co Ltd v Craig

[1939] 4 All ER 558


Categories:        EMPLOYMENT; Other Employment        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN AND LORD WRIGHT        

Hearing Date(s):        8, 9 NOVEMBER, 13 DECEMBER 1939        


Workmens Compensation Sailor Ship sent to mosquito-infested area Death from yellow fever and/or malaria Dangerous locality Whether death due to injury arising out of his employment Workmens Compensation Act 1925 (c 84), s 1(1).

The deceased had been employed as a sailor on a ship which was sent to a mosquito-infested river in West Africa. It was found that his death was due to yellow fever and/or malaria caused by mosquito bites. It was contended for the employers that the death was due to a natural cause, and that this was a risk equally shared by everybody in the locality:

Held the fact that the deceased was especially exposed by reason of his employment to the risk of yellow fever was evidence of a sufficient causal relation to show that he contracted the fatal illness in the course of his employment.

Order of Court of Appeal ([1938] 4 All ER 559) affirmed.

Karemaker v Corsican (Owners) overruled.

Notes

Where, by the conditions of his employment, the workman is brought into contact with a special danger, it must be shown that he had to encounter that danger as a risk incidental to his employment. Where the danger arises from natural causes, it must be shown that the character of the employment created or intensified the risks that arose from those natural causes, so as to expose the workman to some peculiar or extraordinary danger. Where the risk is peculiar to a particular locality, it has to be shown that the employment brought the workman to that locality, and it is here held to be shown that the employment of the workman brought him to a place where he might contract the disease as a result of which he died, and, therefore, his death is due to injury arising out of his employment.

As to Risks Incidental to Employment, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 168, 169, para 358; and for Cases, see Digest, Vol 34, pp 318323, Nos 26042641. See also Williss Workmens Compensation (31st Edn), pp 8594.

Cases referred to

Thom (or Simpson) v Sinclair [1917] AC 127; 34 Digest 320, 2619, 86 LJPC 102, 116 LT 609, 10 BWCC 220.

Dennis v White (A J) & Co [1917] AC 479; 34 Digest 321, 2627, 86 LJKB 1074, 116 LT 774, 10 BWCC 280, revsg [1916] 2 KB 1.

Brooker v Borthwick (Thomas) & Sons (Australasia) Ltd [1933] AC 669; Digest Supp, 102 LJPC 170, 149 LT 590, 26 BWCC 495.

Karemaker v Corsican (Owners) (1911) 4 BWCC 295; 34 Digest 319, 2609.

Warner v Couchman [1912] AC 35; 34 Digest 318, 2604, 81 LJKB 45, 105 LT 676, 5 BWCC 177, affg [1911] 1 KB 351.

Upton v Great Central Ry Co [1924] AC 302; 34 Digest 276, 2336, 93 LJKB 224, 130 LT 577, 16 BWCC 269.

Millar v Refuge Assurance Co Ltd [1912] SC 37; 34 Digest 319, case r.

Lawrence v Matthews (George) (1924) Ltd [1929] 1 KB 1; Digest Supp, 97 LJKB 758, 140 LT 25, 21 BWCC 345.

Appeal

Appeal by the employers from an order of the Court of Appeal (Slesser Clauson and Goddard LJJ), dated 28 November 1938 and reported [1938] 4 All ER 659, allowing an appeal from an award made by His Honour Judge

Page 559 of [1939] 4 All ER 558

Richardson on 6 May 1938 in the South Shields County Court: (reported [1938] LJNCCR 183), wholly setting aside the award, and ordering that an award be made in favour of the respondent for the sum of £180 as workmens compensation with costs. The facts and the arguments are fully set out in the opinions of their Lordships.

D P Maxwell Fyfe KC, J Harvey Robson and John Bassett (for Harvie Watt on war service) for the appellants.

F A Sellers KC and Paul Tyrie (for Alexander Ross on war service) for the respondent.

13 December 1939. The following opinions were delivered.

VISCOUNT MAUGHAM (read by Lord Thankerton). My Lords, I do not propose in the present case to embark on the dangerous task of endeavouring to lay down any general principle which will help to solve future problems arising out of the Workmens Compensation Act 1926. I am content to take the facts as stated in the opinion of my noble and learned friend Lord Atkin, and to state as shortly as I can why, in those circumstances, I agree with the judgments of the Court of Appeal, and therefore feel compelled to differ from the decision of the county court judge at South Shields.

The question is whether the death from yellow fever in the circumstances detailed by my noble and learned friend Lord Atkin was an accident arising out of and in the course of the employment of the deceased as a seaman serving on board the Sea Rambler. Clearly the death occurred in the course of his employment. Did it also arise out of it? The authorities show, if authorities are needed on that point, that the words connote a certain degree of causal relation between the accident and the employment. It is impossible exactly to define in positive terms the degree of that causal connection, but certain negative propositions may, I think, be laid down. For example, we are bound, I think, to hold that the fact that the risk is common to all mankind does not prove that the accident does not arise out of the employment: Thom (or Simpson) v Sinclair, and Dennis v White (A J) & Co. Nor can it be held that death or injury from the forces of nature, eg, earthquake and lightning, is not, merely because the accident is due to the forces of nature, an accident arising out of the employment: Brooker v Borthwick (Thomas) & Sons (Australasia) Ltd, and cases there cited. In these cases, however, it is laid down that, as was said by Lord Atkin in delivering the judgment of the Privy Council in Brookers case, at p 676:

… it has to be shown that the workman was especially exposed by reason of his employment to the incidence of such a force.

In my opinion, there is no doubt as to the correctness of that principle, and we are bound by it.

My Lords, it is clearly impossible to hold that all illnesses or diseases contracted by a workman in the course of his employment are accidents arising out of his employment. Even if the proposition were limited to

Page 560 of [1939] 4 All ER 558

cases in which modern science has discovered that the illness or disease is due to pathogenic bacteria, whether borne by air, water, animals such as rats, or insects such as lice or mosquitoes, I think that the general proposition cannot be supported. If it can be shown, however, that the workman was especially exposed, by reason of his employment, to the risk of the infection by disease-bearing bacteria, I see no difficulty in coming to the conclusion that illness or disease so caused is due to an accident arising out of his employment. This is no more than an application of the principle stated in Brookers case to cases where pathogenic bacteria operate in a sense as forces of nature. In my opinion, there is no distinction between the extent and the nature of the causal relation in the one case and in the other.

My Lords, this view is sufficient for the decision on this appeal. Res ipsa loquitur. The facts themselves establish the terrible nature of the risk to which the ships company in this case was exposed by reason of the ships visits to Zighinchor and Dakar Roads on the West Coast of Africa in July and August 1936. Thirteen members out of a crew of 24 contracted yellow fever, and 7 died. It is impossible to doubt that the Sea Rambler was one of the most dangerous places in the world at the time when the officers and crew were exposed to the risk of being bitten by day-flying mosquitoes which had themselves bitten human beings suffering from yellow fever.

My Lords, I share the doubts which some of your Lordships will express as to whether Karemaker v Corsican (Owners) was correctly decided, but I do not mean to hold that all illnesses due to extremes of heat and cold in various parts of the globe are accidents arising out of the employment. I express no opinion one way or the other on that question.

I ought to add one remark. In the case now before us, it is, I think, an irrelevant circumstance that the risk in question was a danger to which all other persons in the same area were also subjected. For me, it is sufficient that the unfortunate man Craig was especially exposed by reason of his employment to the risk of yellow fever. That is, I think, evidence of a sufficient causal relation to show that he contracted the fatal illness in the course of his employment, and it is not ad rem to show that other persons, voluntarily or otherwise, ran the same risk. For these reasons, I agree with the conclusion of the Court of Appeal, and, accordingly, this appeal should be dismissed with costs.

LORD ATKIN. My Lords, this is an appeal from the Court of Appeal, who reversed the decision of the county court judge at South Shields, who, in an application by the respondent under the Workmens Compensation Acts, made an award in favour of the employers, the present appellants. The applicant claimed as a dependant of her son John Charlton Craig, deceased, who she alleged died as the result of an injury by accident arising out of and in the course of his employment. Craig

Page 561 of [1939] 4 All ER 558

was employed by the appellants as an able-bodied seaman on their steamship the Sea Rambler. In the course of June and July 1936, the ship made two visits to ports round about Dakar, Senegal. With the first we do not now appear to be concerned. She left Dakar for Gibraltar, proceeded to the south of France, returned to Gibraltar, and thence made the voyage in connection with which this claim arises. She reached Dakar, thence went to Kaolakh, and thence to Zighinchor. She then returned to Dakar Roads, and stranded for a few hours at the mouth of the river. When refloated, she left for Gibraltar on 5 August. On 14 August a series of illnesses began. On 14 August one member of the crew, on 15 August another, and on 17 August four others, went down with high temperatures. The captain was naturally alarmed, and altered his course for Funchal, Madeira. The ship arrived there on 18 August. On 19 August three more members of the crew became ill, and, on 20 August, two more, including the captain. On that date, the man whose symptoms had become known on 14 August died. The next day, the chief steward died on board ship. Between 20 August and 26 August 11 members of the crew were taken to hospital, of whom 5, including Craig, died, and 6 recovered. The crew numbered about 24. The judge found that Craig died of yellow fever, probably accompanied by malaria, and that the illness was caused by the bites of mosquitoes, which were prevalent in large quantities, especially at Zighinchor. He rightly held such an illness to be an injury resulting from accident, and to have been suffered in the course of Craigs employment. He felt constrained by authority, however, to hold that the injury did not arise out of the employment, on the ground that Craig was not more exposed to the risk of mosquito bite than were all other people who frequent this part of the West African coast in summer. He particularly relied on the decision of the Court of Appeal in Karemaker v Corsican (Owners).

This decision was reversed by the Court of Appeal, Slesser Clauson and Goddard LJJ. The judgment of Slesser LJ, who delivered the leading judgment, so entirely accords with my own views that I find it unnecessary to deal with the matter at length. In my opinion, this particular risk of injury by accident was inherent in the nature of the employment, and it was necessarily incidental to the performance of the sailors workphrases which are to be found in the opinion of Lord Finlay LC in Dennis v White (A J) & Co. I do not think that the case can be distinguished from the street-risk cases, of which that just cited is the leading case. As in those cases, here it seems irrelevant that other persons are exposed to the same risk. As was said by Lord Parmoor in Thom (or Simpson) v Sinclair, at p 145, cited by Lord Finlay LC in Dennis v White (A J) & Co, at p 482:

The fact that the risk may be common to all mankind does not disentitle a workman to compensation if in the particular case it arises out of the employment.

For my part, I find it difficult to conceive a risk more truly arising out of the employment than the risk incurred by the seaman who is sent

Page 562 of [1939] 4 All ER 558

to work in a fever-infested place abroad. Once establish that the risk is one of “accident” and the connection between the employment and the accident seems to be clearly established. It seems as irrelevant that all other residents in the locality are subject to the same risk of accident as it is that all persons using the street are subject to the same risk as the servant employed to work in the street. In this particular case, however, the servant would never be exposed to the common risks of the locality but for his employment. Unemployed, the seaman would not meet the particular risk at all. I myself am inclined to think that common risk of natural forces must mean the operation of the natural forces in the degree and to the extent that they would operate in the area in which the workman could be said to be exposed to them unemployed. A seaman may be directed to serve in places abroad where the forces of nature, heat, cold, flood and tempest, cause much greater risk of injury than they do at home. In such cases, I personally doubt whether the fact that persons ordinarily to be found in the locality are exposed to such risks is of any importance. They are exposed to the risk as residents in the area. He is exposed to the risk because he is required by his employment so to expose himself.

I cannot but think that a seaman ordered to serve within the Arctic Circle is exposed to the risk of cold by reason of his employment, and that it is irrelevant that Eskimos or Laplanders are ordinarily subject to such risks. In particular, I wish to say that in my opinion Karemaker v Corsican (Owners), which the arbitrator felt bound to follow, was wrongly decided. I think it was wrong to consider only whether the risk of frostbite was usual to residents of Halifax, Nova Scotia, in December. The judge should have considered whether the seaman was exposed to that risk by reason only of his employment. In any case, seeing that the injury was brought about by handling frozen rigging, the association with the employment seems to have been established conclusively. It seems difficult to distinguish between an injury to a deckhand caused by handling frozen rigging and an injury to a fireman caused by handling hot firebars. It was interesting to hear, on the relation of counsel, that the experienced county court judge who decided that case at Liverpool later declined to follow it, treating it as a mistaken finding of fact. So far, I have followed the argument of counsel in treating the accident as resulting from the “forces of nature.” I doubt whether mosquito bites could properly be classified as instances of the exercise of the forces of nature any more than snake bites, or lion bites, or shark bites. They may, however, in the appropriate area, possibly be said to form one of the common risks to which the public is exposed, whether employed or unemployed, and, if in such an area a Workmens Compensation Act in similar terms to our own applied, the local tribunal might have to apply its mind to questions arising from such accidents. The present case merely decides that, where a seaman is sent to such an area and exposed to such risks in the course of his employment, the

Page 563 of [1939] 4 All ER 558

injury is the result of an accident arising out of his employment. I should like to add that the sentence from the judgment of the Privy Council in Brooker v Borthwick (Thomas) & Sons (Australasia) Ltd, at p 675, beginning, “In the case of such a community risk as it was labelled,” cited by the arbitrator, does not purport to convey the reasoning of the Board, but merely forms part of the statement of the argument of counsel, which the judgment proceeds to discuss. Taken by itself, as printed at the beginning of a paragraph, I can see that it might mislead, though, when the context is considered, I cannot think that the meaning is doubtful. For the reasons given above, I am of opinion that this appeal should be dismissed.

LORD RUSSELL OF KILLOWEN. My Lords, I concur, and I do not desire to add anything, except that I share the opinion that the Karemaker case was wrongly decided.

LORD WRIGHT. My Lords, this appeal raises the constantly recurring problem under the Workmens Compensation Act 1925, s 1, of whether an injury by accident which arose in the course of the mans employment also fulfilled the further condition that it arose out of his employment. The facts as found by the county court judge are simple, and can be shortly stated. The deceased man was a seaman, and the steamer on which he was employed sailed to the West Coast of Africa, and called at places where yellow-fever mosquitoes were numerous, and where there was a serious danger of an infectious mosquito bite. In fact, the deceased man, along with six other members of the crew, died of yellow fever, caused by poisonous mosquito bites incurred while the vessel was on the West Coast. It was not contested that the mosquito bites and consequent death constituted an injury by accident.

It has been established by various decisions of this House that the Workmens Compensation Act is a remedial measure, intended to give rights beyond those the common law gives, and that it is a practical measure expressed in non-technical language, to be construed according to the ordinary sense of mankind. Nothing could be simpler than the words “arising out of and in the course of the employment.” It is clear that there are two conditions to be fulfilled. What arises “in the course” of the employment is to be distinguished from what arises “out of the employment.” The former words relate to time conditioned by reference to the mans service, the latter to causality. Not every accident which occurs to a man during the time when he is on his employmentthat is, directly or indirectly engaged on what he is employed to dogives a claim to compensation, unless it also arises out of the employment. Hence the section imports a distinction which it does not define. The language is simple and unqualified. I do not know that attempts to amplify the language or define the dividing line have been very illuminating, though help in deciding any particular problem may

Page 564 of [1939] 4 All ER 558

be obtained by examining actual reported cases, not generally as laying down principles of law, but as showing how, in particular circumstances of fact, the dividing line has been drawn. It is not legitimate to seek to write into the section definitions and limitations which the legislature have not thought fit to insert. It seems that Earl Loreburn LC in Warner v Couchman, at p 37, had something like this in mind when he referred to cases under the Act which

… stated the law fairly enough, or rather stated what was the point of view with which a judge ought to approach cases of this kind.

However, Earl Loreburn LC manifestly did not mean that, if this House has laid down a definite canon of construction, it has not to that extent stated the law.

There have, indeed, been many attempts which may be found in the authorities to define or describe the distinction. As was said by Lord Dunedin in Upton v Great Central Ry Co, at p 310:

… the distinction between accidents which happen to a man and are, so to speak, brought on him by his business, and accidents which, although a man may in one sense be on his business, are just accidents which may happen to everybody, is a very fine one.

However, the distinction may in some cases, as to my mind it is in the present case, be clearly marked. Thus Lord Dunedin in Uptons case, at p 310, quotes Lord Kinnear as saying in Millar v Refuge Assurance Co Ltd, at p 43:

“I think that a risk is specially connected with a mans employment if it is due to the particular place where his employment requires him to be at the time.”

In the same case, Viscount Haldane said, at p 307, that the conditions necessary to enable it to be said that an accidental injury arose out of the mans employment must be

… such that the accident has some sort of causal relation with them, although not necessarily an active physical connection.

Similar statements might be multiplied, but it may be that they often go no further than writing out at length the simple words of the Act, and perhaps in some cases eliminating fallacious accretions which have overlaid the language of the Act in the course of judicial decisions. Thus, in cases before Thom (or Simpson) v Sinclair, it seems to have been held that the necessary connection must be between the nature of the employmentthat is, the actual work which the man was employed to doand the accident. However, the Act says “arising out of the employment,” not out of the nature of the employment. Hence this House held in Thoms case that a girl employed to work at fish-curing in a building was entitled to claim compensation when she was injured through part of the building falling on her, though the collapse of the building was due to causes external to the building. The work was not inherently dangerous, but, as my noble and learned friend Lord Russell of Killowen (then Russell LJ) said in Lawrence v Matthews (George) (1924) Ltd, at p 19:

… sufficient causal relation or causal connection … is established if the mans

Page 565 of [1939] 4 All ER 558

employment brought him to the particular spot where the accident occurred and the spot in fact turns out to be a dangerous spot.

My noble friend there used the word “spot” because in the special facts of that case the dangerous place was a “spot,” or very limited areanamely, the particular place in the road where the tree which injured the man while he was travelling on his duty happened to fall. The risk was in a sense “necessarily” incident to the performance of the servants work (to quote from a further passage from the judgment of Lord Russell of Killowen in that case), but that statement is true only if taken to refer to the way in which things in fact turned out, not to what normally happens to a traveller by road in England. Many other illustrations could be given of instances where it has been held that an accidental injury sufficiently arises out of the employment if it befalls a man simply because of the place into which he is sent or taken by his employment. Thus, in Dennis v White (A J) & Co, a boys employment required him to proceed by bicycle through the streets. He was knocked down and injured. It was nothing to the point that everyone who bicycles in the street incurs a similar risk, or that the risk is general and ordinary. As Lord Finlay LC said, at p 483:

… the accident was … necessarily incidental to the performance of the servants work, all inquiry as to the frequency or magnitude of the risk is irrelevant.

I have referred to these important decisions as illustrating how eminent judges have approached cases of this kind. It would be futile to attempt to cite or reconcile all the decisions on the construction of these words of s 1. They are often merely decisions of fact, though some seem to involve reading into the section words which are not there or ideas which are not expressed in it. Indeed, in cases of this type, once the actual facts are ascertained, it is for the court to ask itself whether, on those facts, the accidental injury arose out of the employment. In the present case, the answer to the question seems clear and inevitable. The seaman sustained the fatal injury because his employment took him to a river or a roadstead or a sandbank on which his vessel grounded on the West Coast of Africa. Though the circumstances are different, he was as much exposed by the exigencies of his employment to the risk of being bitten by the mosquitoes as Mrs Thom was exposed to the risk of the falling building, or the boy Dennis to the risk of being run over in the street. The infliction of the bites was an accident. In essence, it was the same as if the crew had been assailed by a flight of poisoned arrows aimed at the ship by a raiding party of natives. If one takes the facts as they have been found, the claim to compensation appears to be unanswerable on the words of the section, or, indeed, if analogy and authority are also considered, on the decided cases.

It is sought to evade this conclusion by a series of arguments which, with all respect, I find both artificial and unauthorised by the language of the Act. In effect, it is argued, mosquitoes are a force of nature to which everybody in the geographical area, which is here the particular

Page 566 of [1939] 4 All ER 558

region on the West Coast of Africa, is equally subject. It is a normal risk, so it is said, affecting alike natives and visiting strangers such as the crew. It is hence a normal risk of the region. The standard of normality, it is said, is that of the ordinary person in that region, so that it is irrelevant that the deceased man was brought into that area and exposed to the poisonous elements there rampant by the exigencies of his employment. On the basis of these contentions, it has been submitted that, before the claim can be maintained, it must be shown that the deceased man was exposed in an abnormal degree to the ordinary dangers of the region, which, it is said, is not shown here.

No doubt it has often been said that, if a workman, while on his employment, is accidentally injured by a force of nature which is operating generally in the area where he is, he cannot recover unless he can show that his employment exposed him in a degree beyond that of other people then present in the area to the injurious effects of the natural force. Thus it has been held that a man struck by lightning cannot recover compensation under the Act unless his employment placed him in a position in which he was peculiarly exposed and vulnerable. The same has been said of exposure to extremes of heat and cold which are endemic in the region. Everybody then present in the place, whether employed or not, is subject to the same heat and cold. To associate the evil consequences of the exposure causally with the employment, so that they can be said to arise out of it, there must be some special exposure consequent on the employment beyond that of the common lot of those in the place or region, as in Brookers case, where a number of men were injured in consequence of an earthquake, which caused havoc over a large area in New Zealand. The New Zealand Act is, for this purpose, identical with the English Act. The Court of Appeal in New Zealand had rejected the claims, on the ground that the risk was common to everybody in the area, and that the injuries sustained by the men were caused by a natural force which had no particular relation to their employment. The risk of the earthquake affected everybody in the neighbourhood, whether employed or not. The fact of their employment was irrelevant. Hence, it was held that, though the accidents arose in the course of the employment, they did not arise out of it. The Privy Council reversed the judgment of the Court of Appeal of New Zealand, on the ground that, on the facts, the injuries could be sufficiently associated with the mens employments. Thus, one was killed by the collapse of the building in which he was working, so that the case was analogous to Thoms case, though the collapse was in fact due to the earthquake. Another man, by reason of the earthquake shock, lost his balance and fell from the top of a high sheep-race where his duty had taken him. Another claimant had been sent to do some shopping, and was killed by the collapse of the shop just as he left it. Thus there was in each case a special risk associated with the employment, and the position was different from what it would have been if the claimant had been situated like his fellow-citizens, whose

Page 567 of [1939] 4 All ER 558

employment did not expose them to any peculiar risk. It could not be said that the men would equally have been injured, whether employed or not. The claims were accordingly upheld, and the decision of the Court of Appeal of New Zealand reversed.

In the present case, I do not know that the deceased man was subject to any special or peculiar risk of being bitten beyond that of the natives. Indeed, the county court judge expressly finds that, to the sailor on board ship, the risk of a mosquito bite is no more a danger than it is to any inhabitant of a house or hut in the locality. I shall assume that the finding was justified, but it appears to me to be irrelevant. The seaman is exposed to the risk, not because he is an inhabitant of the place, but because he is specially taken to the dangerous place by his employment. The position of a seaman under the Act is in many ways peculiar, because his employment may expose him to risks in strange climates outside the limits of this country. In that way, such risks are not normal to him, but are necessarily incidental to his employment. It is, in my opinion, fallacious to treat as normal to him risks which are normal to the ordinary inhabitant of the place, who is not there because of special employment, like the seaman. If analogy were needed, it may be pointed out that the boy in Denniss case only took the risks which everybody who bicycles in the street takes, but he was held entitled to compensation because he took those risks on his employers work. Mosquito bites on the West African coast are very unlike a street accident in an English town, but they are analogous in the respect essential for the purposes of this casenamely, that in each case the employee met with the accident because he was sent by his employer to the place where the danger was. If anything inconsistent with this was decided in Karemaker v Corsican (Owners), it was, in my opinion, wrongly decided. As to Warner v Couchman, this House decided that case purely as on a finding of fact.

It has been said that, if this claim is upheld, it will have far-reaching consequences. For instance, it is said that it would follow that, if a seaman who was sent on his ship to a British port, say Southampton, where influenza was rife, caught the disease, he would have a claim. That case, however, is so different in so many respects from the present that I do not feel called upon to discuss it. It is enough for me that, in my opinion, on the facts of this case, there was an injury by accident which arose out of the employment. I agree with the Court of Appeal, and would affirm their judgment.

Appeal dismissed with costs.

Solicitors: Botterell & Roche, agents for Botterell Roche & Temperley, Newcastle-upon-Tyne (for the appellants); Barnett Janner, agent for Winskell & Walker, South Shields (for the respondent).

Michael Marcus Esq   Barrister.


Alexander v H Burgoine & Sons Ltd

[1939] 4 All ER 568


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        1 DECEMBER 1939        


Practice Trial Hearing Trial before jury Speeches of counsel No witnesses called for defence Right of defendants counsel to invite jury to stop case.

In a civil case tried in the Kings Bench Division before a judge and jury, counsel for the defendants, at the close of the plaintiffs case, addressed the jury and suggested to them that they should stop the case. It was contended that counsel for the defendants, not intending to call evidence for the defence, was entitled to suggest to the jury that they ought to stop the case:

Held it is not in accordance with the proper practice for an invitation to stop the case to be given to a jury by counsel before the judge has summed up. The judge in his discretion may invite the jury to dispense with a summing up, but that is a matter entirely in the discretion of the judge.

Notes

The order of speeches in a jury trial is well settled, but the present case deals with a point which seems to go beyond the usual rules, and one which has admittedly given difficulty in practice. An invitation to the jury to stop a case is a matter for the judge, and it is clear that, if counsel for the defendant does not intend to call evidence, he must not address the jury at the close of the plaintiffs case, but must declare his intention not to call evidence, so that counsel for the plaintiff can then exercise his right of summing up his case to the jury before counsel for the defendant does so. It must be noted, however, that this decision is confined to civil cases, and is not properly applicable to criminal cases.

As to Speeches of Counsel, see Halsbury (Hailsham Edn), Vol 2, pp 540542, paras 735737; and for Cases, see Digest, Vol 3, pp 348352, Nos 380439.

Appeal

Appeal by the defendant company from the verdict of a common jury and the judgment given by Macnaghten J, dated 21 July 1939. The action was a claim against the defendants for damages for injury caused by the negligence of a lorry driver employed by them. The facts are not material to the point of law on which the case is reported. After the close of the plaintiffs case, counsel for the defendants, although he was to call no evidence, addressed the jury, and, in doing so, suggested to them that they could stop the case and say they had heard enough. Thereupon the judge said that, if counsel for the defendant addressed the jury at the close of the plaintiffs case, it indicated that he was going to call evidence, and that, if he did not call evidence, counsel for the plaintiff was entitled to sum up . Counsel for the defendants then submitted that, subject to the right of counsel for the plaintiff to address the jury again, when the plaintiffs case was complete, the jury were at any time entitled to stop the hearing and say that they had heard enough. The judge replied that he had heard that observation before, and that he thought that it was a very unfortunate one, because it indicated that the jury could come to a conclusion before they had heard all the evidence they ought to have heard. It might, he said, be becoming to a judge to indicate to the jury that they might stop the case, but it was not becoming to counsel. If

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counsel wished to submit that there was no evidence fit to be left to the jury, he should do so at the close of the plaintiffs case. The judge said that his observations, however, applied only to running-down cases. Where, for instance, a man brought an action for libel, and, on cross-examination, turned out to be a traducer of women and obviously a man of no character, it was very often said that the jury could not want to hear any more of that man, because his character was obviously of no value. The judge then directed the jury that they ought not to come to a final decision until they had heard the whole of the case for each side and the summing up. The course of procedure of intimating that a concluded opinion might be arrived at in the course of a case when persons were sitting in the jury-box and had had no opportunity of consulting among themselves as to what their decision should be might lead to great inconvenience, as well as to injustice. The judge permitted counsel for the defendants to address the jury again, and then summed up. The jury returned a verdict for the plaintiff, with £400 damages. The judge gave judgment, accordingly, with costs, and the defendants appealed, on the ground, inter alia, that the judge was wrong in law in refusing to allow counsel for the defendants to invite the jury, subject to hearing counsel for the plaintiff, to stop the case when the plaintiffs evidence was complete.

N R Fox-Andrews for the appellants.

Charles Doughty KC and Neil Lawson for the respondent.

1 December 1939. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). The only point of interest which is raised upon the notice of appeal is this. It seems that, at the close of the plaintiffs case, counsel for the appellants started to address the jury. If he was not going to call any evidence, he should, of course, have said so, because then counsel for the respondent would have summed up the case for the plaintiff. Whether or not counsel for the appellants had made up his mind at that time that he was not going to call evidence I do not stay to inquire, but it appears that, when he was addressing the jury, he invited them to stop the case, after telling themperfectly properlythat counsel for the respondent would have the right to address them, and that they could then stop the case if they liked. In other words, he invited them to express an opinion before they had heard the judges summing up. One complaint which was raised here, though it has not really been persisted in by counsel for the appellants, was that the judge was wrong in expressing the opinion that this was not a right thing to do, and that counsel was not entitled to ask the jury to stop the case in this way.

This is a matter which has arisen in my own experience on more than one occasion, and I think that I may say with some certainty that the opinion of the judges is, and always has been, that it is not correct for counsel to ask the jury to stop the case at any particular time, because counsel is not entitled to interfere, so to speak, between the judge and the

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jury. A judge, when the case has been heard, may, and not infrequently does, say to a jury in a case which appears to be perfectly clear: “Gentlemen, do you think it will be of any assistance to you if I sum up, or do you think you can give an opinion at once?” Judges, indeed, have said that to juries in cases such as Macnaghten J instancesfor example, a libel case where a man is complaining of libel, and, after cross-examination has shown that he has no case at all, the judge sometimes turns to the jury and says, “Have you heard enough of this case?” although the judge should then be careful to say that the plaintiffs counsel has still the opportunity of addressing them if they wish.

We think, however, that it ought to be understood that it is not in accordance with proper practice for an invitation to stop the case to be given to a jury by counsel before the judge has summed up. If the judge thinks that it is a case in which he may invite the jury to dispense with a summing up, that is a matter entirely in the discretion of the judge. No one is censuring counsel for the appellants for what happened in this case, because it has certainly been done, and sometimes done without objection, from the Bench, but the objection, of course, is that there ought to be no interference in the course of the trial between the judge and the jury. Macnaghten J, who took that viewwhich, in the opinion of this court, is the right viewlimited his remarks, I notice, to civil cases, because any question as to what would arise in a criminal case would very properly be dealt with by the Court of Criminal Appeal, and not by this court, which has no jurisdiction in criminal matters. I therefore abstain from saying what my experience was as a judge in criminal cases, and, as the judge below did, I limit what I have said to cases which are tried on the civil side of the Kings Bench Division. The result is that this appeal fails and will be dismissed.

Appeal dismissed with costs.

Solicitors: Hewitt Woollacott & Chown (for the appellants); Butt & Bowyer (for the respondent).

Derek H Kitchin Esq   Barrister.

Wooding v Monmouthshire and South Wales Mutual Indemnity Society Ltd

James v Same

Hawkins v Same

[1939] 4 All ER 570


Categories:        EMPLOYMENT; Other Employment: INSURANCE        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        16, 20, 21, 22 NOVEMBER, 13 DECEMBER 1939        


Workmens Compensation Insolvency of employer Liability of insurers to workman Mutual indemnity society Non-payment of calls Workmens Compensation Act 1925 (c 84), s 7.

A mutual indemnity society by the terms of its memorandum and articles of association protected a colliery company against its liabilities

Page 571 of [1939] 4 All ER 570

under the Workmens Compensation Act in respect of all workmen who had not contracted out of the Act. Originally the arrangement was that for the first 18 months after any accident the company in effect met all payments due to the injured workman, but, upon the expiration of that period, the liability in respect of each injured workman was to be actuarially assessed, and a call for such sum was then made upon the company. The 18-months indemnity period above referred to was later altered to 5 years. A receiver of the company was appointed by debenture holders, and an injured workman thereupon claimed compensation from the indemnity society under the Workmens Compensation Act 1925, s 7. The society repudiated this claim, on the ground that the calls from time to time made upon the company in respect of the injured workman had not been paid at the date of the appointment of the receiver, which was found to be the fact:

Held (i) the contract of insurance was subsisting at all material times, and the rights of the employers against the insurers vested in the workman.

(ii) those rights consisted of an indemnity against the payment of any compensation in respect of all workmen injured during the material period.

per Lord Wright: I cannot dissect the contract into two periods, or split the transaction into two disparate bargains. As part is insurance, I think the whole must be, and in any event to my mind is, insurance.

Order of Court of Appeal ([1938] 3 All ER 625) reversed.

Notes

Two questions arise in this case. The first is whether the matter was one of insurance, the difficulty being that during the first five years the insured were to pay to the insurers all moneys paid under the indemnity. The other question is whether the consideration for the insurance was collective or several. If the consideration was collective then the failure to make the appropriate payment in respect of individual workmen did not defeat the obligation to indemnify and this is the view taken by the House.

As to Liability of Insurers on Insolvency of Employer, see Halsbury (1st Edn), Vol 20, Master and Servant, pp 191, 192, para 423; and for Cases, see Digest, Vol 29, pp 406408, Nos 32043213. See also Williss Workmens Compensation (31st Edn), pp 204214.

Cases referred to

Pailin v Northern Employers Mutual Indemnity Co [1925] 2 KB 73; 29 Digest 407, 3210, 133 LT 77, 18 BWCC 32.

British Equitable Assurance Co Ltd v Baily [1906] AC 35; 10 Digest 1069, 7482, 75 LJCh 73, 94 LT 1, revsg SC sub nom Baily v British Equitable Assurance Co [1904] 1 Ch 374.

Roberts v Security Co [1897] 1 QB 111; 29 Digest 415, 3248, 66 LJQB 119, 75 LT 531.

Universo Insurance Co of Milan v Merchants Marine Insurance Co [1897] 2 QB 93; 29 Digest 82, 416, 66 LJQB 564, 76 LT 748.

Bhugwandass v Netherlands India Sea & Fire Insurance Co of Batavia (1888) 14 App Cas 83; 29 Digest 75, 341.

Daff v Midland Colliery Owners Mutual Indemnity Co (1913) 82 LJKB 1340; 29 Digest 407, 3206, 109 LT 418, 6 BWCC 799.

Appeal

Appeal from an order of the Court of Appeal (Greer and Mackinnon LJJ, Slesser LJ dissenting), dated 28 July 1938 and reported [1938] 3 All ER 625, affirming an award of His Honour Judge Thomas at the Tredegar County Court, dated 20 January 1938. The facts and the arguments are set out in the opinion of Viscount Maugham.

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Gilbert J Paull KC and A L Macmillan for the appellants, the workmen.

H Wynn Parry KC and J P Ashworth for the respondents, the indemnity society.

13 December 1939. The following opinions were delivered.

VISCOUNT MAUGHAM (read by Lord Thankerton). My Lords, we have before us three appeals by three workmen, Wooding, James and Hawkins, all of them employed by the Ebbw Vale Steel, Iron and Coal Co Ltd. They were injured by accidents arising out of and in the course of their employments at the following datesnamely, Wooding on 24 August 1923, James on 27 April 1923, and Hawkins on 15 April 1929. Subject to certain defences of a special character, which will be dealt with later, it is admitted that Wooding is entitled as against the Ebbw Vale company (which I shall call the company) to compensation at the rate of £1 15s per week, James to compensation at the rate of £1 2s 6d per week, and Hawkins to a declaration of liability. These liabilities arise under the Workmens Compensation Act 1925. The claims of the appellants in this case are not, however, against the company, but against the respondent society (which I shall call the society), who are alleged to be insurers of the company in respect of its liability to the three workmen. A receiver of the business of the company was appointed on 21 October 1936 on behalf of holders of debentures secured by a floating charge. The appellants therefore contend that the rights of their employers (the company) against the society are now vested in them under the Workmens Compensation Act 1925, s 7, which provides as follows:

(1) Where any employer has entered into a contract with any insurers in respect of any liability under this Act to any workman, then, in the event of the employer becoming bankrupt, or making a composition or arrangement with his creditors, or, if the employer is a company, in the event of the company having commenced to be wound up or a receiver or manager of the companys business or undertaking having been duly appointed, or possession having been taken, by or on behalf of the holders of debentures secured by a floating charge, of any property comprised in or subject to the charge, the rights of the employer against the insurers as respects that liability shall, notwithstanding anything in the enactments relating to bankruptcy and the winding up of companies, be transferred to and vest in the workman, and upon any such transfer the insurers shall have the same rights and remedies and be subject to the same liabilities as if they were the employer, so however that the insurers shall not be under any greater liability to the workman than they would have been under to the employer.

In these circumstances, three arbitrations took place in the county court of Monmouthshire before His Honour Judge Thomas who held, following the decision of the Court of Appeal in Pailin v Northern Employers Mutual Indemnity Co, that the society were not, at the material times, insurers so as to confer on the workmen the rights specified in s 7. He therefore made awards in favour of the society. There was an appeal to the Court of Appeal, and that court by a majority (Greer and Mackinnon LJJ, Slesser LJ, dissenting) dismissed the appeal. The matter now comes before your Lordships.

A certain number of letters and other documents was put in evidence

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before the county court judge, and a certain number of facts was agreed. The society by their particulars denied their liability to pay compensation on three main grounds. First, they denied that at any material time they were insurers of the company. Secondly, they relied on the fact that the names of the three workmen were not contained in certain lists of cases of accidents which were outstanding at particular dates, and they asserted that their liability to indemnify the company in respect of the three workmen had thus been terminated. This contention requires for its consideration the statement of a number of further circumstances, and was based on various legal arguments. Thirdly, they contended that any liability of the society to pay compensation to the company terminated on the appointment of the receiver. This last point, however, was abandoned on the hearing before your Lordships, and need not be further considered. There was also an argument based on estoppel, which is not now insisted on. I think it is important to state that the society in their particulars never raised the contention that, at the date of the appointment of the receiver, they had any right or remedy by way of set-off, cross-claim or otherwise against the company, nor did they at any time assert that the company had made default in payment of any premium or any call demanded by the society, and no evidence was given that any such demand or call was made and not paid.

The terms of the contract of insurance relied on by the appellants are to be gathered from the memorandum and articles of association of the society, for no insurance policy was issued by them at any relevant time. The society was incorporated on 25 June 1898 as a company limited by guarantee. Its main object was “to indemnify the members of the society against the payment of any compensation or damages payable under,” amongst other Acts, the Workmens Compensation Acts in respect of accidents to workmen employed at any mine in which any member of the society might be interested and to which the Coal Mines Regulation Acts or certain other Acts should apply. The articles provide for a mine-owner becoming a member of the society, for mines of any member being entered in a register of protected mines, and for “mutual insurance against ordinary accidents” in accordance with elaborate and complicated regulations contained in the articles. We are only concerned on these appeals with “ordinary” accidents, as the appellants only suffered from such accidents. The company was at material times a member of the society, and its mines were entered in the register of protected mines. There is no doubt that the company, having complied with these requirements in and prior to 1923, was entitled to indemnity from the society against ordinary accidents, and was bound to pay “calls” of the nature of premiums like other members, in order that the society might thereout provide the stipulated indemnity to all the members.

My Lords, it will be remembered that two of the appellants met with

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their accidents in 1923 and the third in 1929. The original articles of 1898 were in force as regards accidents taking place in 1923, but, by a special resolution confirmed on 12 April 1927, the original articles were modified in certain material respects. In particular, a new art 13A was inserted, a new art 15 was substituted for the old art 15, and a new art 35 was substituted for the old art 35. A question of some difficulty arose in the courts below as to whether the amended articles, after they came into force, would apply to (amongst others) accidents which had occurred in 1923in other words, whether the new regulations as to calls, compensation and so forth in the amended articles had any operation as regards previous accidents in respect of which compensation remained payable. It is at least doubtful whether, in the circumstances, it makes any difference to the result of this appeal or which view is to be taken, and counsel on each side, who, I may say here, argued for their clients with both skill and discretion, were willing, for the purposes of the appeals, to assume that the amendments of 1927 applied to the accidents prior to that year, so far as compensation remained payable in respect of them, as well as to subsequent accidents. It is not, therefore, necessary for your Lordships to embark on the vexed question as to the effect upon a contract, the terms of which are to be gathered from articles of association, of an alteration of those articles under the statutory power. The true meaning and effect of the Companies Act 1908, ss 13, 14 (now replaced by the Companies Act 1929, ss 10, 20), must be left for consideration by this House at some future time, and British Equitable Assurance Co Ltd v Baily, where there is an illuminating opinion by Lord Macnaghten, will also have to be examined.

In what follows, I shall deal with the amended articles as those on which the present case must turn. There was, however, a further change on 19 December 1932. On that date a new set of articles was adopted by the company in substitution for, and to the exclusion of all, existing articles (except as therein mentioned) as from 1 January 1933. These articles provided for a new system by the issue of policies of insurance to the members. Art 3, however, provided that, for the purpose of discontinuance of the old system, certain transitional provisions in the appendix should have effect. Clause 7 of these provisions stated that (subject to cl 8 and to certain other matters) the ordinary accident fund and its assets and liabilities should be taken over by the society. Clause 8 provided that the ordinary accident accounts for the accidents occurring in 1928, 1929, 1930, 1931 and 1932 should be dealt with under the existing articles, but the directors might fix a period earlier than 5 years from the beginning of any of such years for the purpose of a final call under art 35(g), (h),(i), of the amended articles, and that, on the closing of each of such accounts, the assets and liabilities thereof should be taken over by the society. Clause 11 provided that, for the purpose of the transitional provisions, arts 24 to 36 of the existing articles of association should continue, where necessary, to have effect and to bind

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the society and every member so far as concerns the keeping of accounts and the making of calls, the liability of members to make payments or contributions, and the liability of the funds to contribute to the societys expenses.

On the footing that the cases of Wooding and James were, and had remained, 1923 cases, these new articles do not seem to affect their cases, since the five-year period had come to an end, and the final calls should have been made and paid pursuant to art 35(g), (h). Hawkins was a 1929 case, and therefore cl 8 would apply to him and also arts 24 to 36 of the amended articles to the extent mentioned in cl 11.

My Lords, I have had the advantage of reading the opinion of my noble and learned friend Lord Wright, and I am unwilling to take up time in an elaborate statement of the articles as amended, since I find in that judgment all that I should myself like to say on the subject. The respect I have for the opinions of Greer and Mackinnon LJJ, from whom I feel compelled to differ, makes it necessary for me to indicate in my own words the reasons for my conclusion.

I agree with the view of the Court of Appeal that, under the system laid down by the amended articles, there were two periods in relation to the accidents of each member of the society. The accidents for each year were kept separate, and the first period for these accidents was 5 years from the commencement of each year, and during that periodeg, at the end of 1927 in respect of the accidents to Wooding and James in 1923the directors of the society were to make “provisional calls” on the member concerned in respect of accidents in that year of an amount in the opinion of the directors sufficient adequately to provide the moneys required to indemnify such member against all compensation and damages payable by such member in respect of the ordinary accidents at his mine in that year. The sum so paid had to be credited to an “ordinary accident account” for that year between such member and the society, and the society had to discharge all sums payable by the society in respect of those accidents (art 35(d), (e), and see also art 35(i), which provides for final adjustment of the ordinary accident account).

During this five-year period, therefore, dating from any particular year, it is agreed that each member bore his own liability for all the accidents at his mine in that year. I agree with the view of the Court of Appeal that this is not, so far, a contract with insurers within the meaning of the Workmens Compensation Act 1925, s 7. However, this is only the first part of the story, for at the end of the five-year period the directors had

… to assess or estimate … (on an actuarial basis so far as practicable) the amount of the outstanding liability of each member protected under this article to pay compensation or damages in respect of ordinary accidents which occurred during the particular year.

That is art 35(g). A “final call” had then to be made on each member in respect of the particular year of the amount or estimated

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amount of his outstanding liability (art 35(h)). This closed the account between the member and the society as regards the accidents for that year. The member was under no further liability to the society in respect of those accidents, and the society had to indemnify the member against all liability in respect of them. The amount of the “final calls” went into the ordinary accident fund of the society. These calls were no longer kept separate, but, to use a popular phrase, they went into the common pool, and the society out of its assets indemnified all the members as regards all accidents of that particular year. Insurance is none the less insurance because it is mutual, and I think it is clear that, as regards this second period, the contract was one of insurance, and the society was an insurer in respect of the liability of any member as regards accidents of the year in question. The Court of Appeal seems to have agreed in that view. The decision in Pailin v Northern Employers Mutual Indemnity Co, on which, as I have said, the county court judge relied, would not apply to liabilities existing in the second period.

There is, however, a curious point affecting the five-year periods on which the respondents place reliance as regards the claims of Wooding and James. It is based upon the amended art 35(b), which was a new sub-clause in 1927. It provides in effect that, where a workman wholly or partially incapacitated by an accident:

… recovers and ceases to be entitled to compensation and such total or partial incapacity recurs so as to entitle him to compensation without his being involved in any fresh accident, such recurrence shall be deemed a fresh accident happening when the recurrence takes effect.

This provision, where it applies, has the effect of causing a new five-year period to begin, during which the member is in effect his own insurer, and of postponing for five years the making of a final call on him. The appellants Wooding and James, however, dispute that the provision applies to them.

In my opinion, the words “recovers and ceases to be entitled to compensation” in this sub-clause cannot be read as if the word “recovers” were omitted, and that word, in my view, must, in the absence of any reason to the contrary, indicate a recovery which restores the man to his pre-accident state of health and capacity so far as relates to the consequences of the accidentin other words, a recovery which will enable him to compete for employment in the open market on the same terms as if the accident had not happened. There may still be recurrence of incapacity, because it is well known that there are many injuries which leave in some organ a latent weakness or defect which may not become manifest except as the result of renewed work and strain. If this view is correct, it is quite plain on the admitted facts that neither Wooding nor James had ever recovered from his accident, and, indeed, the contrary is not asserted. The result is that, upon the true construction of art 35(b), neither Wooding nor James ceased to be a case of the 1923 class.

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It is argued, however, that, on 23 January 1929, the respondents transferred or purported to transfer the case of Wooding from the class of 1923 to that of 1928, and that at a later date the case of James was transferred from 1923 to 1932, both transfers being alleged to be made under art 35(b). On the view I have taken of the facts and the true construction of the article, such transfers could only be relied on as effective if there had been an agreement between the employers and the society so to transfer the cases. No such agreement was set up or alleged, and the evidence as it stands is, I think, insufficient to establish anything more than a mistake as to the construction of the article. The conclusion must, therefore, be that the five-year period as regards both Wooding and James ended on 31 December 1927 and there should then have been an assessment of the outstanding liability of the company in respect of their ordinary accidents (including those of Wooding and James) during 1923 (art 35(g)), followed by a “final call” on the company under art 35(h).

It is at this stage that we come to the most singular and troublesome circumstance in the case. On 19 May 1928 the society wrote a letter to the company which contained the following paragraphs:

1923 Cases.

Dear Sirs

I beg to enclose a statement showing the list of cases of accidents and industrial diseases which occurred at your collieries and works during the 12 months to Dec. 31, 1923, and which were outstanding and in which compensation was being paid as on Dec. 31, 1927.

You are probably aware that under the terms of the societys articles of association all future liabilities arising from those accidents are now taken over by the society.

Before making the final financial adjustments in regard thereto, I should be much obliged if you would kindly confirm whether these cases agree with your records of outstanding cases.

I am to add that the figures shown as to the outstanding liability arising from those accidents have been assessed on the basis of the Post Office annuity tables and that cases on full compensation have been dealt with on the actual amount of weekly compensation paid, and cases on light work on the actual partial compensation when such payments have exceeded 10s. per week and on a minimum of 10s. when payments have been less than 10s. per week; excepting cases which have been settled since Dec. 31, 1927, when the outstanding liability has been assessed for the actual payments made since that date.

Kindly sign the enclosure when returning it to me. A formal statement, embodying this assessment, will be sent to you at a later date, setting forth your companys position relative to the whole of your accidents which arose during the 12 months to Dec. 31, 1923, together with any further observations which it may be deemed necessary to make in regard to the matter.

The list enclosed included the names of those workmen only who had met with accidents at the companys mines which were outstanding and in which “compensation was being paid as on 31 December 1927.” The list, as it happened, included by mistake the name of Wooding, whose weekly compensation on 31 December was said to be 35s and the valuation of his case (on an actuarial basis) was stated to be £1,221. The list did not contain the name of James, and it is to be presumed that he was known not to be in receipt of compensation on 31 December. The company returned the list omitting the names of Wooding and some other workmen who

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were not in receipt of compensation on the date named. No evidence was given of any discussion or interview between the officers of the company and of the society on this important matter. The only witness called at the hearing was the secretary of the society, who proved the correspondence which was put in, and we are left to draw our own conclusions from that correspondence. The result of the course adopted was certainly important. The list sent by the society to the company would have justified a call of £13,139 in respect of the 1923 accidents, less credits due to the company in respect of their ordinary accident account. The list returned by the company reduced the figure of £13,139 to £9,223, the reduction being made up of items including the £1,221 in respect of Wooding. The society on 31 July 1928 made a final call in respect of the 1923 accidents of the company of £9,223 (the figure above-mentioned), less a credit due to the company of £6,406 17s 9d, leaving a balance payable to the society of £2,816 2s 3d, which was to be paid according to the letter on 28 February 1930, as a result of a resolution of the directors. It was further stated that failure to pay on the date mentioned would render the company liable to be charged with interest at a rate to be determined by the directors.

On the basis of these facts, there is raised what is, I think, the main point made by the respondents in their particulars and in the argument before your Lordships. It is that the case of Wooding was not included by the company in the lists passing between the company and the society as a liability outstanding on 31 December 1927 nor on 31 December 1932. Precisely similar allegations, with some alterations of dates, are made in the answers and particulars as to the claims of James and Hawkins. If these allegations were true in a sense which would lead to the inference that the company and the society had agreed that the society would have no further liability in respect of compensation to the three men after the dates mentioned, the point would be a most serious one. The point, however, becomes untenable as soon as the language of the societys letter of 19 May 1928, is carefully examined. The society was endeavouring, as the letter shows, to act in accordance with art 35(g) of the amended articles, and to estimate the amount of the outstanding liability of the company in respect of ordinary accidents in 1923. On the last date of 1927, the five-year period had come to an end. The 1923 cases were of three kindsnamely, (i) those on full compensation on 31 December 1927, (ii) those on light work in which partial compensation was being paid at that date (sometimes more than 10s per week and sometimes less), and (iii) cases where, on the said date, the man was being paid (generally for light work) a wage not less than the full compensation he would have received if not employed. The fourth paragraph of the letter (beginning with the words “I am to add”) explains how the directors had assessed the total outstanding liability of these cases on an actuarial basis, so far as practicable. They took as a basis the Post Office annuity tables, and applied them in relation to the age of

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each workman as if he were a normal life. Thus Wooding, aged 33, at 35s per week (his maximum weekly compensation), was reckoned as a liability amounting to no less than £1,221. To the second class they applied a rough-and-ready method, probably because the partial compensation which was being paid was variable. If the man was in receipt of more than 10s (eg Henry Butcher, who was in receipt of 13s 2d), they treated him as in receipt of 10s for life, and, if in receipt of less than that sum (eg, Thomas Crewe, who was in receipt of 4s 4d per week), they treated him also as in receipt of 10s per week. There remained the third class, those who were temporarily back at work at wages equal to, or in excess of, full compensation, but who were liable from time to time to have a recurrence of their incapacity owing to the original accident in 1923. These men were not in receipt of compensation on 31 December and, therefore, the Post Office annuity tables could not be applied to them, unless, indeed, there were made some estimates on medical grounds of the average sums which the men might get in the future, which would be a departure from the actuarial system on which the directors were proceeding. The directors had clearly determined to leave these cases out of their assessment, presumably relying on the other figures to provide a sufficient assessment to enable the society to discharge on the average their liabilities in the future in respect of all the 1923 cases of all the members. There can have been no mistake as to this. The first paragraph of the letter as well as the fourth are perfectly clear, and the list of workmen in the schedule relates only to workmen in receipt of compensation on 31 December 1927. The list sent back by the company omitted the names of 6 workmen, including the name of Wooding, as not being cases in which compensation was being paid on 31 December. On this footing, the liability of the company in respect of 1923 accidents was fixed at £9,223.

This sum, I repeat, was assessed by the directors of the society under art 35(g). It represented:

… the amount of the outstanding liability of each member protected under this article to pay compensation or damages in respect of ordinary accidents which occurred during the particular year.

I read that as meaning that all the outstanding liability of the member was to be assessed. The view that the letter was intended to have the effect of releasing the society from all liability as to men not in actual receipt of compensation on 31 December is really an extraordinary one. It would release the society from risk as regards men merely entitled to a declaration of liability. It would also release them from risk in relation to all men who had just come back to work after a long period of incapacity and who might permanently break down in a few weeks or months. It would also release them from risk as regards a permanently injured man employed on light work, eg, as a doorkeeper, at wages as large as the compensation payable to him if he was not so employed. Nor can any reason be suggested, in the case of such a mutual insurance

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society as that with which we are now dealing, for so strange a result. The objects and the articles of the society clearly contemplate provisions dealing with all ordinary accidents at all the protected mines.

My Lords, I cannot think that these letters, or the facts which they disclose, can justify the contention that the society was being released from future liability in respect of the men who happened not to be included in the lists because no multiplying factor could be applied to them since they were not in receipt of any compensation on 31 December. The societys system of applying art 35(g) may have been prudent or imprudent, wise or unwise. Their directors had adopted it, and they in fact continued to follow it. They made, as I have said, a final call of £2,816 2s 3d, relying on their own method of assessment. It seems to have been paid at some date, perhaps with interest from 28 February 1930. The contrary at least is not stated. In any case, however, it seems to me that it is impossible to deduce from the documents in evidence either an agreement to vary the contract of insurance relating to the 1923 cases so far as regards Wooding and James or, which amounts to the same thing, an abandonment or waiver by the company of the right to claim indemnity from the society in respect of compensation payable in the future to those two men. Even if it were proved that the assessment on the basis shown in the letterthat is, one based on an omission of all cases in which compensation was not being paid on 31 December 1927was quite insufficient, it would not affect the above conclusion. In fact, however, there is no evidence to justify such a view. The application of the Post Office annuity tables to men on full compensation would give a generous assessment so far as regards those men, for it amounted in effect to a capitalisation on the footing of a life annuity of the liability in respect of a man who was recovering from his accident and who would soon be back at some kind of work. It may be observed that the surplus of the society as at 31 December 1933, as appears from their letter to the company of 26 March 1934, amounted to no less than £149,789. That sum was distributed in the form of bonuses to members, and the sum of £10,745 was actually paid by cheque by the society to the company on that day. The bonus so paid included the sum of £2,668 in respect of the ordinary accident insurance for 1922 to 1928. Incidentally, I think it cannot be suggested that the company owed large sums to the society at the end of 1933, or there would have been a set-off.

It is true that the society in a letter of 4 November 1933, asserted that, since the case of Wooding was not included in a list of 1923 cases, and was not included in the 1928 final call, any future liability would have to be borne by the company. There is no evidence that this view was assented to. Moreover, in a letter from the society, dated 19 June 1934, the managerapparently resiling from the previous contentionwrote that, since the recurrence was due to the 1923 accident, the company would be “quite in order in restoring the man to payment of compensation.” A similar letter was written on 31 March 1936. In the case of James,

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the society continued to take an interest in his case and to urge a final settlement of his claim from 1932 to September 1936. It is perfectly clear that there was no agreement to release the society from risks in regard to these two men. A similar observation may be made as to the case of Hawkins.

My Lords, I am not sure that I understand the views of Greer and Mackinnon LJJ, as to the facts in regard to payment of premiums by the company. The former states that the company had failed to pay the premium in respect of Wooding and James and were in default with regard to it. I think Mackinnon LJ, takes the same view. Both the Lords Justices appear to think that, this being so, the society was released from the risks in respect of the men. With the greatest respect, I am unable, for the reasons above stated, to agree that the company is shown to have committed any default whatsoever. They never were separate premiums payable after the five-year period in respect of any of the men. There was a final call to be paid on 28 February 1930, which was assumed to cover all the 1923 cases. There is nothing to show that it was not paid either in cash or in account, and not long afterwardsnamely, after completing the accounts up to the end of 1933we find that the society is paying a large sum to the company. Even if the call, or some other call, was not paid, however, I do not know why the majority of the Court of Appeal should assume that the society was “off the risk.”

There is, I think, no principle of law that there must be implied in a contract of insurance a provision that the right to indemnity by the assured is conditional on his previous payment of the premiums. As a matter of commercial good sense, there is a great deal to be said for the terse phrase enunciated by counsel for the society“no premium, no cover.” It is doubtless for that reason that insurance companies usually require that the consideration for which they undertake to indemnify the assured must be paid before the risk attaches. There is, however, no doubt that a contract of insurance may involve merely a promise by the assured or his broker to pay the premium, and this is implicitly acknowledged in such marine insurance cases as Roberts v Security Co, Universo Insurance Co v Merchants Marine Insurance Co and Bhugwandass v Netherlands India Sea & Fire Insurance Co of Batavia.

In the present case, the terms of the amended articles (like the original articles) show clearly that the risk attaches before payment, and that it continues even if the member fails to pay moneys due by him to the society in respect of a particular year within “such reasonable time as the directors may in their discretion allow,” for the result of default is limited to this, that the member, “whilst such default continues,” is not entitled to any further indemnity in respect of ordinary accidents which had occurred during that year, but he is entitled to be credited with refund or bonus (art 35(m)). Moreover, if a call is not paid on or before

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the day appointed for payment, the member must pay interest as provided by art 36. It is also to be noted that the default relates, not to the moneys payable in respect of a particular workman, but to that payable in respect of all the workmen at the protected mines of the member who have suffered accidents in a particular year (art 35(m)). There is, in my opinion, no possibility, according to the terms of any of the articles, of coming to the conclusion that the society has been released from risk in respect of two or three particular workmen, and yet remains liable as regards other accidents in that year. There might, no doubt, be an agreement to that effect, but no such agreement is even suggested in the particulars of the society. I must repeat that there is no allegation by the society that there has been any default by the company in payment of a call after a reasonable time for payment has been fixed by the directors of the society.

It is no doubt true that the company was in arrears as regards calls in 1932, and an agreement was then made with the society to release it from certain further liabilities for accidents which occurred in 1930 and 1931. There remained £5,673 12s 1d due to the society in July 1932 and a letter of 21 July 1932 was put in evidence containing a statement that a cheque for that amount would be sent to the society in the course of the following week. No letter by the society was put in complaining that this cheque was not sent, and, in the absence of such a letter or other evidence of non-payment, the presumption seems to me to be that the sum was paid. Further, the letter of 26 March 1934 to which I have referred seems to me to afford strong evidence that any default prior to that date had been made good.

My Lords, out of respect for the Court of Appeal I have dealt, I fear, at some length with matters with which they dealt, though they were not, I think, in strictness, before an appellate tribunal, which, in such a case as the present, should only be concerned with questions of law. However that may be, my conclusion must be that at which Slesser LJ, arrived, with which I concur. The appeals must be allowed with costs here and below. The awards must be set aside, and new awards must be made in terms which counsel have agreed.

LORD ATKIN. My Lords, the facts and issues in this case have been fully set out in the opinion of my noble and learned friend Lord Wright which I have had the advantage of reading, and I can state at once my reasons for thinking that this appeal should be allowed, which, except in one small matter to which I will refer, agree with the judgment of Slesser LJ. In all matters arising under the Workmens Compensation Act 1925, s 7, two questions must be answered. (i) Does the section apply? (ii) If so, what are the rights enforceable by the workman under it? On the first question, the only issue is: Have the employers entered into a contract with any insurers in respect of any liability under the Act to any workman? On the second question, the issue is: What,

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under that contract, were the rights of the employers against the insurers? The two questions seem to be in risk of being confused. The section may apply, and yet under it the workman may acquire no rights against the insurers, for his employers may have none.

The first question, therefore, in this case is: Had the employers entered into a contract with insurers in respect of their liability under the Workmens Compensation Act? I think this can only be answered in one way. By the contract between the indemnity society and its members evidenced by the articles, the society agreed to indemnify the member from liability for the unforeseen events of accidents for which the member was liable under the Workmens Compensation Act. The essential purpose of the society as set out in its memorandum and its articles is to agree to give and to carry out such an indemnity. The society intended to be, and were, insurers, and the contract between them and their members was such a contract as is described in s 7. It was a contract with insurers, and it was also, if there be a difference, a contract of insurance. There was one contract, and I, for my part, do not accept the division into two “phases” or “periods” as having any bearing on the matter. The contract remained throughout a contract to indemnify against unforeseen events, and the fact that, for some events or for some periods of time, the society, as the consideration for their promise, were entitled to demand complete reimbursement of the sums they became liable to pay seems to me irrelevant. A contract does not cease to be a contract to indemnify because the contractor exacts payment, either in advance or subsequentlyequal to what he has paid. In this particular case, at the end of five years even this situation did not arise, for the society had to bear the liabilities incurred over and above the reimbursement assessed as a final call. However, this double phase does not, in my mind, prevent the whole contract from being “a contract with insurers.” With the greatest respect, I dissent from the description given by Scrutton LJ, in Pailin v Northern Employers Mutual Indemnity Co, at p 87, “the insurer is an indemnified agent, not an indemnifying principal,” a neat antithesis which was applied by Mackinnon LJ, to the present case. Neither in that case nor in this were the insurers agents. They paid the compensation direct to the workman in that case, though not in this. In the first case, however, they received reimbursement, not because they had agreed to pay compensation as agents for the assured, but because they had agreed to pay compensation under an agreement to indemnify the assured, and the reimbursement was not indemnity due to an agent, but the consideration for an indemnity promised to the assured. In the present case, the position is still clearer. The indemnity promise operated from the first payment of compensation made to the workman. The assured could have sued for the indemnity week by week, but for the stipulation that the indemnity was to be paid quarterly. Whether the calls were made at the beginning of the year or at the end or at intervals in the course

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of the year is irrelevant, though doubtless, as a matter of bookkeeping, payments were made in account. In no circumstances, in my judgment, could the society be called “indemnified agents.”

Once it is established that here there was a contract with insurers, the rights of the employers against the insurers vested in the workman, and the only question that remains is: What were the rights? They are clearly expressed in art 35A, and amount to a right to be indemnified against the payment of any compensation. The obligation to indemnify is qualified by two provisions, arts 12 and 35(m), the substance of which seems to be that, if a member is in default as regards the payment of any money due to the society within such reasonable time as the directors may allow, he is not to be entitled to any further indemnity while such default continues. Greer and Mackinnon, LJJ, seem to have come to the conclusion that there had been some default by the employers. Mackinnon LJ finds that it was in not paying a final call in 1924 under the old articles. My Lords, I should have agreed with the contention of counsel for the appellants referred to by Mackinnon LJnamely, that, in the circumstances, both parties continuing their relations for years after the alleged default, the true inference in fact is that all payments in 1924 were duly made. I can find no evidence at all to the contrary, and in particular I can find no trace in the correspondence and accounts of June and July 1928, of any suggestion that the employers were in default. In fact, it is now admitted that no call had been made by the society which had not been paid. There is no amount now due by the employers to the society. There is, therefore, no set-off available to the society, assuming that set-off would be a valid defence. It was pointed out that, when assessing final calls for 1923 in 1928, the employers had struck out the name of Wooding from the list of outstanding cases, and that that fact showed an express agreement between the employers and the society that Wooding should no longer be treated as an outstanding case. I will not refer to the facts in detail, but I am quite satisfied that in the correspondence both parties considered that they were acting under, and not in variation of, the articles, and that the omission to include Woodings name was due to the terms of the societys own letter, which described the list as the list of accidents which were outstanding and in which compensation was being paid on 31 December 1927. Wooding, who had been seriously injured, and was always at least partially incapacitated, was not being paid compensation on 31 December 1927, for he had been given light work at his former full wages. This episode introduced the contention that Wooding and the other two workmen concerned were workmen, as described in art 35(b), “who had recovered and ceased to be entitled to compensation,” so that, when their total or partial incapacity recurred, the recurrence was to be deemed a fresh accident. It was said that Wooding was such a case, and that everyone intended that, when he came again to receive compensation, he was to be treated as suffering a fresh accident on the date of such

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renewed compensation. My Lords, the answer to this is that that clause, in its plain meaning, never applied to Wooding or the other two workmen, for it is admitted that throughout they continued, as they are now, at least partially incapacitated. In other words, they had never recovered or ceased to be entitled to compensation. In the result, I think that the society are justified in saying that they are being called upon to grant an indemnity in respect of Wooding without having received a sum equivalent to an actuarial calculation of their future liability in respect of him. The answer is that they omitted to make any such assessment without any misrepresentation by the employers. What the assessment would have been in respect of a man incapacitated but receiving full wages I have no idea. It is one of the facts not discussed at the trial, and not open for discussion in an appeal on points of law only. In any case, apart from an agreed variation of the contract, which, as I have already said, must be negatived, I agree with what was said by Slesser LJ, that the consideration is collective, not several, and that failures to make the appropriate payments in respect of individual workmen do not defeat the obligation to indemnify unless they amount to defaults within the meaning of the articles. I am not prepared to accept the view expressed by Slesser LJ, that we have only to consider the contract between the society and the employers evidenced by the original articles. I think that, to the extent that that is relevant in this case, the contract could be, and was, varied by the amended articles. Subject to this, as I have said, I agree with his opinion. The cases of the other two men follow what has been said in the case of Wooding. The appeals should be allowed with costs here and below, and the cases remitted to the county court judge for him to make an award of compensation in the cases of Wooding and James and a declaration of liability in the case of Hawkins.

LORD RUSSELL OF KILLOWEN. My Lords, I concur in the proposed motion.

LORD WRIGHT. My Lords, the appellants are workmen who, while employed by the Ebbw Vale Steel, Iron and Coal Co Ltd, in their collieries as underground miners, sustained injuries by accident arising out of and in the course of their employment, and became entitled to claim compensation or a declaration of liability from their employers. In October 1936 possession of the Ebbw Vale companys undertaking and assets was taken by a receiver who was appointed for debenture holders. Thereupon, under the Workmens Compensation Act 1925, s 7, the appellants claimed that the rights of the Ebbw Vale company as employers against the respondents, a mutual indemnity society formed for the object of covering employers against the risk of liability to pay compensation under the Acts, the Ebbw Vale company being protected members of the society, were transferred to and vested in the appellants severally,

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so far as concerned the employers liability to compensate them. S 7 provides that, upon such transfer, the miners should have the same rights and remedies, and be subject to the same liabilities, as if they were the employers, so, however, that the insurers should not be under any greater liability to the workmen than they would have been under to the employer. Hence it was material in this case to determine whether s 7 applied. That inquiry envolved two questionsnamely, (i) whether or not there was a contract with insurers within the section, and, if so, (ii) whether or not the respondents would have had a defence or set-off or other answer against the Ebbw Vale company. The appellants claims against the respondents went to arbitration before the county court judge at Cardiff, who dismissed the claims on the ground that there was no contract of insurance between the respondents and the Ebbw Vale company, and he also held that, if there was, it was determined by the appointment of the receiver. On appeal, the members of the Court of Appeal were divided. Greer and Mackinnon LJJ were for dismissing the appeal. They held that, if there was a promise to indemnify, which they negatived or questioned on the facts of the case, it was conditional on payment of a certain consideration which was never made, and hence the obligation under the contract never arose. Slesser LJ, dissented, and was of opinion that, at the date of the receivership, there was a contract with insurers, or of insurance, subsisting between the respondents and the Ebbw Vale company under which the claims of the appellants against the Ebbw Vale company were covered, and that the respondents had not shown any defence or set-off or other reason why those claims should not, having vested in the appellants under s 7 of the Act, succeed. Before your Lordships, the arguments have covered a large field. The case is no doubt one of some difficulty and complexity, but the difficulties of the case have been increased because many points which have been raised were not formulated in the pleadings or dealt with by specific findings of fact by the county court judge. Several of the issues debated have been abandoned or seen to be irrelevant, and I do not discuss them further in this opinion. On consideration of the whole case, however, I find myself in substantial agreement with the careful judgment delivered by Slesser LJ and am of opinion that the claims should succeed.

On the issue whether the appellants had good claims against the Ebbw Vale company, there is no dispute. It is necessary, however, to summarise the history of these accidents and claims in respect of them in order later to understand how they were dealt with between the respondents and the Ebbw Vale company. Wooding was injured on 24 August 1923, and became entitled to 35s per week during such period or periods as he should be totally incapacitated by reason of the accident. He was totally incapacitated, and was paid the appropriate compensation until early in January 1928. The precise date is immaterial, because the appeal has proceeded on the assumption, the materiality of which

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will appear later, that he was not receiving compensation on 31 December 1927. Between then and March 1936, he did light work, and was paid the same wages as before the accident, except during certain intermittent periods of complete incapacity. From that date, he became finally subject to total incapacity from the effects of the accident. He has been paid no compensation since 29 December 1936, though it is agreed that he is entitled to 35s per week compensation as against his employers.

As to the appellant James, he sustained injury by accident arising out of and in the course of his employment on 27 April 1923 and became entitled to 35s per week during such period or periods as he was thereby totally incapacitated. He was totally incapacitated until 8 March 1926, from which date until 2 April 1932 he was able to do light work and was paid wages equal to those he earned before the accident. He ceased work on 2 April 1932 and from that date he received 8s 4d per week by way of compensation until 29 December 1936. Since then, he has received no compensation, though it is agreed that he has been all the time thereafter partially incapacitated as the result of the accident, and is entitled to compensation at the rate of 22s 6d per week as against his employers.

As to the appellant Hawkins, on 15 April 1929 he was injured by an accident arising out of and in the course of his employment, and became entitled to 23s 10d per week during such time as he should be totally incapacitated as the result of the accident. He was totally incapacitated until 26 March 1933, when he returned to light work and received, and is receiving, wages equal to those he earned before the accident. It is agreed that he is entitled to a declaration of liability as against his employers. In all these cases, it has been agreed between the parties that at no material time since the accident has any of the appellants ceased to be incapacitated.

While the claim of each of the men against the Ebbw Vale company is not in dispute, the respondents deny that any one of the appellants has any claim against them. Their case is that they are not under any liability to the Ebbw Vale company, and they rely on the words of s 7 that the insurers shall not be under any greater liability to the workman than they would have been to the employer because there are vested in the workman only such rights (if any) as the employers had against the respondents, assuming that the respondents were insurers. The respondents deny that they were insurers within the meaning of the section, and, alternatively, if they were insurers, they set up against the appellants various answers which they say they had to any claim made against them by the Ebbw Vale company in respect of these particular accidents. There can be no question that the appellants must fail in whole or in part if the Ebbw Vale company could not have successfully claimed an indemnity in whole or in part against the respondents as insurers in respect of these accidents. The section says in clear terms that the insurers shall have the same rights and remedies, and be subject

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to the same liabilities, as if they were the employer, and that their rights and liabilities are no greater and no less. It is accordingly necessary to ascertain the position between the Ebbw Vale company and the respondents. For that purpose, the terms of the contract between them must be examined, and then it must be considered, so far as the evidence permits, what was done under the contract in respect of these particular claims. I shall at first assume that the contract was a contract with insurers within the meaning of the section.

The contract between the Ebbw Vale company and the respondents was constituted by the fact of their becoming members of the respondent society, but the terms and conditions of that contract are to be found in the memorandum and the articles of association of the society. The society is a mutual society making calls on the members in order to provide funds to meet the liability. The provisions of the articles are necessarily of some complexity, but, on the whole, are carefully thought out and clearly expressed. Certain of the articles are peculiarly material. I shall attempt to summarise as briefly as possible the effect of these provisions. There is, however, a complication, in that the articles were twice changed between 1923 and 1936. The amended articles (as I shall call them) were passed by a special resolution of the society convened on 12 April 1927. Counsel for the appellants is content to rest his case, for purposes of this appeal, on the amended articles. These are similarly accepted by counsel for the respondents. I question if there is any difference material to this appeal in the articles, but, in order to seek to explain the course of events, it will be necessary to begin with the original articles. There was a third change, which was effected by special resolution in December 1932. This was more drastic, and no doubt was influenced by anticipation of the passing of the Workmens Compensation (Coal Mines) Act 1934. This Act, however, is not here material, because it applied only to men employed after the Act came into force. It imposed compulsory insurance on employers in respect of compensation for their workmen. It is common ground that these 1932 articles do not really affect the questions raised in these appeals. In effect, what were called transitional provisions preserved the earlier articles in their application to the accidents in question.

The original articles made it obligatory for any member (who had to fulfil the specified qualifications of owning, or working, or being interested in, a coal mine) to furnish to the society particulars of all underground workers employed in the mine for entry in the register. The most important of the articles for the purposes of these appeals is art 35 (I am still dealing with the original articles), which is headed mutual insurance against “ordinary accidents.” The accidents here in question were “ordinary” accidents as defined in the articles. There was a separate class of “extraordinary accidents,” by which term was meant casualties of a more serious character involving death or injury to three or more men. There was a special account for such accidents, but that account

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may be disregarded for the purposes of these appeals. Art 35(a)(1) provided that the society was to indemnify the member against the payment of any compensation, inter alia, under the Workmens Compensation Acts. The society was given full control of investigating arbitrations and admission of liability in respect of any such accidents. This right is a usual concomitant of insurance contracts. Indemnity moneys payable by the society to a member were to be paid monthly or quarterly, or otherwise as the society might determine. The society is a mutual indemnity society, and the contributions of the members, which constituted the consideration for the benefits they received, were obtained by means of “calls.” Certain classes of such calls were distinguished. A separate account was kept in respect of the accidents occurring in each year. This was necessary because the liability of an employer under the Workmens Compensation Act 1925, accrues once and for all when the accident occurs, though it may be many years before the liability is discharged by means of the weekly payments provided for by the Act, or their commutation. So it was decided by this House in Daff v Midland Colliery Owners Mutual Indemnity Co, and, indeed, it follows from the nature of the liability to pay compensation under the Act. Hence art 35 proceeded on the footing of accounts in respect of each protected member for each particular year. The article made special provision in respect of any ordinary accident for a period of 18 months after the beginning of the year in which the accident occurred. During that period, “provisional calls” were to be made, of which one or more should be made before the end of the year of such amount as would be sufficient to indemnify the member in respect of compensation payable by him in respect of accidents occurring in that year. The sums obtained by the calls were to be paid into a fund called the societys “ordinary accident account” to be kept in respect of that year. The sums so paid by each member were to be credited to him, and he was to be debited with the amounts paid by the society in order to indemnify the member, together with a due proportion of administration expenses. I disregard a provision for reinsurance, which was not acted upon during the relevant period by the society. The account might show a credit in favour of the member or a debit against him. At the end of the period of 18 months, an actuarial estimate was to be made of the amount of compensation still payable by any member in respect of each workman in his employment injured in the particular year, and a “call,” entitled the permanent fund call, was then to be made on the member, and was to be of an amount equivalent to the amount of the assessment. The ordinary accident account of the member was to be struck. He was to be credited or debited with any balance resulting. In this way, the “permanent accident fund” of the society was maintained, and was available for payment by the society of moneys due in respect of the outstanding liabilities. These might eventually turn out to be greater or less than the amounts assessed. Finally, after the end of five years

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from the beginning of each particular year, there was to be a further actuarial assessment of the societys outstanding liabilities in respect of the ordinary accidents of that year. If the assessment exceeded the amount of the fund, proportionate “adjusting” calls were to be made to replenish the deficiency. If the fund exceeded the assessment, provision was made for refunds. In either event, administration expenses were brought in to account. There was also provision for a bonus distribution if the directors thought the permanent accident fund was excessive in amount. The ordinary accident fund for each year and the permanent accident fund were to be kept separate. There was thus a clear distinction between the two funds. The ordinary accident fund was a fund kept in respect of the member. The payments under it were in theory to be recouped by the calls on him. It was wound up for the particular year when it was superseded by the permanent accident fund which was part of the general assets of the society.

I turn to the amended articles of April 1927. For present purposes, the most notable change was the change in regard to the period during which provisional calls were made, which was altered from one-and-a-half years to five years. It may be that it had been found that 18 months from the commencement of the year in which the accident took place was too short to ascertain the extent of the liability resulting from that accident or to obtain a satisfactory actuarial assessment of the outstanding liabilities of the year for the purpose of making the final call and constituting the permanent accident fund for that year. Under the amended articles, there was to be only one actuarial estimate, as contrasted with the two assessments under the original articles, one at the end of one-and-a-half years and the other at the end of five years. The procedure provided by the original articles, however, was, mutatis mutandis, to be in general still followed. Certain other articles may be referred to. There were default clauses in the original and amended articles. In the latter, these were art 12 and art 35(m). By these, it was provided that, if a protected member should fail to pay moneys payable by him to the society in respect of any particular year within a reasonable time to be fixed by the directors, he should not be entitled to any further indemnity in respect of ordinary accidents occurring during that year, save in so far as his account in respect of that year was sufficient. It is conceded that the Ebbw Vale company were not in default under these clauses, which, accordingly, as regards them, did not come into effect. A good deal of argument was directed to art 35(b), which was a new clause introduced into the amended articles. That clause provided as follows:

… where a workman wholly or partially incapacitated by an accident in the ordinary sense [as contrasted with disease] recovers and ceases to be entitled to compensation and such total or partial incapacity recurs so as to entitle him to compensation without his being involved in any fresh accident, such recurrence shall be deemed a fresh accident occurring when the recurrence takes place.

As has already been pointed out, it is agreed in these appeals that at

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no time had any of the appellants ceased to be incapacitated. It follows that they cannot have recovered. I think the clause is referring to a type of case which is very common, in which the workman has recovered in the sense that he can go into the labour market and obtain employment as a sound workman, but there remains some latent weakness consequent on the accident, which breaks down and again incapacitates him. This is still a result of the original accident. For obvious reasons, this is to be treated under the amended articles as a fresh accident, which is deemed to take place at the time of recurrence. The position of the appellants was quite different. They never recovered, but at certain periods ceased to be entitled to compensation, because, according to a common practice, they were employed at light work at full wages, and hence could not claim compensation for loss of earnings, though they would have been entitled to a declaration of liability so as to come on compensation if the light work was no longer available, either because they broke down completely or for some other reason, or were not remunerated at full wages.

Before I state my opinion on the case as a whole, I must summarise what happened as between the Ebbw Vale company and the respondents, at least so far as the evidence enables this to be done, in respect of the claims in question. Both Wooding and James sustained their accidents in 1923. The 18-months period fixed by the original articles thus expired in June 1924 and the actuarial assessment should then have been made, and the calls for the permanent accident fund declared by the directors and paid by the member. On 19 May 1928 the respondents wrote to the Ebbw Vale company enclosing a valuation of outstanding cases on hand on 31 December 1927 and showing the actuarial assessment in respect of them as on that date. On that date, the five-years period would have expired. Wooding was entered on that list and assessed at £1,221. James does not appear. A revised valuation was drawn up omitting Wooding and some others. This formed the basis of a final call for £9,223 made on the Ebbw Vale company, which was the sum as reduced from the original valuation of £13,139 by reason of Woodings name and other names being omitted. At that date, Wooding was not receiving compensation. It is said that Woodings name was struck out because the first valuation was meant to include only cases in which the men were receiving compensation, and that the Ebbw Vale company were asked to confirm the valuation on that basis. Whatever the reason, it is clear at least that the striking out of Woodings name was deliberate, not accidental, and the final call was thus deliberately fixed, excluding Wooding and not including James. It is possible that in June 1924, the assessment required by the original articles at that date had actually been made. It may have been for that reason that in 1928 Woodings name was struck out. It is not, indeed, easy to see how, in 1924, the change in the articles should have been foreseen, and why the respondents should not have done then what the articles

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requirednamely, make an assessment at the end of one-and-a-half years, which period expired in June 1924. Thus the revised valuation may have simply corrected a mistake. The point is of some importance, because the majority of the Court of Appeal as one of the grounds of their decision held that there was no cover in respect of Wooding because the “premium” had not been paid. There are, in my opinion, many answers to this way of looking at it. This was a collective insurance covering all the Ebbw Vale companys men in 1923. The respondents were a mutual company, and the consideration proceeding to them from the Ebbw Vale company was not a specific premium, payable at a fixed or ascertainable date. It took the form of a call made by the directors under the articles from time to time. It was for the respondents to determine the amount of the call. They did so, fixing it at £9,223, in the exercise of their discretion. There is no suggestion that they were misled by the Ebbw Vale company. The respondents must have known all the facts. The company paid all that was demanded from them by way of calls, and, as is admitted, were not in default. I cannot find any justification for the conclusion that they were deprived of their right to be covered in respect of Wooding, because, if such was the fact, the respondents had made no final call in respect of him. The fact, however, is not made out. Probabilities rather point the other way. There is no finding on the point. Counsel for the respondents sought by an elaborate examination of certain accounts to show that the final call in respect of the Wooding accident was never paid. The accounts produced, however, are incomplete, and, even if complete, would have needed explanation by an accountant. This argument, for what it was worth, failed. In any case, the default clauses which I have quoted terminate liability on the part of the insurers only in the very limited way therein provided, and would not affect the liabilities in question. Apart from express agreement, there is no general rule of law in insurance contracts that there is no cover unless the premium is paid.

Nor do the later documents which have been produced afford any more decisive arguments against Woodings claim. It seems from certain documents, which I do not profess to understand, the evidence in respect of them being insufficient or non-existent, that Woodings claim was “transferred from 1923 to 1928,” and later from “1923 to 1930.” Whether the Ebbw Vale company knew of, or agreed to, such transfers, which seem to have been recorded in some way by the respondents, does not appear. I cannot give any effect to these entries. There is no finding about them by the judge. In any event, if, as it is said was the case, the transfers were under art 35(b), which I have discussed above, that clause, for reasons I need not repeat, could not apply to this case. The Ebbw Vale company were later in some financial difficulties, and were in arrears with the payment of calls. These calls, however, had no reference to Woodings claim, and the matter was

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settled by a compromise arrangement, under which the Ebbw Vale company, in consideration of being released from the arrears, agreed to give up any claims in respect of 1930 and 1931 accidents. Subsequent letters, the latest of which is dated 7 July 1937, show that the respondents were still interesting themselves in Woodings claim, though I do not find any express admission of liability, any more than I find any express repudiation.

Much the same applies to Jamess claim, which is even simpler. In 1934, 1935, and 1936, the respondents appear to have been pressing the Ebbw Vale company to negotiate a commuted settlement of the case, as if it were a liability which concerned them.

Hawkins case was different in some respects. The accident, which occurred in April 1929, fell under the amended articles. The five-year period thus expired on 31 December 1933. In the assessment of outstanding liability in respect of the Ebbw Vale companys men as on that date, the name of Hawkins does not appear. At that date, he was not in fact receiving compensation, because, though partially incapacitated, he was receiving for light work as a doorkeeper the same wages as he received before the accident. This had been his position since March 1933. Up to that latter date, he must have been paid compensation, and presumably provisional calls were made which included indemnity in respect of these payments. Whether any final call included an assessment in respect of Hawkins I do not know. Perhaps not. If not, however, then, as in the other cases, there could not be a default on the part of the Ebbw Vale company in paying any sum which was not the subject of, or included in, any call. It would seem, however, that a final “adjusting call” was made on the Ebbw Vale company in respect of their 1929 accidents, which would seem prima facie to close the account. In the case of Hawkins, also, the letter from the respondents to the Ebbw Vale company, enclosing their statement of 1929 accidents and asking confirmation from the company, referred to the particular items included as “outstanding and on which compensation was being paid on 31 December 1933.”

Subject to the question whether there was a contract with insurers within the section, which I shall discuss later, the general position, in my opinion, stands thus. The Ebbw Vale company had entered, as I for the moment assume, into a contract with insurersnamely, the respondentsin respect of their liability to the appellants, inter alia, under the Act. The employers undertaking had been taken possession of by a receiver. The rights of the Ebbw Vale company against the respondents under that contract, so far as concerned the appellants, were thereupon transferred to, and vested in, the appellants severally. It is true that the respondents were to have the same rights and remedies against the appellants as if they were the employers, but the onus is upon the respondents to show some ground why the appellants were not covered by the contract, or some other ground of defence or cross-

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claim. Thus, they might have shown that the contract had been varied, or, indeed, determined, or that they had some other defence, or that they had some cross-claim or set off which could have been raised on the facts if a claim had been brought by the Ebbw Vale company in respect of these accidents. This, in my opinion, they have failed to do. It follows, so far, that the claims should succeed. The formula “no premium, no cover,” is neither generally sound in law nor as applied to this insurance contract, and, if it were, the facts would not support it here.

However, I have up to now assumed something which was at least questioned by Greer LJ and was negatived by Mackinnon LJ, in addition to what seems to have been the main ground of their decisionnamely, that no “premium” had been paid. I have assumed so far in this opinion that there was a contract of insurance, or, in the words of the section, a “contract with insurers.” However, Mackinnon LJ did not accept that this was so, so far as was relevant for purposes of these appeals. He said that, under the system followed by the respondents, there were two periods. In the first periodthat is, the period of 18 months under the original articles, and five years under the amended articlesthe society were to be what, adopting the expressions used by Scrutton LJ in Pailins case, he calls in the first period indemnified agents, and, in the second, indemnifying insurers. The second period, he held, only began when the Ebbw Vale company paid the final call, which was in effect the premium in consideration of which the society passed from the status of indemnified agents to that of indemnifying insurers. There was, he held, no evidence that this event happened. On the contrary, he held on the evidence that it never did. Hence, so far as concerned this case, there never was a contract with insurers. Things never passed into the stage where there was such a contract.

I think this view is erroneous, both because, on the facts, the contract in respect of each man had passed into the second period, and on the law. The reasoning of Mackinnon LJ, was based on the view that, in the first period, the society merely paid the claims out of moneys which they recovered from the employers. No doubt they indemnified the employers, but they were directly and completely indemnified by the employers. Hence it was said that they paid as the employers agents, and were in turn indemnified by the employer. As an authority for this view, Mackinnon LJ relied on Pailin v Northern Employers Mutual Indemnity Co. In that case, the system of mutual indemnity as regards what were called “ordinary accidents” was limited to a system analogous to the system adopted by the respondents in what has been called the first period. The Court of Appeal in Pailins case held that there was an insurance contract as regards extraordinary accidents where the system followed was similar to that adopted by the respondents in the second period, but that in the first period the

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society was not indemnifying against loss, but paying on behalf of the employer a sum for which he is entitled to be indemnified by the employer (see Scrutton LJ, at p 87). I do not think it necessary to express any final view on this matter, though, as at present advised, I think that the decision involves what may be said to be too narrow a view of the words of s 7 of the Act, “a contract with insurers.” I think that the contract was a contract to indemnify the employer for an agreed consideration. Insurance, in practice, especially mutual insurance, in which the losses of the members are only paid out of the members contributions, may take many forms. Thus, we may have, for instance, single premium policies, endowment policies, and many other types, all of which are generally described as insurances. I think that s 7 should be construed as widely as can fairly be done, since it is a section of an Act which is remedial in character, and there are obvious reasons for holding that in Pailins case the relevant contract was a contract with insurers. The contract in the present case, however, appears to me to be so different in character that Pailins case is no authority on the point. Mackinnon LJ artificially splits up the contract, so far as concerns ordinary accidents, into two parts, so that in the first period the same accident is not covered by an insurance contract, while in the second it is. I find myself, with deference, unable to concur in this opinion. I think that there was only one contract in regard to these accidents, and that it had the single uniform character of a contract of insurance, not only in the second period, as Mackinnon LJ, following the analogy of what Scrutton LJ held in Pailins case in respect of extraordinary accidents, accepts, but from beginning to end. It would be in respect of the same accident a curious result if there were two contracts embodied in the articles, differing so fundamentally in character. The contract seems to me to be a single whole of cohering parts. In the first place, an accident falling within the contract creates co-instanti a single liability, which may not be discharged except by a number of payments and after a considerable lapse of time. A machinery is set up in the articles with the object of giving a single complete indemnity to the employer. The society is a mutual indemnity society, so that the funds are derived from the contributions of the members. This object is effected in the first period by the provisional calls, which are based on each members own liability for accidents. All the provisional calls are made (apart from administration expenses) to recoup in this period actual payments of compensation. The system might have been adopted of apportioning the totality of payments pro rata among the different members, instead of making calls on each to the extent of his demands on the fund. In effect, in this way, an employer is his own insurer in the first period, but it is not uncommon in contracts of insurance for the assured to bear a certain first proportion of the losses. In the present case, this system has been adopted in regard to a special period of the contract. In the second period, no one can dispute that, if the aleatory

Page 596 of [1939] 4 All ER 570

element, the element of uncertainty or risk assumed by the insurer, is an essential feature of insurance, that element was present in the second period. In consideration of the final call in respect of the particular year, the society assumes the whole outstanding liability of the member in respect of that year. The call is based on an actuarial estimate, which may in the result turn out to be either too little or too much. The society only assumes liability to pay out of its general funds. I cannot dissect the contract into two periods, or split the transaction into two disparate bargains. As part is insurance, I think the whole must be, and, in any event, to my mind, is, insurance. I cannot agree with Mackinnon LJ, in regard to this matter.

I have, I think, dealt with all the points raised in the case so far as they appear to me to call for detailed examination. It was indeed also argued that the contract had been varied so as to exclude the three appellants from the cover, because, it was said, they were not included in the assessment. It became clear, however, that this argument was untenable, and I think it was expressly abandoned. The society throughout was proceeding according to the conditions of the articles. A vague suggestion of estoppel, not clearly defined, also failed. It was not contended before this House that the contract was determined by the receivership. That point was very properly not advanced before this House, and was obviously untenable. In my opinion, the appeals should be allowed, and the cases remitted to the county court to make awards allowing the claims.

LORD ROMER. My Lords, the three appellants Wooding, James, and Hawkins in 1923, 1923, and 1929, respectively, and while in the employment of the Ebbw Vale Steel, Iron and Coal Co Ltd, sustained personal injury from accidents which admittedly arose out of and in the course of their employment. Each of them since the date of his accident has been, and still is, totally or partially incapacitated.

On 21 October 1936 a receiver of the assets and business of the company was duly appointed on behalf of debenture holders having a floating charge thereon, and the appellants Wooding and James now claim to be paid by the respondents the compensation accruing due to them since 29 December 1936, that being the last date on which either of them received compensation from the company. The appellant Hawkins, who on 26 March 1933 returned to light work, and has been in receipt ever since of his pre-accident wages, merely claims against the respondents a declaration of liability. These claims are made in pursuance of the provisions of the Workmens Compensation Act 1925, s 7. The meaning and effect of this section are plain enough. If, under the contract admittedly subsisting between the respondents and the company, the respondents could, on 21 October 1936, be properly regarded as insurers of the companys liability to pay compensation to an appellant, the rights of the company against the respondents under the contract in regard to

Page 597 of [1939] 4 All ER 570

that liability were upon that date transferred to, and because vested in, such appellant, for it is not now contended by the respondents that the contract between them and the company was determined by the appointment of the receiver. The first question, therefore, to be determined upon this appeal is whether the respondents were such insurers upon the date in question. If this question be answered in the affirmative, the further and quite distinct question will arise whether the company at that date had any rights under the contract in relation to its obligations to pay compensation to the appellants, for the appellants can have no greater or better claims against the respondents than the company itself had at the time the receiver was appointed. My Lords, for the purpose of considering these questions, counsel for the appellants was content to treat the contract between the company and the respondents as being regulated, after 31 December 1927, by the terms of the respondents amended articles of association, and the arguments before your Lordships House proceeded throughout upon this basis. It is, therefore, upon this basis that I propose to deal with the case.

It is unnecessary for me to consider in detail the relevant provisions of those articles. That has already been done by my noble and learned friend Lord Wright. Looking at those provisions, however, I cannot for a moment doubt that, after the expiration of five years from the beginning of any particular year, the respondents were truly insurers in respect of the companys liability to compensate any workman who was incapacitated by an ordinary accident which happened, or, under art 35(b), must be deemed to have happened, in that particular year. Whether or not the same can be said in respect of the companys liability to compensate during the five years is a question upon which I do not find it necessary to express an opinion. If and when that question arises, it may be necessary to consider whether Pailin v Northern Employers Mutual Indemnity Co was rightly decided. It does not arise now, for I am satisfied that, in the case of the appellants Wooding and James, the five years in question ended on 31 December 1927 and that, in the case of the appellant Hawkins, it ended on 31 December 1933. My reasons for coming to these conclusions can be stated quite shortly.

The company was admittedly entered in the register of protected mines and works as protected against “ordinary accidents” under art 35. In the case of each of the appellants, the accident which happened to him was admittedly an “ordinary accident” within the meaning of the articles. The respondents, therefore, were, according to the plain terms of art 35(a), bound to indemnify the company against any compensation payable by the company under the Workmens Compensation Acts in respect of the injuries resulting to the appellants from such accidents. During the first five years dating from the beginning of the year in which the accident happened, all sums paid by the respondents to the company in respect of such indemnity came, in the end, out of the companys own

Page 598 of [1939] 4 All ER 570

funds. After the expiration of that period, however, the liability of the respondents under their agreement to indemnify was in no way limited to, or measured by, the calls made upon the company. From that time, the respondents were without question “insurers” of the company, whatever may be said about their position before then.

It is said by the respondents, however, that, at the date of the receivers appointment, the five years had not elapsed in the case of any one of the appellants. This contention is based upon art 35(b) of the amended articles in its relation to the following facts. The appellant Wooding ceased to be totally incapacitated at some time during 1927, and returned to light work with the company, though still partially incapacitated. He succeeded in carrying out such light work, except for certain periods of total incapacity, until March 1936, when he became finally totally incapacitated from the effects of his accident. While engaged in such light work, he received wages equal to those received by him before the accident, and, accordingly, was paid no compensation. The appellant James in November 1928, returned to light work with the company, though still partially incapacitated, and succeeded in carrying it on until April 1932. While so employed, he received his pre-accident wages, and, therefore, no compensation. He ceased work in April 1932, and from then until after the appointment of the receiver he received compensation on the footing of partial incapacity. The appellant Hawkins returned to light work with the company on 26 March 1933, though still partially incapacitated, and since that date has been receiving his pre-accident wages, and, therefore, no compensation. In these circumstances, the respondents contend that the accident to Wooding must be deemed to have taken place in March 1936, that the accident to James in April 1932, and that it must be deemed in the case of Hawkins, apparently, that no accident has happened to him at all. It is said that all three recovered and ceased to be entitled to compensation within the meaning of art 35(b) on the dates when they respectively returned to light work and began to receive their pre-accident wages. I do not so construe the article. It is admitted that no one of the three has ever ceased to be incapacitated, and how it can be said, in those circumstances, that any of them has recovered I am at a loss to conceive. It is true that the recovery contemplated by the subsection cannot be a complete recovery, for the subsection goes on to provide for the event of a recurrence of total or partial incapacity, but it is plain that the recovery must be such that all incapacity has temporarily ceased, and only a latent incapacity is left. There could not otherwise be a “recurrence” of the total or partial incapacity. In such a case, the workman ceases to be entitled to compensation in the sense that compensation ceases to be presently payable to him, and the words “ceases to be entitled to compensation” must, I think, be used in the subsection in that sense. All the appellants, therefore, ceased to be entitled to compensation within the meaning of the

Page 599 of [1939] 4 All ER 570

subsection when they began to be paid their pre-accident wages. They have never recovered, however, and recovery is one of the conditions necessary to bring the subsection into operation. It is, indeed, to be observed that, upon the construction of the word “recovers” for which the respondents contend, the words “recovers and” are mere surplusage, and might just as well have been omitted altogether.

Down to this point, therefore, it would seem that the appellants claims against the respondents are well-founded, and down to this point I do not think that I find myself in any material disagreement with the Court of Appeal. However, it was held in that court by Greer and Mackinnon LJJ (Slesser LJ dissenting), that the claims of the appellants failed, on the ground that the company ceased to be insured after 31 December 1927 in respect of the compensation payable to Wooding and James, and after 31 December 1933 in respect of any compensation that might become payable to Hawkins. It was said that the Company in each case failed to pay the “final call” under art 35(h) in respect of the particular workman, or, in the words of Greer and Mackinnon LJJ, failed to pay “the premium” due under the articles for the respondents agreement of indemnity. For the purpose of considering this question, it will be sufficient to take the case of Wooding. If his claim be well-founded, the other appellants are admittedly entitled to succeed.

The contention that the company made default in respect of Wooding is based upon the fact that, in estimating under art 35(g) the amount of the outstanding liability of the company on 31 December 1927 in respect of ordinary accidents occurring in 1923, and in making under art 35(h) the final call upon the company in respect of that year, the society omitted to include any sum in respect of the liability to pay compensation to Wooding. It is, I think, reasonably clear that this was due to a misconstruction on the part of the respondents of art 35(b). They seem to have thought, inasmuch as Woodings name had been struck out of the statement sent to it by the respondents with the letter of 19 May 1928, that Wooding had recovered by 31 December 1927, within the meaning of the article. However, the company paid in cash or in account the final call made under art 35(h), and thus completely discharged their obligations to the respondents in respect of ordinary accidents occurring in 1923. It was for the respondents, and not for the company, to estimate the amount of the final call in respect of those accidents, and the company, having paid that call, cannot be regarded as being in default in relation to Wooding. As was truly said by Slesser LJ, the consideration to be paid by the company for the insurance was not several, as regards each individual workman, but collective. Nor can any blame be properly attributed to the company for striking Woodings name out of the statement sent to them on 19 May 1928, for they did no more than they had been asked to do by the respondents. Had they omitted to remove Woodings name, they would have been representing to the

Page 600 of [1939] 4 All ER 570

respondents that Wooding was in receipt of compensation on 31 December 1927, and that representation would have been untrue. The respondents wished to have an accurate list of the men who had sustained accidents in 1923 and who were, on 31 December 1927, still in receipt of compensation, and this they admittedly obtained. If, therefore, the respondents, in estimating as on 31 December 1927 the outstanding liability of the company in respect of the ordinary accidents which occurred during 1923, estimated that liability at too low a figure by reason of their failure to take into consideration any liability in respect of Wooding, they have only themselves to blame. At the expiration of five years from the first day of 1923, the only obligation of the company in respect of accidents occurring during that year was to pay the final call made by the respondents under art 35(h). The fact, if fact it be, that the amount of that final call was fixed by the respondents at too low a figure cannot, in the absence of fraud on the companys partand no such fraud is suggestedaffect in any way the companys position. However, I am by no means convinced that the final call would have been fixed at any higher figure even if the respondents had placed the proper construction on art 35(b). As was pointed out in the letter of 19 May 1938, the outstanding liability was valued, in cases where full compensation was being paid, upon the assumption that such compensation would continue to be paid during the rest of the workmans life. The possibility of the workman recovering from his disability in whole or in part was disregarded. In those circumstances, the respondents might well be justified, when estimating the total outstanding liability in respect of all the 1923 accidents, in attributing no figures to a case where no compensation at all was being paid. It would no doubt be a rough-and-ready way of arriving at the total liability, but the respondents in assessing it were at liberty to adopt any method of calculation which they thought fit. However this may be, it would not in any case be correct to say that the company made default in payment of the “premium” for the indemnity against its liability to Wooding. In paying the final call, the company paid the proper “premium” that was payable under the amended articles in respect of all the accidents that happened in 1923 collectively, including, therefore, the accident that happened to Wooding.

My Lords, it only remains to deal with the contention on the part of the respondents that the company and the respondents in or about May 1928, agreed that the contract subsisting between them should be modified or amended in some way which was never very clearly defined during the arguments of the respondents counsel, but which would, I gather, have made the contract operate as though art 35(b) bore the construction that the respondents have sought to place upon it. I need only say as to this contention that I can find no evidence, oral or documentary, which even faintly suggests that the two parties made any such agreements, either expressly or by implication, or that either of them ever had any wish so to do. In my opinion, the appeal should be

Page 601 of [1939] 4 All ER 570

allowed and an order made in the terms which have been stated by my noble and learned friends.

Appeal allowed with costs. Cases remitted to county court to make awards of compensation.

Solicitors: Smith Rundell Dods & Bockett, agents for T S Edwards & Son, Newport, Mon. (for the appellants); Slaughter & May (for the respondents).

Michael Marcus Esq   Barrister.

Portavon Cinema Co Ltd v Price and Century Insurance Co Ltd

[1939] 4 All ER 601


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        BRANSON J        

Hearing Date(s):        28, 29, 30 NOVEMBER 1939        


Insurance Fire insurance Double insurance clause Insurance of premises by lessor and lessee Equitable interest Ratification of insurance Reinstatement of premises Fires Prevention (Metropolis) Act 1774 (c 78), s 83.

The plaintiffs, who were the lessees of a cinema, insured the premises with the first defendant and other underwriters under a Lloyds policy of insurance against loss by fire. The lessors were desirous of raising a loan on the security of the cinema, and for this purpose, and, as a condition of the granting of the loan, took out a policy of insurance with the second defendants. Cl 4 of the Lloyds policy was as follows: “This insurance does not cover any loss or damage or liability which at the time of the happening of such loss or damage or liability is insured by or would, but for the existence of this policy, be insured by any other policy or policies except in respect of any excess beyond the amount which would have been payable under such policy or policies had this insurance not been effected.” The premises were later destroyed by fire at a time when both policies of insurance were in existence, and upon the plaintiffs making a claim under the Lloyds policy, it was contended that the second defendants policy was an insurance insuring the loss or damage or liability insured by the Lloyds policy, and that it was, therefore, a case of double insurance and came under cl 4 of that policy:

Held (i) cl 4 should be applied only to cases which are strictly cases of double insurance.

(ii) the taking out of the second policy created no equity in favour of the plaintiffs, there being no intention in the minds of the lessors to give the plaintiffs any interest in the policy moneys.

(iii) the second policy had not been taken out by the authority of the plaintiffs, nor had there been any subsequent ratification by the plaintiffs.

(iv) the Fires Prevention (Metropolis) Act 1774, s 83, did not have the effect of making a lessee or other person having an interest in the premises an insured person, but gave to such a person, although he was not the insured, a statutory right to direct the insurers to apply the policy moneys in reinstatement of the property.

(v) in the result, no double insurance had been created.

Notes

Generally speaking, double insurance requires two policies to be taken out by the same insured. In the case of mortgages and leases, a policy taken out by one party often enures for the benefit of the other party. The two policies in the present case being in respect of the same premises, it was argued that the lessees had an equitable interest in the policy taken out by the lessors.

Page 602 of [1939] 4 All ER 601

It is held, however, that, upon the particular terms of the clause here in question and the circumstances in which the policy had been effected, the lessees had no such interest, and therefore no case of double insurance arose.

As to Double Insurance, see Halsbury (Hailsham Edn), Vol 18, pp 471, 472, paras 708711; and for Cases, see Digest, Vol 29, pp 318320, Nos 26282631.

Cases referred to

Waters v Monarch Life Assurance Co (1856) 5 E & B 870; 29 Digest 311, 2568, 25 LJQB 102, 26 LTOS 217.

Grover & Grover Ltd v Mathews [1910] 2 KB 401; 29 Digest 327, 2668, 79 LJKB 1025, 102 LT 650.

Williams v North China Insurance Co (1876) 1 CPD 757; 29 Digest 89, 473, 35 LT 884.

Action

Action upon a Lloyds fire insurance policy claiming that the plaintiffs, lessees of certain premises, were entitled to be indemnified by Lloyds underwriters against the loss which the plaintiffs had sustained by the destruction by fire of the premises insured, the premises being also insured by the lessors with a second insurance company. The facts are fully set out in the judgment.

C T Le Quesne KC and H H Maddocks for the plaintiffs.

F Soskice for the first defendant.

H U Willink KC and G O Slade for the second defendants.

30 November 1939. The following judgment was delivered.

BRANSON J. This action raises a number of interesting points, and arises in the following circumstances. The plaintiffs are the Portavon Cinema Co Ltd, and the first defendant is a leading Lloyds underwriter of a policy under which the underwriters insured the Portavon Cinema Co Ltd, against loss by fire in respect of certain interests to which I shall have to refer in more detail hereafter. The second defendants are the Century Insurance Co Ltd, Messrs Woodward, who were the lessors of the Empire Cinema in Talbot Road, Port Talbot, Glamorganshire, leased it to the Portavon Cinema Co Ltd, and, in circumstances which I shall have to consider, took out a policy insuring it against fire with the Century Insurance Co Ltd. The Empire Cinema was burnt while both of those policies subsisted in relation to it, and the plaintiffs sued Lloyds underwriters upon their policy, claiming to be indemnified against the loss which they had sustained, they being under contract to reinstate the cinema if it was burnt.

Lloyds underwriters have raised a number of defences, and I think that it would conduce to clarity if I dealt with the facts of the case first, and called attention to the defences when I have ascertained the facts. There is very little dispute about the facts, which are as follows. In 1937, by a lease dated 4 May, Woodward Theatres Ltd, leased to the Portavon Cinema Co Ltd, certain cinemas, including the Empire Cinema in Port Talbot, the one in question. Under that lease, the Portavon Cinema Co Ltd, agreed that they would insure the premises

Page 603 of [1939] 4 All ER 601

against fire, and they agreed that, if the premises were burned, they would reinstate them. I do not think that it is necessary to go in detail into the language of that clause.

The lessors, Messrs Woodward, were minded to raise a loan upon those premises from a company named the Friends Provident and Century Life Office, and that company had a subsidiary called the Century Insurance Co Ltd. The Friends Office (as I shall call it for short) were willing to lend the money, but only upon the term that the buildings should be insured against fire with their subsidiary office, the Century Insurance Co Ltd. For one year, that insurance was taken out by the Portavon Cinema Co Ltd, and all was well. When the next year was approaching, whether because the negotiations for the loan had not materialised, or whether for some other reason I do not think it is material to discuss, the Portavon Cinema Co Ltd, declined to continue their insurance with the Century Insurance Co Ltd, and, instead of continuing that insurance, they placed an insurance with Lloyds, which is the insurance upon which the Portavon Cinema Co Ltd, are now suing their underwriters.

When that became known to the Friends Office and to the Century Insurance Co Ltd, those bodies immediately objected, and took up the position that, unless the insurance of those premises was given to the Century Insurance Co Ltd, they would decline to go on with the negotiations for the loan to Messrs Woodward. Thereupon Mr Wehrle, Messrs Woodwards solicitor, took out policies with the Century Insurance Co Ltd, and endeavoured to get an agreement with Mr Ewan Davies, the solicitor and managing director of the plaintiffs, that the plaintiffs would cancel their policy with Lloyds and hand over the premiums that they would have paid under the Lloyds policies, and in return get an interest under the policy with the Century Insurance Co Ltd. However, no such agreement was ever reached. Mr Ewan Davies objected, and, for reasons best known to himself, refused to have any thing to do with the policy which had been taken out with the Century Insurance Co Ltd, which remained a policy taken out by Mr Wehrle, acting for Messrs Woodward, for the sole reason, as appears quite clearly from the documents in the case, that, without such a policy, Messrs Woodward could not get the loan which they wanted to get from the Friends Office. I think that there is no escape from that conclusion on the facts, and, if that is borne in mind, I think that it will help to clarify the legal position when I come to deal with it.

So much for the facts of the case. The result was that, when, on 12 April 1938, the Empire Cinema was burnt, there were in existence these two policiesnamely, the Century policy insuring Messrs Woodward, and the Lloyds policy insuring the Portavon Cinema Co Ltd. In those circumstances, the Portavon Cinema Co Ltd, claim against Lloyds payment of the amount of the loss which they have suffered. There is no question about figures, and I need not go into that matter.

Page 604 of [1939] 4 All ER 601

Lloyds then took, as I have said, a number of points in defence to that claim. I think that, in principle, it all comes to the same thing. They say that the effect of the taking out of the policy with the Century Insurance Co Ltd, by Messrs Woodward has been to call into operation cl 4 of the general conditions of the Lloyds policy. That condition reads as follows:

This insurance does not cover any loss or damage or liability which at the time of the happening of such loss or damage or liability is insured by or would, but for the existence of this policy, be insured by any other policy or policies except in respect of any excess beyond the amount which would have been payable under such policy or policies had this insurance not been effected.

Lloyds say that the Century policy is an insurance insuring the loss or damage or liability insured by their policy, and, therefore, in effect, that it is a case of double insurance, and comes under cl 4.

I think it is necessary in the first place to say what, in my view, is the meaning of cl 4. I do not think that there is any real dispute as to that. If one looks at the language used, without putting any restriction upon the wideness of it, it may be urged that the existence of any other insurance of any other type covering the particular loss or liability, though taken out by a stranger, and without the knowledge of the assured in question, would operate to bring that clause into effect. I think it is quite clear upon the authorities, however, that that cannot be said, and, indeed, counsel for the first defendant does not contend for any such construction in the present case. I think that the meaning is fairly dealt with in the passages which were cited from Macgillivray on Insurance (2nd Edn), p 874, by counsel for the second defendants:

The clauses, designed to effect these objects appear in many different forms and with many variations in detail, but in construing them it is always important to remember that they are aimed primarily at double insurance, that is, at cases where the assured has made contracts with other insurers upon the same property and the same interest and against the same risk, and unless a condition contains words which compel a different construction it ought only to be applied to cases which are strictly cases of double insurance.

I turn then to see whether there can be said to be any case of double insurance in the present instance. The first way in which it is contended that a double insurance was created is this. It is said that the taking out of the insurance with the Century Insurance Co Ltd, by Messrs Woodward raises an equity in favour of the Portavon Cinema Co Ltd and that, therefore, the Portavon Cinema Co Ltd having their own insurance with Lloyds, and an equitable interest under the Century policy, there is a double insurance created. The first case which was cited for that proposition is Waters v Monarch Life Assurance Co. The case was tried before Lord Campbell CJ and a verdict was found for the plaintiffs, subject to the opinion of the court upon a case stated. The facts were quite shortly these. The plaintiffs had taken out a policy of insurance with the defendants against fire, and that policy was, amongst other things, on goods in the plaintiffs warehouse and on goods on trust or commission therein. The defendants had

Page 605 of [1939] 4 All ER 601

covenanted to make good any damage by fire to the property insured. The property was property in which the plaintiffs had an interest and also in which their customers had an interest, the customers being the owners of the property which the plaintiffs had in their warehouse. The question which was put before the court was whether, in the circumstances above stated, the plaintiffs were entitled to recover, and, if they were, what sum or sums, the plaintiffs suing the insurance company upon the policy. Upon that case, and in answer to that question, the court found that the plaintiffs were entitled to recover for the value of the goods, and, in giving judgment, Lord Campbell CJ having dealt with the question as to whether or not the plaintiffs were entitled to judgment for the amount claimed, said, at p 881:

They will be entitled to apply so much to cover their own interest, and will be trustees for the owners as to the rest.

That passage is seized upon by counsel for the first defendant as authority for the proposition that, in any case of that kind, where a person takes out an insurance upon goods which are not solely his own, a trust is created in favour of the owners of the goods in respect of their interest, whatever it may be, in them, subject to the interest of the person who has taken out the insurance.

The first comment I have to make upon that case is that that remark of Lord Campbell CJ had nothing to do with anything which had been argued before the court or raised in the case before the court. Secondly, Wightman and Crompton JJ, who were the other members of the court, said nothing whatever in their judgments about there being any equity at all. Wightman J said that there were two questions, the first being whether the goods destroyed were covered at all by the policies and proceeded to deal with that question. Then he said, at p 882:

Can the plaintiffs recover their value? It seems to me that they may, unless there be something making it illegal to insure more than the plaintiffs own interest.

It was upon that ground that he decided that the plaintiffs were entitled to recover the whole value. Crompton J gave judgment upon the same lines. He said that they were persons interested in every particle of the goods, both in respect of their lien and in respect of their responsibility to their bailors, and that they were entitled to recover the judgment for which they asked, that is, for the whole of the value.

That really is the only authority which it is suggested shows that there is any equitable right raised in a case of this kind merely by the fact that one person takes out an insurance upon buildings in which not only he himself but also somebody else is interested. In my view, no such equity arises in this case. That is particularly due to the finding which I have already made in relation to the facts of the casenamely, that this was not a case in which Messrs Woodward or Mr Wehrle were taking out this insurance with any intention of giving a present interest in it to the plaintiffs, the Portavon Cinema Co Ltd. The utmost that

Page 606 of [1939] 4 All ER 601

can be said is that, when Mr Wehrle took out this insurance, he probably hoped to be able to make some arrangement with Mr Ewan Davies under which Mr Ewan Davies companythe Portavon Cinema Co Ltdwould take over the insurance, provided that Messrs Woodward would pay any excess in the amount of the premium over and above that at which the plaintiffs had been able to secure the Lloyds policy. The mere taking out of a policy cannot possibly give an equity to somebody else. An intention is necessary, and I am satisfied that, when this policy was taken out, there was no such intention in the minds of Mr Wehrle or Messrs Woodward.

Then it is said that, supposing that that is not the case, yet there was a declaration of trust when the Century Insurance Co Ltd, at the request of Mr Wehrle, indorsed a memorandum upon the Century policy. Mr Wehrle has not been called, and one can only guess at what his intentions in the matter were, but in April 1938 Mr Atkinson, the solicitor for the Century Insurance Co Ltd, wrote a letter to the Century Insurance Co Ltd, telling them to put this memorandum upon the policy:

The loan by the office to Woodward Theatres, Ltd., was made yesterday. I received at completion the four policies mentioned in the list. … Will you please have each of them indorsed with a memorandum showing that the office is interested as mortgagee and the Portavon Cinema Co., Ltd., of 10, Windsor Place, Cardiff, is also interested as lessee, and return them to me.

That was done. It is said that that was a declaration of trust made by Messrs Woodward (who, after all, were the people in whose favour the policy with the Century Insurance Co Ltd had been issued) in favour of the Portavon Cinema Co Ltd. I cannot see that there is really any excuse for saying so. The declaration is not made by Messrs Woodward. It is not made by Messrs Woodwards solicitor. It is made by the solicitor to the Century Insurance Co Ltd. How he came to make the suggestion has not been investigated, because none of these gentlemen has been called before me, and I decline to draw inferences of that kind, in the absence of proof, from the mere fact that a letter is written by Mr Atkinson giving that instruction to the company whose solicitor he was.

Then counsel for the first defendant says that, if there is not a declaration of trust, then I am to infer that the Century policy was taken out by the authority of the Portavon Cinema Co Ltd. I think that the answer to that is again to be found in the documents. I need not refer to them, but the letters of Mr Ewan Davies make it clear beyond peradventure that, so far from authorising anybody to take out policies with the Century Insurance Co Ltd, when those policies were being taken out, he was saying that he would have nothing whatever to do with them, though he did say that, with regard to future years, he would be prepared to invite his company to do what they could to make things easy for Messrs Woodward in respect of the loan that Messrs Woodward required to get. That, again, is a pure question of fact, and, as I say,

Page 607 of [1939] 4 All ER 601

I see no evidence to support the suggestion of authority from the Portavon Cinema Co Ltd, to anybody to take out this policy with the Century Insurance Co Ltd.

The next point is this. It is said that, supposing that the court comes to the conclusion that there was no authority, yet there was ratification. The answer to that is quite a short answer, and is to be found in Grover & Grover Ltd v Mathews. In that case, Hamilton J, saying that he was bound by a decision in the Court of Appeal, came to the conclusion that one could not ratify a fire policy which had been taken out after the loss had arisen, and said, at p 404:

… it appears to me that the judgments in Williams v. North China Insurance Co., which is a decision of the Court of Appeal, compel me to say that it was too late for ratification; because, as it appears to me, the Court of Appeal in Williams v. North China Insurance Co. recognised that a rule which would permit a principal to ratify an insurance even after the loss was known to him was an anomalous rule which it was not, for business reasons, desirable to extend, and which, according to the authorities, had existed only in connection with marine insurance. No case has been cited to me which suggests that this anomalous rule ought to be extended to fire insurance.

Counsel for the first defendant urges me, with what I might perhaps describe as vicarious courage, to refuse to follow that decision and hold that the rule should be extended. However, I have not the boldness of youth, and I decline to differ from Hamilton J.

That leaves two ways in which the matter is attempted to be dealt with. Perhaps it is one way, and the objection to it under the Act of 1774. It is said that the Fires Prevention (Metropolis) Act 1774, s 83, enacting, as it does, that any person interested in, or entitled to, any house or houses or other buildings which may thereafter be burned down or damaged, and so on, by fire, may give notice to the governors or directors of the several insurance offices for insuring houses or other buildings against loss by fire, calling upon them to expend the insurance moneys upon reinstating the premises burnt down, has the effect of giving anybody entitled to any interest in a building upon which an insurance has been effected by somebody else an insurance upon that building. In my view, that is a misinterpretation of the statute. There is all the difference in the world between giving A, who is interested in the premises upon which B has taken out a policy, a right to call upon Bs insurers to expend those policy moneys upon the property, and saying that the statute has invested A with an insurance upon those properties. One is a statutory right and the other is a right arising ex contractu, and I think that it is quite wrong to say that the effect of the Fires Prevention (Metropolis) Act 1774, s 83, is to make anybody an insured. What it does do is to give him, though not an insured, a statutory right to direct people who have to pay moneys to an insured in respect of premises to expend those moneys in a particular way.

That makes it unnecessary to deal with the other question which is raisednamely, whether or not Lloyds underwriters fall within the description “governors or directors of the several insurance offices for

Page 608 of [1939] 4 All ER 601

insuring houses or other buildings against loss by fire,” which is the description of persons who can be called upon to spend the money in reinstatement of places burnt under that section. It is suggested, first of all, that the words might apply to the corporation of Lloyds. The answer to that is that the corporation of Lloyds do not insure anybody against anything. It is the underwriters who undertake the burden of insurances.

Then it is said that, when one finds a certain group of underwriters continually acting as a body, allowing their names to be written by a particular individual, that might be such an association of persons as to fall within the language of the Act. Again, I disagree. If one thing is plain with regard to underwriting by members of Lloyds, it is that each member makes a contract for himself for the amount of his liability, the contract being an independent contract of his own, and he is in no way interested in the other contracts undertaken at the same time by other members who underwrite the same policy. No authority is needed for that which, by now, one would have thought was known to everybody who had to deal with Lloyds policies and the liabilities of underwriters under them. Thus, that endeavour to bring about a double insurance in this case also fails.

That leaves only one point to be dealt with on the question of law. It is said by counsel for the second defendants that, even supposing that there were a declaration of trust, and supposing that, by means of the Fires Prevention (Metropolis) Act 1774, some insurance right was created for the Portavon Cinema Co Ltd, still there is no double insurance, because, if any such right were created, the Portavon Cinema Co Ltd, not having its name put in the Century policy, that policy is an unlawful policy under the Life Assurance Act 1774, s 2, except perhaps that insurances bona fide made by any person or persons on ships, goods or merchandise are excluded from the operation of the Act by s 4 thereof. As I say, it is not material to decide that point, because I have already decided that, in my view, no double insurance has been created, and, therefore, it was quite right in the Century policy not to put in the name of the Portavon Cinema Co Ltd.

For those reasons, I have come to the conclusion that the defence of Lloyds underwriters fails in general.

Judgment for the plaintiffs against the first defendant for a sum to be agreed between the parties. Costs of plaintiffs and second defendants to be paid by first defendant.

Solicitors: Wrentmore & Son, agents for Ewan G Davies, Cardiff (for the plaintiff); Chamberlain & Co (for the first defendant); J Shera Atkinson (for the second defendants).

W J Alderman Esq   Barrister.


Fraser-Wallas and Another v Elsie and Doris Waters (a firm)

[1939] 4 All ER 609


Categories:        TORTS; Negligence: EMPLOYMENT; Contract of service        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ        

Hearing Date(s):        28, 29 NOVEMBER 1939        


Negligence Producer of variety programme heel of dancers shoe becoming detached and hitting member of audience Whether dancer servant or independent contractor Standard of care required.

The defendants, who were two sisters in partnership, entered into an agreement with the management of a music-hall to present a variety programme there, and they in turn made an agreement with certain artists whereby the latter accepted an engagement to appear “subject to the conditions of the Arbitrators Award, 1919.” The plaintiffs, who were husband and wife, attended a performance, which included a turn by those artists. As part of this turn, one of them gave a kick, with the result that the heel of one of his shoes came off, flew through the air, and hit the female plaintiff in the face, causing her injury. The shoes were of a well-known make, were quite new, and had been cleaned personally by the wearer, and no accident of this kind had ever occurred in the past. The plaintiffs alleged that the accident occurred through the negligence of the defendants of their servants:

Held (i) the relationship of master and servant had not been constituted by the contract between the defendants and the artists, even though the defendants exercised over the artists a certain amount of supervision and control.

(ii) the only obligation of the defendants to a member of the audience was that arising between an invitor and an inviteenamely, the obligation to take reasonable care.

(iii) there had been no negligence on the part of the artist whose shoe had caused the injury.

Notes

The position as between the proprietor of an entertainmentthat is, the person receiving the entrance moneyand the person paying to see it has recently been considered in a line of decisions. The present circumstances are exceptional, because the parties sued were not the proprietors of the entertainment, but were a firm who by contract supplied certain of the artists. The question, therefore, is what is the liability of such a firm to a paying spectator. It is held that this liability is the same as that between an invitor and an invitee.

As to Risks Incident to Entertainments, see Halsbury (Hailsham Edn), Vol 23, pp 718, 719, para 1009; and for Cases, see Digest, Vol 36, pp 40, 41, Nos 242246.

Cases referred to

Cox v Coulson [1916] 2 KB 177; 42 Digest 909, 53, 85 LJKB 1081, 114 LT 599.

Indermaur v Dames (1866) LR 1 CP 274; 36 Digest 35, 208, 35 LJCP 184, 14 LT 484, affd (1867) LR 2 CP 311.

Norman v Great Western Ry Co [1915] 1 KB 584; 38 Digest 352, 580, 84 LJKB 598, 112 LT 266.

Hurst v Picture Theatres Ltd [1915] 1 KB 1; 42 Digest 905, 23, 83 LJKB 1836, 111 LT 972.

Action

Action for damages by two plaintiffs, husband and wife, for injuries received by the female plaintiff through being struck in the face by a heel of a dancers shoe while attending a performance of a variety programme at the Wood Green Empire. The plaintiffs alleged negligence

Page 610 of [1939] 4 All ER 609

on the part of the defendants as producers of the programme or on the part of the dancer as their servant. The facts are fully set out in the judgment.

Denis Murphy for the plaintiffs.

Lionel Jellinek for the defendants.

29 November 1939. The following judgment was delivered.

LORD HEWART LCJ. In this case, the plaintiffs, Robin Fraser-Wallas and his wife Violet Fraser-Wallas, sue the defendants, Elsie and Doris Waters (a partnership firm), for damages for negligence. The statement of claim states as follows:

The plaintiffs claim is for damages for negligence and/or breach of duty in and about the production of a variety show.

The evidence may be very shortly re-stated. It appears that on 12 November 1937 the two plaintiffs went to a performance at the Wood Green Empire in the High Road, Wood Green, and witnessed a performance of a variety show given by certain performers, including a turn which was called “The Four Playboys.” The plaintiffs allege that during the progress of the variety show, and by reason of the negligence of the defendants, their servants or agents, the heel of the dancing-shoe of one of the dancers engaged in the show became detached from the shoe and hit the female plaintiff violently in the face, doing damage and causing injury.

The evidence of the husband was that in the course of the performance he saw one of the performers give a kick on the stage. He said that the heel of the players shoe flew through the air and hit the female plaintiff on the jaw. He asked to see the shoe and the heel, and he came to the conclusion that it was a heel of heavy rubber, or composition. Mrs Fraser-Wallas gave evidence that she saw something come through the air, and that she put her hands to her face, and remembered nothing more. A player in the orchestra was called, and he said that, at the moment when he made a crash on the drum, the heel of the shoe of one of the performers flew off. The performer kicked, and the heel of his shoe flew off. The player in the orchestra went on to say that the kick was modified on the following night. That means that the man who kicked did not kick so strongly. A doctor gave evidence on behalf of the plaintiffs, and also a dental surgeon.

For the defendants, one of the Four Playboys was called. He said that during his performance he made a kick at an imaginary figure. He was not aware that the heel of his shoe had come off until he put his foot down. He said that his shoes were only a few weeks old, that he cleaned his own shoes, and that no such accident had ever occurred during his performance before, and he had been doing that performance for two or three years. In cross-examination, he added that the motion which he made was a sliding movement of the foot.

Dr Anderson was called for the defendants. He had attended the female plaintiff immediately after the happening of the accident on

Page 611 of [1939] 4 All ER 609

12 November 1937, and he said that the wound which he discovered was a wound skin-deep, and in size about ¼ in to 1/3 in. One of the defendants, Miss Doris Waters, was called. She said that she was in partnership with her sister, and that they presented a programme of variety turns at the Wood Green Empire during the week ending 13 November 1937. According to her evidence, the owner of the particular turn had control over that turn, and she referred to the Arbitrators Award 1919, Contract as being the standard contract:

As long as the artists abide by the terms of their contract, my sister and I have no control over them.

There are several features in this case on which I need not dwell. One of them is that it was not until 6 months after the accident that any complaint was made to the defendants, and it was not until 5 months after the accident that the writ was issued. It was quite obvious to me as I heard the evidence that the plaintiffs case was manifestly exaggerated, and I refrain from criticising it further.

In regard to the legal position, some discussion naturally arose. It is to be observed that the defendants are not, and are not sued as, the owners or the lessees of the Wood Green Empire, and it was made clear in the course of the case that they held no such position. What their exact position was I will endeavour in a few moments to state.

My attention was directed by counsel for the defendants, partly by way of comparison and partly by way of contrast, to Cox v Coulson. That case is certainly deserving of attention in relation to the present case. The headnote there is as follows:

The defendant was the lessee and manager of a theatre. He had arranged for the performance of a play in his theatre with the manager of a touring theatrical company, who was to provide actors and scenery, the defendant providing the theatre, the lighting, and the playbills; each took an agreed proportion of the receipts. The plaintiff took and occupied a seat in the theatre; during the performance an actor fired a pistol, which should have contained only a blank cartridge, but in the barrel of which, by some unexplained mischance, there was also a second cartridge of smaller size, which when the pistol was fired struck the plaintiff on the wrist, inflicting a serious wound.

The case came originally before a county court judge, who held as follows:

… it was an implied term of the contract between the plaintiff and the defendant that all persons connected with the performance of the play should exercise reasonable care so that members of the audience should not be exposed to any danger which could be avoided by the exercise of such reasonable care.

The decision of the county court judge was taken on appeal to a Divisional Court, and Bailhache and Shearman JJ, heard the appeal. It was made plain in the course of the arguments [p 178] that:

… by some mischance, of which no explanation was given, there was also in the barrel of the pistol a second cartridge, of smaller size than the one with which the pistol was properly loaded; the pistol, when fired, was pointed by the actor towards the audience, and the plaintiff was struck in the wrist by the loose cartridge …

In the Divisional Court, Bailhache and Shearman JJ, did not take quite the same view of the matter, and, in the result, the case was taken

Page 612 of [1939] 4 All ER 609

to the Court of Appeal. Swinfen Eady LJ, as he then was, delivering judgment in the Court of Appeal, referred to the fact that the plaintiff in that case, who was a domestic servant, took a seat in the dress circle for the performance, for which she paid 9d. He then considered the facts of the case, and said, at pp 181183:

If the defendant is under any liability it must arise out of the contract which was made when, having held out by means of the playbill an invitation to his theatre, he issued a ticket to the plaintiff and received her 9d. The contract whatever its implied terms may be, was made between the defendant and the plaintiff, as the defendant received the takings from the persons paying and issued the tickets to them … Is there, then, to be implied, in the contract between the plaintiff and the defendant, any term with regard to the play apart from the premises in which the play is to be performed? The play involved the use of firearms, and according to the evidence included a scene in which a wireless station was defended against an enemy; the performers were dressed as soldiers and were shooting with revolvers. Such a scene, properly performed and without negligence, would be free from danger, but injury would be likely to result from it unless care was taken in loading and using the firearms. The county court judge held that it was an implied term of the contract between the defendant and the playgoer that all persons connected with the performance of the play should exercise reasonable care so that the members of the audience should not be exposed to any danger which could be avoided by the exercise of such reasonable care. In my opinion this is too wide, and there is no authority and no principle upon which so extended a liability can be said to rest upon a person who, for reward agrees that others shall enter his premises and witness the performance of a play there. Upon this footing the defendant would be liable for any negligence of the performers as if they were his servants. It was, however, upon this view of the law that the judgment of the county court judge proceeded … If there are incidents in a play which are intrinsically dangerous unless carefully performed especially if they involve the use of firearms, and which the manager knew or ought to have known of, then, in my opinion, it is an implied term of the contract between the playgoer and the other contracting party that such contracting party will use reasonable care and diligence to see that such incidents are performed without risk to the playgoer. He is not, however, under liability for any accident which he could not have prevented by the exercise of reasonable care or supervision, but which happens through some carelessness or want of skill on the part of a member of the company. He does not warrant that there shall be no such negligence or want of skill. His liability is that of an invitor towards an invitee as expressed in Indermaur v. Dames and in Norman v. Great Western Ry. Co. per Buckley, L.J.: The duty of the invitor towards the invitee is to use reasonable care to prevent damage from unusual danger which he knows or ought to know. If the danger is not such that he ought to know of it, his liability does not extend to it.”

The next judgment in Cox v Coulson was delivered by Pickford LJ. He began by saying, at pp 185, 186:

This case raises a question on which there is very little authority, ie, what is the responsibility of the lessee of a theatre towards a person who takes a ticket for admission to that theatre when a performance is given by a travelling company not engaged by the defendant and the lessee takes a part of the sum paid for admission … The nature of the contract is, I think, correctly stated by Buckley, L.J., in Hurst v. Picture Theatres, Ltd.: “The plaintiff in the present action paid his money to enjoy the sight of a particular spectacle. He was anxious to go into a picture theatre to see a series of views or pictures during, I suppose, an hour or a couple of hours. That which was granted to him was the right to enjoy looking at a spectacle, to attend a performance from its beginning to its end.” The learned judge was considering the matter from a different point of view but I think those words correctly express the result of the contract: see also the judgment of Kennedy, L.J. This, I think, creates the relationship of invitor and invitee, and in such a case, from the nature of the invitation, the defendants obligation, I think, is not confined to the structure. In addition to his obligation with regard to the structure and the further obligation not to give a performance of an intrinsically dangerous nature, or, if he do so, to take the consequences, he is, I think, under an obligation to take reasonable care that the performance of

Page 613 of [1939] 4 All ER 609

the play does not expose to danger the person whom he invites to see it. If there be incidents in it which are dangerous in their nature if proper precautions are not taken, he would have to take greater precautions than if there were no such incidents, and I think that he must exercise reasonable care and skill in seeing that such precautions are taken.

Finally, Bankes LJ, delivering judgment in the same case, said, at pp 191, 192:

What then are the rights and obligations of the parties if the entertainment is provided, as it was in the present case, by an independent company, some member of which was guilty of the negligence which caused the plauntiffs injury? Those rights and obligations may, I think, be best described as being those of an invitee and an invitor as applied to the members of an audience invited to a theatre by the owner or lessee of the building to witness an entertainment there provided by persons who are not in his employ. The duty of the invitor is expressed in general terms by Buckley, L.J., in Norman v. Great Western Ry. Co. in these words, at p 592: “The duty of the invitor towards the invitee is to use reasonable care to prevent damage from unusual danger which he knows or ought to know. If the danger is not such that he ought to know of it, his liability does not extend to it.” It seems to me obvious that the duty of the invitor in a case like the present is not only confined to the state of the premises, using that expression as extending to the structure merely. The duty must to some extent extend to the performance given in the structure, because the performance may be of such a kind as to render the structure an unsafe place to be in whilst the performance is going on, or it may be of such a kind as to render the structure unsafe unless some obvious precaution is taken. As an illustration under the latter head I would instance a case where a tight-rope dancer performs on a rope stretched over the heads of the audience. In such a case the provision of a net under the rope to protect the audience in case the performer fell seems so obvious a precaution to take that in the absence of it the premises could not be said to be reasonably safe. In the present case the performance was one which included a discharge of pistols loaded with blank ammunition as one of the incidents. If the pistols had been properly loaded, it is difficult to see that the incident exposed any member of the audience in any ordinarily constructed theatre to any danger. On the other hand, if any one of the pistols was not properly loaded, what would otherwise be a safe performance became an exceedingly dangerous one, and any part of the auditorium might be rendered an extremely unsafe place to be in. Whether the circumstances were such that any negligence or want of proper care can be attributed to the appellant in relation to the loading of the pistol or in relation to the ammunition supplied for that purpose has not been investigated, and I do not think that justice can be done between the parties until this is done.

Accordingly, a new trial was ordered in that case, in order that, as Bankes LJ said, at p 192:

… the county court judge may investigate the circumstances and come to a conclusion upon them as to whether, in the sense which I have endeavoured to indicate, the appellant did or did not fail in the duty which he owed to the respondent of taking reasonable care that the respondent was not exposed to unusual danger of which he either knew or ought to have known.

That case, as I have said, was referred to in the present case by counsel for the defendants, partly by way of comparison and partly by way of contrast. Some points of the contrast are perfectly obvious. Cox v Coulson was a case which turned upon contract. The present case is a case which depends upon the allegation of tort. There was no contract here between the plaintiffs in this action and the defendantsno contract whatsoeverand the whole case against the defendants is a case of negligence, as it is alleged on behalf of the plaintiffs.

It was contendedor, at any rate, it was suggested in the course of the argument, no authority being citedthat in the present case the performers on the stage were the servants of these defendants. It was not suggested, as it could not be suggested, that there was anything in

Page 614 of [1939] 4 All ER 609

the performance of an intrinsically dangerous character. One performance which it was suggested bore some analogy to the performance in this case was where pistols and ammunition were likely to be used. The question whether the man the heel of whose shoe came off was a servant of the defendants was a somewhat different question. The agreement which existed was made between the Hackney and Shepherds Bush Empire Palaces Ltd, “the management of the one part,” and the defendants of the other part, and it was agreed for certain consideration that the defendants, who, for the purposes of this contract, were called the “producer,” would provide, produce and present at the Wood Green Empire a variety programme:

… at two performances nightly and at any matinees required by the management, during the week commencing 8 November 1937.

Clause 2 of the contract provides as follows:

The management will give the requisite use of the said theatre, stock sceneries, stock properties (but not consumable or perishable properties) and such orchestra and stage staff as are usually employed at the said theatre.

Clause 3 provides as follows:

The producer agrees to provide a full and efficient variety programme including Elsie and Doris Waters and supporting company to be the same as will play G.T.C. Houses prior to this date. The whole to be to the entire satisfaction of the management.

Clause 4 provides as follows:

The producer undertakes that the performances shall not be dangerous or likely to cause injury to persons or property …

Then there are other provisions to which I need not refer, and stipulations with regard to the sharing of receipts. That was the contract between the defendants and the management of the theatre.

Then the defendants for their part had made another contract, which was called an emergency contract. It was a contract made between them as the management of the one part and the Playboys, thereinafter called the artist, of the other part, whereby the management:

… engages the artist and the artist accepts an engagement to appear as required (or in his usual entertainment) at the theatre …

That contract, as a line in black type shows, is “Subject to the conditions of the Arbitrators Award, 1919.”

My attention was also directed, and properly directed, to that document, the Arbitrators Award 1919, which, according to the evidence, was at the material time the standard contract in such a case as this. That contract imposes many obligations. Under it, for example, the artist that is to say, the individual performerundertakes in cl 9 that his performance:

… shall not be dangerous to the artists, audience, or theatre employees. If any accident or injury results from the performance of the artist through the artists default, the artist shall pay for any loss occasioned to, or damage or costs incurred by, the management.

Again, by clause 13, it is provided as follows:

If the artists performance is contrary to law, or is objected to by any licensing

Page 615 of [1939] 4 All ER 609

or other public authority, the contract in respect to which the objection is made may be cancelled by the management.

By clause 19, it is further provided as follows:

The annexed rules and regulations shall be read and construed as forming part of this contract and the artist agrees to abide by all reasonable rules which may from time to time be made by the management for the good and orderly conduct or special requirements of their theatres, and which do not conflict with the terms and conditions of this contract, provided that such rules shall have been served on or brought to the notice of the artist.

In my opinion, when I look at these documents, and when I consider the evidence given in this case, it does not appear to be the true conclusion that the performers in the variety turn called “The Four Playboys” were the servants of the defendants. They had a contractual relationship with them. A certain degree of supervision was undoubtedly involved, but I do not think that the relationship of master and servant, employer and employed, was constituted by the contract. Although the term “producer” seems to have been not very aptly applied to this case, undoubtedly there was a relationship between the defendants and the individual players in the variety turn, and that relationship involved a certain element of supervision and control. According to Miss Doris Waters, as long as the artists abode by the terms of their contract, she and her sister had no control over them. I do not think I am putting the matter too high, but, at any rate, I cannot extract from these documents or from this evidence any obligation on the part of the defendants to a member of the audience in this theatrewhich was not the defendants theatre, and from the management of which the defendants received no payment directlyhigher than the obligation which arises between an invitor and an invitee, and that obligation is the obligation to take reasonable care. I cannot find from the evidence in this case that there was any higher obligation than that which was expressed, for example, by Buckley LJ in Norman v Great Western Ry Co, at p 592:

The duty of the invitor towards the invitee is to use reasonable care to prevent damage from unusual danger which he knows or ought to know. If the danger is not such that he ought to know of it, his liability does not extend to it.

This was a most unfortunate accident. Naturally it was an unpleasant one, and, for the moment, of a startling character, but it was an accident of a kind which had never happened before, and an accident of a kind which there was no reason to expect. There was no danger of an intrinsic character involved in this particular performance, and it cannot be said that there was any danger of which the defendants knew or ought to have known. It was said, and indeed it was said with reiteration, that here there was negligence on the part of somebody. I sec no evidence of any negligence on the part of these defendants, and, having heard the very fair evidence of Mr Leslie West Murphy, who was one of the Four Playboys, I think that there are no grounds for suggesting that there was any negligence on his part. He had, so far as he knew, a perfectly proper shoe, purchased from a well-known company of

Page 616 of [1939] 4 All ER 609

makers and suppliers. He had used the same sort of shoe for a long time, doing exactly the same kind of performance, and no evil consequence had followed. In my opinion, there was no reason to apprehend danger, and there was no failure, either on the part of the performer himself or on the part of these defendants, to take reasonable care.

It is to be observed that, while in the evidence one of the witnesses suggested that on the night of this accident the particular performer gave a rather violent kick, there is no such allegation as that in the statement of claim. Nor am I prepared to accept that evidence. The case for the plaintiffs, in my opinion, is disfigured by manifest exaggeration. I refrain from commenting further upon it. It is enough to say that I do not think that these defendants are liable under the head of negligence or otherwise, and it is on negligence, and on negligence alone, that this action is founded.

So far as damages are concerned, the question does not now arise, but, if it had arisen, and if I had had to assess damages in this case, I should not have awarded more than the modest sum of £50 to be divided in equal parts of £25 each for the two plaintiffs. However, as I have said, that is a purely academic point, because I do not think that these defendants are liable at all. I therefore give judgment for the defendants with costs.

Judgment for the defendants with costs.

Solicitors: Godfrey A Elkin (for the plaintiffs); Bevan & Co (for the defendants).

W J Alderman Esq   Barrister.

Rousou v Photi (Gort Estates Co, Third Party)

[1939] 4 All ER 616


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant: CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        8, 15 DECEMBER 1939        


Landlord and Tenant Fitness of property for human habitation Condition implied by statute Rent not exceeding £40 per annum Whether inclusive or exclusive rent Housing Act 1936 (c 51), s 2.

Practice Costs Poor person Burden on solicitor Proportion of profits costs RSC Ord 16, r 31B.

A part of a house was let to the defendant at 17s 6d per week. The corresponding annual rent would be £45 10s. The landlord paid all rates and taxes, which admittedly amounted to more than £5 10s. The defendant sub-let one room to the plaintiff, who was injured by a fall of the ceiling in that room. The plaintiff brought the present action for damages and the defendants landlord was added as a third party. The question whether this part of a house was let at a rent not exceeding £40 within the meaning of the Housing Act 1936, s 2, was ordered to be tried as a preliminary point of law. The plaintiff and defendant in the action had been granted a poor persons certificate and an application was made that the defendants solicitors might receive a proportion of his profit costs:

Held (i) “rent” in the section means the net rent, that is, the rent paid less the rates and taxes.

(ii) the defendants solicitor, by reason of the setting down of this preliminary issue, had had to bear a greater burden than he might ordinarily expect in a poor persons case, and was entitled under RSC

Page 617 of [1939] 4 All ER 616

Ord 16, r 31B, to an order that he receive £5 5s in addition to his out-of-pocket expenses.

Notes

The judge here has followed the conclusion of Lewis J in Jones & Jones v Nelson, but, in the latter case, the point did not require to be decided. The point is, therefore, now settled so far as a court of first instance is concerned. The order as to costs is, of course, purely one for the discretion of the court in each case, and is only of importance in showing that in a case of this nature such an application can be made. Whether such an application is granted is a matter to be decided solely on the merits of each particular case.

As to Implied Condition of Fitness for Human Habitation, see Halsbury (Hailsham Edn), Vol 20, p 204, para 222; and for Cases, see Digest, Vol 31, p 181, Nos 31583160.

As to Poor Persons Costs, see Yearly Practice of the Supreme Court 1939, pp 239, 240.

Cases referred to

Sheffield Waterworks Co v Bennett (1872) LR 7 Exch 409; 43 Digest 1088, 209, 41 LJEx 233, 27 LT 199, affd (1873) LR 8 Exch 196, 42 LJEx 121, 28 LT 509.

Smith v Birmingham Corpn (1883) 11 QBD 195; 43 Digest 1088, 210, 52 LJMC 81, 49 LT 25.

Wilkinson v Bury Water Board (1905) 92 LT 417; 43 Digest 1089, 215.

Jones & Jones v Nelson [1938] 2 All ER 171; Digest Supp.

Mackworth v Hellard [1921] 2 KB 755; 31 Digest 563, 7111, 90 LJKB 693, 125 LT 451.

Preliminary Issue

Preliminary Issue to determine the proper construction of the Housing Act 1936, s 2, the question being whether the words “the rent” used in that section mean inclusive or exclusive rent. The facts are fully set out in the judgment.

N J Skelhorn for the defendant.

G F Kingham for the third party.

15 December 1939. The following judgment was delivered.

ATKINSON J. In this case, the defendant is tenant of two rooms on the second floor which he rents from the Gort Estates Co, and he claims to be indemnified by the company against the plaintiffs claim on the ground that the letting is within the Housing Act 1936, s 2, and that, therefore, it was a term of the letting that the premises were, and would be kept, fit for human habitation.

On 24 October 1939 an order was made that the defendant and the third party, Gort Estates Co, proceed to trial of the issue as to whether or not the letting was within the provisions of the Housing Act 1936. There is no dispute as to the facts. The accident happened in September 1937. On 26 July 1937 the Gort Estates Co let the second floor of No 27, Stephen Street, to the defendant at a rent of 17s 6d per week, payable in advance, the company paying all rates and taxes. In 12 months, if the tenancy lasted as long as that, a sum of £45 10s would be paid by the tenant. It is agreed that the rates and taxes paid in respect of the premises let to the defendant exceed the sum of £5 10s. The Housing Act 1936, s 2, provides as follows:

(1) In any contract for letting for human habitation a house at a rent not exceeding (a) in the case of a house situate in the administrative county of London, £40;

Page 618 of [1939] 4 All ER 616

(b) in the case of a house situate elsewhere, £26; there shall, notwithstanding any stipulation to the contrary, be implied a condition that the house is at the commencement of the tenancy, and an undertaking that the house will be kept by the landlord during the tenancy, in all respects reasonably fit for human habitation:

The definition of “house,” which is in sub-s (3), is as follows:

… the expression “house” includes part of a house.

The main question is in regard to the meaning of the word “rent” in that section. It is said by the company that it means the sum at which the house is let, the amount actually paid by the tenant to the landlord notwithstanding that the landlord has to pay away part of that sum in rates, etc, and, further, that, if one multiplies 17s 6d by 52, the amount comes to over £40 in a year, and, therefore, the house is outside the section. For the tenant, it is said that the section refers to the true or net rent, a sum arrived at after deducting at least the rates and taxes payable, and, further, that a weekly letting at 17s 6d is not the same as a yearly letting at £45 10s, as the latter sum makes no allowance for what is called “voids.”

The first point noticeable about the section is that it does not indicate any period in respect of which the rent of £40 is to be payable, but I think it must be takenand I understand that both counsel take the same viewthat the legislature had in mind a yearly letting of £40. If by “rent” is meant the actual sum agreed to be paid by a tenant, as the third party contends, it would seem that weekly tenancies are not provided for. I have great difficulty in seeing how a contract to take a house on a weekly tenancy is the same thing as a contract to take a house at a yearly rental, and yet it is impossible to suppose that the legislature meant to exclude houses let on weekly terms. The declared aim of the statute was to protect the small houses. The heading immediately above cl 2 reads as follows:

Provisions for securing the repair, maintenance and sanitary condition of houses. Obligation of lessors of small houses.

The marginal note is:

Conditions to be implied on the letting of small houses.

On the other hand, if by “rent” is meant the sum which represents the true annual value or net rent, this difficulty is avoided. The section would read in this way: “In any contract for letting a house at a sum which indicates a true annual value or rent not exceeding £40. …” Again, the declared aim being to protect small houses, it is reasonable to suppose that the legislature meant to provide a uniform standard whereby to decide whether or not a house was a small house. One man has two houses exactly alike side by side. He lets one at £30 per annum, the tenant paying rates and taxes amounting to, let us say, £12. It is admitted that this house is within the section. The other is let at £42, the landlord paying the rates and taxes of £12. Can it reasonably be said that this house is not equally as small a house as the other? Can it really be thought that the legislature meant to protect the one and not the other? Can an astute landlord take a house out

Page 619 of [1939] 4 All ER 616

of the Act by saying, “I will pay the rates and taxes,” and then adding the amount to the rent? Again, there is no means of comparison with other houses as regards their worth if the introduction of adventitious advantages can be taken into consideration in fixing rent. It seems to me that one is driven to the conclusion that the legislature had in mind the sum the tenant pays for the right to occupy the premises in a normal state and without adventitious advantages, or, putting it the other way round, the sum which the landlord would put into his pocket in a year for rent after paying rates and taxes.

There are several cases which throw light on the problem, and which I think indicate that that is the true view. The first to which I was referred was Sheffield Waterworks Co v Bennett. By a local Act, the plaintiffs there, according to the headnote:

… were bound to supply the houses within a certain district with water “at the following rate per annum, that is to say, where the rent of such dwelling house” should not amount to £7 per annum, at a rate not exceeding 6 per cent. per annum on such rent. … The defendant was owner of numerous small houses supplied with water by the plaintiffs, in respect of which he paid, either under statutory obligation or by voluntary agreement, the poor-rate, water-rate, and district-rate: Held: that rent in sect. 79 was equivalent to annual value, and that in estimating the rents on which the water-rate was payable, the defendant was entitled to deduct the rates so paid by him.

In the same case, Bramwell B pointed out, at p 416, one of the difficulties to which I have alluded.

On the other hand, the defendant insisted that it was impossible that the word “rent” could have the meaning contended for by the plaintiffs; and he called attention to the fact that the Act always speaks of the rent “per annum” of the premises, so that where there was no letting at a yearly rent, but from month to month or week to week, the case was on that construction not provided for.

Later, he said, at p 418:

But the defendant, as I said before, contends that this [the amount included for rates] really is no part of the rent; it is not part of the annual value of the premises. … It would be unreasonable to say that these things contributed to the rent of the houses, although as between landlord and tenant they might conveniently use the term “rent,” and agree that it should be distrained for, and in point of law it might all issue out of the realty. It is impossible to suppose that, for the purposes of the Act of Parliament, and to enable the company to charge rates upon the sum so payable, it would be rent.

Both the judgments really contain a lot of helpful matter. I do not want to read more than is necessary, but there is a paragraph in the judgment of Cleasby B, at p 420:

The word “rent” cannot signify strictly the rent actually or accidentally paid. In a row of houses all of equal value, one might be let at a nominal rent from love or affection; another might be let at a greatly reduced rent to a servant in the employ of the landlord; another might yield a small rent because the tenant had repaired the house himself or paid a premium; and no one would contend that in any such cases the actual rent would be the criterion. It would not be the criterion in any case in which it does not form a means of comparison with other houses us regards their worth. In general, the rent paid is what the house is worth, and is the real criterion of value as distinguished from a mere estimate. It makes the test a fact which is certain, and excludes partiality.

He proceeded to hold that the word “rent” in the section meant the proper rent to a tenant paying the rates and charges regularly paid by the tenant, of which the actual rent, when the tenant does pay those

Page 620 of [1939] 4 All ER 616

rates and charges, is in general the proper criterion. That is the same thing as the yearly worth or annual value.

The next case was, I think, Smith v Birmingham Corpn, which turns upon the construction of an expression which is, I think, exactly equivalent to the one it is agreed must be read into the Housing Act 1936. The headnote reads as follows:

It was provided by a Water Act that the charge to be made for the supply of water for domestic use should be at a rate varying according to the “annual rent” of the premises supplied. The appellant was the owner of certain houses supplied with water by the respondents under the Act. The houses were let at weekly rents, the appellant paying all rates charged thereon, and also for all repairs and insurances in respect thereof. … The respondents charged the appellant with water-rates calculated on the following basis: they multiplied the weekly rents by 52 and deducted from the amount so arrived at the actual sums paid by the appellant for rates, and then charged the water rates upon the balance: Held, that, in order to arrive at the “annual rent” upon which the water-rate was to be computed, an allowance should be made in respect of “voids,” ie, houses lying vacant from time to time; and that the actual amount of the poor-rates and other rates paid by the appellant was rightly deducted. …

The headnote then went on to state that certain other deductions which the landlord claimed were not admissible. It is clear authority that the definition was trying to arrive at the real meaning of the expression “annual rent” when one wants to apply that to weekly tenancies. The amount paid by the landlord for rates and taxes must be deducted, and also there must be deducted a proper sum on account of voidsthat is, the chance of houses let on weekly terms being empty from time to time.

Then the same view was taken in Wilkinson v Bury Water Board, and the very point was considered by Lewis J in Jones & Jones v Nelson. The actual decision in that case turned upon the point that no notice of the want of repair had been given to the landlord, and, therefore, that he was not liable to the claim that was being made against him. The point I have to determine, however, was apparently fully argued, and the judge expressed a very clear view as to what the expression “rent” meant, and, although it is not an actual decisionhe says it is not himselfit is a very valuable guide to me to the conclusion at which I ought to arrive. He says, at p 173:

The question which is put to me, and which I have to decide, is whether or not in this section of the Act “rent” means 12s. 6d. or 12s. 6d. less the rates.

There is authority for saying that “rent payable” means what it saysnamely the amount which is given to the landlordbut that is not what the section says. The section says “rent,” and I am inclined to the view that Mr Gormans point as to this is right, and that the word “rent” as used in this section is equivalent to annual value, or the amount which actually comes into the landlords pocket. I incline to this view upon a consideration of the decision of the court in Sheffield Waterworks Co. v. Bennett, where it was held that “rent” means the amount which comes into the landlords pocket, and not the gross rent the tenant has to pay. The considerations in that case apply here, and I should be prepared to hold that, in the circumstances, the house was a house within the Housing Act, 1936, s 2. I say that that is my opinion. I have not considered it very carefully, because it seems to me quite unnecessary for me to do so as no notice that the house was getting out of repair was ever given, and therefore the landlord escapes the liability for any breach of warranty there may be.

Apparently, Lewis J, had not the advantage of having had Smith v

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Birmingham Corpn reported to him, but obviously, although the name is not mentioned, he had been referred to the last case which I will mention, Mackworth v Hellard. There the question was what “rent payable” meant in the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, s 12(7), which provides as follows:

Where the rent payable in respect of any tenancy of any dwelling-house is less than two-thirds of the rateable value thereof, this Act shall not apply to that rent or tenancy. …

It was there held by the Court of Appeal that “rent payable” meant the rent which the tenant had to pay, and not the net amount which the landlord got after paying the rates and taxes. That decision seems to me to be no help in the case I have to decide. I respectfully agree with what Lewis J said about it. If one reads that decision, it seems to me that it really all turns on the word “payable.” What was the rent payable? The court felt it could not get away from that, and distinguished the cases to which I have referred on that ground. That word does not come into this at all. It is “at a rent not exceeding £40 per annum or at an annual rent not exceeding £40.” The word “payable” is not in the section, and cannot be read into the section. Therefore, I think that that case is clearly distinguishable, and is no help to me in the case which I have to decide. In Wilkinson v Bury Water Board the phrase to be interpreted was “annual rack rent or value.” The same view was taken there as in Smith v Birmingham Corpn. I have come to the conclusion that the only reasonable interpretation is that contended for by the defendant, and that his rooms constitute a house which was within the section.

It is unnecessary to decide the further point as to whether, in seeking to ascertain the true annual rent, one has merely to multiply the weekly rent by 52 or whether one must make a deduction from the sum so arrived at on the ground that a yearly letting avoids the risk of voids, which is inseparable from a letting on weekly terms. Smith v Birmingham Corpn seems to me to be a clear authority for the proposition that some such deduction would have to be made, but I need not deal further with that, as I have come to a clear view on the other point. I direct that judgment should be entered for the defendant on this issue, with costs.

Skelhorn: The defendant in this action is a poor person. I apply on behalf of the solicitor instructing me, that your Lordship should make an order under RSC Ord 16, r 31B, either (2) or (3), that the defendant shall recover against the third party

… profit costs, or a proportion of profit costs, or a sum of money in respect thereof, in addition to out-of-pocket expenses properly incurred in the course of the proceedings, but not fees to counsel or court fees.

In the first place, the defendant is a Greek, who has little or no knowledge of English, and a substantial burden has been put upon the solicitors in this case in getting instructions with regard to the relevant matters. In addition, the solicitors were in the position that, when they

Page 622 of [1939] 4 All ER 616

accepted instructions in this matter under the poor persons certificate which he was granted, they were dealing with a matter which was simply a defence to a claim against him. Since then, they have had to take these proceedings and join a third party, with the result that there have been substantial interlocutory proceedings, resulting eventually in this issue having to be tried before your Lordship, entirely separately, and in addition to the original issue which the solicitor was concerned to defend on behalf of his client under the poor persons certificate. In those circumstances, I should ask your Lordship to say, either that there were special circumstances within para (2), or under para (3) which states:

Where it appears to the court or a judge that the proceedings are of such length or difficulty as to throw an unusual burden on the solicitor acting for the poor person, the court or judge may order the other party to pay, in addition to out of-pocket expenses properly incurred in the course of the proceedings, such sum as the court or judge thinks fit in respect of such unusual burden.

Under one or other of those paragraphs I should ask your Lordship to say that this is a proper case in which the solicitor should obtain remuneration in addition to his out-of-pocket expenses.

Kingham: Clearly there should be no costs. Here the third party is fighting against a poor defendant upon a point upon which there was no decision. It is very necessary for him, the only person who can in any possibility be called upon to pay, to see that this matter is properly defended, and to get out of it if he can. Clearly, if in fact the rent was more than £40 per annum, he ought not to have been brought into this matter at all, and therefore a speedy and proper way of getting a decision on that point was the one under which an issue should be tried as to whether the rent exceeded £40 upon the proper construction of the Act of 1936. A less burden is placed upon the defendants solicitor, because now at the trial he will not have to try this issue which would have been raised at the trial itself.

Atkinson J. I think what is underlying the rule is this. A solicitor acting for a poor person, if an unusually big burden is put upon him, ought not to be working for nothing to the advantage of the man who has lost, and who would otherwise have to pay full costs. If this man was not a poor person, without question the third party would be paying full costs. The only point on which the application can rest is that the proceedings have been unusually complicated and it has not been just one trial and one fight, but a sort of excrescence has been added on to the normal proceedings, throwing a good deal of extra trouble on the solicitor, more than was expected. What I am disposed to do is to order £5 5s as profits costs in addition to the out-of-pocket expenses.

Solicitors: Leonard Kasler (for the defendant); Walfords (for the third party).

C St J Nicholson Esq   Barrister.

1940


• Volume 1 • Volume 2 • Volume 3 • Volume 4 •        



Volume 1


English and Scottish Co-Operative Properties Mortgage and Investment Society Ltd v Odhams Press Ltd and Another

[1940] 1 All ER 1


Categories:        CIVIL PROCEDURE: TORTS; Defamation        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        5, 6 DECEMBER 1939        


Libel and Slander Libel Statement reflecting on plaintiff in way of his trade or profession Words true in ordinary meaning Construction of innuendo Headline in large type “False profit return charge against society.”

The plaintiffs, a society registered under the Industrial and Provident Societies Acts, were charged with making a return of income which was false in the sense that, without any suggestion of moral blame, it was, as a question of law, inaccurate. The defendants published an accurate report of the charge under a headline in large italic type “False Profit Return Charge Against Society.” The plaintiffs pleaded an innuendo that those words meant and were understood to mean that the plaintiffs had deliberately falsified their accounts in order to deceive their members and the general public. At the trial before Humphreys J, the jury decided that the innuendo had been proved but awarded only a farthing damages. The plaintiffs appealed against the award of damages and the defendants cross-appealed on the ground that there was no evidence to be left to the jury contending that the words were not capable of the meaning alleged in the innuendo and were, in their natural and ordinary meaning true:

Held (i) the words were capable of the innuendo alleged and the matter was, therefore, properly left to the jury.

(ii) the jury having decided that the defamation alleged in the innuendo had been proved, the award of one farthing damages was wholly insufficient. There must, therefore, be a new trial limited to the assessment of damages.

Notes

The effect of a publication of libellous words may be aggravated by the type in which they are printed and the place in which they are inserted in a newspaper. The modern newspaper has developed a headline printed in large type and running across the entire width of the page. Such headlines must often be very condensed and make use of the minimum number of words. The present case considers how these matters affect the libellous nature of such words and more particularly the extent to which such matters may justify an innuendo.

As to Innuendo, see Halsbury (Hailsham Edn), Vol 20, pp 425433, paras 511520; and for Cases, see Digest, Vol 32, pp 6467, Nos 912952.

Page 2 of [1940] 1 All ER 1

Cases referred to

Tolley v Fry (J S) & Sons Ltd [1931] AC 333; Digest Supp, 100 LJKB 328, 145 LT 1.

Nevill v Fine Art & General Insurance Co [1897] AC 68; 32 Digest 72, 1010, 66 LJQB 195, 75 LT 606.

Capital & Counties Bank v Henty (1882) 7 App Cas 741; 32 Digest 21, 121, 52 LJQB 232, 47 LT 662.

Sturt v Blagg (1847) 10 QB 906; 32 Digest 72, 1011, affg (1846) 10 QB 899.

Ratcliffe v Evans [1892] 2 QB 524; 32 Digest 170, 2086, 61 LJQB 535, 66 LT 794.

South Hetton Coal Co v North-Eastern News Assocn [1894] 1 QB 133; 32 Digest 148, 1795, 63 LJQB 293, 69 LT 844.

Draper v Trist [1939] 3 All ER 513; Digest Supp.

Sutherland v Stopes [1925] AC 47; 32 Digest 142, 1739, 94 LJKB 166, 132 LT 550.

Appeal

Appeal by the plaintiffs from the verdict and judgment at the trial of an action before Humphreys J and a special jury in the Kings Bench Division on 11 July 1939 and cross-appeal by the defendants. The defendants published in their newspaper, the Daily Herald, an announcement that the plaintiff company had been convicted before magistrates of making a return in which they wrongfully stated their profits. The plaintiffs admitted that the paragraph contained nothing that was not literally true and omitted nothing relevant, but said that the manner in which the information was presentednamely, by the use of large headlinesconveyed the meaning that the company had deliberately falsified their accounts with intent to deceive, and had carried on their business by dishonest methods, and other defamatory meanings. In summing up, the judge left the evidence in support of the innuendo to the jury. On the quantum of damages, he directed the jury that the plaintiffs claimed no special damage but that the law always assumed that a defamatory libel might have caused the plaintiff some damage. The jury returned a verdict for the plaintiffs, finding that the libel bore all the meanings attributed to it in the innuendo. They asked the judge whether they were bound to award damages, and his Lordship replied that they were, but that they were not bound to award any particular sum. They thereupon awarded one farthing damages. Counsel for the defendants thereupon applied to the judge to disregard the finding of the jury, to rule that there was no evidence upon which they could possibly have arrived at their verdict, and to say that to award one farthing damages on the facts which they found was a compromise verdict based on a complete misunderstanding of the matters before them. Counsel for the plaintiffs maintained that the damages were irrelevant, and that he had only to satisfy the jury that the words bore the meaning in the innuendo. He contended that he need not call any evidence as to their meaning. The judge, giving judgment on this application, said that the admission that the words were literally true was not conclusive. Circumstances were conceivable in which true words might be defamatory.

Page 3 of [1940] 1 All ER 1

There was material upon which the jury were entitled to conclude that the article made an attack upon the company, that one or more of the allegations in the innuendo were proved, because of the way in which the statement made in the newspaper would be understood by the ordinary reader, and that the impression on the mind of the ordinary reader would be that the company had done something very discreditable. He gave judgment for the plaintiffs without costs. The defendants appealed and the plaintiffs cross-appealed.

Valentine Holmes and Hugh Holmes for the appellants.

H St John Field KC and C N Shawcross for the respondents.

Valentine Holmes: As the jury found that the words meant that the plaintiffs deliberately falsified their accounts, and as the defendants made no suggestion reflecting upon the integrity or stability of the company, the award of one farthing damages showed either that the jury must have taken into consideration matters which they were not entitled to consider, or that they were misled by the summing up and interlocutory observations of the judge. The judge should have told the jury that the law assumed that a man who has been libelled must, not might, have suffered damage: Fraser on Libel and Slander, 6th Edn, p 34, Ratcliffe v Evans, South Hetton Coal Co v North-Eastern News Assocn and Draper v Trist. (Counsel was not called on to reply on the cross-appeal.)

Field KC: The words were literally true in their natural and ordinary meaning. When words are true, they cannot be made a libel by innuendo. Capital & Counties Bank v Henty, Nevill v Fine Art & General Insurance Co and Sutherland v Stopes. The judge ought not to have left the case to the jury.

Shawcross: Where the trial judge has held that the words are capable of a defamatory meaning and the jury have found that they bear a defamatory meaning, the defendant is not obliged to satisfy this court that the words were not capable of bearing a defamatory meaning. He has only to show that there was not sufficient evidence on which the jury could reasonably find that the words bore a defamatory meaning: per Lord Blackburn in Capital & Counties Bank v Henty, at p 775. A new trial ought to be had, because the judge admitted in evidence a former article in the same newspaper as tending to show that the article complained of had, or was intended to have, a worse meaning than appeared on its face, because he did not direct the jury to dismiss from their minds the evidence brought by the plaintiff to show such worse meaning or the evidence of the later article, and because the verdict of the jury was so obviously a compromise that, if a new trial of all the issues were not allowed, a serious miscarriage of justice would occur.

Valentine Holmes and Hugh Holmes for the appellants.

H St John Field KC and C N Shawcross for the respondents.

6 December 1939. The following judgments were delivered.

SLESSER LJ. This is an action for defamation brought by a society registered under the Industrial and Provident Societies Acts, the English and Scottish Co-operative Properties, Mortgage and In-

Page 4 of [1940] 1 All ER 1

vestment Society Ltd, against Odhams Press Ltd, and the Daily Herald Ltd, who are respectively the printers and proprietors and publishers of a daily newspaper known as the Daily Herald. The article in that paper which is now complained of was in the issue of Thursday 23 December 1937. The statement is contained in various kinds of type now usual in newspapers, and more particularly in those making a popular appeal. There is written in italics in large print at the top of the statement these words: “False Profit Return Charge Against Society.” To those not used to reading newspapers, it may be a little difficult, in the absence of all the verbs, to give any sense to those words, but we have all, I think, become familiarised with the modern methods of expression used by newspapers in their headlines, and those words, I think, would convey to an ordinary man of reasonable intelligence the meaning that against the society there had been, or there was about to be, made a charge of making a return which stated a false profit. I think that that is a fair paraphrase of those somewhat curious words. Then follow words which, for the most part, are themselves unobjectionable, and are, it is conceded, in their natural meaning, an accurate statement of facts:

Summonses for making a return wrongfully stating the profit for 1936 have been issued against [the defendant society] and the managing director, Mr. J. Wolstenholme. This action has been taken by the registrar of friendly societies. The case is put down for hearing at Marlborough Street Police Court on Dec. 30.

Then the print gets slightly blacker, and more emphatic:

Annual returns

Annual returns for 1936 made to the registrar of friendly societies showed a profit of £4,833, but this was made, as was stated in the return, only after including £11,131 net proceeds from the sale of a ground rent of one of the societys properties, and £7,768 surplus of realisation on other properties.

The print then becomes fainter:

In their report on the 1936 accounts, the auditors drew attention to the sale of the ground rent, and gave their opinion that this amount was not a realised profit.

Then in large letters comes “The Directors,” and then in smaller letters:

The directors of the society at the time of the last annual report were Brig.-Gen. Sir William Horwood, G.B.E., K.C.B., D.S.O. (chairman), a former Commissioner of the Metropolitan Police: Sir Gervais Rentoul, K.C., a London magistrate. Lord Massereene and Ferrard, D.S.O., and Mr. J. Wolstenholme (managing director). Sir Gervais Rentoul told the Daily Herald last night: “The summonses are in connection with the balance sheet issued last night, when I was a director. Viscount Massereene resigned two or three months ago because he was ill. Sir William Horwood and Mr. Wolstenholme are still directors.”

On Friday 10 Decemberthat is to say, some 13 days before the issue complained ofthere had been another statement in the same newspaper:

Friendly Society Heads may be Sued.

A court case of supreme interest to all investors in mortgages and property-holding friendly societies of a certain category is likely to come before a London court. In consequence of collaboration between the chief registrar of friendly societies and another authority, proceedings are contemplated. Such action, if taken, will be against the directors of a registered friendly society with headquarters in London. Among the directors are men of title and eminent public

Page 5 of [1940] 1 All ER 1

service. The action arises out of alleged contravention of the special Act governing friendly societies. Inquiries in progress cover the activities not only of this one particular society, but of others in which the trading methods are of a rather similar character.

In the statement of claim, the complaintat any rate, so far as we have now to consider the matteris limited to the issue of 23 December, which I have read. There is pleaded in para 5 the following innuendo:

By the said words the defendants meant and were understood to mean that the plaintiffs had deliberately falsified their accounts, and had published a return of annual profits which they knew to be wrong and had been advised by their auditors to be wrong and that they had done so with a view to deceiving their shareholders and bondholders and the general public as to their true financial position, and that they were insolvent or in an unstable financial position, and that they were a society which investors should avoid, and that they carried on their business and attracted investors by dishonest methods.

The innuendo there pleaded was objected to by the defendants, on the ground that the words in their natural and ordinary meaning were incapable of the innuendo there set out. The judge ruled, however, that the words were capable of an innuendo, and left the matter to the jury. That ruling is the subject of a cross-appeal.

The words being, therefore, left to the jury, the judge for convenience disintegrated them into six different allegations, to each of which the jury replied “Yes,” as follows:

… meant and were understood to mean [that the plaintiffs] had deliberately falsified their accounts, [and that they] had published a return of annual profits which they knew to be wrong, [and which they] had been advised by their auditors to be wrong, [and] that they had done so with a view to deceiving their shareholders and bondholders and the general public as to their true position, [and] that they were insolvent or unstable, and a society which investors should avoid, [and] that they carried on their business by dishonest methods.

All those words the jury found were words which arose out of the statement made in the issue of the Daily Herald on 23 December 1937. A more terrible indictment of a society of this kind it is difficult to imagine. Every kind of fraud and falsity, according to the jury, was suggested by the words used, and, of course, so far as the innuendo was concerned, there was no attempt at any justification. Nevertheless, the jury, despite this finding of falsity and fraud and attempt at deception of shareholders and the like, compensated the plaintiff society in the small sum of one farthing, and there is an appeal to this court for a new trial on that ground.

Counsel for the appellants says that, in his view, the new trial should be limited to the quantification of damages, and, as on all other matters he has succeeded, he asks us to limit the order for a new trial, as was done in Tolley v Fry (J S) & Sons Ltd, to the assessment of damages.

The grounds on which the cross-appeal is based logically come before the appeal of the appellants, because, if it be true that the judge was wrong in leaving this matter of innuendo at all to the jury, it would follow that the plaintiffs would fail, because they admitted that in one sense the words as stated in the article are true. I say “in one sense” advisedly, because, as I see this case, some confusion appears to have arisen in this way. It is said by the plaintiffs that all that those words

Page 6 of [1940] 1 All ER 1

would convey, in their natural sense, without reference to extrinsic facts, to any reasonable person of ordinary intelligence, experience and education, is the meaning which is attributed to them by the innuendo. They do not seek to set up here any secondary meaning in this sense. They do not say that those words are words which require evidence of special circumstances, or of some special situation, so that the innuendo may be put upon them. They say that the ordinary newspaper-reader, reading those words, would form the opinion that the defendants did make those accusations against the plaintiffs which are set out in para 5 of the statement of claim. That, as I understand, is the gravamen of their complaint. When one comes to look at the language, the matter being, of course, limited on this head to the question of whether the judge was right in holding that the words were capable of the innuendo, without evidence of any secondary or special meaning, but in their natural and ordinary meaning, which is what the plaintiffs were contending for, one finds this at the outset. The heading of the whole matter in large type in italics contains these words: “False Profit Return Charge Against Society.” It is the society which, as they describe it, is charged with having made a return falsely showing a profit.

If one stops at that heading, what does the word “false” convey to the ordinary reader? In the dictionary sense, the word “false” may mean deceitful, untrue or dishonest; or it may have the less usual, but I think still an ordinary meaning, of mistaken, inaccurate, or untrue, but not implying any moral obliquity at all. However, I do not think that this is the type of case to which Lord Halsbury LC refers in Nevill v Fine Art & General Insurance Co, where one has to seek for the evil meaning and discard the innocent meaning. I think that the ordinary reader, reading this, would assume that the word “false” in this context, and stated with this imprint, meant something fraudulent. I think one may take into consideration the fact, as was said in Capital & Counties Bank v Henty by Lord Selborne LC, at p 744, approving what Wilde CJ had said in Sturt v Blagg, at p 908, of “the manner and the occasion of the publication.” This is published in a popular newspaper. If the words “false profit” in a popular newspaper mean that which is merely untrue, in the technical sense that something had been attributed to profit which, being the sale of freehold land, technically should not have been so called, I do not think that that would have found expression in large italicised block type as something worthy of observation by the readers of the newspaper. As I pointed out during the argument, we have frequently in this court, sitting in revenue cases, to decide the very difficult question whether a particular profit or gain is to be considered income so as to attract tax or whether it is a capital increment. I have never known the Daily Herald or any other daily newspaper, when some gentleman has falsely, if you please, stated that to be capital which has turned out ultimately to be income, to honour that state of things by a statement in

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large letters in italics: “False return to the income tax authorities.” I think one is entitled to have regard to the mode and occasion, and to say that, in the mind of the ordinary man, a jury might come to the conclusion that these words were defamatory in their ordinary and natural meaning, having regard to the place in which they appear in this paper and having regard to the ambiguous, at least, if not to the primary, meaning of the word “false”namely, that it connotes something of a fraudulent nature. All that the judge had to do was to decide that these words were capable of that meaning, and I think he was right in leaving the matter to the jury in that form.

We have been told the history of this matter. The facts are these, so far as they are material. It is quite true that a summons was taken out against this society, which, being registered under the Industrial and Provident Societies Acts, is required to make an annual return under the Act of 1893. That annual return has now, by an amending Act, to be passed by public auditors. A difference of opinion arose between the society and those auditors as to whether or not, on the return, a certain accession to the wealth of the society should be treated as a profit. It seems to me immaterial for this purpose to consider whether the method employed was an appropriate method of dealing with the matternamely, to bring proceedings under s 10(c) of the 1913 Act before the magistrate in the form of an information alleging that the society had made a return which was false. Whether it is expedient to test these nice points by means of criminal proceedings I doubt. We have expressed recently, in a test case under the Stamp Act, the view that it is very often undesirable. Be that as it may, this case was brought before the magistrate after this publication in the Daily Herald, with the result that this society was fined £5, it being stated by counsel for the prosecution more than once, and repeated by the magistrate, that no suggestion of fraud or improper dealing had been made at all. The magistrate took the view of the public auditors that technically this was not a profit, a view contrary to the advice which had been given to the society, which had taken legal opinion on the matter of an eminent Kings Counsel. So much, therefore, for that part of the cross-appeal. I am of opinion, for the reasons I have stated, that it fails.

Certain other grounds, however, were alleged with regard to this cross-appeal. One was that there was a misdirection by the judge, in that he had drawn the jurys attention to the earlier issue of the paper, which I have read, of 10 December. I need not pause once more to set out its terms. In so far as that earlier issue was evidence, I think that it was rightly received as evidence. The only objection is that it does not identify by name the society and the directors. The satisfaction of the appetite of curiosity raised on 10 December was only completed on 23 December. Nothing, however, turns on that matter. When the judge did in fact deal with this, he simply said that, as a matter of history, he would refer to the issue of 10 December. It might be that more might have been

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made of it on behalf of the plaintiffs, but, as I understand, very little use was made of it at all. There is obviously no misdirection there.

Then I come to another objection which was raised rather by Mr Shawcross than by Mr St John Fieldnamely, that the view of Mr Dean, who was called as a witness, and who was the chairman of directors of the plaintiff society, should not have been allowed to have been before the court. Much of Mr Deans opinion of this libel was elicited in cross-examination, and I find it difficult to see how that can possibly be a ground on behalf of the defendants for a new trial. I am rather inclined to agree that the opinions of Mr Dean may be entirely irrelevant, but their irrelevance has not in any way caused a miscarriage of justice.

Then one comes to the substance of this matter, which is the ground of the appeal by the plaintiffs. As I have said, counsel for the appellants based his appeal on two grounds. The first is misdirection. With regard to misdirection, what is said is this. The judge left the jury with the impression that, on the one hand, either they must be satisfied that the plaintiffs had suffered a loss in business as a result of this libel, or, on the other hand, if they thought that was not so, they must not give any pecuniary damage other than something purely nominal or nothing at all.

The actual words particularly complained of were these:

It was open to the plaintiff society here, if they had thought it right to do so, to plead what is called special damage. I daresay some of you may have had experience of that, and you may have been in a jury-box before. If not, I daresay you have read accounts of trials in which people have said, “I have been damaged by this man. I had a good contract which was just going to be signed, and, as a result of my being held up as a rogue, the thing went off. I was going to get a big order and make a large deal, and the deal went off,” and so forth. That is what is called special damage. It is damage which the plaintiff says can be shown to have arisen as a result of this libel, or injury, or whatever it was. Nothing of the sort was suggested here. There was no evidence that the company lost any business, but it is true that, if a person publishes a defamatory libel of another, the law always assumes that that may have caused him some damage.

I speak with considerable diffidence, having regard to the very great experience of this judge and his, if I may say so, extreme capacity, particularly in summing up to juries, but I cannot help feeling in this particular paragraph, more particularly having regard to what happened in the result, that the jury must have come to the conclusion that, in so far as they were not satisfied that the company had lost any business, they must treat the damages as something quite nominal or trivial. If they did go into their deliberations with that point of view, they were entirely in error. A libel by the invasion of a legal right gives a light to damages. It is the duty of the jury to assess those damages, which may be punitive or contemptuous, or, in an ordinary case, may be such as would recompense the plaintiff for the wrong done to his reputation. That is altogether apart from any question of special damage. I think that that is quite clear, and really needs no authority at all.

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In the result, the jury gave a farthing. They seem to have been reluctant even about that, because they asked the judge: “Are we bound to award damages?” That may have arisen from the fact that the judge had said they “may” award damages. The judge then, perfectly correctly, told them:

Members of the jury, you are bound, if you come to the conclusion which you have come to, to say what damages are recoverable. I do not say you are bound to award any particular sum.

To this the foreman of the jury replied, “Then the damages will be one farthing, my Lord,” which rather looks as though they would have been inclined to give no damages at all if they had not been compelled to do so.

However that may be, whether it be due, perhaps, to a misunderstanding by the jury of the position and of their duty consequent upon the direction, or whether it be due to the fact that they acted in a way in which in law no reasonable jury could act, I know not. In the result, they gave a farthing, which seems to me a finding impossible to sustain. For myself, for the reasons I have indicated, I think that there was here a misdirection, but, in any case, I think that no jury, having found this terrible series of innuendoes to be what an ordinary person would understand by reading this issue, could properly award such a sum. It seems to me so wholly insufficient to the case that I think there will have to be a new trial.

I think it would be very wrong if, in ordering a new trial, we were to put the appellants in jeopardy once more as to the whole of the matter. They have established to the satisfaction of the jury that an article has been written containing, in the meaning which a normal man would put upon it, these injurious reflections. It seems to me, therefore, that the only matter left, the cross-appeal having failed, is the question of damages, and on that, as I say, in my view there should be a new trial. As the parties cannot consent to letting this court assess the damages, there will have to be a new trial limited to the quantification and assessment of damages.

MACKINNON LJ. I agree. The accurate title of the item of news published by this paper might have been something like this: “Dispute between accountants as to the proper principle of drawing up a balance sheet.” I can hardly doubt that this newspaper would have thought such a matter was not worth reporting at all, even in the smallest paragraph, or that, if it were reported in the smallest paragraph in the smallest type, it would not have been of the least interest to any of its readers.

Here I find, following on a paragraph with enormous headlines on 10 December intimating that a charge is going to be brought, with the assistance of a person clearly indicated as the Director of Public Prosecutions, against a friendly society with directors of title, there is in this issue of 23 December a lengthy paragraph with headlines in very large type, which includes the words “false charge” and begins with the words

Page 10 of [1940] 1 All ER 1

“Summonses have been issued.” I find, which is quite an unnecessary addition to the paragraph, the names, titles and qualities of the directors. It is alleged that this publication meant, and was understood to mean, and was capable of being understood to mean, only that the directors had been guilty of some criminal turpitude. I am clearly of opinion that the words are capable of that interpretation, and that, therefore, the plaintiffs case was rightly left to the jury. That is all that it is necessary for me to say in deciding the cross-appeal, but, as counsel for the respondents has strenuously argued that no reasonable man could so understand them, and that therefore the words should not have been left to the jury, I am tempted to add that I am quite convinced that this was the meaning that the defendants did intend, and I am equally convinced that it is the meaning that any reasonable man would attach to them. Therefore, in my view, the cross-appeal fails.

As to the appeal, most unfortunately, I think, the judge, having gone through all this matter, was a little hasty in dealing with the damages. Reading what he said and what the jury said, I am quite satisfied that the jury were left under the belief that, unless special damage was proved, the plaintiffs would be entitled to nominal damages only. That is the reason why they arrived at the amount they did. If they had been told that damage must be assumed if they found serious aspersions on the defendants, and that, without proof of any actual loss sustained by them, they ought to receive such amount of damages as showed the untruth of the imputation and the seriousness of the charges, it would have been quite impossible for a reasonable jury to have said a farthing. I rather regret that the respondents will not consent to our fixing the damages. I had originally settled in my mind on a figure which I thought would be sufficient to mark the seriousness of this accusation without being excessive. I am bound to say I rather increased that amount because I recollected that, having had their attention drawn to the matter in the letter of 2 February and it being requested that an explanation should be put in the paper, the defendants refused somewhat curtly, and said that there never was any design to do anything other than to publish what they knew to be a fact. I do not think that that was candid, and I do not think it was true. For that letter, I should, on further consideration, have increased the damages. However, we are not allowed to fix them, and, therefore, there must be a new trial, and, I agree, a new trial on the issue of damages only.

GODDARD LJ. I agree. Out of deference to the attractive argument of counsel for the respondents, I think I ought to add a few words of my own. This case is a very good illustration, by way of warning, of the dangers which newspapers run if they publish information about pending litigation. They are amply protected in publishing reports of cases which are heard in courts, but, if they publish inaccurate information about pending litigation, they do it at their own risk.

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The way in which this case has arisen is this. The Industrial and Provident Societies Act 1893, s 62(c) provides that it shall be an offence under that Act if, among other things:

… a registered society, or an officer or member thereof, or any other person, makes a return, or wilfully furnishes information in any respect false or insufficient …

It may be that some day it will have to be decidednot in this court, because the case would be in the Crown Paper and heard in the Divisional Courtwhether those words “makes a return … false or insufficient” mean makes a return which is merely incorrect, or whether the word “false” there implies some conscious falsity. It is immaterial for us to consider that in this case, because, in fact, it has been assumed throughout in this case that the word “false” in that section, for the purpose of giving a magistrate jurisdiction to convict, means no more than incorrect. As I say, I reserve my opinion as to that, but it may very well be that that is right.

What in fact happened here was that a summons was issued against this society for making a false return. Counsel for the chief registrar, who appeared to support the summons, stated on his instructions more than once that there was no question whatever as to any moral guilt at all, or any fraud. All that was said was that a particular entry was wrong. The accountant who had advised the society and the counsel who had also given an opinion were wrong, and the Public Auditor was right. This matter was stated to be brought as a test case, and not one involving any fraud or misconduct on the part of the plaintiffs at all.

The cross-appeal in this case is based principally upon this. It is said: “We, the newspaper, published nothing except what was strictly and accurately true, because we said that a charge had been made of making a false return, and so it had been.” I think the difficulty which is in their way is this. They did not say that it was a false return in which no suggestion of fraud arose. They used the word “false,” which is a word which in one sense is ambiguous, but which would convey to most people, to the ordinary person, that the company had made a fraudulent return. The man on the Clapham omnibus, to use the classic illustration of Lord Bowen, does not, when he has the Daily Herald in his hand, also have in his hand a copy of Baden Fuller on Friendly Societies, or a copy of Gasquets Friendly Societies Acts, or a copy of Stones Justices Manual. Any ordinary man, reading these passages from the newspaper, would, I think, inevitably consider that a charge involving moral obliquity on the directors was being made against the company. Therefore, it seems to me that it would have been quite impossible for the judge to have held that the words were incapable of a defamatory meaning. If a further explanation had been given, if entirely different language had been used, the position would have been different. It would have been quite possible for the newspaper to announce that a charge under this section had been preferred. In the way that this was set out, however, with headlines, and so forth, and the language used, the in-

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evitable result, I think, would be to lead anybody who read this to think that a charge of dishonesty was being preferred. I am supposed to know the law, but I do not pretend that I can carry accurately all the provisions of the Industrial and Provident Societies Act 1893, as amended by the Act of 1913, in my head. I should certainly have supposed that a charge of dishonesty was being made against the directors of the company, and I think that the judge was perfectly justified in leaving the case to the jury.

The only one point on which I had any doubt at all was whether the judge should have said that there was no evidence to support, and that the words were incapable of supporting, one innuendonamely, that the company was insolventbut, as the innuendo which was set forth was that they were insolvent, or in an unstable financial position, I do not think that any complaint can be made about that, because I think that that is capable of the construction that they were in an unstable financial position. In any case, it would not matter, because the jury found that all the rest of the innuendoes were proved.

That being the case, the jury returned a verdict of a farthing damages. Obviously, that cannot stand. I do not refer to any particular word, or to any particular passage in the summing up, but, unfortunately, the whole summing up of the judge on the question of damages conveyed to the jury the impression that this trading company had suffered no damage at allat least, it had not proved that it had suffered any damage at alland therefore, in those circumstances, the damages could only be nominal. He says: “Very often juries read in newspapers about a farthing damages: but those are contemptuous damages, and not nominal damages. I think that that is the real reason why they gave the farthing.” That that was the intention of the judge, and that that was the view he took of the verdict of the jury, I think is shown quite clearly from what he said when he gave judgment:

The jury took the view that the plaintiffs, who are a company or corporation had not been shown to have suffered any damage from the publication of what they considered defamatory matter about them. I think the jury were quite entitled, on the evidence in this case, to come to the conclusion, assuming that some defamatory matter had been published about the plaintiff corporation, that there was a complete absence, and a deliberate absence, of any attempt to show that they were a penny the worse, and, in those circumstances, the jury awarded one farthing damages to the plaintiffs.

That, I think, is the impression which the jury would get from the judges summing up. However, it is not right. There is no obligation on the plaintiffs to show that they have suffered actual damage. A plaintiff can, if he likes, by way of aggravating damages, show that he has suffered actual damage, which he can prove, but in every case he is perfectly entitled to say: “Here is a serious libel upon me. The law assumes that I must have suffered damage, and I am entitled to substantial damages.” If the defendant, by giving evidence in mitigation of damages, or by saying that the libel is very nearly true, but not quite, can mitigate the damages, be it so. In this case, however, there was

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not anything of that sort. It would have been open to the defendants in this case to have justified the libel by saying: “We are not bound by what the magistrate found in the police court proceedings. We say that this was a dishonest return. You did it dishonestly.” However, they did not choose to do that. They accepted the position that there was no moral obliquity on the plaintiff company at all.

Therefore, one has the position of a trading company having been charged, as the jury find by their answers to the questions left to them on the innuendo, with the most disgraceful conduct with which any company could be charged, and yet having been told, because they have not given any evidence showing actual pecuniary loss, that they are to be compensated by a farthing. The fact is, there was misdirection here.

Apart from that, it was a verdict which, in my opinion, no reasonable jury could find. I regret that the defendants have not agreed to this court assessing the damages, because it would have saved the expense of a new trial. If this case were going down for trial by another jury, there would have been something in it, but, as, under the emergency legislation, it will have to be tried by a judge, I should have thought it would have been more satisfactory for the defendants to have had the damages assessed by three heads instead of by one. However, they are perfectly entitled to take up that attitude, even if I think it is an unreasonable attitude. Therefore, I agree that the case must go down for a new trial.

Appeal allowed. New trial ordered.

Solicitors: Randolph & Dean (for the appellants); Lewis & Lewis (for the respondents).

Derek H Kitchen Esq   Barrister.

Carpenters Estates Ltd v Davies

[1940] 1 All ER 13


Categories:        CONTRACT: LAND; Other Land        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        29 NOVEMBER 1939        


Specific Performance Building contract Contract to make sewers and roads Whether defendant must by the contract obtain possession of land Defendant in fact in possession of land on which work to be done.

The plaintiff company purchased building land from the defendant, who, in the transfer, covenanted to make certain roads and sewers. The defendant made the roads sufficiently for building operations to be commenced, but did nothing with regard to the sewers. The plaintiffs, who had not commenced the erection of any buildings on the land, claimed specific performance of the defendants covenant. It was found as a fact that there was other property in the neighbourhood which had remained unlet for some time, and that it was not shown that any buildings erected by the plaintiff company could have been profitably let:

Held the plaintiff company could not have been properly compensated for the defendants breach of covenant by an award of damages and was entitled to a decree for specific performance of the covenant. It was not necessary for the granting of this decree that

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the defendant was in possession of the land by the contract. It was sufficient that the defendant was in possession of the land on which the work was contracted to be done.

Wolverhampton Corpn v Emmons considered.

Notes

It has been laid down that there are three essentials which must be fulfilled before the court will grant specific performance of a contract to build. The first two essentialsclear definition of the work and the substantial interest of the plaintiff in the performance of the workare not called in question here. The discussion here is as to the precise terms in which the third essential shall be couched. The usual statement is taken from the judgment of Romer LJ, in Wolverhampton Corpn v Emmons and states that the defendant must by the contract have obtained possession of the land on which the work is to be done. The judgment herein dissents from this statement, and it is held to be sufficient if the defendant is in possession of the land.

As to Specific Performance of Building Contracts, see Halsbury (Hailsham Edn), Vol 31, pp 333, 334, para 365; and for Cases, see Digest, Vol 7, pp 400, 401, Nos 265273.

Cases referred to

Wolverhampton Corpn v Emmons [1901] 1 KB 515; 7 Digest 401, 273, 70 LJKB 429, 84 LT 407.

Ryan v Mutual Tontine Westminster Chambers Assocn [1893] 1 Ch 116; 42 Digest 443, 138, 62 LJCh 252, 67 LT 820.

Mosely v Virgin (1796) 3 Ves 184; 7 Digest 400, 265.

Action

Action for specific performance by the defendant of certain covenants entered into by the defendant with the plaintiff company for the making of certain roads and certain drainage works upon land in the possession of the defendant. The facts are fully set out in the judgment.

M Gravenor Hewins for the plaintiffs.

Sebag Shaw for the defendant.

29 November 1939. The following judgment was delivered.

FARWELL J. The plaintiff company is a company which has been formed for the purpose of, among other things, developing an estate which they have purchased in Essex. The plaintiff company entered into an agreement with the defendant on 13 July 1937 to purchase a plot of land in Essex, being a plot of undeveloped land of some three-quarters of an acre situate between the roads known as Church Hill and Rectory Lane. The matter was completed by a transfer dated 25 September 1937 and by that transfer the defendant, who is the owner in fee simple subject to mortgage, with the concurrence of the mortgagee:

… transferred to [the plaintiffs] in fee simple a piece of land situate at the corner of Church Hill and Rectory Lane in the parish of Loughton in the county of Essex as shown and coloured red on the plan which is referred to in the transfer together with a right of way for [the plaintiffs] and their successors in title and all other persons authorised by them over all roads and footways on the Church Hill Estate and full and free right for the purchasers and their successors in title to connect up with and use all sewers drains pipes and watercourses gas electric and water mains then or thereafter laid in under and over the roads and footways on the Church Hill Estate.

As I have said, the plaintiffs acquired the land for the purpose of building upon it. The transfer contained a covenant by the defendant in these terms:

[The defendant] on behalf of herself and her successors in title covenants with

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[the plaintiffs] and their successors in title that she will at her own expense and free of all cost and expenses to [the plaintiffs] and their successors in title … completely finish the accommodation roadways (including channelling kerbing sewering paving and lighting) between the said land and the public highways in accordance with the town planning scheme requiring the said accommodation roadways to the satisfaction of the local or other authority at the expense of [the defendant] such accommodation roadways to give complete access for all purposes from Church Hill and Rectory Lane respectively over the dyke running round the frontage of the said land to the buildings to be erected on the said land and further that [the defendant] would construct and lay at [the defendants] own expense all necessary main sewers and drains and electric gas and water mains thereunder (the said accommodation roadways and pavements being coloured brown on the said plan) and further that [the defendant] would properly construct and completely finish the passageway in the rear of the said land (which is coloured brown hatched green on the said plan) with rolled gravel and would lay and connect a main sewer in the position shown by a dotted black line on the said plan to enable [the plaintiff] to connect the drains and sewers from the buildings to be erected on the said land at the point marked X and that all the said items should be properly completed to the requirements and satisfaction of the local or other authority and should be completed within three months of the date of the said transfer.

With regard to the roads, what the defendant has done is this. She has concreted part of the accommodation roadways and has made a hard core foundation over the roads which she has covenanted to make. The county council required that those roads should be made with a hard core and finished with tarmac, and, so far as the hard core is concerned, the defendant has made those roads. They have not been finished with tarmac finish, but they are, and the evidence satisfies me on this, in a perfectly proper condition for the purpose of using the site which the plaintiffs bought for building purposes. The roads are perfectly passable, and they are in the condition in which it is usual to leave roads until the building operations have been completed, because, when once the tarmac finish is put down, the cartage of heavy materials by lorries passing over it is apt to damage the surface, and it may require re-doing. Therefore, it is not unusual to leave the roads in the condition in which they now are until the building operations have been complete, and, so far as the roads themselves are concerned, there has been nothing which has in any way prevented the plaintiff company from proceeding with the building of any erections which they desire to put up on the site which they bought.

With regard to the making of the sewers, that has not been done. It would be impossible to deal with any buildings on the land until they could be connected up with the sewers, because the local authority would not permit such houses or buildings to be occupied until there were proper drainage arrangements. The evidence shows, however, that, had the houses and shops been erected, it would not have taken a very long time for the defendant to have carried out her contract, and to have made the connection necessary to enable the buildings to be connected up with the main sewers. The fact remains, however, that the defendant has not carried out the obligations which she undertook in the transfer to which I have referred, and, since the transfer in September 1937, the covenant has not been fully performed. The plaintiff company from time to time wrote and pressed the defendant to carry

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out her obligations and to complete the work, but from time to time the matter was put off, and nothing in fact was done by the defendant beyond what I have already mentioned. Ultimately, the plaintiff company, in November 1938, issued the writ in this action.

The position now is that no houses or shops have been erected by the plaintiff company upon the plaintiffs land, and that the defendant has failed to carry out her obligation. She has not fully made up the roads, although she has made them up in a way which would enable building operations to be carried out, and she has not performed that part of the covenant which has relation to the sewers and the drains. Thus, there can be no doubt that the defendant has committed a breach of the covenant which she entered into by the transfer of 25 September 1937.

In those circumstances, two questions arise. (i) Is this a case in which the plaintiffs are entitled to an order for specific performance? (ii) Are the plaintiffs entitled to damages, and, if so, what is the measure of damage? With regard to the question of specific performance, it is true to say that, generally speaking, this court does not grant specific performance of a contract to erect and to build. The matter has been considered in various cases, and one of the cases to which I have been referred is Wolverhampton Corpn v Emmons. In that case, the headnote states that the plaintiffs were an urban sanitary authority, and:

… in pursuance of a scheme of street improvement, sold and conveyed to the defendant a plot of land abutting on a street, the defendant covenanting with them that he would erect buildings thereon within a certain time. The nature of the buildings to be erected was not precisely specified by the covenant, but subsequently, in consideration of the plaintiffs giving the defendant further time for performance of his obligation to erect buildings, he agreed to erect on the land eight houses in accordance with certain plans, submitted by him to, and approved by the plaintiffs, which definitely showed the nature and particulars of the houses to be erected. The defendant failing to perform this last-mentioned agreement, the plaintiffs brought an action against him claiming specific performance:Held, that the case came within the class of cases which has been recognised by the courts as forming an exception to the general rule …

An order for specific performance was then made. In that case, Sir A L Smith MR said, at pp 522, 523:

The authorities to which reference has been made appear to me to show that, where there is a definite contract, by which a person, who has acquired land in consideration thereof, has agreed to erect on the land so acquired a building, of which the particulars are clearly specified, and the erection of which is of an importance to the other party which cannot adequately be measured by pecuniary damages, that is a case in which, according to the doctrine acted upon by courts of equity in relation to such matters, specific performance ought to be ordered. If a man has contracted to build a house on a piece of land according to certain detailed plans, and has obtained a conveyance of the land on the terms that he will do so, why should he be allowed to turn round and refuse to perform that contract especially where damages will not compensate the person with whom he has contracted? In the judgment of Kay, L.J., in Ryan v. Mutual Tontine Westminster Chambers Assoc., after stating that ordinarily the court will not enforce specific performance of building works because damages are generally in such cases an adequate remedy, and the court cannot superintend such worksof which last objection I have never seen the forcehe said [p. 128]: “An exception to this rule has been established in cases where a railway company has taken lands from a landowner on the terms that it will carry out certain works.” Here the defendant has taken land from the plaintiffs on the terms that he will erect buildings. Kay, L.J., proceeded [p. 128]: “In those cases, because damages are not an adequate remedy, the

Page 17 of [1940] 1 All ER 13

court has gone to great lengths, and has granted specific performance of the definite worksthey must be definite workswhich the company that has taken the lands has contracted to do.” In the present case I agree with the learned judge that, though the original covenant did not specify the buildings to be erected, the plans referred to by the subsequent agreement define the work to be done sufficiently to enable the court to make an order for specific performance.

Accordingly, the appeal in that case was dismissed, Wills J having granted specific performance. Collins LJ agrees with Sir A L Smith MR and I do not think there is anything in his judgment to which I need refer, but I must refer to the judgment of Romer LJ. He also agreed that the judgment of Wills J should be affirmed. He states the question in this way, at pp 524, 525:

The question, which is not free from difficulty, is whether, under the circumstances of this case, an order for specific performance should be made in favour of the plaintiffs. There is no doubt that as a general rule the court will not enforce specific performance of a building contract, but an exception from the rule has been recognised. It has, I think, for some time been held that, in order to bring himself within that exception, a plaintiff must establish three things. The first is that the building work, of which he seeks to enforce the performance, is defined by the contract; that is to say, that the particulars of the work are so far definitely ascertained that the court can sufficiently see what is the exact nature of the work of which it is asked to order the performance. The second is that the plaintiff has a substantial interest in having the contract performed, which is of such a nature that he cannot adequately be compensated for breach of the contract by damages. The third is that the defendant has by the contract obtained possession of land on which the work is contracted to be done. The rule on this subject is stated by Fry, L.J., in his work on Specific Performance, 3rd Edn., pp. 44, 45, in substantially the same terms as those in which I have just stated it.

Then he proceeds to consider whether or not the plaintiff in that case before him had brought himself within the exception.

The only exception which, with great respect, I venture to take to what Romer LJ there says is to that part where he says that the third matter which it is necessary for the plaintiff to show to bring himself within the exception is that the defendant has by the contract obtained possession of the land on which the work is contracted to be done. I would rather say that what the plaintiff has to establish is that the defendant is in possession of the land on which the work is contracted to be done. Obviously, if the defendant is no longer, or is not, in possession of the land, it may be impossible for him to carry out the contract, and, of course, in such a case as that, the court would not grant specific performance. If, however, as in the present case, the defendant is in possession of the land, and there is no difficulty about the defendant carrying out the obligation under which she has put herself, then it seems to me that, if the other two requirements are satisfiednamely, that the particulars of the work are sufficiently clear and defined, and that it is a case in which the plaintiff has a substantial interest in having the contract performed which cannot be adequately compensated for by damagesthen, in such a case as that, the court will, if it thinks right, in a proper case, grant specific performance. That seems to me to be in accordance with what has been decided in other cases, such as Mosely v Virgin, where the court has seen fit to grant specific performance.

I think, speaking for myself, that this portion of the judgment of

Page 18 of [1940] 1 All ER 13

Romer LJ is a statement which is perhaps not strictly accurate, so far as the last requirement is concerned. In my view, the mere fact that the defendant has not got possession of land on which the work is contracted to be done is not necessarily a complete bar to the courts granting specific performance. If, in the present case, the defendant has contracted to do the work on her own land in consideration of the purchase price of other land belonging to her, then, if the other two conditions are fulfilled, for myself I am wholly unable to see why the court should be debarred from granting relief by way of specific performance, and I am not prepared to accept the statement of Romer LJ as completely exhaustive, so as to prevent my granting specific performance if I think it right to do so in the present case.

The nature of the work which the defendant has undertaken to do seems to me in this case to be sufficiently clearly defined. She has to finish completely accommodation roads which are clearly defined in the plan attached to the transfer, and has to construct certain sewers and drains which are also defined in the contract, and that has to be done within 3 months to the requirements and satisfaction of the local or other authority. In my judgment, there is nothing whatever in the contract itself which prevents the court from granting specific performance. The court will not grant specific performance in a case of this kind, however, unless it is satisfied that there is no sufficient remedy by way of damages. In the present case, the plaintiffs have, in my judgment, a substantial interest in having the contract performed, and, so long as the contract remains unperformed, the plaintiffs may find it impossible, or extremely difficult, to deal with their land in any way. Moreover, it is, in my judgment, a case in which the plaintiffs cannot be compensated by damages. The position is that the plaintiffs only prospect of making an advantageous use of the land in question was, and is, to build upon it buildings which they can dispose of either by sale or by lease at a profit. In fact, they have not attempted to erect any building on the land at all, and the fact that they have not done so cannot be put down to the failure of the defendant to make the roads in question, because, although the roads are not completely made up, the state of them is such that the plaintiff company could have carried out the work of constructing and erecting shops or houses on the land. No doubt, also, it is true that no effective use could be made of the erections when they were constructed unless there was a proper method of joining them up with the main sewer, but, until the houses were erected, or in course of erection, the necessity for any such connection with the main sewer did not arise, and it appears to me to be quite impossible for this court to assess with any degree of certainty at all what, if anything, the damage due to the failure by the defendant to carry out the contract might have been. It seems to me that the attempt which has been made to prove the existence of damage really is nothing more than a speculation as to what the plaintiff company might have

Page 19 of [1940] 1 All ER 13

made if they had erected a certain number of houses and if they had been fortunate enough to find tenants at the rent which was asked for all those houses and shops, and those tenants had remained satisfactory tenants from the point of view of paying their rents for a period of time. What in fact might have resulted from the erection of the proposed houses and shops in the beginning of 1938 is, as I have said, purely a question of guessing. There is evidence that some shops and houses in this district are unlet, and have been unlet for some period. The building of houses and shops as in this case is, at the best, a somewhat speculative way of investing money, and I think that it would be quite impossible for any court to say now what might have resulted from the erection of the proposed shops and flats at the time when they could have been erected. It may be that the plaintiffs are really better off, as things have turned out, in having saved the money which they would have put into building the shops and houses than they would have been had they erected these buildings. It may be, on the other hand, that, if they had been very fortunate, they could have found tenants quickly, and could have made a profit, but the whole matter is so speculative that I feel it impossible to assess any sum as representing the compensation here to which the plaintiffs are entitled for the failure by the defendant to carry out her contract, especially having regard to the fact that it is not possible to say that the whole of the damage, whatever it may be, which the plaintiff company think they may have suffered is wholly due to the defendants failure to carry out her contract. It is to some extent due to the fact that the plaintiffs themselves had not done what they might have done and erected the houses and shops.

In all the circumstances, this is a case, in my judgment, in which the only adequate remedy which I can give to the plaintiffs is by way of specific performance. I am not oppressed with the difficulty in this case of the court seeing that the order for specific performance is performed, and I myself feel that, if I am not in a position to give the plaintiffs specific performance, I cannot give the plaintiffs any adequate remedy, and, in fact, it would be a case where the plaintiffs, having a perfectly good covenant which has been broken, and being entitled prima facie to have that covenant performed, would be deprived of the remedy, because it is a case in which, if I took the view that I could not grant specific performance, the plaintiffs would get no adequate compensation at all. In all these circumstances, I have come to the conclusion that the right order to make in this case is to make an order for specific performance of the covenant. So far as damages are concerned, I can give the plaintiffs no more than nominal damages.

Order for specific performance and for 40s damages and costs.

Solicitors: Payne & Co (for the plaintiffs); Clarke & Co (for the defendant).

F Honig Esq   Barrister.


Finska Angfartygs Aktiebolaget and Others v Baring Brothers & Co Ltd

[1940] 1 All ER 20


Categories:        INTERNATIONAL; Other International, International Relations        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        13, 14, 15 NOVEMBER, 13 DECEMBER 1939        


Choses in Action Assignment Foreign acts of state Duly authenticated copies of orders unobtainable and no access to originals Law applicable to assignments made abroad Whether facts constitute assignment Evidence Act 1851 (c 99), s 7.

During 1916 and 1917, thirteen ships belonging to the appellants, a group of Finnish ship-owners who were then Russian subjects, were taken over by the Russian government and lent to the British government for war purposes. Payment for the use of the ships was made by the British government to the Russian government. No payment having been received by the appellants from the Russian government, either before or after the 1917 revolution, in respect of the hire of the ships or as compensation for four thereof which were sunk as a result of enemy action, the appellants sued the respondents, an English bank, with whom funds were deposited by the Russian government before the revolution. The appellants claimed that they were the legal assignees of the former Russian government of a part of the balance of the funds equivalent to the sums due to them in respect of the ships. Copies of orders duly issued by the Russian government were produced as evidence by the appellants, who claimed that such evidence constituted an assignment. The appellants adduced further evidence before the Court of Appeal:

Held (i) the further evidence adduced by the appellants before the Court of Appeal was inconsistent with the documents which were the original foundation of their claim.

(ii) the appellants had failed to establish that they were the legal assignees of the former Russian government.

Notes

The litigation in respect of these large funds in the hands of the respondents to the present appeal has been considerable. In the present proceedings it was unsuccessfully attempted to prove an assignment, but this has failed because the final direction to pay, which was intended to have been given by the then Russian Government, was not given, because that government was overthrown before the necessary formalities were completed.

As to Essentials of Assignment, see Halsbury (Hailsham Edn), Vol 4, pp 437444, paras 805812; and for Cases, see Digest, Vol 8, pp 445456, Nos 205287.

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR, Scott and Clauson LJJ), dated 11 July 1938, ordering that the judgment of Luxmoore J, dated 14 December 1937, whereby it was ordered that the action should be dismissed with costs, should be affirmed. The facts and the arguments are set out in the opinion of Lord Russell of Killowen.

D N Pritt KC and Vladimir Idelson for the appellants.

Valentine Holmes and Anthony Marlowe for the respondents.

13 December 1939. The following opinions were delivered.

VISCOUNT MAUGHAM (read by Lord Thankerton). My Lords, like all your Lordships, I should have been glad to have decided this appeal, if I could, in favour of the Finnish shipowners, but I find myself

Page 21 of [1940] 1 All ER 20

unable to do so. The reasoned judgment of the Court of Appeal expresses precisely my own view of the case. The opinion of my noble and learned friend Lord Russell of Killowen, which I have had the advantage of reading, is to the same effect. Your Lordships considered with great care the relevant documents in the light of the evidence on Russian law which was given before Luxmoore Jthat law being in our courts a question of factand came to the same conclusion as he did. The unusual feature in the case was the admission in the Court of Appeal of fresh evidence consisting of the affidavit of Dimitry Pavlovitch Miller, which seemed to supply a fresh foundation for the claim of the appellants as assignees from the Russian government of certain large sums standing to the credit of a compte spécial in the books of the respondents. Miller was available for cross-examination, but was not cross-examined. It is this circumstance which afforded a fair scope for argument, and counsel for the appellants made full use of it. Your Lordships, like the Court of Appeal, were, however, unable to accept Millers evidence, relating as it did to events over 20 years old, and inconsistent as it is with the documents on which the appellants relied before Luxmoore J. It is only fair to add that no one suggests that Miller was an untruthful witness, but great lapse of time is apt greatly to impair everyones memory, and documents are not subject to this disadvantage. My noble and learned friend has examined Millers statements in considerable detail, and has given reasons for not accepting them with which I agree, and to which I cannot usefully add anything. My only reason for saying what I have said is that I desire to express the hope that the course taken by the experienced counsel for the respondents in not cross-examining the witness will not be regarded as an example to be followed by others, unless, indeed, the circumstances are at least as exceptional as they were in the present case. My Lords, the appeal must be dismissed with costs.

LORD ATKIN. My Lords, I entirely agree with the reasons contained in the opinion of my noble and learned friend Lord Russell of Killowen, which I have had the opportunity of reading, and which are compelling to show that the appellants have not the legal rights which they claim. I also share with him the regret that we are constrained to come to this conclusion. I should like to point out that the fund against which the appellants claim was provided by the British government under arrangement with the then Russian government as an advance to that government against Russian Treasury bills for the very purpose of enabling that government to meet claims of this kind. The money was not provided until the British government approved of the objects for which it was to be spent, and payment was not made by the bank with whom the funds were deposited until the specific payments were approved, although in the last few months this restriction was relaxed. The claim by the Finnish shipowners is for freight and

Page 22 of [1940] 1 All ER 20

loss of ships, requisitioned, indeed, by the Russian government, but chartered by them to the British government, and the freight was earned and losses incurred while the ships were rendering services for the benefit of this country. The money in the hands of the respondents, the bank, represents money which was provided in fact for the express purpose of enabling the Russian government to meet these claims, and, as is apparent from the facts narrated by my noble and learned friend, only the delay of a few days prevented the necessary order for payment of this claim being given to the bank. The amount had been agreed with the Russian government. In the events that have happened, the respondents have been left with a sum of some millions in their hands which they have enjoyed for over 20 years, and which certainly does not belong to them. They have quite correctly required that claimants for payment should prove their legal right, and in this, so far as I know, none has been successful. Nevertheless, it seems quite wrong that the dead hand should rest on this money for ever. The present Russian government appears to disclaim all interest in it. It would seem only reasonable that measures should be taken by the British government, acting with the bank, to secure that the money should reach the creditors, to pay whom it was provided, so that at any rate a pro rata distribution should be made amongst that special class, of whom the Finnish ship owners are conspicuous examples.

LORD RUSSELL OF KILLOWEN. My Lords, I feel sure that I express the feelings of all your Lordships when I say that, if I could, consistently with true legal principles, accede to the claim of the Finnish shipowners in this case, I would very gladly do so. I am, however, of opinion that, when tested by those principles, their claim cannot succeed. The claim is that they are either jointly or severally entitled as assignees from the Russian government, of part or parts of the moneys standing to the credit of the compte spécial, either jointly to two sums of £196,915 and £259,250, or severally to such parts thereof as appear in a table annexed to the statement of claim. The sum of £196,915 is claimed in respect of the use of ships requisitioned by the Russian government in 1916 and 1917, and the sum of £259,250 is in respect of the value of certain of those ships which were sunk.

The claim to be such assignees as presented before the trial judge and as adjudicated upon by him was based upon two documents, dated respectively 3 October 1917 and 13 October 1917, which were said to constitute, according to Russian law, legal assignments of the two sums of £196,915 and £259,250 respectively. The judge was of opinion that neither document constituted an assignment according to Russian law, and that they amounted to no more than directions that certain necessary steps be taken, which, if taken, would ultimately have resulted in payment of the sums out of the compte spécial, but as to which there was no evidence that the necessary steps had ever been taken. In the Court

Page 23 of [1940] 1 All ER 20

of Appeal, these alleged assignments were not seriously pressed. Reliance was there placed upon a different transaction as being an assignment. This new foundation of the plaintiffs claim was based upon fresh evidence adduced in the Court of Appeal for the first time. Before your Lordships, also, the claim was based upon that fresh evidence, and not upon the documents of 3 October 1917 and 13 October 1917. I need say no more about them, except that, had I to pronounce upon their meaning and effect, I would not have desired to add a word to the judgment of Luxmoore J.

I now turn to the basis of the claim as presented in this House. It is unnecessary to describe to your Lordships the governmental body known as Glavzagran, or its two sectionsnamely, the Maritime Division for Shipping, and the Valuta Division for Foreign Exchange. Nor need I describe the origin of the compte spécial at Baring Brothers & Co Ltd, or the means by which the account was fed, or the procedure followed when a department of the Russian government was desirous of making thereout a payment in sterling. These matters have all been explained in detail in the judgments of Luxmoore J and the Court of Appeal. It is sufficient to say that in July or August 1917, a very large balance stood to the credit of the compte spécial, and that at or about that time the British government told the Russian government to use up the existing balance before applying for the discount of any further bills. The witness Conrad de Sahmen called this balance a “free” balance, and it was contended that this meant and showed that the British government had no voice in, or control over, the payments to be made out of that balance. It is not necessary, in the view which I take of the case, to say anything on the subject of this contention, for I will assume in favour of the appellants that it is well-founded.

The new witness upon whose evidence the claim of the appellants to be assignees was based in the Court of Appeal was Dimitry Pavlovitch Miller. His evidence is contained in an affidavit. He was available for cross-examination on behalf of the respondents, but was not cross-examined. He was formerly a Russian subject and lived in Russia, but he left that country on 28 September 1917 (old style). In October 1915 he was attached to the governmental department known as the Valuta Commission, which in or about March 1917 became (in effect) the Valuta Division of Glavzagran. From March 1917 until about 24 September 1917 (old style) he was the head of a section of the Valuta Division, and was secretary of the Valuta Division. He deposes to a practice by which the Valuta Division made a provisional allocation of an amount of foreign currency to a Russian government department which required it for a specified purpose, a black-ink entry being made in the books of the Valuta Division showing the provisional or conditional allocation. The entry would be made in the name of the ultimate payee if it were known at the time. If not, it would be made

Page 24 of [1940] 1 All ER 20

in the name of the applicant department. An allocation became unconditional (he says) when the Valuta Division was informed by the applicant department that the contract in question had been actually placed, but, when the foreign currency required was (to put it shortly) sterling to the credit of the compte spécial, the allocation would not become unconditional until the Valuta Division had been informed that the purpose for which the foreign currency was required had been approved by the appropriate department of the British government. Upon the allocation becoming unconditional, the black-ink entry was underlined in red ink. The affidavit then states:

When once an entry in the books had been underlined in red ink the corresponding amount of foreign currency was regarded by the Valuta Division of Glavzagran as having ceased to be the property of the Russian government and to have become the property of the firm or person against whose name the said amount was entered, and no alteration could be made in the amount so allotted without the consent of that firm or person.

He then goes on to state that he was present at a meeting of the Valuta Division at some date in September 1917. This must have taken place before 24 September 1917 (old style). There were present a representative or representatives of the Finnish shipowners, and of the other division of Glavzagran, and also the president of the Russian government committee in London, General Hermonius. He states that it was reported to the meeting that an agreement had been reached concerning the amounts to be paid to the Finnish shipowners, and that the appropriate department of the British government had approved of sterling currency out of the credits granted by the British government being used for such purpose. No final calculation of the precise amount payable was made, but, to the best of his recollection, £460,000 was fixed as an amount which could not have been less than the amount then owing up to 1 August 1917 (old style). An entry was immediately after the meeting made in red ink in the books of Glavzagran of £460,000 either against the names of the Finnish shipowners or against a general group-description of “the Finnish shipowners.”

My Lords, it is not surprising that the Court of Appeal looked askance at this evidence, which related to events over 20 years old, and felt themselves unable to accept it. It is inconsistent with the documents which were the original foundation of the plaintiffs claim, and, in particular, with the two documents of 3 October 1917 and 13 October 1917 by which General Michelson approved a recommendation of the Maritime Division, that payments to the shipowners be made in sterling, and indicated the necessary steps to effectuate that payment, which included the provision of counter-valuta, which was never provided. This seems to me quite irreconcilable with the idea that the Finnish shipowners were already the legal owners of £460,000, part of the compte spécial. Indeed, I can conceive no reason why the parties should ever have contemplated that this debt should be paid by so unusual a procedure as by a legal assignment to the creditor of a portion of the debtors

Page 25 of [1940] 1 All ER 20

bank balance, and I agree with the Court of Appeal that it is impossible to hold that Glavzagran can have agreed to make a binding and irrevocable allocation of part of the compte spécial at a time when the matter was still quite unripe for any such action.

Another aspect of this fresh evidence which presents itself to me, is one to which I think it right to call attention. It suggests another ground on which the appeal should fail. Mr Millers affidavit is that of one who is not an Englishman but who makes it in English. I do not know how perfect or imperfect his knowledge of English may be, but I will assume that he has complete command of that tongue and fully appreciates the language which he has used. His affidavit has been drafted with great care, but it is, I venture to think, likely to mislead unless it is examined with equal care. I say that for the reason that at first sight one imagines that the witness (after stating the conditions under which, according to general practice, an “allocation” of foreign currency became absolute and passed the property in the allocated foreign currency) has gone on to allege that, at the meeting which he describes, such an “allocation” had been made. In fact, he says no such thing. All he says is that it was reported to the meeting that the amount of the debt had been agreed, and that the British government approved of its being paid out of the compte spécial. In the subsequent portions of his affidavit, however, he speaks without further ado of the “sum so allocated” and “the sum allocated,” and so creates the impression that an allocation of foreign currency was made at the meeting. All I can say is that, if any such allocation was in fact then made, Mr Millers affidavit does not prove it, and there is no evidence of the fact.

The truth seems to be that amounts and source of payment had been agreed, and that, if everything had proceeded as all anticipated, the moneys in question would in due course have been paid to the Finnish shipowners, and paid out of the compte spécial. However, some sand from the Lenin revolution stopped the machinery, and the debt remained unpaid. Mr Lars Krogius described the position accurately when (on 5 December 1917) he wrote to his agents in London a letter in which he said:

In the meantime, however, the question of payment of hires and compensation for lost steamers had advanced so far that the Credit Chancery already had decided to issue cheques in London. It only required the transferring of the corresponding amount in roubles from the War Ministry to the Credit Chancery to have brought the matter in order, but this again was cut short in consequence of the Lenin revolution, and God only knows when the question might advance any further.

It is difficult to imagine that Mr Krogius then thought he was already legal owner of part of the compte spécial. He was hoping that the Russian government would direct their bankers to pay him, but, unfortunately for the appellants, no such direction was ever given. The appeal must, I fear, be dismissed, though I confess I would gladly, if I could conscientiously do so, vote against the motion.

Page 26 of [1940] 1 All ER 20

LORD WRIGHT. My Lords, I have had an opportunity of considering in print the opinions of my noble and learned friends which have just been delivered. I share their regrets, but, in the circumstances, I must concur in the motion proposed, and I have nothing to add.

LORD ATKIN. My Lords, I am asked to say that my noble and learned friend Lord Romer agrees with the opinion expressed by my noble and learned friend Lord Russell of Killowen.

Appeal dismissed with costs.

Solicitors: Roney & Co (for the appellants); Slaughter & May (for the respondents).

Michael Marcus Esq   Barrister.

Rouse v Gravelworks Ltd

[1940] 1 All ER 26


Categories:        LAND; Other Land        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        7, 8, 11 DECEMBER 1939        


Easements Support Natural right of support Neighbouring owners Escape of water Natural use of land Escape by operation of natural causes Water blown on to adjoining land by wind.

The defendants in digging for gravel on their land created a large pit, which by natural causes filled with water and formed a lake reaching almost to the boundary of the adjoining property, of which the plaintiff was the owner. The wind blew the water thus collected on to the plaintiffs land, and caused damage by erosion:

Held no action would lie for such damage as the water had accumulated only as a result of the defendants natural user of their land and had escaped on to the land of the plaintiff only by the operation of natural causes.

Notes

The owner of land has no right by his own acts to withdraw the support his land gives to adjacent land. It would appear from the present case that, if natural causes, superimposed upon the acts of the owner (being in the course of the natural user of the land), result in the withdrawal of support, then this is not an infringement of the right of support and gives no cause of action to the adjoining owner.

As to Natural Right of Support, see Halsbury (Hailsham Edn), Vol 11, pp 362365, paras 636641; and for Cases, see Digest, Vol 19, pp 163168, Nos 11391167.

Cases referred to

Wilson v Waddell (1876) 2 App Cas 95; 34 Digest 725, 1071, 35 LT 639.

Rylands v Fletcher (1868) LR 3 HL 330; 34 Digest 727, 1089, 37 LJEx 161, 19 LT 220, affg (1866) LR 1 Exch 265, revsg (1865) 3 H & C 774.

Hurdman v North Eastern Ry Co (1878) 3 CPD 168; 34 Digest 724, 1065, 47 LJQB 368, 38 LT 339.

Broder v Saillard (1876) 2 ChD 692; 36 Digest 190, 321, 45 LJCh 414.

Giles v Walker (1890) 24 QBD 656; 36 Digest 195, 359, 59 LJQB 416, 62 LT 933.

Brady v Warren [1900] 2 IR 632; 2 Digest 206, case c.

Page 27 of [1940] 1 All ER 26

Smith v Kenrick (1849) 7 CB 515; 36 Digest 157, 8, 18 LJCP 172, 12 LTOS 556.

Appeal

Appeal by the defendants from a judgment of Cassels J at the Lincoln Assizes, dated 21 June 1939. The facts are fully set out in the judgment of Slesser LJ.

M D Van Oss for the appellants.

S H Granville-Smith for the respondent.

11 December 1939. The following judgments were delivered.

SLESSER LJ. This has been a difficult and troublesome case, but, as the court has come to a clear opinion on the matter, we do not think it necessary to reserve our judgment. The plaintiff, Albert Rouse, and the defendants, Gravelworks, Ltd, are neighbours. Gravelworks, Ltd, as their name implies, carry on the business of acquiring land, and then digging or quarrying the land for the purpose of getting out gravel. In fact, it is open digging. The plaintiff is a farmer, and is the owner and occupier of the field adjacent to that in which the defendants have for many years been excavating gravel. In the course of the excavations, the defendants were quite close to the boundary of the plaintiffs land, and the plaintiff said in the course of his case that in fact they had worked right over the boundary of his land, and actually had taken from his land certain gravel, and had deprived him of support, and had prevented some of his land from being available for agricultural user. On that matter, a dispute arose between the plaintiff and the defendants as to the exact boundary of the land. Had the boundary for which the plaintiff contended been held to be the true boundary, his case on a head would have been really without answer, and the only matter which would have remained would have been to have assessed the damages. However, this strip of some 4 ft which was in dispute was adjudicated on by the judge at the trial, who held that the boundary between the two lands was where the defendants, and not where the plaintiff, contended it was, and there is no appeal from that part of his judgment.

The case thus comes before us on the basis of the defendants boundary being the boundary. Upon that basis, certain considerations arise, and certain facts, which really are not in dispute. Thus, on the basis of that boundary, it is not now contended that the defendants have directly, by any action of their own, by their gravel-grab or digging, dug away any of the plaintiffs land. What is said, however, is this: “You, the defendants, have admittedly dug the gravel, and have created almost up to my boundary a mere of water, over which the winds will blow, and do blow, and those winds have already blown the water on to my land, and have already by erosion caused the disappearance of some gravel, which is estimated at the value of 7s. 6d.” That estimate of damage makes it quite clear that the damage is absolutely insignificant in amount. That is one thing. It is important to say that, at the time when the action was tried, that was in fact the only gravel which had

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been taken away by this erosion caused by the wind blowing over the water, and it was an erosion which only amounted, I think, to some 5 cubic yards. It was said, at the hearing, however, that further damage is bound to follow, and that this erosion will continue until the gravel reaches a certain angle of inclination, which is a matter of mechanical ascertainment, and really not in dispute. Then, when the gravel reaches that angle of repose, there will be a strip of some 12 ft which will have been to some extent done away with, owing to the position of this angle, and which will not be suitable for agricultural use, though it may still be used, of course, by the plaintiff himself for the extraction of gravel. It is the surface top which would be taken away for in all about a quarter-of-an-acre, I think.

The defendants said: “Whatever else may be the position with regard to the rights of the plaintiff, either at the time of action brought or in regard to future rights which he may acquire, we say there is here disclosed really no cause of action at all. That is to say, in law what we have done is consistent with no more than the natural user of our land. It is said that every freeholder has the right to work his minerals, and we have done no more than work our minerals. If water has accumulated on our land in consequence of that working, and if some of that water has escaped on to the land of the plaintiff, albeit in the form of waves which may beat on his land, we have committed no wrong against him. We have not deprived him of the lateral support to which he, as freeholder, is entitled. We have done no more than use our land in its natural way. He can point to no grant, no prescription, which gives him any right to be protected from the consequences of our natural user of our land, and he cannot support any case for the complaint that he has suffered in lateral support.”

Numerous authorities were quoted to us on this matter by counsel for the appellants. Perhaps the most conclusive for this purpose is Wilson v Waddell. That case laid it down that the owner of minerals has the right to take away the whole of what is in his land, according to the natural course of user. Lord Blackburn said, at p 99:

The general rule of law in both countries is that the owner of one piece of land has a right to use it in the natural course of user, unless in so doing he interferes with some right created either by law or contract; and as a branch of that law, the owner of the minerals has a right to take away the whole of the minerals in his land, for such is the natural course of user of minerals; and that a servitude to prevent such an user must be founded on something more than mere neighbourhood.

I pause to say that I think that in the present case the complaint as founded is a complaint on mere neighbourhood. Then Lord Blackburn goes on to quote the opinion of Lord Cairns LC in Rylands v Fletcher, at p 338:

[The occupiers of a close] might lawfully have used that close for any purpose for which it might in the ordinary course of the enjoyment of land be used; and if, in what I may term the natural user of that land, there had been any accumulation of water, either on the surface or underground, and if, by the operation of the laws

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of nature, that accumulation of water had passed off into the close occupied by the plaintiff, the plaintiff could not have complained that that result had taken place.

I think that Lord Cairns LC, was then speaking primarily of the case of water passing on by seeping, or by underground channel, or by watercourse, but I can see no distinction between accumulation of water passing by watercourse, or by seeping, and the case of water being blown by the wind, albeit in a battering form, upon any persons land. The position seems to me to be the same. In all of them, it might be that the lateral support of the neighbourhood would be destroyed, but in none of them could it be properly said that it was the responsibility of the person who had used his land naturally, because his water had been an element upon which nature had played to destroy the natural lateral support of the plaintiffs land.

It has been indicated in argument that this principle might be, or ought to be, applied only as between one mineowner and another. For myself, I can see no reason for coming to that conclusion. If the right view be that a neighbour cannot complain because the person alleged to have injured him has been putting his land to a natural user, I cannot see what difference it makes whether or not that neighbour is himself a mineowner. If, however, there be any doubt on the matter, I think that Hurdman v North Eastern Ry Co makes it quite clear that the principle is one of general application. There it was held that there had been an artificial erection on some land which had caused water to flow into the plaintiffs land, and, therefore, on the principle of Rylands v Fletcher, the defendant was held responsible. It was equally clear, from the way in which the case is put in the judgment, that, had there been no such artificial erection, the judgment would have gone the other way. Cotton LJ said, at pp 173, 174:

Every occupier of land is entitled to the reasonable enjoyment thereof. This is a natural right of property, and it is well established that an occupier of land may protect himself by action against anyone who allows any filth or any other noxious thing produced by him on his own land to interfere with this enjoyment. We are further of opinion that, subject to a qualification to be hereafter mentioned, if anyone by artificial erection on his own land causes water, even though arising from natural rainfall only, to pass into his neighbours land, and thus substantially to interfere with his enjoyment, he will be liable to an action at the suit of him who is so injured, and this view agrees with the opinion expressed by Jessel, M.R., in Broder v. Saillard. I have limited this statement of liability to liability for allowing things in themselves offensive to pass into a neighbours property, and for causing by artificial means things in themselves inoffensive to pass into a neighbours property to the prejudice of his enjoyment thereof, because there are many things which when done on a mans own land (as building so as to interfere with the prospect, or so as to obstruct lights not ancient) are not actionable, even though they interfere with a neighbours enjoyment of his property. But it is urged that this is at variance with the decision that if, in consequence of a mine-owner on the rise working out his minerals, water comes by natural gravitation into the mines of the owner on the deep, the latter mine-owner cannot maintain any action for the loss which he thereby sustained. But excavating and raising the minerals is considered the natural use of mineral land, and these decisions are referable to this principle, that the owner of land holds his right to the enjoyment thereof, subject to such annoyance as is the consequence of what is called the natural user by his neighbour of his land, and that when an interference with this enjoyment by something in the nature of nuisance (as distinguished from an

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interruption or disturbance of an easement or right of property in ancient lights, or the support for the surface to which every owner of property is entitled), is the cause of complaint, no action can be maintained if this is the result of the natural user by a neighbour of his land. That this is the principle of these cases appears from Wilson v. Waddell, and from what is said by Lord Cairns, L.C., in Rylands v. Fletcher.

If that view which I have expressed be the correct one, it of course concludes this case in favour of the defendants because all the complaints made here, whether they accrued before the action was brought or were expected in the future, or were of one order or another, are complaints for none of which are the defendants responsible. In fact, however, this case was decided by the judge upon the assumption that the defendants were responsible for their alleged wrongful acts. That, I have indicated is wrong. I do not think that it would be right, however, to leave this case without expressing the view that, even had I thought the defendants responsible, I for one would have been quite unable to arrive at an understanding of the principles upon which the judge assessed the damages in this case. One thing is clear, and that is that, though the judgment on the face of it was for £75, the judge was of opinion that, as the law stood, he could only assess the damages as to the cause of action which had accrued at the time of action brought, which he assessed at £40. It appears that all parties (counsel for the appellants being careful to preserve his right to contend, as he has successfully contended in this court, that he was under no obligation at all to the plaintiff) did agree, subject to that condition, that, if he was liable at all, the judge should assessI assume as an arbitrator, because it was clearly a matter that he had no power to assess by way of judgment, because the damage had not yet accrued, and this was an action on the casethe remaining £35 which it might be expected would be the damage which the plaintiff would sustain when the gravel reached the angle of repose. However, in reality, as regards the £40, excluding the insignificant claim for 7s 6d for gravel actually washed away by the operation of wind, of which I have already spoken, the only evidence that he had suffered any damage at all was that he said as regards this quarter-of-an-acre of landI am not very clear whether it was the whole of it, or only a part of itthat he was unable to plough with a tractor, and could only plough by means of using horses, on which he said generally, without giving any particulars at all, that the tractor method would be the cheaper. The judge appears to have forgotten in his judgment that there was the alternative and efficacious method of ploughing by horses admittedly open to this man at the time when the action was brought. So far as the photographs can be believed, he actually did plough right up to the edge of the land. How the judge arrived at damages of £40, in these circumstances, it is very difficult to understand. I am of opinion that the plaintiff fails to establish any right of action at all against the defendants for damages even of a nominal character. Therefore, this appeal should be allowed.

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MACKINNON LJ. I agree that the plaintiffs cause of action quite clearly was a claim that the defendants had impaired that right of support of the plaintiffs land which, as neighbouring landowners, they were bound to give. I think the proper answer of the defendants to that is: “We have only used our land as we are entitled to, by digging out the mineral. When we dug out the mineral, we had not in any way impaired your right of support. Your land was as much supported as you were entitled to have it. Subsequently nature intervened, and water accumulated in our land. We are not liable for that. The water having accumulated, wind blew upon it, and the effect of the natural operation of wind and water was to erode the edge of your land. That is not a thing for which we are liable, because it is the natural result of the operations of nature, for which the natural user of our land may have given the occasion, but for which we are not responsible as having caused it.” The result is that, in my view ( I need not repeat what has been said by Slesser LJ), the plaintiff fails to establish his cause of action.

As regards the judgment of the judge below, I entirely agree with what has been said. I am entirely unable to understand how the judge arrived at £75 as being the total damage which the plaintiff is supposed to have sustained when the maximum result ever to be contemplated in this case was that he would lose possession of a quarter-of-an-acre of land, which it is suggested would ultimately be washed away by the effect of the water. As the freehold value of that quarter-of-an-acre was, at the outside, £25, it is a complete mystery to me how it can be said that £75 could in any circumstances have been regarded as the proper amount of damages.

I agree that the appeal should be allowed, and judgment entered for the defendants with costs in both courts.

GODDARD LJ. I agree. In my judgment, the plaintiff had no cause of action. This is not a case in which a defendant has introduced on to his land something which has escaped or done damage. It is a case in which he was exercising what has always been regarded in English law as the normal right of a landownernamely, the excavation of minerals. When he had excavated the minerals on his land, the space formerly occupied by the minerals filled up with water, partly from underground places, I suppose, and partly from surface water. The result was the formation of a lake, which was on the land as naturally as a lake which is formed by a river flowing into a confined space, or a river itself. The water was naturally on the land. Then it is said that the action of the water has been to erode or undermine the neighbours bank. It is quite obvious in this case that an action for trespass will not lie. The only question would be whether there was an action on the case. Counsel for the respondents has argued, and has argued very strenuously, that this is a case of withdrawal of support, just in

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exactly the same way as though in the quarry, through working the gravel, the defendants had withdrawn the support to the plaintiffs land, which they did not. It was the action of water. It was the action of water as it was affected by the wind.

It seems to me that, when the case is properly understood, one has exactly the same position as in Giles v Walker, where an owner of land was held not liable because he allowed thistles to grow on his land and thistledown to escape, or in Brady v Warren, in which the owner was sought to be held liable for allowing an accumulation of rabbits on his land, which escaped, following the rule in the English courts of Smith v Kenrick. It is a purely natural act. If the landowner is not liable for the actual escape of water naturally on his premises, as is shown by the judgment of Lord Cairns LC in Rylands v Fletcher, and by the judgment in Wilson v Waddell, and other cases of that nature, it seems to me impossible to say that he is responsible for water which he has himself not brought on to the land, but which is there naturally, and he cannot be responsible for any damage which that water may cause.

Appeal allowed with costs in both courts.

Solicitors: Charles Greenwood & Co (for the appellants); Gibson & Weldon, agents for Andrews Stanton & Ringrose, Bourne (for the respondents.)

Derek Kitchen Esq   Barrister.

Attorney-General v Hancock

[1940] 1 All ER 32


Categories:        CIVIL PROCEDURE: CONSTITUTIONAL; Crown        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        19 DECEMBER 1939        


Emergency Legislation Judgment for arrears of income tax Whether Courts (Emergency Powers) Act 1939, binding on the Crown Courts (Emergency Powers) Act 1939 (c 67), s 1(1).

Execution Crown debt Taxes Whether Courts (Emergency Powers) Act 1939, binding on the Crown Courts (Emergency Powers) Act 1939 (c 67), s 1(1).

An information was laid against the defendant claiming arrears of income tax. Judgment having been signed, the defendant contended that the Crown could not proceed to execution without the leave of the court under the Courts (Emergency Powers) Act 1939:

Held the Courts (Emergency Powers) Act 1939, did not bind the Crown, since the Crown was not specifically mentioned and there was no necessary implication to be drawn from any of the words of the Act so as to involve the Crown.

A-G of the Duchy of Lancaster v Moresby distinguished.

Notes

The general rule as to statutes being binding upon the Crown is well settled, and the main difficulty in the present case was whether the decision of Rowlatt J, in A-G of the Duchy of Lancaster v Moresby was distinguishable from the present case. It is held to be so for the reason that it was in no way concerned with the rights and remedies of the Crown in respect of the recovery of taxes.

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As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Cases referred to

Re Bonham, Ex p Postmaster General (1879) 10 ChD 595; 4 Digest 34, 286, 48 LJ Bcy 84, 40 LT 16.

Re Henley & Co (1878) 9 ChD 469; 4 Digest 34, 285, 48 LJCh 147, 39 LT 53, 1 Tax Cas 209.

A-G v Edmunds (1870) 22 LT 667; 5 Digest 1022, 8343.

Re Smith (1876) 2 ExD 47; 5 Digest 1022, 8344, 46 LJQB 73, 35 LT 858.

Wirral Estates Ltd v Shaw [1932] 2 KB 247; Digest Supp, 101 LJKB 370, 147 LT 87.

A-G of Duchy of Lancaster v Moresby [1919] WN 69; 42 Digest 692, 1070.

Magdalen College, Cambridge Case (1615) 11 Co Rep 66 b; 42 Digest 689, 1039.

Special Case

Special Case stated by consent for the opinion of the court pursuant to RSC Ord 34. On 27 October 1938 an information was laid against the defendant in respect of arrears of income tax, and on 28 November 1938 judgment was signed for £173 11s 4d and £9 2s 7d costs. The defendant had not paid. After 3 September 1939 the informant had proposed to proceed to execution on the judgment but the defendant contended that the informant (that is, in effect, the Crown) was not entitled so to do without the leave of the appropriate court under the Courts (Emergency Powers) Act 1939, s 1(1).

The Attorney-General (Rt Hon Sir Donald Somervell KC), Reginald P Hills and Valentine Holmes for the informant.

Harold Murphy KC and J H Bowe for the defendant.

19 December 1939. The following judgment was delivered.

WROTTESLEY J. In this case, by means of a special case stated by consent for the opinion of the court pursuant to RSC Ord 34, the Attorney-General on behalf of the Crown propounds a question which is not so difficult to put as it is to answer, the question being whether, in respect of a judgment properly obtained against a defendant or respondent, the Crown may proceed to execute that judgment in accordance with the powers vested in the Crown, or whether, before the Crown can take that step, it is necessary for it to obtain the leave of the appropriate court under the Courts (Emergency Powers) Act 1939, s 1(1). The defendant, of course, says that leave is necessary. Before the execution can be proceeded with, he must be given the opportunity of putting his case and resisting the Crown, if it is a case upon which he can resist it under the provisions of the Courts (Emergency Powers) Act 1939. The Crown, on its part, says that the Courts (Emergency Powers) Act 1939, is one of those Acts which do not bind the Crown, in accordance with the old rule under which the Crown is not bound by Acts of Parliament unless specially named in the Act. It is clear by way of a beginning that the subject of this judgment is, as appears from the Income Tax Act 1918, s 169, a debt due to the Crown, and it is so

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provided, and one, therefore, for which the Crown is entitled to obtain judgment and to enforce that judgment. The rule dealing with Acts of this kind and the effect of these Acts upon the Crown is, of course, a very old one. In Maxwell on the Interpretation of Statutes, 8th Edn, p 120, it is described as follows:

It has been said that the law is prima facie presumed to be made for subjects only. At all events, the Crown is not reached except by express words or by necessary implication in any case where it would be ousted of an existing prerogative or interest. It is presumed that the Legislature does not intend to deprive the Crown of any prerogative, right or property, unless it expresses its intention to do so in explicit terms, or makes the inference irresistible.

In Craies on Statute Law, 4th Edn, a passage dealing with this matter from Plowden is quoted as follows, at p 361:

The reason of the rule is thus put by Plowden at 240: “Because it is not an Act without the Kings assent, and it is to be intended that when the King gives his assent he does not mean to prejudice himself or to bar himself of his liberty and his privilege, but he assents that it shall be a law among his subjects.”

That would, perhaps, nowadays be regarded as rather an over statement of the position of the Crown with regard to Acts of Parliament, and the true rule is probably, as has been put in argument, more likely that it is not that the Crown merely legislates for its subjects but that very often the Crown legislates for itself and its subjects, and that, when the legislation in question is one which would otherwise affect, or which would affect, the Crowns rights, interests and prerogatives, then the Act does not apply to the Crown unless the Crown is specially named in that sense, and it is only a short step from that proposition to the further one that the Crown is again to be regarded as being party to the Act of Parliament which affects itself when it is shown that the Crown was to be affected by necessary implication from the language of the statute. That being the origin of this rule, and that being, as I understand it, the exception, it is clear that from time to time in the last hundred years the question has come before the courts for debate and decision.

My attention was drawn to a number of cases where the courts have had occasion to deal with this rule. In Re Bonham, Ex p Postmaster General, the first case to which my attention was drawn, the question was whether the provisions of the Bankruptcy Act 1869, generally speaking applied to the Crown. I see from the report that in some sections of the Bankruptcy Act the Crown was actually named, while in others it was not. The question here was whether the filing of a liquidation petition and the appointment of a receiver by the court would affect the rights of the Crown against the person who had filed that petition, or in any way reduce or mitigate the rights of the Crown, and Sir George Jessel MR said, at pp 600, 601;

The first point to be considered is what is the general law on the subject of the prerogative of the Crown. Now on that I think there is no dispute whatever. The general rule, as expressed in Bacons  Abridgement, is, “that where an Act of Parliament is made for the public good, the advancement of religion and justice, and to prevent injury and wrong, the King shall be bound by such Act, though not particularly named therein; but where a statute is general, and thereby any

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prerogative, right, title, or interest is devested or taken from the King, in such case the King shall not be bound, unless the statute is made by express terms to extend to him.

The court went on to hold that generally speaking, and in this particular case, the Crown was not bound by the particular section which there came under discussion, because it was not specially named and because the result of treating that Act as binding on the Crown and affecting the Crown would have been that the Crown would have been divested of, or had taken from it, some prerogative, right, title or interest.

The next case to which my attention was drawn is Re Henley & Co. This was a case dealing with the Companies Act 1862. A similar question arose on the matter of a winding up in the Court of Appeal, when James LJ said, at p 481:

It appears to me clear on every principle that the Crown is not bound by the Companies Act 1862, not being specially mentioned in it. The Crown is not debarred, in respect of any sum of money due to it, from taking proceedings against the property of the debtor; and by the Income Tax Act the right is given to the Crown to distrain upon any of the debtors chattels for the arrears of the tax. Independently of that Act, it is a debt due from the person in possession of the property in respect of which it is claimed. The company is in possession of the property; they are the tenants, and are liable to pay the tax. Therefore there is nothing to prevent the Crown from suing the company or distraining their chattels, not only on the property, but anywhere else. There being this right, the Crown says that it does not wish to exercise its power of distress, but instead of that, asks to be paid in priority to the other creditors; and the liquidator, on behalf of the company, is ready to admit that right. That being so, it being clearly a debt due to the Crown, and a debt in respect of which the property of the company might be taken, I think it is right and proper that the liquidator, as an officer of the court, should pay the debt without allowing the distress to be made.

With that opinion of James LJ, Brett and Cotton LJJ concurred. It is true that in that case there arose also a question of priority which does not arise in this case. Then came A-G v Edmunds, which dealt with the Debtors Act 1869, then just passed. I should say that the Debtors Act 1869, enacted that, with certain exceptions:

… no person shall, after the commencement of this Act, be arrested or imprisoned for making default in payment of a sum of money.

I need not deal with the exceptions. Down to that date, as most of us are aware, debtors could be imprisoned for debt, or for making default on the payment of a sum of money. In the course of the argument, Willes J made this interlocutory observation, at p 667:

[He] intimated that the Crown was not bound, unless named or impliedly referred to. He would, however, consider the question before he gave judgment.

Then he came to the other question as to whether the Crown ought not to have taken some step before proceeding to take process against the debtor with a view to arresting him. It was a point which struck the judge in the course of the argument, but, nevertheless, when he came to give judgment, what he is reported as having said was this, at p 667:

… it is not necessary to go through the form of an inquisition as in the case of an extent. On the main question he had taken time to consider the point raised, not because he had any doubt on the general principle as to the right of the Crown, but whether the case might come within any exception to the general rule. His

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opinion was, that the case did not come within the Act of Parliament abolishing imprisonment for debt. The general principle was that the Crown was not affected except by express enactment, or by necessary implication.

I will dwell a little longer upon that case, because nobody, I think, will deny that the abolition of imprisonment for debt as such must be regarded as being a great step forward, and a step which was directed against anything in the shape of oppression, and yet it is to be seen that the court was clearly of opinion that, having regard to the form of the Act and the omission of the Crown in express terms or by necessary implication, the Crown preserved its right, if it liked, to imprison its debtors for debt. Then came Re Smith. That was a curious little case, because it appeared, and for all I know it is still the fact, that the prisoner had been an appellant in an appeal to the House of Lords, and had, in conformity with the practice in these appeals, entered a recognizance to the Crown for the payment, not of the Crowns costs, but of the respondents costs of the appeal if unsuccessful. The appellant lost his appeal, and the appellant failed to pay the respondents costs. His recognizance was estreated, he was arrested under process, and a writ of habeas corpus had been obtained, and this was the return. Although, therefore, it was not a Crown debt in reality, it was a Crown debt in form, and it was, therefore, suggested by counsel for the prisoner that he should be discharged, because the debt, though in form a Crown debt, was not so in substance, and therefore the power to imprison in respect of such a debt was taken away by the Debtors Act 1869. Lord Coleridge CJ said, at p 48:

I think this is clearly a Crown debt in law, and that consequently the Debtors Act, 1869, does not apply, and the power of imprisonment continues.

With that decision, Pollock B concurred.

My attention was also called to Wirral Estates Ltd v Shaw. The Acts under discussion there were the Rent Restrictions Acts 1920 to 1923not very recent legislation, but legislation which took place after the last War. That was a case of huts which had been erected by the Crown under one or other of its powers during the War. The huts had been let out to tenants, and the question was whether those tenants, the Crown having in the meantime sold the land and desiring, or the purchasers desiring, to get vacant possession, were protected by the Acts as being tenants of the Crown, and it was held that those Acts did not affect premises owned by the Crown even when they fell within the limits laid down by those Acts. That is to say, the rental and so forth was such as to make the premises subject to the Acts but for the fact that they were the Crowns property.

Thus, we have a series of decisions in Acts which are clearly for the public benefit, and one after another we find the courts deciding that, in the matter of such Acts, the Crowns prerogative, rights and interests are not affected. That is to say, the Act is to be construed so as not to affect them unless there are clear words to that effect, or words from which clearly there is only the indication that they are to be affected.

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Now, however, comes the Courts (Emergency Powers) Act 1914, for this is not the first occasion upon which Parliament has found it necessary to pass into law an Act along the lines of the Courts (Emergency Powers) Act 1939, with which I have to deal in this case. I have looked at the 1914 Act to see what the words of that Act were as originally passed on 31 August 1914 and s 1 provides as follows:

(1) From and after the passing of this Act no person [which word admittedly can include the Crown] shall (a) proceed to execution on, or otherwise to the enforcement of, any judgment or order of any court (whether entered or made before or after the passing of this Act) … or (b) levy any distress, take, resume, or enter into possession of any property … except after such application to such court and such notice as may be provided for by rules or directions under this Act.

That was an Act which was passed in 1914 to deal with a situation which is not unlike the situation in which we find ourselves to-day. The first thing I have to note about that is that never at any time has any person, so far as I am informed, suggested that the Act bound the Crown in its application to the subject for taxes. It is not, however, that the matter did not fall to be discussed, and in point of fact no later than 24 November 1914 it was left for an Irish farmer to raise the question with regard to the payment which he was liable to make to the Irish Land Commission in respect of a farm which I suppose he had purchased under one of the Irish Land Acts. He suggested that the question which the court had to decide was whether, before this debt could be enforced, there ought not to be an application under the Courts (Emergency Powers) Act 1914, and accordingly the court, consisting of three judges of the Kings Bench Division in Ireland, Madden, Boyd and Kenney JJ, had to decide this question. The ground upon which it was argued, however, was not that the Courts (Emergency Powers) Act 1914, applied to the Crown. That was not the ground upon which the enforcement of the payment of this debt was resisted. It was on the ground that this particular Act under which this payment was made did not make it a debt due to the Crown. As has been said in argument here, it is clear that not merely the court but also the counsel engaged in that case all assumed that, if this were a debt due to the Crown, or a payment to the Crown which the Crown was entitled to receive, in that event, the Crown not being named, and there being no necessary implication to be drawn from that, the Crown could then proceed to enforce the payment without first applying for leave under the Courts (Emergency Powers) Act 1914. It is not, I think, unimportant, and it is not entirely irrelevant, therefore, that until to-day no person has come forward either in respect of the Courts (Emergency Powers) Act 1914, during its pendency, or under the present Act, to claim that the Crown is, like a subject, unable to enforce its judgment until it has proceeded to get leave under the Courts (Emergency Powers) Act 1939. However, those are not the only occasions upon which the Courts (Emergency Powers) Act 1914, has been discussed in the courts in reference to the Crown, because on

Page 38 of [1940] 1 All ER 32

21 February 1919, A-G of Duchy of Lancaster v Moresby was tried before Rowlatt J, as he then was. That was a peculiar case. The Duchy of Lancaster had leased premises to, I will not call them tenants, but to persons interested in the lease or tenancy, and they had suffered having the premises taken from them by the Crown under one or other of its powers in the last War. Nevertheless, the Duchy of Lancaster, I suppose knowingthey must have been toldthat their tenants, therefore, had no beneficial use of the premises themselves, and had also been unable to recover the compensation which was provided for by other war legislation, chose to press this claim for rent. When the case came on for trial, they were no longer pressing for their rent, because in the interim a substantial payment of compensation had been made to the tenants, and the tenants had thereupon paid their rent. It appears from the report, which is not very full, that the real dispute there was as to who should pay the costs. The Attorney-General of the Duchy of Lancaster thought that the Duchy of Lancaster ought to have their costs paid. The tenants who had this rather unfortunate experience did not think so. It was apparently upon that that this question arose, but certainly when it came to Rowlatt J, as he then was, he is reported as having said, at p 70:

… that in his opinion the action was utterly unconscionable. The Office of Works was a department of the Crown, and it seemed to him monstrous when one department of the Crown took possession of premises belonging to His Majesty in right of the Duchy of Lancaster so that the lessees of the Duchy could not receive their rent that proceedings should be taken by the Duchy, which was another department of the Crown, to recover the rent. That was sufficient ground for him to say that he would not give costs to plaintiff.

I cannot find it in my heart to disagree with a single word which has been said so far. The report continues, at p 70:

He did not decide whether he had jurisdiction in such an action to award costs; he was not familiar enough with actions by or against Attorney-Generals to do so.

I think that Rowlatt J was permitting himself to make a humorous statement then. The report continues, at p 70:

With regard to the counterclaim he thought it was not properly raised. He had never heard of a counterclaim against an Attorney-General. He would therefore not give any costs to the defendants as they had not proceeded in a proper way. He had, however, to consider the substance of the counterclaim, and he had therefore to consider whether the Courts (Emergency Powers) Act, 1917, bound the Crown. That statute dealt with cases where the circumstances showed great hardship, and where the normal conduct of affairs was rendered impossible by the action of the government. He thought that this Act belonged to the class of statutes which bound the Crown as being one for the suppression of wrong: see Craies on Statute Law, 4th Edn., p. 361. In his opinion it was impossible to divide up the Crown into departments. He would make an order relieving the defendants, so long as the premises were in the occupation of the Office of Works, from paying rent in excess of the payments made to them by the Losses Commission.

It is said, and I think that it is said rightly, that at any rate Rowlatt J decided that, if he made an order (it may have been an imperfect report), the Courts (Emergency Powers) Act 1917, s 1(2), applied to the Crown in the sense that it applied to a contract to which the Crown was a party. That Act of 1917 dealt with the case of contracts which, owing

Page 39 of [1940] 1 All ER 32

to a restriction or direction given under the Defence of the Realm Act or regulations, or owing to the fact that the Crown had seized or was using the premises or shops, could not be enforced without serious hardship, and that Act empowered the courts of this country to give what the courts thought appropriate relief. There is no doubt that Rowlatt J if he is rightly reported, thought that that section would have applied to a contract to which the Crown was a party. It is really sufficient for the purpose of this case for me to say that neither Rowlatt J nor anyone else has ever decided that the section of the Courts (Emergency Powers) Act 1914, to which I have referred, affected the Crown or applied to it so as in any way to diminish its rights to recover taxes, and on that ground alone, of course, the decision of Rowlatt J in A-G of Duchy of Lancaster v Moresby is distinguishable. At any rate, looking at all those decisions and applying the analogy of the Debtors Act, which I think is not very far away from the present case, the Bankruptcy Acts, also not very far away, and the winding-up provisions in the original Companies Actnone of them very far distant from the subject-matter with which I have to dealI think I am bound to say that this Act of 1939 is an Act which, if applied to the Crown, would clearly divest it of, or diminish in some way, the Crowns property, interest, prerogative or rights, and it is not necessary for this purpose, I think, for me to say which of that category I think is affected. I think that very likely all of them would be. For that reason, I do not feel myself bound by the decision of Rowlatt J in dealing with the Courts (Emergency Powers) Act 1917, and, since that is so, then, I think, on the analogy of those cases dealing with those not dissimilar provisions, I am bound to say that the Crown here is not affected by the Courts (Emergency Powers) Act 1939. There are, of course, other difficulties in A-G of Duchy of Lancaster v Moresby. To begin with, it did not deal with a debt due to the Crown at all. It dealt with costs. However, I cannot say that I agree with it, if it purports to decide, quite apart from principles of procedure, that a subject can rely upon that section to suspend or annul a contract with the Crown under the section which is contained in the Act of 1917. However, this, of course, is not a case of a contract with the Crown. It is a case of a debt due to the Crown, not under contract, but by way of tax. It is a debt, and not a contract.

My attention has been called to Magdalen College, Cambridge Case. Many reasons were given in this case for the decision in that case, which was to the effect that the master and fellows of Magdalen College, Cambridge, had no right to divest themselves of certain property, which they had endeavoured to do by the process of conveying it to the QueenQueen Elizabeth, I supposenot for the Crown, as it happened, but for some other purpose, and it is apparent from the case that the conveyance to the Crown, or what was the form of the conveyance in those days to the Crown, was made in order, I suppose, to evade the

Page 40 of [1940] 1 All ER 32

Act which forbade bodies like this to get rid of their property. Many reasons were given by the Chief Justice for holding that that disposal of their land was void, but it is at any rate clear that one alone would justify it and would not involve some of the discussions which took place and some of the reasons given by the Chief Justice in the course of his judgment, and that reason is the simple one that the Act of Parliament forbade the master and fellows of the College to divest themselves of their property, so it was not really an Act affecting the Crown. That in itself was enough. However that may be, I feel that this principle has now been discussed and applied, or not applied, in a number of decisions which have taken place in the last hundred years, and the rule is now, as I understand it, well laid down and clear, the rule being that, if an Act of Parliament would otherwise divest the Crown of its property, its rights, its interests or its prerogative, then it is not to be construed as applying to the Crown unless the Crown is specifically mentioned. If that be the test, I have looked at the Act, and nobody has drawn my attention, because nobody can draw my attention, to any special words naming the Crown. It is also clear that there is no necessary implication to be drawn from any of the words of the statute so as to involve the Crown. That being so, I must answer the question in this way. I must declare that the informant may proceed to execution upon, or otherwise to enforce, this judgment without further leave. I make the declaration in the form in which it is asked for in the case, and that is, as I understand, the agreed case, so that there is no question as to what is the appropriate relief.

Solicitors: Solicitor of Inland Revenue (for the informant); James Turner & Son & Whitehouse (for the respondent).

W J Alderman Esq   Barrister.

Re An Arbitration between A/S Tank of Oslo and Agence Maritime L Strauss of Paris

[1940] 1 All ER 40


Categories:        SHIPPING        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        21, 22 NOVEMBER 1939        


Shipping Charterparty Ship to “proceed (as ordered on signing bills of lading) direct to one safe port” Option to discharge at two safe ports for small additional freight charge Option exercised before bills of lading signed but by mistake not communicated to master or charterers factors at loading port Master signing bills of lading for one port only Meaning of words “on signing bills of lading” Mistake Estoppel.

The respondents chartered the ship James Hawson to proceed to Philadelphia, there load a cargo of oil from the charterers factors, and then “proceed (as ordered on signing bills of lading) direct to one safe port east coast United Kingdom or on the Continent.” The charterparty contained a clause giving the charterers the option of discharging at two safe ports as mentioned above, and, in the event of this option being exercised, they were to pay a small amount of extra freight. After considerable correspondence between the parties,

Page 41 of [1940] 1 All ER 40

it was finally agreed, on the day before the ship arrived at Philadelphia, that the charterers, in exercise of their option, should discharge first at Bordeaux and then at Havre. This arrangement, however, was not notified by the owners to the master, or by the charterers to their factors, and accordingly the master, on arriving at Philadelphia, cabled the owners agents stating his sailing date, and adding that Havre was the only discharging port. He subsequently signed bills of lading for this port. The owners agents, on receiving this cable, suspected that a mistake had been made, and, after various communications had passed between the parties, the ports of discharge were finally verified, and the master was ordered to proceed accordingly. It was thereupon contended by the owners that there had been no proper exercise of the option, as the words “proceed (as ordered on signing bills of lading) direct to one safe port” must be construed strictly, and meant that the order had to be given to the master while he was in the act of signing the bills of lading, and therefore could only be given by the factors at Philadelphia:

Held there was nothing in the charterparty which required that the option should be exercised at the moment of the signing of the bills of lading. The option was, therefore, duly exercised.

Decision of Atkinson J ([1939] 2 All ER 585) affirmed.

Notes

The general rule for the construction of documents is that the grammatical and ordinary meaning of words must be adhered to, but, where that leads to a capricious and irrational result, the rule may be departed from. This departure is more easily made in a commercial document, in which words and expressions have to be given a reasonable meaning. It must be emphasised that in the present case the contest is solely between the shipowners and the charterers. No question of the rights of third parties arises.

As to Construction of Charterparties, see Halsbury (Hailsham Edn), Vol 30, pp 365370, para 542; and for Cases, see Digest, Vol 41, pp 305309, Nos 16701703.

Appeal

Appeal by the claimants from a judgment of Atkinson J, dated 18 April 1939 and reported [1939] 2 All ER 585, where the facts are fully set out.

Sir Robert Aske KC and H M Pratt for the appellants.

Valentine Holmes for the respondents.

Aske KC: The ship having issued a bill of lading to go to one definite port, she cannot go to any other without all the consequences of a deviation ensuing. The umpire was right in holding that, on the true construction of the charterparty, the time for the exercise of the option of fixing the part of discharge was the date of signing the bill of lading. In view of the subsequent bill of lading, the purported exercise by the charterers before the ship reached Philadelphia was a mere nullity.

Holmes: There is nothing in the charterparty which prevents the charterers from exercising their option for two ports before the ship reached the port of loading, and, once they have done so, the signing of the bill of lading amounts to no more than the giving of a receipt for the goods by the master. From the moment the charterers exercised their right to name two ports, the owners were admittedly entitled to extra freight.

Page 42 of [1940] 1 All ER 40

Sir Robert Aske KC and H M Pratt for the appellants.

Valentine Holmes for the respondents.

22 November 1939. The following judgments were delivered.

SCOTT LJ. In this case, the appellants are shipowners and the respondents are charterers. Under the charter, a Norwegian tanker was chartered to load in the United States a cargo of oil or petroleum spirit of sorts. The charter contains an arbitration clause, and the dispute between the owners and charterers in this case was referred to arbitration, and the umpire has stated a case raising the questions of law on which our decision depends. The charterparty is a tanker charterparty in English. It does provide that the contract shall be governed by the laws of the flag of the carrying vessel, which in this case was Norwegian, the ship being owned by a Norwegian company. No evidence was given of any difference between English law and Norwegian law, and, therefore, the court applies English law to the solution of the problems to which it has to address its consideration.

The dispute is as to whether, when the ship sailed from the American port of Philadelphia for Europe, she was under obligation to go to two ports on this sidenamely, Bordeaux and Le Havreor whether, as the owners say, she was under obligation to go to Le Havre only. The dispute arose in this way. The charter contained a provision that the ship should load the cargo from the factors of the charterers:

… and being so loaded shall therewith proceed (as ordered on signing bills of lading) direct to one safe port east coast United Kingdom or on the Continent Bordeaux/Hamburg range.

The words down to “direct to” are in the printed form of charter, and the additional words which I have just readnamely, “one safe port east coast United Kingdom or on the Continent” are in type. Gummed on were three additional typed clauses, of which only that numbered 26 is relevant to the dispute. Cl 26 provides as follows:

Charterers have the option of discharging at two safe ports as above and in the event of this option being exercised charterers are to pay extra freight as follows: 6d. per ton on the whole cargo shipped for two ports on the same coast and in the same country. Ports between Bordeaux and Dunkirk to be considered as on the same coast. 1s. per ton on the whole cargo shipped for two ports on different coasts or in different countries.

Bordeaux and Le Havre both being in France, the 6d per ton would be the correct extra freight on the exercise of that option by the charterers.

What happened was that, shortly before the loading of the ship at Philadelphia, the sailing date being 23 January, as it turned out, the charterers had intimated to the shipowners some weeks before that they desired to exercise the option and have the ship go to two ports. The phrase “two safe ports as above” I think refers to the typewritten words in the clause following after the printed words “…proceed (as ordered on signing bills of lading) direct to one safe port. …” It means that the two safe ports must be within the range there specified “as above.” The charterers wanted the ship to go to Bordeaux first and then to Le Havre. The charterers are a firm in Paris. The shipowners wanted the order of ports to be Le Havre first and then Bordeaux. Correspondence took place between them as to whether the rotation should be the one which the charterers desired or the one which the shipowners desired. The

Page 43 of [1940] 1 All ER 40

charterers insisted on their rotationnamely, Bordeaux firstand the shipowners agreed to comply with their wishes. That is all that happened on this side of the Atlantic, but, on the other side of the Atlantic, when the cargo had been loaded from the factors of the charterers, an American company named the Atlantic Refining Co, that company tendered the bills of lading as factors of the charterers, and only one bill was tendered. That bill of lading provided that the ship should proceed to Le Havre only, and nothing was said in it about two ports or about Bordeaux. After the ship had sailed, the owners and charterers on this side learned that only one port had been put in the bill of lading. Then a correspondence took place between them, and the shipowners agreed with the charterers that the ship should proceed to Bordeaux first and then to Le Havre, but they accepted the charterers offer of a bankers indemnity against risks which the shipowners might incur by changing the ships voyage as specified in the bill of lading, and the shipowners required them to pay any extra costs to which the shipowners were put by the change, in addition to the 6d per ton extra for the option of going to two ports.

The matter went to arbitration, as I have said, and the umpire decided that the charterers were liable under the arrangement made, because they had no right, after presenting the bill of lading for one port, to call upon the shipowners to send the ship to two ports. The umpire decided that the correspondence which took place before the loading of the ship was only what he called a provisional exercise by the charterers of their right of requiring the ship to go to two ports. He took the view that, under the charterparty, the printed words “(as ordered on signing bills of lading)” made that moment of time the appropriate moment for the exercise of the option for the two ports, and that, consequently, the intimation given by the charterers by correspondence before the ship sailed that they wished it to go to two ports was merely a provisional exercise of the option, so that, when their factors tendered the bill of lading for one port, that was the definitive exercise of the option. He accordingly decided in their favour, but left these two questions to the court:

Whether upon the facts as found by me and upon the true construction of the documents: (1) Orders for the discharging port or ports must be given at the time of signing bills of lading. (2) When bills of lading are presented by the charterers factors indorsed for a different destination, the charterers have thereby altered or waived any earlier orders given by them or are estopped from denying that the destination so indorsed is the proper one.

He says that, if the court finds that the answer to the first question should be in the affirmative, or that the answer to the first question should be in the negative and the answer to the second question should be in the affirmative, then he gives the shipowners the sum of £301 odd and costs, but that, if the court answers both questions in the negative, then he gives the charterers the costs, with nothing to pay by way of damages or indemnity to the owners.

Page 44 of [1940] 1 All ER 40

The question, therefore, is a very short one, and though at first I was inclined to agree with counsel for the appellants in his argument that the interpretation of the charter required the conclusion that the exercise of the option for two ports must be at the time of signing bills of lading, I have come to the conclusion that that argument is wrong, on the ground pointed out by counsel for the respondentsnamely, that it is necessary to distinguish between exercising the option for two ports and the naming of the particular ports which has to be effected according to the charter on signing bills of lading. Counsel for the respondents further submitted that, under the charter, the charterers had an absolute right to say that the ship should go to two ports, without naming what ports, at the time when they exercised that rightcalled an option in cl 26and that, when they had exercised it, in accordance with the ordinary rule about options in contracts, the contract then came to be ipso facto, by the exercise of that right intimating to the owners what their exercise wasnamely, two portsa charter for two ports, and that, when that had happened, it was then necessary to approach the question as to what was the effect, in a charter for two ports, of the charterers factors tendering for signature a bill of lading for one port.

The first point to realise is that, as between the charterers and the shipowners, the bill of lading, when signed by the master, was a mere receipt for the cargo loaded, and did not alter the contract as between shipowner and charterer. That is a matter of law. Then, in addition, there is this point of fact. In the correspondence which passed between the charterers and the shipowners through the owners various agents in London and Oslo the charterers had not only said: “We exercise the option for two ports,” but they had also said: “We exercise the option for the two ports of Bordeaux and Le Havre.” The shipowners clearly assented to that exercise of their option, and, as between the shipowner and the charterer, I think it was at least common groundpossibly a binding contract alsothat the ship should go to these two ports in that order.

That being so, what is the effect of the charterers factors tendering the bill of lading for one port? Clearly that happened through a mistake, for which, no doubt, the charterers were primarily responsible, in that they had not told their factors to make out the bill of lading for two ports. Then, secondly, it was a mistake on the part of the master. He signed that bill of lading because he had not heard from his owners that the option for two ports had been exercised, and, therefore, looking at the charter, thought it was only a charter for one port, and, consequently, had no reason to suppose that the naming of one port only in the bill of lading was a mistake. Correspondence took place afterwards which has no bearing at all on the question of liability, because it merely relates, in my view, to the amount payable in case the owners were entitled to hold the charterers, as they did, to the one port named in the bill of lading. As a matter of fact, in this case the one bill of lading did not leave the

Page 45 of [1940] 1 All ER 40

possession of the charterers or their agents at all, and the risk of third parties taking one proceeding or another in consequence of the bill of lading not corresponding to the actual voyage of the ship never arose. However, we need not in this case consider the rights of third parties which might have accrued, since there is no evidence before the umpire that any did accrue. On the contrary, the evidence was that the bill of lading remained a receipt, and nothing more.

That is the whole story, except the conclusion. In my view, in this particular case, and on these particular facts, the option for two ports was duly exercised by correspondence. There is nothing in the charter which compels that exercise at the moment of signing bills of lading, because I think that that clause relates only to the naming of a port or ports, and, since the bill of lading was, as between shipowners and charterers, not a new contract at all, but only a receipt by the master for the charterers goods, in my opinion, it had no operative effect at all as between these two parties.

It follows from that that my judgment must be for the charterers and against the shipowners upon the questions asked, and they will be answered, as I have indicated, in accordance with the judgment given by Atkinson J below. He took the view that the umpire was wrong in his interpretation of the charter, and that the position was one in which the charterers were right. I think that he made certain minor slips in regard to some of the correspondence, but in effect the judgment which I have just delivered is to agree with the judge in the conclusion at which he arrived. Therefore, that will be a dismissal of the appeal.

CLAUSON LJ. I agree.

GODDARD LJ. I agree.

Appeal dismissed with costs.

Solicitors: Sinclair Roche & Temperley (for the appellants); Thomas Cooper & Co (for the respondents).

C St J Nicholson Esq   Barrister.

Francis v Squire

[1940] 1 All ER 45


Categories:        LANDLORD AND TENANT; Leases        

Court:        KINGS BENCH DIVISION        

Lord(s):        ASQUITH J        

Hearing Date(s):        24, 27 NOVEMBER 1939        


Landlord and Tenant Lease Covenant to pay all assessments, impositions and outgoings whatsoever Road charges Charges not paid by landlord at date of issue of writ Right of landlord to recover charges.

The plaintiff was the landlord and the defendant the tenant of certain premises at a yearly rental, the defendant having covenanted, inter alia, “to bear pay and discharge all existing and future rates taxes assessments duties impositions and outgoings whatsoever imposed or charged upon the demised premises.” A sum of £133 13s 3d was imposed upon the premises for road charges. The defendant admitted that, on the wording of the covenant, he was liable for these charges. He set up two defences. First, he alleged a precedent oral agreement exempting him from liability and claimed rectification of the lease, but

Page 46 of [1940] 1 All ER 45

this was overruled on the facts; secondly, he alleged that, as in fact the plaintiff had not at the date of the issue of the writ paid the charges to the local authority, his liability towards the plaintiff had not matured:

Held the defendant was liable to pay the amount of the charges to the plaintiff, because the latter was liable to pay them to the local authority, even though he had not yet done so.

Notes

The liability of the tenant under the covenant to pay is admitted so far as a court of first instance is concerned. The question here debated is whether the landlord can obtain judgment for the amount of the charges before he has actually paid them; and it is decided that he can.

As to Incidence of Outgoings,  see Halsbury (Hailsham Edn), Vol 20, pp 187195, paras 205212; and for Cases, see Digest, Vol 31, pp 294300, Nos 43964455.

Cases referred to

Loosemore v Radford (1842) 9 M & W 657; 26 Digest 127, 908.

Lethbridge v Mytton (1831) 2 B & Ad 772; 17 Digest 176, 799, 9 LJOSKB 330.

Action

Action for the recovery of £133 13s 3d, being an apportioned amount of road charges charged on premises demised by the plaintiff to the defendant and claimed under a covenant whereby the latter had undertaken “to bear, pay and discharge all existing and future rates taxes assessments duties impositions and outgoings whatsoever imposed or charged upon the demised premises. …”

Valentine Holmes for the plaintiff.

H G Robertson for the defendant.

27 November 1939. The following judgment was delivered.

ASQUITH J. On 27 March 1935, the plaintiff leased to the defendant certain premises consisting of a house called Torwood and an adjoining orchard in Buckinghamshire. The lease reserved a rent of £90 per annum payable quarterly, and contained, amongst other covenants, one providing that the tenant was to

… bear pay and discharge all existing and future rates taxes assessments duties impositions and outgoings whatsoever imposed or charged upon the demised premises or upon the owner or occupier in respect thereof or payable by either in respect thereof except landlords property tax.

The premises in question abut on a private road, and in October 1936 the Buckinghamshire County Council resolved that certain work should be done in connection with the conversion of this road into a public road. The council acted under powers granted to it by the Private Street Works Act 1892. By that Act, it is provided that the council may recover the cost of such works from the freeholder. The amount to which each frontager is liable is apportioned on the basis of his frontage, and the owner of that frontage is liable to pay. The works in this case were completed in early AprilI think on 14 Apriland on 14 April a final apportionment was made under s 12 of the Act, apportioning some of the £4,000 which the scheme involved altogether, £75 18s 10d to the orchard and £57 14s 5d to the house Torwood

Page 47 of [1940] 1 All ER 45

itself. By notices of 2 May the council notified the plaintiff of this apportionment, and informed him that the premises stood charged with those respective amounts as from the date of the final apportionment. The plaintiff, claiming that these sums were assessments or impositions or outgoings within the covenant which I have read, claimed payment thereof from the defendant. The defendant, after a good deal of correspondence, finally refused to pay. The defendant had meanwhile tendered the rent of £22 10s per quarter for the quarters of Michaelmas 1938, Christmas 1938, and Lady Day 1939. The plaintiff declined to accept these instalments of rent, fearingI think without any reasonthat, if he did so, he might be taken to have waived the rights he was asserting to insist on the payment of the road charges.

The writ was issued on 29 March 1939, claiming under two heads. It was claiming, first, the total amount of the road chargesnamely, £133 13s 3d, with interest at 4 per cent from April 1938, making in all £138 15s 5d. As I have said, the plaintiff was tendered or offered the rent for these three quarters, and he refused it. When the action was started, the defendant paid the money into court with an admission of liability. That was before delivering his defence. When he delivered his defence, he set up a plea of tender, and said he had brought the money into court. The money was taken out of court after it was paid in, and no question arises under this head except as to costs. It seems to me that a payment into court with an admission of liability is consistent with setting up a defence of tender, and, as far as costs are concerned, I think that the costs, if there are any separate costs of this issue, ought to follow the rule which applies to payments into court with an admission of liability when the money is taken out.

The other issuethe important one in the actionis as to liability for the road charges. The defence here falls into two sections. First of all, the defendant admits, on the wording of the covenant as it stands, and upon the authorities as they stand, that it is impossible for him to contend with any hope of success in this court that the road charges are not assessments, impositions or outgoings within the covenant and sums which the defendant was liable to pay if the covenant applies, but he desires to keep the point open in the event of an appeal to a court upon which those authorities are not binding. What he does raise upon this assumption that the covenant is binding is a contention as to the amount of damage. He argues that the plaintiff cannot, assuming the covenant to apply and to have been broken, recover from the defendant any sums except such as he himself has actually had to pay, and has paid, to the county council before the issue of the writ. That contention I will deal with in a moment. The other point he raises is this. He asks for rectification of this part of the lease. He claims that an oral agreement was made, before the lease was drafted or engrossed, whereby the tenant was to bear only such rates and taxes as are usually borne by the tenant under a lease for a short term. In evidence, the defendant said that it

Page 48 of [1940] 1 All ER 45

was orally agreed that he should pay only the usual rates and taxes, and he contends that this provision ought to have been embodied in the lease, and that cl 1(2) did not give effect to the oral agreement between the parties which preceded it. He accordingly counterclaims for rectification in the sense indicated, and he asks for a declaration that sums assessed or apportioned under the Private Street Works Act 1892, are not the usual rates and taxes in a lease for a short term.

As regards the plea for rectification, I do not think the defendant has established the oral agreement on which he relies as the foundation of his claim.

The only question remaining is one to which I referred a little while agonamely, whether or not, under cl 1(2), the plaintiff is entitled to recover the road charges from the defendant, notwithstanding that, at the time of the issue of the writ, he had not paid any part of them, and, between the writ and the hearing, had paid only some £29 odd out of a sum of £138 odd. It is argued by counsel for the defendant that the defendant is not liable, because this is a covenant for breach of which damages must be proved, and only sums which can be shown to have been disbursed in consequence of the defendants failure to discharge his obligations can be recovered, so that a liability which has not yet matured in payment is, according to that argument, excluded. It does not seem to me that that contention is well-founded, and there appears to me to be authority against it. First of all, leaving aside the particular form of this covenant, it is quite plain that, not only where there are engagements to indemnify, but also in all kinds of other cases, a plaintiff can often recover a sum of money without showing that he has yet had to disburse it by showing that, through the defendants default, he has come under a liability to disburse it. The instance cited by counsel for the plaintiff is that of an ordinary running-down case, in which a plaintiff is plainly entitled to recover the amount for which he has become liable to a doctor for fees without showing he has actually paid those fees. I spoke of authority just now, and two cases have been citednamely, Loosemore v Radford and Lethbridge v Mytton. The second case is in point for a reason which I have not yet mentioned, and that is that, upon a final apportionment, a charge attaches immediately to the premises for the sums assessed upon them. That charge attaches to the freehold, and, that being so, the obligation imposed by the covenant in this case was in effect to relieve the premises of that charge. In Lethbridge v Mytton, the facts as stated in the headnote were these:

Defendant, by a settlement made on his marriage, conveyed estates upon certain trusts, and covenanted with the trustees to pay off incumbrances on the estates, to the amount of £19,000 within a year:

Held, that on his failing to do so, the trustees were entitled to recover the whole £19,000 in an action of covenant, though no special damage was laid or proved …

Thus, here the charge attached, and the defendant came under a liability to pay £138 odd, which would, in effect, clear off that charge. He failed to do so, in breach of his covenant, and the whole amount here, as in the

Page 49 of [1940] 1 All ER 45

case which I have cited, seems to me to be properly recoverable by the plaintiff by reason of that default. The other case cited is perhaps also worth referring to, Loosemore v Radford, in which the headnote is as follows:

The plaintiff and defendant being joint makers of a promissory note, the defendant as principal and the plaintiff as his surety, the defendant covenanted with the plaintiff to pay the amount to the payee of the note on a given day, but made default:

Held, in an action on this covenant, that the plaintiff was entitled, though he had not paid the note, to recover the full amount of it by way of damages.

Both of those cases seem to me to be in point, and, accordingly, I must reject the contention that, because the plaintiff has not, or had not, disbursed anything at the time of the issue of the writ, he is, therefore, debarred from recovering the full amount of the road charges as damages for breach of this covenant. It follows that there must be judgment for the plaintiff with costs, and the counterclaim is dismissed, also with costs.

Judgment for the plaintiff with costs. Counterclaim dismissed with costs.

Solicitors: George L Barnett & Co (for the plaintiff); Simmons & Simmons (for the defendant).

W J Alderman Esq   Barrister.

Easdown v Cobb

[1940] 1 All ER 49


Categories:        CIVIL PROCEDURE        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD RUSSELL OF KILLOWEN AND LORD WRIGHT        

Hearing Date(s):        27 JUNE 1939        


Workmens Compensation Workman Farmer Deed of assignment for benefit of creditors Trustee appointed by creditors Farmer continuing to manage farm Accident Whether contract of service with trustee Workmens Compensation Act 1925 (c 84), s 3(1).

The applicant and his brother, who were carrying on a farm in partnership, fell into difficulties and called a meeting of their creditors. At that meeting, which took place on 12 August 1937, it was proposed that the applicant should be employed as manager of the farm at a salary to be eventually decided by the committee of inspection. On 16 August, a deed of assignment was fully executed by the applicant and his brother, and sent to the defendant, the trustee under the deed, who was then on holiday in Scotland. The assignment was completed on 18 August, and on 19 August the applicant, while at work on the farm, met with an accident, in respect of which he claimed workmens compensation. There was an agreement that the applicant should be paid wages at the rate of £2 12s per week, but it was contended that the applicant was not working under a contract of employment, and was not, therefore, a workman within the meaning of the Workmens Compensation Act 1925, s 3(1). The county court judge awarded compensation on the ground that the applicant was the trustees servant, but on appeal the Court of Appeal reversed his decision, holding that there was no evidence of a contract of service on the day of the accident. Thereupon this appeal was brought:

Held there was evidence upon which the county court judge was entitled to find as a fact that the applicant on the relevant date was a “workman” within the meaning of s 3 of the Act of 1925.

Page 50 of [1940] 1 All ER 49

Notes

The question in this appeal is treated as one of fact, but it is a little curious that one of the partners in a partnership should become an employee of the partnership entitled to compensation.

As to Workman, see Digest, Vol 34, pp 239244, Nos 20432078; and see, also, Williss Workmens Compensation, 32nd Edn, pp 168, 169.

Appeal

Appeal by the workman from an order of the Court of Appeal (Greer, Slesser and Mackinnon LJJ), dated 24 June 1938, reversing an award, dated 18 May 1938, made by His Honour Judge Clements in the Rochester County Court.

Hon Sir Stafford Cripps KC and Francis A Hopkinson for the appellant.

Donald McIntyre for the respondent.

27 July 1939. The following opinions were delivered.

LORD ATKIN. My Lords, this is a simple case, as I think it appears to all your Lordships, in which I have the misfortune to differ from the conclusion which was arrived at by the Court of Appeal, who reversed the county court judge on a question which I think, in the ultimate analysis, turns out to be purely a question of fact. The claim is brought under the Workmens Compensation Act 1925, and it might be as well to refer to the relevant section of the Act, because the question which arises is whether or not the appellant was a workman within the meaning of s 3 of that Act. In that section, the expression “workman” is defined as meaning:

… any person who has entered into or works under a contract of service or apprenticeship with an employer …

The appellant, George Easdown, in partnership with his brother Walter, had been carrying on a market-garden or farm of about 35 acres at Mid-Higham, near Rochester. In 1937, unfortunately, the brothers had got into financial difficulties. They called their creditors together, and a meeting of creditors took place on 12 August 1937, at the offices of Messrs Cobb, who are well-known estate agents in that district. The proposal was that there should be a deed of assignment. Nothing was eventually concluded at that meeting, but it was proposed by the creditors that George Easdown should be employed as manager at a salary which the committee of inspection would eventually decide. A question still arose, however, as to whether or not there should be a composition, and nothing was decided until a day or two later, when the brothers decided to execute a deed of assignment, and Robert Cobb, the senior partner in the firm of estate agents, was to be the trustee. On 16 August a deed of assignment was duly signed by the two brothers and sent to Robert Cobb, who at that time was enjoying what I have no doubt was a well-earned holiday in Scotland. The brothers continued on the farm, George Easdown managing it and the two or three farm servants continuing their respective employments. Unfortunately, on the third day, 19 August, George Easdown, while carrying on his work at the farm, met with an accident. He fell off a hay cart and seriously

Page 51 of [1940] 1 All ER 49

injured his knee. There is no question about his being incapacitated, and there is no question at all but that, if he were a workman, he would have a claim for compensation against his employers.

Was he or was he not working at this time under a contract of service? The facts are that, after the accident, he continued to be manager. He went home after he had been treated in hospital, and he apparently managed the farm, though he was not able to work on it. He prepared accounts, and he duly sent accounts of wages to Robert Cobbs firm. Later, he had an interview with one Strouts, a clerk in the employment of Robert Cobbs firm, who said that the accounts were not quite satisfactory and that he wanted some further detail. On 24 September the appellant received a letter signed by H & R L Cobb saying that it was necessary to make a valuation, and adding:

With regard to the wages paid, we shall be glad to receive details as soon as possible.

The “wages paid” referred to an account of wages which the appellant had sent to Messrs Cobb on 20 September, being the accounts for the month from 16 August to 11 September setting out wages for each week paid to the appellants brother, to Mrs Kent and Marchant, to W Wright and others, and adding at the end: “Self, one month, £10 8s.” A question had arisen between the appellant and the representative of Messrs Cobb who had called upon him as to the amount which the appellant, George Easdown, should receive, and the letter of 24 September says:

As far as your salary is concerned, we have no objection to your drawing £2 12s. per week for the time being.

My Lords, in those circumstances, how can it be said that there was no evidence that this man was employed? As from the date of the signing of the agreement, which was completed on 18 August, but by which, on 16 August, subject to acceptance by the trustee, the brothers had divested themselves of every interest in the farm, what was the position of the trustee? Obviously, he knew that the farm had to be carried on. He knew that there would have to be farm servants. There were horses on the farm, and he knew that the stock would have to be fed and dealt with, and that the whole of the market-garden would have to be attended to, and that quite obviously someone would have to manage it. All that must have been thoroughly well known to him, and must have been contemplated by him at the time when he took over the position of trustee. He took it over under a deed by which he had power, with the permission of the committee of inspection, to appoint the debtorsand, with respect to the argument of counsel for the respondent, I think that means the debtors or either of themas managers or servants. The fact isand this must have been known to the respondentthat the farm had to be run by servants and by a manager, for the respondent was not managing it himself. It appears to me perfectly plain that the fact that he agreed, as he did on 24 September, that the appellant should receive a “salary” of £2 12s per week as from 16 August is ample evidence that

Page 52 of [1940] 1 All ER 49

he had intended that the appellant, George Easdown, should be in his employment as manager from that date. That is a fact which the judge has found, and he had before him a piece of evidence which counsel for the respondent has attempted to explain, but which, on the face of it, seems to me to be quite plain. I read from the note of the county court judge:

Respondent cross-examined: Applicant was managing the business after Aug. 16.

Then there was a suggestion made which hardly deserves to be treated seriouslynamely, that, when the respondent paid George Easdown £2 12s per week and called it “salary,” he was in fact only paying him a “compassionate allowance”a thing which he had no conceivable right to do, because he would then be handing over charity at the expense of the creditors.

My Lords, in those circumstances, it appears to me that the county court judge was completely justified in coming to the conclusion at which he did arrive. However, that is not the question for us. The question is whether or not there was any evidence upon which he could find that there was here a contract of employment as from 16 August. My Lords, I put it on those bare facts, and it seems to me to be quite plain that there is quite sufficient evidence to justify his finding. I prefer not to put it on the ground which was suggested in the first instancenamely, that there was here a definite agreement at the creditors meeting to employ the appellant, because, as was pointed out by counsel for the respondent, that was before there was a deed of assignment, and I think that that would have created a difficulty, though no doubt it afforded very strong evidence that the creditors, and Robert Cobb, who was in the chair, would know that the business required a manager. That makes it all the more easy, in my opinion, for the county court judge to come to the conclusion that that would have been well within the knowledge of Robert Cobb when he signed the agreement.

My Lords, for these reasons, I find it quite impossible to concur in the view of the Court of Appeal, which seems to me to be that, until there was some actual assent, by fixing the salary or otherwise, by Robert Cobb, there was no service at all. I find it quite impossible to imagine what I ventured to call in the course of the argument a vacuum of that kind existing in the farm, in which apparently nobody at all would be employed or would be in anybodys service until the trustee had actually signified his assent to those actual people being employed. I venture to suggest to your Lordships that there was a complete contract which was entered into by the people tendering their service, the trustee knowing that they would be employed and assenting to their employment as he did at a later time, and assenting to it on the terms that they were employed from the very beginning. With great respect, there seems to me to be ample evidence on which the judge could come to that conclusion on this question of fact, and ample evidence that it ought not to be

Page 53 of [1940] 1 All ER 49

disturbed. Therefore, I move your Lordships that this appeal be allowed, and that the award of the county court judge be restored.

LORD RUSSELL OF KILLOWEN. My Lords, I agree. The only question for our consideration is whether or not there was evidence in this case upon which the arbitrator could find as a fact that the appellant on the relevant datenamely, 19 August 1937came within the definition of “workman” which is contained in s 3 of the Act of 1925. The relevant words are:

… any person who … works under a contract of service … with an employer … whether the contract is expressed or implied …

My noble and learned friend Lord Atkin has detailed the evidence in the case, and I need not repeat that process, but, having considered the evidence, I feel no doubt that there was in this case sufficientindeed, ampleevidence upon which the arbitrator could state, as he did state in his judgment:

I find as a fact that this man was employed as a servant, and therefore there must be an award.

That finding of fact, my Lords, should not have been disturbed by the Court of Appeal, and I am accordingly of opinion that this appeal must be allowed.

LORD WRIGHT. My Lords, I also agree. The only question is whether or not there was any evidence upon which the county court judge could come to the conclusion to which he did come. I think that there was ample evidence. The appellant was working as manager of the farm after the deed of assignment on the actual day of the accident, and, to my mind, it is impossible to hold, if all the facts of the case are looked at, that he was doing so without the knowledge, if not of the respondent, at least of those whom he left in control of his affairs and representing him at the time. The case would have been absolutely unarguable if Robert Cobb had been on the spot. The fact that he was in Scotland when he signed the deed on 18 August means only that he was leaving the conduct of the business, in the ordinary course, to his representatives on the spot. I think that there was ample evidence to justify the finding of fact.

Appeal allowed with costs.

Solicitors: H Flint & Co, agents for Thomas Church, Gravesend (for the appellant); William Charles Crocker, agents for Arnold Tuff & Grimwade, Rochester (for the respondent).

Michael Marcus Esq   Barrister.


Apostolic Throne of St Jacob v Saba Eff Said

[1940] 1 All ER 54


Categories:        INTERNATIONAL; Other International: CONTRACT        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT SANKEY, SIR LANCELOT SANDERSON AND SIR PHILIP MACDONELL        

Hearing Date(s):        23, 24, 26 OCTOBER, 21 NOVEMBER 1939        


Privy Council Palestine Money Currency in which debt payable Loan in French liras Payments of interest on gold basis Palestinian law.

In 1916, the appellant borrowed from the predecessor in title of the respondent 1,000 French liras on the security of a bond. Payments of interest, which were indorsed on the back of the bond, were made from time to time in Turkish liras, Egyptian liras, French liras, Egyptian piastres and Palestinian pounds, the last payment having been made on 21 August 1931. It was contended that the appellant was bound to pay the value of the principal and interest on the date of repayment in Palestinian currency of 1,000 French gold napoleons. The appellant contended that he was liable to pay only at the tariff rate. The payments of interest up to 1931 were made on a basis compatible only with the contract being a gold contract, and not a currency one. By Palestinian law, a person is bound by his own admission, and may not retract an admission made with regard to private rights:

Held the payments of interest amounted to an admission from which the proper inference to be drawn was that the contract was a gold one, and, as the appellant had done nothing to displace this inference, he must make repayment on a gold basis.

Notes

The present case, as the judgment states, is outside the line of authorities recently decided on this subject. Though governed by Palestinian law, the case may, perhaps, show that such contract may have to be construed in the light of the payments of interest upon the principal. If these payments are made upon a gold basis, that may be sufficient to justify the construction of the principal contract which makes it a gold contract and not a currency one.

As to Currency in which Debt is Payable,  see Halsbury (Hailsham Edn), Vol 23, pp 173174, para 251; and for Cases, see Digest, Vol 35, pp 169176, Nos 1363.

Cases referred to

Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd [1934] AC 122; Digest Supp, 103 LJCh 85, 150 LT 281.

Feist v Société Intercommunale Belge DÉlectricité [1934] AC 161; Digest Supp, 103 LJCh 41, 150 LT 41.

Ottoman Bank of Nicosia v Chakarian [1938] AC 260, [1937] 4 All ER 570; Digest Supp, 107 LJPC 15, 158 LT 1.

Appeal

Appeal from a judgment of the Supreme Court of Palestine, sitting as a Court of Appeal, dated 14 May 1937, affirming the judgment of the District Court of Jerusalem, dated 25 May 1936. The facts are fully set out in the judgment which was delivered by Viscount Sankey.

Colin H Pearson for the appellant.

Sir Thomas Strangman KC and Phineas Quass for the respondent.

21 November 1939. The following judgment was delivered.

VISCOUNT SANKEY. This is an appeal from a judgment of the Supreme Court of Palestine, sitting as a Court of Appeal, dated 14 May 1937, affirming the judgment of the District Court of Jerusalem, dated 25 May 1936, which ordered the appellant (hereinafter called the defendant) to pay to the respondent (hereinafter called the plaintiff) an amount in Palestine currency to be measured by the value on the date of payment of 1,000 French gold napoleons, with interest and costs.

Page 55 of [1940] 1 All ER 54

The question raised by the appeal is the extent of the defendants liability to the plaintiff as representing the estate of Yakoub Giries Said, deceased, on a bond dated 16 August 1916. The plaintiff submits, and both the Palestinian courts have so held, that the defendant was bound under the bond to pay the value on the date of repayment in Palestine currency of 1,000 French gold napoleons, with interest from 21 August 1931. The defendant admits liability to repay the principal of the loan and interest thereon from 16 August 1931, as sums of Palestinian currencythat is to say, (i) for the principal, £P.791.282, and (ii) for the interest, £P.55.385 per annum.

The bond referred to was in the following terms:

The Apostolic Throne of St. Jacob, Jerusalem.

Aug. 16, 1916.

No. 107.

French L.1,000.

DEBT BOND.

Loaned for the needs of this Apostolic Throne, from Yakoub Giries Said of Jerusalem, only (1,000) one thousand French liras at an annual interest of 4% (four per cent.), and on condition that if he should claim the recovery of the capital on the expiration of one year, he shall notify us 3 months beforehand, and in confirmation whereof we gave this bond, sealed.

SEAL (Signed) The Chief of the Holy Throne,

David Wartabet Derderian.

It will be observed that the bond provided for interest at the rate of 4 per cent, but, by agreement between the parties, the rate of interest was increased in 1918 to 6 per cent, and a year later to 7 per cent. Interest was paid from time to time either in Turkish liras, Egyptian liras, French liras, Egyptian piastres and Palestine pounds, and the payments were indorsed on the back of the bond. No interest was paid after 21 August 1931. On 28 October 1935 the plaintiff commenced proceedings for the recovery of the amount due to him, and by para 4 of his statement of claim he alleged:

As can be seen from the bond the liability of the defendant is expressed in French liras which expression always had and can only have the meaning of French gold napoleons, and the claim is made accordingly, the value of the claim being calculated on the basis of the rate of gold napoleons at the time of lodging the action.

The defendant denied the allegations of the plaintiff, and in particular denied that the bond was given in respect of a loan in gold napoleons. The defendant also reserved the right to counter-claim for set-off against the account of the plaintiff certain overpayments which he alleged he had made.

The hearing in the District Court of Jerusalem took place on 9 April 1936, the plaintiff contending that the bond indicated a debt of 1,000 gold napoleons, and he argued that the defendant was estopped by his own conduct from claiming that the debt was in other than gold napoleons. He drew attention to the payments made for interest and indorsed, as stated above, on the bond. The case was adjourned for a short time to enable the defendant to search the Turkish records for the exact text of the law enacted by the Ottoman government during the period of the Great War substituting paper currency for gold in Turkish

Page 56 of [1940] 1 All ER 54

dominions. The judgment of the court was given on 25 May 1936. It was brief, and in the following terms:

The defendant is bound by the loan document and his subsequent admission by payment of interest on the basis of gold loan.

Following decision in C.A. No. 85/32, the judgment must be given for plaintiff amount of debt, l,000 gold napoleons at the rate of exchange upon date of payment, with interest from Aug. 21, 1931, as agreed, to date of payment, provided the interest does not exceed the principal.

The defendant appealed, and, in his notice of appeal, advanced grounds many of which were abandoned as the case proceeded. Before this court, only three of these grounds were relied upon. It was pointed out that neither the word “gold” nor the word “napoleon” was mentioned in the bond. It was denied that there was payment of interest on the basis of a gold loan, and that the indorsement on the bond itself constituted such an admission, and it was contended that the only evidence available proved that interest was paid on the basis of a certain arbitrary or tariff rate, which, over the course of years, bore no relation to the fluctuating gold-exchange rate.

At the hearing in the Supreme Court on 22 April 1937 the defendant expressly admitted, apparently for the first time, that he was liable to pay at tariff rate, and subsequently in this court he admitted his liability to repay the principal of the loan and interest thereon from 16 August 1931, as sums of Palestinian currency (i) for principal, £P.791.282, and (ii) for interest, £P.55.385 per annum.

Their Lordships were referred, in an appendix to the case for the appellant, to various extracts from the Turkish, Egyptian and Palestinian currency laws, decrees and ordinances, but it is not necessary to set them out at length. By art 1 of a draft decree concerning Turkish coinage in 1286 (1881), which was subsequently passed by the Chamber of Deputies, it is provided that the Turkish monetary unit is the gold pound of 100 piastres. By a Turkish ordinance of 2224 August 1914 it was provided that the Ottoman Bank would be exonerated of its obligation to redeem bank notes in gold for as long a period as that law should be in force. By a decree relating to the monetary system of Egypt, dated 18 October 1916, it was provided in art 1 that the monetary unit of Egypt is the Egyptian pound. The Egyptian pound is divided into 100 piastres. After the occupation of Palestine by the Allies, a notice was issued on 23 November 1917, making Egyptian coins and bank notes legal tender. On 18 January 1918 a notice was issued relating to acceptance of certain coins for purposes of receipts and payments, and it was provided as follows:

The following are the official rates of conversion into Egyptian piastres of the coins mentioned below. On the basis of these rates these coins may be accepted for purposes of receipt and payment in addition to currency.

(1) Coinage other than Turkish:

In addition to Egyptian currency the following may also be accepted for purposes of receipts and payments in the occupied enemy country. Gold at the following exchange: French 20 francs, 77.15 P.T. (Egyptian).

(2) Turkish coins:

£ Turkish (Gold)87.75 P.T. (Egyptian).

Page 57 of [1940] 1 All ER 54

By a notice on 18 January 1918, from the acting administrator of occupied enemy territory, the public was reminded that the Egyptian bank note was worth exactly its face value in Egyptian gold, silver or nickel currency, and that, on the basis of the above rate of P.T. 87.75 for the pound Turkish gold, the value of the 100 P.T. Egyptian note must be considered as 144 Turkish piastres gold.

The payments of interest indorsed upon the bond are as follows. The first two indorsements (the only indorsements which relate to the period prior to the British occupation) show that interest for the first year, ie, from August 1916 to August 1917, was paid in Turkish liras. The second indorsement clearly means “20 French liras in its equivalent of 17.5 Turkish liras,” as in the first indorsement. For the year August 1917August 1918, interest was paid in Egyptian liras at the tariff rate for gold coins. For the year August 1918August 1919, the interest was actually paid in French liras. For the year August 1919August 1920, interest was again paid at the tariff rate for gold napoleons. For the year August 1920August 1921, interest was paid similarly, and again for the year August 1921August 1922. The payments were continued at the tariff rate for the years 19221923, 19231924, 19241925, 19251926, 19261927, 19271928, in each case the payment being 5,400 Egyptian piastres, being the equivalent of 70 gold napoleons at the tariff rate of 77.15 Egyptian piastres per gold napoleon. The remaining three indorsements represent similar payments for the years 19281929, 19291930, and 19301931, the payment being made in Palestine pounds, at the same tariff rate, with the necessary adjustment between the gold value of the Palestine pound and the Egyptian pound.

The judgment of the Supreme Court was given on 14 May 1937:

The case came before the District Court on Apr. 19, 1936. The plaintiffs case was that the defendant was estopped from saying the transaction was not gold by the payments which were made and accepted on account of interest, these showing that the parties must have treated the loan as gold. This was done by showing that the payment of interest was calculated at the tariff rate under a public notice, dated Dec. 12, 1918, on the basis that the interest was payable on a gold loan.

The defendant argued that the transaction could not have been gold as there was then no gold coin in circulation, and that, if it was in gold, the transaction was void, gold transactions being forbidden by law. He went on to say there was a definite issue of fact between the parties as to whether the transaction was gold.

Then Sir Harry Trusted CJ proceeded as follows:

I think that the fact that interest had been paid for a number of years upon a basis compatible with the loan being gold cast the onus of proof upon the defendant, and it is clear that he made no effort, by the production of his books or otherwise to discharge that onus, and, although I do not think, upon the evidence, that the defendant was estopped from denying that the loan was gold, I think the District Court was entitled, in the absence of any evidence by the defendant, to hold that it was gold. This disposes of the first point raised for the appellant before us by Abcarius Beynamely, that the onus was on the respondent (the plaintiff) to prove that he gave gold.

Counsel for the defendant argued before their Lordships that the loan was repayable in any currency legal at the time of repayment. He contended that the two questions for determination were (i) did the

Page 58 of [1940] 1 All ER 54

bond by itself show that the contract was, to put it briefly, a gold or a gold value contract? and (ii) did the payment of interest show that the bond was a gold or a money contract? Several cases were referred to, including Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd, Feist v Société Intercommunale Belge DÉlectricité and Ottoman Bank of Nicosia v Chakarian, but none of these authorities was in point in the present case, for reasons which will appear later.

In the view of their Lordships, the judgment of the Supreme Court was right upon the materials which were before it. With regard to the bond, the defendant submitted that the French lira or napoleon was a Turkish unit of account, and that there was no gold clause in the bond, or any indication in it that repayment was required to be in gold, or in anything other than legal currency.

If the bond stood alone, and if attention were directed to the bond only, it might have been successfully contended that the contract was a currency contract as distinguished from a gold one. However, the bond did not stand alone. The payments of interest were sometimes in Egyptian liras at the tariff rate for gold coins, sometimes actually in French liras, sometimes in Egyptian piastres equivalent in amount and value to gold napoleons, sometimes in Palestine pounds with the necessary adjustment between the gold value of the Palestine pound and the Egyptian pound. These were admissions by the defendant by which he was bound.

The legal effect of admissions in Palestine is to be found in the Turkish Code (the Méjelle) which provides in art 79 that a person is bound by his own admission, and, in art 1588, that no person may validly retract an admission made with regard to private rights. It is clear, as was held by both of the courts below, that these payments of interest show that the defendant, by his conduct over a number of years, admitted that the loan was one of 1,000 gold napoleons, and consequently he was prevented by such admissions from claiming that he could discharge his liability other than by the payment of the amount claimed.

In order to counteract the effect of these admissions, the defendant contended before their Lordships that the interest had been paid, not on the basis of the gold rate, but on that of a tariff rate, which, he alleged, had borne no relation over the course of years to the gold rate. He further alleged that the tariff rate for gold coins was not the gold exchange rate. Had the defendant been able to substantiate these points, or had he proved them in the District Court, he might have been in a position to displace the inference drawn in both courts from the payment of interest, but the difficulty in his way in the present appeal is that in the court of first instance he made no attempt, either by the production of his books or otherwise, to displace the only inference which could be drawn from a proper consideration of the payments of interest indorsed upon the bond. Those payments indicated that the basis of the bond was compatible, and compatible only, with the loan being gold. Conse-

Page 59 of [1940] 1 All ER 54

quently, the Palestine courts were entitled, on the evidence which was before them, and, indeed, bound to hold that the loan was a gold one. In the result, their Lordships will humbly advise His Majesty to dismiss this appeal, and order the defendant to pay the costs of the appeal.

Solicitors: Stoneham & Sons (for the appellant); T L Wilson & Co (for the respondent).

Charles Shelley Esq   Barrister.

H C & J G Ouston v G Scammell & Nephew Ltd

[1940] 1 All ER 59


Categories:        CONTRACT: CONSUMER; Consumer credit        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        6, 7 DECEMBER 1939        


Contract Agreement for the acquisition of goods Price to be discharged “on hire-purchase terms” Hire-purchase terms not settled by parties Whether concluded agreement Whether transaction a sale of goods Sale of Goods Act 1893 (c 71), s 4.

The plaintiffs entered into negotiations with the defendants to acquire from the latter a motor lorry, giving an old lorry in part exchange therefor. The parties were agreed as to the new lorry to be supplied, its price, the rebate in respect of the old lorry and further that the matter was to be concluded on hire-purchase terms; but the precise terms of the hire-purchase agreement were not settled. The defendants subsequently repudiated the transaction on the grounds (i) that there never was any concluded agreement at all between the parties, because the terms of the proposed hire-purchase agreement had not been settled, and (ii) if there was an agreement, it was unenforceable under the Sale of Goods Act 1893, s 4:

Held (i) there was a concluded agreement. The fact that the actual terms of the hire-purchase had not been settled was irrelevant, and did not effect the main contract between the parties, which was that the defendants should put the plaintiffs in possession of the lorry, the plaintiffs discharging the payment therefor by one of the methods commonly known to business men as “hire-purchase.”

(ii) the agreement was not a contract of sale.

Notes

The question here is whether the terms are sufficiently settled so that it may be held that there is a completed agreement in law. This, of course, is not necessarily the same question as whether the terms are sufficiently stated so that there may be a proper memorandum of the agreement within the meaning of some statute. All that it is here necessary to show is that the parties were ad idem, and this may be so where the general and usual terms of this contract are merely stated as “cif,” “hire-purchase terms”, or the like.

As to Essentials of Agreements, see Halsbury (Hailsham Edn), Vol 7, pp 65, 66, para 83; and for Cases, see Digest, Vol 12, pp 5153, Nos 277298.

Cases referred to

May & Butcher v R [1934] 2 KB 17, n; Digest Supp, 103 LJKB 556, n, 151 LT 246, n.

Foley v Classique Coaches Ltd [1934] 2 KB 1; Digest Supp, 103 LJKB 550, 151 LT 242.

Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503; Digest Supp.

Re Vince, Ex p Trustee in Bankruptcy [1892] 1 QB 587, on appeal, sub nom Re Vince, Ex p Baxter [1892] 2 QB 478; 4 Digest 483, 4345, 61 LJQB 836, 67 LT 70.

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Modern Light Cars Ltd v Seals [1934] 1 KB 32; Digest Supp, 102 LJKB 680, 149 LT 285.

Appeal

Appeal by the defendants from a judgment delivered by Tucker J, dated 27 July 1939. The facts are fully set out in the judgment of Slesser LJ. Tucker J said in his judgment that he did not think he was bound to assume that a hire-purchase transaction necessarily involves a sale by the trader to a finance company and the release by the finance company of the article to the customer. He was not bound to take the view that the words of the agreement necessarily implied that it was essential that a three-cornered agreement should be entered into by three different parties, affording rights and imposing obligations on all three. The understanding was a condition precedent to a contract which was otherwise sufficiently clear and definite to become effective. If the defendants had not wrongfully repudiated the contract, the plaintiffs would no doubt have had to show, before they could enforce it, that the condition precedent had taken effect, and that the purchase price on hire-purchase terms over a period of years had in fact been obtained, or could be obtained. As, however, the defendants had repudiated the contract on wrong grounds, they could not rely on the necessity for the plaintiffs showing that that condition had been fulfilled. The documents contained among them a sufficient memorandum to comply with the Sale of Goods Act 1893, s 4. The plaintiffs ought to have mitigated their damages at the time of repudiation, or very shortly afterwards, by taking the new van at the price at which the defendants were willing to supply it. They would not have been likely to get £100 for the vehicle in part exchange from other customers. His Lordship estimated the loss they had suffered at £50, and awarded this sum as damages, with costs. The defendants appealed.

R F Levy KC and Constantine Gallop for the appellants.

Gilbert Beyfus KC and W A L Raeburn for the respondents.

Levy KC: The agreement was to make an agreement. There was never to be a transaction of purchase and sale. There was to be one agreement onlynamely, a hire-purchase agreement. The parties did not even decide whether there was to be a tripartite agreement for sale by the dealer to the finance company and then a hiring-out by them or whether there was to be a direct transaction between the dealer and the customer. None of the terms was agreed. Alternatively, if the parties intended to define the terms of the hire-purchase agreement, they did not do so sufficiently. The only express term was the durationnamely, 2 years. Neither the amount of each instalment nor the interest was stated, nor was any right of reception given. Such a failure to define any particular term is fatal to a contract: Re Vince, Ex p Trustee in Bankruptcy.

Gallop: If this contract is enforceable, then an open contract for hire purchase is possible. The forms of hire-purchase agreements, even though they take a certain number of well-defined shapes, still vary

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considerably one from another: Modern Light Cars Ltd v Seals. These agreements cannot yet be included in the class of open contracts recognised by law, which includes such agreements as a lease subject to “the usual covenants,” an open contract for the sale of land, and a contract of option under the Pawnbrokers Act 1872.

Mackinnon LJ: Could it be suggested that in a contract for sale cif, there is no sale until all the terms of the insurance policy are agreed?

Gallop: A contract cif  means only that it is open to the seller in his discretion to procure an effective insurance for the cargo. He fails to fulfil this obligation if he does not insure with a solvent company, or fails to cover the goods. Here there was no question of discretion, for neither party bound himself to accept any specific terms of hire purchase. The whole transaction was mere negotiation. The agreement did not even lay down which party was under the obligation to ensure that hire-purchase finance was available. It is void for uncertainty.

Beyfus KC was not called upon in reply.

R F Levy KC and Constantine Gallop for the appellants.

Gilbert Beyfus KC and W A L Raeburn for the respondents.

7 December 1939. The following judgments were delivered.

SLESSER LJ. In this case, two business firms purported to enter into an agreement with regard to the acquisition by the plaintiff firm H C & J G Ouston, of a Commer motor lorry at a price of £268. As against that, the defendants were to be let into possession of an old lorry called a two-ton Bedford Luton van, and the plaintiffs were to be given credit to the extent of £100 of the £268 for that van by the defendants, G Scammell & Nephew Ltd, who were supplying the new van.

The actual negotiations took place at interviews at some club of which the parties appear to have been members, and they find expression in a number of letters. There is really no doubt about what the arrangement sought to be made was. The substance of it was as I have stated. That is to say, the price was to be £268, there was to be a rebate of £100 in respect of the old lorry, and (this is perhaps the most important part of it) the transaction was to be carried out by means of hire-purchase finance.

The letters, which begin on 24 November 1937, do not at first speak of the hire-purchase finance. The letter of that date speaks of the one sum as being £268, and £100 to be allowed “for your [the plaintiffs] 1935 two-ton Bedford Luton van.” Then a specification is sent by the defendants to the plaintiffs of this special Scammell Commer lorry. On 7 December 1937 there is a letter from the defendants in the following terms:

Thank you very much indeed for the order which you placed with the writer last evening for one Commer 15-cwt. chassis complete with body.

That refers to a meeting which had taken place on 6 December, the day before. As to that, the judge says that they never in any letter gave any assent to that condition, but the defendants assented to the con-

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dition as to the balance of the purchase price being had on hire purchase over a period of 2 years. That omission from the letters is not surprising, having regard to the fact that both parties were well aware of that, as a result of the interview of 6 December. Then on 8 December the plaintiffs reply as follows:

We beg to acknowledge receipt of your acceptance of our order … This order is given on the understanding that the balance of purchase price can be had on hire-purchase terms over a period of 2 years.

That is merely to ratify, to try to put in writing, what had been agreed at the interview on 6 December, which, on the judges findingand there is no doubt about ithad been the basis of all the negotiations.

After that, on 27 January 1938, the defendants write to the plaintiffs as follows:

We have now received advice from the United Dominions Trust Co., Ltd., of their acceptance of the hire purchase in connection with the vehicle we are supplying, and we will in due course forward the documents to you.

Those documents apparently were never received by the plaintiffs, either from the United Dominions Trust Co Ltd, or from the defendants. On 10 February 1938, however, the defendants write as follows:

Further to our conversation with you on the telephone to-day, we beg to advise you that the new vehicle, which will be taken by you on hire purchase from the hire-purchase company, will be ready for collection in the next few days, subject to mutual acceptance of the hire-purchase agreement, which you advised us you had not yet received from the hire-purchase company. We make it a condition of the supply of vehicles on hire-purchase terms that we approve terms of agreement before supply.

On 11 February an altogether new matter is raised by the defendants. They say that they will inspect the van which was to be taken in part-payment at the figure of £100:

We advised you that we should only be prepared to take the vehicle at the allowance value of £100 on terms that the vehicle would be subject to our inspection when the new vehicle would be ready for delivery. This is a customary condition applicable to all part-exchange transactions. This is an essential condition.

Then a report was received some time early in February which, in the opinion of the defendants, as appears in their later letters, was unsatisfactory. On 14 February they notified the plaintiffs to this effect. First they make a mistake, as is now admitted, in saying it was a 1934 vehicle, and not a 1935 one, as stated. Then they continue as follows:

Furthermore the steering is in a dangerous condition, and needs complete overhaul, and certain electrical equipment is missing. Our report discloses that the vehicle generally is in very bad order, and that the steering is so defective as to justify the issue of a prohibition order in respect of the vehicle. We very much regret that under the circumstances this vehicle does not fulfil the conditions contained in our letter of the 24th, and we suggest that you take steps to dispose of it locally. We assume that the hire-purchase company will require a minimum of 25 per cent. deposit, which would call for £67.

On that, the plaintiffs put the matter into the hands of their solicitors, who recite the facts of the agreement and state that Cook, the agent of the defendants, had inspected the vehicle before making the offer, and it was expressly on the basis that they would allow the sum of £100 for

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it. They say they have suffered loss owing to failure to deliver, and they threaten an action.

It is not necessary to go into the details of this dispute now. It is sufficient to say that, for reasons which appeared to the defendants enough, they did in fact fail to deliver, and, though there was a concluded agreement in the earlier letters, to which I have referred, and in the interviews, they repudiated that agreement. Certain defences which were raised in the action for breach of contract to supply the new van have now been either abandoned or dismissed, and are not taken upon this appeal.

The essential matter which is raised on this appeal is this. It is said that, in the circumstances of this case, there never was any concluded agreement at all between the plaintiffs and the defendants. They say that the matters which passed between them, rightly considered, are no more than negotiations, and that no agreement was ever concluded. They say that the matters which had to be settled between the parties to make a concluded agreement, so that the parties could be ad idem, were not in essential matters settled. On this, I think it is right to say that everything must turn upon the actual arrangement made between these particular parties, having regard to the fact that they were business men, dealing with a commercial matter in a usual or very familiar way. For myself, I do not think that the authorities help at all in this matter.

There are two points which almost always arise in this class of case. First of all one has the kind of consideration pointed out by Viscount Dunedin in May & Butcher v R, which is cited in Foley v Classique Coaches Ltd. Viscount Dunedin says, at p 21:

To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties … Therefore, you may very well agree that a certain part of the contract of sale, such as price, may be settled by some one else.

On the other hand, there are considerations which are set out in such cases as Hillas & Co Ltd v Arcos Ltd in the opinion of Lord Wright, at p 514:

Business men often record the most important agreements in crude and summary fashion: modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.

Then Lord Wright refers to a well-known maxim, and proceeds as follows, at p 514:

That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except in so far as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the court as matter of machinery where the contractual intention is clear but the contract is silent on some detail.

Applying those considerations, I think that the substance of these negotiations, which I think resulted in a concluded contract, was this.

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The price was fixed. The goods which were to be ultimately supplied were agreed on. The rebate was agreed. The van which was to be taken in consideration of the rebate was agreed, and it was agreed also that the matter was to be concluded upon hire-purchase terms. That was to be the method of financing the transaction. It may be that under the phrase “hire-purchase terms” many different methods of finance might be adopted. It might constitute in certain cases an agreement to make a sale to a third party such as a finance corporation, who in their turn will hire the goods with an option of purchase to the plaintiffs. Alternatively, it might take the form of a hire purchase from the defendants themselves, though I do not think that that is contemplated in the present case. Again, it might take the form of a direct sale to the party to the hire-purchase agreement, subject to considerations as to payment. All those matters, I agree, are not determined in this contract between the plaintiffs and the defendants. What is certain, however, is this. It is to be done by the method of hire-purchase agreement. I read that to mean that the purchaser must, within a reasonable time, in a reasonable way, satisfying the words “hire-purchase agreement,” produce some method whereby he can, under the conditions of a hire-purchase agreement, satisfy his undertaking by one way or another through a hire-purchase agreement to pay the defendants. That seems to me sufficient, and is covered by the kind of case which Viscount Dunedin mentions in May & Butcher v R, where he says, at p 21:

… you may very well agree that a certain part of the contract of sale, such as price, may be settled by some one else.

I would say here: “You may very well agree that a certain part of the contract, such as the particular conditions on which the hire-purchase agreement was to be made, was to be settled in conjunction with a third party.”

I think, giving normal commercial efficacy to this agreement, this does mean that here what is commonly understood by business men to be one of the methods of hire purchase at least shall be the method of discharging the payment to the defendants for this car. To read it otherwise, I think, would be to nullify the intention of the parties, who quite clearly, to my mind, intended such an agreement.

It is perhaps not conclusive, but it is significant, that the reason why the defendants repudiated their obligation was not by any means related to any failure of the hire-purchase transaction, but was on a different ground altogether.

It is said, alternatively, that, if there be here a hire-purchase agreement of this kind to be incorporated into this contract, it must be in the nature of a sale. I think that the judge has rather come to that conclusion, although he has found that the Sale of Goods Act 1893, s 4, had no application to this case by reason of the factand I think it is true, if the matter does arise for consideration at allthat these letters,

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looked at as a whole, do constitute a sufficient memorandum of the whole agreement. In my view, however, it is unnecessary to state definitely that this arrangement would necessarily result in a sale. I think the more than likely view is that, as regards the relations between the plaintiffs and the defendants, it would be one of hiring with an option subsequently to purchase. However, as I say, that question, to my mind, does not arise, because this concluded agreement was not one of sale, but one of a kind, if you please, peculiar to such hire-purchase transactions. Nevertheless, one may now say that it is of a type very familiar to persons undertaking transactions of this kind. It may not be a contract of sale, but it is a method by which people in this class of business constantly obtain the possession of goods which they desire. I think, therefore, that this agreement was a concluded agreement, that the judge was right in his view, and that this appeal fails.

MACKINNON LJ. I agree. Between 24 November and 8 December, by interviews and letters, the plaintiffs and the defendants made a contract. By the terms of that contract, the defendants agreed with the plaintiffs that they would procure a finance company to purchase a lorry from the defendants and hand over its possession to the plaintiffs under the terms of a hire-purchase agreement, pursuant to which the plaintiffs would ultimately pay to the finance company £268. The defendants further agreed that they would take over from the plaintiffs an old lorry of theirs at a price of £100, and would pay this sum to the finance company, so that it would be deducted from the £268, which the plaintiffs would ultimately pay the finance company under the hire-purchase agreement. That was a perfectly simple and ordinary business agreement. It is said that it does not constitute a contract enforceable at law, because there was a reference to a hire-purchase agreement, and it is said that no concluded contract would ever have arisen until all the terms of that proposed hire-purchase agreement had been discussed, agreed and settled between these parties. I cannot accept that suggestion for one moment.

It is significant that the defendants had no difficulty, and were in no doubt at all as to the result of the obligation upon them, because on 27 January 1938 they wrote following on these arrangements:

We have now received advice from the United Dominions Trust Co., Ltd. [the finance company], of their acceptance of the hire purchase in connection with the vehicle we are supplying, and we will in due course forward the documents to you.

There is supplied, among the papers before us, the draft of that agreement, which is complete except for the signature, which carried out the transaction in the way I have indicated. I should have said that the defendants, when they agreed to give the £100 for the plaintiffs old lorry, had inspected it. Subsequently, the defendants tried to get out of their bargain. When they wanted to get out of this bargain, they said, on a second inspection by a more experienced expert investigator, that they did not think that the old lorry was as good as they had

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thought it was. They also alleged (as it is admitted now, without justification) that it had been sold as a 1935 lorry, whereas it was really a 1934 one. On those pretexts, the defendants refused to implement their contract. Thereupon the plaintiffs, not unnaturally, sued them for damages.

In answer to that claim, two defences are raised. The first is that there was no contract enforceable at law made between these parties, because it is said that what took place between them amounted only to negotiations for a contract, or an agreement up to a certain point to enter into a contract, the full terms of which were not, according to the exact terms of most hire-purchase agreements, settled and agreed. Secondly, it is said that there is no memorandum within the Sale of Goods Act 1893, s 4, and, therefore, the plaintiffs cannot sue upon this alleged contract. I think both those defences fail. I do not desire to go further into the matter which we have been discussing during the argument. Cases like Hillas & Co Ltd v Arcos Ltd and a good many others show that in a business contract one may perfectly well leave as implied many things which would be necessary for discussion and settlement if the parties were the first human beings ever to enter into contracts of this description. As I pointed out during the argument, millions every week pass upon contracts made in the city of London which are made with no more expression of their terms than three letters “c.i.f.” In this case, when the parties agreed that they would procure the finance company to sell this particular lorry on hire-purchase terms to the plaintiffs, they knew perfectly well the sort of agreement with the finance company that both parties contemplated. As I have pointed out, the defendants knew that, as they show by their letter of 27 January. It is quite true that the form of that agreement might have been in one or other of two or three forms. The essential stipulation implied was that it should be in a reasonable form. Either one of two variant forms, if in a reasonable form, would have sufficed for the satisfaction of the defendants obligation. In my opinion, therefore, there was a quite complete and enforceable contract concluded between these parties, for the breach of which the defendants are liable.

On the second defence, under the re-enacted provision from the old Statute of Fraudsthat statute which has enabled more frauds to be committed than it has ever preventedthere is even less to be said for the defendants than on the first defence, for the simple reason that, in my view, this is not a contract for the sale of goods at all. It is a contract to procure the finance company to purchase from the defendants a car, and to let it on hire-purchase terms to the plaintiffs. Therefore, I think that it is not a contract for the sale of goods, and, therefore, the Sale of Goods Act 1893, s 4, does not apply. In the result, I think that the judge was right in his reasoning, and I think the result at which he arrived was right. For these reasons, the appeal, in my opinion, ought to be dismissed with costs.

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GODDARD LJ. I agree. I think that the judge was perfectly right in the conclusion to which he came, and I agree with his reasons. I only desire to say this. Like the judge, I am not satisfied that this was an agreement under which the defendants undertook to procure a finance company to buy from them, because I think that the contract was: “I will put you, the plaintiffs, in possession of a vehicle for a sum of £268, £100 of which is to be satisfied by the delivery of a van, and £168 of which is to be satisfied by instalments over 2 years, being 24 monthly instalments.” It seems to me that it is a matter of entire indifference to the plaintiffs whether the defendants procured a finance company to buy direct from them and let to the plaintiffs or whether the defendants procured a finance company to discount bills given under a contract by which the defendants themselves entered into direct relations with the plaintiffs. Those are matters which the defendants could choose for themselves. The plaintiffs, however, would have to take the vehicle, and have to enter into the agreement, provided an agreement was submitted to them which gave them 2 years credit for the £168. In fact, what happened was that, without submitting any hire-purchase agreement to the plaintiffs, either direct from them to the plaintiffs or by means of a finance company, by assuming the position of hirers, the defendants repudiated the whole transaction on wrong grounds. I think that the reasoning of the judge was perfectly right, that there was a contract, and that the contract was broken. Accordingly, the damages which he awarded must stand. I agree that the appeal fails.

Appeal dismissed with costs.

Solicitors: Montague Waters (for the appellants); George L Barnett & Co (for the respondents).

Derek H Kitchen Esq   Barrister.

Wilkinson v Chetham-Strode

[1940] 1 All ER 67


Categories:        TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        ASQUITH J        

Hearing Date(s):        30 OCTOBER, 1 NOVEMBER, 11 DECEMBER 1939        


Street and Aerial Traffic Pedestrian crossing Light-controlled crossing Crossing with refuge Whether refuge part of crossing Pedestrian stepping from refuge Contributory negligence Pedestrian Crossing Place (Traffic) Provisional Regulations 1935, regs 2, 3, 4, 5.

The plaintiff was crossing the road at a pedestrian crossing controlled by lights. At the centre of the crossing there was a refuge consisting of three paved sections, one carrying a lamp standard and the other two carrying pylons. The plaintiff had passed along the crossing to the island, and, after taking two or three steps from the island, he was struck and injured by the defendants car. It was found as a fact that neither party was using reasonable care, and at common law the action would have been dismissed. It was contended that the plaintiff having been injured by a motor vehicle while on a pedestrian crossing was entitled to recover in spite of his contributory negligence:

Held the refuge was a separate entity from the crossing and a person stepping abruptly from the refuge was in the same position

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as a person stepping abruptly from the pavement on to the crossing and could therefore be guilty of contributory negligence. On the facts, the plaintiffs negligence had contributed to the accident and the action would be dismissed.

Chisholm v London Passenger Transport Board extended.

Notes

The present case is very similar to that of Chisholm v London Passenger Transport Board. It was there held that a person stepping from the pavement on to a light-controlled crossing might be guilty of contributory negligence. It had been previously decided in Bailey v Geddes that a person fairly and squarely on the crossing is, in practice, incapable of contributory negligence. The question thus arose whether the refuge was a part of the crossing, so that a person stepping from the refuge was in the same position as one stepping from the pavement, and this question is answered in the affirmative.

As to Pedestrian Crossing, see Halsbury (Hailsham Edn), Vol 16, p 492, para 724; and for Cases, see Digest, Supp, Street and Aerial Traffic, Nos 31a, 31b.

Cases referred to

Bailey v Geddes [1938] 1 KB 156; [1937] 3 All ER 671; Digest Supp, 107 LJKB 38, 157 LT 364.

Chisholm v London Passenger Transport Board [1939] 1 KB 426, [1938] 4 All ER 850; Digest Supp, 108 LJKB 239, 160 LT 79.

Action

Action for damages for personal injuries received by the plaintiff by the negligence or breach of statutory duty on the part of the defendant. The defendant alleged contributory negligence on the part of the plaintiff. The facts are fully set out in the judgment.

Cyril Salmon for the plaintiff.

R Armstrong-Jones for the defendant.

11 December 1939. The following judgment was delivered.

ASQUITH J. The statutory duty which the defendant is alleged to have violated is that imposed by the Pedestrian Crossing Places (Traffic) Provisional Regulations 1935, dated 25 January 1935 and made by the Minister of Transport under the Road Traffic Act 1934, s 18. The accident occurred on 10 July 1938 at 4.30 pm at the junction of Artillery Row and Victoria Street, Westminster. The plaintiff at the time was walking along the southern pavement of Victoria Street from west to east, making for Horseferry Road. This involved crossing the mouths of a number of streets running into Victoria Street from the south. Of these Artillery Row was one. Opposite the mouth of Artillery Row and running into Victoria Street from the north is Buckingham Gate. In the middle of the mouth of Artillery Row is a refuge or island. A common type of island consists of an oval area of pavement with a pylon near each end and an electric lamp standard in the middle. The present island diverged from this common type to the extent that, instead of consisting of a continuous paved surface, all of it raised above the level of the carriageway, it consisted of three sections of such paved surface, the middle one carrying the lamp standard, and the other two, to the north and south of it, carrying two pylons. Between the section carrying the lamp standard and each

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section carrying a pylon on each side of it there were gaps of unpaved roadway about 4 ft wide. Hence a pedestrian could cross the mouth of Artillery Row via either of these gaps without mounting the raised parts of the island at all, but remaining throughout on the level of the carriageway. A pedestrian so crossing would have on his left a line of metal studs extending from the western pavement to the northern end of the island, and extending thence to the eastern pavement. He would have on his right a metal stop-line extending to the southern end of the island, and thence a line of studs going to the eastern pavement. The mouth of Buckingham Gate is considerably narrower than that of Artillery Row, being about the same breadth as the western half of that street, and lying opposite the western half. The longitudinal axis of the island points, not to the middle of the mouth of Buckingham Gate, but at the pavement east of Buckingham Gate at the point where there are traffic-lights on that pavement. Hence a pedestrian standing on or at the level of the island, in order to see a vehicle in the mouth of Buckingham Gate would have to look, not merely to his left, but somewhat to his left rear; and, if he were standing at the southern end of the island, or in its southernmost gap, and if such a vehicle moved from Buckingham Gate and crossed Victoria Street, the lamp standard and northern pylon would obstruct his view of that vehicle during most of its transit, unless, indeed, on leaving Buckingham Gate the vehicle swung sharply outwards to its left and entered Artillery Row with a wide sweep. I mention these facts with some minuteness because, in my view, they furnish the clue to the accident.

This road junction is controlled by traffic lights. Two of these show east and west along Victoria Street. One of the two is on the northern pavement of Victoria Street and west of the junction, the other on the southern pavement of Victoria Street and east of the junction. The other two lights show north and south along Artillery Row and Buckingham Gate. One is on the western pavement of Artillery Row south of the junction, the other on the eastern pavement of Buckingham Gate north of the junction. These four lights work automatically in conjunctionthat is, the lights facing north and south are red when those facing east and west are green, and vice versa.

The plaintiff says that, just before he stepped off the pavement to cross Artillery Row from west to east, he saw the traffic-light opposite him was green in his favour. He glanced to right and left, saw no traffic, and walked ahead to the right handthat is, the southernmost gap in the islandand proceeded straight through the gap without pausing. As he reached the island, he says, he again noticed that the light opposite him was green. He had gone perhaps two or three steps from the island on to the second half of the crossing when he was struck on the outside of the left leg by the defendants car. He received a violent blow on the left shoulder, was spun round to his right, and fell with his forehead

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against one of the raised pylons on the island, fracturing his skull and sustaining other injuries.

The defendant says that, with a friend sitting beside her on her left, she was driving her car southwards down Buckingham Gate. At the stop-line near the mouth of Buckingham Gate, she was halted by the traffic-light level with that stop-line and on her left, since the light was red, and so against her. When this light changed to amber and while it was still showing amber, she changed gear and moved forward across Victoria Street towards Artillery Row, when the light turned green. It was not until she was halfway across Victoria Street that she first saw the plaintiff standing on the refuge, or in one of the gaps in it, and looking, as it seemed, towards his left, and, as she thought, towards her car. He did not move, so, assuming that he was waiting for her to pass, she moved on. She had to pass rather close to the refuge, because, on her left and a little beyond it, there was a car drawn up stationary at the side of the road. As she passed the refuge, she felt a bump as of an impact on the side of her car behind the level of her head.

The passenger in the defendants car, Miss Richards, in substance confirms the defendants account of the accident. In addition, however, Miss Richards saw what the defendant did not. She saw the plaintiff start to cross the mouth of Artillery Row before the lights turned to green for the defendant, and, therefore, while the plaintiffs lights were green in his favour. She confirms the plaintiffs story to the extent that he had started to cross when the lights were in his favour.

Although I think that all the witnesses were doing their best to tell the truth, I cannot accept without qualification the account given by any of them. If the plaintiff is right in saying that he still had a green light in his favour when he reached the island, the defendant must have crossed most of Victoria Street with a red light against her. I am satisfied that she did not do this. I am also satisfied that, unnoticed by the plaintiff, the light facing him had changed to red when he had advanced only a few steps from the pavement towards the island, and before he had reached the island itself. I think it probable that he paused in the southern gap in the island and then moved forward into the path of the car.

The accident, in my view, was due to the failure of both parties to allow for the imperfect alignment of Buckingham Gate with Artillery Row. The effect of the configuration of these two streets, together with the greater breadth of Artillery Row, was, in the circumstances, to screen each from the other a car crossing from Buckingham Gate and a pedestrian standing at or near the southern end of the island, unless, as I have said, the car swung well out to its left immediately on emerging from Buckingham Gate. The defendant said, in reply to a question of mine, that the car did not make a wide sweep of this kind. Therefore, the defendant would tend not to see the plaintiff, nor to be seen by him, till she was very close indeed. Though the defendant was travelling at a modest speed, I think that she emerged suddenly from behind the northern

Page 71 of [1940] 1 All ER 67

section of the island just as the plaintiff, having previously looked to his left, but not far enough to his left, also suddenly emerged from the southern end of the island and stepped from its shelter on to the crossing right in front of her wheels. I think that the defendant was mistaken in thinking that the plaintiff was looking at the car as it approached. If he had been looking at it, he would have seen it and avoided it. Nor do I think that, on a careful inspection, he would have appeared to have been looking at it. I do not find that the plaintiff allowed the bonnet and the front part of the car to pass him and then walked into the side of the car, as was suggested on behalf of the defendant.

Accordingly, I find that neither party was using reasonable care, if one has regard to the peculiarities and dangers of this particular crossing, which reasonably vigilant persons would have appreciated and for which they would have made provision. I also find that the negligent conduct of the plaintiff and that of the defendant were substantially simultaneous, thus leaving no room for the operation of the rule of last opportunity. Therefore, if the liability of the parties falls to be determined exclusively by the common lawthat is to say, if there were here no question of a pedestrian crossing and the peculiar statutory incidents attached to a pedestrian crossingthen the action fails. The plaintiff can succeed only if the operation of the regulations referred to relieves him of liability for contributory negligence.

The second question, therefore, is whether or not the pedestrian crossing at the mouth of Artillery Row, or any part of it, is a pedestrian crossing governed by the Pedestrian Crossing Places (Traffic) Provisional Regulations 1935, which I will call the 1935 regulations. The material 1935 regulations are regs 2, 3, 4 and 5. Reg 2 defines a crossing as follows:

“Crossing” for the purpose of the regulations means a crossing-place for foot passengers indicated by a traffic sign prescribed for the purpose by regulations made by the Minister.

Reg 3 provides as follows:

The driver of every vehicle approaching a crossing shall, unless he can see that there is no foot passenger thereon, proceed at such a speed as to be able if necessary to stop before reaching such crossing.

Reg 4 provides as follows:

The driver of every vehicle at or approaching a crossing where traffic is not for the time being controlled by a police constable or by light-signals shall allow free and uninterrupted passage to any foot passenger who is on the carriageway at such crossing, and every such foot-passenger shall have precedence over all vehicular traffic at such crossing.

Finally, reg 5 provides as follows:

The driver of every vehicle at or approaching a crossing at a road intersection where traffic is for the time being controlled by a police constable or by light-signals shall allow free and uninterrupted passage to every foot passenger who has started to go over the crossing before the driver receives a signal that he may proceed over the crossing.

The first question, therefore, is whether or not this crossing is a crossing-place for foot passengers indicated by a traffic sign prescribed

Page 72 of [1940] 1 All ER 67

for the purpose of regulations made by the Minister. The material regulations dealing with traffic signs are the Traffic Signs (Pedestrian Crossings) No 2 Provisional Regulations 1934, dated 7 November 1934, which I shall call the 1934 regulations. I need not recite these regulations beyond stating that the relevant ones are regs 2, 2(a), 3(1), (2) and 4.

On behalf of the defendant, it was first contended that the mouth of Artillery Row is not a pedestrian crossing within the meaning of the 1935 regulations, and that those regulations do not apply to it because it was not indicated by the traffic signs prescribed by the 1934 regulations. It was argued that, although it was indicated by studs, as provided in the 1934 regulations, the studs were not in all cases separated by the intervals specified in reg 3(2) of the 1934 regulations. Some colour was lent to this suggestion by the plan, which, if it was accurate, showed the studs to be wrongly spaced. At best, the point is a very technical one, but counsel and myself both viewed the crossing and found that in fact the studs complied with the regulation. The point that this was not a pedestrian crossing was, therefore, rightly abandoned by counsel for the defendant.

If, then, the 1935 regulations apply, which of them apply directly to this case? Reg 4 applies only to crossings where traffic is not controlled by a police constable or by light-signals. Reg 5 applies only to crossings which are so controlled. Having regard to the arrangement of the light-signals described above, I hold that this is a controlled crossing, and that, as between regs 4 and 5, reg 5 is the relevant regulation. Reg 3 would appear to apply both to controlled and to uncontrolled crossings, but reg 5 seems more directly in point in this case.

If we assume that my findings of fact are right, and that the regulation which applies directly is reg 5, and if the whole transit from pavement to pavement, including the island and its gaps, is a single pedestrian crossing, then, in the absence of other considerations, the plaintiff must succeed, for, on my findings, he had started to go over the crossing before the defendant received a signal that she might proceed over it, and she failed to give him free and uninterrupted passage. On the authorities, this duty would appear to be an absolute duty, and not to be excused by any contributory negligence on the part of a pedestrian.

At first sight, this might seem to conclude the case in favour of the plaintiff. If the crossing was a pedestrian crossing and a pedestrian was fairly and squarely on it when he was run down, then, by the decision of the Court of Appeal in Bailey v Geddes, the plaintiff would seem to be incapable of contributory negligence. It is true that in Bailey v Geddes the crossing was an uncontrolled crossing governed by regs 3 and 4, and not, as here, a controlled crossing governed by regs 3 and 5, but there seems to me no ground for distinguishing between the application of regs 4 and 5 quoad the immunity of the plaintiff from liability for contributory negligence.

In order to distinguish this case from Bailey v Geddes, counsel

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for the defendant here argued (i) that the transit from side to side of Artillery Row consisted, not of a single pedestrian crossing, but of two crossings, one from the west pavement of Artillery Row to the island, and the other from the island to the east pavement of Artillery Row, and (ii) that, if this were so, then, in stepping from the island on to the second crossing, the plaintiff was not a person “on a crossing” within reg 3, nor a person who had “started to go over the crossing” within reg 5. On the contrary, it was submitted, he was a person stepping on to a crossing in the same sense and to the same extent as the plaintiff in Chisholm v London Passenger Transport Board. In that case, the Court of Appeal held that, while a person fairly and squarely on a crossing was incapable of contributory negligence, a person stepping on to a crossing suddenly from a pavement under the wheels of approaching traffic was capable of contributory negligence, and was guilty of it. Finding, therefore, that that was what had happened on the facts of the case before them, they gave judgment for the defendants.

In support of the contention that the so-called pedestrian crossing was in reality two distinct crossings, it was submitted on behalf of the defendant that the western half of the crossing was controlled and the eastern half uncontrolled, as was held in Chisholms case of the north and south halves of the crossing at the mouth of Fleet Street. As to this contention, I do not think that the two halves of this crossing were, as to one, controlled, and, as to the other, uncontrolled. The foundation of the courts decision in Chisholm v London Passenger Transport Board that the Fleet Street crossing was of this character was that no light from Fleet Street showed east towards Ludgate Circus. The light on the northern pavement of Fleet Street was blind to westbound traffic moving into Fleet Street. To such traffic no light from Fleet Street was visible at all. In this case, the corresponding light is that on the west pavement of Artillery Row, and this was not a blind light, but showed both ways. The only object of its showing northwardsthat is, towards the defendants carmust have been to control the movements of a car coming across Victoria Street into Artillery Row, but, even if it were otherwise, and if one half of the crossing were controlled and the other half uncontrolled, nothing in the language of the Court of Appeal in Chisholms case supports the suggestion that, because half is controlled and half uncontrolled, there were two separate crossings. Indeed, passage after passage from the judgment of Scott LJ might be cited to negative that suggestion. Therefore, I hold that the whole transit across the mouth of Artillery Row was a single pedestrian crossing.

Again, however, this does not dispose of the matter. It is manifest that, if a pedestrian on an island at a pedestrian crossing were free to step under the wheels of traffic approaching the island at a moderate pace, and free then to hold such traffic liable without being open to the answer of contributory negligence, then much the same inconveniences and absurdities would result as those which were stressed by the Court

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of Appeal in Chisholm v London Passenger Transport Board. Unless the language of the material regulation is so plain that this result is inevitable, I should try to construe that language in a sense which avoids it. When reg 5 provides that, in certain circumstances, a pedestrian who has started to go over a crossing is to have free and uninterrupted passage, it seems to me reasonable to construe its language as subject to the implied limitation that this right is to be enjoyed by the pedestrian only so long as he is on the crossing itself, and I think he ceases to be on the crossing when he reaches an island and steps on to it, or, as in this case, into a space enclosed by its contours and within its protection.

Counsel were unable to cite to me any case which directly decides whether or not an island in the middle of a crossing is part of that crossing. I have been informed that there is an unreported case in which a person was convicted of lingering on a pedestrian crossing when he was in fact pausing on an island, but the conviction was quashed on appeal, on the ground that, for the purpose then in hand, an island was not part of the crossing. There is also a diagram annexed to certain Pedestrian Crossings Traffic Signs Regulations 1934, dated 7 June 1934, designated in the margin “Pedestrian crossing in conjunction with refuge” and another diagram designated “Pedestrian crossing without refuge,” which, so far as they goand at best they carry one a very short waymay be taken to imply a distinction between the crossing itself and a refuge as something superimposed on it. I hold that, for the present purpose, the refuge is a separate entity from the crossing, there being nothing in principle and no authority which binds me to hold otherwise, while what authority there can be said to be points to that conclusion.

If this be so, a person who steps off an island is stepping from something which is not part of the crossing on to something which is, and, by analogy with Chisholm v London Passenger Transport Board, he is capable of contributory negligence if he steps on to it abruptly and when traffic travelling at a reasonable speed cannot stop in time to avoid hitting him. I find that this is what the plaintiff did in the present case. At common law, he is guilty of contributory negligence, and his claim must fail unless he can pray in aid the immunities conferred by reg 5 or reg 3. For the reasons I have given, I do not think that he can invoke them successfully. There must, therefore, be judgment for the defendant with costs.

Judgment  for the defendant with costs.

Solicitors: Pothecary & Barratt (for the plaintiff); Stanky & Co (for the defendant).

W J Alderman Esq   Barrister.


Temperance Permanent Benefit Building Society v Isles

[1940] 1 All ER 75


Categories:        CIVIL PROCEDURE: LAND; Mortgages        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        21 DECEMBER 1939        


Mortgage Remedies of mortgagee Enforcement of security Claim for possession Originating summons Substituted service Courts (Emergency Powers) Act 1939 (c 67), s 1(2)(a)(ii), (iv).

Practice Originating summons Substituted service Copy of notice placed on door of premises Newspaper advertisement RSC, Ord 67, r 6.

A mortgagee desired to obtain possession of, and to proceed to a sale of, the mortgaged premises and to issue an originating summons for leave to do so in pursuance of the Courts (Emergency Powers) Act 1939, s 1(2)(a)(ii). The whereabouts of the mortgagor were unknown, and the question arose whether the court could order substituted service of the notice of the summons on the mortgagor and, if so, what form the substituted service should take:

Held there was jurisdiction under RSC, Ord 67, r 6, to order substituted service, and such substituted service should be effected by placing a notice of the summons on the door of the mortgaged premises and by advertisement in one newspaper.

Notes

Crossman J, was of opinion that there was no jurisdiction to order substituted service in this case, and that the court could have such power only if the rule was amended as was done in the last year. The Court of Appeal have taken the opposite view, and there is, therefore, jurisdiction to order substituted service in such a case.

As to Substituted Service of Originating Summons, see Halsbury (Hailsham Edn), Vol 26, p 108, para 211; and for Cases, see Digest, Practice, pp 964, 965, Nos 50195026. See Yearly Practice of the Supreme Court 1940, p 1581.

Appeal

Appeal from a decision of Crossman J, given on 13 December 1939, holding that, in the circumstances of the present case, he could make no order for service other than for personal service. The case being a meritorious one he ordered the costs of the application to be added to the security.

M Gravenor Hewins for the appellants.

Hewins: This application relates to the service of an originating summons issued under the Courts (Emergency Powers) Act 1939, s 1(2)(a)(ii), (iv). The mortgagees are seeking to recover possession of and sell the property, the present whereabouts of the mortgagor being unknown. The mortgagor has vacated the premises and has handed the keys to the mortgagees. The application raises the question as to whether, in the circumstances, the court has power to dispense with service of the originating summons on the mortgagor, or may direct substituted service, such as by posting up a copy of the summons on the door of the premises. The present application is in the nature of a test application, and there are many similar cases pending. This application has been made at the suggestion of one of the masters, in order that a ruling of the court may be obtained. The application is made to this court under RSC Ord 58, r 10, consequent upon the refusal of a similar application

Page 76 of [1940] 1 All ER 75

by Crossman J. The application was for an order dispensing with service and ordering that service by posting a copy of the summons on the premises should be deemed sufficient service under RSC Ord 67, r 6. Crossman J, said that there was no rule authorising the dispensing with service, and that substituted service, in the strict sense, would mean complying with the rule. Also, to obtain an order for substituted service, it was necessary to satisfy the court that service in the way suggested might reasonably be expected to bring the notice to the knowledge of the mortgagor.

M Gravenor Hewins for the appellants.

21 December 1939. The following judgments were delivered.

MACKINNON LJ. We cannot dispense with notice. RSC Ord 67, r 6, provides for the substitution of notice for service by letter or otherwise. There must be a public advertisement, and a copy of the notice must be placed on the door of the house. There will be 8 days allowed for appearance, and leave to add the costs of this application to the security.

CLAUSON and GODDARD LJJ agreed.

Order for notice by advertisement in a London morning paper and by the posting up of a copy of the summons on the door of the premises.

Solicitors: Shaen Roscoe Massey & Co (for the appellants).

W K Scrivener Esq   Barrister.

Attorney-General (at the relation of Stevens) v Wimbledon Corporation

[1940] 1 All ER 76


Categories:        ADMINISTRATIVE        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        16, 17, 20, 21, 22, 23, NOVEMBER, 13 DECEMBER 1939        


Electricity Supply Charges for supply Agreement for supply on two-part tariff system Method of assessing fixed annual charge Validity of agreement made under Electric Lighting (Clauses) Act 1899, Sched s 33 Incorporating two-part tariff Electric Lighting Act 1882 (c 56), ss 19, 20 Electric Lighting (Clauses) Act 1899 (c 19) Sched s 33 Electricity (Supply) Act 1926 (c 51), s 42.

The defendants were the authorised undertakers for the supply of electricity to consumers in their area. The relator was a resident in that area and was supplied with electricity under a two-part tariff on the terms, inter alia, that he should pay a fixed annual charge and also a charge per unit for all electricity actually consumed by him. The fixed charge was assessed by the defendants chief engineer and manager “mainly in accordance with the size and type of house” supplied, and his “decision as to the amount of the fixed charge” was to be final and conclusive. It was also to be “assessed … by the corporation based on the size and nature of the electrical demand of the house and their decision as to the fixed charge is final and conclusive.” The fixed charge in the case of the relators house was assessed at £15, and it was proved that similar houses in the same neighbourhood had been assessed at £7 0s 6d. These terms were incorporated in an agreement between the relator and the defendants, the latter contending that they had power to enter into such agreement under the

Page 77 of [1940] 1 All ER 76

Electric Lighting (Clauses) Act 1899, Sched s 33. It was contended by the plaintiffs that the contract was ultra vires on the grounds that (a) the Electric Lighting (Clauses) Act 1899, Sched s 33 was intended to meet only exceptional cases, (b) agreements on the two-part system are provided for under the Electricity (Supply) Act 1926, s 42, which impliedly excludes the power to make such agreements under the schedule to the 1899 Act, (c) the terms of the contract constituted an undue preference of other consumers:

Held (i) the defendants two-part tariff system was not illegal per se as they were entitled to act under the power given to them by the Electric Lighting (Clauses) Act 1899, Sched s 33, and neither the provisions of the Electricity (Supply) Act 1926, nor those of the Electric Lighting Act 1882, rendered it in itself ultra vires, although it was found as a fact that the assessment of the fixed annual charge was arbitrary and capricious.

(ii) on the facts of this particular case, the plaintiff relator was entitled to an injunction in the words of the Electric Lighting Act 1882, ss 19 and 20.

(iii) the relator was not entitled to be informed of the basis and method of assessment of the fixed charge.

Notes

It has become a common practice for householders to be supplied with electric energy upon the two-part tariff here considered. This tariff may be incorporated in an agreement made under the 1899 Act, but it is held that the assessment of the fixed charge must be reasonably uniform in the cases of houses of the same type and taking a similar supply of current.

As to Charges for Electric Supply, see Halsbury (Hailsham Edn), Vol 12, pp 582584, para 1123; and for Cases, see Digest, Vol 20, pp 207, 208, Nos 4756.

Cases referred to

A-G v Long Eaton Urban Council [1914] 2 Ch 251; on appeal [1915] 1 Ch 124; 20 Digest 207, 48, 84 LJCh 131; 111 LT 514.

A-G v Hackney Corpn [1918] 1 Ch 372; 20 Digest 207, 50, 87 LJCh 122, 118 LT 393.

Action

Action by the Attorney-General at the relation of Major C H Stevens for a declaration that the defendants two-part tariff agreement for the supply of electricity to consumers was invalid and ultra vires, for an injunction to restrain them from supplying electricity on the terms thereof, and for a declaration that all consumers in the area supplied by the defendants were entitled to be supplied with electricity under a two-part tariff on uniform terms.

C E Harman KC, J Leonard Stone and F B Alcock for the plaintiffs.

Sir Lynden Macassey KC and Maurice FitzGerald KC for the defendants.

13 December 1939. The following judgment was delivered.

SIMMONDS J. This is an action by the Attorney-General on the relation of one Charles Henry Stevens, who is the owner and occupier of a private dwelling-house, No 204, Worple Road, Wimbledon. The defendant corporation are, under the conjoint effect of numerous provisional orders, which were duly confirmed by Acts of Parliament, authorised, subject to these orders and to the provisions of the Electricity Supply Acts 1882 to 1936, to supply electrical energy within an area of supply embracing Wimbledon, Merton and the Maldens and Coombe.

Page 78 of [1940] 1 All ER 76

The relators house is in that area, and, on his relation, the Attorney-General in this action challenges the validity of the charges which the defendants make for the electricity supplied by them under the form of two-part tariff which they have adopted. The relator himself joins as co-plaintiff, claiming in his own right the relief to which I shall later refer.

Nothing here turns on the provisions of the Wimbledon provisional orders. The defendants powers of charging for a supply of electrical energy are governed by the Electricity Supply Acts. In other words, they may charge (i) according to the actual amount of energy supplied, or (ii) according to the electrical quantity contained in the supply, or (iii) by such other method as may for the time being be approved by the proper authority (now the Minister of Transport). However, in addition to those statutory methods of charge, it is open to a local authority as undertaker to avail itself of the Electric Lighting (Clauses) Act 1899, Sched s 33. Since this is the section by virtue of which the defendant corporation have purported to charge the relator, I will set it out:

Subject to the provisions of the special order and of the principal Act, and to the right of the consumer to require that he shall be charged according to some one or other of the methods above mentioned, the undertakers may make any agreement with a consumer as to the price to be charged for energy, and the mode in which those charges are to be ascertained, and may charge accordingly.

The defendant corporation took advantage of this section to introduce in 1933 a form of two-part tariff which, as it was hoped, would benefit a large number of consumers of electricity within the area of supply, and would result in a greatly increased consumption. They did not, as perhaps they might have done, obtain, or try to obtain, the authority of the Minister under the Electricity (Supply) Act 1926, s 42, but preferred to introduce the tariff by agreement with each consumer, leaving untouched the right of the consumer to be supplied at such flat rate as the private Acts or orders authorised.

The terms and conditions of the two-part tariff so introduced are conveniently set out in their original and later form in the particulars of defence. In their original form, they were described as follows:

Terms and conditions of the two-part tariff for the supply of electricity for domestic purposes in a private dwelling-house, bungalow or flat. Consumers of electrical energy in premises occupied solely as private residences may at their option and as an alternative to the existing rates, be charged for the supply for all purposes under a two-part tariff … (A) An annual fixed charge based on the size and type of premises occupied, with the addition of: (B) A charge of ½d. per unit for all electricity consumed during the two winter quarters and 1/3d. per unit for all electricity consumed during the two summer quarters …

There was also the further term that the fixed charge should be payable by equal quarterly instalments, and should be assessed by the chief engineer and manager mainly in accordance with the size and type of house, and his decision as to the fixed charge should be final and conclusive. Further terms were that the supply should be given on the basis of an annual contract and that the corporation reserved the right to revise and alter the terms and conditions of supply from time to time,

Page 79 of [1940] 1 All ER 76

if found necessary, on giving not less than one months notice by advertisement or otherwise.

In April 1934, these terms and conditions were materially changed. I need only notice that the fixed charge was to be:

… assessed and notified by the corporation based on the size and nature of electrical demand of house and their decision as to the fixed charge is final and conclusive …

The price per unit is not stated, and a months notice was no longer required for the exercise of the reserved right of revision and alteration. These were the terms upon which the relator and many other consumers agreed to take a supply of electricity from the defendant corporation. The relator, who had for many years been a consumer both for lighting and for power purposes, and had paid for the units consumed by him at the appropriate rates, was attracted by the possibility of saving on the two-part tariff, and inquired of the corporation what would be the fixed charge for his premises, No 204, Worple Road. On 22 November 1933 he was informed that the annual fixed charge would be £16, and that the additional charge would be only ½d per unit during the two winter quarters and 1/3d per unit during the two summer quarters, whether for lighting or for power purposes. He was further told that, upon the basis of his consumption during the four quarters ending September 1933, he would, by coming on the new tariff, save £22 8s 4d. Accordingly, on 24 November, he made formal application to the defendant corporation to be charged for the supply of electrical energy in accordance with the terms and conditions of the two-part tariff, and agreed to pay as the annual fixed charge a sum of £16 in four quarterly instalments as required. His application was accepted, and he was thereafter charged on the new basis. It is irrelevant to this part of the case that in 1934 the defendant corporation, in exercise of the right that I have mentioned, purported to alter in certain respects the terms of supply.

Upon these bare facts, the first question arises. It is claimed that the defendants two-part tariff is ultra vires, and the claim is supported by a number of contentions with which I must shortly deal. First, it is said that the defendants are making a misuse of the Electric Lighting (Clauses) Act 1899, Sched. s 33. That section, it is said, being intended to meet only the exceptional case where a special agreement is made necessary by special circumstances, the defendants are using it to offer a tariff to all and sundry who care to take it. I see no force in this contention. If an undertaker can make an agreement with one consumer, he may make it with ten, a hundred, or a thousand consumers. He may be laying up for himself a store of difficulties, but that does not arise at this stage.

Secondly, it is said that it is not permissible to make an agreement under s 33 which takes the form of a two-part tariff. That, it is said, is a special form of charge, for which provision is made by s 42 of the Act of 1926, and it is not to be supposed that the legislature intended on the one hand to authorise, subject to special safeguards,

Page 80 of [1940] 1 All ER 76

that particular method of charge, and, on the other hand, to permit it as an agreed method of charge under s 33 of the earlier Act. This, I think, is a mistaken contention. It is one thing to allow the undertaker and the consumer to come to an agreement and another and very different thing to permit the undertaker to impose upon the consumer a particular form of charge. It is with the latter only that the Act of 1926 was concerned. The defendant corporation was, in my judgment, entitled to enter into an agreement for a two-part tariff with the relator and with other consumers.

Next, a contention is raised which makes it necessary to refer to other provisions of the Electricity Acts, though they are more directly relevant to other questions raised in the action. The Electric Lighting Act 1882, s 19, provides as follows:

Where a supply of electricity is provided in any part of an area for private purposes, then except in so far as is otherwise provided by the terms of the license, order or special Act authorising such supply, every company or person within that part of the area shall, on application, be entitled to a supply on the same terms on which any other company or person in such part of the area is entitled under similar circumstances to a corresponding supply.

S 20 of the same Act provides as follows:

The undertakers shall not, in making any agreements for a supply of electricity, show any undue preference to any local authority, company, or person, but, save as aforesaid, they may make such charges for the supply of electricity, as may be agreed upon, not exceeding the limits of price imposed by or in pursuance of the license, order, or special Act authorising them to supply electricity.

I will later consider those sections in relation to the particular facts of this case upon which the relator relies for his claim that their provisions have in fact been infringed. At this stage, their relevance, as I understand it, is that the relator says that, given such terms and conditions as constitute the agreement here under consideration, it follows that there must be a breach of the statutory provisions. A system, it is said, is inherently vicious under which a fixed charge is based on “the size and type” of premises, or “the size and nature of electrical demand,” with a proviso that the decision of the chief engineer or of the corporation is to be final and conclusive, and with the reservation of a right to the corporation to revise and alter at will the terms and conditions of supply. I so far concur in this contention as to agree that such a system is a thoroughly bad one. A method of charging which is not based on any precise and ascertainable formula, but proceeds from the vagueness of “type” and “nature of electrical demand” to the final and unchallengeable decision of an official of the local authority is open to grave abuse. The committee appointed by the Electricity Commissioners to report upon the uniformity of electricity charges and tariffs in their 1930 report were unanimous in expressing their strong disapproval of any basis of charge which requires adjustments by members of the staff of the undertaking which are not made public. The method adopted by the defendant corporation is peculiarly open to this criticism. It will appear, when I come to examine the evidence, that in practice the

Page 81 of [1940] 1 All ER 76

method became what in theory it might be expected to becomenamely, arbitrary and capricious in its incidence, and, if capable of explanation, at any rate unexplained by the defendants officers. Nevertheless, however strongly such a method may be condemned, it does not follow that it is ultra vires, and I am unable to conclude that such a method, irrespective of its consequences, is per se illegal and invalid. I cannot, therefore, make a declaration on the broad lines claimed by the plaintiff, but must turn to the other part of the case, which raises the question whether or not, assuming that the system is not per se an illegal one, it has been operated as between the relator and other consumers in such a way as to infringe ss 19 and 20 of the 1882 Act.

In considering this question, I must bear in mind the principles laid down by Sargant J and the Court of Appeal in A-G v Long Eaton Urban Council and by the Court of Appeal in A-G v Hackney Corpn, and, further, the particular conditions under which the defendants purchase their supply from the joint electricity authority and sell it to their own consumers. Circumstances which render it less costly or otherwise more profitable to supply customers other than the relator constitute a legitimate reason for giving better terms to them than to him, and the court will not attempt to measure what is probably incapable of measurementnamely, the degree in which, as between one consumer and another, the supply is costly or profitable to the undertaker. Nor is it to be doubted that the undertaker may charge a consumer less in order to induce him to take another supply where taking that other supply will lower the cost to the undertaking of the existing supply: per Scrutton LJ, in A-G v Hackney Corpn, at pp 397, 398.

Again, it must be borne in mind that the supply of electricity is attended by peculiar difficulties. The obligation to meet a maximum demand which only occurs for a short time in the year involves the undertaker in an expenditure upon plant and equipment which the output for the rest of the year does not justify. Any consumer who increases the total maximum demand upon the undertaker is thus unprofitable as compared with a consumer whose demand does not add to the burden.

It is beyond the wit of man to device a system of charge under which each consumer is charged in exact proportion to the cost of supplying him, and it is questionable whether, if it could be devised, it would be in all respects satisfactory. It remains, however, a fact distinguishing the supply of electricity from that of water or gas that it cannot be provided from a reservoir, so that the cost of supply to different consumers may vary, not merely by reason of different circumstances of distribution, but also by reason of the month or week or hour of the day in which their demands have to be fulfilled. In the present case, the undertakers do not generate their own electricity, but they are

Page 82 of [1940] 1 All ER 76

faced in effect with the same problem, as they in turn have to meet charges from their suppliers into which the element of maximum demand largely enters.

I therefore approach the questions which are raised by ss 19 and 20 of the Act of 1882 with the full consciousness that inequalities are inevitable, and that such words as “same terms,” “similar circumstances,” “corresponding supply” and “undue preference” must be construed and given effect to with the latitude which the subject-matter demands.

I have already stated the terms on which the relator became a consumer on the two-part tariff at a fixed charge of £16 per annum. On 16 August 1934 he was notified that as from 1 July 1934 his annual fixed charge would be reduced to £15, the charges per unit for electricity consumed remaining unaltered. On 13 September 1934 he repeated a question which had been asked before and gone unanswerednamely, how the fixed charge was arrived atalleging that others in higher-rented houses were being charged considerably less. From that time until the hearing of this action, he tried repeatedly to get a clear answer, but did not get one. It was not, indeed, until the chief engineer for the defendant corporation went into the witness-box in the course of this action that one at least of the most material factors in determining the fixed charge was divulged. I do not propose to go through all the wearisome correspondence between the relator and the chief engineer, and, later, between the relators solicitors and the town clerk. The impression which is left upon my mind on a re-reading of it is that a little more candour in its initial stages on the part of the chief engineer might well have averted these proceedings. In his reply to the letter of 13 September, he declined to give any further information beyond that contained in the pamphlet issued to all consumers, which amounted only to the statement that the fixed charge was based, not only upon the size of the premises, but also upon the nature of the demand for electricity at such premises, and further committed himself to the statement that in none of the premises which the relator was comparing with his own was the demand in any way similar. This was the tone adopted throughout. Further information and explanation were from time to time extracted by the pertinacity of the relator, but, if he regarded the further information as inconsistent with itself, and the explanation as obscure, he is not, in my judgment, to be blamed for that, for in fact all the time the chief engineer was concealing from him the arbitrary adjustments which he thought it desirable to make. It is in truth a difficult task at the same time to give a satisfactory explanation and to conceal the fact which alone explains what is done.

Eventually, the relator, who knew well that a much lower fixed charge was assessed on houses which appeared to be in all respects comparable with his, asked and obtained an answer to the following question:

Will you tell me the maximum demand that I can make upon your supply so

Page 83 of [1940] 1 All ER 76

that the standing charge on this house may be reduced to that of other houses of similar size?

The answer, given on 26 November 1936, was as follows:

2½ kilowatts at times of our peak load.

Upon this, he naturally asked on 1 December what the times of the peak load were, adding that, when he knew, he would see that that restriction was observed. To this, on 3 December 1936, the chief engineer replied that the relator would realise that, through inadvertence, it was possible that his demand might not be so restricted, and that the corporation in consequence might lose heavily on his supply. It would therefore be necessary to instal a time-switch and circuit-breaker to ensure automatically that during November and December the demand at his premises should be restricted to 2½ kilowatts between the hours of 8 am and 9 am and the hours of 5 pm and 7 pm daily. He pointed out the inconvenience of such a restriction, and added that, if the relator wished to proceed further in the matter, he would ascertain what the necessary apparatus would cost, and would inform him what the rental for it would be. I pause to point out that 2½ kilowatts is a very small amount, and that the restriction would not, for instance, permit simultaneous consumption by two ordinary electric fires. Not unnaturally, the relator replied that he was willing to instal any gadgets and to check his supply in the same way as the supply of anyone else was checked, and willing to pay the cost which it was usual to charge the residents in a similar sized house in similar circumstances. On 8 December the chief engineer replied as follows:

By your letter of the 1st instant you agreed to restrict the demand at your premises to 2½ kilowatts between the hours of 8 a.m. to 9 a.m. and 5 p.m. to 7 p.m. throughout the months of November and December in each year, and therefore on that condition and as from the date of the above letter the fixed charge on your premises has been reduced to £7 0s. 6d. per annum, which is the fixed charge applicable to any other house in the borough of similar size to your own with a normal demand. In the first part of your letter under acknowledgement you give me permission to instal any gadgets that I may wish to check your supply. I accept this offer with thanks and propose to do this and will give you 48 hours notice.

This letter at least disclosed that £7 0 6d would be the fixed charge for the relators house if his demand were “normal,” though that term is still undefined.

On 11 December the relator replied that he took it that the chief engineers letter meant that all houses of this size were likewise restricted during the same hours of the same months, and, as that was the only condition, he was put on the same footing as to fixed charge. To this the chief engineer replied on 12 December as follows:

There is no other house in our area of supply of similar size to your own where the same maximum demand may arise as at your premises, but I can assure you that if a similar case does arise the same limitation will be imposed unless the consumer is willing to pay the increased fixed charge that we have asked from you and which you have refused.

If this letter is intended to mean that no house of similar size had an exactly same maximum demand, it may be correct. It appears to me, however, to be a letter which it is difficult to justify, for it is obvious that

Page 84 of [1940] 1 All ER 76

such a restriction, if imposed at all, ought to be imposed, not only where the maximum demand was the same as that of the relator, but also wherever it was such that there was a reasonable possibility of a load of 2½ kilowatts being exceeded during the peak hours. At any rate, it was not satisfactory to the relator, and, after further interminable correspondence, in the course of which, on 23 February 1937, the chief engineer once again refused to explain in detail how he arrived at the fixed charge, this action was brought.

In the course of the action, discovery was had and certain interrogatories delivered, but, even so, the relator must have come into court without knowing, and without his advisers knowing, why his fixed charge should be £15 if a house of the same size with a so-called normal demand was charged £7 0s 6d. He knew that the fixed charge was determined by the size and the nature of the electrical demand. He knew, or could assume, that the size of the house was a factor capable of certain assessment. Upon the other factornamely, the nature of his demand for electricityhe could obtain no satisfactory information. It is indeed a striking fact that he was not told that the essential feature of the fixed charge system was that the assessment was based on floor spacethat is to say, size onlyunless it appeared that the consumer, upon a basis of past consumption, would save more than 25 per cent of his electricity cost by going on the two-part tariff. It was only when the chief engineer was in the witness-box that this fact came out. It did not matter whether the consumers load factor was good or bad from the point of view of the undertaker. If he saved less than 25 per cent his case was not brought before the chief engineer for special assessment. If he saved more than 25 per cent then he was specially assessed in a sum which might be twice or thrice the fixed charge based on floor area, or any other sum which the chief engineer thought fit to select. This at least was the system, and it is to be observed that the very factor which the chief engineer had repeatedly told the relator was wholly irrelevantnamely, the number of units consumedwas in fact the first vital element, for the question of special assessment never arose unless so many units were consumed that a certain saving was effected by the two-part tariff.

Having at length ascertained the first step in the system of special assessment, one may pause to examine its bearing on the present case. Let me assume the validity of such an arbitrary distinction between consumers who do and consumers who do not, upon the basis of past consumption, save 25 per cent of their cost, irrespective of what their load factor may be. How is this system worked in practice? It is not surprising to find that its operation is haphazard and capricious. If, for reasons which appear to the defendant corporation as adequate, a saving of 25 per cent is made a ground for distinction between one consumer and another, it is surely not too much to expect that such a distinction should be observed with reasonable care. I do not lay stress on the fact that the chief engineer,

Page 85 of [1940] 1 All ER 76

when challenged with cases where no special assessment was made though the saving was slightly in excess of 25 per cent, justified his action or inaction by saying that he did not work meticulously to that percentage, though that reservation is, from an administrative point of view, dangerous and undesirable. I do, however, emphasise this fact, which goes, in my judgment, to the root of the matter. If the defendants, while professing to make it a part of their method of charge that a consumer who saves 25 per cent by going on the two-part tariff is to be specially assessed, yet in practice in numerous cases do not specially assess consumers who make that saving, they must justify what appears to be a clear infringement of ss 19 and 20. I have at some length shown how, at the date of the writ in this action, the defendants were insisting on the necessity of imposing on the plaintiff a fixed charge of £15 though, if based on floor area only, it would be £7 0s 6d. It was, therefore, instructive to find out whether at the same date other houses whose normal assessment would be £7 0s 6d remained at that figure notwithstanding a 25 per cent saving. It appeared that, after the writ had been issued, and in consequence of it, a scrutiny was undertaken to see whether special assessments had in fact been made in all the cases in which in theory they should have been made, and forthwith it was discovered that in 3 out of 15 houses of the £7 0s 6d class, the special assessment which ought to have been made had not been made. These were “Kingfishers,” The Drive, Kingston Hill, the fixed charge on which was put up from £7 0s 6d to £26, “The Brake,” Almer Road, Wimbledon, the fixed charge on which was similarly put up, and 9, Highbury Road, Wimbledon, the fixed charge on which was advanced to £17 10s. In other cases also it was ascertained that there had been a failure to act up to the principle which is alleged to have guided the chief engineer. I am far from satisfied that all, or even the greater part of, such cases were discovered.

No one, I think, could have examined the numerous files that were brought before the court, and listened to the explanations of the chief engineer, without coming to the conclusion that, but for the plaintiffs action, the anomalies of which he complains would have continued. At the date of the writ, there were many casesI need take no more than the three glaring instances which I have mentionedwhich make it impossible to say of the relator that he was getting a supply on the same terms as other consumers in similar circumstances were getting a corresponding supply. It appears to me to be irrelevant that the undertakers, upon the discovery of such cases, have chosen to put up their fixed charge above that of the relator, and not to bring down his to theirs. The fact was that, for a period before the date of the writ, other consumers were getting a supply upon terms which, in relation to him, were a clear infraction of both ss 19 and 20. They cannot, in my judgment, justify it by saying that it was the other consumers who were assessed too low, and not the relator who was assessed too high.

Page 86 of [1940] 1 All ER 76

If the facts had been otherwise, and if the method of assessment had been plain for all the world to see, and a mistake had been made which, upon discovery, was immediately redressed, it might have been unnecessary for the court to intervene. Here, however, from first to last, the defendants have been sedulously evasive, and it was only under the stress of these proceedings that it was revealed that the chief engineer acted, or purported to act, upon some basic principle in making special assessments, and that in several conspicuous cases this principle had not been observed. The plaintiff had, in my judgment, no other course open to him than to bring his action, and he is entitled to relief. I have already indicated that I am not disposed to grant an injunction which would debar the defendants from operating by agreement this or any other kind of two-part tariff. It will meet the case, I think, if I grant an injunction following the language of ss 19 and 20 of the Act. It will be sufficiently clear from what I have already said that the attempt to impose upon the relator alone among consumers a limit of maximum demand cannot be justified.

I must add a word upon a further claim raised by the relator. He claims a declaration that he is entitled to be informed of the basis and method by which the annual fixed charge on his house was assessed. I do not think that there is any foundation in law for this claim. The plaintiff need not enter into an agreement with the defendants unless he likes, and they, if they like, may make it a term of the agreement that he shall not know the basis and method of charge. That they may run grave risks by taking such a course is shown by this case, and it is in fact much to be deprecated that any local authority undertaker should endeavour, as the defendants have done, to conceal the basis and method of charge. Adjustments of an arbitrary nature are in any case to be avoided. When the further claim to make such adjustments behind a screen is made, and when information properly sought is denied, the way is paved to suspicion and discontent, and not without justification. I am content to assume that the existing and gross anomalies which, as the result of this action being brought, were brought to light and put an end to, were due to carelessness in administration. However, it wants little knowledge of public or local administration to appreciate that the exercise of such a power in secret might lead to grave abuse. If the result of the plaintiffs action is to end a system in Wimbledon which has, as I understand, been adopted by no other electricity undertaking, he will have done good service to the community. The court will accept an undertaking that the defendants will supply to the relator plaintiff electricity on the same terms as those on which any other person in the area is entitled, in similar circumstances, to a corresponding supply, and will not show undue preference to any other person over the plaintiff.

Solicitors: Baileys (for the plaintiffs); Herbert Emerson Smith, Town Clerk, Wimbledon (for the defendants).

F Honig Esq   Barrister.


Powell v Great Western Railway Co

[1940] 1 All ER 87


Categories:        EMPLOYMENT; Other Employment: HEALTH; Health and safety at work        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        12 DECEMBER 1939        


Workmens Compensation Course of employment Locality risk Engine fireman hit by pellet from airgun aimed at engine.

A fireman employed by a railway company, being at the time on his engine carrying out his duties, was hit by a pellet from an airgun deliberately aimed at the engine by a boy of nineteen years of age. The question was whether this was an accident arising out of and in the course of his employment:

Held the mans work brought him to the place where there was the risk of being injured by a pellet from the airgun, and the accident, therefore, arose out of the employment.

Notes

It is held to be clearly proved that the mans employment brought him to the place where the risk here in question existed, and that, therefore, the accident was one arising out of the employment. It will be noted that the gun was deliberately aimed at the engine.

As to Locality Risk, see Digest, Vol 34, pp 270, 271, Nos 22952301 and pp 320, 321, Nos 26192626; and see Williss Workmens Compensation, 32nd Edn, pp 102106.

Cases referred to

Thom (or Simpson) v Sinclair [1917] AC 127; 34 Digest 320, 2619, 86 LJPC 102, 116 LT 609, 10 BWCC 220.

Upton v Great Central Ry Co [1924] AC 302; 34 Digest 276, 2336, 93 LJKB 224, 130 LT 577, 16 BWCC 269.

Challis v London & South Western Ry Co [1905] 2 KB 154; 34 Digest 315, 2585, 74 LJKB 569, 93 LT 330, 7 WCC 23.

Dennis v White (A J) & Co [1917] AC 479; 34 Digest 321, 2627, 86 LJKB 1074, 116 LT 774, 10 BWCC 280; revsg [1916] 2 KB 1.

Lee v Breckman (S & I) & Co (1928) 138 LT 610; Digest Supp, 21 BWCC 32.

Appeal

Appeal by the railway company from an award of His Honour Judge Reeve, sitting in the Worcester County Court, dated 15 June 1939. The applicant was a fireman employed by the respondent company on a locomotive. During the course of his employment, his engine halted, and he signalled to a signalman by waving his hat, to indicate that the driver wanted the “all-clear” signal. As his locomotive moved off, he was struck in the eye by a pellet from an airgun fired in mischief by a boy of 19 standing on ground adjoining the track. He was disabled for a time, and claimed compensation and a declaration of liability. The judge decided that the injury was caused by accident arising out of the employment. The particular employment rendered him more liable than any other member of the public to meet with this accident. This specific offence was penalised by the Offences against the Person Act 1861, s 33, and, therefore, the legislature considered it to be a danger to the public. The Court of Appeal in Challis v London & South Western Ry Co recognised the tendency of mischievous boys to throw missiles at a train in motion, and evidence had been given to the same effect.

Page 88 of [1940] 1 All ER 87

The county court judge gave a declaration of liability, and made an award of £23 8s. The respondents appealed.

Gilbert J Paull KC and F Bertram Reece for the appellants.

F W Beney for the respondent.

Paull KC: The judge was wrong in law in holding that the provision in the Offences Against the Person Act 1861, s 33, against throwing stones at engines decided the point at issue. His Honour also failed to appreciate the difference between Challiss case and the present case. There was no evidence here of special risk. This man was no more exposed to this risk than was any other member of the public. The deliberate firing of an airgun at a stationary train by a youth of 19 must be distinguished from the dropping of stones by small children from a bridge on to a locomotive travelling at 50 mph. (Counsel referred to Thom (or Simpson) v Sinclair, where the man was injured by the fall of a roof, and Dennis v White (A J) & Co, where he was injured in a street accident). There must be some special exposure to the injury incidental to the work. Here there was none. This was an assault, and the case is governed by Lee v Breckman (S & I) & Co, in which a van driver was assaulted by a carter whose van he was loading and the injury was held not to arise out of his employment.

Beney was not called upon.

Gilbert J Paull KC and F Bertram Reece for the appellants.

F W Beney for the respondents.

12 December 1939. The following judgments were delivered.

SLESSER LJ. The facts of the case are not in dispute, and are very simple. The injured workman was engaged by the appellant railway company as a fireman. At a time when his train was going very slowly, and he was apparently making some indication to a signalman with regard to the signal, an ill-disposed person, described sometimes as a lad, sometimes as a man, and sometimes as a boyit does not matter which he was, he was nineteen years of agedeliberately aimed a pellet, as is now admitted, at the engine. That is the definite admission which has been made. In so doing, he missed the engine, but unfortunately hit this man with a pellet, and the man suffered injury as a result of the hitting. The injured man took proceedings against his employers, and succeeded in getting compensation. The appeal is now brought primarily upon the ground that it is not shown on the evidence that this mans particular work brought him into a position where the risk of being injured by this airgun was any greater than the risk to any other member of the public. In other words, this casualty did not arise out of his employment.

I think that that matter is very clearly and sufficiently summarised in Willis on Workmens Compensation, 32nd Edn, p 102, under the heading “Locality risk”:

A workman who by the conditions or obligation of his employment has to work in a particular place is subject to the risks attending his presence there, and any accident occurring to him through having to occupy that position and place, whilst legitimately working there, will be one arising out of his employment …

That seems to me to be a summary of the effect of certainly two decisions

Page 89 of [1940] 1 All ER 87

of the House of Lords, Thom (or Simpson) v Sinclair and Upton v Great Central Ry Co.

As regards Thom (or Simpson) v Sinclair, the facts were simply these. A girl who was working in a shed was injured while at work there because an adjoining brick wall, in the course of erection for a neighbour, fell down and brought down the roof of the shed in which she was working, and injured her. It is a Scottish case. In the Second Division, the award was set aside on the ground that the accident did not arise out of the employment, but it was held in the House of Lords that the girl was entitled to compensation, because the conditions of her employment obliged her to work in that particular place, and so subjected her to any dangers which might specially attach to that building. It is unnecessary to read the opinions, which are all in agreement upon the point, save only that Viscount Haldane says, at p 134:

But where a man is ordered to work under a particular roof and that roof falls in on him, it is not clear that the accident belongs to that category [the category of a case where there is no reason why an accident should happen to a man in one situation rather than to a man in another]. If the particular accident would not have happened to him had he not been employed to work under the particular roof, there seems to be nothing in the language of the Act which precludes an occurrence from being held within it which satisfied the test proposed by the first of the alternative constructions modified to the extent I have suggested. The falling of the particular roof could only happen in one place, and the presence there of the person injured was due to the employment.

Then there is a passage which I need not read, from the opinion of Lord Dunedin in Upton v Great Central Ry Co to the same effect.

If one applies those principles to this case, this man was required, as part of his employment, to be on this engine. While on this engine, he was subjected to a particular peril, in that a misguided youth aimed at the locality where this man was required to work. In my opinion, the problem in the cases of assault of whether the assault on the man arises out of some danger which exists by reason of his employment, or whether it arises out of a quarrel which had no relation to the employment, does not arise here. This is a case of a man being, by reason of his work, brought into a locality which was dangerous. Whether it was dangerous when he went into the locality, as in the case, for example, of certain ships being required to go into a mine-infested area, or whether it became dangerous after he got into the locality, by reason of somebody shooting at him, or dropping a bomb on the engine, or whatever it may be, matters nothing. This man suffered this casualty in the course of his employment, and it arose out of the employment, because he was at that place. It was by its very nature a place which was rendered dangerous by the shooting of the gun, and, therefore, it follows that the judge was right in awarding him compensation.

MACKINNON LJ. I agree.

GODDARD LJ. I agree. I only want to say one word with regard to Challis v London & South Western Ry Co, because that was much

Page 90 of [1940] 1 All ER 87

relied upon below, and, indeed, the judge based his judgment upon it. Challiss case was decided at a time when the courts were proceeding to lay down the principles, so far as they were to govern the interpretation of this Act, and, naturally, were proceeding cautiously. For the first time, I think it is right to say, in Challiss case this court was faced with the problem of whether or not an injury which is caused by a criminal act committed by a third party can be said to be an accident arising out of and in the course of a mans employment. Both Sir Richard Henn Collins MR and Cozens-Hardy LJ, in the judgment which they delivered are really seeking to show how the criminal act of the third party could have been treated as an accident. Mathew LJ, with the robustness which one is accustomed to find in his judgments, said, at p 158:

In common parlance the accident which happened in this case would be said to have arisen out of the workmans employment; and I cannot see why the Act should not be construed according to the fair meaning of the words employed in their ordinary sense.

With those words I may say I respectfully agree, more particularly because in recent years the courts have moved very much further in these matters. Thom (or Simpson) v Sinclair shows the extent to which the courts have gone.

In this particular case, the accident arose because a boy shot an airgun deliberately at a locomotive engine on the railway, and, missing that somewhat large target, he hit the fireman standing in the cab of the engine. The fireman had to be there. If he had not been there, he would never have been injured. His service and duty required him to be there. Therefore, I entirely fail to see how it can be argued that this accident did not arise out of his employment, quite apart from the question of whether or not trains are an allurement to children. It seems to me that that does not matter. The deliberate act which here caused the accident was the firing at the engine. The accident happened to the workman because the workmans duty required him to be on the engine. Thus, it seems to me to follow that the accident arose out of his employment.

Appeal dismissed with costs.

Solicitors: A G Hubbard (for the appellants); Kenneth Brown Baker Baker (for the respondent).

Derek H Kitchin Esq   Barrister.


Bomford v Osborne

[1940] 1 All ER 91


Categories:        TAXATION; Income Tax        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        3, 6, 7 NOVEMBER, 20 DECEMBER 1939        


Income Tax Schedule B Nurseries and market-gardens Mixed farm Apportionment of assessment Income Tax Act 1918 (c 40), Sched B, r 8.

Where a farm is worked as a mixed farm, but as one unit, the commissioners can apportion the assessment, assessing one part of the land as a farm and the other part as nurseries or gardens for the sale of produce under the Income Tax Act 1918, Sched B, r 8. This is so even where, by a rotation of crops, garden crops are in one year grown on a part of the land which is in other years used for farm crops.

Decision of Lawrence J ([1939] 3 All ER 259) affirmed.

Notes

On the point here considered, there was a dictum by Finlay J (as he then was), in Dennis v Hick, and a decision of the Court of Session in Scotland in Lowe v Inland Revenue Comrs. Lawrence J, while saying that he preferred the dictum of Finlay J, felt bound to follow the decision of the Scottish court. By a majority the Court of Appeal have affirmed the decision of Lawrence J. This matter is of great importance to farmers, who, as a part of their general farming operations, grow a certain amount of garden crops. For the purpose of arriving at a proper assessment to tax, it will be necessary, under the decision here given, for them to call in expert accountants, who can apportion the various expenses of the farm in respect of the part of the farm used for garden produce. It may well be that the profit from a farm of moderate size will not be able to bear this additional expense. A further objection to the construction of Schedule B here adopted is that the question is made, for all practical purposes, a matter for the decision of the local commissioners, whose decision, being one of fact, cannot, as Finlay J pointed out in Dennis v Hick, be questioned in a court of appeal so long as there is some evidence to support it. The result is that there is a great possibility of conflicting assessments in different parts of the country.

As to Nurseries and Market Gardens, see Halsbury (Hailsham Edn), Vol 17, p 72, para 145; and for Cases, see Digest, Vol 28, pp 15, 16, Nos 7583.

Cases referred to

Monro & Cobley v Bailey (1933) 102 LJKB 471; Digest Supp, 148 LT 505, 17 Tax Cas 607.

Lean v Inland Revenue [1926] SC 15; Digest Supp, sub nom. Leen & Dickson v Ball 10 Tax Cas 341.

Back v Daniels [1925] 1 KB 526; 28 Digest 15, 74, 94 LJKB 304, 132 LT 455, 9 Tax Cas 183.

Fry v Salisbury House Estate Ltd, Jones v City of London Real Property Co Ltd [1930] AC 432; Digest Supp, 99 LJKB 403, 143 LT 77, 15 Tax Cas 266, affg [1930] 1 KB 304.

Re Mayfair Property Co, Bartlett v Mayfair Property Co [1898] 2 Ch 28; 10 Digest 734, 4593, 67 LJCh 337, 78 LT 302.

Birmingham Corpn v Barnes [1935] AC 292; Digest Supp, 104 LJKB 281, 152 LT 558, 19 Tax Cas 195.

Coltness Iron Co v Black (1881) 6 App Cas 315; 28 Digest 6, 13, 51 LJQB 626, 45 LT 145, 1 Tax Cas 287.

Knowles v McAdam (1877) 3 ExD 23; 28 Digest 6, 12, 47 LJQB 139, 37 LT 795, 1 Tax Cas 161.

Wakefield Rural Council v Hall [1912] 3 KB 328; 28 Digest 55, 279, 81 LJKB 1201, 107 LT 138, 6 Tax Cas 181, revsg [1912] 2 KB 265.

Page 92 of [1940] 1 All ER 91

Dennis v Hick (1935) 19 Tax Cas 219; Digest Supp.

Lowe & Sons Ltd v Inland Revenue Comrs (1938) 21 Tax Cas 597; Digest Supp.

Kerr v Davis (1939) Tax Cases Leaflet No 1020.

Williams v Rowe (1939) Tax Cases Leaflet No 1023.

Re Hammond, Ex p Hammond (1844) De G 93; 4 Digest 21, 133, 14 LJBcy 14, 4 LTOS 215.

Purser v Worthing Local Board of Health (1887) 18 QBD 818; 38 Digest 458, 233, 56 LJMC 78.

Cooper v Pearse [1896] 1 QB 562; 42 Digest 6, 24, 65 LJMC 95, 74 LT 495.

Stewart (or Watters) v Hunter [1927] SC 310; Digest Supp, [1927] ScLT 232.

Keir v Gillespie [1920] SC 67; 28 Digest 16, case e.

Macpherson & Co v Moore (1912) 6 Tax Cas 107; 28 Digest 34, case 177i.

Hughes v Bank of New Zealand [1938] AC 366, [1938] 1 All ER 778; Digest Supp, 107 LJKB 306, 158 LT 463, 21 Tax Cas 472.

Appeal

Appeal by the taxpayer from an order of Lawrence J, dated 26 May 1939, and reported [1939] 3 All ER 259, where the facts are fully set out.

Rt Hon Sir William Jowitt KC and L C Graham-Dixon for the appellant.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the respondent.

Jowitt KC: Since it has been held by the commissioners that the appellant is carrying on a mixed farm as one unit, the assessment of such a farm cannot be split. It must be treated as an ordinary farm, and must be assessed on the annual value. If the court holds that it is in order to assess these lands on two separate principles, it becomes material to know if the nature of the use of the land is the determining factor. [Counsel referred to Keir v Gillespie, Back v Daniels, Monro & Cobley v Bailey, Dennis v Hick and Lowe & Sons Ltd v Inland Revenue Comrs.]

The Solicitor-General: It would lead to confusion if this court should try to lay down any definite criteria. [Counsel referred to Kerr v Davis and Williams v Rowe.] The return made should be a return of the profits as a market-gardener, irrespective of the particular fields from which the produce is derived. That the assessment may be divided according to the user of the land is clear from the fact that the statute expressly says that buildings may be assessed on a different basis, and also from the provision that woodlands managed as a commercial undertaking may be assessed differently. The court must have regard to the holding, and must see if there are any lands which are used as market-gardens. The nature of the produce is not the sole test of a market-garden.

Hills: By “lands used as gardens” the statute means, according to the authorities, that the main determining factors are the nature of the produce, and whether or not it is intended for domestic consumption.

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Prima-facie, where fruit is exclusively grown upon the land, it is a garden. The obvious purpose of r 8 is to meet a case where the assessment on the annual value does not give a fair assessment of the profits obtained. The question is whether or not the land is occupied as gardens, and not whether or not it is a garden. [Counsel referred to Re Hammond, Ex P Hammond, Stewart (or Watters) v Hunter and Cooper v Pearse.] The treatment of hop-gardens shows that it is possible to split the assessment. [Counsel referred to Macpherson & Co v Moore and Hughes v Bank of New Zealand.]

Graham Dixon, in reply.

Rt Hon Sir William Jowitt KC and L C Graham-Dixon for the appellant.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the respondent.

20 December 1939. The following judgments were delivered.

SCOTT LJ. This is an appeal by the taxpayer from a judgment of Lawrence J, dismissing an appeal, except on one point, on a case stated by general commissioners for income tax for the Pershore West Division of Worcestershire, who had, on appeal to them, affirmed original assessments, in respect of an area of land in that county containing 553 acres gross and 536 net (after deduction for house, farm buildings, etc), of which the appellant was both owner and occupier. The assessments against which he was appealing had divided the total net area of landthat is, the 536 acresinto two categories, arable, 229 acres, and “the remainder”that is, 307 acres, made up of 40 arable acres under hops, 82 acres of mowing grass, 178 acres of grazing and 7 acres of osiers. The original assessments treated the whole of the arable land (other than the 40 acres under hops) as land occupied by the appellant as “a nursery or garden,” and, therefore, as falling to be assessed under the provisions of the Income Tax Act 1918, Sched B, r 8, on the actual profits thereof made in the preceding year, and not on the ordinary basis of Sched Bnamely, the annual value of the land. That rule is as follows:

The profits arising from lands occupied as nurseries or gardens for the sale of the produce (other than lands used for the growth of hops) shall be estimated according to the provisions and rules applicable to Sched D, but shall be assessed and charged under this schedule as profits arising from the occupation of lands.

If Lawrence J, had felt free to exercise his own judgment, he would, I think, have decided that, on the commissioners findings viewed as a whole, there was no evidence of the land being “occupied as nurseries or gardens,” in the phrase of the rule. However, he felt bound by a Scottish case to affirm the decision of the commissioners as to the larger part of the arable, although disagreeing with them as to a part which they had included as “nursery or garden” only because they thought it “ancillary” to the nursery or garden. On that part, he held that there was no evidence. I find myself in agreement with that minor decision, and also with the main decision which he would have liked to give, and I do not think that he need have regarded the Scottish decision as applicable. Both my colleagues, however, have come to the conclusion that the appeal should be dismissed.

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The occupation of land under hops as well as of nurseries and gardens was, by the Income Tax Acts of 1806 and 1842, specially charged on profits, but hop-lands were removed from that category and made chargeable under Sched B under the general rule of annual value by the Income Tax Act 1853, s 39, and have remained so chargeable ever since. It was, therefore, properly placed by the commissioners in the same category as the rest of the land which had been treated in the original assessment as ordinary farming land, and accordingly assessed on annual value. The taxpayer contended throughout that he should have been so assessed on the whole 536 acres, and not only on the 307. The two figures of the original assessments were respectively £2,000 for the arable land and £495 for the rest. The appeal commissioners, however, dealt only with questions of principle, and kept open all questions of amount, so that this court is not concerned with money figures. Counsel for the appellant in opening the appeal before us said that the case was of great general importance to farmers. I agree, but would add that the question raised is also of importance to the whole community, for, if the decision stands, it will, in my belief, lead indirectly to a serious decrease in the total supply of culinary vegetables and small fruit available to our urban populations. The reasons for my belief are these. Farmers as a class attach great importance to their present statutory privilege of being taxed on the annual value of the land they occupy. It saves them from the complications of agricultural accountancy for tax purposes, and that is probably the main reason why so few farmers have elected for Sched D under Sched B, r 5, because Sched B itself protects them from the risk of the Sched B basis being an unfair measure of their taxable profit, since r 6 enables a farmer who can prove a loss or a smaller profit than the figure of his annual value to claim assessment, or even repayment, on his actual pecuniary results. The more skilful farmer, on the other hand, whose profits often exceed the figure of his annual value, derives substantial fiscal benefit from his Sched B basis. The fact that such advantages are thus conferred by the ordinary rule of Sched B on all farmers, whatever their profits, accounts for their dislike of being compulsorily charged on profits. They have enjoyed the annual value basis ever since 1806, when the occupation of land was first definitely separated from ownership and made a separate charge by Addingtons Income Tax Act 1806. From 1806 to 1930a century and a quarterI have found no record in any law report of any attempt to tax farmers under r 8. During the last half century, there has been an enormous improvement in marketing facilities for farmers through the development of quick motor transport over our wonderful system of good country roads, accompanied by competitive improvement of railway facilities. The direct consequence has been that British farmers have been enabled to include small fruits and culinary vegetables in their list of ordinary farm crops wherever the conditions of soil, climate and altitude are favourable, and the indirect

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consequence has been a very great increase in the available supplies of both to our urban populations, with corresponding benefit to the health of the nation. If r 8 is rightly construed and applied by my colleagues, I fear that no farmer will feel safe in growing even a few fields of fruit or vegetables, lest those fields should be held to constitute a “garden” or gardens, and so expose him to the necessity, not only of keeping separate accounts in respect of those fields, but also of producing completed accounts for the year preceding the year of assessment upon which the estimate of “garden” profits would have to be based as required by the Finance Act 1926, s 29(1), although during that year corn or other ordinary farm crops may have been grown on those very fields. This risk will, I am convinced, tend to deter farmers from growing such crops, to the detriment of the supplies of vegetables and fruit to the population at large. Of course, if the rule clearly had the meaning which, in my respectful opinion, would alone justify my colleagues decision, the considerations I have mentioned would be irrelevant. If, however, it is not clear in their sense, those considerations, in my opinion, do have materiality in connection with the statutory and judicial history of the provision, and particularly in ascertaining its original object and meaning when first introduced in 1806, for there has been no change of language material to the present question of interpretation since 1806, except for a quite minor change in the language referring to hop-lands, which, for a reason I will mention presently, can be disregarded. Moreover, if the language of the rule is not clear beyond reasonable doubt, the principle of construing a taxing Act strictly, in my opinion, should also apply to protect the taxpayer here. Having regard to my colleagues opinion, I need hardly say I express my own dissentient view with diffidence, however strongly I may hold it. Sched B, r 8, does not appear to me, on its true interpretation, to be capable of bearing the meaning attributed to it in the present case by the commissioners and my colleagues, but at least, if it is ambiguous, its statutory history and the material circumstances commonly known at the time of its introduction in 1806 appear to me sufficient to establish the construction which I put upon it. I feel bound, however, as I am differing, to explain my reasons fully, and, in any event, perhaps my analysis of the policy which appears to me to have dictated the very limited scope of the original enactment (as I construe it) may be of some use should any question of legislation arise.

Although the substance of the rule was enacted as long ago as 1806, I know of only five reported cases under it, the first of which, Monro & Cobley v Bailey, began in 1930 and ended in 1932, when the House of Lords held that, in that case, it was not possible to say that there was no evidence upon which the commissioners could apply r 8. I shall return to that case in a moment, but the other four cases all seem to me to disclose an absence of any clear and definite interpretation of the rule. At any rate, I find it impossible to deduce from them any plain

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meaning of the statutory phrase “nurseries or gardens.” I do not suggest that the interpretation is easy, but one cannot help being struck by the apparent inconsistencies in either interpretation or application of the words as between the different tribunals of factthat is, the commissionersand counsel for the appellant was instructed to say that the case was important just because of such inconsistencies:

… as between commissioners up and down the country, who seem to arrive at opposite findings without any plain difference in the facts.

I know of no case where the meaning and scope of the word “garden” in the rule have been the subject of judicial explanation, and I can find no clear criteria in the reported decisions for answering the basic question: “What does r 8 mean by a garden?” In Monro & Cobley v Bailey, the Court of Appeal and the House of Lords both held that the question of the character of the occupation was one of fact for the commissioners, and that it was impossible to say in that case that there was no evidence before the commissioners to support their finding that the whole of the land in question was occupied as a garden. However, neither court found it necessary for the purpose of that case to interpret the words “nurseries or gardens” in the rule. The only light upon their meaning is, therefore, to be gathered from the commissioners findings of fact which were in the minds of their Lordshipsnamely, that the holding was wholly arable, that it covered 200 acres of which 60 acres were under bulbs, that there was 1 acre covered by 13 glasshouses which the taxpayer conceded was chargeable under r 8, that the main purpose of the occupier was the growing and selling of bulbs, and, in a secondary degree, of their flowers, that the whole 200 acres were essential for that business because of the horticultural necessity of transplanting bulbs to fresh ground each season, that the sales of bulbs and flowers realised in the year in question nearly £14,000, against £1,600 from general farm crops, and that the cost of labour was £27 per acre on the bulbs, which was “far in excess” of the average price of ordinary farming in the locality. On these findings, it was held that there was prima facie evidence of “occupation as a garden.” I venture to think, however, that the actual decision goes no further towards defining the word “garden” than holding that, with such concomitant facts as were there present, bulb-growing may satisfy the meaning of the word “garden” in the rule, so far as the crop produced is concerned.

Before I discuss the legal position, it is necessary to state carefully the chief findings of fact in the present case. The lands composing the “holding” (as I will call it in order not to beg any question by calling it the “farm”) lay in Worcestershire. The main part was called Springhill, and covered 508 acres out of the total of 553. The appellant, however, had a further 10 acres called Fingerpost Ground, 7 called Lower Moor, and 28 called Willspit, thus making the grand total 553 acres. However, as that figure included the 17 acres occupied by buildings or the precincts of buildings, which were excluded from these

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assessments, the case is only concerned with 536 acres. Apart from the 40 acres of hops, all the arable land was in Springhill, except for the 17 acres of Fingerpost Ground and Lower Moor. In the year of assessment, there were on the holding 229 acres of arable (apart from hop-lands)namely, 11½ acres of fallow, 40½ acres of ground and bush fruit, 17 acres of plums, and the following acreages of various other crops: wheat 16 acres, potatoes 7 acres, mangolds 3 acres, lucerne ½ acre, peas 26½ acres, beans 18½ acres, brussels sprouts 44½ acres, savoys 4 acres, cauliflowers 18½ acres, leeks 3½ acres, carrots 4 acres, parsnips 6 acres, asparagus 2 acres, plants 5 acres, rhubarb 1 acre. There were no glass houses, there was no nursery, and there was no bulb-growing. The commissioners did not suggest that there was any separation in fact which would enable them to split the holding geographically into separate and self-contained units of occupation, and to point out which unit they considered farm land, and which they considered garden. On the contrary, in order to arrive at the total acreage of what they called garden, they merely added up the acreages of the fields actually in the particular year of assessment appropriated for longer or shorter periods of cultivation to fruit-growing, or to such green or root crops as they thought were distinctively garden crops, and then they said that the rest of the arable land was “ancillary” to the gardening, with the result that they considered all the arable fields to be occupied as “garden.” There is nothing in their findings of fact to indicate that the fields they added together were not scattered over the whole holding, so as to be interspersed with mowing grass or pasture fields. Indeed, it was common ground, as we were informed, that the arable fields were in fact so interspersed. Included in the commissioners garden acreage were about 20 acres of indisputable farm crops, wheat, mangolds, and lucerne, nearly 80 acres under vegetable crops, or sorts which are commonly seen up and down the country growing on various fields of farms where the soil is suitable, often in the ordinary course of farm crop rotation, such as potatoes, peas, beans, brussels sprouts, savoys, cauliflowers, etc, not to mention another 6 acres devoted to parsnips, a common feed for stock, as we were told, and stated in the case to have been grown on this holding for that purpose, and, finally, the 11½ acres of fallow.

The case is stated in considerable detail, and it is not possible to do it justice without quoting the actual language of the salient findings of fact, which are as follow:

(b) The following live stock was kept by the appellant: 16 horses, 90 cattle, 232 sheep, 1,012 pigs, 8,046 poultry. The horses worked upon the farm. Cattle, sheep, pigs and poultry were produced and bred by the appellant upon the land. (c) The whole acreage occupied by the appellant was worked as a single mixed farm in one unit. The appellant employed ordinary farm-labourers, who were not highly skilled. (d) The appellant used very up-to-date appliances and practised mechanised farming over the whole farm. The minimum of hand labour was used in producing crops upon the arable land, much of it being machine-planted and machine-hoed. (e) The appellant was a registered producer under the Pigs Marketing Scheme. (f) The wheat was grown partly to obtain the subsidy payable under the Wheat Act and partly to provide straw litter for the pigs. The mangolds,

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parsnips and lucerne were grown to provide feed for the stock and horses. (g) The livestock, pigs and poultry were kept not for the purpose of providing manure for the arable and pasture land but for their fattening and sale. (h) During the winter, the poultry had access to the arable land. (i) The purchases and sales of livestock in 1936 were £5,386 1s. 6d. and £22,147 10s. 7d. respectively. (j) The wages for the year amounted to £9,684 17s. 10d. A big proportion of this expenditure was incurred in relation to the pigs and hops. The numbers of regular employees were 80 men and 29 women. These workers worked indiscriminately upon the whole farm, whether upon the sheep, pigs, cattle and poultry, or upon the pasture and/or the arable land, often being engaged upon different parts of the farm at different times in the same day. ... (l) The purchases of artificial manures amounted to £1,471 8s. 6d. only and had been progressively reduced year by year as the manure produced by the pigs increased. (m) The purchase of feeding stuffs amounts to £10,939 4s. 2d. (n) There are no glass-houses on the land occupied by the appellants and no nursery work was done upon any part of the land. (o) The methods of cultivation were the ordinary accepted agricultural methods.

Of the facts so found, the most significant is (c)namely, that the whole acreage of 536 acres “was worked as a single mixed farm in one unit”especially when it is supplemented by the further finding in (d) as to the method of cultivation, that the appellant “practised mechanised farming over the whole farm.” The finding marked (g) is a little ambiguous, but I think its effect is that the keeping of livestock, pigs and poultry was not merely ancillary to the vegetable-growing. This inference is borne out by subparas (b), (i) and (m), which disclose livestock farming on a large scale. Subpara (l) seems to show that the pig manure produced was in fact used throughout the holding, and helps to explain subpara (g), which, I think, should be construed as if it had read: “The livestock, pigs and poultry were kept primarily for the sake of fattening and selling them, although these also served the purpose of providing manure.” Subpara (h) is equally important with subpara (l) in its indication of the economic inter-action between the two farming activities prosecuted by the appellantlivestock-rearing and arable cultivationwhich made it a “mixed farm.” As the former furnished manure to, and consumed waste-products of, the arable crops, so the ”fruits of the arable land” throughout the winter supplied food to the large head of poultry which were run over it, an aspect which the Court of Session in Lean v Inland Revenue thought an important characteristic of husbandry. Subpara (k) contains an obvious arithmetical error, as £12 x 536 acres equals £6,432, and not £9,684, as stated in subpara (j), for wages over the whole farm.

The commissioners conclusions were as follow:

(1) That the farming operations on the arable land (apart from that used for the growth of hops are ancillary to the market garden operations. (2) That the whole of the arable land (apart from that occupied for the growth of hops) is occupied as gardens for the sale of produce. (3) That the remainder of the land occupied by the appellant is devoted to farming operations and is assessable under the ordinary rules applicable to Sched B.

The issue before us is whether conclusions (1) and (2) involve errors of law. In my opinion, they do, and I think that it will be convenient at once to formulate the questions which seem to me to call for decision, and to state, with reasons, the opinions which I have reached, for I do

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not think; that the points raised are covered by any judicial decision binding on this court.

Of the detailed findings upon which the commissioners purported to base their conclusions, subparas (c) and (d) are the most far reaching. If they are read together, I regard them as a finding of fact that the whole area of 536 acres was farmed as one unit, and that that unit was in fact a single mixed farm, partly arable, partly grass. These positive findings, considered with due regard to the absence of any finding either that there was a physical line of local demarcation between what was admittedly farm and what the commissioners held to be garden or that the appellant was conducting two businesses, one farming and the other market-gardening, show that the commissioners themselves did not regard the farm as being really severable into two separate units of occupation. Indeed, they find expressly in subpara (o) that the whole of the arable was cultivated by “ordinary accepted agricultural methods,” or, in other words, that the gardeners arthorticulturewas not practised or even attempted. I do not, and could not in the light of the decision in Monros case, suggest that finding (o) is conclusive, but it does seem to me to indicate the absence of one important characteristic of gardening, especially when accompanied by the positive findings in subparas (c) and (d). For these reasons, I think that the facts found in the case rule out any possibility in law of the legitimate “splitting” of the total area into a farm unit and a garden unit. If, however, to the cultivation of fruit or vegetables the gardeners art was not applied, but only the arable farmers art, on what definition of the word “garden” is it to be said that any individual field carrying potatoes or cabbages or fruit and lying between grain crops or meadows is a garden? Moreover, if it cannot be said of one field, the proposition cannot, either in fact or in law, be predicated of twenty fields picked out here and there from surrounding farmlands and added together by a sum in arithmetic to make up a notional “garden.” There are, in my opinion, other reasons why the commissioners method of approach to the problem of r 8 is wrong in law. However, it has seemed to me convenient, first of all, to emphasise the impossibility of “splitting” in such a case as the present, especially as this aspect of the appeal is one of such practical importance to farmers. The commissioners conclusions must depend primarily on whether the facts found can bring the congeries of individual fields totalling 236 acres, which in the year of assessment were carrying certain vegetables, bush and ground fruits, and fruit trees, within the word “garden.” In my opinion, they cannot, for more reasons than one. Parenthetically, I would point out that we are not concerned with the words “for the sale of the produce,” for there is no doubt that that requirement was fulfilled here. It was a necessary condition in framing the rule, as some pleasure gardens make profits of another kind.

I have no wish to attempt any exhaustive definition of the word

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“garden,” but I do not see how any court asked to apply r 8 can avoid forming an opinion on some aspects of what is or is not a garden within r 8. Such a garden connotes geographically, as it seems to me, a more or less defined and self-contained whole, or unit of area, cultivated according to the gardeners art. Hence the recognition by the commissioners in the reported cases of the need, first, of deciding whether or not all the non-garden land within the total unit of occupation is, in either a cultural sense or a business sense, or both, necessary to, and used for the purpose of, the garden“ancillary” is the dubious word sometimes employedand, if it is not, secondly of deciding as to the possibility of “splitting”that is, of dividing the total area of occupation into two separate and self-contained parts, a farm and a garden. Acting on the legal hypothesis that the 236 acres here could constitute a garden, with which I disagree, the commissioners have been forced to resort to the “splitting” solution within the 236 acres, because of the obvious impossibility of treating the 307 acres of pure farm area, with its large livestock business, as “ancillary” to their “garden,” although, by treating the total acreage of fields which in the year of assessment were arable as if it could be regarded as a true unit of occupation, they did have occasion to pray in aid the “ancillary” principle within that unit of area, because some fields carried obvious farm crops. Hence their first conclusion:

That the farming operations on the arable land … are ancillary to the market garden operations.

So much for the principle of the self-contained unit of area as a necessary element in “a garden.” That is a limitation in space. I think, however, that there is also a limitation in time, in the sense that there is a moment when the garden begins and another when it ends, and that some degree of permanent existence from year to year is connoted by the garden of r 8. The general rule under Sched B makes the valuation for Sched A the basis for estimating annual value, and that is usually a more-or-less lasting figure. So, too, in “the provisions and rules applicable to Sched. D,” incorporated for estimation by r 8, the profits, formerly estimated on a 3-years average, are now, under the Finance Act, 1926, estimated on the yield of the preceding year. In either case, the contemplation of the income tax statutes is that the same source of profit was flowing in the preceding period, whether 3 years or one, as is flowing throughout the year of assessment, unless the source only came into existence during the year of assessment, or during the preceding year, when special provisions for reckoning the profit apply. Here let me assume for the moment that the reasoning of the commissioners can apply in law to a mere arithmetical total of discrete fields. Even so, how could it be supposed that a farm profit of last year was intended by the rule to be the measure for estimating the quantum of a garden profit this year? For the purpose of the question, let me assume that every vegetable crop is a “garden” crop (although again I disagree

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with that assumption). In the common practice of agricultural rotation. Each field may change its annual crop each of the 3 to 5 years of the rotation cycle. In my view, that feature alone makes it impossible to suppose that Parliament intended that a field bearing cabbages this year should constitute a “garden” when its crop was last year, and may be next year, a patently farm cropwheat last year and clover next year. Moreover, if the reasoning of the commissioners were right as to their congeries of odd fields, it would lead inexorably to the conclusion that each individual field, bearing a vegetable crop, or fruit, of itself constitutes a garden within the rule, because I can see no logical halting-place between 20 such individual fields constituting a big garden and one field being a little garden. However, I cannot think that it was the intention of Parliament in the rule to expose to the burden of separate accountancy and separate assessment every farmer who here and there on his farm grows one, or a few, or even a good many, fields of potatoes or cabbages, or, indeed, any one of the vegetable or fruit crops mentioned by the commissioners in the present case.

That brings me to another important aspect of the appeal. It seems to me that in ultimate analysis the real reason why the commissioners came to their second conclusion was that they thought the true determining characteristic or feature of a garden intended by the rule was the kind of crop grown, and that, if it was a kind of crop that persons who are beyond dispute market-gardeners do grow, then the land on which it was grown must be a garden within r 8. A similar view appears in two of the decided cases. In my view, that is wrong, and wrong for more than one reason. In the first place, the natural meaning of the language of the rule appears to me to be such that Parliament must have intended to tax on profits only those who carried on the business of a market-gardener, and also cultivated their land in the way characteristic of market-gardenersnamely, in accordance with the gardeners art. That art is often very different in its methods and objects from the farmers art. The gardeners methods, for instance, of treating soil and crop differ, regarded as a whole, from the farmers. I say this quite apart from the difficulty in many gardens of using those mechanical methods which are characteristic of soil cultivation on the larger scale possible in farming, and some of which, indeed, are not economically practicable at all in the narrower limits of many market-gardens. In the second place, as agricultural knowledge advances, new crops appear on farms. This probably accounts for some of the increased cultivation of vegetables on farms. Why should that of itself constitute each such field a garden? Why should not an innovation in farming practice, when it has once become usual, turn what was a garden crop into an ordinary farm crop? That, in my opinion, is undoubtedly what happened long ago with potatoes. In other words, the type of produce cultivated on a farm, although admittedly one element in the problem, and, in the case of a

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crop like bulbs, an important element (as it certainly was in Monros case), can afford by itself but little guidance, where the crop is not exceptional in character, and, where the crop is one ancipitis usus, because quite commonly grown on farms, it affords no guidance, because of the general rule of logic, and, therefore, of law, that a fact equally explicable by either of two explanations is no evidence of either. The potato is a good illustration of this rule of the law of evidence. Anyone who knows the countryside well knows that it is a very usual farm crop, so usual as to justify judicial notice of the fact. Everyone who shot partridges in the eighties and nineties will remember walking them up in ridged potato fields. In Back v Daniels (discussed and approved in Fry v Salisbury House Estate Ltd by Viscount Dunedin, at p 442, and by Lord Atkin, at p 456), potatoes were the only crop, and were treated throughout as an ordinary farm crop. The contest in the case was whether the Revenue could charge the profits under Sched D as to the profits of a business. The Court of Appeal held unanimously that the Daniels were farmers in occupation of the land, and must be charged under the general rule of Sched B. No one suggested that the crop was of a kind to make r 8 apply, and it looks as if the Revenue had never imagined that it could apply. In Monros case, the crop, although peculiarly a garden or even a nursery crop, was not the only feature which led both the Court of Appeal and the House of Lords to say that the applicability of the rule was a question of degree in each case, for there was there a defined unit, and the whole unit was occupied for the one main object of cultivating and multiplying on a large scale that one particular cropnamely, bulbsand of selling their flowers. The finding was that the whole 200 acres were a necessity for growing 60 acres of bulbs. Bulbs had not at that date ceased to be a characteristic nursery or garden crop. I doubt if they ever will, for bulbs are grown either for the sale of their blooms or for sale as bulbs directly or indirectly to those who possess gardens, private or public. I confess that they do seem to me to constitute a true garden, or even nursery, produce, which may well be the reason that in Monros case neither this court nor the House of Lords thought it necessary, having regard to the other findings of fact, to say anything about the meaning of the word “garden.”

For the purpose of construing the present r 8, and particularly for ascertaining the kind of garden to which the rule was originally addressed, it is important not merely (i) to see what other light is shed by the scope of the rule itself in its setting and wording to-day, but also (ii) to consider the statutory history of the provision, what its original form was, and what were the known facts to which it was originally applied, for (ii) has, I think, a direct bearing on (i). On the first point, it is to be observed that two other subjects of taxation are expressly mentionednamely, nurseries and hop-lands. As to the word “nursery,” I see no reason why the dictionary definition should not have been in the mind

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of the legislature. Johnsons Dictionary, 1st Edn, 1755, defines it as follows:

A plantation of young trees to be transplanted to other grounds.

The Century Dictionary, Vol V, 1899, defines it as follows:

A place where trees are raised from seed or otherwise in order to be transplanted; a place where vegetables, flowering plants, and trees are raised (as by budding or grafting) with a view to sale.

Bacon says of the word:

Your nursery of stocks ought to be in a more barren ground than the ground is whereunto you remove them.

The Oxford Dictionary defines it as follows:

A plot or piece of ground in which young plants or trees are reared until fit for transplantation; a collection of such plants. Now usually a piece of ground of considerable extent in which the plants or trees are reared for sale; a nursery-garden.

I think that these coincide with the ordinary understanding of the word. It is, therefore, worth noting that the word associated with garden connotes (i) a definite horticultural purpose and method of growing, and (ii) a self-contained and homogeneous area devoted to that purpose. Noscitur a sociis may be overdone, but whatever light the word “nursery” throws on the word “garden” supports a limited and definite meaning.

Dictionary definitions of the word “garden” are numerous. Johnsons Dictionary, 1st Edn, 1755, defines it as follows:

A piece of ground enclosed, and cultivated with extraordinary care, planted with herbs or fruits for food, or laid out for pleasure.

The Century Dictionary, 1899, defines it as follows:

A plot of ground devoted to the cultivation of culinary vegetables, fruits or flowering and ornamental plants.

It also defines “garden husbandry” as follows:

The careful cultivation of land for profit, according to the methods pursued by gardeners, so as to secure the largest possible production.

The Oxford Dictionary defines the word garden as follows:

An enclosed piece of ground devoted to the cultivation of flowers, fruit, or vegetables; often preceded by some defining word, as flower, fruit, kitchen, market, strawberry-garden, etc.

Hop-lands were, and are, farmlands, and not gardens. Their only common measure with nurseries and gardens was their original profit-making character. Their bearing on the word “garden,” however, is best considered after looking at the earlier form of the rule.

I now turn to the historical side. We were told by counsel for the Inland Revenue that r 8 was first introduced in the 1842 Act. That is not so. The five schedules, A, B, C, D and E, were first introduced by the Income Tax Act 1803, very much in their present form. Sched B, however, did not then contain the equivalent of the present

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r 8. Addingtons Act, passed in 1806, re-enacted the five schedules (with some changes), and the substance of r 8 was then introduced by s 75, which dealt with the operation of Sched B under the two “numbers,” No VII, the ordinary rule of annual value, and No VIII, the special rule about nurseries, gardens and hop-lands, which was worded as follows:

Lands occupied as nurseries or gardens for the sale of the produce, and lands occupied for the growth of hops, shall be charged to the duties in Sched. B on the profits of one year, on an average of the 3 preceding years, except where the lands so occupied for the growth of hops shall be part of a farm held under one demise or by the same person as owner, and shall not exceed one-tenth part of such farm, in which case the duty thereon under this schedule shall be charged, together in one sum as for a farm, by the said general rule in Sched. A mentioned.

The 1806 Act having lapsed after the peace which followed Waterloo, the 1842 Act re-enacted it substantially, including Sched B, No VIII, but with one difference, in that the measure of the profits was to be in accordance with Sched D, which included the basis of the average of the 3 preceding years (Case I, r 1):

The profits arising from lands occupied as nurseries or gardens for the sale of the produce, and lands occupied for the growth of hops, shall be estimated according to the rules contained in Sched. D, and the duty shall be charged at the rate contained in the said Schedule; and when the said duty shall have been so ascertained, the same shall be charged under Sched. B as profits arising from the occupation of lands, except …

Then the exception in regard to hop-lands of the 1806 Act was repeated. It will be noticed that the 1806 paragraph said that the lands occupied should be charged on the profits, whereas in the 1842 paragraph it sufficed to say that the profits should be estimated, etc, as the lands had already been charged by s 63 and Sched B itself. The words in bothnamely, “lands occupied as nurseries or gardens”are the same as in the Income Tax Act 1918, Sched B, r 8, but, whilst those two subjects are associated together, hop-lands were in 1806 and 1842 added as a wholly separate subject, prefaced by “and.” All hop-lands were put back into the general category of Sched B by the Income Tax Act 1853, s 39, and the excepting provision ceased to operate. The bracketed words of r 8 to-daynamely, “other than lands used for the growth of hops”were presumably added in 1918 only to prevent doubt arising from the repeal of the 1853 Act. Thus, to infer on an ejusdem generis principle from the grammatical effect of the words “other than” in the present r 8 that, because the “lands” where hops are grown are usually fields lying here and there within a farm, therefore nurseries and gardens may also consist of such scattered fields would be a false construction.

One might have expected help towards understanding the word “garden” from the facts of the reported cases, all being since the House of Lords decision in 1932 in Monro v Bailey, but the difficulty in extracting help from them is, first, that the different tribunals of fact seem to me to have had in mind, consciously or unconsciously, wholly

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different and in some ways almost opposite conceptions of what the word “garden” in the rule really means, and, secondly, that the judgments contain no definition of it. In view of the degree of doubt thus attaching to the word, I have tried to learn historically what type of gardens were earning such profits in 1806 as to make their retention under the general rule of Sched B appear wasteful to a Chancellor of the Exchequer in need of revenue to fight Napoleon. In short, I have looked for the mischief or defect in the old law for which the new law of 1806 was to provide, for I think that the aid to interpretation of looking back in history to ascertain the mischief at which the statutory provision was originally directed, particularly if the provision has been re-enacted in a series of statutes in pari materia, may properly be applied here, as it was by Sir Nathaniel Lindley MR, in Re Mayfair Property Co, Bartlett v Mayfair Property Co, at p 35, and by Lord Atkin to an income tax question in Birmingham Corpn v Barnes. There was published in London in 1798 a most interesting book, Middletons Agricultural Survey of Middlesex. It was still a standard work in 1843, when Knights London, Vol III, was published, containing his account of Covent Garden and the sources of supply for London fruit, flowers and vegetables. He cited Middletons facts and figures largely. The following excerpts from Middletons book give a good idea of the market-gardens round London at the very end of the eighteenth century. He says, at p 48:

Size of Farms. The farms of this county are in general small. Near great towns, small farms of good land are so much better suited to the purpose of a gardener than a husbandman (his art being more beneficial to the public, to his landlord, and to his family), that the gardener should in such situations have the preference.

Later he says, at p 51:

Character of the Farmers. In the vicinity of London the ground is mostly rented by gardeners and nurserymen.

Then in Chapter IX he begins as follows:

Gardens and Orchards. Section 1. Fruit Gardens. From Kensington, through Hammersmith, Chiswick, Brentford, Isleworth and Twickenham, the land on both sides of the road for 7 miles in length, or a distance of 10 miles from market, may be denominated a great fruit garden, north of the Thames, for the supply of London. ... The fruit gardeners have what they call upper and under crop growing on the same ground at one time.

Later again, he says, at p 256:

I suppose there are upwards of 3,000 acres of land under this most excellent and valuable management. The quantity of productive labour depending on these gardens is surprising. Estimating their produce in money it cannot be less than £100 per acre, or £300,000 per annum.

He continues, at pp 261, 262:

Observations on the gardens at the Neat Houses lying between Westminster and Chelsea … This land has been as long, or perhaps longer, in the occupation of kitchen-gardeners, than any other land in Britain.

Then he says, at p 264:

The very great expenses, in labour, manure, etc., which kitchen-gardeners are at, is evident to everyone who lives in the neighbourhood of them. Probably their expenses may be thus dividednamely, in labour, £35; teams and dung, £25;

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rent, taxes and tithes, £12; marketing and expenses, £8; together £80, which, taken from the foregoing sum of £200, leaves £120 per acre as interest on capital and profit. The farming gardeners, or those who work their soil principally with the plough, are situated rather more distant from London; occupy larger tracts of land.

Again he says, at p 266:

I think there are about 8,000 acres in four counties cultivated in this manner [by farming gardeners], producing per acre about 50 lbs.

Middleton recapitulated acreages and values of produce of the vegetable gardens wholly cultivated by the spade thus, at p 267:

200 acres at the Neat Houses at £200 per acre; on the Surrey side of the Thames 500 acres at £150, round the outskirts of London 1,300 acres at £100, making in all 2,000 acres at an average output of £122 10s. per acre, or £245,000 in all.

To these he added, first, his “farming gardeners” (their land cultivated partly by the spade, but mostly by the plough)8,000 acres at £50 per acresay, £400,000, and then his fruit gardens, whose produce he put at another £400,000, making £1,045,000 in all. He then made this comment, at p 267:

I think these several estimates cannot be too high for the produce raised by the labour of the kitchen-gardeners round London, as they are known to live, and provide as well for their families, on five acres of the best ground, nine acres of the second best, or twenty acres of an inferior soil, as the generality of farmers can on 150 or 200 acres. This cannot fail of placing the gardeners art in the most favourable point of view, as no other application of land, or of labour, does, or can supply, so large a surplus revenue towards supporting the non-productive part of the community.

Later he says, at p 269:

Section III. Nursery Grounds. At Chelsea, Brompton, Kensington, Hackney, Dalston, Bow and Mile End much ground is occupied by nursery-men, who spare no expense in cultivating the choicest sort, and the greatest variety, of fruit-trees and ornamental shrubs and flowers, from every quarter of the globe; and which they cultivate to a high degree of perfection.

Lastly, he says, at p 272:

It is supposed there are about 1,500 acres of nursery ground in this county; and that including the hot-houses and green-houses belonging to them, they produce nearly £70 [out of] each [acre] or £100,000 a year.

Then Knights London, Vol III, 1843, has this passage in Chapter CIX on Covent Garden. It says, at p 140:

Since Middletons work was published the population of the metropolis has just doubled, and it probably will not be far wrong to double his estimates; the mode of cultivation and of preparing the produce for market remains much in the same state as it was fifty years ago.

One distinction between gardener and farmer in Middletons mind seems to have been the greater intensity of cultivation in the garden, achieved no doubt in part by the closer attention to the needs of the individual plant, rendered possible by hand-cultivation as distinguished from horse-cultivation. I wonder what he would have said about the mechanical methods of farming to-day as applied to vegetable growing.

The facts stated by Middleton must have been well-known to the government of 1806, and the profits made would naturally attract

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fiscal attention. I think that it is a reasonable inference that No VIII of the Act of 1806 was directed to that “mischief,” and that the inclusion of it in the Act was due to the realisation by the government and Parliament that a particular class of cultivator, observable widely in the gardens round London, was getting off too lightly compared with the professional and trade or business taxpayer. If this presumption be justified, it affords material guidance in interpreting and resolving any ambiguity in the undefined words: “nurseries or gardens for the sale of produce.” The line of demarcation intended to be drawn between the nursery or garden, on the one hand, and the farmer, on the other, may in the concrete case be difficult to draw, and, where there is some evidence on each side, the question must be one of degree, and, therefore, of fact, for the commissioners, as was said in Monros case by Romer LJ, in the Court of Appeal and by Viscount Buckmaster in the House of Lords. The descriptions of nurseries and market-gardens contained in the above passages from Middletons work seem to me illuminating, however, because they help towards a fair understanding of the words “nursery” and “garden” in the 1806 Act, and tend to show that the “nursery or garden” there intended was as definite a unit of cultivable area and business as was the area meant by the word “farm.” Had it been intended to tax the farmer on profits made by the growing of fruit or vegetables not in a definite “garden,” and not as a separate business, but on fields or in orchards of the farm itself, and in spite of the management, cultivation, labour, expenses and receipts forming an integral part of his business of farming, other and clearer provisions would have been inserted in the Act. It would have been so simple, for instance, to add a proviso that: “Where table or culinary fruit or vegetables are grown for sale on a farm for the purpose of the farmers business, those parts of the farm shall be deemed to be a garden, and the profits thereof shall be estimated as provided in this Number.” Nursery stuff such as flowers, bulbs, flowering plants and so on, could have been treated analogously under the word “Nursery” There is no hint in No VIII that the profit from growing fruit or vegetables on a farm was to be “charged” on the farmer, and, if this interpretation of the Act of 1806 is right, I see no such difference of language in the 1842 Act, or in the 1918 Act, as would justify a new and different interpretation of the word “garden.”

It is perhaps important to repeat that No VIII did not transfer the profits of a garden to Sched D so as to charge the recipient of the income under that schedule. It was not so transferred any more than the properties enumerated in Rules (1), (2) and (3) of No III of Sched A of the Acts of 1842 and 1918 (quarries, mines, ironworks, etc) were transferred by r (8) of No III: Coltness Iron Co v Black, overruling Knowles v McAdam, Wakefield Rural Council v Hall, per Hamilton J, at p 275, and the notes in Dowell on Income Tax, 9th Edn, pp 357-360. Sched D was brought into No VIII only in

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order to facilitate the ascertainment of quantum. It was for “estimation,” and not for “charge.” It was still the “occupation” of the land which was taxed, and taxed under Sched B. In Back v Daniels, the whole dispute was whether the Daniels could be taxed under Sched D on the profits from potato-growing on certain land of which they had the temporary use for 14 months, and, therefore, the occupation under r 2 of No VII of Sched A, on the ground that they were carrying on a business separate from the occupation of the land. It was decided that, as they were occupiers, they could only be charged under Sched B.

Where, from the point of view of the activity conducted or the art applied, the line of distinction between farming and gardening should be drawn in any particular case must, no doubt, whatever the definition of the word “garden,” remain a question of degree, and, therefore, of fact, for the commissioners, but I cannot help thinking that the distinction which Middleton drew between (i) “gardeners” and (ii) “farmers who garden,” as described by him in the citations I have read, throws a good deal of light on the line of demarcation intended by the restricted and definite language of Sched B, No VIII, of 1806, and that his “farming gardeners,” for instance, who produced only £50 per acre, would not in 1807 have been held to be occupiers of gardens, but would have been held to be still occupiers of farms, in spite of their growing a proportion of vegetable crops, although I recognise that in the penumbra between the farmer who gardens as well as farms and the gardener who also farms must lie an area of pure fact for decision by the commissioners.

If my reasoning about the interpretation of the word “garden” is well-founded, it supports very strongly my previous conclusions, which I have endeavoured to explain, and which I venture to summarise thus: (1) The statutory “garden” must be, within reasonable limits, a defined unit of occupation in relation to space, and also time, for it must have some degree of permanence and continuity, so as to permit, in the normal case, of the gardening profits of the year of assessment being measured by gardening profits of the preceding 3 years, as it used to be, or one year, as it is now (except where a permanent garden has begun so recently as to make the year of assessment the measure under the Act). (2) The “splitting” of a farm into two separate units of the kind indicated in (1) is legitimate only if such a division is present in fact. (3) A finding that a farm is “worked as a single mixed unit” prima facie means that it is one in management, cultivation, labour, business accounting and so on, and, therefore, that it is a single farming unit, and, if so, that fact must necessarily exclude the possibility of “splitting.” (4) If any given unit of occupation is worked in part as a farm and in part as a garden, but is not susceptible of splitting within conclusion (2), it must be held to be either wholly a farm, or wholly a garden, and it cannot be held to be a garden unless gardening is the dominant purpose of the whole, and such a conclusion is not

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legitimate, unless the farming part is found as a fact to be truly a necessity of and for the garden, as it was in Monros case. (5) However, odd fields, or fields scattered over a farm amongst what are plainly farm fields, cannot be added up arithmetically into a “garden,” whatever crops they carry, either for the purpose of splitting or for the purpose of conclusion (4). In other words, such arable fields in a farm, being usually subject to rotation, sometimes bearing vegetables or fruit crops of kinds which may also regularly be seen growing in market gardens, do not constitute a unit “occupied as a garden,” and have no such permanence of “garden” occupation as the Acts of 1806, 1842, 1918, and 1926 must have contemplated as essential when they required the profits to be estimated on the preceding 3 years or one year.

Since Monros case, so far as I know, there have been only four cases reported under r 8. In the last two, Kerr v Davis and Williams v Rowe, the commissioners decided that there was no garden, and Lawrence J, dismissed the appeal. Of the other two, one was English and the other Scottish. Neither is binding on us, and neither affords material assistance in the solution of the legal problem of the present case, but I think that they both illustrate the need of judicial guidance on the interpretation of r 8. In the English case, Dennis v Hick, the general commissioners found that the whole area of 350 acres, in Bedfordshire, was occupied as a garden, and Finlay J, (as he then was), came to the conclusion, though not entirely without hesitation, that he could not interfere. From him there was no appeal. Of the 350 acres in the year of assessment, 80 acres were pasture, 7 acres were fallow, and 263 acres carried crops. Of the 263 acres, 51 acres were hired for the season of 12 to 14 months, on temporary agreements, but the tenant was occupier within Back v Daniels. On the 51 acres, he was growing brussels sprouts. On the rest of the 263 acresnamely, 212 acresthere were various vegetable crops, but potatoes accounted for 115 acres, beans for 26 acres, parsnips for 12 acres, and mangolds for 2 acres, making 155 acres in all. He also grew 52 acres of other vegetables, including 14 acres of cabbages. There were 7 horses, 32 cattle, 49 pigs and 100 poultry. The different fields carried different crops each year, though it would appear that the rules of agricultural rotation were not strictly followed. There was nothing in the method of cultivation which was peculiarly characteristic of gardening. Ordinary agricultural labour was employed, but it was found that the total labour cost per annum was £12 per acre, as against an average farm cost in the locality of £2 10s. The pasture was used for grazing the horses and stock, which in turn produced £300 worth of manure for use on the land. The most important feature of all was the admission of the appellant that he did in fact carry on the business of market-gardening. The commissioners held that the 263 acres were cultivated as a garden, that the appellants farming operations were ancillary to the business of market-gardening, and that the whole 350 acres of the land in the

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appellants occupation was in fact mainly devoted to market-gardening. They accordingly dismissed the appeal. Finlay J (as he then was), came to the conclusion, not without hesitation, that he could not interfere. The judgments of the Court of Appeal in Monro & Cobley v Bailey had been cited to the commissioners, and, between their decision and the hearing before the judge, the Court of Appeal decision had been affirmed in the House of Lords. Finlay J, says of the 263 acres, at p 226:

I cannot doubt that … it was open to any commissioner to find that that part at least was occupied as a garden …

He recognises, however, the distinction from Monros case, in that there was the stock farm with its 80 acres of pasture land (in the report in 19 Tax Cases, at p 228, l 9, the word “arable” is a misprint for “pasture”), and, whilst saying that that too was a question of fact, he did make the important comment, at p 228, about “splitting” which Lawrence J, cited with approval in the present case [at p 262]:

It may be that in some cases the proper course is to split up the thing and to say: “Well, these are two quite distinct things, you occupy part of your land as a garden, and you occupy another part of your land as a farm, you have to be separately assessed in respect of these two things.”

In view of the finding that the rest of the land was “ancillary” to the garden, he dismissed the appeal. I cannot help thinking that, if Finlay J, had not felt bound by the commissioners view that the 156 acres were under market-garden crops, he would have decided the other way, and, to my mind, there was no evidence to justify that view of the commissioners. All the crops grown on the 155 acres were of sorts which everybody has seen commonly grown on farms all over the country where the soil is suitableespecially potatoes, which seems to have been regarded by the Revenue in Back v Daniels as a farm crop. Beans also are very familiar as a farm crop, especially to those who hunt and have to keep off them if possible. Even cabbages are common, especially on farms carrying stock which will consume any waste or unsold surplus. I cannot understand the appellants admission that the 80 acres of pasture which carried his stock were “ancillary” to the market-garden. Whether the 100 acres carrying other kinds of vegetables could have been “split” off into a unit which could properly be regarded as a garden one cannot tell from the report. In the result, I cannot see that that decision affords any direct guidance for the present case.

In Lowe & Sons Ltd v Inland Revenue Comrs, a Scottish case, the findings of fact were these. The appellants had 378 acres at R, 77 acres at EL, and 21 acres at N. The appellants managing director was president of the Edinburgh Market Gardeners Association. All the holdings were managed and worked as one whole. The 280 acres were held on terms which bound the appellants generally to the most approved rules of good husbandry, and especially to put the whole under particular

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cropsone-quarter of it under turnips, potatoes or “other drilled green crops,” one-half under grain, and one-quarter under hay or grass. The commissioners found as a fact that 170 acres were under farm crops (in which they includedrightly, as I think55 acres of late potatoes), and that the remaining 110 acres were under various “drilled green crops.” The whole of the 98 acres (77 acres plus 21 acres) was under peas, beet, savoys, sprouts, parsley, onions, leeks, broccoli, lettuce and early potatoes. There was a definite annual rotation, and the vegetable crops were not confined to any one part of the land. There were kept 9 horses, 100 cattle, and 1,200 pigs and poultry. Ordinary (meaning, I think, agricultural) methods of cultivation were followed in all three holdings. Average wages were £10 per acre. The commissioners by a majority held that the holdings of 77 acres and 21 acres, and 110 acres of the 280 acres, were “used as a garden,” but that the remaining 170 acres at R were “used for ordinary farming purposes,” and they divided the assessments accordingly. That is to say, they split them. The Lord President, speaking of the 77 acres and the 21 acres, said, at p 604, that counsel for the appellants admitted that, if using the land for the vegetables in question could be using it as a garden, then the 77 acres and the 21 acres might properly be assessed as garden. He then held that growing vegetables for human consumption was using the land as a garden, and accordingly held that the commissioners had evidence to justify their finding as to the 98 acres, and that the 110 acres out of the 280 acres at R were on the same footing. He also pointed out that counsel made no objection to such a splitting. The division of the R holding of 280 acres into two categories by adding up the fields which happened to carry vegetable crops and calling that part a garden would not, in my respectful opinion, have been right, had the court been deciding the question. However, as they were merely acting on counsels admission, they were not giving any decision of their own. I find it difficult to treat the case as an authority on any of the questions which we have to decide, but the court seems to me, if I may say so, to have come perilously near to expressing the opinion, that, wherever “vegetables” for human consumption are grown, the land must in law be regarded as being “occupied as a garden.”

It is interesting to compare those conclusions of the commissioners and the judges of the Court of Session with those reached by the commissioners and Lawrence J, in the two recent cases I have already cited of Kerr v Davis and Williams v Rowe. The contrast affords a striking illustration of the contradictory views entertained by commissioners, not only on what are garden crops and what are farm crops, but also on the cost of cultivation as indicating the character of the occupation.

In the present case, Lawrence J, on the question of “splitting” preferred the dictum of Finlay J, in Dennis v Hick to the solution accepted by the Court of Session in David Lowe & Sons Ltd v Inland

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Revenue Comrs, and was evidently inclined to allow the appeal, but felt bound by the decision of the House of Lords in Monros case to decide as he did. In my humble opinion, there is nothing in the decision in Monros case to prevent either him or this court from allowing this appeal.

There are two main questions of law for decisionnamely, (i) whether or not there was any evidence of the 229 acres of arable land, or any part thereof, being occupied as a garden, to which my answer is that there was not, and (ii) whether or not, even if distinctively garden crops were in the year of assessment grown on some of the fields, those fields were so situate as to be capable of being “split” from the farm so as to constitute a garden unit of occupation, having regard to the absence of either finding or evidence of any local separation between them and the rest of the farm, or of those fields carrying garden crops permanently, or even of their having carried them in the preceding year. Again my answer is that they were not. Besides these two main questions, there are the various other legal aspects of the meaning of r 8 which I have already discussed but need not repeat, and on which, I think, the commissioners have misdirected themselves in law. However, they are really covered by the two main questions. I am of opinion that the appeal should be allowed, but my colleagues, whose judgments I have had the advantage of reading, are in agreement that the appeal should be dismissed, and dismissed it will be.

CLAUSON LJ. The taxpayer in this case occupies an area of 553 acres, and has been assessed for the year ending 5 April 1937, (a) in respect of profits from 238 acres (being arable), part of the 553 acres, occupied as nurseries or gardens for the sale of produce, in the sum of £2,000, and (b) in respect of the occupation of the remaining 315 acres, in the sum of £495. The figures of acreage which I mention are taken from the assessment. The £2,000 was an estimated figure of profit, which would admittedly require adjustment so as to represent the profits arising from the occupation of the 238 acres during the period from 5 April 1935, to 5 April 1936. The £495 is the admitted annual value of the 315 acres in the year ending 5 April 1937. The assessment is based on the following propositions: (i) that part of the 553 acres, consisting of the 238 acres is occupied as nurseries or gardens for the sale of the produce other than lands used for the growth of hops, and that, accordingly, in respect of these 238 acres, the tax payable under Sched B in respect of profits arising from the occupation of these 238 acres is (under Sched B, r 8) to be estimated according to the provisions and rules applicable to Sched D, that is, by reference to the profits of the year preceding the year of assessment (see the Finance Act, 1926, s 29); (ii) that the remainder of the 553 acres, consisting of 315 acres, is not occupied as nurseries or gardens for the sale of the produce (apart from the portion used for hops), and accordingly is not within Sched B.

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r 8, and, being occupied for the purpose of husbandry only, falls to be assessed under the general provisions of Sched B by reference to the annual value.

When the matter came before the general commissioners, the taxpayer raised a technical objection that the assessments were bad for insufficiently identifying the subjects of the respective assessments, and also raised the substantial objection that no part of the 553 acres was occupied as a garden for the sale of the produce. He contended that the whole of the 553 acres should be assessed by reference to the annual value as being occupied for the purpose of husbandry only. The general commissioners rejected the taxpayers technical objection, and held that the assessments sufficiently described the lands comprised therein. They also decided that the 553 acres could properly be divided for the purposes of assessment under Sched B, and confirmed the assessments, subject to the token figure of £2,000 being adjusted so as to represent the true figure of profit.

The general commissioners found the following facts: (i) that the farming operations on the arable land (apart from that used for the growth of hops) are ancillary to the market garden operations; (ii) that the whole of the arable land (apart from that occupied for the growth of hops) is occupied as gardens for the sale of produce; (iii) that the remainder of the land occupied by the appellant is devoted to farming operations, and is assessable under the ordinary rules applicable to Sched B.

A case was then stated at the taxpayers instance. From the stated case, it appears that before the commissioners it was proved or admitted (a) that the whole of the 553 acres was worked as a single mixed farm in one unit, and (b) that wheat was grown in the year in question upon 16 acres of the arable land, one purpose of its being grown being to provide straw litter for the pigs kept on the non-arable land, and that mangolds, parsnips and lucerne were grown on the arable land to provide feed for the stock (90 cattle, 232 sheep and 1,012 pigs) and the 16 horses kept on the non-arable land. The case stated came up for consideration before Lawrence J, who made an order on 26 May 1939, which, as drawn up, is as follows:

The court is of opinion that the determination of the commissioners is correct except so far as they held that part of the arable land is ancillary to the gardens, and dismissing this appeal the court remits the matter to the commissioners to be dealt with in the light of the order of this court.

As I read this order, the effect is that the commissioners are directed to amend the assessments by taking out of the 238 acres (assessed on the profits principle) such acres as are used for farming operations as distinct from being used as “gardens for the sale of the produce,” and to add them to the 315 acres assessed on the annual valuethat is, occupied for the purpose of husbandry only.

I can dispose shortly of the point raised as to insufficiency of identifi-

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cation. I cannot feel any doubt that the assessing authority ought to identify the subject-matter of the assessment sufficiently to enable the taxpayer to appreciate to what subject-matter it relates. It was said on behalf of the Crown that the question of the identity of the parcels in the two assessments was in fact cleared up in correspondence, and I am satisfied that, after the exhaustive discussions before the commissioners, before Lawrence J, and in this court, there is no substantial doubt left as to the identity. The leading counsel for the appellants told us that he did not desire to press the point, and I think he was wise in that regard. I do not propose to refer to this point any more.

I turn now to the substantial points which arise. It appears on reference to the oral judgment of Lawrence J, that the appellant argued before him (i) that, in view of the fact stated in the case that the whole of the 553 acres was worked as a single mixed farm in one unit, it was wrong to split the assessment of the 553 acres into two, and that the 553 acres should be assessed as a whole, and (ii) that the nature of the produce grown is not the sole consideration under r 8, which deals with gardens for the sale of the produce. The judge, as I read his judgment, was of opinion that the finding that the whole acreage was worked as a single farm made it impossible to uphold an assessment upon one part as gardens for the sale of the produce, under r 8, and another part as farmlands. In his view, lands to be assessed as gardens must be distinct and separable from the farm, and he thought it could not be said, on the findings before him, that the lands assessed as gardens were so separate.

However, he felt himself bound to follow the decision of the Court of Session in Lowe & Sons Ltd v Inland Revenue Comrs, which he regarded as a decision that the commissioners can apportion the assessment even where lands are held and worked as one unit. For myself, I have failed to extract any clear-cut principle from that decision, and, as it cannot be suggested that the decision is binding upon us, I think it best to consider the question as one of principle.

On the question of principle, I find myself in agreement with the views, as I understand them, expressed by Finlay J, in Dennis v Hick, at p 228, and, as I read his judgment, approved by Lawrence J, the assessing authority, as it appears to me, must address to itself the following questions. First, is the occupation of the area (in the present case, the 553 acres) by the taxpayer an occupation of the whole as “gardens for the sale of the produce”? If the answer to this question is in the negative, a second question must be putnamely, is there any part, and, if so, what part, of the area which is occupied as gardens for the sale of the produce? If the answer to the second question is in the affirmative, r 8 will apply to the part in regard to which the question is so answered.

In my judgment, the questions which I have formulated above are, to use the language of Finlay J, questions of fact and of degree. In

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any particular case, the question may arise, and may have to be determined by the court, whether there was evidence to justify the answers given to the questions, but, as regards that, each case must stand by itself, and I do not see what general guidance can be given. In the particular case before this court, there is a finding of fact that the whole 553 acres were worked as a single mixed farm in one unit. Lawrence J but for feeling bound by Lowe & Sons Ltd v Inland Revenue Comrs, would, as I understand his oral judgment, have construed this to mean that the commissioners held that the taxpayer oocupied the whole 553 acres for the purposes of one indivisible business namely, husbandry. I am not surprised that he should so construe the finding, as, apart from the context, the phrase “as a single mixed farm in one unit” might well be understood to carry such an obligation. On considering the stated case as a whole, however, I cannot for myself so construe the finding. The commissioners have clearly treated the taxpayer as occupying the separate parts for activities which are separately assessable, and that means, as I understand it, that, notwithstanding that there may be unity of administration over the whole area, and though the labour may be used now in one part of the area and now in another, there is a portion of the area which, as a matter of business and common sense, is recognisably occupied as “gardens for the sale of the produce.” In other words, notwithstanding their finding that the whole of the 553 acres were worked as a single mixed farm in one unit, the commissioners have addressed to themselves the right questions, and they were, as it appears to me, fully justified on the facts of the case in answering them on the footing that one part of the area could be properly treated as occupied as “gardens for the sale of the produce” and the remainder as occupied for ordinary husbandry.

Having dealt with the matter on the footing that he was bound to approve of the existence of two separate assessments, Lawrence J, came to the conclusion that there was some evidencenamely, the gardening character of most of the crops grown on the arable landwhich justified the commissioners in holding the parts of the arable land occupied by those crops to be occupied as gardens for the sale of the produce. As I understand it, however, he held that the commissioners were wrong in law in treating the parts of the arable land which were under other than “gardening” crops as forming part of “gardens for the sale of the produce.” On a careful consideration of the stated case, I cannot satisfy myself that Lawrence J, was right in this regard. The commissioners first findingnamely, “that the farming operations on the arable land (apart from that used for the growth of hops) are ancillary to the market garden operations”must, I think, mean that they consider that the whole of that arable landnamely, the 238 acresis occupied substantially as “gardens for the sale of the produce,” notwithstanding that a small part of it in the particular year in question, about 26 acres, was cropped with other than what might be called strictly

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gardening crops. This again is a question of fact and of degree, and I am not prepared to say that their conclusion was wrong in law.

It is necessary now to deal with a question which was apparently argued below, and was certainly argued on the Crowns behalf before usnamely, whether or not the growth upon a particular area of ground of such a crop as is commonly grown in “gardens for the sale of the produce” necessarily constitutes that area a “garden for the sale of the produce.” I agree with the opinion expressed by Lawrence J, that the mere presence of such a crop is some evidence that the area occupied by it is a “garden for the sale of the produce,” but, in my judgment, as a matter of construction, the test laid down by the legislature for the application of r 8 is not merely the presence of what I will call for short a “gardening crop.” The test is whether the locus in question is occupied as nurseries or gardens for the sale of the produce. I have little doubt that in 1842, or at the earlier date, if it is so, when this test was laid down, the application of it was easy. Modern developments, due not only to the application of mechanical methods, but also to increased facilities for transmission of produce, have made the application of the test so difficult that it may well be, as was suggested in argument, that nothing will suffice to meet the position but the interposition of the legislature. However that may be, the test laid down in or before 1842 must be applied in 1939, and, in applying the test, the question to be propounded seems to me to be whether or not the locus in question is occupied as nurseries or gardens for the sale of the produce. While the nature of the produce is an important factor, the test involves the due consideration of all other factors which may throw light on the question whether or not, within the ordinary meaning of the English language, the locus is occupied as nurseries or gardens for the sale of the produce. The matter, if I may again borrow the language of Finlay J, is a question of fact and degree.

While this is my view, I see no reason to doubt that in this particular case the commissioners have applied the right test. If I had thought that they considered themselves bound to hold a particular area to be a garden merely because it is cropped with garden crops, irrespective of any other consideration, I should have been in favour of sending the case back to them for further consideration. However, the very fact that in the area which they find to be “gardens for the sale of the produce” they include an area which happens this year to be cropped with a crop of wheat is, to my mind, sufficient indication that they took no such narrow view. Again, the question is one of fact and degree. It does not seem to me to be reasonable to lay down that, if a market gardener happens to grow in any particular year in one portion of his market-garden a comparatively small area of non-garden crop, that circumstance makes it necessary as a matter of law to treat that small area as separated for assessment purposes from the rest of the garden, even if the area in question is so cultivated (as may quite possibly be

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the case) merely as a matter of convenient rotation. For these reasons, I am of opinion that the commissioners reached a conclusion in this case which is not open to legal objection, and, for my part, I should affirm the order of Lawrence J, save in so far as relates to the exception therein contained, and save in so far as it remits the matter to the commissioners. The costs of the appeal should, in my judgment, be paid by the appellant.

GODDARD LJ. The appellant occupies lands in three adjoining parishes in Worcestershire, known respectively as Fingerpost Ground, Lower Moor, Springhill and Willspit. Springhill is a holding of just over 500 acres, the other three being much smaller. The commissioners have found that these lands are all worked by the appellant as a single mixed farm in one unit. They have upheld an assessment upon him under Sched B in respect of the lands at Fingerpost Ground, Lower Moor, and rather less than half of Springhill under r 8, finding that those lands, which comprise all the arable of the farm, other than that under hops, are a garden of which the produce is sold, or, as I will call it for the sake of brevity, a market-garden. The rest of the land, comprising meadow, pasture, hops and osiers, they assess under r 1. The principal question which arises is whether or not they are entitled so to split or apportion the assessment. If apportionment is permissible, it cannot, in my opinion, be said that there was no evidence on which they could find that the part assessed under r 8 is a market-garden. If it is not so permissible, and the case has to be remitted for assessment as a whole, then the commissioners must consider, as I understand the decisions, whether the holding is substantially a market-garden or an ordinary farm, and assess accordingly.

Counsel for the appellant took three points, one of which can for the moment be left over. His first point was whether or not the mere fact that vegetables to be sold for human consumption are grown on parts of an ordinary mixed farm justifies a finding that those parts are used as a garden. His second point was whether or not it is permissible in such a case to split the assessment under Sched B into two parts, assessing part as a garden under r 8 and part as a farm under r 1. The main argument was that to do so would be inconsistent with the finding that the holding was worked as a single mixed farm in one unit. Mixed farming, as I understand what is quite a common expression, means no more than that the farmer does not confine his activities to one particular branch of agriculture. While one may carry on exclusively dairy-farming, and another may confine himself to raising corn and ordinary rotation crops, others may combine the two. Thus, an arable farmer may grow, in addition to corn and rotation crops, vegetables and fruit intended for sale in greengrocers shops. A farmer engaged in mixed farming may or may not keep separate accounts for each variety of farming carried on. He would naturally use the manure from his

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farmyard indiscriminately over so much of his holding as required it. His carters and other workpeople would be engaged in one field or another as occasion might require, and there would be one direction or management over the whole, which is what I understand by working the farm as one unit. If he were minded to grow what I may call greengrocers stuff as well as corn, he would no doubt use the leguminous crops for rotation purposes in place of, or in addition to, swedes, mangolds, clover, sainfoin or the like. If his operations are such that it can fairly be said that he is carrying on a market-gardeners business as well as that of a farmer, I do not see that the fact that he works the two together, whether as a matter of good farming or for his own convenience, makes any difference. Whether he is carrying on a market-gardeners business, either exclusively or in addition to other business, is, in my opinion, a question of fact. I am far from saying that, because a farmer may in any year put a field under potatoes some or all of which are sold to greengrocers, that will necessarily justify a finding that he was using his land as a market-garden. It must be largely a question of degree: Re Hammond, Ex p Hammond. There is, however, a body of authority which shows that a tribunal may regard the produce as the test to be applied in determining whether or not land is being cultivated as a garden, and this not only in connection with the Income Tax Acts. In Purser v Worthing Local Board of Health, a case under the Public Health Act, the Court of Appeal held that land used for the purpose of growing fruits or vegetables for sale was a market-garden. In Cooper v Pearse, the question arose under the Allotments and Cottage Gardens Compensation Act 1887, and Collins J, said, at p 556:

You have a holding which may be used as a farm or a garden, and from which in the ordinary course crops or fruits may be expectedcrops, I should suppose, from the farm, fruit from the garden. Taking the definition of “garden” found in a standard dictionary, it is a “piece of ground enclosed and cultivated for herbs or fruits for food, or laid out for pleasure.”

In the Scottish case of Stewart (or Watters) v Hunter, the question was as to the validity of a notice to quit under the Agricultural Holdings (Scotland) Act 1923, and it had to be determined, inter alia, whether the holding was a market-garden. It was held it was not, but Lord President Clyde said [p 317]:

“The trade or business of a market gardener is, in my opinion, the trade or business which produces the class of goods characteristic of a greengrocers shop, and which in ordinary course reaches that shop via the early morning market where such goods are disposed of wholesale.”

I think that Monro & Cobley v Bailey was in some respects very like the present case, except that there was no splitting of the assessment. The total acreage of the farm was 204½ acres, of which 60 acres were used for bulb and flower cultivation, 50 acres for potatoes, and 94½ acres for general farm crops, including cereals. The House of Lords held that there was evidencewhich was that bulbs and flowers were grown on the holdingon which the commissioners could hold that the whole

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farm was a garden within r 8, and I may also refer to Dennis v Hick, where again a finding that the holding was a garden within r 8 was upheld. It is said, however, that in none of these cases was there a finding that the holding was a mixed farm. I confess I can attribute no magic to these words. In Monro & Cobley v Bailey, the case shows that it was a mixed farm. I have already mentioned the various cultivations and the respective acreages, and is it found in the case that the whole acreage consisted of open fields worked as one farm by labourers using ordinary methods and implements of husbandry; and, further, that the crops were changed each year according to the usual agricultural principle of rotation of crops. If that is not a mixed farm, well might one ask “Whats in a name?” I do not overlook the fact that the commissioners in that case came to the conclusion that the main purpose of the holding was the growth of bulbs, and that the farming operations were ancillary to the bulb business. This word “ancillary” occurs in many of these cases, though not in the judgments. From the commissioners findings, it is clear that what was meant in Monros case was that it was the bulb-growing, and not ordinary farming, which was the principal object for which the farm was carried on. As Viscount Buckmaster put it, at p 474, it “is a matter of degree.” With this case before me, I do not feel able to say that, if the commissioners had assessed the appellants lands as a whole, we could have interfered with the decision, whether they had assessed them as a farm under r 1, or acre a garden under r 8. To do so would, I think, be directly contrary to the decision of the House of Lords.

I now deal, therefore, with what I have already said is the main questionnamely, whether or not the assessment can be split or apportioned. What the commissioners have done here, as I read their findings, is this. They have in effect taken the plan of the appellants holding and put a blue pencil round the arable, excluding the hops, and said: “We find the land inside the blue line is in substance a market-garden.” True it is that, on some of that land, farm and not garden crops are grown, but the principal object of the cultivation is the raising of greengrocers stuff, and that part which is used for straw crops or mangolds is only a subsidiary matter, or, if you like, ancillary to that main purpose, in that it enables manure to be produced which can be used on the garden land. The lands outside the blue line are entirely different. They consist of hop lands, which by statute cannot be treated as garden, and pasture, meadow and osiers, which no one could consider to be a market-garden. Thus, we find that the taxpayer has in effect two classes of lands: one is in substance a market-garden, assessable under r 8, the other farmlands assessable under r 1.” I confess that I can find nothing in the Act which presents this being done, and the result seems to be fair both to the taxpayer and to the Revenue. By this method, the former does not escape taxation under the rules of Sched D on that part which he cultivates as a garden, while he gets the advantage of

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having what I may call ordinary agricultural land kept within the general provisions, of Sched B. This principle of splitting up the assessment was, adopted in Lowe & Sons Ltd v Inland Revenue Comrs in the Court of Session, where again the facts would amply justify the holding being described as a mixed farm. That case would perhaps have been of greater assistance had counsel not admitted that it was open to the commissioners to split the assessments. However, none of their Lordships seems to have had any doubt that it could be done. Like them, I can find nothing in the rules which prohibits this course, and, indeed, it appears to me that in certain cases they directly contemplate, and to some extent actually require, a division of the taxpayers lands for the purpose of Sched B. A dwelling-house and a warehouse or trade premises have to be taken out. Then the taxpayer has an option to have his farmlands, or woodlands if managed on a commercial basis, assessed under Sched D. Thus, it is possible for the owner of an estate consisting of a mansion, a park, home farm and woodlands to have different assessments, differently calculated, made on him, which can be done only by a method of apportionment.

I may point out that, as I understand Lowe & Sons Ltd v Inland Revenue Comrs, the commissioners actually apportioned or split up the assessments on the various arable holdings, so that those on which ordinary farm crops were grown were assessed under the rules of Sched B, while those on which vegetable crops were grown fell under the rules of Sched D. In such a case, I can, with Lord Fleming, well imagine that great administrative difficulties may arise because the vegetable crops appear to have been used, in part at least, as rotation crops for the corn land, so that in one year a particular field may be under corn while in the next year it may be under brussels sprouts. This aspect may well demand the attention of Parliament. In the present case, however, no such difficulty arises, because a clean cut has been made between the arable lands and the rest of the lands.

In the court below, Lawrence J, following the decision of the Court of Session, held that apportionment was permissible, but he remitted the case to the commissioners to deal again with that part of the arable land which they held was ancillary to the market-garden. He gave no direction as to how they were to deal with this portion, but I gather he thought that less of the arable should have been apportioned to the garden assessment. I cannot agree to this course, and do not think the case should be remitted. The commissioners have distinctly held that all the arable is a market-garden, and, for the reasons given above, there was, in my opinion, evidence on which they could so find. The finding that some portion, which I assume was that part not under vegetable crops, was ancillary to the market-garden means, I think, no more than that the main purpose of the arable cultivation was gardening, and not farm crops, and that, if a market-gardener grows some crops useful for the production of manure, as all straw crops are, they can

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be regarded as ancillary to the main operation. However, there was exactly the same finding in Monro & Cobley v Bailey, a case which, considering that only 60 acres out of 204 acres were under a garden crop, may be considered stronger in favour of the taxpayer than the present. Yet this did not avail to upset a finding that the whole farm was a garden. With all respect to the judge, in view of the finding that the whole of the arable land was a garden, I do not think that the case can be remitted on the ground suggested without disregarding the decision of the final Court of Appeal. It is true that, for some reason which was not explained, the Crown has not entered a cross-appeal against this part of the order, but this court must make such order as it deems the court below ought to have made, and, in my opinion, the proper order would have been simply to confirm the assessments appealed against.

It remains only to say a word on the third point taken by counsel for the appellantnamely, that the assessment must identify the particular lands which come under each category, I suppose by reference to the ordnance survey numbers. As all the arable land other than hop-land has been included in the garden assessment, there is nothing in this point, so far as the particular assessments in this case are concerned, nor do I find anything in the Act which would make the assessment bad if the apportioned assessments stated only the acreage, and not the actual fields. It is desirable, however, that every information should be given to the taxpayer, as has been done in this case, as to which lands are claimed by the Revenue authorities to come under r 8, so that he and his advisers may have proper material upon which to decide whether or not to appeal. I think that this appeal should be dismissed, and I concur with the order proposed by Clauson LJ.

Appeal dismissed with costs.

Solicitors: Ellis & Fairbairn, agents for Ryland, Martineau & Co, Birmingham (for the appellant); Solicitor of Inland Revenue (for the respondent).

C St J Nicholson Esq   Barrister.

Butler v Standard Telephones and Cables Ltd

McCarthy v Standard Telephones and Cables Ltd

[1940] 1 All ER 121


Categories:        TORTS; Nuisance        

Court:        KINGS BENCH DIVISION        

Lord(s):        LEWIS J        

Hearing Date(s):        7, 8, 11, 13, 14, 18, 20 DECEMBER 1939        


Nuisance Adjoining owners Roots of trees causing damage to adjoining owners houses Natural user of land.

The plaintiffs were the owners of two houses adjacent to land in the occupation of the defendant company. In 1930 the defendants planted a number of Lombardy poplar trees at a distance of from 10 to 13 feet from these houses. In 1934 a serious settlement occurred in McCarthys house from, at the time, some unascertained cause. It was attempted

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to remedy the difficulty by underpinning, which for a time appeared effective. In 1937 settlements occurred in the houses of both plaintiffs, and the buildings threatened to collapse. The plaintiffs claimed damages for trespass and nuisance, contending that the damage was the result of the spreading of the roots of the trees, which caused the sub-soil to lose moisture and that the foundations were damaged by the roots. The defendants contended that the facts, if proved, showed no cause of action since the planting of the trees was a natural user of the land:

Held the action was well-founded in law, and the plaintiffs were entitled to recover.

Notes

There appears to be no previous English decision on nuisance by the spreading of the roots of trees beyond the boundary of the owners land. It was strenuously argued in the present case that, the spreading of the roots being a matter of which the owner would have no knowledge, and the planting of trees being a natural user of the land, no action would lie for any damage so caused. This argument has, however, been rejected, and the owner has been held liable to his neighbour in damages. The neighbour, of course, also has the remedy of abating the nuisance, ie, of cutting the roots.

As to Liability for Nuisance, see Halsbury (Hailsham Edn), Vol 24, pp 8385, paras 147, 148; and for Cases, see Digest, Vol 2, pp 6366, Nos 397418.

Cases referred to

Middleton v Humphries (1913) 47 ILT 160; 36 Digest 224, case 656i.

Smith v Giddy [1904] 2 KB 448; 2 Digest 64, 407, 73 LJKB 894, 91 LT 296.

Crowhurst v Amersham Burial Board (1878) 4 Ex D 5; 2 Digest 65, 412, 48 LJQB 109, 39 LT 355.

Lemmon v Webb [1894] 3 Ch 1; 2 Digest 64, 405, 63 LJCh 570, 70 LT 712, affd [1895] AC 1.

Noble v Harrison [1926] 2 KB 332; 36 Digest 189, 316, 95 LJKB 813, 135 LT 325.

Barker v Herbert [1911] 2 KB 633; 36 Digest 197, 374, 80 LJKB 1329, 105 LT 349.

Blake v Woolf [1898] 2 QB 426; 36 Digest 196, 369, 67 LJQB 813, 79 LT 188.

Job Edwards Ltd v Birmingham Navigations [1924] 1 KB 341; 36 Digest 214, 575, 93 LJKB 261, 130 LT 522.

Consolidated Actions

Consolidated Actions for damages for nuisance, trespass by the wrongful interference by trees, the property of the defendants, with the support of the plaintiffs premises, or, alternatively for negligence or, alternatively for the wrongful removal of water from the plaintiffs land. The plaintiffs also asked for an order that the defendants should cut down the trees, and for an injunction restraining the defendants from permitting the roots of their trees from entering upon the plaintiffs land. The facts are fully set out in the judgment.

R E Manningham-Buller and J C Lawrence for the plaintiffs.

Cecil R Havers KC and Malcom McCougan for the defendants.

Havers KC: No action will lie even if the plaintiffs succeed on the facts. The defendants are not liable for damage caused by the natural user of their land. Trees are not in themselves dangerous things: Noble v Harrison. It must be shown that the defendants knew of the harm they are alleged to have done: Barker v Herbert. [Counsel

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also referred to Blake v Woolf and Job Edwards Ltd v Birmingham Navigations.]

Manningham-Buller: An action will lie for overhanging branches of a tree which cause damage to the plaintiffs land: Smith v Giddy, Crowhurst v Amersham Burial Board and Lemmon v Webb. An action will similarly lie for damage done by the roots of trees: Middleton v Humphries and Lemmon v Webb.

R E Manningham-Buller and J C Lawrence for the plaintiffs.

Cecil R Havers KC and Malcolm McGougan for the defendants.

20 December 1939. The following judgment was delivered.

LEWIS J. The defendants are the owners and occupiers of a sports ground at Eltham. On the west side of the sports ground lies a road known as Green Lane, and between Green Lane and the sports ground there are numerous semi-detached houses. The means of access to the sports ground from Green Lane is an entrance way which has been referred to during the case as “The Avenue.” It is a piece of ground some 40 ft wide and some 100 ft or more long. The exact measurement of its length I have not got, but, speaking from recollection of the premises, which I went to inspect at the invitation of the parties, I think that it is a distance of 100 ft or more from Green Lane to the sports ground. That avenue is fenced on the north side and south side with a wooden fence. To the north of the fence on the north side of that avenue there is a semi-detached house belonging to the plaintiff McCarthy. On the south side of the fence on the south side of the Avenue is the house No 86, which belongs to the plaintiff Butler.

In 1928, McCarthy purchased the house No 83, which is attached to No 81, Nos 81 and 83 being a pair. When he bought the plot of land on which the house now stands, the actual building operations had not begun, but the foundations had been marked out. He went into possession in 1928, and he had not been in the house more than a very short time when he had trouble with the south wall of the house, which is the flank wall. The house faces east and west, and the flank wall is the south wall. He had trouble with that wall because the wall became damp. That was due to the fact that that flank wall was exposed to the weather, the prevailing wind being the south-west wind, and the rain beating on that wall rendered it damp because the bricks of which the wall was constructed were found to be porous. That was remedied, and there was no further trouble for some 5 or 6 years.

In the winter of 1930/31, the defendants planted two rows of Lombardy poplars some 3 ft inside the two wooden fences. That is to say, there was a row on the north side of the Avenue just inside the fence and a row on the south side of the Avenue just inside the fence. Those trees were at a distance of some 10 ft to 13 ft from the flank wall of McCarthys house. This wall does not lie exactly parallel to the line of the wooden fence on the north side of the Avenue, there being a greater distance from the fence to the back of the house than there is from the fence to the front of the house. Those poplar trees were planted when they were some 7 ft or 8 ft high and they have grown remarkably well.

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Every witness who has assisted me in this case has said that the trees are extremely fine specimens of Lombardy poplars. They were planted only in 1930/31, and they are now of an average height of something over 40 ft. They are good big trees, well grown, with substantial butts.

In 1934 McCarthy found that there were signs of a very severe settlement in his house. He did not know what the cause of it was, and it was eventually decided to underpin the flank wall of his house. For that purpose there were three excavations made along that flank wall and the wall was underpinned, which apparently remedied the settlement for the time being.

When the excavations were made for the purpose of the underpinning, it was found that there were a certain number of roots from the poplar trees on the north side of the Avenue which had spread right up to, and were burrowing down below, the foundations of the wall. These roots were cut, and the underpinning was replaced. Everything appeared to be then in order. In 1937, however, the trouble again arose, and the crack and the signs of settlement which appeared in 1934 again made themselves manifest. I myself have been to visit the premises, and there is no question, and indeed there is no dispute, that McCarthys house shows serious signs of settlement. I do not think it is necessary for me to go into the details of the various cracks which there are in the house, but the position is that the cracks which appeared in 1934 are now evident again. To some extent they are worse. One particular matter is that the roof of McCarthys house is coming away from the chimney-breast which stands in between the two houses Nos 81 and 83, and it is possible, and indeed quite obvious, that there is a large fissure between that chimney-breast and the roof, and the house is gradually settling down towards the south and coming away from No 81. At the same time, there is now evident in No 81 signs that that houseparticularly with regard to the party wall between Nos 81 and 83is feeling the effects of the subsidence of No 83. That is to say, there are cracks in the party wall which apparently were not there in 1934 when the first sign of damage occurred, and the position now is that McCarthys house is falling down and to a certain extent pulling No 81 with it. The condition of No 81, of course, is not nearly so serious as that of No 83.

Butler, who lives in No 86, on the south side of the Avenue, noticed no trouble, other than the usual small cracks which frequently appear in newly-built houses, until 1937, when the trouble in McCarthys house appeared for the second time. The condition of Butlers house, which I have also seen, is undoubtedly due to subsidence. That is to say, Butlers house is subsiding and falling slightly to the north. It is No 87, which is the second of the two houses forming the two semi-detached houses Nos 85 and 87 which is beginning to show signs of the settlement of Butlers house, because there again there are cracks which have appeared in the party walls, and the same thing is happening, or has happened, to No 87 which has happened to No 81namely, it is feeling

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the pull of the subsidence of Butlers house, just as No 81 is feeling the pull of the subsidence of McCarthys house.

At the present momentwhen I say at the present moment, I mean on the day upon which I went to visit the siteit is abundantly clear that the roots of the poplar trees are working, and have worked, below the foundations of No 83 and No 85. The plaintiffs say that the subsidence is due to the fact that the poplar trees, through their roots, have disintegrated the clay upon which these two house are built so as to cause the clay to shrink, and, therefore, to reduce the support of these two houses, and, that being so, they bring their action for damages against the defendants for nuisance, for trespass and for negligence.

As I have already said, I have had the assistance in this case of the evidence of experts on each side, and I need hardly say that their evidence has been of the greatest assistance to me. It is not disputed that the cause of the collapse, if I may use that expression, of McCarthys house and Butlers house is the shrinkage of the clay below the foundations of those houses. The question which I have to decide is whether or not the plaintiffs have satisfied me that the shrinkage of that clay has been caused, as the plaintiffs allege, by the drying up of the moisture in the clay owing to the action of these Lombardy poplars.

There is one other fact which is agreed by the experts on each side, and that is that it is part of the nature of this particular variety of poplar to act as a drain. In other words, this particular variety of poplar is a shallow-rooted tree which throws out roots of a considerable length, with smaller roots and capillaries attached thereto, which capillaries seek water. A poplar tree, moreover, is a tree which may be described as a very thirsty tree, because it consumes a large amount of water, and the roots, although they are shallow and run under the surface more or less horizontally, and not vertically, as do the roots of some other trees, will go down, in spite of that fact, to find water. The plaintiffs, as I have said, say that the shrinkage of this clay is due to the thirsty nature of the poplar trees. That is to say, they allege that those poplar trees, by their roots which have acted as drains, have sucked up the water content in the clay, with the result that the clay has shrunk and in course of time has caused both houses to subside. In answer to that, the defendants say that this shrinkage of claywhich, as I have said, is concededis due to what was referred to in the course of the case as natural causes. It is said (and said no doubt with a great deal of truth) that, when one has dry weather on a clay soil, when one has a drought, the water-content in the clay rises, owing to the action of the sun, and the clay is dried up. It is pointed out that on a clay soil, as, if I may say so, ones own experience tells one, in a dry season or period of drought there are cracks in the ground, and those cracks occur more frequently on a clay soil than anywhere else. That is to say, the water is being drawn out of it and the clay is becoming baked. It is said, moreover, by the defendants that it is quite obvious from the extremely good growth

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of these trees that this particular place, the site of Nos 83 and 85, was a wet place, and that the poplar trees have grown as they have extremely well owing to the fact that they have a place which suits themthat is to say, there is plenty of waterand that this site was a wet site. Owing to the facts that at the end of 1933 and the beginning of 1934, before the first trouble was discovered in No 83, there was a period of extreme drought, the first collapse in 1934, it is suggested, is attributable, not to any action of the roots of the poplar trees, but to the fact that during that period of drought the water was being extracted from the clay owing to the drought. That, it is alleged, is the real cause of this subsidence, and the poplar trees have nothing whatever to do with it. It is similarly pointed out that the second subsidence in McCarthys house, No 83, in 1937, and the first signs of it at the same time in Butlers house, No 85, also followed a period of drought. Those are the contentions of the plaintiffs and the defendants respectively. The plaintiffs say that this subsidence was caused by the action of the poplar trees. Not at all, say the defendants, the poplar trees have nothing whatever to do with it, and it has occurred as a result of natural causes.

I am of opinion that the plaintiffs have satisfied me that this subsidence was due to the action of the roots of the poplar trees. As I have already said, it is conceded that the action of poplar trees is to drain the clay. Indeed, Dr Faber, who gave evidence before me, and of whose reputation every one is cognisant, told me quite frankly that, although he formed the view that the poplar trees up till now had not caused any damage, he thought that in time, when, as he said, the roots of the trees got right down below the two houses, they very likely would cause damage. That is to say, they would cause damage from further draining of the clay soil. That perfectly frank admission, which one would expect from Dr Faber, seems to me to point to the facts that he is acknowledging the action of the roots of the trees, and that he bases his view that these poplar trees had nothing whatever to do with the shrinkage of the clay on the fact that in 1937, in his opinion, the roots of these poplar trees had not got sufficiently far below the foundation to cause any shrinkage of clay, and that, if they had not got down in 1937, it follows that they had not got down in 1934.

However, I have heard evidence to the effect that in 1934 those persons who made the excavations for the underpinning of McCarthys houses found and cut roots which were going down below the foundations of the house. It may be said that the foundations of the house were shallow, and that the foundations might have been lower, but the fact remains that, in my view, in 1934, the roots were found to be going down below the foundations of the house.

I myself have seen those roots in 1939, and, if one can believe the evidence of ones own eyes, it is quite obvious that there are numerous roots going below No 83 and No 85. There are not as many as there

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were in 1938, because some of them have now been cut, but it is quite obvious that in 1937 there were roots, as the evidence has proved to me, going down below the foundations of those two houses. As I have said, the roots of a poplar tree are shallow, and they run just below the surface, but, when they meet an obstruction such as the foundations of a wall, they will, being unable to go any further in the direction in which they are then running, proceed either to dive below or to come up to the top. They will dive below if there is water for them to find, and that is exactly what has happened in this case.

There is one other matter to which I think reference should be made, and that is that both in the garden of No 83 and in the garden of No 85 (and, although I have not seen it, in the entrance in the Avenue according to the evidence) cracks appeared in the ground. Those cracks ran exactly parallel to the line of the poplar trees, and, with regard to the crack in the ground at No 83, as time went on that crack moved, so to speak, to the north. As one knows (and as is the evidence before me), in a dry summer, or after a period of drought, cracks do appear in the ground. The extraordinary thing about the cracks in this present case, however, is that they have moved out away from the poplar trees as time went on, and they run exactly parallel to the line of the trees, which would seem to indicate that the ground to the south of those cracks was being drained, and that the drainage of the ground was gradually spreading, taking the garden at No 83, in a northerly direction. That is exactly what one would expect if there were roots burrowing out to the north and gradually draining the clay under the top soil.

One other matter deserves consideration, and that is this. I have had a certain amount of evidence before me from a man who was the agent of some insurance company which held a mortgage, I think, on one of these houses. He has told me (and, indeed, there is evidence from other sources) that in this particular area there are 18 houses which have been built by the same builder, one Scudamore, including these houses, and that in none of the other houses has there appeared anything like the damage which appears in these two houses. The sun shone with the same heat in 1933 and 1934 upon the sites of those other houses as that with which it shone in 1937, yet apparently the clay, if there was clay under those houses, was not shrunk by the action of the sun. Although it is not my function to decide cases by reason of curious coincidences, nevertheless the coincidence is rather strong when one bears that in mind and when one finds that the only houses which show any signs of subsidence are houses close to which have been planted the poplar trees which have this propensity for drying up the clay, and when one knows that the roots of these poplar trees, as I have said, had reached to a spot underneath the foundationsin the case of McCarthys house in 1934, and in the case of Butlers house in 1937.

One curious feature there is with regard to this case. I have said that, in respect of the houses built along Green Lane, there is no sign of sub-

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sidence except in these two houses, the houses to which I refer being the houses built on the east side of Green Lane. On the west side of Green Lane, there are houses, not, I think, built by the same builder. In fact, I think some of the cottages which are on the west side of Green Lane are a few years older, though it does not matter whether or not they are a few years older. There is no sign of cracking or subsidence in those houses. The only sign of any cracking in any of the houses in the area is cracking not nearly so severe as in the houses No 83 and No 85, but indicating, in my view, trouble in the foundations in two houses, No 16 and No 23, which are on the opposite side of the sports ground or recreation ground to the houses No 83 and No 85. Those houses are a considerable distance away, and, curiously enough, close up to those houses there is planted a row of poplar trees. Those poplar trees, although they were planted apparently at the same time, have not flourished as have the poplar trees in this particular avenue, which indicates that the soil in which they are planted is not so damp, and does not suit them so well, as the soil in the Avenue. That is a matter which may be said to be a coincidence, but it is an extremely striking coincidence that the only sign of subsidence in the whole of this area should be in houses close to which poplar trees have been planted.

As I have said, I am satisfied that the cause of this subsidence is the action of the roots of these poplar trees. The only way in which it is sought to show that what I have just mentioned as purely a coincidence is that the experts called by the defendants, in particular Dr Faber, have said that the reason for that is that most unfortunately McCarthy and Butler have each bought houses which happen to be on a pocket of particularly damp clay in this neighbourhood, and apparently it is the only pocket of damp clay in the neighbourhood. Dr Faber tells me (and I accept it, of course) that the wetter the clay the worse is the shrinkage, and that, therefore, if there is clay with a considerable amount of water content, directly it dries up it acts as a sponge, and shrinks to a greater extent than a clay which contains less water, and the only explanation which can be given is that this is on a pocket of clay, or, it is said, there may be some waternot necessarily a subterranean water course or ditchbut, Dr Faber says, there is obviously a pocket of water there.

Another expert was called before me, one who has some skill (and, I have no doubt, considerable skill) with the divining rod. He tells me that, when he went there, he tried, I think he said 50 yds to the north and 50 yds to the south of this avenue, and the hazel twig remained quite stationary until he got outside and close up to Butlers house, No 85, where, he says, the twig bent down and indicated that there was water there. That there is water there is beyond question, and, as Dr Faber and others have explained to me, the wetter the clay, the better it is. The only trouble with clay is when it is drained of its water. It then begins to shrink. I have no doubt whatever that this was, if I may use the expression, a wet patch, but I am quite satisfied that that wet

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patch would have held but for the fact that, by the action of the poplar trees planted by the defendants, that wet patch was drained, causing the clay to shrink. I find as a fact that the plaintiffs have satisfied me that the cause of the collapse is the shrinkage of the clay caused by the action of the roots of the poplar trees.

I ought perhaps to mention that the experts, or certainly one of the experts called by the plaintiffs, attributed the condition of the cracks in these houses to three causes. The first cause, he said, was the shrinkage of the clay, and he agrees with all the other experts that the action of these roots is to drain the clay, causing the clay to shrink and thus rendering the foundations unstable. However, he also gave two other causes, and, if I read his evidence aright, of those two other causes he attributed little to the third cause which he gave, but he thought that the second cause which he offered in conjunction with the firstnamely, the draining of the water from the claywas the cause of the trouble. The second cause which he gave, if I understand his evidence correctly, is this. He said that, as the clay is drained by the action of the rootsI am not putting it scientifically, I know, but as I understand itthe clay becomes more brittle. It becomes drier, and, when there is a root running through dry ground as compared with wet clay, then, when there is a gale of wind, the poplar tree sways in the wind, and that puts a strain upon the roots of the poplar tree. The illustration is given of an anchor, the roots of the poplar tree or the roots of any tree being the anchor to anchor the tree securely into the ground. When there is a strain put on the top of the tree by swaying about, there is a certain amount of pull on those anchors, or, perhaps it would be more accurate to say, on the anchor chain, and, if the ground into which the chain and anchor are placed begins to get brittle, there is a movement which leads to further disintegration of the soil in which that anchor and chain are placed. Dr Faber and the witnesses for the defendants rather discounted that theory. It was said that, the nature of a poplar tree being that it is very whippy, a Poplar tree whips about and takes all the strain in the butt of the tree, so that no strain is imparted through the tree to the roots. Whether or not that is sound is a little difficult to say, but I confess that I should have thought, although it may be only a question of degree, that, if the top of the tree is swaying about in the wind, there must be a strain, or tendency to movement, down the whole butt of the tree which spreads to the roots. It is, of course, a question of degree, and it may be that in this case there was no further damage caused by any movement, if there was any, in the roots of the trees.

The third reason given by the expert called for the plaintiffs was this. He said that he also thought that the action of these roots, when they got under the foundation, would be to push up, and he gave the instance of how fungi will actually push up a paving stone very often. The growth of the thing is so strong that it will even push up a great heavy paving stone. He suggested that some of the damage might be caused

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by the larger roots getting underneath the foundations and pushing up, and so causing cracks to appear in the brickwork. He did not dogmatise about it. He said that he thought that that was possible, but he did not attribute the damage in this case really to any such action of the roots. He thought it was a combination of the first twonamely, the draining of the clay and the movement of the roots.

Whether or not he is right about the second reason I do not think it is necessary for me to decide, because I am quite satisfied that the reason for the subsidence is the draining of the clay. It is agreed by the defendants that that is the reason, and the only question which I have to decide, as I have already said, is what caused that draining of the clay. I am quite satisfied that it was the action of the roots of the poplar trees which caused that clay to drain and so caused the subsidence.

The defendants in this case through their counsel have argued that in law, as I understand the argument, even assuming that this trouble was caused by the roots of these trees, that does not give the plaintiffs any right of action. There were cited to me various cases which I have had an opportunity of considering, and, without, I hope, any disrespect to his argument, I am not satisfied that those cases support the contention which he sought to put forward. It is quite true that, apparently, as far as the research and diligence of counsel is a guide, there is no case recorded in the books of an action having been brought for nuisance or for trespass owing to damage alleged to have been caused by the action of the roots of a tree. There are many cases, of course, of actions brought for damage caused by overhanging branches, but there is apparently no case in the books of an action for damage caused by the roots of a tree, except Middleton v Humphries, a case decided by Ross J, in Ireland. That was a case in which the plaintiff alleged that his wall had been damaged owing to the action of the roots of a tree on the defendants land, which had burrowed under the wall and caused it to collapse. In that case, Ross J, had no doubt whatever that that gave a cause of action just as though the wall had been damaged by the overhanging branch of a tree on the defendants land, and he accordingly granted an injunction restraining the defendant from continuing to permit the injury, and awarded damages. It appears to me that that decisionwhich, if I may say so with the greatest respect, I think is perfectly right draws no distinction, either in law or in fact, between damage caused by overhanging branches and that caused by roots which burrow and cause damage. Indeed Gale on Easements, 11th Edn, takes the same view, and the passage at p 438 to which counsel for the plaintiffs referred has been cited with approval in cases decided in these courts.

It seems to me that it is clear that an action will lie on the facts which I have already detailed, and that, not only is there a right for a plaintiff who has so suffered to cut the roots of the offending tree, but he is also entitled to recover damages, if damage has accrued to him or been suffered by him owing to the action of these roots.

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Of the many cases which counsel for the plaintiffs cited to me, I need only refer to Smith v Giddy, and particularly to the judgment of Kennedy J, at p 451, and also to Crowhurst v Amersham Burial Board and Lemmon v Webb. In Lemmon v Webb, Kay LJ, has summed up the authorities on this part of the law, at p 24:

The result of the authorities seems to be this:The encroachment of the boughs and roots over and within the land of the adjoining owner is not a trespass or occupation of that land which by lapse of time could become a right. It is a nuisance. For any damage occasioned by this an action on the case would lie. Also, the person whose land is so affected may abate the nuisance if the owner of the tree after notice neglects to do so.

Then Kay LJ, goes on to discuss the question of notice.

It seems to me that in law this action will lie, and that, in view of the facts which I have found, the plaintiffs are entitled to recover.

Judgment for each plaintiff for £225 damages and costs.

Solicitors: Janson Cobb Pearson & Co (for the plaintiffs) Merrimans (for the defendants).

A Grimble Esq   Barrister.

Newman v Real Estate Debenture Corporation Ltd and Flower Decorations Ltd

[1940] 1 All ER 131


Categories:        LANDLORD AND TENANT; Leases, Other Landlord and Tenant        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        18, 19, 20 OCTOBER, 10, 13, 27, 28, 29 NOVEMBER, 5 DECEMBER 1939        


Landlord and Tenant Restrictions on user Common scheme Flats in one house let subject to similar covenants as to user User for private residence only Notice of restriction Registration Law of Property Act 1925 (c 20), s 199 Land Registration Act 1925 (c 21), s 50 Land Charges Act 1925 (c 22), s 10(1)D(ii).

Landlord and Tenant Derogation from grant Property subject to restriction Letting for purposes inconsistent with restriction.

Nuisance Letting for business purposes Noise.

By lease dated 20 December 1935, the plaintiff leased from the first defendant, the corporation, the fourth and fifth floors of what was then, with the exception of the ground floor, a block of residential flats. The lease contained certain covenants by the lessee restricting the user of the flat to residential purposes only, and in fact, all the then-existing leases of other flats contained the same covenants as to user, the restrictions being clearly intended to be for the benefit of the flats and their tenants, and making up a body of local law imposed upon the tenants. On 12 August 1938, the corporation leased the whole building to the second defendants, the company, with the benefit of the lease granted to the plaintiff. Alterations to the building were then carried out in accordance with the local authoritys requirements for business purposes, the main alterations being the changing of doors on every floor, the substitution of clear glass for stained glass on the stairs, and the insertion of a lift which started in the basement and came up through the first, second and third floors, the shaft ending just under the end of the plaintiffs bedroom. The lift was fitted with iron collapsible doors. The work continued until the middle of November, and was during that time a source of annoyance and inconvenience to the plaintiff. On the completion of the work, the company commenced its business, the first floor being used as a show-

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room and for offices, the second for a workroom, and the third for the accounts department and a stockroom. The plaintiff alleged that the business as carried on constituted a common law nuisance rendering his flat materially less fit to live in for the reasons, firstly, that the companys vans obstructed the highway so as to interfere substantially with the reasonable access to the entrance to his flat; secondly, that the companys employees were constantly running up and down the stairs; and thirdly that excessive noise was caused by the movement of the lift, and closing of its collapsible doors, and also by the banging of the doors on all floors. The plaintiff contended that there existed a scheme for the benefit of the tenants of the flats in the building, under which the building could be used only for residential purposes, and that there was, therefore, an implied covenant with the plaintiff binding the corporation not to let the flats for any other purpose. It was also contended that as the flat was let for the purpose of the plaintiff and his wife using it as a residence, they were confined to that user, and there was therefore an implied obligation upon the corporation not to derogate from its grant by rendering the flat materially less fit for that purpose. The evidence showed that the company, its agents and advisers had inspected the building and knew of the essential facts raising the presumption that there was or might be a scheme for using the flats for residential purposes only:

Held (i) the plaintiff had established that there was a scheme which imposed, inter alia, an obligation on the corporation not to let any of the flats other than the ground floor for other than residential purposes, nor to permit any tenant of any other flat to do anything which might cause annoyance to the plaintiff.

(ii) the corporation could not derogate from its grant, and the letting of the flats for business purposes was such a derogation.

(iii) the companys advisers should have made inquiries as to the existence of a scheme applicable to the flats which would have satisfied them that the company was doing something inconsistent with the scheme. The company, therefore, took with notice of the restrictive covenants and were bound by them.

(iv) as the company was sued not as lessee of one of the flats but as owner of the leasehold reversion bound by the head lessors covenants, these covenants were not capable of registration under the Land Charges Act 1925, s 10(1)D(ii), or of being noted in the register under the Land Registration Act 1925, s 50.

(v) the corporation and the company had both broken the obligation not to derogate from the grant to the plaintiff, the corporation by the nuisance created during the alterations, and the company by the nuisance created by the way in which its business was conducted.

(vi) an injunction would be granted against the company restraining it from breaking the covenant as to user, and damages against both defendants in respect of breaches of the covenant as to user and the covenant not to derogate from grant.

Notes

The principle generally known as the building scheme is commonly applied to a substantial area. It has in the past been applied to blocks of flats of considerable size, but not, apparently, to a building of the size here considered. However, no lower limit to the size of the “building estate” has ever been suggested, and it seems logical that the principle should be applied even to a small number of flats in a single building, since the user of any one part of the premises must materially affect the comfort of the remainder. A more important aspect is the discussion of the registration of restrictive covenants. The statute exempts from registration covenants between a lessor and lessee, and it has been said that the reason for this is because the assignee of a lease always inspects, or should inspect, the lease. On the other hand, a sublessee is not, apart from special stipulation, entitled to see the head lease, and similar considerations apply where

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the premises originally demised are assigned in separate parts. It is important, therefore, that the words “covenant between a lessor and lessee” should be construed by the court, but the present case does no more than commence the process of construction. It seems important that something more precise should be said on this matter, or that the statute should be amended.

As to Derogation from Grant, see Halsbury (Hailsham Edn), Vol 20, pp 243246, paras 271277; and for Cases, see Digest, Vol 31, pp 122141, Nos 25572768.

As to Restrictions on the User of Leasehold Premises, see Halsbury (Hailsham Edn), Vol 20, pp 224233, paras 245255; and for Cases, see Digest, Vol 31, pp 157, 158, 169, Nos 29052915, 30163019.

Cases referred to

Hudson v Cripps [1896] 1 Ch 265; 31 Digest 135, 2701, 65 LJCh 328, 73 LT 741.

Gedge v Bartlett (1900) 17 TLR 43; 31 Digest 158, 2914.

Spicer v Martin (1888) 14 App Cas 12; 31 Digest 166, 2997, 58 LJCh 309, 60 LT 546.

Jaeger v Mansions Consolidated Ltd (1902) 87 LT 690; 31 Digest 97, 2368, on appeal (1903) 87 LT 694.

Elliston v Reacher [1908] 2 Ch 665; 28 Digest 448, 675, 78 LJCh 87, 99 LT 701, affg [1908] 2 Ch 374.

Renals v Cowlishaw (1879) 11 ChD 866; 40 Digest 316, 2686, 48 LJCh 830, 41 LT 116.

Reid v Bickerstaff [1909] 2 Ch 305; 40 Digest 312, 2665, 78 LJCh 753, 100 LT 952.

Keates v Lyon (1869) 4 ChApp 218; 40 Digest 314, 2673, 38 LJCh 357, 20 LT 255.

Nottingham Patent Brick & Tile Co v Butler (1886) 16 QBD 778; 40 Digest 314, 2674, 55 LJQB 280, 54 LT 444.

Vanderpant v Mayfair Hotel Co Ltd [1930] 1 Ch 138; Digest Supp, 99 LJCh 84, 142 LT 198.

Harrison v Southwark & Vauxhall Water Co [1891] 2 Ch 409; 36 Digest 162, 44, 60 LJCh 630, 64 LT 864.

Sanders-Clark v Grosvenor Mansions Co Ltd and DAllessandri [1900] 2 Ch 373; 36 Digest 175, 204, 69 LJCh 579, 82 LT 758.

Ball v Ray (1873) 8 ChApp 467; 36 Digest 194, 354, 30 LT 1.

Dare v Bognor Urban District Council (1912) 76 JP 425; 12 Digest 615, 5088.

Browne v Flower [1911] 1 Ch 219; 31 Digest 135, 2703, 80 LJCh 181, 103 LT 557.

Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200; 31 Digest 136, 2707, 90 LJCh 140, 124 LT 418.

OCedar Ltd v Slough Trading Co [1927] 2 KB 123; Digest Supp, 96 LJKB 709, 137 LT 208.

Walter v Selfe.

Action

Action for an injunction and damages for an alleged breach of covenant by the two defendants not to use the premises for other than residential purposes, and for damages for trespass and nuisance. The facts are fully set out in the judgment.

G R Blanco White KC, Valentine Holmes and John Senter for the plaintiff.

J W Morris KC and H G Robertson for the first defendants.

J D Casswell KC and F W Beney for the second defendants.

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5 December 1939. The following judgment was delivered.

ATKINSON J. This is an action brought by George Newman, the holder of a lease dated 20 December 1935, for 7 years from 25 December 1935, of a flat on the fourth and fifth floors of what was, until the happening of the matters complained of, a block of residential flats known as Cleveland Mansions, 64, South Audley Street, against his lessors, the Real Estate Debenture Corporation, Ltd (hereinafter called the corporation), and Flower Decorations, Ltd (hereinafter called the company), who are lessees of the whole building under a lease granted to them by the corporation, dated 12 August 1938, with the benefit of the lease granted to the plaintiff.

The substance of the plaintiff claim is that, when he took his lease, the building was being used solely for residential purposes, and that the corporation were under an obligation to maintain that user throughout the term of his lease, but that, instead of so doing, they let the whole of the rest of the building to the company for business purposes, thereby changing the whole character of the building, and that the business has been carried on by the company so as to be a nuisance to the plaintiff, and so as to render his flat materially less fit for residential purposes. The plaintiff must, of course, establish a legal basis for the alleged restrictive obligations resting upon the corporation, his lessor. For that purpose, it is said first that there existed a scheme under which every tenant was bound, for the benefit of the tenants of the other flats in the building, to refrain from using his flat otherwise than as a residence, and that, therefore, the lessors could not lawfully themselves do anything inconsistent with the scheme they had created or maintained. It is said that there was, therefore, an implied covenant with the plaintiff binding the corporation not to let the other flats in the building otherwise than as residential premises. It is also said that, at any rate, the flat was let for the purpose of the plaintiff and his wife living in it as a residence, and they were confined to that user, and that there was, therefore, an implied obligation upon his lessors not to derogate from their grantthat is, not to do anything which would render the flat materially less fit for that purpose.

If it is established that these obligations rest upon the corporation, the question arises as to how far the company are bound by them. The covenants are both restrictive in their nature, and would, prima facie, bind the company if they took this lease with actual or constructive notice of them, or, rather, with notice of the facts and circumstances from which they are to be implied.

The history of the building starts in 1892. It was then a new building belonging to the Duke of Westminster. On 20 August 1892, the Duke demised the building to one Frederick George Best for 99 years. Except for the ground floor, which was designed as a shopobviously the most suitable purpose to which it could be putthe rest of the building was designed for, and laid out as high-class residential flats. The entrance to the shop is at the corner of South Audley Street and Aldford Street.

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Some 20 yds down Aldford Street are the porch and entrance to the rest of the building. Entering by that porch into the hall, one was faced on the left front by stairs going up to the first and other floors, and, on the right front, by stairs going down to the basement. On either side were unbroken main walls. There was no connection with the shop, and nothing to suggest that on the other side of the main wall on the left there was a shop where business was carried on. The head lease contained the following covenants material to this case, and I think the three are 10, 11 and 12. Covenant 10 provides as follows:

… will not without the preview written consent of the landlord for the time being for the following purposes respectively make or permit to be made upon any part of the said demised premises above the ground floor any show of any trade or business whatsoever nor place or set up nor permit to remain upon the said demised premises or any part thereof [which of course extends to the ground floor as well] any forge nor use or permit to be used the said demised premises or any part thereof as a place of public entertainment nor carry on or exercise or permit to be carried on or exercised upon the said demised premises or any part thereof any or either of the trades or businesses following …

Then follows a long list of almost every conceivable trade of which one can think, ending up with the words:

… or any other art trade business or employment whatsoever which shall be dangerous or a nuisance or an annoyance to the tenant or occupier of any messuage or other hereditaments in the neighbourhood of the premises hereby demised.

Then covenant 11 provides as follows:

… will not keep any fowls nor do or permit to be done upon the said demised premises or any part thereof any act deed or thing which shall or may be or become a nuisance (whether indictable or not) or which may be grow or lead to the damage annoyance or disturbance of the landlord for the time being or the tenant or occupier of any adjacent property.

Then covenant 12 provides as follows:

… will not make or permit to be made any alteration in the construction height elevation or architectural appearance of the said demised premises or any part thereof or in the chimney stacks or chimney pots thereof nor alter or cut any of the principal walls or timbers thereof nor erect or build any additional or any substituted building … without the previous consent of the landlord.

Best occupied the shop and carried on business there as a portmanteaux-dealer. From the date of the lease, the flats had been let for residential purposes only. So far as concerns the appearance of the building, or the impression that would be made, before the matters complained of, upon the mind of anyone entering the hall and going up the stairs, I do not think that it would have occurred to anybody that the building was being put to any other use.

Best retained the lease for many years. His agents for letting the flats were Messrs Collins & Collins. Mr A P Saunders, a member of that firm, has given evidence. I gathered from him that Bests executors were two people named H E Manfield and Philip Bush, that in 1924 there was a sale by auction by order of the court, when the lease was bought from the executors by a Mrs Turrill, and that early in 1935 the corporation bought from her. The earliest lease produced, dated

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25 June 1923, was one between Manfield and Bush and Davies. It demised the third-floor flat for 14 years. On 8 March 1928, Mrs Turrill demised the second-floor flat to Barnato Joel for 14 years. On 6 March 1928, Mrs Turrill demised the first-floor flat to Mr Cran for 7 years. On 8 November 1934, she let the first-floor to a Mrs Halford as a yearly tenant. She had held under an underlease from Mr Cran. On 4 December 1934, Mrs Turrill let the shop and that part of the basement fronting South Audley Street to Mrs Constance Spry for 21 years. Then the corporation bought the leasehold reversion of the building, and on 20 December 1935, they demised the fourth and fifth floors to the plaintiff.

Before taking the lease, Newman and his wife saw the agents, Messrs Norfolk & Prior. One of their representatives showed them the flat. Newman said that he could see that the others were all residential. Among other things, the names of the occupiers were above the bells. Mrs Newman asked about the other tenants, and was assured that they were nice quiet people and everything that one could desire. It was just residential, very quiet and comfortable, she was told. Newman was told that very good references would be required. He gave three business references, but was then asked for three social references. Rather surprised, he asked why, and was told that the people living in the flats were of such good standing and so high-class that it was necessary to be very particular, and that they always wanted them.

The lease is dated 20 December and, as I have said, leases the flat on the fourth and fifth floors:

… of the messuage known as No 64 South Audley Street together with full and free liberty at all times in common with others of the use of the porch and entrance hall and to pass and repass over and upon the staircase leading from Aldford Street to the said fourth and fifth floors …

Then came a series of covenants. I will begin with covenant (g), which provides as follows:

… to properly clean the windows belonging to the demised premises once at least in every month of the said term and as often as need or occasion shall require thoroughly to sweep and cleanse all chimneys and flues and to keep the taps in repair.

Then covenant (h) provides as follows:

… not to maim cut or injure any of the walls or wood or ironwork nor alter the cornices ceilings mantelpieces or ornaments or any of the fixtures or the general construction or plan of the demised premises without the previous consent in writing of the lessor [and then to restore].

Then covenant (i) provides as follows:

… to occupy and use the demised premises as private dwelling-rooms only and not to use the same or any part thereof or permit the same or any part thereof to be used for any trade business or calling whatsoever or for any unlawful or immoral purpose and not to deposit therein any stores of coal or any combustible or offensive goods provisions or materials and not to exhibit any placard on any part thereof nor hang or allow to be hung any clothes or other materials on the outside of the demised premises nor to make any noise or do any act or things which may cause scandal or occasion annoyance damage or disturbance to the lessor or the lessors other tenants or whereby the insurance of the demised premises or any part thereof against damage by fire would be made void or voidable or whereby

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the rates of premium payable in respect of such insurance would be increased beyond the ordinary rate.

Then covenants (j) and (k) provide as follows:

(j) Not to permit any public auction or sale. (k) To observe and comply with all reasonable regulations and arrangements which may from time to time be made by the lessor for the proper management of the building or for the general comfort and convenience of the tenants and occupiers thereof and not to do or permit anything which may be contrary to or inconsistent with such of the covenants and conditions of head lease of the building from His Grace the Duke of Westminster as appears herein and to indemnify the lessor in respect of any breach by the lessee of such covenants and conditions.

Then covenant (l) provides as follows:

… to permit the lessor its agents and workmen at all reasonable times during the said term upon appointment being made to enter the demised premises for the purposes of repairing or painting the outside of any part or parts of the building or for carrying out any structural or other repairs or any alterations or additions which may be required in or to the building or to cleanse empty or repair any of the sewers drains gutters or pipes …

The covenants by the lessor include a covenant for quiet enjoyment and a covenant to perform the covenants contained in the lease under which the lessor held the building, and covenant (c) provides as follows:

… to keep the building of which the demised premises form part and the structure of the walls of the demised premises and the pipes tanks and electric wiring thereof (except such said pipes tanks and electric wiring as are contained in the demised premises) in good and tenantable repair and condition.

Then covenant (e) provides as follows:

… to keep the porch entrance hall and staircase of the building in good order and condition and properly cleaned and lighted.

I have no doubt whatever that Newman took it for granted that everyone held subject to the same restrictions, and that every newcomer would hold on the same restrictions. All the then-existing leases did in fact contain the same covenants in so far as material to this case, certainly all those which I have read. Davies lease had the extra words in the clause forbidding any trade or business: “and will not keep therein any noisy or objectionable animal bird or reptile.” The clause in the plaintiffs lease about reasonable regulations contained the words which I have read: “for the proper management of the building.” Those six words are not in any of the other leases, but, apart from those two differences, I think that every relevant clause is identical in all the leases. There may be an odd word different here and there, but I have compared them sufficiently carefully to satisfy myself that, except possibly for an odd wordnot that I came across onein substance they are alike.

It is plain that each lease shows on the face of it that it was made in respect of a residential flat forming part of a building which was used for the same particular purpose. The restrictions were clearly intended to be, and were in fact, for the benefit of the flats and their tenants. The restricted user cannot be explained as being necessary to secure compliance with covenants in a head lease. I have no doubt that each lessee either knew or took it for granted that the restrictions imposed

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on him were also imposed on the other lessees, and were so imposed for their mutual benefit inter se. I have no doubt that the various lessors knew that their lessees so believed, and that it was upon that basis that they took their leases. Mr Ritchie, who acted for Mrs Turrill, and who was called as a witness, said they wanted all the lessees to take it for granted that the only permitted user of all the flats was for residential purposes, and that the appearance of the building would itself create that impression. A general observance of the restrictions was certainly calculated to enhance the value of the various flats, and would enure for the benefit of their occupiers as well as for that of the lessors. There were, in fact, no written regulations, because the lease itself contains a number as to washing, coal and one thing and another. There was a porter in uniform. Mr Newman was told when he went in that the doors of the porch entrance were to be closed at 8 pm, and that from 8 pm to 11 pm the bell marked “Housekeeper” could be rung for the door to be opened, but that after that he must use the key provided. He also found that there were existing practices as to ash-bins, letters and parcels and the like.

What is the proper inference from these facts? What is necessary in order to create what is called the scheme? The first case to which I was referred was Hudson v Cripps. That was a case relating to a block of flats, and the relevant covenant was described as follows [at p 266]:

The tenant agreed “not to assign, underlet, or part with the possession of the same premises or any part thereof, nor to carry on or suffer or permit to be carried on thereon any trade or business whatsoever, nor permit any sale by auction, nor pull down or alter the construction … nor use the premises or any part thereof otherwise than for the purpose of dwelling-rooms; and further [not to] affix or exhibit any advertisements, placards … nor commit or suffer or permit any voluntary waste or spoil, nor do any act which may be or grow to be a nuisance, disturbance, annoyance or injury to the landlord or his tenants, or any of them or to the trustees of the late Duke of Portland …”

It is a covenant exceedingly like the covenant in this case. The regulations and conditions annexed to the agreement, and which formed part of it, which indeed was a printed document, are set out at p 267. They relate to the keys, the supply of coals, disposal of house refuse and so on. The landlord was there seeking to turn a number of flats into a club, and one of the tenants had brought an action to restrain him. The only reason why I refer to the judgment is because of the light I can get on what it is necessary to show in order to prove the existence of a scheme.

In that case, North J, said at p 268:

The agreement shews, on its face, that it was made with respect to a certain flat forming part of a large building all used for this particular purpose …

Of course, every word of that applies to this case. Then North J, continued as follows, at p 268:

Now, looking at the agreement itself, the printed agreement, to begin with, is evidently not intended to apply to this particular flat alone. No one can read those

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provisions without seeing that there was a scheme for the general management of this building, composed of several flats, in such a way as to be suitable to the convenience of all the persons who should be tenants of the respective flats. It would be idle to suppose that these requirements were made except for the purpose of the convenience of all the tenants; and where the landlord enters into such an arrangement with each tenant it is obviously intended to be and is, as a matter of fact, for the benefit of all the tenants. Whether this house was built originally with any such scheme in view I do not know, and it seems to me entirely unimportant. There were, at any rate, existing a collection of flats, each occupied in a similar manner, under a common management, by different tenants.

The next case in order of date bearing on the point is, I think, Gedge v Bartlett. There, according to the headnote, the plaintiff had taken:

… lease of a flat in a building from the defendant, the plaintiff covenanting to use the flat for residential purposes only. The other flats in the building were let by the defendant with similar covenants by the lessees, but there was no express corresponding covenant by the defendant as to the use of the flats. The defendant subsequently let some flats in the building to the government for public offices, and possession was given to them.

Then the plaintiff brought an action in respect of this alleged breach, and Buckley J, said, at p 44:

… that there had clearly been a breach of an implied covenant by the defendant that the flats should be used for residential purposes only …

The rest of the case turns upon whether or not an injunction should be granted. He granted a limited injunction. There was an appeal, and the injunction was in its terms extended.

Counsel for the lessors was good enough to take the trouble to look at The Times for 30 January 1900, and there there is a slightly fuller report, or at any rate some of the things that Buckley J, said are reported slightly more fully. The relevant part of the note which he has handed to me, and which is copied from the newspaper, is as follows:

Buckley, J., in delivering judgment, said it was not disputed that the principles laid down in Spicer v. Martin and Hudson v. Cripps applied to the case. The other leases of flats in the same building contained covenants in similar form to the benefit of which the plaintiff was entitled.

That, therefore, indicates that there was a block of buildings with a number of flats, and that in each lease there was a restrictive covenant imposed upon the tenant as to the use of the flats, and it is plain there that it was taken for granted by counsel for the defendants, and by everybody, that in a case of that sort there was a scheme.

Then the next case was Jaeger v Mansions Consolidated Ltd. There the case did not arise in a particularly convenient way, because objection was taken that the statement of claim disclosed no cause of action and the application was struck out. Buckley J, of course, had to deal with the case on the footing that everything alleged in the statement of claim was true and well-founded. There are only one or two short passages, I think, which help me here. Buckley J, said, at p 693:

I then pass to the second head of the claimnamely, that founded upon the existence, which is not denied, of a general scheme, all the flats in the buildings being let under a common form of agreement.

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He held there was a case to meet, and his view was upheld by the Court of Appeal, and I will just read a few lines from the judgment of Sir Richard Henn Collins MR, at p 696:

The flat in the occupation of the plaintiff was letas all the other flats in the building are letupon a document drawn up in the same form for all the tenants. That is a document which shows on its face that one of the main purposes is to secure that the flats occupied by persons taking them shall not be used for immoral purposes [the alleged breach in the particular case]; and every kind of precaution in the shape of agreement is taken authorising the summary eviction of any person who infringes that obligation, and showing that the scheme upon which these flats are let is that they can all be occupied in a respectable manner, and entirely negatives the possibility of anything like a use for immoral purposes …

There again one has an indication that the important point to inquire into is whether or not the common lease shows on its face that it is intended for the common good.

Then came Elliston v Reacher, which was discussed at some length. That was a case of a building estate, not a case relating to flats, and it was a case where the action was brought against another purchaser, and not against a landlord. I am not going to worry about the particular facts there. It is the principle I want to get at, and that is laid down by Parker J, as follows, at pp 384, 385:

I pass, therefore to the consideration of the question whether the plaintiffs can enforce these restrictive covenants. In my judgment, in order to bring the principles of Renals v Cowlishaw and Spicer v Martin into operation it must be proved (1) that both the plaintiffs and defendants derive title under a common vendor [which does not apply here, because it was the landlord, the lessor, who was being sued]; (2) that previously to selling the lands to which the plaintiffs and defendants are respectively enticed the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into by the defendants or their predecessors with the common vendor irrespective of the dates of the respective purchases. I may observe, with reference to the third point, that the vendors object in imposing the restrictions must in general be gathered from all the circumstances of the case, including in particular the nature of the restrictions. If a general observance of the restrictions is in fact calculated to enhance the values of the several lots offered for sale, it is an easy inference that the vendor intended the restrictions to be for the benefit of all the lots, even though he might retain other land the value of which might be similarly enhanced, for a vendor may naturally be expected to aim at obtaining the highest possible price for his land. Further, if the first three points be established, the fourth point may readily be inferred, provided the purchasers have notice of the facts involved in the three first points; but if the purchaser purchases in ignorance of any material part of those facts, it would be difficult, if not impossible, to establish the fourth point.

If one applies what is there said to a block of flats, a scheme certainly is established and a covenant implied binding the lessor not to act in contravention of it where it is established that, previous to the demise to the plaintiff, the lessor or his predecessors in title had designed and,

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constructed the building for letting as residential flats, subject to restrictions intended to be imposed on all the flats, which, though possibly varying in detail, were consistent, and consistent only, with a general scheme of management, that these restrictions were intended by the lessor to be and were in fact for the benefit of all the flats, and that the plaintiff took his lease upon the footing, or in the relief, that the restriction would enure for the benefit of the other flats, and on the well-founded assumption that there were similar restrictions binding the other flats, which would in turn enure for his benefit. Undoubtedly a general observance of these restrictions would in fact enhance the value of the flats, and it is, therefore, an easy inference that the lessor intended the restrictions to be for the benefit of all the flats. I think that everything there applies to this case.

Then comes Reid v Bickerstaff, which I think is, as far as I know, the last word on this topic. There again it was a building scheme relating to the sale of houses, and a number of plots had been sold at different times, all with the same restrictive covenant in themnamely, not to erect any building but a private dwelling-houseand somebody was breaking the covenant, and one person sued another. Joyce J, held that there was a scheme there. He was overruled by the Court of Appeal, but it was not questioned that the court would apply the principle which he laid down. He said, at p 312:

The question whether the several purchasers of parts of a building estate are entitled to enforce against one another the restrictive covenants that they have respectively entered into depends upon the intention which is to be gathered from all the circumstances in each casethat is to say, whether the restrictions were imposed merely with the object and intention of in some way protecting the vendor himself, as in Keates v Lyon, or for the mutual benefit and advantage of the purchasers, as in the case of Nottingham Patent Brick & Tile Co v Butler.

He held, therefore, that the claim was established, but the Court of Appeal thought not. Sir H H Cozens-Hardy MR, summarised the law, I think, as concisely as it can be done, at p 319:

What are some of the essentials of a building scheme? In my opinion there must be a defined area within which the scheme is operative. Reciprocity is the foundation of the idea of a scheme. A purchaser of one parcel cannot be subject to an implied obligation to purchasers of an undefined and unknown area. He must know both the extent of his burden and the extent of his benefit. Not only must the area be defined, but the obligations to be imposed within that area must be defined. Those obligations need not be identical. For example, there may be houses of a certain value in one part and houses of a different value in another part. A building scheme is not created by the mere fact that the owner of an estate sells it in lots and takes varying covenants from various purchasers. There must be notice to the various purchasers of what I may venture to call the local law imposed by the vendors upon a definite area.

I think that that is a most helpful sentence, and, in my judgment, rightly or wrongly, it absolutely applies to this case. There one has a block of flats where the area is clearly defined. One knows exactly the premises to which these various covenants are to refer, and, in my opinion, the covenants in this lease are obviously intended to be for the benefit of the other tenants, and do make up a body of local law imposed upon the occupants of these different flats.

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Why did the Court of appeal reverse Joyce J, in Reid v Bickerstaff? The points are set out by Sir H H Cozens-Hardy MR, as follows, at at p 320:

… the plaintiffs have wholly failed to define the area of the scheme. In the statement of claim they alleged three separate schemes of different parts of the estate of 64 acres. This has been abandoned, and they now contend for one scheme affecting the whole estate of 64 acres. There is no evidence of any such scheme. …

Then the next point he made was this, at p 321:

There is no uniformity in the covenants in conveyances of different lots.

Thirdly, he said, at p 321:

There is nothing to show that the purchaser of 1840 was aware that any of the earlier purchasers had entered into restrictive covenants of any kind …

Therefore he held that the claim there failed. Buckley LJ, stated the same principle, not quite in the same language, at p 323:

There can be no building scheme unless two conditions are satisfied, namely, first, that defined lands constituting the estate to which the scheme relates shall be identified, and, secondly, that the nature and particulars of the scheme shall be sufficiently disclosed for the purchaser to have been informed that his restrictive covenants are imposed upon him for the benefit of other purchasers of plots within that defined estate with the reciprocal advantage that he shall as against such other pursers be entitled to the benefit of such restrictive covenants as are in turn to be imposed upon them.

To my mind, it is obvious on the face of this lease that these restrictions are imposed for the benefit of the other lessees, since I find as a fact that the plaintiff believed that other lessees would be on the same footing.

I am satisfied that the plaintiff has established that there was a scheme which imposed, inter alia, an obligation on the corporation not to let the other flats for purposes other than residential, nor to permit any tenant of any other flat to do anything which might cause annoyance to the plaintiff. I am also satisfied that there was an obligation upon the corporation not to derogate from their grant, and not to do anything which would render the demised premises materially less fit for use as private dwelling-rooms. The demise contained a covenant for quiet enjoyment, but I doubt whether it is of much relevance in this case.

In the autumn of 1937, the company, who were still trading in the shop, were anxious to acquire the building, or as much of it as they could, for the purpose of their business, and for this purpose the London County Council required certain alterations to be made. The two basements, which had been severed before, were to be connected, and there was to be a fireproof door inserted halfway down the stairs to the basement on the right as one enters. There was to be a doorway made between the shop and the hall, and every doorway of the flats had to be completely changed, and doors inserted which opened and shut with great ease. The walls on the slope of the stairs, I think, were mainly stained glass lights with dark wooden window frames. They had all to be taken out and clear glass put in their place. One of the main features of the change was that a lift had to be inserted and constructed, not outside the flats, where one usually finds lifts, but starting in the basement below the shop

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and coming up through the shop and right up through the first, second and third floors, the shaft ending just under the end of Newmans bedroom. It was a small lift with collapsible iron doors. These alterations led to the London County Council insisting on a way of escape on to the roof for the occupants of the different floors, and the scheme which was suggested by the defendants architect, and which was approved and enjoined by the London County Council, involved the construction of a door just outside the plaintiffs two doors at the entrance to his flat on the fourth floor, the one on the left leading to the part where he lives, and, as to the one on the right, where one opens the door, there is a small staircase up to some rooms on the fifth floor, and there was to be a door constructed at the head of the stairs in a fireproof screen, and some thin glass near the lock, so that in an emergency anybody could easily break the glass and open the door from the inside.

The plaintiff was told nothing of all this scheme. He heard nothing of it until a day or two before he was going away on holiday on 18 August. Mr Quint, a member of the firm of Norfolk & Prior, came to see him, and Newman said he was just going away for his holidays and did not want to be bothered then, obviously, but Mr Quint told him roughly what was intended, and told him particularly about the work to be done in his flat. The plaintiff said that it was useless discussing it then as he was going away, and he asked Mr Quint to do nothing until he returnedthat is to say, nothing in the way of work in the plaintiffs own particular flatand Mr Quint assented to that. When Newman got home in September, he found the work in his flat in full blast, and for some weeks the noise and interference with the staircase were very serious from his point of view. The stairway was littered with ladders and scaffolding, interfering very much with easy user, but probably the more important thing was the constant noise of hammering. It was particularly bad in the making of the lift shaft. Apparently the floors were made of concrete, and this concrete had to be hacked away. When it came to the painting, of course, everywhere was being paintedthe hall, the landing, the staircase of every flat. It was all being done, as I gather it could, at one time, and the smell was intolerable, and made the plaintiffs wife ill. This work went on until about the middle of November. There is no question at all about this work having been a nuisance, in fact, while it lasted. Whether or not it was an actionable nuisance, however, is another matter.

The business got into full swing, I think, about the middle of November. At first, it was probably under difficulties, but it was certainly going by then. The first floor was called the wedding-room. It was a showroom, and there were offices. The second floor was the workroom, and some 16 or 20 girls were employed there making artificial flowers and making up fresh flowers. The third floor was the accounts department. It was a stock room, I gathered, for artificial flowers, but it was mainly used for the purposes of accounting and the keeping of the books. This con-

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tinued without any change in the business until the outbreak of war, when, except for the shop, the basement, the first, second and third floors were closed down.

It is said that, quite apart from all this being a breach of covenant, the business as carried on was a common law nuisance, and a nuisance rendering the plaintiffs flat very materially less fit to live in. The complaints are three in number. There were some minor ones, but there are three with which I will deal. First there is a complaint as to the company obstructing the highway so as to interfere substantially with the reasonable access to the entrance to the flat. Then there is a complaint as to the use of the stairs, and it is said that, whenever one went on to the staircase, one would see employees of the company running up and down, perhaps with flowers, perhaps with parcels, perhaps with pots of tea and the like. The third complaint is as to noise.

To begin with the stairs, I am not satisfied that the use of the stairs in itselfand I am dealing now with the question of nuisance apart from covenantsamounted to a nuisance. Doubtless a number of employees passed and repassed up and down during the day. Doubtless it was used at times for the delivery of parcels and flowers to the workroom. I am equally satisfied that the hall was used rather than the steps down to the basement to the left of the porch. I am quite satisfied that at times the hall was used for bringing into the shop and down to the basement large wreaths and large parcels and bundles. I am quite satisfied about all that, and I can understand its being annoying, particularly because of the way in which it stamped the premises as business premises instead of residential. Nevertheless, if there were a right to carry on the business there, if that was not a breach of covenant, I do not think that the use of the stairs amounted to a nuisance in itself.

Then as to the vans. The principle as to when the use of a highway may become an actionable nuisance was laid down by Luxmoore J, as he then was, in Vanderpant v Mayfair Hotel Co, Ltd. He was there dealing with a complaint against the Mayfair Hotel by a plaintiff who lived in the close neighbourhood, and who was complaining of interference with his rights by the delivery vans, and also of noise coming from the kitchens. He says, at pp 162, 163:

… I think it will be convenient to state my view as to the law relating to the obstruction of a public highway, having regard to the rights of the public and those members of the public who occupy premises abutting thereon. Speaking generally, the public have the right of free and unobstructed passage over the whole of a public highway. The owner of premises abutting on a public highway is entitled to make a reasonable use of that highway for the purpose of obtaining access to his own premises, and of loading and unloading goods at his premises. But the right of the public is a higher right than that of the occupier, and if the user by the occupier, though reasonable so far as the particular business carried on by him is concerned, in fact causes a serious obstruction to the public, then the private rights of the occupier must yield to the public rights, and the court will interfere by restraining the continuance of the obstruction. In every case the answer to the question whether the public right has been interfered with must necessarily depend on the extent of the user; in other words, the question is always a question of degree.

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Then he goes on to point out that that action was brought by a private individual, and not by the Attorney-General on behalf of the public. He continues, at pp 153, 154:

The plaintiff must therefore prove that he has been unreasonably obstructed by the defendant company, and that he has suffered particular damage; and that that damage is direct and substantial. Has he succeeded in satisfying all those conditions? As I have pointed out, in each case the question to be determined is one of fact. The plaintiff claims that he has been obstructed in the access to his own house, and if the evidence is sufficient to establish that the defendant company has interfered substantially with the reasonable access to the plaintiffs house, then in my opinion the plaintiff will have satisfied the necessary conditions to enable him to maintain this action …

The company had five vans and a car. The vans brought flowers from the market. They arrived early, at about 8.15 am to 8.30 am. They would empty their load and take the empty boxes away again, and they were used during the day for making deliveries to the various customers. In theory, and I think to a great extent in practice, goods were taken down the steps to the left of the porch, and a van stopping opposite those steps would, of course, block the entrance to the porch. It was impossible for the vans to use South Audley Street at all. That was not permitted. The difficulty the company were in was that they had no place in which to park their vans, and their user of the highway certainly went far beyond mere loading and unloading. However, that would not give the plaintiff a cause of action unless it caused him particular damage beyond the general inconvenience suffered by the public. The particular damage relied on is that the defendants have interfered substantially with the plaintiffs access to the buildingthat is, that he or his wife has been continually prevented from driving up to the porch, and has been compelled to stop lower down the street.

On 1 November 1938, Newman began to keep a diary recording what happened. By 6 June 1939, I find 22 entries recording an inability to get to the entrancethat is, 22 entries relating to a period of some 7 months. It is not very much. I am satisfied that he had cause to complain, and that it amounted at times to a nuisance, but I am not prepared to hold that an actionable nuisance has been established with regard to the vans. I do not think it amounted to a sufficiently substantial interference. Luxmoore J, twice emphasised that word “substantial.” After the improvement which is admitted, I doubt whether it was sufficiently substantial interference to found an action based on nuisance.

As to the complaint of noise, I have no doubt whatever that that did amount to an actionable nuisance. There were two main sources of noise. First, the lift shaft, as I have said, was not outside the flats, but came up immediately under the end of the plaintiffs bedroom. Of course, it did not affect him while he was in bed, because the business stopped at 6 pm, but during the day it was constantly at work, and these collapsible metal doors, which of course had to open and shut every time the lift was used, and the movement of the lift itself coming up under the floor of the flat, I am satisfied were a source of noise. Then there was the

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banging of doors. There was the shop door, there was a door on every floor, and apparently the worst door of all was this fireproof door halfway down the stairs to the basement. They were fitted with springs, but not springs which controlled or checked them. There were two factors which helped noise to reach the plaintiffs flat. There was the lift shaft, which formed a tube which ran up through the whole building, and the borrowed lights running up the sloping part of the stairs on each floor let the noise from each side of the flats on to the staircase. I find that the continual banging of the doors was an inconvenience materially interfering with the ordinary physical comfort of human existence according to plain and sober and simple notions obtaining among English people. I use that language because it is in the leading case of Walter v Selfe and was quoted and applied by Luxmoore J, in Vanderpant v Mayfair Hotel Co Ltd, at p 165.

There are other matters upon which it is necessary to come to a decision. I have held that the corporation committed a breach of covenant in permitting the premises to be used for business purposes, and that they were responsible for the temporary nuisance from August to December. A temporary nuisance is not necessarily actionable. The principle has been laid down clearly, I think, in Harrison v Southwark & Vauxhall Water Co, and in Sanders-Clark v Grosvenor Mansions Co Ltd, and DAllessandri. In Harrison v Southwark & Vauxhall Water Co, Vaughan Williams J, said, at pp 413, 414:

… it seems be me that if the defendants had without statutory authority sunk this shaft and done this pumping for any lawful and ordinary purpose in the exercise of their powers as private owners of the land they would not have been responsible as for a nuisance. It frequently happens that the owners or occupiers of land cause, in the execution of lawful works in the ordinary user of land, a considerable amount of temporary annoyance to their neighbours; but they are not necessarily on that account held to be guilty of causing an unlawful nuisance. The business of life could not be carried on if it were so. For instance, a man who pulls down his house for the purpose of building a new one no doubt causes considerable inconvenience to his next-door neighbours during the process of demolition but he is not responsible as for a nuisance if he uses all reasonable skill and care to avoid annoyance to his neighbour by the works of demolition. Nor is he liable to an action, even though the noise and dust and the consequent annoyance be such as would constitute a nuisance if the same, instead of being created for the purpose of the demolition of the house, had been created in sheer wantonness, or in the execution of works for a purpose involving a permanent continuance of the noise and dust. For the law, in judging what constitutes a nuisance, does take into consideration both the object and duration of that which is said to constitute the nuisance …

The point is that, if a man is doing something which he has a right to do, and causes a nuisance of a temporary kind, it is not actionable, but, if he is doing something which is unreasonable, and which he has not the right to do, he may then be guilty of a nuisance.

In Sanders-Clark v Grosvenor Mansions Co Ltd, and DAllessandri, again a flat case, on one of the floors there was a certain alteration being made, turning it into, or increasing its use as, a restaurant. Buckley J, in dealing with this question, said, at p 375:

That was not a reasonable use of the building. The question is whether he is liable for that, ant in my opinion he is. I am not saying that the alteration was

Page 147 of [1940] 1 All ER 131

not such as he might properly make for the purpose of carrying on a restaurant, but that by so doing he was exposing his neighbour to a burden which he ought not to be called upon to bear. In Ball v Ray, Lord Selborne LC, said [pp. 469, 470]: “In making out a case of nuisance of this character there are always two things to be considered, the right of the plaintiff and the right of the defendant. If the houses adjoining each other are so built that from the commencement of their existence it is manifest that each adjoining inhabitant was intended to enjoy his own property for the ordinary purposes for which it and all the different parts of it were constructed, then so long as the house is so used there is nothing that can be regarded in law as a nuisance which the other party has a right to prevent. But, on the other hand, if either party turns his house, or any portion of it, to unusual purposes in such a manner as to produce a substantial injury to his neighbour, it appears to me that that is not according to principle or authority a reasonable use of his own property; and his neighbour, shewing substantial injury, is entitled to protection.” … I prefer to guide myself by the judgment of Lord Selborne LC, to the effect that the court must consider whether the defendant is using his property reasonably or not. If he is using it reasonably, there is nothing which at law can be considered a nuisance; but if he is not using it reasonably, if he is using it for purposes for which the building was not constructed, then the plaintiff is entitled to relief.

If one applies those principles here, the nuisance was not caused by a lawful and proper exercise of their powers, but by an exercise which was in breach of their duty to the plaintiff, and I think, therefore, that the nuisance caused cannot be excused in the way which has been contended.

The next question is whether or not the corporation are answerable for the nuisance caused by the running of the business. They are certainly responsible for the nuisance in so far as it is attributable to the lift, but I do not think that they can be held responsible for the banging. It is clear that, if the company had taken the proper steps, that trouble could have been eliminated. It was said that there is no difficulty about it at all, and the corporation would not be responsible, I think, for the vans. On the whole, I do not think I ought to find that they are parties to the nuisance caused by the way in which the business has been conducted.

Then comes the question whether or not the company are bound by the implied covenant not to use these flats for any but residential purposes. This is a very important question, because the granting of an injunction must depend on the answer to it. Secondly, there comes the question whether or not they are liable on the implied covenant not to derogate from the grant to the plaintiff. I will deal with the latter question first. It is clear that the company are bound by this covenant equally with the corporation. Indeed, that was admitted. Has there been a breach of it, and, if so, by whom? I have considered Dare v Bognor Urban District Council, Browne v Flower, Harmer v Jumbil (Nigeria) Tin Areas Ltd and OCedar Ltd v Slough Trading Co. I accept, of course, the test suggested by Parker J, that the acts complained of must make the demised premises materially less fit for the particular purpose. The surrounding circumstances must be looked at, and, on the whole, I am satisfied that the corporation broke this covenant by the nuisance for which they were responsible from August to September, and I am satisfied that the company broke it by the nuisance for which they were responsible from towards the end of November 1938, until September 1939.

Page 148 of [1940] 1 All ER 131

I am quite satisfied that at both those periods the premises were rendered materially less fit for the particular purpose for which they were demised.

Finally, then, I have to deal with the question of the companys liability on the restrictive covenant as to user. They can only be bound by this covenant if they took their demise with notice of it in the way defined by the Law of Property Act 1925, s 199, which provides as follows:

(1) A purchaser [including a lessee] shall not be prejudicially affected by notice of(i) any instrument or matter capable of registration under the provisions of the Land Charges Act 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless(a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.

The company and their solicitors and agents, or at any rate the company, knew that this building, apart from their shop, had been used for residential purposes. I think that they must have known that it had always been so used, or at any rate for a very long time. Mrs Spry herself went over the building and saw how it was adapted only for residential purposes. Norfolk & Prior gave the company full particulars of the position in August 1937, when the flats were all occupied for residential purposes, and in the evidence there is an account of Mrs Spry inspection, and the questions she asked and what she was told. Later in the evidence, there is a letter from Messrs. Claude Leigh (Management) Ltd, who are the agents of Flower Decorations Ltd. They speak of them as their clients, and they say they have had an opportunity of discussing it with their clients, Flower Decorations, Ltd, and they make a firm offer. Then this passage occurs:

… bearing in mind that they would be letting the entire premises to an established tenant for a long term and that they would in addition be passing over their liability for staircase lighting and cleaning as well as the provision of a certain amount of service, which is always necessary where a building is let as separate flats.

Then there is a letter which is written by Flower Decorations, Ltd, to the clerk of the council, the whole point of the letter being that they knew that the building was used for residential purposes, and knew that permission had to be obtained for a change of user. There is just this sentence: “Hitherto these have been used as four separate flats.” Later, their solicitors write to Messrs Ashurst, Morris & Crisp asking certain questions about Newmans lease. They ask who is responsible for furnishing the staircase, and to whom the carpet and stair rods belong:

Has the tenant of the flat any and what facilities for storing coal? Have any regulations been made by your clients in regard to the management of the building as referred to in cl. 1? …

Page 149 of [1940] 1 All ER 131

Later in the evidence, a firm of agents writes to the council as follows

On behalf of my clients Messrs. Flower Decorations I beg to make application to your council … for the change of user. At present these three floors are let as flats.

It seems to me that the company, and their advisers knew all the essential facts raising the presumption that there wasor, at any rate, might be a scheme for using the flats on the first, second and third floors for residential purposes only. I am satisfied that they should have inquired, that they could have inquired, and that it was only reasonable to inquire, about this. The existence of such a thing as a scheme applicable to flats must have been known to the companys solicitors, and it seems to me that very little consideration would have satisfied them that there was. When they read Newmans lease, they must have seen that the lease itself contained a scheme of management, and they knew of the other leases. They could have asked to see them. They could have asked to see if these restrictions found a place in these other leases as well, and, if they had given their minds to it, as they ought to have done, they must have been satisfied that they were doing something inconsistent with the scheme.

It is argued by counsel for the company that, notwithstanding the fact that his clients may have had noticeI do not mean that he admitted that they had notice, but, even if they had had noticehis clients are not bound by the covenant, because it was not registered. He relies on the first part of the Law of Property Act 1925, s 199, and says that, if the company has taken with notice of the covenant and it is not registered, then they are not bound by it even though they had notice of it. That section does not refer to the Land Registration Act 1925, but I will read the Land Registration Act 1925, s 50, because there are two quite distinct systems of registration, as far as I can make outnamely, registration of title under the Land Registration Act 1925, and registration of charges under the Land Charges Act 1925. At any rate, the Land Registration Act 1925, s 50, begins as follows:

(1) Any person entitled to the benefit of a restrictive covenant or agreement (not being a covenant or agreement made between a lessor and lessee) with respect to the building on or other user of registered land may apply to the registrar to enter notice thereof on the register.

Then the Land Charges Act 1925, s 10, provides as follows:

(1) The following classes of charges on, or obligations affecting, land may be registered as land charges in the register of land charges. …

Then Class D includes in para (ii):

A covenant or agreement (not being a covenant or agreement made between a lessor and lessee) restrictive of the user of land entered into after the commencement of this Act. …

Prima facie, of course, this covenant is not registrable, because both these covenants are covenants between a lessor and a lessee, but it is said that, if one lessee under a building scheme is being sued by another

Page 150 of [1940] 1 All ER 131

lessee under the scheme, the covenant on which he is being sued is not a covenant between lessor and lessee, and is, therefore, registrable. Well, all I need say is that the company is not being sued as a lessee of one of the flats, but is being sued as owner of the leasehold reversion bound by the late lessors covenants, and these covenants are not capable of registration.

To what relief is the plaintiff entitled? Both the defendants are answerable for the breach of the implied covenant not to use the first, second and third floors for other than residential purposes or so as to annoy the plaintiff. I cannot grant an injunction against the corporation. They have parted with their interest in the reversion. However, I can and ought to grant an injunction restraining the company for the duration of the plaintiffs lease from using the first, second and third floors for other than residential purposes and from carrying on their business on the ground floor and basement so as to create a nuisance by noise to the annoyance of the plaintiff. I accept the evidence that, with a business being carried on in the rest of the building, the flat would be worth substantially less than under the old conditions. I award £40 damages against both defendants for the breach of the covenant as to user, and I have considered under that head only the annoyance and inconvenience caused which were inseparable from the carrying on of the business on those premises. I award £15 against the corporation for the nuisance caused by them from August to December and/or for that breach of the covenant not to derogate from the grant. I do not mean that I award it twice over, but I award the £15 both because the matter in respect of which I award it was a common law nuisance and because it was also a breach of the covenant not to derogate from the grant. I award the sum of £25 against the company for the nuisance caused by them by noise from the end of November until the trial of the action, really until the end of August, and I mean by that to cover all the period and/or for that breach of covenant not to derogate from the grant. The plaintiff must have his costs of the action against both defendants.

Judgment for the plaintiff with costs.

Solicitors: Kenneth Brown Baker Baker (for the plaintiff); Ashurst Morris Crisp & Co (for the first defendants); Edwin Coe & Calder Woods (for the second defendants).

C St J Nicholson Esq   Barrister.


Pitchers Ltd v Plaza (Queensbury) Ltd

[1940] 1 All ER 151


Categories:        ADMINISTRATION OF JUSTICE; Arbitration        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        15 DECEMBER 1939        


Arbitration Application to stay legal proceedings Action on contract containing an arbitration clause Opposition to summons under RSC Ord 14, for leave to sign judgment Affidavit filed and appearance before master Whether a step in the action Arbitration Act 1889 (c 49), s 4.

The plaintiffs sued the defendants by a specially indorsed writ for £3,236 2s 1d, which they alleged to be due to them under a building contract. The contract included an arbitration clause, to be operative on either party forthwith giving to the other notice of any dispute or difference. The plaintiffs took out a summons under RSC Ord 14, for leave to sign final judgment. The defendants filed an affidavit, and appeared before the master claiming that they had a defence to the action. On the masters giving leave to sign judgment, the defendants appealed against his order, and only then applied for a stay of the action by reason of the arbitration clause included therein:

Held (i) the defendants were precluded from relying on the arbitration clause as they had taken a step in the action when they opposed the summons for leave to sign final judgment before the master.

(ii) per Goddard LJ: no step is taken in the action by a defendant opposing a summons under RSC Ord 14, who not merely raises the matter of the arbitration clause in his affidavit, but also at the same time takes out a summons to stay the action.

Notes

To preserve a right to arbitrate it is essential that no step shall be taken in the action before an application is made to stay it. The position of a defendant when the usual procedure on RSC Ord 14 is followed is that he must take out a summons to stay before the summons for judgment comes on for hearing. It would appear from the judgment of Goddard LJ that he may, if he so desires, file the usual affidavit in answer to that of the plaintiff, presumably asking for leave to defend if his application to stay is refused.

As to Step in Action, see Halsbury (Hailsham Edn), Vol 1, pp 639, 640, para 1087; and for Cases, see Digest, Vol 2, pp 375, 376, Nos 395408. See also, Yearly Practice of the Supreme Court 1940, pp 2193, 2194.

Case referred to

Allied Artists Corpn v Jacobson (1922) 7 July, Unreported.

Appeal

Appeal by the defendants from an order of Asquith J, dated 14 November 1939. The facts are fully set out in the judgment of Slesser LJ

Stephen Chapman for the appellants.

H St John Field KC and Gerald Gardiner for the respondents.

15 December 1939. The following judgments were delivered.

SLESSER LJ. In this case, Pitchers, Ltd, are suing Plaza (Queensbury), Ltd for £3,236 2s 1d which is said to be:

The amount due to the plaintiffs by the defendants for work and labour done and materials supplied as per architects certificate, dated Sept. 8, 1939, issued pursuant to a building agreement dated Apr. 12, 1937, and made between the defendant of the one part and the plaintiff of the other part.

The writ is specially indorsed, and claims the sum due on the architects certificate, dated 8 September 1939namely, the sum of £3,236 2s 1d.

Page 152 of [1940] 1 All ER 151

The agreement which is mentioned in the writ is dated 12 April 1937, and is between the plaintiffs and the defendants. It is not necessary to consider it in any detail, but it is an agreement for the construction of the superstructure of a cinema. It contains a clause (cl 25(f)) which provides as follows:

Upon expiration of the defects liability period stated in the appendix or if no period stated then within 6 months after completion of the works or upon completion of making good defects under cl. 13 hereof, whichever is later, the architect shall issue a final certificate of the value of the works executed by the contractor and such final certificate save in cases of fraud, dishonesty or fraudulent concealment relating to the works or materials or to any matter dealt with in the certificate and save as regards all defects and insufficiencies in the works or materials which a reasonable examination would not have disclosed shall be conclusive evidence as to the sufficiency of the said works and materials and of the value thereof.

As I have said, that certificate was dated 8 September 1939.

Upon that, there was a specially indorsed writ, and there was the usual affidavit in support, and an affidavit was sworn on behalf of the defendants asking that final judgment should not be signed. The affidavit was sworn on 18 October 1939, and in it one Wingate says that the work is not in accordance with the priced schedule, that the quantities of certain of the materials are not correct, and that there is a defence to the action. Then there is an allegation as follows:

The plaintiffs account which took 16 months to prepare and which the defendants did not have an opportunity of considering until June or July of this year [1939] involves investigation of a large number of complicated factors and on Aug. 11, 1939 I wrote to Mr. Cecil Masey the architect named in the building agreement that the account would be disputed and accordingly the said architect was not entitled to give the final certificate on which these proceedings are based. In the circumstances a dispute having arisen the provisions of the said building agreement for a reference to arbitration ate operative and in particular cl. 26(b) is applicable.

I shall have to refer to cl 26(b), so I will read it now:

Provided always that in case any dispute or difference shall arise between the employer and the architect on his behalf and the contractor, either during the progress or after completion of the works or after the determination, abandonment, or breach of this contract, as to the construction of this contract or as to any matter or thing arising thereunder. … or as to the withholding by the architect of any certificate to which the contractor may claim to be entitled, then either party shall forthwith give to the other notice of such dispute or difference, and such dispute or difference shall be and is hereby referred to the arbitration and final decision of … But the defendant if so advised would be willing for the action to be referred to the official referee.

The master, on the matter coming before him, gave leave to sign final judgment. An appeal was subsequently entered, but, probably by an oversight, there was no application to the master for a stay of execution until the hearing of the appeal, and in fact execution immediately took place. A further application was then made to the master to stay that execution, which was ordered upon terms. All these matters proceeded, as it seems to me, solely upon the question as to whether or not judgment should be signed under RSC, Ord 14, the defendants maintaining that they had a defence to the action, and, up till the time when the matter came before the judge, no application to stay the action in accordance with the Arbitration Act 1889, s 4, had ever been made, and, beyond a

Page 153 of [1940] 1 All ER 151

vague reference in an affidavit of one Greathead, no specific request had ever been made to grant a stay. When the matter came before the judgeas we are told, upon the judges own suggestionleave was given to apply to stay the action in the proper form, and that matter was before the judge on the adjourned hearing, together with the original appeal against the decision of the master giving leave to sign final judgment.

We are told that in dealing with this matter the judge refused the appeal so far as relates to the application to stay the proceedings, but he did give leave to defend the action. As to that leave to defend the action, and the order that it should be entered in the short cause list, there is no complaint by counsel for the respondents in this court, but there is an appeal before us on behalf of the defendants asking us to hold that the judge was wrong and that the whole action should have been stayed under the arbitration clause. That is really the matter which is before us, and that question depends in part upon the problem whether in this matter the defendants have not taken a step in the action and so precluded themselves, according to the general principles, from raising this matter. Secondly, there arises the question whether, in the circumstances of this case, they have ever complied with the requirements of the arbitration clause of the building agreement at all, so that, even if the matter where open to them, they could satisfy the court that they were entitled to their stay. The second point, which I may describe perhaps as the question of greater merit, seems to me to be a good one, as taken here by the respondents. It is said: “You never have given that notice which is required by cl 26(b) of the building agreement to refer the matter to arbitration.” The first thing which one has to observe is that the obligation is that the party “shall forthwith give to the other notice.” The only possible letter which can be relied on as constituting a noticeand it is one which was never read to the judge, and which I read now with grave doubts as to whether, in any case, the appellant here is entitled to use itis one dated 28 September 1939. That letter was written many months after the dispute originally arose, and it seems to me quite impossible to say that that letter, dated 28 September 1939, which was just before the writ in this action, dated 30 September 1939, can possibly be a notice forthwith given to the other side. It is the only letter which can possibly be said in any event to comply with the obligation of the clause, as it does say:

We take this opportunity of giving formal notice to that effect.

The letter is from the solicitors to the defendants, and they say, and say truly:

Our clients have already intimated to the architect that they intended to invoke the arbitration clause.

There is a certain amount of want of precision in all the proceedings of the defendants in this case, and everything seems to have been done in

Page 154 of [1940] 1 All ER 151

a very, I will not say evasive, but indeterminate manner. It is true that there were written to the architect certain letters, to which we have been referred, which do vaguely refer, if I may say so, to the arbitration clause, but in any case they do not avail the defendants in this action, because the requirement of cl 26(b) is that they shall forthwith give to the other party notice, and they are not notice to the other party. However, this is the sort of passage which is said to constitute a notice to the architect, who is to be the agent for the other party, and so would comply with the requirements of the clause. This is Wingate writing on 11 August as follows:

As far as I can see at the moment the matter will have to be decided by arbitration in accordance with the contract.

Even if such a notice had been given to the other side, I think that it would be far from being a notice within the meaning of the clause. It is a mere intimation of something which may or may not happen. However, as I say, it never was given to the other side, and, in my opinion, for the reasons I have stated, even had the defendants succeeded in showing that they were entitled to raise this matter, not having taken another step in the action, they would have failed before the judge on that point in any event.

The substance of this case, however, has been perhaps argued rather more upon the basis that the defendants here have taken a step in the action. I entertain myself no doubt whatever that they took a step in the action when they appeared before the master and asked for leave (to quote their affidavit) to defend the action. It is true that there may be difficult cases where an application to stay is made at the same time as leave is asked to defend, upon which I do not propose, for myself, to pass judgment in this case, and where there may be a question as to whether or not those two matters, taken together, would constitute such a step in the action as to preclude the defendants from relying upon their request for a stay. Here, however, one has an entirely different case. One has a summons under RSC, Ord 14, for final judgment, and one has an affidavit in support of leave to defend the action, with a vague intimation that they might not object, as appears in one of the affidavits, to the matter being referred in the action to the official referee. It is only when the matter comes before the judge that the judge, not in order to preclude the argument of counsel for the respondents whether this was a step in the action, but so as to have everything before him, says: “De bene esse, you may now take out a summons for a stay.” In truth and in fact, however, a step in the action was taken when the summons to sign final judgment was answered by affidavit, and no application was made to stay the action on the ground of the arbitration clause. They had the appeal following. The whole case seems to me to have been one where the defendants persistently took steps in the actionnot one step but several stepsand finally, among other things, they asked for and received a favour in the action of being given leave to defend the

Page 155 of [1940] 1 All ER 151

action. In these circumstances, it seems to me impossible to say that there was no step taken in this action. For both these reasons, I think that the judge was right, and, now that we understand really what is left of this case, I think also that he was right in ordering it to be tried in the short cause list.

MACKINNON LJ. I agree. Eventually there was an application by the defendants on 10 November by summons to stay the action pursuant to the Arbitration Act 1889, s 4. It is a condition of the right of any party to take advantage of that section that he shall make such application before taking any other step in the proceedings. I am quite clear that in this case the defendants had not complied with that condition. However, there is a further aspect of it. The making of any order under the Arbitration Act 1889, s 4, is in the discretion of the court, and, by the terms of the section, the judge is directed to act under it only if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. Having heard something of the merits of this case as disclosed in the correspondence, I am not only not satisfied that there is no sufficient reason why it should not be referred, but also I am completely satisfied that there is every reason why it should not be referred. In those circumstances, I think that the order of the judge was perfectly right, and the appeal must be dismissed.

GODDARD LJ. I agree, and desire to associate myself with what MacKinnon LJ, has just said as to the reason why this action should not be referred. For myself, I think that, when an employer reserves the advantage in a building contract of appointing his own architect, who is there to certify, and, in certifying, to protect his interests, and when one knows how much he is in fact at the mercy of the architect, and when one finds that the architect and the employer are disputing the certificate, the court should be very slow to take a step which simply means that the builder is going to be kept out of his money for a long time, as, of course, is the case if it is a proper case to go to arbitration, where innumerable items may be gone into, although the architect may have said that his client requires only to be satisfied that he ought to pay.

The only other thing which I want to say is that The Annual Practice 1940, p 2502, states as follows:

In Allied Artists Corpn v. Jacobson, it was held that where, on a summon for judgment under R.S.C., Ord. 14, the defendant had filed an affidavit disputing the claim and claiming the right to submit the dispute to arbitration, he had not taken a step in the action, but as the defendant had alleged fraud in has affidavit, a stay was refused.

For myself, I should say that that is a somewhat dangerous passage to follow. In the first place, as the stay was refused on the ground that the defendant had alleged fraud, any view which the judge may have expressed as to whether or not the affidavit was insufficient to justify

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a stay is in the nature of an obiter dictum. The position was that, as the defendant alleged fraud, a stay had been refused. For myself, I am not at all satisfied that, if the defendant filed an affidavit in answer to an application for judgment under RSC, Ord 14, although he may raise the arbitration clause, it may not be said that he has taken a step in the action unless at the same time he has taken out a summons to stay the action. Of course, if he has taken out a summons to stay the action which comes on (as, in the ordinary course, it would) at the same time as the summons for judgment, and the master refuses the application to stay, and says, “On the plaintiffs summons, I give judgment,” I should say that there could be no doubt that, in appealing against both the refusal of the master to stay and the order giving leave to sign judgment, the defendant is not taking a step in the action. He has done what he can, by taking out the summons to stay, to get the action referred. If the master has refused that, and the defendant goes to the judge on that, he must at the same time, of course, also go to the judge and say: “Set aside the judgment, because, if this had gone to arbitration, it would follow that the master would not have given judgment.” I myself feel great doubt as to whether, if Swift J, did say what he is reported to have said, it is right. It seems to me that, if a defendant who is sued wants an action stayed, he should take out a substantive application at the earliest possible moment.

Appeal dismissed with costs.

Solicitors: Morrish Strode & Searle (for the appellants); Wylie Patterson & Herring (for the respondents).

Charles Shelley Esq   Barrister.

Bismag Ltd v Amblins (Chemists) Ltd

[1940] 1 All ER 156


Categories:        INTELLECTUAL PROPERTY; Trade Marks        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        8, 11, 21 DECEMBER 1939        


Trade Marks Infringement Use of mark in relation to plaintiffs goods Use as trade mark Use as importing reference to plaintiffs goods Trade Marks Act 1938 (c 22), ss 4, 68(1).

The plaintiffs were the registered proprietors of the trade mark “bisurated” in respect of certain chemical preparations. The defendants were manufacturing and retail chemists who, in the course of their business, issued advertising circulars the lefthand columns of which contained the words “bisurated magnesia” followed by an enumeration of its ingredients, while the righthand columns contained an enumeration of the ingredients of the defendants own preparation. There followed in each column the price of the respective preparations, the price of the defendants preparation being considerably lower than that of the plaintiffs “bisurated magnesia” preparation. The obvious implication was that, although the ingredients were exactly the same, the plaintiffs preparation was less advantageous to prospective customers. On these facts, the plaintiffs alleged infringement of their trade mark “bisurated,” and contended that the defendants had, contrary to the Trade Marks Act 1938, s 4, used their trade mark in relation to the plaintiffs goods, and that such use was “use as a trade mark,” or, failing that, use as

Page 157 of [1940] 1 All ER 156

“importing a reference to” the plaintiffs goods. There was a further allegation of passing off the plaintiffs goods by using the word “Bismag,” which was the name of the plaintiff company. This allegation was not disputed:

Held as the defendants had used the plaintiffs trade mark in relation to the plaintiffs own goods, there was no infringement under either head of the Trade Marks Act 1938, s 4(1)(a)(b).

Notes

The new Trade Marks Act of 1938 introduced a number of changes in the law relating to trade marks, and it is open to a trader to say that his goods are the same in quality as, but cheaper than, those of the owners of the trade mark. That he could do so under the old law was, in effect, decided by the House of Lords in Irvings Yeast-Vite Ltd v Horsenail, and it is now held that the law has not been altered in this respect, so far as the infringement of a trade mark is concerned.

As to Infringement and Exclusive User, see Halsbury (Hailsham Edn), Vol 32, pp 587, 588, para 895; and for Cases, see Digest, Vol 43, p 220, Nos 646655.

Case referred to

Irvings Yeast-Vite Ltd v Horsenail (1934) 103 LJCh 106; Digest Supp, 150 LT 402, 51 RPC 110.

Action

Action for infringement of trade mark and passing off. The facts are fully set out in the judgment.

R E Burrell KC and James Mould (for R A B Shaw on war service) for the plaintiffs.

B L A OMalley for the defendants.

21 December 1939. The following judgment was delivered.

SIMONDS J. The plaintiffs, who carry on the business of the manufacture and sale of medicinal preparations, are the registered proprietors of trade mark No 340,411, registered as of 20 February 1912, in Class 3, Sched III, in respect of “a medicinal stomachic powder for human use,” and of trade mark No 561,459, registered as of 11 July 1935, in the same class, in respect of “chemical substances prepared for use in medicine and pharmacy.” Each of the trade marks consists of the word “bisurated.” The defendants also carry on the business of the manufacture and sale of medicinal preparations. They sell preparations, not only of their own manufacture, but also of other manufacturers, including the plaintiffs.

This action is brought, first, to restrain infringement of a registered trade mark, thereby raising a question of general importance under the Trade Marks Act 1938, and, secondly, to restrain passing off at common law.

The infringement of trade mark of which the plaintiffs complain is in a pamphlet issued by the defendants. There have been more than one edition of this pamphlet. For the purpose of this case, I will take the edition of which a specimen was exhibited in evidence. The earlier edition appears to have been superseded, and the defendants do not threaten or intend to issue it. This pamphlet has been prepared with some care in such a manner as will, if its authors hopes are fulfilled,

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escape the consequences of the Trade Marks Act. It opens with an attack upon patent medicines as follows:

Some plain truths about patent medicines. Read the enclosed and you will save yourself money. Safeguard your health and be much happier as thousands of other people have proved for themselves by taking Amblins famous medicines. For too many years have sufferers been exploited by manufacturers of branded medicines and charged shillings for medicines which cost pence to make.

Then follows these words in large type:

Amblins guaranteed prescriptions are now be be obtained in 6d., 1s., and 2s. sizes.

In the body of the pamphlet, there is much more in the same vein. It is pointed out that many of the much-advertised medicines are made according to well-known formulæ, that millions of pounds are spent in advertising them, that every penny spent in advertising is paid for by a credulous public in the form of exorbitant prices, and that precisely the same article can be supplied by the defendants at a very much lower price. The final exhortation is as follows:

If you want the original advertised remedies, we can supply them to your order at the full prices. If you want Amblins remedies, order by number or by Amblins own name.

This is followed by some pages in which are set out in two columns, the left headed “List of advertised patent medicines sold by us,” and the right headed “Amblins Medicine (Brand) Prescriptions,” first, some well-known branded medicine with its analysis or ingredients and prices, and then, immediately opposite to it, under a prescription number, the defendants corresponding preparation, usually with a description or fancy name, but sometimes only with a number, and having also usually an identical analysis or statement of ingredients and a statement of price, which is in every case lower, and often very much lower, than that of its opposite number. In the particular case of the plaintiffs preparation, the left-hand column reads as follows:

Bisurated Magnesia Tablets. Analysis: Bismuth Carb. Soda Carb. Magnesia Carb. Excipient. Price, 1s. 3d. for about 50 tablets.

The righthand column reads as follows:

Prescription No 7 Bismuthated Magnesia Tablets. Analysis: Bismuth Carb. Soda Carb. Magnesia Carb. Excipient. Price, 30 tablets, 6d., 75 tablets 1s.

The plaintiffs preparation in powder instead of in tablets is similarly treated.

This is the alleged infringement of the plaintiffs trade mark “bisurated.” It will be noted that the defendants do not by any means seek to describe goods of their own manufacture by the plaintiffs mark. On the contrary, they emphasise the distinction between their own and the plaintiffs goods, saying in effect to the public: “You can have the plaintiffs goods or ours. Ours are just the same as theirs, and are much cheaper.” The plaintiffs complain that the defendants are

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deliberately taking advantage of the publicity which extensive advertisement of bisurated magnesia has gained in order to sell their own goods, and claim that thereby their statutory right has been infringed. I do not doubt that the defendants get the benefit of the plaintiffs advertisement. It is not my province to say whether there is any impropriety in such a course. I am concerned only to determine whether the plaintiffs statutory rights under the Trade Marks Acts 1938, s 4, have been invaded. I must, however, observe that the right now claimed is something very different from the protection previously given to trade marks by statute or by common law. It was not ineptly described by counsel for the plaintiffs as being something akin to a limited form of copyright. It is a claim which, if it is valid, must have far-reaching consequences. I see, indeed, no limit to the interference with trading, heretofore counted legitimate, which its assertion might not cause. Nor is there any logical reason why this new form of protection should be accorded to trade marks rather than to all forms of advertised goods. If the assertion by a maker of stout that his product is as good as Guinnesss stout but cheaper, or by a maker of soap that his product is as good as Pears soap but cheaper, is an attack from which the proprietors of these widely advertised goods ought to be protected, it is a wholly irrelevant consideration whether any part of the name “Guinnesss stout” or “Pears soap” is a statutory trade mark. If such a right is, for the first time, to be annexed to a trade mark, it must, in my judgment, be created by clear words.

It is necessary for the consideration of this question that I should look back to the earlier law. By the Trade Marks Act 1905, s 3, a trade mark was defined as a mark:

… used or proposed to be used upon or in connection with goods for the purpose of indicating that they are the goods of the proprietor of such trade mark by virtue of manufacture, selection, certification, dealing with, or offering for sale …

By s 39, the rights of the registered proprietor of a trade mark are thus defined:

Subject to the provisions of sect. 41 of this Act and to any limitations and conditions entered upon the register, the registration of a person as proprietor of a trade mark shall, if valid, give to such person the exclusive right to the use of such trade mark upon or in connection with goods in respect of which it is registered …

This being, under the then-existing law, the statutory right of a registered proprietor of a trade mark, in 1934 Irvings Yeast-Vite Ltd v Horsenail was decided. In that case, the plaintiffs, the registered proprietors of a trade mark “Yeast-Vite,” brought an action against one Horsenail (trading as the Herbal Dispensary) to restrain an alleged infringement of their trade mark, which consisted of a sale by the defendants of their own wares under the label: “Yeast Tablets, a substitute for Yeast-Vite.” The defendants, justly thinking, perhaps, that the matter was too clear for argument, did not appear at any stage of the proceedings, in the course of which it was unanimously held by Bennett J,

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the Court of Appeal, and the House of Lords, that there had been no infringement. Two passages from the opinion of Lord Tomlin in the House of Lords may be cited. Lord Tomlin, said, at p 110:

This is clearly a use of the word “Yeast-Vite” on the respondents preparation to indicate the appellants preparation and to distinguish the respondents preparation from it. It is not a use of the word as a trade mark, that is, to indicate the origin of the goods in the respondent by virtue of manufacture, selection, certification, dealing with or offering for sale.

Later, Lord Tomlin said, at p 110:

The phrase “the exclusive right to the use of such trade mark” carries in my opinion the implication of use of the mark for the purpose of indicating in relation to the goods upon or in connection with which the use takes places, the origin of such goods in the user of the mark by virtue of the matters indicated in the definition of “trade mark” contained in sect. 3.

In this state of the law, a departmental committee, appointed by the President of the Board of Trade, in 1934 made a report on the law and practice relating to trade marks. I was invited to look at this report, and did so, for the purpose of learning the state of the lawa matter upon which I was better able to inform myself from other sourcesand the supposed defects in it. I declined to consider what proposals or recommendations the committee made. That appears to me to be a wholly illegitimate method of approach to the construction of an Act of Parliament. Whether and to what extent Parliament thought fit to remedy the supposed grievances of owners of trade marks must depend on the true meaning of the Act of 1938, in the interpretation of which I cannot be guided by what the committee thought should be done.

The Trade Marks Act 1938, introduced numerous changes into the law. A new definition of trade mark is to be found in s 68(1) as follows:

… “trade mark” means, except in relation to a certification trade mark, a mark used or proposed to be used in relation to goods for the purpose of indicating, or so as to indicate, a connection in the course of trade between the goods and some person having the right either as proprietor or as registered user to use the mark, whether with or without any indication of the identity of that person …

The first difference between this definition and the earlier definition is the substitution of the words “in relation to” for the words “upon or in connection with.” I do not think that a different meaning can be attached to the different words. The second difference is in that which the mark indicates. In the earlier definition, the mark indicated in effect the origin of the goods. In the later definition, it indicates a “connection in the course of trade between the goods and some person.” This difference may have been necessitated by some of the changes introduced into the law, particularly in regard to assignment of trade marks. It cannot, in my judgment, have any bearing upon the essential nature of a trade mark. I turn then to s 4, which takes the place of s 39 of the Act of 1905, and enacts what are the rights given by registration. So far as relevant, it provides as follows:

(1) Subject to the provisions of this section, and of sects. 7 and 8 of this Act, the

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registration … of a person … as proprietor of a trade mark … in respect of any goods shall, if valid, give or be deemed to have given to that person the exclusive right to the use of the trade mark in relation to those goods, and without prejudice to the generality of the foregoing words, that right shall be deemed to be infringed by any person who, not being the proprietor of the trade mark or a registered user thereof using by way of the permitted use, uses a mark identical with it … in the course of trade in relation to any goods in respect of which it is registered and in such manner as to render the use of the mark likely to be taken either (a) as being use as a trade mark; or (b) in a case in which the use is use upon the goods or in physical relation thereto or in an advertising circular or other advertisement issued to the public, as importing a reference to some person having the right either as proprietor or as registered user to use the trade mark or to goods with which such a person as aforesaid is connected in the course of trade … (3) The right to the use of a trade mark given by registration as aforesaid shall not be deemed to be infringed by the use of any such mark as aforesaid by any person (a) in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark if, as to those goods or a bulk of which they form part, the proprietor or the registered user conforming to the permitted use has applied the trade mark and has not subsequently removed or obliterated it, or has at any time expressly or impliedly consented to the use of the trade mark …

I do not think that I get any assistance from any other sections of the Act. The question arises on the true construction of s 4 alone whether or not the statutory right of the proprietor of a trade mark has been enlarged so as to make that an infringement which, under the old law, would not have been an infringement. That this is so is the contention of the plaintiffs counsel, who submit that the Yeast-Vite case, if it had to be decided under the new law, would have to be decided in favour of the plaintiff company.

I have already expressed the view that a “trade mark,” under the new law, is what it was under the old lawso far, at least, as the questions raised in this case are concerned. It does not, however, follow that the statutory right of the owner of that form of property may not be very different. The language of s 4 is involved and difficult to construe. If sub-s (1) had stopped at the words “in relation to those goods,” there would be little difficulty. So far, there is little difference between the language of s 4 and that of the old s 39, and it would not have been possible, in my judgment, to hold that any larger right had been created by the new Act than by the old. I could have come to no other conclusion (taking the facts of the present case) than that the user of the word “bisurated” by the defendants would not be an infringement of the plaintiffs trade mark, unless it indicated goods as originating from, or connected in the course of trade with, the plaintiffs, when in fact they did not so originate or were not so connected. This seems to me as clear as was the meaning of the old s 39. The subsection, however, proceeds to particularise what is to constitute an infringement of the exclusive right created by its earlier words. This part of the subsection is introduced by the words “Without prejudice to the generality of the foregoing words,” and these words, while apt to introduce some right or privilege in regard to which there might be some doubt as to its falling within the ambit of the general words, are infelicitous, if they preface the creation of a right, which could not, upon any fair reading of the general words, be carried by them, and which, as

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I have already observed, is something very different from any form of privilege or protection previously given by statute or common law to the owner of a trade mark.

The claim in the present case is that the defendants have used an identical marknamely, “bisurated”in the course of trade “in relation to” goods in respect of which it is registered and in such manner as to satisfy the conditions of either subcl (a) or subcl (b), the words of which need not be repeated at this stage. It is first to be observed that two conditions are to be fulfilled. First, the word “bisurated” must be used “in relation to” goods in respect of which it is registered. Secondly, it being used in relation to such goods, it must be used in such manner as to fall within subcl (a) or subcl (b). First, then, have the defendants used the mark “bisurated” in relation to any goods in respect of which it is registered? Clearly, they have. They advertise the sale of the plaintiffs goods, “bisurated magnesia.” Is it, then, in relation to those goods or to some other goods that they use the mark? Clearly, it is in relation to those, the plaintiffs, goods that they use the mark. It is true that in the same advertisement they offer to sell their own goods, “bismuthated magnesia,” and that their offer is in immediate juxtaposition to the advertisement of the plaintiffs goods, but it does not seem to me a fair use of language to say that the mark “bisurated” is used “in relation to” the defendants goods any more than the word “bismuthated” is used in relation to the plaintiffs goods. If the true construction is that the word “bisurated” has been used by the defendants only in relation to the plaintiffs own goods, they are protected by sub-s (3). In my judgment, the plaintiffs do not establish that the defendants have satisfied the first condition of infringement.

It is possible, however, that what appears to be the plain meaning of the first sentence of that part of the subsection which I am considering may be displaced by the necessary implication of the latter part of it, so that, reading the subsection as a whole, I must conclude that the words “in relation to any goods” have a wide meaning, and that (to proceeds from the general to the particular) the word “bisurated” in the defendants pamphlet is used in relation to the defendants goods as well as to the plaintiffs goods, in which case the defendants would not get the benefit of sub-s (3). I turn then to the second condition in sub-s (1). It is couched in such difficult language that one may well hesitate to say that it has any very clear implication. First, one must consider subcl (a), and ask: “Is the use of the mark such as to render it likely to be taken as being use as a trade mark?” If I understand the plaintiffs contention, they do not say that the defendants use of the word “bisurated” is “likely to be taken as being use as a trade mark.” Truly, one may pause to wonder at an enactment which, for the protection of a trade mark, appears to prohibit the use of a mark, not only as a trade mark, but also as something else. To this, however, the subdivision into subcl (a) and subcl (b) necessarily points, and it

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is, no doubt, upon this that the plaintiffs rely as an answer to the general criticism upon the nature of their claim, which appears in the earlier part of my judgment. I read once more the relevant words:

… that right shall be deemed to be infringed by any person who, not being the proprietor of the trade mark … uses a mark identical with it … in relation to any goods in respect of which it is registered, and in such manner as to render the use of the mark likely to be taken either (a) as being use as a trade mark; or (b) in a case in which the use is use upon the goods or in physical relation thereto or in an advertising circular or other advertisement issued to the public, as importing a reference to some person having the right either as proprietor or as, registered user to use the trade mark or to goods with which such a person as aforesaid is connected in the course of trade.

In relation to the facts of the present case, the question may be put thus: “Does the use by the defendants of the word bisurated in their pamphlet constitute a use by them of the mark in relation to goods in respect of which it is registered in such manner as to render the use of the goods likely to be taken as a reference to the plaintiffs or their goods?” When that question has been put and answered, the question whether the defendants are protected by sub-s (3) still remains. To me, having read and re-read the subsection, the answer still seems plain. I can find nothing in it which allows, much less compels, me to say that the user of the mark “bisurated” by the defendants is in relation to anything but the plaintiffs goods. It is quite true that the mark is used, and that it is used in relation to goods in respect of which the mark is registeredthat is, it is an advertising circular issued to the publicand that it imports a reference to the plaintiffs, but all those conditions may be fulfilled and yet, if the user is in relation to the plaintiffs own goods, as, in my judgment, the user here clearly is, there is no infringement, for the user is protected by sub-s (3). If this is the construction to which I must otherwise come, I do not think that I must allow myself to be driven from it by the difficulty of finding a case which is covered by subcl (b) and not by subcl (a). It may well be that there are such cases, though they do not occur to me. If the plaintiffs contention is right, a chemist will be liable to an action for infringement if in one part of his shop window he exhibits the plaintiffs bisurated magnesia and in another the defendants bismuthated magnesia, with a statement of its contents and its price upon each. Nor would any stores venture to catalogue under the same and appropriate heading rival preparations for the cure of some common ill, lest the owner of either preparation should say that the name of his preparation was in whole or part protected by a trade mark and that the trade mark was infringed by the mention of the other preparation in its immediate neighbourhood. No test is available by which it can be determined whether, in such a case, there is, in relation to any other than the plaintiffs own goods, a user which imports a reference to the plaintiffs or their goods. I must decline, unless I am forced by clear words to do so, to adopt a construction which would leave the trading community at the risk of the assertion of an indeterminate and hitherto unknown

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right. I come to the conclusion that the plaintiffs case upon infringement fails, and must be dismissed with costs.

The other part of the case can be dealt with very shortly. It is a fact admitted by the defendants that they have sold under the description “Bismag” a medicinal preparation which is not of the plaintiffs manufacture. It was established to my satisfaction that such user of the word “Bismag” is calculated to lead the public into the belief that the defendants goods thus sold are the plaintiffs goods. There is, therefore, a clear case for relief. I accept the defendants evidence that they used the word “Bismag” in ignorance of the existence of the plaintiff company and of the possibility of deception. In fact, they themselves called the attention of the plaintiffs to the user of which complaint is made, being under the impression, when they received the writ in this action, that it related to that user, and at once offered to make the necessary amends. They did not, however, by their defence adhere to this line. Accordingly, I must deal with this part of the case strictly. I will accept the defendants undertaking in the terms of para 2 of the claim. There will be the usual order for delivery up of labels, and the like, which contain the offending word “Bismag.” Upon the footing that the plaintiffs have succeeded in this part of their case, I will order them to pay three-quarters only of the defendants costs of the action.

Judgment for defendants as regards infringement of trade mark. Judgment for plaintiffs as regards passing off. Plaintiffs to pay three-quarters of defendants costs.

Solicitors: McKenna & Co (for the plaintiffs); Edward Davis Nelson & Co (for the defendants).

F Honig Esq   Barrister.

Way v Penrikyber Navigation Colliery Co Ltd

[1940] 1 All ER 164


Categories:        EMPLOYMENT; Other Employment: HEALTH; Health and safety at work        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        13 DECEMBER 1939        


Workmens Compensation Course of employment No evidence of cause of accident Compensation paid after notice of accident Whether payments evidence that accident happened in course of employment.

A workman, employed by the respondent company as an ostler, returned home from work on 22 August 1938, injured and with a lump in the groin. He had been found earlier in the day sitting disabled in the colliery, and had been assisted out by the ambulance man there. Up to that date he had been a healthy and regular workman. He was seen by a doctor, who considered that a violent blow would have been necessary to produce the injury. Notice of the accident was given to the employers on the same day. The workman was at home for 11 weeks, during which he was paid 30s a week by the employers. He returned to work, but subsequently collapsed and died on 23 January 1939. There was no evidence as to how, when, or where the accident happened. On a claim for compensation by a dependent, the county court judge found in favour of the applicant on the ground that the injury was

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suffered by an accident arising out of and in the course of the workmans employment, and that that injury caused or accelerated his death. The employers appealed on the ground that there was no evidence on which the judge could so find:

Held (Slesser LJ dissenting) the payment of compensation by the employers was prima facie evidence that the injury was caused by an accident arising out of and in the course of the workmans employment, and, as the employers had done nothing to rebut it, there was evidence to support the finding of the judge.

Notes

In this case the most important point raised was whether the payment of compensation by employers to a workman constitutes an admission of liability. Here there was evidence that an accident had happened, but there was no evidence as to how, when or where it had happened. It was held by a majority that the payment without qualification of the full compensation to which the workman was entitled under the Act was prima facie evidence of an admission that an accident had occurred for which the employers were liable. Such payment, however, does not amount to an estoppel, as the implication can be rebutted by further evidence as in the case of Harrison v Featherstone. Slesser LJ, however, was of the opinion that the payment did not afford even prima facie evidence of an admission of liability.

As to Admissions of Liability, see Digest, Vol 34, p 387, Nos 31353140. See also Williss Workmens Compensation (32nd Edn), pp 653, 654.

Cases referred to

Pitt v Stretford & District Gas Board (1936) 29 BWCC 43; Digest Supp.

Harrison v Featherstone (1916) 10 BWCC 54; 34 Digest 387, 3138.

Manton v Cantwell [1920] AC 781; 34 Digest 257, 2199, 89 LJPC 73, 123 LT 433, 13 BWCC 55.

Appeal

Appeal by the respondents from an award of His Honour Judge Clark Williams KC at the Aberdare County Court, dated 26 October 1939.

The facts are fully set out in the judgment of Slesser LJ.

F W Beney for the appellants.

D P Maxwell Fyfe KC, Griffith Williams and Ralph Etherton for the respondent.

13 December 1939. The following judgment was delivered.

SLESSER LJ. In this case I regret to say that the Court is divided in its opinion. In my opinion, this appeal succeeds. I do not think that there was any evidence on which the judge could find in favour of the applicant that the deceased workman had met with an accident which arose out of and in the course of his employment.

The application for compensation in this case, under headings 3, 4 and 5, nature of employment, date and place of accident, and nature of injury to deceased, states as follows:

The workman Frederick Way was employed as an ostler at the respondent colliery at Penrikyber and met with an accident arising out of and in the course of his employment therein on Aug. 22, 1938, as the result of which the applicant died on Jan. 23, 1939.

The applicant is a dependant, and no question as to dependency arises. Then, finally, para 13 is as follows

Date of service of statutory notice of accident on respondent from whom com-

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pensation is claimed, and whether given before deceased voluntarily left the employment in which he was injured. Notice of injury duly given.

In the answer, it is said, first on all:

… the said Frederick Way deceased did not sustain injuries of the nature in manner alleged in the request for arbitration on Aug. 22, 1938.

Secondly, it is said:

… the death of the said Frederick Way deceased was not the result of his alleged accident.

Then, it was said:

… the said Frederick Way deceased died from natural causes.

There is no denial of the fact, and, therefore, it must be taken to be admitted that notice of injury had been duly given.

On that, the judge came to the following conclusion, as stated in his signed judgment:

In this case, I found that the deceased workman on Aug. 22, 1938, suffered an injury in the region of the right groin by accident arising out of and in the course of his employment under the respondents, and that this injury aggravated and accelerated, if it did not cause, the growth and spread of the sarcoma which caused the death of the workman, and that the injury accelerated the death.

The evidence with regard to the alleged accident was as follows. Selina Way, mother of the claimant, who had lived with the deceased for many years, stated that up to 22 August the deceased was a healthy man, and that she did not recollect that he had had any serious illness. On 22 August he came home earlier than usual. His usual time of return was 10 am. He was employed as a haulier in the colliery, and is described as an ostler in the application. She said he could hardly walk in, and when she was washing him she noticed a “small little lump on the right groin.” After 11 weeks, he went back to work, and then failed again. Later on, being again incapacitated, he fell and broke his arm and was taken to hospital. He was examined by Dr Reid Thomas on 22 August the day on which the deceased came home early, and the doctor noticed that he had a large swelling in the right groin and that the skin in that area was discoloured and bruised. The doctor expressed the view, which we may assume that the judge accepted, that a violent blow would be necessary to produce that condition. That fact was disputed by other doctors, but the judge was, of course, fully entitled to accept the evidence of Dr Reid Thomas to that effect. The judge, therefore, was entitled to hold, if he accepted that evidence, that the swelling of the right groin, and, I suppose, the many other incidence of sarcoma which broke out in different parts of the mans body, were either caused or accelerated by a blow which he had received on 22 August because Selina Way said that before that time he had had no serious illness and was a healthy man, a regular workman, and did not speak of any blow before that time.

If there be any evidence on which the judge could have found, as a fact, that this man had suffered an accident on 22 August which ultimately called his death, this court could not have disturbed that finding, but it is said by counsel for the employers that there is no evidence at all, and

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that the judge, in coming to the conclusion which he did, could only have arrived at it by a mere conjecture or guess, and not by the process of logical inference. I do not think that counsel for the appellants disputes (if he does, I do not agree with him) that there was evidence that a violent blow caused the condition of this man, but that still leaves open the question of how this man got a violent blow on 22 August. As to that, there is no evidence whatever. It may have been that this man was alone at the time, and that no one could speak to how he received this violent blow. However that may be, there is a complete absence of evidence from any of his mates working with him of any accident at all. Counsel for the appellants says that to assume that the blow arose out of and in the course of the employment is an entire assumption, and merely to state that the blow caused the ultimate death of the workman is no ground for saying that the death was caused by an accident arising out of and in the course of his employment, because there was no evidence as to how, when or where the blow was received by this man.

I have not repeated the rest of the evidence, because it is entirely negative in character and throws no light upon the cause of the accident. If the matter had stayed there, I should have entertained no doubt at all but that there was no evidence upon which the judge could have come to the conclusion that this blow was caused by something which happened at this mans work. However, there is raised another question, which has caused a good deal of discussion and the citation of authority, with which I must deal. It is said by counsel for the respondent that there is evidence which the judge could follow in coming to his conclusion, other than the evidence that this mans blow caused his death, which the judge may have taken into account, and which appears in the notes of an oral judgment recorded by the solicitor for the appellants, or, at any rate, as being one of the elements which was before his mind, and it is this. Selina Way states in her evidence that, during the period when he was home for 11 weeks, between 22 August and the time when he went back to work, he was on full compensation of 30s per week, and it is said that that statement, coupled with the fact that it is conceded by the appellants that a notice of injury was duly given, amounts to evidence that this man was being paid compensation in respect of an accident which happened on 22 August and, as I understand the way it is argued, that accident can only have been in relation to the blow which caused the little lump on the right groin which kept him at home.

This argument, to my mind, is one which is very deserving of careful consideration. In my view, what is admitted here, on the evidence, and what is to be derived from the evidence, does not amount, on this head, to anything from which the judge was entitled to draw the inference that the dependants claim should succeed. Compensation under the Workmens Compensation Act may be paid in at least four different conditions. It may be paid as the result of an award. That, of course, is not this case. Secondly, it may be paid as the result of a recorded

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agreement. That is not this case. Thirdly, it may be paid as the result of an agreement not recorded, and, fourthly, it may be a mere voluntary payment not made under any agreement at all. This payment may or may not have been made under an agreement. It is sufficient for my purpose to say that I can find no evidence that it was so paid under an agreement, and it may well have been paid, and, possibly, was paid, as a mere voluntary payment. I do not think it would be right to draw the conclusion that, because an employer had received notice of an accidentI believe I am right in saying that it is a statutory obligation in the case of a colliery company to keep an accident book in which accidents are recorded, if not directly reported to the employer or foremanand a payment of money was made which somebody else (in this case, Selina Way) describes as compensation, that constitutes by itself any evidence of an agreement between the employer and the workman that in consideration of the accident, the workman shall receive the payment. It seems to me quite as likely that, this man giving notice of the accident, this money was paid without prejudice to any rights which the employer might or might not have had at any future time to terminate that payment, subject, of course, to the operation of the Workmens Compensation Act 1925 , s 12, which limits the right to stop compensation once it has been paid. That does not apply in this case, because the workman, in fact, had returned to work.

I find myself unable to draw any conclusion that that is any admission on behalf of the employers that they paid compensation in relation to an accidentthat is to say, an admission that in this case the accident happened on 22 August which resulted in the workmans death, which might have been caused by the blow, as stated by Dr Reid Thomas. For all I know, it may be that compensation was paid in relation to some disability on 22 August which was not the result of the blow at all, but of some other cause. I do not think it is right to speculate on these matters, and counsel for the appellants seemed to me to put a very pertinent question to the court when he asked the rhetorical question: “If this be an admission, of what is it an admission?” I think it can,  on any view, amount to no more than an admission that on that date having received a notice of an accident, the employers paid to the workman a certain sum of money, possibly equivalent to the sum which he would have been entitled to receive if he had had a right to compensation.

I do not think myself that the authorities carry the matter any further. It is admitted that in this case no question of estoppel arises. There is nothing to preclude the employers, as a matter of evidence, from raising any point which they desire to raise, and the only question is whether they have made here an admission sufficient to afford some evidence, if evidence otherwise be lacking, that this man by this blow while working in the course of his employment met his death. For myself, I can find nothing to support that view. In Pitt v Stretford &

Page 169 of [1940] 1 All ER 164

District Gas Board, cited to us by counsel for the appellants in reply, it appears that a workman had made a statement to a foreman of an accident, which was duly entered in the book kept as a register of accidents under the Workmens Compensation Act 1925, s 15. That book was for the purpose of satisfying the conditions of compensation, and it was argued by counsel for the appellant that that entry was evidence of the fact that the man had met with an accident, the question otherwise being whether it was any evidence of an accident arising out of and in the course of his employment. This court came to the conclusion that the mere entry in the book of the accident could not be used as evidence of the occurrence of the accident. In giving judgment, I say, at pp 45, 46:

It is evidence for that purpose [that he had given notice] and, in my opinion, for no other purpose. It is evidence that the man did make a statement to the foreman on 27 July that he had met with an accident.

In this case, having given that notice, the employers paid compensation, which, as I say, may have been paid voluntarily or not, but, however it was paid, the fact that it was paid seems a very long way from constituting any admission that this man met with any specific accident on that date. It is not conclusive, but it is at least to be noted that not only in the application for arbitration, but also in the judgment itself, no accident is defined as to place, time or condition, and, reading the judges judgment, we are left completely in the dark as to what this blow was which alone can be said to be the effective cause of the accident. The judge abstained from finding that this man ever did meet with any blow at all, and, apparently, as pleaded, it was no part of his case. At any rate, the workman was unable, in making his claim, to define how, when or where this accident occurred. It would be wrong to draw from the mere fact that the employers did pay compensation on 22 August which may have been ex gratia, the conclusion that that was an admission that this man had suffered a blow while at work. The authorities, although I abstain from citing them, satisfy me that there is no ground on which such an inference can properly be drawn. Therefore, so far as I am concerned, this appeal would succeed. As the majority of the Court are of a different opinion, however, this appeal fails, and must be dismissed.

MACKINNON LJ. This is an appeal from an arbitration in which it was alleged that the applicants father died as the result of an accident on 22 August 1938. It was asserted by the applicant that the death was caused or accelerated by the alleged accident, and the county court judge held that that assertion had been established and awarded her compensation. There is an appeal to this court which is only capable of being pursued if the county court judge was wrong in law, his findings of fact being binding upon this court. The only question argued, and

Page 170 of [1940] 1 All ER 164

the only question before us, is whether there was any evidence on which the county court judge could, as he did, come to the conclusion that the workman met with an accident on 22 August.

The evidence with regard to that was that of three personsnamely, Williams, the ambulance man in the colliery, Selina Way, the mother of the applicant, and Dr Reid Thomas. Selina Way, who lived with the deceased, gave evidence that up to 22 August 1938, presumably when she saw him depart for his work, he was a healthy man and a regular workman. It appears from the evidence of the ambulance man that the deceased went down the pit at about 5.30 pm. At 6.30 pm, the ambulance man was called by the master haulier and directed to see the deceased. He found the workman sitting on a bin in the stables, where his work was, suffering from a lump in the groin, which disabled him. The workman had to be helped out and tottered home. Then, to resume the evidence of Selina Way, he came home at about 10 am, which was earlier than usual, and could hardly walk. She also saw the lump in his groin. The doctor said that he saw him on that morning, that he found a large swelling in the right groin, and that a violent blow would be necessary to produce that condition. The further facts proved were that the man gave notice of the accident on 22 August. That is alleged in the pleading of the applicant, and was not denied in the defence. She further proved that he stayed at home for eleven weeks and received from the respondents full compensation under the Workmens Compensation Act, at 30s. per week.

Those were the facts proved. The question isand it is a very subtle one, and I agree so far that it is a difficult one, and one on which my opinion has fluctuated during the course of the argumentwhether or not, on proof of those facts, if not displaced or disputed by evidence on the part of the respondents, there is evidence on which the county court judge could come to the conclusion that there was an accident. I think that there is some evidence on which he could come to that conclusion, the main point being, in addition to the other facts I have stated, that the deceased made his claim for compensation, and that for 11 weeks compensation was paid to him by the company. Prima facie, at any rate, it was paid upon the basis that he had met with an accident, and the giving of compensation under that head, I think, is some evidence. The respondents could have given evidence, had they been able to or had they desired to, that, though 30s per week was paid to him, it was not paid by way of any recognition or admission on the part of the company that he had met with an accident, and that it was paid without any investigation into the facts or without prejudice, or merely out of charity, or in some other way. In the absence of any evidence from the respondents, however, I think that the fact of their paying compensation under the Act, or the amount of compensation which would be recoverable under the Act, for 11 weeks, left unexplained, is some evidence that they admitted that there was an accident, and that admission, taken

Page 171 of [1940] 1 All ER 164

with the other facts which I have indicated, is evidence on which the county court judge could come to the conclusion which he did.

It occurs to me that one may test it in this way. Supposing counsel, before this case came into court, had been asked to advise on evidence, and was given a statement that the various facts which I have indicated could be proved. I think that he would be right in saying: “If you can prove those facts, that will be a prima facie case, but, of course, I must warn you that we cannot foresee what evidence the respondents may call. If the respondents call evidence to rebut any of those facts, and, in particular, if they call evidence to explain away the prima facie inference to be drawn from their payment of compensation of 30s per week, we may be in difficulties.” As no evidence was called by the respondents, I think that, upon the facts I have stated, there was some evidence on which the county court judge could come to the conclusion he did. In the result, I think that this appeal fails, and must be dismissed.

GODDARD LJ. I agree with MacKinnon LJ. The only question in this case is whether or not there was evidence of an accident to the workman arising out of and in the course of his employment. I need not go through the facts which have just been recited by MacKinnon LJ. The outstanding feature of the case, to my mind, is this. Notice of an accident stating that an accident had happened on 22 August which is the date upon which the applicant alleges the accident happened, was given by the deceased man to his employers. Thereupon, for 11 weeksthat is to say, until he returned to workfull compensation was paid by the employers to the workman. By “full compensation,” I understand, is meant the full amount which he was entitled to receive under the Act, and, so far as the evidence goes, it was paid to him without qualification of any sort whatever. I find it very difficult to see how it can be said that that is not some evidence on which the judge can find that the respondents to the arbitration admitted that an accident had taken place.

The cases to which we have been referred were all cases in which it was sought to say that payment of compensation amounted to an estoppel. It does not amount to an estoppel, and no one has suggested that it does, but, although it does not amount to an estoppel, it may very well amount to prima facie evidence of an admission, which can be rebutted if the respondents choose to give evidence to rebut it. Of the cases cited, the one which I think brings out the distinction most clearly is Harrison v Featherstone. In that case, an employer had paid to a lad compensation for an accident which the employer believed had taken place. When he ceased to pay compensation and the case came before the county court judge, the whole facts were gone into, and, on the evidence, the county court judge was satisfied that there had never been an accident to this boy at all arising out of and in the course of his employment. He had met with the accident through larking. The county court judge said that, the respondents having

Page 172 of [1940] 1 All ER 164

paid compensation, they were estopped from denying that an accident had taken place. This court said that that was wrong and that there was no estoppel, but the court did not, in that case, have to consider the question whether or not the payment of compensation amounted to an admission, because the whole facts were gone into, the circumstances in which the payment was made were explained, and the county court judge found as a fact that the accident did not happen in the way alleged by the boy. Therefore, there being no estoppel, the boy was not entitled to any compensation.

The only case in which this matter has been adumbrated at all is Manton v Cantwell, in the House of Lords. In that case, which came from Ireland, the county court judge in Ireland had held that the respondent was not estopped by an agreement from denying liability, but had found that the appellant was employed for the purpose of his employers trade or business. The question was whether or not the employment was for the purpose of the employers trade or business. The Court of Appeal in Ireland reversed the county court judge on that fact, and held that the workman was not employed for the purpose of the employers trade or business. When the case came before the House of Lords, the actual decision of the House was that the county court judges decision must stand because it was a question of fact, and he had evidence before him on which he could find as he did that the man was employed for the purpose of the employers trade or business. However, as the county court judge had given a judgment on the ground of estoppel, Lord Birkenhead LC, and Viscount Finlay dealt with that point, and said, as this court had said in Harrison v Featherstone, that there was no estoppel, and, since they were restoring the judgment of the oounty court judge, Lord Birkenhead LC, did not find it necessary to deal with this question of the admission, which had not been argued in the court below, and was not necessary to be gone into in the House of Lords, because, quite apart from any question of admission, the county court judge found facts which entitled him to make the award which he did. Therefore, this point, so far as I know, had never yet come before the court.

It seems to me that it is prima facie evidence that the employer has admitted that an accident, for which he was liable to pay compensation, arose if he paid the man full compensation, without qualification, for 11 weeks. I quite recognise that considerate employers from time to time have been known to pay compensation for accidents, although they may be under no legal liability to do so. Generally, when that happens, one finds that the money is stated to be paid without prejudice, or as an act of grace. After all, however, we are dealing here, not with what I may call a private employer, but with a colliery company, and, so everybody knows, in these matters of employers liability under the Workmens Compensation Act, insurance companies are concerned, and, indeed, rights are given to the workmen, in certain circumstances, to

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enforce their rights against insurance companies, and it is very unusual to find a workman receiving full compensation for 11 weeks without any qualification that it was paid without prejudice, and so forth, on the footing that it was a mere voluntary payment. If the payment had been made by mistake, or because the employers believed that an accident had taken place, when in fact it had not, or if it was the fact that they accepted the mans word and never took the trouble to inquire into it, they can prove it. Once the widow had proved that her husband had met with an accident and had received the amount he was entitled by statute to be paid by the employer, it seems to me that that is evidence upon which the county court judge could say, so long as that was unexplained and uncontradicted: “I shall hold that that accident entitling the man to compensation did take place on the day from which you paid compensation, which was the day on which the notice admittedly received by you stated that the accident took place.”

I think, too, that the case was strengthened by the evidence of the man Williams and by that of the doctor. The man Williams, who was sent to this workman by the master haulier, applied a bandage. Obviously, from the nature of the bandage and from what he saw, Williams thought that an accident had taken place. The doctor stated that from what he saw on this day, from the nature of the swelling, and so forth, he thought that an accident had taken place and that the workman had received a violent blow. Thus, the man received compensation for 11 weeks. He then went back to work again, and ultimately collapsed and died. For these reasons, I think that there was evidence from which the judge could come to the conclusion he did, and, as I agree with MacKinnon LJ, the appeal must be dismissed.

May I add to my judgment one thing. Counsel for the respondent argued here that the money was deemed to be paid under an agreement within s 21 of the Act. I do not want it to be thought that I have overlooked that argument. I only want to say for myself that I prefer to rest my judgment on the ground which I have stated, and I express no opinion as to that argument.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Furness Wells & Co, agents for Arthur J Prosser, Cardiff (for the appellant); Smith Rundell Dods & Bockett, agents for Morgan Bruce & Nicholas, Pontypridd (for the respondent).

Derek H Kitchin Esq   Barrister.


Watson v Buckley, Osborne, Garrett & Co Ltd and Wyrovoys Products Ltd

[1940] 1 All ER 174


Categories:        TORTS; Negligence: SALE OF GOODS        

Court:        MANCHESTER MICHAELMAS ASSIZES        

Lord(s):        STABLE J        

Hearing Date(s):        30 NOVEMBER, 1 DECEMBER 1939        


Negligence Dangerous goods Doctrine of MAlister (or Donoghue) v Stevenson Applicability to distributors of goods Exclusion of intermediate examination by advertising safety of user.

Sale of Goods Implied warranty Contract partly sale of goods and partly rendering of services Dangerous hair dye.

The plaintiff had his hair dyed by the first defendant at her hairdressing establishment with a product which was manufactured by the third defendants and distributed by the second defendants. The product used consisted of the dye proper and a fixative lotion. The latter was intended to contain a 4 per cent solution of acid, to be diluted to a 2 per cent solution before it was applied to the head. The distributors advertised the product as absolutely safe and harmless, and as positively needing no preliminary test before use. The hairdresser showed these advertisements to the plaintiff and told him that she had not put the product to any test and had had no experience of it in action. The plaintiff, upon whom no preliminary test was made, decided to try it, and the hairdresser, without negligence, applied it to his head strictly in accordance with the distributors directions as to diluting the lotion and otherwise. In fact it was found that the lotion used was a 10 per cent solution instead of a 4 per cent solution, and as a result the plaintiff contracted dermatitis. The solution had not been examined by the distributors before they passed it on to the first defendant. The distributors had, in the course of their negotiations with the manufacturers, been informed that the solution should not be more than a 4 per cent solution but took no precautions to make strict conformity with this requirement a term of their contract with the manufacturers, nor did they at any time test the solution supplied. The plaintiff claimed damages against the hairdresser in contract and against the distributors in tort for negligence. The manufacturers, who had gone into liquidation, did not appear and the claim was not prosecuted against them. It was contended, on behalf of the hairdresser, that she had negatived any implied warranty that the product was safe, and on behalf of the distributors, that, even if carelessness were proved against them, they were under no liability to the plaintiff as they were never in direct relationship with him:

Held (i) the hairdresser was liable in contract, as, by using the product, she had impliedly warranted that it was a merchantable hair dye.

(ii) the second defendants were liable, as, on the facts, they were found to be negligent, and by their advertisements they had intentionally excluded interference with, or examination of, the article by the consumer and hence had brought themselves into direct relationship with him.

(iii) the product was itself a dangerous one, even if only the proper percentage (4 per cent) of acid had been present, and hence an unusual standard of care was required, and the distributors, on this further ground, owed a duty to take care towards the plaintiff, and were in breach of that duty.

Notes

This is a case of exceptional importance and interest on all the points decided, but undoubtedly the principal interest lies in the extension of the doctrine of MAlister (or Donoghue) v Stevenson to distributors of goods, as distinct from manufacturers. It is probable that the application of the doctrine to distributors is limited, and it is necessary to show that in some way they have been careless in their handling of the particular goods.

Page 175 of [1940] 1 All ER 174

As to the Doctrine in MAlister (or Donoghue) v  Stevenson, see Halsbury (Hailsham Edn), Vol 23, pp 632634, para 887; and for Cases, see Digest, Supp, Negligence, Nos 361a364m.

Cases referred to

Myers (G H) & Co v Brent Cross Service Co [1934] 1 KB 46; Digest Supp, 103 LJKB 123, 150 LT 96.

MAlister (or Donoghue) v Stevenson [1932] AC 562; Digest Supp, 101 LJPC 119, 147 LT 281.

Parker v Oloxo Ltd, and Senior [1937] 3 All ER 524; Digest Supp.

Grant v Australian Knitting Mills Ltd [1936] AC 85; Digest Supp, 105 LJPC 6, 154 LT 18.

Action

Action for damages. The claim against the first defendant was founded on contract and was for breach of warranty. The second and third defendants were sued in tort for fraud and negligence. The issue of fraud was abandoned. The case against the third defendants was not pursued. Watson was in the habit of having his hair dyed at Mrs Buckleys establishment, and had never had any cause to complain of the skill and care of Mrs Buckley. On 20 June 1938, he called at Mrs Buckleys shop by appointment to have his hair dyed an auburn shade. Mrs Buckley told him that a new dye, “Melereon,” had come on to the market, and showed him some advertising matter relating to the dye in a trade journal. The dye was used on Watsons head, and he contracted dermatitis. The dye was in two parts, a preparation of powder, and a fixative lotion. The lotion in this case was found to contain a 10 per cent solution of chromic acid.

N H Lever for the plaintiff.

A Denis Gerrard and E Perez for the first defendant.

D P Maxwell Fyfe KC, H Simmons and C T B Leigh for the second defendants.

The third defendants did not appear and were not represented.

Lever: The article was not of merchantable quality: Merchandise Marks Act 1887, s 17.

Gerrard: In the simple case of a client going to a barber, there is an implied warranty that the barber will use due skill and judgment: Myers (G H) & Co v Brent Cross Service Co. I decline to draw an analogy between this case and the Sale of Goods Act 1893, s 14.

Stable J: This is analogous only in so far as Watson relied on Mrs Buckleys skill and judgment in selecting dyes.

Gerrard: He knew she was no wiser than he was, and, therefore, the implied warranty is rebutted.

Stable J: This article is sold parts by description“hair dye” and partly by trade name. There must be a warranty that it is a hair dye.

Gerrard: The position is rather that Watson has a choice between what Mrs Buckley has tested and what she has not. If he chooses a dye she has not tested, he takes the risk. Further, this is a purchase by name, and not by substance, on the part of the buyer, and the seller

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is exonerated. The sellers lack of knowledge here overrides the implied warranty.

Fyfe KC: The two questions to be decided are (i) was there carelessness, on the facts, on the distributors part? and (ii) was there a duty on Watson to take care? [Counsel referred to Salmond on Torts, 9th Edn, p 459, and to MAIister (or Donoghue) v Stevenson at p 599.] The manufacturer and consumer must be brought into direct relationship. The distributors are not connected directly here, as (i) they are not manufacturers, and (ii) they have not excluded intermediate persons. Mrs Buckley represented this as a merchantable article. [Counsel referred to Parker v Oloxo Ltd and Senior and Grant v Australian Knitting Mills Ltd.]

Simmons followed.

Lever in reply.

N H Lever for the plaintiff.

A Denis Gerrard and E Perez for the first defendant.

D P Maxwell Fyfe KC, H Simmons and C T B Leigh for the second defendants.

The third defendants did not appear and were not represented.

1 December 1939. The following judgment was delivered.

STABLE J. This is a case, from the legal point of view, of some interest. The plaintiff claims damages from Mrs Buckley and Messrs Osborne, Garrett & Co Ltd, and from Wyrovoys Products Ltd, by reason of the fact that on 20 June 1938, he attended Mrs Buckleys hairdressing establishment and there had his hair dyed with a produce which was manufactured by Wyrovoys Products Ltd, distributed by Ogee Ltd, and rubbed on his head by Mrs Buckley, as a result of which as he alleges, he contracted dermatitis. He claims against Mrs Buckley on contract, and on nothing but contract. His claim against Ogee, Ltd and Wyrovoys Products Ltd, was, in the statement of claim, based on negligence and fraud. Before I deal with the case, it is only right at the very outset, that I should make it quite plain that, so far as there was an allegation of fraud, there was not one scintilla of evidence from start to finish of this case, to support any such allegation, and the allegation was very properly withdrawn without qualification and without reservation by counsel for the plaintiff at the conclusion of the evidence which he had called.

On 20 June, Watson, as I have said, had his hair dyed with this material by Mrs Buckley for reward. As a result of that, beyond a shadow of a doubt, he contracted dermatitis and has suffered damage. No evidence of negligence on the part of Mrs Buckley was adduced and any allegation of lack of care or skill on her part was expressly disclaimed on behalf of the plaintiff.

A Spanish gentleman named Wyrovoys, who had carried on his hair dressing trade at Barcelona, being driven out of Spain, came to London. Ultimately he was introduced to one Osborne, the managing director of Ogee Ltd. Ogee Ltd., is a limited company which, I am told, has carried on business for over a century in the distribution of lotions and various articles of that sort which are found in hairdressers shops. It is an old-established business, and the present managing director has told me that his own family has been associated with the business since its inception. It is sufficient to say it is an old established,

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important and highly reputable concern, to which Wyrovoys represented that he had got a hair dye, a secret process which dyed hair successfully and which was safe. He told Osborne that he had used it in Barcelona for 16 years and had never had a complaint as to its harming anyone, and Osborne was interested in the matter.

Ultimately, an agreement was made on 9 January 1938, between trustees for Wyrovoys Products, Ltd, a limited company which on 9 January 1938, had not then come into existence, and Ogee, Ltd. At some time prior to the hearing of the case, the former company went into liquidation. The written agreement provided, in not unfamiliar form, for the appointment of Ogee, Ltd, as the sole selling agents and distributors for a certain geographical territory. The appointment was for 3 years, and the agreement provided the price at which the commodities were to be supplied to the distributors, and contained a clause which left the packing and get-up for sale in the discretion of Ogee, Ltd, subject to the approval of Wyrovoys Products, Ltd. Cl 9 provided that Ogee, Ltd, the distributors, should advertise and push the sale, and cl 11 provided a guarantee by the proprietorsnamely, the trustees for the companythat the product was, to the best of their belief, harmless. Before that agreement was signed, Dr Parry, a well-known analyst, had had a specimen of this dye. I should say that the dye is sold in two bottles, one the dye proper, and the other the fixative lotion. Dr Parry had certified that he had examined the sample, and that he found it to be a very efficacious hair dye of a harmless character which might be used without any ill-effects. What Dr Parry examined, however, was the hair dye and the fixative lotion at its 4 per cent solution of a certain acid, and he made the examination on the basis that the 4 per cent solution of this acid was to be diluted to 2 per cent before the lotion was applied to the human head.

In performance of this agreement, Wyrovoys Products, Ltd, appear to have set up a factory. So far as we know, it was somewhere in Great Portland Street, but no one who gave evidence before me saw the factory, or seems to have known who was in charge of the manufacture, or who was supervising. From time to time, however, deliveries were made, the lotion in carboys and the powder in cartons, and the practice was that, when these deliveries to Ogee, Ltd, were made by the manufacturer, the liquid was poured from the carboy into the attractive bottles in which it was distributed to the trade, and the powder or a solution of it was supplied in some other container. This was done by Ogee, Ltd, and it was done, admittedly, without any sort of test being made as to whether the lotion contained a safe proportion of this acid, which, for the purpose of this judgment, I will call chromic acid. I do not suppose that that is technically the right word, from the chemists point of view, but it has been called so many things, from potassium chromate to chromic acid, that, as I must fix on some name, I will call it chromic acid.

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I ought to say that actually the sample which was submitted to Dr Parry for analysis contained 4 per cent of this chromic acid, and, on dilution, before being put on to the customers head, if the directions were complied with, it would be reduced to 2 per cent. I was told in evidence that the most important and essential stipulationnamely, that the chromic acid was not to exceed 4 per cent in the lotionwas merely mentioned as between Ogee Ltd, and the manufacturers at a general conversation, but the percentage of chromic acid was never the subject-matter of a particular clause in the written agreement, nor was this particular percentage ever reduced to writing or brought to the mind of the manufacturers other than by word of mouth, and one cannot help thinking that, in dealing with a limited company such as Wyrovoys Products, Ltd, wereafter all, human beings come and goit was a very grave omission that written confirmation of, and insistence on, the importance of this 4 per cent limit was non-existent.

Having taken over delivery of this in the way they did, and having put it up in the cartons and bottles for distribution to the trade, Ogee, Ltd, proceeded to advertise the commodity somewhat extensively. An advertisement appeared in the Hairdressers Weekly Journal, a work which, although perhaps of rather more interest to the particular trade than to the general public, is registered as a newspaper. The issue of 4 June 1938, contained, among other references to this product, a full-page advertisement on pp 2376, 2377. I will not read it all, but on the lefthand page, it is important to observe, we see this:

Mark your next hair dye order “Melereon” the safe harmless hair dye.

Then on the righthand page we are told that this preparation:

… has no ifs or buts; is a hair dye that will not harm the most sensitive skin, the hair dye that positively needs no preliminary tests.

That advertisement appeared in a newspaper controlled by Ogee, Ltd. It was an advertisement which they themselves approved and prepared, and for which they were responsible in every sense of the word, and it was thus that this preparation was launched on the world.

In 1938, Watson, like most of us, found he was not getting any younger. He is a waiter by occupation, and he found that, the older you get and the older you look, the harder it is to get a job, so, very sensibly, when patches of grey appeared in his hair, he adopted the practice of going to Mrs Buckley, who carries on an old-established hairdressing business, and having this slight infirmity removed. On 20 June 1938, he went to Mrs Buckley for that purpose. Mrs Buckley had got in a supply of this new hair dye. She had the advertisement in the Hairdressers Weekly Journal, and she had one or two little brochures. These are both in evidence, and contain a certain amount of directions as to the use of this hair dye. They lay considerable emphasis on the fact that “It is the harmless hair dye” and that “It combines the qualities of colour and safety.” It is said in the brochure:

It has been claimed before but this time [in large print] it is true. It is new.

Page 179 of [1940] 1 All ER 174

It is different from any hair dye previously put on the market. It contains no poison, toxic, or harmful ingredient. [Then, in large print] Since “Melereon” is harmless, no previous test is required.

It was suggested by the plaintiff that, when Mrs Buckley dyed his hair, she expressly warranted to him that the hair dye was harmless. The evidence does not support that at all. Watson came in to have his hair done, and, instead of using the other dye which she had used before, Mrs Buckley told him that she had a new hair dye in the shop. She showed Watson the advertisement in the Hairdressers Weekly Journal, and the brochure, and Watson read them and was impressed. Mrs Buckley told Watson that she had not put this hair dye to any test, and that she had had no experience of it in action. There it was, with the advertisement and the registered name “Melereon,” and that is all she knew about it. Watson decided that he would give it a trial, and accordingly Mrs Buckley set to work. I am quite satisfied that Mrs Buckley carried out the directions for the application of this dye carefully and scrupulously, in accordance with the pamphlet which she received from the distributors, and, as I have said, no suggestion of negligence or lack of skill was made against her. Watson left, and immediately afterwards developed a sharp attack of dermatitis. He was confined to hospital for some time, and suffered very considerable pain and discomfort. He has made an excellent recovery, and I do not think that the ill-effects of this mishap are permanent in any shape or form. There can be no doubt that the cause of the dermatitis was the application of the dye, or, rather, not so much the actual dye as the lotion which was applied afterwards, and which formed part of the product which Ogee, Ltd, distributed.

It has been argued that, on that, Mrs Buckley is not liable to Watson in contract. It is quite plain that this was not a sale of goods, pure and simple. It was a contract for rewardI ought to have said, of course, that Mrs Buckley was paid for what she did in the ordinary waywhereby Mrs Buckley undertook to dye Watsons hair, and I do not think Watson relied on any representation which Mrs Buckley made in relation to this hair product, because she did not make any, beyond the fact that there it was, and there was the advertisement, which Watson read. No doubt, I think, Watson, probably unconsciously, or subconsciously, felt confident that anything he found at Mrs Buckleys establishment would come from a reliable origin, as, indeed, this particular commodity did.

It has been argued on behalf of Mrs Buckley that any implied warranty there might be, must, on the evidence in this case, be negatived by the fact that she told Watson, as she did, that she had not tried this stuff herself and that it was new to her. In my view, although I think the point one of very considerable interest, I do not think that that represents the law. I have been referred to G H Myers & Co v Brent Cross Service Co, which, in my judgment, establishes that in such

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transactions as this, which is really half the rendering of service and, in a sense, half the supply of goods, the implied warranty is no less than it would be in the case of the sale of goods simply.

Perhaps before I dispose of the claim against Mrs Buckley I ought to continue the narrative of facts. The plaintiff, owing to obvious difficulties, was not in a position to prove the analysis of the particular bottle that was used on Watsons head, but counsel for the distributors admitted that, actually, the percentage of chromic acid in the bottle was 10 per cent. In my judgment, on the evidence, there is no doubt whatever that, although some heads, or scalps, are tougher than others, a 10 per cent solution (and, to save constant repetition, when I say 10 per cent or 4 per cent, whichever it may be, by the time it reaches the head must be divided by two) is dangerous, and a hair dye that contains a lotion with a 10 per cent solution of chromic acid is not a hair dye which is merchantable as a hair dye.

I do not think that Watson relied upon Mrs Buckleys knowledge of the preparation. I am quite satisfied that he did not, but, none the less, although Mrs Buckley said, “All I know about this thing is what the advertisement says, and I have not used it,” in my view there is an implied warranty, or it is an implied term of the contract, that, when I go into a hairdressers shop and say I want my hair done, the hairdresser will apply to my head something which is a hair dye, and not something which, in this particular case, through no conceivable fault or negligence on the part of Mrs Buckley, was in fact a poisonous and harmful substance. I think that this particular bottle had got out of the category of what one might call an imperfect hair dye and was not really fit to be used as a hair dye at all. The acid was much too strong, and I think that Mrs Buckley, in treating Watsons head, under the relationship which was contractual, notwithstanding the fact that she told him what I have already stated, impliedly warranted that what she was rubbing into his head was merchantable hair dye. I do not think she represented, or warranted, or can be taken to have warranted, that it would dye his hair well, or ill, or this colour or that colour. I do not think the implied warranty went any further than that she contracted to rub into his hair something which was fit for hair dye. In fact, it was not. In those circumstances, I think that Watson is entitled to judgment against Mrs Buckley on that basis alone.

The second question, and it is very interesting, is the question of judgment against the distributors. I need not discuss, and do not intend to discuss, the position as between the plaintiffs and Wyrovoys Products, Ltd. That company has not appeared. It has gone into liquidation, and apparently it is a matter of no importance whether or not judgment is recovered against it.

In order to succeed against Ogee, Ltd, the plaintiff has to prove three things. He has to proveI am not speaking perhaps in strictly technical legal language(i) carelessness in fact, (ii) duty owed to him, in the

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particular circumstances of this particular case, by Ogee, Ltd, and (iii) breach of that duty, if it exists, and the consequences of that.

First of all, was there negligence in fact? In my judgment, there was, beyond any shadow of doubt. When I say negligence, I do not mean actionable negligence. I mean carelessness. I need not detail the facts at length. One has to take everything into consideration. Ogee, Ltd, were not dealing with an old-established manufacturer who had been supplying them for years. They were, in essence, dealing with a gentleman who had emerged quite unexpectedly from Spain. Although at an interview they stipulated 4 per cent of the chromic acida matter of vital importance in connection with the hair dye, as I have saidthat stipulation was never reduced to writing. It was never made a term of the agreement between them and the manufacturers. The percentage was never confirmed in a letter. They never saw where it was manufactured. They took no steps to ascertain under what sort of supervision the manufacture was carried on. When deliveries were made, no test of any sort, kind or description was made. I am not suggesting that they ought to have tested every consignment. Perhaps it would have been enough, I do not know, if they had made a sample test here and there. I was told that the test could have been made, and that it took 30 seconds. In fact, however, there was no test at all of the deliveries. Last, but by no means least, this commodity, of which they knew singularly little, and in connection with which they had taken no steps whatever to ensure that the deliveries of the commodity were in accordance with the stipulated article, was put out to the trade and to the world as being the hair dye which, in contradistinction to every other hair dye, was absolutely safe and harmless, could not harm the most sensitive skin, and positively needed no preliminary tests. I need not labour the matter. That, in my judgment, was carelessness. Before committing their name to such an assertion to all and sundry, they should have taken far greater care to ensure that that assertion was based on solid ground. In fact, nothing, or virtually nothing, was done to see that what was being distributed by them was this absolutely safe commodity. As the result of that carelessness, Watson has been severely injured. He read the advertisement. He told me that he was interested by the advertisement, and that it was because of the advertisement that he had the dye used, believing what he was told, and he suffered accordingly.

The very interesting question which arises is whether or not there was a duty, and I have been referred to MAlister (or Donoghue) v Stevenson. It was pointed out that there are certain passages in the opinions in the House of Lords which tell very strongly in favour of this defendant. The material passages are in the opinion of Lord Thankerton at p 603, and in the opinion of Lord Atkin, at p 599. Lord Thankerton says, at pp 602, 603:

The present case is that of a manufacturer and a consumer, with whom he has no contractual relation, of an article which the manufacturer did not know to be

Page 182 of [1940] 1 All ER 174

dangerous, and, unless the consumer can establish a special relationship with the manufacturer, it is clear, in my opinion, that neither the law of Scotland nor the law of England will hold that the manufacturer has any duty towards the consumer to exercise diligence.

I will not read the rest of the passage, nor will I read the opinion of Lord Atkin, more particularly the passage at p 599.

It seems to me that one reason why carelessness plus injury is insufficient and the law demands a duty as well is that, where a manufacturer manufactures an article, and, it may be, months or years afterwards, that article, by reason of the careless manufacture, does harm to the consumer, it is extraordinarily difficult to put ones finger on the tortious act of which the plaintiff in such an action would complain. The selling of the article is not the act of the manufacturer or the agent. The article itself has ceased to be the property of the manufacturer, or under his control, and, because of that, that may well be the foundation of the undoubted principle that, where the manufacturer has parted with his property and put it in circulation all over the world, unless the consumer who is ultimately harmed by something which the manufacturer has negligently done can establish the special relationship with the manufacturer, then, under the law of this country, no action for tort will lie.

How can that special relationship be established? Lord Thankerton tells us at p 603, Lord Atkin explains at p 599. Lord MacMillan concurred with Lord Thankerton. I need not read all the passages, but Lord Thankerton says, at p 603:

The special circumstances from which the appellant claims that such a relationship of duty should be inferred may, I think, be stated thusnamely, that the respondent, in placing his manufactured article of drink upon the market, has intentionally so excluded interference with, or examination of, the article by any intermediate handler of the goods between himself and the consumer that he has, of his own accord, brought himself into direct relationship with the consumer, with the result that the consumer is entitled to rely upon the exercise of diligence by the manufacturer to secure that the article shall not be harmful to the consumer.

In a few words: “The manufacturer has, of his own accord, brought himself into direct relationship with the consumer.”

If Ogee, Ltd, had been the manufacturers, I should have held without difficulty here that, by this advertisement which Watson saw (it is unnecessary to consider what would have been the case if he had not seen it, or if the contents had not been imparted by someone who had, for, in this case, he saw the advertisement), and upon which he relied, Ogee, Ltd, if they had been the manufacturers, of their own accord would have brought themselves into direct relationship with the consumer. It is said that here, although the manufacturers would owe such a duty, the distributors, being distributors and not manufacturers, are absolved. It seems to me that that statement must be qualified. The number of cases in which a distributor would owe a duty must, I think, be comparatively few. As it has been said, duty is not duty in the abstract. One does not have to search for the duty in vacuo, but one has to look at

Page 183 of [1940] 1 All ER 174

the facts and decide whether or not the law attaches a duty out of those facts, or to those facts.

The initial tortious act or careless actcarelessness would be betterwas the putting of the 10 per cent solution into the lotion, and for that the distributors were not responsible. The manufacturers were not their agents. They had no direct control over the manufacturers, and I have to ask myself whether, in law, as between this consumer and this distributor, having regard to all the circumstances of the case, there is a duty. It is extremely difficult to arrive at a legal decision without some guidance as to the sort of test one applies as to whether or not there is a duty. I think I am thrown back on the words of Lord Thankerton in MAlister (or Donoghue) v Stevenson. I do not think that it matters whether the man is a manufacturer or whether he is a distributor. It seems to me to be the same in the case of a person through whose hands there has passed a commodity which ultimately reaches a consumer to his detriment. Where that person has intentionally so excluded interference with, or examination of, the article by the consumer, then he has, of his own accord, brought himself into direct relationship with that consumer so as to be responsible to the consumer for any injury the consumer may sustain as a result of the distributors negligence. The duty is there.

The question is now whether or not it was the negligence of the distributor which did the damage. I think that it was. I do not think that the distributor can escape liability for gross carelessness, where the consumer has been injured, by saying: “The initial mistake was made by someone for whose actions I am not responsible.” I think that, if there had been any doubt as to the duty (the two questions are really interdependent, but assume the duty was there) the plaintiff here could have sued both defendants. The negligent act of the manufacturer was putting in the acid in too strong a solution. The negligent acts of the distributor were the various acts and omissions and representations which intervened between the manufacture of the article and its reaching Watson.

If this view is wrong, however, I think that there is another ground on which the distributor is liable. I think that this hair dye was an article which was dangerous in itself. Unquestionably, a 10 per cent solution is dangerous in itself, but I do not think that that is the proper test. I think that the proper test which I have to apply is whether or not the 4 per cent solution which Ogee, Ltd, the distributors, thought was contained in the bottle, although they were wrong, was dangerous in itself. On the evidence, it seems to me to be perfectly plain that, although a 4 per cent solution will not harm most people, it will harm quite a few, and, therefore, it would be dangerous indiscriminately to use a hair dye containing that strength of acid without carrying out certain tests to see whether the particular person on whom the dye was to be used would be affected by it. I think that it is impossible for the defen-

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dants here to say that hair dyes are not dangerous. The whole point of their brochures and pamphlets is that hair dyes are dangerous, and what they say is that this hair dye, unique among all other hair dyes on the market, is perfectly safe.

It seems to me that, when they know that the thing they are putting on the market is of a class which is dangerous, although they claim that theirs is the exception to the rule, and know, particularly here, that the hair dye, the solution, the percentage which they think they are putting on the market, is dangerous in fact to quite a percentage of people by whom it will be used, then I think they fall under that principle which demands an unusual standard of care in putting abroad a dangerous article, and which does create a duty between any person by whom the dangerous article is distributed and the consumer who is ultimately injured by reason of some carelessness for which the distributor or manufacturer is responsible.

I think that this article was additionally dangerous. I refer to the observations of Scrutton LJ, about the wolf being a dangerous beast, and the wolf in sheeps clothing even more dangerous, and it is really difficult to think of a better example of a wolf in sheeps clothing than a hair dye being put out to the world containing, as this did, 10 per cent of the acid, but believed to contain 4 per cent of the acid, coupled with an advertisement that it was, at last, the perfect, completely harmless hair dyefor which, apparently, the world has been waiting for centuriesso much so that it could not harm the most sensitive skin, and, for that reason, because it was absolutely safe (and the brochure says that in the plainest terms), no preliminary tests of any description were required. It seems to me that there is the perfect example of the wolf in sheeps clothing, and I am not sure that a more apt parallel would not be to describe this as a sheep which the distributors had made as dangerous as a wolf, and, if that is so, then this thing was doubly dangerous. It was dangerous because it was dangerous in fact, and it was more dangerous still because everybody was assured that it was perfectly safe.

On both grounds I am satisfied that counsel for the plaintiff has made good the cause of action against the distributors, both on the principle extended to the facts of this case, or applied to this case, as laid down in MAlister (or Donoghue) v Stevenson, and also on the principle that this was, on the facts of the case, a dangerous thing to put into circulation by the distributors.

Judgment for the plaintiff for £75 14s with costs against the first two defendants.

Solicitors: Leslie M Lever & Co (for the plaintiff); G C Kirk (for the first defendant); Leader Plunkett & Leader (for the second defendants).

M D Chorlton   Barrister.


Oscar Harris, Son & Co v Vallarman & Co

[1940] 1 All ER 185


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        12 JANUARY 1940        


Bills of Exchange Consideration Failure of consideration Partial failure Remote party Right of set-off.

The plaintiffs as agents of an American company sued the defendants as acceptors of 8 foreign bills of exchange. The bills were accepted in respect of the purchase of certain machines from the principals of the plaintiffs, and the defendants, in the defence, alleging that the machines did not correspond with the description and were not of merchantable quality, claimed to set off the loss and damage which they had sustained for that reason. It was contended that the paragraphs of the defence in which a set-off was claimed ought to be struck out as showing no cause of action:

Held upon the authorities relating to set-off against a claim upon a bill of exchange, it was not possible to say that the defence did not disclose any reasonable cause of action.

Notes

It has been said that loss or damage in respect of a partial failure of consideration can be set off only against an immediate party to a bill of exchange, and that it is not a defence against a holder for value. The Court of Appeal have here held that this proposition is not sufficiently settled that a pleading based on the contrary view can be struck out as showing no cause of action.

As to Failure of Consideration and Bills of Exchange, see Halsbury (Hailsham Edn), Vol 2, 648, para 891; and for Cases, see Digest, Vol 6, pp 159166, Nos 10251052.

Cases referred to

Warwick v Nairn (1855) 10 Exch 762; 39 Digest 474, 971.

Bow, McLachlan & Co v Ship Camosun [1909] AC 597; 40 Digest 380, 116, 79 LJPC 17, 101 LT 167.

Bankes v Jarvis [1903] 1 KB 549; 40 Digest 420, 416, 72 LJKB 267, 88 LT 20.

Morgan v Richardson (1806) cited 7 East, 482, n; 6 Digest 163, 1044.

Interlocutory Appeal

Interlocutory appeal by the defendants from an order of Hallett J, dated 20 December 1939, reversing an order made by Master Valentine Ball on 2 November 1939. The plaintiffs claimed from the defendants £1,000 4s 5d, as acceptors of 8 foreign bills of exchange drawn in New York upon the defendants, payable in London to the plaintiffs and delivered for collection to the plaintiffs by the drawers. In their defence, the defendants said that they signed the bills, but that they were not holders in due course, and that there was no consideration for the bills. They held them, they said, subject to all equities between themselves and the drawers, inasmuch as the plaintiffs were merely agents of the drawers. Alternatively they said that the bills were accepted in payment for certain machines supplied by an American firm called Simplex, and that they had bought these machines by the description of others previously delivered, but that the machines were defective in breach of a condition of sale, so that the consideration had wholly failed. Alternatively they claimed to set off so much of their loss and damage as would extinguish the plaintiffs claim. Simplex

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knew that the defendants required the machines for resale, and the defendants customers had repudiated their contracts on account of the defects, or had required the defendants to remedy the defects. Particulars of loss and damage were pleaded. The plaintiffs then applied to the master for an order that the paragraphs relating to this transaction with Simplex be struck out as disclosing no defence, tending to prejudice, embarrass or delay the trial, and being contrary to the rules of pleading. The master would not make the order, and the plaintiffs appealed to the judge, who ordered that the paragraphs be struck out. The defendants appealed.

Harold Simmons for the appellants.

Douglas Lowe (for Harold J Brown, on war service) for the respondents.

Simmons: The drawer of a bill of exchange accepted for the price of goods sold cannot, by giving the bill to a holder for collection, prevent the acceptor from setting up a right in respect of the goods against the drawer under the Sale of Goods Act 1893, s 53. If the drawers had been the plaintiffs, the defendants could have set up their breach of condition in mitigation or extinction of the price. The defendants have that right of set-off against the payees. A mere holder for collection is in no better position than the drawer if he takes subject to the equities of the drawers rights: Chalmers on Bills of Exchange (10th Edn), p 118. In Bankes v Jarvis, the court held that an unliquidated claim for damages may be set off against a liquidated claim. Warwick v Nairn may be distinguished, as no set-off was claimed in that case.

Lowe: A claim for damages for breach of warranty must be the subject of a separate action against the suppliers of the goods: Morgan v Richardson and Warwick v Nairn. Bankes v Jarvis was a decision of a Divisional Court, and does not bind this court.

Harold Simmons for the appellants.

Douglas Lowe (for Harold J Brown, on war service) for the respondents.

12 January 1940. The following judgments were delivered.

SLESSER LJ. This appeal succeeds. The claim by the plaintiffs, Oscar Harris, Son & Co (a firm), against the defendants, Vallarman & Co (a firm), as acceptors of 8 foreign bills of exchange is made on a specially indorsed writ. In an affidavit sworn by Mrs Cohen, it was stated that the plaintiffs were suing as agents for the Simplex Cloth Cutting Co of New York. It is clear from the affidavit that the plaintiffs were suing merely as agents. The affidavit recites that the Simplex Cloth Cutting Co, the principals, entered into negotiations for the purchase of certain cloth-cutting machines. In the affidavit, after paragraphs which deal with questions as to whether or not the bills are foreign bills and the like, and state that there was no consideration, there follow numerous paragraphs saying that the bills were accepted in payment of the price of certain leather-cutting, cloth-cutting, and silk-cutting machines, and that the machines were bought as by way of description of the machines previously delivered, and did not correspond with the description, and generally were defective, not reasonably fit, not of a merchantable character, and the like. If the

Page 187 of [1940] 1 All ER 185

plaintiffs are entitled to recover against the defendants, the defendants say that they will set off so much of the loss and damage sustained owing to the circumstances connected with the machines as will be necessary to extinguish the plaintiffs claim. All the paras 49, dealing substantially with this claim to a set-off, have been struck out by the judge as showing no reasonable cause of action, or, in the familiar words of the rule, tending to prejudice the trial of the action.

In my judgment, however, it would be improper at this stage to preclude the defendants, by striking out these paragraphs, from continuing to claim their right to a set-off in respect of the loss and damage suffered, as they allege, by the defects of the machinery to the extent of so much as can be shown to be the proper subject of a claim for loss and damage. It is quite true that the earlier cases seem to support the view that in such a case, under the old pleading, before the Supreme Court of Judicature (Consolidation) Act 1925, it would be necessary to have a cross-action. I refer to such cases as Warwick v Nairn. The matter is last mentioned in the Privy Council in Bow, McLachlan & Co v Ship Camosun, where the position is thus stated, at pp 611, 612:

It seems clear that the change was made, not upon any principle of law, but upon grounds of convenience, in order to prevent circuity of action. Before the statutes of set-off, it was necessary to bring cross-actions in respect of debts on the one side and on the other, and, except in the cases referred to by Parke, B., no change was, as a matter of strict law, made with regard to unliquidated damages until the Judicature Acts. No instances were cited to their Lordships of any cases in which this procedure had been adopted, except such as are referred to by Parke, B., and, indeed, in the cases where a seller or supplier had taken a bill of exchange for the price, the buyer has been left to his cross-action, unless there has been a total failure of consideration: Warwick v. Nairn.

The rule is thus stated in Chalmers on Bills of Exchange (10th Edn), p 118.

Rule 4. Partial failure of consideration is a defence pro tanto against the immediate party when the failure is an ascertained and liquidated amount, but not otherwise. It is not a defence against a remote party who is a holder for value.

Here, as I have said, on the evidence as it now stands, it appears that the plaintiffs are mere agents for this American firm which supplied the machine.

For myself, I would express no concluded opinion upon what may be decided as to the ultimate rights of the appellants in this case, and I assume for this purpose that the allegations in the defence are true as to the quality of this machine.

However that may be, I think that, in the present state of the law, since the Supreme Court of Judicature (Consolidation) Act 1925, it is at any rate very arguable that the defendants may claim as a reduction of the liability under the bills the loss and damage by way of set-off, as mentioned in the defence. I would prefer, as I say, to express no concluded opinion, because the matter is one which may require considerable argument, and I do not wish to prejudge the result of that part of the

Page 188 of [1940] 1 All ER 185

trial. I find it quite impossible, however, to say that such a statement does not disclose any reasonable cause of action, and I think that the judge was wrong in preventing the defendants from making this claim of set-off. In my opinion, therefore, this appeal should be allowed.

MACKINNON LJ. I agree.

GODDARD LJ. I agree.

Appeal allowed with the costs in the Court of Appeal and before the judge in Chambers.

Solicitors: Janus Cohen & Co (for the appellants); Keen Rogers & Co (for the respondents).

Derek H Kitchin Esq   Barrister.

Metropolitan Properties Co Ltd v Purdy

[1940] 1 All ER 188


Categories:        CIVIL PROCEDURE: LANDLORD AND TENANT; Rent: LOCAL GOVERNMENT        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        16 JANUARY 1940        


Emergency Legislation Leave to distrain Debtor able to pay in full all creditors other than landlord and rating authority Discretion of court Order for part-payment of arrears of rent Courts (Emergency Powers) Act 1939 (c 67), s 1.

The appellant was the tenant of hotel premises and was in arrears with his rent to the amount of £1,819 18s 9d. The landlords applied for leave to levy distress. Such leave was given, but suspended on condition that the appellant paid £200 at once and £100 per month off the arrears. The appellant had made a composition with the local authority as to the rates payable in respect of the premises, and, apart from the question of the rent and rates, it was admitted that he was able to pay his accruing debts in full:

Held under the Courts (Emergency Powers) Act 1939, s 1, the court had an absolute discretion as to the order it would make in such a case, and it could not be said that the order in question proceeded upon any wrong principle which would permit its being set aside on appeal.

Notes

Where the court has an absolute discretion, that discretion must be exercised judicially, and the Court of Appeal must intervene where any wrong principle has been applied. The order of the judge here appealed from would, however, seem to have been based in principle on the decision in A v B [1939] 4 All ER 169; Digest Supp, where it was said that the court was not exercising a bankruptcy jurisdiction, but, at the same time, the existence of debts other than the debt which is the subject of the application is to be taken into account, in considering all the circumstances of the case. In a way, the present case is the reverse of that proposition, namely, that the debtor should not be allowed to pay certain creditors in full while others are deprived of their normal remedies for recovering their debts.

As to Leave to Issue Distress, see Halsbury (Hailsham Edn), Vol 10, p 477, para 611; and for Cases, see Digest, Vol 18, pp 274, 275, Nos 128, 129.

Cases referred to

Stirling v Norton (1915) 31 TLR 293; 21 Digest 428, 95.

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Page 189 of [1940] 1 All ER 188

Appeal

Appeal by the tenant from an order of Tucker J, dated 1 December 1939. The facts are fully set out in the judgment of Slesser LJ.

G D Roberts KC and J D Farmiloe for the appellant.

P E Sandlands KC and A E Beecroft for the respondents.

16 January 1940. The following judgments were delivered.

SLESSER LJ. This is an appeal arising out of an order of Tucker J, made under the Courts (Emergency Powers) Act 1939, on an originating summons which was issued on behalf of the applicants, Metropolitan Properties Co Ltd, for an order for leave to distrain for a sum of £1,937 10s against the respondent, Walter James Purdy, who is a proprietor of hotels, being for arrears of rent, due on 29 September, of premises on the north side of Harrington Road, South Kensington, in the County of London, known as the Norfolk Hotel. Under the Courts (Emergency Powers) Act 1939, the remedy to which the summons relates may not be exercised without the leave of the court, and the court has power, under s 1(4) of the Act, to give leave to the applicants to enforce their claim for rent by the levying of distress, and in other ways, subject to such restrictions and conditions as the court thinks proper.

On the matter coming before Master Moseley, he refused an order that the applicants be at liberty to proceed by levying distress under the Act, as asked in their originating summons. Application was made to Tucker J, who varied that order by saying that the applicants should be at liberty to distrain as asked for in their originating summons, but that such leave should be suspended provided that the respondent paid to the applicants:

… the sum of £200 of the sum of £1,819 18s. 9d. now due for rent before Dec. 31, and thereafter so long as the respondent pays off the balance at the rate of £100 per month.

It is from that condition which was inserted into the order by the judge, who otherwise allowed the applicants to be at liberty to distrain, that appeal is brought to this court. There is no cross-appeal.

The facts of the case, so far as they are material, as displayed in the affidavits on behalf of the appellant in particular, are these. The appellant, Purdy, has been at all material times the proprietor of a large number of hotels, and undoubtedly in past times he has been very successful in those hotels. He is also the proprietor of a house and land in the country, and he has now let that house in the country to a government department, we are told, since November 1939, for a rental of some £400 per annum. The particular hotel, the Norfolk Hotel, Harrington Road, South Kensington, is one of which the applicants here are the landlords. What is said by Purdyand it is borne out by the return of his expenses and by the reports which have been exhibited to his affidavitsis that substantially he has now sufficient receipts coming in from his hotels to enable him to carry on those hotels if he can be released from his obligation to pay the rent of the Norfolk Hotel and the rates. I do not think that it is necessary for the purposes of this case

Page 190 of [1940] 1 All ER 188

to go into the figures, which are really not disputed. That is the result of the matter. If the landlord receives no rent, there is no reason to suppose that Purdy would not be able to carry on his hotels, from time to time paying the other creditors, be they tradesmen or other persons, who would have claims upon him arising out of the running of his hotels, except the local authority for rates, in which case a composition or arrangement has been made. In other words, this particular creditor is to carry this business upon his own shoulders, the other creditors receiving all their moneys from time to time in full. No doubt it was some such consideration as that which urged the judge to vary the order of the master, and to see, so far as possible in the difficult times in which we live, that under the statute both the debtor and the creditor should receive consideration, but should also be protected from unnecessary hardship. In the result, the judge made the order which I have mentioned, which provides, not that Purdy should pay the whole of his rent now for which he is at present liable, but that he should pay only £200, and thereafter discharge his liability to the extent mentioned in the order at £100 per month, and that, if he does that, he should be free from the common law remedy of distress.

As was said in Stirling v Norton, dealing with the very similar language of the Courts (Emergency Powers) Act 1914, the question of whether leave shall be given to distrain, and, if it be given, whether it be suspended, and on what conditions, is essentially a question “for the absolute discretion of the learned judge.” It is quite true that in Evans v Bartlam the House of Lords indicated that, if this court were of opinion that the exercise of discretion by a judge given him by statute would result in injustice, this court had power to exercise its own discretion, notwithstanding the fact that the judge had not committed any error in law. In my view, however, it is impossible to say in this case that the exercise of discretion would result in injustice in the sense that Purdy could say that he had suffered an injustice by this order. I think that it is a reasonable attempt to protect both parties. The landlords in their turn are liable for the ground rent. It would be perhaps invidious that this hotel should be continued, with the result that possibly the landlords themselves would be in the position of being unable to discharge their liabilities to their head landlord because Purdy was unable to discharge his. It is an unfortunate situation, but the result, I think, is one with which this court cannot properly interfere.

As to the argument which has been put forward that it would not be to the advantage of the landlords to exercise their powers if Purdy failed to comply with the conditions, that seems to me entirely outside the sphere of this appeal. It may well be that the landlords, if they do exercise their rights of distraint here, will have killed the goose which lays, I will not say the golden, but the somewhat addled eggs which are likely to be laid. At this period, in any event, that is not the question before us. It may be (and I hope it will be) the case, if I may say so,

Page 191 of [1940] 1 All ER 188

that in the interests of both parties the landlords will from time to time watch the prosperity of Purdys business, and, if the matter turns out worse than they expect, they may find it in their interest not to distrain, albeit Purdy cannot produce in any particular month the whole sum. It seems to me essentially a case in which the parties would be well advised to get together from time to time and see what can be done. It is to Purdys interest to discharge his liabilities as far as he can, and it is to the landlords interest, I should have thought, to see that the business continues as long as it can. So far as this appeal is concerned, however, I can see no reason for interfering, nor do I think we have any right to interfere, with the discretion of the judge who has imposed this condition. I think, therefore, that the appeal fails.

MACKINNON LJ. I agree. The order of the judge was one which he made in doing his best to try to do justice between the parties. It seems to me that he had an insoluble problem, but I cannot see that the order which has been made is wrong. Unless I can see that he went wrong in the exercise of his discretion, I do not think it is proper for this court to interfere. Counsel for the appellant has put forward reasons why there is great hardship on his client. We have not heard counsel for the respondents, but he would have been equally in a position to say that there must be grievous hardship on his client if this appeal succeeded. As I say, the problem of how to do justice to both of them is so difficult as to be almost insoluble. I cannot say that the judges method of deciding between them was wrong, and, therefore, I think that this appeal fails.

GODDARD LJ. I agree. I realise to the full the grave difficulties under which hotel proprietors and boarding-house and apartment house keepers are carrying on under war conditions. In fact, I should think that, as a business, there are very few other businesses in the great towns which have been so badly affected as theirs. I can understand that they think themselves, perhaps rightly, entitled to very sympathetic treatment under this Act. On the other hand, the landlords have the ground rent to pay. Some of them have to live out of the rents which they obtain. The great difficulty which is in the way of this courts interfering with the decision of the judge seems to me to be this. Under the Courts (Emergency Powers) Act 1939, the court, be it the master or the judge, is really put very much in the position of a Cadi under the palm tree. There are no principles on which he is directed to act. He has to do the best he can in the circumstances, having no rules of law to guide him, and very often with no dispute as to the facts. The position simply is that the man either cannot pay at all, or cannot pay in full, and does not know how he is going to pay. Then one has to consider whether his business is to go altogether, or whether the landlord is to get nothing, or what is to be done. There are many things to be taken into account.

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I myself should want to take into account the fact as to how far it is right that a man should go on living in another persons property and pay nothing. It may be that some judges would take the view: “I shall not let you, the landlord, distrain. I shall not let you do that, because I want to preserve the tenants goods for him. However, the tenant cannot go on living in the landlords house paying nothing. The tenant must go out of the house.” In some cases, that might suit the landlord, because he might be able to let again, though with this sort of property in Cromwell Road he cannot. The truth is, as MacKinnon LJ has said, there are no principles to guide one. One has to do the best one can. I do not think that this court ought to interfere with the discretion which the judge has exercised after an obviously very careful hearing unless it can come to the conclusion that he has done something unjust. I cannot see that he has done anything which is unjust here, because he had to take into account the position of the plaintiffs as much as the position of the defendant. The Act does make the position of the defendant a crucial matter, but, at the same time, one cannot altogether avoid taking into account the position of the creditor. Therefore, I do not think that it would be right for this court to interfere with what is, after all, just a matter of discretion. If I exercised my discretion, I should be just as likely to be wrong as the judge.

Appeal dismissed with costs.

Solicitors: Gellatly Son & Taylor (for the appellant); McKenna & Co (for the respondents).

Derek H Kitchin Esq   Barrister.

Hall v Hall (by his Guardian)

[1940] 1 All ER 192


Categories:        FAMILY; Divorce: HEALTH; Mental health        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        SIR BOYD MERRIMAN P        

Hearing Date(s):        12 DECEMBER 1939        


Divorce Incurable unsoundness of mind Period of care and treatment Pauper lunatic “discharged not recovered” to workhouse Necessary certificates Lunacy Act 1890 (c 5), s 25 Matrimonial Causes Act 1937 (c 57), s 2(d).

A pauper lunatic was discharged not recovered from a mental hospital to a poor law institution. The mental hospital duly certified that he was a lunatic not recovered, and a proper person to be kept in a workhouse as a lunatic, but the medical officer of the workhouse did not then certify that the accommodation in the workhouse was sufficient for the lunatics proper care and treatment nor that the lunatics condition was such that it was not necessary that he should be kept separate. The Lunacy Act 1890, s 25, requires that these certificates shall be given. The lunatics wife subsequently petitioned for divorce on the ground that her husband was incurably of unsound mind and had been detained for the statutory period:

Held the omission of the medical officer of the workhouse to give the second certificate made it impossible for the court to find that the husband had been for at least 5 years immediately preceding the

Page 193 of [1940] 1 All ER 192

presentation of the petition detained in pursuance of any order under the Lunacy Acts 18901930.

Notes

The lawful detention of lunatics is subject to statutory requirements and these must be strictly complied with before a decree can be granted under the 1937 Act.

As to Divorce on the Ground of Insanity, see Halsbury, Supp, Divorce, para 981; and for Cases, see Digest, Supp, Husband and Wife, Nos 3015a3015e.

Wifes Defended Petition

Wifes defended petition for dissolution of marriage as amended. The facts are fully set out in the judgment.

The Lunacy Act 1890, s 25, provides as follows:

Where a pauper lunatic is discharged from an institution for lunatics, and the medical officer of the institution is of opinion that the lunatic has not recovered and is a proper person to be kept in a workhouse as a lunatic, the medical officer shall certify such opinion, and the lunatic may thereupon be received and detained against his will in a workhouse without further order if the medical officer of the workhouse certifies in writing that the accommodation in the workhouse is sufficient for the lunatics proper care and treatment, separate from the inmates of the workhouse not lunatics, or that the lunatics condition is such that it is not necessary for the convenience of the lunatic, or of the other inmates, that he should be kept separate.

Leslie Brooks for the petitioner.

Roger Ormrod for the respondent.

12 December 1939. The following judgment was delivered.

SIR BOYD MERRIMAN P. This was a wifes petition, originally based solely on the ground that her husband was incurably of unsound mind and had been detained for the statutory period under the provisions of the Lunacy Acts. There was the clearest possible evidence that the husband was of unsound mind and that there was no hope whatever of his recovery, but, when the documents relating to the detention of the husband came to be examined, it appeared that he, being a rate-aided patient who had been received into the Banstead Mental Hospital on 13 May 1927, and was discharged under s 25 on 21 November 1934, and admitted to the Leavesden Mental Hospital, Abbots Langley, Hertfordshire. As that certificate shows, the discharge purported to be made under s 25. I was informed that what was called the Leavesden Mental Hospital was, in fact, an institution which had formerly borne the name of the Leavesden Workhouse, and s 25 enables pauper lunatics to be discharged not recovered to a workhouse, but only on certain conditionsnamely, that the medical officer in the institution in which he is detained under the reception order is of opinion that the lunatic is not recovered, and is a proper person to be kept in a workhouse as a lunatic, and that he certifies such opinion. That condition, I think, was fulfilled in this case, and I need say no more about it. The section goes on to provide that a lunatic may thereupon be received and detained against his will in a workhouse without further order, if the medical officer of the workhouse certifies, in writing, that the accommodation in the workhouse is sufficient for the lunatics proper care and treatment separate from the inmates of the workhouse not lunatics, or that the

Page 194 of [1940] 1 All ER 192

lunatics condition is such that it is not necessary for the convenience of the lunatic, or of the other inmates, that he should be kept separate. It will be seen, therefore, that, unless this second condition is fulfilled, there would be no authority for receiving and detaining a lunatic in the workhouse without further order. In other words, the discharge from the mental institution would operate to bring the reception order to an end.

Accordingly, I adjourned the case to enable the parties to make further inquiry as to whether or not the second condition had been fulfilled, there being on the face of the documents no evidence whatever that it had been so fulfilled. Counsel for the petitioner now tells me that he is unable to satisfy that condition, and counsel appearing for the Official Solicitor, who is the guardian ad litem, carries the matter further by telling me that the London County Council, who happen to be the authority concerned, have been communicated with in detail, and are unable to produce any evidence that this condition was ever complied with. That being so, it is quite clear that it is impossible for me to find that this particular husband was for the period of at least 5 years immediately preceding the presentation of the petitionfor this discharge occurred within those 5 yearsdetained in pursuance of any order under the Lunacy Acts 18901930.

I wish to add only one word. In the course of the discussion, counsel used the phrase that it was merely a technical point. Persons detained under the Lunacy Acts are detained against their will, in their own interest and in that of the public, but upon certain statutory conditions which must be strictly fulfilled, and I do not regard it as a mere technicality that those instructions should be strictly fulfilled. Similarly, under the Matrimonial Causes Act 1937, however clearly it is proved that a person is of hopelessly unsound mind, and for however long a spouse may have been of hopelessly unsound mind, for the purpose of obtaining a decree of divorce it is necessary to prove that he or she has been continually under care and treatment for the statutory period, and care and treatment are defined, so far as this case is concerned, as meaning that a spouse is detained in pursuance of an order under the Lunacy Acts 18901930, and not otherwise. There again, therefore, there is no room for any latitude of interpretation. The statute must be strictly complied with in that sense, and in that sense only is it permissible to use the words that it is a technical point which is involved. What is really involved is strict compliance with two statutes, at which I am obliged by law to look.

It happened, however, that in the course of the hearing it became abundantly clear that the petitioner in this suit had another cause of action. She put in as part of the matrimonial history an order made in the South-Western Police Court on 28 June 1909, which adjudged that she was no longer bound to cohabit with her husband, on the ground that he had been guilty of persistent cruelty and also of wilful neglect to

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provide reasonable maintenance, and by such cruelty and neglect had caused her to leave him and live separate and apart from him. Accordingly, while adjourning the petition as it then stood for further inquiries, I gave the wife leave to amend her petition by adding a charge of cruelty, if she should be so advised. That amendment has been made, and she has given evidence in support of the charge, which is abundantly proved. On at least two occasions, and, I think, on more, her husband had actually been sent to prison for assaulting her before this separation order was made, and I have no doubt whatever that he was guilty of persistent cruelty towards her.

That being so, there only remains the question of her own misconduct. She did not see or hear of her husband for practical purposes after 1909. He never complied with the order, which was not very large, for her maintenance or that of the child, and some 20 years later she met a man with whom from 1928 she has been committing adultery and with whom she has been living. I am bound to say that it seems to me to be the sort of case in which the court ought to exercise discretion in the wifes favour. I accordingly grant her a decree on the ground of her husbands cruelty.

Decree granted on amended ground.

Solicitors: Stanley Attenborough & Co (for the petitioner); Official Solicitor (for the respondent).

J F Compton Miller Esq   Barrister.

Moorgate Estates Ltd v Trower and Barstow

[1940] 1 All ER 195


Categories:        LAND; Mortgages: INSURANCE        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        15 DECEMBER 1939        


Mortgage Insurance Insurance against war risks Breach of covenant Impossibility of performance Waiver.

Emergency Legislation Proceedings commenced before coming into force of Courts (Emergency Powers) Act 1939 Proceedings for foreclosure Taking “any step in any such proceedings” Leave of court Courts (Emergency Powers) Act 1939 (c 67), s 1(2)(b).

The defendants were mortgagees of certain buildings owned by the plaintiffs. The mortgage deed contained, inter alia, a covenant to keep the buildings insured “against loss or damage by missiles or projectiles from or fired at aircraft.” It was further provided in the mortgage deed that the defendants power of sale should become immediately exercisable upon the plaintiffs failing to observe or perform any of the covenants contained in the mortgage. From the facts, it appeared that between 1936 and January 1939, the defendants never objected to the plaintiffs omitting to insure the mortgaged property against war risks as provided by the mortgage deed. In January 1939, however, they intimated to the plaintiffs that the mortgage had become repayable, owing to the plaintiffs failure to insure against war risks. It was found on the evidence that, although insurance against war risks had become impossible at that time, it had been possible in 1936, when the parties concluded their agreement. The plaintiffs asked for a declaration that they were not bound to comply with the defendants notice to pay off the money secured by the mortgage, and the defendants counter-

Page 196 of [1940] 1 All ER 195

claimed for an account, for payment of the amount due under the mortgage, for the appointment of a receiver, for foreclosure or sale, and for possession. On behalf of the plaintiffs, it was contended that their failure to insure against war risks was caused in law by impossibility of performance, and that, failing that, the defendants had waived the performance by the plaintiffs of the covenant relating to such insurance. On behalf of the defendants, it was contended that the plaintiffs failure to insure against war risks was a breach of the covenant relating thereto. Regarding the defendants counterclaim, it was contended that they were not entitled to proceed, as they had failed to obtain leave as provided by the courts (Emergency Powers) Act 1939, s 1(2)(b). Against that, it was contended that, as the defendants had instituted their counterclaim and set it down for trial prior to the coming into force of the Courts (Emergency Powers) Act 1939, they were not taking “any step” in the proceedings such as would require the leave of the court:

Held (i) as, on the facts, it had been proved that insurance against war risks had been possible for some time after the making of the contract, there was no impossibility of performance, and, consequently, there was a breach of the covenant relating to insurance against war risks.

(ii) this was not a case of frustration, but could only be a breach of an implied term that, upon such insurance becoming impossible, neither side would be entitled to rely upon the failure to comply with the covenant. No such term could, however, be implied in this case.

(iii) the defendants had not waived the performance by the plaintiffs of that covenant, and the plaintiffs were not entitled to the declaration asked for.

(iv) regarding the counterclaim, it could not be said that the defendants were taking “any step” in proceedings which had been set down for trial before the coming into force of the Courts (Emergency Powers) Act 1939, and, consequently, the counterclaim must succeed without the leave of the court having to be obtained.

(v) the defendants were entitled to an account and to the appointment of a receiver, the latter remedy not being one for which the leave of the court is required by the provisions of the Courts (Emergency Powers) Act 1939.

(vi) the defendants were also entitled to foreclosure nisi, but not to foreclosure absolute or sale, for which remedies the leave of the court must first be obtained.

Notes

The main question here is whether there could be read into the mortgage deed a term that a covenant to insure against war risks would become unenforceable in the event of it becoming impossible to obtain such insurance. It was shown, however, that it had been possible to obtain such insurance for several months after the date of the mortgage, although it subsequently became impossible, and the court found no difficulty in holding, taking into consideration the fact that the security for the money advanced was a building and the land in the city of London, that no such implied term as that contended for by the plaintiff could have been present to the minds of the mortgagees, more especially as they were trustees and would require the most perfect security possible. The main point argued under the Courts (Emergency Powers) Act 1939, on the mortgagees counterclaim will be of only transitory importance, as it is unlikely that, after the next few months, the courts will be concerned with proceedings which have been instituted before the commencement of the Act.

As to Implication of Terms, see Halsbury (Hailsham Edn), Vol 7, pp 322, 323, para 451; and for Cases, see Digest, Vol 12, pp 607613, Nos 50285066.

Action

Action for a declaration that notice to repay money secured by a

Page 197 of [1940] 1 All ER 195

mortgage need not be complied with, and a counterclaim for an account of moneys due under mortgage, repayment, appointment of receiver, foreclosure and possession.

Rt Hon Sir William A Jowitt KC and Gerald A Gardiner for the plaintiffs.

Charles E Harman KC and L M Jopling for the defendants.

15 December 1939. The following judgment was delivered.

FARWELL J. The plaintiffs in this action are a company who are the mortgagors of certain buildings in the city of London mortgaged to the defendants for a large sum of money. The claim in the action by the plaintiffs is for a declaration that the defendants were not entitled to give, and that the plaintiffs were not bound to comply with, a notice to pay off the mortgage money, and costs, and such further or other relief as to the court may seem just. The defendants join issue with the plaintiffs on that claim, and they counterclaim for an account to be taken of what is due to the defendants under the mortgage, for payment of the amount due, for the mortgage and registered charge to be enforced by foreclosure or sale, and for the appointment of a receiver, and delivery of possession of the mortgaged premises.

The facts are these. On 25 March 1936, a mortgage was executed by the plaintiffs and defendants by which the plaintiffs mortgaged to the defendants buildings in the city of London situate at Moorgate and Coleman Street and known as Lloyds Bank Buildings. At that time, the plaintiffs were registered under the Land Registration Act 1925, as the proprietors subject to the mortgage. The land and premises were of very considerable value, very much in excess of the amount secured by the mortgage. Under the terms of the mortgage, the plaintiffs covenanted with the defendants to pay to the defendants on 25 September then next the sum of £155,000, with interest thereon in the meantime at the rate of £4 per cent per annum from the date thereof, and that, if the principal should not be so paid, to pay to the defendants interest at that rate by equal quarterly payments on 24 June, 29 September, 25 December and 25 March in every year on the principal moneys for the time being remaining due. By cl 2, it is provided as follows:

… the [plaintiffs] as beneficial owners hereby demise to the [defendants] all [the said premises] for all the unexpired residue of the term of years granted by the lease dated Mar. 25, 1936, and made between the [plaintiffs] and the Atlas Assurance Co., Ltd., except the last 10 days thereof.

By cl 3, it is provided as follows:

… the [plaintiffs] as beneficial owners hereby charge the land comprised under the heading “District London Parish or Place City of London Title No. L.N. 8119” with the payment to the [defendants] of the principal sum interest and other money hereby covenanted to be paid by the [plaintiffs].

The mortgage contains the usual covenants with regard to the mortgaged property, but also contains a covenant by the plaintiffs during the continuance of the security:

… to keep the said buildings and all property then or for the time being comprised in or subject to the security (hereinafter comprehensively called the said

Page 198 of [1940] 1 All ER 195

buildings) insured … against loss or damage by missiles or projectiles from or fired at aircraft to the full value thereof in the Atlas Assurance Co., Ltd., or in some other insurance office or with underwriters of repute to be approved in writing from time to time by the [defendants] in the name of the [defendants] and that on default by the [plaintiffs] … in keeping the said premises insured as aforesaid the [defendants] may insure and keep the same insured at the [plaintiffs] expense.

By cl 8, it is provided as follows:

… that if the power of sale shall not have become exercisable then the [defendants] will not before Mar. 25, 1946, call in the said principal sum of £155,000 or such part thereof as shall for the time being be outstanding or any part thereof.

By cl 9, it is provided as follows:

… that the [plaintiffs] shall not be entitled to pay off the said sum of £155,000 or any part thereof except the instalments therein mentioned before Mar. 25, 1941, unless the [defendants] shall go into possession or appoint a receiver of the mortgaged premises or take any other step to enforce their security but that the [plaintiffs] may after that date upon giving at least 3 calendar months notice in writing to the [defendants] or their solicitors pay off all or any part of the principal moneys for the time being owing on their security by instalments of not less than £1,000.

By cl 10, it is provided as follows:

… that the power of sale shall become immediately exercisable by the [defendants] without the necessity of giving any notice in that behalf to the [plaintiffs] if … the [plaintiffs] break or fail to observe or perform any of the covenants or provisions on their part herein contained or implied.

That mortgage having been executed, and the money having been advanced, the question arose with regard to the insurance policy. By a letter, dated 26 March 1936, the plaintiffs solicitors wrote to their agents as follows:

This matter has now been completed, and the insurance of the building against fire should, when it falls due for renewal, be transferred to the Atlas Assurance Co., Ltd.

Again, on 2 April 1936, they wrote to their agents as follows:

By the lease under which Moorgate Estates, Ltd., now hold the premises, the insurance must be effected with the Atlas Assurance Co., Ltd.

Then the letter stated that the defendants were interested in the premises as mortgagees, and that their interest must be noted on the policy. On 18 May 1936, the defendants solicitors wrote to the plaintiffs solicitors as follows:

We thank you for your letter of the 15th instant and return the insurance policy herewith as it does not seem to us that the policy complies with the covenant by the borrowers in the mortgage dated Mar. 25, 1936. We would point out that the property should be insured to its full value, which, in accordance with the recent valuation and schedule of Messrs. John D. Wood & Co., amounts to £259,753. We must, therefore, ask that the insurance be increased to this, or approximately this, amount. Nor can we see that the building is insured against loss or damage by “missiles or projectiles from or fired at aircraft or by reason of riots” except so far as the damage is the result of fire caused by any of such events. We think that the policy should include all damages from such risks and not fire only.

In answer to that, the plaintiffs solicitors wrote on 20 May 1936, dealing with the question of the additional insurance:

We are taking up the question of additional insurance and will let you hear from us again.

Page 199 of [1940] 1 All ER 195

At the same time, the plaintiffs solicitors wrote to their agents as follows:

The policy with the Atlas Assurance Co., Ltd., No. 10501074, which you sent us, appears to insure the premises against fire, with certain exceptions, lightning, explosion of boilers, or explosion of gas used for domestic purposes or for lighting or heating the building, and does not appear to cover the additional risks mentioned above.

In the first paragraph of that letter, they said:

Under the mortgage between the above company and Messrs. Trower and Barstow, the company are obliged, during the continuance of the mortgage, to keep the buildings and all property for the time being comprised in the mortgage insured against loss or damage by fire, damage by missiles or projectiles from or fired at aircraft, or by reason of riots.

The agents wrote back on 21 May 1936, as follows:

We are in receipt of your letter of the 20th instant, the contents of which we note. There is at the moment no insurance cover against “riot” or “aircraft” damage, and we have to-day arranged with the Atlas Assurance Co., Ltd., to issue a cover note against this risk, which as soon as we receive we will forward to you.

On 25 May 1936, the Atlas Assurance Co Ltd, by their manager, wrote to the plaintiff companys agents as follows:

We are obliged by your remittance of £28 10s. 7d. in respect of the above policy and have the pleasure to forward official receipt, together with a suitable indorsement slip for attachment to the document.

On 26 May 1936, the defendants solicitors wrote to the plaintiffs solicitors as follows with regard to the insurance:

We shall, therefore, hope to hear from you further regarding the additional insurance against loss or damage by “missiles or projectiles from or fired at aircraft or by reason of riots.”

On 28 May 1936, the plaintiffs solicitors wrote to the defendants solicitors as follows:

Further to your letter to us of the 26th instant, we now enclose an indorsement to be attached to the policy, in respect of the above premises, covering the further risks, as requested by you. We also enclose the policy, and shall be glad if you will kindly return both documents to us when you have inspected them.

That was acknowledged on 2 June 1936, as follows:

We thank you for your letter of the 28th ultimo, and beg to acknowledge the insurance policy in respect of the above premises. We think, however, we should keep this here, in the usual way, on behalf of the mortgagees, with the title deeds.

The indorsement for the additional security was put upon the policy, and the matter remained there, in those circumstances, for the time being. It appears from the evidence that the additional security which was provided for by the additional term in the policy did not cover risks which the plaintiffs covenanted should be coverednamely, risks from enemy aircraft, missiles or projectiles from or fired at aircraft, or by reason of riots. Although the defendants solicitors received the indorsement (and, if they did not themselves read it, it was read in fact by their managing clerk), neither they nor the plaintiffs solicitors appear to have noticed the fact that the additional policy did not go far enough

Page 200 of [1940] 1 All ER 195

to be a compliance with the covenant in the deed. On 30 March 1937, the defendants solicitors asked to have the insurance policy, together with receipts, sent to them. That appears to have been done, but, again, no question was raised at all with regard to the inadequacy of the policy of insurance. On 26 January 1939, however, the defendants solicitors appear to have become aware of the fact that the policy was not a compliance with the covenant in the mortgage, because they wrote to the plaintiffs solicitors on that date as follows:

In the mortgage of Mar. 25, 1936, made between your clients, the Moorgate Estates, Ltd., and Mr. W. G. Trower and Mr. J. A. T. Barstow of our firm, there is a covenant that your clients will insure the building against “loss or damage by fire, damage by missiles or projectiles from or fired at aircraft” etc. This clause obviously includes war risks. As we understand your clients have failed to insure against these risks, there has been a breach of the covenant in the mortgage. In these circumstances, the principal money of £155,000 secured by the mortgage has become immediately repayable. The mortgagees do not feel justified in allowing this mortgage to remain outstanding in view of the risk attaching to it. Would you kindly take this letter as notice to your clients to pay off the mortgage immediately. We shall be glad to hear that arrangements are being made for this purpose.

In answer to that, the plaintiffs solicitors wrote on 27 January 1939, as follows:

We confess that we do not fully appreciate the letter, and think you must have written it without reference to the correspondence which took place at the time. On May 18, 1936, you wrote us drawing attention to the insurance covenant in the mortgage, to which you now also draw attention. We took the matter up with the insurance company, and obtained the full cover which insurance companies would then give in respect of the risk, and sent the appropriate indorsement to you on May 28, which you duly acknowledged on June 2. This policy has been renewed ever since, and is still in force. Your clients have throughout been aware of and accepted such policy as being in compliance with the covenant of the mortgage and we cannot, therefore, accept the view of your letter under reply that there has been any such failure to insure against any risks provided for by the mortgage as would entitle your clients to call in the mortgage. Further, as is well known from statements made on behalf of the government in the House of Commons and also statements made by insurance companies, it is not possible to insure against damage resulting from enemy aircraft. We have been in constant touch with insurance brokers on this matter, and if it had been possible to effect such a policy our clients would of course, have taken it out. As the covenant in question has become impossible of performance through circumstances entirely beyond the control of our clients, we cannot accept the contention of your letter that the circumstances entitle your clients to call for the mortgage to be paid off immediately.

That letter was not strictly accurate, because, although it was impossible at the date when it was written to insure against such war risks, it had not been impossible during the whole time the mortgage was on foot, because, from the evidence I have heard, until October 1936, such a policy could be effected. I am not suggesting for a moment that the plaintiffs solicitors had that in mind, or possibly were aware of it, at the time they wrote that letter, but it was not strictly accurate, having regard to the evidence I have heard here. On 2 February 1939, the plaintiffs solicitors wrote as follows:

… the points of view of our respective clients were irreconcilable. We have obtained the opinion of leading counsel that your clients are not entitled at law to call in the money, and accordingly we have received instructions from our clients to take the necessary proceedings to have the point decided by the court.

On that, the writ in this action was issued.

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There is very little evidence on this matter which has reference to anything I have to decide. It appears that in March 1938, the plaintiffs had it in mind to pay off the mortgage and make other arrangements with regard to the property. One of the members of the plaintiffs firm of solicitors interviewed one of the defendants, Trower, and discussed with him whether his clients would permit the mortgage to be paid off at once. As the result of that conversation and telephone message, Trower informed the plaintiffs solicitors that his clients would accept payment off, although they were not very willing to do so, because the mortgage was in fact a good security, but they would permit it only at a considerable cost, because there would have to be a premium or bonus paid for the privilege of paying off before the due time. I do not myself see that there is very much relevance in that, and really the whole matter comes down to whether the plaintiff company has committed a breach of the covenant in the mortgage with regard to insurance which would give rise to the right of the defendants to foreclose and re-enter and recover their money, or, in the circumstances, whether it is the fact that there has been no such breach, and that, therefore, the defendants are not in a position to call in their money at once. It seems quite plain, when one reads the terms of the mortgage and considers what has happened, that prima facie there has been a perfectly clear breach of the covenant in the mortgage. The plaintiffs have not, and never had, insured in such a way as to comply with the covenant for insurance which is contained in the mortgage. I think that there is little doubt that such an insurance could have been effected down to October 1936. Also, however, there is no doubt that, from the evidence that I have heard, since October 1936, any such policy was quite impossible to effect. No insurance company, and no member of Lloyds, would accept such a risk, and such a policy could not be procured from any reputable firm or company. I think, therefore, that one must take it that, as from October 1936, a full compliance with the terms of the covenant in question became impossible. In those circumstances, is the plaintiff company relieved from the necessity of complying with the covenant, or is the covenant still an enforceable covenant which they have failed to observe, and which, therefore, has given the defendants the right to recover their money immediately?

The plaintiffs have put their case, as I understand it, upon three grounds. It is not suggested (and, I think, it is quite properly not suggested) that this is a case of frustration in any true sense of the term at all, and the cases about frustration of contracts very rightly have not been referred to. The contract itself remains, and one term of it has, according to the plaintiffs, ceased to be enforceable, and, therefore, as I say, it is not a case of frustration at all. However, the plaintiffs say, in the first place, that it was an implied term of the contract, when it was entered into, that, if such an insurance policy was an impossibility, then neither side should be entitled to rely upon the failure to comply

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with that covenant. It is pointed out (and truly pointed out) that the defendants are given the right to insure themselves in the event of the plaintiffs failing to effect the necessary insurance, and it is said that it was clearly not in the contemplation of either of the parties at that time that such an insurance as was required by the covenant was something which could not be obtained. The very fact that the defendants were given the right to effect the policy themselves in the event of the failure of the plaintiffs to do so is an indication that both sides did not in the least have it in mind that such a policy might not be able to be effected at all. On the other hand, however, it appears to me to be extremely difficult in this case to come to the conclusion that there was any such implication as that which the plaintiffs suggest. The plaintiffs say that this particular term of the mortgage was something which was not to be enforced, both parties intending the covenant to be read as though it was not to be enforced unless such a policy could be effected. It is to be noticed that, if that had been the intention of the parties at the time, there would seem to have been no difficulty about putting a proviso in the covenant to give effect to such an intention. No such proviso is to be found, and I confess that I feel the greatest possible difficulty in coming to the conclusion that there was ever any such implied intention on the part of either party at the date of the covenant. There was at that time no impossibility about effecting that form of insurance, and there was no impossibility for some little time after. In connection with that, one has to bear in mind the position of the defendants. The defendants were advancing a very large sum of money, and were taking as security for that money a charge upon land and buildings in the city of London. It was obviously of the greatest importance to them that the buildings should be insured for an adequate sum, so that, if the buildings were destroyed, there would be a sum of money to represent the buildings, which would be available as security for the loan which they had made. One of the possible ways in which the buildings in question might be destroyed was, by enemy action, and it is difficult to suppose that the defendants were willing to allow their money to remain on mortgage of buildings which were wholly unsecured so far as that particular form of possible destruction went. In fact, the fact that they were not so willing is apparent, I think, from the fact that they did insist uponor they got, at any ratea form of covenant providing in terms for insurance against that possible risk. I myself find it impossible to see how, in this case, there was any such implication as is suggested. I cannot bring myself to think that the defendants ever contemplated that that particular portion of the covenant relating to insurance against enemy action was something which was to be enforced only if such insurance happened at a particular time to be obtainable. In my judgment, the defendants, at any rate, did intend to obtain the particular form of security for their money which would be provided by such an insurance, and I am not at all

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satisfied that they would have been prepared to allow their money to remain outstanding merely because that particular form of insurance was no longer obtainable. In my judgment, there is no ground here whatever for saying that there was any such implied term in this mortgage as the plaintiffs seek to have read into the document.

If that be so, it is then said that, at any rate, in this particular case there is in some way an estoppel which prevents the defendants from setting up the claim which they now set up. I confess I share the great difficulty which counsel for the plaintiffs very frankly said he felt with regard to an estoppel. There is nothing here, so far as I can see, which can amount to any sort of representation upon which the plaintiffs acted to their detriment, and, so far as estoppel is concerned, I think that I need say no more about it. I can see no justification whatsoever for such a suggestion.

The other ground upon which it is sought to escape from this difficulty is this. It is said that the defendants have waived the performance of this particular covenant, and, therefore, can no longer enforce it. In my judgment, there has been no such waiver at all. No doubt the defendants did not read, or did not appreciate, that the form of additional security was not wide enough to be a compliance with the covenant. Whether they read it or not, they did not, at any rate, take any objection to that form of policy, and it seems that both sides, the plaintiffs solicitors and the defendants solicitors, were under the same mistake of fact in thinking that the policy with the indorsement upon it was sufficiently wide. However, apart altogether from that, I can see no ground for suggesting that, even if the defendants were willing to permit the policy in that form to remain in that form for a year, or for two years, there is any sort of waiver whatever so long as the policy remained on foot and they waived their right to a strict performance of the covenant, and, indeed, even if there was any such waiver, it was something which was supported by no consideration whatever, and clearly any such waiver as that could not be enforced against the defendants, in all the circumstances.

That being so, it is, in my judgment, quite a plain case of a breach by the plaintiffs of the terms of the covenant in question. One appreciates the hardship upon the plaintiffs. They have entered into a covenant which they are unable to perform, and their position is one of great difficulty, and one feels, if I may say so, sympathy with them. On the other hand, one must take the point of view of the defendants. I know not whose money the money advanced on mortgage is. I will assume for the moment that it is money which is trust money. The defendants have invested money which they hold on trust, assuming that to be so, upon a 4 per cent security which they thought was a safe security for trust money. The safety of the security depended, and necessarily depended, very largely upon the protection of the property by the proper and necessary insurance, and, therefore, it was vital to

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the defendants to see that a wide enough covenant was put into the mortgage to cover all these risks. If they were bound to allow their money to remain out on mortgage for the full period, and had no remedy, notwithstanding the fact that one of the terms of the mortgage which enabled them to feel reasonably secured was no longer enforceable, that would put them into a position where they might find themselves in the greatest possible difficulty if the buildings were unfortunately destroyed and the security for their money very largely disappeared.

Taking the position at large, I think that the position is this. The plaintiffs and the defendants have entered into a contract under which the plaintiffs have agreed and covenanted to do certain things. They have failed to carry out their covenant, not, as it happens, through any fault of their own, but, nevertheless, they have failed to perform the covenant. As a result of that failure to perform the covenant, the defendants are put in a position where they can call in their money, and have done so. In my judgment, that is something which the defendants were entitled to do, and, accordingly, the plaintiffs are not entitled to the relief which they seek in this action by the form of declaration which they ask. Unfortunately for them, they have failed to comply with one of the covenants in the mortgage, and the result follows that the defendants are in a position now to call in their money, as they have done. So far, therefore, as the action itself is concerned, the plaintiffs, in my judgment, have failed to establish their right to relief which they sought, and, accordingly, the action must be dismissed with costs.

That leaves the question of the counterclaim to be considered. By the counterclaim, the defendants seek an account of what is due under the mortgage payable by the plaintiffs to the defendants of the sum of £155,000 with interest, they seek that the mortgage and registered charge may be enforced by foreclosure or sale, and they seek a receiver, and delivery of possession of the mortgaged premises. To that, objection has been taken under the Courts (Emergency Powers) Act 1939, and it is said that the defendants are not entitled to proceed with their counterclaim at all, because they have not taken the step which it was necessary for them to take before they could proceednamely, an application for leave by summons to proceed. That is said to arise under s 1(2) which provides as follows:

Subject to the provisions of this section, a person shall not be entitled, except with the leave of the appropriate court. … (b) to institute any proceedings for foreclosure or for sale in lieu of foreclosure, or take any step in any such proceedings instituted before the commencement of this Act …

These proceedingsthat is, the counterclaimwere instituted before the commencement of this Act, and, therefore, in order to bring this case within the prohibition in the Act, it is necessary to establish that, by the hearing of the counterclaim, the defendants (the plaintiffs to the counterclaim) are taking a step in proceedings instituted before the commencement of this Act. Whether or not that is so must depend upon what is

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meant by taking any such step. In my judgment, the words do not refer to the hearing of an action which was set down and ready for trial before the Act came into force. Taking “any step in any such proceedings” means, in my judgment, taking any interlocutory step before the action gets to the stage where it is set down and ripe for trial. Once the action is set down, it is no longer possible to get a summons before the master in the proceedings. The matter has passed out of the hands of the master, and is solely a matter for the court, and I cannot bring myself to think that the Act contemplated that a summons should be taken out before the judge who is going to hear the action and the counterclaim for leave to hear the action. In my judgment, that is not what was intended by this Act. There is nothing, in my view, to prohibit the opening and the hearing of such an action as this, commenced, as it was, before the Act came into force. No doubt the result of the hearing, if an order is made for relief such as sale or foreclosure, the right to proceed on the judgment so obtained, is something which the court requires should only be taken with the sanction of the court under the Act. However, in my judgment, when the action is one which was commenced before the Act came into operation (the action itself was ready, in the sense that all the necessary preliminary steps had been taken, and the action had been set down and was waiting for trial), there is nothing in this Act which prevents that action coming on for trial and being heard by the judge without any leave under this Act, although, as I say, of course the right to enforce any judgment so obtained may be something which the plaintiff can only do by the leave of the court, as provided by this Act.

If that be so, it follows, in my judgment, that the defendants are entitled to an order upon the plaintiffs, and that the defendants are entitled to the account which they seek. They are also entitled, in my judgment, to the appointment of a receiver, because, so far as I can see, the Act itself does not necessitate any express leave for the appointment of a receiver by the court. They are also entitled to a foreclosure nisi, but they cannot proceed, either by foreclosure absolute or otherwise, or by sale, to enforce that judgment, and, before they can take steps to enforce the judgment by those means, they must obtain the leave of the court by a summons, as provided by the Act itself. The relief to which I consider the defendants are entitled is relief which, in my judgment, I am entitled to give them, and there is nothing in the Courts (Emergency Powers) Act 1939, which disentitles them to that relief. The whole object of the Act is to prevent a person or persons from enforcing a judgment against a defendant without the leave of the court, to give the defendant an opportunity of showing that his failure to pay the debts which he owed, or to satisfy the judgment, is due, directly or indirectly, to the war. There is nothing, in my view, which prevents a plaintiff in such a case as this from claiming an order for an account or for foreclosure nisi, nor for the appointment of a receiver. In those circum-

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stances, I propose to give the defendants that relief, and the plaintiffs must pay the costs of the counterclaim.

Action dismissed with costs. Judgment for defendants on counterclaim with costs.

Solicitors: J D Langton & Passmore (for the plaintiffs); Trower Still & Keeling (for the defendants).

F Honig Esq   Barrister.

Nash (otherwise Lister) v Nash

[1940] 1 All ER 206


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        LANGTON J        

Hearing Date(s):        6, 7, 8, 12, 20 DECEMBER 1939        


Divorce Nullity Lack of sincerity Time of knowledge of husbands impotence Motives inducing marriage.

The parties were married on 18 January 1939, the respondent being then 74 years of age, while the petitioner, who prior to the marriage had been his secretary and companion, was then 34 years of age. The respondent made unsuccessful attempts to consummate the marriage, and then told his wife, after the first week of the marriage had elapsed, that he did not intend to make any further attempts, as he did not wish to have children by her. About this time, also, he began to deliver to her a number of written communications, in one of which he said: “You can get the marriage annulled.” After much bickering and unhappiness, the petitioner left the respondent on 25 February 1939, and 4 days later filed a petition for nullity on the ground that the marriage had not been consummated by reason of the respondents impotence, or, alternatively, by reason of his wilful refusal to consummate the marriage. The respondent by his answer denied his incapacity, the refusal to consummate, and alleged want of sincerity on the part of the petitioner:

Held (i) it was clear on the face of the respondents admissions that he had been guilty of wilful refusal to consummate the marriage.

(ii) sincerity with which the court is concerned has reference only to the sincerity of the plea, and is not concerned with the motives that induced the petitioner to marry the respondent.

(iii) the petitioner had not been lacking in the necessary sincerity. There had been no kind of delay in presenting her petition, and she had done nothing to approbate the marriage, nor had she obtained any of the benefits, material or otherwise, which a woman has a right to look for in marriage.

Notes

The plea of lack of sincerity is wholly concerned with events after the marriage, and is not concerned with the motives which induced the marriage. Thus it cannot be said that a young woman marrying an old man with a view to her material and financial advancement is precluded from obtaining a nullity decree by reason of the motives which induced her to marry.

As to Lack of Sincerity, see Halsbury (Hailsham Edn), Vol 10, pp 643, 644, paras 942, 943; and for Cases, see Digest, Vol 27, pp 265, 266, Nos 23282338.

Cases referred to

G v M (1885) 10 App Cas 171; 27 Digest 351, 3339, 53 LT 398.

L v L [1931] SC 477; Digest Supp.

Wifes Defended Petition

Wifes defended petition for a decree of nullity of marriage on the ground of the respondents incapacity, or, alternatively, on the ground

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of his wilful refusal to consummate the marriage. The facts and arguments are fully set out in the judgment.

Gerald A Gardiner for the petitioner.

Richard A L Hillard for the respondent.

20 December 1939. The following judgment was delivered.

LANGTON J. In this case, the petitioner asks for a decree of nullity, on the ground that her marriage has never been consummated by reason of the impotency of her husband, or, alternatively, by reason of his wilful refusal to consummate the marriage. By his answer, delivered on 9 March 1939, the respondent denied his incapacity, and denied also the refusal to consummate. Some months afterwards, on 16 June 1939, this answer was amended to include the plea that the petitioner was guilty of want of sincerity in presenting the petition. The case has taken an unconscionable time to try, and this prodigal expenditure of time has been for the most part due to the personal eccentricities of the respondent. It is only fair to a hardworking and conscientious craftsman to add that the respondents case has been presented with great ingenuity and imperturbable good temper by his counsel. As to the first two issues of impotency and wilful refusal, it will not be necessary for me to give a judgment in great detail. It will be necessary hereafter for me to say something concerning the medical evidence touching on the respondents sexual capacity, but, since he admitted at the trial (i) that he had in fact never consummated the marriage, and (ii) that he had not the slightest intention of doing so after the first week of the marriage had elapsed, his counsel considered that it was unnecessary to debate that aspect of the matter any further. The respondent admitted that he had made two attempts to consummate the marriage without success. He further admitted that, after the failure of the second attempt, he informed his wife that he had no intention of making any further efforts, because he did not want to have children by her. Finally, he admitted in the clearest terms that he intended to refuse to consummate the marriage, and that, from the day on which he made that statement to his wife until the day he gave evidence, he had neither offered nor intended to attempt to consummate. He did not suggest that his wife on her side had said or done anything to put any difficulty in his way, and he agreed that on at least one occasion she had attempted to assist him. In the face of these admissions, it was abundantly clear that, impotent or not, the respondent was guilty of wilful refusal.

The greater part of the time which this case has occupied has been devoted to the unusual question of want of sincerity on the part of the petitioner, and this is now the only outstanding issue in the case.

The first thing which appears to me to be necessary, and it is by far the most difficult part of my task, is to attempt to focus this issue as nearly as may be, and to delimit in a proper perspective the nature and bounds of the issue itself. The authority relied upon by both sides as

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being not only the locus classicus of the doctrine to be applied but also the alpha and omega of the doctrine itself is G v M, in the House of Lords. In that case, the Earl of Selborne LC, said, at p 186:

My own belief is that, to whatever criticism the phraseology of learned judges in those cases may be open (and I must say that the adoption of that particular phrase “sincerity” seems, as the learned counsel said, to suggest a psychological question rather than one of law or fact, diving into the motives of a persons mind rather than trying whether a cause of action exists or not,) I think I can perceive that the real basis of reasoning which underlies that phraseology is this, and nothing more than this, that there may be conduct on the part of the person seeking this remedy which ought to estop that person from having it; as, for instance, any act from which the inference ought to be drawn that during the antecedent time the party has, with a knowledge of the facts and of the law, approbated the marriage which he or she afterwards seeks to get rid of, or has taken advantages and derived benefits from the matrimonial relation which it would be unfair and inequitable to permit him or her, after having received them, to treat as if no such relation had ever existed. Well now, that explanation can be referred to known principles of equitable, and, I may say, of general jurisprudence. The circumstances which may justify it are various, and in cases of this kind many sorts of conduct might exist, taking pecuniary benefits for example, living for a lone time together in the same house or family with the status and character of husband and wife, after knowledge of everything which it is material to know. I do not at all mean to say that there may not be other circumstances which would produce the same effect, but it appears to me that, in order to justify any such doctrine as that which has been insisted upon at the bar, there must be a foundation of substantial justice, depending upon the acts and conduct of the party sought to be barred.

In the same case, Lord Watson puts forward his view of the matter as follows, at pp 197, 198:

The first plea against any consideration of the merits of this case was rested upon the rule as to “sincerity,” or more correctly speaking, insincerity. I agree with the observations which have been made upon the English cases bearing upon that matter by my noble and learned friend the Earl of Selborne, L.C. It humbly appears to me that the expression is not a very happy one, and also that it has been used occasionally in circumstances which render it still more inappropriate. I think that when those cases are dissected they do show the existence of this rule in the law of England, that in a suit for nullity of marriage there may be facts and circumstances proved which so plainly imply, on the part of the complaining spouse, a recognition of the existence and validity of the marriage, as to render it most inequitable and contrary to public policy that he or she should be permitted to go on to challenge it with effect.

Again, Lord Bramwell analyses the use of the word “sincerity” with considerable care, at pp 201, 202:

Now, one word as to this question of “sincerity.” It is a most remarkable expression, a very curious word, and I am not at all sure that it has not resulted from this, that sincerity is a very important matter in ascertaining whether the spouse complained of is impotent or not, and sincerity has been dwelt upon for that purpose till at last it has been taken to be a separate head of objection to the complaining partys proceedings. It seems to me very strange. What the complainant does in a suit of this sort is to come to the appropriate court for a declaration of the truth: “I say that this man is impotent and was so at the time of the marriage, and I ask you to declare that fact.” The very words of the summons are, “Declare the truth, that this man was impotent when he married me.” The court say, “No we will not,” or the argument is that the court ought to say, “No we will notwe know that it is true, but we will not say so”why? In my opinion a man who has inflicted this cruel wrong upon a woman ought not to be heard to object to her complaining, when she comes forward with her complaint of this wrong that he has done her, unless in some way or another he can show that he sustains some injury from the double matter of her not having complained earlier, and of her complaining now. In such a case I should indeed think that a law might be made (perhaps it exists, for aught I know,) that in some way or another the declaration of truth should be accompanied by some compen-

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sation to him for the sort of injury which, as I have indicated, might have been done to him.

It is worthy of remark that, although in that case the parties were together after marriage for the better part of two years, and although the wife never raised the question of the impotency until after she had herself given birth to an illegitimate child, and been charged with adultery by her husband, the House of Lords did not find that her plea was tainted by insincerity. It is also worthy of note that none of the opinions from which I have quoted seems to express complete satisfaction with the use made in this connection of the term “sincerity.” It is, I think, clear that their Lordships are of opinion that the word should not be held to be employed with all its usual implications, but should be treated as having a special and limited meaning.

Counsel for the respondent placed great reliance upon L v L. The headnote of the case states both the facts and the findings with considerable terseness and accuracy. As to this case, it should be observed that the parties had lived together for over 4 years before any action was taken by the pursuer, and that two out of the three judges in the Court of Session reserved their view as to whether knowledge of impotency prior to the marriage in all cases necessarily operates as a bar to an action for nullity.

The view which I have formed from a consideration of these and other cases bearing on the point is that the “sincerity” with which the court is concerned has reference only to the sincerity of the plea, and has nothing whatever to do with either (a) the general character of the petitioner as a sincere or insincere person, or (b) the conduct of the petitioner before her marriage or the motives which prompted her to enter into the marriage. In cases of the class to which L v L belongsnamely, cases in which the petitioner knew of the impotency before marriagethe knowledge is obviously of great importance as shedding light upon the sincerity of the plea, and not upon the sincerity of the petitioners conduct. To put the matter in another way, the court may well believe that a plea of this kind is not put forward with sincerity in a case where the petitioner knew of the disability in advance, but the decree will be refused, not because of the petitioners knowledge, but because of the insincerity of the petitioners plea. Knowledge in such cases is only evidence of, and not an acid test of, insincerity. The task before me is, accordingly, to address my mind, not to the conduct or declarations of the petitioner before her marriage, but to the question of whether, since her marriage, she has been guilty of any conduct which ought to estop her from having the remedy she seeks. Is there, in the words of the Earl of Selborne LC, at p 186:

… any act from which the inference ought to be drawn that during the antecedent time the party has, with a knowledge of the facts and of the law, approbated the marriage which he or she now seeks to get rid of, or has taken advantages and derived benefits from the matrimonial relation which it would be unfair and inequitable to permit him or her after having received them to treat as if no such relation had ever existed.

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Be it observed that the Earl of Selborne LC, speaks of an “act … during the antecedent time.” As I read this passage, and, indeed, as I understand the law, the antecedent time here referred to is the time which elapses between the date of the marriage and due ascertainment of the facts and the law, on the one hand, and the date when the plea is put forward, on the other.

In the present case, it has never been suggested, and, indeed, could not be suggested, since the respondent does not even now acknowledge his impotency, that the petitioner had any knowledge one way or the other concerning her husbands capacity before marriage. To my thinking, therefore, the point from which the petitioners conduct falls to be examined commences from the time when she herself became convinced that her husband was impotent. In order to ascertain this moment with reasonable precision, it will be necessary to enter somewhat more exhaustively upon certain questions of fact.

The parties met in December 1938. The petitioner was then a young woman of 34 years of age, and the respondent an old man of 73 years of age. The petitioner entered the employ of the respondent as a typist and secretary-companion. Her duties consisted of work as a typist during the morning and of attendance upon the respondent as a companion between the hours of 6 pm and 10 pm. For these calls upon her time and energy she was remunerated at the somewhat miserly rate of £2 per week. Against this, however, must be set the facts that she obtained at least one meal a day from the respondent, and that she was never called upon to do any serious work between 6 pm and 10 pm. At this time, the petitioner was living by herself in a small flat, the landlady of which, Mrs Hidden, was called before me as a witness. At the hearing of the action, some reliance was placed upon alleged declarations which were said to have been made by the petitioner to Mrs Hidden during the period of her employment as secretary-companion to the respondent. During the time which elapsed between the filing of this petition and the hearing of the case, Mrs Hidden suffered a very serious accident, and was indeed brought to court in an ambulance. Owing either to the shock occasioned by her injury or to natural lapses of memory, she proved unable to give any very clear evidence, and I have not felt it possible to found any conclusion upon her testimony. Her recollection, both of her own statements and of those of the petitioner, seemed to be exceedingly hazy, and she was so ready to agree with almost any suggestion made by either counsel that one could not help feeling that the trend of her evidence would almost certainly be decided by the amount of pressure put upon her to give that evidence. Her name was not mentioned by either counsel in their final addresses before me.

On 23 December 1938, the respondent startled his secretary by placing upon her typewriter before her arrival in the morning an advertisement for insertion in The Times announcing their engagement. The

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petitioner, after expressing her surprise, not unnaturally asked for time to consider the proposal. To this request the respondent replied that he could not give her time, and that he required an answer on the spot. He epitomised, I have no doubt truthfully, his own attitude towards the world by observing, “What I wants, I takes,” and the petitioner so far yielded to his request as to agree that she would be engaged to him for a period of 4 months, with the option of rejecting him after that period if she so desired. This period of 4 months was selected because the petitioner was already under contract with the respondent to share with him a world cruise as his secretary-companion. Events then developed with remarkable swiftness. Within a very short time, a matter almost of hours, the respondent determined to force the pace, and persuaded the petitioner to agree to marry him on his seventy-fourth birthdaynamely, on 18 January 1939. The petitioner has very frankly admitted that, at the time when the respondent delivered his sudden and imperative proposal, she was herself engaged in an association with a young man of her own time of life whose name it is quite unnecessary to mention. With the same commendable frankness, she has told me how at first she determined to continue this association, notwithstanding her marriage, and in fact approached Mrs Hidden with the idea of securing a rendezvous after the marriage had taken place. Later on, however, she felt some qualms of conscience, and eventually, deciding that such a course of action would be dishonourable, she broke off the association some time early in January, and did not resume her meetings with the young man in question until after she had parted from her husband. Since the petitioner has been much aspersed in the course of this case for this portion of her conduct, I desire to say quite plainly, first, that I believe her evidence as she gave it, and, secondly, that I consider the aspersions made upon her in this regard to be unfair. No one, of course, could pretend to excuse her first determination to continue her association after marriage, but the determination was not persisted in or acted upon, and was in fact reversed within a very short time of being made, and in good time before her marriage. Furthermore, it is only bare justice to remember on her side of the case that the respondent, on his own admission, sprang this proposal upon her without the faintest hint of warning, and demanded an instant reply, without affording her any interval for reflection. In such circumstances, only a man of the respondents peculiar mentality, lacking as he is in any instinct of chivalry, and devoid of all consideration for the feelings and convenience of others, could possibly have thought it fair to drag this episode in his wifes career into the limelight of publicity, and endeavour to found upon it a defence for his own shortcomings.

During the early part of January 1939, the respondent appears to have been moved to one of his rare gestures of generosity to the extent of providing £50 towards his wifes trousseau. During the same period,

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he was also moved to a repetition of what appears to be almost a common practice with himnamely, to propose marriage to another secretary. The petitioner having fallen ill towards the end of December, she was requested by the respondent to find and supply a substitute secretary. The respondent stipulated that the substitute should be young and attractive, and the petitioner appears to have performed the task set before her so faithfully that, within a few days of her engagement, the new secretary, Miss Seaton, also received a proposal of marriage. Questioned as to whether this conduct was in his view loyal or sincere towards the petitioner, the respondent agreed quite heartily that it was nothing of the kind, and described his own conduct in the following way

I was quite prepared to throw over Miss Lister and marry Miss Seaton. At my age, we take them as companions. That is all I want really, a companion. From the moment when I met Miss Seaton, I preferred her to my wife. She was much more attractive and younger.

Miss Seaton, however, excused herself on the ground of a prior engagement. The incident was forgotten by the respondent as a matter of no special importance, and preparations for the wedding continued. On 18 January 1939, the parties were married, and started upon a somewhat curious honeymoon, of which they spent one night at Newbury and three at Weston-super-Mare. There were several attempts to consummate the marriage, and, if it were necessary for me to arrive at a determination, I do not think that I should have much hesitation in deciding that the respondent was impotent.

Almost from the outset, the marriage proceeded upon most unusual lines. As early as 26 January, the respondent began to deliver to his wife communications which he described in the witness-box as “ultimatums.” It is not a little remarkable, in view of the defences which he has seen fit to put forward in this case, that in the first of these documents he writes: “You can get the marriage annulled.” His explanation of what he really meant by this phrase was, as usual, not very clear, but he did not deny that he was there referring to the fact that the marriage had not been consummated, and that he intended to convey that, if a petition was presented by his wife, he would not defend the suit. Since he is in the habit of changing his mind for no apparent reason upon most of the determinations at which he has arrived, it is not surprising that he has made his present volte-face on this subject by defending this suit. It seems to me, however, that, in considering the sincerity of the petitioners plea, it is not unimportant to observe that within 8 days of the marriage the respondent was inviting her in writing to take the very course which she shortly afterwards pursued.

The same communication of 26 January contains also the following sentence: “I am bound to keep my adopted daughter.” The passage refers to a young woman whose real name is apparently Joan McGlyn, but whom the respondent has adopted in a form of law which has in fact no legal effect, since the young lady had already attained her majority before the act of adoption. The respondent made no secret

Page 213 of [1940] 1 All ER 206

of the fact that he had proposed to, and had at one time ardently desired to marry, this young lady. I gather that she is sometimes known as Miss McGlyn-Nash, and, about the time when the respondent became engaged to the petitioner, she reappeared at the respondents flat, and resumed her somewhat ill-defined position as an adopted daughter. Miss McGlyn, or McGlyn-Nash, if that be her proper name, was not called before me, and I would not wish that anything contained in this judgment should seem to be a reflection upon either her conduct or her character. It is sufficient for present purposes to say that her continued presence at the respondents flat after the marriage did nothing to assist the harmony of that ill-assorted union. After an uneasy month of bickering and unhappiness, punctuated by frequent and contradictory ultimatums by the respondent to the petitioner, the petitioner left the respondent on 25 February 1939. She left behind her a note the essential part of which is as follows:

You have made my life such a hell that I am leaving you for good. You will hear from my solicitors.

I do not imagine that it is a matter of much importance to attempt to discover what was the final or culminating incident of disagreement which prompted the petitioners action in leaving the respondent. The petitioner claimed that she was driven thereto by a most unreasonable and degrading proposal that the matrimonial home should be transferred to Ramsgate in intolerable conditions. She said that the conditions were that she was to go to Ramsgate in company with the respondent and Miss McGlyn, and that, whilst the respondent was to occupy one flat, she and Miss McGlyn were to occupy another. If, as I understand to be the case, she had neither sympathy nor friendliness for Miss McGlyn, and had never been led to understand that, when she married the respondent, Miss McGlyn would form a permanent part of his household, her determined objection to the Ramsgate project is in every way comprehensible. The respondents explanation of the project was somewhat different, but his memory is so unreliable that he has possibly forgotten the details, and, in any event, his view as to the consideration due to his wife is so unusual that the suggestion put forward by the petitioner does not appear to me to be in any degree unlikely. I am sure that the respondent would have considered his own interests and convenience alone, and would not have been deterred from making, or diverted from pursuing, any project he favoured because it happened to be objectionable to his wife. Within four days of leaving her husbandnamely, on 1 March 1939the petitioner filed her suit for nullity against her husband. If ever there was a case, therefore, in which “delay” in putting forward a plea was reduced to a minimum, it is this case.

Let us return now to a consideration of the legal aspect of the plea of “insincerity.” It will be remembered that, in nearly every case where this plea has been judicially considered, delay in putting it forward

Page 214 of [1940] 1 All ER 206

has been the basis upon which its sincerity has been attacked. The limitation upon the ordinary meaning of the word “sincerity” to which I have alluded above seems, therefore, to be fairly clearly defined. The petitioner must be sincere in the sense of not having wavered in her view as to the action she would take to assert her rights after she attained full knowledge of the facts and the law concerning those rights. The court will not allow a petitioner, after attaining such knowledge, to approbate the contract of marriage and obtain rights and benefits thereunder for a term of years and then subsequently reprobate the contract and claim that it is void upon the strength of those very rights which she had long elected to ignore. Upon this view of the law, the Scottish case of L v L appears to fall in direct line with the earlier decision of the House of Lords of G v M, and the only reason why the antecedent period of which the Earl of Selborne LC speaks was in that case antedated to include a period before the marriage was that there was there present the unusual feature of the petitioners knowledge of incapacity before the celebration of the marriage. Applying the law, therefore, as I understand it, to this case, I think that the point of time at and from which the petitioners “sincerity” is to be judged is such point of time as that at which she obtained knowledge of her husbands incapacity and a corresponding knowledge of the right in law which that incapacity allowed her to exercise.

The petitioner in this case was in no sense an ingenuous person. It is accordingly fair to suppose that, after a week of unavailing efforts, she came to a pretty clear conclusion that her husband was impotent. Nor do I imagine that, at the time when she came to this conclusion, or at least a day or two after, when she received the first of the respondents “ultimatums,” she had any longer any doubt as to her legal position. That she should have thereafter attempted for the better part of a month to make something out of her married life does not appear to me to militate in any way against the “sincerity” of her suit.

In order to understand this aspect of the matter, it is perhaps necessary to dwell for a moment or two upon the respective characters of the parties to the suit. I have already said enough concerning the respondent to make it clear that he is a most unruly, ungovernable, and egotistical individual. In spite of 40 years practice as a solicitor, he proved a garrulous and most unsatisfactory witness. His volubility is only equalled by his volatility. He loves publicity, and luxuriates in litigation, but his abiding interests in life are his health, his money and himself. The petitioner is a woman of great self-possession and fair intelligence. I do not for a moment suppose that she married the respondent under the spell of any particular illusion. However, I think that he had succeeded in concealing from her the more objectionable sides of his character and the harsher aspects of his egotism. She must have known on 18 January 1939, that she was throwing in her lot with an

Page 215 of [1940] 1 All ER 206

eccentric old man, who might possibly prove both difficult and tiresome. On the other hand, she was a person whose lines had not fallen in pleasant places, and who had probably come to feel that she could not expect the best things in marriage. Calculating, however, that the second best in a hard world might be better than the kind of single life she was pursuing, she married the respondent, as she herself said in answer to the first question put to her in cross-examination:

Because I was very fond of him and wanted children and a home.

She could not, of course, know that the question which provoked that answernamely, “Why did you marry Mr. Nash?”was going to be put to her at that moment and in that way, and her reply was prompt, and apparently uncalculated. If I were called upon to appraise the exact value of her answer, I should be strongly inclined to think that the attraction of a home ought to have come first, that she was seeking security rather than indulging an especial fondness for the respondent, and that the idea of children was one which she was ready to tolerate rather than to desire actively. On the whole, however, having seen her for many hours in the witness-box and under a cross-examination which lacked nothing in length and in detail, I come to the conclusion that the answer which I have quoted was in the main truthful. Even upon the topic of children, it is clear that it is not untruthful. It is conceded that she mentioned this subject before marriage, and that no form of contraceptive was ever suggested or employed during the respondents attempts to consummate the marriage. The fact that she was in no way unwilling to have children militated very strongly, to my mind, against the repeated suggestion that she was insincere because she married the respondent for pecuniary advantage. If, therefore, I had to determine whether or not, in her motives for marrying, the petitioner was guilty of “insincerity,” I should not feel justified in arriving at any conclusion of insincerity against her. For the reasons I have given, however, I do not think that the issue of “sincerity,” when properly delimited and understood, has anything to do with her motives for marriage.

To judge the matter from what I conceive to be the proper legal standpoint, the petitioner does not appear to me to be in any manner or degree lacking in the necessary sincerity. There has been no kind of delay in presenting her petition. She has done nothing that I can see to approbate this marriage. She has obtained none of the benefits, material or otherwise, which a woman has a right to look for in marriage, and the continued acceptance of which may properly be held to disqualify her from claiming its avoidance. Accordingly, the respondents defence fails completely.

Decree of nullity with costs.

Solicitors: Gordon Dadds & Co (for the petitioner); James Ball & Son (for the respondent).

J F Compton Miller Esq   Barrister.


Re OKeefe, Poingdestre v Sherman

[1940] 1 All ER 216


Categories:        SUCCESSION; Intestacy        

Court:        CHANCERY DIVISION        

Lord(s):        CROSSMAN J        

Hearing Date(s):        11 NOVEMBER, 1, 5, 6 DECEMBER 1939        


Conflict of Laws Succession to estate of intestate Intestates domicil of choice Law of nationality applicable by virtue of law of domicil of choice Different municipal systems of law of nationality.

In 1937, the intestate, who was of British nationality, died in Naples, where she had been living for 47 years. She was born in Calcutta in 1863, where her father was then residing. Her father was a native of what is now the Irish Free State. The intestate, after spending some years in India, France and England, finally went to Italy in 1890, and died there without ever acquiring Italian nationality. It was not disputed that her domicil at the time of her death was Italian, and that, according to Italian law, her estate was distributable according to the law of her nationality, which was British. There being three different municipal laws applicable according to the law of nationality, the question arose whether (a) English law, (b) the law of the Irish Free State, or (c) the law of British India, was the law according to which the intestates estate was distributable:

Held the intestates estate was distributable according to the law of the Irish Free State, for that country was, on the facts, the intestates domicil of origin.

Notes

Succession on intestacy is governed by the law of the domicil of the deceased, and not infrequently the law of the domicil provides that the succession is to be determined by the law of nationality, and, as between these, it is held that, in the circumstances of this case, the system of the domicil of origin prevails.

As to Law Applicable to Succession on Intestacy, see Halsbury (Hailsham Edn), Vol 6, pp 245250, paras 299304; and for Cases, see Digest, Vol 11, pp 367369, Nos 468491.

Cases referred to

Re Ross, Ross v Waterfield [1930] 1 Ch 377; Digest Supp, 99 LJCh 67, 142 LT 189.

Re Askew, Marjoribanks v Askew [1930] 2 Ch 259; Digest Supp, 99 LJCh 466, 143 LT 616.

Adjourned Summons

Adjourned summons to determine the law applicable to the distribution of the intestates estate. The facts are fully set out in the judgment.

L M Jopling for the plaintiff, a sister of the whole blood.

Hon Denys B Buckley for the first defendant, a sister of the whole blood.

Wilfrid M Hunt for the second and third defendants, a brother and sister of the half-blood respectively.

6 December 1939. The following judgment was delivered.

CROSSMAN J. This case relates to the estate of Mary Alice OKeefe, who died a spinster and intestate in Naples in 1937. Letters of administration were granted in England on 6 February 1939. The facts are not in dispute. Her father, James William OKeefe, was born in County Clare, which is now part of the Irish Free State, in 1835. He went to

Page 217 of [1940] 1 All ER 216

India, and about 1858 he married a lady of Irish parentage in Calcutta. The intestate was born of that marriage in Calcutta about 1860, and the plaintiff was born of the same marriage in Calcutta about 1863, so that those are two sisters of the whole blood.

I may follow now (I do not think it is seriously disputed) the affidavit of the plaintiff which sets out the facts. About 1867, the intestate and the plaintiff were brought by their parents to Boulogne, and lived there with an aunt while the parents went to England and spent the fathers leave there. Later in the same year, the parents called upon the intestate and the plaintiff at Boulogne, and they all returned to India. About 1873, the parents brought the intestate and the plaintiff to Lyons in France, and placed them in a convent there for their education. In the same year, the parents returned to India with the first defendant Jane Margaret Mona Sherman, who was Jane Margaret Mona OKeefe, and Terence OKeefe, who were the third and fourth children of the marriage to which I have referred, leaving the intestate and the plaintiff at the convent. The mother of both the intestate and the plaintiff died in Calcutta about 1877, and about 1878 the father came to Lyons, took the intestate and the plaintiff for a short tour in Ireland, and then placed them at a convent at Roehampton in England.

In October 1878, the father married his second wife in London and took her back to India. There were three children of the second marriagenamely, the second and third defendants, Francis Joseph OKeefe and Agnes Mary OKeefe, and another daughter, Ella OKeefe. Terence OKeefe, who was the third child of the first marriage, and Ella OKeefe, the third child of the second marriage, both predeceased the intestate without leaving issue, so I am not concerned with them. About 1880, the intestate left the convent in Roehampton and joined the father and step-mother in India. About 1884, the father brought the intestate with the rest of his family to England, and, after spending the winter with them in the Isle of Wight, he took a house at Ramsgate, and, leaving the family there, returned to India and died in Calcutta in February 1885. After that, the intestate lived for a short time in Spain and Tangiers, and, in 1890, for a short time in the Channel Islands. In 1890, the intestate went to Naples, and lived there until her death 47 years later in 1937. She never acquired Italian nationality, but, on the evidence which I have shortly detailed, I hold that the intestate was domiciled in Italy at the time of her death. That answers the first question raised by the summons. I do not think that there has been any serious dispute as to that. I think that both sides really accept the view that she had acquired a domicil of choice in Italy at the time of her death. I think that it is also quite clear that her domicil of origin was in Southern Ireland, which is now part of the Irish Free State.

The second question raised by the originating summons is whether the personal estate (I understand that she had personal estate only) as to which the intestate died intestate is distributable (a) under the

Page 218 of [1940] 1 All ER 216

law of England, (b) under the law of Eire, or (c) under the law of British India. Prima facie, the law applicable is the law of the intestates domicil at the time of her deaththat is to say, Italybut, by the law of Italy, as to which I have evidence, and as to which I think there is no real dispute, by the Italian Civil Code, art A, intestate successions are regulated by the national law of the deceased.

I hold that the intestates nationality was British. The question then arises as to which of the systems of municipal law which are applicable to British subjects is the law applicable to a succession to the intestates estate. Italian lawyers cannot say what is the meaning of the law of the nationality where there is more than one system of law of the nationality, but I have evidence, which I think is not disputed, from experts in Italian law that the Italian law would hold that the succession is regulated by the law of the country to which the intestate belonged, and to which she belonged, I think, at the time of her death.

The plaintiff and the first defendant, whose interests are the same, and who are sisters of the whole-blood of the intestate, by their respective counsel contend that the law applicable is the law of England. Counsel for the second and third defendants, who are a brother and sister respectively of the half-blood, contends that the law applicable is the law of Eire. Ex hypothesi, the intestate was not domiciled at her death in any part of the British Empire, but the case depends upon the fact that she was domiciled in Italy at the time of her death. However, I find on the evidence, as I have already said, that her domicil of origin was that part of Ireland which is now Eire. Counsel for the plaintiff and for the first defendant, respectively, say that the law of Eire cannot be the law to be applied, because, by the law of Eire, the intestate would not, in the circumstances, have been a citizen of Eire at her death, by reason of the Irish Act which states what the meaning of Irish citizenship is. Counsel for the second and third defendants admits that the intestate was not a citizen of Eire at her death. However, looking at the whole of the facts, and considering the evidence of the Italian lawyers which I have before me, as to which I think there is no real doubt, I have come to the conclusion that the only part of the British Empire to which the intestate can be said to have belonged, in the circumstances, is the part from which she originated. It is true, as counsel for the second and third defendants points out, that her domicil of origin, which is Southern Ireland, is something which remains in reserve ready to attach again whenever no other domicil arises. It is true that, at her death, her domicil was Italian, which I am bound to accept, because that is the hypothesis on which the question arose, but, if one removes the Italian domicil, the only other domicil which she could have had was that of Southern Ireland.

Finding, as I have found, that her domicil of origin was Southern Ireland, I hold that the law now applicable to the distribution of her estate is the law of Eire applicable to a person dying intestate domiciled in

Page 219 of [1940] 1 All ER 216

Eire. I think that this conclusion is at least in accordance with the respective views of Luxmoore J, as he then was, and of Maugham J, as he then was, in Re Ross, Ross v Waterfield, at p 406, and Re Askew, Marjoribanks v Askew, at p 269, and, although I cannot in any way rely upon them as authorities, I am interested in finding that this conclusion seems to me to be that arrived at in Cheshire on Private International Law (2nd Edn), pp 161, 162, and also in Diceys Conflict of Laws (5th Edn), p 875. The result is that the second question should be answered by saying that the estate of the intestate is to be distributed among the persons entitled thereto under the law of Eire in the Irish Free Statethat is to say, under the law applicable to a person domiciled in the Irish Free State.

Declaration that law applicable is law of Irish Free State.

Solicitors: Sanderson Lee & Co (for the plaintiff); Bennett Ferris & Bennett (for the first defendant); Kingsford Dorman & Co, agents for Thorn Drury & Leach-Lewis, Ramsgate (for the second and third defendants).

F Honig Esq   Barrister.

Dormer and Others v Newcastle-upon-Tyne Corporation

[1940] 1 All ER 219


Categories:        LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        12, 13, 15, 21 DECEMBER 1939        


Public Authorities Statutory powers Erection of barrier along pavement in front of plaintiffs building Nuisance Invasion of private rights of property Newcastle-upon-Tyne Improvement Act 1865 (c ccl), ss 22, 65.

The defendant corporation had erected a barrier, consisting of posts and lines of rails, along the edge of the pavement in front of a block of shops and offices owned by the plaintiffs, with the object of providing that persons walking on the pavement should, when wishing to cross the street, use the pedestrian crossing at either end of the barrier. The barrier constituted a nuisance and a serious invasion of the plaintiffs right of access to the carriageway of the street. The corporation had been empowered by a private Act to place posts, pillars, rails, etc, in the streets for, inter alia, the protection of passengers and traffic, but the Act contained a further section providing that “nothing in this Act shall authorise the corporation … to do … an act … amounting to a nuisance.” It was contended on behalf of the corporation that the word “nuisance” in the section did not there have its ordinary meaning, and that the true meaning of the section was that the corporation, in exercising its powers, was not to act unreasonably:

Held the effect of the section was to prevent the corporation from exercising its powers in such a way as to invade private rights of property, and the erection of the posts and rails was such an invasion.

Notes

It has been thought necessary for the safety of the public to erect railings at the edge of the footpath to ensure that pedestrians cross the road by the pedestrian crossing. The railings necessarily restrict the access to the carriageway from business premises, and it is here held that the statutory powers

Page 220 of [1940] 1 All ER 219

of the local authority were insufficient to justify the erection of these rails, which were in law a nuisance.

As to Permissive Authority, see Halsbury (Hailsham Edn), Vol 26, pp 259, 260, para 573; and for Cases, see Digest, Vol 38, pp 2131, Nos 112175.

Cases referred to

Camberwell Assessment Committee v Ellis [1900] AC 510; 38 Digest 642, 1601, 69 LJQB 828, 83 LT 201.

London, Brighton & South Coast Ry Co v Truman (1885) 11 App Cas 45; 36 Digest 221, 626, 55 LJCh 354, 54 LT 250, revsg 29 ChD 89.

Goldberg & Son Ltd v Liverpool Corpn (1900) 82 LT 362; 38 Digest 29 161.

East Fremantle Corpn v Annois [1902] AC 213; 38 Digest 28, 158, 71 LJPC 39, 85 LT 732.

Edgington v Swindon Corpn [1939] 1 KB 86, [1938] 4 All ER 57; Digest Supp, 108 LJKB 51, 159 LT 550.

R v Pease (1832) 4 B & Ad 30; 38 Digest 46, 275, 2 LJMC 26.

Metropolitan Asylum District v Hill (1881) 6 App Cas 193; 38 Digest 44, 256, 50 LJQB 353, 44 LT 653, affg SC sub nom Hill v Metropolitan Asylum District Managers 49 LJQB 228.

Sutton v Clarke (1815) 6 Taunt 29; 38 Digest 22, 122.

Coats v Clarence Ry Co (1830) 1 Russ & M 181; 11 Digest 137, 244, 8 LJOSCh 72.

Action

Action for damages for nuisance alleged to have been suffered by the plaintiffs through the erection by the defendants of a barrier along the edge of the pavement in front of a building of which the plaintiffs are owners or in which they are otherwise interested. The plaintiffs also ask for an order for the removal of the barrier. The facts are fully set out in the judgment.

Sydney G Turner KC and Cecil R Havers KC for the plaintiffs.

R M Montgomery KC and A Capewell for the defendants.

21 December 1939. The following judgment was delivered.

WROTTESLEY J. The plaintiffs are either owners of, or otherwise interested in, Grainger House, a recently reconstructed block of offices and shops situate in Blackett Street, Newcastle-upon-Tyne, and facing upon a busy traffic centre in that city. Just opposite to Grainger House, two other streets, one of them a very busy street, converge and join Blackett Street. On 16 August 1938, the city engineer erected a temporary barrier, consisting of ropes and iron posts, along the edge of the pavement in front of Grainger House. After this had remained in position for some considerable time, it was lengthened to the eastward so as to extend, not merely along the whole front of Grainger House, but also along the front of two shops lying to the east of Grainger House. The result of this was to provide a barrier extending from a pedestrian crossing in Blackett Street for a distance of about 138 ft, and terminating at the western end of Grainger House. The object of it was to provide that, when persons walking on the pavement on the north side of Blackett Street wished to cross the street, they should either use the pedestrian crossing, or, if they passed that crossing, be prevented from crossing the

Page 221 of [1940] 1 All ER 219

road until they had reached a point beyond Grainger House where a further pedestrian crossing was provided. Corresponding restrictions would thus be placed on movement in the opposite direction. There is no evidence to show when this extension took place or by whom it was ordered, but it happened some time before 2 December 1938, when the rope barrier was taken away and replaced by the present permanent barrier, consisting of posts and two lines of rails. The correspondence appears to show that this extension had taken place by 31 October 1938.

The plaintiffs complain that this barrier is a nuisance and seriously invades their rights, and ask that the court shall order it to be removed and shall award them damages for the injury which has already been caused to them. There cannot be any doubt that this barrier is a nuisance, nor that it seriously invades the plaintiffs rights of access as owners of property in a street to the carriageway of the street. Indeed, this has not been seriously contested. The defendants say, however, that, by the Newcastle-upon-Tyne Improvement Act 1865, s 22, Parliament authorised the corporation to erect the barrier, and that, therefore, nuisance or no nuisance, the corporation is acting within its powers. S 22 provides as follows:

The corporation may continue, or from time to time place and maintain, in any street any posts, pillars, rails, bars, chains, or other fence, permanent or temporary for the protection of passengers and traffic, and for preserving any footway clear from annoyance, and for prevention of accidents, and may place posts in the carriageway of any street so as to make the crossing thereof less dangerous to passengers, and may place fountains in convenient parts of the footways or carriageways of streets.

There is no doubt that, if Parliament has clothed the corporation with such powers, without limitation, the persons whose rights are invaded by such exercise have no remedy. There are many cases where public bodies have been entrusted by Parliament with powers to be exercised for the benefit of the public, the exercise of which results inevitably in the invasion of persons rights, yet Parliament has not always in these cases provided that persons so injured shall be compensated. Such power must always be exercised reasonablythat is to say, in such a manner as to do as little damage as possible to persons affectedbut, provided they are so exercised, then the damage done is one for which the courts provide no remedy.

The Newcastle-upon-Tyne Improvement Act 1865, contains another section, s 65, upon which the plaintiffs rely as an answer to the defendants claim to erect this barrier. S 65 provides as follows:

Provided always, that nothing in this Act shall authorise the corporation or any lessee of the corporation to do or be party to any act or thing amounting to a nuisance.

This section, which is in the form of a proviso, is to be found in a bundle of sections dealing with sewers and sanitary arrangements, and so described in a marginal note, whereas s 22 is the first of a bundle of sections dealing with streets, and so described. The Act, which is one

Page 222 of [1940] 1 All ER 219

obtained by the corporation, deals with a great variety of matters, including various street works, and, apart from s 22, the corporation might find themselves involved in activities authorised under the Act which might be a nuisance. While the defendants do not in terms abandon the point, and in fact in terms reserve it, they did not urge in this court that s 65 is not, by reason either of its language or of its position in the statute, to be read as a limitation on the corporations activities under s 22. Its language is, indeed, indisputable:

… nothing in this Act shall authorise the corporation … to do … any act … amounting to a nuisance.

Thus, except by doing violence to that language, I cannot possibly hold that the corporation are, in the exercise of s 22, authorised to erect and maintain these posts and rails regardless of whether or not they are a nuisance.

The corporation, however, urge that, properly understood, this latter section does not mean that they cannot erect these posts and rails. Their counsel points out that which cannot be gainsaidnamely, that one cannot put any post or rail or fence in a street without committing the most elementary and well-understood form of nuisance, and, since that is so, it is said that s 65 cannot be read in its ordinary meaning, for, if it is so read, Parliament has elaborately enacted in s 22 something which it has with equal formality gone on to forbid in s 65, and, since this is (to use the phrase of the Earl of Halsbury in Camberwell Assessment Committee v Ellis, at p 517) “disrespectful to the legislature,” we are, he says, driven to the conclusion that the word “nuisance” in s 65 has not its ordinary meaning. Accepting this proposition, the corporation offers, as the true meaning of the language in s 65, that it really is only another way of saying, as the courts have said, time and again, that, in exercising their powers, the corporation must not act unreasonably. They must not do more damage to private interests than they need. They must not abuse their powers. They must act bona fide. Their counsel words his proposition in language rather different from that used in the cases upon which he relies, and says that the language of s 65 is directed to prevent the corporation from creating nuisances other than the one which they are in terms permitted to create. For instance, he says that it is there to ensure that the posts which they do erect are not spiked posts, and that a fountain, if constructed, is not so constructed as to be a trap. In other words, the corporation must not, in creating the nuisance they are authorised to create, create also a supplementary or ancillary nuisance.

In support of their case, the corporation rely upon the following authoritiesnamely, London, Brighton & South Coast Ry Co v Truman, Goldberg & Son Ltd v Liverpool Corpn, East Fremantle Corpn v Annois and Edgington v Swindon Corpn.

In London, Brighton & South Coast Ry Co v Truman, a railway company who created a nuisance on land purchased by agreement under

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their special Act by carrying on a cattle yard in connection with their cattle-carrying business were held to be authorised to do what they did, and, in the absence of negligence, it was held that adjoining owners had no remedy. As Lord Halsbury LC said, at p 50:

It cannot now be doubted that a railway company constituted for the purpose of carrying passengers, or goods, or cattle, are protected in the use of the functions with which Parliament has entrusted them, if the use they make of those functions necessarily involves the creation of what would otherwise be a nuisance at common law. Ever since the decision of R. v. Pease, in 1832, it has been established so firmly by repeated decisions that that proposition is no longer within the region of controversy …

Then Lord Halsbury LC went on to deal with the grounds upon which it was said that the case under discussion could be distinguished, in that the cattle yard was not within the limits of deviation shown in the Act, and was not specifically authorised to be built on the site where it was ultimately erected.

The distinction between such cases and Metropolitan Asylum District v Hill was dealt with by Lord Halsbury LC, in the following passage, at p 53:

The Railway Acts, treated as a well-known and recognised class of legislation, were expressly and carefully distinguished from the permissive character of the legislation which your Lordships were then [in Metropolitan Asylum District v. Hill] construing. Broadly stated, the distinction taken amounted to this, that a small pox hospital might be built and maintained if it could be done without creating a nuisance, whereas the Railway Acts were assumed to establish the proposition that the railway might be made and used whether a nuisance were created or not.

It is to be noted that those Railway Acts contained no such section as s 65 in this Act, in terms excluding the power to create a nuisance.

Goldberg & Son Ltd v Liverpool Corpn was the case of a pole and fuse-box erected close to the principal entrance to the plaintiffs premises by the defendants under their Tramways Act 1897. It was in that case pointed out by Sir Nathaniel Lindley MR, at p 365, that the corporation were given:

… express power to do acts which but for that power would be unquestionably common law nuisances. … You cannot interfere with streets without committing a common law nuisance.

The court were satisfied that the defendants acted bona fide in erecting the pole. That being so, said Sir Nathaniel Lindley MR, at p 366:

… the nuisance has been sanctioned by Act of Parliament, and unless they can show that the powers of the Act of Parliament have been so abused that this court ought to say to the defendant, “We will interfere and prevent you using your rights,” the plaintiffs have no case. In my judgment, the plaintiffs fail to make out the essential proposition which it is necessary for them to sustain in this case, that there has been such an abuse of the powers of the defendants that this court can interfere.

Here again it is to be noted that there was not anything equivalent to s 65 in the Acts on which the defendants relied.

East Fremantle Corpn v Annois was a case where the appellant municipality, in altering the grade of a road or street under an Act empowering them to do so, drove a cutting past the respondents house

Page 224 of [1940] 1 All ER 219

leaving it perched on a bank 6 ft or 8 ft above the road. The alteration was clearly no more than was necessary for dealing properly with the road. Lord Macnaghten propounded the law on this topic in this passage, at pp 217, 218:

The law has been settled for the last hundred years. If persons in the position of the appellants, acting in the execution of a public trust and for the public benefit, do an act which they are authorised by law to do, and do it in a proper manner, though the act so done works a special injury to a particular individual, the individual injured cannot maintain an action. He is without remedy unless a remedy is provided by the statute. That was distinctly laid down by Lord Kenyon and Buller, J., and their view was approved by Abbott, C.J., and the Court of Kings Bench. At the same time Abbott, C.J., observed that if in doing the act authorised the trustees acted arbitrarily, carelessly, or oppressively, the law in his opinion had provided a remedy. Those words, “arbitrarily, carelessly or oppressively,” were taken from the judgment of Gibbs, C.J., in Sutton v. Clarke, decided in 1815. As applied to the circumstances of a particular case they probably create no difficulty. When they are used generally and at large, it is not perhaps very easy to form a conception of their precise scope and exact meaning. In simpler language Turner, L.J., observed in a somewhat similar case that “such powers are at all times to be exercised bona fide and with judgment and discretion.” And in a recent case, where persons acting in the execution of a public trust were sued in respect of an injury likely to result from their act, the present Master of the Rolls, then Collins, L.J., observed that “the only obligation on the defendants was to use reasonable care to do no unnecessary damage to the plaintiffs.”

Here again there was no section to the same effect as s 65 in this case.

Finally, in Edgington v Swindon Corpn, the facts were somewhat similar to those in this casenamely, a local Act empowering the local authority to erect shelters, and a shelter erected so as to interfere with the rights of frontagers. Finlay LJ summed up both the authorities and his view of the case before him, at p 92 ([1938] 4 All ER, at p 63):

I, therefore, cannot resist the conclusion that the true view here is that Parliament has thought fit to authorise the defendants to do a thing which at the least might, and I would go further and say almost certainly would, interfere with the rights of the owners of private property. If that is so, it seems to me that the case is at an end. One cannot go into questions of degree. The interference may be very slight, or it may be more serious. These matters are for the consideration of the defendants subject, of course, to the very important fact that the court would intervene if they acted unreasonablyand I should think they would act unreasonably if, having a choice of equally available sites, they chose to put their shelter on a site which would do really serious damage to adjacent property.

None of these cases, therefore, had to deal with the interpretation of an Act which undoubtedly in terms authorised a common law nuisance, and then went on to say that nothing contained in the Act was to authorise the corporation to do or be a party to any act or thing amounting to a nuisance.

Counsel for the plaintiffs offers a different explanation, affording, as he says, both to s 22 and to s 65 of the Act a perfectly reasonable meaning. It is that under s 22 of the Act the corporation is empowered to erect fences or barriers which would undoubtedly be a public nuisance, but that, by the provision of s 65, the corporation are forbidden so to erect this barrier as to be a private nuisancethat is to say, so as to cause some special damage to some person over and above

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that inflicted upon the community at large, or so as to injure a persons property, including any easements to which he may be entitled in respect of that property. It has been said so often that I need not quote authority for it that the burden of proving that Parliament has authorised the doing of acts which interfere with private rights rests on those who claim the right to do those acts, and that statutes of this kind must be construed strictly against the parties to whom the authority is given. More particularly is this the case when the statute relied upon contains no compensation provisions for those who are injured. If, therefore, the only meaning to be given to s 65 is that the corporation are not, so to speak, to pile unnecessary nuisances on to necessary nuisances, this section really enacted nothing that had not already been the law of this country long before 1865. The cases about sparks before the Railway Fires Act 1905, are, of course, only one type of instance of the application of this principle to railway legislation, and even as far back as 1830, in construing a railway Act in Coats v Clarence Ry Co, Lord Lyndhurst LC, held that the court ought to interfere to protect the plaintiff in these circumstances. The railway company, who had power to construct their railway across a mill-race, were proposing so to construct that particular arch or bridge as to interfere with the working of the mill, and it was clear from the evidence in the case that it was possible for the railway so to construct their arch as not to interfere with this mill-race. In those circumstances, Lord Lyndhurst LC was of opinion that in such a case the court ought to interfere to protect the plaintiff, and he awarded an injunction by which the company were restrained from making over the mill-race any arch of less dimensions than those of the arch recommended by the engineers report. It is perfectly true that in the Act authorising that railway are to be found words, with which we are all familiar, to the effect that in making their works the company should do as little damage as might be in the execution of the powers conferred on them, and that they should make full satisfaction for all the damages sustained by reason of the execution of such powers. We are all familiar with those words appearing in that type of Act, but that is the principle which has always governed the courts in controlling persons who are granted by Parliament the right to interfere with those private rights, whether or not those words are in the Act of Parliament. On the other hand, it was certainly not impossible in 1865, and it is not now impossible, to place in streets posts and barriers which are (if I may use that phrase) a technical nuisance and yet do not invade the rights of frontagers or constitute what is called an actionable nuisance. All of us are familiar with such barriers. For instance, there are those which prevent wheeled traffic from invading passages which are either too narrow or too steep to admit vehicles without danger to the vehicles or to the foot-passengers, or to both. Another case is that of a piece of railing set up in front of the exit from a school, and this railing, so far from damaging the value of the school

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premises for the purpose for which they are used, enhances them. Technical nuisances of this kind generally improve, instead of reduce, the value of the premises fronting on the passages, which are by posts made safe from vehicular invasion. Here, then, is an interpretation which gives both scope and meaning to s 65, whether it be applied to sewage disposal works or to posts in streets. Without that section, I should have no doubt that this was a case where Parliament had decided in the public interest to subject individuals to having their rights of property invaded without remedy or compensation. Indeed, the case would be covered by the decision of Finlay LJ, in Edgingtons case. By that section I think that Parliament meant the power so to be exercised as not to invade private rights of property at all. In this respect, therefore, the corporation must put up with a limitation on their powers in the same manner as other important bodies, such as electricity and gas undertakers throughout the country.

That leaves only two matters for consideration. First, the plaintiffs claim that, even if the Act of 1865 did empower the corporation to erect a barrier which invaded the rights of the plaintiffs, yet this particular barrier was an unreasonable use of that power. It is true that the extension of the barrier to which I have referred above is wrapped in mystery. Inquiry has not even now disclosed who ordered this extension to be made. It is clear from the minutes of the two committees involved that neither of them authorised it. Captain Embleton, the chairman of the watch committee, was quite unable to explain who ordered this experiment to be made. He did not himself give the order. This is the more remarkable as the extension was a departure from the scheme recommended by the Ministry of Transport divisional officer, and also from the scheme recommended by the watch committee. It is clear, however, that the watch committee at a later date had before it more than once the temporary and the permanent barrier as extended, and the objections of the plaintiffs to it as an invasion of their rights. It may be that the corporation might have shown more consideration for the plaintiffs without endangering the object which they had in mind. It may be that the scheme originally propounded by the Ministry of Transport officer would have attained the object of the corporation as well as meeting, as it probably would have done, the objections of the plaintiffs. Unfortunately, the watch committee took a different and intransigent view. This experiment was never made. Instead, this action has run its course, or a part of it. All this, however, does not, in my view, constitute an unreasonable use of the powers entitling the courts to interfere. I cannot but remember what Sir Nathaniel Lindley MR said in Goldberg & Son Ltd v Liverpool Corpn. The courts cannot, with the best will in the world, take over and administer the powers granted to the corporation by the Act of 1865. To use the language of Sir Nathaniel Lindley MR, at p 366:

That is not my duty; that is not my province.

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On this point, I am not prepared to find that the corporation abused their powers.

Judgment for the plaintiffs for £1,500 and costs. Order for removal of guard rails in statement of claim referred to.

Solicitors: Dawson & Co (for the plaintiffs); Collyer-Bristow & Co, agents for John Atkinson, Town Clerk, Newcastle-upon-Tyne (for the defendants).

W J Alderman Esq   Barrister.

Re A Debtor (No 13 of 1939)

[1940] 1 All ER 227


Categories:        BANKRUPTCY        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL AND MORTON JJ        

Hearing Date(s):        11 DECEMBER 1939        


Emergency Legislation Bankruptcy Bankruptcy notice not complied with prior to coming into force of Courts (Emergency Powers) Act 1939 Discretion of registrar Courts (Emergency Powers) Act 1939 (c 67), s 1(5).

In May 1939, the debtor failed to comply with a bankruptcy notice served upon her. Thereupon a receiving order was made against her on 23 October after she had been accorded an opportunity to show that her inability to pay was due directly or indirectly to the war. The evidence filed showed that the attempted sale of a house had failed between 13 July and 13 September. The registrar having refused a stay in favour of the debtor, the latter appealed, and contended that the registrar ought to have stayed the proceedings in accordance with the Courts (Emergency Powers) Act 1939, s 1(5). The creditors contended that, irrespective of whether or not the evidence filed was sufficient to grant a stay, the Act was inapplicable, as the debtors inability to pay arose in Maynamely, at the time when the debtor failed to comply with the bankruptcy notice:

Held the inability to pay arose at the time when the debtor failed to comply with the bankruptcy notice, and the registrar had rightly refused to grant a stay of the proceedings.

Notes

The importance of the present case lies in the fact that the bankruptcy notice was served and not complied with before the passing of the Act, but the debtor contended that she would have been able subsequently to comply with it but for circumstances attributable to the war. It is held that the Act did not apply to these circumstances.

As to Emergency Powers, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Appeal

Appeal against an order of the registrar of Yarmouth County Court refusing to grant stay of bankruptcy proceedings. The facts are fully set out in the judgment of Farwell J.

B M Cloutman for the appellant, the debtor.

L Caplan for the respondents, the creditors.

11 December 1939. The following judgments were delivered.

FARWELL J. This is an appeal from a receiving order made by the registrar of the county court at Yarmouth. The receiving order was made on 23 October 1939, the debtor being a married woman. The petition was presented on the ground that the debtor had failed to comply with a bankruptcy notice which was issued out of the court on 29 April 1939,

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and served on her in England on 30 May 1939, so that there was evidence that she was unable to pay her debts by her failure to comply with the bankruptcy notice at that date. The petition came on for hearing on 4 September 1939. It was adjourned to 9 October, and it was then adjourned again to 23 October, when a receiving order was made. The adjournment on the second occasion was to give the debtor the opportunity of filing evidence showing her position for the purpose of showing the court, if she could, that her inability to pay her debts was due directly or indirectly to the war. She filed evidence, which is not conspicuous by its accuracy, with regard to her position. According to her evidence, she is, and was then, the owner of an estate, Ashmans Hall, in Suffolk. In fact, she was only the owner in equity, being tenant of that property, and having an option to purchase. That option she had in fact exercised, but she had failed to complete the contract. She had in fact been sued for specific performance, but no decree against her had been made, because the plaintiff had been unable to serve the notice upon her. At the date when she swore this affidavit, the contract had never been completed, and there is no evidence to show that she ever was in a position to complete that contract. The evidence further shows that in July 1939, through her solicitors, she was in negotiation for the sale of this property, of which she was not the owner at law, although she may have been the owner in equity, and that there was a Colonel Lind who was proposing to purchase it and who had entered into a contract and had paid a deposit. The evidence also shows that some time between 13 July 1939, and 13 September 1939, difficulties arose with the petitioning creditors, and there was some delay in consequence with regard to the contract. Colonel Lind, who was the person proposing to purchase the property, had been recalled to India, and he was unable, therefore, for the time being, to complete the contract. The evidence also shows that there have been some other attempts to sell the property which have been unsuccessful, which may be due partly or wholly to the war.

In those circumstances, the registrar refused to grant a stay of proceedings under the Courts (Emergency Powers) Act 1939, s 1(5), and this court is now asked to say that the discretion which was undoubtedly in him either to grant a stay or to refuse it has been wrongly exercised by his refusal to grant this stay. In my judgment, the registrar exercised his discretion perfectly properly. The petitioning creditors are registered moneylenders, and their debt is in respect of money lent. The notice was served on the debtor in May 1939, and she failed to comply with that notice. Accordingly, she was at that date unable to pay her debts, and that inability to pay her debts was not, and could not be suggested to be, in any way the result, directly or indirectly, of any war at all, because there was then no war. The lady says that now, owing to the war, she has been unable to sell this property of which she was the owner in equity, but that, if she had not been prevented by the war from completing the purchase in September 1939, or October 1939, she would then have

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been in a position to pay her debts. In my judgment, on those facts, there is no ground for the staying of proceedings. Under the subsection, the inability to pay the debts is an inability which arises at a time when the debtor is, as in this case, unable to comply with the bankruptcy notice. She was then unable to pay her debts, and that was in no sense due to the war. The fact that she has since found difficulty in realising the property which might have enabled her (although, on the evidence before us, that is by no means certain) to satisfy the judgment creditor at a later date seems to me to be an irrelevant consideration. Apart from that altogether, the onus is undoubtedly upon the debtor to prove that her inability to pay her debts is due to the war, directly or indirectly. In my judgment, she has failed to discharge the onus that lies upon her, and, therefore, I think that the registrar exercised his discretion rightly in this case. The appeal must be dismissed with costs.

MORTON J. I agree, and I only desire to add that I also view with grave disapproval the words in para 1 of the debtors affidavit: “of which I am owner.” It seems to me that that is apt to convey an entirely wrong impression to the court. To say “I am the owner of Ashmans Hall, Beccles,” in the circumstances which have been described by Farwell J, seems to me to be most misleading.

Appeal dismissed with costs.

Solicitors Drake Son & Parton (for the appellant); Philip Goodenday & Co (for the respondents).

F Honig Esq   Barrister.

Re Wimbush, Richards v Wimbush and Others

[1940] 1 All ER 229


Categories:        SUCCESSION; Wills: COMPANY; Shares        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        22, 23 NOVEMBER 1939        


Executors Apportionment of dividends Sale of shares pursuant to option in will Private sale Apportionment Act 1870 (c 35).

By a will, dated 30 October 1934, the testator directed his executors, inter alia, to offer to his son his shares in a company in which he was interested, the shares not to be sold to the son above a certain price. After the testators death, the son duly accepted the offer, and the sale was completed on 24 September 1935. Subsequently, in April 1936, a dividend was declared on these shares in respect of the year ending 31 December 1935. On behalf of the son, it was contended that, as purchaser, he was entitled to the whole of the dividend declared in respect of 1935. On behalf of the residuary legatees, it was contended that, as the son did not acquire the shares until 24 September 1935, the dividends in respect of 1935 were apportionable pursuant to the provisions of the Apportionment Act 1870, and that, consequently, he was entitled to that part only of the dividend which had accrued in respect of the period commencing on 24 September 1935, and ending on 31 December 1935:

Held the son was entitled to the whole of the dividend declared in respect of 1935, and the dividend was not apportionable.

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Notes

The question of apportionment of dividends in the administration of settled funds was before the courts a short time ago, but the circumstances here are quite different from those then considered. A purchase of shares between strangers raises no question of apportionment, for the shares are bought either ex dividend or cum dividend, and it is here held that a purchase by a beneficiary in the exercise of an option given him by the will is in the same position.

As to Apportionment by Executors, see Halsbury (Hailsham Edn), Vol 14, p 356, para 665; and for Cases, see Digest, Vol 23, p 416, Nos 48744879.

Case referred to

Black v Homersham (1878) 4 ExD 24; 9 Digest 351, 2224, 48 LJQB 79, 39 LT 671.

Adjourned Summons

Adjourned summons to determine whether or not certain dividends were apportionable pursuant to the provisions of the Apportionment Act 1870. The testator provided in his will that the trustees should, within one month of his death, offer to his son Reginald his ordinary shares in the company A D Wimbush Ltd, at a price to be agreed between the trustees and the son, but not exceeding £1 10s per share, the son to exercise the option of purchasing such shares within six months of the testators death, and, in the event of his exercising the option, to pay the purchase price within one year of his doing so. In a codicil to his will, the testator further provided that the trustees should offer 30,000 of the shares to the son at an agreed price, but not exceeding £1 5s per share, the codicil continuing as follows:

My said son shall have three calendar months within which to exercise such option to purchase … and if he … shall exercise such option … the purchase money … shall be paid at such time as my son desires (but not later than three years of such option being exercised) in which case it shall be paid by six equal half-yearly payments … and upon my son paying one-sixth part of the said purchase money my trustees shall assign to him one-sixth part of the shares so purchased and until such shares shall be so assigned my trustees shall be entitled to all the dividends declared by the company upon such shares together with interest at 5 per cent. per annum from the date of any accrued dividend until the actual payment of the said purchase money.

The testator, at the time of his death, was the owner of 70,001 ordinary shares in the company. The executors sold 30,000 shares to the son on 24 September 1935, at £1 5s per share: 5,000 shares on 8 October 1935, at £17s 8d per share: 650 shares on 16 April 1938, at £1 10s per share: and 750 shares on 14 September 1938, also at £1 10s per share. The company declared dividends as follows: for the year ending 31 December 1934, 15 per cent less tax declared on 15 May 1935: for the year ending 31 December 1935, 15 per cent and a bonus of 2½ per cent less tax declared on 15 April 1936; for the years ending 31 December 1936, and 31 December 1937, 15 per cent and a bonus of 5 per cent less tax declared on 14 April 1937, and 14 April 1938, respectively. The dividend for the year 1934 on the shares in question was paid to the testator, who was still alive at the date of declaration of the same, and the subsequent dividends were paid

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either to the trustees or to the son, whichever was the registered holder on the day when they were declared.

Raymond Jennings for the plaintiff, the executor.

Harold Christie KC and W J C Tonge for the first defendant.

C R R Romer KC and Roger W Turnbull for the remaining defendants.

23 November 1939. The following judgment was delivered.

MORTON J. I have to answer the following question:

Whether the dividends which were paid by A. D. Wimbush & Son, Ltd., on the shares mentioned in paras. 1 and 2 hereof in respect of the following respective periods, that is to say, (i) on the 30,000 shares in respect of the year from Jan. 1, 1935, to Dec. 31, 1935, (ii) on the 5,000 shares in respect of the year from Jan. 1, 1935, to Dec. 31, 1935, (iii) on the 650 shares in respect of the year from Jan. 1, 1938, to Dec. 31, 1938, (iv) on the 750 shares in respect of the year from Jan. 1, 1938, to Dec. 31, 1938, are or were properly apportionable between the defendant Reginald Stanley Wimbush and the executors under and by virtue of the provisions of the Apportionment Act, 1870, as at the respective dates on which the said shares were transferred to the said defendant.

One further affidavit has been filed since the last hearing, and it is an affidavit by the defendant Reginald Stanley Wimbush, to whom I shall refer hereafter as Reginald. In para 2, he describes the circumstances under which his first purchase of 30,000 shares in A D Wimbush & Son Ltd, was carried out:

In the case of the first purchase of 30,000 shares completed on Sept. 24, 1935, a letter was handed to me signed by the plaintiff, on behalf of the testators executors, offering me the said holding of shares in accordance with the terms of the testators codicil.

Then he exhibits a copy of the letter. It is dated 8 July 1935, and it says:

In accordance with the first clause of the codicil to your late fathers will, dated June 6, 1934, I hereby offer to you 30,000 shares in A. D. Wimbush & Son, Ltd., at £1 5s. per share, and I shall be glad to receive your written acceptance of this offer in accordance with cl. 2 of such codicil within the next three calendar months.

That is signed by Mr Richards, one of the executors, “for self and co-executors.” Then the affidavit proceeds in para 3 as follows:

I never in fact accepted the said offer in writing, but, I verbally accepted the same and the sale was duly completed on Sept. 24, 1935, as mentioned in para. 9 of the affidavit of the plaintiff filed in support of the originating summons on Mar. 1, 1939.

The codicil in fact provides for written acceptance, but no point is taken on this, as the sale has been actually completed. Then para 4 of the affidavit is as follows:

With regard to the other purchase of shares referred to in the amended originating summons no offers were made to me in writing, but in each case the holdings were verbally offered and purchase money was paid and the shares transferred upon the dates and in the manner mentioned in paras. 10, 11 and 12 of the plaintiffs said affidavit.

That is to say, referring for the moment to the plaintiffs affidavit, 500 further shares were sold to Reginald on 8 October 1935, and, in the events which happened, the price payable by Reginald is £1 7s 8d. That is

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the only sale which was made at less than the maximum price specified in the codicil, which was, in the case of these shares, £1 10s per share. As regards the 650 shares, they were sold and transferred on 16 April 1938, at the price of £1 10s, which was the maximum price under the codicil, and 750 further shares were sold on 14 September 1938, at the same price. Then the last paragraph of the defendant Reginalds affidavit is as follows:

No question of the apportionment of the dividends on the said holdings of shares or on any of them was even raised by myself or my co-executors in regard to any of the said purchases and the point, so far as I am aware, was never present to any of our minds.

The result of this evidence is that there were two sales to Reginald in 1935, after the dividend for the year ending 31 December 1934 had been declared, and there were two further sales of shares to Reginald in 1938, after the dividend for the year ending 31 December 1937 had been declared. All of these sales were made at the maximum price fixed by the codicil, except, as I have said, the sale of 5,000 shares on 8 October 1935. I am satisfied that all those four sales stand on the same footing, in the sense that there must either be an apportionment of dividends in the case of every one of these sales or there must be no apportionment in the case of any of them. Counsel did not suggest the contrary in argument.

For the sake of simplicity, I propose to take the case of the sale of 30,000 shares to Reginald on 24 September 1935. Counsel for the residuary legatees argue that the Apportionment Act 1870, applies to the dividend which was declared on 15 April 1936, in respect of the financial year ending 31 December 1935. They say that the only portion of this dividend which can be retained by Reginald is that portion which is attributable to the period from 24 September 1935, to 31 December 1935, and that the rest of that dividend must be repaid by Reginald to the vendors. I think that it is clear that Reginald acquired these shares as a purchaser, and not as a legatee. In order to arrive at a conclusion as to whether or not Reginalds purchase gave rise to any apportionment of dividend, I think that it is helpful to consider what would have been the position if Reginald had not exercised his option to purchase the first 30,000 shares, and the trustees had sold them, in exercise of the trust for sale, on 24 September 1935, to A B, a stranger. I shall assume that the sale was one by private bargain, and not governed by any Stock Exchange rules as to when a sale is or is not to be deemed to be a sale cum dividend. I shall also assume that, when the bargain was struck, to quote, with necessary adaptations, para 5 of Reginalds affidavit, “No question of the apportionment of the dividends on the shares was raised by the trustees or by A B, and this point was never present to the minds of any party to the transaction.” In other words, what is the position if C owns shares in company X and he says to A B, between the days on which dividends are declared, “I offer you my shares in company X at the price of (let us say) £1 10s per share,” and A B replies: “I accept your

Page 233 of [1940] 1 All ER 229

offer”? In these circumstances, is there any apportionment of dividends, or is there not? Applying that to the case which I am now examining, in the circumstances which I have assumed, would the trustees have been entitled to say to A B, when the dividend in respect of 1935 was declared on 15 April 1936: “When you receive that dividend, you must pay to us an apportioned part thereof in respect of the period from Jan. 1 to Sept. 24, 1935”? In my judgment, they would not have been so entitled. The bargain, in the circumstances which I have described, is as follows. The trustees agree to sell, and A B agrees to buy, at the price of £X, 30,000 shares in A D Wimbush & Son Ltd. What the purchaser agrees to buy is the shares, with all the rights which those shares confer in respect of the capital of the company and in respect of the profit earned up to the date of the sale. This is well illustrated by Black v Homersham. The contract is one, in my view, which precludes any claim by the trustees to any part of the dividend subsequently declared in respect of the year ending 31 December 1935. The purchaser has bought the tree, and, with it, the fruits which are ripening on the tree. I see no reason why different principles should apply to a sale by the trustees to Reginald under the provisions of the codicil. It is true that the trustees were not left entirely free to make the best possible bargain with Reginald. They were bound to offer the shares first to him, and they could not demand more than £1 5s per share. I am still dealing, of course, with the first 30,000 shares. The sale was, however a sale of the shares, and I can see nothing in the provisions as to price which could deprive Reginald of rights which would ordinarily vest in a purchaser of the shares.

Turning to cl 2 of the codicil, I can find nothing there which indicates that the testator intended the dividends to be apportioned. On the contrary, he says:

… until such shares shall be so assigned my trustees shall be entitled to all the dividends declared by the company upon such shares …

I omit for the moment the curious provision as to interest. The provision which I have just read seems to me to indicate that, after the shares have been assigned, the trustees are not to be entitled to any of the dividends declared upon the shares.

I now come to this curious provision:

… together with interest at 5 per cent. per annum from the date of any accrued dividend until the actual payment of the said purchase money.

It is a curious fact that each of the contending parties relies upon the phrase “accrued dividend” as supporting his argument. Let me first examine the position, assuming that counsel for the residuary legatees are right, and that the testator intended the Apportionment Act 1870, to apply. If that is so, suppose that the trustees sold on the day before the declaration of the dividend. That is to say, suppose they sold on 14 April 1936. In these circumstances, under the Apportionment Act

Page 234 of [1940] 1 All ER 229

1870, when Reginald received the dividend declared on 15 April 1936, he would have to account to the trustees for the whole of that dividend, since it was declared in respect of 1935. Similarly, when Reginald in 1937 received the dividend in respect of 1936, he would have to account to the trustees for an apportioned part of that dividend in respect of the period from 1 January 1936 to 14 April 1936. That being so, if the Apportionment Act applied to such a purchase, it would have the curious result that Reginald is not only accounting for an apportioned part of the dividend from 1 January 1936 to 14 April 1936, but he is also bound to pay interest at 5 per cent on his purchase money in respect of the same period. Counsel for the residuary legatees, realising the difficulties of that situation, concedesand, in my view, rightly concedesthat, if a sale were to take place between 1 January in any year and the date on which the dividend was declared, the Apportionment Act 1870 cannot apply. He says, however, that the Apportionment Act 1870, does apply in the case of a sale which takes place between the date of the declaration of the dividend and 31 December of the same year. To my mind, that is a most capricious provision for a testator to have in mind. If he intended apportionment to apply at all, I cannot see why it should not have applied equally whether the sale took place, in the case I have taken as an illustration, on 14 April 1936, or on 16 April 1936. In either event, there would be a proper apportionment of the dividend. The whole of the dividend for 1935 would belong to the trustees, and there would be an apportionment of the dividend for 1936 up to the date of sale. There seems to be no good reason for drawing this distinction, if the argument of counsel for the residuary legatees is right and the Apportionment Act 1870, applies.

I now proceed to assume for the moment that the argument of counsel for Reginald is correct. The position then is not entirely a happy one under this clause which I have read as to interest. The position then would be as follows. If the trustees sold on 14 April 1936, the day before the dividend was declared, Reginald, according to the argument of his counsel, would be entitled to the whole of the dividend declared on 15 April 1936, in respect of 1935, and would also be entitled to the proportion of the 1936 dividend in respect of the period from 1 January 1936 to 15 April 1936, and the only compensation which the trustees would get would be interest at 5 per cent in respect of the latter period. That, as counsel for the residuary legatees has pointed out, is a somewhat inadequate compensation. However that may be, the provision which I am now discussing seems to me, if anything, in favour of the argument put forward on behalf of Reginald, but it is, as I have said, a curious provision, which does not seem to fit very well with either construction, and I do not think that either side can rely upon it very strongly in support of their argument. I base my decision on the reasons which I have already stated, which seem to me sufficient to exclude any apportionment in this case. For these reasons, I propose

Page 235 of [1940] 1 All ER 229

to answer question 4 of the amended originating summons in the negative, so far as regards the 30,000 shares. The same reasoning applies, in my view, to the other three blocks of shares mentioned in this question, and that appears to dispose of all the matters which are left for my decision.

Dividends not apportionable. Costs as between solicitor and client payable out of estate.

Solicitors: Taylor Jelf & Co, agents for Perry Son & Richards, Birmingham (for the plaintiff and the first defendant); Theodore Goddard & Co (for the remaining defendants).

F Honig Esq   Barrister.

Forster v Llanelly Steel Co (1907) Ltd

[1940] 1 All ER 235


Categories:        HEALTH; Health and safety at work        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        18 DECEMBER 1939        


Workmens Compensation Industrial disease Silicosis Crushing bricks Breaking down furnace lining of silica bricks Various Industries (Silicosis) Scheme 1931, s 2(viii)(a).

The workman was engaged in breaking down the brick lining of furnaces. The bricks contained not less than 80 per cent silica, and a certain amount of silica dust would result from the process of breaking them down. The workman contracted silicosis:

Held the work in which the workman was engaged was not crushing or grinding of bricks or other articles containing not less than 80 per cent within the meaning of the Various Industries (Silicosis) Scheme 1931, s 2(viii)(a).

Notes

A workman has to prove that he is suffering from the disease, that the disease arose out of his employment, and that the employment was one of those described in the appropriate scheme. Here the workman has failed to fulfil the third essential. This, of course, is purely a question of construction of the scheme.

As to Silicosis, see Digest, Vol 34, pp 464, 465, Nos 38023811; and see Williss Workmens Compensation (32nd Edn), pp 620632.

Appeal

Appeal by the respondents from an order of His Honour Judge Frank Davies given at the Llanelly County Court on 17 November 1939. The facts are fully set out in the judgment of Slesser LJ.

F A Sellers KC and H Edmund Davies for the appellants.

Gilbert J Paull KC and T Jenkin Jones for the respondent.

18 December 1939. The following judgments were delivered.

SLESSER LJ. This is an appeal brought under the Workmens Compensation Act 1925, s 47, dealing with silicosis, as applied to a workman suffering from silicosis, by the Various Industries (Silicosis) Scheme 1931. The man in question was certified by the Silicosis Medical Board on 11 May 1939, to be suffering from silicosis, and on that date he received a certificate of total disablement on account of silicosis, certifying that that total disablement commenced on 29 March 1939.

In this arbitration the workman claims, in accordance with that

Page 236 of [1940] 1 All ER 235

certificate, that he is suffering from that notional disease, but of course it is not sufficient for him merely to show that he is suffering from that disease as so certified. He has to satisfy the county court judge that his disease arose out of his employment, and also that the process in which he was employed is one to which the Secretary of State has applied a scheme. In this case, no difficulty arises on the first of those contentions, because the county court judge has come to the conclusion that the work in which the respondents employed the applicant caused the disease which now disables him, and there is no appeal with regard to that finding. It is said, however, that the county court judge was wrong in coming to the further conclusion that the work on which the applicant was engaged was work which comes within the definition of the process, which alone will entitle him to say that the scheme and the right to compensation apply in his case.

The Various Industries (Silicosis) Scheme 1931 applies to a number of workmen employed upon a number of processes, but this man can bring himself within the scheme only if he can bring himself within the provisions of s 2(viii,) which provide as follows:

on the under-mentioned trades [this trade is amongst them] … the processes specified and those processes only [are covered by it].

The particular trade in which this man was engaged is that of foundries and metal works. Sub-s (viii)(a) mentions the following trades:

In works engaged in the manufacture of steel or in steel foundries; crushing or grinding of silica rock, or any handling incidental to such crushing or grinding, or crushing or grinding of bricks or other articles containing not less than 80 per cent. total silica (SiO2).

This man was engaged on work in relation to bricks or other articles which, it is conceded, contained not less than 80 per cent total silica, but it is said that the process upon which he was engaged was neither the crushing nor the grinding of bricks, but was the breaking of bricks, and it is argued that sub-s (viii)(a) does not extend to the breaking of bricks, in which process alone this man was employed.

I think that the proper approach to the meaning of the words used in sub-s (viii) is to look at the order as a whole, because the order is dealing with a number of processes in which silica dust may arise, and the whole scheme must be regarded as one. When one comes to look at the order as a whole, one finds that the Secretary of State has discriminated between breaking, crushing, grinding and various other processes such as those mentioned in sub-s (v). For example, of cl 2, “breaking, crushing, grinding, sieving, mixing or packing of silica rock. …” Again, in sub-s (vii), “breaking, crushing, or grinding of flint. …” Again, in dealing with tin mines, under (b), “breaking or crushing of … ore.” All these things seem to me to point to these processes being separate and distinct processes, breaking being one process, crushing being another process, and grinding being yet another process.

In this case, the county court judge has found that what this man did was satisfied by the term “crushing.” I think that he was wrong in

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coming to that conclusion. The county court judge puts it in his judgment in this way. He looks first of all at the definition of the word “crush” which he finds in the dictionary, and he finds that it includes:

… to compress with violence so as to destroy natural shape or condition; to bruise, bray, break down into small pieces; to comminate …

That is the definition of the word “crush” which is given in the Shorter Oxford English Dictionary. Then the county court judge, applying that test, comes to this conclusion:

The work of the applicant exactly complies with this definition. He compressed the cemented bricks with violence so as to destroy their natural shape or condition. He broke them down into pieces so small as to constitute particles of dust. He comminated them.

In my view, as I have already indicated, it would be to over-simplify the problem merely to take the dictionary definition and to ask oneself whether what was here done satisfied some of the many denotations which are expressed in the dictionary in regard to this term. Looking at this order itself, however, I think that there is no doubt that, if this man were in fact engaged in “breaking,” it would be wrong to hold that, by reason of that fact only, unless he was engaged in “crushing” also, mere “breaking” as such, because it produced dust, or even breaking things into small particles, would satisfy the definition of “crushing.” I think “crushing” here means something other than “breaking.” It is true that this is said to be the “crushing” or “grinding” of bricks or other articles, and it may well beand the cross-examination of the applicant rather indicates itthat in certain factories the silica bricks are ground for gas ports, and are possibly also crushed. We have no evidence before us as to whether or not it is usual for these old bricks to be crushed or ground again, but the process which was undertaken by this man can very simply be described. The furnaces used in these works are made of silica bricks, which are made from certain silica clay, and they are lined with a silica cement. They last only a limited time, apparentlysix months, as a rule. After that time, the old bricks have to be broken down. The applicant, in his evidence, said:

We have to break or cut brick with hammer. This gives rise to dust. The lining of walls falls on floor and is kicked up and creates dust. We have to repair air port (or flue) and gas port similarly with silica bricks. We have sledge to break down. We have the help of labourers. Some of the bricks are almost new when broken down.

Once they are broken down, it is then necessary to reline the furnaces with new bricks. That is really the whole of the process.

In my opinion, the process which was here undertaken cannot properly, having regard to the distinction made in the order between “breaking” and “crushing,” be said to be the “crushing” of the bricks. I think that it is a “breaking” of the bricks which is the process which this man had to apply to the old bricks in order to get them out. Of course, as regards putting in the new bricks, that also might involve a certain amount of “breaking,” because they had to be shaped and figured in order to fit them into their respective places. I do not think that any

Page 238 of [1940] 1 All ER 235

part of that process can properly be said, having regard to the trade use of these words and to the careful distinctions made, to extend to “crushing.”

I regret this decision, and I think that possibly this order calls for reconsideration. One thing is quite plain, however, and that is that the legislature did not intend that every person who is a workman in work, and involved in exposure to silica dust, has thereby a right to compensation if he is affected by that silica dust. I think that the legislature intended to limit the right to compensation to the processes mentioned in the scheme. Therefore, although it is true that this man in his work was exposed to silica dust, he was one, possibly of many, who, being exposed to silica dust, was nevertheless one who is outside any of these schemes, and, therefore, although it is true that he is disabled by, and certified as suffering from, silicosis, and has contracted that disease whilst working for his employer, his claim to bring himself within the scheme must unfortunately fail. Therefore, I think that this appeal should succeed.

MACKINNON LJ. With great regret, I am constrained to agree. This unfortunate man clearly suffered from disablement from silicosis by reason of his exposure to silica dust in the course of his employment. It is not for me to speculate about the matter, and I do not know the reason why it was not sufficient for the legislature or the Minister, acting under the Act of Parliament, to provide simpliciter that anybody suffering from silicosis by reason of exposure to silica dust because of the nature of his employment should not be entitled to compensation. The legislation and the statutory orders issued under it do not adopt any such simple method. An attempt is made to specify the various processes or forms of employment in the course of which, if a man becomes afflicted with silicosis, he may be given the right to compensation, and the order very elaborately specifies a number of various employments or processes. As regards this particular one, which is referred to in sub-s (viii), it is:

… in the undermentioned trades, the processes specified and those processes only …

Therefore, if this workman is entitled to recover, he must bring himself within one of the processes specified in sub-s (viii), and the only one under which it is possible for him to bring himself is:

(a) in works engaged in the manufacture of steel or in steel foundries; crushing or grinding of silica rock or any handling incidental to such crushing or grinding, or crushing or grinding of bricks or other articles containing not less than 80 per cent. total silica (SiO2).

I am quite clear that the work this man was engaged in doing does not reasonably come within the definition of the work of “crushing” or “grinding” bricks. It is a great temptationand I wish that I felt myself able to succumb to the temptation as the county court judge succumbed to itto say that, because this work of breaking down these

Page 239 of [1940] 1 All ER 235

brick walls did produce a certain amount of fragmentary pieces of brick, and even powder, one can call the process “crushing.” The truth is that the nature of the mans employment or the process in which he was engaged was not the process of “crushing” or “grinding” bricks. It was the process of breaking down old walls and rebuilding new walls, in the course of which he necessarily produced a certain amount of fragmentary pieces, and even dust, and might produce a similar sort of substance to that which would be produced by a man engaged in the process of “crushing” or “grinding” bricks. At one stage, I was very much tempted to try to pretend that the work on which this man was engaged could be called “crushing” or “grinding” bricks, but I realised that I should really be straining these words beyond their reasonable meaning in saying that, and, as my duty is to construe the meaning of these words, I am, as I say, with great regret driven to the conclusion that this man does not come within the necessary qualifications to entitle him to compensation, that of being engaged in one of these processes, and in one of these processes onlynamely, the process of “crushing” or “grinding” bricks. In the result, therefore, very regretfully, as I say, I agree that this appeal must be allowed.

GODDARD LJ. I agree. I share to the full the regret expressed by Slesser and MacKinnon LJJ, in having to allow this appeal. For some reason, Parliament has, under this Act, dealt specially with silicosis as a ground for giving compensation to a person who has unhappily contracted that distressing disease. It has given it a section in the Act to itself, and that section, s 47, provides as follows:

(1) The Secretary of state may by scheme provide for the payment of compensation by the employers of workmen in any specified industry or process or group of industries or processes involving exposure to silica dust …

It would have been quite easy for Parliament, if they had intended that every person who contracts silicosis in the course of his employment by being exposed to silica dust should be entitled to compensation, to have so provided. Parliament, however, did not do that, but they limited the right to compensation to specified industries or processes, as may be defined in a scheme by the Secretary of State. When one turns to the scheme, one finds a great many processes specifically referred to. There are, for instance, in s 2(iv) of the scheme, such words as:

sawing, planing, dressing, shaping, cutting or carving of silica rock.

It seems to me that they were there trying to use exhaustive expressions. Then one finds in sub-s (v) of the scheme:

… breaking, crushing, grinding, sieving, mixing or packing of silica rock …

Those two subsections, incidentally, deal with “mining and quarrying of silica rock.” Then, when one comes to “foundries and metal works,” one finds a much more confined provision as to the processesmerely “crushing” or “grinding.”

It is said in this case that, when one gets into a foundry where silica

Page 240 of [1940] 1 All ER 235

bricks are used, the only work which can give rise to silica dust is the breaking down of the old bricks in a furnace, or the cutting or breaking of new silica bricks to fit particular positions in the furnace. I know nothing about that. It may be, and there is certainly a trace of it in the evidence, that there is at least one other process which is carried out in a foundry and metal works, and it may be that there are various processes in foundries and metal works which are performed in regard to the disintegration of silica bricks. The county court judge, in the earlier part of his judgment, quite accurately stated the effect of the evidence given before him as to the nature of this work upon which this man was engaged:

The applicant had first to break down the old brick layers inside the furnaces and then build up new layers. The old layers, being cemented hard, require the use of crowbars to break them down, and the new bricks would often have to be chipped to shape them properly. Both processes, especially the former, involve the creation of large quantities of silica dust.

The fact that a large quantity of silica dust is created is not the test. As I said just now, it would have been quite easy for Parliament to have provided that, where silica dust was created in an employment, and a man thereby got silicosis, he should have compensation. Parliament, however, has not done that, and I cannot myself see how it can be said by any use of ordinary language that the breaking down of a wall of bricks, or the building up of a wall of bricks, involving the cutting of a brick to fit a particular place, can be said to be “crushing” or “grinding.”

I am well aware that we should always approach questions under the Workmens Compensation Act with a tendency to give what is sometimes called a liberal interpretation to the Actthat is to say, “liberal” in favour of the workmanremembering that the Act was created to extend the remedies and right to compensation of the workmen, and not to limit them in any way. However, before I can stretch the language, and if I do stretch the language, used in this Act, and in the scheme, to fit the particular facts of this case, I should have to stretch my judicial conscience a great deal further than I am prepared to stretch it. I do not think that by any ordinary interpretation of language the process the county court judge has found to be the one in which the workman in this case was engaged can be described as either “crushing” or “grinding.” It can only be described as “breaking.” As “breaking” is regarded as a separate process in this order, as has been shown by reference to other paragraphs in the order, it seems to me that it is impossible to hold that the words of s 2(viii)(a) bring this man within the ambit of the scheme, or that he is entitled to compensation. I regret, in the circumstances, that this appeal must succeed.

Appeal allowed with costs in both courts. Leave to appeal to House of Lords.

Solicitors: Kenneth Brown Baker Baker, agents for Gee & Edwards, Swansea (for the appellants); W H Thompson (for the respondent).

Derek H Kitchin Esq   Barrister.


Wallace-Johnson v R

[1940] 1 All ER 241


Categories:        INTERNATIONAL; International Criminal Law        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT CALDECOTE LC, LORD THANKERTON, LORD ALNESS, LORD ROMER AND SIR GEORGE RANKIN        

Hearing Date(s):        30, 31 OCTOBER, 11 DECEMBER 1939        


Privy Council West Africa Statutes Construction of colonial statute Criminal law Seditious writing concerning government Words themselves not likely to incite to violence No extrinsic evidence of seditious intention Effect of English decisions on construction Criminal Code of Gold Coast Colony, s 330.

The appellant published in a newspaper in the Gold Coast Colony an article attacking legislation and events in the colony. There was no evidence of any outbreak of violence or of any manifestation of hostility to the government of the Colony as a result of the article. The appellant was convicted of unlawfully publishing a seditious writing of and concerning the government of the Gold Coast, and also of unlawfully having in his possession documents containing seditious writing of and concerning that government, contrary to the Criminal Code of the Gold Coast Colony, s 330(2)(b), (e). The appellant appealed, on the ground that the prosecution could not succeed unless the words themselves were of such a nature as to be likely to incite to violence, and unless there was positive extrinsic evidence of seditious intention:

Held he was rightly convicted, as no extrinsic evidence of incitement to violence or of seditious intention is required under the Criminal Code of the colony.

Notes

The enactments of the colonies are often drafted in words following the decisions of the English courts. Although this may give some clue to the intention of the legislature, the construction of such enactments is still primarily a matter of the construction of the precise words of the enactment, and, if the enactment is intended to be a complete code of the law, it must be construed free from any glosses derived from English decisions.

As to Construction of Colonial Legislation, see Halsbury (Hailsham Edn), Vol 11, pp 182, 183, paras 325, 326; and for Cases, see Digest, Vol 17, pp 465, 466, Nos 317324.

Case referred to

R v Burns (1886) 2 TLR 510; 15 Digest 633, 6736.

Appeal

Appeal from the West African Court of Appeal dismissing the appeal of the appellant against his conviction by Sir Philip Petrides CJ, sitting with three assessors on 7, 8, 9, 10, 12, 13 October 1936, whereby the appellant was convicted of unlawfully publishing a seditious writing of and concerning the government, contrary to the Criminal Code of the Gold Coast Colony, s 330(2)(b), and of unlawfully having in his possession documents containing seditious writing of and concerning that government, contrary to the Criminal Code of the Gold Coast Colony, s 330(2)(e). He was sentenced to pay a fine of £50 on the first count, and, in default of payment within 14 days, to 3 months imprisonment. No punishment was inflicted on the second count.

D N Pritt KC and Norman Wiggins for the appellant.

The Solicitor-General (Sir Terence OConnor KC) and Kenelm Preedy for the Crown.

Page 242 of [1940] 1 All ER 241

11 December 1939. The following judgments were delivered.

VISCOUNT CALDECOTE LC. This is an appeal by special leave from a judgment of the West African Court of Appeal (Gold Coast Session) dismissing an appeal by the appellant against his conviction on 13 October 1936, by the Supreme Court of the Gold Coast at the Assizes held at Victoriaborg, Accra. The appellant was tried upon an information containing two counts charging him with offences against the Criminal Code of the Gold Coast Colony, s 330. The first count charged the appellant with unlawfully publishing a seditious writing of and concerning the government of the Gold Coast contrary to the Criminal Code, s 330(2)(b). The second count charged him with unlawfully having in his possession documents containing seditious writing of and concerning the government of the Gold Coast contrary to s 330(2)(e). The trial took place before Sir Philip Petrides CJ, sitting with three assessors, on 7, 8, 9, 10, 12, 13 October 1936. The appellant was convicted by Sir Philip Petrides CJ, on both counts, and was sentenced to pay a fine of £50 on the first count, and, in default of payment within 14 days, to be imprisoned for 3 months. No punishment was inflicted on the second count. The appellant appealed to the West African Court of Appeal against his conviction. The appeal was heard on 17, 18 November, 1 December 1936, and was then dismissed. The appellant petitioned His Majesty in Council for special leave to appeal, and this was granted on 28 July 1938.

The writing which was the subject-matter of the charges was part of an article signed “Effective,” and was published in a newspaper circulating in the Gold Coast Colony. The material words as set out in the information, together with allegations as to the meaning attributable to certain words and phrases, were as follow:

Personally, I believe the European has a God in whom he believes and whom he is representing in his churches all over Africa. He believes in the god whose name is spelt Deceit. He believes in the god whose law is “Ye strong, you must weaken the weak. Ye civilised Europeans, you must civilise the barbarous Africans with machine guns. Ye Christian Europeans, you must Christianise the pagan Africans with bombs, poison gases, etc.”

In the Colonies the Europeans believe in the god that commands “Ye administrators [meaning to include therein the government of the Gold Coast] make Sedition Bill [meaning to include therein the Criminal Code Amendment Ordinance of the Gold Coast, No. 21 of 1934] to keep the African gagged. Make Forced Labour Bill [meaning to include therein the Labour Ordinance of the Gold Coast] to work the Africans as slaves. Make Deportation Ordinance [meaning to include therein the Kofi Sechere Detention and Removal Ordinance, No. 1 of 1936] to send the Africans to exile whenever they dare to question your authority.

“Make an ordinance to grab his money so that he cannot stand economically. Make Levy Bill [meaning to include therein the Native Administration Ordinance of the Gold Coast Colony, No. 25 of 1936] to force him to pay taxes for the importation of unemployed Europeans to serve as stool treasurers. Send detectives to stay around the house of any African who is nationally conscious and who is agitating for national independence and if possible to round him up in a criminal frame-up [meaning thereby a criminal charge in which the evidence is fabricated] so that he could be kept behind the bars [meaning thereby prison].”

The Criminal Code of the Gold Coast Colony, s 330 (now the Criminal Code 1936 Revision, s 326), provides as follows:

(2) Any person who … (b) prints or publishes by any such act as is specified in Title 18 any seditious words or writing or … (e) being found in possession

Page 243 of [1940] 1 All ER 241

of any newspaper book or document or any part thereof or extract therefrom containing seditious words or writing does not prove to the satisfaction of the court that at the time he was found in such possession he did not know the nature of its contents … shall be liable (i) for a first offence under paras. (a), (b), (c) and (d) to imprisonment for 2 years or to a fine not exceeding £100 … (ii) for a first offence under paras (e) and (f) to imprisonment for one year or to a fine not exceeding £50 …

(8) “A seditious intention” is an intention (i) to bring into hatred or contempt or to excite disaffection against the person of His Majesty, his heirs or successors or the government of the Gold Coast as by law established; or (ii) to bring about a change in the sovereignty of the Gold Coast; or (iii) to excite His Majestys Subjects or inhabitants of the Gold Coast to attempt to procure the alteration, otherwise than by lawful means, of any other matter in the Gold Coast as by law established; or (iv) to bring into hatred or contempt or to excite disaffection against the administration of justice in the Gold Coast; or (v) to raise discontent or disaffection amongst His Majestys subjects or inhabitants of the Gold Coast; or (vi) to promote feelings of ill-will and hostility between different classes of the population of the Gold Coast. It is not a seditious intention (a) to show that His Majesty has been misled or mistaken in any of his measures; or (b) to point out errors or defects in the government or constitution of the Gold Coast as by law established or in legislation or in the administration of justice with a view to the reformation of such errors or defects; or (c) to persuade His Majestys subjects or inhabitants of the Gold Coast to attempt to procure by lawful means the alteration of any matter in the Gold Coast as by law established other than that referred to in para. (2) of this subsection; or (d) to point out with a view to their removal, any matters which are producing or have a tendency to produce feelings of ill-will and enmity between different classes of the population of the Gold Coast. Provided that none of the acts or things mentioned in provisos (a), (b), (c) and (d) shall be deemed to be lawful if they are done in such a manner as to effect or be likely to effect any of the purposes (i) to (vi) which are declared in this section to be a seditious intention. “Seditious words” are words expressive of a seditious intention. “Seditious writing” includes anything intended to be read and any sign or visible representation which is expressive of a seditious intention.

At the trial, a plea of not guilty was entered. The appellant admitted the writing and publication of the article. His defence was that the article was not seditious and that it was not calculated to bring the government of the Gold Coast Colony into hatred and contempt. A great deal of evidence was called as to the application of the article to the affairs of the colony. Notwithstanding the statements of witnesses for the defence that they did not read the article as having reference to the Gold Coast Colony, it was not really in dispute that the appellant had the government of the colony in view when he wrote the article, and that it referred to legislation and events generally in the colony. There was no evidence of any outbreak of violence or of any manifestation of hostility to the government of the colony as a result of the article.

The case presented by counsel for the appellant for their Lordships consideration was that the prosecution could not succeed unless the words complained of were themselves of such a nature as to be likely to incite to violence, and unless there was positive extrinsic evidence of seditious intention. The foundation for these submissions was sought in the summing up by Cave J, in R v Burns, quoted at length in Russell on Crime (9th Edn), pp 8996. Reference was also made to a number of cases on the law of sedition in English and Scottish courts, which, it was said, supported the statement of the law by Cave J. Their Lordships throw no doubt upon the authority of these decisions,

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and, if this was a case arising in this country, they would feel it their duty to examine the decisions in order to test the submissions on behalf of the appellant. The present case, however, arose in the Gold Coast Colony, and the law applicable is contained in the Criminal Code of that colony. It was contended that the intention of the code was to reproduce the law of sedition as expounded in the cases to which their Lordships attention was called. Undoubtedly, the language of the section under which the appellant was charged lends some colour to this suggestion. There is a close correspondence at some points between the terms of the section in the code and the statement of the English law of sedition in Stephens Digest of Criminal Law (7th Edn), arts 123126, quoted with approval by Cave J, in his summing up in R v Burns. The fact remains, however, that it is in the Criminal Code of the Gold Coast Colony, and not in English or Scottish cases, that the law of sedition for the colony is to be found. The code was no doubt designed to suit the circumstances of the people of the colony. The elaborate structure of s 330 suggests that it was intended to contain as far as possible a full and complete statement of the law of sedition in the colony. It must, therefore, be construed in its application to the facts of this case free from any glosses or interpolations derived from any expositions, however authoritative, of the law of England or of Scotland.

In these circumstances, their Lordships turn to the code, and they find nothing in the section under consideration to support the appellants contentions. “Seditious words,” in the terms of sub-s (8), “are words expressive of a seditious intention.” By an earlier definition in the same subsection:

“A seditious intention” is an intention (1) to bring into hatred or contempt … the government of the Gold Coast as by law established …

Their Lordships find these words clear and unambiguous. Questions will necessarily arise in every case, as in this case, as to the facts to which it is sought to apply these definitions. Fine distinctions may have to be drawn between facts which justify the conclusion that the intention of the person charged was to “bring into hatred or contempt … the government of the Gold Coast,” and facts which are consistent only with the view that the intention was no more than, in the words of a later part of sub-s (8), “to point out errors or defects in the government … of the Gold Coast.” It is quite another thing to add words which are not in the code and are not necessary to give a plain meaning to the section. Nowhere in the section is there anything to support the view that incitement to violence is a necessary ingredient of the crime of sedition. Violence may well be, and no doubt often is, the result of wild and ill-considered words, but the code does not require proof from the words themselves of any intention to produce such a result, and their Lordships are unable to import into s 330 words which would be necessary to support the appellants argument.

The submission that there must be some extrinsic evidence of intention,

Page 245 of [1940] 1 All ER 241

outside the words themselves, before seditious intention can exist must also fail, and for the same reason. If the words are seditious by reason of their expression of a seditious intention as defined in the section, the seditious intention appears without any extrinsic evidence. The legislature of the colony might have defined “seditious words” by reference to an intention proved by evidence of other words or overt acts. It is sufficient to say that they have not done so. For the reasons indicated, this appeal should be dismissed, and their Lordships will humbly advise His Majesty accordingly.

Appeal dismissed.

Solicitors: Hy S L Polak & Co (for the appellant); Burchells (for the Crown).

Charles Shelley Esq   Barrister.

Skelt v Norwich Benefit Building Society

[1940] 1 All ER 245


Categories:        CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        CHARLES J        

Hearing Date(s):        15 DECEMBER 1939        


Emergency Legislation Execution on judgment Application at trial Judgment for sum of money and costs Separate application after costs taxed Courts (Emergency Powers) Act 1939 (c 67), s 1(1), (4) Courts (Emergency Powers) Rules 1939 (SR & O 1939, No 995), rr 9, 10.

When judgment is given for a sum of money and costs to be taxed, and the costs are so heavy that the amount at which they will subsequently be taxed cannot be estimated, leave to proceed to execution under the Courts (Emergency Powers) Act 1939, may be given at the close of the trial as to the sum of money, but leave to proceed as to the costs should be made the subject of a separate application after those costs have been taxed.

Notes

Though this may be regarded as a practice point, it contains two important decisions on the position arising under the emergency legislation. The first is that leave to proceed can be given separately in respect of the sum recovered by the judgment and the costs. The second is that any application as to costs is premature until the amount of the costs has been determined by taxation. Until then, no one can know the exact amount of the costs. The matter, however, is only of practical importance where the costs are heavy.

As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Application

Application at the close of the trial for leave under the Courts (Emergency Powers) Act 1939, to enforce a judgment for £49 0s 5d and costs. The trial had been a lengthy one, and not only would the costs be heavy but also the exact amount could not, at the time when the application was made, be estimated within several hundred pounds. The action claimed a sum due for commission, and, by amendment, claims were added for damages for wrongful dismissal and libel. The claim for commission was settled, and, at the trial, it was held that the dismissal was justified and that there was no libel. There was a counterclaim for

Page 246 of [1940] 1 All ER 245

a declaration, for damages and for £49 15s 11d for arrears of rent of the defendants premises occupied by the plaintiff and charges for gas supplied. The precise details of the claim and counterclaim are of no importance on the point here reported. Judgment was given for the defendants on the claim with costs, and on the counterclaim for £105 10s 4d with costs. The sum of £105 10s 4d was reduced by money in court to the sum of £49 0s 5d. In the result, therefore, the defendants were entitled to their costs of the claim and counterclaim and a sum of £49 0s 5d. At the close of the trial, the defendants applied for leave to enforce the judgment.

The Courts (Emergency Powers) Act 1939, s 1 provides as follows:

(1) Subject to the provisions of this section, a person shall not be entitled, except with the leave of the appropriate court, to proceed to execution on, or otherwise to the enforcement of, any judgment or order of any court (whether given or made before or after the commencement of this Act) for the payment or recovery of a sum of money … (4) If, on any application for such leave as is required under this section for the exercise of any of the rights and remedies mentioned in sub-sects. (1), (2) and (3) of this section, the appropriate court is of opinion that the person liable to satisfy the judgment or order, or to pay the rent or other debt or to perform the obligation, in question is unable immediately to do so by reason of circumstances directly or indirectly attributable to any war in which His Majesty may be engaged, the court may refuse leave for the exercise of that right or remedy or give leave therefor subject to such restrictions and conditions as the court thinks proper.

The Courts (Emergency Powers) Rules, 1939, rr 9, 10, provide as follows:

9. (1) Where no judgment or order has been given or made, an application under subsect. (1) or subsect. (3) for leave to proceed may be made at the time when the judgment or order is given or made in the presence of the defendant or respondent or his solicitor or counsel or on notice given in accordance with the provisions of the next succeeding paragraph …

10. (1) Where a judgment or order has been given or made, an application under subsect. (1) or subsect. (3) for leave to proceed may be made by summons in the proceedings.

Robert Fortune and Gordon Thomas for the plaintiff.

Cecil R Havers KC and C E Rochford for the defendants.

Havers KC applied for leave to enforce the judgment for £49 0s 5d and costs.

Fortune: The question to be considered on the application is the plaintiffs ability to pay. Until the costs are taxed, it is not known what those costs will be taxed at, and, if the amount is unknown, it is impossible to consider whether leave should be given. The consideration of any application to proceed to execution as to costs, until the costs have been ascertained and until it is known what is the amount which the man is being asked to pay, is, on the face of it, premature. It is sufficient that the application as to costs should be by a summons on a two-days notice under r 10.

Havers KC: I rely upon r 9. I am not seeking to enforce an order which has not been made. Judgment has been given for a sum of money and for certain costs. The defendant has to satisfy the court that he is

Page 247 of [1940] 1 All ER 245

unable to pay by reason of the war. The Act places the burden on him, and, until he discharges it, no question arises. The words are:

1. (4) If … the appropriate court is of opinion that the person liable to satisfy the judgment or order, or to pay the rent or other debt, or to perform the obligation, in question is unable immediately to do so …

Robert Fortune and Gordon Thomas for the plaintiff.

Cecil R Havers KC and C E Rochford for the defendants.

15 December 1939. The following judgment was delivered.

CHARLES J. Here you have no “debt.” The costs may be taxed at nothing. It has to be an ascertained debt. Costs unascertained may be anything. The proper course is to have the costs taxed, and then by summons, as one can do under r 10 with proper notice, apply to the master under the Act and ask for an order. It is then, and not until then, that the plaintiff has anything in the nature of a definite sum which he can say he is unable to pay. I will make an order in respect of £49 0s 5d unless the plaintiff convinces me that the war has interfered with his ability to pay that sum.

Fortune: I cannot claim that, but I am a little doubtful as to whether or not there is any jurisdiction under the Act to enforce part of the judgment.

Charles J: I have not any doubt about that. I am not enforcing part of the judgment. I think, however, that the costs will have to be taxed, and, after they are taxed, the defendants, if they think proper, will serve a summons under r 10 with the appropriate notice, and will ask for leave to enforce the order for costs duly made.

Solicitors: J Howard Smith & Skelt (for the plaintiff); Butt & Bowyer, agents for Daynes Keefe & Durrant, Norwich (for the defendants).

A Grimble Esq   Barrister.

Webb v Frank Bevis Ltd

[1940] 1 All ER 247


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        12, 15 JANUARY 1940        


Landlord and Tenant Fixtures Trade fixtures Mode of annexation Corrugated iron shed erected upon concrete floor Superstructure removable without material injury Whether concrete foundation and superstructure single unit.

The appellant company was in occupation of part of land held by the respondent on lease from the War Office. The respondent had covenanted that he would, at the end of his term, at his own expense remove all buildings and erections and restore the land to its original state. The appellant company carried on business as manufacturers of breeze and cement products, and, for the purpose of housing their machinery and warehousing their plant and materials, they erected on the land a shed 135 ft long and 50 ft wide. It was built of corrugated iron, and was laid upon a concrete floor. The roof rested upon solid timber posts, which in turn rested on the concrete floor, but they were not embedded in it. Each post was tied to the concrete floor by wrought iron straps on the opposite sides, and was held in position by a bolt which ran horizontally through each post. The straps, which were fixed in and protruded from the concrete floor, were fastened tightly by a nut screwed on one end of the bolt. There

Page 248 of [1940] 1 All ER 247

was no other attachment to the soil. In the shed, there were three heavy pieces of machinery similarly attached to the concrete floor. Once the roof and sides of the shed had been removed (and these could be removed in panels), the posts could easily be removed by undoing the bolts, and, if need be, the upstanding straps could be cut off level with the floor. It was contended by the respondent that the superstructure of the shed must be regarded as one with the concrete floor and as constituting a single unit affixed to the soil, and, consequently, that it was a landlords, and not a tenants, fixture:

Held the superstructure and the concrete floor were not a single unit, and the superstructure was removable by the tenant.

Notes

The attachment of buildings to a concrete base has become such a usual feature of construction in recent times, that this decision is of the highest practical importance. At the same time, it is necessary to be on ones guard as to the precise extent of the decision. It would probably be wrong to say that in all cases a concrete foundation can be regarded as a separate unit from the superstructure, and decisions dealing with fixtures are always very much dependent upon the particular facts and circumstances of each case. It is, however, now safe to say that the foundation and the superstructure are not necessarily one unit. As to the superstructure, it must be noted that it must be removable without losing its identity. If it can only be removed by separation into its component boards or bricks or whatever it is made of, that is said not to be removal as a fixture; but it is sufficient, apparently, that a wooden structure is removable in panels. Here, again, the question will be decided very largely upon the particular facts of each case. For these reasons, the case of Smith v City Petroleum Co Ltd, p 260, post, is of interest as being the application of these principles to the case of petrol pumps and tanks, which is the form in which this problem is most commonly presented at the present time.

As to Annexation of Fixtures, see Halsbury (Hailsham Edn), Vol 20, pp 97107, paras 107113; and for Cases, see Digest, Vol 31, pp 186196, Nos 32103325.

Cases referred to

Pole-Carew v Western Counties & General Manure Co [1920] 2 Ch 97; 31 Digest 196, 3325, 89 LJCh 559, 123 LT 12.

Spyer v Phillipson [1931] 2 Cl 183; Digest Supp, 100 LJCh 245, 144 LT 626.

Fisher v Dixon (1845) 12 Cl & Fin 312; 38 Digest 663, 70.

Penton v Robart (1801) 2 East 88; 31 Digest 194, 3298.

Appeal

Appeal by the defendants from an order of Farwell J, dated 11 July 1939, in so far as it was found that a corrugated iron shed, erected by the appellant company on land which they held from the respondent, was not a trade fixture, and, therefore, not removable by the appellant company. There was also an appeal against the finding of the judge as to the period for which rent should be payable, but this report is confined to the former point. The facts are fully set out in the judgment of the court delivered by Scott LJ.

A J Belsham (for Andrew Clark on war service) for the appellants.

Roger W Turnbull for the respondent.

Belsham: The shed is a removable fixture. The only question is whether or not the superstructure was removable as a tenants fixture. If the nature of a chattel is destroyed by the removal of it, it cannot be removed. If, however, it can be re-erected in the same form else-

Page 249 of [1940] 1 All ER 247

where, it may be removed. [Counsel referred to Pole-Carew v Western Counties & General Manure Co, Spyer v Phillipson and Penton v Robart.]

Turnbull: The judge had to decide whether the floor and the super-structure should be treated as a composite building, or whether the floor should be treated as one thing and the superstructure as another. That was the right way of looking at the matter, and was in accordance with Pole-Carew v Western Counties & General Manure Co. In the present case, the building could not be dealt with bit by bit. The floor and the superstructure were put in together by the same person, and the building must be regarded as a whole. The floor was an essential part of the building for the purposes of the tenants trade.

Belsham was not called upon in reply.

A J Belsham (for Andrew Clark on war service) for the appellants.

Roger W Turnbull for the respondent.

15 January 1940. The following judgment was delivered.

SCOTT LJ (delivering the judgment of the court). The land upon which the shed here in question was erected was a piece of waste ground at Hillsea, Portsmouth, on the east side of the road to London. The respondent, who had leased the land from the War Office, had covenanted in his lease that he would, at the end of the term, at his own expense remove all buildings and erections and restore the site to its original state and condition to the satisfaction of the Secretary of State, and deliver up possession without payment therefor. The purposes for which the land was to be used were for grazing, and for the storage of road-making materials, machinery and implements. The lessee was also allowed with the previous consent of the local military authority:

… to erect or construct buildings or erections of a temporary character only.

The lessee covenanted also not to underlet without the previous consent of the Secretary of State.

The respondent carried on business as a contractor, but did not need the whole site for that purpose. The appellant company carried on business as manufacturers of breeze and cement products, and bought raw materials from the respondent. Mr Bevis, a director of the appellant company, was on friendly terms with the respondent, and the company was in fact allowed by him to occupy part of the land from May 1935. On this land the appellant company erected a large shed for the purposes of housing their manufacturing machinery and of affording warehouse accommodation for plant and materials. They first levelled and consolidated the surface, and then laid on it a concrete floor 3 ins thick for the full dimensions of the shed, 135 ft by 50 ft. The roof and sides were of corrugated iron, both carried by a timber construction, but removable. The sides were capable of being taken down in panels. The weight of the roof was carried by wide timber girders, resting on solid timber posts, which in turn rested on the concrete floor, thickened to some depth to afford adequate support. To prevent lateral movement under wind pressure, each post was tied to its concrete base by

Page 250 of [1940] 1 All ER 247

wrought iron straps on the opposite sides, and the post and straps were held together by a bolt running horizontally through the post, while the straps were fastened tightly by a nut screwed on one end of the bolt. There was no other attachment to the soil. In the shed, there were three heavy pieces of machinery, which were similarly attached to the concrete floor.

Once the roof and sides of the shed had been taken down, the posts could easily be removed by undoing the bolts, and, if need be, the up-standing straps left behind could be cut off level with the surface of the concrete floor. This shed seems to have been erected with the informal consent of the military authorities. At a later stage, the respondent obtained a written agreement authorising the use of the site for 3 years for the purpose of manufacturing concrete and breeze products, and permitting the removal during the 3 years of the “temporary storage shed,” so named in the document, subject to the site being restored. It is thus plain that the respondent recognised the temporary nature of the shed, and so informed the military authorities.

In March 1936, an abortive notice to quit was served by the respondent on the company, and, on 2 April 1938, another notice was served, which was treated by the respondent as effective. This notice not having been complied with, on 13 June 1938, he issued his writ claiming, inter alia, possession of the land and an injunction restraining the appellant company from removing the shed and machinery. A motion came before Morton J on 1 July, and, after evidence and arguments, an agreement was made that the shed and machines should be sold on account of whom it might concern and the proceeds paid into joint names. This permitted the issue as to ownership of the shed and machines to be decided without inconvenience, the money proceeds representing the things. At the trial Farwell J decided that the machines were tenants fixtures and removable by the appellant company, and there is no cross-appeal on that question. He held, however, that the superstructure of the shed must be regarded as one with the concrete floor, and as constituting a single unit affixed to the soil to the same extent as the floor itself. Possibly he found an analogy in the view taken by the Court of Appeal in Pole-Carew v Western Counties & General Manure Co, but the facts there were very different. Be that as it may, he accordingly held that the appellant company had lost all right of property in the chattels out of which the superstructure had been constructed, and that it was a landlords, and not a tenants, fixture. It is against this decision that the main appeal is brought.

That the concrete floor was so affixed to the ground as to become part of the soil is obvious. It was completely and permanently attached to the ground, and, secondly, it could not be detached except by being broken up and ceasing to exist either as a concrete floor or as the cement and rubble out of which it had been made. Does that fact of itself prevent the superstructure from being a tenants fixture? I do not

Page 251 of [1940] 1 All ER 247

think so. If it had been erected on concrete blocks, one under each post, the top level with the surface of the ground, and the attachment of post to block had been plainly removable at ground level, “the object and purpose” of the attachment would have been obviousnamely, to erect a mere tenants fixture. In my opinion, it was equally so in the actual construction adopted for holding the posts in position on their concrete supports. The photographs proved below, and shown to us, demonstrate the simplicity of this method of detachment, once the upper parts and walls had been taken down.

The judge held, and I think rightly held, that the superstructure was “to a very large extent” a “temporary” building, by which I understand him to mean that the object and purpose for which the company erected it were its use for such time as they might need it. That view goes a long way, if not all the way, towards the conclusion that, regarded apart from the floor, the shed was in law removable. The very uncertainty of the companys tenure of the site ultimately of necessity determined “the purpose and object” of the erection, and, when the judge found as a fact, as he did, that “it could be taken away, no doubt piecemeal,” and re-erected elsewhere, I think he consciously decided that, apart from the floor, it was a tenants trade fixture, and removable by the tenant as such. His only ground for taking the opposite view was that he thought himself bound to regard the two as one unit, and thought that the floor compelled him to treat the whole as a landlords fixture. In my respectful judgment, this reasoning rested on a fallacy. If the respondent had already made the concrete floor, as well he might for the purposes of his own business, and the company had then become his tenant at will and put up the self-same superstructure, what relevance would the floor have had? In my view, none. It would not have had any more relevance than would any flat, rigid and unbreakable surface already existing when some heavy superstructure is put upon it, such as a windmill of a century or two ago, or the actual machines in the present case.

I have considered many of the decided cases, but I think the principles as explained by Luxmoore J in Spyer v Phillipson, at pp 192195, and particularly in the passage at pp 193, 194, cited and completely concurred in by Romer LJ in the Court of Appeal, at pp 209, 210, are sufficient to dispose of this appeal. To my mind, it is inconceivable that the tenant at will should go to the expense of putting up such a structure unless it was for “the purpose and object,” first, of himself using it, and, secondly, of taking it away if he ceased to be tenant.

The condition of the legal quality of removabilitynamely, that the subject-matter should not, by the process of removal, lose its essential character or value (see Fisher v Dixon)was plainly satisfied by the judges own finding to which I have referred, and I see nothing in the evidence to raise a doubt as to the propriety of that finding. For

Page 252 of [1940] 1 All ER 247

these reasons, I think that the appeal should be allowed on the issue as to the shed.

Solicitors: Gordon Gardiner Kearton & Co, agents for John R C Miller, Portsmouth (for the appellants); Mills & Morley, agents for Bramsdon & Childs, Portsmouth (for the respondent).

W K Scrivener Esq   Barrister.

Sotherden v Sotherden

[1940] 1 All ER 252


Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        17 JANUARY 1940        


Divorce Desertion Ending an existing state of cohabitation Wife in mental hospital at date of alleged desertion.

The wife was in 1931 admitted to a mental hospital and was detained until 1936. The husband visited her on two or three occasions up to the end of 1932, when he left his then abode and was not heard of thereafter. In 1938 the wife petitioned for divorce on the ground of desertion, but it was contended that, as there was no existing state of cohabitation at the time of the alleged desertion, there was in law no desertion:

Held the mere fact that one of the parties was incompetent at the time to set up a matrimonial home did not make desertion impossible, and the facts proved were sufficient evidence of desertion for the statutory period of three years.

Notes

The departure from the doctrine of Fitzgerald v Fitzgerald that desertion must bring to an end an existing state of cohabitation was affirmed by the Court of Appeal in Pardy v Pardy [1939] 3 All ER 779; Digest Supp. In the present decision, the Court of Appeal approves the decision in Pulford v Pulford, which is, in effect, only a particular aspect of that general proposition. Where a deserted party is detained as a person of unsound mind, it seems to have been suggested that desertion cannot have commenced until that person was discharged. This view is clearly rejected by the Court of Appeal, and the period of desertion is held to have run while that party was so detained.

As to Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 654659, paras 963969; and for Cases, see Digest, Vol 27, pp 306319, Nos 28372977.

Cases referred to

Pulford v Pulford [1923] P 18; 27 Digest 307, 2846, 92 LJP 14, 128 LT 256.

Fitzgerald v Fitzgerald (1869) LR 1 P & D 694; 27 Digest 307, 2845, 38 LJP & M 14, 19 LT 575, subsequent proceedings (1874) LR 3 P & D 136.

Gatehouse v Gatehouse (1867) LR 1 P & D 331; 27 Digest 318, 2965, 36 LJP & M 121, 16 LT 34.

Appeal

Appeal by the petitioner from a judgment given by Bucknill J in the Divorce Division on 9 October 1939, dismissing the petition of a wife for a decree of divorce on the grounds of desertion. The petitioner was married in May 1915. In 1931, she was admitted to a mental hospital. Later, she went to another hospital, and was finally discharged in September 1936. The husband visited her two or three times,

Page 253 of [1940] 1 All ER 252

but not after Christmas 1932. When the wife came out of hospital, she could not find her husband, and, at the date of the hearing, she had had no news of him. She filed her petition on 23 November 1938. The judge, in dismissing the petition, said it was impossible to say that the husband had deserted the wife for the period of 3 years preceding the presentation of the petition. For nearly a year of the 3 years she was in a mental hospital. The only evidence about the husband was that, after the wife went to hospital, her children went to the husbands mother, and the husband stayed for a time with his mother, but went away in July 1932, for an unknown reason. The petitioner appealed.

S J Wilson Price for the appellant: The mere fact that a husband and wife are physically separated does not prevent desertion from beginning during the period of physical separation: Pulford v Pulford. In this case, the husband cut himself off completely from his past life, which indicated an intention to desert the wife in 1932.

S J Wilson Price for the appellant.

17 January 1940. The following judgments were delivered.

SLESSER LJ. This appeal must be allowed. It is a case where the husband and wife were married on 24 May 1915, at Southborough, and lived together for some years. Unfortunately, in August 1931, the wife suffered from mental infirmity, and had to go to Parkhurst Hospital, whence she was transferred in February 1932, to the mental hospital at Maidstone. She remained there until September 1936, when she came out into the world again. Twiceit may have been three timeswhile she was at Parkhurst the husband went to see her. She says in her evidence that she does not remember seeing him after Christmas 1932. Then Mrs Sotherden, the mother-in-law of the petitioner, was called, and she says that about 25 July 1932, the husband went off. She adds: “We have never seen him since.” On that, there having been a period from 1932 to the date of the petition in which the wife has never seen the husband or been offered any matrimonial home or maintenance, or any conjugal rights, the wife lodged a petition asking for the dissolution of her marriage on the ground that she had been deserted for the statutory period. The judge, as I read his judgment, has refused her petition solely upon the ground that, in so far as she was still in the mental hospital as late as September 1936, she was unable to show that, at the date of the petition, the desertion had continued for 3 years. That can only be upon the basis that she was not deserted while she was in the mental hospital, because I think he has accepted the evidence, and the evidence is all one waythe case was undefended and undisputedthat in fact the husband has deserted her in every sense of the word ever since 1932. In my opinion, the judge was wrong, there being clear evidence of intention to desert in 1932, in coming to the conclusion that the fact that the wife was in the mental hospital during part of the 3 years period prevents her from alleging that her husband deserted her for the statutory period.

I think on this matter that the judgment of Sir Henry Duke P,

Page 254 of [1940] 1 All ER 252

in Pulford v Pulford was correct. That was a case where, the parties being married in 1883, in January 1884, the wife was removed to a poor law asylum as a person of unsound mind. She was not finally discharged until 1902. The facts of the case are stated as follows, at p 19:

In 1922 the wife took out a summons against her husband … for neglecting to provide her with reasonable maintenance and so causing her to live apart from him. This summons was served on him in July, and finally dealt with on Aug. 3, when no order was made. On this occasion the husband failed to recognise his wife, and the wife could not swear that he was her husband until he had walked across the court, when she recognised his gait, as he was lame. On Aug. 17, 1922, on a fresh summons charging him with desertion, but not giving any date for the commencement of the desertion, the justices found him guilty of desertion from Aug. 3, the date of the former hearing. The husband appealed.

The matter therefore came before a Divisional Court, and Sir Henry Duke P says, at p 20:

The second objection was of a more serious character. Counsel for the husband cited Fitzgerald v. Fitzgerald, in which case there is a statement by Lord Penzance so precise that it has been relied upon as laying down a principle of law in words which the court has merely to construe textually. That statement is this: “Desertion means abandonment, and implies an active withdrawal from a cohabitation that exists.” It is a passage frequently relied on at the bar as if it were a text, governing all cases of alleged desertion that can arise, which the court is only entitled to construe and apply. And in this case counsel for the husband asked: “How can it be said that a state of cohabitation existed in the face of its termination by the action of the public authorities, which action remained effective until 1902, and has never been followed by the resumption of a matrimonial home?”

However, Sir Henry Duke P goes on to say that the matter must be construed broadly, and that Lord Penzance cannot be taken as giving an exhaustive definition of the circumstances in which desertion may be found. Sir Henry Duke P says, at p 21:

It has been almost a commonplace in this court to hold that in order to ascertain whether there has been desertion, you must look at the conduct of the parties.

Then follow these important words, at p 21:

There may be no matrimonial home, and yet no forfeiture of the rights of the spouses. Desertion is not the withdrawal from a place, but from a state of things. The husband may live in a place and make it impossible for his wife to live there, though it is she and not he that actually withdraws; and that state of things may be desertion of the wife.

Applying that test, which seems to be a correct one, I think it would be right to say here that, on the undisputed evidence, the husband withdrew from the state of things in which the wife had a right to expect her conjugal rights, subject to the fact that for a time she was in this mental home, and that the withdrawal of the husband from the wife of her conjugal rights took place in 1932, when he deserted her. The mere fact that at a later period it was not possible to have a matrimonial home, or for conjugal rights to be accorded, does not seem to me to be a reason for saying that desertion which in fact took place in 1932 was not effectively operative for 3 years before the time when this petition was brought. One can think of the class of case where, for the purposes of employment, a husband may be away altogether

Page 255 of [1940] 1 All ER 252

from his wife, and living in a different part of the world. I see no reason why, in such circumstances, albeit he is parted from his wife, he should not do such things in that other part of the world as would unequivocally amount to desertion of the wife. As Goddard LJ has said, whether the wife here were in a hospital on account of physical or on account of mental infirmity can make no difference. In my view, Pulford v Pulford, of which I myself approve, rightly considered, is authority for saying that one must look in an appropriate case at the actual facts of desertion, without being excluded from coming to the conclusion that there has been desertion merely because one of the parties is, or both parties are, incompetent at the time to set up a matrimonial home. In fairness to the judge, it must be stated that Pulford v Pulford was not cited in the court below. Here there has been desertion, and I think that this wife is entitled to succeed on this appeal.

MACKINNON LJ. I agree.

GODDARD LJ. I agree. The case seems to me to be one of importance, especially having regard to the way in which Bucknill J looked at it. I need hardly say that I differ from a judge for whose opinions I have the most unfeigned respect only with great hesitation, but I am bound to say that I think he has taken a wrong view here.

The facts show that, as far back as 1932, when the petitioner had been for some little time in the asylum, the respondent was living with his children at his mother-in-laws house. At some time about 25 July 1932, he went away and came back in the morning, telling the mother-in-law that he had gone to see his wife. He said that he had had a telephone call to see his wife. Then he went off, and from that date they have never seen him. He simply disappeared.

The judge has said that, as the petitioner was in the mental home in 1932, and down to within 2 years of the presentation of the petition, there cannot have been desertion for 3 years, the statutory period which it is necessary to establish. He regarded the case as one in which the man had perhaps deserted his home and children, but had not deserted his wife. I respectfully differ. Clearly the intention of the man was, in July 1932, to have no more to do with his wife, to desert her, and to go away. While the wife was in the hospital, whether a mental hospital or a hospital for physical diseases, he owed a duty to his wife. A man does not get rid of his obligations as a husband because his wife is in the hospital. If, while she is in the hospital, he disappears, and if, when she comes out of the hospital, he is still absent and does not come back, I think that the only reasonable inference to draw is that he intended to desert her at the time when he went away from her. Not only may Pulford v Pulford, which is very helpful on this occasion, be cited, but also Gatehouse v Gatehouse, to which Sir Henry Duke P referred in giving his decision in Pulford v Pulford.

Page 256 of [1940] 1 All ER 252

I will take this sort of case as an illustration of a case where I think there would be clear desertion. A man who is living in England with his wife goes, with the consent of the wife, to Australia on a matter of business, which it is contemplated will last a year, so that he will not be returning to England for a year. However, after he has been there, we will say, 3 months, he writes to his wife and says: “I tell you I am never coming back to you. I intend to desert you, and to have no more to do with you from now.” It seems to me that then, if he comes back to England at the time he is expectednamely, the end of the yearand does not resume cohabitation with his wife, it cannot be said that the desertion only started from the date when he came back. The desertion started from the date when he expressed his intention to renounce his obligations as husband to his wife. Intention is one of the most important matters to be taken into account when one is considering desertion. There are many cases in which there could be withdrawal from cohabitation in the popular sense, but where there would be no desertion, because there is no intention to desert. However, where one finds, as I think one clearly does in this case, a plain intention on the part of the husband to desert the wife in 1932, to renounce his obligations as a husband, and to have no more to do with the wife, it seems to me that the only inference we can draw here is that from 25 July 1932, the husband deserted his wife. For these reasons, I agree that the wife is entitled to the decree.

Decree nisi granted with such costs as are allowed in a poor persons case.

Solicitors: Montagus and Cox & Cardale, agents for Snell & Co, Tunbridge Wells (for the appellant).

Derek H Kitchin Esq   Barrister.

Mackenzie v Mackenzie

[1940] 1 All ER 256


Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        17 JANUARY 1940        


Divorce Desertion Non-cohabitation clause in magistrates order No evidence that order regarded as ineffective Impossibility of desertion.

In an undefended petition for divorce on the ground of desertion, it appeared that in 1934 the petitioner had obtained from magistrates a maintenance order, which was in a printed form and included the words “that the complainant be no longer bound to cohabit with her husband.” There was no evidence whether or not the husband had regarded this order as effective, but he had not made the payments due under it. The Court of Appeal were prepared to assume, although there was no evidence on the point, that these words were left in the order by inadvertence:

Held so long as the order remained unamended, no decree based on desertion could be granted.

Notes

Here the Court of Appeal have reaffirmed the decision in Harriman v Harriman, although it appears that there may have been some

Page 257 of [1940] 1 All ER 256

departure from the rule. There can, therefore, be no desertion so long as there is an order of the court containing a non-cohabitation clause.

As to Non-Cohabitation Clause in Magistrates Order, see Halsbury (Hailsham Edn), Vol 10, p 659, para 969; and for Cases, see Digest, Vol 27, pp 319321, Nos 29782999.

Cases referred to

Harriman v Harriman [1909] P 123; 27 Digest 321, 2995, 78 LJP 62, 100 LT 557.

Cooper v Cooper [1939] WN 402, 56 TLR 118; Digest Supp.

Hatton v Harris [1892] AC 547; 7 Digest 214, 562, 62 LJPC 24, 67 LT 722.

Appeal

Appeal by the petitioner from a judgment of Croom-Johnson J at the Exeter Assizes, dated 3 November 1939, dismissing an undefended petition for a decree of divorce on the ground of desertion. The petitioner was married in 1928. In her petition she said that her husband deserted her on 1 October 1933. On 12 January 1934, she asked the magistrates of the petty sessional division of Paignton for a maintenance order against her husband. The magistrates made an order, but the clerk, without the knowledge of the petitioner, omitted to strike out of the printed form the condition “that the complainant be no longer bound to cohabit with her husband the defendant.” The judge said at the hearing of the petition that he was bound by the judgment in Harriman v Harriman to hold that the wife could not allege desertion. He would have liked to give relief, but he could not treat the order as ineffective. He therefore dismissed the petition. The petitioner appealed.

J Scott Henderson for the appellant: This case is distinguishable from Cooper v Cooper, but, even if it is not, Sir Boyd Merriman P was right. Where a mistake has been made in an order of a court of summary jurisdiction, the judge is entitled to disregard the part of the order which is affected by the error: Hatton v Harris. In that case, Lord Watson said that, where such an error has been committed, it is within the competency of the court, if nothing has intervened which would render it inexpedient or inequitable to do so, to correct the record in order to bring it into harmony with the order which the judge obviously meant to pronounce. The judge here had evidence of the form of the order which the magistrates meant to make, and evidence that they did not intend that this printed clause should be left in.

J Scott Henderson for the appellant.

17 January 1940. The following judgments were delivered.

SLESSER LJ. The petitioner, Freda Evelyn Mackenzie, was married to Angus Mackenzie, the respondent, on 2 May 1928. The petition alleges that they lived and cohabited together at various places, and then at 29, King Street, Tavistock. There is living issue of the marriage one child, Alastair Donald Mackenzie, born on 17 November 1928. The petitioner alleges that the respondent has deserted her for a period of 3 years and upwards immediately preceding the presentation of this petition.

On the matter coming before the judge, the case being undefended,

Page 258 of [1940] 1 All ER 256

there was put before him, among other matters, an order which had been made by the magistrates on 12 January 1934. By that order it is recited that the petitioner in this case complained that her husband had, since 1 October 1933, at Paignton been guilty of wilfully neglecting to provide reasonable maintenance for her and for the infant child whom he was legally bound to maintain. The magistrates by their order ordered that this husband should pay his wife a certain sum by way of maintenance. Unfortunately, however, the order was in the usual printed form and the magistrates clerk appears to have omitted to strike out the words, which are appropriate in cases of cruelty, but were not sought in this case as relief, as clearly appears, I think, from the notes of the evidence which was given:

That the complainant be no longer bound to cohabit with her husband the defendant.

That was an integral part of the order. It appears from the notes of evidence taken on 12 January 1934, that the order should have been, “Wife 10s., child 10s., and wifes custody of child,” with no reference at all made to the question of cohabitation, which of course really did not arise on the wifes application, which was one exclusively for maintenance. However, that order was duly served by a police constable on 17 April 1934, upon the defendant, and no attemptor no successful attempt, at any ratehas been made at any time since to vary that order. Therefore, the matter now stands thus. When the petitioner came before Croom-Johnson J, there was the order of 12 January 1934 on the file, that she was no longer bound to cohabit with her husband, the defendant. On that, Harriman v Harriman is conclusive against her raising the matter which is necessary under the Act on which she relies to show that there has been desertion. The effect of this non-cohabitation clause in the magistrates order is to prevent a continuance of desertion after the date of that order, and, therefore, it was not competent for her on her petition to allege that she had been deserted by her husband for 3 years, because, after 12 January 1934, she could not allege that there was a continuance of desertion.

Counsel for the petitioner agrees, as I understand him, that Harriman v Harriman would have been fatal to his appeal but for the decision of Sir Boyd Merriman P, in Cooper v Cooper. In that case, the wife had obtained from a court of summary jurisdiction:

… an order for maintenance on the ground that her husband had deserted her, but by inadvertence the non-cohabitation clause was not struck out.

In that case, the clause was not in a form which made it very sensible, because it stated that:

“… the applicant be no longer bound to co-habit with her husband his wife.”

Thus, Sir Boyd Merriman P treated the case, as I read the judgment, upon the basis that it was appropriate in that case, and also as it stands here, that the petitioner was no longer bound to cohabit with her husband.

Page 259 of [1940] 1 All ER 256

In that sense Cooper v Cooper was a case precisely like the present one. There, as here, those words were left in. Sir Boyd Merriman P said, at p 118:

that the petitioners case was that the non-cohabitation clause was never intended to be in the order. The petitioner did not want protection, and was not asking for protection. From first to last neither the husband nor the wife was treating the clause as effective in any way. Unfortunately, it was found to be in the order in its present form, that was to say, not to have been erased, and, as counsel had pointed out, the clause did not make sense.

Eliminating that question of its not making sense, Sir Boyd Merriman P, at p 118, went on to say that he thought:

that it would be pedantic to treat it as an effective non-cohabitation clause.

I think that that is on the basis that it might make sense, but, whether or not that is so, I am of opinion that, if Sir Boyd Merriman P treated it as being a non-cohabitation clause which did make sense, and which was to be read that the petitioner be no longer bound to cohabit with her husband, he was wrong in the conclusion to which he came. I think that his conclusion is inconsistent with the decision in this court in Harriman v Harriman, to which I have just referred. The order is an effective order, and we have to treat it as an order duly served on the husband which regulated the relations between the parties, and which has never since been varied. In those circumstances, it would be wrong to treat that order as a nullity, merely because it has not been treated by the parties as effective in any way. As a matter of fact, we do not know in what way the husband may have regarded this order. It was served upon him. True it is that he has disobeyed that part which deals with maintenance, but whether or not he regards himself as still bound to cohabit with his wife we have no information. The result, therefore, is that, this order so existing at all material times, the petitioner cannot satisfy the requirements of the statute as to the period of desertion, and, therefore, this appeal must be dismissed.

MACKINNON LJ. I agree, also with regret. I observe that on 12 January 1934, there were no fewer than 9 magistrates sitting at this petty sessional division, assisted, no doubt, by a clerk. I do not know whether they have become aware of the fact that, owing to their stupid carelessness in putting this clause into a formal order of the court, they have occasioned the gravest injustice to this unfortunate woman. Unhappily, it is an injustice that we cannot remedy, and I therefore agree that this appeal must be dismissed.

GODDARD LJ. I agree. One difficulty I have with regard to Cooper v Cooper is that there is nothing in the report to show on what Sir Boyd Merriman P was basing himself when he said, at p 118:

From first to last neither the husband nor the wife was treating the clause as effective in any way.

Page 260 of [1940] 1 All ER 256

It may be that there was some evidence before him to that effect, but there is nothing in the report to suggest that there was. Even if there had been, I do not know how, so long as the order stands, it can be disregarded by the court, in view of the decision in Harriman v Harriman. If husband and wife did agree in some way to treat the clause as ineffective, it was a very good reason for going back to the magistrates and asking them to correct the error. However, so long as the order stood, this being an order which the magistrates had power to make, and did make, I do not see how it can be disregarded by this court, so long as it stands unamended. I agree, and I do not think that the decision of Sir Boyd Merriman P in Cooper v Cooper can be upheld.

I should like to associate myself with every word which MacKinnon LJ has just said about what happened at the court of summary jurisdiction. Of course it may bewe do not know, but it is in the highest degree unlikelythat this woman, who probably was not even represented by a solicitor, asked the magistrates to put the non-cohabitation clause in the order. If she did, then, of course, she is the author of her own misfortune. Even then, however, she ought to have been warned of the danger of it. I hope that in one way or another this case will be brought to the attention of the magistrates of the Paignton division of the county of Devon, and more especially to the notice of their clerk, so that in future they may not disregard the plain warning which was given in Harriman v Harriman by this court that those words in this printed form ought to be struck out in cases where the only complaint is one of failure to maintain.

Appeal dismissed.

Solicitors: Walter Crimp & Co, agents for Kitsons Hutchings Easterbrook & Co, Torquay (for the appellant).

Derek H Kitchin Esq   Barrister.

Smith v City Petroleum Co Ltd

[1940] 1 All ER 260


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant        

Court:        MANCHESTER MICHAELMAS ASSIZES        

Lord(s):        STABLE J        

Hearing Date(s):        20, 21 DECEMBER 1939        


Landlord and Tenant Fixtures Trade fixtures Mode of annexation Petrol pumps and tanks Whether pumps and tanks single unit Removal within reasonable time On failure to remove, property in fixtures vests in landlord.

Petrol pumps affixed to tanks embedded in the ground are tenants fixtures, and are removable within a reasonable time after the determination of the term. If not so removed, the property in the pumps passes to the landlord, and a subsequent tenant takes no interest in them.

Notes

The subject of the decision here has long been a matter of discussion. The principles affecting it are also the subject of the decision of the Court of Appeal in Webb v Frank Bevis Ltd, p 247, ante, and, as the two decisions reach the same conclusion in law, the matter may be taken to be now settled.

Page 261 of [1940] 1 All ER 260

As to Annexation of Fixtures, see Halsbury (Hailsham Edn), Vol 20, pp 97107, paras 107113; and for Cases, see Digest, Vol 31, pp 186196, Nos 32103325.

Cases referred to

Davis v Jones (1818) 2 B & Ald 165; 31 Digest 212, 3514.

Saint v Pilley (1875) LR 10 Exch 137; 31 Digest 204, 3453, 44 LJEx 33, 33 LT 93.

Action

Action in detinue claiming the delivery of certain petrol pumps the property of the defendants, the tenants of the plaintiff. The landlord, Smith, let property under a tenancy agreement to a tenant, Ridge, who placed upon the premises petrol pumps and tanks of the type usually used by roadside filling-stations. Ridges tenancy came to an end in October 1937, when the defendants became the tenants, but nothing was said or done about the pumps and tanks, which were used by the defendants for the purposes of their business. It was admitted that the tanks were fixtures and passed to the landlord, but it was contended that the pumps were tenants fixtures and were the property of Ridge, and that, upon the determination of his interest in the premises, he had the right to remove them within a reasonable time. It was further contended that, as he had not done so, the pumps became the property of the landlord, and that the defendants had no interest in them.

G J Lynskey KC and Harold Rhodes for the plaintiff.

William Gorman KC and B Ormerod for the defendants.

21 December 1939. The following judgement was delivered.

STABLE J. The first question that arises is whether these pumps were tenants or landlords fixtures. It seems to me that they are very near the line indeed. It is conceded that the tanks are really an integral part of the pumps, because a petrol pump without a tank of petrol underneath it is of very little use even in these days. However, whatever the nature of the tanks, for this matter, I think that the actual pumping apparatus can be regarded as a separate entity.

Having heard all the evidence, I have come to the conclusion that counsel for the defendants is right when he says that these were tenants fixtures, and not landlords fixtures. The pumps were affixed to the freehold by four bolts which were embedded in concrete, but, of the four bolts, only one was clamped down with a nut, and the pumps were further joined up to the tanks as part of the freehold by a kind of conduit pipe leading from the tank to the pump.

Upon the authorities, I think these trade fixtures were not part of the land, but were capable of being severed from the land without injury to the land, and satisfied the conditions which placed them on the tenants-fixture side of a line which is not by any means easy to draw. On that basis, I think that the position is this. Ridge could have removed the pumps in October 1937, and, if he had done so, Smith would have had no cause of complaint. Ridge had no right to pass on to a fresh tenant any right to the pumps other than the right which

Page 262 of [1940] 1 All ER 260

he had himself, and the only right vested in him was a right to remove them during the period of his tenancy or within a reasonable time thereafter. For example, if the landlords had terminated the weekly tenancy and it had been impossible for Ridge to have removed the pumps within a week, I think that the law would have permitted him a reasonable time after the weekly tenancy had expired to remove them.

The defendant company went into occupation. They were in occupation for some months, and there was not the slightest attempt to remove the pumps. It was never contemplated that the pumps would be removed until February 1939. It is quite plain that a reasonable time after the expiration of Ridges tenancy in which to remove these fixtures had long expired before February 1939. In that month, the agreement between the defendant company and Smith came to an end, and the defendant company were under an obligation to hand over to Smith his property, and, as part of his property, there were these pumps, which, not having been removed by Ridge during his tenancy agreement, had passed to the landlord. Accordingly, when the defendant company removed the pumps, they were inflicting a wrong on Smith.

Whether the proper form of action was detinue or conversion or waste is a question which, in 1939, is academic, although perhaps it would have presented a more formidable problem in 1818, when Davis v Jones was decided.

In deference to the very cogent argument of counsel for the defendants, I think that I must say a word about the authorities. Davis v Jones is quite clearly distinguishable here, because there the outgoing tenants on the expiration of the term gave up possession of the premises to the landlord, but it was without prejudice to their right to remove the jibs as tenants fixtures. As between them and the landlord, it was expressly agreed that they might go on the premises to remove the jibs, although the term had expired. The landlord, who never challenged this right, quite properly demised the land to a fresh tenant, and, when the plaintiffs, in exercise of their rights which they had expressly reserved, presented themselves for the purpose of removing their property, they were met by the incoming tenants, who claimed that the property was theirs. That claim was obviously ill-founded. The incoming tenant could derive title from the landlord only by express agreement between the landlord and the plaintiffs, and the plaintiffs, apart from such agreement, retained the property in these things and had the right to remove them. Davis v Jones, which was decided on the basis that the jibs were personal chattels, established the plaintiffs right to remove their personal property as against a person who had got possession of it and claimed to retain possession of it.

A case nearer this case is Saint v Pilley, in which the tenant, or his trustee in liquidation or bankruptcy, someone who was in a position to exercise the rights of tenant during the existence of the term, sold the tenants fixtures to a third party. Thereafter, the third party, who had

Page 263 of [1940] 1 All ER 260

bought the fixtures, commenced negotiations for a fresh tenancy in his favour, and, because that matter was in negotiation, he did not at once exercise his right of removal of the things. While these negotiations were going on, the trustee informally surrendered the term to the landlord, and, when the landlord got his property back, he let to a new tenant. It was held that the purchaser of the fixtures was nevertheless entitled to get what he had bought from the new tenant. It is plain, when one looks at the judgment, that it depends on the very special facts of the case, and also on the position which arises where there is a voluntary surrender of a term before the term expires.

The court held [p 139] that the effect of this surrender was stated in the maxim laid down in Co Litt 338 b:

“Having regard to the parties to the surrender, the estate is absolutely drowned … But having regard to strangers, who were not parties or privies thereunto, lest by a voluntary surrender they may receive prejudice touching any right or interest they had before the surrender, the estate surrendered hath in consideration of law a continuance.”

It was just sufficiently alive to preserve the rights of the purchaser who was not a party or privy to the purely voluntary surrender. It was said that the trustee, having sold part of the property, could not derogate from his own grant by surrendering the whole thing to somebody else. I do not think that he could.

The facts and the law which govern the decision in that case do not, in my judgment, apply at all where all that happens is that a tenancy agreement comes to an end and the tenant, instead of exercising his right to remove the fixtures, purports, without privity or knowledge of the landlord, to sell to the incoming tenant something which was not his to sell. The result is that there must be judgment for the plaintiff for the agreed amount of damagesnamely, £95and costs.

Judgment for the plaintiff for £95 and costs.

Solicitors: Lambert & Parker (for the plaintiff); John Taylor & Co (for the defendants).

M D Chorlton   Barrister.

Re Zakon, Trustee in Bankruptcy v Bushell

[1940] 1 All ER 263


Categories:        BANKRUPTCY        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        15 JANUARY 1940        


Bankruptcy Deed of arrangement Position of trustee Deed ineffective for lack of assent by creditors Subsequent bankruptcy Expenditure in carrying on business Remuneration Deeds of Arrangement Act 1914 (c 47), ss 2, 3, 21.

In November 1938, the bankrupt executed a deed of arrangement which remained ineffective owing to a refusal on the part of the creditors to assent to it. On 5 January 1939, a receiving order was made against him, and the applicant was appointed trustee in bankruptcy. The respondent, the trustee under the deed of arrangement, had expended certain sums of money for the purpose of carrying on the bankrupts business, and he claimed to be entitled to remuneration

Page 264 of [1940] 1 All ER 263

in respect thereof. He therefore retained a sum of money equivalent to the amount so expended. The applicant contended that, as the deed had never become effective, he, the applicant, was entitled to the money retained by the respondent. Against that, the respondent contended that, as the moneys expended by him had benefited the creditors generally, he was entitled to retain a sum equivalent to the moneys so expended, but the court took the view on the facts that there was no evidence that the general body of the creditors had benefited:

Held the trustee in bankruptcy was entitled to the payment over of the money. The respondent was not entitled to retain it, as he had taken the risk of the deed of arrangement not being assented to by the creditors.

Notes

The position of a trustee of a deed of arrangement is a precarious one since, for the first three months from the execution of the deed, it is always liable to be superseded by bankruptcy. In the present case, however, the deed never became effective by reason of the failure of the creditors to assent to it. The court, however, expresses an opinion that, even in such a case, the trustee might be entitled to remuneration if he could show that his labours have resulted in a real benefit to the creditors.

As to Position of Trustee, see Halsbury (Hailsham Edn), Vol 2, p 439, para 598; and for Cases, see Digest, Vol 5, pp 11081110, Nos 90319048.

Motion

Motion for payment over of certain sums of money retained by the trustee under an ineffective deed of arrangement. The facts are fully stated in the judgment.

Leonard Lewis for the applicant.

Alan S Orr (for John Buckley on war service) for the respondent.

15 January 1940. The following judgment was delivered.

FARWELL J. This is a motion by the trustee in bankruptcy of one Marks Zakon against a gentleman who acted for a time as trustee under a deed of arrangement which turned out to be ineffective. The facts are quite short, and they are these. On 12 November 1938, the bankrupt executed an assignment of his property to the respondent, as trustee, for the benefit of his creditors. On 17 November 1938, the respondent procured the deed to be registered. That was an act done by the respondent on his own motion. There was not any obligation upon him to register the deed himself, but he took upon himself to get it registered, and, in doing so, he incurred some expense. On 18 November 1938, a meeting of creditors was held. There was not at that meeting a majority in favour of the deed. There was still time after that when a meeting could have been held, if it had been possible, at which the majority of the creditors could have assented to the deed, but in fact there was never any such meeting at all. The only meeting which was in fact held was the one on 18 November 1938, at which the majority of creditors dissented from the deed.

On 24 November 1938, a creditor presented a bankruptcy petition against the debtor. A receiving order was made on 5 January 1939, and, on 1 February, the bankrupt was adjudicated bankrupt. On 25 January, the applicant was appointed trustee of the debtors property. The trustee under the deed acted for a period of some weeks, largely in getting in the

Page 265 of [1940] 1 All ER 263

book debts, but also in carrying on the business to a small extent by making up some of the material which was in the possession of the bankrupt and selling it, and it is said that the result of his efforts has been that the stock in trade was sold at a price which might not otherwise have been obtained. The respondent also seems to have incurred some expenses in connection with the collection of the debts and looking after the business. He also appears to have paid £10 as an allowance to the debtor. In those circumstances, when the trustee, the respondent, was called upon by the trustee in bankruptcy to pay over to him the moneys which the respondent had collected from the bankrupts debtors, he paid over a sum which represented the full sum due less a sum of £121 5s 10d, which the respondent claimed was the amount by which he was out-of-pocket in carrying on the business, as he had done in collecting the debts, and he claimed that, in those circumstances, he was justified in retaining those sums for his own benefit. The trustee in bankruptcy did not take the view that, in the circumstances of the case, any sum should have been retained by the respondent at all, and, accordingly, he moved this court for an order upon the respondent to pay to the applicant the sum of £121 5s 10d, being the total amount which the respondent retained.

The question is one which has been argued before me as a matter of construction of the Deeds of Arrangement Act 1914. It is only necessary for me to refer quite shortly to three sections of that Act. S 2 provides as follows:

A deed of arrangement shall be void unless it is registered with the registrar of bills of sale under this Act within 7 clear days after the first execution thereof by the debtor or any creditor, or if it is executed in any place out of England, then within 7 clear days after the time at which it would, in the ordinary course of post, arrive in England …

In passing, I may say that, in my view, in the words “after the first execution thereof by the debtor or any creditor,” the words “by the debtor or any creditor” refer to the execution of the deed, and not to its registration, and there is nothing in that section, so far as I can see, which imposes upon the trustee or upon a debtor or upon a creditor the duty of registering the deed. If it is not registered in accordance with the Act and within the time limited by the Act, however, the deed becomes ineffective, so that it is to the benefit of someone to see that the deed is registered. I cannot read s 2 as it is suggested I might read itnamely, as though the registration had to be done by a debtor or a creditor. In my opinion, that is not the true construction of that section. S 3 provides as follows:

(1) A deed of arrangement, which either is expressed to be or is in fact for the benefit of a debtors creditors generally, shall be void unless, before or within 21 days after the registration thereof, or within such extended time as the High Court or the court having jurisdiction in bankruptcy in the district in which the debtor resided or carried on business at the date of the execution of the deed may allow, it has received the assent of a majority in number and value of the creditors of the debtor.

Page 266 of [1940] 1 All ER 263

In the present case, at the expiration of the 21 days the necessary majority of creditors had not assented, and, accordingly, because there was not a majority of creditors assenting to the deed, the deed became void as from that date. In truth, the deed was never effective at all, because it was not a case where there was a majority, and subsequently a bankruptcy petition or a bankruptcy decree, but it was a case where the necessary majority of creditors did not assent, and, accordingly, the deed never really became effective at all.

The only other section to which I need refer is s 21, which really has nothing to do with what I have to consider. S 21 provides as follows:

Where a deed of arrangement is avoided by reason of the bankruptcy of the debtor, any expenses incurred by the trustee under the deed in the performance of any of the duties imposed on him by this Act shall be allowed or paid him by trustee in the bankruptcy as a first charge on the estate.

It has been held that such expenses as those are strictly limited to expenses and debts imposed by the Act. In my judgment, s 21, having regard to the facts in this case, has no application at all. There is nothing in the Act itself, so far as I can see, which authorises the payment of expenses in a case such as this, where the deed never became an effective deed at all because of the failure to obtain the assent of the majority of the creditors. In my judgment, so far as any attempt was madein fact, it was not made, because counsel for the respondent did not put his case in that wayto rely on s 21 of the Act, it would not have assisted the respondent in the least, and he does not in fact claim that he is really entitled to anything as expenses. The way in which counsel for the respondent put it, however, is this. He says that, in so far as the general body of creditors have benefited by the acts done by the trustee under the non-effective deed, the acts have resulted in a benefit to them, so that they have taken some benefit which they could have obtained only by virtue of his exertion. In such a case as that, it is inequitable to permit the creditors to take the benefit which has been acquired in that way and at the same time to refuse the person who has obtained that benefit for them any consideration or remuneration in respect of it.

It is said that, where a person has expended money, or has put himself to expense, and, as a result of his own exertions, benefited the creditors, then the equity of the matter requires that he shall have some compensation for what he has done. It is not put, as I follow the argument, that there is anything in the Act itself which in terms justifies or permits such payments to be made, but it is said that the court has a general jurisdiction to see that somebody who has in fact, by his labours or expenditure of money acquired a benefit which has passed to the general body of creditors, has some recompense for the expense or trouble to which he has been put. I may say at once that I do not think that there is anything in the Act which would enable the trustee in bankruptcy to

Page 267 of [1940] 1 All ER 263

permit any such allowance to be made. I think that it is a case where, if any such allowance is going to be made, or should be made, it should be made by the court, and by the court only.

In my judgment, the trustee in bankruptcy in this case was amply justified in saying that he could not allow these deductions to be made, and in coming to the court, as he has done, for the assistance of the court in the matter. It does not follow from that, however, that there may not be jurisdiction in the court itself in a proper case to allow something to a person in the position of this respondent by way of compensation or otherwise for trouble or expense to which he has been put. In my judgment, it is a case where the court acts only in rather exceptional circumstances. In the present case, the respondent took upon himself the business of seeing that the deed was registered, of collecting the debts, and of carrying on the business to a limited extent. He even went to the length of making or allowing a small payment to be made to the bankrupt himself as an allowance. During the whole of that time, he had no means at all of knowing for certain whether or not the deed would ever become an effective deed at all. Of course, if the necessary assent had been obtained, he could then have said: “This has been for the benefit of the creditors who assented to the deed, and the fact that I came in before I was safeguarded by any provisions in the Act cannot be held against me.” If, however, a person elects to act in the way in which this gentleman did, it may well be only with the intention of assisting the general body of creditors, but, if he chooses to act in the way he has done, then he does it at his own risk, and, if he expends time, labour or money in doing what he has done, that is something which he is doing only and entirely at his own risk, without any sort of right to recover anything in respect of it. In my judgment, there may be cases in which so obvious a benefit has resulted from the acts which the person in that position has chosen to do that it would be manifestly unfair to permit the creditors to receive such benefit without making some return to the person who had earned that benefit for them, but, before the court could permit that to be done, in my judgment, it would have to be satisfied beyond all reasonable doubt that the exertions in respect of which some claim was made had resulted in a real benefit to the creditors.

In the present case, it is said that, by collecting the debts, the respondent prevented the money from getting into the hands of the bankrupt, and thereby enabled the money to be paid over to the trustee in bankruptcy. It is also said that, by his carrying on the business as he did for a time, again some benefit resulted to the creditors. With regard to those matters, it may be that the general body of creditors have to some extent benefited, but I am not satisfied that that is so. I have no evidence before me that the bankrupt would have collected these debts, and so diverted them from the trustee in bankruptcy. I have no evidence that there has been any real benefit to the

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general body of creditors by reason of the action of the respondent. I do feel some little sympathy with the respondent, merely because it is very hard lines on anyone who expends money for somebody else and has eventually to bear the costs out of his own pocket, but the answer to all that is: “You, the respondent, should not have come in and done what you did, in the circumstances of this case, until you were satisfied that the deed under which you purported to act was going to be affirmed by the general body of creditors, so that your position was secure.” Generally speaking, if a person in the position of the respondent here chooses to come in and chooses to put his hand in his pocket and expend money in the matter, he is doing it entirely at his own risk, except in a very exceptional case where the benefit which has resulted from his exertions is clearly manifest, which is not this case. In my judgment, the respondent has only himself to thank for the position in which he now finds himself. In my judgment, the proper order to make on this motion is that the respondent be ordered to pay over the money in questionnamely, £121 5s 10dand that he must pay the costs in this motion.

Order for payment over of £121 5s 10d and costs.

Solicitors: Zeffertt & Heard (for the applicant); McKenna & Co (for the respondent).

F Honig Esq   Barrister.


Hemerleers-Shenley v The Amazone, Re The Amazone

[1940] 1 All ER 269


Categories:        CONSTITUTIONAL; Other Constitutional        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        14 DECEMBER 1939        


Constitutional Law Diplomatic privilege Immunity from legal process Nature and extent of immunity of assistant military attaché Diplomatic Privileges Act 1708 (c 12), s 3.

The plaintiff was the wife of the defendant, the assistant military attaché to the Belgian Embassy. She put him in funds to enable him to buy a yacht, the Amazone, and he was registered as the proprietor of it. Later, she contended that she was the owner of the yacht, and issued a writ to have possession of it decreed to her. The defendant moved to have the writ set aside on the ground of diplomatic privilege. It was contended by the plaintiff that, because the defendants name was included in the list prepared under the Diplomatic Privileges Act 1708, he could show diplomatic privilege only under that Act, and that by s 3 of the Act he could claim protection only after he had shown that the yacht was actually his property, a matter which could only be determined after the action had been heard and determined:

Held (i) the defendant was a diplomatic agent accredited to the Crown by a foreign state, and hence was entitled at common law to immunity from legal process.

(ii) this immunity was not affected by the Diplomatic Privileges Act 1708, which is confirmatory of, and does not supersede, the common law.

Notes

The question here discussed is of importance, since, if the attaché obtained his privilege only under the Act of 1708, it might be that he could prove his claim to it only after the fact that the goods were his had been established. This difficulty, however, does not arise, since it is held that that Act does not exhaustively define the nature of diplomatic privilege, but is only confirmatory of the common law.

As to Diplomatic Officers, see Halsbury (Hailsham Edn), Vol 1, pp 29, 30, para 31; and for Cases, see Digest, Vol 11, pp 536541, Nos 390453.

Cases referred to

Parkinson v Potter (1885) 16 QBD 152; 11 Digest 538, 409, 55 LJQB 153, 53 LT 818.

Engelke v Musmann [1928] AC 433; Digest Supp, 97 LJKB 789, 139 LT 586, revsg [1928] 1 KB 90.

Magdalena Steam Navigation Co v Martin (1859) 2 E & E 94; 11 Digest 536, 391, 28 LJQB 310, 34 LTOS 30.

Interlocutory Appeal

Interlocutory appeal by the plaintiff from a judgment of Langton J, dated 8 May 1939. The plaintiff claimed possession of the Amazone, and the defendant pleaded diplomatic immunity. The Foreign Office certified that the plaintiffs husband had been received as assistant military attaché to the Belgian Embassy. The facts are fully set out in the judgment of Slesser LJ.

G St C Pilcher KC and Owen L Bateson for the appellant.

H G Willmer KC and Guy N W Boyes (for J V Naisby on war service) for the respondent.

Pilcher KC: The immunity enjoyed by a sovereign state differs in quality and extent from that enjoyed by an ambassador and his suite. The immunity of the state is based on common law and the comity of

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nations. That of the ambassador derives exclusively from the Diplomatic Privileges Act 1708, and is limited by its wording. The statute will protect the respondent only if he can prove ownership of the goods the subject of the action.

Willmer KC was not called upon in reply.

G St C Pilcher KC and Owen L Bateson for the appellant.

H G Willmer KC and Guy N W Boyes (for J V Naisby on war service) for the respondent.

14 December 1939. The following judgments were delivered.

SLESSER LJ. The plaintiff is the wife of a gentleman who at all material times was the assistant military attaché to the Belgian Embassy. It appears from the evidence on affidavit that she was a very wealthy woman, and from time to time she assisted her husband and enabled him to live in that state of life which they thought appropriate. Among other things, it appears that he was put financially into a position to order Messrs Thornycroft to construct a yacht, the Amazone. This boat was built apparently entirely to the orders of Commandant Hemeleers-Shenley. He discharged, so far as regards Messrs Thornycroft, any financial liabilities which arose from the building of the boat, and his name appears in the register as the proprietor of the boat. Nevertheless, disputes having unfortunately arisen between the husband and wife, the wife contends that she is the owner of the boat. By her writ, dated 30 March 1939, she claims, as sole owner of the Amazone, to have possession decreed to her of the vessel.

The judge has come to the conclusion that the possession of this boat is now in the husband, and, so far as that matter is concerned, I think that the judge was right in coming to that conclusion. Indeed, it appears to be conceded by the affidavits filed on behalf of the plaintiff, and it is so stated in the affidavit of the husband. What is said, however, is that the husband is immune from being impleaded in this action to test whether or not he is the owner of this vessel and entitled to possession, by reason of the fact that, as is stated by the Foreign Office, he possesses diplomatic privilege. It is said by counsel for the appellant that the certificate of diplomatic privilege, having stated that the defendant is assistant military attaché, goes on to say that his name has been included in the list prepared under the Diplomatic Privileges Act 1708, and it is argued that, by reason of the facts that his name appears in that list and that there is no statement by the Foreign Office beyond that, if in fact he cannot show diplomatic immunity under that statute, he cannot resist these proceedings.

In my view, however, that is to put entirely too narrow a construction upon the certificate of diplomatic privilege of the Foreign Office. True it is that his name may be included in that list, but I read this certificate as informing the court, as it does state, that he is the assistant military attaché, and that he is a person having diplomatic privilege, not only under the statute, but also under the common lawsuch privilege as would normally attach to an assistant military attaché.

What is stated by counsel for the appellant is this. He draws attention to the Diplomatic Privileges Act 1708, and says that, if reliance is to be

Page 271 of [1940] 1 All ER 269

placed upon that statute, then the language of s 3 is not sufficient to enable the respondent here to avail himself of its protection unless he can show that the goods referred to in the action are actually hisa matter which can only be determined after the action has been heard and determined. The statute first recites as follows:

Whereas several turbulent and disorderly persons having in a most outrageous manner insulted the person of his Excellency Andrew Artemonowitz Mattueof, Ambassador Extraordinary of his Czarish Majesty …

Then in s 3 appear these words:

And to prevent the like insolencies for the future, be it further declared by the authority aforesaid, that all writs and processes that shall at any time hereafter be sued forth or prosecuted, whereby the person of any ambassador, or other public minister of any foreign prince or state, authorised and received as such by Her Majesty, her heirs or successors, or the domestic, or domestic servant of any such ambassador, or other public minister, may be arrested or imprisoned, or his or their goods or chattels may be distrained, seized, or attached, shall be deemed and adjudged to be utterly null and void to all intents, constructions, and purposes whatsoever.

Counsel for the appellant says that it has not yet been established that these are the goods or chattels of the defendant, and, therefore, that the question whether or not they may be “distrained, seized or attached”matters prohibited by the statutecannot be said necessarily to affect this husband as a diplomatic servant until that matter has been litigated.

It is clear, I think, and it has been stated very clearly in earlier casesit is not necessary to state it againthat this was merely in the nature of a penal statute, as the preamble says, to deal with the persons who do the kind of things struck at by the preamble. S 4, for example, provides for punishment of attorneys who seek to enforce process, and says that they shall suffer:

… such pains, penalties, and corporal punishment, as the said Lord Chancellor, Lord Keeper, and the said Chief Justices, or any two of them, shall judge fit to be imposed and inflicted.

I do not know that any attorney has ever been corporally punished under this statute for such proceedings. It may be that, in a certain view, the attorneys in this case are in peril of receiving such punishment, but we have not to adjudicate upon that point.

This question in substance has already been considered, and, I think, decided, in Parkinson v Potter, in which it is assumedand earlier cases have said the same thingthat the Diplomatic Privileges Act 1708, is by no means exhaustive of the common law dealing with diplomatic immunity. In that case, an action was brought on a lease against an attaché of a foreign embassy, and it was argued, rather as it is argued here, that the language of the statute was not satisfied because it was not shown that the goods were the property of the person seeking the diplomatic immunity, and that in the Diplomatic Privileges Act 1708, there is no mention of an attaché, which is perfectly true. It deals with the ambassador and his domestic servants. However, Mathew J, disposing of that argument, says, at p 157:

Then it was urged that, assuming that De Basto was an attaché, it did not follow that he was within the privilege of the embassy; and our attention was

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called to the provisions of the Diplomatic Privileges Act, 1708, s. 3, which only mentions the ambassador and his domestic servants. But it appears from the authorities that the privilege of the embassy is recognised by the common law of England as forming a part of international law, and according to that law, it is clear that all persons associated in the performance of the duties of the embassy are privileged, and that an attaché is within that privilege.

That being so, I ask myself what the privilege is, quite apart from the Diplomatic Privileges Act 1708, and how far it extends. I think that all the textbooks and authorities agree, and I do not think that it is necessary to give any very copious citations. So far as textbooks are concerned, I will content myself with quoting Diceys Conflict of Laws (5th Edn), p 196:

An ambassador or other diplomatic agent accredited to the Crown by a foreign state cannot, at any rate without his sovereigns consent, be made defendant here in an action either for breach of contract or, it would seem, for tort, nor can his property be seized.

There is nothing, I think, in any of the authorities to throw doubt upon that proposition except an early statement in Cokes Institutes, which qualifies the immunity of the ambassador in a way with which everyone has disagreed ever since.

Finally, I may mention the observations of Lord Warrington of Clyffe in Engelke v Musmann, at p 458:

I have also thought it unnecessary to say anything about the Diplomatic Privileges Act, 1708. It is well settled that the questions we have been discussing do not depend on the statute, but are principles of common law having their origin in the idea of the comity of nations.

Counsel for the appellant is prepared to admit that, once we may travel outside the Diplomatic Privileges Act 1708, subject to the doubt expressed as to whether this person is a diplomatic agent otherwise than for the purpose of the statute, there would be here a complete protection. In this action, there can be no doubt at all that this husband, Commandant Hemeleers-Shenley, who is impleaded, is a person coming within the privilege of the embassy. Once that is established, it follows from all the authorities, from Grotius downwards, that he may claim his immunity. In my view, the judge was right in coming to the conclusion to which he did come. I myself express no opinion as to whether or not the respondent is protected under the Diplomatic Privileges Act 1708. It is sufficient for my purpose to say that he can derive his protection from the common law. I think, therefore, that this appeal fails.

MACKINNON LJ. I agree. Counsel for the appellant has argued this appeal very gallantly and at great length. The argument is that, inasmuch as the words of s 3 of the Act do not exactly fit the nature of the present proceedings, therefore they cannot be stopped on the application of the respondent. However, it is perfectly natural that s 3 of the Act should have referred to the matter in the way in which it does, because at that time the normal way of commencing any civil proceeding was by arrest, by civil process or by distraint. It is perfectly

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plain under the authorities that the Act was not meant to define exhaustively the nature of the diplomatic privilege, but was merely confirmatory of the common law. Slesser LJ has referred to several authorities in which that has been laid down. There is only one further case which I think is equally clear and might be referred to, and that is Magdalena Steam Navigation Co v Martin. In that case, a similar question arose, and a kindred argument upon the terms of the Diplomatic Privileges Act 1708 was addressed to the court. Lord Campbell CJ deals with that and deals with the authorities, and says, at p 114:

Reference was frequently made during the argument to the Diplomatic Privileges Act, 1708; but it can be of no service to the plaintiffs.

Then he discusses that, and says, at p 115:

At any rate, it never was intended by this statute to abridge the immunity which the law of nations gives to ambassadors, that they shall not be impleaded in the courts of the country to which they are accredited.

That is repeated in the last sentence of his judgment, at pp 115, 116:

It certainly has not hitherto been expressly decided that a public minister duly accredited to the Queen by a foreign state is privileged from all liability to be sued here in civil actions; but we think that this follows from well-established principles, and we give judgment for the defendant.

I agree with that. I think that this appeal is quite unfounded, and, I was going to say, quite a hopeless one, and that it should be dismissed with costs.

GODDARD LJ. I agree. It is well-established that it is the common law of this country that not only ambassadors but also members of their suites are exempt from judicial process. The Diplomatic Privileges Act 1708, is declaratory in ss 1, 2 and 3, and it really does not achieve any addition to the law by its subsequent sections, because s 4 imposes penalties on attorneys, solicitors, sheriffs, bailiffs and other ministers of justice who issue or execute writs against the person of the ambassador or his suite. Then s 5 provides that persons subject to the bankruptcy laws who put themselves into the service of any such ambassador or public ministerthat is to say, tradersshall not take any manner of benefit by the Act. That may or may not mean that, if a trader attaches himself to the suite of an ambassador, he shall not have any immunity, but I think that it will certainly prevent s 4 from having any effect, so that a solicitor who sues a person within the description of s 5 will not be liable to any pains and penalties under s 4. S 5 gives immunity also from the penalties if the solicitor sues a person who is not on what is commonly called the Diplomatic List. It provides as follows:

… no person shall be proceeded against as having arrested the servant of an ambassador or public minister, by virtue of this Act, unless the name of such servant be first registered in the office of one of the principal secretaries of state, and by such secretary transmitted to the sheriffs of London and Middlesex …

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This is a striking instance of the inaccuracy of a marginal note, because the marginal note is as follows:

No merchant &c. to have any benefit of this Act. Nor the servant of an ambassador, unless his name be registered &c.

That is not what the section provides. It says that solicitors and others are not to be liable to penalties for proceeding against servants of an ambassador who are not registered, and it has since been held that, though a servant is not registered, he may yet have diplomatic privilege. Also, I agree with MacKinnon LJ, that in the time of Queen Anne all common law actions which were started in the Queens Bench in Middlesex by a writ of latitat, or in the Common Pleas by a writ of capias, or by similar processes in the Court of Exchequer, proceeded for the arrest of the defendant, or, if that could not be effected, by a writ of distringas on his goods to compel him to put in an appearance, and, therefore, that those common law processes were contemplated by s 3 was no more than logical. I agree that this appeal should be dismissed.

Appeal dismissed with costs. Vessel ordered to be released.

Solicitors: Janson Cobb Pearson & Co (for the appellant); Stephenson Harwood & Tatham (for the respondent).

Derek H Kitchin Esq   Barrister.


Gambling v Benham

[1940] 1 All ER 275


Categories:        TORTS; Negligence: QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        4 DECEMBER 1939        


Negligence Damages Personal injuries Loss of expectation of life Child aged 2½ years Amount of assessment.

A boy of the age of two-and-a-half years was killed in a road accident. The damages for loss of expectation of life were assessed at £1,200:

Held (per Slesser and MacKinnon LJJ, Goddard LJ dissenting) the damages given were not so different from those in the reported decisions that they should be distrubed or re-assessed in the Court of Appeal.

(per Goddard LJ): the damages should have been reduced to £350.

Notes

This decision, if the case is taken to the House of Lords, can be of ephemeral interest only, but it seems clear that the divergence of view here expressed is a matter of the first importance, not only to litigants whose cases come before the courts for decision, but also to those who settle such claims out of court.

As to Damages for Personal Injuries, see Halsbury (Hailsham Edn), Vol 23, pp 724, 725, para 1016; and for Cases, see Digest, Vol 36, pp 125, 126, Nos 831838.

Cases referred to

Flint v Lovell [1935] 1 KB 354; Digest Supp, 104 LJKB 199, 152 LT 231.

Bailey v Howard [1939] 1 KB 453, [1938] 4 All ER 827; Digest Supp, 108 LJKB 182, 160 LT 87.

Rose v Ford [1937] AC 826, [1937] 3 All ER 359; Digest Supp, 106 LJKB 576, 157 LT 174.

Shepherd v Hunter [1938] 2 All ER 587; Digest Supp.

The Aizkarai Mendi [1938] P 263, [1938] 3 All ER 483; Digest Supp, 107 LJP 141, 159 LT 490.

Owen v Sykes [1936] 1 KB 192; Digest Supp, 105 LJKB 32, 154 LT 82.

Halliday (or Reid) v Lanarkshire Traction Co [1934] SC 79.

Ellis v Raine [1939] 2 KB 180, [1939] 1 All ER 104; Digest Supp, 108 LJKB 292, 161 LT 234.

Appeal

Appeal by the defendant from a judgment of Asquith J, given at the Winchester Assizes, on 21 July 1939. The facts are fully set out in the judgment of Slesser LJ.

N L C Macaskie KC and Humfrey H Edmunds for the appellant.

Cecil R Havers KC and Malcolm McGougan for the respondent.

Macaskie KC: The judge was wrong in ignoring the age of the deceased. An infant of this age falls within the category of special cases, mentioned by Lord Wright, in Rose v Ford, of persons whose life is worth less than the normal amount on account of some disadvantage, such as imbecility or incurable invalidism. A young child cannot consciously appreciate the value of his life. Moreover, his future is uncertain. His life may bring disappointment and privation equally with good fortune and advantage. His expectation of life cannot, therefore, be as valuable as that of a young man entering on a profession,

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who has a certain expectation of the good things of life. The damage suffered is loss of the good things, and not of the span, of life, and the expectation of these for a young infant is highly uncertain. It is also undesirable that judges should vary in their assessment of the value of expectation of life.

Havers KC: When hearing an appeal against an award of damages by a judge sitting without a jury, this court does not interfere with the award, even if it is different from that which this court would have made, unless it concludes that the judge acted upon a wrong principle of law, or that his estimate of the damages to which the plaintiff was entitled was entirely erroneous: Flint v Lovell and Owen v Sykes. In this case, the only error in law which is suggested is that the judge misdirected himself on the meaning to be attached to the dictum of Lord Wright, in Rose v Ford, where Lord Wright included an infant within a special category of persons. In Shepherd v Hunter, Slesser LJ discusses this dictum, and indicates that, though it may be necessary to make allowance for the greater risks to which a very young infant is exposed, it is also necessary to take into consideration the infants greater expectation of life. It is apparent from the judgment of Asquith J that he gave full weight to the special risks to which very young infants are exposed, and, therefore, in assessing damages, he did not follow a wrong principle of law. With regard to the amount, in Bailey v Howard this court refused to disturb an award of £1,000 for loss of expectation of life to a child of 3 years of age, and both in that case and in Shepherd v Hunter MacKinnon LJ expressed the difficulty he felt in assessing damages in such a case. If this court were unable to disturb an award of £1,000 to the estate of a child of 3 years of age, it is equally unable to disturb an award of £1,200 to the estate of a child of 2½ years of age.

N L C Macaskie KC and Humfrey H Edmunds for the appellant.

Cecil R Havers KC and Malcolm McGougan for the respondent.

4 December 1939. The following judgments were delivered.

SLESSER LJ. This case raises in a new form the problem which has been many times before this courtnamely, whether the judge in this case, who was not assisted by a jury, gave a sum to an administrator of the estate of the deceased infant, Wallace Archibald Gambling, which was so wrong an estimate of the damage suffered by the infant as to justify this court in interfering with the judgment. The child in question was killed through what is admitted to be the negligence of the appellant, and was a child of very tender years. Indeed, at the time of the death the child was, I think, some 2½ years of age. The damages which were awarded to the administrator in respect of the loss of expectation of life of this child under the Law Reform (Miscellaneous Provisions) Act 1934, were £1,200. Damage was not given on any other basis, except a small sum in respect of funeral expenses.

The grounds on which this court will interfere in such a case have been stated more than once to follow the criterion laid down by Greer LJ in Flint v Lovell, at p 360. There is really no suggestion

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that the judge here acted upon any real principle of law, and, if the matter is to be considered at all in relation to the observations of Greer LJ, I think that it must be upon the ground that the amount awarded was so extremely high as to make it, in the judgment of this court, an entirely erroneous estimate of the damages to which the plaintiff is entitled. In order to come to any conclusion on that matter, one has, I think, to some extent to be guided by what have been considered in similar circumstances to be estimates of damages which ought not to be disturbed by this court. There has been cited to us Bailey v Howard, a case of an infant of 3 years, where the sum of £1,000 in respect of the loss of expectation of life was considered by this court to be a sum which should not be disturbed. The only difference between the facts of that case and those of this case is that here the child was 2½ years of age, whereas the child killed in Bailey v Howard was 3 years of age, and the sum awarded was £1,000 in that case and £1,200 in this case. In Bailey v Howard, Scott LJ says, at p 456 ([1938] 4 All ER, at p 830), that awards of damages should, as I understand it, be disturbed in such a case as this only on the ground that they are hopelessly inadequate or excessive. To use other language, that is very much the test which was applied by Greer LJ, in Flint v Lovell, where £1,000 had been awarded to a person then living, who was an elderly man of some 70 years of age.

In this case, I find it extremely difficult to say that the award of £1,200 is so excessive as to justify us in saying it is hopelessly excessive or altogether improper, so as to justify this court in interfering. The deceased person here was an infant, a very young child, and some discussion has taken place on a matter which, I think, can be finally set at rest only in the highest tribunalnamely, as to what special treatment is to be accorded to a child of very tender years. It is quite true that in Rose v Ford Lord Wright, who is the only member of the House of Lords who dealt with the question of infancyit was there obiter, as the injured person was a girl of 19speaks of certain special cases, at p 850 ([1937] 3 All ER, at p 373):

… such as that of an infant or an imbecile or an incurable invalid or a person involved in hopeless difficulties. The judge or jury must do the best they can in the circumstances in this as in other cases.

I do not wish to repeat my own view of what the opinion of Lord Wright there means, which I have already expressed in Shepherd v Hunter, but to my mind, whatever else is true, the fact emerges that an infant is not in the same class of case as are some of the other persons mentioned by Lord Wright, the imbecile and the person in distressed circumstances. It may well be, and it is a view which I expressed in Shepherd v Hunter, that all that is meant is that, if the view expressed by Langton J, in the Aizkarai Mendinamely, that the age factor can be taken into account, and that it follows that, the expectation of life of young men exceeding that of older men, other things being equal, they would receive

Page 278 of [1940] 1 All ER 275

greater compensation if they were killed, or rather, the estate would receive itis right, then it may be that all that Lord Wright means is that one is not to apply any such simple test when dealing with a young child. However that may be, I think that it is impossible to say that a child of 2½ years of age, who, according to the evidence has an expectation of life of some 55 years, is receiving too much compensation, in the sense that we should be called upon to disturb the amount awarded, when £1,200 is given in relation to the loss of life, which may extend over another 50 years. I find it impossible to disturb this finding, for the reasons which prevented the court from disturbing the finding of the judge and jury in Bailey v Howard. It is said that there there was a jury, whereas in the present case there is not. It seems to me, however, that, so far as regards this matter, the principles which have been accepted by this court in Owen v Sykes, expressed by Greer LJ, should be applied where the judge is sitting alone and has to estimate the damage, and that, on that view, this case cannot be distinguished from Bailey v Howard, and the mere fact that this child received £200 more, and was 6 months younger, does not so distinguish it from that authority as to make it right to say that these damages should be disturbed or re-assessed in this court. I think that this appeal fails.

MACKINNON LJ. This appeal, in the opinion of Slesser LJ, should be dismissed. I rather gather that the opinion of Goddard LJ is that it should be allowed. I am very much tempted to say that I agree with both of them, but that, I fear, is a course not open to me. A good many cases have been cited to us in which this most obscure matter has been debated. The only sentiment on this topic to which I find I have been committed in those cases is that I have said that I have no idea of the proper basis on which to estimate damages for the loss of expectation of life of anyone, at any age, and I have been, and am, unable to find that any guidance has been provided by the House of Lords, or any indication of the principles which I ought to apply in order to estimate what is right. I am glad to think that I have never had to face the problem of estimating a sum as a judge of first instance. In the Court of Appeal, I see that I expressed a hopeless inability to understand the problem in one case where £90 was given and an appeal was brought saying that it was too small. I said that I could not agree that it was too small, because I did not know what was the proper figure. In another case, where £1,000 was given, and there was an appeal on the ground that it was too much, I intimated the same opinion. I could not say that it was too much, because I did not know what the proper figure was. Unhappily, I find myself in the same state of mind in regard to this case. The utmost at which I can arrive is that, if £1,000 was right in Rose v Ford, the case of the girl of 19 or 20 years of age, then it looks as though £1,200 for this child of 2½ years of age is too much. However, I still find myself in the position of being compelled to say that I cannot

Page 279 of [1940] 1 All ER 275

say that £1,200 is too much, because I have no idea what the proper figure is. In the result, I agree with Slesser LJ that this appeal fails.

GODDARD LJ. For myself, I would allow this appeal. Naturally, can only differ on a matter of this sort with considerable difficulty, but I have less hesitation, for the reason, and for the reason only, that I think that the sooner the attention of the legislature is called to the fact that a great divergence of judicial opinion exists on what is the proper sum to award in these cases, and the sooner we get some assistance, if it be within the power of mortal man to give assistance, on this subject from the House of Lords, the better.

I should like to say, first of all, that I have no intention whatever of departing from the cardinal principles of English law, such as stare decisis. If I thought that, in differing from Slesser and MacKinnon LJJ, I was refusing to follow cases which were binding on me, I should not do it. However, I do not think that I am. I am approaching this case, I hope, bearing in mind the principles which guide the ordering of a new trial or a reduction of damages, or an increase of damages, where those damages have been fixed by a judge, and, if the damages seem to me to be extremely high, to use an expression used by Greer LJ, in Flint v Lovell, then I think that I ought not to be afraid of expressing my opinion that the damages are excessive.

I said a word just now about the divergence of judicial opinion which there is in this case. Everyone knows that that is so. Some judges have awarded quite substantial damagesin this case, over £1,000while others have been content to award quite moderate damages, round about £200, £300 or £500, and no one has yet been able to find any particular principle which is to guide the court in dealing with these damages. I cannot help feeling that recently, at any rate, there has been a tendency for these damages to increase, exactly as Lord Roche, in Rose v Ford, foresaw that they might. He said, at pp 861, 862 ([1937] 3 All ER, at p 381):

I would add that I confess to some apprehension lest this element of damage may now assume a frequency and a prominence in litigation far greater than is warranted in fact, and becoming common form may result in the inflation of damages in undeserving cases, or, more probably perhaps, may become stale and ridiculous to the detriment of real and deserving cases, such as the present.

Of course, bearing in mind that I am differing from a judge so careful as Asquith J, I should not for a moment describe this case as an undeserving case, but it does seem to me, and I cannot help saying it, that damages of £1,200 in a case of this sort are not only extremely high, but are also, in my view, excessive. One difficulty with which one is faced in these cases is this. One knows that, in trying accident cases, one frequently has to apply ones mind to the task of compensating for pain and suffering. Under the Fatal Accidents Act, one would not have to consider pain and suffering, but one may have to now. At any rate, in non-fatal cases one has to apply ones mind to that problem, and I can

Page 280 of [1940] 1 All ER 275

well understand its being said that it is no more difficult to award damages for pain and suffering because one cannot measure them than it is to award damages for loss of expectation of life. However, there is, it seems to me, this great difference. When one is dealing with cases of loss of expectation of life, stripped of all technicalities, one is giving a solatium, not to the person who is injured, for the person who is injured is dead, but nominally to the executor or administrator who is suing. When a person is injured, one has to think of the extent of the injury, and give a sum of money as a solatium to the person who has suffered the injury. In this particular case, one is in effect, though, I agree, not in theory, merely giving a solatium to the parent for the loss of the child. That is a perfectly impossible sum to estimate. One must try to estimate it by considering what the value of the childs life was to the child. There again one is met with an impossible proposition, because a persons life cannot be measured by money or by any standard applicable to human affairs. What one is really doing, and what I think both Lord Sands in Halliday (or Reid) v Lanarkshire Traction Co, cited with approval in the House of Lords in Rose v Ford, and Lord Wright and Lord Roche meant, was that one must add something to the damages, or give some solatium which ought to be of a moderate amount.

Now comes the question as to whether the fact that the child is an infant, by which I mean a baby, should be taken into account. I confess that for myself I read the passage which has been cited from the opinion of Lord Wright as meaning that one should take that into account by way of minimising the damages, because, when I look at the words which immediately precede the passage where he is saying that the consideration is “what is fair and moderate in view of all the uncertainties and contingencies of human life,” for myself I should read that as meaning that, where one is dealing with a case of a baby, or a very young child, it is far more difficult to say what his chances of the advantages of human life are than in the case of an adult, not necessarily of full age, but grown up and embarking, or about to embark, on life, having finished his education and being about to start in some definite calling. With an infant, one does not know that its parents will live, or that it will have any education. It is far more exposed to certain dangers, and so forth, and it is altogether far more difficult with a baby of a few months, or even a few years, it seems to me, to come to a fair sum than is the case with another person. Certainly I should feel that in such a case any estimate based upon the probable length of life was entirely fallacious. Yet that is one of the very few guides, if it be a guide, which has been given to the court as to the principles upon which one is to assess damages. In truth, there is no principle, as it seems to me, and it seems to me that there can be no principle, beyond the principle that one is to give what is fair and moderate and to use common sense. I find that Macnaghten J, recently in the case of a child of 4 years of age, applying those tests, fixed the sum of £350 as a fair sum, and that is

Page 281 of [1940] 1 All ER 275

just about the sum which I myself would give. It may be too low. Double it, and one is still £500 off the £1,200 given in this case. Again, as I say, I do not know what principle to apply. It must be largely a matter of impression, and I am bound to say that £1,200 does strike me as excessive in such a case as this.

I ought to say one other word. I am well aware that in Bailey v Howard this court refused to interfere with the verdict of the jury, who awarded £1,000 to a child not very much older than this one. I am equally well aware that in Shepherd v Hunter this court did interfere where a jury, which Lord Roche in Rose v Ford said was particularly the tribunal to assess damages in this class of case, had awarded £90. If the court, in the circumstances of the case, felt that the rules which apply to interfering with the sum found by a jury prevented them from questioning the amount in Bailey v Howard, I should be the last to differ from them. However, I do not think that this court has laid down by Bailey v Howard or by Shepherd v Hunter any principle or rule. They did not mean to say, as MacKinnon LJ and I said in Ellis v Raine, that we did not regard Shepherd v Hunter as saying that one must give more than £90. I do not think that in Bailey v Howard the court said that in no case would they interfere with a verdict for £1,000, but very different considerations from those which apply to an award by a judge apply to the verdict of a jury. I merely mention those cases to show that I have not overlooked them. I hope that, by differing, I am in no way infringing the rule of stare decisis. I feel that the sum of £350 would have been enough to give in such a case as this, and, in my opinion, the appeal should be allowed.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: C Howe Browne (for the appellant); Mackrell Maton Godlee & Quincey, agents for Talbot & Davies, Andover (for the respondent).

Derek H Kitchin Esq   Barrister.

Mills Conduit Investments Ltd v Tattersall

[1940] 1 All ER 281


Categories:        BANKING AND FINANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        DU PARCQ LJ SITTING AS AN ADDITIONAL JUDGE        

Hearing Date(s):        29 NOVEMBER 1939        


Moneylending Memorandum of loan agreement Loan secured by promissory note Ambiguity in stating effect of promissory note Promissory note only consistent with one view of memorandum Moneylenders Act 1927 (c 21), s 6.

The memorandum of a moneylenders contract stated that £100 was advanced on a promissory note payable three months after date, and that, in case of default, “the same” should bear interest in respect of principal or interest at simple interest on that sum at 120 per cent per annum, and that all payments on account of the advance and interest should be applied in payment of interest due to the date of such payment and then of principal. The promissory note stated that, in the

Page 282 of [1940] 1 All ER 281

event of default of payment, the balance and interest remaining due, whether in respect of principal or interest, should bear interest on that sum at 120 per cent per annum. It was contended that the memorandum was not in conformity with the statutory requirements on account of the ambiguity of the words “the same”:

Held the memorandum was capable of two meanings, but, as one of them was as open to the reader as the other, and as that one was consistent with the terms of the promissory note and correctly represented the true agreement between the parties, the memorandum was a sufficient compliance with the Act.

Notes

Generally speaking, ambiguity would be fatal to a memorandum; but here the ambiguity is merely in stating the effect of the promissory note, and such ambiguity as there is is only a possible misreading of the memorandum. The correct reading is shown to be equally open to the borrower or any other reader of the memorandum, and one reading is quite consistent with the terms of the promissory note, while the other, having regard to the note, is quite impossible.

As to Sufficiency of Memorandum, see Halsbury (Hailsham Edn), Vol 23, pp 190, 191, para 280; and for Cases, see Digest, Supp, Money and Moneylending, Nos 353a353y.

Case referred to

Hoare v Adam Smith (London) Ltd [1938] 4 All ER 283; Digest Supp.

Action

Action by a moneylender claiming the sum due under a moneylending contract, the defence being that the memorandum was ambiguous and not in conformity with the statutory requirements. The facts are fully stated in the judgment.

R F Levy KC and Cyril Salmon for the plaintiffs.

Leonard Pearl for the defendant.

29 November 1939. The following judgment was delivered.

DU PARCQ LJ. This is an action against the borrower brought by a company who carry on business as moneylenders, and counsel for the defendant has put to me very clearly the point on which he really relies, and that point arises on the memorandum. I need not read the material sections. S 6 of the Act says that there must be a note or memorandum, and by sub-s (2) states that that note or memorandum must contain all the terms of the contract. One of the particular terms it must contain is the interest charged in terms of a rate per cent per annum. It is quite clear that, if that section is not complied with, the moneylender cannot recover. In this case, somebody who I should think knew his business very well has settled the terms of the memorandum and of the promissory note. The documents were printed, and they were attached to one another. In fact, they formed one document. It is perforated, so that the promissory note can be easily detached from the note or memorandum. When this money came to be lent, however, some bold person in the employ of the moneylending company gave instructions to a typist to strike out a great deal of this carefully settled document and copy in new words, with the not surprising result that rather a hash has been made of the two documents, and counsel for the defendant quite rightly says that this is not as clear as it might be. To

Page 283 of [1940] 1 All ER 281

that extent, I agree with him. Then he says that in truth the memorandum does not set out the true contract, because, if one compares it with the promissory note, one finds that one says one thing and the other something else. I agree with counsel for the defendant that it is no use saying the memorandum incorporates the promissory note if in fact, when one looks at the promissory note, it says something different from what is said in the memorandum. That will not do. One cannot correct the memorandum by looking at the promissory note. One may, I think, incorporate the terms of one document by reference into the memorandum, provided that one gives the borrower a copy of the document so incorporated with the copy of the memorandum. One may incorporate, for instance, the terms of a bill of sale, as I held, in Hoare v Adam Smith (London) Ltd, following a decision of the Court of Appeal. Counsel for the defendant makes this point. He says that, if one looks at the memorandum in this curious form, it says that 120 per cent is to be paid as interest, and it goes on: “and in case of default the same shall bear interest.” It is not very clear whether “the same” means the promissory note or the £100 which was lent, but I do not know that it matters very much. The memorandum continues as follows:

… in respect of principal or interest at simple interest on that sum at the rate of 120 per cent. per annum.

Counsel for the defendant says that that is either ambiguous or clearly means that the moneylender may charge interest at the agreed rate either on the principal or on the interest, but not on bothin respect of principal, if he likes, or of interest, if he likes, but not of both. If that is what it means, counsel for the defendant goes on to say, the promissory note says something quite different. If I thought that that was so, I should agree with counsel for the defendant, because the borrower might read through the memorandum and not look at the promissory note. It does not warn him that he must look at the promissory note. It does not omit terms, on the face of it, which he will find in the promissory note, and so send him to the promissory note to see what they are. The question is whether, on a fair reading of the memorandum, it does mean the same thing as the promissory note. Although it is quite true that the borrower is not, as I say, referred to the promissory note, still I am disposed to think that, if there is in the memorandum a phrase which may, on the face of it, possibly appear ambiguous, it may well be that, if, when one looks at the promissory note, one finds in it a term quite consistent with one view of the statement in the memorandum, and quite inconsistent with the other view of it, the memorandum may be regarded as a true statement of the contract. In other words, if a contract is arrived at between the parties and a memorandum which is possibly susceptible of two meanings is given to the borrower, then, if one of those meanings is at least as open to the reader as is the other, and if it correctly represents the agree-

Page 284 of [1940] 1 All ER 281

ment, then I do not think that it would be right to say that the memorandum must be regarded as a bad one because one can extract from it another possible meaning which does not truly represent the agreement.

I think the fair way of looking at this case is this. The borrower must know that, if he does not pay principal and interest, there will be outstanding sums of both principal and interest, on which it would not be surprising to find that the lender would want to be paid interest, and I think that, if I had read thisand I do not know that I ought to suppose that my knowledge of the Moneylenders Act is better than that of those who borrow, for the defendant had had some experience of itI should have understood it as meaning that the moneylender should be entitled to charge, in respect of principal or interest, interest at the rate of 120 per cent per annum, in the sense that he could charge interest calculated at that rate whether it was being paid in respect of principal or in respect of interest. It is a perfectly possible meaning of the words, and I am bound to say that I think the suggestion of counsel for the defendant that it should be read as meaning that the moneylender can charge interest on the principal or on the interest at his option, but not on both, is really a much more strained interpretation of the words than is the other. It seems to me, therefore, that, so far as there is any ambiguity (and, in a sense, there is some ambiguity), anybody knowing a little about the Moneylenders Act, and knowing something about the process of borrowing and lending money, would at once think: “This means that, on whichever I am being charged, and I may be charged on either, I shall be charged at the rate of 120 per cent. per annum.” When one gets as far as that, I do not think that it is impossible to pray in aid the attached document, the promissory note itself, which, if there is any ambiguity, completely resolves it. I therefore think that this point fails, although counsel for the defendant stated it very clearly and skilfully, and there must be judgment for the plaintiffs for the amount claimed, which is £25 in addition to the amount of the writ (whatever that comes to) with costs.

Judgment for the plaintiffs for £154 19s 3d with costs.

Solicitors: Woolfe & Woolfe (for the plaintiffs); J F B Satchell (for the defendant).

C St J Nicholson Esq   Barrister.


Rubie v Faulkner

[1940] 1 All ER 285


Categories:        CRIMINAL; Road Traffic        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HILBERY AND HALLETT JJ        

Hearing Date(s):        19 JANUARY 1940        


Street Traffic Motor vehicle Learner-driver “L” sign on vehicle Duty of supervisor Road Traffic Act 1930 (c 43), s 5(3) Motor Vehicles (Driving Licenses) Regulations 1937 (SR & O 1937, No 438), reg 16(3)(a), (c).

The owner of a motor vehicle, who held a provisional licence issued to him under the Road Traffic Act 1930, s 5(3), and whose vehicle displayed the “L” sign in accordance with the Motor Vehicles (Driving Licences) Regulations 1937, reg 16(3)(c), was driving it on a certain road. With him in the vehicle as a “supervisor,” in accordance with reg 16(3)(a) of the regulations, was the appellant, who, as a competent driver, had undertaken to act in that capacity at the owners request. On a bend of the road the owner drew out from behind and attempted to overtake a horse and cart, but, owing to the bend, he was unable to see a motor lorry which was approaching from the opposite direction on its proper side of the road. The engine of his motor van stopped, leaving the vehicle well over the centre of the road, and a collision took place. The appellant was sitting in the passengers seat on the owners lefthand side, and saw the horse and cart and the white line in the centre of the road, and he was in a position to see that the owner was about to overtake the horse and cart on the bend, so taking his vehicle to the off side of the white line. The justices convicted the owner of driving without due care and attention, and the appellant of aiding and abetting the commission of the offence. Thereupon the appellant brought this appeal:

Held the regulation provides that a learner-driver shall be allowed to drive a motor vehicle on the highway only on condition that he is under the supervision of an experienced driver, and it was thus open to the justices to find that, as the appellant had remained passive when the circumstances demanded that he should be active, the regulation had not been complied with, and the appellant was rightly convicted.

Notes

It may be thought that aiding and abetting postulates an active participation in the offence, but it is here shown that a policy of inactivity, where activity is required, can lead to a successful prosecution.

As to Learner-drivers, see Halsbury (Hailsham Edn), Vol 31, pp 781, 782, paras 12201222; and for Case, see Digest, Supp, Street and Aerial Traffic, No 188b.

Appeal

Appeal by the person supervising the learner-driver by way of case stated from a decision of justices sitting at Saffron Walden in Essex. The facts are fully set out in the judgment of Lord Hewart LCJ.

C B Marriott KC and Laurence Vine for the appellant.

George Pollock for the respondent.

19 January 1940. The following judgments were delivered.

LORD HEWART LCJ. This is a case stated by justices for the county of Essex sitting at Saffron Walden. It arises from an information preferred by the respondent, the superintendent of police, against the appellant for that on a day in March 1939, the appellant unlawfully did aid, abet, counsel and procure contrary to the Summary Jurisdiction Act 1848, s 5, one Percy Evans James to commit a certain offence, that is to say, unlawfully to drive a motor vehicle on a road leading from London to Newmarket without due care and attention

Page 286 of [1940] 1 All ER 285

contrary to the Road Traffic Act 1930, s 12. The justices, having heard the information and the evidence, convicted the appellant and fined him a sum of 10s. The question raised by this case is whether in so doing the justices came to a correct determination and decision in point of law.

The facts of the case are extremely simple. It is found in the case that on this day in March Percy Evans James was driving a motor vehicle, of which he was the owner, upon the road referred to, that he was at the time the holder of a provisional licence issued to him under the Road Traffic Act 1930, s 5(3), and that the vehicle displayed the appropriate distinguishing marks, as provided for by the Motor Vehicles (Driving Licences) Regulations 1937, reg 16(3)(c). In other words it was made plain that the person referred to was a learner. The case goes on to find that the appellant was present in that motor vehicle with Percy Evans James in pursuance of reg 16(3)(a) of the regulations of 1937, and:

… as a competent driver had undertaken at the request of the said Percy Evans James to act as supervisor in accordance with that regulation.

That regulation provides as follows:

(3) A provisional licence shall be granted only subject to the condition that until the holder thereof has passed the appropriate test(a) he shall, except in the case of a vehicle which is not constructed or adapted to carry more than one person, use it only when under the supervision of the holder of a licence other than a provisional licence who has been the holder of a licence for at least 2 years or has passed a test under sect. 6 of the Act of 1934, who shall be present in the vehicle with him …

That regulation clearly contemplates and provides that there must be present a person who is a supervisor, under whose supervision the holder of the provisional licence is acting, and without whose presence and supervision it would not be lawful for the holder of a provisional licence to be driving a motor vehicle upon the highway. Therefore, there are clearly contemplated both a duty and a person who is to perform that duty. The duty obviously comprises the task of supervision, and the position of the person is properly called that of a supervisor.

That being the provision of the regulations, what was it that happened here?

The said Percy Evans James on a pronounced bend where the road was 22 ft. wide with a white line in the centre, drew out from behind and attempted to overtake a horse and cart which he was following, being unable, owing to the pronounced bend, to see a motor lorry which was approaching from the opposite direction on its proper side of the road. The engine of his motor vehicle stopped, leaving his motor vehicle well over the centre of the road, and a collision occurred owing to the close proximity of the motor lorry and the fact that the engine stopped.

Then the case contains these significant words, and it is found as a fact

… that the appellant, who had been a driver of motor vehicles for 20 years, was sitting in the passenger seat on the lefthand side of the said Percy Evans James and saw the horse and cart aforesaid and the white line in the centre of the road and further was in a position to see that the said Percy Evans James was about to overtake the said horse and cart on the pronounced bend, taking the said motor vehicle to its off side of the white line.

Page 287 of [1940] 1 All ER 285

In these circumstances, Percy Evans James was convicted of driving the motor vehicle without due care and attention. Was there material upon which it was open to the justices properly to convict the present appellant as an aider and abettor? It is interesting to see the contentions raised on his behalf. It is said that he was acting in accordance with the Motor Vehicles (Driving Licences) Regulations 1937, reg 16(3)(a), and did not have physical control over the motor vehicle, it is said that there was no evidence to prove that the appellant instructed Percy Evans James to do what he did, and, finally, it is contended that the appellant had no time to correct any carelessness on the part of Percy Evans James, and, therefore, that he had committed no offence under the Summary Jurisdiction Act 1848, s 5. With regard to that series of contentions, it is interesting to see what he said and what he did. There is not a suggestion from first to last that the person who had undertaken the responsible task of supervisionresponsible vis-à-vis the public on the highwaydid or said anything at all. For all this case contains, he might just as well not have been there. In other words, there might just as well have been no supervisor, and, if there had been no supervisor, then it would not have been right for the holder of a provisional licence to be driving a vehicle upon the highway. On behalf of the respondent, it is contended that, as the appellant was acting in the capacity of supervisor, he was guilty of aiding and abetting the offence which Percy Evans James committed.

The justices, it seems to me, have expressed their opinion with perfect freedom from ambiguity, and, if I may say so, with perfect clearness. They say that, in their opinion, it was the duty of the appellant to have told Percy Evans James not to attempt to pass the horse-drawn vehicle at the place in question immediately Percy Evans James showed that he was intending to do so, and the justices were also of opinion that, by his passive conductin other words, by his completely refraining from doing or saying anything in the matter at allthe appellant aided and abetted Percy Evans James to commit the offence. It appears to be arguedI am not sure that I quite do justice to the argument which counsel for the appellant has raisedthat, in the circumstances, partly because the lapse of time was extremely brief, the appellant was not called upon to do or say anything, and that he was justified in what the justices describe as “his passive conduct.” That argument, I think, ignores the whole intention of this regulation. The only condition, or one of the conditions, upon which the holder of a provisional licence is allowed to drive a vehicle upon the road is that he shall be under the supervision of the holder of a licence other than a provisional licence who shall be a person of experience in the driving of motor vehicles. The essence of the provision is that there must be a supervisor competent to supervise, and it is only if there is such a person present that the driving of a vehicle is permitted by the holder of a provisional licence. The duty being clear on the face of the regulation,

Page 288 of [1940] 1 All ER 285

it seems to me that it is a pure question of fact for the justices to decide whether or not that duty has been performed. I am bound to say that they do not seem to have received much assistance from the appellant himself. It is inconceivable, the case being stated in the form in which it is, that he alleged that he did or said anything. He seems to have pursued a policy of complete reticence. That being so, it seems to me that it is open to the justices to find, as they did, that, by his passive conduct in circumstances in which what was required was something which was not passive, but active, he aided and abetted the offence. It is only by something of that kind that he could have discharged the duty which he had manifestly undertaken. The importance of this regulation is, of course, the possible consequences to the public who are using the highway, and, on the facts and the findings of fact in the case stated, it seems to me that the justices were quite entitled to come to the conclusion to which they did comenamely, that, by his passive conduct in circumstances in which something was needed to be done in order to fulfil the duties of a supervisor, he aided and abetted the appellant to commit this offence. In these circumstances, I think that this appeal must fail.

HILBERY J. I agree. I think that the regulations are framed to make some provision for the protection of the members of the public against the additional dangers to which they are exposed through a car being driven on the road by a driver who is still a learner, and, therefore, assumed to be not fully competent.

HALLETT J. I agree, and I desire only to make it plain that, like both the other members of the court, I base my judgment upon the consideration of the duty owed to the public as a result of this regulation. If hereafter it should be attempted to be argued in some civil action that the maxim respondeat supervisor should be added to the well-known maxim respondeat superior, it may be that different considerations will arise which will have to be dealt with by the court which hears that case.

Appeal dismissed with costs.

Solicitors: D R W Stevenson Squires & Co, Cambridge (for the appellant); E Tinsley, Chelmsford (for the respondent).

Michael Marcus Esq   Barrister.


Wimborne and Cranborne Rural District Council v East Dorset Assessment Committee

[1940] 1 All ER 289


Categories:        LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HILBERY AND HALLETT JJ        

Hearing Date(s):        18 JANUARY 1940        


Rates and Rating Agricultural hereditament Land partly used for purposes of motor-cycle track racing but otherwise used as pasture land Whether separately rateable hereditament Rating and Valuation (Apportionment) Act 1928 (c 44), s 2(2).

A occupied a farm comprising 11 fields, which, as an agricultural hereditament, did not appear in the valuation list. At all material times, one of the fields was used by A for pasturing cattle in connection with his business as a farmer, but, on 2 afternoons in 1937 and on 4 afternoons in 1938, the field was used by a motor cycle and light car club for the holding of motor-cycle grass track race meetings, when the charge for admission was 1s per head, and in addition charges were made for motor cars, motor cycles and bicycles taken into the field or parked in the adjoining field. On these occasions, the club took £356 in gate money, after allowing for tax. In addition, the club obtained some receipts by letting the right to supply refreshments. Certain money received by the club on these occasions was expended in prize money and expenses. The club paid to A for the use of the field the sum of 10s per 100 spectators, and during 1938 the sum of £42 14s was so paid. A proposal was made by the rating authority to amend the valuation list by the insertion therein of the field as a separately rateable hereditament, on the grounds that it was occupied and used as a race-course, that it was not land used as pasture ground only, and that it was not agricultural land within the meaning of the Rating and Valuation (Apportionment) Act 1928, s 2(2). The assessment committee rejected the proposal, and, on appeal to quarter sessions, the proposal was upheld. Thereupon this appeal was brought:

Held as the real, substantial and normal user of the field was for the pasturing of cattle and the business of a farm, the hereditament was an agricultural hereditament within the meaning of s 2(2) of the Act of 1928.

Notes

Agricultural land means any land used as arable, meadow or pasture ground. This means that the land must be used mainly for these purposes, but use of the land for commercial purposes on three or four occasions in a year will not take it out of the category of agricultural land. This is so even if considerable profit is made on the occasions when it is put to a different use.

As to Definition of Agricultural Land, see Halsbury (Hailsham Edn), Vol 27, pp 378, 379, para 809; and for Cases, see Digest, Vol 38, pp 458, 459, Nos 230234.

Cases referred to

Jarvis v Cambridgeshire Rural Assessment Area Assessment Committee, Dawson v Cambridgeshire Rural Assessment Area Assessment Committee [1938] 4 All ER 186; Digest Supp.

Tattersall v Marlborough Area Assessment Committee Unreported.

Appeal

Appeal by the rating authority by way of special case stated from a decision of the committee of the justices of the county of Dorset appointed by quarter sessions for the purposes of the Rating and Valuation (Apportionment) Act 1928. The facts are fully set out in the judgment of Lord Hewart LCJ.

R M Montgomery KC and G D Squibb for the appellants.

J Scott Henderson for the respondents.

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18 January 1940. The following judgments were delivered.

LORD HEWART LCJ. The question in this case arises in the following way. One Atkins was at all material times:

… the occupier of a certain farm, known as the Home Farm, in the parish of Corfe Mullen in the county of Dorset, comprising 11 fields having an area of 150 acres or thereabouts, which as an agricultural hereditament did not appear in the valuation list.

Afterwards, on 18 March 1939, the appellants, who are the rating authority, made a proposal for the amendment of the valuation list for that parish by the insertion in it of a hereditament consisting of one of the 11 fields of the farm. The proposal was that that field, of an estimated extent of 17 acres, should appear as valued at £50 gross and £47 rateable.

In November 1938, the proposal was heard by the respondent assessment committee, and they rejected it. Accordingly, the appellants lodged an appeal to quarter sessions, the assessment committee being the respondents. That appeal came on for hearing before the assessment appeal committee, and certain facts were admitted or proved. They are set out in this case, and it is not necessary to read them all. It is enough to say, I think, that it was found as a fact that:

Save as hereinafter mentioned, the field, the subject of the said proposal, was at all material times used by the said Atkins for the purpose of pasturing cattle in connection with his business as a farmer carried on on the Home Farm.

In a later passage of the case, it is found that what was done in the matter of motor-cycle racing:

… did not substantially affect the use of the field as pasture land in connection with the Home Farm aforesaid.

There, I think, is the foundation of the facts of the case. The normal use of this particular piece of land was use for the purpose of pasturing cattle in connection with the business of a farmer, and that which was otherwise done did not substantially affect the use of the field as pasture land.

What was otherwise done was that, on 2 afternoons in 1937 and on 4 afternoons in 1938, the particular field was used by the Ringwood Motor Cycle and Light Car Club “for the holding of motor-cycle grass track race meetings.” There are set out the numbers of those who attended on the 4 days in 1938. There was a charge for admission. The money which was taken in gate money was a considerable sum, no doubtnamely, £356 after allowance is made for tax. The club further received certain money, which was expended in prize money and expenses. So far as the track used by the petitioners is concerned, the case finds:

… that it was marked out by means of fencing, which was put up and taken down by the said Atkins, some assistance being given by some members of the club.

The position of the track was not always the same, but it was moved slightly at the four different meetings.

The club paid to Atkins for the use of the field (including the erection and removal

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of fences and any necessary cleaning and tidying of the field, and repairs to fences and an occupation road) the sum of 10s. per 100 spectators.

In 1938, the sum so paid was £42 14s.

In that state of facts, it was contended on behalf of the appellants before the court of quarter sessions that the field “was occupied and used as a race-course,” that it “was not land used as pasture ground only,” that it “was not agricultural land within the meaning of” the Act, and that it “was a separately rateable hereditament.” On the other hand, the respondents contended that the field was not separately rateable, that it was “land used as pasture land only within the meaning of the Rating and Valuation (Apportionment) Act, 1928, s. 2(2),” and that the “field was not land used as a race-course within the meaning of sect. 2(2)” of that statute. The court of quarter sessions accepted the contention of the appellants and allowed the appeal, and the matter was remitted to the respondents to determine the gross and rateable value of the hereditament. The question for this court is whether, on the facts proved or admitted, the court of quarter sessions arrived at a correct decision in point of law.

It has been alleged by counsel for the respondents to this appeal that the question of substance in the court below, and in this court also, is a question, not of law, but of fact, and that, as the court of quarter sessions arrived at a particular decision on the facts, this court ought not to, and indeed cannot in law, disturb it. In my opinion, that is too superficial a view of the question involved. The Rating and Valuation (Apportionment) Act 1928, s 2(2), provides a definition of what are termed agricultural hereditaments. “Agricultural land” is there said to mean:

… any land used as arable meadow or pasture ground only …

Then certain other words follow, but the section proceeds:

… does not include land occupied … or preserved mainly or exclusively for purposes of sport or recreation, or land used as a race-course …

The question which the court of quarter sessions had to decide here was whether or not, within the meaning of that definition, it was true to say that this particular land was land used as a race-course. I do not think that those words can fairly be interpreted as meaning that the land is taken out of the general provisions with regard to agricultural land if it is on particular and comparatively rare occasions used for the purposes of a race-course.

We have been asked by counsel for the appellants to hold that the words “land used as a race-course” must be construed as meaning land used as a race-course in the sense of a race-course for horse-racing. I think that that is too narrow a view. I cannot accept the argument that, because the racing which was done here was racing by means of motor cycles, that therefore the land could not possibly be described as “land used as a race-course.” I think that we must look at the facts

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fairly and fully in order to ascertain what is the true inference to be drawn from those facts. The assessment committee, as appears by one of the documents annexed to this case, came to the conclusion that the assessment proposed had to be cancelled because, in their view:

… the very occasional user for the purposes of motor-cycle racing is not sufficient to take the hereditament out of the category of agricultural land as defined by the Act.

One notes the words: “the very occasional user.”

What is the true view of the use of this land? In my opinion, the facts stated in the case supply an unambiguous answer to that question. The land was part of “a certain farm known as the Home Farm in … Corfe Mullen” containing 11 fields, and the particular field, the one field which was chosen for the purposes of assessment, “was at all material times used for the purposes of pasturing cattle in connection with the farmers business as a farmer” at the Home Farm. Moreover, the user, the very occasional user, of that particular field for the purposes of motor-cycle racing is expressly found to be such as “not substantially to affect the use of the field as pasture land in connection with the Home Farm.” I think that it is apparent, therefore, on the face of this case, that the real, substantial and normal user of this field, in common with the other 10 fields which made up the farm, was for the pasturing of cattle and the business of a farm. That was the real and substantial use. Is it right to take the occasional and exceptional use as something which denotes and describes the true use of this land? It seems to me erroneous to make use of the definition in that sense. It is not true, I think, to say that, when this subsection is correctly interpreted, this land was land used as a race-course merely because it was very occasionally used in the manner described in the case.

Reference has been made to a case which was before this court in October 1938namely, Jarvis v Cambridgeshire Rural Assessment Area Assessment Committee. It is quite true that the facts in that case are not quite the same as the facts in this case, but it is not easy to find cases which precisely correspond in all respects, and I think that in substance the point which was raised in that case was the same as the point which is raised here. The conclusion at which we arrived was that the hereditament in that case was an agricultural hereditament, and was occupied as an agricultural hereditament. In that case, reference was made, as also has been made to-day, to a case which came before Lord Warrington of Clyffe and his colleagues at quarter sessions, Tattersall v Marlborough Area Assessment Committee, as to which we have had the advantage to-day, as we had then, of hearing read the words of Lord Warrington of Clyffe. They seem to me to deal with this very point. As we accepted that opinion as throwing light upon the matter in October 1938, so also we accept it to-day as throwing light upon the matter. I think that, when this section is rightly construed in relation to the proved and admitted facts of this case, the true conclusion here

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was that this hereditament was an agricultural hereditament. That being so, the other question, which is not expressly raised, but which is involved by the statement of the casenamely, whether or not this particular field ought to be rated separatelydoes not really arise. In my opinion, with all due respect to the court of the quarter sessions, the decision at which they arrived was not a correct decision, and I think, therefore, that this appeal ought to be allowed.

HILBERY J. I agree.

HALLETT J. I agree.

Appeal allowed with costs.

Solicitors: Barnes & Butler, agents for J W Miller & Son, Poole (for the appellants); Peacock & Goddard, agents for Luff Raymond & Williams, Wimborne Minster (for the respondents).

Michael Marcus Esq   Barrister.

Ettenfield v Ettenfield

[1940] 1 All ER 293


Categories:        FAMILY; Children, Family Proceedings        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        15, 16, 23 JANUARY 1940        


Bastardy Presumption of legitimacy Separation deed Evidence of non-access Admissibility.

The respondent having left his wife in August 1935, a separation agreement was arrived at between them in September 1935. The terms of this agreement were set out in correspondence between solicitors acting for the two parties, and were consistently observed by both parties. The parties continued to live in the same town, but rarely met. While they were so separated, the wife on 26 May 1937, gave birth to a child. The wife asserted that marital relations had been resumed in August 1936, but this was denied by the husband. The question thus arose whether or not, in these circumstances, the husband could in law adduce evidence of non-access:

Held (i) the rule that evidence tending to bastardise or legitimise a child conceived and born during wedlock cannot be given by either spouse is absolute, and applies, not only when the parties are living together, but also when they are living apart, either under an order of the court or by their own volition.

(ii) where the only evidence of adultery in support of a husbands petition is the birth of a child to the wife, if the parties have been separated by an order of a competent court, the husband need prove no more than the date of the decree or order, and the date of birth of the child. If the child must have been conceived after the date of the decree or order, there is a presumption that it is a bastard. The wife may rebut this presumption if she can, but she must do so by evidence other than her own.

(iii) where the only evidence is the birth of a child to the wife, and the parties have voluntarily separated, whether by deed, writing under hand, oral agreement, or agreement implied from conduct, the husband cannot give evidence of non-access, but he can prove that fact by any means open to him other than his own evidence. The presumption is that the child is legitimate. If the husband leads evidence to rebut

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that presumption, the wife can call, but cannot herself give, evidence in support of the childs legitimacy.

Mart v Mart and Stafford v Kidd overruled.

Decision of Langton J ([1939] 2 All ER 743) reversed.

Notes

The tendency in the Divorce Court has been to mitigate the hardship caused by the rule in Russell v Russell. The Court of Appeal, however, have felt that this tendency is contrary to the opinions given in the House of Lords in that case and that the rule must be applied with more strictness. This view was taken by Luxmoore J (as he then was), in Re Bromage, Public Trustee v Cuthbert, and that decision is here approved by the Court of Appeal. The point at issue is whether the rule is applicable when the parties are living apart from one another. It will be remembered that the decision in Russell v Russell was a majority decision, Lord Sumner and Lord Carson dissenting. Lord Sumners closely reasoned dissenting opinion will presumably be the subject of discussion if the present case is taken to the House of Lords pursuant to the leave given by the Court of Appeal.

As to the Rule in Russell v Russell, see Halsbury (Hailsham Edn), Vol 2, pp 562, 563, para 772; and for Cases, see Digest, Vol 3, pp 364368, Nos 5494.

Cases referred to

Russell v Russell [1924] AC 687; Digest Supp, 93 LJP 97, 131 LT 482.

Warren v Warren [1925] P 107; Digest Supp, 94 LJP 68, 133 LT 352.

Mart v Mart [1926] P 24; Digest Supp, 95 LJP 29, 134 LT 446.

Hetherington v Hetherington (1887) 12 PD 112; 3 Digest 366, 71, 56 LJP 78, 57 LT 533.

Stafford v Kidd [1937] 1 KB 395, [1936] 3 All ER 1023; Digest Supp, 106 LJKB 193, 156 LT 75.

Re Bromage, Public Trustee v Cuthbert [1935] Ch 605; Digest Supp, 104 LJCh 299, 153 LT 313.

St Georges v St Margarets, Westminster (Parishes of) (1706) 1 Salk 123; 3 Digest 360, 20.

Goodright d Stevens v Moss (1777) 2 Cowp 591; 3 Digest 365, 58.

Morris v Davies (1837) 5 Cl & Fin 163; 3 Digest 363, 49.

Banbury Peerage Case (1811) 1 Sim & St 153; 3 Digest 364, 54.

Hospall v Collins, sub nom Dickens v Collins unreported, cited in Banbury Peerage Case, reported in Nicolas on Adulterine Bastardy at p 521. A full discussion of the case of Hospall v Collins is in the same work at pp 122126.

R v Sourton (Inhabitants) (1836) 5 Ad & El 180; 3 Digest 365, 60, 5 LJMC 100.

The Aylesford Peerage (1885) 11 App Cas 1; 3 Digest 367, 80.

Merryweather v Nixan (1799) 8 Term Rep 186; 42 Digest 979, 95.

R v Kea (Inhabitants) (1809) 11 East 132; 3 Digest 365, 63.

The Poulett Peerage [1903] AC 395; 3 Digest 366, 76, 72 LJKB 924.

Appeal

Appeal by a wife from a judgment of Langton J, dated 10 May 1939, in favour of the husband cross-petitioner, and reported [1939] 2 All ER 743. Langton J held that, in spite of the rule in Russell v Russell, the husband might give evidence of non-access, because the parties were living apart under an informal agreement. The wife

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appealed. The facts are fully set out in the judgment of the court delivered by Goddard LJ.

J B Latey and J L Elson Rees for the appellant.

D M Goodbody for the respondent.

Latey: The judge was wrong in holding that, in these circumstances, the petitioner could give evidence of non-access. Mart v Mart, in which the court held that such evidence is admissible when a separation deed is subsisting, was wrongly decided. In Re Bromage, Public Trustee v Cuthbert, Luxmoore J rightly held that, in spite of a separation deed, the presumption of legitimacy arises. The Divisional Court of Kings Bench Division were wrong when, in Stafford v Kidd, they preferred the decision in Mart v Mart to that in Re Bromage, Public Trustee v Cuthbert. Langton J held that he was bound by the decision of the Divisional Court in Stafford v Kidd, but, as a judge of the High Court, he was not so bound, and was entitled to consider the whole question de novo. For over 150 years, in legitimacy cases, the court has presumed the legitimacy of any child born of a married woman, except where the marriage was subject to a decree of divorce a mensa et thoro, a decree of judicial separation, or a separation order under the Summary Jurisdiction Acts. The presumption has been variously called the presumption of legitimacy, the presumption of access, or the presumption of intercourse. In such cases, the rule of evidence has been that a spouse may not give evidence to bastardise a child born in wedlock except, perhaps, where there has been a divorce a mensa et thoro, a judicial separation, or a separation order. The ratio decidendi in Mart v Mart and Stafford v Kidd was simply that the presumption was rebutted by the execution and subsistence of the separation deed. That is to say, the principle of law appertaining to the pronouncement of a divorce a mensa et thoro applied equally to the execution of a deed of separation. Although, before the decision in Russells case, the court had always recognised that neither the rule nor the presumption applied when there was a judicial separation or a separation order, it was held in Morris v Davies and The Aylesford Peeragecases of the highest authoritythat both the rule and the presumption apply when the spouses are living apart under a deed of separation. In Russell v Russell, the House of Lords held that the same absolute rulenot another rule of limited applicationapplies to cases in which the issue is adultery, and only indirectly legitimacy: semble, per Viscount Finlay, the presumption and the rule are to some extent interdependent. Their Lordships approved Morriss case and The Aylesford Peerage. In Marts case and Staffords case, the rule was held not to apply, on the ground that a deed of separation had the same effect as a decree of judicial separation in rebutting the presumption. In Re Bromage, Public Trustee v Cuthbert, Luxmoore J rightly followed Morriss case and The Aylesford Peerage, and held that the presumption was not

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rebutted, and, by clear implication, that the spouses evidence of non-access could not be admitted. In the present case, Langton J held himself bound by Marts case and Staffords case, and was, therefore, concerned to decide only whether there could be a distinction between a formal and an informal agreement. In referring to a prior invasion of the sanctity of the conjugal relation as the basis for an exception to the rule, he misconstrues the effect of the authorities. The rule is as old as the common law, and is absolute: Goodright d Stevens v Moss, R v Kea (Inhabitants), R v Sourton (Inhabitants), Banbury Peerage Case, and The Poulett Peerage. The presumption and the rule do not apply after a divorceSt Georges v St Margarets, Westminster (Parishes of)or a decree of judicial separation. In Hetherington v Hetherington, Sir James Hannen P held that a separation order reversed the presumption of access and legitimacy, and that evidence of non-access could be given by a spouse, for the rule of evidence depends on the presumption. He said that, in refusing to act on the evidence of the parities, the magistrates were under the impression that the issue was one of bastardy, whereas it was actually one of adultery. He implied that, if the rule in bastardy cases had been applicable, the magistrates might have rightly excluded the husbands evidence. However, by Russells case, the rule is identical in bastardy and in adultery cases. It is doubtful whether Hetheringtons case is now good law. A separation agreement does not end the matrimonial relation, nor make the wife for any purpose a feme sole, as does a decree of divorce or of judicial separation. The presumption exists and the rule applies even if the parties are living apart under a deed of separation: Morris v Davies and The Aylesford Peerage.

Goodbody: When the spouses are living apart, the considerations which apply are different from those which are applicable when they are living together. The rule does not then apply, whatever the ground of their separation. In Russell v Russell, the question of what the position would be under a deed of separation was never raised. By St Georges v St Margarets, Westminster (Parishes of), where the parties are living apart under a deed of separation and a child is born, the law presumes that the child is illegitimate. If they are living apart under an informal agreement, the presumption should be the same.

Latey in reply: Neither St Georges v St Margarets, Westminster (Parishes of) nor Hetheringtons case is any authority for any exception to the rule in Russell v Russell. In the latter case, Sir James Hannen P was concerned only with the presumption of legitimacy, and only his dicta on the presumption were approved by Viscount Finlay in Russells case.

J B Latey and J L Elson Rees for the appellant.

D M Goodbody for the respondent.

23 January 1940. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). In 1924, the House of Lords decided in Russell v Russell that the rule long established in legitimacy casesnamely, that neither spouse could be

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allowed to give evidence as to the paternity of a child born during wedlockapplied also in divorce proceedings. This decision had a profound and far-reaching effect on the conduct of divorce cases. Those who remember the great number of undefended petitions which followed the end of the last war will recall how common it was for a petitioning husband, who in so many cases had been a serving soldier, after proving his marriage, to be asked no more than: “When did you last have intercourse with your wife?” When he had given the date, proof was given that the wife had given birth to a child the conception of which must have taken place at a date later than that given by the husband, and a decree followed. After the Russell case, this simple proof could no longer be accepted, and it is perhaps not surprising that the ingenuity of practitioners endeavoured to find distinctions, or ways by which the rigour of this rule could be mitigated. Warren v Warren is an early example, but we need say nothing about that case, because it does not come into question here. Nor do we desire to throw any doubt on that decision. In 1926 Mart v Mart came before Bateson J. Founding his judgment upon Hetherington v Hetherington, he decided that, where parties are living apart under a deed of separation, the presumption of access is rebutted, as it is where the parties are separated by a decree of the court, and he therefore held that the evidence of the spouses as to access or non-access, which was excluded by the Russell case, could in these circumstances be received. This decision has been uniformly followed in the Divorce Division. It has been approved by the Kings Bench Division in Stafford v Kidd, and the only challenge to its correctness, other than in the present case, is to be found in Re Bromage, Public Trustee v Cuthbert, where Luxmoore J declined to follow it, considering that it was in conflict with two decisions of the House of Lords. It is to be observed that neither Bateson J nor the Divisional Court appear to have had their attention called to St Georges v St Margarets, Westminster (Parishes of), which formed the foundation of the judgment of Sir James Hannen P, in Hetherington v Hetherington. We have now to determine whether Mart v Mart was rightly decided.

In the present case, all that need be said as to the facts is that Langton J has found that the husband left his wife about 6 August 1935. There was no deed or written agreement, but the parties in the following month orally agreed to live apart, the husband making a weekly payment to his wife, and both parties have observed and acted upon this agreement ever since. Whilst so living apart, the wife gave birth to a child on 26 May 1937. Having found that there was this agreement, the judge was of opinionand, so far, we agree with himthat, for the purpose of considering whether or not the husband could give evidence of non-access, there was no difference between a separation by deed and one by any other form of agreement. Accordingly, holding that he was bound by the decision of the Divisional Court in Stafford v Kidd, he admitted

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the evidence of both the husband and the wife on the question of access, and, preferring that of the husband, granted him a decree. Except for the husbands evidence that he had not had intercourse with his wife since the separation, there was no evidence whatever against the wife.

The rule as laid down by the House of Lords in Russells case is in the widest possible terms. It applies to all cases, of whatever nature, where the paternity of a child is in question. As the Earl of Birkenhead put it, at p 698:

The rule as laid down is not limited to any special class of case. It is absolutely general in the comprehensiveness of its expression. It has no geographical qualification.

Accordingly, if the husband goes to the other side of the world, on a business visit extending over a period of a year or more, and 12 months after his departure his wife gives birth to a child, nevertheless he cannot give evidence of non-access. If the birth is the only evidence of adultery, his absence must be proved by other evidence. It would indeed be a strange result if, merely because the parties agreed to a separation, intending it to be permanent, but continued to live, as in this case, a few minutes walk from each other, they were able to give evidence, the one denying and the other asserting access, merely because of this agreement to separate. It is said, however, that there has always been an exception to the rulenamely, that, where the parties are separated by the sentence of the court, their evidence on this matter is admissibleand, admitting that exception, it is contended that there can be no sound reason for treating a separation by consent in any way differently from a separation by the court. If it were true that there was this exception, the corollary might well follow, and this is what is at the root of the judgment of Bateson J, in Mart v Mart. Apart, however, from the fact that the House of Lords said in Russell v Russell that the rule is absolutely general in its comprehensiveness, thereby admitting of no exception, when one examines the cases which are supposed to support the view of an exception, it will be found that they are not authority for any such proposition. Sir James Hannen P founded his opinion in Hetherington v Hetherington on St Georges v St Margarets, Westminster (Parishes of). This case was decided in 1706, when Lord Holt presided in the Kings Bench, so it had been law for some 70 years before Lord Mansfield decided Goodright d Stevens v Moss, so often referred to with approval in Russells case. Hetheringtons case decided that, where spouses are separated by sentence of divorce a mensa et thoro, children born to the woman during the separation are presumed to be bastards, but that, if the parties separate without a sentencethat is, voluntarilythe presumption is that the children are legitimate until the contrary is proved. There is not a word in this case to suggest that the spouses were competent witnesses either to prove or to disprove legitimacy. It deals solely with the presumptio juris that arises (i) where parties are separated by the court, and (ii) where the

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separation is voluntary. It does show that, contrary to what we think must have been the opinion of Bateson J, there is a difference for this purpose between a decree and a deed of separation, but it has nothing to do with the competency of the spouses to give evidence.

Reference may also be made to R v Murrey, where it was said that, if the husband was out of the four seas during all the time of the wifes going with child, the child was a bastard, but, if he were at all here within the time, it was legitimate, and no bastard, clearly showing that this is what the law presumes. Again, however, it is no authority for saying that the spouses can testify on the subject. In a note to this case, it is said, and repeated in the House of Lords in Morris v Davies, that the doctrine concerning the four seas is now exploded, and that this might be somewhat misleading. It is more accurate, we think, to say that what is exploded is the idea that, if the husband were ever within the four seas, the child could not be found to be a bastard. This appears most clearly in the opinion of Lord Eldon in the Banbury Peerage Case, and it is of interest to note that Lord Eldon referred to the same decision of Hale CJ as did Lord Holt in St Georges v St Margarets, Westminster (Parishes of), though under the name of Hospall v Collins and not Dickens v Collins. No report of this case can be found, and it is due to the researches of Mr Riches, the librarian of the Bar Library, that we have been able to find the reference to it in the opinion of Lord Eldon. Evidence to establish the bastardy can be called, as was done in Morris v Davies, but this does not mean that it can be that of either spouse. The view that these cases deal with presumptions, and with presumptions only, is supported by the observations of Viscount Finlay on Hetherington v Hetherington in the Russell case, at p 717, where he also points out that Hetherington v Hetherington affords no support for the admission of this evidence. Sir James Hannen P, was only repeating what had been said by Lord Holt as to the presumption which arises where there has been a sentence of the court, and which does not otherwise obtain. To the same effect is R v Sourton (Inhabitants). There it was sought to prove that a female pauper was illegitimate, and the mothers husband was called to prove that 5 years before the birth he had left his wife and ever since had lived 100 miles away with another woman, his wifes sister, by whom he had had a family. The chances, therefore, that he could have been the father of the pauper were non-existent, but, nevertheless, the court held, not only that he could not give evidence as to non-access, but also that he could not even be examined as to any collateral factfor example, that he had been living 100 miles away with a paramouras tending to prove non-access. Then there comes The Aylesford Peerage. That case was before the Committee of Privileges, but, as the various dicta of the members of the committee were approved in Russell v Russell, they are now to be regarded as authoritative in this court. In that case, the Dowager Lady Aylesford, as guardian of her infant son, claimed that

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he was the son of her late husband, the seventh Earl, and entitled to succeed to the dignity. Lord and Lady Aylesford had separated in 1876. A deed of separation was executed in 1877, and a child was born in 1881. All their Lordships were of opinion that neither Lady Aylesford nor, had he been living, Lord Aylesford could have been called to prove who was the real father of the child. That case appears to us to be conclusive of the matter, and we find some difficulty in understanding what view Bateson J took of it. He said, quite correctly, that the committee decided that evidence of the conduct of the spouses was admissible as part of the res gestœ, but not as direct evidence of the fact. He does not deal anywhere, however, with the emphatic expressions of opinion, more especially that of Lord Bramwell, that the spouses could not testify although they were separated.

It remains to deal with Stafford v Kidd, and it is important to understand exactly what questions the court there had to decide. It was a case stated by magistrates arising out of a bastardy summons. The complainant was a married woman, and was separated from her husband, but not under an order of any court. Unless, therefore, she could prove non-access by her husband, it was argued, and the justices agreed, that she must fail. Some independent evidence of non-access was given, but this did not satisfy the justices. They accordingly held that evidence of non-access was a condition precedent to the appellants proceeding with the case, and on all hands this was agreed to be right. They also held that a deed of separation had not the same effect as a decree of judicial separation, or a separation order, in rebutting the presumption of access and legitimacy. For the reasons we have already given, we think that on this point also the justices were right. The justices then went on to hold that, as there was no judicial separation, the appellant was bound by the rule in Russells case, and could not herself give evidence bastardising the child. In our opinion, they were right in holding that she could not give evidence, but they were wrong in thinking that the disability arose from the fact that she was not separated from her husband by an order of court. The disability arose from the rule of law, which applies whether or not she be separated by an order of court. The Divisional Court, following Mart v Mart, held that a separation deed had the same effect as a judicial separation. It is perhaps unfortunate that St Georges v St Margarets, Westminster (Parishes of) was not brought to their attention, as, if it had been, they might well have come to a different conclusion. They also held, however, as Lord Hewart LCJ put it, that the appellant was released from the fetters of Russells case, and in this view we respectfully differ, for reasons already given. However, we do not understand why it is said that The Aylesford Peerage added anything new to Morris v Davies, which was one of the cases relied on by Luxmoore J in Re Bromage, Public Trustee v Cuthbert. We have not thought it necessary to deal in detail with Morris v Davies, because the point

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we have here to decide only arose there by inference. The question was as to the legitimacy of the plaintiff, and the House of Lords held that what was called in the case circumstantial evidence was admissible on the subject, notwithstanding that the mothers husband was always in the kingdom. The husband and wife were separated, and what is to be observed is that no one suggested that either was a competent witness. In The Aylesford Peerage, as already pointed out, there was the direct opinion of all the learned Lords that the spouses could not give evidence in spite of their being separated. Then again, both in The Aylesford Peerage and in Russell v Russell, the House held that the Matrimonial Causes Act 1857, which had been in force for many years before the former came before the House, had made no difference to the law. Nor do we understand the exact implication of the passage which says that Morris v Davies belongs to a period when divorce alone could get rid of the presumption of legitimacy, and when proceedings for judicial separation were unknown. It is perfectly true to say that in those days divorce alone could rebut the presumption, but divorce then was only a mensa et thoro, and that was the equivalent of the decree of judicial separation. If authority be needed for this, it is to be found in the opinion of Sir James Hannen P, in Hetherington v Hetherington. The question, of course, could not arise where there had been a divorce a vinculo matrimonii, or what we should nowadays call a decree of nullity. We are, therefore, unable to agree with either Mart v Mart or Stafford v Kidd, and think that the criticism of the former case by Luxmoore J is sound.

The result of our examination of the authorities may be summarised as follows. (1) The rule that evidence tending to bastardise or legitimise a child conceived and born during wedlock cannot be given by either spouse is absolute, and applies, not only when the parties are living together, but also when they are separated either by a decree of a court of competent jurisdiction or by their own volition. (2) Where the only evidence of adultery in support of a husbands petition is the birth of a child to the wife, if the parties have been separated by the decree or order of a competent court, the husband need prove no more than the date of the decree or order, and the date of birth of the child. If it must have been conceived after the date of the decree or order, there is a presumptio juris that it is a bastard. The wife may rebut this presumption if she can, but she must do it by evidence other than her own. (3) Where the only evidence is as mentioned in the last paragraph, and the parties have voluntarily separated, whether by deed, writing under hand, oral agreement, or agreement implied from conduct, the husband cannot give evidence of non-access, but he can prove that fact by any means open to him other than his own evidence. The presumption is that the child is legitimate. If the husband leads evidence to rebut that presumption, the wife can call, but cannot herself give, evidence in support of the childs legitimacy.

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We are well aware that, in deciding against the reception in cases of divorce of the class of evidence which has been accepted since Mart v Mart, furtherand, in some cases, insuperabledifficulties may be put in the way of petitioners, but rules of law, especially those which admit of no exception, sometimes have that result. It is not always easy to explain the reason for rules which have long formed part of our law. When, for instance, Lord Kenyon CJ, laid down dogmatically in Merryweather v Nixan that there could be no contribution between joint tortfeasors, he was stating a rule of which, as the report of the Law Revision Committee recommending its abrogation showed, no one knew either the origin or the reason, and its justice was certainly not conspicuous. The reason given by Lord Holt for a different presumption prevailing, according to whether the parties are judicially or non-judicially separated, may not to some minds appear satisfactory, but there is the rule. If the evidence given in this case be rightly received, it is obvious that a serious inroad has been made on a rule which the highest court in the kingdom has declared to be without exception. If the rule works hardship, it is for the legislature, and not for the courts, to mitigate its effect. The appeal will be allowed, the decree nisi rescinded, and the petition dismissed.

Appeal allowed with costs in both courts. Decree nisi rescinded. Petition dismissed. Leave to appeal to the House of Lords.

Solicitors: Boxall & Boxall, agents for Woosnam & Co, Blackpool (for the appellant); Gregory Rowcliffe & Co, agents for J Ogden Hardicker Hanson & Co, Manchester (for the respondent).

Derek H Kitchin Esq   Barrister.

Bradford Third Equitable Benefit Building Society v Borders

[1940] 1 All ER 302


Categories:        BANKING AND FINANCE: LAND; Mortgages        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, SCOTT AND CLAUSON LJJ        

Hearing Date(s):        8, 11, 12, 13, 14, 15, 18, 19 DECEMBER 1939, 29 JANUARY 1940        


Building Societies Advances Security on which advances can be made Mortgage of freeholds Collateral charge on fund “Pooling agreement” Validity Injunction Execution of mortgage Estoppel Fraudulent statements by third party Building Societies Act 1874 (c 42), ss 12, 13, 25 Building Societies Act 1894 (c 47), ss 13(1), 17.

The defendant purchased a freehold house from a firm of builders at the price of £730 in respect of which the plaintiffs lent upon mortgage £693. The defendant had in fact been let into possession of the house before the execution of the mortgage. The normal sum which the plaintiffs could have advanced upon the security of the house was £545, but, as they had a collateral security by way of a charge upon sums of money deposited with them by the builders, they were willing to advance the larger sum. Of the sum of £693, only £650 was paid in respect of the purchase, £6 being retained in respect of costs, and £37 being placed to the deposit fund over which there was a collateral charge. The defendant had, before the purchase, been given a brochure

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issued by the builders stating that the house would be built under the strictest supervision by the local authority, would be thoroughly inspected by the plaintiffs surveyors many times during its erection, and would be constructed of exceptionally good materials by excellent workmen. The brochure further stated that a leading building society was lending on mortgage of the houses up to 95 per cent of the purchase price, and this brochure had been discussed with the defendant in the presence of a representative of the plaintiffs. The defendant contended that the collateral security taken by the plaintiffs rendered the mortgage ultra vires the plaintiff society and illegal under the Building Societies Acts and the rules of the plaintiff society, and was, therefore, unenforceable by them, and counterclaimed for damages for fraudulent misrepresentation by oral statements supported by the contents of the brochure:

Held (i) following Halifax Building Society v Salisbury, the mortgage was, as between the plaintiffs and the defendant, a mortgage of freeholds, and the fact that there was to be a collateral security, which might be unauthorised by the Acts, with another party did not make it unenforceable as between the plaintiffs and the defendant, so long as the security of the freehold estate was not merely nominal. The mortgage was not authorised by the rules of the plaintiff society, but that did not make it unenforceable against the defendant, the rules being mere internal regulations.

(ii) the plaintiffs had made themselves responsible for the statements alleged to be fraudulent, and, as it was also shown that those statements induced the defendant to enter into the transaction, the counterclaim for damages for fraud succeeded.

Decision of Bennett J ([1939] 1 All ER 481) affirmed on the first point and reversed on the second.

Notes

The question of the validity of the mortgage had been decided in the Court of Appeal in the recent appeal in Halifax Building Society v Salisbury, and on that part the court merely follows the previous decision. That, however, still left the question of the liability of the society for the statements in the puff of the building estate. In this respect, the Court of Appeal have reversed the decision of Bennett J, and, while no new principle of law is involved, building societies who finance building estates are made aware of a liability which they have probably ignored in the past.

As to Statutory Regulation of Building Society Mortgages, see Halsbury (Hailsham Edn), Vol 3, pp 410, 411, paras 775777; and for Cases, see Digest, Vol 7, pp 472, 473, Nos 112116.

Cases referred to

Halifax Building Society v Salisbury [1939] 4 All ER 427; Digest Supp.

Royal British Bank v Turquand (1856) 6 E & B 327; 9 Digest 615, 4094, 25 LJQB 317.

Fountaine v Carmarthen Ry Co (1868) LR 5 Eq 316; 10 Digest 1178, 8361, 37 LJCh 429.

Re Hampshire Land Co [1896] 2 Ch 743; 9 Digest 645, 4267, 75 LT 181, sub nom Re Hampshire Land Co Ltd, Ex p Portsea Island Building Society 65 LJCh 860.

Livingstone v Rawyards Coal Co (1880) 5 App Cas 25; 17 Digest 83, 29, 42 LT 334.

Smith v Streatfeild [1913] 3 KB 764; 42 Digest 976, 65, 82 LJKB 1237, 109 LT 173.

Appeal

Appeal by the defendant from a judgment of Bennett J, dated

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13 February 1939, and reported [1939] 1 All ER 481. The facts are fully set out in the judgment of the court delivered by Clauson LJ.

A S Comyns Carr KC and C H A Lewes for the appellant.

R F Roxburgh KC and M G Hewins for the respondents.

Comyns Carr KC: It was found by Bennett J that the appellant had been the victim of a fraud. He held, however, that the society was not responsible for it, in the circumstances. With regard to the fraudulent misrepresentation, and to the question as to whether or not the society is responsible for such misrepresentation, one Feldmar was present at the interview as secretary to Morrells, and he was also managing clerk to the solicitors. The effect of the correspondence is to make the building society responsible for the persons whom Feldmar might introduce. If the onus was upon them to disprove that Feldmar was an agent, they have not disproved it. The building society did not take steps to verify the statements in the brochure as to the quality of the house. The representation as to the good workmanship and the materials of the house was untrue. The building society either knew the statement to be untrue or were reckless as to whether or not it was true. The purpose of putting in the brochure the statement about the building society, is so that there may be put forward to intending purchasers the truth of the statements about the quality of the house. The building society have supported the statement of the builders that the house was worth the amount advanced upon it. The true view of the correspondence about the brochure is that the building society authorised the representation as set out in the brochure. Also, there was evidence that the statements were made orally by two persons. One of these persons was Feldmar and the other was someone introduced as an agent of the society. It is fairly incidental to the societys business to advertise the facilities it offers. The brochure issued is an advertisement of the society as well as of Morrells. Some of the representations are matters which would be within the knowledge of the building society, while some of them would not be within the knowledge of the building society. Where two people are acting together in a joint operation, the knowledge of one is the knowledge of both: Smith v Streatfeild.

Roxburgh KC: With regard to the question of fraudulent mis-representation, there are four matters for consideration. The first two are whether or not there was a fraudulent misrepresentation and whether or not the appellant has suffered injury in consequence. Both these points must be proved. The other two matters are the amount of damages and the result of the judgment in considering the bearing of the law upon the issues involved. It is an unusual situation for any one to say that he has been induced to enter into a contract with one of two joint tortfeasors. It is uncommon to find that the claimant has been induced to enter into a contract with one of the tortfeasors. The appellant says that she has allowed the house to be charged with a larger sum than she would have allowed to have been charged upon

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it if she had known the true facts. The appellant has suffered no damage by reason of her having been induced to execute the mortgage. The damage must flow from her having paid something. The appellant has had the use and occupation of the house, and this must be taken into account, as well as the amount she paid.

Lewes in reply.

A S Comyns Carr KC and C H A Lewes for the appellant.

R F Roxburgh KC and M G Hewins for the respondents.

29 January 1940. The following judgment was delivered.

CLAUSON LJ (delivering the judgment of the court). In this case, the plaintiffs are a building society, and they claimed in the action possession of a house at Kingsway, West Wickham, in the county of Kent, which they alleged that the defendant had mortgaged to them by a deed dated 10 October 1934. By her defence, the defendant set up the case that, although she had executed a deed of mortgage of the house in the terms alleged by the plaintiff society, she had executed it as an escrow upon a condition, known to the plaintiffs, and noted on the deed as executed, that it should be delivered to them only if certain defects in the house were made gooda condition which, as she contended, and as the judge held, had not been fulfilled. There were certain alternative defences addressed to the contingency of the mortgage being established by the plaintiffs as a valid and effectual mortgage. The counterclaim asked for a declaration that the house was not charged to the plaintiffs, that declaration being sought, not only on the footing that the mortgage had never become an effective instrument, but also on the ground that the mortgage was beyond the powers of the society. By way of consequential relief, the counterclaim further asked for repayment of £121 16s, being certain moneys paid by the defendant to the plaintiff society in respect of the moneys intended or proposed to be secured by the mortgage. The counterclaim further asked for £500 damages for fraud.

At the hearing before Bennett J, the defendant conducted her case in person, and was (no doubt quite properly) allowed considerable latitude. She was not confined strictly to her pleadings. In this court, the pleadings were amended by order of the court, so as to raise certain contentions which were discussed before Bennett J, and, though not specifically dealt with by him in his judgment, took on an aspect of importance during the arguments in this court. These amendments related to the counterclaim for damages for fraud.

In view of the fact that there is no appeal against the dismissal of the action, the facts, which were necessarily stated in great detail in the very careful judgment of the judge, may be summarised with comparative brevity. Early in 1934, Morrell (Builders) Ltd (to whom it will be convenient to refer as Morrells), were developing a building estate known as the Coneyhall Estate at West Wickham in Kent. The defendant wished to buy a house, and with her husband visited the estate with that object on 1 February 1934, and again on 9 February 1934. They viewed the house to which the action relates, and were supplied by

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Morrells with a copy of a pamphlet which, before this court, has been conveniently referred to as “the brochure.” There was considerable discussion between the defendant and Morrells representatives as to a number of statements in the brochure, and in particular in regard to the following paragraph:

Morrell (Builders), Ltd., are the only builders in Great Britain who can offer, by special arrangement with a leading building society, a 95 per cent. mortgage advance over a period of 24 years at 5 per cent. interest. This proves without a shadow of a doubt the amazing value of Morrells houses.

The judge has foundin our judgment, with complete justificationthat this passage in the brochure led the defendant to believe that the house which she was asked to acquire was exceptionally well-built, and that this representation was false, and was known to Morrells to be false. Further, the representation meant, in our opinion, that the value of the house was such that by itself it afforded a security which would be accepted by a prudent lendernamely, the building society concernedfor a loan equal to 95 per cent of the purchase price asked, and that, accordingly, the house was worth at least the purchase price asked. At the trial, it was suggested that a representative of the plaintiffs was present at the interview of 9 February, and was party to this fraudulent representation. This suggestion, however, was not proved.

Induced by these (among other) representations, on 9 February the defendant entered into two contracts. One was for the purchase from Morrells for £100 of the land on which the house now in question was being erected. The second was for the erection and completion of a house for her on the plot by Morrells for £590. It was a term of the contract that, as security for the £590, the defendant should deposit with Morrells a conveyance of the house and a memorandum of charge. The defendant had a certain amount of money available towards the purchase price, which was, as appears above, in substance £690. She could not complete the transaction, however, without an advance, and for this purpose she applied to the plaintiffs for a loan. For the purposes of this loan, the plaintiffs procured a valuation from their surveyors, who are said to have put the value of the house and land at £690. No evidence was called to justify this valuation. It was arranged that a garage should be built at a cost of £40, and the price thus became £730. On this footing, Morrells solicitors on her behalf asked the plaintiffs to advance £693 to the defendant. On 3 March 1934, the defendant paid Morrells £33 on account of the purchase price, having previously paid a preliminary deposit of £1, and Morrells at once gave her possession of the house, in which she and her husband have lived ever since.

Through April, May and June, nothing further seems to have occurred, save that defects in the house became obvious. In June, the garage was nearly finished, and the plaintiffs surveyors inspected the house and garage with a view to certifying, as they are in fact said to have done, that the total property was worth the total price of £730. No evidence

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was given to justify this valuation. It appears from a letter written to the plaintiffs by their surveyors that it was understood that Morrells would rectify the defects which had appeared in the house.

In July 1934 the position was as follows. The defendant had paid a total of £34 on account of her liabilities to Morrells under the two contracts. She was in possession of the house, in which there were certain defects. She had not obtained a conveyance of the plot, though apparently Morrells had executed the form of conveyance. Therefore, she had not, of course, deposited the conveyance with Morrells, nor had she given them a memorandum of charge to secure her liability for the cost of building the house. It was apparently in contemplation that the transaction should be carried out uno ictu by the completion of the conveyance to her, the completion of a mortgage by her to the society, and the advance to her by the society of a sum of £693, which, with a trifling difference, would make up the sum required to enable her to discharge, as she would thereupon do, her liability to Morrells for the balance of the purchase price of the plot and the cost of building the house and garage.

As to what in fact occurred in regard to the contemplated completion, there was the most acute conflict of evidence before the judge. The facts as he found them are most carefully and completely stated in his judgment. As there is no appeal from his judgment dismissing the action, it is unnecessary to restate his findings at length. It is sufficient to state how matters stood on 10 October 1934. At that date, the plaintiffs had in their hands the document D 5, being a mortgage of the house and land by the defendant to the plaintiffs to secure £693. This document presents the appearance of having been duly executed by the defendant, and there is no note upon it suggesting any merely conditional execution. The plaintiffs also had in their hands the conveyance from Morrells to the defendant. They had paid £650 on the defendants account to Morrells, and themselves retained £43, partly for costs and partly to meet a contribution which, as between themselves and Morrells, was due to be paid to the pooling fund, which was an additional security provided by Morrells to them, and to which reference is made later in this judgment. The plaintiffs had thus cleared off all liability of the defendant to Morrells, on the footing of becoming creditors of the defendant for £693, the figure named in D 5. There is a slight discrepancy of £3 on the figures, but it is not suggested that Morrells, after these payments, had any further claim against the defendant, and it must be taken that all the defendants liabilities to Morrells had thus been satisfied. Morrells had given the defendant an undertaking in writing to make good the defects in the house. The defendant was in possession of the house.

The judge held that the plaintiffs had failed to prove that the document D 5, on which they based their claim, set up in the action, to recover possession of the house, was signed by the defendant, and he therefore held that their action must be dismissed. From this decision there is no appeal. Incidentally, he held that the house, so far from being particularly

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well-built, was badly built, and it must be taken that the house was accordingly of less value than the £730 paid for it, especially as certain defects, which had not been remedied, had already appeared.

Before considering the counterclaim, it is necessary to make special mention of one ground of defence set up by the defendant in answer to the claim for possession. The defendant set up the case that, if one assumes the mortgage to be a duly executed and otherwise effective document, the transaction between her and the plaintiffs was invalid by reason of the fact that, according to the constitution of the plaintiffs, it was ultra vires for them to advance money otherwise than on the security of a mortgage of real property. It appeared that the advance was not made on the security of real property alone, but was made on a composite security consisting of the mortgage of the house supported by way of collateral security by a charge given by Morrells upon a personalty fund provided with a view to securing the plaintiffs against losses upon advances made to purchasers from Morrells. This matter was elaborately argued before Bennett J, and he held, after an exhaustive consideration of the Building Societies Acts, and of various authorities, that the mortgage, had it been established by the plaintiffs, could not have been treated as invalid on the ground of its being ultra vires. We do not propose to pursue this topic, for the decision of the judge on this point was fully considered by this court in Halifax Building Society v Salisbury, and held to be correct. In the present case, it was sought to set up the point that, on the true construction of the rules of the plaintiffsnamely, rr 36, 37 and 38, as they stood prior to April 1934, and rr 23 and 24, as they stood after that monthrelating to the procedure in regard to advances, it was a condition precedent to any advance being made by the society that the directors should for a bona fide opinion that the real property mortgaged to secure the advances was, apart altogether from any collateral security, a sufficient security for the advance. However, as the rules of the Halifax Building Society were in all material respects the same as the plaintiffs rules in this regard, and as this court decided that the advance in that case was not ultra vires, we should feel great difficulty in giving effect to the argument in the present case, even if we agreed with it. In our judgment, however, the contention is unfounded. The rules in question are mere internal regulations, possibly enforceable by the society against its directors, but not having the effect of rendering a transaction which does not comply with them invalid as between the society and those dealing with it, as being outside the scope or the objects of the society. It is unnecessary to do more than refer to Royal British Bank v Turquand, Fountaine v Carmarthen Ry Co, and, in more recent days, Re Hampshire Land Co, as illustrating the distinction between constitutional provisions which limit the scope or objects of the society and mere directory regulations as to internal management or procedure. It was no doubt owing to a correct appreciation of that distinction by counsel in Halifax

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Building Society v Salisbury that the argument placed before us in the present case was not raised in that case. The new point thus raised cannot, in our judgment, be supported.

We turn now to the counterclaim, which asked in the first place for a declaration that the house was not mortgaged or charged in any way to the plaintiff society, with a consequential claim for delivery up of the mortgage deed referred to in the statement of claim. The judge does not in his judgment specifically deal with these items of the counterclaim, and in the first instance counsel for the appellant sought before us to base her appeal on the ground that this relief should have been granted. In view of the very careful and elaborate discussion of the other far more important points in dispute before him, it is not surprising that the judge does not specifically deal with these items in the counterclaim. It is to be borne in mind that the judge decided specifically that the plaintiffs had failed to establish that the deed which they placed before the court as the mortgage deed had been executed by the defendant, and that on this ground he dismissed the action. The defendants evidence was that the deed which she had executed (but, according to her evidence, had delivered only in escrow) was another document altogether, though in fact in the same terms, except that it bore a note referring to its incomplete delivery, but no such other document was produced before the court. A declaration of no charge having been effected by the deed propounded but not proved by the plaintiffs would be otiose and irregular. A declaration of no charge having been effected by a deed not placed before the court nor sought to be established by secondary evidence would be impossible, and it would be equally impossible to make a general declaration of no charge. In our judgment, this part of the counterclaim must, in the circumstances, necessarily and obviously fail, and we cannot doubt that the reason why the judge did not specifically deal with the matter was that he assumedand, in our judgment, rightly assumedthat, in view of his finding, these items of counterclaim had ceased to be effective.

The counterclaim asked in the next place for an injunction to restrain the society (in substance) from making advances supported by a collateral charge on a personalty fund. There was a long argument before us as to whether, in the circumstances, the defendant could be treated as a member of the society, and it is, of course, obvious that such a claim could be set up by her only in the capacity of a member. We have already explained why this court is precluded from deciding the question of ultra vires in accordance with the defendants contention, and it therefore becomes unnecessary to consider whether or not, had this point been open, the defendant would have been in a position to raise it. In our judgment, the judge was correct in refusing to grant the defendant any relief in respect of this head of counterclaim.

The next item of counterclaim is for the return of £121 16s. This sum represents payments made by the defendant to the plaintiffs in or

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towards repayment of the advances made by them, and it falls to be considered in connection with the defendants succeeding head of counterclaimnamely, for damageswhich, in the amended form in which the counterclaim now stands, is a claim for damages for fraud based upon, among other things, the representations in the brochure. The fraud is alleged to have resulted in damage to the defendant by reason of her having entered into the contracts with Morrells, having applied to the plaintiffs for advances, having executed a mortgage to the plaintiffs, and having paid them the £121 16s by way of purported repayments of the advances. It is to be observed that, in the events which happened, and which made restitutio in integram impossible, the defendant does not claim rescission in regard to these various matters. Indeed, Morrells are not parties to the present proceedings, and such a claim could scarcely succeed in their absence. Had rescission been claimed, and claimed successfully, there might have been scope for an order for repayment of this sum of £121 16s as a specific sum, but, in the absence of any right of rescission, counsel for the appellant failed to put forward any legal ground for the return of this money. It was suggested that it might be formulated as a claim for money had and received to the defendants use, on the ground of mistake or otherwise, but, on examination, it was found impossible to bring the case within any such head of relief, and ultimately, on the pleadings as amended, the sum was claimed as an item relevant on the question of damage, and it is on that view of it that it falls to be treated.

Before the judge, the claim for damages was based on various alleged fraudulent misrepresentations which were suggested to have induced the transactions in question, the most important representation being that contained in the brochure to the effect that the house was particularly well-built and that the plaintiffs were prepared to advance an unusually high proportion of the purchase price for that reason. The pleadings as they stood at the trial below, construed with the particulars, based the case on representations made by a representative of the plaintiffs at the interviews of 1 February and 9 February 1934, already mentioned, and it was sought (but unsuccessfully) to prove that such a representative of the plaintiffs was so present. The judge found that the house, so far from being particularly well-built, was badly built, and there is no question but that the willingness of the plaintiffs to advance an unusually high percentage of the purchase price was due, not to any belief on their part that the houses were particularly well-built, but to the fact that collateral security was provided by the operation of the so-called pooling agreement entered into by them with Morrells. There was present in the case, accordingly, every element which would enable the judge to hold the plaintiffs liable in damages for fraud, if only the one further element were presentnamely, evidence that the representations, and in particular the vital representation put forward in the paragraph quoted above from the brochure, were put forward to the plaintiffs knowledge for the

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purpose of inducing the defendant to enter into a transaction with Morrells, which would lead to a consequential transaction between the defendant and themselves. The judge considered himself unable to find for the defendant on this part of the case, because the defendant failed to prove that a representative of the plaintiffs was present at the interviews at which the representations were made and the brochure was produced and discussed. He said, at p 499:

In my judgment, however, her case for damages for fraud fails, because she has failed to prove that the plaintiffs were in any way responsible for the representations made to her. It has been proved that no representative of the plaintiffs was present at the interview of Feb. 9, 1934.

After thus dealing with the matter, the judge continues as follows, at p 499:

I confess that I should have been pleased to see a director or manager of the plaintiffs in the witness-box, and to have had a satisfactory explanation of how, if the directors knew of the brochure and of the statements it contained, they continued to have business associations with Morrells. I have read the statement in this brochure with reference to a building society. If the directors of the plaintiffs knew of that statement after Mar. 3, 1934, and thereafter lent money of the plaintiffs to persons who were buying houses from Morrells, I do not understand how they as honest men could have done so without making it clear to the borrower that, so far as the plaintiffs were concerned, the statement was untrue. Mr. Clough [an official of the plaintiffs who gave evidence at the trial] said that he thought that the directors of the plaintiffs knew of the brochure in Mar., 1934. They lent money afterwards. The loan to the defendant was made afterwards. She certainly was never told what the true position was, and, as I say, I should have been glad to have had an explanation from a director of the plaintiffs with regard to it.

In the course of the hearing, the judge had succeeded in securing the disclosure by the plaintiffs for the first time of certain correspondence between the plaintiffs and Morrells in regard to the brochure. We deal with the contents of the correspondence below, but it is convenient to state at once that, having regard to the correspondence, we are satisfied that the judge ought to have held, and that we are bound to hold, for the defendant on this issue of fraud. It is true that at the interviews of 1 February and 9 February, at which the crucial misrepresentations were made, they were made by Morrells, and not directly by the plaintiffs, but the plaintiffs associated themselves with the fraud, and are, therefore, responsible for it, for they had knowledge of the false representations, and of their falsity, and they must have known that it was under the influence, and through the inducement, of the false representations that the defendant, having originally entered into the contracts with Morrells, was proceeding to complete those contracts, and, as an integral and indispensable part of that completion, accept the obligations of a borrower towards the plaintiffs. It appears to us to result quite clearly that the plaintiffs thus became liable, as participators in the fraud, for any damage which the defendant had suffered thereby. The pleadings as amended by order of this court cover a claim based on these lines, though the pleadings as they stood at the trial before Bennett J, did not. The correspondence, which, in our judgment, establishes a claim on

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these lines, was certainly discussed before the judge. It is no doubt the fact that in his judgment he does not deal with the claim in the form in which we have stated it. This may have been due to the fact that the pleadings before him did not cover the ground. However, we are satisfied that we have done no injustice to the plaintiffs in allowing the claim to be raised in this form by the pleadings as amended, and we are satisfied that we should be doing an injustice if we did not, after the elaborate arguments on the point before us, allow the defendant to rely on this ground of claim.

Upon a study of the correspondence to which we have referred above, the following facts emerge. In December 1932, Morrells inquired of the plaintiffs on what terms the plaintiffs would make 90 per cent advances in respect of certain named building estates which were under development by Morrells. The Coneyhall Estate, of which the house now in question formed part, is not among the estates named. It appears from this letter that Morrells had a very large pool with a leading building society, and would be willing to create a similar pool with the plaintiffs. It should be explained that this refers to the device of arranging for a personalty fund to be put up as a general collateral security against loss by the building society on any individual mortgage, a device which enables the building society with a reasonable degree of safety to advance on each transaction a sum very nearly approximating to the valuation. Negotiations as to the terms on which Morrells would be prepared to give the plaintiffs the business of thus financing purchasers on Morrells estates continued through 1933. About the end of 1933, the brochure relating to the Coneyhall Estate was in the plaintiffs hands, as appears from a letter from them to Morrells dated 3 January 1934. The plaintiffs criticised some of the statements in it relating to building society advances, but did not criticise the important passage quoted above. In the course of that month, the negotiations between Morrells and the plaintiffs reached the stage of the preparation of a draft agreement, and, from a letter of 12 January 1934, from the plaintiff to their surveyors, it appears that the Coneyhall Estate was one of the estates to which the arrangements were to apply. The abstract of title to that estate was sent to the plaintiffs solicitors on 6 February 1934. The terms of the agreement between Morrells and the plaintiffs were settled during February, and the agreement became a binding agreement between Morrells and the plaintiffs early in March. On 12 March, the plaintiffs asked for, and on 13 March they were supplied with, spare copies of the brochure.

These being the facts, the question for consideration is what it was that induced the defendant, who in February had entered into the two contracts with Morrells on the faith of the false representations contained in the brochure, to carry out those contracts, and become a party to the advance of £693 which the plaintiffs made to enable her to carry out those contracts. It is obvious, in our judgment, that her action

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was induced, and that the plaintiffs must be taken to have known that it was induced, by the misrepresentations in the brochure which the plaintiffs knew to be false. The judge recognised that, if the plaintiffs knew in March 1934 of the representations in the brochure (and, from the correspondence to which we have referred, it is quite plain that they did), they would be acting dishonestly if they associated themselves with Morrells in the business of financing purchases which to their knowledge must have been induced by representations which both the plaintiffs and Morrells knew to be false but the purchasers believed to be true. In our view, the judge ought to have proceeded to the conclusion which appears to us to follow quite plainlynamely, that on these facts the plaintiffs cannot escape liability for the fraud to which, by their action, they made themselves parties.

It is only fair that, while we share the regret of the judge that no director of the plaintiffs came forward to explain the directors views, we should make it clear that the facts before the court are not inconsistent with the personal honesty of the directors individually. There is nothing to show that the official who conducted the correspondence and studied the brochure and sanctioned its use ever placed the brochure before the directors. It may be that the only thing which can fairly be said against the directors is that they employed an official who conducted the societys business fraudulently. However, the facts that the business was conducted fraudulently by the societys official and that the society must be visited with the consequences of the fraud appear to us to be quite clearly established by the evidence.

The question still remains as to what damage was occasioned to the defendant by the fraud, for, in the absence of evidence of actual damage, the fraudulent misrepresentation cannot of itself lead to any relief against the plaintiffs. It was ingeniously suggested that no damage has resulted to the defendant, in that she has a house worth, as she admits, £250, she is free from any possibility of a claim by Morrells, since Morrells have in fact been paid, through the medium of the society, for the house, and the plaintiffs have failed to establish their mortgage against her. On the other hand, she has paid out no more than the £121 16s already mentioned and the £34 paid to Morrells. The answer is that, notwithstanding the dismissal of the action, the defendant is still in peril of a claim by the plaintiffs for the excess of £693 in fact advanced by them, with interest, over the £121 16s which she has already paid. True it is that the plaintiffs have not proved that she executed the deed which they propounded in the action as her deed, but she has never disputednor, of course, can she disputethat £693 was in fact provided by the plaintiffs and applied in discharge of Morrells claims against her.

In our judgment, a consideration of the result of the fraud leads with but little difficulty to a conclusion as to the correct measure of damage, if it be borne in mind that, where an injury is to be compensated by

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payment of damages, the court should, in settling the sum of money to be given by way of reparation for the damage suffered, arrive as nearly as possible at that sum of money which will put the party who has been injured, or who has suffered, in the same position as that in which he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation: see per Lord Blackburn in Livingstone v Rawyards Coal Co, at p 39. The plaintiffs fraud induced the defendant to accept liabilities to them based on the view that the house was worth the £730 which had to be paid for it. That is to say, it induced her to accept a liability for £693, being a sum which, for all material purposes (the discrepancy of some £3 may be disregarded), was less by the £34 paid by the defendant to Morrells direct than the pretended value of the house. On the footing that the house was worth £730, she was prepared to accept liability for an advance less by £34 than the pretended value of the house. She was obviously prepared to pay for the house at its true value, and it may be assumed that, if she had become purchaser at the true, instead of at the exaggerated, value, she would have been prepared to accept liability for an advance less by £34 than the true value. Rescission being now out of the question, she cannot escape liability for the larger figure of £693, and the damage is thus measurable by the difference between the position as it now stands and her position as it would have been if the transaction had been precisely the same in every respect save only that she had become purchaser of the house at a price equal to, but not more than, its true value, and had accepted a corresponding liability as a borrower from the plaintiffs.

The damage is no doubt assessable in one sense as at the date at which she was induced by the fraud to act to her own detriment and make herself liable for the larger figure, but, as the liability includes a liability for interest until repayment, the matter is not concluded by merely measuring the difference between the sum which she was induced to borrow and the sum which she would have borrowed had there been no fraud. The easiest way to make the matter plain is to state in accurate terms exactly the relief in this regard to which, on the view which we have expressed above, the defendant will be entitled. There should be inquiries as follows. 1. What sum is, at the date of the certificate, due to the plaintiffs by the defendant on the footing that on 10 October 1934, she became indebted to the plaintiffs in a sum of £693, repayable with interest at 5 per cent per annum, and that she has since repaid to the plaintiffs on account of that indebtedness £121 16s, as in para 9 of the counterclaim alleged? 2. What was the true value on 10 October 1934, of the plot of land with the house and garage thereon in the pleadings mentioned? 3. What sum would, at the date of the certificate, be due to the plaintiffs by the defendant on the footing that on 10 October 1934, she became indebted to the plaintiffs in a sum less by £34 than the said true value, repayable with interest at 5 per cent per annum, and

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that she has since repaid to the plaintiffs on account of that indebtedness £121 16s, as in para 9 of the counterclaim alleged? This will be followed by an order that the plaintiffs are to pay to the defendant by way of damages for fraud within 14 days after the filing of the certificate the amount by which the sum found in answer to inquiry No 1 exceeds the sum found in answer to inquiry No 3.

It is to be borne in mind that this is not an action by the plaintiffs for foreclosure or for the recovery of money lent, nor is it an action by the defendant for redemption. It may well be, however, that the result of the inquiries may be of assistance to the parties in any future steps taken, whether by the defendant for redemption or by the plaintiffs for recovery of money lent. It is also to be observed that, if, simultaneously with the ascertainment of the damages, the plaintiffs were to claim foreclosure or the defendant were to claim redemption, the net result would be that the defendant would be found entitled to redeem on paying exactly the sum which she would have had to pay had she bought the house for the true value, borrowed the price less £34, and since paid £121 16s towards paying off the debt. In other words, the parties will find themselves in just the position in which they would presumably have been had the fraudulent representations not been made.

The order of this court will be as follows. The defendants appeal will be allowed and the judgment of Bennett J, dismissing the counterclaim with costs will be reversed, and in lieu thereof there will be an order for the inquiries stated above, and an order as stated above in regard to the payment of damages. The costs of the inquiries will be reserved, with liberty to apply. As regards the costs of the counterclaim, the defendant has failed in regard to a substantial part of the counterclaimnamely, the claim that the advance was ultra vires. The plaintiffs will be ordered to pay one half of the defendants costs of the counterclaim. The plaintiffs will be ordered to pay the defendants costs of this appeal.

There is one further matter to be mentioned. It was indicated to us, thought not in very clear terms, that the plaintiffs might be willing to call a halt to litigation by abandoning any further claim against the defendant in respect of the transaction in the pleadings mentioned. They should have an opportunity of doing so. If, before the order of this court is drawn up, the plaintiffs are willing to disclaim by their counsel any further rights against the defendant in respect of the transactions in the pleadings mentioned, and to undertake to give up to her on demand the conveyance of the house and land from Morrells to her, the order of this court may be drawn up as an order (a) allowing the appeal and reversing the judgment of Bennett J, dismissing the counterclaim with costs, (b) embodying a disclaimer and undertaking by the plaintiffs by their counsel as above stated, and (c) ordering the plaintiffs to pay one-half of the defendants costs of the counterclaim.

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However, this should make no difference as to the defendants costs of the appeal, which will, as above indicated, be paid by the plaintiffs.

Appeal allowed.

Solicitors: W H Thompson (for the appellant); H Boustred & Sons, agents for J Eaton & Co, Bradford (for the respondents).

W K Scrivener Esq   Barrister.

Davidson v Barclays Bank Ltd

[1940] 1 All ER 316


Categories:        BANKING AND FINANCE: TORTS; Defamation        

Court:        KINGS BENCH DIVISION        

Lord(s):        HILBERY J        

Hearing Date(s):        25 JANUARY 1940        


Bankers Cheques Dishonour Mistake in keeping account Cheque marked “Not sufficient” when sufficient money in account Duty of bank to make communication Qualified privilege.

On 17 December 1938, the plaintiff, a credit bookmaker, issued a cheque for £2 15s 8d which, when presented to the defendant bank, was dishonoured by them, being marked with the words “Not sufficient.” On the previous day, the plaintiff had sent the bank a stop order in respect of a previously-drawn cheque for £7 15s 9d, and, if the bank had acted in compliance with this order, there would have been in the plaintiffs account more than sufficient to meet the dishonoured cheque. The bank, however, debited the plaintiffs account with the amount of the stopped cheque, with the result that the balance shown in his account, which was not the true balance, was insufficient to meet the cheque for £2 15s 8d. The plaintiff alleged that the words “Not sufficient” were a libel upon him in his way of business, and claimed damages accordingly. The bank admitted that the words in their ordinary significance were capable of a defamatory meaning, but contended that the occasion upon which the words were written was one of qualified privilege:

Held the bank could not, by making the mistake of thinking that there were insufficient funds to meet the cheque, create on their own part a duty to make a communication the necessity for which had never arisen. Similarly, they were not making a communication on a matter of common interest both to them and to the payee of the cheque, because, except for their mistake, there was no matter of common interest connected with the cheque which called for a communication. The defence of qualified privilege, therefore, failed.

Notes

The contention here was that the bank could rely upon their own mistake in keeping the customers account to create a privileged occasion. To create a privileged occasion there must be shown to be a duty to make the communication or that the communication was a matter of common interest to the parties, but the bank could not have established either of these matters without relying upon their own mistake. This, it is held, they could not be allowed to do. It would then appear that this defence to an action on a dishonoured cheque has been taken in any previous case.

As to Wrongful Dishonour, see Halsbury (Hailsham Edn), Vol 1, p 827, para 1348; and for Cases, see Digest, Vol 3, pp 217223, Nos 549584.

Cases referred to

Joachimson v Swiss Bank Corpn [1921] 3 KB 110; Digest Supp, 90 LJKB 973, 125 LT 338.

Hunt v Great Northern Ry Co [1891] 2 QB 189; 32 Digest 121, 1528, 60 LJQB 498.

Action

Action for damages for libel. A cheque for £2 15s 8d drawn by the plaintiff, a credit bookmaker, was, through a mistake on the part

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of the bank as to the state of the plaintiffs account, wrongfully marked with the words “Not sufficient,” the use of which words, the plaintiff alleged, constituted a libel upon him in his way of business. The bank pleaded that there was a duty to make the communication, which was, therefore, made on a privileged occasion. The facts and arguments are fully set out in the judgment.

T F Davis for the plaintiff.

Geoffrey H B Streatfeild KC and Clive Burt for the defendants.

25 January 1940. The following judgment was delivered.

HILBERY J. In this case, John Davidson, who is a bookmaker carrying on the business of a cash bookmaker at dog-racing meetings and of a credit bookmaker from his address, No 78, Clapham Road, sues the defendant bank for damages for libel. The libel of which he complains consists of the words “Not sufficient” written on the face and at the top lefthand corner of a cheque drawn by the plaintiff on his business account with the defendant bank at its branch at 414, 416, Kennington Road, London. The plaintiff complains that those words are a libel upon him in the way of his business. He says that they imported to anyone who read them, placed in that situation, that the plaintiff was a person who had drawn a cheque upon an account which he knew, or ought to have known, was not in credit to the amount of that cheque, that the firm of J Davidson & Co, the persons who, on the face of the cheque, were the drawers of it, and the plaintiff, as a partner, were, and the plaintiff was, unable to pay the amount of the cheque, and that that meant to a reasonable being that it was unsafe to do business with the plaintiff or to give him creditthat is to say, to bet with him as a credit bookmaker.

At the close of the plaintiffs case, counsel for the defendants said quite frankly that he would not contend that the words in their ordinary signification placed upon a cheque were incapable of that defamatory meaning, nor did he contend that the words in their ordinary meaning, and as ordinarily understood by a person who saw them placed upon the plaintiffs cheque in that way, were anything but defamatory of the plaintiff in the way of his business. Then the defendants go on to allege by way of defenceand this was the defence which was urged before me, and has been the subject of the contest before methat those words were placed by the bank upon that cheque on the occasion when that cheque was presented to them for payment, and that that occasion was an occasion of qualified privilege, and that they put upon the cheque those words, which were in fact false, in the belief that they were true.

There is no question but that the bank acted honestly in the matter. Somebody who chose to write those words on the cheque on behalf of the bank did so, making an honest mistake. The facts show, however, that it was, as it appears to me, a mistake which ought never to have been made. It was a mistake which one would think that a very

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indifferently qualified bookkeeper who used reasonable care would not have made, but which, none the less, as I have said, was made in this branch of this bank. The defence of the bank which has been fought might be summarised in this way: “We marked this cheque with a statement which was defamatory of our customer in the way of his business, suggesting against him that he was a person who could not meet a cheque for £2 15s. 8d. although he had drawn it and given it to one of his customers. He was drawing a cheque upon an account which had not got that amount in it, but the statement was made on a privileged occasionan occasion which we say was one of qualified privilegeand through our inability on this occasion to keep our books correctly.”

I can shortly state the other facts, for they lie in a very small compass. The plaintiff had opened this account for his credit bookmaking business with this branch of the defendant bank in November 1938. I have seen the certified duplicate copy of the ledger account. If, as I am told, it was opened on 28 November, it appears to me to have always been in credit. Before 17 December 1938, the plaintiff had issued a cheque for £7 15s 9d, payment of which he had stopped by a letter written to the bank on 16 December 1938.

There is a letter in the correspondence on 19 December from the defendants branch at which the plaintiff had this account, acknowledging a letter from the plaintiff, dated 16 December, which had stopped payment of this cheque for £7 15s 9d drawn in favour of J Harris.

Although the defendants were in possession of that stop order against this cheque in favour of Harris, nevertheless, on 18 December, when they received a cheque, dated 17 December, for £2 15s 8d, drawn in favour of S Mark by the plaintiff on this account, they dishonoured the cheque, marking it with the words which are complained of: “Not sufficient.” I say notwithstanding that they were in possession of the stop order upon the cheque drawn in favour of Harris, because, if they had acted obediently to the stop order, which was acknowledged by them in their letter of 19 December, and which was in their possession admittedly before the presentation of this cheque by the plaintiff in favour of Mark, and admittedly before the presentation of the cheque by Harris, provided they obeyed the stop order on the Harris cheque, they had enough funds, and a good deal more than enough funds, belonging to the plaintiff with which to meet the cheque for £2 15s 8d.

I do not now know precisely how their mistake came about. I have had two witnesses called before me on behalf of the bank. One was an inspector for the bank, who, when this matter became a matter of acute controversy between the plaintiff and the bank, went and called upon Mark, the payee of the cheque which had been returned in this way, and had an interview with him and gave him an account of it which really did not substantially differ from that given me by Mark. The other, I think I am right in saying, was a chief clerk, and had been for

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18 months a chief clerk at Kennington, but not either of the ledger clerks at Kennington, who could tell me what the system was which the bank employed when dealing with a cheque upon which there was a stop order, but who could not tell me what had in fact been done which gave rise to the mistake on this occasion. All he could tell me about that was what he had been told, apparently by one or other or both of the ledger clerks in this branch, one or other of whom had in fact made the mistake.

Perhaps it is putting it too high to say that one would have expected that, if an explanation was to be given of how the mistake arose, the persons who made the mistake should have been called as witnesses before me. It is not without some significance that the witness selected to come before me to explain how the mistake arose is a person who can really give me as first-hand evidence only evidence of the system which ought to have worked, and then tell me, upon what he has been told, how it came to break down on the occasion in question.

These further facts we know, however. The defendants having a stop order on this cheque of Harriss, there was placed on the face of the ledger account a square red adhesive label with the word, blocked out in white, very large and occupying no less than about half of the label, “Stop.” One can only supposeI hope it is a reasonable inferencethat that form of label, which must leap to the eye when the ledger is opened at the page which has the label upon it, is used as a warning sign to the person who is going to the ledger to make an entry in it that there is a stop on the cheque which, in the lower half of that label, is described by its number and the name of the payee, and as a sign not to deal with that cheque as a cheque which is to be met, but to deal with it as a cheque upon which there is a stop order. Notwithstanding that, it is apparent that on this occasion the cheque upon which the stop order was in existence was debited to the customers account in the debtor column on the page, and the resultant diminished balance was carried out in the balance column as the balance which was left over, and below that line that diminished balance was brought down to the lefthand side of the sheet in the column which is headed “Old Balance.” There came to be on the face of the book, in those circumstances, a statement of a balance left over which would have been insufficient to meet a cheque of £2 15s 8d. There was left over by that process, as it happened, a balance which was not the true balance at all, but an entirely unreal, though apparent, balance of only £1 9s 10d.

As I say, in the absence of either of the ledger clerks, who are the actual people who made the mistake, I do not know how the mistake came about. The ledger was in such a condition, however, that, when the cheque drawn in favour of Mark was brought in, one or other of the ledger clerks went to the ledger, disregarding, of course, everything apparently except that the balance brought down on the left was

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£1 9s 10d, and managing apparently to close his mind to the other things on that sheet which might, one would have supposed, have been sufficiently brought to his attention by the scarlet label and the word “Stop.” Assuming that the £1 9s 10d is in truth the only balance, he deals with the Mark cheque, and carries out into the balance column the resultant overdraft balance, and then this cheque is returned marked “Not sufficient.”

It is a little important to bear this in mind. The evidence given for the bank is that, owing to the system of the central clearance of cheques which the banks employ, whether a cheque is being met or is being returned, for its own convenience a bank must make an entry of that cheque in their books as a cheque which has been presented to the bank and dealt with by them, although it turns out in the end to be dishonoured. That is so that the total of the cheques coming through the clearing system to that particular branch can be checked and established, and every cheque accounted for. Thus, on the system, for the banks own convenience, when the Harris cheque came in on the day that it did to be dealt with, it would be right for a ledger clerk first of all to make the entry as though that Harris cheque were being met. That is to say, he would put the name and the amount of it in the debit column and carry out the resulting diminished balance of the customer in the balance column. The cheque would then be put on one side, and, when the end of the banking day arrived, and it was therefore known that there was no cancellation of the stop order, the stop order would be given its full effect and the ledger clerk would go backhaving that evidence of the cheque having been dealt with by the bank in the ledgerdelete that entry, and restore the balance to what in truth it should be that evening. I am invited to believe that the error arose through one or other of the ledger clerks not taking that second step at the close of that banking day. It may be that that is the explanation, but, of course, the witness who was called before me quite rightly told me that, while he was told that that was how it occurred, he could not, of his own knowledge, say that that was what happened, because, of course, he was not the person who actually dealt with the cheque. I think that there was a certain shyness, perhaps understandable, about putting into the box the person who had actually made this extremely stupid and highly dangerous blunder. If the bank, for their own convenience, make one entry at one time in the day which diminishes the customers account, because the customers account is being debited with the amount of a cheque which the customer has stopped, and the bank do that for their own convenience, unless it is put beyond any question of doubt and made a matter of absolute certainty that the second and cancelling entry is made at the end of the day when the stop order is persisted in, the customers account stands in the ledger with the diminished balance, which is a wholly untrue balance, and which may lead to the return of any cheque which ought, in fact, to be met.

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In those circumstances, it is conceded that, in truth, the balance then in the account should have been £9 5s 7d, and I say, in fairness to the plaintiff, that that was a lower balance than had generally been in the account up to then. I do not mean by that that there may not have been an occasion when the balance had been lower than that, but it was a lower balance than had generally been in the account up to then. It is conceded that there was that amount, in truth, in the account, and that there was not any genuine or real reason why the plaintiffs cheque for £2 15s 8d should not have been honoured in accordance with the banks duty to their customer.

That is of importance when one considers this defence of qualified privilege which is raised. It has been said, I think, though at the moment I do not profess to have the authority before meI think it was said by Atkin LJ, in Joachimson v Swiss Bank Corpnthat the relationship of banker and customer is one of debtor and creditor, with the additional feature that there is no obligation on the part of this particular debtor to seek out his creditor and to pay him. His obligation is only to pay this particular creditor when the creditor makes a demand for payment, or directs him to pay either the creditor or some person nominated by the creditor.

When this cheque drawn by the plaintiff was presented to the bank, who were in funds sufficiently to meet that cheque, the duty of the bank was a duty to make payment of the amount of the cheque to the payee of that cheque. The interest of the plaintiff, of the payee of the cheque and of the bankan interest which they had in commonwas their common interest in seeing that that payment was duly met. There was no duty on the bank to make any communication about the cheque to the payee of the cheque, or to the bank collecting on his behalf, unless there was in the occasion some circumstance which made it their duty to make such a communication. Nor was there a matter of interest common to them and the payee and the customer calling for any communication, except and unless there was a circumstance in the occasion which gave rise to such a common interest in the subject-matter of such a communication. In other words, there was no duty to say any such thing as would give a reason why the cheque was not met, unless the occasion was one which necessitated the cheque not being met. If the occasion was one which necessitated the cheque not being dealt with in accordance with the plain duty which arose as between the bank and their customer, then the occasion might arise for the making of a communication to explain or to afford the reason why the cheque was not dealt with in the ordinary way.

It seems to me to be utterly and obviously fallacious to say: “Because we, the bank, have made a stupid mistake, so that we got it into our heads that the occasion was one when the cheque must be returned, therefore the occasion was one when we had to make the communication to explain why the cheque was returned.” One may make a mistake

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in a communication which one makes in good faith on a privileged occasion, and it is an answer, if that mistake is a defamatory one, to say: “The occasion was one of qualified privilege, and I made the mistake, but it was an honest mistake, made in the honest belief that it was true.” However, you cannot, by making a mistake, create the occasion for making the communication, and what the bank seek to do here is to create an occasion of qualified privilege by making a mistake which called for a communication on their part. That is the differencethe essential differencebetween this case and such a case as that which counsel for the defendants was putting in argumentnamely, the case where a person comes to another for a character, or where, in the other example which counsel gave, and upon which he argued, the customer of a bank gives the name of the bank manager as a reference to the person from whom he proposes to rent premises. In either of those examples, when the request for the character is made, the occasion which is qualified privilege is already constituted, and, if, on those occasions, once that occasion has been constituted through the circumstances, there is made a communication which is mistakenly defamatory, subject to the other qualification which I have mentioned, of course, the occasion is one of qualified privilege. The communication is privileged, and no action will lie. In each of those examples, the occasion is already there when the communication is made, and the mistake then is made in the communication truly upon an occasion which is one of qualified privilege. Again, however, in either of those cases given by way of example, it is not the mistake which creates the occasion. It is the occasion which is followed by the mistake.

I have said that because, whether one looks at this matter as one of an occasion where there was a duty to make a communication, or whether one looks at it as one where it was a communication made on a matter of interest common to both parties, exactly the same argument seems to me to lie, and exactly the same kind of reasoning appears to me to be correct. The duty of the bank, being in funds, was to meet this cheque. If they are not in funds, it may well be said, I think, that a duty arose on the occasion to make a communication as to why the cheque was not being met, but, by deceiving themselves into thinking there were no funds, and so creating the occasion, they could not create on their own part a duty to make the communication, the necessity for which had never arisen. Similarly, they were not making a communication on a matter of common interest to them and to the payee of the cheque, because, again, except for their mistake, there was no matter of common interest connected with this cheque which called for a communication. There was a matter of common interest, I should have thought, common to them and to the payee of the cheque and to their customer, if the occasion called for the rejection of the cheque. However, unless the occasion called for the rejection of the cheque, there was no such matter of common interest. The matter of common interest which they

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had with their customer and with the payee, if there were sufficient funds to meet the cheque, was the paying of the cheque.

I think that examples might easily be given to show that that is rightfor example, such a case as Hunt v Great Northern Ry Co, where a railway company had dismissed one of their servants for alleged gross neglect of duty, then published his name, and the reasons for his dismissal, and the fact that he had been dismissed, in a monthly circular addressed to the companys servants. That was held to be privileged, because the occasion of the privilege had already arisen when the company had treated the servant in that way and for those reasons, for, the moment they had treated one of their servants in that way and for those reasons, they had an interest, in common with the rest of their employees, in their employees knowing that one employee had been dealt with in that particular way for that type of behaviour. That is an example which I give because it shows that the occasion which gives rise to the matter of common interest must be existent. It could scarcely have been said, it appears to me, that there was an occasion of common interest between the railway company and its servants in that matter, if the fact had been that the particular servant named never had been guilty of any neglect, never had been dealt with by way of disciplinary action, and never had been dismissed. Thus, I think, it is quite plain and beyond doubt that this plea of a privileged occasion and a privileged communication made upon that occasion fails. I turn, therefore, to the question of damages, which is the only question remaining to be dealt with.

Here was a plaintiff who was carrying on business as a credit bookmaker. I sit here to act both as juror and as judge in arriving at the right measure of damages. It is conceded that, by writing these words on a cheque for a very small amountnamely, £2 15s 8dthe bank were certainly imputing that the plaintiff, a credit bookmaker, was drawing a cheque on an account which had not £2 15s 8d in it. I cannot imagine anything much more damaging to a credit bookmaker than a statement which suggests that he cannot meet a cheque for £2 15s 8d if the backer has won from him in bets on a credit basis as much, or as little, as £2 15s 8d. I should think that there was hardly any other business which is more sensitive on the subject of its credit than that of a credit bookmaker. No backer is going to bet, hoping, as he always does, that on this occasion he has selected at long odds a horse which is going to win and bring him a good deal of money for a comparatively small stake, if he thinks that the credit bookmaker is a person who could not meet a cheque for £2 15s 8d, but who might none the less send him a cheque for £2 15s 8d which was going to be returned.

Mark, to whom this cheque was made payable, has told me that the bank official called upon him and told him that this was a mistake at the bank. I have seen and heard the inspector of the bank who paid

Page 324 of [1940] 1 All ER 316

that visit to Mark, and I have had the advantage of hearing the account of that interview from each of them, given as well as he can restate it to me. Mark said that, when he was told that, it was true that the inspector expressed the hope that, now Mark had heard that it was the mistake of the bank, he, Mark, would go back to do business again with the plaintiff. However, Mark told me that he said that he would rather not, because it made him begin to think that the plaintiffs financial circumstances were not such as he had thought, and not such as would lead him to do business with the plaintiff as his credit bookmaker. When he was cross-examined further, he said that the fact was that he had always thought that banks could not make a mistake, and obviously Mark was one who wanted a lot of persuasion to believe that a bank could make a mistake such as this. These defendants, at any rate in this court and in this action, have demonstrated that a bank can make such a mistake. Mark doubted if they could make such a mistake unless the plaintiff was in a very different position financially from what he supposed. I have not any reason to doubt that those observations were made by Mark, and were honest. They do not seem to me to be wholly unlikely views for a man in his position to have formed. It does not seem to me to be unheard of that a man should hold very strongly what has perhaps become an old-fashioned faithnamely, the belief that banks do not and cannot make mistakes in their customers accounts as mere matters of book-keeping.

Parfait, another customer, was called, and he said that he worked on a commission. He laid off bets and worked as between bookmakers and backers on a very narrow margin. He heard about this from a conversation with Mark, and he has done no business with the plaintiff since, because he would not run the risk.

Those are just examples, of course, of the way in which, in a business like that of a credit bookmaker, once there is a breath of suspicion affecting his credit, it has immediate consequences. I am not overlooking the fact that publication here was made, of course, to the collecting bank and to Mark, the customer for whom the collecting bank was presenting the cheque, but I also am not overlooking the fact that, though the bank sought an interview, and by word of mouth stated that a mistake had been made, when complaint was made to them in this matter by way of letter there was no acknowledgement of a mistake, and no letter acknowledging a mistake has, indeed, ever been written, nor is there put on the record of this court any acknowledgement of a mistake, so that the plaintiff is left without anything in writing binding the bank, which he can ever produce to anyone who has heard about this matter, to show that the bank, in truth, have made a mistake. Moreover, there seems to me, if I may say so, to have been a very pronounced shyness on the part of the bank about leaving a trace anywhere in writing on their behalf that they have made a mistake. When their own inspector called upon Mark, he had a great deal of difficulty in persuading Mark

Page 325 of [1940] 1 All ER 316

to abjure his faith in the infallibility of bank book-keeping, or to persuade Mark that in truth it arose by a mistake on the part of the bank. I wonder what chance the plaintiff himself, whose cheque was returned, has of ever persuading some other person who has heard of the matter to believe that it was the mistake of the bank, and not his error in drawing the cheque on an account which had not sufficient funds in it to meet the cheque.

However, I put that matter for the moment from my mind. Nevertheless, those are some of the results which follow in truth in the natural course from a libellous statement made without justification. It is all very well to say that a person calls round and has an interview with the individual who above all others was the first to whom the publication was made. Anyone in the business knows that such a thing as this, once it is done, is not confined to the person who immediately receives the information. Substantial damage is done, for the very good reason that nothing about a man travels so fast as that which is to his discredit. However, what I have to do is to say, having regard to the publication of the libel which I find, and having regard to the evidence, what is a proper sum to be given as a reasonable compensation for the injury which has been done to the plaintiff, and of course it must be sufficient to mark beyond a shadow of doubt the complete lack of justification for making the aspersion which was made by this means on the plaintiffs credit. I think that the right sum by way of damages is £250, and there must be judgment for the plaintiff for £250.

Judgment for the plaintiff for £250 with costs.

Solicitors: Kingsbury & Turner (for the plaintiff); Durrant Cooper & Hambling (for the defendants).

W J Alderman Esq   Barrister.

Canter v Gardner & Co Ltd and Another

[1940] 1 All ER 325


Categories:        TORTS; Negligence, Tortious Liability        

Court:        KINGS BENCH DIVISION        

Lord(s):        TUCKER J        

Hearing Date(s):        13, 14 DECEMBER 1939        


Negligence Building in course of construction Liability of contractors and subcontractors Hole made by contractors in part later under exclusive control of subcontractors left by them in safe condition.

The plaintiff, an employee of a subcontractor, was injured by falling into a hole in the floor of the basement of a building in course of erection. The hole had been made by the main contractors, the second defendants, and left for the purposes of the first defendants, who were subcontractors for the ventilation work under a contract from a firm who were themselves subcontractors. The hole was left in a safe condition, but, owing to the removal of some trunking, became unsafe about 2 days before the accident. It was not known who removed the trunking. The plaintiff sued both the defendants in negligence, with separate and alternative claims against each defendant:

Held (i) the head contractors were not in control of the hole at the material time, and, there being no evidence that they ever became aware of the danger, they were not negligent.

Page 326 of [1940] 1 All ER 325

(ii) the subcontractors were not liable, as they had left the hole in a safe condition and had no knowledge of the danger which had been created by the removal of the trunking. It was not part of their duty to anticipate the creation of such a danger.

Notes

The present case differentiates the duty of the head contractor and that of subcontractors. Where the head contractor has given over the exclusive control of part of the work to a subcontractor, he ceases to be liable to employees of subcontractors for the dangerous condition of that part. The subcontractor, on his part, is responsible for the condition of part of the premises placed in his control, but, if, having carried his work as far as he can, he leaves it in a safe but not finally finished condition, by reason of the fact that other subcontractors have work to do there, then it is not his duty to anticipate that some person or other may come along and render unsafe that which he has left safe. Nor is he under any obligation periodically to inspect the work to see that it is still safe.

As to Duty to Invitees, see Halsbury (Hailsham Edn), Vol 23, pp 604, 605, para 853; and for Cases, see Digest, Vol 36, pp 4145, Nos 247281.

Cases referred to

Howard v Farmer & Son Ltd [1938] 2 All ER 296; Digest Supp.

Indermaur v Dames (1866) LR 1 CP 274; 36 Digest 35, 208, 35 LJCP 184, 14 LT 484, affd (1867) LR 2 CP 311.

Kimber v Gas Light & Coke Co [1918] 1 KB 439; 36 Digest 18, 83, 87 LJKB 651, 118 LT 562.

Action

Action for damages for personal injuries alleged to be due to the negligence of one or other or both of the defendants. The facts are fully set out in the judgment.

P L E Rawlins for the plaintiff.

Montague Berryman for the first defendants.

D P Maxwell Fyfe KC and B L A OMalley for the second defendants.

14 December 1939. The following judgment was delivered.

TUCKER J. This is a claim by the plaintiff, Robert William Canter, against two defendants. The first defendants are J Gardner & Co Ltd, and the second defendants are Demolition and Construction Co Ltd. The claim, which is based on the negligence of the defendants, is against both, or one or other, of them for damages for personal injuries which the plaintiff suffered on 16 November 1938, when he was working on a block of flats at Porchester Gate, Bayswater Road, which were in course of construction. The plaintiff was a workman employed by the firm of Marryat & Scott Ltd, who were engaged as subcontractors in the installation of lifts at the premises. The second defendants, Demolition and Construction Co Ltd, were the main contractors for the erection of this block of flats. The first defendants, J Gardner & Co Ltd, were sub-subcontractors. That is to say, the second defendants had subcontracted the ventilation work at the building to a firm called Scull & Co, who had again subcontracted to J Gardner & Co Ltd, the first defendants in this action.

On 16 November 1938, at about 2.30 pm, the plaintiff went to these premises to do some work in connection with the installation of the lifts

Page 327 of [1940] 1 All ER 325

by his employers, Marryat & Scott Ltd. It was his first visit to the building, and he was not familiar with it. On his arrival, he had occasion to go into the basement to fetch a split pin from the charge hand who was working there. He went across the length of the basement, got the split pin that he required from the charge hand, and then returned by a slightly different route. On his return, he stepped into a hole about 2 ft deep and about 2 ft 6 ins square, with the result that he broke a bone in his foot. He was then unfit for work until July 1939, when he became fit for light work. He is not yet fit to resume his full heavy work, which entails working on ladders, and there is some conflict in the medical evidence as to whether or not he will ever be fit for doing such heavy work as that.

The facts are these. On 16 November, the lighting in this basement was dim, but I am satisfied that it was adequate for all the ordinary and normal work which was being done in the basement. I am satisfied that there was no difference between the lighting in that basement on 16 November and the lighting which there had been during the previous four or five months during which the work had been going on, except, of course, that some days are lighter than others. There was no evidence that 16 November was a particularly bad day. I am satisfied that the lighting, although dim, was adequate for the performance of the work of the various subcontractors being performed down there. There was evidence that any subcontractor who desired more light could obtain it, and there was some evidence that on one occasion one subcontractor had required some further light. In saying that the lighting was adequate, I do not mean to say that the lighting was adequate if anybody had known that there was an unguarded hole in the basement. I am only saying that, in my view, the lighting was adequate for the proper performance of the work which was being done there. It was dull, however, and, to anybody unfamiliar with the place who had to pick his way about, it was no doubt somewhat difficult. There were piles of material there, as one would expect to find in a building in course of erection, and, indeed, there were various subcontractors working down there.

The hole into which the plaintiff fell had originally been made by the second defendants, and was left in the floor because it was required later on by the first defendants, J Gardner & Co Ltd. They required a hole to be left in the floor into which they could insert material called trunking, which was to be used as shafts in connection with the installation of the ventilating system. That hole having been made and left by the second defendants, Demolition and Construction Co Ltd, it is not material for me to find in what condition it was left at any time prior to 3 November. The evidence is that it was covered over with some boards, but I do not think it is material to me to investigate as to what the condition of that hole was prior to 3 November, because on 3 November the first defendants, J Gardner & Co Ltd, took over the hole,

Page 328 of [1940] 1 All ER 325

so to speak. That is to say, they proceeded to put into it the trunking in connection with the ventilating system. Having put that trunking in, they then discovered that they could not complete the whole job and connect it up with some other trunking which was going to run in a horizontal position along the ceiling, because they were told that the electricians were going to be working there, and that the trunking would interfere with them. The vertical piece of trunking was left in this hole. It was projecting about 6 ins below some flanges which protruded and rested upon some boards, and there was some angle iron, which left a gap of about 6 ins round three of the four sides of this square trunking. Then it went up towards the ceiling, and it was affixed to a pipe on the wall or the ceiling. It was affixed by a rope tied round on to a pipe, and it was left in that position.

That was admittedly a temporary operation, in the sense that it was not intended to be permanent, and at some future time, when the electricians had finished their work, the employees of J Gardner & Co Ltd, would return to that trunking and finish the work. In the meantime, it effectively filled this hole in the position in which it was placed and with the boards round it. If it had remained in that position, I am satisfied that the hole into which it was placed would have been no danger to anybody. However, it did not remain in that position, but, at some date prior to 16 November, came out of position. On 16 November there was nothing in the hole. The trunking was lying adjacent to the hole, and there was some indication that it had been dented slightly at the end. There is no evidence as to when it came out of the hole, except that the general foreman of the second defendants said that it had been in position in this hole about two days prior to the accident. It had apparently remained in position from 3 November until 13 November or 14 November. Some time between 13 November or 14 November and 16 November it had come out, and there was this open hole remaining into which the plaintiff stepped.

It is said that those facts disclose negligence on the part of both defendants, or on the part of one or other of them. The negligence alleged is set out in the statement of claim, and I think it is necessary, particularly in a case of this kind, to see precisely what is the negligence which is alleged. The same negligence is alleged against both defendants, and it is as follows:

(a) in causing or permitting a deep hole to be made in the floor of the basement. (b) in failing to fence or guard the said hole. (c) in failing to give warning of the presence of the said hole. (d) in failing to provide adequate lighting in the neighbourhood of the said hole. (e) in removing from the said hole the boards which guarded the same or in failing to secure that the same should remain in position. (f) in permitting the said hole in the said premises to be in such a position and/or condition as to amount to a concealed danger or trap to persons lawfully using the said premises.

It is necessary to ascertain the precise duty which is owed by persons in the position of these defendants to a man in the position of the plaintiff. I take first the case of the second defendants, Demolition and Construction Co Ltd. I think that the position of

Page 329 of [1940] 1 All ER 325

head contractors in a case of this kind is to be found in Howard v Farmer & Son Ltd. In that case, the headnote is as follows:

The plaintiff was a workman engaged in building operations. The first defendants were the general contractors, and the second defendants were subcontractors engaged in putting in the staircase in a new building. At the material time, there was a ladder (provided by the general contractors) from the ground up to the second floor, but no ladder from the ground to the first floor. The subcontractors had put in a staircase from the ground to the first floor, which was incomplete in the following respects. … The plaintiff, almost immediately before the accident, had gone up this staircase without mishap, which he explained by saying that he went up two steps at a time, but, upon coming down, his foot slipped through the hole due to the missing tread, and he was seriously injured:

Held: (i) the plaintiff had no cause of action against the subcontractors, as the staircase was obviously incomplete.

(ii) the absence of a ladder from the ground to the first floor was not in effect an invitation to workmen to use the incomplete staircase.

(iii) the contractors had no power to invite or license any person to use the incomplete staircase, which could only be done by the subcontractors.

(iv) the accident was due to the plaintiffs own want of care, and the action failed.

When one reads the judgment in that case, I think it becomes apparent that, although head contractors in cases of this kind are, generally speaking, in the position of invitors to the workmen of subcontractors working on the premises, they cease to be in that position when any part of the premises is given over into the exclusive control of the subcontractors who are working there. This case of Howard v Farmer & Son Ltd was a case where, on the facts, it was quite easy to see that the particular staircase which was being erected by the subcontractors had passed into their exclusive control.

The case with which I have to deal is not such a clear case as that, but I think that the duty of an invitor exists in the case of a head contractorat any rate, as regards those portions of the building in which he remains in occupation and control. It is not necessary for me to decide what duty he owes in the case of some danger arising on some part of the premises of which he is not in control, when he becomes aware of the existence of that danger. In this particular case, there is no evidence that the second defendants ever became aware of the dangerous condition of this hole as it existed from about 13 November or 14 November until 16 November, but I am satisfied that, as from 3 November, they were not in control of this particular hole which they had previously made in the floor and left for the subcontractor. Therefore, I do not think that, between 3 November and 16 November, they owed the duty which is owed by an invitor to an invitee in respect of premises in the occupation and control of the invitor when the invitee is there on the invitors invitation.

As I have said, it is not necessary for me to decide what the position would be if, during that period, although the head contractors were not in actual control of the part of the premises which is described as being dangerous, none the less they knew that that part of the premises had become dangerous, and took no steps to warn persons who they knew would be lawfully using that part of the premises.

If that is the correct position, I do not think it is material in this

Page 330 of [1940] 1 All ER 325

particular case whether the duty of an invitor is, as laid down in Indermaur v Dames, the duty to prevent damage from unusual danger he knows or ought to know, or whether his duty is to take reasonable care to see that the premises are reasonably safe, because, whichever is the standard, I do not think that, from 3 November, the duty existed. If I am wrong about that, and the duty continues, then the only suggested negligence, in my view, would be that there had been some failure properly to inspect this part of the premises and so ascertain that the trunking had been left in a dangerous condition, or that there should have been such an inspection as would in fact have revealed that there was an open hole there for some unspecified period prior to 16 November, when the accident happened. With regard to that, it is to be observed that there is no allegation in the pleadings of such breach of duty, and I do not think that there is a duty on the part of the head contractor to go round inspecting the work of every subcontractor which is, apparently, on its face, in proper condition, and not obviously dangerous. I think that, if any duty remained on the head contractors after 3 November, there was no breach of that duty in failing to inspect thoroughly this trunking which they saw in position. Nor do I think that there was negligence in inspecting or going round that basement only once every two or three days, as the head foreman said he did. However, as I have indicated, there is the further obstacle that no such amount of negligence is alleged in the pleadings. Therefore, I think that, as against the second defendants, the head contractors, this action fails.

With regard to the first defendants, J Gardner & Co Ltd, the position, I think, is more difficult. With regard to them, the case is really put in this way. It is said that they were the cause of this open hole on 16 November. That is true, of course, in the sense that it was the fact that their trunking had been displaced which caused the accident to happen. In my view, however, in order to succeed against the first defendants, the plaintiff must establish either that this trunking was negligently affixed to the pipe or that there was some duty on the part of those defendants to inspect it from time to time, however securely it had been originally fixed, to see that nobody was interfering with it deliberately and wilfully. There again, neither of those specific allegations of negligence appears in the statement of claim, but, assuming that they are covered by the allegations of negligence, I will proceed to deal with them, although I do not think that they are covered by the allegations of negligence. The uncontradicted evidence is that this trunking was secured in the way I have described, by the rope to a pipe, and was standing in the hole in the way I have already indicated. The two men who put it in that position were named Pete and McCarthy. Pete was a fitter, and he said this:

I tied the top of the duct to the pipe with a piece of rope. The bottom was in the hole. At the floor-level there was an angle iron in position. I left it firmly in position. We placed boards covering up the gaps to 6 ins. at their sides. We left the basement and worked on the upper floors.

Page 331 of [1940] 1 All ER 325

He said that the trunking was firmly fixed. He knew nothing about the accident till January, although he was working in other parts of the building until after Christmas. He said that the trunking could not have fallen in the position in which they left it, and that it must have been untied by somebody. He also said that it was a temporary job. That was admitted to be so, because the men were going to come back later to finish the demolition. McCarthy said:

We fixed boards round the bottom and also tied it with rope at the top.

In cross-examination, he gave this answer:

We expected to be away about an hour. If we had known we should be away for three weeks, we should not have left it like that.

That, I think, wants careful consideration. Am I to say that, because of that answer, the whole of the rest of the previous evidence of this witnessnamely, that he had sworn that it was safely and securely fixedis nullified? He does not say why they would not have left it like that if they had known they were going to be away for three weeks, and I do not think that, in the absence of any other evidence to the contrary, I ought to draw from that one answer the inference that it had been insecurely and negligently fixed on 3 November. It is to be observed that, although it may be difficult for a plaintiff to prove his case, none the less that is his duty in law. There has been no evidence at all with regard to this rope, or with regard to its having been insecurely fixed, except for this one answer of Petes mate in cross-examination, and I do not feel justified in coming to the conclusion that that one answer nullifies his previous evidencewhich stands uncontradicted by any other evidencethat the trunking was securely fixed, that it was safe, and that it must have been untied by someone else. As I say, no evidence was given as to when it fell, as to what the condition around the hole was after it had fallen, or as to what had caused it to fall. Those matters remain wrapped in mystery, and I do not think that I am justified in drawing the inference that, merely because it did not fall after it had been up for about a fortnight, it must have been negligently or insecurely fixed, when two men have sworn to the contrary.

Then it is said that they should have anticipated some possible or probable deliberate interference by some other subcontractors or by some other person using that basement. There, again, there is no evidence to show whether or not it was deliberately done by somebody else. There is no evidence at all to show how it became dislodged, and I do not think that it is negligence on the part of the subcontractor to leave something in this condition, assuming it to have been securely fixed, because he must be taken not to anticipate that some other subcontractor would deliberately remove what he has left securely fixed, and further, having deliberately removed it, would then fail to replace it and would leave a dangerous unguarded hole. I cannot persuade myself that the duty is as high as that, or that there is any duty on them

Page 332 of [1940] 1 All ER 325

to pay a daily visit of inspection, always assuming that the trunking had been firmly and adequately put in position originally.

I think that the duty of the subcontractors, J Gardner & Co Ltd, is a duty somewhat different from that owed by the head contractors, who are in the position of invitors. It seems to me that the duty owed by one subcontractor to the employees of another subcontractor is similar to the duty which was found to exist in Kimber v Gas Light & Coke Co. In that particular case, it was only necessary to say what the law was with regard to the case where the defendants actually knew of the existence of a danger which they had themselves created. Pickford LJ, as he then was, said, at pp 443, 444:

The real point made by the defendants is that, as there was no negligence in making the hole and leaving it unfenced, they were under no duty to the plaintiff to warn her of its existence, as they wore not occupiers of the house and did not invite or license her to enter it, and that therefore the second finding of the jury cannot be supported. The defendants by their servants were not in occupation of the house, but they had sufficient control of it by the licence or invitation of the owner and tenant to justify them in making a hole in the flooring for the purposes of their work. I do not think that they invited or licensed the plaintiff to come upon the premises, and I attach no importance to the fact that the defendants workmen opened the door and told the plaintiff which part of the house was to let except that it informed them that she had come by the licence of the tenant to inspect the premises, and that she was going directly to the landing in which they had made the hole. They of course know the conditions as to lighting and otherwise which existed on the landing. If they had known that persons were likely to come to the premises for lawful purposes I think they would have been negligent in making and leaving a hole which under the circumstances would be a concealed danger to such persons unfenced and without warning. … In this case they had no reason to expect such persons to come, and therefore the making of the hole was found by the jury not to be negligent, nor was the leaving it unfenced, up to a point, negligent. But when the workmen let the plaintiff in and knew that she was there lawfully by the licence of the tenant and was going to the very landing where the dangerous hole was, I think that the same principle applies.

In the same case, Bankes LJ said, at p 445:

If a person creates a dangerous condition of things (something in the nature of a concealed trap), whether in a public highway, or on his own premises, or on those of another, and he sees some other person who to his knowledge is unaware of the existence of the danger lawfully exposing himself or about to expose himself to the danger which he has created, he is under a duty to give such person a warning. There may be cases in which the duty exists though actual knowledge of the danger may not be brought home to the person charged with negligence. It is not necessary for the purpose of the present case to discuss the rule except in the simplest form.

In the case with which I have to deal, the case is not in its simplest form, because this is not a case where the first defendants had actual knowledge that a person was going to expose himself to an existing danger, or that in fact the danger existed. None the less, I think that, if they had known that they had not left this trunking securely fixed, it would have been their duty to take steps to prevent an accident, by warning or otherwise, without knowing that persons were lawfully using the basement. I think that the duty as laid down in Kimber v Gas Light & Coke Co would extend to the first defendants, although this is not a case like Kimbers case, where they actually saw the man, so to speak, walking straight towards the danger. For the reasons which I have already given, I feel that the plaintiff has failed to establish

Page 333 of [1940] 1 All ER 325

negligence on the part of either of the defendants in this case, and that, therefore, the claim fails. There must be judgment with costs for both defendants. I assess the damages at £750 in case of appeal.

Judgment for both defendants with costs.

Solicitors: Rowley Ashworth & Co (for the plaintiff); Carpenters (for the first defendants); William Easton & Sons (for the second defendants).

W J Alderman Esq  Barrister.

Re T H Downing & Co Ltd

[1940] 1 All ER 333


Categories:        COMPANY; Shareholders        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        24 JANUARY 1940        


Companies Scheme of arrangement Priority of preference shareholders in company as originally constituted No express words taking away priority Construction of scheme.

A scheme of arrangement and reconstruction must be construed as not altering existing rights unless the language of the scheme and the new articles of association giving effect to it are such as to compel that interpretation.

Notes

It was here contended, and had been held in the court below, that it was necessary to find in the language of the scheme some recognition of the continuance of the existing rights of priority, but the Court of Appeal has decided that this is a wrong view of the onus of proof. The language of the scheme must be such as to compel the court to come to the conclusion that such rights are taken away. In no other circumstances can an implication of the loss of existing rights be made.

As to Construction of Scheme of Arrangement, see Halsbury (Hailsham Edn), Vol 5, p 797, para 1366; and for Cases, see Digest, Vol 10, p 1059, Nos 7412, 7413.

Appeal

Appeal by a representative preference shareholder in a company from an order of Bennett J, dated 6 November 1939. The facts are fully set out in the judgment of the court delivered by Scott LJ.

W P Spens KC and A F Maurice Berkeley for the appellant, a preference shareholder.

D Ll Jenkins KC and W Gordon Brown for the respondents, ordinary shareholders.

M L Gedge for the liquidator.

Spens KC: This appeal depends upon the construction of certain resolutions passed in 1933 and of a scheme of arrangement made in 1937 in pursuance of those resolutions. The resolutions admittedly attach definite priority of repayment of capital to the then preference shareholders. If that be right, the scheme of arrangement passed in pursuance of the 1933 resolutions has not deprived the preference shareholders of that priority. The scheme of arrangement retained part of the original preference capital as preferential, and converted the remainder of it into ordinary shares. That part of the preference shares which remained preferential was not affected by the scheme of arrangement.

Page 334 of [1940] 1 All ER 333

Unless there is something which clearly deprives the preference shareholders of their rights, the preference must remain. The alteration of the dividend rights does not take away the rights concerning priority of capital. There is nothing which deprives the preference shareholders of their priority. If one is to be deprived of rights, this must be done in terms which one understands. It cannot be done in an ambiguous manner. The impairment of shareholders rights cannot be implied unless the language is such as to require that interpretation.

Jenkins KC: Resolutions were passed to obtain certain results, but there was no creation of new capital. The shares dealt with in the resolutions were part of the original capital. The preference shares were reduced from £1 to 10s, and their name was altered. The preference shareholders were given some ordinary shares to compensate them. A new article was inserted in the articles of association, and that new article states what the capital will be on the new scheme coming into operation. It sets out the capital in a form in which it had not previously existed. The question is not a question of preserving the rights of the preference shareholders, but one of giving them new shares. The whole tenor of the scheme is directed to an entire reorganisation of the capital. The preference shares have become preference shares of a new type, because the new article is intended to define the rights attached to the shares.

W P Spens KC and A F Maurice Berkeley for the appellant, a preference shareholder.

D Ll Jenkins KC and W Gordon Brown for the respondents, ordinary shareholders.

M L Gedge for the liquidator.

24 January 1940. The following judgment was delivered.

SCOTT LJ (delivering the judgment of the court). This is an appeal from a judgment of Bennett J, on a summons in respect of the winding up of a company called T H Downing & Co Ltd. The object of the summons taken out by the liquidator was to obtain a determination by the court as to whether or not the preference shareholders, after a scheme of arrangement had been adopted, were entitled to priority over the ordinary shareholders in respect of repayment of capital out of the assets in the winding up. Counsel for the class of preference shareholders submitted to us that the decision of the judge that the preference shareholders had lost their priority in distribution of capital was wrong. He submitted that it was wrong because, even assuming that the express language of the scheme of arrangement and the new articles passed as part of the scheme of arrangement did not quite clearly and expressly recognise the continuance of the preference shareholders old right of priority in regard to repayment of capital, it would be wrong to interpret the articles as taking away that right, unless the language was such as to compel that interpretation. The judge was not satisfied that the language did, on its fair interpretation, actually recognise the right as continuing, and, because he was not able to find express words continuing that right, he felt obliged to come to the conclusion that the right was taken away. In my opinion, and in the opinion of the whole court, that conclusion was erroneous.

In order to deal with the matter, it is necessary to go back a little

Page 335 of [1940] 1 All ER 333

in the history of the company in order to see how the position came about which resulted ultimately in some modifications of the rights of the preference shareholders in 1937. The history begins in 1933 with three resolutions passed at that time. The first was that the

… meeting of the holders of the 8 per cent. cumulative preference shares of the company hereby sanctions on behalf of all the holders of the said shares the reduction of the capital of the company, the increase of the capital of the company, the variation or alteration of the rights attached to the said shares and the alteration of the articles of association of the company proposed to be effected by the resolutions set forth in the notice convening an extraordinary general meeting of the company for June 8, 1933, … and hereby sanctions on behalf of all the holders of the said shares every variation or alteration of the rights attached to the said shares intended to be effected by the said resolutions.

Then there was a similar extraordinary resolution passed by the holders of the 10 per cent cumulative preference shares, and a similar resolution was passed by the holders of the ordinary shares. Then the following resolutions were passed:

(2) That the capital of the company be reduced from £750,000 divided into 390,000 8 per cent. cumulative preference shares, 120,000 10 per cent. cumulative preference shares, and 240,000 ordinary shares all of £1 each, to £676,666 13s. 4d. divided into 380,000 8 per cent. cumulative preference shares of 16s. 8d. each, 120,000 10 per cent. cumulative preference shares of £1 each, and £240,000 ordinary shares of £1 each, and that such reduction be effected (i) by returning to the holders of the 380,000 8 per cent. cumulative preference shares of £1 each which have been issued and are fully paid up capital to the extent of 3s. 4d. per share (being paid up capital in excess of the wants of the company), and by reducing the nominal amount of each of the said 380,000 issued 8 per cent. cumulative preference shares from £1 to 16s. 8d., (ii) by cancelling the 10,000 8 per cent. cumulative preference shares … That upon such reduction of capital taking effect the capital of the company be increased to £750,000 by the creation of 88,000 new shares of 16s. 8d. each, and that there be attached to the said 88,000 new shares of 16s. 8d. each and to the existing 380,000 8 per cent. cumulative preference shares (which said 88,000 and 380,000 shares shall be known as and called “A” cumulative participating preference shares) and to the existing 10 per cent. cumulative preference shares (which said shares shall be known as and called “B” cumulative participating preference shares), and to the ordinary shares in the capital of the company the rights as to dividend and on a winding up following, that is to say: The profits of the company which it shall from time to time be determined to distribute by way of dividend shall be applied … Thirdly, the balance of such profits shall be distributed as to 25 per cent. thereof to the holders of the “A” cumulative participating preference shares and to the holders of “B” cumulative participating preference shares pari passu as if the same constituted one class of shares and according to the amounts paid up on shares held by them respectively, and as to 75 per cent. thereof to the holders of the ordinary shares according to the amounts paid up on such shares held by them respectively … In the event of the company being wound up the surplus assets available for distribution amongst the members shall be applied: (i) in paying to the holders of the “A” cumulative participating preference shares then issued and outstanding the amounts for the time being paid up on such shares held by them respectively …

I need not read the rest of that resolution. Then there is a resolution in regard to the “B” shares, which I need not read, and there is a resolution in regard to paying the holders of the ordinary shares. Then it was resolved as follows:

Fourthly, the balance, if any, shall be distributed among the holders of the ordinary shares in proportion to the amounts paid up on such shares held by them respectively.

Then in 1937 it was decided that a reconstruction was desirable in accordance with the terms of a scheme of arrangement, and, under the

Page 336 of [1940] 1 All ER 333

document containing the scheme, which was duly passed between the company and the holders of the “A” and the “B” cumulative participating preference shares and the ordinary shares, there was an introductory part stating the existing position in regard to the numbers issued and held, and it recited in para 5 of that introductory part that the

… holders of the 6 per cent. “A” cumulative participating preference shares are entitled on a winding up in priority to all other shares to repayment of the capital paid up or deemed to be paid up thereon together with any arrears or deficiency of the fixed cumulative preferential dividend on such shares calculated down to the date of the commencement of the winding up …

Then para 8 said that the fixed preferential dividend on the 380,001 issued 6 per cent “A” shares, and the fixed preferential dividend on the 7½ per cent “B” cumulative participating preference shares was in arrear. I will just mention that the figure of 380,001 was due to the fact that the 380,000, to which I have already referred in reading the previous resolutions, remained, and that one only of the additional 88,000 preference shares of that class had been issued.

Then comes the scheme. By the scheme, in para (A), it is provided that all arrears of dividend on both classes of preference shares:

… shall be cancelled and the capital of the company shall be reconstituted and rearranged so that the issued capital shall consist of 380,001 6 per cent. non-participating cumulative preference shares each of 10s. [instead of the 16s. 8d. which the “A” shares had at that time represented] ranking for dividend from Feb. 1, 1937 (which [10s. cumulative preference shares] will be retained by the holders of the present 6 per cent. “A” cumulative participating preference shares) [that is, the 380,001 shares] and 1,820,868 ordinary shares of 5s. each which will be held as to 791,668 by the holders of the 6 per cent. “A” cumulative participating preference shares, as to 626,177 by the holders of the present 7½ per cent. “B” cumulative participating preference shares and as to 403,023 by the holders of the present ordinary shares, and the unissued capital shall consist wholly of 5s. ordinary shares. Such reconstitution and rearrangement shall take effect as from the adoption of this scheme by the company and shall be effected by the following operations …

Of the “following operations” I do not think I need read any except (B), (C), (E) and (H). Para (B) of the scheme provides as follows:

Each of the issued 380,001 6 per cent. “A” cumulative participating preference shares shall be subdivided into one 6 per cent. cumulative preference share of 10s., one share of 5s. and one share of 1s. 8d. The shares of 1s. 8d. each resulting from this subdivision shall be consolidated into 5s. shares.

To put it into different language, that meant that each £1 preference share was to be reduced to a preference share of 10s, other things being equal, plus one and one-third 5s shares, so that 3 preference shares would command 4 of these additional shares, as well as the 3 rights of 10s on each of the cumulative preference shares. Then the “B” shares, by para (C), were to be subdivided into 4 shares of 5s each, and each of those 5s shares was to be converted into ordinary shares. Then para (E) provides as follows:

All the issued capital except the said 380,001 10s. 6 per cent. cumulative preference shares shall be consolidated into a single class of ordinary shares and all the unissued capital shall be consolidated and subdivided into a single class of 5s. ordinary shares.

Page 337 of [1940] 1 All ER 333

Thus, although the shares in para (B) which were to be attached to each of the cumulative preference shares of 10s were only called “shares” there, they were going to become ordinary shares. Then para (H) provides as follows:

The articles of association of the company shall be amended as follows: (i) an article shall be inserted after art. 2 [the definition article] in the following terms: “2 A (a) The authorised capital of the company is £750,000 consisting of 380,001 6 per cent. cumulative preference shares each of 10s. and 2,239,998 ordinary shares of 5s. …”

The whole of the preference shares had been issued, and the number I have already mentionednamely, 1,820,868 ordinary shareshad already been issued. Then para (H) continues as follows:

“… (b) The 6 per cent. cumulative preference shares shall as from Feb. 1, 1937, up to Jan. 31, 1939 [two years], carry the right to receive out of any profits which it shall be determined to distribute a non-cumulative preferential dividend at the rate of 6 per cent. per annum and from and after Feb. 1, 1939, shall carry the right to a fixed cumulative preferential dividend at the rate of 6 per cent. per annum on the amount credited as paid up thereon and in the event of a winding up to repayment of the capital credited as paid up thereon and to all arrears (if any) of the said cumulative preferential dividend accrued due to the date of such winding up whether the same shall have been declared or not and whether or not profits have been made out of which such dividend could have been declared but such shares shall not carry the right to any further participation in profits or assets.”

The question in this case turns upon an interpretation of the previous resolutions in 1933 and of this scheme, including the amended articles which are covered by para (H) of the scheme. Under the Companies Act 1929, s 10(2), it is provided that any alteration or addition made by special resolution shall:

… subject to the provisions of this Act, be as valid as if originally contained therein [that is, in the articles of association] and be subject in like manner to alteration by special resolution.

The effect of that is that the special resolutions so passed operate as an amendment of the articles of association, and, for that reason, by s 118(2) of the Act, a copy of every such resolution is to be annexed to every copy of the articles issued after the passing of the resolution. Therefore, when the scheme of arrangement was adopted on that day, and also before its adoption, those resolutions of 1933 were a part of the articles, and the scheme must, therefore, be interpreted on the principle that it is to be applied to the articles as incorporating those provisions contained in the special resolutions of 1933. The first principle which seems to me to be applicable is that in a scheme of arrangement and reconstruction it is not right to imply an alteration of existing rights of any class of shareholders unless the words compel that implication. If an express alteration is made, cadit quaestio, but, if an express alteration is not made, then it ought not to be implied unless, taking as a whole the language of all the relevant provisions in the scheme and the articles, the court is obliged to come to the conclusion that that is clearly intended. That is a principle of our law which is of general application, and it is frequently applied to the interpretation of statutes, and particularly

Page 338 of [1940] 1 All ER 333

so in regard to taxing statutes, but there is no special rule about the taxing statutes which really differs, except from the point of view of the subject-matter, from the general rule, and that general rule applies here. At the moment before this scheme was adopted, it is quite clear that the preference shareholders in question had an absolute right in a winding up to priority over the ordinary shareholders in respect of repayment of their capital, and, unless the words are sufficient to take away that right, it is our duty to construe the alterations made by the scheme of arrangement at that time as not taking them away at all. It is argued that cl H, para (b), of the scheme ought to be construed as taking them away. In my opinion, that argument is fallacious, on the ground that there is nothing in the words of that particular para (b), or in anything contained in the document which is called the scheme of arrangement, or in the scheme itself, which compels that interpretation, an interpretation which, in itself, would seem to me to be, from a business point of view, a most improbable change for the preference shareholders to have accepted. The words upon which counsel for the ordinary shareholders chiefly relies are the words in the latter half of that para (b). In order to appreciate the latter half of para (b), I will read again the first half of it:

The 6 per cent. cumulative preference shares shall as from Feb. 1, 1937, up to Jan. 31, 1939, carry [certain dividend rights] and after Feb. 1, 1939, shall carry the right to a fixed cumulative preferential dividend at the rate of 6 per cent. per annum on the amount credited as paid up thereon [that is, the 10s.] and in the event of a winding up to repayment of the capital credited as paid up thereon and to all arrears (if any) of the said cumulative preferential dividend accrued due to the date of such winding up … but such shares shall not carry the right to any further participation in profits or assets.

Counsel for the ordinary shareholders contends that those last words which I have just readnamely, “shall not carry the right to any further participation in profits or assets”ought to be interpreted as taking from those shareholders the right to priority over the ordinary shareholders in winding up which had been expressly given to them before. In my view, it is quite impossible to attach that meaning to those words without wholly contravening the ordinary principle of interpretation to which I have referred. Indeed, I go further. The position is not a purely neutral position as regards the language used, because the earlier words, to my mind, indicate a presupposition to be kept in mind in construing the last wordsnamely, that, in the event of a winding up, those shares are entitled to repayment of the capital credited, and, therefore, in my view that must be assumed to have been achieved before it shall be said to the preference shareholders: “You should not have any further participation in profits or assets.”

The judge did not, if I may respectfully say so, take into account what may be regarded as almost a presumption in principles of interpretation analogous to onus of proof in a question of evidence. He did not mention the presumption that the rights should not be interpreted as taken away or impaired unless the language either creates that effect or necessarily, on consideration of the whole document, compels that

Page 339 of [1940] 1 All ER 333

interpretation. In my view, there is nothing at all in that provision in the scheme of arrangement to take away the existing rights of the former £1 preference shareholders, which rights were reduced to a 10s preference share plus one and one-third ordinary shares. Indeed, there are provisions which I did not think it necessary to read but which would have had the result of putting such shareholders into a position in regard to their one and one-third ordinary shares which might in certain events be worse than that of the present ordinary shareholders. For those reasons, I think that the judgment below must be reversed and a declaration made that the preference shareholders, as they are to-day, are entitled in the winding up to be paid their 10s in priority to the ordinary shareholders.

Appeal allowed. Declaration that the existing preference shareholders are entitled in the winding up to be paid their 10s in priority to the ordinary shareholders.

Solicitors: Robinson & Bradley, agents for Harding & Barnett, Leicester (for the appellant); Field Roscoe & Co, agents for Whetstone & Frost, Leicester (for the respondents); Kingsford Dorman & Co, agents for Harvey Clarke & Adams, Leicester (for the liquidator).

W K Scrivener Esq   Barrister.

Thornton v Mitchell

[1940] 1 All ER 339


Categories:        CRIMINAL; Road Traffic        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HUMPHREYS AND HILBERY JJ        

Hearing Date(s):        17 JANUARY 1940        


Street Traffic Summary jurisdiction Motor-omnibus driver charged with driving without due care and attention and charge dismissed Conductor of same vehicle charged with aiding and abetting offence alleged against driver Conductor convicted Validity of conviction Road Traffic Act 1930 (c 43), s 12(1).

A motor-omnibus driver was charged under the Road Traffic Act 1930, s 12(1), with driving a motor omnibus without due care and attention, and with driving without reasonable consideration for other persons using the road. The conductor of the same omnibus was charged under the Summary Jurisdiction Act 1848, s 5, with aiding and abetting the offences alleged against the driver. On the hearing before the magistrates, it was found that the omnibus was being reversed, and that, as the driver could not see the road behind him, it was the duty of the conductor to signal that the road was clear. The conductor gave the signal when in fact there were two pedestrians behind the omnibus, and these were knocked down and one fatally injured. The magistrates dismissed both charges against the driver, but convicted the conductor on the first of the charges against him and dismissed the second. The conductor appealed:

Held the conductor could not be convicted of aiding and abetting the principal in what the principal was not doing, and he could not be convicted as principal, because, on the particular words of s 12(1) of the Act of 1930, only the driver could guilty of the principal offence.

Page 340 of [1940] 1 All ER 339

Notes

Only the person who is driving a vehicle can be convicted of driving without due care and attention under the Road Traffic Act 1930, s 12(1). Here, where an accident was caused by the carelessness of the conductor of an omnibus, an attempt was made to convict him of aiding and abetting the driver in committing the offence under s 12(1). As the driver was acquitted, however, it was impossible to convict the conductor of aiding and abetting.

As to Careless Driving, see Halsbury (Hailsham Edn), Vol 31, p 672, paras 987, 988; and for Cases, see Digest, Supp, Street and Aerial Traffic, Nos 222a222p.

Case referred to

Morris v Tolman [1923] 1 KB 166; 14 Digest 92, 612, 92 LJKB 215, 128 LT 118.

Appeal

Appeal by the conductor by way of case stated from a decision of a court of summary jurisdiction sitting at Rochdale, whereby the conductor of an omnibus was convicted of having aided and abetted the driver of the omnibus in driving without due care and attention and without using reasonable consideration for others using the road. The charges against the driver were dismissed. On the hearing of the information, the following facts were proved or admitted. On 18 March 1939, the omnibus arrived at a road junction where all the passengers disembarked. Before the omnibus reversed, the conductor looked out of the back to see if the road was clear. Then he rang the bell three times as a signal to the driver to reverse. At the time when he gave the signal, the conductor, following his usual practice, was standing on the platform at the back of the omnibus. The time was about 7.45 pm, and the visibility was poor. After giving the signal, the conductor jumped off the omnibus, which was reversed slowly. Two persons who had just disembarked were knocked down by the back of the omnibus as it was reversing, and one of them received fatal injuries. The driver could not see any person immediately behind the omnibus while he was reversing, owing to the obstruction caused by the steps to the upper deck, and owing to the height of the window at the back, and he had, therefore, to rely upon the conductors signal.

G H Oliver for the appellant.

Ralph H Etherton for the respondent.

17 January 1940. The following judgments were delivered.

LORD HEWART LCJ. In my opinion, it is quite clear that this appeal must be allowed. Informations were preferred by the respondent, a superintendent of police, against a certain motor driver, one Hollinrake, for driving a motor vehiclethat is to say, an omnibuswithout due care and attention, contrary to the Road Traffic Act 1930, s 12(1), and also against the same driver for driving a motor vehiclethat is to say, a motor omnibuswithout reasonable consideration for other persons using the road. At the same time, the bus conductor was charged as an aider and abettor. The information alleged that Hollinrake did unlawfully drive the motor vehicle without due care and attention, and that the present appellant, who was a bus conductor, unlawfully did aid,

Page 341 of [1940] 1 All ER 339

abet, counsel and procure Hollinrake to do and commit that offence. There was a further charge against the bus conductor under the second information, whereby the driver was charged with driving “without reasonable consideration for other persons using the road.” In the result, the justices dismissed the two charges against the driver, but convicted the appellant of unlawfully aiding, abetting, counselling and procuring the driver to do and commit the offence of driving without due care and attention, contrary to s 12(1). They say in para 8:

We, being of opinion that the conductor [had been very negligent], held that he was guilty of aiding and abetting, counselling and procuring the said Hollinrake to drive without due care and attention, and accordingly we inflicted a fine.

In my opinion, this case is a fortiori upon Morris v Tolman, to which our attention has been directed. I will read one sentence from the judgment of Avory J, at p 171:

… in order to convict, it would be necessary to show that the respondent was aiding the principal, but a person cannot aid another in doing something which that other has not done.

That, I think, is the very thing which these justices have decided that this bus conductor did. In one breath they say that the principal did nothing which he should not have done, and in the next breath they hold that the bus conductor aided and abetted the driver in doing something which had not been done or in not doing something which he ought to have done. I really think that, with all respect to the ingenuity of counsel for the respondent, the case is too plain for argument, and this appeal must be allowed and the conviction quashed.

HUMPHREYS J. I agree, and I have nothing to add.

HILBERY J. I agree.

Appeal allowed with costs. Conviction quashed.

Solicitors: Pattinson & Brewer, agents for J Bright Clegg & Son, Rochdale (for the appellant); Norton Rose Greenwell & Co, agents for Sir George Etherton, Preston (for the respondent).

Michael Marcus Esq   Barrister.


Redditch Benefit Building Society v Roberts

[1940] 1 All ER 342


Categories:        PRACTICE DIRECTIONS        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        22, 26 JANUARY 1940        


Practice Appearance not entered within prescribed time Application for leave to enter judgment in default Judgment entered notwithstanding defendants appearance at hearing of application.

Practice Writ by mortgagee claiming payment and possession Form of order RSC Ord 55, r 8A.

A building society took proceedings against a mortgagor to recover the amount of the mortgage debt and possession of the property. The defendant failed to enter an appearance within the prescribed time, but subsequently appeared before the registrar on an application by the building society for leave to enter judgment in default of appearance, and then intimated his desire to enter an appearance. The registrar, notwithstanding that the defendant was represented before him, ordered that judgment should be entered in default of appearance, but should be suspended for 14 days in order that the defendants case might be investigated to ascertain whether there was a bona fide defence to the claim. The judgment given was simply a judgment for payment and possession. A motion brought before the court to discharge the registrars order was dismissed:

Held (i) judgment ought not to be entered in default of appearance when the defendant is before the court, and, whether he has technically appeared or not, is present and anxious to put himself in a position to defend the action.

(ii) the judgment as entered, being simply for payment and possession, did not comply with the form prescribed by Ord 55, r 8A.

Notes

The present case deals purely with a practice point, but it is important as including a full consideration of the reasons for, and the nature of, the change recently made in the procedure on a claim for possession by a mortgagee. This change was made by the amendment of the rules of court by the addition of RSC Ord 55, r 8A, and the judgment herein should do much to help practitioners proceeding under that rule.

As to Appearance, see Halsbury (Hailsham Edn), Vol 26, pp 3740, paras 5462; and for Cases, see Digest, Practice, pp 376384, Nos 856917. See also Yearly Practice of the Supreme Court 1940, p 1159.

Appeal

Appeal by the defendant from the order of Hallett J, dated 20 September 1939, refusing an application for leave to enter an appearance after the time prescribed had expired. The facts are fully set out in the judgment of the court delivered by Clauson LJ. An application to enter appearance was made on the morning on which the respondent society was applying at the district registry for judgment to be entered in default of appearance. The writ was a specially indorsed writ, and was issued on 22 June 1939, and the application to enter appearance was made at the district registry on 25 August 1939. The application was refused.

G Granville Slack for the appellant.

Herbert L A Hart for the respondent society.

Slack: Under RSC Ord 12, r 22, a defendant is entitled to appear at any time before judgment. The appellant should have been allowed to enter an appearance in the present case.

Page 343 of [1940] 1 All ER 342

Hart: If the court takes the view that any injustice has been done to the appellant, the respondents are quite prepared to allow the order to be discharged and the matter remitted to the registrar.

G Granville Slack for the appellant.

Herbert L A Hart for the respondent society.

26 January 1940. The following judgment was delivered.

CLAUSON LJ (delivering the judgment of the court). This is a most unfortunate case, in which, as sometimes happens, a series of errors, each quite explicable, might have resulted in serious injustice being done. However, we are glad to think that, with the assistance of counsel and the registrar of the district registry in which the matter originated, it is possible to deal with it in such a way that no evil consequences will ensue.

The plaintiffs issued a writ in the Birmingham District Registry claiming repayment of a sum of between £400 and £500 for principal and interest due under a mortgage, and so forth, and possession of the mortgaged property. The defendant, who was living in Middlesex, had executed an ordinary building society mortgage. The writ was served in the usual way. The time for appearance expired without the defendant having entered an appearance, and in due course the plaintiffs proceeded with the usual application for leave to have judgment for payment and possession. I say the usual application, because, as the rules now stand, and have stood for nearly 3 years, in an action of this kind judgment in default of appearance cannot be entered without the leave of the master, or, in the district registry, of the district registrar.

For reasons which are not material, the defendant had not, as I say, entered appearance within the time prescribed, but he did receive notice, as is now required by the rules, that this application for leave to enter judgment in default of appearance was coming before the district registrar on a certain day. On the morning of that day, some attempt was made to enter an appearance, but it was stated that there was a summons then coming on before the registrar and that the matter had better be put before him.

We have had the advantage of hearing from the registrar what happened, and it appears that, when the summons was before him, the defendants representative did appear, and did intimate his desire to put himself in order in regard to entering an appearance with a view to avoiding judgment going by default, and with a view in due course, no doubt, to obtaining time to put in a defence, and so forth. I gather that the representative of the defendant was perhaps not very much versed in all the technical details of Chancery procedure. It is not necessary to consider exactly what was said on one side or the other. What seems to have happened is that the registrar thought that the best thing to be done was for the defendants representative to ascertain from his client what was the real defence to the action, and what was the real point about which he was going to argue. The registrar thought that the most convenient way of dealing with that matter was to give

Page 344 of [1940] 1 All ER 342

judgment in default, but to suspend it for a timewhether 7 or 14 days it is not quite clear, and it is quite immaterialon the understanding, apparently, that the defendants representative was to get instructions, and, if he got instructions which satisfied him that there really was something to fight about, and that the thing ought to be fought, he would then take some step, either by mentioning the matter to the registrar or by applying for extension of time, to put in a defence, or whatever might turn out to be the right procedure to put the matter in order.

It was for that reason that the registrar let judgment go as in default of appearance, notwithstanding that, as a matter of fact, there was a representative of the defendant before him who was anxious to put himself right with the court by entering an appearance. With the greatest respect to the registrar, who, I think, made the order he did make with the best intention, because he thought it was a practical way of bringing the thing to a head, it really was not the right order to make, because a judgment ought never to go in default of appearance when the defendant is before the court and, whether he has technically appeared or not, is there and anxious to put himself in a position to defend. I think that it was quite wrong to enter the judgment as a judgment in default of appearance. As I say, in the normal way I do not know that it would have mattered very much, and I think that the registrar was actuated by a most commendable wish to put the matter on a practical footing, so that, if there really were no defence, no further expense would be incurred by the defendant, while, if there were a defence, having regard to the fact that the order was suspended for 7 or 14 days, there was every opportunity of getting things straight. However, we take the view that that order, entered in those circumstances, is an irregular order, because it proceeds in default of appearance, which is not in accord with the real factnamely, that the man was attempting to put himself before the court. Accordingly, we see no ground upon which that order can be supported, and it must be discharged.

It appears that there was a motion before the vacation judge to discharge the registrars order. Unfortunately, counsel who moved the motion is not now before the court, and counsel for the then respondent did not reach the vacation judges court until matters had already proceeded a certain way, and some obscurity I think still lurks round the reasons which induced Hallett J to leave the order standing. I do not think that it can have been put to him in the way which we envisagenamely, that it was a case of allowing an order to go in default of appearance when there was not really default. Anyway, he refused to interfere with the registrars order, and the matter now comes before us on appeal from his decision.

When the matter came before us and we proceeded to investigate it, another feature of a somewhat alarming character emerged. In order

Page 345 of [1940] 1 All ER 342

to explain that, I must go back historically for about 3 years. Until about 3 years ago, there were two methods of enforcing mortgages of this character. One was by originating summons in the Chancery Division in London, but that procedure did not apply in the ordinary district registry. I say ordinary, because I omit Liverpool and Manchester. There was that procedure, and there was also the procedure of issuing a writ claiming the appropriate relief and obtaining, usually in the Kings Bench Division, a judgment for payment and possession, either in default or under the appropriate rules dealing with summary applications for judgment.

Those whose business it is to see that the procedure of the court is in accordance with what is right and proper were rather perturbed by finding that, whereas on an originating summons the facts and the circumstances of the case were brought before the court, and in proper cases the wind was tempered to the shorn lamb, time given for payment, and so forth, in cases where relief was claimed by the issue of a writ in the Kings Bench Division the relief was obtained automatically, without the matter coming before any judicial officer. Further than that, it had been the practicea practice which dates back to the period before the Judicature Actto give the judgment in the form appropriate in the courts of common law, which had no regard in this matter to the equitable principles governing the relations of mortgagor and mortgagee. Judgments were given in the form of a clean judgment for payment and possession, leaving it to the defendant, by appropriate proceedings in equity, to establish the rights which would flow from his action if he in fact paid the debt. Accordingly, a defendant who found himself served with a judgment of that kind would, on the face of it, see that he was under an obligation to give up possession and to pay, and at all events he would not have it brought to his attention that, upon payment, by taking the proper proceedings in the proper court, he would be entitled to a certain relief in respect of his position as a mortgagor.

It was for that reason that, about 3 years ago, by rules of court it was laid down that certain forms of order were to be used in the case of orders made on originating summons for relief of such character as is usually required in the case of mortgages of this type, and for the first time the jurisdiction on originating summons was extended so as to enable the court on the originating summons to give, not only the usual equitable relief, but also judgment for payment of the debt. That step had the result that all the rights of the mortgagor and the mortgagee under a mortgage of this kind could be dealt with on originating summons.

Further, at the same time it was thought convenient that the method of obtaining judgment automatically, if I may so express it, when a writ has been issued in the Kings Bench Division ought not to continue, and it was decided to make arrangements that all actions of this type

Page 346 of [1940] 1 All ER 342

should be brought, not in the Kings Bench Division, but in the Chancery Division, and that, where an action had been commenced by writ, the defendant should be given the same protection in the case of an application for summary judgment in that action as that to which he would have been entitled if the application had been made by originating summons. In particular, a rule was madeit is RSC Ord 55, r 8Aunder which, in the case of an action commenced by writ, the forms Nos 38, 39 and 40 in Appendix L to the Rules of the Supreme Court, which were prescribed for the originating summons procedure, should be used in the case of actions commenced by writ.

When we went into the matter, we found that the judgment which had been given in default of appearance in this particular case was not in the form which complied with the rules, but was in the old pre-Judicature Act form. It was simply judgment for payment and possession. With the registrar, we have inquired into the matter, and we have had information properly given on behalf of the building society by their counsel, and it seems clear that there has been, as I say, an unfortunate series of blunders.

The district registrar ought never to have allowed the order to go in the form in which it did, and that appears to be due not so much to the fact that the district registrar was ignorant of the rules and the forms, as to the fact that the necessary information as to the right form to use somehow did not seem to have found its way to the clerk whose business it is in the registry to check the order. It would also appear that there had been some misunderstanding in some previous case about the form of order. That was suggested to us by counsel for the building society, and I have not the least doubt that the suggestion was not made without some foundation. However, the blunder, if blunder it was, was certainly not made by the district registrar whom we have with us now, but by another district registrar. It would be unfair to say anything further about it without investigating the circumstances, and I do not think that it is worth investigating the matter.

The fact remains that a blunder was made in allowing the order to go in the form in which it did. Accordingly, on that ground too, even if there had not been the difficulty as to the order being in default of appearance where a defendant had bona fide tried to appear, we should have found it necessary to discharge the order, if only on the ground that it does not comply in its form with the rules. Accordingly, the order which we propose to make is this. The order of the vacation judge refusing to interfere with the order of the district registrar will be discharged. The judgment in default of appearance given by the district registrar will also be discharged. It will not be necessary to intimate that leave is given to the defendant to enter an appearance. If he has not already done soit may be that he has, I do not knowhe will, of course, in the ordinary way, do so. Anyway, he will find no difficulty this time in getting his appearance accepted in the district

Page 347 of [1940] 1 All ER 342

registry. I think that there must be an undertaking by counsel for the defendant to enter appearance, because it is on that footing that he is before the court.

Solicitors: Stanley Moore & Partners (for the appellant); Long & Gardiner (for the respondents).

W K Scrivener Esq   Barrister.

Re James Millward & Co Ltd

[1940] 1 All ER 347


Categories:        COMPANY; Insolvency        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        23 JANUARY 1940        


Companies Winding up Company in voluntary liquidation Right of judgment creditor to compulsory winding up order Ex debito justitiæ Companies Act 1929 (c 23), s 255.

Under the Companies Act 1929, s 255, a judgment creditor of a company in voluntary liquidation is entitled ex debito justitiæ to an order for the compulsory winding up of the company.

Notes

It has generally been understood that the Act of 1929 extended the rights of a judgment creditor in this matter and gave him an absolute right to a compulsory order. The Court of Appeal have confirmed this view, but it was not accepted in the court of first instance.

As to Right of Creditor to Compulsory Order, see Halsbury (Hailsham Edn), Vol 5, p 551, para 889; and for Cases, see Digest, Vol 10, pp 831, 832, Nos 54195424.

Appeal

Appeal by a judgment creditor from an order of Bennett J, dated 20 October 1939, dismissing a petition for the compulsory winding up of the respondent company. The petitioner, the present appellant, on 28 November 1938, commenced an action against the company, and on 24 July 1939, recovered judgment for £5,500 damages and £104 6s 6d costs. On July 31 it was decided that the company should be wound up. There were three creditors for a total sum of about £1,600 as against the debt of some £5,600 due to the petitioner. The company were hopelessly insolvent.

The Companies Act 1929, s 255 is as follows:

The winding up of a company shall not bar the right of any creditor or contributory to have it wound up by the court, but in the case of an application by a contributory, the court must be satisfied that the rights of the contributories will be prejudiced by a voluntary winding up.

J A Wolfe (for E Milner Holland on war service) for the appellant.

Morris Smith (Raymond Jennings with him) for the respondents.

Wolfe: The petitioning creditor has obtained judgment, and has not been paid. He is entitled to a compulsory winding up order. [He was stopped by the court.]

Smith: In Buckley on Companies (11th Edn), p 509, there is a statement which seems to show that there is some doubt on the matter in the case of a creditors winding up. It does not say that a

Page 348 of [1940] 1 All ER 347

creditor shall be in the same position notwithstanding a voluntary winding up. It says that a creditor cannot be stopped by showing that there is a voluntary winding up. So far as I am aware, no reported case deals with the point.

J A Wolfe (for E Milner Holland on war service) for the appellant.

Morris Smith (Raymond Jennings with him) for the respondents.

23 January 1940. The following judgments were delivered.

SCOTT LJ. In this case, the judge has refused to make an order for the compulsory winding up of a company which was already in voluntary liquidation when the petition for compulsory winding up was lodged by a creditor. The present Act has altered the law in regard to the burden of proof which must be met by a creditor who desires a compulsory order for winding up when there is a voluntary liquidation already in progress. He used to have to show that the position of the creditor would be prejudiced in some way. Otherwise he did not get the compulsory order. The present Act, by s 255, explicitly and without any ambiguity whatever, removes that burden of proof, and leaves the position such that the creditor is entitled ex debito justitiœ to an order. It may be that I have overstated the burden upon the creditor, even under the previous legislation. The general principle undoubtedly was that the creditor was entitled ex debito justitiœ to his order, but there is no doubt that the Act has made a difference in the respect of what he has to show. As it stands to-day, he has not to prove any further facts than that he has obtained his judgment debt, that his debt has not been satisfied, and that he desires a compulsory winding up. The judge (I speak with some hesitation), I think, must have been misled into thinking that the creditor had to show prejudice if the winding up on voluntary lines was allowed to continue, by reason of the statements in his affidavit that he would suffer some prejudice. Had the position been that he had to prove real prejudice, I should have agreed with the judges view that his affidavit did not show very strong prejudice. I am not sure that I should not, even under the old law, have taken the same view in the ultimate result. However, be that as it may, the fact that some allegations of a rather insubstantial kind were unnecessarily included in his affidavit does not deprive him of the right ex debito justitiœ which he has to-day, just as a judgment creditor serving a bankruptcy notice is entitled to have an order made by the Bankruptcy Court. The same principle underlies both, and gives to the creditor the same kind of remedy in a particular form of judicial execution, whether the debtor is an individual person or a company. The appeal, therefore, must be allowed, with costs here and below.

CLAUSON LJ. I agree. I would desire to add only this. In a case like this, where the onus is on those who are opposing the winding up, for myself I would place but little reliance upon the affidavit of a liquidator, however eminent or however respectable, who filed evidence founded entirely, or almost entirely, on information and belief. Where the onus is on those who are opposing the winding up petition, I should

Page 349 of [1940] 1 All ER 347

very much hesitate to regard the onus as discharged in a case where those who must necessarily be conversant with the whole matternamely, the directorsdo not put in any affidavit, and are, therefore, shielded from cross-examination. That is all I wish to add.

LUXMOORE LJ. I agree.

Appeal allowed with costs in both courts.

Solicitors: Waller Neale & Houlston (for the appellant); Woolfe & Woolfe (for the respondents).

W K Scrivener Esq   Barrister.

Youngs v Youngs (Baker Claimant)

[1940] 1 All ER 349


Categories:        FAMILY; Ancillary Finance and Property        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        30 JANUARY 1940        


Bills of Sale Receipts on sale of furniture Unregistered Whether goods in possession or apparent possession of grantee Sale to housekeeper residing on the premises Bills of Sale Act 1878 (c 31), ss 4, 8.

The petitioner in a divorce suit obtained an order against her husband for alimony pendente lite, and a claim in respect of this order being unsatisfied, on 30 June 1939, a writ of fieri facias was issued, and, inter alia, certain furniture was seized by the sheriff thereunder. The claimant thereupon alleged that the furniture was her property and had been wrongfully seized by the sheriff. On 2 March 1939, the husband had sold part, and on 18 June 1939, the balance, of this furniture to the claimant, who was then, and continued to be, his housekeeper. The sale was, in each case, evidenced by a receipt for the money signed by the husband. After the sale, the furniture remained in his house and he and his daughter continued to use it as they had formerly done, the claimant using it only in so far as she was in the house, and was a member of the household. The county court judge held on the evidence that the receipts were intended to be part of the transactions, and, therefore, constituted bills of sale within the meaning of the Bills of Sale Act 1878, s 4. These receipts were not registered in accordance with s 8, but it was contended by the claimant, in reliance upon Ramsay v Margrett, that they were in her possession, and so protected from seizure by the sheriff. The judge, however, found that there was no intention on the part of the husband to part with the possession of the furniture to the claimant:

Held (i) the receipts were intended to be part of the transaction, and, therefore, constituted bills of sale within the Bills of Sale Act 1878, s 4.

(ii) the husband had not parted with the possession of the furniture. The principle of Ramsay v Margrett does not apply simply because there is a marriage tie, and it does not have any bearing where the transaction is between a man and his domestic servant and the latter has the use of the goods only as a servant.

Notes

The decision herein sets a definite limit to the principle enunciated in Ramsay v Margrett. The possession of goods may pass from one person to another in the same house provided they each have an equal use of the goods. That is not the case, however, where one uses them as a master and the other uses them as a servant. It must be particularly noted that the decision

Page 350 of [1940] 1 All ER 349

herein turns upon the finding of fact that the housekeeper had the use of the goods only as a servant.

As to Apparent Possession, see Halsbury (Hailsham Edn), Vol 3, pp 6567, paras 110112; and for Cases, see Digest, Vol 7, pp 110118, Nos 649685.

Cases referred to

Ramsay v Margrett [1894] 2 QB 18; 21 Digest 499, 740, 63 LJQB 513, 70 LT 788.

French v Gething [1922] 1 KB 236; 21 Digest 499, 741, sub nom French v Gething, Gething Claimant 91 LJKB 276, 126 LT 394.

Antoniadi v Smith [1901] 2 KB 589; 7 Digest 115, 675, 70 LJKB 869, 85 LT 200.

Appeal

Appeal by the claimant from a judgment and order made by His Honour Judge Drucquer at Willesden County Court on 29 September 1939. The facts are fully stated in the judgment of Slesser LJ.

H E Park for the appellant, the claimant.

Norman E Wiggins for the respondent, the execution creditor.

Park: On the authority of Ramsay v Margrett and French v Gething, it cannot be said that the furniture was in the apparent possession of the defendant. The law attributes the possession to the person who has the legal title, whether the property is real or personal. These were not bills of sale. If a document is intended by the parties to be a part of the bargain to pass the property in the goods, it is a bill of sale whatever its form; but if it is not so intended, and the bargain is complete without it, so that the property passes independently of it, then it is not to be deemed a bill of sale: Ramsays case.

Wiggins: The receipts were a bill of sale within the Bills of Sale Act 1878, s 4. The goods remained in the apparent possession of the grantor of the bills, and the bills, not having been registered, are, under s 8, void as against the execution creditor.

H E Park for the appellant, the claimant.

Norman E Wiggins for the respondent, the execution creditor.

30 January 1940. The following judgments were delivered.

SLESSER LJ. In this appeal, Mrs Belinda Youngs, who was the petitioner in a divorce suit against her husband, Walter Cyril Youngs, on 24 April 1939, obtained an order for alimony, and in respect of that order she had a claim against her husband. This claim being unsatisfied, goods and chattels were seized by the sheriff of the county of Middlesex under a writ of fieri facias. The goods consisted, amongst other things, of certain furniture worth, it is said, respectively £50 10s and £39. The claimant, Miss I M P Baker, said that the sheriff wrongfully seized those goods, in that they were her property, and an interpleader issue was directed to determine that question.

The facts of the case are that the claimant had been employed until December 1937, partly as a domestic servant at the home of the judgment debtor Walter Cyril Youngs and his wife, who were then living together, and partly as an assistant in a shop conducted by them. In February 1938, the wife left the husband, and, later in that year, their young

Page 351 of [1940] 1 All ER 349

daughter returned to him, and, at the same time, the claimant returned and acted as the husbands housekeeper.

In March 1939, the husband got into financial difficulties, and said that he wanted to sell his furniture. The claimant thereupon bought his furniture for the two sums which I have mentioned, on 2 March 1939, as to £50 10s, and on 18 June 1939, as to £39 for the second lot of furniture. It is suggested that the purchase of that furniture by the claimant was not a genuine purchase, and evidence was given as to the borrowing by her of certain moneys from friends to buy the furniture. The judge has come to the conclusion that the claimant did buy the furniture from the husband for the sums and on the dates mentioned, and that, in his opinion, they were genuine transactions, and not done with intent to defraud the creditors within the meaning of the Law of Property Act 1925, s 172, and the case must be dealt with upon that basis.

What is said on behalf of the execution creditor, the wife, is this. It is said that this transaction constituted a bill of sale within the meaning of the Bills of Sale Act 1878, s 4, in that a bill of sale includes “an assurance of personal chattels”; and that the taking of those receipts of 2 March 1939, and 18 June 1939, both setting out the furniture bought, and both having this subscription: “Received” the respective sums “from I. M. P. Baker for the above effects,” signed by the husband, constituted bills of sale. It is not seriously disputed that it was by reason of those receipts that this lady was willing to purchase these goods, that she received the necessary assurances of the personal chattels, and that the goods, therefore, were passed by the bills of sale. If it be the right view that those documents constitute bills of sale, it is conceded that they have not been registered, and, if they have not been registered, they are avoided as unregistered bills of sale as against the sheriffs officer and other persons seizing the goods under the Bills of Sale Act 1878, s 8, if after the lapse of seven days “they are in possession or apparent possession” of the person making such bills of sale.

It is said that these goods are not “in the possession or the apparent possession” of the person making the bill of sale. It is said that the right view is that they are in the apparent possession of the claimant. On that point we have been referred to Ramsay v Margrett, which really follows the old principles of law on the general law of possession, namely, that, where the possession of goods may be in one person or another, and the matter of possession is doubtful, then the law will attribute possession to the person who has the legal title. However, such cases as Ramsay v Margrett and the later case of French v Gething, which was also cited to us, are cases where it was doubtful, apart from the question of title, whether the possession was in the husband or in the wife. In a later case of Antoniadi v Smith, a similar problem had arisen with regard to a son-in-law and a mother-in-law. However, the judge has found in the present case that there was no

Page 352 of [1940] 1 All ER 349

intention on the part of the husband to part with the possession of his furniture to the claimant, and, in my opinion, there is evidence on which he could come to that conclusion. The evidence consists in this. First, he has found that at all times the claimant was a domestic servant in the house. Though it might be possible to draw certain inferences against her morality (which I hesitate to do) owing to the fact that she was the woman with whom adultery was charged in the undefended divorce case, in which a decree was granted, nevertheless the judge has not found that she occupied that anomalous position, but has found that at all material times she was servant or housekeeper. Secondly, he has found that the furniture which is the subject-matter of these bills of sale, which has never been moved from the house, is still being used by the husband for himself and his daughter, and that the claimant uses the furniture only in so far as she is in the house as a member of the household. That is to say, being a servant or housekeeper, she does not use this furniture, which consists of the normal furniture of a house, the bedroom suite, the dining-room suite, bookcases, dining-trolleys and kitchen utensils, as of right, but as a servant. Therefore, this is not one of the cases where it is doubtful whether the apparent possession is in A or B, and where it is said that possession follows the title. It is a case where the judge has found as a fact that the apparent possession is in the execution debtor, the husband. If he has so found, then the matter falls sufficiently within the ambit of the Bills of Sale Act 1878, s 8. These being bills of sale and being unregistered, are void against the sheriffs officer, and it follows, therefore, that this appeal fails.

MACKINNON LJ. I agree. When the writ of fieri facias was issued, and execution put in by the wife, the sheriffs officers seized certain furniture. The claimant asserted that the furniture belonged to her. The judge found and is satisfied, that the husband did sell her the furniture by two sales on 2 March 1939, and on 18 June 1939, as was shown by two receipts and invoices of those dates, signed by him. Then the execution creditor says: “Well, that may be so; but, if those facts are established, then I rely on the Bills of Sale Act, 1878, ss. 4, 8, and say those receipts constitute bills of sale, and they are not registered; and thus the chattels remain in the possession of the grantor of those bills of sale.” In reply to that, the claimant seeks to rely on the principle laid down in Ramsay v Margrett as regards the first point, whether the document in question constituted a bill of sale within the definition of the Bills of Sale Act 1878, s 4. The gist of that decision is: If a document is intended by the parties to it to be a part of the bargain to pass the property in the goods, then, whatever the form of the document may be, even if it be only a simple receipt for the purchase money, it is, by s 4, to be deemed to be a bill of sale, though it is not so in fact. However, if the document is not intended to be part of the bargain to pass the property in the goodsif the bargain

Page 353 of [1940] 1 All ER 349

is complete without it, so that the property passes independently of itthen it is not to be deemed to be that which it is not in facta bill of sale. In this case, as in Ramsay v Margrett, the claimant argues that these documents fall into that second category, but the judge has found, in the terms of that distinction laid down in Ramsay v Margrett:

I came to the conclusion that the receipts were intended to be part of the transaction in passing the property.

And further:

I came to the conclusion that the receipts in question were given as assurances of title.

There was ample evidence on which the county court judge could come to that conclusion. If so, on that head this case is the opposite to that which was decided in Ramsay v Margrett.

The other point is whether the goods remained in possession of the grantor of these bills of sale. Ramsay v Margrett was the case of a sale by a husband to his wife, the husband and wife living together in the same house. As I understand it, it was held by the judges there, as was pointed out by Scrutton LJ, in the later case of French v Gething at p 245, that when a husband and wife are living together in a house, the furniture in the house is in the apparent possession of either or both of them. If it is in possession of both of them, or each of them; and if it is a question of whose property it is, one may have to go into the question of title to see who is really in possession, under the old doctrine which has been cited from Littleton on Tenures, s 701. In this case there is nothing of that sort. These persons are living in the same house, but one is the owner and master of the house and the other, up to September 1939, was, on her own evidence, in the house as housekeeper and servant, receiving £2 per week as wages. There is no more apparent possession of the furniture by her than there would be apparent possession of furniture in the house by any servant living permanently in the house. Therefore, Ramsay v Margrett is not a binding authority in this case. The county court judge was not bound to hold that this furniture was in the possession either of the husband or of the claimant, and he finds on the facts that the possession of the furniture never did leave the former. The furniture has never been moved from the house; it is still being used by the husband for himself and his daughter, and the claimant uses it only so far as she is a member of the household. The county court judge says:

I was of opinion that possession of the furniture was not given by Mr. Youngs to the claimant.

In those circumstances, there was again a finding of fact for which there was evidence, and, on that, the county court judge held that the claimants claim was unfounded. That being so, I think the appeal against his decision entirely fails.

Page 354 of [1940] 1 All ER 349

GODDARD LJ. I agree. We have heard an interesting, and, if I may say so, an exceedingly well put argument by counsel for the claimant. It in no way detracts from the value of his argument if I say that I myself am glad that I cannot accede to it, because I cannot imagine any case in which it would be more proper that the Bills of Sale Act 1878, should apply than in this case. It is just the sort of case which, in my opinion, illustrates the mischief which the Act was intended to prevent.

Two points have been taken. One under s 4 and one under s 8. With regard to s 4, it is said that this document, which consists of an inventory with a receipt attached, which therefore is deemed to be a bill of sale if it is a document which, on the authorities, was intended to be part of the transaction. In considering whether or not it was a bill of sale, the judge must, of course, look at the evidence. In this case, I should have thought that it was demonstrably clear that this document was intended by both partiescertainly by the grantorto be an assurance of title to the claimant. It is quite clear from the husbands own evidence that what he was doing was either, on the most charitable view, raising money to pay his creditors, or, on the other view, wanting to put his furniture beyond the reach of his creditors. However, in either case, as he was selling to his housekeeper, the last thing that he would want would be that the sheriff should come in and take the property which had been in his house, and of which he was getting the use, although he had been paid £89 10s by his housekeeper in respect of it. I am quite satisfied that he intendedand I have not the least doubt that the claimant also intendedthat there should be a document created which would transfer the property to her, and which could be shown to any creditor who might come along, or to the sheriff if he came along, as showing that the property in the goods had been transferred to the claimant. There was ample evidence here, in my opinion, on which the county court judge could dispose of the point under s 4 as he has done.

As to the point under s 8, I loyally accept the decision in Ramsay v Margrett, and that in French v Gething, which approved the decision in Ramsay v Margrett. I think that one may say that the result of those cases is that, when a husband and wife are living together, the Bills of Sale Act 1878 has no application to a transaction between them. Nor has it any application, as I think is shown by French v Gething, where two people are occupying what I may call a common establishment. As Davey LJ said, in Ramsay v Margrett, at p 27:

… she [the claimant] purchased from her husband goods which were then in their common use in the conjugal domicil, and the goods remained there after the purchase.

He then cited the passage from Littleton on Tenures which has been referred to, and which I need not cite.

So far as the conjugal domicil is concerned, French v Gething

Page 355 of [1940] 1 All ER 349

says that s 8 may not apply, although the parties are not husband and wife, and, therefore, there is no question of conjugal domicil. It can apply, Atkin LJ pointed out, at p 247, to three friends who may be keeping a common establishment together. I think it could apply to a case where a man was living openly with a mistress instead of a wife. If he holds the mistress out as the person with whom he is living as his wife, I think one is bound to hold that, on the principle of Ramsay v Margrett, as the principle of Ramsay v Margrett does not apply merely because there is a marriage tie. However, those cases cannot, in my opinion, have any bearing where the transaction involved is a transaction between a man and his domestic servant, even if he mis-conducts himself with the domestic servant on one or more occasions. In this case, the claimant was in his house for 11 months as a housekeeper, and received wages as such. It is impossible to say that a servant has a common use of the furniture in the house in which she is living with her master in the sense in which that expression is used by Davey LJ, in Ramsay v Margrett, or that it comes within the class of case which was contemplated by the passage in Littleton on Tenures, s 701. It is perfectly true that my servant has the use of the furniture which I provide for his or her bedroom, or for his or her sitting-room, and has the use of the kitchen utensils, and so forth, but he or she has not a common use with me; he or she is using them as my servant. Therefore, it seems to me that it would be carrying the doctrine of Ramsay v Margrett to an extravagant length to say that, if a man sells his household furniture to his housemaid, or to his butler, and things go on exactly as before, the property ceases to be in the apparent possession of the master merely because the butler or housekeeper or servant remains in the house and goes on rendering him services. It is entirely different from the case where a mother-in-law and son-in-law, or a mother and son, may be living in the same house, or where two friends may be sharing a common establishment. I think the judge was well justified in this case in finding that the goods were still in the apparent possession of the husbands execution debtor. Therefore, this appeal fails and should be dismissed.

Appeal dismissed with costs.

Solicitors: Samuel Coleman (for the appellant); Saville Bailey & Scott (for the respondent).

Derek H Kitchin Esq   Barrister.


Chapelton v Barry Urban District Council

[1940] 1 All ER 356


Categories:        TORTS; Tortious Liability        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        30 JANUARY 1940        


Bailment Liability of owner Hire of deck chair Conditions negativing liability Conditions on notice exhibited where chairs stacked Further conditions on ticket.

The respondent council provided deck chairs for persons desiring to use them on the beach. The vacant chairs were stacked up on the beach, and beside them was a notice reading as follows: “Barry Urban District Council. Cold Knap. Hire of chairs. 2d. per session of 3 hours.” The appellant received two such chairs from the attendant and, upon payment of the fee, two tickets, which he immediately put in his pocket without examination. On the back of the tickets these words were printed: “… The Council will not be liable for any accident or damage arising from hire of chair.” The canvas of the chair which the appellant used gave way and he was injured:

Held in the circumstances, the appellant was entitled to assume that all the conditions of hire were contained in the notice near the stack of chairs, and was not bound by the condition printed on the back of the ticket. He was, therefore, entitled to recover damages in respect of his injuries.

Notes

The basis of the decision here is that the ticket is a mere voucher or receipt and given to the hirer merely for the purpose of being shown at a later time to prove payment or the time of the commencement of the hiring. It is said to be entirely distinguishable from a railway ticket which contains upon it the terms upon which the railway company agreed to carry the passenger.

As to Liability of Bailor, see Halsbury (Hailsham Edn), Vol 1, pp 757759, paras 12411243; and for Cases, see Digest, Vol 3, pp 7275, Nos 133148.

Cases referred to

Parker v South Eastern Ry Co, Gabell v Same (1877) 2 CPD 416; 8 Digest 129, 866, 46 LJQB 768, 36 LT 540.

Thompson v London, Midland & Scottish Ry Co [1930] 1 KB 41; Digest Supp, 98 LJKB 615, 141 LT 382.

Henderson v Stevenson (1875) LR 2 Sc & Div 470; 8 Digest 127, 855, 32 LT 709.

Harris v Great Western Ry Co (1876) 1 QBD 515; 8 Digest 129, 865, 45 LJQB 729, 34 LT 647.

Nunan v Southern Ry Co [1924] 1 KB 223; Digest Supp, 93 LJKB 140, 130 LT 131.

Hood v Anchor Line (Henderson Brothers) [1918] AC 837; 8 Digest 104, 695, 87 LJPC 156, 119 LT 684.

Watkins v Rymill (1883) 10 QBD 178; 3 Digest 85, 198, 52 LJQB 121, 48 LT 426.

Appeal

Appeal by the plaintiff from a judgment given by His Honour Judge L C Thomas at Barry County Court on 15 August 1939. The action was for damages for personal injury caused by the negligence of the defendant council, their servants or agents. The facts, which were not disputed, are fully set out in the judgment of Slesser LJ. The question was whether or not in law the plaintiff had adequate notice of the condition disclaiming liability for accident.

Carey Evans for the appellant.

Page 357 of [1940] 1 All ER 356

E Ryder Richardson (for Griffith Williams on war service) for the respondents.

Evans: The existence of conditions was not mentioned on the front of the ticket. The contract was constituted by the plaintiffs assent to the conditions, which were on the notice board, and did not include a disclaimer of liability. [Counsel referred to Henderson v Stevenson and Harris v Great Western Ry Co. He was stopped by the court.]

Richardson: The front of the ticket gives no indication of what the hirer gets for his money. He is obliged to turn to the back. When he does so, he cannot help seeing the disclaimer of liability. [Counsel referred to Ansons Law of Contract (19th Edn), p 19.] Although the question whether or not all reasonable steps have been taken to give notice of the conditions is a question of fact, in answering which the court must look at all the circumstances, it is for the court to decide as a matter of law whether or not there is evidence that notice was given: Parker v South Eastern Ry Co. If the material term is in the document which contains the contract, it does not matter how slightly it is brought to the notice of the other contracting party. He is in any event bound by it: Nunan v Southern Ry Co. This decision was approved by Sankey LJ in Thompson v London, Midland & Scottish Ry Co. Every citizen must expect to enter into contracts in all sorts of circumstances, and it is his fault if he does not acquaint himself with their conditions: Hood v Anchor Line (Henderson Brothers). It is for the court to decide as a fact whether or not the contract in question is of a kind in which the display of conditions ought reasonably to be expected: Watkins v Rymill.

Evans was not called upon in reply.

Carey Evans for the appellant.

E Ryder Richardson (for Griffith Williams on war service) for the respondents.

30 January 1940. The following judgments were delivered.

SLESSER LJ. This appeal, which must be allowed, arises out of an action brought by one David Chapelton against the Barry Urban District Council, and it raises a question of some importance to the very large number of people who are in the habit of using deck chairs to sit by the seaside at holiday resorts.

On 3 June 1939, Chapelton went on to the beach at a place named Cold Knap, which is within the area of the Barry Urban District Council, and wished to sit down in a deck chair. There is a café known as Bindles Café on the beach, and by the side of Bindles Café there was a pile of deck chairs. By the side of the deck chairs there was a notice in the following terms:

Barry Urban District Council. Cold Knap. Hire of chairs, 2d. per session of 3 hours. …

Then followed words which said that the public were respectfully requested to obtain tickets for their chairs from the chair attendants, and that those tickets must be retained for inspection. Having taken two chairs from the attendantone for himself, and one for a Miss Andrews, who was with himChapelton received two tickets from the attendant,

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glanced at them, and slipped them into his pocket. He said in the court below that he had no idea that there were any conditions on those tickets, and that he did not know anything about what was on the back of them. He then said that he took the chairs to the beach and put them up in the ordinary way, setting them up firmly, as he said, and that, when he sat down, he had the experience, which many of us have had from time to time, of going through the canvas. Unfortunately, he had a bad jar, the result of which was that he suffered injury and had to see a doctor, and in respect of that injury he brought his action.

The county court judge had found that, if he had been satisfied that the plaintiff had had a valid legal claim, he would have been entitled to the sum of £50 in addition to the special damages claimed. He also found that the accident to the plaintiff was due to negligence on the part of the defendants in providing a chair which was unfit for use, and which gave way in the manner stated. Nevertheless, he found in favour of the defendants, by reason of the fact that on the ticket which was handed to Chapelton when he took the chair there appeared these words:

Available for 3 hours. Time expires where indicated by cut-off and should be retained and shown on request. The council will not be liable for any accident or damage arising from hire of chair.

As I read the county court judges judgmentand we have had the advantage of a note taken by counsel for the appellantin addition to the summary reasons which the county court judge gives for his decision, he said that the plaintiff had sufficient notice of the special contract printed on the ticket, and was, accordingly, bound by the same. That is to say, as I understand it, the county court judge has treated this case as a case similar to the many cases which have been tried in reference to conditions printed on tickets, and more particularly, on railway tickets, and has come to the conclusion that the local authority made an offer to hire out this chair to Chapelton only on certain conditions, which appeared on the ticketnamely, that the council would not be responsible for any accident which arose from the use of the chairand they say that Chapelton hired the chair on the basis that that was one of the terms of the contract between him and themselves, the local authority.

Questions of this sort are always questions of difficulty, and are very often largely questions of fact. In the class of case where it is said that there is a term in the contract freeing railway companies, or other providers of facilities, from liabilities which they would otherwise incur at common law, it is a question of how far that condition has been made a term of the contract and how far it has been sufficiently brought to the notice of the person entering into the contract with the railway company, or other body, and there are numerous authorities on that point. In my view, however, the present case does not come within that category of case at all. I think that the contract here, as appears

Page 359 of [1940] 1 All ER 356

from a consideration of all the circumstances, was this. The local authority offered to hire chairs to persons who wished to use them to sit upon on the beach. There was a pile of chairs standing ready there for use by anyone who wished to use them, and the conditions on which the local authority offered persons the use of those chairs were stated in the notice which was put up by the pile of chairsnamely, that the price of using a chair was 2d per session of 3 hours. I think that that was the whole of the offer which the local authority made in this case. They said, in effect: “We offer to provide you with a chair, and, if you accept this offer and sit in the chair, you will have to pay 2d. per session for 3 hours for that privilege.”

I think that, when the plaintiff, in common with other persons who used these chairs, took the chair from the pileit happened to be handed to him by an attendant, but I suppose that he might well have taken it for himself if the attendant had been on his rounds collecting money, or was otherwise awayand simply thought that he was liable to pay 2d for the use of the chair and that the local authority were liable to him for such common law obligations as might arise from their furnishing of the chair to him. No suggestion of any restriction of the councils liability appeared in the notice near the pile of chairs. That, I think, is the proper view to take of the nature of the contract in this case. Then the notice contained these further words:

The public are respectfully requested to obtain tickets properly issued from the automatic punch in their presence from the chair attendants.

The very language of that “respectful request” shows clearly, to my mind, that, for the convenience of the local authority, the public were asked to obtain from the chair attendants ticketsmere voucherswhich were receipts, and which showed how long a person hiring a chair was entitled to use that chair. It is wrong, I think, to look at the fact that this particular man obtained his receipt at the same time as he took his chair as being in any way a modification of the contract which I have indicated. This was a general offer to the general public, and I think that it is right to say that one must take into account here that there was no reason why anybody taking one of these chairs should necessarily obtain a receipt at the moment when he took his chair. Indeed, the notice is inconsistent with that, because it “respectfully requests” the public to obtain receipts for their money. It may be that somebody might sit in one of these chairs for one hour, or two hours, or, if the holiday resort was a very popular one, for any time, before the attendant came round for his money, or it may be that the attendant would not come to him at all for payment for the chair although in that case I take it there would be an obligation upon the person who used the chair to search out the attendant, like a debtor searching out his creditor, in order to pay him the sum of 2d for the use of the chair and to obtain, a receipt for the 2d paid.

I think that the county court judge has completely misunderstood the

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nature of this agreement. I do not think that this document was in the nature of a term of a contract at all, and I find it unnecessary really to refer to the different authorities which were cited to us, save that I would just mention a passage in the judgment of Mellish LJ, in Parker v South Eastern Ry Co, where he points out that it may be that a receipt or ticket may not contain terms of the contract at all, but may be a voucher. He says, at p 422:

For instance, if a person driving through a turnpike-gate received a ticket upon paying the toll, he might reasonably assume that the object of the ticket was that by producing it he might be free from paying toll at some other turnpike-gate, and might put it in his pocket unread.

I think that the object of the giving and the taking of this ticket was that the person taking it might have evidence at hand by which he could show that his obligation to pay 2d for the use of the chair for three hours had been duly discharged, and I think that, in the absence of any qualification of liability in the notice put up near the pile of chairs, it is altogether inconsistent to attempt to read into it the qualification contended for. In my opinion, this ticket is no more than a receipt, and it is entirely distinguishable from a railway ticket which contains upon it the terms upon which the railway company agree to carry the passenger. This, therefore, is not, I think, as counsel for the respondents has argued, a question of fact for the county court judge. I think that the county court judge as a matter of law has misconstrued this contract, and, looking at all the circumstances of the case, he has assumed that this condition on the ticket, or the terms upon which the ticket was issued, has disentitled the plaintiff to recover. The class of case with which Sankey LJ dealt in Thompson v London, Midland & Scottish Ry Co, which seems to have influenced the county court judge in his decision, is a class of case different from that which we have to consider in the present appeal. I think, therefore, that this appeal should be allowed.

MACKINNON LJ. I agree that this appeal should be allowed. The county court judge decided this case relying upon a dictum of Sankey LJ in Thompson v London, Midland & Scottish Ry Co, when he was speaking of a transaction which was totally different from the transaction in this case. If a man does an act which constitutes the making of a contract, such as taking a railway ticket, or depositing his bag in a cloakroom, he will be bound by the terms of the document handed to him by the servant of the carriers or bailees, as the case may be. If, however, he merely pays money for something, and receives a receipt for it, or does something which may clearly only amount to that, he cannot be deemed to have entered into a contract in the terms of the words which his creditor has chosen to print on the back of the receipt, unless, of course, the creditor has taken reasonable steps to bring the terms of the proposed contract to the mind of the man. In this

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case there is no evidence at all upon which the county court judge could find that the defendants had taken any steps at all to bring the terms of their proposed contract to the mind of the plaintiff. In those circumstances, I am satisfied that the defendants could not rely upon the words on the back of the ticket issued to the plaintiff, and, having admittedly been negligent in regard to the condition of the chair, they had no defence to the plaintiffs cause of action. I agree that this appeal should be allowed.

GODDARD LJ. I agree. In my view, the cases which deal with railway tickets, cloakroom tickets, or documents issued by bailees when they take charge of goods, have no analogy with this case. In this case, the appellant paid 2d in order to have the right to sit on a chair on the beach. He was asked to take a ticket in the form of a receipt for that purpose, and he was given a document which showed nothing on the face of it except the fact that the man had the right to sit on the chair until 7.30 pm on the day when the accident occurred and the fact that the ticket was not transferable. I cannot imagine that anybody paying 2d in those circumstances for the privilege of sitting on a chair on the beach would think for one moment that there were being imposed upon him some conditions which would limit his ordinary rights, or that the document he received when paying his 2d was a contractual document in any shape or form. I think that the ticket he received was nothing but a receipt for his 2d, a receipt which showed him how long he might use the chair. I think that the county court judge was quite wrong in thinking that Thompson v London, Midland & Scottish Ry Co, upon which he seems to have relied, had any bearing on the present case. One must have regard to the facts of the case and the general circumstances of the case. In my opinion Thompson v London, Midland & Scottish Ry Co has no bearing at all on this case.

I agree that there was no evidence upon which the county court judge could find that the plaintiff was bound by this condition on the ticket, and, therefore, this appeal must succeed.

Appeal allowed with costs. Judgment for the plaintiff for £52 2s 6d with costs.

Solicitors: Kingsley Wood Williams & Murphy, agents for Edward T Davies & Son, Cardiff (for the appellant); Wrentmore & Son, agents for Thos John & Co, Cardiff (for the respondents).

Derek H Kitchin Esq   Barrister.


Unsworth v Elder Dempster Lines Ltd

[1940] 1 All ER 362


Categories:        EMPLOYMENT; Other Employment: HEALTH; Health and safety at work: TORTS; Tortious Liability        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        22, 23 JANUARY 1940        


Workmens Compensation Alternative remedies Election between two remedies Receipt of compensation Knowledge of workman Receipt signed “without prejudice” Onus of proof where unequivocal act proved Workmens Compensation Act 1925 (c 84), s 29(1).

On 8 March 1938, the appellant was injured in the course of his employment, and such injury was admittedly due to a breach of statutory duty by the defendants. From 18 March 1938, until 19 August 1938, workmens compensation at the appropriate rate was paid to him without any reservation by him, and from the latter date to the date of trial he had continued to receive the same amounts of compensation, but in the receipts for such compensation had added the words “without prejudice.” At no time did he make any other reservation of his rights, either to the clerk paying him the compensation or to anyone else acting on behalf of the defendant company. It was proved that he had not become aware that he had to elect between receiving workmens compensation and suing in an action for damages at the time he first signed the receipt “without prejudice”:

Held the payments up to 19 August 1938 were received without the knowledge that they were payments in respect of workmens compensation, and those received after that date were received with a sufficient reservation of his rights. There was, therefore, no election between the alternative remedies under the Workmens Compensation Act 1925, s 29(1).

Decision of Croom-Johnson J ([1939] 3 All ER 339) reversed.

Notes

The question whether or not there has been a binding election is largely one of fact, and, indeed, is one of those questions of mixed fact and law upon which every case must more or less be an authority only on its own facts. At the same time, there has been a widely held opinion that a receipt for compensation which includes the words “without prejudice” is a sufficient protection for the workman. The present case considers this matter very fully. The essential matter underlying such a case as this is the knowledge of the workman of his choice between two remedies, and, if the receipt of compensation is relied upon as an election, the receipt of such compensation must be at a time when he had such knowledge or with a sufficient reservation. The previous decisions in Perkins v Hugh Stevenson & Sons Ltd and Selwood v Towneley Coal & Fireclay Co Ltd had made it doubtful whether there was a sufficient reservation of rights in the present case, but those decisions are here distinguished.

As to Alternative Remedies, see Digest, Vol 34, pp 490492, Nos 40634071; see also Williss Workmens Compensation (32nd Edn), pp 518, 524.

Cases referred to

Perkins v Hugh Stevenson & Sons Ltd [1940] 1 KB 56, [1939] 3 All ER 697; Digest Supp, 161 LT 149.

Selwood v Towneley Coal and Fireclay Co Ltd [1939] 4 All ER 34; Digest Supp.

Oliver v Nautilus Steam Shipping Co [1903] 2 KB 639; 34 Digest 495, 4087, 72 LJKB 857, 89 LT 318, 5 WCC 65.

Codling v Mowlem (J) & Co Ltd [1914] 3 KB 1055; 34 Digest 491, 4067, 83 LJKB 1727, 111 LT 1086, 7 BWCC 786, affg [1914] 2 KB 61.

Kendall v Hamilton (1879) 4 App Cas 504; 21 Digest 218, 540, 48 LJQB 705, 41 LT 418.

Page 363 of [1940] 1 All ER 362

Scarf v Jardine (1882) 7 App Cas 345; 36 Digest 382, 581, 51 LJQB 612, 47 LT 258.

Bennett v Whitehead (L & W) Ltd [1926] 2 KB 380; 34 Digest 492, 4068, 135 LT 329, 19 BWCC 133.

Kinneil Cannel & Coking Coal Co Ltd v Sneddon (or Waddell) [1931] AC 575; Digest Supp, 100 LJPC 113, 145 LT 289, 24 BWCC 181, affg SC sub nom Waddell v Kinneil Cannel & Coking Coal Co Ltd (1930) 23 BWCC 567.

Huckle v London County Council (1910) 27 TLR 112; 34 Digest 495, 4090, 4 BWCC 113, affg 26 TLR 580.

Davenport v R (1877) 3 App Cas 115; 31 Digest 472, 6195, 47 LJPC 8, 37 LT 727.

Croft v Lumley (1858) 6 HL Cas 672; 31 Digest 376, 5229, 27 LJQB 321, 31 LTOS 382, affg (1856) 5 E & B 682.

Re Daintrey, Ex p Holt [1893] 2 QB 116; 4 Digest 105, 946, 62 LJQB 511, 69 LT 257.

Avery v London & North Eastern Ry Co, Harris v London & North Eastern Ry Co, Bonner v London & North Eastern Ry Co, Watson v London & North Eastern Ry Co [1938] AC 606, [1938] 2 All ER 592; Digest Supp, 107 LJKB 546, 159 LT 241, 31 BWCC 133.

Appeal

Appeal by the plaintiff Unsworth, from a judgment of Croom-Johnson J, dated 3 May 1939, at the Liverpool Spring Assizes, and reported sub nom Burke and Unsworth v Elder Dempster Lines Ltd [1939] 3 All ER 339, where the facts and arguments are fully set out.

Wilfrid Clothier KC and M Turner-Samuels for the appellant.

G J Lynskey KC, Hartley Shawcross KC and C N Shawcross (for Robertson Crichton on war service) for the respondents.

Clothier KC: There can be no election without knowledge of the right to elect: Scarf v Jardine, per Lord Blackburn, at pp 360, 361, Kendall v Hamilton, per Lord Blackburn, at p 642, and Codling v Mowlem (J) & Co Ltd. The second limb of s 29(1) does not confer an independent defence upon the respondents. The protection in the second limb against double payments depends upon there having been an election by the same person, who, having elected, is precluded from receiving payment both under and independently of the Act: Bennett v Whitehead (L & W) Ltd. [Counsel referred to Kinneil Cannel & Coking Coal Co Ltd v Sneddon.] The acceptance by the appellant of the payments before 19 August 1938, without knowledge of their statutory nature, or of his right to damages or to elect, and without any clear indication by the respondents of their nature, ought not to be construed as an unequivocal election to bar him from subsequently claiming damages. The words “without prejudice,” coupled with the letters, were words apt to indicate that the appellant was accepting those payments on the condition that his rights apart from the Act were not to be thereby prejudiced. They were in fact sufficient to achieve that purpose: Oliver v Nautilus Steam Shipping Co and Huckle v London County Council. The cases of Davenport v R and Croft v Lumley, cited by the judge, merely decided that a landlord cannot approbate and reprobate a lease.

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[Counsel referred to Re Daintrey, Ex p Holt, Perkins v Hugh Stevenson & Sons Ltd and Selwood v Towneley Coal and Fireclay Co Ltd.] The principle underlying the Kinneil Cannel case, and Avery v London & North Eastern Ry Co is that s 29(1) of the Act confers an option upon a workman injured by accident arising out of and in the course of his employment, or upon his representatives or dependants, and that the exercise of that option is not to be frustrated by any payment which the employer may make not in accordance with the election made by each one of those who are entitled to make it. Though knowledge of the right to elect is in general necessary to a true election, a workman may so act as to lead his employer to believe that the workman has in fact elected with knowledge of his right to elect, and so as to induce the employer to pay in accordance with that apparent election. Whether or not the workman has so acted in that unequivocal manner is a question of fact. In Perkins case, the workman claimed compensation under the Act, and signed a receipt in which he declared his election and his acceptance of compensation under the Act. In Selwoods case, the acceptance of compensation on the basis that it was compensation under the Act was held to be the equivalent of election, even if the workman did not know of his option. The facts in the present case were quite different from those upon which these cases were decided.

Lynskey KC: The workman, having received payments from his employers, was debarred from bringing an action against them at common law, irrespective of whether or not he knew of his rights: Perkins v Hugh Stevenson & Sons Ltd and Selwood v Towneley Coal and Fireclay Co Ltd. The present case is distinguishable from Oliver v Nautilus Steam Shipping Co. There an insured person refused to accept moneys from an insurance agent in respect of compensation unless he added the words “without prejudice,” to which course the agent assented. In this case, there has been no such assent by the employers to the addition of these words. The workman has made his election under s 29(1) of the Act by having in fact received compensation, and is, therefore, in accordance with the provisions of that section, disentitled to recover at common law. The workman has been receiving half his wages, and this is the amount to which he is entitled under the Act.

Wilfrid Clothier KC and M Turner-Samuels for the appellant.

G J Lynskey KC, Hartley Shawcross KC and C N Shawcross (for Robertson Crichton on war service) for the respondents.

23 January 1940. The following judgments were delivered.

SLESSER LJ. This case once more raises a very difficult problem, which is constantly before the court, arising out of the Workmens Compensation Act 1925, s 29(1). The question which has to be considered in this class of case is in what circumstances a man, having received compensation from his employer when he has suffered an injury in working for his employer, can be said so to have received compensation under the Workmens Compensation Act as to preclude him from proceeding with the remedy which he might otherwise have at common law. S 29(1) provides as follows:

When the injury was caused by the personal negligence or wilful act of the

Page 365 of [1940] 1 All ER 362

employer or of some person for whose act or default the employer is responsible, nothing in this Act shall affect any civil liability of the employer, but in that case the workman may, at his option, either claim compensation under this Act or take proceedings independently of this Act; but the employer shall not be liable to pay compensation for injury to a workman by accident arising out of and in the course of the employment both independently of and also under this Act …

It has been decided in this court in Perkins v Hugh Stevenson & Sons Ltd, and also in Selwood v Towneley Coal and Fireclay Co Ltd, that, where a workman has either claimed compensation from his employers under the Workmens Compensation Act and been paid compensation or accepted payments sent to him by his employers as compensation without making any claim, in such cases the employer cannot be held liable to any damages in proceedings taken by the workman at common law. It is the basis of the decision both in Perkins v Hugh Stevenson & Sons Ltd, and in Selwood v Towneley Coal and Fireclay Co Ltd, that the workmen, without any qualification, either claimed and received payment of workmens compensation or received it from the employers knowing it to be compensation without making a claim.

On the other hand, it has been held in another decision in this court, in the case of Oliver v Nautilus Steam Shipping Co, that, in cases where a workman receives from his employer after injury weekly payments which are not to be taken as payments made by the employer under the Workmens Compensation Act or received by the workman as payments of compensation under the Workmens Compensation Act, then, as the language of the statute, I think, itself makes clear, s 29(1) does not operate at all. As Romer LJ puts it in Oliver v Nautilus Steam Shipping Co, at p 651:

… proceedings by a workman against his employer for compensation should not be held to irrevocably bind the workman in the exercise of the option given him by sect. 6 [now sect. 29] unless those proceedings have resulted in some compensation, as such, being paid to and received by the workman in such a manner so as to bind both parties.

The question which arises in the particular case before us is whether this is a class of case where the workman has been paid and has received compensation as such, bringing the case within Perkins v Hugh Stevenson & Sons Ltd, and excluding him, therefore, from the right to take common law proceedings, or a case where he has not received compensation as such, in which he has not made his election, and payments will not have been made both independently of and under the Workmens Compensation Act, and is, therefore, free to proceed with his common law remedy.

The history of the case is to be divided into two periods. This man was injured by an accident which is now admitted to have been the result of negligence on the part of the employer, and to be actionable, because it is admitted that, apart from preclusion of the right under s 29, the action would lie. On 8 March 1938, he was working on a certain ship, the Accra. He was helping to load the vessel, when a

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beam which was unsecured fell upon him and he was injured. Consequent upon his injury, he thought, according to his evidence, that he would be “entitled”which was the word he finally used in answer to a questionor, at any rate, would be likely, to receive half his wages if he went to the employers and claimed them. He referred to this payment which he received as “accident money.” He said that all his fellow-workmen, when they were injured at work, got it, and he therefore proceeded to go to the proper place and ask for his accident money, which he received. From week to week, on receiving this accident money, which was half his wages, he signed his name on a sheet issued by Elder Dempster Lines Ltd, which was headed with the word “Compensation” and the appropriate date. On the other hand, he saidand the judge accepted his evidence upon this pointthat he had never heard of the Workmens Compensation Act, and that he did not know the difference between his right to damages and his right to compensation under the statute. The judge has accepted his evidence on that point. The man says that until a very recent date, when he happened to be at the Manchester Assizeswhy I do not knowand went into the library and asked the librarian to give him some textbooks (which he says he found very confusing), he did not know anything about the Workmens Compensation Act at all. It was only after he had been to visit a solicitor in August 1938, that he knew that he had the right to choose between making a claim for compensation and bringing a claim for damages. In other words, when the man received this money, he did not know whether he was receiving it as the result of some right he had under the Workmens Compensation Act or as the result of some arrangement made between his trade union and his employers by which people in the place should be compensated, or as an act of grace on the part of his employers. All he knew was that, when his friends were injured, they were in the habit of receiving half their wages.

It was pointed out by me to counsel for the respondents in the course of the case that it by no means follows, under the Workmens Compensation Act, that the workman will be entitled to receive half his wages. That may be the maximum amount fixed in case of incapacity, but it may be that, by reason of the workmans being able to do light work, or for other reasons, economic or physical, his actual statutory right may be considerably less than half his wages. We do not know. At any rate, the judge has found as a fact that this man did not know of any legal rights which he might possess to receive compensation.

In those circumstances, the question arises whether or not this man elected to receive this workmens compensation. Did he receive it “as such,” to use the expression of Romer LJ? I have no doubt at all that the employers intended to pay the money as compensation, but I can find no evidence that this man intended to receive the money as compensation under the Workmens Compensation Act. For all he knew, he might be receiving compensation to which he was entitled at

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common law as a compromise of his right to damages. Such was the position until the time when he consulted his solicitors and his attention was drawn to the fact that he might claim damages. We do not know exactly what the solicitors told him, but the substance of it, as appears in the evidence, was that the solicitors asked him whether he had taken compensation, and, when the workman said that he had, gave him certain advice.

As a result of that advice, a letter was written to the employers on 15 August 1938, to this effect:

We have been consulted by Richard John Unsworth, of 20, Southill House, Southill Road, Liverpool, with reference to injuries sustained by him on Mar. 8, 1938, at about 3.30 p.m. on board the Accra in West Brunswick Dock, when the beam in No. 2 hatch gave way owing to the fact that there was no bolt in the beam. According to our instructions, it would appear that our clients injuries are due to the negligence of yourselves, your servants or agents, and we should be glad to hear by return post that you are prepared to admit liability in the matter, and pay our client such damages and costs as may ultimately prove reasonable. You will appreciate our client has an alternative claim under the Workmens Compensation Acts, which claim for the moment he reserves.

I think that that must refer to the right given under the statute by which, if a man fails at common law, he has his compensation assessed under the Workmens Compensation Act. The answer, dated 17 August, is as follows:

Your letter of the 15th instant addressed to our clients, Elder Dempster Lines, Ltd., has been handed by them to us. Our clients cannot admit that any injuries sustained by your client was due to their negligence or that of their servants or agents, and we accordingly repudiate liability on their behalf. In case you are not so informed, we should point out that your client is in receipt of compensation from our clients at the rate of 25s. 9d. per week, the payments having been made since Mar. 8 last.

At that point, information concerning the situation had been given to both solicitors. The solicitors for the workman Unsworth had already been told by him that he had had this money, and the solicitors for the employers are informing them to that effect on 17 August. On 19 August, the solicitors for the workman acknowledge the letter of 17 August from the employers, and reply as follows:

We suggest the circumstances in which our client met with his injuries are such as to preclude, but for any question of workmens compensation, any possibility of a successful defence to an action for damages at common law. With regard to the last paragraph, our instructions are that the circumstances in which our client accepted certain payments were such as in no way to invalidate his claim at common law.

As I understand it, that is a statement from the workmans solicitors to the employers solicitors that the only possible defence would be by reason of the receipt of workmens compensation, and that, in the circumstances, the fact that their client had accepted the payments were such as would not invalidate his claim at common law, no doubt referring to the fact that they had not received the money as compensation to the knowledge of their client, the workman. On that, following the advice which had been given to him by his solicitors, Unsworth, upon receiving the subsequent payment for the week ending 26 August,

Page 368 of [1940] 1 All ER 362

added after his name the words “without prejudice.” He said in his evidence that he was bound to go on receiving those payments, because he had no other means of supporting his wife and family. Being pressed as to the meaning of “without prejudice,” he gave what I think is a satisfactory definition when he said that he thought it meant “without bias.”

However, one has to consider the circumstances as a whole. When the facts known to both parties are considered, I myself entertain no doubt that the proper inference is that it was agreed between the workman and the employers, when they paid this money for the week ending 26 August, that he should take that money from them without prejudicing his rights at common law. I think that that is the fair result to be derived from the information contained in the letters and by the use of the words “without prejudice.”

With regard to the use of the words “without prejudice,” it was held in Oliver v Nautilus Steam Shipping Co that those words, when used by a man who declined to take money from an insurance agent in respect of compensation unless he added the words “without prejudice” (to which the agent assented, saying that he would make a note of it in his notebook), were a protection to the man against its being said against him under s 6 of the Workmens Compensation Act 1897, as it then was, that “he had made an election.”

Counsel for the respondents endeavoured to distinguish that case from the present case by saying, as regards this second period after 26 August, that the words “without prejudice” were not so assented to by the employers, as they were in Oliver v Nautilus Steam Shipping Co. In my opinion, however, when the facts are considered, I think that the right inference to draw (and it is a question rather of inference of fact than of any direct evidence) is that here the employers, when they paid the money and obtained without question a receipt marked “without prejudice,” and continued to pay on that basis, accepted the position that the payments which the man continued to receive were to be received without prejudice to his position at common law, and that, therefore, there was here, as there was in Oliver v Nautilus Steam Shipping Co, an agreement between the parties which prevented any question of election arising on the part of the workman. If that be the right view, it concludes this case, as I think that for the first period the workman received the money, not as compensation, but neutrally, either as damages, as compensation, or as a result of some private arrangement, whatever it might be, not knowing or understanding what he was receiving, and that, as to the second period, after he was informed that it was compensation, and possibly even informed that the further receipt of it would, unless he took steps to the contrary, prejudice his position by creating an election, he and his solicitors took steps between them in factby the letters which were written and by the use of the phrase “without prejudice”to prevent that election from taking place.

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In the result, I think that the judge was wrong. In particular I disagree with him when he says in his judgment that this man took this money knowing that it was compensation under the Act. If the judge means that as a finding of fact, it is not to be derived from the evidence. The evidence rather is the other way. The actual language of the judge is as follows, at p 349:

I cannot see what right these plaintiffs had in this case to receive money as anything other than that which it was. It was offered to them, and they knew it was offered to them, as workmens compensation in respect of this accident …

I can find no evidence in support of that view. I think it was paid as a solatium, as the result of the accident, if you please as compensation, but whether paid as workmens compensation under the Workmens Compensation Act or as partial payment of damages which might or might not afterwards be taken into account in a common law action, or paid through some arrangement with the trade union of which this man was a member, is all left in the dark. It is for an employer who prima facie admits a liability for his negligence to take advantage affirmatively of the section and say that he is protected because the workman has precluded himself by the specific acts mentioned in the section. If the employer cannot prove that fact affirmatively by saying that the workmens compensation was taken as such, if one has to speculate as to the capacity in which this money was received, then I think that the workman is entitled to say that the employer has failed to discharge the burden which is cast upon him to protect himself from the liability which he would otherwise have at common law, and I think that he must bring himself strictly within the language of s 29(1) or else he must fail. For these reasons, I think that this appeal succeeds.

MACKINNON LJ. I am glad to think that I can agree with the order proposed by Slesser LJ. I confess that, after listening to the many cases which have been cited to us, I find myself in very considerable difficulty as to the enunciation of any clear principles with regard to the operation of s 29. In particular, I am embarrassed by the fact that I was a party to the decision in Perkins v Hugh Stevenson & Sons Ltd, and expressed my agreement with the judgment of Sir Wilfrid Greene MR in that case.

At first sight, when I heard this case opened, it seemed to me very difficult to state any principle here that was not covered by the decision in Perkins v Hugh Stevenson & Sons Ltd. I am now satisfied that this case is not concluded by that one, and that there is a difference on the facts, though I appreciate that the difference may appear to be a small one. I also appreciate that it may be difficult for a judge, seeking to apply the principles previously laid down by this court, to say whether or not the facts of a particular case come within the decision in Perkins v Hugh Stevenson & Sons Ltd. I say that the difference is a small and narrow one, but I think that it is a real one. In Perkins v Hugh

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Stevenson & Sons Ltd, the man knew of the existence of the Workmens Compensation Act, and he knew that he was accepting money under it. His only ignorance was that he did not know that he had an option to make an alternative claim at common law. I think that the whole basis of the decision in Perkins v Hugh Stevenson & Sons Ltd consisted of the statement which appears in the judgment of Sir Wilfrid Greene MR, at p 61 ([1939] 3 All ER, at p 700):

He [the plaintiff] applied for, and was paid as such, weekly sums by way of compensation under the Workmens Compensation Act.

In this case, on the facts, this man Unsworth knew nothing of his rights at all, either his rights under the Workmens Compensation Act or his rights at common law. All he knew was that he was receiving weekly a sum of moneythat is, from the first period up to 19 August. On 19 August, he was advised by his solicitors, and received, no doubt, some glimmer of illumination as to the subtle legal position which existed. Thereafter he went on receiving the weekly amounts from his employers, but he gave that receipt for them every week expressed to be “without prejudice.” Here, again, one gets a very subtle distinction between these various cases. If one is putting forward on the form of receipt that he received the weekly payments “without prejudice,” and that the employers had assented to his so receiving them, then this case would be exactly like Oliver v Nautilus Steam Shipping Co. If, on the other hand, the employers had repudiated this proposal so to receive the money, and the workman had continued to take the money, knowing that they so repudiated his attempt to keep his rights open, and, as in Perkins v Hugh Stevenson & Sons Ltd, given clean receipts for the money as received under the Workmens Compensation Act, then the position would have been as in Perkins v Hugh Stevenson & Sons Ltd.

In this case, it was an intermediate position. He put forward his receipts saying that he received the weekly payments “without prejudice”that is, without prejudice to his rights, of courseand the employers, who must be taken to have seen those successive weekly assertions by him, say nothing at all. In those circumstances, I think that one can assimilate the position in this case to the side of the line represented by Oliver v Nautilus Steam Shipping Co, rather than to the side of the line creating the disability which occurred in Perkins v Hugh Stevenson & Sons Ltd. I realise, as I have said, that this is a very narrow ground on which to distinguish this case from Perkins v Hugh Stevenson & Sons Ltd, but, unhappily, one has to take narrow points in the administration of this very obscure branch of legislation. I therefore agree (and I am glad that I can agree) with the proposed order. I would like to add only this. In Perkins v Hugh Stevenson & Sons Ltd, in addition to expressing my agreement with the judgment of Sir Wilfrid Greene MR, I did in some words indicate that I felt a difficulty as to the ground on which, if the man were allowed to go on with his action at common law, the employers could claim repayment, or take credit for

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the £81 they had paid to him in weekly payments under the Act. On further consideration, I do not think that I need have felt this difficulty. I have been assisted by some remarks made in the course of this case by Goddard LJ. I think that he is right in pointing out that, in the supposed common law action, which might have been allowed to proceed, the mans damages would have to be assessed. Part of those damages would be his loss of wages. In so far as he had received his weekly payments from his employers, those receipts would pro tanto have diminished the amount of his damages under the head of loss of earnings. Therefore, there would be no question of claiming back the £81, or of setting it off against the amount which, in the hypothetical common law action, he would recover, because he would recover in the common law action only his loss of wages less what he might have received from his employers. Therefore, so far as concerns that additional, and really unnecessary, reason so put forward by me in that case, I am not at all sure that I was correct. I agree with the proposed order.

GODDARD LJ. I agree. As we are differing from the judge, I propose to add a few words of my own. If one takes first of all the period from the accident to 19 August, the questions arise (i) whether or not there had been an election by the plaintiff, so as to debar him from bringing his action at common law, and (ii) whether or not the fact that he had received the payments, which the employers intended to pay him as workmens compensation, debarred him from now exercising the option which otherwise would have been open to him.

On that part of the case, it is necessary to look carefully at the facts. In reference to the plaintiff Unsworth, Croom-Johnson J said, at p 349:

I cannot see what right these plaintiffs had in this case to receive money as anything other than that which it was. It was offered to them, and they knew it was offered to them, as workmens compensation in respect of this accident. …

I do not think that that is a right inference to draw from the evidence. The evidence (and the judge accepted it) shows that Unsworth says he was entirely ignorant of what his rights were in respect of an accident which he might sustain during the course of his employment. He did not know that conceivably he might be able to bring a common law action. I think, therefore, that it is a reasonable inference to draw that he knew nothing about the mysteries of common employment, or how any employer can sometimes be defeated by pleading a breach of statutory duty, which was what was done here. He says he knew nothing about the Workmens Compensation Act, and his belief was that he had a right to bring an action for damages only if he was injured in the street. In fact, he had never heard of the Workmens Compensation Act until he read something about a case tried before the same judge at the Manchester Assizes. He then took himself to the Manchester public library, where the perusal of four textbooks which were handed to him, especially Willis on Workmens Compensation, with its 1,158 pages,

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left him exactly as wise, I think, as he was before he went there. However, if a man does not know of his right to elect, it is quite clear, on the authorities, that there is no election. Atkin J, as he then was, said in Codling v Mowlem (J) & Co Ltdand his view has been since approved in the House of Lords on this point, though they differed from him on another pointthat the doctrine of election in connection with s 29 of the Workmens Compensation Act is exactly the same as it is with regard to any other matter in which election can be exercised. There cannot be election, said Lord Blackburn, in Kendall v Hamilton, without knowledge of the right to elect. This man did not know that he had the right to elect, and, knowing nothing about it, obviously he could not exercise any election before 19 August.

It was said by counsel for the respondents that, as the workman had received payment from his employers, that debarred him from bringing the action, whether or not he knew of his rights. For that, I think his principal authorities were Perkins v Hugh Stevenson & Sons Ltd, to which both Slesser and MacKinnon LJJ have referred, and Selwood v Towneley Coal and Fireclay Co Ltd. Both those cases seem to me to be clearly distinguishable from this case. The whole basis of Perkins v Hugh Stevenson & Sons Ltd was that the matter had been started by a claim put forward by the plaintiff for workmens compensation. In Selwood v Towneley Coal and Fireclay Co Ltd, although the man had not made a claim, he knew (and there was no question about it) about his rights under the Workmens Compensation Act. He wanted workmens compensation, he asked for it, and he got it. Those cases seem to me to have no bearing upon the facts of this case, which show, when properly understood, that the workman knew nothing whatever about it. I cannot agree that this mans state of knowledge, which was accepted by the judge, would indicate to him that he was receiving a sum of money under some statutory right. All he knew was that, if he met with an accident and went down to the offices of the pool who employed himhe was one of a pool of men who worked for a certain pool of employersafter the accident he would get some money, which he called “accident money.” He says that he thought that he would get half his wages. However, he was not necessarily entitled to half his wages, because he might not be wholly incapacitated. He thought, nevertheless, that he would get “accident money.” If he ever applied his mind to it, which I do not suppose for a moment he did, “accident money” might mean money payable under a contract which could be inferred by custom of the trade, or the custom of the port, or because there had been a collective bargain between the trade union and the employers, so that it would be assumed that every dock labourer was employed upon the terms of the bargain which had been agreed between the union and the employers.

I think that it is quite impossible in this case to say, on the evidence which was given herethere was no evidence called by the defendants

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that this man, in receiving this money before 19 August, was receiving it with his knowledge as compensation payable under the Workmens Compensation Act. Therefore, I think that this case is clearly distinguishable from Perkins v Hugh Stevenson & Sons Ltd and from Selwoods case. My attention has been called by Slesser LJ to the fact that in Selwoods case he said, at p 38:

… if the workman does not receive the money as compensation under the Workmens Compensation Act, different considerations arise.

That is just the state of affairs which we have here. I think that it is clear on these facts that quite different considerations do arise here.

With regard to the payments made after 19 August, the position was this. The man having been to his solicitors, and having been told, I supposeas no doubt he was told by his solicitorsin future to take any payments “without prejudice,” the solicitors wrote to the employers and asserted that their client was going to bring an action at common law. When the employers set up in answer that the workman had since accepted compensation, the solicitors told the employers again:

On our instructions this was not accepted in such circumstances as would debar him from bringing his action.

The workman then presented himself at the offices of the pool again. Whether or not the employers had actually informed the clerk who had to pay the money of this correspondence matters not. The employers representative was there, and the employers, having knowledge of what the solicitors had asserted this mans intention to be, handed him some money, and, either immediately before or immediately afterwardsI should think, from the way these things are done, that it was immediately before, but it does not matterthe workman signed his name on a sheet which was kept for the purpose, and which all men in receipt of compensation sign, and, as he had been told to do, added the words “without prejudice.” Thereupon the employers could have said: “If you are saying that there is no agreement here to pay you compensation, we are going to stop the compensation, and we are not going to pay any more money.” S 12 of the Workmens Compensation Act, in my opinion, would not afford any difficulties at all to the employers. S 12, which forbids them to stop payment, except as a result of arbitration, applies only where there has been an agreement. In these circumstances, the workman could not say that there was an agreement, because he was saying that he had never taken the money under the Workmens Compensation Act at all. However, the employers continued to pay him week after week money which he received, telling the employers that he so received it, without prejudice to the rights which had already been asserted for him by his solicitor. It seems to me that this payment of money comes within Oliver v Nautilus Steam Shipping Co, a case which has never been questioned or overruled. If the passage in the judgment of Romer LJ, which has already been referred to by Slesser LJ, properly states the law, I think that it is

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quite clear that the man saved his rights, and, therefore, was not barred from taking his common law action.

I have only one more word to say. I did in the course of the argument, and I still do, venture respectfully to express my disagreement with that part of the judgment of Sir Wilfrid Greene MR, in Perkins v Hugh Stevenson & Sons Ltd which deals with the question of set-off, or recovery of sums paid. It was obiter, because it was not necessary for the decision of the case. It was an expression by Sir Wilfrid Greene MR of some difficulty which he thought might arise if the decision had gone the other way. I think that, as it was only obiter, one is entitled to express ones dissent from it. I dissent from it on the ground just stated by MacKinnon LJ. It seems to me that s 29 is really designed to prevent the employer from being harassed by two legal proceedings, and is intended to protect him against the danger of having to pay twice over, so that the workman cannot say, when he recovers damages for an accident caused by the personal negligence of his employer: “In addition, I now want my workmens compensation.” Thus, equally, if he has received workmens compensation, perhaps having been paid up to the full, since he has demanded workmens compensation, he cannot then turn round and say: “I have demanded my compensation. I have been paid it, and now I am going to launch proceedings against you at common law.” Where the payment has been made in such circumstances as when it is held, as we are now holding, that an action at common law would lie, it is clear, I think, that, when the damages are assessed, the employer will not pay twice over, because, when the damages come to be assessed, the only damages which the man recovers, in addition to damages for pain and suffering, are damages for that which he has actually lost, and he will have lost, not the whole of his wages, but only half of his wages. At common law, he would be entitled to recover the whole of the wages which he has lost, but, if he has been paid, no matter what the circumstances, and under whatever name, half the wages which he would otherwise have earned, then, of course, when one assesses the damages in the common law action, one would give him only half his special damages, which is what has been given to him in this case. Therefore, I think that that presents no difficulty. It is not a question either of set-off or of recovery of what has been paid. It is simply a matter of giving him only the damages for that which he has suffered. I agree, therefore, that this appeal should be allowed.

Appeal allowed with costs.

Solicitors: Silverman & Livermore (for the appellant); Lawrence Jones & Co, agents for Forwood Williams & Co, Liverpool (for the respondents).

Derek H Kitchin Esq   Barrister.


Re Luck, Walker v Luck

[1940] 1 All ER 375


Categories:        FAMILY; Children        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        12, 16, 26 JANUARY 1940        


Conflict of Laws Illegitimate child Legitimation according to law of foreign domicil Law of domicil recognising subsequent legitimation by adoption Father not domiciled in foreign country at time of childs legitimation Public policy.

Perpetuities Rule against perpetuities Distribution Life in being Vital date Not date when distribution first possible, but date when distribution actually effected.

Under a marriage settlement dated 24 April 1867, to which the testator was a party, and by a will dated 20 December 1887, respectively two funds of property were left, inter alia, and as far as is material, on trust for the issue of the testator living at the time of his death or born within 21 years thereafter. His wife having predeceased him in 1892, the testator died in 1896. Both the marriage settlement and the will had been executed in England. Among other children, the testator left a son him surviving. The son married in 1893, and there were two children of that marriage, the second and the third defendants. Some years after his marriage, the testators son left his wife and proceeded from England to the United States of America. In the state of California, he formed a connection with a woman while his marriage was still subsisting, and of that illicit union the first defendant was born in 1906. It was found as a fact that the first defendants father was not at that time domiciled in the state of California. In 1922, the wife obtained a divorce from him, and thereafter, in 1925, he married a woman not the mother of the first defendant. At that time, he was domiciled in the state of California, and shortly after the marriage he adopted the first defendant. It was proved that the law of California requires for the legitimation of a child that the latter shall be adopted and received into the home of the parent. This was not, therefore, a case of legitimation by subsequent marriage. The first defendants father having died in 1938, the first defendant now claimed to be entitled to his share in the funds of the marriage settlement and the testators residuary estate respectively. On behalf of the second and third defendants, the legitimate children of the first defendants father, it was contended that, as both the marriage settlement and the will had been executed in England, they had to be construed according to English law, and that, on the authority of Udny v Udny, the first defendant was barred from taking any benefit, owing to the fact that his father, although domiciled in California at the time of the first defendants adoption, had not been so domiciled at the time of his birth. It was also contended that to recognise the first defendant as a legitimate child would be contrary to public policy. As regards the fund under the marriage settlement, it was further argued that, the testator having died in 1896, only such children could take as were lawful children in 1917namely, 21 years after the testator's deathand that, as the first defendant had not been adopted until 1925, it would be an infringement of the rule against perpetuities if he were allowed to benefit:

Held (i) as, according to the law of the country of the fathers domicil at the time of the first defendants adoption, the latter was legitimated as from the date of his birth, he was entitled to his share in the funds, regardless of the fact that his father was not domiciled in that country at the time of the first defendants birth.

(ii) as this was not a case of legitimation by subsequent marriage, Udny v Udny did not apply.

(iii) as distribution had not taken place prior to 1925namely, the date of the first defendants adoptionit could not be said that to benefit him would be an infringement of the rule against perpetuities. The vital date was the date of actual distribution, and not the date when distribution had first become possible.

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Notes

The law of California is peculiar in its provisions relating to the legitimation of children. Generally speaking, legitimation is effected by the subsequent marriage of the parents, although in many cases certain other conditions must also be fulfilled. The present case has nothing whatever to do with legitimation by subsequent marriage, and the decision is founded upon this distinction. The judge has not, therefore, felt himself bound by the decision in Udny v Udny.

As to Legitimation, see Halsbury (Hailsham Edn), Vol 6, pp 315, 316, para 367; and for Cases, see Digest, Vol 3, pp 372375, Nos 131153.

Cases referred to

Re Askew, Marjoribanks v Askew [1930] 2 Ch 259; Digest Supp, 99 LJCh 466, 143 LT 616.

Re Wrights Trust (1856) 2 K & J 595; 3 Digest 372, 134, 25 LJCh 621, 27 LTOS 213.

Udny v Udny (1869) LR 1 Sc & Div 441; 3 Digest 372, 132.

Originating Summons

Originating summons to determine whether or not one David George Croft Luck was entitled to a share in certain trust funds under a marriage settlement and a will respectively. The facts and arguments are fully set out in the judgment.

J A Reid for the plaintiff.

J Neville Gray KC and A J Belsham for the first defendant.

A F Maurice Berkeley for the second and third defendants.

26 January 1940. The following judgment was delivered.

FARWELL J. This summons raises two questions as to whether or not the first defendant, David George Croft Luck, is entitled as a child of Frederick Charles Luck to a one-third or to some other, and, if so, what, share in the settled share of Frederick Charles Luck in certain trust funds settled by Frederick Charles Lucks parents on the occasion of their marriage, and also whether or not the same defendant is entitled to participate in the residuary estate of Frederick George Luck. The question turns upon whether or not the defendant, David George Croft Luck, is, or is entitled to be deemed to be, a legitimate son of his father.

The facts which give rise to this question are as follows. By a settlement made on 24 April 1867, between Frederick George Luck of the first part and Fanny Elizabeth Walker of the second part, and two other persons, as trustees, certain investments and personal property were settled on the usual trusts in a marriage settlement, and the trust after the death of the survivor of the husband and wife was:

… in trust for all or such one or more exclusively of the other or others of the issue of the said intended marriage to be born during the lives of the testator and Mrs. Luck or the life of the survivor of them or within 21 years after the death of such survivor at such age or time or respective ages or times if more than one in such shares and with such future and executory or other trusts for the benefit of the said issue or some or one of them and with such provisions for their respective maintenance education or advancement at the discretion of the trustees or trustee for the time being or of any other persons or person and upon such conditions with such restrictions and in such manner as the testator and Mrs. Luck should by any deed or deeds or writing or writings sealed and delivered with or without power of revocation and new appointment jointly appoint …

Then there was a gift in the form of an appointment to the issue. The appointment was made on 12 November 1888, by the testator and his wife,

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and they appointed that the whole of the moneys, stocks, funds, securities and property then subject to the trusts of the settlement (except the moneys assured by or under two several policies of assurance on the life of the testator as therein mentioned) should be held in trust for all the children of their marriage then living and the children then living of any child who should have died leaving children living at the decease of such survivor of them, such children taking amongst them, if more than one, only the share which their parent would have taken if he or she had survived them, but subject nevertheless as to the shares of the children of their marriage of and in all the trust premises to the following trusts. Those trusts were that the share of each child of theirs was to be retained by the trustees of the settlement upon trust to pay the income thereof unto such child during his or her life, as the same should accrue, and, in the case of a female or females, not by way of anticipation, and from and after his or her decease to transfer the same unto the child or divide the same equally between all the children of such deceased child of the testator and Mrs Luck who should have been born within 21 years after the decease of the survivor of them, and, if any of their children should die without leaving issue to take his or her share under those trusts, then the share of the one so dying should be added to the remaining share or shares as an accretion thereto, and such accretions should be subject to the like trusts as the original shares to which they were added. Mrs Luck, the wife, died on 14 June 1892, and on 26 December 1892, the testator, the settlor, revoked the appointment so far as it extended to certain real estate. Nothing turns on that, and I need not mention it further. The testator by his will, dated 20 December 1887, appointed certain trustees and executors and gave certain legacies. Then he gave the whole of his residuary estate to trustees in trust for sale, conversion and investment, and then there was a provision for paying the annual income to his wife during her life, and, after her death, as to the capital and income thereof, upon trust for all his children living at his decease who being a son or sons should attain the age of 21 years or being a daughter or daughters should attain that age or be married. Then he declared that the share of each child of his should be held by his trustees upon trust to pay the income thereof unto such child during his or her life and as to each daughter for her separate use without power of anticipation or alienation, and, immediately after the decease of each such child of his, his said trustees should hold as well the capital as the income of the share of his same child in trust for the child, if only one, or all the children, if more than one, of his same child who (either before or after the decease of his same child) being a son or sons should attain the age of 21 years or being a daughter or daughters should attain that age or be married, such children of his same child if more than one to take in equal shares. Then there was a provision that, if any of the testators children should die without having issue who should attain a vested interest in his or her parents share of the

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testators residuary trust estate, then the share of each child of his so dying with all accretion thereto under that clause should, upon the decease of such last-mentioned child, or the failure of such issue, whichever should last happen, be added to the other share or shares equally of his residuary estate. The testator died on 1 July 1896. There was issue of the marriage of the testator and his wife 9 children, and no more. One of them, the eldest child, died in infancy. The second child was a daughter, who married and who is dead, leaving an infant son, who also is dead. The third child was Frederick Charles Luck, who is the father of the first defendant about whom the question arises. He died on 6 July 1938. The other children are alive, and, in the case of 4 of them, there were no children. The position with regard to Frederick Charles Luck, the third child of the marriage, is this. He was married twice. His first marriage was to Clare Henriette Batiste on 26 January 1893. There were two children of that marriage, the two defendants Charles Pyne Luck and the third defendant, who is a married woman. Some years after the marriage, Frederick Charles Luck left his wife and went abroad. On 19 July 1922, his wife obtained a divorce from him. On 27 July 1925, he married again, and, when he died, he left his wife provided for, but there was no issue of that marriage. Before his second marriage, and while his first marriage was still subsisting, he formed a connection with a woman known as Martha Croft. He lived with her for several years. There was issue of that union the defendant David George Croft Luck, and that child was, of course, according to the law of England, illegitimate, because his father was not married to his mother, and, moreover, there was at the time of the childs birth a subsisting marriage with the first wife which had not then been dissolved. The defendant, David George Croft Luck, was born on 26 July 1906, and he was born in California. Apparently Frederick Charles Luck, the father of this defendant, after he left his first wife was desirous of avoiding her as far as possible. The evidence seems to indicate that his idea was to put a considerable distance between himself and his first wife, and for a time he went to the Continent. In April 1907, before the dissolution of the marriage, he entered into an agreement with his first wife under which certain financial provisions were made for her. In that agreement of 19 April 1907, he described himself as formerly of an English address and then of an American address, and it is recited in that deed that he is engaged in business in the United States and will necessarily be out of England for some years. In the early part of 1906, he went to California. Before that, he had been in New York, and he had been in Europe. In 1906, he and Martha Croft were living together, and went to California, and on 26 July 1906, this defendant was born in California. In September 1907, he acquired a house in California, and he lived in California more or less during the remainder of his life, but there were times when he went elsewhere. He went to Arizona for a time. He made two visits to Arizona, and he was else

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where for a time, but there is no doubt, in my view, and I do not think that this is seriously disputed, that at some time prior to 23 October 1925, Frederick Luck was domiciled in California. I do not think that it is very important to know or to state the exact date upon which he became domiciled in California. At any rate, to my mind it is reasonably plain that at the date of the birth of this defendantnamely, 26 July 1906he had not become domiciled in California. The evidence seems to me to be fairly conclusive as to that. On 26 July 1906, when this defendant was born, the father had been in California quite a short time only. It was after that date that he executed the deed, in which he certainly did not describe himself as of California. In fact, the recital rather shows the opposite. In my judgment, it is impossible to say that by that time he had deliberately abandoned his domicile of origin, which was English, and acquired a Californian domicil, but at a later dateand the date is of some importancein October 1925, he had definitely acquired a Californian domicil. Counsel for the second and third defendants did not really dispute that by that date he had acquired such a domicil. I do not propose to go through the evidence in detail. The evidence is quite plain that he obtained a house and seemed to have settled down in California, and so to have made California his permanent home, and to have abandoned his domicil of origin. After his second marriage, on 23 October 1925, Frederick Luck proceeded to adopt the defendant, David Croft Luck, in accordance with the law of California. That is to say, he signed a document and deliberately took this defendant into his home with the consent of his wife, who was not, of course, the mother of this defendant, and this defendant lived as his son in his house after that date at any rate for some time. The form of the document which he and his wife both signed made it perfectly plain, according to the law of California, that he was deliberately adopting his son as his son, and was introducing him into his house as his son with the consent of his wife. The question of the effect of his so doing is, of course, a question of Californian law, and that is a pure question of fact. Having read the whole of the evidence as to the Californian law, I think there is no doubt at all as to the effect, according to the law of California, of such an act as was done by Frederick Luck. The effect was that this defendant became, according to the law of California, the legitimate son of his father. Not only that, the effect of the law was that he became the legitimate son of his father from the date of his birth. The evidence of the Californian lawyers makes it quite clear that, according to the law in California, he would be treated in all respects as the legitimate son of his father, and, as a question of fact, I find, without any doubt, that what is the law of California was the law at the time, and, according to the Californian law, he is, and must be treated as, the legitimate son of his father.

That being the position, the funds which were the subject both of the marriage settlement and of the trusts of the will have now become

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distributable, and the question which I have to determine is whether or not this defendant is entitled to participate either in the funds of the marriage settlement or in the residuary estate of his grandfather. So far as the construction of both those documents is concerned, the law of this country must, of course, govern the construction, and, that being so, the only persons who can takes either under the trusts of the will or the trusts of the settlement, are the children or issue of the settler and testator, and they must be, according to the law of this country, the legitimate children. The question, therefore, turns upon whether, for the purpose of construing these two documents, the first defendant is to be treated as the legitimate son of his father or whether he is illegitimate, and, therefore, barred from taking any share in either of the funds. Whether or not a person is legitimate is, of course, a question of status. I think that it is quite clear on the authorities that prima facie, at any rate, the question of a persons status is governed by the law of that persons domicil. If authority is wanted for that, I think that it is to be found in the decision of Maugham J, as he then was, in Re Askew, Marjoribanks v Askew. If the law of the domicil is to determine whether or not the first defendant is the legitimate son of his father, the answer must be, on the evidence before me, that he is to be so treated. However, it has been said by council for the second and third defendants, who has argued this case with great ability, that there is an exception to that rulethat is to say, that the law of the domicil governs the question of status to the extent at any rate, that, in order that the law of the domicil should apply, the person in question must not only have been domiciled in the place where the law is applicable at the time when the act was done by the father to make the child legitimate, but he must also have been so domiciled at the time of the birth of the child.

Reference has been made to, and council for the second and third defendants quite rightly based his argument upon, a decision of Sir W Page Wood V-C, in Re Wrights Trust and the later Scottish case of Udny v Udny, in which Lord Hatherley LC, as Sir W Page Wood V-C had then become, gave one of the opinions. It is said that those decisions show that, according to the law of England, in a case where the child is made legitimate by the subsequent marriage of his parents, although it has the effect of making the child legitimate according to the law of the domicil of the father, it is not sufficient to entitle that child to be treated as legitimate in this country unless his father was, at the time of his birth, domiciled in the same place. I think it is said in one of the cases that, at the moment of its birth, their child must have the potentiality of being made legitimate, and that, if, by the law of the domicil of the father at the time of the childs birth there was not that possibility, then the subsequent marriage of the father and the mother of the child is insufficient to render the child legitimate according to the law of this country. There is no doubt that that is

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the effect of the decisions, both in Re Wrights Trust and, I think, in Udny v Udny, and those decisions, if they apply here, are undoubtedly binding upon me, and I am bound to follow them. I confess, however, that I feel great difficulty in appreciating exactly on what ground those decisions have been based. If the law which governs status is the law of the domicil, I myself find it very difficult to appreciate why there has to be introduced into the law of the domicil some portion of the law of England, and why it is not sufficient to satisfy the requirements of the law of the domicil to make the child legitimate without having introduced into that law an element of the English law. Notwithstanding my difficulty in appreciating the reason, I am still bound by those authorities, if they apply. In my judgment, however, they are not applicable in a case of this kind, where the facts are so widely different from the facts in those cases. In those cases, that which made the child legitimate according to the law of the domicil was the subsequent marriage of the parents, but in the present case the position is totally different. It is not a question of marriage at all. According to the law of California, if the father, being domiciled in California at the time, performs the act which may be called the act of adoptionnamely, takes the child into his own home as his legitimate child with the consent of his wifeand does that formally, so that the act is as far as possible done publicly, then, according to the law of California, that does make the child legitimate, and it makes the child legitimate, not from the date when the act was done, but from the time of his birth. In my judgment, those facts, which are quite unlike the facts in the two cases I have mentioned, where the act which legitimated the child was the subsequent marriage of his parents, appear to me to be so different that they are not decisions which are binding upon me in this particular case. The law of California is peculiar, so far as I am aware, in that it does so make a child legitimate. The idea of the legitimation of a child by the subsequent marriage of his parents is, of course, not uncommon, but all the cases in which the rule as to the necessity for the father being domiciled in the country at the time of the birth of the child have been considered are cases where the legitimation has been by marriage, and I know of no authority, and I can find no authority, which can assist me in dealing with a case where the law is what it is in California.

In those circumstances, it appears to me that it is open to me to decide this case in the way which appears to me to be the right way, without being bound to follow the earlier decisions, which are decisions upon a different state of facts. In my judgment, if it be true to say that the question of the status is a question which, according to the law of this country, must be governed by the law of the domicil, then there can be no doubt that, according to the law of the domicilnamely, the law of Californiathis defendant is the legitimate son of his father, and he is legitimate from the date of his birth. In those circumstances, I myself

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am wholly unable to see why he is not entitled to participate, at any rate, in the property subject to the trusts of the will of the testator. The question must be in this case, as in all other similar cases, who are the children or issue of the testator, meaning thereby the legitimate children or issue of the testator, and the answerand the only answer which can be given to that question if the law of the domicil of this defendant is to be taken into consideration, as, in my judgment, it must beis that this defendant is one of the children or issue of the testator, and, as such, is entitled to participate in his residuary estate.

I should say before I leave this matter that counsel for the second and third defendants has also argued that, apart from the question of the domicil at the date of the birth, the law will not recognise such a legitimacy as in this case, because it would be against public policy. That seems to me to be an argument to which I cannot give effect. As I have said, the law of the domicil makes this defendant legitimate, and, in my judgment, it would not be right for me to say that, notwithstanding that law, the child must not be treated as legitimate merely because, according to the views of some people, and possibly according to the views of people in this country, such a legitimation may not be desirable, or may be rendered impossible, according to the law of this country, by the fact that the child was born of a person who was not the fathers wife, and who could not be the fathers wife at that time, because the father was married to somebody else, and, more than that, when the first wife ceased to be his wife, he married another woman, not the mother of the child. That may appear to some minds to be a most undesirable state of affairs in which to permit the child of the irregular union to be legitimated, but that is the law of the domicil, and, in my judgment, it would be wrong for me to say that that law was not to be applied because, as I say, the circumstances in which the legitimation took place may be such as would not be looked at with approval in this country.

Therefore, so far as the property which is subject to the trusts of the will is concerned, in my judgment, the first defendant is entitled to participate. However, that does not solve the question whether or not that defendant is entitled to participate in the marriage settlement fund, because different considerations arise with regard to that. The children or issue who could participate in the marriage settlement fund were such lawful children or issue as were living on 1 July 1917namely, the expiration of 21 years after the death of the testator. It is said, and said truly, that, if on that date or at any time before 1925 the funds had become distributable and the trustees had been called upon to distribute them between the persons entitled, they must have ignored this first defendant, because, although he was a life in being, at that date in 1917 it would have been impossible for him to prove that he was the legitimate son of his father, and that, in those circumstances, the court must exclude him, at any rate, from the marriage settlement fund, because he was

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not at that date a person who would have been entitled to share at all, and that the trustees, had they been called upon to distribute the fund, would have been bound to distribute it omitting this defendant, and, had they refused to do so, the court would have ordered them to make such a distribution. It is said, and no doubt truly said, that, had they made that distribution, then this defendant could not subsequently have attacked them for having wrongly parted with the funds. However, there was not a distribution in 1917, and there has not been a distribution down to this date, and, in my judgment, what the court has to do when it is asked to determine who are the persons entitled to participate in the fund is to answer the question, having regard to all the facts as they are at the date when the court is asked to make an order. In my judgment, the court is not entitled to ignore or overlook any of the material facts, and one of the material facts in this case is the fact that now this defendant is, and must be treated as, the legitimate son of his father. The fact that he was a life in being at the critical date is not, of course, in dispute, and now he is in a position to say: “I fulfil the necessity of showing that I am the legitimate son of my father, and that I was alive on July 1, 1917, and, therefore, I am a person who is entitled to a share in these funds.” In my judgment, that is the state of facts which the court has to consider when it is asked to make an order for distribution or to decide the question as to who is entitled to participate. The court is not, in my view, entitled to ignore the position that this defendant is now the legitimate son of his father. It is said that that in some way offends against the rule against perpetuities, but, in my judgment, that is not so. This defendant was a life in being at the critical date. It is true that at that date he could not have proved that he was the legitimate son of his father, but he is now in a position to fulfil that condition, and, in my judgment, the court, taking the state of affairs as it is to-day for the purpose of making an order as to who are the persons entitled to participate, must come to the conclusion that this particular defendant is entitled, along with the other legitimate children or issue of the testator, to a share in the settled fund.

For those reasons, I have come to the conclusion that this defendant is entitled to share, together with the other persons, in both the settled funds and the will fund. The question is one of considerable difficulty, but, having carefully considered the casesand because I have not cited them it must not be thought that I have not carefully examined and considered themI have come to the conclusion to which I have come. It does not appear to me that it would assist if I were to go through the various cases in any detailthere are several of them at which I have looked, and which I have examinedbecause I have stated what, in my view, is the effect of the whole matter. Therefore, it is sufficient, in my judgment, for me to decide as I have done, and make the declarations accordingly. I will make a declaration that the defendant, David George Croft Luck, is entitled, as a child of Frederick

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Charles Luck, deceased, to one-third of the settled share, and similar declarations with regard to the residuary estate of the testator.

First defendant entitled to one-third share in each of the funds. Costs as between solicitor and client payable as to one-half out of each fund.

Solicitors: Stibbard Gibson & Co (for the plaintiff); Crane & Hawkins (for the first defendant); Kenneth Brown Baker Baker (for the second and third defendants).

F Honig Esq   Barrister.

Brackenborough v Spalding Urban District Council

[1940] 1 All ER 384


Categories:        LOCAL GOVERNMENT: TORTS; Negligence, Nuisance        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, MACKINNON AND GODDARD LJJ        

Hearing Date(s):        24, 25 JANUARY 1940        


Animals Escape on to highway Escape from pen provided by local authority at cattle market for cattle waiting to be certified for subsidy Liability of local authority Livestock Industry Act 1937 (c 50) Cattle Subsidy Scheme (Approval) Order 1937 (SR & O 1937, No 659), Schedule, para 1.

Public Authorities Liability for negligence and nuisance Cattle market provided for cattle waiting to be certified for subsidy Pen insecure Animal escaping and doing damage Livestock Industry Act 1937 (c 50) Cattle Subsidy Scheme (Approval) Order 1937 (SR & O 1937, No 659), Schedule, para 1.

The S Market, which was owned by the appellant council, was an approved certification centre for the purposes of the Cattle Subsidy Scheme 1937. That scheme required, inter alia, that the place where animals were to be examined should be equipped with adequate penning accommodation for cattle. P, a local farmer, sent a number of steers in charge of employees to the market to be graded. The man in charge of the centre put them in a pen which was ordinarily used for the purpose of a normal market day. The pen consisted of permanent obstructions on three sides, while in front was a chain. Waiting at the market to meet the animals was B, who was the appellants husband and Ps foreman. One of the steers, while waiting to be graded, escaped under the chain, ran amok, and knocked down and killed B, whose widow sued the appellant council as the highway authority and the owners of the market, founding her action both in negligence and in nuisance:

Held as P, through his employees, had at all times, retained control of the animal, and as the appellant council, though they had allowed it to be brought into the pen for the purpose of certification, had not at any time assumed any control over it, they were under no liability for injuries caused by its escape.

Notes

The basis of this decision is that the animal was at all times in the custody and control of the farmers servant, and not in that of the local authority. Upon this finding, it became immaterial to consider whether or not the pen was properly fenced for preventing the escape of the animal, and, indeed, whether or not the pen was provided by the local authority under a statutory or other duty. It would appear, however, that the court took the view that the authority was under no duty to provide the pen, and, therefore, would not be liable if the pen were such that it permitted the escape of an animal placed within it.

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As to Injuries by Domestic Animals, see Halsbury (Hailsham Edn), Vol 1, pp 539542, paras 929932; and for Cases, see Digest, Vol 2, pp 229235, Nos 198230.

Cases referred to

Deen v Davies [1935] 2 KB 282; Digest Supp, 104 LJKB 540, 153 LT 90.

Knott v London County Council [1934] 1 KB 126; Digest Supp, 103 LJKB 100, 150 LT 91.

MKone v Wood (1831) 5 C & P 1; 2 Digest 239, 250.

North v Wood [1914] 1 KB 629; 2 Digest 240, 255, 83 LJKB 587, 110 LT 703.

Lax v Darlington Corpn (1879) 5 Ex D 28; 33 Digest 528, 52, 49 LJQB 105, 41 LT 489.

Appeal

Appeal by the defendants from a verdict and judgment of Cassels J, and a special jury, given at Lincoln Assizes on 13 June 1939. The facts are fully set out in the judgment of Slesser LJ

H J Wallington KC and G A J Smallwood for the appellants.

P E Sandlands KC and M D Van Oss for the respondent.

Wallington: The steers were taken by the farmers men to the place where the market was held and where they were to be weighed and graded. They were placed in the pen and looked after there by the farmers men, and never left the control of the farmers men. The appellants never took over control of the steers, and, therefore, never assumed any obligation in respect of them, or any duty to protect the public from them. They were, therefore, under no legal liability to anyone who became injured by one of the animals. The summing up was defective in that it contained no direction to the jury concerning any of the defences put forward by the council.

Sandlands KC: There was ample evidence to justify the verdict. Several witnesses swore that the pen was unsafe, though they said that it appeared safe to those who did not know it. There was also evidence that the defendants authorised the certifying authority to use these pens when the occasion demanded.

Goddard LJ: Assume the facts to have been in the plaintiffs favour: what duty then did the defendants owe to the deceased?

Sandlands KC: It is the duty of the holders of the market to keep the market in a safe condition for those who come there for any lawful purpose on certain occasions: Lax v Darlington Corpn per Bramwell LJ, at p 34. Under the elementary principles of the law of torts the defendants were bound to take reasonable care to see that cattle which were assembled upon the highway at their invitation did not cause unnecessary damage to the persons frequenting the market or passing along the highway in the neighbourhood.

Van Oss: The council invited the owners of cattle to put them into the pens. They owed a duty to the public and to persons using the market to see that those pens were reasonably suitable for preventing the escape of the cattle, or, alternatively, a duty to see that the pens did not,

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deceptively appear safe when in reality they were dangerous, so that persons might be induced to confine cattle in them without taking special precautions. If they failed to perform this duty, they became parties to the assembling of cattle on the highway in such a manner as to be a danger to the public. The council were assembling these beasts, not as a marketing authority, but as a grading authority. Even if they were acting as a marketing authority, their exemption from liability for common law nuisance extended only to the nuisance occasioned by the obstruction which their market created. It did not absolve them from the duty to take all reasonable steps to prevent danger to the public.

H J Wallington KC and G A J Smallwood for the appellants.

P E Sandlands KC and M D Van Oss for the respondent.

25 January 1940. The following judgments were delivered.

SLESSER LJ. Under the provisions of the Livestock Industry Act 1937, it is possible for purchasers of certain classes of cattle to obtain subsidies under conditions which are provided by statutory rules and orders made under that Act. The Cattle Subsidy Scheme 1937, Schedule, para 1, provides as follows:

(1) Every producer of fat cattle who desires to claim subsidy payment in respect of an animal or carcase of an animal in accordance with the provisions of the Act shall present the animal for certification at a place approved for the purpose (hereinafter referred to as a “certification centre”).

It appears that as early as 29 August 1934, in order to comply with provisions of an earlier Actnamely, the Cattle Industry (Emergency Provisions) Act 1934the Spalding Urban District Council had applied to the Cattle Committee under that Act for approval of the Spalding Market as a certification centre in accordance with the then existing requirements, and that approval was then given. That approval has been continued under the Act of 1937, and, therefore, it appears that the Spalding Market is a certification centre within the meaning of the Livestock Industry Act 1937. It is also required for the purpose of that certification that the place where the animals are to be examined shall be equipped with adequate penning accommodation for cattle, and various other matters. I quote from para 5 of the scheme.

On 12 April 1938, one Proctor, who is a farmer near Spalding, desired to send a number of steers to be graded under the scheme to which I have referred. One of the beasts was to be sold, but with that we are not necessarily concerned. He therefore caused these animals to be taken into Spalding on that occasion by a man named Pentelow, who was in his employment, assisted by a lad named Walton. The grading of these animals, which involves their first being weighed and then examined, was to begin at 2 pm. The animals arrived about midday, and, there being no particular accommodation for them, they were, as is stated by Bates (who was in charge of the centre), put into a pen which was ordinarily used for the purposes of a normal market day. Pentelow says that he remained in charge of the animals while they were in the pen. His actual statement is that he was told by Bates to put them in a pen. The pen into which these animals were put consisted of permanent

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obstructions to their escape on three sides, while in front there was a chain. He says that he is not quite sure who put up the chain, but somebody put it up. His evidence was as follows:

Did you stand near where the pen was, after that?I stood there, minding them.

Then the next thing which is material is that this chain sagged and one of the steers nipped out (to use the witnesss expression) underneath it. He says that up to that time the animal was quite normal and kindly. It ran away. There was waiting at the market to meet these beasts Frank Brackenborough, the husband of the plaintiff, who was the foreman in the employ of Proctor, the farmer. Unfortunately, when chase was being given to this animal, the animal knocked down Brackenborough, who subsequently died. The widow, proceeding under the Fatal Accidents Act, and also under the Law Reform (Miscellaneous Provisions) Act 1934, sued the Spalding Urban District Council as the highway authority for the town of Spalding and as the owners of the market. The action against them was in the statement of claim stated in this way, being first founded in negligence:

It was the duty of the defendants … to provide a market which was not dangerous to persons using the same or to persons frequenting the said market place and/or the adjoining highways … to take all reasonable precautions to prevent cattle escaping in the said market place and/or causing danger to persons or property on or adjoining the highway.

Then there is an allegation that they failed in that duty, that the cattle pen provided by them was dangerous and defective, and that the sides consisting of chains were slack, or not securely fastened, or inadequate and insufficient. Then the case was put alternatively in nuisance.

When the case came on for trial, evidence was given on behalf of the plaintiff as to the facts which I have stated, and it was put to the judge for submission to the jury that, on this evidence, among other matters, it should be held by the jury that the urban district council had been negligent and had failed to take the proper precautions to restrain these cattle, which they had invited to be placed in one of their pens, and, as I understand, upon the basis that Brackenborough was to be regarded as any other member of the publicnamely, as a person entitled to be protected from the negligence of the defendants. No point was made of the fact that Proctor was paying either 1s for the weighing of these animals or 6d for their being penned and 6d for their being weighed. Brackenborough, it was said, had, as a member of the public, been injured by the negligence of the defendants.

At the end of the plaintiffs case, there was really very little dispute on the facts. It appears that these pens were of three kinds. Some, as appears from the plan of the market, were completely and permanently enclosed, others were open at one end, and the third set, with one of which we are here concerned, were enclosed by means of chains. There was some discussion whether those chains were for the purpose of keeping in the beasts or for preventing motor cars from parking in the pens.

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However that may be, a submission was made on behalf of the defendants at the end of the plaintiffs case that there was no case to answer, and that the matter should be withdrawn from the jury. The judge, however, declined to withdraw the case from the jury, and, after further evidence had been led, he summed up to the jury. In the result, the jury found for the plaintiff, and gave considerable damages, both under Lord Campbells Act, and also in respect of loss of expectation of lifenamely, £1,045 under Lord Campbells Act, being £795 to the widow, £250 to the son, and another £500 to the widow in respect of loss of expectation of life.

Counsel for the appellants says here that, when the case is examined, as a matter of law the judge was wrong in leaving this case to the jury, and that no duty can be found, on the facts of the case, which can make the defendants in any way responsible. In the first place, it is to be observed that it cannot be said, on the facts of this case, that the control and possession of these animals ever passed out of the hands of Proctor. They were Proctors beasts. Two of his men brought them into this market place. He put them in the pen, and they were at all times entirely under his control. Primarily, therefore, if the beasts escaped and did damage, the person who would be liable to the person so injured would be that one who had the control and possession of these beasts, as in Deen v Davies, where a man bringing a pony into a town and imperfectly tethering it in a stable was held liable to a woman who was knocked down in the street as the result of the escape of the pony from the stable. However, it is said that over and beyond that there is the further liability here, as I understand it, that the market authority invited the farmer to place his beasts in this pen, inviting him for reward, and that, having undertaken that obligation to provide him with that for which he was willing to give payment, they were under an obligation, not only to himself but also to the whole world, to see that this pen was safe. I think myself that some guidance on this question can be obtained from Knott v London County Council. There a charwoman, employed as a cleaner of a school owned by the defendants, was bitten by a dog which belonged to the school-keeper, who lived on the school premises. He was allowed to keep a dog by the authority of the London County Council, and it is said that he knew that the animal was accustomed to attack mankind. Part of the case turned on the question of how far the school-keepers knowledge of the fierceness of the dog could be imputed to the London County Council, but, apart from that, there are observations, more particularly in the judgment of Lord Wright, which seem to me to indicate that what has to be looked at primarily is the question of possession and control. Lord Wright at pp 140, 141:

It is true that the real test of responsibility is not ownership but possession and control; hence in MKone v. Wood, Lord Tenterden, C.J., in ruling before the jury put as the test whether the defendant was “harbouring the dog.” The ruling was a ruling at nisi prius and the facts of the case are not very fully or

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precisely stated, but I understand Lord Tenterden, C.J. was ruling on a case where a dog was allowed, with the defendants knowledge, to live on his premises, where it had been left by a former servant on his going away. In such a case it might well be found in fact that there was possession and control in the occupier, there being no one else on the premises to exercise control or claim possession.

Then he also mentions North v Wood, where, a dog being owned by a mans daughter, the father paying for the food and the licence, and the dog and the daughter both living with the father, the father was none the less held not liable for the dog, though he knew it to be savage, because in fact it was under the control of the daughter. In this case, I can see no reason to suppose that this local authority in any way accepted any responsibility or harboured, or had any measure of control over, these beasts at all. All that was done by them was this. Proctor and others being willing to bring their beasts into a convenient place which had been approved by the competent authority as a certification centre, the Spalding Urban District Council (who undoubtedly, as regards ordinary marketing, had the privilege of a market, and this occasion was market day) allowed the animals to be brought there, and it is said that the urban district council were immune from any liability in nuisance for allowing animals or people to form a concourse on the highway or for private pens which persons could use if they wished to do so. I cannot see that, in those circumstances, they were any more liable if these beasts got loose and ran away than they would have been if they had not provided the pens at all. It was not the pens as such which caused this steer to run away, as I understand it. It was the unnatural surroundings, and the fact that it found itself in the market place in a town when it was accustomed to standing quietly in a field. At any rate, there is no evidence whatever that the pen as such incited this animal to run away. I find it difficult to understand the principle upon which this case can be put. The class of case cited to us by counsel for the respondent, deciding that, where a person has an obligation to the public, he cannot be released from that obligation by handing over the performance of the obligation to a subcontractor, seems to me to have nothing to do with the present case at all. Here we have no more than this. The farmer retains control of his beasts. He brings them to a place at which (whether because it was a market or whether because it was a certification centre recognised under the statute matters not) the Spalding Urban District Council could allow these animals to assemble without any risk of anybody complaining that they were constituting a nuisance. Having done that, the urban district council have no control whatever over these animals, any more than the London County Council had in Knott v London County Council, when it permitted the school-keeper to keep a dog. There it was held that the mere permission of the London County Council to the school-keeper to keep the dog did not render them liable for anything which the dog might do. Here also the mere permission given by the Spalding Urban District Council for these animals to congregate in their market does not seem to me to make them

Page 390 of [1940] 1 All ER 384

responsible if those animals get away. Once more, to quote Lord Wright in Knott v London County Council, at p 142:

… the respondents were not concerned with the dog and had neither property in nor possession of it and made no use of it. …

I would add, in conclusion, only that, to my way of thinking, it is a matter of indifference whether these animals in the pens on market day at this time waiting to be graded were regarded as in a market or in a certification centre. In either case, all that the district council have done has been to permit their highway to be used for the purpose of a market or certification. They have no control and no responsibility. I am assuming for all these purposes that the jury were entitled to find, if the matter was one for them, that the pen was a dangerous and insecure pen. How they arrived at that conclusion I find it difficult to understand, but I am prepared to assume it as a fact. I think that that is immaterial for the purposes of this case, and that the judge, there being no legal duty at all on the council to keep the animals in the pen, ought to have held that the responsibility for these animals remained in the person who possessed the control over themnamely, Brackenborough. The judge was wrong in leaving the case to the jury at all. It follows, therefore, that this appeal succeeds.

MACKINNON LJ. I agree. The deceased man was knocked down by a steer running amok through the streets of Spalding, and, as a result, the mans skull was fractured. The plaintiff, his widow, desired to get compensation for his lamentable death. What was her possible cause of action? I think that she had one possible cause of action, and one only. That is illustrated by Deen v Davies. The headnote there dealing with the facts is, as, follows:

No duty is cast upon the owner of an animal mansuetae naturae, which is being depastured on land adjoining the highway, to prevent it from straying on the highway, unless it is known to be of vicious habit. But a person who brings an animal on the highway must take reasonable care to prevent it from doing damage to other persons thereon. What constitutes reasonable care is a question of fact in each case, and the standard of reasonable care may not be the same in the country as in a town. In this respect the duty to the public is the same in the case of one who leaves an animal in the street and of one who places it in a stable or yard adjoining the street without taking proper steps to prevent it from straying into the street, where it would naturally go. In either case the owner is liable for the conduct of the animal if he puts it in a position in which it is likely to cause damage to persons lawfully using the highway.

A more exact statement would refer to the person who has the custody and control of the animal, and, in most cases, that person will be the owner. The plaintiff sues the defendants, the Spalding Urban District Council, who have a market in Spalding. The essence of her claim is, I think, in para 3 of the statement of claim:

It was the duty of the defendants and/or it was their duty as holders of the said market and/or as highway authority to provide a market which was not dangerous to persons using the same or to persons frequenting the said market place and/or the adjoining highways and/or it was the duty of the defendants as aforesaid to take all reasonable steps to provide a market which was in all respects free from dangers of which they knew or ought to have known. It was further the duty of the defendants as aforesaid to take all reasonable precautions

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to prevent cattle escaping in the said market place and/or causing danger to persons or property on or adjoining the highway.

To succeed against the defendants the plaintiff must show that the defendants had taken over the custody and control of this animal after it had arrived at the market place. Of that, I think, there was no evidence. The defendants provided pens where the animals might be stood by their owner for a time, but it is obvious on the facts that, as between the defendants and the owner of the animals, the defendants never agreed to assume the custody and control of them, and so relieve the owner of that duty. In fact, as is obvious on the evidence, it remained the duty of the owner through his servants to keep guard over the beasts, and so continue the control which those servants had already exercised in bringing the beasts into the town to the market. There was, I think, no evidence on which it could be alleged that this animal, after being brought into the market, was or became in the custody of the defendants, or under their control. In the course of the argument, I suggested a parallel case. Many local authorities provide parking-places for motor cars and charge the owners of the cars a fee for that service. Suppose such a parking-place were on a slope, and a car left insecurely braked in the parking-place started to run down the slope and injured a passer-by on the highway. If the victim of that accident sued the local authority, alleging that it was their duty to take all reasonable precautions to make the parking-place safe, and to prevent cars running away from it, I think that he would fairly obviously fail in that claim. Personally, I can see no difference in principle between that case and the present case.

I add only one thing. I have so far spoken of the deceased only as if he were an ordinary member of the public using the highway. In fact, the deceased was the chief of those three servants of the farmer, the owner of these cattle, who had brought them to the market. That fact does not give the plaintiff, the administratrix of the deceased, any better or greater right than that which she would have had if the deceased had been an ordinary member of the public. If it had any effect, it might be to give the plaintiff a diminished right, for it might be said that the deceased, along with his fellow-servants, failed to exercise due diligence, in keeping the animals under control and so preventing them from escaping from the pen. However, that aspect of the case is not really material. I think that the plaintiff failed to establish the breach by the defendants of any duty which was owed by them to the deceased, and that, therefore, this appeal succeeds.

GODDARD LJ. I agree, and have nothing further to add.

Appeal allowed and cross-appeal dismissed.

Solicitors: J D Langton & Passmore, agents for Mellows & Sons, Peterborough (for the appellants); Lee Bolton & Lee, agents for Edmund W Roythorne, Spalding (for the respondent).

Derek H Kitchin Esq   Barrister.


Scott v Frank F Scott (London) Ltd and Others

[1940] 1 All ER 392


Categories:        COMPANY; Shares        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        11, 12, 15, 16 JANUARY 1940        


Companies Shares Restriction on transfer Transmission Construction of articles.

Companies Articles of association Rectification of mistake Equitable jurisdiction of court to rectify documents Whether applicable to articles of association Companies (Consolidation) Act 1908 (c 69), s 14.

The plaintiff was the sole executrix and beneficiary under the will of her husband, who had held 100 ordinary shares in the defendant company, the remaining ordinary shares being held by his two brothers, the personal defendants to this action. The plaintiff asked for a declaration that she was entitled to have her name entered on the register of members of the defendant company as the holder of these shares. The personal defendants counterclaimed for a declaration that they were entitled, upon the true construction of the companys articles, to acquire these shares at par, or, alternatively, they claimed for rectification of the articles so as to give them the right so to acquire these shares. Art 11 provided that no share should be transferred to a person who was not a member, and art 18 provided that all ordinary shares of a deceased member should be offered to the principal shareholders:

Held (i) there was no ground for not giving the words in art 18 the meaning which, prima facie, they had, and, as a matter of construction, the plaintiffs claim failed.

(ii) the personal defendants were, upon the construction of the articles, entitled to a declaration that the plaintiff was bound to offer them the shares at par.

(iii) the court has no jurisdiction to rectify articles of association even although it should be proved that they do not accord with what is proved to have been the concurrent intention of the signatories at the moment of their signature.

Evans v Chapman followed.

Notes

The first point is one of construction only, but the second raises the question whether the remedy of rectification is available in the case of the articles of association of a limited company. This question was answered in the negative some years ago, and the judge has followed that decision.

As to Rectification, see Halsbury (Hailsham Edn), Vol 23, pp 140143, paras 197200; and for Cases, see Digest, Vol 9, p 557, No 3691.

Case referred to

Evans v Chapman (1902) 86 LT 381; 9 Digest 557, 3691.

Action

Action claiming a declaration that the plaintiff was entitled to be entered upon the register of members of the defendant company as the holder of 100 ordinary shares in respect of which her husband of whose estate she was sole executrix and beneficiary, was so registered prior to his death. She further claimed that certain resolutions were invalid, but this matter was settled out of court. The personal defendants counterclaimed for a declaration that, upon the true construction of the articles, they were entitled to acquire these shares from the plaintiff at par, or, alternatively, for rectification of the articles so as to give them this right.

D Llewelyn Jenkins KC and A F Maurice Berkeley for the plaintiff.

Charles E Harman KC and E M Winterbotham for the defendants.

Page 393 of [1940] 1 All ER 392

16 January 1940. The following judgment was delivered.

BENNETT J. Frank F Scott (London) Ltd, was incorporated on 12 October 1926, as a private company, and its incorporation was effected under the Companies Acts 19081917. It had a share capital of £10,500, divided into 10,200 preference shares of £1 each and 300 ordinary shares of £1 each, and to the preference shares there were attached, by the memorandum of association, those rights:

(1). The holders of the said preference shares shall be entitled to a fixed cumulative preferential dividend at such a rate as shall after deduction of income tax at the rate for the time being in force yield a clear £15 net per centum per annum on the capital for the time being paid up on the said preference shares. (2). The holders of the said preference shares shall in a winding up have priority as to return of capital and payment off of arrears of the said preferential dividend, whether declared or earned or not up to the commencement of the winding up over all other shares in the capital for the time being of the company, but shall not have any further right to participate in profits or assets.

The company was formed to take over a business of shipping butchers carried on in partnership in London by three brothers, the two personal defendants and one Frank Stanley Scott. Frank Stanley Scott and Reginald Scott were also interested in a similar kind of business carried on in Liverpool. The business, to carry on which the defendant company was formed, was, immediately before the defendant company was formed, being managed on behalf of the partnership by the defendant Stuart Scott. I said it was a private company, and it adopted as its articles of association Table A in the First Schedule to the Companies (Consolidation) Act 1908, with certain modifications and the whole of the share capital, both preference and ordinary, was issued to the three brothers Frank Stanley Scott, Reginald Scott and Stuart Arthur Scott in equal shares. Each had one-third of the 10,200 preference shares and each had 100 ordinary shares allotted to him.

The plaintiff is the widow of Frank Stanley Scott, who died on 10 September 1937, and she is the sole executrix of his will and, as I understand, the sole beneficiary under it, and she is, under his will, entitled to all his preference shares and to all his ordinary shares. There is no question between the parties with regard to her rights to the preference shares, but in regard to the ordinary shares she claims, as I have said, the right to be placed upon the register of members in respect of them. The personal defendants, on the other hand, claim that under the articles of association, she is bound to offer to them the testators ordinary shares and that they have the right to acquire these ordinary shares at par.

The articles of association by which the company is governed and which are relevant for the purpose of determining whether, as a matter of construction, the view advanced by the plaintiff is right or whether the view advanced by the defendants is right, are to be found in arts 10 and 20 of the articles of association of the company and in cls 21 and 23 of Table A. It is perhaps necessary, before considering the terms of these articles and clauses, to observe that the control of the company is in the hands of the ordinary shareholders, the preference shareholders

Page 394 of [1940] 1 All ER 392

only having a right of voting at a general meeting upon some or one of the questions following, that it is to say, reduction of capital, winding up of the company, sanctioning a sale of the undertaking or altering the regulations of the company so as to affect directly the rights of the preference shareholders. Those are the provisions of art 23. The first of the articles of association which has to be considered, art 10, is only relevant because it contains in it a definition of the expression “the principal shareholders,” an expression which finds a place in the relevant articles, and that expression is defined in art 10 as meaning and including those members who respectively hold at least 20 per cent of the issued ordinary share capital.

Arts 11, 12 and 13 are in the following terms:

11. Save as hereinafter provided, no share shall be transferred to a person who is not a member.

12. Any member or other person entitled and proposing to transfer any shares (hereinafter called “the proposing transferor”) shall give notice in writing (hereinafter called “the transfer notice”) to the company that he desires to transfer the same. Such notice shall specify the sum he fixes as the fair value of the share or shares included therein, and shall constitute the company his agent for the sale of the same at the price so fixed or in the case of preference shares at the option of the purchaser or purchasers at the fair value to be fixed by arbitration in accordance with these articles. In the case of ordinary shares the purchase price in the absence of agreement shall be par. The transfer notice may include several shares, and in such case shall operate as if it were a separate notice in respect of each. The transfer notice shall not be revocable except with the sanction of the directors.

13. The shares comprised in any transfer notice shall be offered in the first place to the principal shareholders and such offer shall be made to them collectively and individually but so that in case of competition they shall rank for acceptance pari passu in proportion to the ordinary shares held by them and so that if any share cannot be so apportioned such shares shall be offered to them in order determined by lot and the directors shall cause lots to be drawn accordingly and any shares not taken up by the principal shareholders as aforesaid shall be offered to the other members in such order as shall be determined by lot.

It is plain on those articles that, so far as transfer by members on the register is concerned, any member desiring to transfer shares must in the first place give the principal shareholders the opportunity of acquiring them, and, if they are ordinary shares, in the absence of agreement, the price at which the principal shareholders may acquire them is at par.

Then in art 14 there are provisions which bind or enable to be bound a person who desires to become a purchaser of the shares offered or comprised in the transfer notice. In art 15 there are provisions enabling in the case of preference shares, if there should be a difference between the proposing transferor and the person who desires to buy as to the price, the price to be fixed by reference subject to or under the provisions of the Arbitration Act 1889. In art 16 are the usual provisions for enabling, in case a purchaser makes default, a contract to be completed and in art 17 is to be found the first relaxation of the rigour of art 11 against transfer to a person who is not a member. Art 17 is as follows:

If the company shall not, within the space of twenty-eight days after being served with the transfer notice, find a member willing to purchase the shares, and give notice in manner aforesaid, the proposing transferor shall at any time within three calendar months afterwards be at liberty, subject to cl. 20 hereof, to sell and transfer the shares or those not placed to any person at any price.

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Art 18 is the article which gives rise to the dispute between the parties, and it deals with two matters or, perhaps, three. It is, I think, the first article which deals with transmission of shares as contrasted with transfer of shares, the articles I have already read being confined exclusively to transfer. It is necessary in connection with art 18 to read cll 21 and 23 of Table A. Clause 21 is as follows:

21. The executors or administrators of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivors or survivor, or the executors or administrators of the deceased survivor, shall be the only persons recognised by the company as having any title to the share.

That clause establishes as against the company the title of an executor or administrator to the shares of a deceased member but does not give the executors or administrators of a deceased member any right to have his or her name put upon the register of members as the holder of a share.

Clause 23 provides as follows:

23. A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company.

So that under that clause an executor not on the register is entitled to dividends and other advantages which he would have had if he had been entered upon the register as a member.

Art 18 is as follows:

Any preference share of a deceased member may be transferred by his executors or administrators to any son, daughter, grandson, granddaughter, or other issue nephew, niece, son-in-law, widow or widower of such deceased member (to whom such deceased member may have specifically bequeathed the same).

That is the second relaxation of the rigour of art 11, a relaxation in respect to the preference shares, and enables those shares to be transferred by a person not himself necessarily a member, that is to say, by the executors or administrators of a deceased member, to the specified relations who need not be members. The article proceeds:

and preference shares standing in the name of the trustees of the will of any deceased member may be transferred upon any change of trustees to the trustee for the time being of such will, and cl. 20 hereof shall not apply to any transfer authorised by this clause.

Down to this point there has been no provision in the articles for putting upon the register of members as the holder of preference shares the trustee of the will of a holder of preference shares, but the article plainly, I think, contemplates that such a person shall have had his name placed upon the register in respect of such shares, because the article provides that preference shares standing in the names of the trustees may be transferred upon any change of trustees to the trustee for the time being of such will. Then there follows in the article the words which are the words on which the whole question in the action turns:

but all ordinary shares of a deceased member shall be offered to the principal shareholders pursuant to the provisions of cll. 12 and 13 hereof.

Page 396 of [1940] 1 All ER 392

I should have thought myself, upon the articles down to that point, that the matter really was not open to serious doubt. The contrast between the provisions in regard to the preference shares and those in regard to the ordinary shares in the same article would, to my mind make it clear that, so far as ordinary shares are concerned, the words in the article mean what they say, that where the holder of ordinary shares has died the ordinary shares are to be offered to the principal shareholders of the company pursuant to the provisions of cll 12 and 13 hereof.

The next article is art 19, which is as follows:

Clause 22 of Table A shall not apply.

They have already by art 1 excluded cl 22. In art 19, there is a repetition of the exclusion of cl 22 of Table A, and perhaps it is necessary to have in mind what that clause is:

Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be required by the directors, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such transfer of the share as the deceased or bankrupt person could have made; but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or bankrupt person before the death or bankruptcy.

The article deliberately excludes, and for the second time, the clause which gives a person becoming entitled to a share in consequence of the death of a member the right to be entered on the register. Then art 19 proceeds as follows:

Without prejudice to the provisions of cl. 18 hereof any person who shall have become entitled to a share in consequence of the death, bankruptcy, or insolvency of any member, or in consequence of the marriage of any female member, may, if he shall not be registered as a member as provided by cl. 21 of Table A transfer the same in manner provided by and subject to the conditions contained in cll. 11 to 16 inclusive of these articles.

In the first place, the article is expressed to operate without prejudice to the provisions of cl 18, and the question is what that phrase means, upon the construction of these articles. I think it can only mean this in these articles without affecting or modifying the provisions which are to be found in art 18, and there is, in my judgment, nothing in this article which affects what, having had art 18 read, and having had it read more than once, seems to me to be the clear meaning of it with regard to the ordinary shares of a deceased member. However, the suggested difficulty, if there was any, of giving effect to what, in my judgment, upon these articles, is their clear meaning, is a decision of the Court of Appeal upon the articles of a company formed to take over the Liverpool business, and formed after the incorporation of the London company on 19 May 1927, with somewhat similar articles.

The articles of the Liverpool company have received the consideration of the Court of Appeal, and have been the subject of a decision of the Court of Appeal, and the articles of F Scott & Co (Liverpool) Ltd, were construed by the Court of Appeal as not giving to the principal shareholders in that company the right to acquire or to have offered to them the

Page 397 of [1940] 1 All ER 392

ordinary shares of a deceased member being the holder of those shares. Of course, if the two sets of articles had been identical, I should have been bound by, and would have followed, the decision of the Court of Appeal. I should be bound to do so, but I venture to think that, if, in what seems to me to be the most material respect, there is a difference in the two sets of articles, I cannot be bound by that decision. There is, in my judgment, between the articles which the Court of Appeal had to consider in the Liverpool case and the articles which I have to consider in the London case one word which is contained in art 18 which makes all the difference between the proper construction of the two sets of articles.

Art 18 of the articles of association of the Liverpool company, which deals with the transfer and transmission of shares is as follows:

Any preference share of a deceased member may be transferred by his executors or administrators to any son, daughter, grandson, granddaughter, or other issue, nephew, niece, son-in-law, widow, or widower of such deceased member (to whom such deceased member may have specifically bequeathed the same).

So far the articles are identical. In the Liverpool case the article proceeds as follows:

and shares standing, [not “and preference shares”] in the name of the trustees of the will of any deceased member may be transferred upon any change of trustees to the trustee for the time being of such will.

Upon that article the Court of Appeal came to the conclusion that, as a matter of necessary implication, the ordinary shares must have been put into the names of the trustees of the will, and, therefore, it was a matter of necessary implication that the trustees of the will had the right to be put upon the register in respect of ordinary shares. However, the words of the article which I have to construe are wholly different, and, in my judgment, there is no room for any such implication, and for that reason I cannot conceive that I am bound by the decision of the Court of Appeal in a case in which, on different language, they had come to a clear conclusion that the articles of association meant what they said, and there is no ground for not giving the words in art 18:

but all ordinary shares of a deceased member shall be offered to the principal shareholders pursuant to the provisions of cls. 12 and 13 hereof.

the meaning which those words, prima facie, have. There is no ground upon which, in my judgment, I can come to a conclusion that those words were intended to have any operation other than some cautionary option, or as being words warning those who read the articles of that provision of art 11.

For these reasons, as a matter of construction, in my judgment, the plaintiffs claim for a declaration that, in the events which have happened, she is entitled to be placed upon the register of members in respect of the ordinary shares of the defendant company, of which Frank Stanley Scott deceased was registered as holder, fails, and it follows that her action must be dismissed.

The defendants counterclaim asks that, upon the true construction of the articles of association of the defendant company, the plaintiff

Page 398 of [1940] 1 All ER 392

is bound to offer the 100 ordinary shares, of which Frank Stanley Scott is the registered proprietor, to the defendants Stuart Arthur Scott and Reginald Scott in manner provided by arts 12 and 13. In my judgment, upon the counterclaim the defendants are entitled to that declaration, that being, in my judgment, the meaning and effect of these articles of association, and, in particular, of art 18.

There remains the question of counterclaim, which raises interesting points of law. I suppose (indeed, it is perfectly certain) that this matter will not remain in this court and that the plaintiff will go to the Court of Appeal. There, of course, my judgment may be reversed, and then it will become necessary for the court to consider the claim by the defendants to have the articles of association rectified. With reference to the first question upon the counterclaim of the defendants to have the articles of association rectified, the first objection taken by counsel for the plaintiff, is that the equitable jurisdiction of the court of equity to rectify instruments does not extend to articles of association, and that that proposition is based upon the provisions to be found in some of the sections of the Companies (Consolidation) Act 1908, Part I, under the authority of which the defendant company was registered, and it is necessary to consider the statutory provisions.

The first provision is the one in s 2, which enables individuals, natural persons, to bring into existence the ordinary features of a corporation. That section provides that:

Any seven or more persons (or, where the company to be formed will be a private company within the meaning of this Act, any two or more persons) associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability …

Then there follows in the section a reference to the three kinds of incorporated companies which may be brought into existence, companies with limited liability to the amount unpaid on the shares, companies limited by guarantee and unlimited companies. S 3(1), para 3, provides that the memorandum must state the objects of the company. S 4 is not material. Ss 6 and 7 provide as follows:

6. The memorandum must bear the same stamp as if it were a deed, and must be signed by each subscriber in the presence of at least one witness who must attest the signature, and that attestation shall be sufficient in Scotland as well as in England and Ireland.

7. A company may not alter the conditions contained in its memorandum except in the cases and in the mode and to the extent for which express provision is made in this Act.

S 9 provides that however a company may alter the provisions of its memorandum and in what respects a company may alter the provisions of its memorandum, the alterations shall not take effect until, and except in so far as, they are confirmed on petition by the court, and the section goes on to provide that an office copy of the order confirming the alterations shall, with a printed copy of the memorandum as altered, be delivered to the registrar of companies, and he shall register the same and

Page 399 of [1940] 1 All ER 392

shall certify the registration under his hand, and the certificate shall be conclusive evidence that all the requirements of the Act with respect to the alteration and confirmation thereof have been complied with.

Articles of association are first dealt with in s 10, which provides that:

(1) There may, in the case of a company limited by shares, and there shall in the case of a company limited by guarantee or unlimited, be registered with the memorandum articles of association signed by the subscribers to the memorandum and prescribing regulations for the company. (2) Articles of association may adopt all or any of the regulations contained in Table A in the First Schedule to this Act.

Ss 11 and 12 are as follows:

11. In the case of a company limited by shares and registered after the commencement of this Act, if articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations in Table A in the First Schedule to this Act, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

12. Articles must(a) be printed; (b) be divided into paragraphs numbered consecutively; (c) bear the same stamp as if they were contained in a deed; and (d) be signed by each subscriber of the memorandum of association in the presence of at least one witness who must attest the signature, and that attestation shall be sufficient in Scotland as well as in England and Ireland.

Then follow in s 13 provisions with regard to the alteration of articles of association by special resolution.

Ss 14, 15, 16 and 17 are as follows:

14. (1) The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member, his heirs, executors, and administrators, to observe all the provisions of the memorandum and of the articles, subject to the provisions of this Act.

16. The memorandum and the articles (if any) shall be delivered to the registrar of companies for that part of the United Kingdom in which the registered office of the company is stated by the memorandum to be situate, and he shall retain and register them.

What he retains is the document to which the signatories have put their signature, and that is the physical thing he retains and registers.

16. (1) On the registration of the memorandum of a company the registrar shall certify under his hand that the company is incorporated, and in the case of a limited company that the company is limited. (2) From the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, with power to hold lands …

17. (1) A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Act.

Those, I think, are all the relevant provisions in the statute.

So far as authority is concerned, during all the years since 1862, when the first Joint Stock Companies Act was passed, there has apparently been only one reported case in which the question whether articles of association could be rectified has been considered, and that is the case of Evans v Chapman. In that case Joyce J refused to rectify articles of association in a case in which it had been plainly proved that

Page 400 of [1940] 1 All ER 392

there was a mistake in them. The articles of association of a public company contained as one of its articles an article which provided that:

If the company shall offer any of its shares to the public for subscription: (a) The directors shall not make any allotment thoreof unless and until at least 7 per cent. of the shares so offered shall have been subscribed, and the sums payable on application shall have been paid to and received by the company.

There was clear proof in the case of Evans v Chapman that the words “per cent.” had been inserted in the article as printed by mistake. Nevertheless Joyce J refused to rectify them. The matter came before him in rather a curious way. An action was begun by one of the seven signatories to the memorandum and articles against the other six and against the company, and in that action a motion was made for some interlocutory relief. I do not know what interlocutory relief there was, or what it could have been, or how it could have been anything except the relief to which the plaintiff, who was entitled to it, would be entitled at the trial of the rectification action, obviously a matter, I should have thought, for interlocutory relief, but the matter was argued and Joyce J is reported as having said this, at p 382:

I do not see my way to make the order asked for. No doubt a blunder was made in drafting the articles, but that can be rectified under the provisions of the Companies Act, 1862, s. 50, and is the proper way of doing it

as if the signatories had passed the special resolution to alter the articles

With reference to the jurisdiction to rectify such a document, counsel have not had much time or opportunity to look into the authorities on the subject; but on the materials before me and as at present advised, I am of opinion that the general jurisdiction of the court to rectify instruments has no application to a document of this kind, which has only a statutory effect, and can only be rectified by statutory authority.

It is said on behalf of the defendants, the plaintiffs in the counter-claim, that that language is so guarded that it ought not to be taken as an authority in favour of the proposition that there is no jurisdiction to rectify articles of association. Of course, it is plain that Joyce J did use very guarded and qualified language, but it does nevertheless express the view that the general jurisdiction of the court to rectify instruments has no application to articles of association. That is the only authority.

Looking at the matter apart from authority, in my judgment, the arguments advanced by counsel for the plaintiff are to be preferred to those advanced by counsel for the defendants. The Act says in s 14 that articles of association, when registered, shall bind not merely the persons who put their signatures to them, but the company, the company which had no existence at the time when by mistake, if they did make a mistake (and for this purpose I assume they did), those who put their signatures to the articles of association omitted to make in them a certain provision. How can their mistake be put right as against the company which, when they made their mistake, had no existence at all, when the Act says that the articles, when registered, shall bind the company? It seems to me that the effect of the Act upon the company as stated in

Page 401 of [1940] 1 All ER 392

s 14 is in effect to exclude from applying to articles of association the jurisdiction of the court in regard to rectification.

There are these further difficulties, apart from the language of s 14, which occur to one. If rectification should have been ordered, the court ought to see that the articles of association, which are the articles registered with the registrar, are made to conform with the courts order. The registrar is not before the court. There is no jurisdiction in the court to order the registrar of joint stock companies to correct the articles of association registered with him under the Act, and it would be idle, I think, for this court to make an order which this court has neither the means nor the power of enforcing. Wherever the memorandum is altered as the result of an order of the court, for instance, where the objects of a company are altered or where the capital of a company is reduced, the Act contains provisions authorising, or, indeed, compelling, the registrar to make a note upon the register of the order which the court has made in regard to those matters, and, when one considers the provisions of s 243 of the Act of 1908, provisions which have found their way into the Companies Act 1929, to the effect that the register is open to inspection, that copies of the documents on the register can be obtained by members of the public and that copies certified by the registrar to be true copies are admissible in legal proceedings as legal evidence, it is of vital importance, if the articles of association are to be rectified, that the file should be altered so as to conform to the courts order. There is no machinery for that. For these reasons, in my judgment, the court has no jurisdiction to rectify articles of association, even although it should be proved that the articles of association do not accord with what is proved to have been the concurrent intention of the signatories at the moment of their signature.

In this case, so far as the facts are concerned, I think it has been proved by the documents which have been put in, letters or copies of letters passing between the three brothers and the company, that it was the intention of the three brothers that these articles of association should contain a provision that the ordinary shares held by a deceased member should be offered to the principal shareholders defined by the articles at par, and, apart from this technical difficulty of being unable to rectify articles of association, I should have been of opinion that the defendants had proved the facts necessary to support an action for rectification if I had come to the conclusion that, as a matter of construction, the articles did not give the principal shareholders the right to acquire from a deceased shareholder his ordinary shares.

For these reasons, in my judgment, the defendants counterclaim succeeds in so far as they ask for a declaration as to the construction of the articles, but fails in so far as they ask for the articles of association to be rectified. I think that the proper order as to costs is that the action fails and must be dismissed with costs. So far as the counterclaim is concerned, I think justice will be done by ordering the plaintiff be pay to

Page 402 of [1940] 1 All ER 392

the defendants one half of the costs of their counterclaim, and I make a declaration on the counterclaim.

Action dismissed with costs. Counterclaim allowed in so far as it asked for a declaration of the construction of the articles, but dismissed in so far as it asked for rectification of the articles. Plaintiff to pay the defendants half the costs of their counterclaim.

Solicitors: Field Roscoe & Co, agents for Guy Williams & Co, Liverpool (for the plaintiff); Layton & Co (for the defendants).

F Honig Esq   Barrister.

R v Day

[1940] 1 All ER 402


Categories:        CRIMINAL; Criminal Evidence        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        LORD HEWART LCJ, HILBERY AND HALLETT JJ        

Hearing Date(s):        24 JANUARY 1940        


Criminal Law Evidence Admissibility Evidence called by prosecution at judges suggestion after close of case for defence No case of surprise.

The appellant was convicted of forging a cheque for £5. The prosecutions case depended entirely upon the evidence of an accomplice, D, who had been convicted previously of the theft of the cheque form used in the commission of the forgery. The prosecution also produced two letter-cards, and it was admitted that the handwriting upon these was the genuine handwriting of the appellant, and, in answer to a contention of counsel for the appellant that there was no corroboration of Ds evidence, it was submitted that corroboration was to be found in the letter-cards. Thereupon the appellant was called, and gave the only evidence for the defence, which consisted of a complete denial of the forgery. The case was then adjourned, and, at the resumed hearing, the judge, on the application of counsel for the prosecution, admitted evidence of a handwriting expert to say that there were similarities between the known genuine handwriting of the appellant and the handwriting of the signature on the cheque. It was contended by the appellant that this evidence was wrongly admitted:

Held the evidence was wrongly admitted as it was not evidence upon any matter which arose ex improviso, or evidence the necessity for which no human ingenuity could have foreseen, but was evidence the necessity for which was obvious from the commencement of the proceedings.

Notes

The judge at a criminal trial, it is said, may call a witness not called by either side, without their consent, if he considers it to be necessary in the interests of justice. There is, however, a definite and clear limitation upon this discretionary power of the court. After the defence has been closed, no such evidence can be called either by the court or by either party, unless the cause for such evidence is one which no human ingenuity could have foreseen.

As to Additional Evidence, see Halsbury (Hailsham Edn), Vol 9, p 170, para 246; and for Cases, see Digest, Vol 14, p 267, Nos 27312734.

Cases referred to

R v Baskerville [1916] 2 KB 658; 14 Digest 463, 4934, 86 LJKB 28, 115 LT 453, 12 Cr App Rep 81.

R v Harris [1927] 2 KB 587; Digest Supp, 96 LJKB 1069, 137 LT 535, 20 Cr App Rep 86.

Page 403 of [1940] 1 All ER 402

R v Frost (1840) 4 St Tr NS 85, 9 C & P 129; 14 Digest 362, 3827.

R v McMahon (1933) 24 Cr App Rep 95; Digest Supp.

R v Liddle (1928) 21 Cr App Rep 3; Digest Supp.

Appeal

Appeal from a conviction on the ground of wrongful admission of evidence. The facts and arguments are fully set out in the judgment of the court delivered by Hilbery J

W St J C Tayleur (for Cyril Harvey on war service) for the appellant.

P H Thorold Rogers for the Crown.

24 January 1940. The following judgment was delivered.

HILBERY J (delivering the judgment of the court). In this case, the appellant was convicted on two counts of an indictment which charged him with forging a bankers cheque and causing £5, the proceeds of that cheque, to be paid over. He was sentenced to 18 months imprisonment with hard labour, and he now appeals on certificate against conviction.

The case made by the prosecution depended entirely upon the evidence of a witness named Miss Dixon, who had been convicted previously of the theft of the cheque form which had been used and said to have been forged, and who was admittedly an accomplice of the appellant. There was also in the possession of the prosecution certain handwriting of the appellant. Two letter-cards were produced in the course of the case for the prosecution which were stated to have been received by a police officer from the appellant, and the writing upon those letter-cards was thereafter treated as the genuine handwriting of the appellant. Those letter-cards had been written by the appellant and received by the police officer before the appellant was charged, and they had been thereafter in the hands of the prosecution.

When the prosecutions case was closed, it depended upon the evidence of the accomplice, Miss Dixon, and counsel for the defence submitted to the judge at the trial that there was no such corroboration of the evidence of that accomplice as was required by the rule of practice authoritatively stated in R v Baskerville. Counsel for the prosecution answered that contention by saying that the only evidence by way of corroboration upon which he could rely was to be found in the handwriting on those two letter-cards, and he suggested that the jury could be invited to arrive at a conclusion without any positive evidence of a handwriting expert to assist them. The judge then expressed his view that the jury could not be asked to give a verdict without some assistance by way of expert evidence, but he decided that the mere lack of corroboration was not a sufficient ground for him there and then to withdraw the case from the jury, and that the jury would have to pass their verdict on the evidence subject to his direction, which would be based on the decision in R v Baskerville.

Thereupon counsel for the appellant called the appellant into the witness-box and his evidence was heard and received. He was the only witness for the defence, and his evidence was a complete denial that he

Page 404 of [1940] 1 All ER 402

had written the cheque or signed it. When the case for the defence was closed on the Saturday of the trial, the judge adjourned the case, and, in adjourning it, said this:

I shall adjourn the case at this point until 11 oclock on Monday morning. In the meantime the prosecution can consider whether they will or will not make an application to me for leave to tender further evidence, always remembering that before such an application can be made, notice of any proposed additional evidence must he served upon the defence.

Then, turning to the jury, the judge said:

I think it is better that we should have this case properly investigated.

On the Monday morning, the prosecution asked permission of the court to call additional evidence, that is to say, the evidence of a handwriting expert to say that there were similarities between the known genuine handwriting of the appellant and the handwriting of the signature on the cheque in question. Counsel for the defence took this objection to that course:

In my submission, this is a case in which both the prosecution and the defence have closed their case, and nothing has arisen ex improviso which could justify the calling of fresh evidence.

It is true to say that he added the words “by your Lordship,” who, in the discussion which took place, made it clear that the principle applied whether the fresh evidence was to be called by the court or by the prosecution. The judge overruled that objection and admitted the evidence. In the result, the accused was convicted.

We think that the law is now well decided. It is true to say that, if a question as to the time at which evidence is to be received arises in the course of the trial, it may be that the judge may be called upon to decide the appropriate time, and, in so doing, exercise a judicial discretion. However, this was not such a case. This was a case where all that was being done was to seek to remedy an obvious deficiency in the evidence in support of the case for the prosecution, not only after the case for the prosecution had been closed, but also after the evidence for the defence had been heard, and it was an endeavour to call that supplementary evidence, although the material upon which that evidence was to be given had been in the hands of the prosecution from the beginning. It was evidence upon one branch of the prosecutions case, upon which it must have been realised that they must give positive evidence.

The law has been laid down and expounded in R v Harris, where it is said, at p 594:

But it is obvious that injustice may be done to an accused person unless some limitation is put upon the exercise of that right, and for the purpose of this case, we adopt the rule laid down by Tindal, C.J., in R v. Frost where Tindal, C.J., said: “There is no doubt that the general rule is that where the Crown begins its case like a plaintiff in a civil suit, they cannot afterwards support their case by calling fresh witnesses, because they are met by certain evidence that contradicts it. They stand or fall by the evidence they have given. They must close their case before the defence begins; but if any matter arises ex improviso, which no human ingenuity can foresee, on the part of a defendant in a civil suit, or a prisoner in a criminal case, there seems to me no reason why that matter which so

Page 405 of [1940] 1 All ER 402

arose ex improviso not be answered by contrary evidence on the part of the Crown.” That rule applies only to a witness called by the Crown and on behalf of the Crown, but we think that the rule should also apply to a case where a witness is called in a criminal trial by the judge after the case for the defence is closed.

Counsel for the prosecution sought to say that the rule relied upon for the appellant was confined to cases in which the fresh evidence was being called by the judge, but that passage answers that contention and makes the rule apply to evidence called on behalf of the Crown and by the judge. The judge continued, at p 595:

and that the practice should be limited to a case where a matter arises ex improviso, which no human ingenuity can foresee, on the part of a prisoner, otherwise injustice would ensue.

In other words, the principle is to be applied whether the witness is called by the court or by the Crown. Now that case has been followed and that principle applied twice in this court. It was applied in the case of R v McMahon, and that passage to which I have referred was there again quoted by Lord Hewart LCJ, who gave the judgment in that case, and after quoting that passage, and immediately after the words

… but in order that injustice should not be done to an accused person, a Judge should not call a witness in a criminal trial after the case for the defence is closed except “in a case where a matter arises ex improviso, which no human ingenuity can foresee, on the part of the prisoner, otherwise injustice would ensue,”

added these words at p 97:

Now in our opinion those conditions were not fulfilled with regard to these witnesses and it follows that the evidence of these six witnesses was, in our view, wrongly admitted.

If those words are applied to the case which we have now under consideration, it becomes manifest, I think, that those conditions were not fulfilled in this case. First, the matter whether this handwriting was the handwriting of the appellantthat is, whether his was the hand which wrote the forgery with which he was chargedwas a question about which from the outset the burden had been upon the prosecution to show that the handwriting was that of the appellant. It was, therefore, evidence concerning material which had been in the hands of the prosecution before the case was heard, and it was evidence the necessity of which was obvious from the start. Indeed, the judge had no hesitation in saying that, without it, it was impossible to ask the jury to act as handwriting experts and to pass a verdict which might be a conviction. It cannot be said, in the circumstances, that this evidence was evidence upon any matter which arose ex improviso, if those Latin words are given the meaning which was originally attributed to them. Nor can it be said that it was evidence the necessity of which no human ingenuity could foresee. It was evidence the necessity of which was obvious. In addition, in this case, the unfortunate thing is that, in the view of the judge at the trial, unless that evidence was given, there was no corroboration of the evidence of the accomplice whose evidence had

Page 406 of [1940] 1 All ER 402

been given for the prosecution. It was obvious from the course of the trial that the evidence of the accomplice was not such as the jury could reasonably be expected to accept if it stood alone, and, in our view, without the evidence, which was wrongly admitted, it seems probable that the jury must have acquitted.

That is sufficient to dispose of the matter, but how unfortunate it would be if such a practice as this were allowed to grow up is well instanced and explained by Lord Hewart LCJ, in another case in which this principle was being applied, R v Liddle, at p 13:

Nothing had suddenly emerged which required the calling of witnesses, and the circumstances in which the witnesses were called were such as gravely to imperil the defence and put the defence to an unfair disadvantage. [I have pointed out that in the circumstances the wrongful admission of the evidence destroyed a defence which otherwise probably would have succeeded.] If the same reasoning were to apply, it would have been perfectly open for the defendant, on the second of these adjourned hearings, to require a further adjournment in order that he might call, in his turn, rebutting evidence, and so the inquiry might wander on indefinitely.

In this case, it would have been open to counsel for the prisoner to ask for a further adjournment on his side, so that he might have an opportunity of consulting a handwriting expert and, perhaps, of calling that handwriting expert on another occasion. The eventuality of experts differing is not unheard of, and so the inquiry might have wandered on. In our view, the necessary conditions which had to be fulfilled before this evidence could be admitted were not fulfilled, and it is impossible to say that, if they had been fulfilled, the verdict of the jury would have been the same. The appeal is allowed and the conviction quashed.

Appeal allowed and conviction quashed.

Solicitors: Registrar of the Court of Criminal Appeal (for the appellant); Director of Public Prosecutions (for the Crown).

W J Alderman Esq   Barrister.

Geiringer v Swiss Bank Corporation

Oesterreichische Creditanstalt v Geiringer

[1940] 1 All ER 406


Categories:        CIVIL PROCEDURE: BANKING AND FINANCE        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        28 NOVEMBER 1939, 24 JANUARY 1940        


Aliens Enemy aliens Right to proceed with action suspended Security for costs Safeguarding enemys claim.

In April 1939, the plaintiff brought an action against a London bank, claiming to be entitled to certain securities in the hands of the bank. The bank interpleaded, alleging that they held the securities for the account of a Viennese bank and that they themselves claimed no interest therein. Thereupon it was ordered that the issue of ownership should be tried between the plaintiff and the Viennese bank and that the latter should be plaintiffs in that issue while the former was to be defendant. After the making of that order, war broke out between this country and Germany, and the defendant in the issue issued the present summons asking for security for costs to be furnished by the plaintiffs in the issue. He also asked for an order that the plaintiffs in the issue

Page 407 of [1940] 1 All ER 406

be for ever barred from proceeding against the London bank in connection with the matter in dispute:

Held (i) the plaintiffs in the issue would not be ordered to give security for costs, as they were unable to proceed with their claim until after the cessation of hostilities.

(ii) the plaintiffs ought not to be barred from proceeding against the London bank after the cessation of hostilities.

Semble: the defendant in the present issue could be made plaintiff and the Viennese bank defendant in an issue, and the matter could thus be determined before the cessation of hostilities.

Notes

The point in this case is purely one of practice, and suggests that, if a party who is not an enemy alien is made plaintiff, the rights of the parties can in some cases be sufficiently determined.

As to Rights of Enemy Aliens, see Halsbury (Hailsham Edn), Vol 1, pp 455457, paras 771774; and for Cases, see Digest, Vol 2, pp 154158, Nos 250280.

Summons

Summons asking for an order for security for costs against an enemy plaintiff, or, in the alternative, for an order that the enemy plaintiff be for ever barred against the defendant in the action. The facts are fully set out in the judgment.

L M Jopling for the plaintiff, the defendant in the issue.

Neil Lawson for the plaintiffs in the issue.

24 January 1940. The following judgment was delivered.

BENNETT J. This is a summons by the plaintiff in the action, who is also the defendant in an interpleader issue ordered to be tried by an order made on 6 July 1939. The respondents to the summons are a Viennese bank, Oesterreichische Creditanstalt Wiener Bankverein. They are not parties to the action, but they are the plaintiffs in the interpleader issue. The summons before me asks for the following relief:

That the plaintiffs in the issue give security for the defendants costs in the issue to the satisfaction of the master on the ground that the plaintiffs in the issue are out of the jurisdiction of this court and that in the meantime all further proceedings be stayed and for an order that the costs of this application be costs in the issue alternatively for an order that the plaintiffs in the issue and all persons claiming under the plaintiffs in the issue be for ever barred against the defendants in the action and persons claiming against the defendants in the action but the order shall not affect the right of the plaintiff and the defendants in the issue as between themselves.

The facts which led up to the summons are as follow. The writ in the action was issued on 12 April 1939, the plaintiff, Ernst Geiringer, being described in the writ as residing in New York, USA. The defendants in the action are the Swiss Bank Corporation, whose address on the writ is stated to be 99, Gresham Street, in the city of London. The relief claimed in the writ is as follows:

(1) A declaration that the defendants hold the following investment or securities namely:£300 sterling 3½ per cent. British war loan; £200 sterling deferred stock Peninsular & Oriental Steam Navigation Co.; 400 Atlas Electric and General Trust Co., Ltd. shares of £1 sterling; £200 7 per cent. cumulative preference shares in the International Nickel Co. of Canada, Ltd.; 200 7 per cent. second preference stock units Shell Transport & Trading Co., Ltd., of £1 sterling as trustees upon trust for the plaintiff absolutely. (2) An order that the defendants do forthwith transfer or deliver the said investments or securities and/or the proceeds of sale thereof to the plaintiff or as he shall direct. (3) Injunction. (4) Further or other relief.

Page 408 of [1940] 1 All ER 406

The writ was served on the defendants on 12 April 1939, and then interpleaded, supporting their claim to interplead by an affidavit made by one Pierre de Wolff, which I will read, beginning at para (2). Pierre de Wolff is the deputy manager of the London office of the defendants, and the facts to which he deposes are these:

(2) For a considerable period previous to July 19, 1938, the several securities mentioned in the indorsement on the writ of summons herein together with £500 Austrian 7 per cent. international loan 1930 (English Issue) bonds had been continuously held by the London office of the defendants for the Société de Banque Suisse of Zurich in the Confederation of Switzerland (being the Zurich office of the defendants) in accord with their instructions to hold such securities and bonds for the account of the said Zurich office. (3) By a letter dated July 19, 1938, the said Zurich office instructed the said London office to hold the said investments and bonds for the account of the Vienna office of the claimants, the Oesterreichische Creditanstalt Wiener Bankverein, which is a company originally constituted under the laws of Austria, now incorporated in the Republic of Germany and hereinafter called “the Viennese bank,” and having its head seat of control and management in Vienna where it can be lawfully served with legal process …

Then he exhibits the correspondence and translations, and continues as follows:

On July 22, 1938, the said London office of the defendants notified the Viennese bank that they had received and thenceforth held the aforesaid securities for their [the Viennese banks] account …

Then he exhibits some more correspondence, and continues as follows:

By a letter dated Jan. 18, 1939, the Viennese bank instructed the said London office to ship to them the £500 Austrian bonds mentioned in para. (2) of this affidavit.

The letter of instructions is produced and exhibited. He continues as follows:

Such instructions were duly carried out by the said London office on or about Jan. 20, 1939. (5) By a letter dated Mar. 18, 1939, the Viennese bank instructed the said London office to sell all the rest of the said securities and to credit their account with the proceeds thereof.

The correspondence containing the instructions is exhibited. He continues as follows:

In accordance with the last-mentioned instructions the London office of the defendants sold the said investments on Mar. 20, 1939, and on that same date sent to the Viennese bank the relevant credit advice notes concerning the proceeds of such sales. The bundle now produced and shown to me marked “P. de W.5” contains true copies of the said credit advice notes. (6) The proceeds of such sales amounting to the sum of £1,105 13s. are now in the possession of the defendants said London office merged in the general funds standing to the credit of the said claimants (the Viennese banks) current account with the defendants said office. The Viennese bank claims such proceeds. The defendants have no knowledge in regard to the beneficial ownership thereof. (7) The defendants claim no interest in the said sum of £1,105 13s. except for their charges and costs, and are ready to bring into court or to pay or dispose of such sum in such manner as this honourable court may order or direct.

Affidavits were filed on behalf of the plaintiff and the Viennese bank, and, having read the affidavits, on 6 July 1939, the master made the interpleader order. So far as it is relevant, the order is as follows:

It is ordered that the following issue be tried before the court, that is to say: “Whether the plaintiff or the claimants is or are entitled to receive payment and

Page 409 of [1940] 1 All ER 406

give a good discharge for the sum of £1,105 13s. at present in the hands of the defendants representing the proceeds of sale of the securities in the indorsement of the said writ mentioned”; and it is ordered that in the said issue the claimants be plaintiffs and the plaintiff be defendant; and it is ordered that the plaintiffs in the said issue do deliver their statement of claim on or before July 26, 1939, and that the defendant in the said issue do deliver his defence within 14 days after delivery of the statement of claim, and that the plaintiffs in the said issue do deliver their reply if any within 7 days after the delivery of the defence.

Then there are provisions with regard to the trial of the issue, and the order concludes with these words, so far as the action is concerned:

That all further proceedings in this action be stayed until after judgment in the said issue.

War broke out on 3 September 1939 between this country and Germany. Nevertheless, on 7 October 1939, the claimants delivered their points of claim in the issue. Afterwards, on 17 October 1939, the plaintiffs issued the summons now before me. Originally the only order asked for was an order for security for costs. It was not until the summons was before me on 28 November 1939, that the plaintiffs amended it by asking for the alternative relief.

It is admitted that the plaintiffs in the issue are alien enemies, and, that being so, it is clear that, so long as there is a state of war between Great Britain and Germany, they cannot proceed with their claim. Their rights are in a state of suspense. That being so, it would, in my judgment, be unfair to them to make now the order for security for costs asked for. They could not comply with it. I also think that it would be unfair to make the order asked for in the alternative. It is true that to make such an order would not determine the rights of the claimants against the plaintiff in the action. Such an order would leave those rights undetermined and suspended, but it would enable the plaintiff to recover from the defendants the money the subject-matter of the interpleader issue, and such an order would or might adversely affect the position of the claimants, who, after all, may be right. It would leave the claimants in a position in which they might have to sue the plaintiff in the United States of America. At the moment, the money about which the parties are fighting is in safe hands. I do not know what the financial position of the plaintiff is. He may be a wealthy man, or he may be a poor one. Plainly, I think, it would be unfair to the claimants, before hearing their case on its merits, to bar their rights against the solvent body which may be their debtor, and substitute for that body the plaintiff, an individual about whom I know nothing, and who, apparently, would have to be sued in the United States of America.

I cannot make the alternative order asked for on the summons, but it would not, I think, be right or fair to the plaintiff to leave him without a remedy during the war. So to do might harm him if he should be right, and might benefit the alien enemy if he should be wrong. It would be possible to reconsider the order of 6 July 1939, and, notwithstanding that order, if the plaintiff is so minded, to order that in the issue the plaintiff be the plaintiff, and the claimants be the defendants. So framed,

Page 410 of [1940] 1 All ER 406

the issue could be proceeded with during the war. I understand that the master suggested this course to the plaintiff when the summons was before him, and that the plaintiff then refused to take it. All I can do on this summons is to dismiss it with costs, with leave to the applicant to appeal if he desires so to do.

Summons dismissed with costs. Leave to appeal to the Court of Appeal.

Solicitors: Donald W Plunkett (for the plaintiffs); Herbert Oppenheimer Nathan & Vandyk (for the defendants).

F Honig Esq   Barrister.

Pratt v Cook Son & Co (St Pauls) Ltd

[1940] 1 All ER 410


Categories:        EMPLOYMENT; Industrial relations        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        11, 12, 13 DECEMBER 1939, 8 FEBRUARY 1940        


Master and Servant Wages Payment otherwise than in coin of the realm Necessity for written agreement Agreement between trade union and masters association Truck Act 1831 (c 37), ss 1, 2, 3, 4, 8, 9, 23 Truck Amendment Act 1887 (c 46), ss 2, 4, 5, 12.

Limitation of Actions Specialty Right of action conferred by statute Civil Procedure Act 1833 (c 42), s 3.

The plaintiff was employed from 8 March 1920 to 1 December 1935, as a packer by a firm of wholesale drapers at a weekly wage of 53s, and it was agreed that dinner and tea supplied by the firm were worth an additional 10s per week. The plaintiff claimed that the above sum of 10s was an improper deduction under the Truck Act 1831, ss 3, 4, and that he was entitled to recover the sums deducted as a specialty debt, so that the period for the purposes of the Statutes of Limitation was twenty years. The defendants contended (i) that the deduction was one they were entitled to make under the Truck Act 1831, s 23, but to this it was objected that there was no agreement in writing signed by the plaintiff to permit these deductions, and (ii) that certain agreements made between the plaintiffs trade union and the masters association were sufficient agreements in writing within the Truck Act 1831, s 23. These agreements were signed by an official of the union and the association, but the defendants at all times insisted on negotiating with their own men direct:

Held (Lord Romer dissenting) (i) as part of the plaintiffs wages was not paid in the current coin of the realm, the contract fell within the mischief aimed at in the Truck Act 1831, s 1.

(ii) the exemptions provided by s 23 of the Act did not apply to s 1, and both sections could stand together without any contrariety or overlapping.

(iii) as the plaintiffs claim was brought on s 4 of the Act of 1831, and on nothing else, the debt was a specialty debt due under a statute and, therefore, the proper period of limitation was twenty years under the Civil Procedure Act 1833, s 3.

(iv) it must be taken that the plaintiffs wages were 63s per week, and he was entitled to recover 10s in respect of each week for the whole period of his service.

Order of Court of Appeal ([1938] 4 All ER 356) reversed.

Notes

This case is important in view of the fact that vast sums of money are probably dependent upon the decision. It is also remarkable in that the

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statutory provisions here construed concern the payment of ordinary working men, and the courts have not been asked to construe them until 100 years after the passing of the Act. The legal issue, however, is within the narrowest compass. The only question of construction is whether the exceptions stated in s 23 of the Act of 1831 apply only to s 2 or also to ss 1 and 3. The suggestion that they were to be read into ss 1 and 3, which found favour with the majority of the Court of Appeal, is here rejected, but the decision is again not unanimous, Lord Romer dissenting and agreeing with the majority decision in the Court of Appeal. There is a further matter upon the Statute of Limitations, but this is easily disposed of.

As to Payment of Wages in Kind, see Halsbury (Hailsham Edn), Vol 14, pp 654658, paras 12371241; and for Cases, see Digest, Vol 24, pp 934941, Nos 229284.

Case referred to

Williams v Norths Navigation Collieries (1889) Ltd [1906] AC 136; 24 Digest 938, 263, 75 LJKB 334, 94 LT 447, revsg [1904] 2 KB 44.

Appeal

Appeal from an order of the Court of Appeal (Slesser and Finlay LJJ, Goddard LJ dissenting), dated 11 November 1938, and reported [1938] 4 All ER 356, reversing an order of Wrottesley J, dated 11 February 1938, and reported [1938] 1 All ER 555. The facts and the arguments are fully set out in the opinion of Lord Atkin.

H J Wallington KC and A Melford Stevenson for the appellant.

Rt Hon Sir William Jowitt KC, G O Slade and Victor Wolff (for Charles M Cahn on war service) for the respondents.

8 February 1940. The following opinions were delivered.

LORD ATKIN. My Lords, this is an appeal from the Court of Appeal, who by a majority (Slesser and Finlay LJJ, Goddard LJ dissenting), set aside a judgment of Wrottesley J, in favour of the plaintiff and entered judgment for the defendants. The plaintiffs action was under the Truck Act 1831, s 4, to recover from the defendants, his former employers, arrears of wages at the rate of 10s per week not actually paid to him in current coin. It is plain from the facts found by the judge, and it is not now disputed, that part of the plaintiffs remuneration as a packer in the employment of the defendants consisted of the provision of dinner and tea at the value of 10s per week. The plaintiff was an artificer within the meaning of the Truck Act 1831, and, therefore, in apparent violation of s 1 of the Act, his wages were not “made payable in current coin of the realm and not otherwise,” and apparently, therefore, he had the right to recover so much of his wages earned as were not so paid to him. On the question of liability, the only question is whether s 23 of the Act operates as an exception to the general prohibition in s 1.

It is not necessary to dwell upon the evils which led to the passing of the Truck Act 1831. The practice of paying wages in kind had been an abuse for centuries, and a series of Acts dating from 4 Ed IV had been passed prohibiting such payments in particular trades. By 1 and 2 Will IV, c 36, all the previous prohibitions contained in some eighteen statutes were repealed, and by the Truck Act 1831, passed on the same

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day, which is the Act in question, the whole question was dealt with, and the list of trades in which the practice was prohibited was extended. The previous acts had contented themselves with a mere prohibition of paying wages otherwise than in current coin or in bank notes. The new Act provided numerous safeguards to avoid evasion to be found in ss 26. The Act is entitled:

An Act to prohibit the payment, in certain trades, of wages in goods, or otherwise than in the current coin of the realm.

It begins as follows:

Whereas it is necessary to prohibit the payment, in certain trades, of wages in goods, or otherwise than in the current coin of the realm; be it therefore enacted … that in all contracts hereafter to be made for the hiring of any artificer of any of the trades herein-after enumerated, or for the performance by any artifice of any labour in any of the said trades, the wages of such artificer shall be made payable in the current coin of this realm only, and not otherwise. …

S 2 provides that in any contract of the specified employment no provision shall be made directly or indirectly respecting the place where, or the manner in which, the whole or any part of the wages shall be expended. S 3 makes effective the prohibition which in s I was confined to contracts by providing that the entire amount of the wages earned by, or payable to, any artificer shall be actually paid to such artificer in the current coin of the realm. It thus would prohibit all deductions, but it goes on to say that every payment made to any such artificer of or in respect of wages:

… by the delivering to him of goods, or otherwise than in the current coin aforesaid, except as herein-after mentioned, shall be … illegal …

The reference to the exception appears to be to s 8, which permits payment of wages to be in bank notes if the artificer consents. S 4 gives the artificer the right to recover so much of the wages as have not been paid to him in current coin. S 5 provides that in any action for wages the employer shall not be allowed a set-off or reduction in respect of any goods (a) received by the artificer as wages, or (b) supplied to the workman at any shop of the employer. S 6 provides that the employer may not maintain any action against any artificer in respect of any goods as mentioned in (a) and (b) in s 5. S 9 imposes a penalty upon any employer who makes a contract or any payment by the Act declared illegal.

So far, the legislature seems to have devised a very thorough system of protection against the evils of truck, one of the chief of which was the habit of unconscionable employers, not only of paying wages in goods, but of requiring wages to be expended in goods bought from the employer at prices which were much above the true value of the goods. It is said, however, that, after constructing this elaborate fortification, the legislature by s 23 provides what appear to be easy methods of undermining its foundations. Wages, it is said, could be paid in medicine and medical attendance, fuel, materials and tools for the trade of a miner, provender for the artificers beast, rent, and victuals pre-

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pared or consumed on the employers premises. It is true that the section provides for deductions to be made from wages in respect of such matters, and in respect of loans made to the artificer for such purposes, and it is clear that, in respect of deductions, the goods and services mentioned cannot have been supplied as wages, for, if already supplied as wages, no deductions are necessary or possible. It has to be conceded that in respect of some of the goods a deduction can only be made of the true value, and, as to any deduction, it cannot be made unless there is an agreement in writing signed by the artificer. Nevertheless, the true construction is that one may pay and contract to pay wages in the goods and services mentioned without any agreement in writing and without any check on value, whereas one may only deduct the value of such goods and services from wages if there is an agreement in writing, and, in some cases, adequate value. My Lords, I cannot accept this construction of the section. I think, with respect, that Goddard LJ went too far in saying that the section applied only to deductions, though there appears to be some support for that view in some of the opinions in Williams v Norths Navigation Collieries (1889) Ltd, at pp 140, 142. I agree, however, that the main purpose of the section was to authorise deductions from wages. For that purpose, it was necessary to make clear that the goods or services in respect of which the deductions might be made might lawfully be supplied, or agreed to be supplied. The terms of s 6, and, in particular, the terms of s 2 that no provision shall be made directly or indirectly as to the manner in which any part of the wages is to be expended, are quite sufficient, in my opinion, to raise such doubts as would need to be allayed by the terms of the section: “nothing herein contained shall extend or be construed to extend to prevent …” When one considers that the expressed object of this Act was to prevent the payment of wages in goods, it would be very remarkable that an exception should be made without any reference at all to the supply of the goods and services specified being by way of wages. When there are added the provisions as to deductions and loans, which are unmeaning unless the supply of goods and services to which they relate is something other than wages themselves, I am forced to the conclusion that the section does not afford the easy passage through the early prohibitions, and that the supply of the goods and services specified in the section cannot be made by way of wages. I should add that, in any circumstances, this case could not be regarded as one of deduction, but that the defendants must succeed, if at all, on their contention that the first part of the section authorised the payment of wages in kind.

On the remaining question of the period of limitation, there has been no difference in the courts below, and the decision seems manifestly right. There is a new cause of action created by s 4, which goes only to a limited part of the remuneration. No such cause of action exists apart from the statute, and it follows that the period of limitation

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must be as decided. The appeal should be allowed, with costs here and in the Court of Appeal, and the judgment of Wrottesley J restored.

LORD THANKERTON. My Lords, I have had the opportunity of considering the opinion which has just been delivered by my noble and learned friend Lord Atkin and I desire to express my concurrence in it. I only wish to add one or two observations.

In my opinion, s 23 is dealing with matters external to the hiring contract, which has been dealt with by ss 1 and 2, but it is to be observed that s 2 not only deals with the hiring contract but also strikes at any other contract between the artificer and his employer which contains provisions which directly or indirectly offend against the section. One of the purposes of s 23 is to make it clear that the contracting to supply any of the matters specified in s 23 is not to be affected, but s 23 in no sense expresses permission to supersede the hiring contract so as to make it a contract of truck, or barter, for wages. On the other hand, s 23 does expressly authorise the employer to make, or contract to make, a stoppage or deduction from the wages due under the hiring contract in respect of the supply of the matters specified in the section, despite the provisions of s 2, provided that he has the signed agreement of the artificer. I agree with the motion proposed by my noble and learned friend Lord Atkin.

LORD RUSSELL OF KILLOWEN. My Lords, that this is a difficult case is apparent from the difference of opinion prevailing both in the courts below and in your Lordships House, but, after careful and anxious consideration, I concur with the view that the appeal should succeed. As I see it, the case turns wholly upon the true construction to be placed upon the Truck Act 1831, s 23.

The respondents contend that (as regards the trades to which the Act applies) the Act specifically authorises the payment of wages in goods, or otherwise than in cash, to the extent and in manner therein mentioned, and that, accordingly (what is relevant to this case), it authorises an employer to supply, or to contract to supply, to a workman as part of his wages victuals dressed or prepared under the roof of the employer and there consumed by the workman. On the other hand, the appellant contends that the section only authorises the employer to supply, or to contract to supply, to a workman the matters specified in the section (including such victuals as aforesaid) as something outside his wages which must be wholly payable in cash, though the section permits a proper deduction from those wages in respect of the matters supplied, provided an agreement for such deduction shall be in writing and signed by the workman. Those are the two rival views, between which we have to choose. For myself, I feel at the outset pressed by the fact

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that the act, by its title and preamble, declares that its object is to effect something which it says is necessarynamely, to prohibit the payment in certain trades of wages in goods, or otherwise than in current coin of the realmand, it being the avowed object of the Act to effect that necessary reform, it would, in my opinion, require words plain, and incapable of any other construction, to justify the view that by s 23 the very evil which the Act says it is necessary to prohibit is permitted to continue even to a comparatively limited extent. If, however, as I think it does, the section lies wide open to a different interpretation, I feel bound to give it that interpretation and preserve unimpaired the declared intention of the Act.

In my opinion, the section is confined to making it clear that an employer is not prevented from supplying, or contracting to supply, to a workman any of the specified matters (but not on account of wages), and, if he wishes, making a deduction or stoppage in respect of that supply from the workmans wages, provided the workman has signed a written agreement for such stoppage or deduction. In other words, it authorises two kinds of transactions which might otherwise have been said to be forbidden by certain provisions of the Actnamely, (i) the supply of goods by s 2(see the words “directly or indirectly”), s 5 (second part), and s 6(second part), and (ii) the stoppage or deduction by s 3. The section presupposes a wage payable wholly in cash, and authorises the supply, or a contract for the supply, of other matters, and, if the workman has signed a written contract authorising it, a deduction or stoppage from the wages in respect of what has been supplied. The power to stop or deduct necessarily refers to a stoppage or deduction in respect of the matters which the section permits to be supplied or contracted to be supplied, and, since wages cannot be deducted from wages, it must follow that the matters to be supplied are to be supplied for some value other than the workmans labour, and not on account or as part of the wages for that labour. It would indeed be strange if the legislature had authorised a verbal contract for the payment of wages (it might be wholly) in kind, but insisted on a contract in writing before any deduction in respect of kind could be made from cash wages. For these reasons, I think that the section does not operate to allow any portion of a workmans wages to be paid or payable otherwise than in cash.

Upon the question of limitation, I agree with the view which is, I believe, shared by all before whom this case has been argued. The appellant is bringing an action which, but for s 4 of the Act, he could not bring. The action is, therefore, brought on a specialty, and the limitation period is twenty years. I would allow the appeal and restore the judgment of Wrottesley J.

LORD WRIGHT (read by Lord Russell of Killowen). My Lords, the facts of the case have already been fully stated, and I need not

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repeat them. It is enough to say that, in my opinion, the weekly wages which the respondents contracted to pay to the appellant were 53s in cash and certain mealsnamely, dinner and teadressed and prepared under the roof of the employers and there consumed, said to be worth 10s. The meals were as much the mans wages as was the money payment. This follows from the definition contained in s 25. The food was something which was had or contracted to be paid as a reward for his labour, and was, equally with the money, to be deemed to be the wages of his labour. His wages were not 63s subject to a deduction of 10s per week, which was the admitted fair value of the meals, but were 53s and the meals.

Such being the contract, it falls precisely within the mischief aimed at in the Truck Act 1831, s 1. The preamble to the section stated that it was necessary in certain trades to prohibit the payment of wages in goods, or otherwise than in the current coin of the realm, and the section enacted that, in all contracts thereinafter to be made for the hiring of any artificer in any of the enumerated trades, and for the performance by the artificer of any labour in such trades, his wages should be made payable in the current coin of the realm, and not otherwise. The section went on to declare “illegal, null and void” any such contract in which the whole or any part of such wages should be payable in any manner other than “in the current coin aforesaid.”

The appellant is admittedly an artificer to whom the Act applies. It must, it seems, follow, unless there is in the Act some specific exception to the contrary which takes this contract out of s 1, that the contract was illegal, null and void. If that is so, the appellant must be entitled to say that he is not bound by the illegal and void contract, but has the right to claim to be paid a fair remuneration for his services, and, after giving credit for any money payments which he has received on account of remuneration, to recover under s 4 so much of the wages earned by him as was not actually paid to him by the respondents in the current coin of the realm. In effect, if a fair wage was 63s per week, the respondents must deduct from each week the amount of 53s actually paid to him in cash or current coin, and then he is entitled, under s 4 of the Act, to claim the balance of 10s per week. This is his actual claim, which, so far as I understand it, it is only attempted to meet, apart from questions of limitation, by a contention that the plain effect of s 1 is qualified by s 23, with the result that, in the circumstances of the case, the contract is not illegal and invalid, but is good and enforceable.

It is true that a statute must be read as a whole, and, when its sections are read together, it may turn out that the apparent effect of one section, even of a governing section such as s 1 of the Act, may be cut down and qualified by a later section or sections. However, with all respect to the members of the Court of Appeal, who have taken the view that s 23 has this effect, I find it impossible so to construe this Act as to

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nullify the plain provision of s 1, or to find anything which legalises a contract of employment in which wages are payable otherwise than in current coin. The mere fact that s 23 enables the employer to supply certain things to the man is not expressly inconsistent with s 1, nor is it so inferentially. It says nothing as to how the things supplied are to be paid for. The part of s 23 which deals with deductions from wages, which is expressly an exception to s 3, seems to me to presuppose that the wages are cash wages and nothing else. The Act was a remedial measure, following a long-established policy of the English legislature to protect workmen against the exaction of avaricious employers who sought to make an extra profit by compelling their men to take their wages in part in goods, or, in some cases, to purchase necessaries at the employers shops. The evils liable to result are too well known and too obvious to need to be stated here. It is no answer to the claim for breach of the positive prohibition of the Act that, in the particular case, the employer was generous, and was helping his men, or thatas, for instance, in this casethe man would be getting an undue advantage by first accepting the wages in cash and kind and then reopening the transaction by claiming a second payment in cash in respect of what he had already received by way of a reward in kind. S 4 provides for that very state of things. Nor could the statute draw a distinction between good and bad employers. Its terms are, and must be, mandatory and absolute. Hence, it is not right to say that the claim is unconscientious. The appellant is merely claiming what the law gives him. It is the respondents own fault or misfortune if, no doubt with the best intentions, they did not comply with the law. The plain effect of s 1 can only be negatived or qualified by an equally plain exception, whether expressed or by necessary inference. As I hope to explain in detail, I find no such exception in the Act.

The respondents contention, however, is that they did comply with the law. That depends on what is the true effect of s 23. As the statute is remedial and for the benefit of the workman, there is no reason to construe it strictly against him, though it does limit the employers common law rights. On the contrary, the statute should be, if requiredthat is, if it is ambiguousconstrued in favour of the workman. However, in the view which I take of the position, there is no occasion to dwell on this aspect. The Act is not, to my mind, ambiguous. It is enough to construe the Act according to its ordinary fair interpretation in order to decide this appeal.

Before further considering s 23, I should refer shortly to some other sections of the Act. S 2, like s 1, deals with the provisions of the contract. A contract coming within the Act is to be illegal, null and void if it contains provisions as to the place where, and the manner in which, the whole or part of the wages are to be expended. S 3 deals, not with the contract, but with payment of the contracted wages.

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It requires such wages to be paid in the current coin of the realm, and enacts that any payment made by the employer to the man “of or in respect of any such wages” by the delivering to him of goods, or otherwise than in current coin of the realm, shall be illegal, null and void. S 3, however, unlike ss 1 and 2, is qualified by the words “except as hereinafter mentioned.” The qualification, as the sequel here will show, refers to ss 8 and 23. Before considering the effect of these sections, I should refer to ss 5 and 6. S 5 prohibits, in any action brought by a man against his employers for his wages, any set-off or claim to reduce the claim by reason of any goods received by the man “as or on account of his wages or in reward for his labour,” or for any goods supplied at a shop or warehouse kept by the employer or in the profits of which he is interested. S 6 contains a prohibition against any action by an employer against the man in respect of goods supplied to the man “as or on account of his wages or reward for his labour,” or supplied from a shop or warehouse kept by the employer or in which he is interested. These two sections are ancillary to the first four sections of the Act, and are aimed at excluding any subterfuge by which the provisions of the first four sections might be evaded, as well as expressly dealing with the mischief of what used to be called “the tommy shop”that is, a shop in whole or in part, in name or in fact, owned or operated in the interest of the employer. It is to be noted that these sections deal with two different and distinguished matters. The former deals with goods and the like supplied as on account of his wages, but does not prohibit the man doing what he likes with his cash wages, such as paying his employer for goods supplied, provided the workman does not get them from a shop or warehouse owned by the employer or in which he is interested. However, there is no prohibition, so far, aimed at preventing the employer from supplying goods or services to his men, so long as they are on cash or other ordinary terms and do not affect the wages, or the payment of the wages, and are not supplied for or on account of wages, or at a tommy shop.

The prohibition in s 8, which is one of the exceptions referred to in s 3, is obviously inserted for reasons of convenience, which are not thought to be inconsistent with the policy of the Act. Banknotes, in enacts, are to be treated as currency, and as equivalent to current coin, just as they are commonly regarded in ordinary life. In fact, they are now legal tender, and have practically ousted gold as currency. The section deals, not only with actual payments, but with contracts for payment in banknotes, but only, however, if the “artificer shall be truly consenting to receive them.”

S 23 is the section on which the majority of the Court of Appeal proceeded, holding that it protected contracts offending against s 1 as well as payments offending against s 3. In the words of Slesser LJ, at p 361, s 23 provides that:

… nothing in the Act shall render illegal a contract to give food of the

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kind defined in s 23 in addition to money wages as remuneration for his services …

In his view, also [p 361], the section is:

… an omnibus provision sweeping up sects. 2 and 3 in the permitted exceptions.

S 23 may be analysed into two parts. The latter part deals with stoppages and deductions from wages in respect of the mattersgoods, rent, and so forthenumerated in the first part of the section. This part of s 23 is not directly relevant in this appeal, for two reasons. First, there was no stoppage or deduction from a money wage which this part of the section is clearly postulating, on account of goods and so on supplied. The food was part of the wage, and could not be deducted from itself. Secondly, even if there had been a deduction from the cash wage of the fair value of the things supplied, there was no agreement or contract for such stoppage or deduction in writing or signed by the appellant, which is the condition required by the section. This part of the section does pro tanto, where it applies, qualify s 3, which deals with payment, and constitutes one of the exceptions referred to in s 3. The question raised, however, is whether the first part of s 23 constitutes, as the majority of the Court of Appeal held, an exception to s 1. I cannot, with all respect, think that it does. In the first place, s 1 is unqualified in terms. Nor does s 23 in terms refer to s 1, or purport to qualify it. It is said that inferentially it does, because otherwise it is superfluous. There is nothing, it is said, in the Act which forbids an employer to supply goods and the like as an ordinary creditor, so long as he does not do so as, or on account of, wages. The section, it is said, must have been inserted with some definite object, and that object must at least have been to give a special exception from s 1 in respect of the specific categories of goods or other considerations enumerated in the section in respect of which, it may be, the legislature thought that it would or might be beneficial to the man if he were able to get them from the employer as remuneration for his services. I do not regard this as a sound argument. In my opinion, so drastic a qualification of the fundamental provisions of s 1, if intended, would have been effected by clearly expressed exceptions and permissions, and not by the mere cautionary words: “nothing … shall extend or be construed to prevent …” Such words are more apt to introduce matters inserted ex abundante cautela, and to resolve possible doubts by clearly stating what may be lawfully done, or to lead up, by enumerating the relevant matters, to the express and definite modifications which the latter part of the section enacts. It is true that in the Act there is nothing to prevent an employer from supplying goods or other benefits to a workman and charging for them, so long as ss 1 and 3 are not infringedthat is, so long as the contract wages are in current coin, and so long as ss 2, 5 and 6 are not infringed. The first part of s 23 may have been inserted to exclude, in the specific cases mentioned, any question under these latter sections. However that may be, the first part of s 23

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contains no reference to the wages contract. It does not in terms enable the employer to supply, or contract to supply, the enumerated things or benefits as for, or on account of, wages. It does not say that any part of the wages should be made payable in the form of, or by means of, such things. To my mind, it leaves s 1 entirely on one side. The two sections can stand together, without any contrariety or overlapping. S 23(first part) is silent as to how the goods and the like are to be paid for by the workman. The clear intention is, in my judgment, that the wage contract is to be for payment in current coin, and payment is to be made, accordingly, in current coin subject only to s 8, and to s 23, where it appliesthat is, where a stoppage or deduction is permitted in the special casesand subject to the special conditions expressed in the section. Save in such cases, and subject to these conditions, s 3 is unaffected. S 1 is not affected by s 23 at all. In the facts of this case, the latter part of s 23 obviously does not apply. That section can only be relevant if it be held that the former part qualifies s 1 and validates what is ex facie a breach of its clear terms. As I do not think, for the reasons which I have endeavoured to explain, that it expressly or impliedly qualifies s 1, I regard it as irrelevant in this appeal, and I agree with Wrottesley J, and Goddard LJ. After more than a century, this important question of construction has for the first time come before this House. The House must decide the question simply on a fair reading of the actual words of the Act. I further observe that the construction adopted by the majority of the Court of Appeal would, over a wide and important area, completely nullify s 1, which is the governing section of the Act. The Truck Amendment Act 1887, s 4, is different in expression and in policy, and, in any case, could not help in determining the construction of the Act of 1831.

On the question of the proper period of limitation of the claim, I agree with what I think has been the opinion of all the judges below, which is that the proper period is twenty years under the Civil Procedure Act 1833, s 3, because the debt is a specialty debt due under a statute. The appellants claim is brought on s 4 of the Act of 1831, and on nothing else. As the contract offended against s 1, it was illegal, null and void. There was thus no contract under which he could claim any remuneration. He must rely on s 4, which contemplates that the man has earned wages, and enables him to receive so much of the wages as he has not been paid in current coin. What, in such a case, are the wages, and how are they to be estimated? They cannot be estimated on the basis of any contract, because there is none. The answer can only be that they are to be assessed on the basis of a fair and reasonable remuneration. In this case, that has been taken to be 63s per week, not because the contract is reinstated in any sense, because that is in law impossible, but because the facts afford good evidence that 63s per week was a reasonable reward. That being so, from the wages earned, sums

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actually paid in cash must be deducted, and the balance of 10s per week is recoverable by the appellant for the whole period of his claim. I concur in the motion proposed.

LORD ROMER. My Lords, the question to be decided upon this appeal is one of some importance, arising under the Truck Act 1831. The question is this. Having regard to the provisions of s 23 of that Act, is it lawful for an employer to pay, or contract to pay, part of the wages of an artificer within the meaning of the Act by the supply of victuals dressed or prepared under the roof of such employer and there consumed by the artificer? The answer to the question depends upon the proper construction of the section, and, in order to ascertain this, some of the earlier provisions of the Act must be examined.

S 1 of the Act is concerned with the contract of hiring made between the employer and the artificer. In every such contract, the wages of the artificer must be made payable in the current coin of the realm, and not otherwise. If, in any such contract, the whole or any part of such wages are made payable in any manner other than in the current coin of the realm, the section provides that the contract shall be, and is, thereby declared illegal, null and void. This section, however, would not of itself be sufficient to effect the object of the Act, which, as expressed in its title, was:

An Act to prohibit the payment, in certain trades, of wages in goods, or otherwise than in the current coin of the realm.

An unscrupulous employer might well contract to pay the wages of an artificer in such coin, and, nevertheless, on the day of payment, induce the artificer to accept goods in discharge of the contractual sum in whole or in part. It is accordingly provided by the second half of s 3 that any payment of wages by delivery of goods, or otherwise than in current coin, shall be illegal. Another way in which such an employer could defeat, not the letter, indeed, but the spirit, of the object as so expressed would be by inducing his employee to purchase goods from him on credit and subsequently deducting the price of such goods from the mans wages. Any such deduction is forbidden by the first half of s 3, which provides that the entire amount of the wages earned by, or payable to, the artificer shall be actually paid to him. The object of the Act might have been defeated in yet another way. An employer might by contract with the artificer impose upon the latter the obligation of laying out or expending the wages due or to become due to him upon, or in the purchase of, goods from a shop or warehouse kept by, or belonging to, the employer, or in the profits of which the employer might have a share or interest. The wages, in such a case, would, no doubt, be wholly paid in coin of the realm, but, by virtue of such a contract, they would in whole or in part find their way back into the pockets of the employer. It is therefore provided by s 2 of the Act that a contract imposing such an obligation is “illegal, null and void.” Ss 5

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and 6 are also designed to prevent, on the part of an employer, evasions of the objects that the Act had in view, and, though some of the provisions contained in them are not, perhaps, strictly necessary, in view of the earlier sections, they do contain other provisions which complete the scheme of the Act by depriving the employer, as between himself and the artificer, of any right of action or set-off in respect of goods sold or supplied to the artificer at any shop or warehouse kept by or belonging to the employer, or in the profits of which the employer has any share or interest. The important thing to notice about the five sections to which I have referred is that each one is an integral and necessary part of the scheme for carrying into effect the expressed object of the Act.

I must now turn to s 23. Its terms are familiar to your Lordships, and I need not read it at length. It is sufficient for the moment to call attention to the opening words:

Nothing herein contained shall extend or be construed to extend to prevent …

Notwithstanding these words, it is plain from what follows that the section is not inserted ad majorem cautelam, but is really a section which introduces exceptions to the Act. In other words, I agree with the author of the marginal note to the section, who there describes it as constituting: “Particular exceptions to the generality of the law.” The question that your Lordships are called upon to determine upon this appeal is what those exceptions are. In the Court of Appeal, Goddard LJ thought that the exceptions were of a very limited nature, and he said, at p 366:

In my opinion, the section deals with authorised deductions and the circumstances in which they may be made, and with nothing else.

He considered, therefore, in effect, that the section merely creates an exception to the first part of s 3, which provides that the entire amount of the wages shall be actually paid in coin of the realm. I do not so read the section. If that had been its object, it would necessarily, I think, have been expressed in very different language. The section as drawn seems to make a clear distinction between the supply, or the contract to supply, certain things and the demising therein mentioned, on the one hand, and the stoppage, or deduction from wages, on the other. The stoppage or deduction is treated as a separate and distinct matter. The section provides that nothing in the Act is to prevent an employer from supplying, or contracting to supply, the things mentioned, or demising as therein provided. That is one thing. It goes on as follows:

… nor from making or contracting to make any stoppage or deduction …

That means: “… and nothing in this Act is to prevent an employer from making or contracting to make any stoppage or deduction.” That is another, and a different, thing. Slesser LJ said that the section deals with two different subject-matters. Finlay LJ said that the

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section falls into two distinct parts, intended to have a separate and distinct operation. I respectfully agree with them. For those reasons, the section, so far as it is relevant to the present appeal, may be read as follows: “Nothing herein contained shall extend or be construed to extend to prevent any employer of any artificer from supplying or contracting to supply to any such artificer any victuals dressed or prepared under the roof of any such employer and there consumed by such artificer.” This, taken by itself, is sheer nonsense. Nothing in the rest of the Act is capable, even by the most perverse construction, of being treated as prohibiting an employer from supplying, or contracting to supply, his workmen with food, wherever dressed or prepared, or wherever it may be eaten. What the Act does prevent is the attaching by the employer of certain conditions to any such supply, or contract to supply. He may not, at the time of hiring, attach a condition that the food shall be taken as part of the artificers wages (s 1). He may not stipulate that the artificer shall lay out his wages in buying the food from the employer, whether on or off the employers premises (s 2). The employer may not pay the wages, either in whole or in part, by supplying him with the food (second part of s 3). If the employer supplies the artificer on credit with the food from his own shop, or from any shop in the profits of which the employer has a share or interest, he cannot recover the price by action, or set it off in any action brought by the artificer for the recovery of his wages (ss 5 and 6). If, therefore, the first part of s 23 is to have any operation at alland it is plain that some effect must be given to it if possiblethis can only be done if it be treated as introducing an exception to one or more of the sections to which I have just been referring. This much is, indeed, conceded by the appellant, if the section is not to be regarded as dealing solely with deductions from wages. He contends, however, that the only sections of the Act to which s 23 is, in that event, to be regarded as introducing an exception are s 2 and (presumably) ss 5 and 6. He maintains that there are no exceptions to s 1 or to the second part of s 3.

My Lords, with the greatest respect to those who think differently, I find it impossible to understand why, if the first part of s 23 is to be treated as introducing an exception to ss 2, 5 and 6, it is not to be treated as having the like effect on s 1 and the second half of s 3. It has been objected that so to treat it is inconsistent with the expressed object of the Act, which, as I have already stated, is to prohibit payment, in certain trades, of wages in goods, or otherwise than in the current coin of the realm. However, in the first place, I know of no rule of construction which would deny to a section of an Act an excepting effect because to do so would limit the expressed object of the Act. That is the function of an exception. The exceptions which I find contained in s 23 are, in any case, very limited in their scope, and, even if they extend to s 1 and to the second half of s 3, as I think they do,

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it is still quite accurate to describe the Act as one to prohibit the payment in certain trades of wages in goods, or otherwise than in the current coin of the realm. In the second place, each of the ss 1, 2, 3, 5 and 6 is, as I have already pointed out, an essential and integral part of the scheme for effecting the object of the Act, and, if it be inconsistent with the expressed object of the Act to treat the first part of s 23 as introducing exceptions to the provisions of s 1 and the second part of s 3, it is also inconsistent with that object to treat s 23 as introducing exceptions to s 2 and the first part of s 3. That the second part of s 23 does introduce an exception to the first part of s 3, which prohibits deductions from the wages, is admitted by everybody, but a deduction from wages results in a part of them, not only not being paid in the current coin of the realm, but not being paid at all, and that is even more inconsistent with the expressed object of the Act.

A further criticism of the construction which I place upon s 23 is that the section throughout assumes that the wages are contracted to be paid in current coin of the realm. If part of the wages contracted to be paid consists of food, so runs the argument, the second part of s 23 can have no operation. Wage cannot be deducted from wage. With all respect, I am unable to regard this as a legitimate criticism. The second part of the section is, no doubt, dealing exclusively with cases where the contractual wage consists wholly of coin of the realm, or the substitutes for such coin permitted by s 8, but that is no reason for confining the exceptions introduced by the first part of the section to such cases. The word “wages” is not to be found in that part of the section, from beginning to end. I would also, in this connection, call attention to the fact that in s 25 of the Act it is provided that, within the meaning and for the purposes of the Act, any money “or other thing” had or contracted to be paid, delivered, or given as a recompense, reward, or remuneration for any labour done or to be done shall be deemed and taken to be the wages of such labour. These words seem to contemplate that in some cases a thing other than money may properly form part of the wages of an artificer. This, however, can never be the case unless s 23 bears the construction which I put upon it.

I have not lost sight of the fact that the stoppages or deductions permitted by the second part of s 23 can only be made when there is an agreement or contract in that behalf in writing signed by the artificer, whereas no such contract or agreement would be requisite in the case of any exception to the provisions of ss 1 and 2 and the second part of s 3. This may be an argument in favour of treating s 23 as merely permitting certain deductions from wages. It is no argument in favour of treating it as providing an exception to s 2 and not an exception to s 1 and the second half of s 3. In my opinion, s 23 creates certain exceptions of a very limited character

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to the scheme, and to every part of the scheme, devised by the Act for ensuring that a workman shall not directly or indirectly be paid his wages except in coin of the realm, or its permissible equivalent. The scheme is to be found in ss 1, 2, 3, 5 and 6, and I can find no good or sufficient reason for excluding from the operation of s 23 any single one of these integral parts of the scheme. This was the view of the section taken by Slesser and Finlay LJJ, and I agree with them. I would dismiss the appeal with costs.

Appeal allowed with costs.

Solicitors: Corbin Greener & Cook (for the appellant); J N Mason & Co (for the respondents).

Michael Marcus Esq   Barrister.

Lissenden v C A V Bosch Ltd

[1940] 1 All ER 425


Categories:        CIVIL PROCEDURE: HEALTH; Health and safety at work: QUANTUM        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        7 DECEMBER 1939, 8 FEBRUARY 1940        


Workmens Compensation Award of arrears of compensation but terminating weekly payments Appeal against termination of weekly payments Arrears and costs of arbitration accepted by workmans solicitors Approbation and reprobation Workmens Compensation Act 1925 (c 84), Sched I (4) RSC Ord 58, rr 4, 20 (d).

An award of workmens compensation at the rate of 12s 3d per week was made in favour of a workman under the Act of 1925 in respect of his incapacity caused by industrial disease for the period from 5 October 1936, until the date of the hearingnamely, 31 October 1938together with the costs of the arbitration. The workman received, and signed a receipt for, the arrears of compensation due under the award, and the taxed costs were paid to his solicitors. The workman thereafter appealed from the award in so far as it terminated the weekly payments of compensation on 31 October 1938, on the ground that he had not wholly recovered from the effects of the industrial disease:

Held in accepting the arrears of compensation, the workman was exercising a legal right to be paid what was admittedly due to him, and, in serving his notice of appeal, he was exercising another and independent legal right of claiming the further relief to which he maintained he was entitled. The case, therefore, was not one of election, and the workman had a right of appeal.

Johnson v Newton Fire Extinguisher Co Ltd overruled.

Notes

In the opinions given herein there is a careful and full consideration of the phrase “approbation and reprobation,” more commonly known to English lawyers as “blowing hot and cold.” It is obscure whether this is a doctrine or principle of English law. If it is rightly so called, it has certainly been adopted from Scots law. It is probable that the better view is that the authorities which refer to the phrase are particular examples of the doctrines of waiver, election or estoppel. Although the phrase is discussed with reference to a number of authorities dealing with a variety of subjects, it will probably be the wiser course to treat the decision as confined to the case of an appeal from an award of an arbitrator under the Workmens Compensation Act. It is stated, however, that in general a litigant may appeal from part of a judgment, and in this respect judgments and

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awards are not entire and indivisible, but the point is reserved whether or not there are certain cases of a statutory right of appeal where the right of appeal may be lost by taking the benefit of the judgment.

As to Appeal against Part of an Award, see Digest, Vol 34, pp 479, 480, Nos 39473954; and see Williss Workmens Compensation (32nd Edn), pp 671673.

Cases referred to

Johnson v Newton Fire Extinguisher Co Ltd [1913] 2 KB 111; 34 Digest 479, 3947, 82 LJKB 541, 108 LT 360, 6 BWCC 202.

Malcolm v Barber, Walker & Co Ltd (1927) 137 LT 470; Digest Supp, 20 BWCC 516.

Reeves v Smith (S) & Sons (1922) 15 BWCC 190; 34 Digest 480, 3954.

Jones v Smith [1936] 1 All ER 661; Digest Supp, 29 BWCC 75.

Ker v Wauchope (1819) 1 Bli 1; 20 Digest 405, 1429.

Birmingham v Kirwan (1805) 2 Sch & Lef 444; 38 Digest 681, case qqq.

Codrington v Codrington (1875) LR 7 HL 854; 20 Digest 406, 1433, 45 LJCh 660, 34 LT 221, affg SC sub nom Codrington v Lindsay (1873) 8 Ch App 578.

Lacy v Anderson (1582) Ch Cas in Ch 155; 13 Digest 123, 1540.

Dillon v Parker (1833) 7 Bli NS 325; 20 Digest 443, 1684, affg (1822) Jac 505.

Re Vardons Trusts (1885) 31 ChD 275; 20 Digest 407, 1435, 55 LJCh 259, 53 LT 895.

King v Simmonds (1848) 1 HL Cas 754; 4 Digest 22, 154, affg (1845) 7 QB 289.

Tinkler v Hilder (1849) 4 Exch 187; 16 Digest 123, 218, 18 LJEx 429, 13 LTOS 238.

Kennard v Harris (1824) 2 B & C 801; 2 Digest 553, 1845.

Pearce v Chaplin (1846) 9 QB 802; 21 Digest 328, 1231, 16 LJQB 49, 8 LTOS 161.

Mills v Duckworth [1938] 1 All ER 318; Digest Supp.

Cunard SS Co Ltd v Moore (1935) 104 LJKB 467; Digest Supp, sub nom Moore v Cunard SS Co 153 LT 51, 28 BWCC 162.

Yarmouth v France (1887) 19 QBD 647; 34 Digest 225, 1884, 57 LJQB 7, on appeal (1888) 4 TLR 561.

Appeal

Appeal from an order of the Court of Appeal (Slesser, Clauson, and Goddard LJJ), dated 7 December 1938, affirming an award under the Workmens Compensation Acts by His Honour Judge Drucquer, dated 31 October 1938, at the Brentford County Court, dismissing the present appellants appeal with costs. The facts and the arguments are fully set out in the opinions of their Lordships.

D N Pritt KC and Donald McIntyre for the appellant.

F A Sellers KC and Martin Jukes for the respondents.

8 February 1940. The following opinions were given.

VISCOUNT MAUGHAM (read by Lord Romer). My Lords, this is an appeal from the Court of Appeal affirming an award under the Workmens Compensation Act 1925, made by His Honour Judge Drucquer at the Brentford County Court. By the award, it was ordered that an award be entered for the appellant against the respondents for the sum of £66 3s, being compensation at the rate of 12s 3d per week as for partial incapacity from 5 October 1936, until 31 October 1938,

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with costs. The appellant appealed to the Court of Appeal against the award, asking that the award be set aside or varied so that the weekly sum of 12s 3d, being compensation as for partial incapacity, should continue after 31 October 1938, so long as the appellant should be incapacitated, or, in the alternative, that a new trial be had between the parties. The appeal came before the Court of Appeal, consisting of Slesser, Clauson and Goddard LJJ, on 7 December 1938, and, upon the hearing of the appeal, a preliminary objection was taken by counsel for the present respondents, based on the contention that the appellant could not be heard to prosecute the appeal, as he had accepted the compensation and the costs awarded by the terms of the award, and had thereby approbated the award.

The grounds on which it was contended that the appellant had approbated the award are these. On 14 November 1938, the respondents solicitors sent to the appellants solicitors a cheque for £66 3s being the amount of compensation payable under the award. On 17 November 1938, the respondents solicitors sent to the appellants solicitors a cheque for the amount of the appellants costs in the arbitration as taxed. On 21 November 1938, the respondents solicitors received, with a letter dated 19 November 1938, from the appellants solicitors, a receipt signed by the appellant for the sum of £66 3s compensation. On 23 November 1938, the respondents solicitors received an acknowledgement of the sum of £26 8s 8d paid in respect of the costs of the arbitration. These facts are not in dispute. The notice of appeal to the Court of Appeal bore the same date as the date last mentionednamely, 23 November 1938and it was limited as above stated. That is to say, it did not seek to alter or disturb the award of compensation up to 31 October 1938, but sought to have the period of compensation for partial incapacity extended, or, alternatively, to have a new trial.

The preliminary point is, in effect, a plea as to jurisdiction. The Court of Appeal held themselves bound by certain previous decisions of the court to allow the plea and to dismiss the appeal, with the result that the award stands. The leading case is Johnson v Newton Fire Extinguisher Co Ltd, which has frequently been followed, till recently without comment or criticism. The court consisted of Sir H H Cozens-Hardy MR, and Buckley and Hamilton LJJ. The award was for weekly compensation, but it ordered certain instalments of costs to be deducted from these sums. The court held that workmen who had received certain sums under the award could not appeal against any part of it. The ground stated had at least the merit of simplicity. The award, it was said, was indivisible. The appellant had accepted and acted upon it by a receipt of compensation. He could not accept part of it and claim to amend another part. That would be an attempt to approbate and reprobate the award, which could not be allowed.

My Lords, the question is whether this proposition is a sound one. I do not propose to mention all the reported cases in which it has been

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followed, but I may observe that it was doubted by Sargant LJ, in Malcolm v Barber Walker & Co Ltd, and that in the present case all three Lords justices commented upon the injustice to which the proposition by which they were bound had led. The rule has been held to apply irrespective of intention and of hardship. Thus, in Reeve v Smith (S) & Sons, there was an award on the basis of partial incapacity on 18 April 1922. Pending the drawing up of the award, the employers sent to the workman a cheque for 5 weeks compensation, in accordance with the award, and said that they would in future send him a cheque every 4 weeks. He accepted the cheque, and shortly after a notice of appeal was served, on the ground of the alleged insufficiency of the award. His solicitor then sent a cheque of his own for the amount of the cheque which had been received by the workman. It was held (by Lord Sterndale MR, Scrutton and Younger LJJ) that, on the decided cases, it was clear that the acceptance of the cheque by the workman, even if it were returned, precluded the appeal. In Jones v Smith, it was held by the Court of Appeal that receipt of a cheque in payment of costs awarded was an approbation, and precluded an appeal. Greene LJ held, moreover, following the principle laid down by the authorities, that merely to proceed to taxation of costs under the award was an act of approbation which precluded an appeal.

My Lords, I think our first inquiry should be as to the meaning and proper application of the maxim that one may not both approbate and reprobate. The phrase comes to us from the northern side of the Tweed, and there it is of comparatively modern use. It is, however, to be found in Bells Commentaries (7th Edn), Vol I, pp 141 142, and he treats “the Scottish doctrine of approbate and reprobate” as “approaching nearly to that of election in English jurisprudence.” It is, I think, now settled by decisions in this House that there is no difference at all between the two doctrines. I will cite three cases. First is Ker v Wauchope, where Lord Eldon LC, explained the doctrine in these terms, at pp 21, 22:

It is equally settled in the law of Scotland, as of England, that no person can accept and reject the same instrument … The court will not permit him to take that which cannot be his, but by virtue of the disposition of the will … and at the same time refuse to effectuate the implied condition contained in the will of the testator.

The next case is Birmingham v Kirwan where Lord Redesdale treats the two doctrines as the same. He said, at p 449:

The general rule is, that a person cannot accept and reject the same instrument: and this is the foundation of the law of election. …

The third case is Codrington v Codrington, where Lord Chelmsford observed, at p 866:

It seemed to be considered in argument that the rule of the Scotch law that a person cannot approbate and reprobate under the same instrument was not altogether the same as the English doctrine of election, but Lord Redesdale in Birmingham v. Kirwan puts them exactly on the same footing.

With this opinion Lord Hatherley agreed, and said that he was him-

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self about to cite the observations made by Lord Redesdale in Birmingham v Kirwan which had just been made by Lord Chelmsford. Lord Cairns LC stated the matter thus, at p 861:

By the well-settled doctrine which is termed in the Scotch law the doctrine of “approbate” and “reprobate,” and in our courts more commonly the doctrine of “election,” where a deed or will professes to make a general disposition of property for the benefit of a person named in it, such person cannot accept a benefit under the instrument without at the same time conforming to all its provisions and renouncing every right inconsistent with them.

In the light of these authorities, it seems that the phrase “One may not approbate and reprobate,” or the Latin quod approbo non reprobo, as used in England is no more than a picturesque synonym for the ancient equitable doctrine of election, originally derived from the civil law, which finds its place in our records as early as the reign of Queen Elizabeth: Lacy v Anderson, and see, as regards the history of the doctrine, the very learned note of Mr Swanston to Dillon v Parker.

It is perhaps well to observe here that the equitable doctrine of election has no connection with the common law principle which puts a man to his election (to give a few instances only) whether he will affirm a contract induced by fraud or avoid it, whether he will in certain cases waive a tort and claim as in contract, or whether, in a case of wrongful conversion, he will waive the tort and recover the proceeds in an action for money had and received. These cases mainly relate to alternative remedies in a court of justice. The history of the common law rules, the principles which apply to them, and the effect of the election are all very different from those which prevail where the equitable principle is in question. I will not attempt to summarise all the rules which are applicable to election in equity, but it is desirable for my present purpose to state some general propositions, which are not, I believe, in doubt. In the first place, till Johnson v Newton Fire Extinguisher Co Ltd, the doctrine seems to have been confined, in England as in Scotland, to cases arising under wills and deeds, and other instruments inter vivos. In the second place, the doctrine is founded on the intention, explicit or presumed, of the testator in the case of a will, and of the author or donor in the case of instrumentsnamely, the intention that a man shall not claim under the will or instrument and also claim adversely to it. The intention, it may be added, is not presumed in the case of two clauses in the same will, and in such a case the doctrine does not apply. Nor could the doctrine be applied in the case of a married woman where either of the properties between which she would prima facie have to elect was subject to a restraint on anticipation, for the imposition of the restraint showed an intention that the married woman should not be put to her election: Re Vardons Trusts, at p 279. In the third place, the doctrine proceeds upon the principle, not of forfeiture, but of compensation. The beneficiary electing against an instrument is required to do no more than to compensate the disappointed beneficiaries. The balance of the property coming to him under the

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instrument he may keep for himself. In the fourth place, no person is taken to have made an election until he has had an opportunity of ascertaining his rights, and is aware of their nature and extent. Election, in other words, being an equitable doctrine, is a question of intention, based on knowledge.

My Lords, I am quite unable to see how this doctrine can be made to apply to the rights of a litigant to appeal either from a judgment or from an award of a county court judge made under the Workmens Compensation Act 1925. For the present purpose, there is no difference between the two. Both are the result of judicial proceedings. The Arbitration Act does not apply to arbitrations under the the Workmens Compensation Act. The powers of a county court judge in such a case are practically the same as those in an ordinary action in the county court, though he remains an arbitrator, and, having made his award, is functus officio. The position as to enforcing the award and the position as to appealing on points of law from it are in substance the same as that which obtains in the case of High Court judgments: see the Workmens Compensation Rules, 1926, rr 82, 86, and, as to appealing, see RSC, Ord 58, r 20.

Whether we are dealing with a judgment or an award by a county court judge under the Workmens Compensation Act, it is, I think, clear (i) that there is no one in the position of a testator or donor, and (ii) that the tribunal cannot be supposed to be intentionally putting the successful litigant to his election between two rights, since his right of appeal is his by statute and rule, and does not depend on the bounty of the judge. Moreover, if Johnson v Newton Fire Extinguisher Co Ltd was rightly decided, the would-be appellants right is forfeited, and he is not allowed to make compensation. Further, his alleged “approbation” would appear to have been an act done without the least intention of giving up his right of appeal. In truth, a judgment, or such an award as that which we are now considering, in no way resembles a will, an instrument inter partes, or a deed poll. The tribunal is deciding rights, and has no option but to adjudge or award to a litigant that to which he is entitled, and cannot be supposed to be imposing limits on the powers of the appellate tribunal.

My Lords, I feel bound to come to the conclusion that the decision of the Court of Appeal in Johnson v Newton Fire Extinguisher Co Ltd and all the cases in which the courts have felt bound to follow that decision are erroneous, for I think the doctrine which the Court of Appeal invoked was quite inapplicable to the case with which they had to deal. It is necessary to add that there may well be cases in which a litigant may lose his right of appeal by reason of his conduct after the judgment or award, but this result would not, in my view, depend on “approbating and reprobating,” but on whether the intending appellant is by his conduct estopped from appealing, or has in equity or at law released his right of appeal. It must be remembered in this connection

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that an appeal from an award or a judgment does not operate as a stay of execution as to either damages or costs unless the court appealed from or the Court of Appeal so orders (RSC Ord 58, rr 16, 20(c), (d), and RSC Ord 59, rr 14, 16), and it would, therefore, seem very difficult to contend that payment by the defendant of a sum for which the judgment has found him liable can prevent the plaintiff from proceeding with his appeal. If payment of that sum is demanded, execution would not in general be stayed pending the appeal unless evidence were given to show that the plaintiff would probably be unable to repay the amount levied by the execution if, as the result of the appeal, the sum turned out not to be due. If it were shown that the amount of the judgment recovered was no more than the respondent or his counsel had admitted to be due from him, there could be no possible ground for a stay of execution. Conditions are not infrequently imposed when a stay is granted, but I think that the numerous cases reported in the books will be searched in vain for any suggestion that payment by a defendant of what has been found to be due from him operates without more to prevent the plaintiff from appealing for some further relief.

It may be true that an award under the Workmens Compensation Act 1925, is “indivisible” if not appealed from, but it is not an accurate statement of the position pending appeal. The rules make it plain that an appellant may appeal from any part of the award, and that his notice of motion must state whether the whole or part only of the award is complained of: RSC Ord 58A, and RSC Ord 59, r 10. That was the course taken by the appellant in the present case. The award was sought to be varied only so far as regards payment of the weekly sum after 31 October 1938. On what ground of law or equity (apart from that suggested in Johnsons case) the launching of an appeal so limited ought to make it wrong for the appellant to receive from the respondents the sum awarded up to 31 October, and the costs, I am unable to understand, and counsel for the respondents were unable to enlighten us. It certainly cannot be suggested that the receipt of the sum tendered in any way injured the respondents. Neither estoppel nor release in the ordinary sense was suggested. Nothing was less served than the principles either of equity or of justice. My Lords, for these reasons, I am of opinion that this appeal should be allowed, with costs here and in the Court of Appeal, so far as they are applicable to pauper appeals, and that the case should be remitted to the Court of Appeal to be heard and decided.

LORD ATKIN. My Lords, in this case, the applicant admittedly has suffered from an industrial diseasenamely, dermatitisand has been incapacitated from 16 August 1936, either wholly or partially until 8 October 1938. During the short period of total incapacity from 16 August 1936 to 5 October 1936, he was paid full compensation by his employers, the respondents, by whom he was employed as an electro-plater. After

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that date, the employers employed him in another job at lower wages. On 10 August 1938, he claimed compensation as for partial incapacity from 5 October 1936 onwards. The employers by their answer admitted liability to pay 11s 3d per week from 5 October 1936 to 8 October 1938, at which date, they alleged, their liability ceased. The judge awarded the applicant compensation at 12s 3d per week, from 5 October 1936 to 31 October 1938, the date of his award, but found that the incapacity had ceased at that date. The sum so awarded was £66 3s, of which sum the employers had admitted they were liable to pay £58 18s. The judge further awarded to the applicant the costs of the application, which were taxed at £26 8s 8d. These two sums the employers solicitors paid to the applicants solicitors by cheque on 14 November 1938, and 17 November 1938, receiving in return a receipt signed by the applicant, enclosed in a letter from the applicants solicitors intimating their intention to appeal. On 23 November 1938, the applicants solicitors gave notice of appeal, asking that the award should be set aside or varied so that the weekly sum should continue so long as the applicant was incapacitated, on the ground that the judge was wrong in law in holding that the applicant had recovered from the industrial disease on 31 October 1938. When the case came before the Court of Appeal, objection was taken by the respondents that the applicant had lost his right of appeal by accepting payment of the £66 3s compensation and the £26 8s 8d costs awarded by the county court judge. My Lords, I am shocked to say that the Court of Appeal felt constrained to accede to this contention, being bound by Johnson v Newton Fire Extinguisher Co Ltd, and a series of cases which followed that case, which undoubtedly laid down the law as contended for by the respondents. Slesser, Clauson and Goddard LJJ, pointed out the serious injustice which was done to workmen in such circumstances by such a rule, following in that respect similar remonstrances which had fallen in the more recent cases from other members of the Court of Appeal. That a workman who had been held to be entitled to some compensation withheld from him in the past should not be entitled to exercise his statutory right to appeal so as to ask for more without forgoing the receipt of the compensation admittedly and undoubtedly due until his appeal is heard would, I think, appear to most people a rule unjust and entirely opposed to the scheme of the Act. I have no hesitation in saying that both the original decision and those that followed it are wrong, and should be overruled. In Johnsons case, there had been no dispute as to the liability to pay compensation, but there was a dispute as to amount, and the workman commenced arbitration proceedings. He claimed 15s per week, and in the proceedings the employers gave notice submitting to an award of 12s 8d. The judge held that this was enough, awarded 12s 8d, gave the applicant the costs up to the employers submission and gave the employers the costs after that date, and ordered that there should be a set-off of costs and that any balance due to the employers, up to £5 5s should be set

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off against the compensation payable. The applicant accepted, and received the compensation of 12s 8d per week, but appealed against the order as to costs. The grounds of the appeal were (i) that the judge had no jurisdiction to order, or, alternatively, was wrong in ordering, the applicant to pay the employers costs, and (ii) that the judge had no jurisdiction to order, or, alternatively, was wrong in ordering, the balance of costs to be set off against the weekly payments of compensation. At the hearing of the appeal, the applicants counsel withdrew the grounds of appeal affecting the order on the applicant to pay costs, and sought to confine the appeal to the question of set-off of costs against compensation. Nevertheless, the court held that, inasmuch as the workman had received the compensation awarded, he could not further appeal. He was attempting “to approbate and reprobate” the judgment of the county court judge. The award was one and indivisible and it was impossible to allow him to say that part of it was good and part of it was bad.

My Lords, I find it difficult to speak of this judgment with the respect which is due to the eminent lawyers who composed the court. The underlying fallacy is that it appears to treat an “award” made under the Workmens Compensation Act as identical, for purposes of appeal, with an award of an arbitrator under an ordinary arbitration. It in no way resembles such an award, and it in every way resembles an ordinary judgment. By s 21 of the Act, disputes are to be settled by a judge of a county court in accordance with Sched I of the Act. By Sched I, cl 4, the Arbitration Act 1889, is not to apply, and the decision of the county court judge is to be final unless, within the time and in accordance with the conditions prescribed by the Rules of the Supreme Court, either party appeals to the Court of Appeal. By the Workmens Compensation Rules 1926, r 29, the procedure in an arbitration shall be the same as the procedure in an action commenced in the county court by plaint and summons in the ordinary way, and by r 30 the award of the judge shall be enforceable in the same manner as a judgement or order of the court. Rule 100 provides that the forms in the appendix may be used where applicable. The rules of the Supreme Court dealing with appeals are to be found in RSC Ord 58, r 20, which, after prescribing certain procedure, provides as follows:

… (d.) Subject to the foregoing provisions, the rules for the time being in force with respect to appeals from the High Court to the Court of Appeal shall, so far practicable, apply to and govern appeals to which this rule applies:

One of the rules so applied is RSC Ord 58, r 4, which, inter alia, provides as follows:

The Court of Appeal shall have power to draw inferences of fact and to give any judgment and make any order which ought to have been made, and to make such further or other order as the case may require. The powers aforesaid may be exercised by the said court, notwithstanding that the notice of appeal may be that part only of the decision may be reversed or varied …

All those rules, in substantially the same form, were in force in 1913.

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They seem to me to establish that the award of the county court judge is, for practical purposes, the equivalent of a judgment, and is no more one and indivisible than is a judgment. If the Court of Appeal can say that part is good and that part is bad, why cannot an appellant ask them to say so? And, if he can, what difference can it make that he has accepted that which is good? The fact is that awards in these cases may, and often do, contain on the face of them adjudications on many mattersfor instance, that the applicant suffered injury from accident arising out of and in the course of his employment, that he was totally incapacitated from a given day to another given day and that the compensation for that period should be so much, that the total incapacity ceased on the given day and from that day he was partially incapacitated until another day, or that it has not ceased, and that the proper compensation is so much. Nearly all these findings are findings of fact, and, in that case, are not appealable. Any of these, however, may involve questions of law, and so may be appealable. It would reduce the whole system to chaos if the principle that there was one entire award, which must be assailed as a whole or not at all, were really acted upon. If one were to scrutinise the forms, it would be found that form 24, dealing with application by dependants, divides the award into nine heads, in which one declares who are the dependants, another declares that a particular respondent is not a dependant, and another orders the appointed sum to be apportioned in named proportions. It would be quite impossible to apply the Act and the right to appeal if the order were not treated as divisible. It is unnecessary to emphasise the essential differences between an “award” made in these conditions and an award in an ordinary arbitration. In the latter, there is no appeal. The only right is to set aside the awardfor instance, for misconduct of the arbitrator, or error in law on the face of the award, or defects in not awarding in full, or in awarding in excess of the submission. In these cases, the whole award goes. There is no power in any court to affirm part and disaffirm part. In these circumstances, it may be right to say that, if a party takes a benefit under an award, he cannot afterwards be heard to say that it was entirely invalid, for, if so, he would have had no right to the benefit he took. I do not propose to decide what the law is in such a case. It may be that even then the question is merely one of restitution. I am quite clear, however, that such a case has no kind of analogy to the present class of case. For these reasons, I am of opinion that the foundation of the reasoning in Johnsons casenamely, that the award is an entire awardhad no existence, and the decision and all the subsequent decisions decided upon it fall.

In support of the contention that a party cannot appeal from a judgment after he has taken any benefit under it, the respondents relied on two practice cases decided in 1845 and 1849 respectively, which, in view of the importance of this case, I propose to discuss.

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King v Simmonds was a case which went to the Exchequer Chamber on a writ of error. When the case first came before the Exchequer Chamber, it was found that, while the writ alleged error on a judgment in a plaint in an action on promises, the transcript of the record showed that the judgment complained of was in fact given on an issue in execution proceedings. The Court of Exchequer Chamber then suggested that application should be made by the plaintiffs (the defendants in error) to the Court of Kings Bench, from whom error was brought, to amend the issue and record. The application was made to Wightman J, who gave leave to amend and directed that the plaintiffs should pay the costs of the amendments. The defendant taxed his costs, which were paid on 16 January. On 14 January, the defendant obtained a rule to show cause why the order giving leave to amend should not be rescinded. The ground was that the only power to amend under the statutes then applicablenamely, 14 Ed III, c 6, and 9 Hen V, c 4, was for misprision of a clerk, which in this case was not suggested. It was obviously an objection to the jurisdiction, and the court held that, having taken a benefit, the defendants could not attack the order. I should suppose that the court would be relieved to find a ground for not deciding the question whether the Court of Exchequer Chamber had directed an application to be made when there was no jurisdiction to hear it.

In Tinkler v Hilder the plaintiff had brought an action for trespass against a county court bailiff for seizing goods on an execution issued under a county court judgment against one Clarke, her landlord. While the plaintiffs action was pending, the bailiff served the plaintiff with an interpleader summons in the county court, as he was entitled to do. Meanwhile, he allowed the plaintiff to obtain an interlocutory judgment for want of plea. When the interpleader summons was heard, the plaintiff objected that the interpleader summons was too late. The judge repelled this objection, and, as the plaintiff had filed no particulars in the interpleader proceedings, gave judgment for the execution creditor. The defendant, the bailiff, took out a summons to stay proceedings in the plaintiffs action on account of the interpleader proceedings. This was dismissed by Patteson J. A writ of inquiry was then issued, and the jury assessed the damages at £35. The defendant then took out a summons before Parke B, to set aside the judgment and all proceedings thereon, on the ground of the adjudication in the interpleader proceedings. Parke B made the order on payment of the costs of the day and of the execution of the writ of inquiry. These costs were taxed and paid. The plaintiff obtained a rule nisi to rescind this order. It seems to be plain that the ground was that the statute 9 & 10 Vic, c 95, s 18, which gave the power to stay, had no application to an action based on trespass to land. In other words, the contention was that the order was made without jurisdiction. The court thought that the fact that the plaintiff had

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received costs under the order precluded her from taking further objection, and discharged the rule. The short ground was expressed thus by Parke B, in argument, at p 190:

You have, therefore, received a benefit under the order, and cannot now say it is valid for one purpose and invalid for another.

In the course of the argument, counsel for the defendant cited King v Simmonds, Kennard v Harris and Pearce v Chaplin. Kennard v Harris was the case of an award of an arbitrator. A rule to set it aside was discharged when it was shown that the plaintiff had accepted the costs of the reference and award. This case needs no comment. In Pearce v Chaplin a judgment had been signed in default of plea, and the defendant applied to set aside the judgment and execution on the ground of an irregularity, it being alleged that, before the judgment was signed, the defendants solicitor had duly served a summons for time. On the summons, Pollock CB, made the order, but made a condition that no action should be brought (presumably against the sheriff). The sheriff, when served with the order, had relinquished the defendants goods. On a rule to show cause why the order as to no action should not be rescinded, the Court of Kings Bench took the view that Pollock CB, had not purported to decide the question of irregularity, but had imposed the term acting under his discretionary power, and that, in those circumstances, a party who had taken advantage of the conditional order could not be allowed to discharge the condition. These four cases will be found cited in Chittys Archbold on Pleadings (12th Edn), as matters of practice. They are not cited at all in The Annual Practice. In any case, they form a very flimsy foundation for such a wide-reaching principle, applicable to all appeals, as was asserted in this case, and, if they did lead to that result, should not be followed.

However, I also share the difficulty which I think all your Lordships feel as to the application of what has been called the doctrine of “approbation and reprobation.” Viscount Maugham has, to my mind, clearly shown the limitations of that doctrine as defined in the law of Scotland, from which it comes. In this country, I do not think it expresses any formal legal concept. I regard it as a descriptive phrase equivalent to “blowing hot and cold.” I find great difficulty in placing such phrases in any legal category, though they may be applied correctly in defining what is meant by election, whether at common law or in equity. In cases where the doctrine does apply, the person concerned has the choice of two rights, either of which he is at liberty to adopt, but not both. Where the doctrine does apply, if the person to whom the choice belongs irrevocably and with knowledge adopts the one, he cannot afterwards assert the other. Election between the liability of principal and agent is perhaps the most usual instance in common law.

The doctrine of election could have no place, in the present case.

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The applicant is not faced with alternative rights. It is the same right which he claims, but in larger degree. In Mills v Duckworth, a plaintiff who had been awarded damages for negligence had taken the judgment sum out of a larger sum paid into court and had then appealed against the quantum of damages, and was met by a similar objection to his appeal. Greer LJ, in overruling the objection, pointedly said, at p 321:

He [the plaintiff] said:“I am not going to blow hot and cold. I am going to blow hotter.”

Here the applicant is not faced with a choice between alternative rights. He had exercised an undisputed right to compensation, and claims to have a right to more. One has not lost ones right to a second helping because one has taken the first.

It may be the case that the receipt of a remedy under a judgment may be made in such circumstances as to preclude an appeal. I do not think it necessary to discuss in what circumstances the statutory right of appeal may be lost. I only venture to say that, when such cases have to be considered, it may be found difficult to apply this doctrine of election to cases where the only right in existence is that determined by the judgment, and the only conflicting right is the statutory right to seek to set aside or amend that judgment, and that the true solution may be found in the words of Lord Blanesburgh in Cunard SS Co Ltd v Moore, at p 471:

It constantly happens that orders appealed against to this House and set aside have been acted upon in the meantime. In such a case, by appropriate direction of this House, any mischief so done is undone.

In other words, it is possible that the only question is whether the party appealing has so conducted himself as to make restitution impossible or inequitable. However, I have formed and express no final opinion on the matter. In the result, it is established that the workman has the right of appeal which was reluctantly denied him by the Court of Appeal, and the case must be remitted to that court in order that the appeal may be heard. The appellant must have the costs of the hearing in the Court of Appeal and of the appeal to this House, so far as they are applicable to pauper appeals.

LORD RUSSELL OF KILLOWEN. My Lords, we are differing from, and reversing, a decision of Slesser, Clauson and Goddard LJJ, which, however, they reached with just reluctance, and only under the compulsion of earlier authorities by which they were bound. These being the circumstances in which their judgments come before us for consideration, I do not think that comity requires me to make a detailed statement of the reasons which influence me in supporting a motion for allowing the appeal. I have had an opportunity of reading and considering beforehand the opinions of my noble and learned friends Viscount Maugham and Lord Atkin. They express fully and

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accurately my own views, and I shrink from adding anything, lest, in the process, I should have the misfortune to detract from their weight.

LORD WRIGHT (read by Lord Russell Of Killowen). My Lords, the question in this appeal is whether Johnson v Newton Fire Extinguisher Co Ltd was rightly decided. There is no controversy that the facts of the present case bring it within the ruling of that decision, which has governed similar cases for more than a quarter of a century. I am bound to confess that, like the members of the Court of Appeal, who in the order now under review followed that decision, I regard it as not merely erroneous in law, but also, to adopt the language of Clauson LJ, a shock to ones sense of justice. Here is a working man who, in order to seek relief, has to come to this House as a pauper because he has been held to be barred from his statutory right of appeal, not by anything in an Act of Parliament, but by a judicial decision. The county court judge has awarded him a sum as compensation and costs. No one disputes his right to either. He complains, however, that the award is erroneous, in that he has not been awarded enough compensation, because his incapacity continued beyond the date fixed by the judge, and also in that he has not been given a declaration of liability. If the order appealed from stands, he is barred from his appeal on these matters simply because he has accepted the amount of the award when it was sent spontaneously to him by the employers, as was also the amount of the taxed costs. He is admittedly entitled to both of these sums in any case. They stand entirely outside the further claims which he made in the arbitration and wishes to make in the appeal. What he was awarded and what he received consisted of arrears of compensation withheld, but now conclusively found to be due and owing to him. He is a wage-earner with a wife and children. It would be cruel if he were held to be prevented from applying these belated payments to the pressing necessities of himself and his family, except at the cost of being deprived of the right of appeal given him by statute. It is said that he ought to have waited until the appeal was heard, which might not be for many months. If he does not wait, or if he accepts the proffered payment, his appeal, it is held, is barred, and that even though he does so in ignorance of the fact that he is sacrificing his right to appeal. Johnsons case has bound subsequent Courts of Appeal ever since 1913. There is no court which could overrule it except this House. For some reason, no litigant has had the courage or the money to bring it before this House, and this unfortunate doctrine of law has remained in force because the remedial powers of this House are dependent on some private litigant at his own expense or initiative bringing up the question by way of appeal. Such is the English system. However, notwithstanding that the decision has been followed so long and so often, and has no doubt become regarded in

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certain quarters as an established rule, this House has the duty to reconsider it when at last it is brought before it, and to set it aside if it is seen to be contrary to justice and convenience. There is in this case none of the considerations which in some other appeals have made the House refuse to disturb an established rule.

The rule in Johnsons case was thus stated in compendious and positive terms by Scrutton LJ, in Reeves v Smith (S) & Sons, at p 192:

On the decided cases, it is clear that if it is desired to appeal against an award there must be no acceptance of any money under it.

The question at once arises on what principle a rule so apparently unfair and anomalous was based. Johnsons case was the decision of a strong court. It is no disrespect to the eminent judges who decided it to observe that even a strong court may, like Homer, on occasion nod. On full consideration, I find it impossible to support the decision. Johnsons case presented no unusual features. The compensation awarded was not in issue. It was clear that the workman was entitled to an order for costs, but the judge, for reasons which appeared to him to be good, ordered a set-off in respect of a certain part of the employers costs. The workman accepted payment of the undisputed compensation and the undisputed costs, but he served a notice of appeal limited to the order as to the set-off of costs. The employers took a preliminary objection, contending:

… that the order dealt with compensation and costs as a whole, and the applicant has accepted and acted upon it.

The procedure originally contemplated by the Workmens Compensation Act was that claims should be settled by arbitration, but it was competent to bring the arbitration in the county court before the county court judge as arbitrator. To-day, the great majority of such claims are thus dealt with in the county court. There are statutory rules governing the procedure there, and in effect equating the procedure in such claims to those in an ordinary action. In particular, the rules as to appeals are put on the same footing as ordinary appeals from county courts: the Workmens Compensation Act 1925, Sched I(4), and the rules made under it. Thus, the Rules of the Supreme Court as to appeals from county courts apply. Of these rules, I need now refer only to part of one rulenamely, RSC Ord 58, r 4, which enables a notice of appeal to ask that part only of the decision appealed from should be reversed or varied. Thus, the precise effect of the rules is to treat the order as appealable in part, and thus to recognise that it need not be regarded as a single indivisible whole. To apply this to Johnsons case, it follows in the precise terms of the rule that the part of the order as to costs was capable of being regarded as a separate and distinct part of the judgment, for purposes of being separately appealed against. Equally, in the present case, that part of the judgment which refused compensation beyond a certain date and that part

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which, in effect, though sub silentio, refused a declaration of liability constitute severable and distinct parts of the judgment, as to which RSC Ord 58, r 4, enables an appeal that these parts of the judgment should be reversed or varied.

In so far, therefore, as Johnsons case and those which have followed it, including the order appealed from, proceeded on the basis that the award was one entire indivisible award, they were in flat contradiction of the statutory rules regulating the right of appeal. I do not know if the fact that judgments of county court judges in workmens compensation cases are called awards has led to some confusion. In arbitration in the ordinary sense, the award is the fruit of a consensual agreement under which the parties have agreed to accept the arbitrators award, which thus governs them by their agreement. There is no appeal in the proper sense of the term. The court has certain powers over arbitrators, which the parties may invoke. Thus, a party may claim that the award was made without jurisdiction, or that the arbitrator was guilty of misconduct, and that, for these or other like reasons, the award should be set aside. A party who has treated the award as valid, for instance, by accepting payment of what it awarded him, would generally be barred from adopting the inconsistent attitude of claiming to set it aside. It might then be said that he could not affirm and disaffirm, or perhaps even that he could not approbate and reprobate. I think it is clear, however, that the position in a case like the present, that of an award by the county court judge, which is put on the same footing as an ordinary judgment of the court, is an entirely different matter. I cannot see how questions of election or of approbating or reprobating come into the matter at all in any ordinary case of this class. The workman, when he decides to appeal, exercises a choice between appealing and not appealing, and, when he decides to appeal, exercises a choice whether he will appeal against the whole or against any part of the award. In the latter event, as in the former, he is exercising a legal right, just as in the case of an appeal in an ordinary action. The part of the order from which he does not appealespecially if it is not attacked, but is accepted by the opposite partygives him a present vested right, independently of the separate matters on which he desires to appeal and independently of the question whether or not he appeals. I do not see why he should not be entitled to receive, or even to enforce payment of, what the court has awarded him, or how that can affect his rights to appeal on other independent parts of the judgment. It is true that, even where there is no cross-appeal, the Court of Appeal may in some cases modify or reform a judgment which is brought before it on appeal. If that affects payments already made, the court might, in a proper case, order compensation. However, questions of that type cannot arise, or at least are not likely to arise, in cases like the present.

In Johnsons case, however, the Court of Appeal, having held that

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the award was one entire award, proceeded to decide the appeal by applying the principle, rule or maxim that one cannot both approbate and reprobate. I am induced here to quote the language of Lord Esher MR, in Yarmouth v France, at p 653:

… I detest the attempt to fetter the law by maxims. They are almost invariably misleading: they are for the most part so large and general in their language that they always include something which really is not intended to be included in them.

Indeed, these general formulæ are found in experience often to distract the courts mind from the actual exigencies of the case, and to induce the court to quote them as offering a ready-made solution. It is not safe to act upon them, however, unless, and to the extent that, they have received definition and limitation from judicial determination. How this has happened in respect of the doctrine of “approbation and reprobation” has been fully and clearly explained by my noble and learned friend Viscount Maugham. Indeed, the formula in its more precise and technical significance has become an equivalent, derived from Scots law, of the equitable doctrine of election. The formula is also sometimes used to indicate the position where a person takes benefits under a deed and is held bound, because of his conduct in so doing, by conditions expressed in the deed, though he has not executed it. In such and similar cases, the formula becomes, as it were, a label, and lawyers know when and where to apply it. A more doubtful, but still not infrequent, use of the formula is in cases of common law election, where there is a choice between alternative and inconsistent remediesfor instance, between charging a defendant in tort and charging him for money had and received, or between charging the principal and charging the agent. In these latter cases, the alternatives are mutually exclusive. In the cases of equitable election, the conscience of the defendant is affected, because, in the language of Lord Cairns LC, quoted by Viscount Maugham from Codrington v Codrington, at p 861, it would be inequitable that he should

… accept a benefit under the instrument without at the same time conforming to all its provisions, and renouncing every right inconsistent with them.

It is, in my judgment, impossible to apply any such idea to the present case. The appellant was doing nothing inequitable or inconsistent. In taking the moneys which the respondents sent him in satisfaction of the sums actually awarded, he was exercising a legal right to be paid what was admittedly due to him. In serving his notice of appeal, he was exercising another and independent legal rightnamely, the right to claim that the award should be reversed or varied in part, because it did not give the further relief to which he claimed to be entitled. I cannot see how the maxim or formula in any judicially recognised meaning can apply to this case. There is no question here of alternative or mutually exclusive rights between which the appellant had to choose. Even if it were (which it is not) a case of election, there is futhermore no evidence of the essential elements of electionnamely, the presence

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of knowledge of the position and intention to elect. I agree with the reservations made by my noble and learned friend Lord Atkin on the question whether there may not be cases where a statutory right to appeal may be lost. Like him, I prefer to leave such cases for consideration if and when they arise. The appeal should, in my opinion, be allowed.

LORD ROMER. My Lords, I agree.

Appeal allowed with costs.

Solicitors: L O Glenister & Sons (for the appellant); Carpenters (for the respondents).

Michael Marcus Esq   Barrister.

Hollis v Wingfield and Others

[1940] 1 All ER 442


Categories:        LAND; Mortgages        

Court:        CHANCERY DIVISION        

Lord(s):        FARWELL J        

Hearing Date(s):        31 JANUARY 1940        


Mortgage Accounts Mortgagee in possession Sum received for principal and interest Whether mortgagee entitled to deduct amount of tax on interest.

A mortgagor mortgaged certain shares in a company to a first mortgagee for £7,000 and interest, which was later reduced to approximately £5,000. The company went into liquidation, and the liquidator paid to the first mortgagee from the proceeds of sale of the companys property an amount of some £9,000, and the first mortgagee became to that extent a mortgagee in possession. The mortgagor had also created a second mortgage. In a redemption action brought by the mortgagor, an account was ordered of the dividends and sums received by the first mortgagee in respect of the mortgaged shares. The first mortgagee filed an account showing certain sums which she had deducted from interest received, and paid to the revenue as income tax in respect of this interest. The mortgagor contended the first mortgagee was not entitled to deduct the sums so paid as income tax:

Held the first mortgagee was entitled to discharge the amount of the tax for which she was liable out of the moneys which she had received as interest on the mortgage.

Notes

The point here decided is purely on the question of accounting by a mortgagee in possession. The matter is of great importance to mortgagees in possession now that the rate of income tax has increased so greatly, but few mortgagees take possession of the mortgaged property.

As to Accounting by Mortgagee in Possession, see Halsbury (Hailsham Edn), Vol 23, pp 396404, paras 591605; and for Cases, see Digest, Vol 35, pp 647651, Nos 37753839.

Adjourned Summons

Adjourned summons for determination of the question whether a mortgagee of certain shares of a company in liquidation was entitled out of interest moneys in her hands to discharge the amount of income tax for which she was liable in respect of such interest.

J Norman Daynes KC, and C A J Bonner (for J A Brightman on war service) for the plaintiff.

Herbert Hart for the second mortgagee.

Cyril King KC and G D Johnston for the defendant, the first mortgagee.

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31 January 1940. The following judgment was delivered.

FARWELL J. This is a summons taken out in an action which raises a rather unusual question with regard to the incidence of income tax in the case of certain mortgaged property. The question arises in these circumstances. There was a mortgage, dated 26 September 1930, under which the plaintiff mortgaged certain shares he held in a company known as the First Worthing Garden City. He mortgaged these shares to a Miss Finch, to secure a sum of £7,000 odd at 8 per cent interest. The mortgage was reduced subsequently, and I think that the amount of principal which is due is £5,000 odd. The company has gone into liquidation. There has been a liquidation for some time, and the moneys which have been realised by the sale of the various properties belonging to the company have been in the hands of the liquidator. The liquidator has very properly utilised this fund in paying to the first mortgagee the amounts in his hands. The first mortgagee has received these amounts, and, therefore, is to that extent mortgagee in possession. The mortgagor now desires to redeem. He has created a second mortgage, and the second mortgagee is, of course, interested in seeing that the money in the hands of the first mortgagee is not used except for necessary purposes, so that there may be more available to discharge his debt.

In the action, an order was made on 28 November 1938, under which it appears that, the plaintiff by his counsel offering to redeem the Finch mortgage on a certain basis, the following accounts were ordered to be taken:

An account of what is due to the defendant Edith Barbara Finch on the basis of her said amended defence under or by virtue of the Finch mortgage, and in taking such account the principal sums mentioned in the Pergolas mortgage and the Finch mortgage respectively are not to be treated as settled accounts. (2) An account of all dividends and other sums received in respect of the shares comprised in the Finch mortgage by the said Edith Barbara Finch and George William Finch or either of them, or by any other person or persons by the order or for the use of the said Edith Barbara Finch and George William Finch or either of them or which since Dec. 30, 1932, might without the wilful default of the said Edith Barbara Finch and George William Finch or either of them have been so received.

That order being made, an affidavit was made by Miss Finch, and an account was put in by her. In fact, there were two accounts. The first account, which was in the usual form in a redemption action, showed the amount due for the interest and for the capital. The amount due for interest in each case is shown as a sum less tax. The total figure is arrived at in that way. The second account shows the moneys which the first mortgagee has actually received from the liquidator, and shows it in three sums, making a total sum of just under £9,000. Thus, I think that it is clear on these accounts that there will be a surplus in the hands of the first mortgagee after the amount due to her has been satisfied, and that amount will be available, of course, for paying off the second mortgagee. Before the mortgagor can recover the property, of course, the second mortgagee will have to be satisfied.

Those accounts having been put in by Miss Finch in February 1939, and verified by affidavit, subsequently, on 25 July 1939, Miss Finch put in

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another affidavit in which she sought to amend the account which she had put in. The amended account was based on this footing. It appears that in 1936 Miss Finch got into communication with the inspector of taxes for the suitable district with regard to the income tax payable on the interest payable to her under the mortgage. Certain correspondence took place between her solicitors and the income tax authorities, with the result that ultimately the liability to tax in respect of such interest was agreed at a certain sum, and that sum was duly paid by Miss Finch to the income tax authorities. I think that the actual paymentanyhow, the actual assessmentwas made at a time when she had received the whole of the sums payable by the liquidator. According to her second affidavitand I see no reason to doubt itwhen the first account was put in and the first affidavit was sworn, the fact that she had paid this amount of income tax had been overlooked. She therefore desired to put in an amended account, under which credit would be given for, or under which she would be allowed to treat, those sums she had paid as moneys which she was entitled to recover as against the mortgaged property. She put in an account based on that footing.

The plaintiff and the second mortgagee, who appear before me, object altogether to that course being adopted, and they say that the proper and only way of taking an account of this sort is the way in which Miss Finch first proposed that the account should be takennamely, by allowing in the account the amount due for interest less tax in each case. It is said that, unless that course is pursued, in some way the second mortgagee will be damnified, and it was even suggested that in some way it would hurt the mortgagor. At any rate, it is said that it will turn out badly for the second mortgagee, and possibly for the mortgagor.

The position seems to me to be this. In July 1936, Miss Finch had in her hands large sums representing both capital and interest, some of which was due to her as first mortgagee. She would ultimately have to bear income tax upon so much of that sum due to her as represented interest. Knowing that, she communicated with the revenue authorities, and the amount which was properly payable for income tax was agreed and paid. Under the Income Tax Acts and Rules, it is quite clear that, if the mortgagor has in his hands money out of which he had to pay interest to the mortgagee, he is bound, and the mortgagee is bound to permit him, to deduct from that amount the sum properly payable for income tax before the balance is paid over to the mortgagee. That is a provision made for the purpose of enabling the collection of the tax to be made most easily. The person who has the money in his hands is made the person to see that payment is made. The payment being so made, however, is made, not out of the money of the payee, but out of the money of the person to whom the money belongs. The payment is made by the mortgagor as agent for the mortgagee. The mortgagors liability to pay is only, in my judgment, a liability to pay

Page 445 of [1940] 1 All ER 442

out of the money which is in his hands, or which passes through his hands, but which in fact belongs to the mortgagee. He is under no personal liability to pay anything out of his own pocket, and, if he never has in his hands any money payable to the mortgagee, apart from the question of tax, then he is under no liability at all, so far as tax is concerned.

In the present case, the mortgagor has not had in his handsand so far as I can see, until the first mortgagee and the second mortgagee have been satisfied, he never will haveany part of the moneys which represent the security. Therefore, he never has had the money, and never has become liable to pay tax. The person who is liable to bear the tax on the interest on the mortgage is the mortgagee, who has had the money, and is liable as the person who has received the money, and must account for the tax. In my judgment, the mortgagee, in taking the course which she took in this case of discharging her liability for the tax out of the moneys in her hands, was not doing anything which she was not entitled to do. If the mortgagor had money out of which he had to pay the mortgagee, then the mortgagee would get no money except subject to the deduction of tax, which the mortgagor was bound to make. If the mortgagor has no money in his hands at all, but the money does in fact get into the hands of the mortgagee, then, in my view, the mortgagee is bound to see that the income tax on the interest is duly paid. If she takes that course, and if she does in fact discharge the income tax out of the moneys in her hands, then she must be entitled, as it seems to me, when it is a question of taking an account to see what is due, to have it taken on the footing that the mortgagor does not deduct tax which the mortgagee has already paid out of her own pocket.

It is said that the second mortgagee will be damnified by that course, but I confess that I feel great difficulty in appreciating that. The second mortgagee is entitled to nothing until the first mortgagee has been fully satisfied as to principal, interest and costs. When the interest is being paid, a portion of the interest has to go to the Inland Revenue for income tax. So far as the second mortgagee is concerned, whether the person who pays that is the first mortgagee or the mortgagor seems to me to make no difference, because in any case it is a sum of money which has to be found and paid to the Inland Revenue, and which is treated for the purposes of payment as the money of the first mortgagee. In my judgment, in the present case the mortgagee is right in saying that she is not bound to submit to an account on the footing of the first account she put in. I am not quite sure that I think her second account is quite accurate, or quite the right way of doing it. I should have thought that the right way of doing it was to have an account taken of the principal and interest, but, in calculating the interest, not to make any deduction for tax. The mortgagee will then get the full amount of the tax out of the money, and she will, therefore, get back again, as it were, the amount which she has already paid in respect of income tax.

Page 446 of [1940] 1 All ER 442

No doubt the form of taking the account which was first suggested is the ordinary way of taking an account in chambers, and I am not suggesting for a moment that it is not the right way of doing it in an ordinary case. However, this is by no means an ordinary case. Here the property is proceeds of sale. That is to say, the mortgaged property is represented by proceeds of sale in the hands of the liquidator which were handed over to the first mortgagee, and the first mortgagee has had the money, and has the money in her hands, while the mortgagor has never had the money, and never will have the money in his hands. The first mortgagee is entitled, in my view, to discharge the amount of the tax for which she is liable out of the moneys which she has received, or ought to receive, as interest on this mortgage. When she has paid that, then, when the account is taken, in my judgment, it should be taken on the footing that no deduction should be made in respect of tax. I think that that really answers the question raised by the summons.

Solicitors:Evill & Coleman(for the plaintiff and the second mortgagee); Fladgate & Co (for the first mortgagee).

F Honig Esq   Barrister.

Abingdon Borough Council v James

Abingdon Borough Council v Thane

[1940] 1 All ER 446


Categories:        CIVIL PROCEDURE: LOCAL GOVERNMENT: LAND; Other Land        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        14, 15, 19 DECEMBER 1939, 7 FEBRUARY 1940        


Water Supply Water mains Buildings over mains Buildings purchased by defendants without knowledge of existence of mains Right of local authority to order for demolition Waterworks Clauses Act 1847 (c 17), ss 20, 21 Public Health Act 1875 (c 55), s 26 Public Health Act 1875 (Support of Sewers) Amendment Act 1883 (c 37), s 3 Public Health Act 1936 (c 49), s 25.

The plaintiff council, in pursuance of certain powers conferred upon them by statute, constructed a number of water mains which passed under land situate outside their district. A, the owner of the land at the time the mains were laid, received compensation for damage in connection with their laying and maintenance, and later sold the land to one L, who had notice of the existence of the mains. L built two houses on the land, and sold these houses to the defendants in these actions, who had no knowledge of the existence of the mains. The plaintiffs claimed, inter alia, an injunction to restrain the defendants from permitting their houses to remain on the land so as to prevent the free access by the plaintiffs to the water mains for the purpose of maintaining and repairing them. On behalf of the plaintiffs, it was contended that the defendants, as owners of servient tenements, were not entitled to render the exercise of the plaintiffs right of access to the water mains impossible or substantially more difficult, and that, furthermore, if the defendants houses were allowed to remain on the land, the performance of the plaintiffs statutory duty to inspect, maintain and repair the water mains would be rendered practically impossible, and that, for these reasons, the plaintiffs were entitled to a mandatory injunction ordering the demolition of the defendants houses. On

Page 447 of [1940] 1 All ER 446

behalf of the defendants, it was contended, inter alia, that, as the plaintiffs had failed to deposit a map or plan of the water mains in question with the local rural district council as required by statute, they were not entitled to a mandatory injunction. It was further contended that, as the Public Health Act 1936, s 25(3), prescribed the manner in which, and the procedure by which, buildings built over water mains might be ordered to be demolished, the jurisdiction of the court to make a mandatory order was thereby ousted, or, alternatively, that the court had a discretion not to exercise that power, and ought to refuse to do so:

Held (i) as the plaintiffs right of access to the water mains had been infringed by the erection of the defendants houses, the plaintiffs were entitled to the injunction asked for, whether or not they had failed to deposit a map or plan in accordance with the statutory requirements.

(ii) as the plaintiffs consent to the erection of the defendants houses had never been asked, the Public Health Act 1936, s 25(3), did not apply.

Semble: where a main is laid outside the district of a local authority, the builder of a house in another district through which that main passes is not required to obtain the consent of that local authority. He need only obtain the consent of the local authority within whose district he builds.

Notes

In this case, a decision has been reached without finding it necessary to determine whether the local authority could only proceed under the Public Health Act 1936, s 25(3), by way of notice to the defendants to pull down the buildings, which notice might have been questioned before the local magistrates by the defendants in the usual way as “persons aggrieved.” It was argued that this special statutory remedy was an exclusive one, and precluded the authority from seeking any other, but the case has been decided on other grounds.

As to Water Mains, see Halsbury (1st Edn), Vol 28, Water Supply, pp 259, 260, para 483; and for Cases, see Digest, Vol 43, pp 1061, 1062, Nos 2836.

Cases referred to

Goodhart v Hyett (1883) 25 ChD 182; 19 Digest 80, 483, 53 LJCh 219, 50 LT 95.

Birkenhead Corpn v London & North Western Ry Co (1885) 15 QBD 572; 41 Digest 20, 156, 55 LJQB 48.

Thurrock, Grays & Tilbury Joint Sewerage Board v Goldsmith (E J & W) Ltd (1914) 79 JP 17; 19 Digest 81, 485.

Metropolitan Water Board v London & North Eastern Ry Co (1924) 131 LT 123; 43 Digest 1068, 72.

Consolidated Actions

Consolidated actions to restrain the defendants from permitting certain buildings, their property, to remain on certain land so as to prevent the free access by the plaintiffs to water mains laid under the land. The facts are fully set out in the judgment of Simonds J.

W P Spens KC, and F McMullan for the plaintiffs.

J Leonard Stone for the defendants.

7 February 1940. The following judgment was delivered.

SIMONDS J. In each of these actions, the plaintiffs claim an injunction to restrain the defendant from permitting his dwellinghouse in Lashford Lane, Dry Sandford, in the parish of St Helen Without, in the county of Berks, from remaining thereon so as to

Page 448 of [1940] 1 All ER 446

prevent their free access to their water main under such dwelling-house for the purpose of repairing and maintaining it.

In 1933 and 1934, the plaintiffs, in exercise of the powers conferred on them by the Public Health Act 1875, and the Abingdon Water Order 1931, constructed and laid a 9-ins water main (I take the words of the order):

… from land owned by the corporation southwards along the public highway known as Dry Sandford Lane for a distance of about 160 yds. and thence in a south-easterly direction for about 1,300 yds. across certain fields in the parish of St. Helen Without to the public highway known as Wootton Road and then in south-easterly direction along the Wootton Road for a distance of about 600 yds. to their existing waterworks at the junction of the Wootton Road and Foxcombe Hill.

The land in question is outside the district of the plaintiffs and within the district of the Abingdon Rural District Council. For part of its course, the main so laid passed into and under the land of one Amey, who claimed and received compensation for the exercise by the plaintiffs of their rights. He was content to accept a sum of £36 5s, which, in the receipt signed by him, dated 6 February 1935, was expressed to be:

… compensation for any past present or future damage in connection with the laying and maintenance of a water main and any other works by the corporation between Lashford Lane and to their Wootton waterworks.

Shortly thereafter, Amey sold the land to one Francis Herbert Lister, with full notice of the existence and line of the main. Lister proceeded to build upon the land, and in particular built two houses, one called The Chateau, which he afterwards sold to the defendant Thane, and the other called Croesaw, which he afterwards sold to the defendant James. It was established to my satisfaction that the main passes diagonally right under the centre of The Chateau and passes under the corner of Croesaw. The defendants did not know this fact. It appears that they purchased through a building society. They did not, nor did anyone on their behalf, ask the familiar question whether there were any easements affecting the land proposed to be sold, and Lister did not volunteer the information. As a result, they find themselves in their present predicament. It is necessary to state one more fact before considering the legal position of the parties. Speedy access to the main for the purpose of inspection and repair is said to be of peculiar importance. The pipe is of cast iron, with leaden sockets, and it is laid at some distance below the surface. The task of construction was difficult, it being often necessary to blast through the solid rock. The pipe works as a syphon, so that a crack which let in the air would have far more serious consequences than the waste by leakage of a certain amount of water. It would, according to the evidence before me, result in the complete stoppage of an important part of the plaintiffs water supply. Hence the necessity for speedy access. In these circumstances, the plaintiffs contend that they are entitled to the relief claimed by the writ.

Under the Public Health Act 1936, s 119, which replaces the Public

Page 449 of [1940] 1 All ER 446

Health Act 1875, s 54, they have the like powers and duties, and are subject to the like restrictions in respect of the laying and maintenance of water mains within or without their district, as they have and are subject to in respect of the construction and maintenance of public sewers. Amongst their duties, there is that prescribed by s 23namely, to maintain, cleanse and empty all sewers vested in them, or, mutatis mutandis, to maintain all water mains vested in them.

They say, in the first place, that they have the right which every dominant owner has to enter upon the servient tenement for purposes of maintenance and repair, and the right to require that the servient owner shall not render the exercise of that right practically impossible or substantially more difficult. They say, in the second place, that this view of their rights is supported by the fact that they are under a statutory duty, which the erection of these houses makes it substantially more difficult, if not practically impossible, for them to perform.

There has been some discussion before me as to which of the phrases “substantially more difficult” or “practically impossible” is the appropriate one. In Goodhart v Hyett, where the facts were very similar to those in the case before me, except that there the plaintiff did not assert a statutory duty and the defendant had not begun to build over the line of pipes, North J uses these words, at p 187:

But the fact that the plaintiffs would continue to have the right to do it [to enter and repair] is not enough. They must have the opportunity and the means of doing it … In my opinion they will not, and my reason is this …

Having given his reason and further discussed the position, North J says, at p 189:

… it seems to me that the plaintiffs will not have the same opportunity that they had before, and will not have reasonable means of access for the purpose of doing such repairs as must necessarily be wanted, and therefore that the defendant is doing something which interferes with the right of the plaintiffs.

Upon this footing, North J granted the appropriate injunction.

In Birkenhead Corpn v London & North Western Ry Co, the facts were that the plaintiffs claimed compensation from the defendants on the ground that access to a sewer which was vested in them under a local Act had been rendered more difficult and expensive by reason of the defendants having constructed an embankment over it. Their claim was dismissed upon a consideration of the local Act which conferred upon them the right to construct a sewer, and vested it, when constructed, in them. That Act gave them no express right of access to the sewer when constructed, and it was held that the true rule of construction was not to imply any more right of access than was reasonably necessary to enable them to perform their duty. Bowen LJ said, at pp 579, 580:

… one ought only to imply that the statute gave the commissioners such powers as were reasonably necessary for the efficient working of the sewer system. For the purpose of so working it no particular mode of access, nor any particular degree or convenience of access is wanted, but all that is wanted is a right to go on the land of the owner and to get to the sewer, and such owner is not to do any-

Page 450 of [1940] 1 All ER 446

thing which would make it practically impossible for the plaintiffs to go on such land and exercise such right.

In Thurrock Grays & Tilbury Joint Sewerage Board v Goldsmith (E J & W) Ltd, a somewhat similar question came before Eve J, but, inasmuch as he distinguished the Birkenhead case, upon the ground that the canon of construction applied in that case was not properly applicable to a contract such as he had to consider, I am not able to derive any great assistance from his judgment.

In Metropolitan Water Board v London & North Eastern Ry Co, Tomlin J adopted the language of North J in Goodhart v Hyett, and held that the defendants were not justified in an operation which would substantially diminish the reasonable access of the plaintiffs to their main for the purposes of inspection and repair, notwithstanding that they claimed to be protected by the terms of their agreement.

No other case was cited to me in which this aspect of the right of access of the dominant owner has been discussed. It is, however, in my judgment, unnecessary for me to seek to define with nicety the measure of interference with the right of access for purposes of repair which is enjoyed by the dominant owner, in which expression I include a statutory authority invested with a duty of maintenance. Whatever test is adopted, “material interference,” “substantially greater difficulty” or “practical impossibility,” I must come to the conclusion, upon the facts of this case, that the plaintiffs right of access has been infringed. It is true that for very many years they might not require to inspect or repair the main where it passes under the defendants houses. Nevertheless, it is true also that they may require to do it at any time, and to do so with the least possible delay. It is suggested that they could do anything which had to be done by tunnelling from outside the walls of the houses. This appears to me to be a theoretical rather than a practical possibility. I see no reason to suppose that even in the Birkenhead case the court intended to impose upon the dominant owner so heavy a burden. It is not to be forgotten that, inasmuch as the plaintiffs easement is exercised by means of a pipe laid in the servient tenement, they might be liable to the servient owners to make good any damage done by the pipe falling into disrepair, apart altogether from the statutory duty of repair. In these circumstances, the plaintiffs are entitled to relief, unless the defendants can make good any of the contentions to which I shall next refer, and, if they are entitled to relief, they are, in my judgment, entitled to a mandatory order.

The defendants, however, urge a number of reasons why a mandatory order should not be made. In the first place, they say that the plaintiffs stood by and knowingly allowed these houses to be built along the line of the main without protest. Upon the facts, I find that this contention is founded. It was not until after the event that it was brought to the knowledge of any responsible officer of the plaintiffs that the houses had been built. On the other hand, it appears that the

Page 451 of [1940] 1 All ER 446

defendants predecessor in title, Lister, was told by Amey, and knew where the main lay, and nevertheless built over it.

In the second place, the defendants say that the plaintiffs were required by the combined effect of the Waterworks Clauses Act 1847, ss 20, 21, and the Public Health Act 1875(Support of Sewers) Amendment Act 1883, s 3, to deposit a map or plan of the main with the Abingdon Rural District Council, and that, not having done so, they are not entitled to a mandatory order. Assuming, without deciding it, that these sections had any application to the present case, I am unable to see why the plaintiffs failure to comply with the provisions of the section should debar them from relief. The statute provides the appropriate penalties for non-compliance with its provisions. It would not, in my judgment, be right further to penalise the plaintiffs by making more difficult the discharge of their statutory duty.

Finally, it was urged that the Public Health Act 1936, itself prescribes the circumstances and the manner in which a building built over a water main may be ordered to be pulled down, and that the jurisdiction of the court to make a mandatory order to that end is either ousted or, as a matter of discretion, ought not to be exercised. This contention requires an examination of the relevant provisions of the Public Health Act 1875, and the Public Health Act 1936. It was not until the Rural District Councils (Urban Powers) Order 1931, made under the Local Government Act 1894, s 25, put the Public Health Act 1875, s 26, into force throughout England and Wales as from 22 July 1931, that it was a statutory offence to build over a sewer or main in a rural district. If the local authority in whom the sewer or main was vested wished to prevent the erection of such a building, or to have it removed when built, they had no special statutory remedy, but had to go to the proper court for relief. I do not doubt that in a proper case they would have obtained a mandatory order. Under the Public Health Act 1875, s 26, any person who in an urban district, without the consent of the urban authority, caused any building to be newly erected over a sewer of the urban authority was liable to forfeit to the urban authority a certain sum, and, further, the urban authority were authorised themselves to pull down the offending building and to recover in a summary manner from the offender any expenses incurred by them in doing so. It could not, I think, be argued that, if an urban authority had preferred not to perform the work of demolition, with the possible risk of exceeding their statutory powers, and accordingly had gone to the court for relief, the court could not, and would not in its discretion, have made a mandatory order if the circumstances justified it. The same considerations necessarily apply to a rural district council after the coming into force of the 1931 order to which I have referred.

The Public Health Act 1936, which came into force on 1 October 1937that is, after the main here in question had been laid and the houses built over itmade an alteration in the law. It provides by s 25(1)

Page 452 of [1940] 1 All ER 446

that, where plans of a building are, in accordance with building byelaws, deposited with a local authority, and it is proposed to erect the building over any sewer or drain which is shown on the map of sewers required by Part II of the Act to be kept deposited at the offices of the authority, the authority shall reject the plans unless they are satisfied that, in the circumstances of the particular case, they may properly consent to the erection. By s 25(3), it is further provided that, if, after the commencement of the Act, a building has been erected over a sewer without such consent (if any) as, under the Public Health Act 1875, s 26, was required at the date of the building, the local authority may by notice require the owner of the building to pull it down or to alter it in such manner as may be necessary, and, further, that the provisions of Part XII of the Act with respect to appeals against, and the enforcement of, notices requiring the execution of works are to apply in relation to any notice given under sub-s (3). This in effect provides for appeal against notices to a court of summary jurisdiction, and gives that court wide powers of dealing with the situation in an equitable way.

It is s 25(3) upon which the defendants rely. They contend that their houses were not built without the consent required under the Public Health Act 1875, s 26, at the date of building, but that, if they were built without such consent, then the plaintiffs have their remedy under the subsection, and ought not to be granted any other relief. In my judgment, however, the subsection has no application to the present case. The defendants houses were erected with the consent, not of the plaintiffs, but of the Abingdon Rural District Council, which was, no doubt, for certain purposes, the proper authority to give such consent, but either did not know or did not care whether or not the building was over the line of the water main which was vested in the plaintiffs. The plaintiffs, whose concern it was whether the houses were built over their main, were not asked their consent.

It appears to me that there is in fact a gap in the Acts. Where a main is laid outside the district of the local authority, and it is desired to build a house over it, the builder does not appear to be required by the Public Health Act 1875, to obtain the consent of that local authority. He must, without any reference to sewers or mains, submit his plans to the local authority within whose district he builds. He did so in this case, and obtained an approval, which, no doubt, was given after proper consideration of the matters which the Abingdon Rural District Council were bound to consider, but without regard to the plaintiffs rights and duties, and without their knowledge. I have not had pointed out to me any provision, either in the old law or in the new, which requires the local authority in whose district a house is built to consult or communicate with the local authority over whose mains or sewers buildings are erected. The Public Health Act 1875, s 26, deals with the case of a person doing something in an urban district without the consent of the urban authority,

Page 453 of [1940] 1 All ER 446

and as extended by the order of 1931 to a person doing something in a rural district without the consent of the rural authority. It appears to have overlooked the doing of something in a rural district without the consent of the urban authority who will be affected by the order. This being the position, it seems that it cannot be predicated of the houses now in question that they were erected over the main “without such consent, if any, as under the Public Health Act, 1875, s. 26, was required at the date of the erection of the building,” for that can only refer to the case where the section requires the consent and the buildings are, in disregard of the statute, built without it. It was urged that this interpretation does not give effect to the words “if any,” and that the section is applicable where no consent of the local authority is required. This is not, in my judgment, the true meaning of the section. The words “if any” are inserted just because, before the 1931 order, no question of consent arose in a rural district. They cannot, in my judgment, have the effect for which the defendants contend.

It follows that the plaintiffs cannot avail themselves of the statutory remedy provided by the Public Health Act 1936, s 25, and it is unnecessary for me to consider the difficult question whether or not, if they could, that remedy is exhaustive and excludes them from any other relief to which they might otherwise be entitled. I am unable, then, to accept any of the defendants pleas, and must give the plaintiffs the relief which they claim. I am reluctant to make, as the plaintiffs themselves were reluctant to ask for, a mandatory order, but I see no real alternative. It would not be right to leave matters as they are, with a mere declaration of rights. The plaintiffs have duties the neglect of which might have serious consequences for a number of people. They may, at some near or at some distant time, find it necessary to inspect or repair their main where it lies under the defendants houses. They could do so, as matters now stand, only by breaking through the floors and foundations of the houses or by tunnelling under them. This is not, as I have already said, a burden which ought to be put upon them. Apart from that, however, it is at least possible that, at a time when this contest has been forgotten, the occupants might strenuously object to the plaintiffs exercising their rights in a manner gravely interfering with their comfort, and, on one side or the other, an appeal to force might be made. Force is the sanction of the law, but its exercise must be invoked by process of law. It is, I think, my duty now to make an order which will avert this possibility of further dispute. I must accordingly make a mandatory order in the terms of the claim, and the defendants must pay the costs of the action.

Injunction granted with costs. Operation suspended for one year.

Solicitors: Sharpe Pritchard & Co, agents for W C Croasdell, Town Clerk, Abingdon (for the plaintiffs); Preston Lane-Claypon & OKelly, agents for Andrew Walsh & Son, Oxford (for the defendants).

F Honig Esq   Barrister.


Trebanog Working Mens Club and Institute Ltd v Macdonald

Monkwearmouth Conservative Club Ltd v Smith

[1940] 1 All ER 454


Categories:        LEISURE AND LICENSING        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HUMPHREYS AND HILBERY JJ        

Hearing Date(s):        16, 17 JANUARY, 9 FEBRUARY 1940        


Clubs Incorporated members club Sale to member Liquor served to members and honorary members in exchange for money payment Liquor purchased in clubs name as authorised by club committee Agency Whether club separate legal entity apart from its members Whether service of liquor to members a sale Licensing (Consolidation) Act 1910 (c 24), s 65.

The appellant society was registered under the Industrial and Provident Societies Acts 1893 to 1913, and its objects, as set out in its rules, were to carry on the business of club proprietors by providing for the use of its members, and for such associates of the club as were admitted to honorary membership, the means of social intercourse, mutual helpfulness, mental and moral improvement, rational recreation, and the other advantages of a club. The appellant society was the owner of certain premises which were used as the societys registered office and by the members thereof as the club premises. The society was also registered as a club in pursuance of the provisions of the Licensing (Consolidation) Act 1910, s 91. Intoxicating liquors were purchased in the appellant societys name upon the authority of the societys committee, paid for by cheque drawn upon the banking account of the appellant society, and served to members and honorary members of the society in exchange for a money payment. The appellant society was thereupon charged with having unlawfully sold by retail certain intoxicating liquor, the society not then holding an excise licence for the sale of that intoxicating liquor, contrary to s 65 of the Act of 1910. On the part of the appellant society, it was contended that, although the society had become a body corporate by registration under the Industrial and Provident Societies Acts, the intoxicating liquors bought on the authority of the committee were bought for consumption by, and were the property of, the members of the society (including the honorary members) as members of a club, that, in so far as the society had any property or interest in such intoxicating liquor, it was as trustee thereof for such members, and that, as there were no shareholders in the society who were not members of the society, the supply of liquor to any of such members was merely a release of the interest of the other members therein, as in the case of a club which was not incorporated. On the part of the respondent, it was contended that the appellant society was a corporate body and a legal entity apart from its members, that in its capacity as a club proprietor it was the owner of the liquor in question, and that the supply thereof to members and honorary members constituted a sale of the intoxicating liquor within the meaning of s 65 of the Act of 1910. The stipendiary magistrate upheld the contentions of the respondent and convicted the appellant society. Thereupon this appeal was brought. The facts were similar in the second appeal, except that the company was constituted under the Companies Acts, and was not registered under the Industrial and Provident Societies Acts:

Held in the circumstances, the transaction in question was not a sale in the statutory sense, but was rather to be deemed the transfer of a special property in the goods from all the other members of the club to the consumer, in consideration of the price paid. The conviction, therefore, must be quashed.

per Lord Hewart LCJ: what is essential is that the holding of the

Page 455 of [1940] 1 All ER 454

property by the agent or trustee must be a holding for and on behalf of, and not a holding antagonistic to, the members of the club.

Notes

It has long been recognised that, in the case of a members club, the supply of goods of the club to a member is not in law a sale. The member is part-owner of the goods of the club. It was thought that the decision in Wurzel v Houghton Main Home Delivery Service Ltd aided an opinion which has long been entertained that a distinction might be made where the club was a company, and thus a separate legal entity. The present decision disposes of that opinion, and the position is the same whether or not the club is a company or other incorporated body. In short, the decision in Newell v Hemingway is affirmed.

As to Sale to Members of an Incorporated Club, see Halsbury (Hailsham Edn), Vol 4, p 510, para 946; and for Cases, see Digest, Vol 8, pp 522, 523, Nos 109121.

Cases referred to

Graff v Evans (1882) 8 QBD 373; 8 Digest 522, 109, 51 LJMC 25, 46 LT 347.

National Sporting Club Ltd v Cope (1900) 82 LT 352; 8 Digest 523, 118.

Newell v Hemingway (1888) 58 LJMC 46; 8 Digest 523, 119, 60 LT 544.

Bowyer v Percy Supper Club Ltd [1893] 2 QB 154; 8 Digest 523, 117, 69 LT 447.

Wurzel v Houghton Main Home Delivery Service Ltd, Wurzel v Atkinson [1937] 1 KB 380, [1936] 3 All ER 311; Digest Supp, 106 LJKB 197, 155 LT 575.

Young v Gentle [1915] 2 KB 661; 42 Digest 670, 802, 84 LJKB 1570, 113 LT 322.

Re Cathcart, Ex p Campbell (1870) 5 Ch App 703; 42 Digest 669, 795, 23 LT 289.

Lester v Torrens (1877) 2 QBD 403; 30 Digest 99, 750, 46 LJMC 280.

R v Pelly [1897] 2 QB 33; 30 Digest 99, 751, 66 LJQB 519, 76 LT 467.

Appeal

Appeal by way of case stated from decision of the magistrates. The facts are fully set out in the judgment of Lord Hewart LCJ.

G R Blanco White KC and A H Forbes for the appellants in the first appeal.

John W Morris KC and D Morgan Evans for the respondent in the first appeal.

John Charlesworth for the appellants in the second appeal.

H B Hylton-Foster (for W A Macfarlane on war service) for the respondent in the second appeal.

9 February 1940. The following judgment was delivered.

LORD HEWART LCJ (delivering the judgment of the court). I will deal first with the case of the first appellants. This is a case stated by a stipendiary magistrate, who convicted the first appellants upon an information charging them with having on 10 December 1938, unlawfully sold by retail certain intoxicating liquor without holding a justices licence, contrary to the Licensing (Consolidation) Act 1910, s 65. The information was laid by the local superintendent of police. The premises upon which the alleged sale took place are used as a genuine working-mans club, and here been so used since April 1922.

Page 456 of [1940] 1 All ER 454

The appellants are a society registered under the Industrial and Provident Societies Acts, and the sole object of the society, as appears from r 1 of the rules, which are the rules of the club and of the society, is to carry on the business of club proprietors by providing for the use of its members:

… the means of social intercourse, mutual helpfulness, mental and moral improvement, rational recreation and the other advantages of a club.

The membership of the society is identical with the membership of the club. The club was also registered in accordance with the requirements of the Licensing (Consolidation) Act 1910, s 91. The other rules of the club show that it is in all respects a members club.

Para 7 of the case states that intoxicating liquors are purchased in the name of the appellant society upon the authority of the committee referred to in r 17(5). What is in fact provided by r 17 is as follows:

(1) The committee shall control the management of the club. … It shall have power to purchase such articles and do all such things as it may deem necessary for the carrying out of the objects of the club … The committee shall not enter into any bond or agreement binding the club to purchase excisable articles from any person or persons or in any way to part with its absolute control and that of the club members over the supply of excisable articles to the club.

The last sentence is taken from the Licensing (Consolidation) Act 1910, s 95(h). Failure to comply with this rule would render the club liable to be struck off the register.

Rule 17(5) merely provides that the committee or any officer authorised by them shall have power to give orders for such goods to be supplied and work to be done as may be necessary for carrying out the purposes of the club. It would seem, therefore, that it would be more accurate to say that any purchase of excisable articles for the use of this club was made by the committee on behalf of the members of the club, the committee for that purpose making use of the existence of the appellant society to obtain for the club whatever may be the benefits of registration under the Industrial and Provident Societies Acts.

Rule 22 of the club rules makes it clear that any profit accruing to the club from the disposal of articles so bought can be used only in the general interest of the members. The question raised by the case is whether or not, in distributing to the members as against cash payments the excisable articles so provided, there was a sale of intoxicating liquor by retail requiring a licence.

The first general Act dealing with unlawful sales by retail of intoxicating liquor without a justices licence was the Licensing Act 1872, which in s 3 created the offence now contained in the Licensing (Consolidation) Act 1910, s 65, in almost identical terms. Ever since that date, it has been a matter of general agreement that the transaction which takes places in a members club, in which the property in the liquor is in all the members equally, when a member orders and pays for intoxicating liquor is not a sale at all in the sense in which that word is used in s 3, but is rather to be deemed the transfer of a

Page 457 of [1940] 1 All ER 454

special property in the goods from all the other members of the club to the consumer, in consideration of the price paid. That aspect of the matter is fully explained in the judgments of Field J, and Huddleston B, in Graff v Evans. The club in that case was a bona fide members club, but by r 7 of the club rules [p 375]:

All property acquired by the club shall be vested in the trustees.

No doubt, as Field J, observed in his judgment, this was for the purpose of enabling them to sue or take other legal proceedings with respect to injuries to the possession of the goods belonging to the club. In holding that no sale by retail of intoxicating liquor took place when a member ordered and paid for a drink, Field J put the matter in this way, at p 378:

I think the true construction of the rules is that the members were the joint owners of the general property in all the goods of the club, and that the trustees were their agents with respect to the general property in the goods …

In the same case, Huddleston B, in concurring, says, at p 379:

It seems to me clear that Foster had a property or at least an interest in the goods which were transferred to him.

The correctness of that decision has never, so far as we are aware, been doubted. In National Sporting Club Ltd v Cope, Channell J said that the case decided that the settled principle that, for a pure members club, no licence is required is not defeated by the fact that the property is vested in trustees for the purposes of convenience, although the result of such vesting is, as the judge pointed out, that the members of the club have no legal property in the excisable articles. They retain, however, an interest in them, and the obtaining and paying for liquor by the members is treated as a mere distribution of property in which they have a common interest. In our opinion, the decision in Graff v Evans applies to, and governs, the present case. Once it is conceded that a members club does not necessarily require a licence to serve its members with intoxicating liquor because the legal property in the liquor is not in the members themselves, it is difficult to draw any legal distinction between the various legal entities which may be entrusted with the duty of holding the property on behalf of the members, be it an individual, or a body of trustees, or a company formed for the purpose, so long as the real interest in the liquor remains, as in this case it clearly does, in the members of the club. In this connection, there is no magic in the expressions “trustee” or “agent.” What is essential is that the holding of the property by the agent or trustee must be a holding for and on behalf of, and not a holding antagonistic to, the members of the club. We are dealing here with a quasi-criminal case, where the court seeks to deal with the substance of a transaction rather than with the legal form in which it may be clothed.

The precise question raised in this case was decided by a Divisional

Page 458 of [1940] 1 All ER 454

Court in Newell v Hemingway. The facts there were not distinguishable from those in the present case, except that there the company was formed under the provisions of the Companies Acts, and the person who had been convicted, one Newell, was the manager of the club, and, in any event, was not the person who should have been prosecuted. The court consisted of Lord Coleridge CJ, and Manisty J. After a full argument, Lord Coleridge CJ held that there had been no transaction in the nature of a sale by anyone. He considered the case covered by the decision in Graff v Evans, with which he entirely agreed, adding that he would have arrived at the same result had the matter been res integra. He further observed that to describe what had taken place in this members club as a sale requiring a justices licence would be to go far beyond what the Act of Parliament was ever intended to do, and would be to put down practices at which the Act was never in the slightest degree aimed. Manisty J gave judgment to the same effect.

From 1888, the date of the decision in Hemingways case, the law was regarded as settled, and it has been acted upon ever since. During the last fifty years, many hundreds of bona fide members clubs have become registered under the Companies Acts, or under the Industrial and Provident Societies Acts, upon the faith of the law as therein declared. So far as we are aware, in regard to none of them has it ever been suggested that it required a justices licence to cover the serving of intoxicants to members.

Of the other cases to which reference was made, Bowyer v Percy Supper Club Ltd and National Sporting Club Ltd v Cope emphasise the distinction to be drawn between a sale by a third party for his own benefit, for which a licence is required, and a transaction such as that which took place in this case. Wurzel v Houghton Main Home Delivery Service Ltd, which was much relied upon by the respondents, was a case different altogether from the present case. It did not depend upon the question whether or not a transaction was one of sale. The only question there decided was whether or not a vehicle, owned by an incorporated society whose members consisted exclusively of persons employed at a colliery and which had as its object the business of delivering to its members coal supplied to them from the colliery, was a vehicle used for the carriage of goods for hire or reward when it delivered coals to a member and payment was made for such delivery. All that was there decided was that, as the incorporated society was a legal entity, and was using the vehicle for the carriage of goods, and was receiving a reward for the hire, the incorporated society was offending against the words of the Road and Rail Traffic Act 1933, s 2(4). Of the members of the court in that case, only Swift J made any reference to Newell v Hemingway which expressed any doubt as to the correctness of that decision.

Since 1902, the attention of Parliament has been frequently directed

Page 459 of [1940] 1 All ER 454

to the question of regulating the distribution of intoxicating liquor in clubs. The Licensing (Consolidation) Act 1910, itself contains an elaborate code in ss 91 to 98 in relation to the registration, as distinct from the licensing, of clubs, and it is significant to find that this general consolidating Act, in repealing s 3 of the Act of 1872, has re-enacted it without any material alteration. Even if the court were to take the view that the decision in Newell v Hemingway stood upon a less sure foundation than, in our opinion, it does, it would not follow that we should be entitled to regard the matter as res integra. We agree with the views expressed by Lord Reading LCJ, in Young v Gentle, when he says, at pp 668, 669:

I desire to call attention further to the Licensing Act, 1902, s. 1(1), because, to my mind, it has a bearing upon the case we are now considering. I refer to the Act of 1902 for the reason that, as expressed by James, L.J., in Re Cathcart, Ex p Campbell [p. 706]:“Where once certain words in an Act of Parliament have received a judicial construction in one of the superior courts, and the legislature has reputed them without any alteration in a subsequent statute, I conceive that the legislature must be taken to have used them according to the meaning which a court of competent jurisdiction has given to them.” Now in 1902 the legislature repeated the words which are to be found in the Licensing Act, 1872, s. 12; some words were added, but the material words are repeated almost ipsissima verba. Therefore, after the decision in Lester v. Torrens and R v. Pelly, the legislature deliberately used the same language which had received an interpretation not only of a court of competent jurisdiction, but of a court of co-ordinate jurisdiction with this court, and in my view we are not entitled at this date to consider the question as if it were res integra. We must decide it in accordance with the decisions of courts of co-ordinate jurisdiction, which have already dealt with it.

This appeal is accordingly allowed with costs, and the conviction quashed.

I will pass now to the case of the second appellants. In this case, the appellant company is a company limited by guarantee which has for the last 50 years carried on the business of a club in Sunderland. It was agreed between counsel that the facts in this case are not to be otherwise distinguished from those in the last case, and our decision must be the same. The conviction is, therefore, quashed, and the appeal allowed with costs.

Appeals allowed with costs.

Solicitors: Wrentmore & Son, agents for Edward T Davies & Son, Pontyclun (for the appellants in the first appeal); Torr & Co, agents for Clifford Walter, Cardiff (for the respondent in the second appeal); Vizard Oldham Crowder & Cash, agents for Wm Bell & Sons, Sunderland (for the appellants in the second appeal); Maude & Tunnicliffe, agents for Morton & Morton, Sunderland (for the respondent in the second appeal).

Michael Marcus Esq   Barrister.


Middlesex County Council v Essex County Council

[1940] 1 All ER 460


Categories:        FAMILY; Other Family: LOCAL GOVERNMENT: SOCIAL SECURITY        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, CHARLES AND HILBERY JJ        

Hearing Date(s):        19 DECEMBER 1939, 9 FEBRUARY 1940        


Poor Law Settlement Wife and children deserted by husband Wife and children in receipt of poor relief Wife and children on change of residence becoming chargeable to another local authority Order for removal to former locality Validity Maintenance order against husband Poor Law Act 1930 (c 17), ss 13, 18, 19(1), 84(1), (2), 85(1), 86(1), (2), 93(1)(f), (4).

From the date of their marriage, 22 August 1918, to 27 June 1922, a husband and his wife resided in the county of London without interruption, and without receiving poor relief. There were three children of the marriage, none of whom had attained the age of 16 and none of whom was blind or deaf or dumb. From 28 June 1922 to about April 1933, the husband and wife continued to reside in the county of London, but were from time to time in receipt of poor relief. About April 1933, the husband deserted his wife and children, and has since lived apart from them. From about April 1933 to 25 May 1937, the wife resided in the county of London, and was continuously in receipt of poor relief for herself and the children, who all lived with her. On 17 November 1933, upon complaint made by the wife, a maintenance order was made against the husband. On 25 May 1937, the wife and children went to live in the county of Essex, and on the following day they all became chargeable to the county of Essex, and remained so chargeable until 5 August 1937, upon which date an order was made for the removal of the wife and children to the county of Middlesex. From April 1934 onwards, the husband resided in the county of Middlesex without interruption, and without receiving poor relief personally. The question was whether or not under the Poor Law Act 1930, s 18(b), the relief given to the wife and children after April 1933, the date of desertion, was to be considered as relief given to the husband:

Held (i) the relief given to the wife, whose husband was living apart from her, must be considered, by reason of s 18(b) of the Act, as given to her, and not as given to the husband, who, therefore, during his residence in Middlesex, had not in law been in receipt of relief.

(ii) the husband had acquired a settlement in Middlesex, and, by virtue of s 85(1), (2), the wife and children took and followed that settlement, and were thus last legally settled in Middlesex.

Notes

The difficulty in the present case is whether relief given to the wife is to be attributed to the husband and so prevent his acquiring a settlement. It is held that, where the parties are living apart, the receipt of relief by the wife will not be so attributed and will not prevent the husband from acquiring a settlement, but, at the same time, the liability of the husband to maintain the wife and that to refund such relief will not be affected.

As to Settlement of Wife, see Halsbury (Hailsham Edn), Vol 25, pp 412, 413, para 721; and for Cases, see Digest, Vol 37, pp 242244, Nos 336363.

Appeal

Appeal by way of case stated from an order made by two justices acting in and for the county of Essex. The facts are fully set out in the judgment of the court delivered by Hilbery J.

W H Cartwright Sharp KC and Harold Williams for the appellants.

R M Montgomery KC and H W Wightwick for the respondents.

9 February 1940. The following judgment was delivered.

HILBERY J (delivering the judgment of the court). By this case stated, the appellants appeal against an order, made on 5 August 1937,

Page 461 of [1940] 1 All ER 460

by justices for the county of Essex, for removal of a certain woman with her children to the county of Middlesex. The material facts can be summarised, and they are as follow. On 22 August 1918, Elizabeth Day married John Day. Hereafter, for convenience, they will be referred to as they are in the case as the wife and the husband, respectively. Dorothy, Jessie and Raymond Day, hereafter referred to as the children, are children of that marriage. None of these children has attained the age of 16, and none is blind or deaf or dumb. From the date of this marriage until 27 June 1922, the husband and the wife resided in London without interruption, and without receiving poor law relief. From 28 June 1922, until about April 1933, the husband and the wife continued to reside in the county of London, but were from time to time in receipt of poor relief. In or about April 1933, the husband deserted the wife and the children, and has ever since lived, and still lives, apart from them. From April 1933, until 25 May 1937, the wife resided in the county of London with the children, and was continuously in receipt of poor relief for herself and for the children.

On 17 November 1933, upon complaint made by the wife, a maintenance order was made against the husband by a court of summary jurisdiction sitting at Clerkenwell. On 25 May 1937, the wife went with the children to live in the county of Essex, and, on the day following her arrival, she and the children became chargeable to the county of Essex. They remained chargeable until 5 August 1937, when there was made the order for their removal about which complaint is made. From about April 1934, until the date of the case stated herein, the husband resided at 20, Douglas Road, Kilburn, and elsewhere in the county of Middlesex, without interruption and without receiving poor relief, unless the relief given to the wife or the children is to be considered as given to him. On 5 August 1937, the order for the removal of the wife and the children to the county of Middlesex was made by two justices of the peace acting in and for the county of Essex. On 9 September 1937, the appellants gave notice of appeal against this order of removal, and duly served a statement of the grounds of appeal. Afterwards, by an order of this court, dated 2 February 1939, and by consent of the parties, this case was stated for the opinion of this court.

It was expressly agreed between the parties (i) that, after being deserted by the husband, the wife had not acquired for herself a settlement by residence, (ii) that the wife takes and follows the settlement of the husband, by virtue of the provisions of the Poor Law Act 1930, s 85(2), and (iii) that the children take and follow the settlement of the husband, their father, by virtue of the provisions of s 85(1) of the same Act.

Put shortly, the appellants contentions were that the order of removal was bad because the husband did not, up to July 1937, reside for a period of 3 years at 20, Douglas Road, Kilburn, and elsewhere in the county of Middlesex in such manner and in such circumstances as to be settled therein, because the relief given to his wife and children during that time

Page 462 of [1940] 1 All ER 460

must be considered as given to him, that the husbands last legal settlement by residence was derived from a period of residence, until 1920, for 3 years and upwards at 14, Sidmouth Street, Holborn, and elsewhere in the county of London, and that the wife was a deserted woman, and derived and retained such settlement by residence as her husband had by virtue of his residence as aforesaid in the county of London.

The respondents contended that the husbands residence in the county of Middlesex for a period of 3 years commencing in or about April 1934, was in each of those years such as would, in accordance with s 93(1) of the Act, render him irremovable from the county of Middlesex, that, by reason of the provisions of the Poor Law Act 1930, s 18(b), the relief given to the wife and the children after April 1933, when the husband began to live apart from his wife and children, was not to be considered as relief given to the husband, and that the husband, by reason of his residence, acquired a settlement in the county of Middlesex, and was last legally settled therein.

S 18 provides as follows:

All relief given to or on account of a wife shall be considered as given to her husband, and all relief given to or on account of any child under the age of 16, not being blind or deaf and dumb, shall be considered as given to the father of the child, or to the husband of the mother, or, if the, mother of the child is unmarried or a widow, to the mother of the child, as the case may be: Provided that (a) nothing in this section shall discharge the father, grandfather, mother or grandmother of any child from liability to relieve and maintain the child in pursuance of the provisions of this Act; and (b) where the husband of a woman is beyond the seas, or in legal custody, or in confinement in a licensed house or asylum as a lunatic or idiot, or is living apart from her, all relief given to her or to her child shall, notwithstanding her coverture, be considered as given to her in the same manner and subject to the same conditions as if she were a widow, without prejudice, however, to the liability of her husband in respect of the relief.

The question is, therefore, whether or not, in the circumstances, the husband is to be considered in law as the recipient of the relief given to his wife and children while they were living apart from him. If he is so considered, then he has not acquired a settlement in Middlesex, for, during the whole of the time he has resided at 20, Douglas Road, Kilburn, his wife has been in receipt of poor relief, and the order for removal of his wife and children to Middlesex is bad, and the appeal succeeds.

It will be noticed that s 18 begins by providing that relief given to or on account of a wife shall be considered as given to her husband. Those words, one would suppose, are intended, not merely to make the husband liable for the relief given to his wife, but also to make him the recipient of the relief in the eyes of the law. In that case, such disabilities as result from the receipt of relief will attach to him. They will attach to him, not because he has actually received any relief himself, but as a consequence in law of relief being given in fact to his wife. Except for the proviso, his position would be the same if he were living apart from his wife. He would still be considered as the recipient of the relief given to his wife. S 18(b), however, provides as follows:

… where the husband of a woman … is living apart from her, all relief given

Page 463 of [1940] 1 All ER 460

to her or to her child shall, notwithstanding her coverture, be considered as given to her in the same manner and subject to the same conditions as if she were a widow without prejudice, however, to the liability of her husband in respect of the relief.

The scheme of that proviso seems to be to draw a distinction between the person who is to be considered the recipient of the relief and the person who, notwithstanding that he is not the recipient in fact or in law, is to be under a liability for it. The relief, the proviso says, is to be considered as given to the wife under the same conditions and exactly as if she were a widowthat is to say, as if her husband were dead, although, ex hypothesi, he is alive. The proviso is thus creating an exception, where the wife is living apart from her husband, to the rule just expressed in the sectionnamely, that relief given to a wife shall be considered as given to the husband. However, while thus providing that, in considering to whom the relief is to be considered in law as given, the husband is to be treated as dead, none the less, as the husband is not in fact dead, the proviso has added to it an express reservation of liability for the relief on the part of the husband. The very fact that this reservation of liability on his part is expressly added goes some way to show that without it the husband would have no such liability, and, if, without it, he would have had no liability, then relief given to his wife when she was living apart from him could not have been considered as given to him. Moreover, in the section itself it is provided that, where the mother of a child is a widow, the relief given her on account of the child shall be considered as given to the mother. That is to say, a widow whose child is relieved shall be considered the person to whom the relief is given. Where, then, the proviso says that relief given to a wife living apart from her husband is to be considered as given in the same manner, and subject to the same conditions, as if she were a widow, one would suppose that it was intended to provide that, in such circumstances, she should be the person considered as the recipient of the relief, and as the one to whom the relief was given, just as when she is in fact a widow she is to be considered the person to whom relief to or for her child is given.

We arrive, therefore, at the conclusion that the relief given to the wife whose husband is living apart from her must be considered, by reason of s 18(b), as given to her, and not as given to the husband. The husband, therefore, during his residence in Middlesex, has not in law been in receipt of relief. He has acquired a settlement in Middlesex, and, by virtue of s 85(1), (2), the wife and children take and follow that settlement. The answer to the question asked is that the wife and children are last legally settled in Middlesex. The justices order for removal made on 5 August 1937, was, therefore, right.

Since, by consent of the parties and by the order of this court, dated 2 February 1939, this special case was stated, and it was agreed between the parties that judgment in conformity with the decision of this court, and for such costs as this court might adjudge, might be entered at the

Page 464 of [1940] 1 All ER 460

quarter sessions, the judgment of this court will be entered for the respondents. This appeal will be dismissed with costs, and the respondents will enter judgment accordingly at the quarter sessions.

Appeal dismissed with costs.

Solicitors: C W Radcliffe, Clerk to Middlesex County Council (for the appellants); Sharpe Pritchard & Co, agents for E S Holcroft, Chelmsford, Clerk to Essex County Council (for the respondents).

Michael Marcus Esq   Barrister.

Maude v Inland Revenue Commissioners

[1940] 1 All ER 464


Categories:        BANKING AND FINANCE: TAXATION; Income Tax        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        6 FEBRUARY 1940        


Income Tax Bank interest Interest on bank overdraft on account kept at Guernsey Interest paid to Guernsey branch of bank having its head office in London Whether interest payable in United Kingdom Income Tax Act 1918 (c 40), s 36(1).

The appellant, a British subject resident in Guernsey, paid interest on an overdraft to the Guernsey branch of a bank having its head office in London. Her income liable to United Kingdom income tax exceeded the amount of the interest, and it was all paid into the Guernsey branch of the bank. At its head office, the bank was assessed, for income tax, upon profits which included the profits of its branches. The appellant claimed relief under the Income Tax Act 1918, s 36(1), in respect of the sum paid as interest. It was contended on behalf of the respondents that the interest was payable only in Guernsey, and so was not “payable in the United Kingdom” within the meaning of s 36(1):

Held in the absence of any special arrangements to the contrary, the appellant could have insisted on paying interest to the bank at its head office in London. The interest was, in that sense, “payable in the United Kingdom,” and the appellant was entitled to the relief claimed.

Notes

The point whether this interest was “payable in the United Kingdom” is decided upon a finding that the appellant could have insisted upon paying it at the head office of the bank in London. Of course, as a matter of practice, it is usual to pay such interest in Guernsey, if it is paid at all, but generally the whole matter is merely a book entry at the local office. The decision is of some importance owing to the amalgamation of banks and the centralisation of banking in London.

As to Income Tax on Bank Interest, see Halsbury (Hailsham Edn), Vol 17, p 334, para 671; and for Cases, see Digest, Vol 28, pp 97, 98, Nos 580585.

Cases referred to

Paton v Inland Revenue Comrs [1938] AC 341, [1938] 1 All ER 786; Digest Supp, 107 LJKB 354, 158 LT 426, affg SC sub nom Fentons Trustee v Inland Revenue Comrs [1936] 2 KB 59, [1936] 1 All ER 116.

R v Lovitt [1912] AC 212; 8 Digest 423, 25, 81 LJPC 140, 105 LT 650.

Woodland v Fear (1857) 7 E & B 519; 3 Digest 217, 548, 26 LJQB 202, 29 LTOS 106.

Prince v Oriental Bank Corpn (1878) 3 App Cas 325; 3 Digest 173, 301, 47 LJPC 42, 38 LT 41.

Clare & Co v Dresdner Bank [1915] 2 KB 576; 3 Digest 173, 302, 84 LJKB 1443, 113 LT 93.

Page 465 of [1940] 1 All ER 464

Leader, Plunket & Leader v Direction der Disconto-Gesellschaft (1914) 31 TLR 83; 13 Digest 432, 1548, subsequent proceedings [1915] 3 KB 154.

Garnett v McKewan (1872) LR 8 Exch 10; 3 Digest 222, 574, 42 LJEx 1, 27 LT 560.

Case Stated

Case stated under the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice. The appellant was a British subject resident in Guernsey. In 1936, she arranged with the Guernsey branch of the National Provincial Bank for an overdraft, and in 1937 she paid £133 6s to that branch as interest in respect of the overdraft. A portion of the appellants income liable to United Kingdom income tax was found to exceed the sum of £133 6s. The whole of this income was paid into the Guernsey branch of the bank. The head office of the bank was in London, where the bank was assessed to income tax upon profits which included profits of its branches. The appellant claimed relief under the Income Tax Act 1918, s 36(1), upon the sum of £133 6s. It was contended on behalf of the appellant that she was entitled to repayment of income tax under the Income Tax Act 1918, s 36(1), in respect of the whole of the sum of £133 6s. It was contended on behalf of the respondents:

(a) that, in the absence of any evidence to the contrary it must be assumed that the general law of Guernsey which was relevantnamely, the law of contractis the same as English law; (b) that the interest (on the overdraft) was payable in Guernsey, and not elsewhere, and consequently was not payable in the United Kingdom within the meaning of the Income Tax Act, 1918, s. 36(1).

The decision of the special commissioners was as follows:

The sole question for our decision can be stated thus. Is, as Mrs. Maude argued with great force and clarity, the business of the National Provincial Bank indivisibly one to the extent of making interest paid to a branch which is not within the United Kingdom, by reason of a contract not made within the United Kingdom, a payment of interest payable in the United Kingdom to a bank carrying on a bona fide banking business in the United Kingdom?

It is common ground that the National Provincial Bank is such a bank, and that the business of its branches is its business to the extent at least that the profits of the branches, whether within or without the United Kingdom, are part of the profits of the National Provincial Bank. Furthermore, it is an admitted fact that the ultimate control of the business of the branch in Guernsey is with the head office in London.

Argument on these lines is very strong, and it is not without considerable doubt and difficulty that we have come to the conclusion that, for the purposes of this case, we must regard the business of the National Provincial Bank as falling under two headsnamely, (i) that part which is carried on in the United Kingdom, and (ii) that part which is carried on not within the United Kingdom, the fruits of which are gathered outside the United Kingdom and subsequently brought within, when they come to swell the business receipts of the bank in London.

The claim, therefore, fails, because the interest is not “payable in the United Kingdom.”

Raymond W Needham KC and J S Scrimgeour for the appellant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondents.

6 February 1940. The following judgment was delivered.

WROTTESLEY J. Upon the facts of this case, two arguments are put before me by counsel for the appellant. The first one is that, if I look at the Income Tax Act 1918, s 36, which governs

Page 466 of [1940] 1 All ER 464

the terms upon which income tax may be recovered and will be repaid in the light of the Income Tax Act 1918, All Schedules Rules, rr 19, 21, and bear in mind the way in which those three statutory provisions all work together to ensure mainly that what he calls the enormity of double taxation shall not occur, I shall really be able to come to the conclusion that, although s 36 uses the words “interest payable in the United Kingdom,” the stress is not to be laid on the words “in the United Kingdom,” and that what I really ought to find out is whether the interest payable is in respect of something which has really already borne taxas in this case it undoubtedly has, the bank being taxed on the whole of their earnings regardless of whether or not they are earned, so to speak, in London. It occurs to me that, if I were to take that attitude, I should be doing the very thing which Greene LJ, in Fentons Trustee v Inland Revenue Commissioners, at p 131, though sorely tempted, suggested it was not right to do, and which, of course, it is not right to donamely, really so to construe s 36 as to leave out the words “in the United Kingdom.”

However, that is not the only argument which is put forward here. The other argument put forward is that, properly regarded, the interest which Mrs Maude owed in respect of her overdraft at the National Provincial Banks branch in Guernsey is interest which was payable “in the United Kingdom,” and, therefore, falls precisely within the terms of s 36. This, at any rate, is common ground in this case, though not much is common groundnamely, that, if that be so, she is entitled to succeed here. It has to be borne in mind that the National Provincial Bank lives in London, and, prima facie, may there be paid its debts by any person who owes it money. That is prima facie the position. It is perfectly true that either the National Provincial Bank itselfby which I mean the headquartersor any managers of its branches might, in concluding some arrangement or agreement with a customer, insist on payment locally, but nothing of that kind has happened here.

Counsel for the respondents has drawn my attention to two authorities dealing, not with the place at which interest is to be paid to a bank on a loan granted by them, but with the place at which they are to be called upon to cash cheques in respect of accounts which they have opened on behalf of customers, or with or for customers. First there is R v Lovitt, where Lord Robson in giving the judgment of the Privy Council, there being there no specific agreement as to where the customer could call for payment by the bank of money deposited with it, pointed out the difficulties which would arise if, in such a case, the customer could go into the branch of the bank or to headquarters and expect the bank to carry out its ordinary liabilitynamely, to cash cheques or pay over moneyinasmuch as it would mean that in that case [p 218]:

… the bank in London might be called on at any time by a person of whom it

Page 467 of [1940] 1 All ER 464

would probably know nothing, and with only a very limited time in which to obtain the detailed information that would be necessary from the St. Johns branch, to pay $90,351 in London without any deduction for cost of transmission or any agreement as to the rate of exchange.

Then Lord Robson went on to say, at p 219:

No such obligation appears by express words or necessary implication in the contract of the parties, and it is very improbable that it was ever contemplated or intended by them … Although branch banks are agencies of one principal firm it is well settled that for certain special purposes of banking business they may be regarded as distinct trading bodies. Thus, it was held in Woodland v. Fear that the obligation of a bank to pay the cheques of a customer rested primarily on the branch at which he kept his account, and that the bank in that case had rightfully refused to cash the cheque at another branch. Commenting on that decision, Sir Montague Smith, in delivering the judgment of their Lordships board in Prince v. Oriental Bank Corpn., points out that it would be difficult for a bank to carry on its business by means of branches on any other footing, because the officials at one branch do not know the state of a mans account at another branch.

It is clear, therefore, that, in the absence of any express arrangement, it is not to be implied from the ordinary relations between banker and customer, where a banker keeps the customers money, that the customer can call for his money to be repaid to him at any branch he likes, and without notice.

A further case which was cited by counsel for the respondents is Clare & Co v Dresdner Bank, which is a decision of Rowlatt J. That was a case where the plaintiffs, having an account at the Berlin branch of the defendant bank, which had its head office in Germany and a branch in London, wrote to the London branch demanding payment of the balance due on the account of the Berlin branch. Having been refused that, they sued the bank, without first making a request to the bank at Berlin to pay or remit the balance to London. Rowlatt J, in that case held that the plaintiffs were not entitled to demand payment from the London branch, and that there had not been any breach by the defendant bank of any obligation to the plaintiffs. He pointed out, at p 578:

As a rule, no doubt, a debtor has to seek out his creditor and pay him, but in the case of a bank with several branches, that cannot be the true relation of the parties. Money has a different value in different parts of the world … I cannot conceive it possible that a man who has, we will say, £1,000 sterling to his credit at a bank in New Zealand on coming to London would have the legal right to demand payment of £1,000 at an office of the same bank in London without being liable to pay anything in consideration of that convenience or even to give time for the bank in London to ascertain whether he was in fact a customer of and had a credit balance at the branch in New Zealand.

In other words, for the customer of the bank to have the right to walk into a branch of the bank and then and there demand payment was obviously quite impossible and absurd, and a thing which no court could possibly infer from the relationship between them.

It is to be observed that in both those cases the courts were dealing with cases where the man owed money to the bankit was not the ordinary case of a banker and customerand were not dealing with the case, as here, of a bank which lends money to a customer. It is to be

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observed that there was not thought to be, either by the Privy Council in R v Lovitt or by Rowlatt J in Clare & Co v Dresdner Bank, or in Leader, Plunket & Leader v Direction der Disconto-Gesellschaft, referred to by Rowlatt J in his judgment in Clare & Co v Dresdner Bank, any rule by which the banker and the customer had, so to speak, automatically a local character. What was said was that it could not be implied from the relationship between them that there was a liability to pay at any branch.

As has been pointed out by counsel for the appellant in reply, in Prince v Oriental Bank Corpn, which was cited in R v Lovitt in the Privy Council, it was pointed out by Sir Montague Smith at p 333, that the nature of a branch bank was this, quoting as an instance:Garnett v McKewan:

There the plaintiff had accounts at two branches of the London and County Bank. His account at branch A. was in funds; his account at branch B. was over-drawn. He drew a cheque upon his account at branch A. where he had funds, and the bank refused to pay it because his account at branch B. was over-drawn, and the court held it was justified in so doing. The principle of that decision affirms the identity of the bank and its several branches; though separate agencies, the latter were still agencies of one principal bank, with which alone the plaintiff contracted.

It seems to me that, when one comes to consider whether or not Mrs Maude could have insisted on paying any interest which she owed the National Provincial Bank at their headquarters in London, in the absence of some special arrangement to the contrary, it is clear that she would have been entitled so to do, and that that would have been a perfectly good tender, for which she could have insisted on getting a proper receipt.

That being the position, it seems to me to dispose of this case, because, in the absence of some special provision to the contrary, of which there is no tracebecause we have all the evidence, and no special arrangement was made, we are told, and the document which is now produced makes no reference to it one way or the otherit seems to me quite impossible to conclude from the facts here that the bank could have refused to accept this interest except at the Guernsey branch. It seems to me quite clear that they would have had to accept this interest on its being tendered at their London headquarters. That being so, it seems to me that it was interest which was, in that sense, “payable in the United Kingdom,” and it was there payable if Mrs Maude chose to pay it there, and that is, within the meaning of s 36 of the Act, “interest payable in the United Kingdom.” The appeal, therefore, must be allowed with costs.

Appeal allowed with costs.

Solicitors:Wood Nash & Co (for the appellant); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.


Smith v Moss and Another

[1940] 1 All ER 469


Categories:        TORTS; Negligence        

Court:        KINGS BENCH DIVISION        

Lord(s):        CHARLES J        

Hearing Date(s):        12 DECEMBER 1939        


Husband and Wife Action by wife for tort of husband Tort committed by husband as agent of third party Action against third party.

Mrs R was the owner of a car, but was unable to drive it. Her son drove it for her, as the judge found, as her agent. The car was garaged at the sons house. On 1 January 1938, the son drove his mother and his wife home from a party, and, having set his mother down at her house, was driving the car to the garage at his own house, his wife being a passenger in the car. On the way, an accident occurred by reason of the sons negligence, and the wife was injured. The wife sued the mother for damages for personal injuries, and it was pleaded in defence that the wife could not recover in respect of her husbands negligence:

Held at the time of the accident, the husband was acting as the agent of his mother, and the wife was entitled to recover.

Notes

The decision herein sets a limit upon the principle that a wife cannot recover in respect of her husbands tort. Where the tortin this case, negligenceis committed as the agent of a third person, the negligence is, in law, that of the third person, and a wife is entitled to succeed in an action against the third party.

As to Actions in Respect of the Tort of the Other Spouse, see Halsbury (Hailsham Edn), Vol 16, pp 739, 740, para 1210; and for Cases, see Digest, Vol 27, pp 259, 260, Nos 22882295.

Action

Action for damages for personal injuries. The facts are fully set out in the judgment and the case is only reported so far as the claim against Mrs R Smith is concerned.

F G Paterson for the plaintiff.

Humfrey H Edmunds for the first defendant.

S R Edgedale for the second defendant.

12 December 1939. The following judgment was delivered.

CHARLES J. In this case, Ida Ethel Smith, the wife of Leslie Alfred Smith, makes a claim against a gentleman named Moss, and also, by amendment, against Rosalie Smith, her mother-in-law.

Mrs Rosalie Smith bought a car. She thus became the registered owner of the car, and, until she sold her house with a garage under it to her son, Leslie Alfred Smith, she garaged the car in her own garage. After that sale, she still garaged it in the same garage, the son making no charge. She paid for all the running repairs, the licence fee and the insurance, but, whenever she wanted to use the car, the son, and he alone, was the person who was allowed to drive it. No one else was the driver of the car. If it had not been for him, it would have been immobile, for she had no one else to drive it. It is clear that, when he was so driving the car, he was driving as her agent. When the son desired to take the car out on his own business, he did so, and it might be argued that on those occasions he certainly was not acting as the agent of his mother.

At 3 am on 1 January 1938 the car was being used to convey the mother, the son and his wife home from a party, and the son was driving.

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The mother was taken to her house, and, as the car could not be left outside that house for the night, the son had to drive it to the garage, which was at his own home. I find that, when so driving, he was acting as an agent. On the way to the garage, the son drove the car towards certain crossroads at much too high a speed and collided with another car, his wife being injured and receiving a nasty shock. It is said that, although the son was, as I have held, acting as the agent of his mother, the wife cannot recover damages in respect of her injuries against the mother-in-law, because the accident was caused by the negligence of her husband (for so I find) and a husband can commit no tort against his wife. I cannot conceive, however, that the mere fact that he is acting as an agent for someone else, and, while acting as such agent, happens to commit a tort, such as negligence in the driving of a motor car in which his wife is a passenger, deprives his wife of her rights against his employerthat is to say, the wifes mother-in-law. It is true she paid no wages, but she was a person who was using him as her agent to drive the car.

If one takes it to the extreme, supposing that this lady were in the habit of hiring her car from, we will say, James & Co, and supposing that James & Co happened to employ the husband, out of many dozens of drivers in a big concern, and supposing that on a certain day the wife telephoned to James & Co and said, “I want a car to take me to the station,” and her husband happened to be the driver of that particular car, then, if there was an accident on the way to the station, I do not think that it could be said that she would be deprived of her rights against James & Co merely because the active operator in this tort was the husband. He has two persons, one as husband and one as agent. In this case, I think that he was acting as the agent of his mother. He was the only man whom she ever had to drive the car, and on this night he had been driving her, the registered owner. Without him she would not have got to her party, and without him she would not have got back from her party. It was by her direction that he took her to the party, and it was by her direction that he took her back from the party. It was while he was on his way back to the garage that the accident happened, and, in my judgment, he had not then ceased to be acting for her. That being so, the plaintiff succeeds in law against Mrs Rosalie Smith.

Judgment for the plaintiff for £150 against the second defendant with costs.

Solicitors: Darracotts (for the plaintiff); R I Lewis & Co (for the first defendant); William Charles Crocker (for the second defendant).

A Grimble Esq   Barrister.


McQuaker v Goddard

[1940] 1 All ER 471


Categories:        ANIMALS: TORTS; Negligence        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        7, 8 FEBRUARY 1940        


Animals Liability of owner Domesticated animals Animals not known in wild state Camel Onus of proof of vicious propensity Functions of judge and jury.

The appellant, while visiting a zoo owned by the respondent, had his hand bitten by a camel which he was in the act of feeding. The camel was in a field fenced in with wire-netting some 6 ft high. The appellant sued the respondent for damages, and contended (i) that the camel had a propensity, known to the respondent, to attack mankind, and (ii) that the camel was, at any rate in England, a wild animal disposed to attack mankind, and that the respondent was, therefore, absolutely liable for any damage which it did. It was also contended that the respondent had been guilty of negligence in that the fence around the enclosure was not sufficiently high or solid to prevent the camel from putting its head over and so reaching people standing nearby:

Held (i) there was no evidence that the respondent knew that this camel had a propensity to bite.

(ii) it is the function of the judge and not of the jury to decide whether an animal belongs to the class of domestic animals or to the class of wild animals. In this case, the judge had rightly decided that a camel must be regarded as a domestic animal.

(iii) the respondent had not been guilty of negligence. As he had no knowledge that the camel might put its head over the fence and bite someone, he was not under any duty to have a more effective fence.

Notes

It is said in this case that nowhere in the world is the camel found as a wild animal. Most domestic animals are also found somewhere in the world in the wild state. The camel is, therefore, a domestic animal, unless the law applies a different rule to animals brought from their native land and kept in captivity in a strange country. This suggestion the Court of Appeal has refused to entertain.

As to Injuries Caused by Animals, see Halsbury (Hailsham Edn), Vol 1, pp 539, 540, para 929; and for Cases, see Digest, Vol 2, pp 236241, Nos 238258.

Cases referred to

Rylands v Fletcher (1868) LR 3 HL 330; 36 Digest 187, 311, 37 LJEx 161, 19 LT 220, affg (1866) LR 1 Exch 265, revsg (1865) 3 H & C 774.

Aldham v United Dairies (London) Ltd [1939] 4 All ER 522; Digest Supp.

Mason v Keeling (1699) 1 Ld Raym 606; 2 Digest 243, 274.

Filburn v Peoples Palace & Aquarium Co Ltd (1890) 25 QBD 258; 2 Digest 238, 243, 59 LJQB 471.

May v Burdett (1846) 9 QB 101; 2 Digest 237, 240, 16 LJQB 64, 7 LTOS 253.

Osborne (Osborn) v Chocqueel [1896] 2 QB 109; 2 Digest 245, 288, 65 LJQB 534, 74 LT 786.

Nada Shah v Sleeman (1917) 19 WALR 119; Digest Supp.

Appeal

Appeal by the plaintiff from the verdict and judgment at the trial

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by Branson J and a common jury at Kingston Assizes on 6 July 1939.

Harold J Brown for the appellant.

Eric Neve KC and A A Pereira for the respondent.

Brown: An animal may be domestic in its native sphere and yet not domestic if taken abroad. Even if camels are domestic animals in their native sphere, they may have to be treated as wild if they are brought to this country. It is necessary to give a meaning to the word “domestic.” It may mean domestic in the English colloquial sense, and need not necessarily mean domestic in the sense of being of service to mankind throughout the whole world. In the present case, Branson J has taken the subjection of the animal to man as the test. In other words, the camel is nowhere found out of captivity. May v Burdett had reference to a monkey, and the decision in that case was the basis of the decision in Filburn v Peoples Palace & Aquarium Co Ltd, where the Court of Appeal, without any evidence on the point, held that an elephant must be regarded by the law of this country as a wild animal. In the present case, the matter is a point of law for the court, and evidence upon the point is immaterial. The court should ignore the evidence given on this part of the case, and should base its decision upon the ordinary knowledge of animal life which we all have, as was done by the Court of Appeal in Filburn v Peoples Palace & Aquarium Co Ltd. In this country, an animal must be held to be a wild animal until it has gained a reputation for harmlessness. [Scott LJ referred to Osborne (Osborn) v Chocqueel.] Aldham v United Dairies (London) Ltd is ground for the proposition that, if an animal bites a person, the animal must ferœ naturœ, or there must have been negligence. In that case, there was no evidence of scienter. In Nada Shah v Sleeman, the opinion was expressed that the camel would be held to be a wild animal in England. Although that opinion is not binding on this court, it is the only expression of judicial opinion I am able to cite. [Counsel referred to Halsburys Laws of England (Hailsham Edn), Vol 1, p 539.]

Neve KC: Whether or not the camel is a domestic animal was a question for the judge to decide on the facts placed before him. It must be a question of law, based upon the facts which were proved. It was proved that the camel is a domestic animal. No one can regard the camel as being ferœ naturœ. The finding of the judge on that part of the case is a finding of fact, and it is a finding which ought to remain undisturbed. It was for the judge to determine, upon the facts, whether or not the camel was a domestic animal. That is a determination of law, but it is a determination based upon the evidence which was called before him. Counsel for the appellant says that a third class of animal should be added to the two classes into which animals were divided by Lord Esher MR in Filburn v Peoples Palace & Aquarium Co Ltd. That third class has never found its way into English law at all. Once

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it has been established that an animal is in the class of domestic animals, the natural inference is that it is not a dangerous animal. [Clauson LJ referred to Mason v Keeling).]

Harold J Brown for the appellant.

Eric Neve KC and A A Pereira for the respondent.

8 February 1940. The following judgments were delivered.

SCOTT LJ. This case has been very well argued by counsel for the appellant, and is a case of general interest. It is also one in which the court joins with the judge in the court below in expressing sympathy for the plaintiff, in that, as the law stands, he is not entitled to any remedy in respect of the serious injuries which he received. In expressing that sympathy, I, at any rate, do not desire to imply any sense of blame in any respect against the defendant, who was the owner of zoological gardens at Chessington.

In August 1938, the plaintiff went with a lady to see this zoo. They took a picnic lunch with them, and were sitting on the lawn next to a camels enclosure, a piece of field fenced in with wire-netting some 6 ft high, inside which there was an Arabian camel. Some children, who were also picnicking, with their parents, were on the same lawn. After they had had their picnic lunch, and after the plaintiff had had his, the children started giving apples, or other food, to the camel, which ate them with pleasure, and without doing any harm. The plaintiff then thought that he would do the same thing, and he offered an apple to the camel. Unfortunately, in a way which he described, the camel, instead of taking the apple from his hand, caught hold of his hand. Having got his hand, which was not an apple, as the camel had expected, the camel bit and crushed the plaintiffs hand very seriously. The plaintiff himself thinks that he was lifted off the ground by the camel and shaken. That may or may not be so. I express no opinion about that, because it is quite clear that the injury done to the unfortunate mans hand was very serious, and it may be that his recollection of those exact incidents is not strictly accurate. Be that as it may, it was a serious injury. He subsequently brought an action against the owner of the zoo to recover damages for the injury he had suffered.

He put his case in his amended statement of claim on two alternative groundsnamely, (i) the usual form of action against the owner or keeper of an animal, where the plaintiff succeeds in showing that a propensity to bite or otherwise attack mankind was known to the defendant, or (ii) on the ground that the camel is a wild animalat any rate, in Englandand that English law holds the owner or keeper of a wild animal of a disposition to attack mankind as being under an absolute duty to prevent that animal from attacking anybody, the breach of which results in a liability in damages, without any proof of knowledge of the propensity on the part of the animal, and without any proof of negligence. Another ground put forward in the statement of claim was that, even if a camel is properly to be regarded as a domestic animal in respect of which knowledge of a propensity to bite or injure mankind is essential, and even if the plaintiff could not prove what is known as

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scienter, or knowledge of that propensity, yet, on the facts of the case, the defendant was guilty of negligence in that the fence was not high enough or solid enough to prevent the camel from putting his head over it, and pressing down the wire in such a way as to be able to reach people who were standing on the lawn. Those were the issues raised by the statement of claim, and they were met by traverses on the part of the defendant, including a point of which we have heard nothing in this courtnamely, that the plaintiff took the risk voluntarily upon himself. That we can disregard. Shortly, those are the facts, and, I think, all the facts which are material for the consideration of the issues which arose between the parties.

The plaintiff called witnesses to prove that all camels have a tendency to bitethat is to say, that they are treacherous, and may bite at any timebut it was not very strong evidence, and it was not as strong as the evidence of the two witnesses called on behalf of the defendant. One, in particular, was a man who had had long experience over many years in dealing with camels as transport animals, and he spoke to their being obviously domestic animals, and being free from vice, just as free as many animals of the domestic kind in England, such as bulls or stallions, or some dogs. The chief witness called for the defendant, however, was a man who had been a keeper of camels at the Zoological Gardens in Regents Park for a very great number of years. He spoke to the nature of camels as he got to know them there, and, spoke, no doubt, with other knowledge about camels of an expert kind, and said that this idea that camels have a natural tendency to bite human beings is not true. He proved, among other things, that at the Regents Park Zoological Gardens the camels are kept behind iron railings. It is true that they were 6 ft high, but they were 6 ins apart, so that it was quite easy for people to put their hands through and feed the camels, and the keeper had never known of a case of biting.

Broadly, those are the results of the evidence on the two sides, with one qualification. It was quite clearly established by the defendants witnesses, in my view, that camels do not exist anywhere in the world to-day, and did not exist in 1938, as wild animals. There is no race of wild camels which can be captured and tamed as elephants can be. Wild elephants do exist in the world, both in Asia and in Africa, in great numbers. Though they can be tamed, and can be taught to be extremely clever, as, for instance, in the teak forests of Burma and in India, wild elephants are apt to be savage, and to attack human beings in certain circumstances. Camels, on the other hand, are nowhere in the world to be found in the wild state. In every country in the world where camels exist, they are domestic animals used for carrying either people or loads, or for draught purposes.

There was no evidence given in this case that the defendant had any knowledge that this camel was vicious. Nor, indeed, was there any evidence to the effect that this camel was vicious as distinct from

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camels as a class. Nor was there any evidence given for the plaintiff that the defendant had any knowledge at all of any propensity of camels to bite. If the evidence of the camel-keeper from the zoo is to be accepted, and if the evidence of the other witness called for the defendant is to be accepted, that propensity to bite was very much exaggerated by the plaintiffs witnesses. In addition to that, the plaintiffs witnesses had nothing like the same experience or means of knowledge to constitute really valuable expert witnesses about camels as the defendants witnesses had.

On the question of law, it is important to bear in mind that, in the old common law of England, a rule was laid down long ago that domestic animals are regarded in quite a different light from wild animals. Wild animals are assumed to be dangerous to human beings because they have not been domesticated. The law does not assume domestic animals to be dangerous. That is the reason why, in English law, a keeper of a wild animal must keep it in at his peril. If he lets it out and it causes damage to any human being personally, or to the property of another, the keeper or owner of the animal, as the case may be, is liable in damages for the injury so caused.

On the other hand, in the case of domestic animals, the presumption of law is the other way. The plaintiff has to prove that the defendant was aware of the particular propensity of the animal to hurt human beings which was evinced in the case where, ex hypothesi, the plaintiff suffered. Unless the plaintiff proves that knowledge, at common law there is no liability upon the defendant. That liability has, in the case of dogs worrying sheep and in the case of certain other animals, been altered by legislation in Parliament. Apart from those exceptional statutory cases, however, there is no liability without proof of knowledge on the part of the defendant, or, as it is called in law, scienter.

In the present case, it was argued strongly on behalf of the appellant that the camel stands in a different category from that of ordinary English domestic animals, because it has not become a domestic animal in England. In my view, that argument is fallacious. If an animal does not exist in a wild state in any part of the world, it has ceased altogether to be a wild animal, whether it is in England or in any other country. It is a domestic animal, and an animal which has become trained to the uses of man, and, ex hypothesi, become accustomed to association with man. Therefore, in my opinion, that argument falls to the ground altogether. With regard to that argument, it is also well to remember that it is the function of the judge, and not of the jury, to decide whether an animal belongs to the class of domestic animals or to the class of wild animals. I need say no more for the moment on this head. I think that Clauson LJ, will probably add a few words on that aspect of the case. It is enough, for the purposes of my judgment, to say that in this case the judge decidedand, in my view, rightly decidedthat the camel must be regarded as a domestic animal.

Page 476 of [1940] 1 All ER 471

If that is so, then the cause of action which the plaintiff had was not on the higher basis of absolute duty which rests upon the keeper of a wild animal, as in the case of a man who brings on his land any foreign matter or animal likely to escape and do damage, which is part of the law of this country as laid down by the House of Lords in Rylands v Fletcher. His only course is either to prove the knowledge of this defendant of the propensity to bite on the part of this camelI keep open a possibility of a general propensity to bite in all camels, which may be expected, or ought to be expected, in any camelor, on the other hand, to establish a case of negligence. I deal with the first aspect left to him in the first instance. There was no evidence at all in the case that, at the time the plaintiff was unfortunately injured, the defendant had any knowledge that this camel had a propensity to bite people. Also, there was no evidence given by any witness that he had knowledge of a propensity of most camels, or of many camels, to bite. On the second point, however, counsel for the appellant submitted to the court that, as the defendant was a keeper of zoological gardens, the court ought to presume that he had expert knowledge of the habits and nature of all camels as a species. In my view, it is not necessary to do more than say that, on the facts of this case, as proved by the evidence, there was no such propensity established in fact as would bring into operation any such presumption, even if in law it exists. There was evidence, no doubt, that some camels did bite, and that there was a risk that any camel might bite. That was the evidence given by the plaintiffs witnesses. The evidence of the defendants witnesses, however, was very much stronger than that of the plaintiffs on that point. In my view, the question of the character of a particular species of animal and the question whether or not it is a wild animal being an issue to be decided by the judge, it may be that, where the question is whether or not a particular class of domestic animal, such as a camel, is alleged to have a general propensity to bite, that issue is also one which should be decided by the judge. I assume several points of law in favour of the plaintiffs argument in making those observations. In my view, however, it is not necessary for the court to decide any of them. It is clear that there was no evidence of knowledge on the part of the defendant that this camel had a propensity to bite, and there was no evidence that it had such a propensity. In my view, the plaintiffs own evidence, disregarding the defendants evidence altogether, did not amount to evidence of such a general propensity as would justify the proposition submitted by counsel for the appellant, even if it were valid, that this defendant, keeping an animal of that class, ought to be presumed, where he has a zoological gardens where he keeps the animal, to have such knowledge as would raise that presumption. That being so, in my opinion, the plaintiff made no prima facie case on that alleged ground, any more than on the ground that this particular camel had a vicious propensity, or that the

Page 477 of [1940] 1 All ER 471

defendant knew of that vicious propensity. Consequently, in my judgment, the judge was right in not leaving the issue on that part of the statement of claim to the jury. He rightly decided that there was no case made by the plaintiff to go to the jury on either of those two contentions. In saying that, I assume that counsel for the appellant made the wider case plain to the judge, though I am not sure that he did. In dealing with it, however, I have given him the benefit of the doubt.

The other aspect of the case was that of negligence. The way in which the plaintiff put it was this. He contended that the defendant ought to have known that it was dangerous to have so flimsy and ineffective a fence as this wire-netting fence within which the camel was kept. As I put it to counsel for the appellant in argument, however, that submission really rests upon the unproved assumption that the defendant knew that there was a danger that the camel might put its head over the fence, press down the fence, and bite somebody. If the defendant had not that knowledge, there was nothing to give rise to any duty on his part to have a more effective fence.

This case differs wholly from Aldham v United Dairies (London) Ltd. Mackinnon LJ was a party to that decision, and I leave it to him to make any observations he feels disposed to make upon that case. That, however, was a case where there was independent evidence of negligence, apart from any knowledge of a propensity on the part of the pony which did the damage in that case to cause injury to mankind. For that reason, in my view, that authority has no bearing at all upon the present case. That final conclusion leads me to the general conclusion that the judges judgment in this case was wholly right, and is open to no attack at all. The various cases on the law as to dangerous animals were considered by us, but the law is so well-known that I do not think it necessary to refer to them. The appeal must be dismissed with costs.

MACKINNON LJ. I agree. The law upon this topic has been settled for a very long while. The leading cases begin with Mason v Keeling, a decision of Holt CJ in 1699. The principle has nowhere been better laid down than in the judgment of Bowen LJ in Filburn v Peoples Palace & Aquarium Co Ltd, at p 261:

The broad principle that governs this case is that laid down in Rylands v. Fletcher, that a person who brings upon his land anything that would not naturally come upon it, and which is in itself dangerous, must take care that it is kept under proper control. The question of liability for damage done by mischievous animals is a branch of that law which has been applied in the same way from the times of Lord Holt and of Hale until now. People must not be wiser than the experience of mankind. If from the experience of mankind a particular class of animals is dangerous, though individuals may be tamed, a person who keeps one of the class takes the risk of any damage it may do. If, on the other hand, the animal kept belongs to a class which, according to the experience of mankind, is not dangerous, and not likely to do mischief, and if the class is dealt with by mankind on that footing, a person may safely keep such an animal, unless he knows that the particular animal that he keeps is likely to do mischief.

Page 478 of [1940] 1 All ER 471

This is a case of an animalnamely, a camelhaving done harm to the plaintiff, and the plaintiff sues the defendant. The question of the defendants liability depends primarily upon the question into which of the two classes of animals specified by Bowen LJ the camel comes. Is it of a class of wild animal of which individuals may be tamed, or is it of the other class, tame animals, mansuetœ naturœ, which notoriously may sometimes develop vicious habits? If it is in the second class, then, in order to establish the defendants liability, the plaintiff must prove that the defendant knew that the particular animal kept was likely to do mischief. The judge has held, upon overwhelming evidence, that the camel is within the class of tame animals, and not within the class of wild animals. The evidence was overwhelming that in fact camels are the oldest domesticated animals in the world.

That being so, though a particular camel may have vicious tendencies, as dogs or even cattle may have vicious tendencies, the defendant is not liable unless the plaintiff proves that the defendant knew that this particular animal was likely to do mischief. There being no evidence to that effect, the plaintiff fails to prove what is the essential element in his cause of action against the defendant, and the judge rightly gave judgment for the defendant. I agree that the appeal should be dismissed. I was rather invited by Scott LJ to say something about Aldham v United Dairies (London) Ltd, but that was so totally different a case that I do not think it necessary to do so.

CLAUSON LJ. I agree. I should be content to say that I can find no flaw in the judgment of the judge in the court below, but I should like to add just a word as to the part taken in the matter by the evidence given as to the facts of nature in regard to camels. That evidence is not, it must be understood, in the ordinary sense evidence bearing upon an issue of fact. In my view, the exact position is this. The judge takes judicial notice of the ordinary course of nature, and, in this particular case, of the ordinary course of nature in regard to the position of camels, among other animals. The reason why the evidence was given was so that it might assist the judge in forming his view as to what the ordinary course of nature in this regard in fact is, a matter of which he is supposed to have complete knowledge.

The point is best explained by reading a few lines from Stephens Digest of the Law of Evidence, art 62:

No evidence of any fact of which the court will take judicial notice need be given by the party alleging its existence, but the judge, upon being called upon to take judicial notice thereof, may, if he is unacquainted with such fact, refer to any person or to any document or book of reference for his satisfaction in relation thereto, or may refuse to take judicial notice thereof unless and until the party calling upon him to take such notice produces any such document or book of reference.

After all, the document or book of reference only enshrines the knowledge of those who are acquainted with those particular branches of natural phenomena, and, in this particular case, owing to some extent to the

Page 479 of [1940] 1 All ER 471

fact that there appears to be a serious flaw in a statement in a well-known book of reference on the matter here in question, the judge thought fit to permit, and properly to permit, oral evidence to be given before him by persons who had, or professed to have, special knowledge with regard to this particular branch of natural history. When that evidence was given, and when it was weighed with the statements in the books of reference which were referred to, the facts became perfectly plain, and the judge was able without any difficulty whatever to give a correct statement of the natural phenomena material to the matter in question, of which he was bound to take judicial notice. I agree that the appeal should be dismissed.

Appeal dismissed with costs.

Solicitors: Gordon Gardiner Kearton & Co (for the appellant); Watson Sons & Room (for the respondent).

W K Scrivener Esq   Barrister.

British Industrial Plastics Ltd, and Others v Ferguson and Others

[1940] 1 All ER 479


Categories:        CONTRACT: INTELLECTUAL PROPERTY; Patents        

Court:        HOUSE OF LORDS        

Lord(s):        LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        16, 17, 18 JANUARY, 8 FEBRUARY 1940        


Master and Servant Secret process Leaving agreement Disclosure to patent agent Patentability Inducement of breach of agreement Justification Conspiracy.

Tort Inducing party to break contract Bona fide acts.

The defendant D had been employed by the plaintiffs for many years. In 1932, he left their employ, and thereafter entered into a leaving agreement with them whereby he undertook, inter alia, until 31 March 1934, not to interest himself directly or indirectly in the manufacture or sale of certain chemicals which were used in a secret process of the plaintiffs. In June 1934, D approached the defendant company and suggested that he had a process of his own which might be of use to them. They sent him to their patent agents, who, after investigation, reported that the process was patentable, and in due course application was made for a patent. The plaintiffs commenced an action against D, the defendant company, and F, its managing director. The claim against D was for damages for breach of contract, that against the defendant company and F was for damages for inducing the breach of contract, and that against all the defendants was for damages for conspiracy. It was found that the defendant company had acted honestly, but in a muddle-headed way, and that, though, when the defendant D first approached them, they suspected that his process might have been secret and the plaintiffs property, they were under the impression that, if this process were patentable, it could not be secret:

Held (i) as there was no evidence that the defendant company had actual or constructive knowledge that the process disclosed was the process of the plaintiffs, there was no ground of action.

(ii) if the defendant company had induced D to reveal the process to their patent agents, it could not be held that patent agents, in giving advice, filled the character of agents in law.

Order of Court of Appeal ([1938] 4 All ER 504) affirmed.

Page 480 of [1940] 1 All ER 479

Notes

Where a contractual relationship exists between parties, it is a tort for anyone wrongfully to induce one of the parties to break the contract so as to cause damage. There is a right of action whether or not specific damage has accrued. The word “wrongfully” in such a case is here construed to mean knowingly rather than maliciously. It would seem to be sufficient that a party should act bona fide in the matter, and he will not be liable to an action by reason of the fact that he has acted mistakenly, so long as it cannot be said that he was wilfully shutting his eyes and excluding a means of knowledge. Thus, where a party suspects that there is a possibility that an act of his will in effect induce a breach of contract, and he adopts means of testing that possibility which he honestly believes to be a proper test, he does not render himself liable to an action because he is mistaken as to the efficacy of that test.

As to Inducing Breach of Contract, see Halsbury (Hailsham Edn), Vol 32, pp 172, 173, para 248; and for Cases, see Digest, Vol 42, pp 986990, Nos 167194.

Appeal

Appeal by the plaintiffs from an order of the Court of Appeal (Slesser, MacKinnon and Finlay LJJ), dated 24 November 1938 and reported at [1938] 4 All ER 504, affirming an order of Porter J, dated 14 February 1938. The facts and the arguments are fully set out in the opinions of Lord Russell of Killowen and Lord Romer.

Rt Hon Sir William Jowitt KC, K E Shelley KC and Guy T Aldous for the appellants.

A T Miller KC and James Mould for the respondents.

8 February 1940. The following opinions were delivered.

LORD ATKIN. My Lords, I have had the opportunity of reading in advance the opinion about to be delivered by my noble and learned friend Lord Russell of Killowen. I entirely agree with it, and I have nothing to add.

LORD THANKERTON. My Lords, I have had the privilege of reading the opinions about to be delivered by my noble and learned friends Lord Russell of Killowen and Lord Romer, and I desire to express my concurrence in both of them.

LORD RUSSELL OF KILLOWEN. My Lords, the facts and events which led up to this litigation are fully stated in the judgment of Porter J and I do not propose to refer to them further than is necessary to make plain the reasons why I agree with the Court of Appeal in thinking that the order made in pursuance of that judgment should stand. The effect of the judgment and order was that judgment was entered (i) for the defendants John Edward Ferguson and James Ferguson and Sons Ltd, with costs, and (ii) for the plaintiffs against the defendant Doherty for £15,000 with costs. There was no appeal by the defendant Doherty, but the plaintiffs appealed and asked that the defendant Ferguson and the limited company be ordered to pay to them the sum of £15,000 by way of damages, and the costs of the trial and appeal. That appeal was dismissed with costs, and the plaintiffs have now appealed to your Lordships House.

Page 481 of [1940] 1 All ER 479

The claim of the plaintiffs (I treat them as one) against the respondents is based upon an allegation that they wrongfully and maliciously induced and procured the defendant Doherty to commit breaches of his agreements of service with his former employers (the plaintiffs) by disclosing to the respondents information relating to the processes used by the plaintiffs, which information to their knowledge was secret and confidential, and the exclusive property of the plaintiffs. That allegation, if proved to the satisfaction of the trial judge, undoubtedly discloses and establishes a good cause of action, which would entitle the plaintiffs to recover damages against the respondents. The judge was satisfied that all but one of the essential ingredients of the cause of action had been proved. What, in his view, had not been proved was the essential ingredient of knowledge on the part of the respondentsthat is, knowledge that the process disclosed by Doherty was not his property, but the property of his former employers.

Let me state shortly how, as I read his judgment, the judge reached this conclusion. He thought, as a result of all the evidence relating to the interview of 27 June 1934, (i) that Ferguson and his co-director Welch suspected that the process which Doherty said was his own property might (since Dohertys knowledge was in the main derived from his experience at the plaintiffs works) be the plaintiffs process, or part of it, (ii) that, frightened by their recollection of the results of their recent dishonesty in regard to the Bakelite secret process, they declined to hear any description of the process until they were satisfied that the process was truly the property of Doherty and of no one else, (iii) that they muddle-headedly and illogically, but in fact, believed that, if patent agents found the process to be patentable, that would establish definitely that the process belonged to Doherty, and to no one else, (iv) that they sent Doherty to Messrs Haseltine, Lake & Co, in order to make sure, before any disclosure was made to them (the respondents), that the process was the property of Doherty, and of no one else, and (v) that, since Messrs Haseltine, Lake & Co did find the process to be patentable, the respondents had no knowledge, when they induced the disclosure to themselves, that the process was the property of the plaintiffs.

My Lords, if there was evidence to support those conclusions of the judge, this appears to me to be essentially a case in which we should be slow to take a different view from that of the person who had the overriding advantage of seeing and hearing the witnesses, and observing their demeanour in the witness-box. In my opinion, there was, without doubt, evidence upon which the trial judge could properly acquit those through whom the limited company acted of acting with a fraudulent mind, and upon which he could properly make the following findings as to the state of mind and beliefs of Ferguson and Welch, which I cite from his judgment:

It did not occur to them that Doherty could be making a false claim, or that

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he might be revealing his employers secrets, provided that, before the revelation, they had been assured that he had something which could be the subject of a patent. To them, that fact was decisive of the question whether or not they were obtaining the plaintiffs secrets. … they thought … that the process, once found to be patentable, would be proved not to be secret. … I think … that their refusal to have the process disclosed then was because they were suspicious, and wished to know whether or not their suspicions were justified, and that they referred the matter to their patent agents in the beliefillogical but actualthat, if those agents found the process patentable, their suspicions would be proved to be unfounded, and the process neither secret nor confidential.

When the judge uses the words “proved not to be secret” and “proved to be … neither secret nor confidential,” he obviously means proved not to belong to anyone but Doherty.

Great reliance was placed by the appellants upon the fact that Porter J expressed the view that, if Ferguson and Welch had induced Doherty to disclose the process at the interview of 27 June 1934, they would have been liable, because of their suspicion that what he was going to disclose was the property of his former employers. Whether or not this would be so must, I should think, depend upon how far, in all the circumstances of the case, the “suspicion” approximated, or was equivalent, to knowledge. In view, however, of the judges other findings, and of what in fact happened, this hypothetical finding of liability is, upon this part of the case, of minor importance.

My Lords, feeling myself not justified in differing from the conclusions on the evidence which were reached by Porter J and which I have set out above, I think that the appeal must fail so far as regards the only disclosure pleadednamely, disclosure to the respondents themselves. As pleaded, it would seem, from the particulars, that the disclosure to the respondents which was relied upon was the disclosure to the world at large by the acceptance of the complete specification, whereas disclosure to the respondents in fact took place immediately after the lodging of the provisional specification. However, which is the relevant date is, for this purpose, immaterial, because, upon the findings of the judge, before either disclosure took place, the proof, which to the respondents was decisive as to Dohertys ownership of the process, had already been forthcoming. The plaintiffs, however, contended that they were entitled to succeed on this appeal on the ground of the disclosure made by Doherty to Messrs Haseltine, Lake & Co in accordance with the suggestion or requirement of the respondents at the interview of 27 June 1934. The judge found that the respondents then suspected that the process was the secret process, and the property of the plaintiffs. That being so (so ran the argument), the respondents shut their ears to anything which might make their suspicion a certainty, and are consequently fixed with constructive knowledge of the truth. With that knowledge, they induced Doherty to reveal the process to their patent agents, and disclosure to their agents is disclosure to themselves. A short answer would be that this case is nowhere pleaded. The only plea is disclosure to the respondents themselves, and, even if disclosure to an agent in the legal sense came within the plea, people

Page 483 of [1940] 1 All ER 479

who carry on the profession of advising in regard to applications for patent rights do not appear to me to fill the character of agents in giving advice, any more than does a counsel who writes an opinion upon a question of patent law. There is, however, a further answernamely, that the contention is made in the teeth of the judges findings. So far from the respondents closing their ears to anything which might turn their suspicion into a certainty, and so being fixed with constructive knowledge, they adopted a course (as found by Porter J) for the purpose of ascertaining, and by which they thought they would decisively ascertain, whether or not the process was the property of the plaintiffs. Those being the facts, it would be, in my opinion, impossible to hold that the respondents possessed, constructively or otherwise, the knowledge which is an essential ingredient to the cause of action. For these reasons, I would dismiss this appeal with costs.

LORD THANKERTON. My Lords, I am requested by my noble and learned friend Lord Wright to express his concurrence in the opinion which has just been delivered by my noble and learned friend Lord Russell of Killowen.

LORD ROMER. My Lords, the appellants by their statement of claim in the action alleged that the respondent company and its managing director, the respondent Ferguson (hereinafter called the respondents), wrongfully induced the defendant Doherty to commit a breach of his agreement of service with the appellants by disclosing to the respondents a secret process of manufacture, the property of the appellants. That the respondents did in fact induce Doherty to make such a disclosure of the process, and that such disclosure was in breach of Dohertys service agreement, is not now disputed, but it is plain that this did not give the appellants any right of action against the respondents unless the latter at the time of the disclosure had actual or constructive knowledge that the process disclosed was the process of the appellants. The question whether or not the respondents had such knowledge is purely one of fact. Porter J, who tried the action, decided that question in favour of the respondents. That there was evidence upon which he could properly so decide it is, in my opinion, quite clear, if Ferguson and his co-director Welch were honest witnesses. Porter J came to the conclusion that they were. He found that they honestly, though stupidly, thought that, as their patent agents had reported that the process was patentable by Doherty, it could not possibly be the process in use by the appellants, secret or otherwise. Their stupidity consisted in not realising that the patent agents would concern themselves solely with the question of anticipation by existing patents, and would not concern themselves with any question of want of subject-matter owing to prior user. In the words of Mackinnon LJ in the Court of Appeal, the honesty of Ferguson was vindicated at the expense of his intelligence.

Page 484 of [1940] 1 All ER 479

The same may be said of Welch. However, their honesty was vindicated by Porter J. who had the great advantage of seeing them and observing their demeanour in the witness-box. It would be quite impossible for your Lordships, who have not had that advantage, to arrive at a different conclusion. The action, so far as it was based upon the disclosure to the respondents themselves, was, therefore, as held by the Court of Appeal, rightly dismissed.

Before that court, however, the appellants sought to establish an alternative claim against the respondents, based upon the disclosure of the process by Doherty to the respondents patent agents, but not advanced at the trial before Porter J. This disclosure naturally took place before the patent agents had reported to the respondents that the process was patentable, and at a time when it might have been contended that the respondents were affected by constructive knowledge of the ownership of the process, for the respondents were suspicious at that time that the process might turn out to be the process of the appellants, and Porter J was of opinion that, if, at that time, the respondents had induced, Doherty to reveal the process to them, they would have been liable. How, then, it was argued, could they escape liability by inducing Doherty to break his agreement with the appellants by disclosing the process to the patent agents? It is a plausible argument. However, one short and sufficient answer to it is that this alternative contention was not open to the appellants on the pleadings, and was not even mentioned at the trial before the judge. It was not open on the pleadings, for I agree with my noble and learned friend Lord Russell of Killowen whose opinion just delivered I had the privilege of seeing beforehand, that, even if disclosure to an agent of the respondents were covered by the allegation in the statement of claim to which I have referred, the patent agents were in no sense the agents of the respondents. This objection might have been met by allowing an amendment of the pleadings on suitable terms, but the objection that the alternative claim was not advanced at the trial is a different matter. It is not a merely technical objection. It is one of substance. Had the claim been then raised, evidence might have been specifically directed to a question upon which I am not at present at all satisfied. It is the question whether the disclosure by Doherty to the patent agents can be said to have been induced by the respondents. I have studied the evidence given by Ferguson and his co-directors as to their first interview with Doherty, and I am not satisfied that they did more than intimate to him that they could accept no disclosure of the process until they were assured by patent agents that the process was patentable. If this were so, I fail to see how they could properly be charged with having induced him to make a disclosure to the patent agents, even though they mentioned their own patent agentsthat is to say, the patent agents whom they usually employedas persons whose opinion they would be willing to accept, and even though they agreed to pay the patent agents fees. However this may be, though, the question

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of inducing or not inducing a disclosure to the patent agents must turn upon the further question whether the directors urged Doherty to make such a disclosure or merely left it to his option whether or not he would make it. Had the point been raised at the trial, the evidence would have been specifically addressed to this further question. As the point was not raised, no attention was paid to it by the judge or by the respondents counsel. It is accordingly too late to raise the question now. For these reasons, I agree that the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Crane & Hawkins (for the appellants); Chas G Bradshaw & Waterson (for the respondents).

Michael Marcus Esq   Barrister.

Naas v Westminster Bank Ltd

[1940] 1 All ER 485


Categories:        TRUSTS        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        29, 30 NOVEMBER, 4, 5, 6, 13 DECEMBER 1939, 6 FEBRUARY 1940        


Deeds Settlement Execution by one party Settlement in satisfaction of covenant and containing release of covenant Sufficiency of execution by one party Execution upon faith of execution by other parties.

In a deed executed in 1923, A covenanted to pay B a weekly sum to be applied to the maintenance of herself and a son then expected to be, and afterwards in fact, born. By that deed, A had an option to execute a settlement by which similar benefits should be secured to B and the son, such settlement to be in satisfaction of the weekly sum payable under the deed. A settlement was engrossed to which A and B were parties, the plaintiff bank also being named as a party as the trustee. The settlement secured to B and the infant benefits similar to those in the deed of 1923, and also contained a release of the covenant in that deed. The settlement was executed by A and unconditionally delivered to B, who, it was alleged, refused to execute it, and eventually returned it unexecuted. The property settled was India stock, and, after the execution of the settlement by A, this was sold by the bank and the proceeds paid to A. The bank did not execute the settlement. B sought a declaration that the handing over of the proceeds of sale constituted a breach of trust:

Held (i) the settlement, being an absolute and unconditional declaration of trust in its terms, and not having been delivered as an escrow, became binding on the settlor, although not executed by B.

(ii) there was no evidence that the settlement was executed on the faith either that B would execute the deed of settlement or that she would grant a release from the obligations under the deed of covenant. The court will refuse to enforce a deed against an executing party on the ground of non-execution by another party only where the obligation sought to be enforced is different from the obligation which would have been enforceable if the non-executing party had executed the deed.

(iii) in the circumstances, the return of the settlement unexecuted did not amount to a disclaimer of the rights thereunder, as there was no

Page 486 of [1940] 1 All ER 485

knowledge of the interest alleged to be disclaimed, and no evidence of an intention to disclaim.

Order of Court of Appeal ([1938] 3 All ER 652) reversed and order of Morton J restored.

Notes

Sir George Jessel MR, in Luke v South Kensington Hotel Co, stated that two persons, executing a deed on the faith that a third will do so, are not bound by the deed if the third does not execute it, provided that other parties are aware that it was executed on that understanding. It is here decided that this statement is too wide. The court will refuse to enforce the deed in such circumstances where its enforcement would lead to injustice and the party against whom it was enforced would suffer some substantial loss. The statement was only an obiter dictum by Sir George Jessel MR, and the position is here fully explored by the House of Lords.

As to Execution by One Party, see Halsbury (Hailsham Edn), Vol 10, p 86, para 134; and for Cases, see Digest, Vol 17, pp 203205, Nos 140169.

Cases referred to

Morgan v Pike (1854) 14 CB 473, 17 Digest 223, 384, 23 LJCP 64, 22 LTOS 242.

Macdonald v Law Union Insurance Co (1874) LR 9 QB 328, 17 Digest 223, 376, 43 LJQB 131, 30 LT 545.

May v Belleville [1905] 2 Ch 605, 17 Digest 223, 378, 74 LJCh 678, 93 LT 241.

Luke v South Kensington Hotel Co (1879) 11 ChD 121, 17 Digest 222, 370, 48 LJCh 361, 40 LT 638.

Underhill v Horwood (1804) 10 Ves 209, 26 Digest 139, 1031.

Re Dover, Hastings & Brighton Junction Ry Co, Carews Case (No 2) (1855) 7 De G M & G 43, 17 Digest 222, 367, 24 LJCh 769, 24 LTOS 329.

Evans v Bremridge (1856) 8 De G M & G 100, 17 Digest 222, 366, 25 LJCh 334, 27 LTOS 8.

Re Smith, Fleming & Co, Ex p Harding (1879) 12 ChD 557, 26 Digest 50, 344, 48 LJBcy 115, 41 LT 517.

Cooper v Evans (1867) LR 4 Eq 45, 26 Digest 78, 557, 36 LJCh 431.

Bowker v Burdekin (1843) 11 M & W 128, 17 Digest 211, 231, 12 LJEx 329.

Xenos v Wickham (1866) LR 2 HL 296, 17 Digest 204, 149, 36 LJCP 313, 16 LT 800, revsg (1863) 14 CBNS 435.

Cock v Richards (1805) 10 Ves 429, 7 Digest 169, 72.

Butler & Bakers Case (1591) 3 CoRep 25a, 17 Digest 205, 169.

Bolitho v Hillyar (1865) 34 Beav 180, 24 Digest 950, 39.

Peto v Peto (1849) 16 Sim 590, 24 Digest 950, 38, 13 LTOS 134.

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR, Scott and Clauson LJJ), dated 28 July 1938, and reported sub nom Westminster Bank Ltd v Wilson [1938] 3 All ER 652, reversing part of an order of Morton J, dated 21 January 1938. The facts and arguments are fully set out in the opinion of Lord Russell of Killowen.

Serjeant Sullivan KC, J M Gover KC, F E Skone James and Arthur D Houston for the appellants.

Rt Hon Sir William Jowitt KC, H Wynn Parry KC, and Valentine Holmes for the respondents.

Page 487 of [1940] 1 All ER 485

6 February 1940. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, I have had the advantage of reading the reasons of my noble and learned friend Lord Russell of Killowen on this appeal, and I find myself in agreement with them. No useful purpose, therefore, would be served by a restatement of the somewhat complicated facts and documents, and, if it were not for the circumstance that, like my noble friend, I felt compelled to differ from the judgments of the Court of Appeal, I would add nothing of my own. The appeal, however, raised points of considerable importance, and, out of respect for the Court of Appeal, I will state in my own language the grounds on which, as I viewed the case, the appeal was allowed and the judgment of Morton J restored.

The first point to be considered is the effect on the deed of covenant, dated 1 February 1923, of the settlement executed in August 1925, by the covenantor (a gentleman whom I propose to call the settlor). Is the settlement one which is in pursuance of, and in accordance with, the option given to the settlor by cl 4 of the deed of covenant, or, alternatively, is the declaration contained in cl 17 of the settlement a declaration which, under cl 5 of the deed of covenant, is final, binding and conclusive on all parties? In either event, the covenant for payment in cl 1 of the deed of covenant comes to an end under the express terms of cl 1 of that deed. In answering this question, it is to be noted that the settlement was plainly intended to be such a settlement as was contemplated by the deed of covenant, since the settlement contains a recital of that deed, including cl 5 thereof. It is true that the settlement gives to Miss Wilson a life interest which comes to an end if she does, or attempts to do, any act or thing, or any event happens, whereby, if the same were payable to her absolutely for her life, she would be deprived of the right to receive the same or any part thereof, but the deed of covenant contained a substantially similar limit to the covenant for payment in cl 1. Assuming this would not be an annuity “during the life” of Miss Wilson, as contemplated by cl 4 of the deed of covenant read alone, we have to bear in mind the provision in cl 5 which gives the settlor a free discretion to insert in the settlement under the option “any trusts not repugnant to the preceding text,” coupled with a provision that:

… any declaration by him that the same is in satisfaction of the provisions hereinbefore contained shall be final, binding and conclusive.

I have formed a clear opinion that these two clauses are sufficient to justify the insertion of the protected life interest in the settlement, and that the deed of covenant came to an end to all intents when the settlor executed the settlement in August 1925.

It may be said that this construction of the deed of covenant is one as to which there can be a legitimate difference of opinion, as is indeed evident from the judgments of the Court of Appeal. This leads me to my second point, as regards which I cannot see any room for legitimate doubt, and that is that Miss Wilson could not knowingly accept any

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benefit under the settlement without releasing all her rights, if any, under the deed of covenant. The settlement proceeds on the footing that those rights are extinguished. It is clear beyond doubt that a party who knowingly takes the benefit of a deed is bound by it although he has not executed it. Her own solicitor had approved the form of the settlement, so that there is no question of surprise or duress or misunderstanding. The principle I have stated is to be found in the year books, but it is not necessary to go back earlier than Coke  upon Littleton 230 b, note (1). There are a number of later authorities, see Morgan v Pike, Macdonald v Law Union Insurance Co, at p 330, and May v Belleville, at p 612. It follows that it was immaterial whether or not Miss Wilson executed the settlement, if she accepted her allowance from the respondents (whom I will call the bank) as trustees of the settlement. She did in fact accept that allowance from the bank from the time when the settlement was executed until November 1926. In my opinion, she was bound by the settlement long before the settlor purported to revoke it on the alleged ground that the lady had not executed it.

However, it is then assertedand this, I think, is the third pointthat it was more satisfactory to the settlor to have an express release by Miss Wilson, as provided by cl 16 of the settlement, that the instrument provided for such a release, and that the deed was executed by the settlor “upon the faith” that Miss Wilson would execute it. It is true, as pointed out by Sir Wilfrid Greene MR, that it was open to the settlor to stipulate for a release, and that, by the form of the deed, a release was to be given. On the other hand, it is admittedand I doubt not rightly admittedthat the settlement was not executed as an escrow. Nor is it argued that, upon the true construction of the settlement, there was an implied condition in law that Miss Wilson should execute the settlement. Nor is it suggested that the settlor, when he delivered the document as a deed, made any statement to anyone, or that he expressed an intention that it was not to take effect until Miss Wilson had executed it. What is contended is that he can escape liability under the settlement on an equitable principle which was formulated by Sir George Jessel MR in Luke v South Kensington Hotel Co, at p 125:

It is well settled that if two persons execute a deed on the faith that a third will do so, and that is known to the other parties to the deed, the deed does not bind in equity if the third refuses to execute …

This dictum, for it was no more, having regard to the facts of the case, now requires consideration. Sir George Jessel MR was purporting to state the existing law, which he said was well settled. Your Lordships have, I think, been referred to all the reported cases on the subject, and I think it is safe to say that, stated in the wide form which Sir George Jessel MR employed, it is not to be found in any previous

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authority. There are, I think, three typical cases which directly deal with the pointnamely, Underhill v Horwood, Re Dover, Hastings & Brighton Junction Ry Co, Carews Case (No 2), at p 52, and Evans v Bremridge. All the cases, so far as I can find, relate to persons who were undertaking obligations of guarantee or suretyship on the terms, plain from the instrument or instruments themselves, that others would share their liability. All are cases where it was sought to impose on a man a greater liability than he had ever intended to bear, where his intention was not in doubt, and where, if he were not able to get equitable relief, he would suffer substantial loss.

It is necessary to mention here that, apart from the equity relied on, there is no doubt as to the position at law. The settlement having been delivered unconditionally, and not as an escrow, it was, as Sir Wilfrid Greene MR said [at p 655] “unquestionably the deed of the settlor.” The settlement, according to its terms, had the effect of vesting equitable rights of property in the lady and the infant. The deed, as Sir Wilfrid Greene MR also pointed out, was effective to convey the property and to bind the settlor according to its terms, notwithstanding that the lady did not execute it, and he cited some out of the many authorities which showed beyond doubt the legal view of the effect of such a deed. It became, as he said, at p 658, “immediately effective, according to its terms, so far as the settlor was concerned,” and, as he said, at p 659:

… effective to divest him of his equitable interest immediately upon its execution by him, and to vest it in the beneficiaries.

My Lords, I think all your Lordships are of opinion that the judgment to which I have referred up to this point is unquestionably correct. The contrary view entertained by Scott and Clauson LJJ, who treated the matter as analogous to one of offer and acceptance, is a little difficult to follow in the case of a deed with declarations of trust, and counsel for the bank found himself unable to support it. I think it sufficient to say, following Sir Wilfrid Greene MR and without repeating the remarks on this point of my noble and learned friend Lord Russell of Killowen, that it appears to me that there was an unconditional declaration of trust by the settlement, and nothing remained to be done by the settlor. Miss Wilson no doubt could, but the infant could not, disclaim, and there was clearly no disclaimer by Miss Wilson of the grant to her.

Having said this, I must now return to the equity relied on, and first I must remark that this is clearly one of those equities whereby the Court of Chancery was accustomed by injunctions in personam (in effect) to override judgments at common law in order to correct harshness or to prevent the legal right being made an instrument of oppression. There are a great number of examples to be found in the books, but I do not think there can be found one in which the Court

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of Chancery interfered with the legal right unless it was satisfied that it was necessary to prevent serious injustice.

My Lords, with all respect to the memory of a great judge, I must state my opinion that the principle is too widely stated by Sir George Jessel MR in Luke v South Kensington Hotel Co, and I doubt the wisdom of any attempt rigidly to define it. The words “if two persons execute a deed on the faith that a third will do so” probably mean “in the expectation that a third will do so and with the intention that the two persons will not otherwise be bound.” Sir George Jessel MR adds the words “and that is known to the other parties,” but I do not think, as the authorities above cited show, that that addition is justified in all cases. It may be observed parenthetically that, in the present case, there is no evidence to show that Miss Wilson knew that the settlor had executed the settlement “on the faith” that she too would do so. However, I think that two propositions as regards the equity in question may safely be assertednamely, (i) that the intention of the person who is setting it up is not a matter of mere conjecture, and (ii) that the equity comes into play only when, in its absence, the legal effect of the unconditional execution of the deed will lead to substantial injustice.

On the first point, it is sufficient to cite a passage from the judgment of James LJ in Re Smith, Fleming & Co, Ex p Harding, at p 564. One Fleming, a partner in a firm named Nicol & Co, in which there were four other partners, had signed a guarantee in which two only of the other partners had joined. James LJ observed as follows, at p 564:

But it is said that by the original agreement it was intended that all the five partners in Nicol & Co should join in the guarantee, and as only three of them did join, the liability cannot be enforced against those three. The answer is that that is an equity which must be alleged and proved. If three persons sign a document, and it is said that they are not liable, because the intention always was that they should not be liable unless some other persons should also sign, that is an equity to get rid of a legal liability. Fleming has not alleged anything of the kind. …

On the second point, I think that the nature of the equity is itself enough to prove that the equity cannot be invoked on a matter of form rather than substance. If authority is needed, I think Cooper v Evans may be referred to. The facts in that case might perhaps have justified a different conclusion, but in principle I have no doubt that the decision was correct. It is hardly necessary to say that the Judicature Acts have not altered the grounds on which the equitable principle is applicable. I will add that I am unable to see any ground on which the equity relied on could ever be applied so as to destroy an equitable interest unconditionally created in favour of a person who, not being a party to the deed, was, of course, not intended to execute it.

My Lords, in the view I have expressed that the execution of the settlement by Miss Wilson was a matter of no importance to the settlor, and in view of the fact that he, though called as a witness at the trial, gave no evidence that he executed the settlement on the faith that

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Miss Wilson would also execute it, I am of opinion that there is no ground in this case for the application of the equity in question, which seems to have been due to the ingenuity of counsel rather than to the true intentions of the parties. For myself, I see no reason to suppose that the settlor cared two straws whether or not the lady executed the document. He was making a generous provision for the infant in whose future he was at that time greatly interested, and I cannot believe that he would have desired this provision to fail merely because Miss Wilson was seeking, as a condition of her execution, to have the deed of covenant destroyed, for reasons which probably commanded his sympathy. If he had made any inquiry on the matter from his solicitors, he would certainly have been told that the lady could not claim both under the deed of covenant and under the settlement, and that it was perfectly obvious to all concerned that it was to her interest to claim under the latter. In any case, it mattered nothing to him, since, as I have pointed out, she could not claim to be paid under both instruments. The view of the Court of Appeal as to the intention of the settlor in this matter is, with all respect, founded on conjecture alone. I do not think that any of your Lordships are disposed to make the same conjecture, and it seems clear to me that an equity to set aside an executed deed cannot be applied on so doubtful a foundation.

I regret to find myself differing on another point from the Court of Appeal. Let us assume that the equity was applicable, and that the settlor could insist on the execution of the settlement by the lady. What then? Is there anything on the facts to show that she declined to execute it? She tried, no doubt, to get the settlor to agree to the destruction of the deed of covenant. This desire on her part could be rational only if the settlement was to be effective. The negotiations on this minor point came to a head, and were settled between the settlor and the lady in December 1925 and her letter of 23 December to the settlor, coupled with her evidence, shows quite clearly that she was relying on the settlement, and, as the trial judge held, that she was willing to sign it. She travelled on the Continent after that date, leaving the settlement behind, and there was much delay, but she was paid by the bank as trustees £130 per quarter out of the income of the stock in settlement. My noble and learned friend Lord Russell of Killowen in his opinion has commented on the correspondence, and I agree with his remarks. I will add, however, that to me it is clear that Miss Wilson never refused to execute the settlement, and that the assertions on behalf of the settlor that she had done so are wholly inaccurate. As I have said, she was actually receiving £130 per quarter from the bank out of the income of the settlement. Never, from first to last, was she told that the settlor peremptorily required her to execute the document, nor did he or his solicitors seek to make her execution within a limited time of the essence of the matter. When the solicitors for the settlor were endeavouring to get for him the proceeds of sale of the settled stock,

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and wrote to her solicitors on the matter in February 1927, they received the answer that the lady was prepared to execute the settlement. The contention then raised was that the settlement was merely an offer, a proposed settlement, which the settlor had “revoked.” These contentions seem to me to be without foundation, and I need not further deal with them. Reliance is, however, placed on the facts that on 16 May 1927, the solicitors for Miss Wilson returned the settlement to the settlor unexecuted and that she thus made clear her intention not to execute it. Quite apart from the difficulty that she could not put an end to the equitable assignment in favour of the infant, I do not so understand the letter. The settlement was returned as the result of demands and threats of divers legal proceedings, and after a distinct offer by her on 20 April 1927 to execute the settlement. Moreover, it had been repeatedly and erroneously stated that the settlor had revoked the document, which, of course, implied that he was entitled to revoke it, and that the document was valueless, while as a piece of paper it was the property of the settlor. In these circumstances, I can attach no importance to the fact that the settlement was returned in a letter which plainly reserved the rights of Miss Wilson and the infant to have a settlement in the same terms executed by the settlor.

The decision of the Court of Appeal was naturally affected by the view that they were bound by the decision of that court in Luke v South Kensington Hotel Co, and by their desire to follow the statement by Sir George Jessel MR of the equity, which I think they looked upon as entitling the settlor to say he was no longer bound by the deed which he had sealed and delivered. For the reasons I have given, I cannot agree with this view. I think that the equitable interests created by the settlement were never destroyed, and that whether or not Miss Wilson executed the settlement. In my view of the facts, she never refused to execute it. In my opinion, even if she was bound to execute it, time was not of the essence, and her formal offer to execute it in February 1927 was not too late.

The bank unfortunately were not fully informed as to the facts by the solicitors of the settlor. They had, however, full notice of the settlement and its contents before they handed back the proceeds of sale of the stock to the settlor. They paid until November 1926 the quarterly sums payable under the settlement to Miss Wilson. They were given copies of certain letters inaccurately alleged to show a definite refusal by her to execute the settlement. They realised on 16 November 1926 that they ought to obtain her consent to handing the proceeds to the settlor. How they thought this would protect them against a claim on behalf of the infant does not appear. They rightly stated on 18 November 1926 that it was quite clear that they had notice of the settlement. With some trouble, they obtained a copy of it. On 24 January 1927 they obtained from the solicitors for the settlor a promise to give notice to Miss Wilson of the proposed withdrawal of the trust funds by the settlor. Strangely

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enough, they gave an undertaking not to communicate with their supposed beneficiary on the subject of the proposed withdrawal. They preferred to accept the statements of the solicitors for the settlor, coupled with an indemnity given by him, rather than to take the usual course. Ultimately, on 11 June 1927 they took the step of writing to the solicitors for the lady to say that they proposed to pay over the fund to the settlor within a week unless proceedings were commenced to restrain them from doing so. They were left to take their own course. No proceedings were taken, and the settlor received the trust funds. The problem which was presented as regards the deed of covenantnamely, whether or not it was at an end from the date when the settlement was executedwas never solved, nor did the banks advisers, as far as one can see, tackle the question as to how the declaration of trust in favour of the infant had been rendered null and void. I agree with the judge who tried the case both on the facts and on the law, and I do not see how the bank can escape liability.

My Lords, there was great delay by the lady in asserting her rights against the bank, and her numerous changes of solicitors, with, it would seem, somewhat contradictory instructions, were probably not conducive to her interests in the matter. I am glad to note that from the start the bank generously stated that, if the infants claim was held to be a good one, they did not desire to take the point that the lady might, by her conduct, have disentitled herself to relief. It was, therefore, unnecessary to consider whether or not there was anything special in the ladys conduct which might have prevented her succeeding on her counterclaim. For the above reasons, My Lords, I was of opinion that the appeal should succeed and that the order of Morton J should be restored with costs here and below.

LORD RUSSELL OF KILLOWEN. My Lords, the question which was in issue on this appeal can be shortly stated. It was whether the plaintiff bank were trustees of a sum of India Stock for the defendants, and acted in breach of their trust in paying over the proceeds of sale of that stock to the former owner thereof. Morton J decided both questions in the affirmative, and, on a counterclaim by the defendants to the action, gave relief against the bank upon that footing. The Court of Appeal discharged the judgment of Morton J and dismissed the counterclaim. The defendants then appealed to your Lordships House.

Although the issue can thus be shortly stated, it will, I fear, be necessary to mention the relevant facts in some detail, in order to make clear the grounds for my opinion that the judgment of Morton J was right. On 1 February 1923, a gentleman (whom I will without prejudice refer to as the settlor) executed a deed of covenant with the first appellant (therein called the beneficiary) under which he covenanted to pay to her as from 31 March 1923, such a weekly sum as, after payment of income tax thereon, would leave the clear sum of £10 per week. This sum was

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to be paid to her during her lifetime (or until she should do or permit some act or event, whether voluntary or involuntary, by which the same, if her absolute property, would be forfeited, or vested in or payable to some other person or persons or a corporation, or inconsistently with her personal enjoyment of the whole) or:

… until the execution by the settlor of a settlement in accordance with his option in that behalf [thereinafter contained].

The option referred to was contained in cl 4, which, with cl 5, must be quoted verbatim:

4. Provided always that in case the settlor shall by will bequeath or by settlement secure to the beneficiary during her life an annuity of equal or greater amount than the weekly sum hereby made payable as aforesaid then the annuity so bequeathed or secured shall be in satisfaction of such weekly sum which shall in that case cease to be payable from such date.

5. Any provision made by the settlor for the beneficiary as in the last clause is contemplated may contain any trusts not repugnant to the preceding text which the settlor may desire and any declaration by him that the same is in satisfaction of the provisions hereinbefore contained shall be final binding and conclusive on all parties.

In the autumn of 1923, the settlor became desirous of making a settlement in favour of the first appellant and the infant appellant, and, with a view thereto, procured to be inscribed in the banks name a sum of £15,000 India 4½ per cent stock to be held meanwhile to the settlors order, pending further instructions. As the bank stated in their letter to the first appellant of 6 May 1924:

… the settlement has not yet been executed, and for the time being we are merely holding the stock at the disposal of the settlor.

Some delay occurred before the draft of the settlement had been approved by all parties, but ultimately the settlement was engrossed and executed by the settlor on or shortly before 12 August 1925. It was admitted that the deed was signed, sealed and unconditionally delivered by the settlor. About that there was no dispute. The appeal was to be decided on that footing. The settlors execution was not attested, nor was the deed dated, but neither fact is in any way material.

The contents of the deed must now be noticed. It is expressed to be made between the settlor of the first part, the first appellant (therein called the first beneficiary) of the second part, and the bank of the third part. It recites (i) the deed of covenant of 1 February 1923, and, in particular, cll 4 and 5 thereof, (ii) that the settlor was desirous to make such provision as thereinafter contained as well for the first appellant as for the infant appellant, and had for that purpose transferred the India stock into the name of the bank, to be held and applied by the bank upon the trusts thereinafter declared, and the settlor had agreed with the first appellant to enter into the covenants on his part thereinafter contained, and (iii) that it had been further agreed between them that, in consideration of the provision made by those presents, the first appellant should release as thereinafter appearing the settlor his executors and administrators from all liability and claims under the deed of

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covenant of 1 February 1923, and that forthwith upon the execution of those presents the deed of covenant should cease to have effect. The document then proceeds as follows:

Now this indenture made in pursuance of the said agreement and in consideration of the premises witnesseth and it is hereby agreed and declared as follows …

Trusts are then declared of the India stock in favour of both the appellants. The first appellant is given a determinable life interest in the income of the stock, which is to be applied by the bank in payment to her, so far as it will extend, of the clear weekly sum of £10, and also the balance, if any remaining, at the end of each year, the settlor covenanting to pay to the bank the moneys (if any) necessary to provide the clear £10 per week for each year. As to the infant appellant, it is sufficient to say that trusts and provisions are declared and contained for his benefit as to both income and capital of the whole of the trust fund. Cll 16 and 17 are important, and I cite them verbatim:

16. In consideration of the settlement by these presents made by the settlor and the covenants on his part herein contained the first beneficiary hereby releases the settlor his executors and administrators and his estate from all the covenants on his part contained in the hereinbefore recited indenture of Feb. 1, 1923, and from all claims and demands thereunder.

17. In consideration of the premises it is hereby agreed and declared by and between the settlor and the first beneficiary that as from the execution of these presents the hereinbefore recited indenture of Feb. 1, 1923, and all the provisions therein contained shall cease to have effect.

The settlement so executed by the settlor was sent to the first appellant for execution by her. She at first wished the deed of covenant to be destroyed, a proceeding to which the settlors advisers, Messrs Lewis & Lewis, would not consent, and on 16 November 1925, her solicitor, Mr Jacobs, wrote to Lewis & Lewis as follows:

My clients instructions to me are that unless the first document is destroyed now she does not wish either copy to be in the hands of anyone except herself, and I am afraid that she will not proceed further with the present document unless she is satisfied on this point.

Ultimately she came to an agreement personally with the settlor by which it was arranged that the deed of covenant should be deposited with the bank in a box with two locks with different keys, each party keeping a key for one lock only, so that the box could never be opened without their joint consent. Having been satisfied upon this point, she was ready and willing to execute the settlement. Unfortunately, she was at that time unable to say where the document was. She had received it in Deauville and had brought it back to London. She had then gone abroad again to Paris, St Moritz, and Algiers, and, indeed, seems to have forgotten all about executing it herself. The judge, however, after hearing her evidence, found as a fact that, as from a date about the end of 1925, she was always ready and willing to execute the settlement, and would have done so if she had been asked to do so.

Meanwhile, the bank, acting on the settlors instructions, had, ever since the middle of May 1924, been paying out of the income of the

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India stock the quarterly sum of £130 to the credit of a banking account of the first appellant, and they continued so to do until 1 November 1926. In that month, however, they received a letter from Lewis & Lewis, dated 9 November 1926, which stated that, acting under their advice, the settlor was “proposing to make other arrangements.” This was followed by a letter requesting the bank to sell the India stock and remit the proceeds to the settlor. The bank, strange to relate, immediately sold the stock, but some glimmer of the duties and responsibilities attaching to trusteeship seems suddenly to have reached its trustee department, for on 16 November 1926 they wrote a letter to Lewis & Lewis stating that it had occurred to them that, before handing the proceeds to the settlor, the consent in writing of the first appellant should be obtained, and that they had been paying the income of the stock to her for some time, and they asked Lewis & Lewis to advise. I do not comment on the strange attitude here adopted of asking the advisers of the person who was claiming the fund to advise the bank upon the validity of a possible claim by a third party. The danger is apparent from the answer received from Lewis & Lewis, who, in a letter dated 17 November 1926, said that the bank were under no liability to the first appellant, and that her consent was unnecessary, and asked for an assurance that the bank would not communicate with her. It is difficult to speak with restraint of this letter and request, which can only have been written and made by a writer who had forgotten that the settlement had been signed, sealed and delivered unconditionally by the settlor, or who failed to appreciate the effect in law of that act.

Most unfortunately, by letter of 18 November 1926, the bank gave an undertaking not to communicate with the first appellant without referring to the settlors solicitora strange proceeding by trustees of stock who, to put it at the lowest, had an uneasy feeling that they might be trustees of it for the very person with whom communication was forbidden. They still, however, kept the proceeds of the stock, and asked to be told whether the settlement had been executed by the settlor. On 21 December 1926 Lewis & Lewis wrote to the bank that the first appellant had declined to execute the settlement, and that the settlor:

… has since refused to have anything more to do with the proposed settlement and does not intend to carry it through.

On 24 December 1926 the bank pressed for an answer to the question which they had asked some five weeks previouslynamely, whether or not the settlement was actually executed by the settlor. The answer was given in a letter, dated 30 December 1926, in which the late Sir George Lewis stated that, while he was unaware of the facts until recently, he had then ascertained them. He enclosed copies of four letters passing between his firm and Mr Jacobs, the solicitor for the first appellant, dated 13 November, 14 November, 16 November and 17 November 1925, respectively. The position then, he states, was as follows. The deed had been engrossed and

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executed by the settlor and sent on 12 August 1925 for execution by the first appellant. She refused to sign it then, and, from the time when her solicitor wrote on 16 November 1925, “I am afraid that she will not proceed further with the present document,” the settlor had regarded the proposed settlement as at an end.

It will be observed that Sir George Lewis (although he enclosed a copy of the letter) did, in quoting Mr Jacobs letter of 16 November 1925, omit the words “unless she is satisfied on this point,” and, as I have pointed out, the trial judge found upon the evidence that she was so satisfied, and had come to an agreement with the settlor upon the point. Moreover, the judge held that a letter to the settlor had been written by the first appellant as she was starting for St Moritz from Paris, on or about 23 December 1925 and had been received by him, in which she thanked the settlor for arranging for the tin-box device, and treated the settlement executed by him as an existing and effective document. The words used by her were:

I didnt have time to dig out that settlement you signed, but I will; and do I keep it?

All that is quite inconsistent with the suggestion that from 16 November 1925 the settlor had regarded the settlement as at an end.

Ultimately, the bank, having obtained a copy of the settlement, obtained separate advice. From the correspondence, it would appear that they were advised that the settlor should give a notice to the first beneficiary “revoking the offer of settlement.” The bank informed Lewis & Lewis that, provided such notice were given, and no proceedings were threatened by the first appellant within one month, they would hand over the fund to the settlor on his indemnity against costs of possible litigation and otherwise. No such notice was ever sent, but, as the result of certain correspondence between Sir George Lewis and Sir John Withers (who was then acting for the first appellant), the deed of settlement which had been executed by the settlor was handed over by Sir John Withers to the settlors solicitors, with a letter dated 16 May 1927. I will have to refer to this correspondence and letter, and to the circumstances in which the deed was handed over, in connection with another aspect of this case. For the moment, I merely state the fact.

On 17 May 1927 Lewis & Lewis wrote to the bank stating that they had written to the solicitors of the first appellant “revoking the offer of the settlement” and had obtained the return of the document, and asking for the proceeds of the stock. The bank in reply asked for a copy of the notice of revocation. Lewis & Lewis insisted that the settlors withdrawal of what they termed “the offer of the settlement” and Sir John Withers knowledge of it were sufficiently proved by the following extract from a letter to his firm dated 1 February 1927:

As a matter of fact the terms of the proposed new settlement were refused by your client, and our client, as we wrote to Mr. Jacobs, declined to agree the

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alterations which [the first appellant] suggested. In the result [her] solicitor wrote to us that she was not prepared to proceed further with the document, and [the settlor] therefore revoked the offer of the settlement.

Here again we meet an imperfect reference to Mr Jacobs letter of 16 November 1925 and the statement to the bank, in the letter of 30 December 1926, that the settlor had “regarded the proposed settlement as at an end” has developed into an assertion that he “therefore revoked the offer of the settlement.” We know from the evidence and findings of Morton J how completely at variance with the true facts the statements proved to be. The bank were by no means satisfied, but nevertheless they were advised to inform Withers & Co of their intention to hand over the funds to the settlor unless proceedings were taken within a limited time to restrain them from so doing. The bank accordingly wrote to Withers & Co on 11 June 1927 that they would hand over the funds to the settlor:

… unless during the course of next week proceedings are commenced to restrain the bank from so doing.

To this Withers & Co replied that they had nothing to add to their letter to Lewis & Lewis dated 16 May 1927. The bank, having obtained a copy of that letter for the first time, repeated their intention of handing over the funds to the settlor, and on 27 June 1927, on receiving the settlors indemnity, they paid over the proceeds of sale of the stock, with interest and accumulated income, to his solicitors.

My Lords, that is the whole story as regards the bank. Their intimation of their intention to part with the fund can afford them no protection, and the first question to determine is whether or not there was an effective settlement of the stock made by the settlor when he signed, sealed and unconditionally delivered the deed. If such a settlement was made, the bank admittedly and incontestably had notice of it, and had notice of the beneficial interests thereby vested in the appellants in the India stock which was held by the bank. They became trustees of the stock for the appellants, and they can have no defence to the claim against them unless on some ground or another the appellants have become deprived of those interests or disentitled to assert them.

Upon this first question, Morton J and Sir Wilfrid Greene MR were in agreement. Morton J, in his careful and closely reasoned judgment held that, on the execution by the settlor, a valid settlement came into being, and the stock became impressed with trusts which the settlor was incapable of revoking, that any mistaken view of the legal position which may have been taken by the settlor or the first appellant mattered not, and that the trusts remained in existence. Sir Wilfrid Greene MR took the same viewnamely, that, on the execution of the settlement by the settlor, his then equitable interests in the stock became vested in the beneficiaries under the trusts declared in the deed. The judgment of Scott and Clauson LJJ rests on the view that, upon the true construction of the deed, no trust was to come into being

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except if and when the deed had been executed by the first appellant as well as by the settlor, and that, accordingly, the non-execution by the first appellant left the deed wholly inoperative, and they liken the case to a written offer by one to another followed by nothing more. I can see no justification for this view. The language of the deed in no way supports it. The recital of cll 4 and 5 of the deed of covenant and the presence in the settlement of cl 17 indicate that the trusts are being created by the settlor in exercise of his powers under the deed of covenant. The trusts declared under cll 1, 2 and 3 are immediate trusts. They are not made subject to any condition as to the happening of any event or otherwise. They sprang into existence the moment when the settlor unconditionally delivered the deed. Scott and Clauson LJJ appear to have dealt with the matter as if it lay in contract and was governed by the rules as to offer and acceptance, with time being in some way of the essence of the contract, whereas the case is really one of a divesting and vesting of property. Indeed, in your Lordships House, counsel for the bank stated that they could not, and did not, attempt to support the reasoning of the judgment of Scott and Clauson LJJ. That the view of Morton J and Sir Wilfrid Greene MR is correct admits, in my opinion, of no doubt. Once the settlor signed, sealed and unconditionally delivered the deed, the trusts in favour of the appellants were constituted. The appellants became the persons beneficially interested in the stock, and it did not lie in the power of the settlor to undo what he had done. He had no power to revoke the trusts unless such a power was contained in the deed.

However, Sir Wilfrid Greene MR based his decision in favour of the bank on reasons which I must now examine. He held that, although there were trusts completely constituted in favour of the appellants, nevertheless, by reason of subsequent matters, the settlor was entitled as against both appellants to treat the settlement as no longer effective, with the result that the bank committed no breach of trust. As against the first appellant, he put the case on two grounds. The first was that the settlor executed the settlement on the faith that the first appellant would execute it and give the release for which he stipulated, and that, since she had not in fact executed the deed, there came into operation the equitable principle which was referred to by Sir George Jessel MR in Luke v South Kensington Hotel Co, at p 125:

It is well settled that if two persons execute a deed on the faith that a third will do so, and that is known to the other parties to the deed, the deed does not bind in equity if the third refuses to execute …

The second ground on which Sir Wilfrid Greene MR put the case as against the first appellant was that her action in returning the settlement unexecuted and the language of the letter of 6 May 1927 showed an intention on her part to disclaim the benefits given to her by the settlement, and, therefore, I presume, revested those benefits

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in the settlor. I will consider the case thus made against the first appellant. Taking the first ground first, Sir Wilfrid Greene MR said, at p 660:

… in my judgment, he executed the settlement of 1925 upon the faith that he would get a release.

My Lords, this allegation or opinion that the settlor executed the settlement on the faith of getting a release is not founded on any evidence given by him, nor was it suggested to the first appellant when she gave evidence, nor is it to be found in any of the numerous letters from Lewis & Lewis. I am at a loss to know on what it rests. For myself, I cannot see any necessity for the release, or the value of it to the settlor. It is said that it was of importance because the determinable life interest given by the settlement was not a life annuity within cl 4 of the deed of covenant. I am not prepared to assent to this view. By the joint effect of cl 5 of the deed of covenant and cl 17 of the settlement, the settlement was a settlement within the option conferred by cl 4 of the deed of covenant, and that deed ceased to operate when the settlor executed the settlement. Even if it was not authorised by cl 4, it is impossible to conceive that rights could be asserted by the first appellant under the settlement without such assertion involving a release of all her claims under the earlier deed. However, even if it be assumed that the settlor executed on the faith that he would get a release, and that the first appellant was aware of the fact, I am still unable to see how on that ground the settlement had become inoperative in June 1927 when the bank parted with the fund, or why the first appellant on that ground is prevented from asserting her rights thereunder. The actual decision in Lukes case has no relevance here. It merely decided that, since one of three trustees had refused to execute a deed dealing with trust property which was vested in the three, the trust estate was not bound by the execution of the two trustees who had executed the deed. The statement of Sir George Jessel MR, as to a well-settled principle is an obiter dictum and is, in my opinion, much too wide in scope. I know of no equitable principle so wide as that. We were referred to, and I have considered, all the authorities cited in Norton on Deeds (2nd Edn), p 21, in relation to this alleged principle, and they do not justify so broad a proposition. I do not think that the proposition can be carried further than saying that the equity arises where a deed is sought to be enforced against an executing party, and, owing to the non-execution by another person named as a party to the deed, the obligation which is sought to be enforced is a different obligation from the obligation which would have been enforceable if the non-executing person had in fact executed the deed. The most common instance is the case (such as Evans v Bremridge) where only one of two co-sureties named in the deed in fact executes the deed, and it is sought to enforce the deed against the one who did execute. I know of no such equity against a non-executing party who seeks to enforce benefits con-

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ferred upon him by the deed. There is no foundation on which the equity could rest in such a case, for by his action he is affirming and adopting the deed and every provision of it, and is bound by it as effectually as if he had executed it.

The second ground upon which Sir Wilfrid Greene MR based his judgment is disclaimer by the first appellant. This ground is, in my opinion, ill-founded, in the circumstances of this case. It involves, however, an examination of both the correspondence which passed between Sir George Lewis and Sir John Withers and the evidence, in order to ascertain whether any disclaimer by or on behalf of the first appellant ever took place. Proceedings had been taken by the settlor which had resulted in the infant appellant having been made a ward of court in or about November 1926. In those proceedings, Sir John Withers was acting for the first appellant. While Sir George Lewis was endeavouring to induce the bank to hand over the proceeds of the stock, Lewis & Lewis wrote to Sir John Withers a letter dated 1 February 1927. As this letter initiated the correspondence which resulted in the first appellant, at the instance of her adviser, parting with the possession of the deed and making the alleged disclaimer, it must be quoted in full. I do not think it is misdescribing it when I say that the story thereby told to Sir John Withers is wholly inaccurate, a fact which I think must be ascribed to ignorance or lack of legal appreciation on the part of the writer. The letter runs thus:

We are writing to you with regard to a matter which is quite separate from the question which we have been dealing with on the custody summons. Our attention has been called to the fact that for some considerable time previous to Aug., 1925, negotiations were passing between ourselves on behalf of [the settlor] and Mr. M. A. Jacobs, the solicitor then acting for [the first appellant], as to a settlement of Feb. 1, 1923. As a matter of fact, the terms of the proposed new settlement were refused by your client, and our client, as we wrote to Mr. Jacobs, declined to agree the alterations which [the first appellant] suggested. In the result, [her] solicitor wrote to us that she was not prepared to proceed further with the document, and [the settlor] therefore revoked the offer of the settlement, and since Mr. Jacobs letter of Nov. 16, 1925, the negotiations have been closed and the question of a further settlement has been at an end. The position with regard to this matter was attended to by the conveyance department of our office, and Sir George Lewis knew nothing of these matters until the question which arose on the pending summons with regard to the child, and he thought it would be best that the proposed settlement which had been signed by [the settlor] and which was sent to Mr. Jacobs for [the first appellants] signature should be returned. Mr. Jacobs, however, informs us that the document was at the time sent to [the first appellant], and that he has heard nothing of it since her instructions to refuse to proceed further with the proposed settlement. We feel sure that you will agree that it is desirable that this document should be returned, as [the settlor] had revoked the offer contained in it, and your client has refused to proceed with it, and we shall be very much obliged if you will kindly obtain from [the first appellant] the document which was sent to her, and return it to us.

I need not pause to point out to your Lordships how far from the truth it was to say that the settlor had offered to make a settlement, that the offer had been refused by the letter of 16 November 1925, that the settlor had, therefore, revoked the offer, and that the negotiations had ever since been closed. We now know that, so far from the settlor then resiling in any way, as between him and the first appellant, their differ-

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ence in regard to the fate of the deed of covenant had been settled, and the substituted settlement was an accomplished fact.

Sir John Withers saw his client, who told him the true position, and he asked that the matter be completed. Lewis & Lewis, however, in their reply, stuck to their story, and pressed for the return of the document. On 2 March 1927 Sir John Withers endeavoured to obtain information from the bank, but the bank were unable to give it, owing to the undertaking which had (most improperly) been asked for and given that they would not communicate with the first appellant. He therefore wrote to Lewis & Lewis on 2 March 1927 expressing his natural surprise at the undertaking, stating that he understood from what they had told him that the settlement had been merely executed as an escrow, and asking for the following information:

(a) Were any funds and if so what funds transferred to the bank by [the settlor] for the purposes of the deed, and what is the position of those funds now? (b) A copy of all correspondence with the bank as to the deed or the fund, and (c) A copy of any document of revocation.

In their answer, Lewis & Lewis gave none of the information asked for, except that the India stock was held by the bank in 1923 to the order of the settlor, and had since been sold on his instructions. The letter, dated 7 March 1927, concludes with these observations:

We maintain that it is absolutely clear that [the first appellant] refused to proceed with the proposed settlement, and that this is confirmed by what [her] solicitors wrote in 1925, and the proposal of [the settlor] has been revoked. If [she] is not prepared to instruct you to return to us the documents for which we have asked we shall know what course to adopt. In the meantime we rely upon your retaining the document in your possession as arranged.

Sir John Withers wrote on 17 March 1927 that, since Lewis & Lewis would not give the information, he could do nothing. On 20 April 1927 however, he wrote stating that the first appellant was willing to sign the settlement, and asked whether the settlor would give effect thereto. Lewis & Lewis replied by repeating that the settlor had revoked his proposal. Sir John Withers then approached his client. As appears from his letters, and I think also from his oral evidence (though his evidence is that of a man who has no clear recollection at all of the events of 1927), his view was that the document, although executed by the settlor, was incomplete and of no binding effect, either because it was merely executed as an escrow or because it was undated, and unattested, or for some or all of those reasons. He was, therefore, quite prepared to accept the view that the matter still lay in contract, and had never got beyond an offer by the settlor, withdrawn by him before acceptance. He had consulted counsel, and had apparently been advised that the first appellant should return the document with a letter in a form settled by counsel. I refer to the terms of this letter later. For the moment, I content myself with saying that it is hard to conceive that counsel would have so advised had he (or the solicitor who instructed him) been aware that the deed had been signed, sealed and unconditionally delivered by the settlor.

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Sir John wrote letters to his client on 27 April, 4 May, 9 May, 10 May and 11 May 1927. They urge her to authorise him to hand over the document, and they so urge her on the footing that the settlor was not bound, that he was entitled to refuse to carry out a proposal to settle, and, in short, that the view insisted upon by Sir George Lewis was correct. Matters came to a head when on 12 May 1927 the first appellant asked him to hand the document over to her. Thereupon Sir John, after telling his client that he was doing so, wrote to Sir George, as follows:

[My client] asked me to-day to hand her the incomplete deed signed by [the settlor]. I told her what I cannot do so at present but I shall do so on Monday unless I am otherwise prevented.

In reply, Sir George Lewis caused him to be served with a subpœna duces to produce the document before the judge before whom an application as to maintenance of the infant was pending in the wardship proceedings. Thereupon Sir John wrote to his client on 13 May 1927 informing her of this, and saying that he therefore could not part with the deed. The letter continued as follows:

I have done my very utmost for you, spared no personal trouble, and have got the case on proper and reasonable lines, but it is obvious that you will not take my advice and that of [counsel] and therefore under those circumstances, I am afraid there is no alternative but to say, with great regret, that I cannot act for you, and must ask you to make other arrangements.

Yielding to this pressure, the first appellant gave her consent in a letter to Sir John Withers of 14 May 1927:

I have received your letter but really cannot understand the letter at all. I gather from our conversation that nothing was going to be done about the document until Monday, but I quite appreciate now that it must be returned at once, so will you have a certified copy made and send off the document to Messrs. Lewis & Lewis with a letter as suggested by [counsel], or if this cannot be done at the moment, please say I agree it shall go to them as soon as it has been produced by the court. This I hope will stop any fresh proceedings. I sincerely trust you will not persist in your refusal to continue to act for me as I do not know what I shall do, as I have actually always relied on your advice. I trust this letter shows I intend acting in accordance with it.

Immediately on receipt of that letter, Sir John Withers sent the document to Sir George Lewis, accompanied by a letter, dated 16 May 1927, which had been settled by counsel:

Under the present circumstances we are advised that [the first appellant] is not entitled to retain the document executed by [the settlor], and we accordingly return it in accordance with his request conveyed through you. This however must not be taken as any admission [that the settlor] is under no obligation to execute a settlement in the terms of that document, and the return of the document is without prejudice to any question as to the rights of [the first appellant] or the infant to have a settlement executed. We wish formally to repeat that [the first appellant] is willing to execute a settlement in the terms of the document executed by [the settlor].

My Lords, I have given in detail the circumstances leading up to the handing over of the deed, because, in my opinion, when those circumstances are considered, it is impossible to say that there was any disclaimer of her interest under the settlement by or on behalf of the first

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appellant. In my opinion, disclaimer can only be made with knowledge of the interest alleged to be disclaimed, and with an intention to disclaim it. So far as her legal advisers were concerned, they were misled by the statements insisted upon by Sir George Lewis. They had not, and could not have, any knowledge of the unconditional delivery of the deed, and must have believed that, in the circumstances, the deed was inoperative, and that the whole matter was capable of revocation and had been effectively revoked, with the result that there could be no interests to disclaim. In this they were misinformed and mistaken, but their mistake cannot affect the rights of the beneficiaries under the deed. As regards the first appellant herself, so far from finding any intention on her part to give up her rights under the deed, I find that the evidence points the other way. She had settled her difficulty with the settlor by the end of 1925, and ever since then was prepared to execute the document. It was overwhelmingly to her interest that the document should stand and be substituted for the deed of covenant, because under it provision was made for the infant, and, when in her letter of 14 May 1927, she gives her consent to the handing over, she makes it clear that she still treats the settlement as operative, because she stipulates that it shall be produced to the judge who in the wardship proceedings is to deal with the maintenance of the infant. Two passages from her oral evidence may well be quoted in this connection. The first is as follows:

When Sir John Withers told me that I would lose my boy if the deed was not handed over, and that he would refuse to act for me, I did authorise him to hand it over, but on the understanding that it would be produced in court.

The second passage from the oral evidence of the first appellant is as follows:

I did place a lot of reliance on it [the settlement] because it was a capital for my boy. It did not affect me, and it does not affect me now, but it does effect my boy.

In my opinion, the second reason for deciding in favour of the bank given by Sir Wilfrid Greene MR, is not well-founded.

The case in favour of the infant appellant is a fortiori case. Although no question of disclaimer by an infant could arise, Sir Wilfrid Greene MR was of opinion that his rights must stand or fall by the action of the first appellant. I find a difficulty in accepting the view that, assuming, as Sir Wilfrid Greene MR held, that a trust had been completely constituted in favour of the infant, he can lose his beneficial interest thereunder by any action on the part of his mother. However, since I have already expressed the opinion that the first appellant has not been deprived of her beneficial interest under the settlement by any action on her part, or by reason of the application of any equitable principle, it is unnecessary to pursue the matter any further.

My Lords, I have not forgotten that the banks attitude on this appeal was that, if they could not defeat the infants claim, they would not resist the first appellants claim to relief. Notwithstanding this, being

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of opinion that the first appellant was entitled to succeed on the merits of her own case, I have thought it right to deal with the whole matter in detail, in stating the reasons why I was of opinion that the appeal should succeed, and why I voted for the restoration of the order of Morton J.

LORD WRIGHT (read by Lord Romer). My Lords, I have had the privilege of reading in print the opinion which has just been delivered by my noble and learned friend Lord Russell of Killowen. He has so completely and accurately analysed the tangled web of fact and misconception which grew up in this case, primarily due to an erroneous view of the position stated and reiterated to all parties by the settlors solicitors, that I do not desire to add anything on the facts. The statement of Lord Russell of Killowen agrees in all substantial respects with that contained in the careful and convincing judgment of Morton J, with which, like my noble and learned friend, I am in agreement. I shall merely add some general observations on the case out of respect to the members of the Court of Appeal from whom I have the misfortune to differ.

The crucial issue is whether the deed of settlement was unconditional so as to vest immediately on execution the beneficial interest in the India stock in the appellants. In the Court of Appeal, it has been held that it had not that effect. Sir Wilfrid Greene MR so held, as I understand his judgment, on the ground that the settlement did not bind in equity, because, though unconditional in law, it was in equity subject to a condition which was never fulfillednamely, that it should be executed by the first appellant, or at least that that circumstance constituted an equitable ground for relief. Scott and Clauson LJJ, on the contrary, relied, not on any equitable principle, but on the construction of the deed in law, which they adopted, being of opinion that it was bilateral, and not unilateral, and was not binding until the first appellant by her execution of the deed released the pre-existing deed of covenant. These two views, though directly inconsistent, do, however, agree in holding that the deed did not take effect and was never binding. On neither view is it material to determine whether there was, in the strict sense of the term, a disclaimer by the first appellant of the benefits under the deed, because either view denies her any benefit except on terms of her executing it, which in fact she never did. Both views proceed on the assumption that the instrument was not an escrow. Indeed, the respondents have conceded that it was delivered by the settlor, not as an escrow, but as his deed. In my opinion, the concession was right, and, indeed, inevitable. Whether or not an instrument was delivered as an escrow is a question of fact. The old law, as stated in Sheppards Touchstone, p 58, that an instrument could not be held to be an escrow unless it was delivered with express words so declaring, and it was delivered to some person

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other than the person executing it, has now been abandoned. The character of the act of delivery depends on intention, which must be ascertained by considering the nature and circumstances of the case. This is the effect of Bowker v Burdekin and Xenos v Wickham. In this case, there are no circumstances which could justify a finding of fact that the instrument was delivered as an escrow.

The issue of whether or not the first appellant disclaimed the deed is material only if there was something to disclaimthat is, if there was a valid and binding settlement of a beneficial interest in her favour. On both views taken in the Court of Appeal, it is clearly not a material issue, though it might perhaps be material to ascertain if she effectively refused the benefit of the settlement. Her disclaimer could only affect her life interest. Thus, her disclaimer would not by itself entitle the respondents to succeed in the appeal, because it would not affect the rights of the second appellant, the infant, assuming that the deed gave him rights. In addition, the respondents have stated throughout that, if they do not succeed against the second appellant, they will not take the point that the first appellant was disentitled to relief. However, notwithstanding, I feel that it is right to determine the question whether or not the first appellant disclaimed the deed. The contention that she did has been much pressed on behalf of the respondents, and she is entitled to have her position and rights vindicated. In my opinion, the issue of disclaimer should be decided in favour of the first appellant. That issue depends on analysing what passed between the settlor or his solicitors, on the one side, and the first appellant and her solicitors, on the other side. The respondents were not directly concerned with that aspect of the facts. A careful consideration satisfies me that no disclaimer has been made out. Disclaimer of a deed has been rightly described as a solemn irrevocable act. If it is alleged, the court must be satisfied that it is fully proved by the party alleging it, who must also establish that it was made with full knowledge and with full intention. In this case, I can find no evidence that the first appellant ever desired to disclaim. In fact, the judge has found, with abundant evidence, that from about the latter part of November 1925, she was always willing to sign. If, in the end, she did not do so, it was because her will was overborne by the urgency of the counsel and solicitors who advised her. They made her believe, much against her will, that it would be dishonourable and improper, as well as futile, to attempt to execute an instrument which, as they were led to believe, was merely an escrow. That this was their belief is clear, to my mind, from her solicitors letter of 16 May 1927 which I cannot explain on any other footing. The settlors solicitors from some date late in 1926 were determined to get back the instrument without its being executed by the first appellant. I presume their intentions were of the best, but I cannot applaud their methods. The formula which they so persistently reiterated both to the solicitors of the respondents and

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to those of the first appellantnamely, that there was no settlement, but merely a proposal for a settlement by the settlor, which he had revokedobviously had a convincing effect at the time on both the solicitors of the appellants and those of the respondents. In my opinion, however, what the first appellant did cannot, in the circumstances, be construed as a disclaimer of the settlement, and, in any event, even if it were, could not be held to be binding, because she clearly acted under a material mistake. There is a further difficulty in the respondents way on this point. As I understand the facts and the findings of the judge, the first appellant accepted the settlement in December 1925 at a personal interview with the settlor, and arranged the difficulty or complaint raised in her solicitors letter of 16 November 1925, which I cannot construe as a repudiation or rejection of the settlement. It was old law that a deed, once accepted, cannot be disclaimed (Sheppards Touchstone, p 70), and I see no ground to think that the rule has been changed. It seems to me to be a sound rule. If either party desires at a later date to get rid of the deed, or to divest any estate or interest conveyed by it, that object must be achieved by some procedure between the parties other than disclaimer.

I pass to the crucial question, which is what the effect of the deed was. That must depend on the effect of the deed either in law or in equity. Its construction in law must first be determined, even though, as in this case, the deed deals with an equitable interest. Equity follows the law, and, when it interferes, does so to qualify or modify the rights or liabilities which would flow from the legal construction of the deed. A deed may, no doubt, be subject to conditions expressed in it. Thus, a deed may contain executory reciprocal conditions, as to which questions may arise whether they are dependent or independent, whether a breach excuses performance or whether it merely gives a claim for damages. A deed which is a grant or settlement may contain conditions precedent to the passing of the property, or conditions subsequent or resolutive providing for a divesting of the interest conveyed. Where, however, there is an absolute and unconditional settlement, it takes effect at once by the act of the settlors executing it. This is complete when he delivers it as his deed. I disregard the possible effect of fraud or similar matters which may be availed of in proper cases to nullify the act of execution, and I disregard any question of disclaimer. The absolute settlement is as immediately effective as is a completed gift of a chattel at law or an oral declaration of trust in equity. Questions of consideration are in this connection irrelevant. As Lord Eldon LC tersely said of deeds in Cock v Richards, at p 438, “Consideration is not necessary.” The settlor or obligor, once the deed has been delivered by him as his deed, cannot revoke it: Butler & Bakers case and Xenos v Wickham. One of the clearest and most striking statements and applications of these principles is to be found in Bowker v Burdekin, where a partner executed a

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deed conveying to a trustee for the benefit of creditors all the personal property of the partners. He was held bound by it though it was clear that he only executed it on the footing that the other partners would also execute it, which they failed to do. However, there was not an express condition to that effect. Parke B said that an instrument executed as a deed cannot be denied its effect for transferring property according to its terms. If these principles are applied to the deed in question, it seems to be clear that its terms involve an unconditional settlement.

In the opinion of Scott and Clauson LJJ, however, that is not its true effect in law. In their view, it was not intended to be a unilateral declaration of trust which would have effect whether or not the first appellant executed it, but was to be construed as a consensual document, requiring for its operation that the first appellant should concur in it by executing it. This criticism is not, as I follow it, based on any express condition precedent. Clearly there was none. It is based on an argumentative interpretation of the deed which presupposes that its intention was to create the trust only if it superseded the obligations under the deed of covenants of 1923, and that this supersession could only be effected by the execution of the deed by the first appellant. The declaration of trust was to bind the settlor only when the deed was executed by the other party, the first appellant, and, until that happened, the position was analogous to that which arises when one party makes a written offer to another party and the latter does nothing more. There, it is said, there is no acceptance, no consensus, and no legal result. It seems to be assumed that there was some time limit within which execution was to take place, or perhaps it had to take place before the date of the writ or counterclaim. Counsel for the respondents showed themselves somewhat reluctant to uphold this view of Scott and Clauson LJJ, but I think that I have stated it with sufficient accuracy. I find it quite impossible, with all respect, to agree with it. The deed might well have been drawn in such a way as expressly to make the declaration of trust conditional on the first appellant executing it. In that case, it would not have taken effect unless she had done so. However, there is nothing of the sort expressed in the deed. On the contrary, the declaration of trust is absolute and unconditional in terms. It may have been expected that the first appellant would execute the deed, but it was certainly not made a condition of the settlement. In my opinion, the settlement was unilateral. I think it is misleading to import into the law of deeds analogies from an entirely different region of lawnamely, that of simple contracts. They, indeed, are consensual, and depend on a meeting of minds in a common intent, evidenced by words or conduct. It is from this mutual consent that the rights and duties under the agreement arise. This might be the position in a case of a simple agreement to convey property, but the deed in question is something different. The declaration of trust by the settlor depended, not on the other partys consent, any more than

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on mutual consideration, but on an act of the settlor in executing the settlement. The beneficiary might, it is true, disclaim, but her acceptance was immaterial, except, perhaps, as ruling out disclaimer. There is nothing in the deed which could be construed as an express condition, and no legal principle on which a condition such as is suggested could be implied. The law as to obligations or transfers under seal was fixed in days before the nature of the consensual contract was realised. In my judgment, the views of Scott and Clauson LJJ cannot be supported.

On the other hand, Sir Wilfrid Greene MR took a different view. He did not find on the true construction of the deed, any condition in law. He held that, immediately on execution by the settlor, in law the settlement was completely constituted in favour of the appellants, but he went on to deal with what he described as a different matter altogether, and found that the deed was clearly executed by the settlor on the faith that the first appellant would also execute it. He then proceeded to hold that, because she had not, it was not binding on the settlor in favour of either the first or the second appellant. The deed was never binding at all, because equity would relieve against it. While he did not, at least primarily, base this conclusion on the equitable principle which he found to be expressed by Sir George Jessel MR in Luke v South Kensington Hotel Co, at p 125, which has been quoted by my noble and learned friend Lord Russell of Killowen in his opinion, I think he was proceeding on some such principle. In Lukes case, the dictum was unnecessary to the decision of the case, and is not referred to by James LJ who was the other member of the court who gave judgment. The dictum is stated by Sir George Jessel MR in terms too broad and general to be of any service. Nor is that vagueness and indefiniteness cured by considering how it was applied in the particular case, because it could have no application to the facts of that case. There are, however, earlier decisions, which have been cited to your Lordships, in which an equitable principle is laid down for giving relief against the strict construction of a deed at law. That there is some such principle in equity I do not doubt, however reluctant as a common lawyer I may be to weaken the legal effect of the solemn undertaking involved in a conveyance or covenant under seal. The principle, however, is necessarily of limited application, as the cases show. What its precise limits are I do not seek to fix. A doctrine of this kind must always be somewhat elastic to fit the special equities of the particular case, but I am clear that, however understood, it cannot affect this appeal. Certain things seem clear. The word “faith” is not, perhaps, very happy. In some of the cases, the word “assumption” or “understanding” has been used in this context. “Faith” is clearly not used in a theological sense. Nor can it mean a mere intention or expectation in the settlors mind. It need not necessarily be proved by extrinsic evidence, such as a prior

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agreement, but may be inferred from the nature of the transaction as known to both parties. The expectation or intention so inferred must be such that its failurefor instance, by reason of the absence of execution by the other party or partiesmakes the transaction substantially different from what it would have been if the parties had executed. Thus, in Evans v Bremridge, the Lords Justices, affirming the decision of Page Wood VC, held that the intention of the transaction was that two joint and several co-sureties should execute, whereas only one did. They held that the lender could not enforce the deed according to its legal effect as against the one who executed. In the words of Turner LJ, it was not a matter of indifference to him that the intended cosurety did not execute. If the covenant had been enforced against him, he would have been charged on a contract into which he did not enter. By way of contrast, the equitable relief was refused in Cooper v Evans to joint and several sureties who claimed that they had executed the deed on the faith of its being executed by the principal debtor. This failure to execute, however, did not change the substance of the transaction. The sureties could not, it was true, directly treat him as a specialty debtor on that deed, but they could treat him as a specialty debtor indirectly by being subrogated on payment to the creditors rights against him, and these rights were by specialty. I need not refer in detail to other authorities, such as Bolitho v Hillyar or Peto v Peto, which were cases of family arrangements, but which proceeded on the same principle that the absence of the parties who did not execute changed the substance of the transaction. The same test was applied in Re Dover, Hastings & Brighton Junction Ry Co, Carews Case (No 2), a case in which the director and subscribers of a company were concerned. These cases all deal with non-execution by a person named in the deed as being intended to execute it, where his failure to execute materially affected the substance of the transaction.

It seems to me impossible to apply any such principle to the present case where the substance of the transaction is not changed by reason of the fact that the first appellant did not execute the deed. It is true that she was not a party to the deed, nor did she grant a release under seal if she did not execute it, but she could not enforce the deed or accept its benefits without binding herself to accept any reciprocal burden which its terms imposed on her. It is true that, if she did not execute, she was bound only as a promisor, not as a covenantor, but that, in my opinion, did not go to change the substance of the transaction. By the mere fact of her accepting, as I think she did, the benefits under the deed, she promised and agreed to release the former deed of covenants in accordance with cll 16 and 17 of the deed. The substance of the matter is the transfer of the beneficial interest. This is not subject in terms to her executing the deed, and her failure to execute did not, in my opinion, raise any equity. If the settlor wanted her execution

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as a condition precedent to the declaration of trust, he should have inserted an express condition to that effect. Furthermore, in the event of her non-execution, he could, in a proper case, have claimed an order against her to execute. In my opinion, however, her failure to execute was, both in fact and in law, a matter of indifference to him. There is no ground for saying that he executed the deed on the faith or assumption that the first appellant would execute. That idea was an afterthought. The same conclusion might be reached from a different line of argument. In the cases to which I have referred, the person who did not execute was neither plaintiff nor defendant. He was contemplated as a necessary party, but, because he did not execute, he never became a party to the instrument. The party who claimed the equity did so on the ground that he was subject to a greater burden because the other person, his intended co-surety, did not execute. In the present case, the first appellant, by claiming to enforce the settlement, put herself in the same position, for all practical purposes, as if she had executed, and the settlor was not prejudiced in fact, because the release became effective when the first appellant accepted the benefits under the deed. For these reasons, which deal with the substance of the matter, I find myself, with all deference, unable to see eye to eye with Sir Wilfrid Greene MR. I have not thought it necessary to pursue various subsidiary difficulties which, it seems to me, would arise on his view. In the result, the settlement is and has been effective in favour of both appellants, as your Lordships have already decided.

LORD ROMER. My Lords, I have had the privilege of reading beforehand the opinion of my noble and learned friend Lord Russell of Killowen. I agree with it so entirely that I venture to add a few words of my own only out of respect for the Court of Appeal, with whose decision I felt myself constrained to disagree. The conclusion arrived at by the members of that court was unanimous, but they reached it by different paths. Sir Wilfrid Greene MR, agreeing so far with Morton J, was of opinion that the deed executed by the settlor in August 1925 was sufficient, in the circumstances, to create an immediate and complete trust, notwithstanding the fact that it was not then executed by the female appellant. He thought, however, that her subsequent failure to execute the document entitled the settlor to treat the settlement as no longer effective, upon the principle enunciated by Sir George Jessel MR, in Luke v South Kensington Hotel Co, at p.125. He was also of opinion that the female appellant had disclaimed, and so put an end to the trusts thereby declared in favour of both appellants. Scott and Clauson LJJ, on the other hand, regarded the deed as being in effect no more than an offer made by the settlor to the lady to make a settlement upon her and the infant appellant in the terms which are contained in it. Referring to the deed, they said, at p 663:

… the crucial question is whether cl. 1 is intended toor, indeed, canon its

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true construction operate as though it were a unilateral declaration of trust by the settlor. In our judgment, it does not bear such a construction. Taken in conjunction with the recitals and the testatum and the remaining clauses of the deed, and in particular cll. 16 and 17, cl. 1 operates, in our view, to create a trust by the consensus of the settlor … and the female defendant, her consensus in the creation of the trust and the contemporaneous release of the pre-existing trust, being requisite in order to perfect the transaction, which appears on the face of the document to be the creation of a trust by way of supersession of a previous trust, such previous trust to be brought to an end by the concurrence of the female defendant in the deed.

It is, I think, plain that in forming this view of the deed in question Scott and Clauson LJJ must have regarded the settlement which it purported to effect as not being such a settlement as was contemplated by cll 4 and 5 of the deed of covenant of 1 February 1923 and, therefore, as being one which would not operate as a satisfaction of the settlors covenants without the consensus of the female appellant. In this I think, with all deference, that they were wrong. It is true that the deed of August 1925 did not secure to the lady an annuity during her life, for the annuity determined upon alienation, but so did the weekly sum payable under the deed of covenant. The trust for payment to her of the annuity under the deed of August 1925 did not, therefore, contain anything repugnant to the preceding text referred to in cl 5 of the deed of covenant. In my opinion, a settlement in the terms of the deed of August 1925 was one which would bring about a “supersession of the previous trust” without any consent or concurrence on the part of the lady. The settlement effected by that deed was, in my judgment, intended by the settlor to be, and was in fact, a unilateral declaration of trust by him. I cannot otherwise understand why cll 4 and 5 of the deed of covenant were recited. The recital of them would have been altogether out of place in a settlement intended to operate as an agreement between the parties.

However, the female appellant was made a party to the deed of settlement, and was so made for the purpose of expressly releasing the settlor from liability under the deed of covenant in consideration of the settlement which he was making. What effect, then, did her failure to execute the deed have upon the settlors declaration of trust? In my opinion, it had none. The general rule at common law as to non-execution of a deed by one of the parties is quite clear. In Sheppards Touchstone, it is stated as follows:

If there be divers grantors obligors etc. named in a deed and one of them only do seal the deed, this is a good deed as against him that doth seal and void as to all the rest that do not seal.

In Morgan v Pike, it was accordingly held that a covenantee who was a party to an indenture might sue the covenantor who executed it, although he himself had not executed it, and notwithstanding the fact that there were cross-covenants on the part of the covenantee which formed part of the consideration for the covenants on the part of the covenantor.

In equity, however, an exception has been engrafted upon the common law rule, and one of the questions to be decided upon this appeal is

Page 513 of [1940] 1 All ER 485

whether the present case falls within that exception. Sir Wilfrid Greene MR, as I have already stated, held that it does, treating the exception, as perhaps he was bound to treat it, as having been correctly enunciated by Sir George Jessel MR in Luke v South Kensington Hotel Co. What Sir George Jessel MR said was this, at p 125:

It is well settled that if two persons execute a deed on the faith that a third will do so, and that is known to the other parties to the deed, the deed does not bind in equity if the third refuses to execute …

My Lords, with all respect to that great judge, this statement of the equitable principle is expressed far too widely. He does not mention the authorities by which the principle as enunciated by him had been well settled, and, for myself, I know of none. The authorities most in point are Underhill v Horwood, at p 225, Evans v Bremridge and Re Dover, Hastings & Brighton Junction Ry Co, Carews Case (No 2), none of which appears to have been cited to Sir George Jessel MR. The equitable principle which they lay down is that, where, owing to the non-execution of a deed by one of the parties, the others who have executed it would, by the application of the common law rule, be bound by a covenant or transaction different in kind from that which it was their intention to enter into, they can be relieved in equity from the results of their execution of the deed. The cases which most commonly call the principle in aid are those in which a covenantor executes a deed with the intention of binding himself jointly with another party to the deed but, owing to the non-execution of the deed by that other party, finds that he alone is bound at common law. Equity will, where such intention is sufficiently shown, relieve the covenantor from his liability. The principle is not confined to such cases, however. In the very case with which Sir George Jessel MR was dealing, a deed had been prepared by which three trustee mortgagees purported to release the mortgagor and the mortgaged property from the mortgage debt. Two of the trustees executed the deed. The third trustee refused to do so. It was argued, however, that the effect of the deed was to release the debt at law, and it was this argument which was refuted by Sir George Jessel MR in the passage cited. He held that the deed did not bind the two trustees who had executed it. They would otherwise have been held bound by a transaction into which they never intended to enter. The only transaction which they intended was plainly one under which all three trustees concurred in releasing the mortgage debt. The case fell directly within the limited equitable principle established by the earlier authorities to which I have referred. It was not, therefore, necessary to extend the principle for the purpose of the decision, and it is plain that Sir George Jessel MR in no way intended to do so. His judgment, like all other judgments, must be construed in reference to the question which had to be decided, and, so construed, it should not, in my opinion, be regarded as an authority governing the case which was before your Lordships House.

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Upon the question whether the first appellant disclaimed the trusts in favour of herself and the second appellant, I cannot usefully add anything to what has fallen from my noble and learned friend Lord Russell of Killowen. It was for these reasons, in addition to those given by my noble and learned friend, that I concurred in the motion for the restoration of the order made by Morton J.

Appeal allowed with costs.

Solicitors: Bircham & Co (for the appellants); Murray Hutchins & Co (for the respondents).

Michael Marcus Esq   Barrister.

Digby v General Accident, Fire and Life Assurance Corporation Ltd

[1940] 1 All ER 514


Categories:        INSURANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        8, 9, 13 FEBRUARY 1940        


Insurance Motor insurance Third-party risks Extension of protection Indemnity of authorised driver while driving against liability “in respect of any claim by any person including passengers” Claim by policyholder Road Traffic Act 1930 (c 43), ss 35(1), 36(1)(b), (4).

The claimant was the chauffeur employed by the owner of a car. In a collision, the owner was injured, and, in proceedings in respect of that accident, she recovered damages against the chauffeur. The chauffeur thereupon claimed that he was entitled to be indemnified against the sum awarded as damages by the respondent insurance company under a policy issued by them to the owner. By the policy, in a section with a marginal heading “Third Party Liability” the insurance company undertook to indemnify the policyholder against all sums which the policyholder should become legally liable to pay in respect of any claim by any person (including passengers in the car) for loss of life or accidental bodily injury or damage to property caused by, through or in connection with the car. The insurance was to extend to indemnify in like manner any person driving the car on the order or with the permission of the policyholder, and it provided that such person should as though he were the policyholder observe, fulfil and be subject to the terms, exceptions and conditions of the policy, in so far as they could apply. The policy contained the usual arbitration clause. It was contended that the extension of the insurance was not an extension of the class of claimants and that, therefore, the policyholder could not be a claimant under the policy:

Held (i) the chauffeur was entitled under the policy to be indemnified against the damages awarded to the policyholder against him.

(ii) the chauffeur was bound by the arbitration clause.

Notes

The substance of this case is whether or not the policyholder can be called a third party within the meaning of those words as used in the policy of insurance where the claim is made by the insured person. The decision, of course, is based upon the particular wording of the policy, but the wording here in question follows the general form of wording used in such cases.

As to Extension of Protection, see Halsbury (Hailsham Edn), Vol 18, pp 558, 559, paras 901903; and for Cases, see Digest, Vol 29, p 408, Nos 32143217.

Page 515 of [1940] 1 All ER 514

Cases referred to

Vandepitte v Preferred Accident Insurance Corpn of New York [1933] AC 70; Digest Supp, 102 LJPC 21, 148 LT 169.

Williams v Baltic Insurance Assocn of London Ltd [1924] 2 KB 282; 29 Digest 408, 3215, 93 LJKB 819, 131 LT 671.

Guardian Assurance Co Ltd v Sutherland [1939] 2 All ER 246; Digest Supp.

McCormick v National Motor & Accident Insurance Union Ltd (1934) 50 TLR 528; Digest Supp.

Hamilton & Co v Mackie & Sons (1889) 5 TLR 677; 2 Digest 331, 138.

Thomas & Co Ltd v Portsea SS Co Ltd [1912] AC 1; 2 Digest 331, 141, affg SC sub nom The Portsmouth [1911] P 54.

Royal London Mutual Insurance Society v Barrett [1928] Ch 411; Digest Supp, 97 LJCh 177, 139 LT 208.

General Accident, Fire & Life Assurance Corpn Ltd v Watson unreported.

Tattersall v Drysdale [1935] 2 KB 174; Digest Supp, 104 LJKB 511, 153 LT 75.

Dennehy v Bellamy [1938] 2 All ER 262; Digest Supp.

Freshwater v Western Australian Assurance Co Ltd [1933] 1 KB 515; Digest Supp, 102 LJKB 75, 148 LT 275.

Case Stated

Case Stated by an umpire in an arbitration for the opinion of the court regarding the construction of the terms of a policy of motor insurance. The facts are fully set out in the judgment.

H U Willink KC and Montague L Berryman for the respondents.

H D Samuels KC and R Armstrong-Jones for the claimant.

Willink KC: The words “claim by any person” in s 2(1) of the policy do not include the policyholder. There is unlimited indemnity in respect of claims against the policyholder by the public, and an indemnity to an authorised driver on like terms. “Any person” must exclude the insured. The insurance of the driver is not an independent insurance. The insured cannot be a third party in respect of the policy issued to her by the corporation. The statutory right to indemnity is only on the terms of the policy. [Counsel referred to Guardian Assurance Co Ltd v Sutherland.] As to the arbitration clause, none of the conditions is aptly phrased to apply to an arbitration between an authorised driver and the corporation. The claimant cannot take advantage of the clause. [Counsel referred to Williams v Baltic Insurance Assocn of London Ltd, Vandepitte v Preferred Accident Insurance Corpn of New York, McCormick v National Motor & Accident Insurance Union Ltd, Tattersall v Drysdale, Guardian Assurance Co Ltd v Sutherland, Hamilton & Co v Mackie & Sons, Thomas & Co Ltd v Portsea SS Co Ltd) and Royal London Mutual Insurance Society v Barrett.]

Samuels KC: The words “claim by any person” are wide enough to include a claim by the policyholder. A third party is anyone who has a legal claim. It means all claims which an authorised driver shall become legally liable to pay. If it meant anything short of this, it would not comply with the statute. If the words of the policy are ambiguous, they are the corporations own words, and should be construed against

Page 516 of [1940] 1 All ER 514

them in case of doubt. Any claim against the claimant must be by a third party as between him and the corporation. The definition of third party in the statute supports this argument. [Counsel referred to Dennehy v Bellamy and Freshwater v Western Australian Assurance Co Ltd.]

H U Willink KC and Montague L Berryman for the respondents.

H D Samuels KC and R Armstrong-Jones for the claimant.

13 February 1940. The following judgment was delivered.

ATKINSON J. By a policy of insurance, dated 27 October 1936, the General Accident, Fire and Life Assurance Corporation agreed, among other things, to indemnify Miss Thompson (better known as Miss Merle Oberon) against third-party liability for accidents arising out of the use of her motor car. The policy also purported to indemnify authorised drivers in like manner. There was a condition in the policy requiring expenses between the policyholder and the corporation to be referred to arbitration and making an award a condition precedent to any liability.

The claimant in this arbitration is Miss Thompsons chauffeur. He was admittedly an authorised driver within the terms of the policy. On 16 March 1937, while Digby was driving the car, Miss Thompson being in the car, an accident occurred in which she sustained personal injuries. Her car collided with another car. She brought an action against those responsible for the driving of the other car. The defence attributed the blame to Miss Thompsons driver, Digby, and he was, therefore, joined as a defendant. Ultimately it was held that Digby was alone to blame, and Miss Thompson recovered judgment for £5,000 damages and costs against him. Digby then claimed to be indemnified by the corporation. On 1 December 1938 the corporation delivered their points of defence. Para 4 raised the point that the plaintiff was not a party to the policy, and not entitled to sue upon it, and para 5 said:

Alternatively, the defendants say that if the plaintiff can in law take proceedings against them under or in respect of the said policy, such proceedings can only be by way of arbitration as provided for by condition 8 of the said policy, under the terms of which condition the obtaining of an award in such arbitration proceedings is a condition precedent to any liability of the defendants under the said policy, or of any right of section against the defendants.

Para 7 said:

In the further alternative and without prejudice to the matters set forth in paras. 4, 5 and 6, the defendants say that the said Thompson was not a “third party” within the meaning of the contracts of insurance and deny that the terms of the policy extend to indemnify the plaintiff in respect of his alleged liability to the said Thompson under the terms of the said judgment.

The claimants advisers thought that the plea in para 5namely, the plea that proceedings could only be by way of arbitrationwas a good one, and on 3 February 1939, on his application, an order was made staying the action in terms that he paid the costs of the corporation. On 6 April 1939, the claimant appointed an arbitrator and, by notice, called upon the corporation to appoint their arbitrator. By a letter, dated 18 April the solicitors to the corporation wrote that they were instructed to accept service, and so on, and said:

We, as you are aware, deny the right of your client Mr. Digby to arbitrate under

Page 517 of [1940] 1 All ER 514

the policy and this acceptance of service and any subsequent procedure on our clients behalf is and will be without prejudice to and whilst reserving our clients rights in the above connection.

On 24 April the respondents appointed their arbitrator, equally without prejudiceand it is not suggested that they prejudiced their rights in any way by doing thatand ultimately Mr Maxwell Fyfe was appointed umpire. There were two matters in disputenamely, (i) whether or not the dispute was within the arbitration clause, and (ii) whether or not the claim by Miss Thompson against the claimant was a third party claim within the indemnity given by the policy to an authorised driver. The arbitration took place, and by agreement the umpire stated his award in the form of a special case, raising for the opinion of the court the following two questions:

(1) Whether, on the facts and circumstances which happened as hereinbefore set forth, the claimant is entitled to avail himself of the arbitration provided for in the policy: (2) Whether, on the assumption that he is so entitled to avail himself of such arbitration, the claimant is entitled to recover the sum of £5,693 1s. 9d.

The award proceeded to award in favour of the claimant on both questions if neither party set down the case for argument within the time appointed. The case was set down, and was argued with conspicuous clarity, and all that remains for me is to express my opinion on the points raised.

The relevant parts of the policy are as follow:

Now this policy witnesseth that in consideration of the payment to the corporation of the premium … the corporation will, subject to the terms, exceptions and conditions contained herein, and of any indorsement hereon, indemnify the policyholder in respect of any automobile described in the schedule against …

Then I pass to s 2, where, in the margin under the words “sect. 2,” appear the words “Third Party Liability.” The relevant part of the section is as follows:

(1) All sums which the policyholder shall become legally liable to pay in respect of any claim by any person (including passengers in the automobile) for loss of life or accidental bodily injury or damage to property (including animals) caused by, through, or in connection with such automobile … (3) The insurance under this section shall also extend to indemnify in like manner any person whilst driving any automobile described in the schedule hereto on the order or with the permission of the policyholder, provided there is no other insurance subsisting under which such person may be indemnified, and that such person shall as though he were the policyholder observe fulfil and be subject to the terms exceptions and conditions of this policy in so far as they can apply …

The next heading of importance is “Emergency Treatment,” and that is followed by a proviso, which is not a proviso to the emergency treatment clause, but, I think, a proviso with reference to s 2, the third party liability section:

Provided that the corporation shall not be liable in respect of: Death of or bodily injury to any person where such death or injury arises out of and in the course of the employment of such person by the policyholder.

I think that that is all which is relevant there. Then, when I come to the conditions, there are 11 conditions. I think that the only one of importance is condition 8:

If any difference shall arise between the policyholder and the corporation, such difference shall be referred with all usual powers of two arbitrators mutually chosen

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or their umpire, or to one arbitrator if the policyholder and the corporation shall so agree, and an award shall be a condition precedent to any liability of the corporation or any right of action against the corporation.

Before the Road Traffic Act 1930, the provision for extended insurance was of very doubtful value. That extended provision, of course, conferred no benefit on the policyholder, and the persons it purported to benefit, not being parties to the contract, could not claim under it. That, I think, was finally decided in Vandepitte v Preferred Accident Insurance Corpn of New York. Roche J, in an earlier case, Williams v Baltic Insurance Assocn of London Ltd, had in that particular case, and on that particular policy, found a way of giving effect to it by permitting the policyholder to recover as a trustee for a person within the extended provision. However, I do not think that that case was regarded with any particular favour in Vandepittes case, because in Vandepittes case, referring to Williams case, it was said, at p 82:

The facts in that case and the contractual terms were, however, different from those in question here and the provisions of the relevant statutes were not the same: nor is it clear whether the learned judge treated the driver of the car as directly insured or as a cestui que trust. Their Lordships have not been able to derive from that case any principles helpful to the issue now before the Board.

At any rate, that is enough to show that the value of this extended provision was very doubtful to the persons intended to be benefited.

Then came the Road Traffic Act 1930. There are three provisions of importance which I must read. S 35(1) provides as follows:

Subject to the provisions of this part of this Act, it shall not be lawful for any person to use, or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third-party risks as complies with the requirements of this part of this Act.

Then s 36 deals with the requirements, and sub-s (1)(b) reads:

insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle on a road.

Then s 36(4) provides as follows:

Notwithstsnding anything in any enactment, a person issuing a policy of insurance under this section shall be liable to indemnify the persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of persons.

The effect of s 36(4) has been considered once or twice, but the most helpful case, I think, is Guardian Assurance Co Ltd v Sutherland. There a person claiming indemnity within the extended benefit clause in a policy was met by the plea that the policy was voidable, on the ground that it had been obtained by fraud by the policyholder, and the insurance company took proceedings for a declaration to establish their right to avoid the policy even against an innocent claimant not a party

Page 519 of [1940] 1 All ER 514

to the policy, and they succeeded. The only part of the judgment to which I want to refer is where Branson J said, at p 249:

A policy obtained by misrepresentation of material facts insures no one.

I agree that that must not be taken too literally, because until it is set aside I think it does. Branson J continues, at pp 249, 250:

and so cannot be held to be such a policy, and, therefore, sub-sect. (4) does not apply to a policy so obtained. To accede to Mr Holmes argument would be to hold that the legislature had deprived an insurance company which issues a policy under sect. 36 of its common law right to repudiate liability arising out of a policy, the granting of which has been induced by material misrepresentation. However, I am not left without authority.

Then he refers to several cases, and reads a passage from the judgment of Scrutton LJ in McCormick v National Motor & Accident Insurance Union Ltd. He then says, at p 250:

The effect of this paragraph can only be avoided by Mr Holmes if he says that his action for indemnity is not upon the contract but upon the statutory right conferred by the section. The section does not, in my opinion, impose any statutory liability upon the insurer. It only gives to “persons specified” a statutory right, which, apart from statute they did not possess, to sue upon the contract.

With great respect, I entirely agree with that view. It means that an authorised driver claiming by virtue of s 36 is claiming upon the contract contained in the policy. Although not a party, by the statute he is given the right of a party, and can enforce only the obligations contained in the policy, and can enforce those obligations only subject to the conditions therein contained.

The first question is whether the arbitration clause applies to Digbys claim. It will be remembered that the relevant words are:

… and that such person shall as though he were the policyholder observe fulfil and be subject to the terms exceptions and conditions of this policy in so far as they can apply …

The argument for the corporation is that, even if one reads condition 8 into the contract made with Digby by the statute, a contract which he is seeking to enforce, it still refers only to differences arising between the policyholder and the corporation, and, therefore, does not cover differences between persons not policyholders and the corporation. Counsel for the respondents prays in aid the principle laid down in Hamilton & Co v Mackie & Sons. The principle of that case was also approved and adopted in Thomas & Co Ltd v Portsea SS Co Ltd. Quite shortly, the point was this. In substance, a bill of lading contained a provision that all the terms and conditions of the charterparty were to be deemed to be incorporated in the bill of lading. That is not putting it in the precise language, but that was the point. What was held there was that one must deal with the matter as if those clauses were set out verbatim in the bill of lading. It was dealing with an arbitration clause and, if one had it set out, the words would have been, “All dispute, under this charter shall be referred to arbitration,” and, therefore, the clause would not cover any disputes under the bill of lading, even if one

Page 520 of [1940] 1 All ER 514

had that clause set out verbatim in the bill of lading. The argument of counsel for the respondents is: “So here, if one had that clause set out in the contract with the authorised driver, it would still read: if any difference shall arise between the policyholder and the corporation. ” I do not think that any argument on those lines is open to the corporation, in view of the words:

… that such person shall as though he were the policyholder observe fulfil and be subject to the terms exceptions and conditions of this policy …

It seems to me that it would be giving no effect whatever to those words to hold that he was not bound by this arbitration clause, and I think also that it is extremely difficult for counsel for the respondents to get over the last words of the arbitration clause:

… and an award shall be a condition precedent to any liability of the corporation or any right of action against the corporation.

In my judgment, a person bringing an action by virtue of that statutory provision, bound by the terms of the contract on which he is permitted to sue, is bound by that clause, and has a right to invoke its aid. Therefore, I answer the first question in the affirmative, and I am sure that it will be a matter of satisfaction to those controlling the business of this corporation that my decision saves them the mortification of having obtained the discontinuance of the action brought against them, and payment of their costs by Digby, by setting up an ill-founded plea as to the meaning of their own policy.

On the second question, the argument for the corporation is this. By s 2(1), the policyholder is to be indemnified against all sums which she becomes liable to pay in respect of any claim by any person other than the parties to the contract. The expression “third party” means, it is said, a person outside the contract, a person other than the two contracting parties, and, therefore, the policyholder, if injured, cannot claim indemnity under that subsection, because the policyholder cannot be a third party. Further, of course, Miss Thompson could not become liable to pay damages to herself. There is one case which I think throws light upon the meaning of the words “third party,” and that is Royal London Mutual Insurance Society v Barrett. It was not a policy of this kind which was in question, but the insurance company issued a policy containing the following condition:

The policy shall be void if the life assured dies by suicide or by the hands of justice. In any such case the directors may allow to the policyholder such part of the sum assured as they shall think fit, and the policy shall remain in force to the extent of the pecuniary interest of third parties bona fide acquired for valuable consideration … provided notice thereof in writing shall have been received …

The company had advanced money to the assured on a mortgage of certain property and on an assignment to them of the policy by way of security, and it was provided by a clause in the mortgage deed that the company should satisfy themselves primarily out of the policy moneys. The assured committed suicide, and the company commenced an action

Page 521 of [1940] 1 All ER 514

against his executrix for the purpose of enforcing their security. The executrix said: “You must first satisfy yourselves out of the policy moneys, the money due on the policy, before you can come upon the leasehold property.” It was held that the expression “third parties” did not include the assured. The relevant part of the judgment of Tomlin J is at pp 414, 415.

Now, taking the question of the natural and primary meaning of the words it seems to me that the third party there is a third party by reference to those who are concerned in the contract of assurance. In other words, I think the phrase means a third party with reference to the assurer and the policyholder, and possibly the assured, because the policyholder and the assured may conceivably be different persons. But it seems to me that it is impossible to say there that “third party” means “anybody other than the assured,” or “anybody other than the policyholder,” and that it therefore includes the assurer.

That is a decision to the effect that at any rate in that policyand I do not see why the principle should not apply to this policya “third party” means somebody other than the two contracting parties. The words “any person” at the end of the first line in sub-cl (1) cannot, therefore, include Miss Thompson, for the two reasons given by counsel for the respondentsnamely, (i) that she could not be a third party under that, and (ii) that, of course, she could not sue herself. Then the argument continues that, when one comes to the first two lines of sub-cl (3), the third party insurance under this sub-clause is merely an extension of the main insurance already defined and limited, and that it is an extension to include authorised drivers, but not an extension of the class of claimants against whose claims indemnity is to be givennamely, the class already defined as, and limited to, persons other than the policyholder and the insurers. In effect, the insurers are saying: “Persons not parties to this policy will normally be making claims against the owner, but there may be occasions on which they may be claiming against a person driving. Against claims by those persons, and those persons only, we indemnify both the policyholder and the driver.” A claim by Miss Thompson against herself could not come within the indemnity in sub-cl (1), as she is not a third party, and, therefore, it is said that a claim by Miss Thompson against Digby cannot come within sub-cl (3). I think that that is stating the argument as I understand it.

Reliance was placed upon an opinion on a petition given by Lord Robertson in General Accident, Fire & Life Assurance Corpn Ltd v Watson. I gather that there is a procedure there by which points of law can be raised by petition, and a point exactly similar to this was raised there, and was decided as counsel for the respondents argues this case should be decided. The words in the policy which Lord Robertson had to construe were different. There it was provided that the corporation would indemnify the policyholder against:

… all sums which the policyholder shall become legally liable to pay in respect of … In terms of and subject to the limitations of and for the purposes of this section, the corporation will indemnify any person who is driving such motor car policyholders order or with his permission.

Page 522 of [1940] 1 All ER 514

In that case, dealing with the extended second indemnity, Lord Robertson said:

The scope of the indemnity is not expressed. It is, however, an indemnity which is granted only “in terms of and subject to the limitations of and for the purposes of this section.” For the ascertainment of its scope I think that one must look back to the main part of “this section.” The main part of the section provides indemnity to the policyholder for any sums which she may become legally liable to pay in respect of, inter alia, “bodily injury to any person”; and the whole section is headed “Liability to Third Parties.” I think it is plain (and it was not denied) that if the policyholder is personally injured she cannot directly claim indemnity under the main part of the section. She cannot become legally liable to pay damages in respect of injuries to herself. She is not, within the meaning of the main part of the section, a “person” against whose claims indemnity is provided. It is argued, however, that the subsidiary part of the section provides a completely independent indemnity for Miss Peggy Watson [the authorised driver]. That argument may be sound up to a point, but, since the scope of any such indemnity is determinable only by reference to the main part of the section and since the policyholder herself is not a person against whose claims an indemnity is provided by the main part of the section, I am of opinion that the scope of Miss Peggy Watsons indemnity does not extend to cover such claims. The contrary argument must proceed on the view that while the expression “any person” as contained in the main part of the section does not include the policyholder it must be construed as including her in any question as to the scope of the indemnity provided to Miss Peggy Watson by the subsidiary part of the section. I reject this argument. I see no imperative reason for changing the meaning of “any person,” and I think that its proper meaning in terms of the contract is controlled by the heading of the section“Liability to Third Parties.”

It will be seen that the ratio of the decision is really contained in the words:

… since the scope of any such indemnity is determinable only by reference to the main part of the section …

It is to be observed that the words are different in the policy I have to construe. They are [s 2(3)]:

The insurance under this section shall also extend to indemnify in like manner any person whilst driving any automobile … with the permission of the policyholder …

The words in the Watson casenamely, “In terms of and subject to the limitations of and for the purposes of this section … will indemnify”seem to me to be quite different. Those words plainly mean, I think, that the scope of the second insurance is to be no wider than the scope of the first. At any rate, there is the argument for the corporation.

Counsel for the claimant argued that the words I have to construe contemplate such an extension of the insurance as will indemnify the driver as completely as it indemnifies the policyholder, that the driver can only be indemnified “in like manner” if the same language is used of him as is used in s 2(1) of the policyholdernamely, indemnify him against:

All sums which [the driver] shall become legally liable to pay in respect of any claim by any person (including passengers in the automobile) …

The policyholder gets complete indemnity. Why is not the driver to get complete indemnity? Is he indemnified “in like manner” if he does not get complete indemnity? Further, he contends that “third-party

Page 523 of [1940] 1 All ER 514

liability” must be construed in relation to the person liable, that in the contract purporting to be made with an authorised driver, and upon which he is permitted to sue, “third party” means at any rate someone other than the driver, someone to whom the driver is liable in damages. Lord Robertson said that he saw no imperative reason for changing the meaning of the words “any person.” Counsel for the claimant says that one cannot avoid a change on any view, and that an authorised driver must be within the definition of “any person” in sub-cl (1). For example, supposing a friend is driving Miss Thompson, and Miss Thompson, suddenly startled, clutches his arm and causes him to lose control of the car and collide with something, then quite obviously the friend would have a claim against her. He must be within the phrase “any person” in sub-cl (1), and yet he cannot be within the expression when incorporated in sub-cl (3), as he can have no claim against himself.

After giving a good deal of thought to the case, I think that Lord Robertson was right when he said that it is always to be borne in mind that the dispute is as to the meaning of the particular contract. It is easy to go astray if one is unduly swayed by the construction put upon another and different contract. I think I must concentrate upon the language of this contract, and give it its natural and primary meaning. The mere fact that it may lead to a result not contemplated by the corporation is, of course, not material. The language is the language of the corporation, and, if there are two constructions equally reasonable, the one more favourable to the insured ought to be adopted. I think that counsel for the claimant is right when he says that sub-cl (3) should be read as follows: “The insurance under this section shall also extend to indemnify an authorised driver while driving against all sums which he shall become legally liable to pay in respect of any claim by any person, including passengers.” I cannot see why the words “any person” there should be given precisely the same meaning or scope as the same words in sub-cl (1). As I have pointed out, the same meaning cannot be given. The authorised driver is not excluded from sub-cl (1), and he is necessarily excluded from sub-cl (3). I think that sub-cl (1) gives complete indemnity to the policyholder, and I cannot see why sub-cl (3) should not give complete indemnity to the driver. Weight must be given to the words “in like manner.” It is as if the corporation said to the policyholder, “We will indemnify you against all claims which you may become legally liable to pay,” and then, turning to the authorised driver, said, “And we will do the same for you.” What does that mean? It means: “We will indemnify you against all claims which you may become legally liable to pay.” I am satisfied that the plain and natural meaning of the words is that the authorised driver is to be indemnified against all claims which he shall become legally liable to pay. The suing by an owner of her chauffeur, of course, is an unusual, and perhaps a startling, proceeding, but the same question would arise if a friend to

Page 524 of [1940] 1 All ER 514

whom the car had been lent, while driving up to the owners gate in order to return the car, negligently ran into and injured the owner who was waiting to receive it. There would be nothing startling in a claim against the careless friend for damages, and I cannot see any reason why such a person should not be indemnified.

Then counsel for the claimant makes a further point that the friend in such a case would be the person using the car, because the owner would not be in it, and that he would be guilty of an offence under s 35 and s 36(b) if not covered against claims in respect of bodily injury to any person. That is the statutory obligation. He is to be covered against claims in respect of bodily injury to any person. Miss Thompson, too, would be guilty of an offence in permitting her car to be used by a person not fully covered. I think that there is no doubt that the corporation intend policyholders and authorised drivers to believe that the policy gives them at least the protection which the law requires them to have, and it may be some consolation to the corporation that I have been driven to the conclusion that they have used apt words to give effect to what must have been their intention. Therefore, I answer the two questions in favour of the claimant, Digby.

Award confirmed with costs.

Solicitors: Kenneth Brown Baker Baker (for the respondents); Walter Burgis & Co (for the claimant).

C St J Nicholson Esq   Barrister.

Blanket v Palmer

[1940] 1 All ER 524


Categories:        CIVIL PROCEDURE: LANDLORD AND TENANT; Rent        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ, AND FARWELL J        

Hearing Date(s):        16 FEBRUARY 1940        


Emergency Legislation Action for possession and rent Order in effect reducing rent payable Other trade creditors being paid in full Discretion of court Courts (Emergency Powers) Act 1939 (c 67), s 1.

The appellant was the landlord of a shop in which the respondent carried on business. The premises were let to the respondent at a rent of £150 per annum, payable weekly at the rate of £2 17s 8d. The respondent being in arrears with his rent, the appellant commenced proceedings to recover possession of the premises, and also to recover the arrears due. Judgment was given by the master for the appellant for £20 3s 8d arrears of rent, and for mesne profits and for costs, there being no defence. The respondent, however, asked for relief under the provisions of the Courts (Emergency Powers) Act 1939, and leave to issue execution was suspended so long as the respondent paid £3 per week. The respondent appealed from the order of the master to the judge, who varied the order by directing that the respondent should pay the sum of £10 within 10 days and the sum of £1 10s per week thereafter:

Held in the circumstances of the case, the order of the master should be restored, and leave to enforce the judgment should be suspended only so long as the respondent paid £3 per week.

Notes

This case, taken with the similar decision in Metropolitan Properties Co Ltd v Purdy, might be thought to establish a principle that

Page 525 of [1940] 1 All ER 524

general trade creditors are not to be paid in full while the landlord is to be restricted in the recovery of his rent. Such a statement of principle has also received considerable support from the decision of the Court of Appeal in A v B [1939] 4 All ER 169; Digest Supp, but the decision herein is expressly stated to be a decision, not upon principle, but upon the particular circumstances of this case.

As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Cases referred to

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Southport Tramways Co v Gandy [1897] 2 QB 66; 31 Digest 553, 7004, 66 LJQB 532, 76 LT 815.

Metropolitan Properties Co Ltd v Purdy [1940] 1 All ER 188; Digest Supp.

Appeal

Appeal by the plaintiff from an order made by Cassels J, varying an order made by Master Baker.

The appellant was the landlord of a lock-up shop let to the defendant for a period of 21 years under a lease dated April 1935, and the action was brought to recover possession of the premises for non-payment of rent. The amount of the rent was £150 per annum, payable weekly at the rate of £2 17s 8d. At the time when the proceedings were commenced, a little over £20 was owing, being 7 weeks rent, and, at the time when judgment was given, on 16 January 1940, a further £20 3s 8d was owing in respect of mesne profits. Judgment was given for possession and for the arrears of rent and for mesne profits to the date of the judgment, and an application was made at the same time for leave to proceed under the Courts (Emergency Powers) Act 1939. The respondent put in an affidavit showing that his business had suffered by reason of the black-out, and asked for relief under the above Act. The master made an order to the effect that the appellant should have leave to enforce the order, but such leave was suspended so long as the respondent paid £3 per week. The respondent appealed to the judge, who varied the masters order by requiring the respondent to pay £10 within 10 days and reducing the weekly payments to £1 10s the respondent being left in possession.

Phineas Quass for the appellant.

Guy T Aldous for the respondent.

Quass: The Courts (Emergency Powers) Act 1939, was not intended to allow a tenant to continue in possession against the will of the landlord at a rent lower than that provided by the terms of the lease. The court has no power to compel a landlord to accept as current rent an amount lower than that provided by the lease. There is nothing in the Courts (Emergency Powers) Act 1939, to differentiate the position of a landlord from that of any other creditor. No other person can be required to supply anything to a debtor at a price lower than the price he agreed to pay. Evans v Bartlam is authority for saying that, if the exercise of a judges discretion works injustice, the matter can be

Page 526 of [1940] 1 All ER 524

raised in the Court of Appeal. The whole of the courts jurisdiction is concerned with the discharge of debts already crystallised. [Counsel referred to Southport Tramways Co v Gandy and Metropolitan Properties Co Ltd v Purdy.]

Aldous: It is contrary to the purposes of the Act to say that a tenant must necessarily leave if he is unable to pay the rent. The intention of the Act is to provide that the tenant shall not be turned out if the court comes to the conclusion that that would not be right, because his inability to pay his rent has arisen by reason of circumstances arising from the war. The whole purpose of the Act is to prevent a tenant from being evicted by reason of his inability to pay the full rent. The judge has found that the tenants inability to pay the full rent is due to circumstances arising out of the war, and the discretion of the judge should not be interfered with unless it can be shown to have been exercised upon a wrong principle: Metropolitan Properties Co Ltd v Purdy. In the present case, the discretion was exercised on a right principle, as it was in accordance with the purpose of the Act.

Quass in reply.

Phineas Quass for the appellant.

Guy T Aldous for the respondent.

16 February 1940. The following judgments were delivered.

MACKINNON LJ. This was a claim by the plaintiff, who was the owner of a shop where the business of supplying fried fish was carried on by the defendant under a lease at a rent of £150 per annum, payable weekly at the rate of £2 17s 8d. The defendant having got into arrears with his payment of rent, on 28 November 1939, the plaintiff issued a writ claiming possession of this shop by reason of non-payment of rent, and claiming £20 3s 8d, being 7 weeks rent due up to the day before the issue of the writ. There was no defence to that claim, and on 16 January 1940 judgment was given for possession. The judgment went on to say:

… for £20 3s. 8d. rent and mesne profits from Nov. 27, 1939, the date hereof, at the rate of £150 per annum and £11 5s. costs.

In my view, as a matter of fact, that judgment was not in the form in which it should have been. Strictly, it should have been a judgment for possession and for £20 3s 8d, the rent due, and, as by a coincidence it so happened, for the same amountnamely, £20 3s 8dmesne profits from 27 November 1939 until 16 January 1940 and for further mesne profits at the same ratenamely, £2 17s 8d per week up to the time of obtaining possession. That, I think, would have been the form in which the judgment ought to have been drawn up.

Whatever the form of judgment was, however, it was necessary for the plaintiff, under the Courts (Emergency Powers) Act 1939, to apply for leave to issue execution to enforce the judgment. Application was made to Master Baker, who ordered as follows:

It is ordered that the plaintiff be at liberty to sign final judgment … and it is further ordered that the plaintiff be at liberty, under the Courts (Emergency Powers) Act, 1939, s. 1, to issue execution, but that such leave be suspended so long as the defendant pays £3 per week, the first payment to be made on Jan. 21, 1940.

Page 527 of [1940] 1 All ER 524

I have no doubt whatever of the intention of the master in making that order, but here again I think that the form of order was inaccurate or undesirable. I think that the order should have been: “Leave to issue execution to enforce the aforesaid judgment, but such leave to be suspended so long as the defendant pays £3 per week, such payment to be treated, as to £2 17s 8d, as payment of the accruing mesne profits, and, as to 2s 4d, as payment off of the amount due under this judgment.” That, however, is a mere matter of detail.

The defendant appealed from that decision to the judge, and the judge varied the order of the master by varying the direction for satisfaction of the judgment to a direction that the defendant do pay to the plaintiff the sum of £10 on 5 February and the sum of £1 10s each week thereafter, and that either party do have liberty to apply. As there was in existence a judgment for possession in addition to a judgment for £20 3s 8d rent, and a judgment for mesne profits at the rate of £2 17s 8d per week until possession was given, the effect of the judges order is that that possession could never be secured so long as the defendant paid £1 10s per week, and, so long as the defendant paid £1 10s per week, he, the defendant, is to remain in possession of this shop of which the lease is terminated by the order for possession to be given up to the plaintiff. The result of that order is that in effect the contractual rights of the parties are drastically altered. Whereas by those contractual rights the defendant was liable to pay £2 17s 8d per week, by virtue of the order of the judge he is now left in possession of the premises as though he were a tenant there at an agreed rent of £1 10s per week.

Various questions have been debated before us, some of which raise very difficult questions of principle as to the application of this Act. Counsel for the appellant has suggested that it is not within the powers of the court in any circumstances thus to vary the contractual rights of the parties by reducing the amount of the rent reserved under the lease to a smaller figure. Counsel for the respondent says that that clearly is within the powers of the court. I do not express any opinion upon that question of principle. So wide and so vague are the terms of the Act that my present impression is that it is quite conceivable that it might be within the power of the court to order almost anything in variation, or in defiance, of the existing contractual obligations of the parties.

I think, however, that it is sufficient in this case to confine myself to the facts of this case. This is not a case, such as was suggested by counsel for the respondent, of the wife of a soldier being turned out of her home, or anything of that sort. This is a case of business premises. At this shop a business is carried on for the profit and advantage of those concerned in the business. Towards that business, the plaintiff supplies the premises, as landlord. The defendant supplies the energy in managing the business, buying the raw materials and other supplies, attending to the customers, and so forth. Various fish merchants, potato merchants and others are another element in the carrying on of the business. They

Page 528 of [1940] 1 All ER 524

have to be paid by the defendant their proper market rate for what they supply. Under this decision of the judge, the only one person of all these various contributors to the carrying on of this business who is to be deprived of his share of the profits of carrying it on is the plaintiff, the landlord. The plaintiff presumably knows her own interest. If it were not likely that she could let, or if it were impossible for her to let, this shop to somebody else at a rent which the defendant ought to be paying to her, she would not take these present proceedings to get possession of the premises and take them over. It would be better for her, if she could not get the proper rent elsewhere, to let the defendant remain there, and get as much as she could out of him. The fact that she is asking for possession shows, prima facie, that this is a business interest of sufficient value for somebody else to pay the rent if the defendant does not. In those circumstances, looking at it from that point of view, I think that the order made by the master was the proper order to be made in this case, and I do not agree with the variation of it which was made by the judge.

I think, therefore, that the appeal should be allowed and the order of the master restored, but I think also that the several amendments of the proceedings which I have indicated should be madenamely, that the judgment should be rectified so as to read it in the form which I recited, and that the order of the master should also be varied or rectified by putting it in the form: “Leave to issue execution to enforce the judgment, such leave to be suspended so long as the defendant pays £3 per week, such payment to be treated, as to £2 17s 8d, as the paying of accruing mesne profits, and, as to 2s 4d, as payment off of the amount due hereunder.

CLAUSON LJ. I agree.

FARWELL J. I agree.

Appeal allowed.

Solicitors: H W Henniker Rance & Co (for the appellant); Crane & Hawkins (for the respondent).

W K Scrivener Esq   Barrister.

Re Griffiths

Re Davies Contract

[1940] 1 All ER 528


Categories:        CIVIL PROCEDURE; Courts: LAND; Sale of Land        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        19 FEBRUARY 1940        


Emergency Legislation Contract for sale of land Failure to complete Application for leave to forfeit deposit and to re-enter Onus of proof Courts (Emergency Powers) Act 1939 (c 67), s 1.

Under a contract, dated 16 December 1937, the appellant agreed to purchase from the respondent certain land for £8,500, the contract to be completed on 25 October 1939. The appellant paid a deposit of £500, and was let into possession, but was unable to complete the contract as agreed. The respondent commenced proceedings to obtain leave to

Page 529 of [1940] 1 All ER 528

forfeit the deposit and to re-enter into possession of the land. The effect of the evidence was that the appellant would not have been able to complete the contract even if hostilities had not broken out:

Held the appellant had not discharged the onus which rested upon her of satisfying the court that her inability to complete the contract was due to circumstances arising out of the war.

Notes

In an application under the Courts (Emergency Powers) Act 1939, it is fundamental that the party alleging inability to pay money or perform an obligation must show that that inability is due to circumstances arising out of the war. If it appears that there would have been the inability even if the war had not supervened, there is no case for relief.

As to Emergency Powers, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Cases referred to

A v B [1940] 1 KB 217, [1939] 4 All ER 169; Digest Supp.

Tomley v Gower and McAdam [1939] 4 All ER 460; Digest Supp.

Interlocutory Appeal

Interlocutory Appeal by the respondent from an order of Morton J, dated 23 January 1940. The application was for leave under the Courts (Emergency Powers) Act 1939, to forfeit a deposit and to allow the applicant, the vendor, to enter into possession. The defendant, the appellant in this appeal, was the purchaser, and the respondent in this appeal was the vendor, of certain land at Cheston. The contract was dated 16 December 1937 and the date fixed for completion was 25 October 1939. The purchase price of the land was £8,500, and £500 had been paid as the deposit. This was one of many transactions into which the parties had entered with each other. By the system of dealing formerly adopted, the respondent received 50 per cent of the profits made on the development of the land, while the responsibility for making the profit fell upon the appellant. The respondent changed his mind with regard to this transaction, and he entered into the contract with the original vendor and a contract of sub-sale with the appellant. All the costs were to be paid by the appellant. The transaction here in question was commenced in December 1937, and the appellant had experienced considerable difficulty in developing the property before the outbreak of war.

A Grant KC and F E Skone James for the appellant.

G H B Streatfeild KC and R Cozens Hardy Horne for the respondent.

Grant KC: This is not an ordinary transaction in which A sells to B, and later A seeks leave to forfeit the deposit by reason of Bs failure to complete. The effect of granting the respondent the remedies he seeks would be to deprive the appellant of over £2,000, as she has spent sums upon the property. Further time should be given to the appellant to enable her to sell part of the property. Time is not of the essence of a contract of this kind.

Skone James followed on the same side.

Streatfeild KC: In A v B, it was held that the Courts (Emergency Powers) Act 1939, existed for the benefit of debtors who were

Page 530 of [1940] 1 All ER 528

unable to complete contracts owing to circumstances which were connected with the war. The Act, however, cannot be treated by debtors as a kind of windfall to enable them to escape from the consequences of failure to complete contracts which they would not have been able to complete in any event. The difficulties of the appellant are not due to the war. There is no evidence which tends to show that her position would have been different from what it is if the war had not broken out. Tomley v Gower and McAdam is in many respects similar to the present case.

Grant KC in reply.

A Grant KC and F E Skone James for the appellant.

G H B Streatfeild KC and R Cozens Hardy Horne for the respondent.

19 February 1940. The following judgments were delivered.

MACKINNON LJ. The plaintiff and the defendant in this case entered into a contract, dated 16 December 1937, whereby the defendant agreed to purchase from the plaintiff a building estate at Cheston. She paid £500 deposit, and agreed to complete the purchase by a payment of £8,000 on 25 October 1939. She agreed also to pay interest on the purchase price at the rate of 7 per cent until that completion. A certain amount of interest was paid by the defendant to the plaintiff, and then she defaulted. When 25 October 1939 arrived, the defendant then was not in a position to complete and pay the agreed price. In accordance with the original contract, she had been given immediate possession of the property.

In those circumstances, the plaintiff issued an originating summons, dated 26 October 1939, asking for an order from the court that he might be at liberty to exercise the remedy now available to him by way of (a) forfeiture of the deposit of £500, and (b) the re-taking of possession of the property comprised in the contract, which, as I say, had been given to the defendant. That summons was served upon the defendant, and with it, as part of the form, a notice informing her that those remedies might not be exercised without the leave of the court, and calling attention to the provisions of the Courts (Emergency Powers) Act 1939. The defendant sought to take advantage of the provisions of that Act, and, therefore, it was necessary for her to satisfy the court, under s 1(4) of the Act, that she, being a person liable to satisfy the judgment or order, or pay or perform the obligation in question, was unable to do so immediately:

… by reason of circumstances directly or indirectly attributable to any war in which His Majesty may be engaged …

That was the issue which came before the judge. The defendant in evidence put forward certain facts as to her financial position, and as to what she had been doing with this land, but the judge came to the conclusion that all that she had said only went to show that she had entered into a highly speculative undertaking, that, owing to circumstances totally unconnected with the war, it was extremely unlikely that she would ever have been able to bring it to a successful conclusion and pay the purchase price in October 1939, and that her

Page 531 of [1940] 1 All ER 528

inability to do that had not been shown by her to be in any way caused by circumstances “directly or indirectly attributable” to the war. In those circumstances, the judge was of opinion that she had not satisfied the requirement of the statute, and thereby established a reason why the plaintiff should be prevented by the court from exercising his ordinary legal rights.

We have now heard the matter, and counsel for the appellant has called our attention to the evidence. I agree with the judge. I do not think that the defendant even began to establish that her difficulty in this matter, and her inability to perform her obligation under this contract, were caused directly or indirectly by the existence of the war. That being so, no reason has been adduced, as it seems to me, why the plaintiff should not be entitled to exercise his ordinary rights according to the contract which he entered into with the defendant. That being so, I think that the appeal from the judges decision fails.

CLAUSON LJ. I agree.

Appeal dismissed with costs.

Solicitors: Gustavus Thompson & Sons, agents for R G B Regge, Walton-on-Naze (for the appellant); Wrentmore & Son, agents for P H R Evans, Bournemouth (for the respondent).

W K Scrivener Esq   Barrister.

Hollis v Wingfield and Others

[1940] 1 All ER 531


Categories:        LAND; Mortgages: COMPANY; Shares: TAXATION; Income Tax        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        19 FEBRUARY 1940        


Mortgage Accounts Mortgagee in possession Sum received for principal and interest Whether mortgagee entitled to deduct amount of tax on interest.

A mortgagor mortgaged certain shares in a company to a first mortgagee for £7,000 and interest, which was later reduced to approximately £5,000. The company went into liquidation, and the liquidator paid to the first mortgagee from the proceeds of sale of the companys property an amount of some £9,000, and the first mortgagee became to that extent a mortgagee in possession. The mortgagor had also created a second mortgage. In a redemption action brought by the mortgagor, an account was ordered of the dividends and sums received by the first mortgagee in respect of the mortgaged shares. The first mortgagee filed an account showing certain sums which she had deducted from interest received and paid to the revenue as income tax in respect of this interest. The mortgagor contended that the first mortgagee was not entitled to deduct the sums so paid as income tax:

Held the first mortgagee was entitled to discharge the amount of the tax for which she was liable out of the moneys which she had received as interest on the mortgage.

Decision of Farwell J ([1940] 1 All ER 442) affirmed.

Notes

The point here decided is purely on the question of accounting by a mortgagee in possession. The matter is of great importance to mortgagees

Page 532 of [1940] 1 All ER 531

in possession now that the rate of income tax has increased so greatly, but few mortgagees take possession of the mortgaged property.

As to Accounting by Mortgagee in Possession, see Halsbury (Hailsham Edn), Vol 23, pp 396404, paras 591605; and for Cases, see Digest, Vol 35, pp 647651, Nos 37753839.

Cases referred to

Union Bank of London v Ingram (1880) 16 ChD 53; 35 Digest 661, 3952, 50 LJCh 74, 43 LT 659.

Interlocutory Appeal

Interlocutory Appeal by the plaintiff from an order of Farwell J, dated 31 January 1940, and reported [1940] 1 All ER 442, where the facts are fully set out.

J Norman Daynes KC, C A J Bonner (for J A Brightman, on war service) and Herbert Hart for the appellants.

Cyril L King KC and G D Johnston for the respondent, the first mortgagee.

Daynes KC: It is unfair to the puisne incumbrancer to say that the interest should be treated as gross and not as net interest. As regards the revenue authorities, there is no evidence as to how far the interest will be treated as being paid out of money which has already borne tax. The mortgagor is personally liable to the revenue because he had had the benefit of the deduction of the tax. It was quite unnecessary for the first mortgagee to have paid for her protection, and the money so paid can be recovered. There is no reason why, in this case, the ordinary procedure should be departed from. [Counsel referred to Union Bank of London v Ingram.]

Counsel for the respondent were not called upon.

J Norman Daynes KC, C A J Bonner (for J A Brightman, on war service) and Herbert Hart for the appellants.

Cyril L King KC and G D Johnston for the respondent, the first mortgagee.

19 February 1940. The following judgments were delivered.

MACKINNON LJ. This problemto me, at any rateis not at first sight at all an easy one, but I have reached a clear view about it, and I have no doubt that the judgment of Farwell J is correct. Miss Finch was in possession of certain income which happened to be interest on a mortgage. It was interest payable to her as mortgagee. If she were paid that interest by the mortgagor, he would have been entitled to, and indeed did, deduct the tax when paid. Her liability for tax upon the interest she received would then be discharged, because she would have suffered deduction by the mortgagor when he paid the interest to her.

In this case, she gets her interest. She gets it, however, not because the mortgagor pays it to her, but because, as mortgagee in possession, she has realised the security and come into possession of a certain fund out of which she is entitled to recoup herself for her capital, and to satisfy any interest due to her. So far as, out of that fund, she satisfies her claim for interest, she receives a portion of her income in the matter of interest. In respect of that income, she is liable to pay income tax. The mortgagor has not paid it to her, and he has not deducted the tax. Therefore, she has no discharge of her liability for income tax by reason of its having been deducted on payment to her.

Page 533 of [1940] 1 All ER 531

Having received a certain sum by way of interest, and being liable to pay tax upon that receipt, what answer would she have to a claim for the tax by the revenue, except to put the amount in her return for income tax, pay the tax, and get the receipt, as she has in fact done? In other words, Farwell J seems to me to have been perfectly correct when he said, at p 445, that the mortgagor:

… never has had the money, and never has become liable to pay tax. The person who is liable to bear the tax on the interest on the mortgage is the mortgagee, who has had the money, and is liable as the person who has received the money, and must account for the tax. In my judgment, the mortgagee, in taking the course which she took in this case of discharging her liability for the tax out of the moneys in her hands, was not doing anything which she was not entitled to do.

As it seems to me, one might go further, and say that she was not doing anything but that which she was bound to do. In other words, I think that, in the special circumstances of this case, Miss Finch was in error in the original account which she put in when she credited her items of interest in that account less tax. If she had received those sums paid to her by the mortgagor, that would have been correct. In fact, however, she received those items of interest as part of the proceeds of the security which she, as the first mortgagee, had realised. In realising those items of interest, she had not suffered any deduction of tax. She had got the whole amount, and she was liable to pay income tax on it. Those being the real facts in the case, the decision of the judge seems to me to be perfectly right, and this appeal fails.

CLAUSON LJ. I agree.

Appeal dismissed with costs.

Solicitors: Evill & Coleman (for the appellants); Fladgate & Co (for the respondent, the first mortgagee).

W K Scrivener Esq   Barrister.

Shop Investments Ltd v Sweet

[1940] 1 All ER 533


Categories:        TAXATION; Income Tax        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        23, 24, 29 JANUARY 1940        


Income Tax Lease of furnished cinema Rent received by lessors in excess of Sched A assessment Apportionment of rent in respect of premises and furniture Income Tax Act 1918 (c 40), Scheds A, D.

The appellant company granted a lease of cinema premises for 42 years at a yearly rent of £2,285, which rent included payment for the use of a considerable amount of furniture in the cinema. The lease contained a covenant by the lessees to keep the furniture in repair, and, if necessary, to replace it, and to hand it back at the end of the term. The appellant company, however, did not carry on a business of letting furnished properties. The rent was in excess of the Sched A assessment. The premises were assessed to income tax under Sched A, and, in addition, the company was assessed under Sched D in respect of the balance of rent received by them in excess of the amount of the assessment under Sched A as representing a profit excluded from consideration in the assessment under Sched A:

Held the composite rent must be disintegrated by a separation of the element in such rent which related to the hereditament from

Page 534 of [1940] 1 All ER 533

that which was due to the fact that the hereditament contained furniture; but the part assessable under Sched D was not necessarily the balance after the deduction of the Sched A assessment. The rent must be apportioned as in Loughnan v Marstons Dolphin Brewery Ltd.

Notes

It is now treated as settled that the assessment to income tax in respect of the demised premises proper is wholly covered by the Schedule A assessment. It is also settled, however, that the inclusion of a payment for goodwill, fittings, or furniture in the sum called rent renders that payment liable to be also assessed under Schedule D. The real question here is as to the apportionment under the two schedules and it is held that the rent must be apportioned according to the respective values of the premises and the other property included in the total rent, and that it is not correct to deduct the Schedule A assessment from the total rent and to assess the remainder under Schedule D. The reason for this is that the assessment under Schedule A covers the whole liability to tax so far as the premises are concerned. The present decision treats the case of Windsor Play-House Ltd v Heyhoe, where the facts were very similar to those in the present case, as overruled by the decision in Whelan v Alfred Leney & Co Ltd, Loughnan v Marstons Dolphin Brewery Ltd.

As to Assessment of a Composite Rent, see Halsbury (Hailsham Edn), Vol 17, pp 34, 35, para 62; and for Cases, see Digest, Supp, Income Tax, Nos 116a116g.

Cases referred to

Fry v Salisbury House Estate Ltd, Jones v City of London Real Property Co Ltd [1930] AC 432; Digest Supp, 99 LJKB 403, 143 LT 77, 15 Tax Cas 266, affg [1930] 1 KB 304.

Whelan v Alfred Leney & Co Ltd, Loughnan v Marstons Dolphin Brewery Ltd [1936] AC 393, [1936] 1 All ER 468; Digest Supp, 105 LJKB 197, 154 LT 537, 20 Tax Cas 321.

Windsor Play-House Ltd v Heyhoe (1933) 17 Tax Cas 481; Digest Supp.

Campbell v Inland Revenue (1879) 1 Tax Cas 234; 28 Digest 7, case l.

Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74; 35 Digest 307, 550, 92 LJCh 558, 129 LT 466.

Case Stated

Case Stated by the Commissioners for the Special Purposes of the Income Tax Acts under the Income Tax Act 1918, s 149, for the opinion of the Kings Bench Division of the High Court of Justice. The business of the appellant company consisted of the buying of properties, the acceptance of surrender of existing leases with a view to modernising the premises, and letting or selling the property so modernised. At no time had the company equipped buildings in any way for the purpose of letting premises furnished. The facts relevant to the assessment here reviewed are fully set out in the judgment. The question was whether the difference between the amount of certain rents received by the company as lessor of certain premises and the amount of the Sched A assessment was chargeable to tax under the Income Tax Act 1918, Sched D. It was contended on behalf of the company:

(i) That the company did not at any relevant time carry on a business of letting furnished premises.

(ii) That the company did not seek to make, and had not in fact made, any profit from letting the fittings and fixture.

Page 535 of [1940] 1 All ER 533

(iii) That the whole profit arising to the company in respect of the Hounslow Empire was chargeable under the Income Tax Act, 1918, Sched. A, and had been so charged, and that the company could not be assessed under Sched. D for any amount by which the assessments under Sched. A might be insufficient be cover the profit.

(iv) Alternatively, that, if the company had in this case made a profit from letting fittings and fixtures, such profit must, for purposes of assessment under Sched. D, be separated from the profit made by letting the hereditament demised therewith, and that this could only properly be done by estimating the part of the total rent of £2,285 which was attributed by the parties to the use of the fittings and fixtures.

(v) That the assessment should be discharged. Campbell v. Inland Revenue, Whelan v. Alfred Leney & Co., Ltd., Loughnan v. Marstons Dolphin Brewery, Ltd., Vaudeville Electric Cinema, Ltd. v. Muriset and Fry v. Salisbury House Estate, Ltd. were referred to and relied on, and Windsor Play-House, Ltd. v. Heyhoe was distinguished.

It was contended on behalf of the Crown:

(i) That the decision in Fry v. Salisbury House Estate, Ltd. related only to profits arising from the letting of unfurnished premises.

(ii) That the profits arising from the letting of the cinema fully equipped and furnished were distinct from the profits which the company as landlord derived from its property in the premises.

(iii) That the profits arising from this letting of the cinema so equipped and furnished were outside the scope of Sched. A, and were assessable under Sched. D.

(iv) That the assessments were correct in law and in amount, and should be confirmed. Windsor Play-House, Ltd. v. Heyhoe was referred to and relied upon.

The finding of the special commissioners was as follows:

On the evidence adduced before us, we were of opinion that the contentions of the Crown were correct, and that, on the authority of Windsor Play-House, Ltd. v. Heyhoe, the assessments under Sched. D were rightly made to include the rent received under the lease, and we accordingly confirmed the assessments appealed against.

Cyril L King KC and F N Bucher for the appellant.

The Solicitor-General (Sir Terence OConnor KC), Reginald P Hills and P H Thorold Rogers for the respondent.

29 January 1940. the following judgment was delivered.

WROTTESLEY J. In this case, the relevant facts are few and simple. The appellant company tried to buy a cinema or hall, called the Hounslow Empire, in order to pull it down and build shops on the site. Negotiations disclosed, however, that the owners had given their lessees, who already had a lease for 35 years, an option to purchase the reversion, so that this scheme had to be abandoned. The lessees were, however, prepared to purchase the hall from the owners for £25,500 and pass it on to the appellants for £29,500, provided that the appellants let it back to them for 42 years, as against the remaining 33 years of the term which they already enjoyed, at a yearly rent of £2,500. These terms, embodied in a letter of 9 November 1938, were later reduced into two agreements(i) an agreement of purchase by the appellants from the lessees, and (ii) an agreement of lease by the appellants to the lessees. The agreement for sale provided that a considerable amount of furniture in the cinema should pass with the cinema to the appellant company, though this had not been referred to in the letter of 9 November and the lease must be taken to include this

Page 536 of [1940] 1 All ER 533

furniture. Moreover, the lease contained various covenants obliging the lessees to carry on their entertainment business and to keep in repair and, if necessary, replace the furniture, and, finally, to hand it back at the end of the term. The lessee company continued to carry on their entertainment business and pay the agreed rent, which was modified in view of certain payments which the lessees undertook to make, and became £2,285.

The Crown claims that this rent ought to be taxed under Sched D, on the ground that it is profits under either Case I or Case VIthat is to say, profits of a trade, or at least a profit not taxed or taxable in any other way. They are willing to deduct from the sum, and so to give credit for, the amount at which the premises have already been taxed under Sched A. The appellants say that the whole rent they receive is nothing but rent, and is, therefore, already taxed under Sched A. The fact is that the hereditament is in fact already taxed under Sched A, but at some figure substantially less than £2,285.

The first question which arises is whether the rent of £2,285 is partly in consideration of the furniture and fixtures other than those adhering to the hereditament and which the appellants purchased and subsequently let to their tenants. Although the amount of the rent was apparently fixed and agreed without reference to these chattels, I cannot say that there was no evidence on which the commissioners could find that the rent was partly in consideration of this furniture and fittings, and it is implied in the case that the commissioners so found. The appellants have, therefore, let something more than that which was assessed and taxed under Sched Anamely, a furnished cinemaand the question is whether the Crown are right in claiming to tax the resulting “furnished rent,” giving credit for, and so deducting from it, only the rental value under Sched A, upon which tax has already been levied.

The appellants say that this is not the true method of assessment laid down in the Income Tax Acts, and rely on such cases as Fry v Salisbury House Estate Ltd and Whelan v Alfred Leney & Co Ltd. The proper method, they say, is to analyse this rent, divide it up into its constituents, extract from it that part which is relative to the hereditament, and tax under Sched D only that part, if any such be found, which is due to the furniture and movable fittings.

The Solicitor-General tells me that the method adopted in this case and approved by the commissioners is a long-standing practice, and any departure from it would result in a large amount of profit income going untaxed. Further, he relies, as did the commissioners, upon Windsor Play-House Ltd v Heyhoe, which he says is rightly decided, and should govern my decision even though I may not agree with it. It will be seen that, by the method employed by the Crown, it is assumed that the whole of the additional rent paid in respect of any period over and above the rental value as assessed by Sched A is profit due to the

Page 537 of [1940] 1 All ER 533

fact that the premises are furnished. In this connection, it has to be remembered that, if an unfurnished hereditament is let in fact at a higher rent than the amount at which it is assessed under Sched A, this is a profit upon which no tax can be levied. The liability of such a hereditament to be taxed is exhausted by the tax levied under Sched A. The resulting anomaly is that, if a person lets his house furnished, he is assessed on the increased income which he receives over and above his Sched A assessment, whether that increased income is due to an increased rental value of the hereditament as such or to the fact that it is furnished. If this anomaly is something which is inherent in the Income Tax Acts, there is no more to be said, and the commissioners in this case are right. To see whether that is so, it is necessary to consider the authorities.

The case which makes it quite clear that the tax collected under Sched A exhausts the Crowns powers, in so far as rental value of property is concerned, is Fry v Salisbury House Estate Ltd. If the assessment under Sched A falls short of, or lags behind, the rent actually received for a hereditament, that gap or lag is not to be made up by calling the letting a trade, or by taxing the increased rent or profit under Sched D. Income tax is one, and the tax collected under Sched A is the tax, and all the tax, that may be collected in respect of the letting of a hereditament. Incidentally, I may say that I see no ground in the facts of this case for saying that the appellants carry on the business of letting furnished cinemas. To some extent by accident, they in fact let one furnished cinema.

What, then, is proper to be done if, together with a taxed hereditment, something else is included in the demise? The answer to this question is to be found in Whelan v Alfred Leney & Co Ltd, in which the House of Lords appear to have applied the law as they had laid it down in Fry v Salisbury House Estate Ltd. The composite rent must be disintegrated, for only so can one be sure that one does not do what Fry v Salisbury House Estate Ltd has forbidden one to donamely, fill in the gap between the Sched A rent and the rent actually received in the year of assessment. By separating the element in the composite rent which relates to the hereditament from that part which is due to the fact that the hereditament contains furniture, one treats all taxpayers alike. Similarly, if the demise includes goodwill, or rights, or entitles the tenant to services, there again is a subject for apportionment.

This, as I understand it, is the result of the principles laid down in the cases to which I have referred. It is said, however, that Windsor Play-House Ltd v Heyhoe has concluded the matter, so far as this case is concerned. I should certainly not give judgment in a contrary sense to that given by Finlay J in that case if he had had at that time the guidance which I now have in Whelan v Alfred Leney & Co Ltd. I cannot, however, shut my eyes to the fact that Windsor

Page 538 of [1940] 1 All ER 533

Play-House Ltd v Heyhoe, whilst it came after the Salisbury House case, was some years before Whelan v Alfred Leney & Co Ltd. It was relied upon in Whelan v Alfred Leney & Co Ltd and was reconsidered and approved then by Finlay J in his judgment in Whelan v Alfred Leney & Co Ltd. In all three cases, he was, I think, influenced by the fact that, unless he decided as he did, a large amount of income might, anyhow for a time, go untaxed. Moreover, he was not prepared to extend to cases like Whelan v Alfred Leney & Co Ltd the principle laid down in Fry v Salisbury House Estate Ltd. There was a difference. In the latter case, the battle raged round the increased rent which the company obtained for letting in parts a hereditament assessed and taxed as a whole under Sched A, for the company assessed to being taxed under Sched D in respect of profits made by housekeeping and other such services to their tenants. In Loughnan v Marstons Dolphin Brewery Ltd, on the other hand, there was included in the letting the goodwill which a brewer has through selling his own beer in his own tied houses. In the House of Lords, the principle laid down in Fry v Salisbury House Estate Ltd was applied to the two leases then under consideration, as it had been in the Court of Appeal. In Whelan v Alfred Leney & Co Ltd, the Crowns method was found to be wrong, and the assessment was discharged. In Loughnan v Marstons Dolphin Brewery Ltd, an apportionment was directed to be made: see per Lord Russell of Killowen, at p 404.

I cannot, therefore, if I understand the decisions of the House of Lords rightly, take shelter behind Windsor Play-House Ltd v Heyhoe, any more than Finlay J himself would have done had he had before him in Windsor Play-House Ltd v Heyhoe the decision in Whelan v Alfred Leney & Co Ltd.

Then it is said that, without appealing against it, the appellant cannot grumble if the rental value of the hereditament, as such, be taken at the valuation put upon it under Sched A. Something akin to estoppel is suggested, the result of which is that the whole of the difference between the rent of £2,285 and the Sched A assessment becomes of necessity the profit which the appellant derives from letting his furniture in the hereditament. To accept this argument would be to sidestep the decision of the House of Lords, not merely in Fry v Salisbury House Estate Ltd, but also in Whelan v Alfred Leney & Co Ltd, Loughnan v Marstons Dolphin Brewery Ltd, and to give the Crown, by a side wind, if a subject should let his house furnished, that which the Crown has been refused if the subject should let his house unfurnished. Moreover, it is an argument which, if sound, would have defeated completely the taxpayers claims in Whelan v Alfred Leney & Co Ltd, Loughnan v Marstons Dolphin Brewery Ltd. Particularly in Loughnan v Marstons Dolphin Brewery Ltd, apportionment would have been unnecessary, since all that was necessary

Page 539 of [1940] 1 All ER 533

was to deduct from the total rent received the Sched A assessment, and the result was ex hypothesi the value of the only other thing demisednamely, the goodwill. Yet in that case Lord Russell of Killowen thought it right to approve the order of the Court of Appeal and to order an apportionment, following the principle laid down in Campbell v Inland Revenue. The fact that the stables in the last case were physically in a different part of Oban from that where the hotel lay is again no answer, for the goodwill in the case of Loughnan v Marstons Dolphin Brewery Ltd, if it had any local habitation, resided, I suppose, mainly in the tied houses which were assessed under Sched A. I think, therefore, that the assessment was wrongly made, and that the commissioners should enter upon an inquiry as in Loughnan v Marstons Dolphin Brewery Ltd.

Solicitors: Wigram & Co (for the appellant); Solicitor of Inland Revenue (for the respondent).

W J Alderman Esq   Barrister.

Boarland v Pirie Appleton & Co Ltd

Stemco Ltd v Inland Revenue Commissioners

Stemco Ltd v Hyett

[1940] 1 All ER 539


Categories:        TAXATION; Income Tax, Deduction in computing profits        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        22, 23 JANUARY 1940        


Income Tax Deduction against profits Repairs Depreciation of buildings Full repairing covenant by lessee Whether “whole of the burden of any depreciation” falls on lessee Finance Act 1937 (c 54), s 15(1), (5).

Two companies, S Ltd and P A & Co Ltd, who were lessees of certain premises used by them as factories for the purposes of their respective businesses, had entered into strict covenants to repair and maintain the respective premises and to deliver them up in good condition on the determination of the leases. The lease to S Ltd provided that the lessor should keep the heating apparatus and boilers in good order and condition, while the lease to P A & Co Ltd provided that the company should not be liable for damage arising to the buildings through actual subsidence or general failure of structure. The companies contended that, by reason of their obligations under the covenants to repair, the whole of the burden of any depreciation fell upon them, and that they were, therefore, entitled to the allowance for depreciation granted by the Finance Act 1937, s 15:

Held upon the wording of the covenants to repair, the whole of the burden of any depreciation did not fall upon the companies. However faithfully a lessee may comply with a strict repairing covenant, there is going on all the time a continuing wearing out of the fabric, for which he is not made liable during, or on the determination of, the lease.

Notes

The Finance Act 1937, s 15 speaks of the whole burden of any depreciation falling on the tenant by reason of the covenants to repair contained in the lease. It is here held that under the usual strict covenant to repair the tenant does not undertake the whole burden of repair, since, however fully a tenant may repair, there is still a depreciation by reason of the age of the building and the change from time to time in the nature of the buildings required for any purpose. It may be arguable whether this construction of the section

Page 540 of [1940] 1 All ER 539

gives any effect to the distinction which has repeatedly been drawn between a covenant to repair and a covenant to rebuild or renew. It has been said that in no case can a covenant to repair import an entire reconstruction, and it would seem to follow that, the legislature having used the words “covenants to repair,” those words could not be construed to mean “covenants to rebuild or renew.” A covenant so drafted as to place the whole burden of depreciation on the tenant would, in strict language, not be a covenant to repair, but a covenant to rebuild or renew.

As to Depreciation, see Halsbury (Hailsham Edn), Vol 17, pp 165169, paras 337343; and for Cases, see Digest, Vol 28, pp 45, 46, Nos 230232.

Cases referred to

Napier v Ferrier (1847) 9 Dunl (Ct of Sess) 1354; 31 Digest 330, case p.

Allan v Robertsons Trustees (1891) 18 R (Ct of Sess) 932.

Lister v Lane & Nesham [1893] 2 QB 212; 31 Digest 328, 4700, 62 LJQB 583, 69 LT 176.

Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716; 31 Digest 329, 4710, 130 LT 691, sub nom Calthorpe v McOscar 93 LJKB 273.

Turners Trustees v Steel (1900) 2 F (Ct of Sess) 363; 31 Digest 326, case 4678i.

Case Stated

Case Stated under the Finance Act 1937, Sched V, Part II, r 4, and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice.

By a lease, dated 1 January 1919, Pirie Appleton & Co Ltd, leased for a term of 21 years certain premises known as the Union Works, situated in Aberdeen. These premises were used as a factory for the purposes of their business. The lease contained, inter alia, the following provisions:

(1) The second parties [the lessees] shall further be bound and hereby bind themselves and their foresaids to maintain the whole subjects in good condition and repair during the period of this lease and for that purpose timeously execute and carry out all repairs of every kind required to keep the premises in such good condition and repair. They shall not be liable for damage arising to the buildings through actual subsidence or general failure of structure, but otherwise the whole responsibility for maintenance shall fall upon them, and they shall be bound to hand back the premises to the first parties [the lessors] at the termination of the lease in as good condition as they received them.

(2) The second parties shall at the termination of the lease be entitled to remove the whole plant and machinery belonging to them whether of the nature of moveables or fixtures and they shall not be liable for any damage thereby necessarily caused to the building.

The Union Works were occupied and used by the company as a factory, and were about 40 years old. The whole of the plant and machinery belonged to the company. The company had from time to time effected repairs to the works and fixtures, and the cost of such repairs had been allowed as deductions in the computation of the companys liability to income tax under Sched D, Case I.

By a lease, dated 12 September 1932, Stemco Ltd, a company carrying on the business of manufacturing chemists, leased for a term of 20 years certain premises known as the Albert Street Works, which they used as a factory for the purposes of their business. By cl 2(3) of the lease,

Page 541 of [1940] 1 All ER 539

the company covenanted at all times during the term to repair and maintain the demised premises and all additions and improvements. By cl 2(15) they further covenanted to yield up the premises at the determination of the tenancy in good and substantial repair and condition. By cl 3 the lessors covenanted to keep the heating apparatus and boilers in good order and condition. The company had from time to time executed repairs to the works, and the cost of such repairs had been allowed as deductions in the computation of the companys liability to income tax under Sched D, Case I. The company had in fact done any repairs necessary to the heating apparatus and radiators. No repairs to the boilers had been necessary. It was stated in evidence that the obligation of the lessors to keep the heating apparatus and boilers in good order and condition must have been overlooked. It was agreed that the Albert Street Works were mills, factories or other similar premises within the meaning of the Finance Act 1937, s 15(1)

The question for determination, in the case of each company, was whether the company should be treated, for the purposes of the Finance Act 1937, s 15, as if it were the owner of the premises and allowed a deduction in respect of depreciation as such

The Finance Act 1937, s 15(1), provides as follows:

In computing for any year of element the amount of profits or gains arising or accruing from any trade the profits of which are chargeable to tax under Sched. D, Case I, there shall be allowed a deduction of an amount hereafter provided in respect of the depreciation of any premises being mills, factories or other similar premises, wherever situate, which, during the period of computation, are owned by the person carrying on the trade and occupied by him for the purposes thereof.

S 15(5) provides as follows:

A person occupying any premises as the tenant thereof shall be treated for the purposes of this section as if he were the owner thereof if, under the covenants to repair contained in the lease or agreement by virtue of which he occupies the premises, the whole of the burden of any depreciation of the premises fall upon him.

It was contended on behalf of the companies:

(a) That under the covenants to repair contained in the respective leases the whole burden of any depreciation of the premises fell upon the companies. (b) That the companies should be treated for the purposes of the Finance Act, 1937, s. 15, as if they were the owners of the premises, and so entitled to the allowance under the section.

The following cases were referred to on behalf of Pirie Appleton & Co Ltd.: Napier v Ferrier and Allan v Robertsons Trustees.

It was contended on behalf of the inspectors of taxes:

(a) That under the covenants to repair contained in the leases the whole burden of any depreciation of the premises did not fall upon the companies, (b) that the companies were not entitled to the allowance for depreciation granted by the Finance Act, 1937, s. 15.

The following cases were referred to on behalf of the inspector of taxes: Lister v Lane & Nesham, Anstruther-Gough-Calthorpe v McOscar and Turners Trustees v Steel.

Page 542 of [1940] 1 All ER 539

The decision of the special commissioners regarding Stemco Ltd was as follows:

Having considered the evidence and arguments adduced before us, we held that having regard to the covenant by the lessors, under cl. 3 of the lease, to keep the heating apparatus and boilers in good order and condition, the whole burden of any depreciation of the premises did not fall upon the company. We therefore held that the appeal failed, and we adjusted the assessment to figures which were agreed between the parties.

The decision of the special commissioners regarding Pirie Appleton & Co Ltd, was as follows:

We, the commissioners who heard the appeal, were of opinion that under the terms of the lease the whole burden of maintaining the premises fell upon this company and that it was entitled to the deduction conferred by the Finance Act 1937, s. 15. We accordingly discharged the assessment.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the Crown.

F N Bucher for the respondent company.

H B Vaisey KC and J S Scrimgeour for the appellant company.

23 January 1940. The following judgment was delivered.

WROTTESLEY J. There is one question which is common to all these three appeals. It is one upon which I have come to a conclusion, and so I think that I will give my reasons now. The question is whether or not the tenant of a factory under a lease containing what I may call a strict covenant, or strict covenants, by the tenant to repair and maintain the demised premises is a person upon whom, under those covenants, the whole of the burden of any depreciation of that factory falls. If he is such a person, then, when one is computing the amount of his profits or gains from the trade or business which he carries on in the factory, he is to be treated as if he owned the factory, and accordingly a deduction will have to be made from his profits and his receipts in respect of this depreciation of his factory, and the way in which that is to be calculated is shown in the Finance Act 1937, s 15.

It is agreed that, if the phrase “the whole of the burden of any depreciation of the premises” is used in its ordinary literal and commonsense meaning, then a tenant, however wide or strict the covenants to repair in his lease may be, does not bear such a burden. Certainly he does not bear the whole of any such burden. However faithfully he may comply with his strict repairing covenants, there is going on all the time a continuing wearing out of the fabric, for which he is not made liable during, or on the determination of, the lease. This wearing out is effecting a fall in value, which is what is commonly meant by “depreciation.”

By those whom I would describe as the taxpayers in these three cases, however, it is said: “There never was a lease and there never were covenants to repair which imposed on the tenant the whole burden of depreciation literally speaking. If, therefore, this subsection is to perform any useful function, the meaning of the phrase must be cut down from its ordinary plain and usual meaning. In the first place, it

Page 543 of [1940] 1 All ER 539

is to be cut down to cases where this burden is cast upon a tenant by the covenants in the lease, for that is so said in the sub-section itself.” Here again the taxpayers say that, in the literal sense, there are no such cases. They say that there are no covenants to repair which do that. All that is meant, and all that can be meant, therefore, is such a burden as is cast on a tenant by strict repairing covenants such as are to be found in all these three cases under argument. I think that the answer to that part of the argument is two-fold. The answer to the argument advanced by counsel for the appellant company, as I see it, is that the limiting words “covenants to repair” are necessary because the depreciation to be dealt with is that due to wear and tear as contrasted, for instance, with that due to change of fashion and that due to obsolescence of design. Obsolescence of design is something which does apply to factories, as we all know. That is one reason for bringing in something more than “covenants,” and for bringing in the words “covenants” and “covenants to repair.”

The second reason why that phrase is used is, I think, that it is a legal condition precedent to earning the relief dealt with in this section that the burden should be cast on the person asking for the relief by a covenant, and that it should take the form of a legal liability to a third party. The language is not of the happiest, I agree, and that is where the difficulty in this case comes in, for I think that it is right to say that no covenant to repair, as lawyers in this country, and I think also in Scotlandperhaps more so in Scotlandunderstand the word “covenant to repair,” ever can strictly put upon a tenant the whole burden of depreciation. Even if that be so, however, I do not see how I can interpret the phrase “the whole of the burden of any depreciation” as not carrying its ordinary meaning just because the usual form of lease does not entitle the lessee to-day to relief. In any event, by getting out of one alleged absurdity, I am afraid I should only get into another one, and, by deciding in favour of the taxpayer here, I should bring it about that a tenant, who, unlike an owner, does not himself ultimately bear the loss due to depreciation, should, nevertheless, be given a measure of relief as though he did bear that burden. Thus, as I say, I should merely be getting out of one difficulty and into another.

In a skilful and ingenious argument, counsel for the respondent company suggested that that could be justified in two ways, and so he arrived at the second limitation upon the otherwise plain words of the phrase “the whole of the burden of any depreciation of the premises.” If one looks at sub-s (2) and sub-s (3), and particularly the latter, of this section, containing as they do the prescription for measuring the relief, he says that it is clear that the Act is aiming at giving relief to those who occupy premises subject to excessive vibration, and so to excessive wear and tear. I think that those subsections do indicate that, but here again I fail to see why a tenant whose factory is more costly to maintain and repair because of an unusual degree of vibration

Page 544 of [1940] 1 All ER 539

should be allowed to deduct from his profits, not merely those extra costs, but also the resulting fall in value of the factory.

It is common ground that the extra cost of maintenance and repair is a deduction he can make already, without recourse to this section. The resulting fall in the value of the factory is a loss which will fall, not upon the tenant, but upon the owner when the lease expires or is terminated. The only sense in which that loss can fall on the tenant is that he will be occupying premises which are perhaps becoming every year a little less suitable for the purpose for which he is using them. That appears to me to afford a good reason for his getting a reduction of rent, but I do not see that it is a good reason for his getting a reduction in the tax which he has to pay.

Then there is put forward the argument that, strictly construed, sub-s (5) is empty of content, because there is no case to which it applies to-day. I think that the answer is that those who want the benefit of that section must first of all accept the burden borne by the owner-occupier in the like casenamely, (i) the burden of maintaining and repairing from time to time, and (ii) over and beyond that, the burden of carrying the loss due to the ownership of what is a wasting asset. I do not commit myself to the Solicitor-Generals formula, but I have no doubt that by appropriate words in a lease a tenant could shoulder this burden, either in the way suggested by the Solicitor-General or in some other way, and that that could be put in that part of the lease which is properly described as the covenants to repair.

Passing to the particular cases argued, I deal first with the Scottish case of Pirie Appleton & Co Ltd. I think that, under Scots law, the exception with regard to subsidence is no more than automatic. I think that the exception of subsidence is one which is made automatically by the court in what we in England would call a strict covenant. That seems to be common ground. I am not sure, however, that the other casenamely, general failure of structureis one which is automatically excepted by the courts from the strict covenant to repair. The phrase “general failure of structure,” unless, of course, it is a term of art with a special meaning, seems to cover two quite different cases, one being a hidden defect and the other being precisely that decay which takes place in an old fabric. Therefore, if “general failure of structure” means hidden defect, and hidden defect only, then I should be inclined to agree with the submission of counsel for the respondent company that the statement of those exceptions in actual language adds nothing to the deed or lease, for it would be a case which would already be excluded by the courts from the liability imposed on a tenant by strict covenants to repair. I think, however, that it is language which is appropriate, as say, to that which takes place by a process of age, and, therefore, I think that one has here language which is particularly appropriate to describe the effect of depreciation. Thus, I think that, even if I were wrong in principle

Page 545 of [1940] 1 All ER 539

here, that language, not placing upon the tenant, but excluding from the tenant, the burden which may be arising from general failure of the structure, makes it quite plain that the tenant here is not bearing the whole burden of any depreciation.

As regards the other cases, the two cases of Stemco Ltd, I do not find any real difficulty in construing this lease. At any rate, I think that two ordinary plain persons without any legal training would find no difficulty in understanding this lease. The effect of it would be that, whereas the premises, generally speaking, were the subject of a strict repairing covenant, the heating apparatus and boilers were excluded from the strict repairing covenant, the burden of keeping those in good order and condition being cast upon the landlord. Small and insignificant though that is, in a sense it again affords an illustration of a case where the whole of the burden of depreciation of the premises does not fall upon the tenant. I do not think that it can be said, and I do not think that counsel for the appellant company would like me to hold, that the heating apparatus and boiler are not let. I think that it must be said that they are let, although they are let as an appurtenance. Therefore, though it does seem rather a trivial exception, it seems to me that here again, in the rather strong language of the section, “the whole of the burden of any depreciation” does not fall upon the lessees in this case any more than in the other case. Therefore, for that special reason, quite apart from the decision in principle, I think that the Inland Revenue Commissioners were right in their decision. Therefore, in the result, I find that the Crown succeeds in all these cases.

First appeal allowed with costs. Second and third appeals dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the Crown); Richards Butler & Co (for the respondent company); Piesse & Sons (for the appellant company).

W J Alderman Esq   Barrister.

Re Birchall, Re Valentine, Kennedy v Birchall

[1940] 1 All ER 545


Categories:        SUCCESSION; Wills, Family Provision        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ, AND FARWELL J        

Hearing Date(s):        14 FEBRUARY 1940        


Wills Construction Words of futurity Gift to children of child who shall die in lifetime of testatrix Child already dead at date of will.

A testatrix left property on trust for her children living at her death, and, if any such child “shall die in my lifetime leaving a child or children living at my death who being male shall attain the age of 21 years or being female attain that age or marry,” the parents share was to be taken by the grandchildren as though such child had survived the testatrix:

Held The children of a child already dead at the date of the will who had attained the age of 21 and were living at the time of the death of the testatrix were entitled to share in the residuary estate.

Re Lambert, Corns v Harrison and Loring v Thomas followed.

Page 546 of [1940] 1 All ER 545

Notes

Where a testator uses words of futurity without clearly showing the time contemplated, the words of futurity must be taken as speaking from the date of his making the will. This is the prima facie rule, subject to the exception that it does not apply where it is a question of what property is comprised in the will. It may, however, be shown by the context that the testator contemplated that the words of futurity should have reference to the time of his death, but, in the matter of the description of donees, there is a strong presumption that the description is to be construed according to the circumstances existing at the date of the making of the will. This presumption, however, is less strong in the case of a gift to a class on a contingent event. In this case, the whole context of the will must always be considered.

As to Words of Futurity in Description of Donees, see Halsbury (1st Edn), Vol 28, Wills, pp 714, 715, paras 13351338; and for Cases, see Digest, Vol 44, pp 792799, Nos 64976545.

Cases referred to

Re Lambert, Corns v Harrison [1908] 2 Ch 117; 44 Digest 798, 6537, 77 LJCh 553, 98 LT 851.

Loring v Thomas (1861) 1 Drew & Sm 497; 44 Digest 796, 6528, 30 LJCh 789, 5 LT 269.

Barraclough v Cooper (1905), [1908] 2 Ch 121, n; 44 Digest 532, 3483, 77 LJCh 555, n, 98 LT 852.

Re Walker, Walker v Walker [1930] 1 Ch 469; Digest Supp, 99 LJCh 225, 142 LT 472.

Gorringe v Mahlstedt [1907] AC 225; 44 Digest 796, 6525, 76 LJCh 527, 97 LT 111, revsg SC sub nom Re Gorringe, Gorringe v Gorringe [1906] 2 Ch 341.

Re Metcalfe, Metcalfe v Earle [1909] 1 Ch 424; 44 Digest 798, 6538, 78 LJCh 303, 100 LT 222.

Re Williams, Metcalf v Williams [1914] 2 Ch 61; 44 Digest 798, 6540, 83 LJCh 570, 110 LT 923.

Re Cope, Cross v Cross [1908] 2 Ch 1; 44 Digest 796, 6526, 77 LJCh 558, 99 LT 374.

Re Brown, Leeds v Spencer [1917] 2 Ch 232; 44 Digest 796, 6527, 86 LJCh 561, 117 LT 268.

Appeal

Appeal by the defendants, grandchildren of the testatrix, from a judgment of Sir John Bennett, Vice-Chancellor of the Palatine Court of the County of Lancaster, dated 17 July 1939. The appellants are children of a child of the testatrix, which child had died before the date of the will, the respondents, being other defendants, consisting of children and other grandchildren. Sir John Bennett held that the appellants were not entitled to participate in the division of the residuary estate of the testatrix.

In giving judgment, he said that the primary meaning of the words “shall die” in a will was “shall hereafter die.” The commonest case in which a context had been found for construing the word “shall” in a conditional sense, and not in a future sense, was where the will went on to say “leaving children living at my death who shall attain 21 years.” There was here no such context, and it was impossible to give the word “shall” any meaning other than one of futurity, and, therefore, the

Page 547 of [1940] 1 All ER 545

clause applied only to children who died after the date of the will. The relevant clause in the will was in the following words:

… my trustees shall stand possessed of the residue of the trust moneys and the investments for the time being representing the same (hereinafter called my trust estate) in trust for all my children … living at my death in equal shares and if there shall be only one such child the whole to be in trust for that child provided that if any child of mine … shall die in my lifetime leaving a child or children living at my death who being male attain the age of 21 years or being female attain that age or marry then and in every such case such last-mentioned child or children shall take … the share which his her or their parent would have taken in my trust estate if such parent had survived me.

G Maddocks (for P Ingress Bell on war service) for the appellants.

E Ackroyd for the respondents.

Maddocks: The Vice-Chancellor did not correctly interpret the authorities in regard to the effect of a proviso containing an independent gift to a contingent class of grandchildren. He was also wrong in relying upon the absence of the word “shall,” as he appears to have done, in connection with the words “attain the age of 21 years.” He was applying the wrong principle. He was seeking to find and apply a dictionary meaning, whereas the true principle is that, where there is a gift for children with a gift over of the shares of those who shall die in favour of their children who “attain”not necessarily “shall attain”the age of 21, the very presence of that gift to their children indicated that the testator intended that the independent gift should operate in favour of all grandchildren who qualified by satisfying the contingency. The principle laid down in Loring v Thomas is dependent, not upon the word “shall,” but upon the presence in the will of an independent gift which the testator necessarily intended should operate in favour of any grandchildren who qualified within the terms of the giftthat is, in the present case, who attained the age of 21 years. Re Lambert, Corns v Harrison, except for the presence in that case of the word “shall,” is practically identical with the present case. The words of the will in the present case must mean either “shall attain” or “should attain.” The qualification of attaining the age of 21 can be satisfied at any time before the date of distribution. In Re Walker, Walker v Walker, no condition, such as attaining the age of 21 years, was attached to the gift. That was the reason why the court was unable to apply Loring v Thomas. In Gorringe v Mahlstedt, it was found that the testator specifically referred to a deceased child, and the court could find nothing in the will to enable it to assume that that child was included in a gift to children of those “who shall die.” In the present case, there are all the essential provisions of Loring v Thomas. The appellants are entitled to participate as children of a child of the testator, by reason of their having qualified in that they have attained the age of 21 years. [Counsel referred to Barraclough v Cooper, Re Metcalfe, Metcalfe v Earle, Re Williams, Metcalf v Williams, Re Cope, Cross v Cross and Re Brown, Leeds v Spencer.]

Ackroyd: In the cases which have been cited, the word “shall”

Page 548 of [1940] 1 All ER 545

has appeared in the second part of the bequest. It is for that reason that one can consider the real meaning of “shall” in the earlier part of the bequest. If it is of the nature of a condition in the second part, there is nothing to throw any light upon the meaning of the words in the earlier part of the clausenamely, “shall die in my lifetime.” In Loring v Thomas, the word “shall” is found in the second part. This is also the case in Barraclough v Cooper and Re Lambert, Corns v Harrison. In Re Metcalfe, Metcalfe v Earle, the words are “shall survive and attain,” and this means “shall survive and shall attain.” In Re Walker, Walker v Walker and Re Cope, Cross v Cross, the word “shall” is not used in the second part, and, therefore, in those cases it has no repercussion in the construction of the earlier part of the wills, where the words are “and shall die.” In the present case, the testatrix must be taken to have known that one of the children had been dead many years. The word “shall” in the second part of the clause is in the important part.

G Maddocks (for P Ingress Bell on war service) for the appellants.

E Ackroyd for the respondents.

14 February 1940. The following judgments were delivered.

MACKINNON LJ. I think that this appeal succeeds. For my part, I propose to deal with it very shortly. In Re Lambert, Corns v Harrison, decided over 30 years ago, which followed upon Loring v Thomas and Barraclough v Cooper, the words in question were these:

… Provided always that if any nephew or niece of mine shall die in my lifetime leaving a child or children who shall survive me and being a son or sons shall attain the age of 21 years or being a daughter or daughters shall attain that age or marry … then and in every such case the last mentioned child or children shall take … the share which his her or their parent would have taken of and in the residuary trust funds if such persons had survived me.”

In the present case, substituting “any child of mine” for “nephew or niece of mine,” the words are precisely and identically the same, with the one difference that in Re Lambert, Corns v Harrison the words were “who shall survive me and being a son or sons shall attain the age of 21 years,” whereas in this case they are, “who being male attain the age of 21 years.” The decision in Re Lambert, Corns v Harrison was as follows:

… the child, who attained 21 and survived the testatrix, of a nephew already dead at the date of the will was entitled to share in the residue.

In the present case, the claim is made by the child of a child already dead at the date of the will. It is said that the decision in this case ought to be to the contrary of that in Re Lambert, Corns v Harrison, because the word “shall” is omitted before the word “attain.” That is a subtlety which I am quite unable to appreciate. If these cases were to be decided upon minute differences of that sort, I am bound to say that the art of the construction of wills would get into a highly discreditable condition. The truth is that the words “who being male attain the age of 21 years” are exactly equivalent to the words “who

Page 549 of [1940] 1 All ER 545

being a male shall attain the age of 21 years.” As I suggested during the argument, if one attempted to translate one or other of those two passages into Latin, I believe that one would have to express it in Latin by exactly the same verb. In those circumstances, this case appears to me completely indistinguishable from the decision in Re Lambert, Corns v Harrison, which only followed from the decision in Loring v Thomas and Barraclough v Cooper, and various other cases. Therefore, the same result ought to follow in this case as in those cases. For these reasons, I think that this appeal succeeds.

CLAUSON LJ. I agree, for the reasons which have been expressed by MacKinnon LJ.

FARWELL J. I also agree.

Appeal allowed.

Solicitors: Percy Haseldine & Co, agents for Wilfrid Taylor & Hindle, Manchester (for the appellants); Alfred McMaster, Liverpool, agent for Leo Kennedy & Glover, Ormskirk (for the respondents).

W K Scrivener Esq   Barrister.

Menzies v United Motor Finance Corporation Ltd

[1940] 1 All ER 549


Categories:        CONSUMER; Consumer credit        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        7 FEBRUARY 1940        


Hire Purchase Hire-purchase price Less than £50 Agreement providing for instalments of £37 and notional first payment of £25 Hire-Purchase Act 1938 (c 53), ss 1, 11(1), (2), 20, 21.

The appellant entered into a hire-purchase agreement, dated 18 October 1938, with the respondents, a finance corporation, in respect of a motor car. The appellant was the actual owner of the car, but in the agreement the respondents were described as owners, the object of the transaction being the making of an advance to the appellant on the security of her car. The agreement provided: “The total hire rent payable by 12 monthly rentals of £3 1s. 8d. each on the seventeenth day of each month commencing in Oct., 1938, £37.” The appellant also agreed on the signing of the agreement to pay £25, the amount of a first payment set out in the schedule thereto, as consideration for an option to purchase. In fact, this payment was never made to the respondents, being only notionally paid to a third party. The appellant fell into arrears with her payments after more than one-third of the hire-purchase price had been paid, and the respondents thereupon took possession of the motor car. The appellant then sued them, alleging a breach of the Hire-Purchase Act 1938, s 11, and claiming the relief given by that section. The respondents contended that by reason of the payment of £25 contracted to be made, the hire-purchase price was £62, and that consequently the Act did not apply to this agreement:

Held as the payment of £25 had not been made to the respondents, it did not form part of the hire-purchase price payable by the hirer under the hire-purchase agreement. The Act, therefore, applied to the agreement, and the appellant was entitled to the relief claimed.

Page 550 of [1940] 1 All ER 549

Notes

The Hire-Purchase Act 1938 only applies to motor cars where the hire-purchase price does not exceed £50. In considering what is the hire-purchase price, it is possible to ignore a payment which is purely notional, and only mentioned in the agreement to give it the appearance of a genuine transaction.

As to the Hire-Purchase Act 1938, see Halsbury (Hailsham Edn), Supp Hire Purchase, para 812A; and for Cases, see Digest, Vol 3, pp 9298, Nos 241268.

Case referred to

Helby v Matthews [1895] AC 471; 3 Digest 93, 245, 64 LJQB 465, 72 LT 841.

Appeal

Appeal by the plaintiff from a judgment delivered by His Honour Judge Woodcock at Marylebone County Court on 13 December 1939. The action was for the recovery of certain payments made in the course of a hire-purchase transaction in relation to a motor car. The hire-purchase price as stated in the agreement was £37, to be paid by 12 monthly instalments of £3 1s 8d. The appellant paid 7 instalments, amounting to £21 11s 8d, and then fell into arrears, whereupon the respondents seized the motor car in accordance with the terms of the agreement. The appellant alleged a breach of the provisions of the Hire Purchase Act 1938, s 11, entitling her to a cancellation of the agreement, and a return of the instalments paid. There was also a provision for a first payment of £25, and the position with regard to this is fully dealt with in the judgment of Luxmoore LJ.

Helenus P J Milmo for the appellant.

H V Lloyd-Jones for the respondents.

Milmo: In the circumstances, the hire-purchase price within the meaning of the Act was £37 10s, and no more. The amount of the interest of the hire-purchase companythat is, the amount with which they part, and which they expect to be repaid to them under the agreementis the hire-purchase price within the meaning of the Act.

Lloyd-Jones: The hire-purchase price is as stated in the documentsnamely, the amount of the instalments due plus the deposit which the schedule to the agreement shows as a first payment. Only when the various instalments stated in the agreement to be due to be paid have been paid can credit be given to the hirer for payment of the initial deposit. This is then credited to her for the purpose of completing the transaction. Because, in the proposal form signed by her, she stated that she had already deposited the sum of £25 in cash, or its equivalent, with the owner of the car, she is estopped from denying that she has done so. The company, in paying the dealer £32 10s, are entitled to treat the £25 as having already been paid to him. He is already holding part of the purchase price which is owed to him, and they are entitled to deduct this sum from their payments to him.

Helenus P J Milmo for the appellant.

H V Lloyd-Jones for the respondents.

7 February 1940. The following judgments were delivered.

SLESSER LJ. In this case, Amelia Menzies sought to recover certain payments which she had made in connection with a very curious

Page 551 of [1940] 1 All ER 549

and complicated transaction, which will be explained by Luxmoore LJ, in relation to a motor car which was originally hers. For the purpose of this case, however, I will assume, as the county court judge appears to have assumed, that the defendants, as owners, in reality hired the motor car from the plaintiff. On that assumption, the claim which she now makes is that she should recover the sums which she has paid as instalments under a hire-purchase agreement dated 18 October 1938.

The question to be determined in this case is whether or not, in the circumstances, she is protected from what happened, in the events which I shall detail, by the Hire-Purchase Act 1938. This lady, having agreed to pay a sum of £37 to be repaid by 12 monthly rentals of £3 1s 8d each on the seventeenth day of each month beginning in October 1938, fell into arrears with her instalments. Relying upon their powers, if they be applicable under the memorandum of agreement, the persons described in that memorandum of agreement as owners of the motor car, the United Motor Finance Corporation Ltd, on 8 July 1939, retook possession ofor, as they say, collectedthe motor car.

The Hire-Purchase Act 1938, s 20(1), provides that certain sections of that Act shall apply:

… in relation to all hire-purchase agreements whether made before or after the commencement of this Act …

The Hire-Purchase Act 1938, was passed on 29 July 1938, and it was provided by s 22(2) that the Act should come into force on 1 January 1939. Therefore, the Act as a whole was not in force at the time of the making of this agreement, but, by virtue of s 20, the relevant sections which we have to consider here were made operative retrospectively, and affect this agreement. That being so, the particular section we have to consider here, which is s 11, provides as follows:

(1) Where goods have been let under hire-purchase agreement, and one-third of the hire-purchase price has been paid … the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than by action.

In such a case, s 11(2) provides as follows:

If an owner recovers possession of goods in contravention of the foregoing sub-section the hire-purchase agreement, if not previously determined, shall determine and (a) the hirer shall be released from all liability under the agreement.

Then follow these words, on which the appellant here relies:

and shall be entitled to recover from the owner in an action for money had and received all sums paid by the hirer under the agreement … in respect thereof …

The only answer which can be made to the claim of the appellant here to recover the sums paid by the hirer, the instalments, is to be found in the argument that the relevant sections do not apply to this case by reason of the provisions of s 1 of the Act, which provides as follows:

This Act shall apply in relation to all hire-purchase agreements, and credit-sale agreements under which the hire-purchase price or total purchase price, as the case may be, does not exceed (a) where the agreement relates to a motor vehicle … the sum of £50 …

It is contended here by the respondents, and was contended in the court

Page 552 of [1940] 1 All ER 549

below, that this agreement did relate to a hire-purchase transaction in which the price was more than £50. The hire-purchase price is defined in s 21 as follows:

“Hire-purchase price” means the total sum payable by the hirer under a hire-purchase agreement in order to complete the purchase of goods to which the agreement relates …

I therefore look to the memorandum of agreement in this case to see what was the total sum payable by the hirer under the hire-purchase agreement. To my mind, that appears quite clearly in the agreement thus:

The total hire rent payable by 12 monthly rentals of £3 1s. 8d. each on the seventeenth day of each month commencing in Oct., 1938, £37.

The total liability payable under this hire-purchase agreement was £37, and, therefore, the agreement came within the ambit of the Hire-Purchase Act 1938, s 1(a).

It is said that the total sum was not £37, but £62, and the reason for that contention is this. In the agreement, s 2 provides as follows:

On the signing hereof the hirer agrees to pay to the owners the amount of the first payment set out in the schedule hereto as consideration for the option to purchase hereinafter given.

In reality, no such payment was made by the appellant to the United Motor Finance Corporation Ltd, at any time. In the schedule attached to the document to which I have just referred, there is the figure of £25 under the description “first payment.” In truth and in fact, however, this first payment was never made to the United Motor Finance Corporation Ltd, and formed no part of the hire-purchase price.

It may well be that, where persons are hiring with an option of purchase from somebody else for a first payment down and subsequent payments by instalments, the first sum paid down may be, and very likely would be, a part of the total sum payable under the hire-purchase agreement. The sum is not limited, and there is no reason why it should be limited, to the instalments. It may include some initial sum paid down. On the facts of this particular case, however, the United Motor Finance Corporation Ltd (who describe themselves as, and I will assume for this purpose that they are, the owners), never received this sum from the hirer at all. The sum was notionally paid, if I may use that expression, to a third party, and, therefore, never was at any time a part of the hire-purchase price.

The county court judge, as I understand his judgment, has been influenced by a consideration of the value of this car, but that is a matter which is entirely irrelevant to anything to be considered here. The only question to be considered here is what the hire-purchase price was. It is clear beyond question that the hire-purchase price was £37, no more and no less, and, consequently, the agreement being within the Act, this company has unlawfully, contrary to s 11, attempted to enforce a right to recover possession of the goods from the hirer otherwise than by

Page 553 of [1940] 1 All ER 549

action. It follows that the hirer is now not only released from liability under the agreement but is also entitled to recover from the owner the money which has been paid under the agreement. As that is the claim which the hirer here makes, in my opinion, she brings herself directly within the rights conferred on her by s 11 of the Act. Therefore, this appeal succeeds, and the hirer should have judgment for the amount claimed.

LUXMOORE LJ. There is only one matter to which I should like to refer, because I think that there has been some insufficient statement of facts with regard to what is called the first paymentnamely, the payment of £25. As I understand the facts, the plaintiff in the action was the owner of the car, and she wanted to borrow a sum of £30 or thereabouts on the security of the car. In order to enable her to do so, it was represented that she was buying the car for a sum of money from a motor dealer, that she had paid the motor dealer £25, and that she owed him on the car the sum of £32 10s. No such transaction had in fact ever taken place. She did not owe the motor dealer anything. The motor dealer represented to the United Motor Finance Corporation Ltd, that he had received £25, and that the balance of £32 10s was due, and he offered to sell the car to the United Motor Finance Corporation Ltd, for £32 10s, and the finance corporation agreed to buy it at that price. It was in respect of that purchase price that the United Motor Finance Corporation Ltd, represented themselves to be the owners of the car, and, as such owners, they purported to sell the car to the plaintiff for a sum which was to be paid by instalments representing a total of £37. There was in fact no first payment of £25 to the finance corporation, nor is the statement in the hire-purchase agreement that “on the signing hereof” the hirer was to pay to them £25, or any other sum, as a first payment in any way a correct representation of the facts. The finance corporation knew quite well that they were not to receive £25, and that the hirer was not going to pay it. All they were going to get under the hire-purchase agreement was £37 by twelve monthly instalments.

In those circumstances, I agree that it is quite impossible to say that the £25 is any part of the hire-purchase price, having regard to the definition of that phrase which is contained in the Hire-Purchase Act 1938, s 21. That being so, the hire-purchase agreement is a hire-purchase agreement for a sum under £50, and the Act applies to it. I agree entirely with what Slesser LJ has said with regard to the application of this section to this particular case, and I am satisfied that the county court judge was in error in dismissing the plaintiffs claim. The plaintiff is entitled on this appeal to judgment for £21 11s 8d.

GODDARD LJ. I propose to add a few words of my own, because the case seems to me to be one of some importance. I think that this is

Page 554 of [1940] 1 All ER 549

the first time the Hire-Purchase Act 1938, has been considered in this court. At any rate, it is, as far as I know, the first time that it has been considered in relation to what is generally called nowadays hire-purchase finance.

It has fallen to my lot, when sitting in the Kings Bench Division, to have had to try many cases arising out of hire-purchase finance, and I have always found that many of the difficulties which occur in those cases become clear when the true nature of the transaction is thoroughly understood. It is a comparatively recent development in commercial transactions, and has been imported, I think, from America. It is only in recent years that extensive use has been made of it. It is important to understand the distinction which exists in fact between those hire-purchase cases where “the owner of the goods,” to use the expression of the Act, is a hire-purchase company and the ordinary transactions of hire purchase which take place where the owner of the goods is a shop-keeper who is selling the goods on hire purchase. In that case, as in Helby v Matthews and that class of case, the shopkeeper or dealer in the goods himself enters into a contract of hire purchase with the would-be purchaser. If he is selling £100 worth of furniture, it is a common thing to find that he stipulates for a first payment of, say, £20, and for so many monthly instalments of stated sums. The hire-purchase price, in those circumstances, of course, is £100. The buyer pays down £20, and has to pay so many monthly instalments.

Nowadays, largely due to the desire of people who cannot pay for them in a lump sum to buy motor cars, refrigerators, vacuum cleaners, or other household equipment, there has been evolved a system by which they are enabled to buy these things, which they could not afford to pay for at once, from dealers who, however, also cannot afford to wait for their money. When one is considering this hire-purchase finance, one has to remember that the whole object of the business is to finance the dealer. It is not the case of a dealer in the goods entering into a hire-purchase agreement with a would-be buyer of the goods.

I am going to deal with this case, for the purposes of my judgment, exactly as though this were a genuine hire-purchase agreement by this hirer, and as though there had not been all this misrepresentation as to the real nature of the transaction. I am going to deal with it as though it were an ordinary transaction entered into by a woman who wanted to buy a car from the dealer. What happens then? The car dealer cannot afford to wait for his money when the car is sold on the instalment system, and so he goes to one of these corporations who are prepared to finance the transaction. In essence, the transaction is a loan of money by the finance corporation to the dealer. The question of how much the dealer wants is entirely a matter for the dealer. If the dealer is selling a car for, say, £200, it may be that he will take as a payment down, and the customer can afford to pay, £50. Thus, the dealer then wants to be financed to the extent of £150. The way

Page 555 of [1940] 1 All ER 549

the transaction is worked is this. The dealer purports to sell the car to the finance company, and the finance company then purport to let the car on hire purchase to the would-be customer. The hire-purchase company acquire the property in the car which they have to let, not for £200, but for £150. That is what they pay to the dealer. They are interested in the total price to be paid for the car, because it is to their interest to know that there is what I may call a good and valuable car. Their security for getting their money back is then all the greater. It may be that, if they found that the dealer was selling the car for £150, and wanted £150, they would not lend the money, any more than an intending mortgagee would lend up to the full amount of the mortgage property. However, the first payment which is made, in those circumstances, is made to the dealer. He retains that money. It is his money, and he keeps it for himself. The finance company have not any right to recover that money from the dealer. They cannot bring any action against him. He has not received it for their use. He has received it for his own use. In truth, what he has done is this. He has borrowed the balance from the hire-purchase company, and their true interest in the transaction is the loan which they have advanced to the dealer. So here, when one is considering what, for the purposes of this Act, is the hire-purchase price, and one finds that the Act says, “ Hire-purchase price means the total sum payable by the hirer under the hire-purchase agreement,” that must mean the total which he pays to the person with whom he is entering into the agreement.

The total price which he is paying here is the price which the hire-purchase company have advanced, plus charges and plus interestnamely, £37. In fact, it is not arguable that the sum payable here was any sum other than £37. The fact that they chose to put into their agreement that a first payment had been made is neither here nor there. If they say that it has been made to them, they are saying something which is not true. The first sum was paid to the dealer. It remains the dealers property, and nobody but the dealer is interested in the money. In my opinion, it is perfectly clear that the hire-purchase price which was paid in this case was not £62, but £37. The Act, therefore, applies, and I agree with Slesser LJ that the plaintiff is entitled to the relief she seeks.

Appeal allowed with costs.

Solicitors: Lewis & Raynes (for the appellant); Kinch & Richardson, agents for Barrett & Thomson, Slough (for the respondents).

Derek H Kitchin Esq   Barrister.


Commissioners of Church Temporalities in Wales v Representative Body of the Church in Wales and Tithe Redemption Commission

[1940] 1 All ER 556


Categories:        ECCLESIASTICAL        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        31 JANUARY, 1, 6, 7 FEBRUARY 1940        


Ecclesiastical Law Church in Wales Lay corporation Duty to repair chancel of parish church Right of Representative Body to part of redemption stock Welsh Church Act 1914 (c 91), ss 1, 3, 4, 8, 10, 13, 19, 28 Welsh Church (Temporalities) Act 1919 (c 65), ss 1, 2, 4 Tithe Act 1936 (c 43), ss 1, 2, 4, 31.

The plaintiffs were the Commissioners of Church Temporalities in Wales as constituted by the Welsh Church Act 1914, s 10, and, as such, were a lay corporation. The first defendants, the Representative Body of the Church in Wales, were a body incorporated by Royal Charter, pursuant to the Welsh Church Act 1914, s 13. The second defendants the Tithe Redemption Commission, were created by the Tithe Act 1936, s 4. The plaintiffs asked for the determination of two questionsnamely, (i) whether the liability for the repair of the chancel of a certain parish church in the county of Carmarthen formerly attaching to the ownership of a tithe rentcharge which, by virtue of the Welsh Church Act 1914, s 4, vested in the plaintiffs, and which, by virtue of s 8 of that Act, became transferable, but was not actually transferred, to the Carmarthen County Council, had ceased to attach to the ownership of the rentcharge, and whether the latter had ceased to be subject to the liability for the repair of the chancel, and (ii) whether the first defendants were precluded, by reason of the Welsh Church Acts 1914, and 1919, from receiving a part of the redemption stock to be issued by the second defendants in respect of the extinguishment of the rentcharge on 2 October 1936, as provided by the Tithe Act 1936:

Held (i) as, on the facts, the plaintiffs were the legal owners of the tithe rentcharge, they were, on the proper construction of the relevant sections of the Welsh Church Act 1914, and the Tithe Act 1936, liable to repair the chancel.

(ii) as the plaintiffs had not ceased to be liable to repair the chancel before 2 October 1936, and as they had not transferred the tithe rentcharge to the county council before that date, the first defendants were not precluded from receiving a part of the redemption stock payable in respect of the extinguishment of the tithe rentcharge.

Notes

The liability to repair the chancel was before 1936 placed on the owners of the tithe rentcharge. By the Act of 1914, the tithe rentcharge was transferred to the plaintiffs herein, but such transfer was not to be permanent, but merely while certain transitional provisions relating to the disestablishment of the Welsh Church were given effect to. Ultimately, the tithe rentcharge was to be transferred to the county council, but this is held not to prevent a proportionate part of the redemption stock from being payable to the Representative Body of the Church in Wales. This result may appear inconsistent, and is probably due to an oversight on the part of those who drafted the Act of 1914.

For the Law on the Point, see Halsbury (Hailsham Edn), Vol 11, pp 581, 582, para 1026; and for Cases, see Digest, Vol 19, p 307, Nos 10621065.

Cases referred to

Wickhambrook Parochial Church Council v Croxford [1935] 2 KB 417; Digest Supp, 104 LJKB 635, 153 LT 187.

Church Temporalities in Wales Comrs v Gustard [1923] 1 KB 640; 38 Digest 503, 583, 92 LJKB 349.

Hough v Windus (1884) 12 QBD 224; 42 Digest 702, 1188, 53 LJQB 165, 50 LT 312.

Page 557 of [1940] 1 All ER 556

Originating Summons

Originating Summons under RSC Ord 54A, r 1A, for the determination of the following questionsnamely, (i) whether or not the liability for the repair of the chancel of a certain parish church in Wales attached to the ownership of certain tithe rentcharges, and whether or not the latter had ceased to be subject to liability to repair, and (ii) whether or not the Representative Body of the Church in Wales were precluded from receiving a part of the redemption stock to be issued by the Tithe Redemption commission in respect of the extinguishment of those rentcharges. The facts and arguments are fully set out in the judgment.

C S Rewcastle KC, J V Nesbitt (M J L Beebee with him) and R T E Latham for the plaintiffs.

R F Roxburgh KC and W S Wigglesworth for the first defendants.

H O Danckwerts for the second defendants.

7 February 1940. The following judgment was delivered.

MORTON J. The plaintiffs on this originating summons, the Church Temporalities in Wales Commissioners, are a statutory corporation created by the Welsh Church Act 1914, s 10, which Act brought about the disestablishment of the Church of England so far as it existed in Wales and Monmouthshire. S 10(1) provides as follows:

Such persons, not exceeding three in number, as His Majesty may by warrant under his sign manual appoint, of whom one at least shall be a member of the Church of England, shall be commissioners under this Act. If any vacancy among them occurs by death, resignation, incapacity, or otherwise, His Majesty may, by warrant under his sign manual, appoint some fit person to fill the vacancy.

Then sub-s (2) provides as follows:

The said commissioners (in this Act referred to as the Welsh Commissioners) shall be a body corporate, styled, “The Commissioners of Church Temporalities in Wales” with a common seal, and power to hold land for the purposes of this Act without licence in mortmain.

I will pause there to say that there is no dispute that the plaintiffs are a lay corporation. The first defendants, the Representative Body of the Church in Wales, are a body incorporated pursuant to the Welsh Church Act 1914, s 13, which provides as follows:

(1) Nothing in any Act, law, or custom shall prevent the bishops, clergy, and laity of the Church in Wales from holding synods or electing representatives thereto or from naming, either by themselves or by their representatives elected in such manner as they think fit, constitutions and regulations for the general management and good government of the Church in Wales and the property and affairs thereof, whether as a whole or according to dioceses, and the future representation of members thereof in a general synod or in diocesan synods, or otherwise. (2) If at any time it is shown to the satisfaction of His Majesty the King that the said bishops, clergy, and laity have appointed any persons to represent them, and hold property for any of their uses and purposes, His Majesty in Council may by charter incorporate such persons (in this Act referred to as the representative body), with power to hold land without licence in mortmain.

In fact, the representative body, as I shall call it for brevity, was incorporated subsequently by Royal charter. The second defendants, the Tithe Redemption Commission, are a statutory body created by the Tithe Act 1936, s 4. S 4(1) of that Act provides as follows:

There shall be established for the purposes of this Act a commission to be called

Page 558 of [1940] 1 All ER 556

the “Tithe Redemption Commission” (in this Act referred to as “the commission”), consisting of a chairman and not more than four other commissioners appointed by the Treasury after consultation with the Minister of Agriculture and Fisheries (in this Act referred to as “the Minister”).

Then the section goes on to mention the duties which are to be performed by the Tithe Redemption Commission.

The contest on this summons, which is no doubt a friendly contest between two representative bodies, arises between the plaintiffs and the first defendants. The Tithe Redemption Commission do not take sides in the matter, and their counsel addressed no argument to me on their behalf. The two questions which are raised by the summons are closely linked together:

(1) Whether or not the liability for the repair of the chancel of the parish church of Llanglydwen in the county of Carmarthen formerly attaching to the ownership of the tithe rentcharges of £100 per annum which before Mar. 31, 1920, belonged to the rectory of the said parish but which on that date by virtue of the Welsh Church Act, 1914, s 4, vested in the plaintiffs and by virtue of sect. 8(1)(c) of that Act became transferable by them to the council of the said county of Carmarthen had before Oct. 2, 1936, by virtue of sect. 28 of that Act or otherwise by virtue of the Welsh Church Acts, 1914 and 1919, ceased to attach to the ownership of the said rentcharges and whether or not the said rentcharges had before Oct. 2, 1936, so ceased to be subject to such liability within the meaning of the Tithe Act 1936, Sched. VII, Part I, para. (1)(b) … (2) Whether or not the defendants the Representative Body of the Church in Wales are by reason of the provisions of the Welsh Church Acts, 1914 and 1919, precluded from receiving pursuant to the Tithe Act, 1936, a part of the redemption stock to be issued by the defendants the Tithe Redemption Commission for compensation in respect of the extinguishment on Oct. 2, 1936, of the said rentcharges by the said Act.

To state the matter more shortly, as I am able to do, having read those questions, I have to decide whether or not, immediately before 2 October 1936, the plaintiffs were liable to repair the chancel of the parish church of Llanglydwen. Of course, if they never became so liable, they could not have ceased to be liable. If, on the other hand, they were at any time made liable, and were not liable immediately before 2 October 1936, I think it follows that they ceased to be liable within the meaning of the Act. I think the question, therefore, can be put in this simple form. Were the plaintiffs, immediately before 2 October 1936, liable to repair the chancel of this parish church? If, as they say, they were not so liable, they are entitled to receive the whole of the redemption stock mentioned in the second question of the summons. If the plaintiffs were so liable, then I think it must follow, on the Tithe Act 1936, that the representative body is entitled to receive a part of that stock.

I am told that this is a test case and that the decision of this case will govern, or may govern, many other cases, and determine the ownership of very large sums of stock. I have felt considerable doubt, in the course of the argument of counsel for the plaintiffs and of counsel for the first defendants, about the matter, but, as I have arrived at a definite conclusion, based on the reasons which I think can be stated quite simply, I think it unnecessary for me to reserve my judgment.

The facts in the case are not in dispute, and they are as follow. The ecclesiastical parish of Llanglydwen, which I shall hereafter call the

Page 559 of [1940] 1 All ER 556

parish, is situate in the county of Carmarthen and in the diocese of St Davids. It is coterminous with the tithe district of Llanglydwen. At all material times, the sole benefice in the parish was a rectory with cure of souls, which I shall hereafter call the rectory, and the holder of which at any material time I shall hereafter call the rector. Immediately before 1 October 1845, that being the date upon which tithe was commuted into tithe rentcharge, all tithes and payments in lieu of tithes issuing out of lands in the parish belonged to the rector as such. As from 1 October 1845 all tithes and payments in lieu of tithes issuing out of lands in the parish, including tithes of glebe, became commuted for annual tithe rentcharges of £100 in the aggregate, apportioned to issue out of lands in the parish, including glebe lands. This commutation took place by virtue of an award duly made pursuant to the Acts for the commutation of tithes on 20 April 1844 and by virtue of an apportionment annexed thereto, which award was duly confirmed by the Tithe Commissioners for England and Wales on 27 April 1844 and which apportionment was so confirmed on 18 February 1846. From a Parliamentary Return, dated 4 May 1848, it appears that on 31 December 1847 the whole of the tithe issuing out of lands in the parish commuted and apportioned under the Acts for the commutation of tithes consisted of tithe rentcharges of an aggregate annual amount of £100 belonging and payable to the rector as parochial incumbent. These tithe rentcharges of the aggregate annual amount of £100 at all times since the commutation and prior to 31 March 1920 belonged, and were payable, to the rector as parochial incumbent. These tithe rentcharges of the aggregate annual amount of £100 I shall hereafter call the tithe rentcharges, referring to them collectively. There was not at any time prior to 31 March 1920, belonging to or appropriated to the use of the rectory or to the rector as such any fund or endowment specially allocated to the repair, restoration, or improvement of the fabric of any church or other ecclesiastical building in the parish. The Welsh Church Act 1914, s 1, as amended by the Statute Law Revision Act 1927, provides as follows:

On the day (in this Act referred to as the date of disestablishment), the Church of England, so far as it extends to and exists in Wales and Monmouthshire (in this Act referred to as the Church in Wales), shall cease to be established by law and, save as by this Act provided, no person shall, after the passing of this Act be appointed or nominated by His Majesty or any person, by virtue of any existing right of patronage, to any ecclesiastical office in the Church in Wales.

The date of disestablishment was subsequently, by the Welsh Church (Temporalities) Act 1919, s 2, fixed as 31 March 1920 and that is the reason why I have specified that date in my statement of the facts. The Welsh Church Act 1914, s 4(1), provides as follows

As from the date of disestablishment there shall, save as by this section provided, vest in the Welsh Commissioners herein-after mentioned [the plaintiffs on this summons] (a) all property vested in the Ecclesiastical Commissioners or Queen Annes Bounty, which is ascertained as herein-after mentioned to be Welsh ecclesiastical property; and (b) all property not so vested, and not consisting of charges on the common fund of the Ecclesiastical Commissioners, which, at the passing of this Act, belongs to or is appropriated to the use of any ecclesiastical office or

Page 560 of [1940] 1 All ER 556

cathedral corporation in the Church in Wales, or the holder of any such office as such; subject, in the case of all such property, to all tenancies, charges, and incumbrances, and to all rights and interests saved by this Act, affecting the property.

It is not in dispute that the tithe rentcharge, as I have called it, came within s 4(1)(b), and vested in the plaintiffs as from 31 March 1920, the date of disestablishment. The Welsh Church Act 1914, s 8(1), provides as follows:

Subject to the provisions of this Act, the Welsh Commissioners shall by order transfer the property vested in them by this Act, as follows: (a) they shall transfer to the representative body (i) all churches … (iii) all funds or endowments specially allocated to the repair, restoration, or improvement of the fabric of any such church or ecclesiastical residence … (c) of the property not so transferred to the representative body they shall transfer any tithe rentcharge which was formerly appropriated to the use of any parochial benefice to the council of the county in which the land out of which the tithe rentcharge issues is situate. …

I do not think I need read for the moment the rest of that section, but, if we turn to the part which I have read, it provides that the plaintiffs shall transferit is imperativethe tithe rentcharge to the Carmarthen County Council, but no date is stated for such transfer. S 10(7), however, provides as follows:

The powers of the commissioners shall continue until the end of the year in which this Act is passed and for 3 years thereafter, and no longer, and the commissioners shall then be dissolved; but it shall be lawful for His Majesty from time to time with the advice of his Privy Council, on the application of the commissioners, to suspend the dissolution of the commissioners and, subject to revision by the Treasury of the salaries of the commissioners and the remuneration and number of their officers, to continue their powers for such time, not exceeding in the aggregate 2 years, as His Majesty thinks fit.

From that sub-section it appears that, at the time when the Act was passed, it was not thought likely that the discharge of their duties by the commissioners, including the transfer of the various properties to the parties who were ultimately to receive them, would take a very long period, but I must now explain why the plaintiffs have not yet been dissolved, and why, as is the fact, the tithe rentcharge has not yet been transferred to the Carmarthen County Council. The Welsh Church (Temporalities) Act 1919, s 1(1), provides as follows:

His Majesty in Council may, from time to time, on the application of the Welsh Commissioners appointed under the Welsh Church Act, 1914, suspend the dissolution of the said commissioners, and, subject to revision by the Treasury of the salaries of the said commissioners and the remuneration and number of their officers, continue their powers for such time as His Majesty thinks fit

By s 4(1) of the same Act, it is enacted as follows:

The Welsh Commissioners may postpone the transfer under the Welsh Church Act, 1914, of any property vested in them to any person or body of persons, whether corporate or unincorporate, other than the representative body, and such person or body of persons shall not be bound to accept the transfer of any such property until the Secretary of State so directs; and so long as any tithe rentcharge which was previously attached to a benefice remains vested in the Welsh Commissioners the Welsh Commissioners shall be deemed to be the owners of a tithe rentcharge attached to a benefice for the purposes of the Tithe Rentcharge (Rates) Act, 1899.

The plaintiffs were duly appointed pursuant to the Welsh Church Act 1914, s 10(1). Their dissolution has been duly suspended, and is now

Page 561 of [1940] 1 All ER 556

suspended, and their powers have been duly continued, and do now continue, by virtue of an order in council under s 1(1) of the Act of 1919. Thus, the tithe rentcharge vested in the plaintiffs on 31 March 1920, by virtue of s 8(1)(c) of the Act of 1914. The plaintiffs postponed the transfer of the tithe rentcharge to the county council under the powers conferred on them by s 4(1) of the Act of 1919, and the tithe rentcharge was vested in the plaintiffs until 2 October 1936. Of that there is no doubt. At the date of the passing of the Welsh Church Act 1914, the rector was the Rev Samuel Davies, and he continued to be rector until his death, which occurred on 20 November 1922.

I must now turn to certain portions of the Tithe Act 1936. By s 1, it is enacted as follows:

Subject to the provisions of this Act, all tithe rentcharge shall be extinguished on Oct. 2, 1936 (in this Act referred to as “the appointed day”), and accordingly as from that day the land out of which any tithe rentcharge issued immediately before that day shall be absolutely discharged and freed therefrom.

The Tithe Act 1936, s 2(1), provides for the issue of stock, to be called “redemption stock,” to be

… charged by way of guarantee on the Consolidated Fund and the growing produce thereof … for the compensation of the persons interested in a tithe rentcharge in respect of the extinguishment thereof by this Act.

I have already read the Tithe Act 1936, s 4(1), which established the second defendants. I must now read s 4(2), which provides as follows:

It shall be the duty of the commission, subject to and in accordance with the provisions of this Act, (a) to determine what tithe rentcharges have been extinguished by this Act, the amount of stock to be issued for compensation in respect of the extinguishment thereof, and the persons entitled to receive the stock to be so issued … and to perform such other functions for the purposes of this Act as are hereafter in this Act mentioned.

The Tithe Act 1936, s 31(1), provides as follows:

The provisions of this section shall have effect with respect to liabilities to repair chancels of churches or other ecclesiastical buildings arising from the ownership of (a) tithe rentcharge extinguished by this Act in respect of which stock is to be issued under this Act. …

S 31(2) provides as follows:

In respect of liability to repair arising from the ownership of a tithe rentcharge extinguished by this Act in respect of which stock is to be issued under the Act the diocesan authority shall be entitled to receive a part of the stock to be issued in respect of the rentcharge equal in amount to such a sum (in this section and in Sched. VII to this Act referred to as “the sum required for repairs”) as may be reasonably sufficient, having regard to the condition of the chancel or building at the appointed day, to provide for the cost of future repairs thereof and to provide a capital sum the income of which will be sufficient to insure it for a sum adequate to reinstate it in the event of its being destroyed by fire.

The body referred to in this sub-section as the diocesan authority is, in the case of the tithe rentcharge which I am considering, the first defendants, the representative Body of the Church in Wales. That is so by reason of the Tithe Act 1936, Sched. VII, Part III, which provides as follows:

Modifications as to Wales and Monmouthshire. (1) For references to the diocesan

Page 562 of [1940] 1 All ER 556

authority or to Queen Annes Bounty there shall be substituted references to the Representative Body incorporated under the Welsh Church Act, 1914, s. 13.

The result is that, if the plaintiffs were liable to repair the chancel immediately prior to 2 October 1936, it would appear that a substantial portion of the redemption stock which is to be issued under the Act would pass to the representative body, and the Carmarthen County Council would be deprived of that stock. It is noteworthy, moreover, that the sum referred to as “the sum required for repairs” includes the cost of future repairs of the chancel, I suppose in perpetuity, and is to provide a capital sum which would be sufficient by the income thereof to insure the chancel “for a sum adequate to reinstate it in the event of its being destroyed by fire.” Thus, it is plain that the decision of this question is one of considerable importance to the parties. The extent to which provision has to be made in respect of the sum required for repairs may have some bearing upon the point which I have to decide. The Tithe Act 1936, s 31(5), provides as follows:

The foregoing provisions of this section shall have effect subject to the provisions of Sched. VII, Part I, to this Act, which relate to the apportionment of liability to repair in certain cases.

S 31(8) provides as follows:

This section and Sched. VII to this Act shall have effect in relation to a chancel or building in Wales or Monmouthshire subject to the modifications specified in Sched. VII, Part III.

To these modifications I have already referred, the modification which is material for the purpose of this case being that for the words “references to the diocesan authority” I must substitute the words “references to the representative body.”

I must now turn to Sched VII, Part I, to which I am referred by s 31(5), which I have already read. Para 1 provides as follows:

The commission [the second defendants] shall ascertain in relation to every chancel or other ecclesiastical building for the repair of which liability attached to the ownership of tithe rentcharge agreed or awarded on the original commutation of tithes under the Tithe Acts (a) the rentcharges in respect of which such liability attached and the aggregate amount of those rentcharges; (b) which, if any, of those rentcharges was or were redeemed under the Tithe Acts or ceased before the appointed day to be subject to such liability, and the amount, or the aggregate amount, as the case may be, of any such rentcharges; and (c) the identity and the aggregate amount (in this part referred to as “the apportionable amount of rentcharge liability”) of the residue of those rentcharges.

The language of this part of the schedule does not appear to be altogether consistent, because in the earlier portion of it reference is made to the “liability attached to the ownership of tithe rentcharge,” which is, I think, on the authority of Wickhambrook Parochial Church Council v Croxford, an accurate description of the liability, whereas in para 1(b) reference is made to rentcharges being “subject to such liability.” However, I do not think any real importance, for the purpose of this case, can be attached to that variation of language. I think that para 1(b) is merely referring to rentcharges which render their owners liable, by

Page 563 of [1940] 1 All ER 556

reason of the ownership thereof, to carry out the repairs. The Tithe Act 1936, Sched. III, Part I, provides as follows:

Persons to whom stock is to be issued. Stock to be issued for compensation in respect of the extinguishment of a tithe rentcharge shall be issued … (1) In the case of a rentcharge which immediately before its extinguishment was vested [in the commissioners, to the commissioners].

I think that it is clear that, if, immediately before 2 October 1936, the plaintiffs were liable, as legal owners of the tithe rentcharge, to repair the chancel, part of the stock to be issued in respect of the extinguishment of the tithe rentcharge must be issued to the representative body, and I have now to consider whether or not the plaintiffs, immediately before 2 October 1936, were liable to repair the chancel.

There are three points which seem to me to be quite clear in this difficult case. First of all, as I have said, immediately before 2 October 1936, the plaintiffs were the legal owners of the tithe rentcharge. This plainly appears from the facts as I have stated them. Secondly, apart from any statutory provision to the contrary, they would, as such legal owners, immediately before 2 October 1936, be liable to repair the chancel. If authority is needed for this proposition, it will be found in Wickhambrook Parochial Church Council v Croxford. Thirdly, if there is any statutory provision which relieves the plaintiffs from the liability to repair the chancel, it must, I think, be found in the Welsh Church Act 1914. It is not suggested by counsel that it can be found in any other Act. I now turn back to the Act of 1914 to see if I can find any such provision. Counsel for the plaintiffs says that it is to be found in s 3, which I must now read. S 3(1) provides as follows:

As from the date of disestablishment ecclesiastical courts and persons in Wales and Monmouthshire shall cease to exercise any jurisdiction, and the ecclesiastical law of the Church in Wales shall cease to exist as law.

S 3(2) provides as follows:

As from the same date the then existing ecclesiastical law and the then existing articles, doctrines, rites, rules, discipline, and ordinances of the Church of England shall, with and subject to such modification or alteration, if any, as after the passing of this Act may be duly made therein, according to the constitution and regulations for the time being of the Church in Wales, be binding on the members for the time being of the Church in Wales in the same manner as if they had mutually agreed to be so bound, and shall be capable of being enforced in the temporal courts in relation to any property which by virtue of this Act is held on behalf of the said Church or any members thereof, in the same manner and to the same extent as if such property had been expressly assured upon trust to be held on behalf of persons who should be so bound.

Counsel for the plaintiffs says that this section destroyed the liability to repair the chancel as from the date of disestablishment. He relies upon the whole of sub-s 1, and says that these words extinguish any liability which would otherwise have rested on the plaintiffs by virtue of the ownership of the tithe rentcharge, an ownership which was, as appeared from the sections which I have read, vested in them by this same Act. The reply of counsel for the first defendants to this is threefold. First of all, he says that s 3, on its true construction, does not

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operate to extinguish the liability at all. It does not apply to this particular liability. Secondly, he says that, even if the liability would otherwise have been extinguished by s 3, it is expressly preserved by s 4, which vested the tithe rentcharge in the plaintiffs:

… subject … to all tenancies, charges, and incumbrances, and to all rights and interests saved by this Act, affecting the property.

Thirdly, he says that there is a general provision in s 28 of the Act which makes it plain that nothing in the whole of this Act can affect the liability to repair the chancel, which, in the absence of any statutory provision, would rest upon the plaintiffs as owners of the tithe rentcharge. As regards the first contention, I cannot put upon s 3(1) so limited a construction as that which counsel for the first defendants invites me to put upon it. Much of the argument has turned upon the question whether or not the liability to repair the chancel is part of the ecclesiastical law of the Church in Wales mentioned in s 3(1). 1 have been referred to a long and very interesting series of authorities, ranging over some hundreds of years. I do not propose to deal with those authorities in detail, for reasons which will appear hereafter, nor do I propose to discuss, for the same reasons, the precise scope and effect of s 3(2). Nevertheless, as the matter has been very fully argued, I think that I ought to express the view which I hold that the contention of counsel for the plaintiffs on this part of the case is correct. The authorities which have been cited to me satisfy me that the liability to repair the chancel is properly described as part of the ecclesiastical law of the Church in Wales within the meaning of s 3(1), and, apart from any other provisions which may appear in the Act, it would seem that the liability to repair the chancel would be destroyed by s 3(1). As regards the second point of counsel for the first defendants, he did not contend before me that the liability to repair the chancel could be a tenancy, charge or incumbrance within the meaning of s 4(1). He statedand I think rightlythat he was precluded from putting forward that argument in this court by reason of the Wickhambrook case, but he desired to keep the point open if, as I gather is likely, this case should go to the House of Lords. He contended, however, that the liability to repair the chancel was covered by the words, “all rights and interests saved by this Act, affecting the property.” For reasons which again will appear hereafter, I do not think that it is necessary for me to discuss that argument in detail. All I shall say is that I think there would be certain difficulties in holding that the liability to repair the chancel is a right or interest affecting the property, in view of the decision in the Wickhambrook case.

It is to be observed that the liability was held in the Wickhambrook case to be a personal one, and, prior to the passing of the Chancel Repairs Act 1932, the appropriate procedure for compelling a person liable to repair the chancel to carry out his duty was to seek to have him admonished by the appropriate ecclesiastical court in a

Page 565 of [1940] 1 All ER 556

cause of office promoted against him in that court. That being the nature of the liability at the time of the passing of the Act of 1914, and at the date of disestablishment, if that be material, I think that there are certain difficulties in coming to the conclusion that this Liability is a right or interest affecting the property, whether or not it is a right or interest saved by the Act. On that part of the case, I have formed no concluded opinion, nor is it necessary for me to do so, having regard to the view which I take of s 28 of this Act.

I pass now to the third argument of counsel for the first defendants, which, if it is correct, is a very far-reaching one indeed. Counsel for the first defendants contends, as I have said, that s 28 has the effect that nothing in the Act affects the liability which, in the absence of any statutory provision, attaches to the plaintiffs as owners of the tithe rentcharge. S 28 provides as follows:

(1) Nothing in this Act shall affect any liability to pay either rentcharge, or the liability of any lay impropriator of any tithe rentcharge to repair any ecclesiastical building, but a county council shall not, by reason of being entitled to or receiving any tithe rentcharge under this Act, be liable for the repair of any ecclesiastical building. (2) Such liability as aforesaid of a lay impropriator may be enforced in the temporal courts as the instance of the representative body in like manner as if such liability arose under a covenant made with the representative body and running with the tithe rentcharge.

Before I consider the effect of this section, I think that I ought to read s 8(2), which I omitted to read when I read the provisions as to the transfer of the property in s 8. I read it for the purpose of seeing whether or not at this stage it throws any light on the problem which I have to determine. S 8(2) provides as follows:

Save as otherwise provided by this Act, all property transferred under this section [the section provides for the transfer of the whole of the property vested in the plaintiffs by the Act] shall be held subject to all existing public and private rights with respect thereto

The word “existing” is defined as follows in s 38 of the same Act:

The expression “existing” means existing at the passing of this Act.

Then sub-s (2) continues as follows:

and all tenancies, charges, and incumbrances which may at the date of transfer be subsisting therein, and in the case of all such property, except tithe rentcharge transferred to a county council, to the existing interests of all persons who at the passing of this Act hold ecclesiastical offices in the Church in Wales, and in the case of such tithe rentcharge to the obligation to make such provision as in hereinafter mentioned in lieu of such existing interests.

A good deal of argument has taken place as to this sub-section, and I think that each side, to some extent, relies upon the sub-section as promoting its own cause. It is to be observed, however, that the sub-section, whatever may be its true construction in other respects, refers to the position after the property has been transferred to those who are ultimately to take it, and, for my part, although I have considered the sub-section with great care, and have read it many times, I do not find that it is of any real assistance in the problem which I have to

Page 566 of [1940] 1 All ER 556

determine, which deals with the period still subsisting on 2 October 1936, when the tithe rentcharge remained vested in the plaintiffs and had not yet been transferred to the county council.

With regard to s 28, to which I must now return, counsel for the plaintiffs contends that the words “lay impropriator” in this section are words of art. Not every lay person who owns tithe rentcharge, he says, is a lay impropriator. The words refer only to the direct successors in title of persons who acquired the tithe, afterwards tithe rentcharge, by impropriation resulting from royal grants made by various statutes, from the dissolution of the monasteries by Henry VIII until the time of William III. He specifies more particularly the lay impropriators to whom these words refer by referring me to a list in Groves Alienated Tithes, pp 654 et seq, and he says that, on the true construction of s 28(1), the term “lay impropriator” has that very special meaning. Secondly, he says that, even if the term “lay impropriator” has a wider meaning than that, the scope of the section is limited to the state of affairs existing at the date of disestablishment, and refers only to lay impropriators who were properly described as such immediately prior to the date of disestablishment.

As regards the first contention of counsel for the plaintiffs, I am satisfied that, whatever may be the true significance of the words “lay impropriator” in certain contexts, or in a different context, they apply in this section to any lay person, or body of persons, owning a tithe rentcharge. Apart altogether from the wording of the remainder of the section, to which I shall shortly refer, it seems to me most unlikely that in this section the legislature intended to draw any distinction between the lay impropriators described by counsel for the plaintiffs and any other lay persons owning tithes. I think that the words “lay impropriator” are there used merely in contradistinction to the words “ecclesiastical appropriator,” just as Romer LJ used those words in his judgment in the Wickhambrook case. I can see no reason for treating the class of lay persons owning tithe rentcharges referred to by counsel for the plaintiffs differently from any other lay persons owning tithe rentcharges. If, however, I had felt any doubt upon this point, it is removed, to my mind, by the words of s 28(1):

… but a county council shall not, by reason of being entitled to or receiving any tithe rentcharge under this Act, be liable for the repair of any ecclesiastical building.

This provision seems to me to be quite unnecessary unless a county council owning tithes is a lay impropriator within the meaning of the section. Surely the legislature is saying, in effect, by this section that the liability of a lay impropriator is preserved, but it is desiredthe word “but,” I think, is of vital importanceto make an exception in the case of a county council which is entitled to, or receives, any tithe rentcharge under this Act. If this is so, it seems to me plain that the legislature regards such a county council as being a lay impropriator

Page 567 of [1940] 1 All ER 556

within the meaning of the section, and, if such a county council is a lay impropriator within the meaning of the section, it seems to me that the plaintiffs must also be lay impropriators within the meaning of the section. It is not disputed that the plaintiffs are a lay body. In fact, there is a decision to that effect in Church Temporalities in Wales Comrs v Gustard, and, if it be said, “It is true that the plaintiffs are entitled to tithe rentcharge, and the county council will be entitled to tithe rentcharge, but that is only by virtue of this same Act, and it only takes effect, as regards the plaintiffs, at the date of disestablishment, and, as regards the county council, at a later date,” then I reply: “I can see no distinction between the county council and the plaintiffs as regards this particular matter.” If one of them is a lay impropriatorand I think it is reasonably clear from the section that the legislature regarded the county council as a lay impropriatorthen I think that the plaintiffs must also be lay impropriators within the meaning of the section.

These words of s 28(1) which I have read also seem fatal to the second contention of counsel for the plaintiffs. If the section had been dealing only with bodies or persons who were lay impropriators immediately before the date of disestablishment, these words would have been quite unnecessary. I think that it must follow from the provision introduced by the word “but” that the section is dealing with the liability of any lay impropriator at any time, and, if one asks, “Are the plaintiffs, by reason of being entitled to the tithe rentcharge immediately before 2 October 1936, liable to repair the chancel?” I think that this section has the effect of saying: “You will find nothing in the Act of 1914 which affects their liability. If they are otherwise liable, there is nothing in this Act which frees them from the liability.” I may observe finally, in regard to s 28, that the framers of the Act must, of course, have known, because the provisions are contained in the same Act, that the tithe rentcharge would successively vest in the plaintiffs and in the Carmarthen County Council. The legislature have thought fit to insert an express exemption of the county council in terms, and I think that that is a strong indication that the plaintiffs were not intended to be exempted. Counsel for the plaintiffs suggests that it is inconceivable that, as a county council is clearly ultimately exempted from this liability, the legislature should have intended the plaintiffs to be subject to it. He described the plaintiffs as being a mere conduit pipe, through which the tithe rentcharge was ultimately to pass to the county council. I do not think the words “conduit pipe” are altogether an apt description, nor did counsel for the plaintiffs suggest that they were an exact description. The plaintiffs are not merely bare trustees during the period in which the tithe rentcharge is vested in them. They have certain important powers and duties during that period. For instance, by s 9 they are directed to determine certain matters. By s 11 they are given wide powers to decide certain questions. By s 27

Page 568 of [1940] 1 All ER 556

they are given certain powers of management and sale of the property vested in them, and by s 30 they are given powers to borrow. It does not seem to me inconceivable that the plaintiffs were intended to be liable for the repair of the chancel, notwithstanding that the county council is expressly exempted from that liability. The Act itself suggests certain reasons why this should be so, and in particular counsel for the first defendants referred me to s 19 of the Act of 1914. Sub-s 1(a) of that section provides as follows:

The property formerly appropriated to the use of parochial benefices and transferred to a county council shall be applied, in accordance with one or more schemes made by that council either alone or jointly with any other such council and approved by the Secretary of State, to any charitable or eleemosynary purpose of local or general utility, including the aiding of poor scholars …

S 19(2) provides as follows:

In framing schemes under this section as to the application of property formerly appropriated to the use of parochial benefices, due regard shall be had to the wants and circumstances of the parish in which the property is situate or from which it is or has been derived, and of the parish comprising the ecclesiastical parish to which any such property was attached, and generally to the circumstances of each particular case.

These provisions seem to me to supplyand possiblythere are other provisions to which reference can be madea special reason why the county council was exempted by the legislature from the liability to repair the chancel. That which they received is wholly dedicated, by the section which I have read, to other charitable purposes. The view which I have formed as to the construction of s 28 does not, it seems to me, make it necessary for me to examine in detail the provisions of any other section. Suppose I assume in favour of the plaintiffs that the liability of a tithe rentcharge owner to repair the chancel is part of the ecclesiastical law referred to in s 3as, indeed, I think it isand suppose I assume that this liability does not come within the words “subject … to all tenancies, charges, and incumbrances, and to all rights and interests saved by this Act, affecting the property” (and I think it may well be that this assumption is also well founded), the plaintiffs still, in my view, remain under this liability, by reason of the provisions of s 28. I may add that, in the course of the argument, each side has drawn attention to certain difficulties which would arise if I accept the argument of the other, and no doubt each side will again call attention to those difficulties if this case is considered by any other court. For my part, I do not propose to discuss those difficulties in detail, although they have been argued with great skill and ingenuity.

It seems to me that, if I have construed s 28 correctly, it affords a safe anchorage in what I think I might fairly describe as a sea of doubt and difficulty. The result is, on the view which I take of s 28, that the plaintiffs, as owners of the tithe rentcharge, will be liable to repair the chancel immediately prior to 2 October 1936, unless some statutory provision relieves them of that liability. S 28, as I read it, says that

Page 569 of [1940] 1 All ER 556

nothing in the 1914 Act is to affect that liability, and it is not suggested that there is any other Act which so relieves them.

There is one other observation bearing on the construction of the 1914 Act which I desire to make. Immediately prior to the date of disestablishment, the rector was liable to repair the chancel, because he owned the tithe rentcharge. The 1914 Act deprived him of the tithe rentcharge, subject to certain provisions, to which I have not referred, for compensating him, and vested it in the plaintiffs. It is, of course, possible that the Act intended to give the property to the plaintiffs free from the liability to repair the chancel, and thus deprive the owners of the chancel of a very valuable right. It is also possible that, while in effect vesting the tithe rentcharge in succession in the plaintiffs and in the county council, the Act intended to exempt both the plaintiffs and the county council from the liability to repair. However, that seems unlikely, as there is this express exemption of the county council. Further, I would refer to the well-known rule, to which counsel for the first defendants referred me, which is referred to by Bowen LJ in Hough v Windus, at p 237, as the recognised rule “that statutes should be interpreted if possible so as to respect vested rights.” It is quite clear that the right of the owners of the church to require the chancel to be repaired is taken away in the case of the transfer to the county council, but to my mind it is not made clear by the Act that that right is taken away in the case of a transfer to the plaintiffs. In fact, as I have held, there are provisions which prevent that from being so. Had there been any doubt in my mind, however, I think that this principle might have been applied with force.

Counsel for the first defendants has pointed outand it is quite true, to my mindthat the construction at which I have arrived has a very strange result, in this respect. The 1914 Act intended that ultimately the county council should get the tithe rentcharge free from any liability to repair the chancel. In the view which I take of this matter, the plaintiffs, as events have happened, had not ceased to be liable to repair the chancel before 2 October 1936 and, as a result of that, as I read the Act of 1936, a portion, which may be a substantial portion, of the redemption stock to be issued on the redemption of the tithe rentcharge will go, not to the county council, but to the representative body, and it will so go by reason, and by reason only, of the fact that the plaintiffs had not transferred the tithe rentcharge to the county council before 2 October 1936. By reason of that fact, if the argument for the representative body is right, as I have held it is, the county council will in effect be saddled with that very liability from which the Act of 1914 intended to free them, because a sum calculated with reference to the sum required for repairs will in fact be taken from the county council and given to the representative body. I entirely agree with the submission of counsel for the first defendants that that is a strange result, but, taking the view that I do of the construction of the Act of 1914, I think that it is a result

Page 570 of [1940] 1 All ER 556

which necessarily follows from the language used in the Tithe Act 1936. Whether or not it is a result which was foreseen by the framers of that statute I do not know, but it is a result which seems to me to follow from the language which has been used in the Tithe Act 1936, and I must leave it at that. For these reasons, I answer both questions of the originating summons in the negative, and I shall make declarations accordingly.

Both questions answered in the negative. Parties to pay their own costs by agreement.

Solicitors: R Primrose (for the plaintiffs); Milles Jennings White & Foster (for the first defendants); Official Solicitor to the Ministry of Agriculture (for the second defendants).

F Honig Esq   Barrister.

A Lewis & Co (Westminster) Ltd v Bell Property Trust Ltd

[1940] 1 All ER 570


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        7, 8 FEBRUARY 1940        


Landlord and Tenant Restrictive covenant Restrictions on user of adjoining premises Premises let to tobacconist Adjoining premises let to caterers Caterers selling cigarettes on premises Business of “sale of tobacco, cigars and cigarettes.”

The defendants granted a lease of certain premises to the plaintiffs for the purpose of carrying on the business of tobacconists. Inter alia, they covenanted “not to suffer or permit to be used certain adjoining premises for the purposes of the business of the sale of tobacco cigars and cigarettes.” Some few months later, they granted a lease of the adjoining premises in question to the ABC, who carried on the business of restaurateurs and caterers and afforded their customers the opportunity of buying cigarettes at the cash desk upon leaving the premises. On the facts, it was found that in isolated cases persons entering the restaurant purchased cigarettes without consuming meals or refreshments on the premises. Thereupon the plaintiffs claimed damages for breach of the defendants covenant, alleging that the defendants had suffered or permitted to be used the adjoining premises in question for the purposes of the business of the sale of tobacco, cigars and cigarettes:

Held as the adjoining premises in question were not, on the facts, being used for the purposes of the sale of tobacco, cigars and cigarettes, there could be no breach of covenant, and the plaintiffs claim failed.

Notes

It has been increasingly common in cases where a tenant is restricted in his own use of premises for him to require from his landlord a covenant that the latter will not let adjoining premises without such a restriction on user as will prevent competition with him. There has always been a certain overlapping of trades, and this has largely increased in modern times, because the retailer is not supplied in bulk, but in small packages suitable to be resold to the public without further handling or packing. It is now a very simple matter for a tradesman to carry on a subsidiary business, and the question here dealt with then arises. This question is whether that business is so far subsidiary as not to cause a breach of the landlords covenant.

Page 571 of [1940] 1 All ER 570

As to Restrictions on User of Adjoining Premises, see Halsbury (Hailsham Edn), Vol 20, pp 225229, paras 247249; and for Cases, see Digest, Vol 31, pp 166169, Nos 29963019.

Cases referred to

Buckle v Fredericks (1890) 44 ChD 244; 40 Digest 325, 2748, 62 LT 884.

Fitz v Iles [1893] 1 Ch 77; 31 Digest 160, 2938, 62 LJCh 258, 68 LT 108.

A-G v Plymouth Corpn (1909) 100 LT 742; 43 Digest 6, 14.

Lumley v Metropolitan Ry Co (1876) 34 LT 774; 31 Digest 160, 2936.

Wartski v Meaker (1914) 110 LT 473; 31 Digest 157, 2904.

Stuart v Diplock (1889) 43 ChD 343; 31 Digest 167, 3002, 59 LJCh 142, 62 LT 333.

Action

Action for damages for breach of covenant. The facts and arguments are fully set out in the judgment.

H Wynn Parry KC and Frank C Watmough for the plaintiffs.

C E Harman KC and J G Strangman (for Andrew E J Clark, on war service) for the defendants.

8 February 1940. The following judgment was delivered.

SIMONDS J. In this case, the defendants, Bell Property Trust Ltd, by an indenture of lease of 7 June 1937, granted to the plaintiffs, A Lewis & Co (Westminster) Ltd, a lease of certain premises, No 12, The High, Streatham High Road, in the county of London, for a term of 21 years from 25 March 1937, at the rent in the lease mentioned. The lessees covenanted, amongst other things, that they would not, without the consent in writing of the lessors, use the premises for any purpose other than that of the business of tobacconists. Amongst other covenants the lessors, on their part, entered into a covenant with the lessees that they would

… not at any time during the term thereby created and so long as the business of a tobacconist is carried on upon the demised premises suffer or permit to be used or give permission to be used by others any adjoining adjacent or neighbouring premises known as Nos. 1 to 22 The High for the purposes of the business of the sale of tobacco cigars and cigarettes as aforesaid whilst the said demised premises are being used for the purpose of such business as aforesaid. Provided always that if the lessees shall require the lessors to institute proceedings against any person or firm or company which may be carrying on the trade or business of the sale of tobacco cigars and cigarettes the lessors will upon receiving complete security for such costs as may be incurred or are likely to be incurred institute such proceedings as may be considered by the lessees to be appropriate.

That is the covenant which it is claimed has been broken by the lessors, the defendants in these proceedings.

Before I come to the further consideration of the covenant here in question, it is necessary to state the further and relevant facts. That being the covenant into which the lessors, the defendants here, had entered with the plaintiffs, on 8 September 1937, some few months later, the defendant by an indenture of lease of that date granted to the Aerated Bread Co Ltd (which I will for short call the ABC), a lease of premises immediately adjoining those demised to the plaintiffsnamely, Nos 13 and 14, The High, Streatham High Road, for a term of 21 years from 24 June 1937, at the rent therein mentioned. In that lease, the

Page 572 of [1940] 1 All ER 570

lessees, the ABC, covenanted that, amongst other things, they would not during the continuance of the term without the consent in writing of the lessors use the demised premises for any purpose other than that of the business of a restaurant and tea-shop. There is nothing else in that lease to which I need refer.

That being the position, the ABC duly opened their shop in the premises adjoining those of the plaintiffs, and, in the course of carrying on their business, they sell cigarettes. They sell them in this way. There is in this shop, as in other tea-shops, a cashiers desk, and in the desk there are arranged a number of packets of cigarettes which are available to be purchased by any customer of the tea-shop. It is common for a customer to purchase a packet of cigarettes upon leaving, when he pays his counter bill or his restaurant bill. No doubt there are other cases where the cigarettes are purchased either in the course of a meal or upon the customer entering the shop. It is said to be very rareindeed, the cashier could call to mind no casefor a person to enter the shop for the purpose of buying a packet of cigarettes and no more.

In those circumstances, the question I have to determine is this. First of all, does the ABC carry on upon these premises the business of the sale of tobacco, cigars and cigarettes? Secondly, if such a business is carried on upon these premises, have the defendants permitted or suffered the premises so to be used that they are liable upon their covenant with the plaintiffs? I think I may fairly say that this is a very puzzling point. Ultimately, I think that it is to be solved by asking oneself whether, upon the fair meaning of the covenant, and according to the ordinary use of language, it can be predicated of the ABC that they there carry on the business of the sale of tobacco, cigars and cigarettes. This, I think, at least is clear. It cannot be predicated of the ABC that they carry on upon these premises the business of tobacconists. I do not think that anybody, on being asked whether the ABC carried on there the business of tobacconists, would answer that question in the affirmative.

Next I ask whether there is any difference for this purpose between carrying on the business of a tobacconist and carrying on the business of the sale of tobacco, cigars and cigarettes. One must give a meaning, if one can, to every part of an instrument carefully drawn and entered into between the parties, and, since the words “business of a tobacconist” and “business of the sale of tobacco cigars and cigarettes” occur in immediate proximity in the same clause, I must assume that some difference was intended between the two phrases. Therefore, I am disposed to think that here there is some difference between the two, and that, even though the business of a tobacconist as a whole was not carried on, yet the provision would be infringed if it could fairly be said that the business of the sale of tobacco, cigars and cigarettes was carried on. Therefore, I have to consider that question.

I find it difficult to take the view that anybody on being asked, “What

Page 573 of [1940] 1 All ER 570

is the business which the ABC carry on at this shop?” would say: “They carry on several businesses. They carry on the business of selling refreshments. They carry on the business of selling (it may be) confectionery. They carry on the business of selling tobacco, cigars and cigarettes.” I do not think that, according to the ordinary use of language, and upon the plain meaning of the covenant, that is an interpretation which could fairly be given to it. In my view, what is done at these premises is the carrying on of the business of a tea-shop and restaurant, and that involves, amongst other things, the sale of cigarettes. It is commonindeed, I am told that it is almost universalfor cigarettes to be sold in a tea-shop of this character. Accordingly, it appears to me that it is no more right to predicate of this shop that there is carried on there the business of the sale of tobacco, cigars and cigarettes than it is to say of it that there is carried on there the business of the sale of milk, or the business of the sale of confectionery. There is carried on there the usual business of a tea-shop, which involves the sale of a number of articles therein usually sold. It is, of course, quite true that I was referred to a number of authorities where it could fairly be said that more than one business was being carried onas, for instance, in Buckle v Fredericks. There the prohibition was against the trade, not the business, of, amongst other things, the retailing of wines, spirits or beer. In that case, the defendant, who was the lessee of a theatre, bought a piece of land adjoining his theatre, and erected thereon a building which served at once as a convenient egress from his theatre and as a place where refreshments might be sold. Therefore, he erected a counter for that purpose. It was held that, in addition to the business of a theatrical manager, be carried on the trade of a retailer of wines and spirits. The latter might be ancillary to the former, but it was a business which he carried on. It seems to me, if I may say so with respect, that it was impossible to come to any other conclusion in that case.

So also in Fitz v Iles. There the defendants were bound by a covenant in the lease of their house not to use it as a coffee-house. The defendants were dealers in tea, coffee and other groceries, but they proposed, as ancillary to their business, and for the convenience of their customers, to sell light refreshments, consisting of cups of tea and coffee, bread and butter, pastry, ham sandwiches and pork pies, to be consumed on the premises. The Court of Appeal, affirming North J, came to the conclusion in that case that the defendants were carrying on the business of a coffee-house keeper, and so clearly they were. They were carrying on the business of a coffee-house keeper as well as that of a grocer. Upon the facts of that case, it appears to me that no other conclusion could have been reached.

Again, I was referred to A-G v Plymouth Corpn for the proposition, which, indeed, is self-evident, that a man may be said to carry on a particular trade though he does not carry it on in all its branches.

Page 574 of [1940] 1 All ER 570

Thus, I would be prepared to concede that a man may carry on the business of a tobacconist although he does not carry it on in all its branches. I ventured to point out, in the course of the argument, that as it is true of a trade, so it is true of a profession. A barrister may be said in the fullest sense to carry on his profession, although he does not profess to do all things which other barristers may do. Thus, he may equally decline to settle a disentailing assurance or to prosecute at the Old Bailey.

Other cases have been cited, such as Lumley v Metropolitan Ry Co and Wartski v Meaker. In each of them, the test is the test of broad common sense and the meaning of the covenant.

I think I need only refer to one other case in detailnamely, Stuart v Diplock. In that case, the plaintiffs carried on the business of ladies outfitters, juvenile outfitters and the selling of baby linen. The defendants, who were assumed in that case to be under a covenant not to carry on those businesses, carried on a business which they described as fancy drapers and hosiers. In the course of that business, they sold articles which would, in the normal course, be sold by a ladies outfitter. Therefore, said the plaintiffs, the defendants had committed a breach of the covenant. Kekewich J held that they had not committed a breach, but the Court of Appeal took a different view. The view of the Court of Appeal is perhaps most happily expressed in the judgment of Bowen LJ where he illustrated the fallacy of the argument by the following syllogism, at p 352:

“All ladies outfitters sell combinations, the defendants sell combinations, therefore the defendants are ladies outfitters.” I do not think that a covenant not to carry on the business of a ladies outfitter is broken by carrying on a part of that business which is also a part of another distinct business, even though it be a substantial part of the business of a ladies outfitter and only a subordinate part of the other business.

The syllogism which Bowen LJ, stated there, translated into terms of this case, would be: “The business of the sale of tobacco, cigars and cigarettes consists in selling tobacco, cigars and cigarettes. The ABC tea-shop sells cigarettes. Therefore, the ABC tea-shop carry on the business of selling tobacco, cigars and cigarettes.” That, of course, is a fallacy. The tea-shop do not carry on the business of a tobacconist, or the business of selling tobacco, cigars and cigarettes, because, as part of their business, they sell cigarettes, any more than they carry on, in ordinary parlance, the business of a retailer of milk because, in the course of their business, they sell milk, either in glasses or as an ingredient of a cup of tea.

Therefore, a review of all the authorities leads me back to exactly the impression which I formed upon first reading this covenant. It is simply a question of the ordinary use of language whether or not one can predicate of the ABC that they carry on upon these premises the business of selling tobaccos, cigars and cigarettes. The conclusion to which I come now is the conclusion to which I came at the outset of the case

Page 575 of [1940] 1 All ER 570

namely, that one cannot fairly predicate of the ABC that they are carrying on that business.

Supposing I am wrong upon that, then the difficult question arises whether that which is being done is being, or has been, permitted or suffered by the defendants. If it were necessary to form a final conclusion upon that pointwhich it is not, in view of the decision to which I have come upon the first pointI should want a further consideration of the matter. I merely throw out this suggestion. No case has been cited to me which, in my view, involves the proposition that a person who has entered into such a covenant as this and then demised the premises for a purpose which he knows, or ought to know, would involve the prohibited user is entitled to rely upon that fact, and say: “I am not liable. I have not permitted this, because I have put it out of my own power to prevent the user for the purpose of which I have demised the premises.” It is not necessary to come to a final conclusion upon that matter, because, in the view which I take upon the first point, the question does not arise. In the result, the action must be dismissed, with the usual consequences.

Judgment for the defendants with costs.

Solicitors: Zeffertt & Heard (for the plaintiffs); Simmons & Simmons (for the defendants).

F Honig Esq   Barrister.


Rappaport v London Plywood and Timber Co Ltd

[1940] 1 All ER 576


Categories:        SALE OF GOODS: ADMINISTRATION OF JUSTICE; Courts        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        5, 6, 7, 8 FEBRUARY 1940        


Sale of Goods Non-delivery Purported compliance with control order Measure of damages.

Emergency Legislation Timber control Purchaser to whom property in timber has passed Whether restrictions apply Control of Timber (No 1) Order 1939 (SR & O 1939, No 1031), art 1 Control of Timber (No 5) Order 1939 (SR & O 1939 No 1329) arts 1, 2, 3.

The plaintiff had, before the coming into operation of the Control of Timber (No 1) Order 1939, purchased certain timber (and it was held that the property in the timber had passed to him), but had not taken delivery, the timber being left in the warehouses at the docks with the defendants other stock. The order provided that no person should dispose of any timber to any other person beyond a certain quantity, and a later order provided that no person should acquire timber for consumption except under licence from the Minister of Supply:

Held (i) the orders did not prevent the plaintiff from taking delivery of timber bought before it came into force.

(ii) the defendants, having refused delivery by reason of the orders, were liable in damages to the plaintiff for non-delivery.

Notes

In this case, the construction of the Control of Timber Orders is dealt with, and the orders are held to have no application to prevent or restrict the delivery of timber to a person to whom the property in the timber has passed before the orders came into operation. Where delivery is wrongfully withheld, the purchaser will have a claim for damages for non-delivery.

Action

Action for a declaration that the defendants were bound to deliver certain timber sold to the plaintiff upon the payment of certain bills of exchange. The plaintiff also claimed delivery of the quantity found due and damages for non-delivery. The plaintiff was a manufacturer of furniture, and from time to time purchased varying quantities of timber from the defendants. Payment for the timber had been made by bills of exchange payable at 3 or 4 months. The timber was invoiced to the plaintiff, who took delivery against his acceptances in the quantities which he required from time to time. In the meantime, the goods remained warehoused at the docks with the defendants other stock, and in all cases bore distinctive marks by which they could be identified as the timber invoiced to the plaintiff. The terms of credit arranged between the parties had varied from time to time, but on 9 October 1939 the total sum paid by the plaintiff against which he had not had delivery of timber amounted to £142 3s 3d. On 14 October 1939 the defendants finally refused to make any further deliveries of the timber earmarked for the plaintiff until a number of bills of exchange which the plaintiff had accepted in the ordinary course of the dealings between the parties had been met.

The defendants raised various defences on the facts, but these were

Page 577 of [1940] 1 All ER 576

decided against them by the judge, who held that, in the circumstances of the case, the property in the timber had passed to the plaintiff. The defendants pleaded that the plaintiff had not at any time since 3 October 1939 had a licence to acquire or take possession of the timber, or, alternatively, had not produced any such licence, and that, in consequence, the delivery by the defendants and the acceptance by the plaintiff would have been illegal, since such a transaction was forbidden by the Control of Timber Orders 1939. The case is reported only in so far as it deals with the construction of these orders, which were made by the Minister of Supply under the Defence Regulations 1939, regs 55, 98.

The Control of Timber (No 1) Order 1939, art 1, provides as follows:

No person shall dispose of, or agree or offer to dispose of, any quantity of timber situate in the United Kingdom to any other person or invite an offer to acquire any quantity of any such timber, if that quantity or the aggregate quantity produced by adding that quantity to the quantity of all such timber (being timber of the same category according to the classification of categories in the first schedule hereto) disposed of or agreed to be disposed of by the same person since the coming into force of this order (excluding any timber in relation to which the provisions of this article do not apply) exceeds 10 per cent. of the aggregate quantity of all such timber of the same category owned by that person at the coming into force of this order and all such timber of that category coming into the ownership of that person in the United Kingdom since that time …

Then follows a proviso which is not material for the purposes of this case. The Control of Timber (No 5) Order 1939, art 1(1), provides as follows:

No person shall acquire or agree or offer to acquire for consumption any timber or boxboards except under the authority of a licence granted by the Minister of Supply or in accordance with a special or general direction issued by the Minister of Supply.

F Hallis for the plaintiff.

A W Roskill for the defendants.

8 February 1940. The following judgment was delivered.

ATKINSON J. The third point which is raised in this case is the defence that the plaintiff has not at any time since 3 October had a licence to acquire and take possession of the timber, or, alternatively, that he had not produced a licence. The defence then goes on to say that both delivery by the defendants, and, indeed, acceptance by the plaintiff, would be illegal, because such a transaction was forbidden by various Control of Timber Orders. That defence has involved consideration of the true meaning of a number of orders which have been made under the Emergency Powers (Defence) Act 1939. The first one, the Control of Timber (No 1) Order 1939, dated 1 September 1939 and coming into operation on the same day, by art 1 provides as follows:

No person shall dispose of, or agree or offer to dispose of, any quantity of timber … [in excess of] 10 per cent. of [his stock] at the coming into force of this order and all such timber of that category coming into the ownership of that person in the United Kingdom since that time …

Page 578 of [1940] 1 All ER 576

That means 10 per cent of his stock and 10 per cent of any additions to his stock. It is just as well, when we are thinking of the clause, to remember that the definition of “dispose of and acquire” includes the giving and taking of possession. Therefore, this clause really means, for the purpose of this case, that no person shall give possession of, or dispose of, any timber in excess of 10 per cent of his stock to any other person. One thing is quite clear, and that is that that prohibition only applies to owners, because, when dealing with the 10 per cent, it uses the words:

… exceeds 10 per cent. of the aggregate quantity of all such timber of the same category owned by that person at the coming into force of the order and all such timber of the category coming into the ownership of that person in the United Kingdom since that time …

Art 3 provides as follows:

No person shall acquire, or agree or offer to acquire … any timber … unless that person is (a) a person requiring the timber for his own use or for use in his business …

Therefore, by art 1 the plaintiff did not come within that prohibition. It is obvious that there is nothing in that order which affected this transaction. The defendants were not owners of this timber. The plaintiff was the owner, and it is only a prohibition against owners disposing of timber. I should add that, even if one is wrong as to that, there is no evidence whatever that these deliveries would have exceeded 10 per cent of the stock of the defendants. A further order, the Control of Timber (No 3) Order 1939, was made on 15 September 1939, increasing the 10 per cent to 15 per cent. The order which is most material in this case is the Control of Timber (No 5) Order 1939, dated 30 September 1939, which came into operation on 4 October 1939. Art 1(1) provides as follows:

(1) No person shall acquire [which includes shall take possession] or agree or offer to acquire for consumption any timber or boxboards except under the authority of a licence granted by the Minister of Supply or in accordance with a special or general direction issued by the Minister of Supply.

That is a prohibition on anybody acquiring timber, including taking possession for the consumption of that timber. Art 1(3) provides as follows:

(a) No person who has acquired any timber or boxboard otherwise then for consumption shall without the permission of the Minister of Supply consume such timber or boxboards.

Art 2(1) provides as follows:

No person shall dispose of or agree or offer to dispose of for consumption any timber or boxboards except to a person who produces a licence. …

Then there is an exception to these provisions of timber up to the value of £20, on a declaration by the buyer that that, with any other purchase he has made, will not exceed £20 per month.

The point for decision seems to me to be this. Does the word

Page 579 of [1940] 1 All ER 576

“person” mean in this order what it means in the earlier order? In the earlier order, it is quite clear that “person” means “owner.” It is suggested here that “person” means anybody who happens to have possession of timber, although he may be holding it on behalf of somebody else, who is the real owner. I cannot see why I should give to the words “no person” there a different interpretation from that which is clearly intended by the earlier order. It seems to me very difficult to read an order in this way, and to say that it means: “No owner shall get possession of his own timber without producing a licence.” It would need very strong language, I think, to justify an interpretation of that kind. There are two directions given under that order which, I think, support the interpretation which I intend to put upon the word “person” in the Control of Timber (No 5) Order 1939. The second direction is as follows:

Any person disposing of any timber from his “private stocks” shall … forward a certified return of such disposals …

The words “private stocks” are defined as meaning all timber owned by any person other than timber acquired from or through an agent of the Minister of Supply. Taking all these orders together, I think it quite clear that it is only imposing restrictions on owners parting with their timber. At any rate, it cannot possibly include a prohibition against people who are already owners taking possession of timber which is in truth their own. There could be no object in such a prohibition. It makes no difference either to the public interest or to the Timber Control whether the timber is in the possession of A or B. One would have thought that it would have been best for the timber to be in the possession of its true owner, and I can see nothing to prohibit the true owner from getting possession of the timber which is his. Therefore, in my judgment, there is nothing in this plea either.

I now come to the relief to which the plaintiff is entitled. There is no difficulty about a declaration that the undelivered balance is the property of the plaintiff. There is no difficulty about a declaration that the defendants are legally bound to give to the plaintiff delivery orders for that timber without production of licences, and there is no difficulty which I can see about ordering delivery of the timber to the plaintiff. The plaintiff is not satisfied with that. He claims, in addition, damages, and bases that claim on these grounds. On 1 January 1940 an order came into operation which restricted the use to which he could put his timber, and he says that, if this timber had been delivered at the end of September 1939, or the beginning of October 1939, he would have had a free hand as to the use to which he could have put it. His business is to make suites of bedroom furniture, and he has given very inadequate particulars of the loss of profit which he would have made if this timber had been available to him. Since January 1940 he has not been in a position to carry on his business on account of the restrictions imposed on user and because, of course, he has not had the timber. It seems to me

Page 580 of [1940] 1 All ER 576

that he is entitled to some damages for the wrongful withholding of that timber.

Declaration accordingly and matter referred for inquiry as to damages.

Solicitors: Alec Woolf & Turk (for the plaintiff); Rundle & Hobrow (for the defendants).

C St J Nicholson Esq   Barrister.

Murrell SS Co Ltd v Nordenfjeldske Steamship Services Ltd

The Thurston

[1940] 1 All ER 580


Categories:        SHIPPING        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        1 FEBRUARY 1940        


Shipping Charterparty Expenses of discharging cargo “Charge not to exceed what other steamers pay (at London according to the tariff in force on 1 January 1935)” Alternative maximum charges Right of charterers to retain rebate allowed by stevedores.

The respondents owned the Thurston, a ship which was chartered by them to the appellants for the purpose of transporting a cargo of fresh fruit from Spain to England. The charterparty provided, inter alia: “Cargo to be brought to and taken from alongside at merchants risk and expense and to be properly stowed and discharged by a regular stevedore appointed by charterers or their agents at the risk and expense of the steamer. The steamer to be discharged in the customary manner and where ordered by charterers or their agents. The charge not to exceed what other steamers pay (at London according to the tariff in force on 1 January 1935).” The cargo was discharged at London, and the charterers claimed that they were entitled to debit the shipowners with a sum about twice as large as that paid to the stevedore for discharging the cargo, on the ground that the words in brackets meant that the shipowners were liable to pay the actual rate in the Port of London Authoritys printed tariff in force on 1 January 1935, and that the preceding words applied only if the ship were unloaded at a port other than London:

Held (i) the appellants were not entitled to debit the shipowners, as expenses for unloading the cargo, with a sum exceeding that actually charged by the stevedore for doing the work.

(ii) a bonus allowed by the stevedore in respect of the berthing of the vessel is not an allowance made by him in respect of the discharging of the cargo.

Notes

The question of construction here is one of importance, as it involves a large number of transactions, and the construction adopted by the court is said to run counter to the general view which has up to now been held in the trade.

As to Construction of Clauses providing for Charges for Loading or Unloading, see Halsbury (Hailsham Edn), Vol 30, pp 456458, para 614; and for Cases, see Digest, Vol 41, pp 311314, Nos 17181748.

Appeal

Appeal by the defendants from a judgment of Goddard LJ (sitting as an additional judge of the Kings Bench Division), dated 28 July 1939. The parties to the action were the shipowners as plaintiffs and

Page 581 of [1940] 1 All ER 580

a firm acting as ships agents, who were agents for the charterers. The charterers were brought in as a third party, their agents claiming to be indemnified by them, but they took no part in the appeal. The facts and the material parts of the charterparty are fully set out in the judgment of Scott LJ.

H U Willink KC and R A B Powell (for A A Mocatta, on war service) for the appellants.

C T Le Quesne KC and A W Roskill for the respondents.

Willink KC: The ship must discharge the goods by the hands of a regular stevedore. The work of the stevedore is at the risk and expense of the steamer. The shipowner desires to protect himself, in a measure, against the charge which the stevedore appointed by the charterers or their agents is going to make. The charterparty provides, by cl 25, that the charge is “not to exceed what other steamers pay (at London according to the tariff in force on 1 January 1935)”. That means that at all ports except London the shipowners are to pay the customary charge. At London, however, they are to pay this charge, not limited by the current rate, but limited by what was current 2 years previously. It is clear, from cl 26 of the charterparty, that the shipowners were willing not to claim money which the agents received from the wharf. It was contemplated that a stevedore might offer a bonus to the charterers or their agents to bring the ship to a particular wharf. The primary question is as to the true meaning of the language. The primary meaning of the word “tariff” is a list of charges which can be found and identified. The shipowner has not the right to interfere in the contract between the charterer and the stevedore, because he has given the charterer the right to appoint the stevedore. The effect of cl 24 is to enable the charterer to make an independent contract with the stevedore. The vital clause is cl 25, which states that the charge is “not to exceed what other steamers pay (at London according to the tariff in force on 1 January 1935)”. The words in parenthesis must be construed as an independent provision. The only tariff in force in London on 1 January 1935 was the Port of London Authoritys printed tariff, which was used by all. It was the invariable practice for shipowners to be charged in accordance with that tariff. The charge of 16s less 10 per cent was in accordance with that tariff. That was what the shipowners promised to pay, and they have not been debited with a penny too much. A special provision has been made for London, and nothing is said about “exceeding,” or “other steamers.” That is the true construction.

Counsel for the respondents were not called upon.

H U Willink KC and R A B Powell (for A A Mocatta, on war service) for the appellants.

C T Le Quesne KC and A W Roskill for the respondents.

1 February 1940. The following judgments were delivered.

SCOTT LJ. The dispute here is between shipowners and a company acting as ships agents. The trade in which the transaction took place was the export of fresh fruit from Spain to England in 1937 on the Thurston, a ship owned by the plaintiffs in the action, the

Page 582 of [1940] 1 All ER 580

respondents here, and chartered by them to the defendants, the appellants here. The dispute relates solely to a question of an expense incurred, for which, under the charter, the shipowners accepted liability, in transferring the cargo from the hold of the ship on to the quay, the obligation under the charterparty being to place the goods alongside. The division of functions between ship and merchant was not at the ships rail, but was a little further from the hold than thatnamely, actually on the quay.

Clause 24 of the charter, provides as follows:

… cargo is to be brought to and taken from alongside at merchants risk and else, and to be properly allowed and discharged by a regular stevedore appointed by charterers or their agents, at the risk and expense of the steamer …

The stevedore was to be wholly under the direction of the master. In the particular case, the ship was consigned to London. The payment of chartered freight was by a lump sum of £4,500, the ship undertaking to bear the expense of putting the cargo on the quay at port of arrival. What happened, shortly, was that the ships agents appointed by the charterers, the defendants in the action, employed a stevedore to discharge the cargo, and the stevedore, in performing that operation, performed the first part of it, in my opinion, on behalf of the shipnamely, to the point where the goods reached the quaysideand in respect of that portion of the operation the defendants deducted, in their account rendered of the ships expenses and receipts, a larger sum than was in fact retained by the stevedore as his remuneration for performing that part of the work. They contended that, under the terms of the charterparty, they were entitled to debit the shipowner with a sum which was practically twice what the stevedore in fact retained for doing the work. The shipowner complained, on ascertaining what the position was, and asked for a credit to him, or for payment to him, of the difference. When the ships agents refused, he issued a writ against them, and it was that issue which came up for trial before the judge.

The question turned on the realities of the case, with which were mingled questions of the practice at the Port of London. To appreciate them, it is necessary to look at some clauses of the charterparty, dated 22 December 1936 and made between the shipowners and the charterers, who were known in the case by the initials of their name, CLUEA. Clause 1 said that the steamer should proceed to a port on the east coast of the United Kingdom. Clause 24 provides as follows:

The cargo to be brought to and taken from alongside at merchants risk and expense, and to be properly stowed and discharged by a regular stevedore appointed by charterers or their agents, at the risk and expense of the steamer.

The facts are not in dispute here, and were found by Goddard LJ who tried the case. The stevedore was appointed by the charterers or by their agents in Londonin fact, by their agents, the Nordenfjeldske Steamship Services Ltd, who act as agents for ships of any owner and also as managers of a line of Norwegian ships. The words “at the expense

Page 583 of [1940] 1 All ER 580

of the steamer” are words which, to my mind, are quite unambiguous. They provide that the shipowner will defray the actual cost of the discharge on to the place where the shipowners duty endsnamely, the quay alongside the shipand no more, the stevedore in that operation being under the direction of the master.

The dispute arises out of cl 25, which provides as follows:

The steamer to be discharged in the customary manner and where ordered by charterers or their agents.

That took place, and nothing turns on that. Then cl 25 continues as follows:

The charge not to exceed what other steamers pay. …

There is no ambiguity in that, and there is no doubt thrown by those words on the meaning of the word “expense” in cl 24. Those words leave that word as meaning the actual expense incurred by paying to the stevedore the amount for which he is willing to do the work. The dispute arises out of the words in brackets which immediately follow:

… (at London According to the tariff in force on Jan. 1, 1935). …

The rest of the clause is immaterial. It is said that those words in brackets do not mean what the preceding part of the sentence must necessarily meannamely, that that is to be a maximum higher than which the actual expense which the steamer agrees to bear shall not go. It means, on the contrary, nothing to do with the maximum. It means that at London the expense of discharge should be according to a particular printed tariff of the Port of London Authority in force on 1 January 1935.

My first answer to that argument is that I see no reason in the language of the clause to give those words a sense which seems to me artificial. I construe the bracketed words as governed by the preceding wordsnamely, “the charge not to exceed what other steamers pay”and that that provision of a maximum charge which the steamer has undertaken to bear shall not be exceeded, not only at other ports, but also at London. That is the first answer to the appellants argument in the present case. If that is a mere maximum, it does not matter what it is. It may have been considerably higher than the charge which was in fact retained by the stevedore in the present case and kept in his own pocket in the ultimate result. It would not entitle the agents to claim to put upon the owners in their account a figure any higher than the actual charge, because nothing higher than that would be the expense of discharging.

However, there is another answer to the argument, which involves some little statement of the facts. At the time referred to in the bracketed clause, the Port of London Authority had what may be called a tariff which was printed and published, the Port of London Authority being themselves engaged in the work of discharging ships to the extent

Page 584 of [1940] 1 All ER 580

of some 10 per cent of the total tonnage discharged in the Port of London. In regard to fruit, in the little booklet, issued in 1932, one finds this passage, at p 29:

Fruit, green, in packages from Spain, Portugal and Italy, per 100 packages 16s. on to the quay.

Then there was a reduction of 10 per cent applying to all the charges on the page, and all through the book. At the time when this booklet was issued, or, at any rate, at a later datenamely 1 January 1935, which is the date referred to in cl 25 of the charterpartythat was not the actual charge ever made by stevedores. The charge made by them at that time was 16s per 100 packages, less 1d for each packagethat is to say 8s 4dand, if one takes 8s 4d from 16s, the actual gross rate, apart from percentage reduction, was 7s 8d and the evidence in the case as found by the judgeand I agree entirely with him, after having my attention directed to the whole of the evidence which was taken before him, of which we have had a transcript put before usis quite clear that the actual current charge for which the stevedore was willing to do this part of the work throughout the Port of London was 7s 8d less 10 per cent.

On 1 April 1935 a new schedule of charges which would equally come within the word “tariff” of the charterparty was made, and there the charge for green fruit in packages from Spain and Portugal was reduced to what was really the current chargenamely, 7s 8d per 100 packagesand, as a matter of fact, the scale of percentage deduction to get at the net charge was reduced from 10 per cent to 7½ per cent, so that the reduction was not as great as before, and a smaller subtraction from the rate of 7s 8d was in fact made. Of course, however, that tariff, which was published on 1 April 1935 was not, and could not be, of itself the tariff in force on 1 January 1935, because it had not been published at that date, and had not come into use in that form.

That leads to a third question of interpretation of cl 25, and that is this. The words in brackets, even if they ought to be interpreted as having nothing to do with a maximum, refer only to the tariff in force. They do not refer to the Port of London Authoritys printed tariff, or contain any reference to a particular printed document, and the tariff in force on 1 January 1935, was that which had prevailed through the preceding years, and which, except from the point of view of the percentage, was in force on 1 January 1935 and was repeated in express terms in the Port of London Authoritys booklet of tariff charges on 1 April. Therefore, in my opinion, the insertion of the words “Jan. 1, 1935,” makes no difference, so far as regards the deduction from the gross rate of 16s, which had nominally prevailed, of 1d per package, reducing it in fact to 7s 8d. Goddard LJ gave judgment for the difference between the two points of view, making it £111 3s 2d as the overcharge which the agents had made against the ship, and gave judgment in favour of the shipowner for that amount. That difference included in the calculation

Page 585 of [1940] 1 All ER 580

upon which it was based the difference in the percentage deduction between 10 per cent and 7½ per cent, and on that there is no dispute.

An argument was adumbrated, but not pressed, on behalf of the agents that cl 26 was helpful, not directly, but indirectly, as throwing light upon the meaning of cll 24 and 25. Clause 26 reads as follows:

Steamer to be cleared by charterers agents at loading ports and also at port or ports of discharge. Any bonus or other usual pecuniary consideration allowed by stevedore and/or wharfinger or dock company in respect of the berthing of the vessel to belong to agents or charterers and owners to have no claim thereto.

There is an express provision giving, in certain circumstances, a right to the agents or charterers to an allowance of a special bonus paid to them, and the shipowner disclaimed any right to it. The first reflection which occurs to one on that is that, that being an express exception to the shipowners right to be charged only with actual expenses, it goes to indicate even more strongly that it was his right to be charged only actual expenses, except in a mentioned case, as in cl 26. However, the further objection is that, in my opinion, that provision has nothing at all to do with any rebate handed back by stevedores, or allowed by stevedores, to agents or charterers out of the nominal 16s which they used to get. A bonus or pecuniary consideration allowed by a stevedore in respect of the berthing of the vessel is not an allowance made by him in respect of the discharging of the cargo from the hold to the quay alongside. The berthing of the vessel is what it saysnamely, the operation of bringing the vessel to the berthand that clause, in my opinion, has nothing whatever to do with the interpretation of cll 24 and 25. For these reasons, I entirely agree with the judgment of Goddard LJ, and think that the appeal ought to be dismissed.

MACKINNON LJ. I agree. This is a charterparty, and the main purpose of that contract is that the shipowner agrees to carry the goods of the charterer from Spain to the port of discharge. For his services in doing that the charterer is to pay him an agreed freight if the voyage merely takes a reasonable time, and an extra payment by way of demurrage if the voyage takes an excessive time. In addition to the cargo being carried from one port to another, it has to be put on board at the port of origin and taken out of the ship at the port of discharge, so provision is made for that. The charterer is to bring the cargo to a spot alongside the ship, and the charterer is to take the cargo away from a spot alongside the ship. As regards the process of loading it from alongside into the ship and discharging it to alongside out of the ship, it is provided that this is to be the duty and concern of the shipowner, and cll 24 and 25 provide how he is to carry that out. I need not trouble about the words as to loading, but the material words as to discharging are the words in cl 24 providing that the cargo is to be

… discharged by a regular stevedore appointed by the charterers or their agents, at the risk and expense of the steamer.

Page 586 of [1940] 1 All ER 580

That means that the shipowner says to the charterer: “Yon may appoint a stevedore, and I will pay his proper charges.” After the charterer, or his agent, has appointed the stevedore, it is perfectly possible, and within the rights of the shipowner, for him to agree with the stevedore the price at which he is to do his work and to pay him direct. If, on the other hand, it is convenient, as a matter of business, he leaves it to the charterers agents, who for certain purposes, he has agreed to accept as his agents under this charterparty. If he leaves it to the charterers agents, he agrees to repay to the charterers agents what they have in fact paid to the stevedore.

In this case, the charterers agents did appoint the stevedore, and engaged him, and for the work he did the stevedore charged, and the charterers agents paid him, £107 17s 2d, and quite clearly they can ask the shipowner prima facie to repay to them that sum of money which they have paid to the stevedore, and no more. The extraordinary feature of this case, however, is that the charterers say to the shipowner: “You must pay us, not £107, but £219 0s. 4d. and we can ask you for that on the ground that, under this charterparty, you, the shipowner, have not only agreed to reimburse us the £107 17s. 2d. we have paid to the stevedores, but have also agreed to pay us, the charterers, £111 3s. 2d.” That, on the wording of the charterparty, so far as I have read it, seems a bold and extraordinary contention, but it is raised upon a few words in cl 25:

The steamer to be discharged in the customary manner and where ordered by charterers or their agents. The charge [which is to be made for which the shipowner makes himself liable to pay for the stevedores services] not to exceed what other steamers pay (at London according to the tariff in force on Jan. 1, 1935). …

The whole of this contention that under this charterparty, though the stevedores charges are only £107, the charterers are to get a bonne bouche of £111 rests upon an attempted construction of the words in that parenthesis.

I am quite satisfied of two things. First of all, the words in that parenthesis are words of limitation. They are co-ordinated with the first phrase, and stipulate that the charge is not to exceed (a) what the other steamers pay, and (b) in London, the amount according to the tariff in force on 1 January 1935. Secondly, there is, of course, the question of what is that maximum which is there put in by way of limitation. What was the amount of the rate according to the tariff in force on 1 January 1935? I am quite satisfied that the rate in force on 1 January 1935, was 7s 8d per 100 cases. This ridiculous arrangement, under which somebody prints in a document 16s, when everybody knows it is all nonsense, for it is 16s, less 1d per package, which is 7s 8d, renders the thing an absurdity. The rate, or the charge, according to the tariff in force on 1 January was 7s 8d, and that is the precise rate charged by the stevedores, making up their £107 17s 2d, except that, if it had been on 1 January 1935, there would have been 10 per cent deducted from the

Page 587 of [1940] 1 All ER 580

7s 8d whereas on this stevedores bill it was only 7½ per cent. That, and that alone, is the amount which Goddard LJ has found he was liable to pay. I think that the judgment in that respect was perfectly right.

CLAUSON LJ. I agree.

Appeal dismissed with costs.

Solicitors: Constant & Constant (for the appellants), Sinclair Roche & Temperley, agents for Temperley Tilly & Hayward, West Hartlepool (for the respondents).

W E Scrivener Esq   Barrister.

N V Amsterdamsche Lucifersfabrieken v H & H Trading Agencies Ltd

[1940] 1 All ER 587


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        12 FEBRUARY 1940        


Practice Costs Counterclaim Claim and counterclaim both successful Claim admitted before trial No costs on claim except for setting down.

In an action which was remitted to the county court, the defendants in their defence admitted the plaintiffs claim. There was, however, a counterclaim, which was the subject of dispute, the defendants ultimately succeeding on the counterclaim, though for a smaller amount than that claimed. The order drawn up adjudged that the plaintiffs should recover the amount of the claim and the costs of the claim, and that the defendants should recover the sum awarded on their counterclaim and the costs of the counterclaim:

Held by reason of the admission in the defence of the plaintiffs claim, there were attributable to the claim no costs which had to be divided or apportioned as between the claim and the counterclaim. The plaintiffs costs should have been taxed on the principle that, after the admission of the claim, the plaintiffs were not entitled to incur any costs relating to the claim except those of setting down and obtaining leave to proceed, and the costs of the defendants should be taxed upon the principle that they were successful on the only matter litigated, but this would not affect any costs given to either party in any event.

Notes

Where the plaintiffs claim is admitted and there is no issue at the trial with reference to it, but the whole trial is devoted to the counterclaim of the defendant, the plaintiff is entitled, not to the general costs of the trial, but only to such costs as are necessarily incurred in setting down the action for trial.

As to Costs where Claim and Counterclaim both Successful, see Halsbury (Hailsham Edn), Vol 29, pp 518520, para 768; and for Cases, see Digest, Vol 40, pp 434436, Nos 552568. See also Yearly Practice of the Supreme Court 1940, pp 366, 367.

Cases referred to

Saner v Bilton (1879) 11 ChD 416; 40 Digest 436, 569, 48 LJCh 545, 40 LT 314.

Christie v Platt [1921] 2 KB 17; 40 Digest 436, 568, 90 LJKB 555, 124 LT 649.

Page 588 of [1940] 1 All ER 587

Wilson v Walters [1926] 1 KB 511; 40 Digest 437, 571, 95 LJKB 624, 134 LT 597.

Medway Oil & Storage Co v Continental Contractors [1929] AC 88; Digest Supp, 98 LJKB 148, 140 LT 98.

Baines v Bromley (1881) 6 QBD 691; 40 Digest 433, 550, 50 LJQB 465, 44 LT 915.

Atlas Metal Co v Miller [1898] 2 QB 500; 40 Digest 437, 574, 67 LJQB 815, 79 LT 5.

The Stentor [1934] P 133; Digest Supp, 103 LJP 105, 152 LT 450.

Appeal

Appeal by the defendants from a judgment and order of His Honour Judge Sir Mordaunt Snagge, given at the Westminster County Court on 15 January 1940. The facts are fully set out in the judgment of Slesser LJ.

T Humphrey Tilling for the appellants.

A S Diamond for the respondents.

Tilling: As the appellants were awarded judgment for the bulk of their counterclaim, they should have the costs of fighting it. The rule in Christie v Platt is not a settled rule, but is merely a caution to the taxing master that, in applying the rule in Saner v Bilton, he must look at the substance of the action, and must not be enslaved by the form of the proceedings. Medway Oil & Storage Co v Continental Contractors is to be distinguished, as it does not apply to a case in which, like this, there has been no issue on the claim.

Diamond: In the proceedings in the county court, the defendants relied upon a defencenamely, a set-offand also on a counterclaim based on the same facts. The effect of the judgment of the judge is, therefore, that the counterclaim bears only such costs as were incurred by reason of the counterclaim. Subject to that, the plaintiffs obtain the costs of the proceedings, except such items as are common to both the claim and the counterclaim. [Counsel referred to Saner v Bilton, Baines v Bromley, Atlas Metal Co v Miller, Christie v Platt, Wilson v Walters, Medway Oil & Storage Co v Continental Contractors and The Stentor.]

T Humphrey Tilling for the appellants.

A S Diamond for the respondents.

12 February 1940. The following judgments were delivered.

SLESSER LJ. In this case, the Dutch company sued the English company, H & H Trading Agencies Ltd, for the sum of £99 10s 1d, the price of goods sold and delivered and duty refunded, an agreed amount, less an amount of commission which had been paid by the plaintiffs to the defendants, so that the effective claim was for £92 9s 10d, the commission being £7 0s 3d. An action for that amount was started in the High Court by specially indorsed writ, and was remitted to the county court, an affidavit being sworn by one Heney on behalf of the defendant company. In para 4 of his affidavit, Heney says:

The above-named defendant company purchased from the above-named plaintiff company a quantity of matches for its own account and in respect of these dealings there is a sum of money due to the plaintiff company. The defendant company has from time to time obtained orders on behalf of the plaintiff company for various

Page 589 of [1940] 1 All ER 587

quantities of matches and there is due to the defendant company commission on such orders amounting to the sum of £72 3s. 9d. The defendant company claims to set off the said sum of £72 3s. 9d. against the amount claimed by the plaintiff company, or alternatively, the defendant company has a counterclaim for the said sum of £72 3s. 9d.

Then, on the matter coming into the county court, there was put in a defence and counterclaim. Para 1 of the defence is as follows:

The defendants admit that the sum of £92 9s. 10d. was due from them to the plaintiffs as alleged in the statement of claim.

Subsequently they paid the sum of £20-odd, so that there remained owing to the plaintiffs £72 3s 9d. There is no question about that at all, and there was nothing at all with regard to that matter to be litigated in the county court. There was really no dispute about that amount. It was a clean admission of liability. In the counterclaim, the defendants again raised the question mentioned in Heneys affidavit, which I have read, as to the sum of £72 3s 9d due by the plaintiffs to them for commission. On that, it was said, first of all that the sum was not due at all, and that it had not yet fallen due, and was not due till third parties, the customers, had paid the Dutch company, and, secondly, that, as regards one part of the claim relating to the North Borneo Estatesnamely, a claim for £34 7s 6dthe commission should have been on a 5 per cent basis, and not a 10 per cent basis. On the general defence to the counterclaimnamely, that the commission was not duethe plaintiffs failed. As to the amount of the commission, it turned out in the result that the sum actually held to be owing was not £72 3s 9d. It was £55, and the order which was drawn up, dated 15 November 1939, was as follows:

It is this day adjudged that the plaintiff in this action do recover against the defendant the sum of £72 3s. 9d. for debt. …

Then follows the matter of costs, which has produced this discussion, amounting to £74 16s 9d, a sum larger than the claim which the defendants in their defence had fully admitted, and on which there was really no litigation at all. Then it is further adjudged that the defendants do recover on their counterclaim against the plaintiffs the sum of £55 for debt and £39 14s 2d for costs. Then it is ordered:

That the defendant do pay to the registrar of this court the sum of £62 6s 4d being the balance in favour of plaintiff after deducting the amount adjudged to the defendant as aforesaid.

Upon the amount being so taxed on that principle, there was an appeal to the judge, on the ground that this case was not in the class of cases where there were in issue a claim and a counterclaim, and where there had arisen the question whether, the claim and counterclaim being either, as the case might be, dismissed or allowed, the counterclaim should bear only the amount by which the costs of the proceedings had been increased by it, or whether it was a proper case for apportionment, but was one where there was no issue at all to be litigated in the county court, owing to the complete admission of the defendants on the claim, and, therefore,

Page 590 of [1940] 1 All ER 587

no costs attributable to that matter were to be divided or apportioned as between the claim and the counterclaim at all, and that difficult questionsraised in cases such as Saner v Bilton, on the one hand, and Christie v Platt, on the other (discussed in Wilson v Walters)of apportionment, division or bearing of extra costs caused by a counterclaim did not arise, because this was in substance (and the court should look at the substance) a claim by the defendants only for the recovery of their commission when the matter reached the county court. That kind of argument apparently did not find favour with the county court judge, who upheld the decision of the registrar. In my view, however, the argument is a sound one. As Atkin LJ has said in Christie v Platt, we have to look at the substance of the matter, and we have not, as Lord Blanesburgh pointed out in Medway Oil & Storage Co v Continental Contractors, to be enslaved by pleadings. Whether this claim of the defendants to recover commissionon which they succeeded, albeit they claimed for £72 and recovered £55is to be regarded as a set-off or a counterclaim seems to me entirely irrelevant to anything which has here to be considered. That may well be important in questions of entering judgment and the like, but it is not relevant to the substance of the matter we have to consider herenamely, whether the defendants are entitled to the costs which they had to incur in the county court by reason of the plaintiffs resisting their claim for commission, having regard to the fact that the plaintiffs had brought an action in the High Court for a certain amount, which had been admitted in their favour by the defendants before the whole action really started in the county court, so that it was unnecessary that the plaintiffs should incur any further costs on it. In those circumstances, I think that the proper direction on which the registrar should have acted was this. He should have taxed the plaintiffs costs on the principle that, after the defence was delivered in the county court, their claim was admitted, and they were not entitled to incur any costs relating to their claim except the costs of setting down and of obtaining leave to proceed, and that the costs of the defendants should be taxed upon the principle that they were successful on the only matter litigated in the county court, and that this order should not affect any costs given to either party in any event. That is the principle on which the taxation ought to proceed, and, as it is the principle which the appellants here have succeeded in establishing, they are entitled to succeed in this appeal, and the appeal should be allowed.

LUXMOORE LJ. I agree.

GODDARD LJ. I agree.

Appeal allowed with costs in both courts.

Solicitors: Theodore Bell Cotton & Curtis (for the appellants); J N Nabarro & Sons (for the respondents).

Derek H Kitchin Esq   Barrister.


Perry v South Metropolitan Gas Co

[1940] 1 All ER 591


Categories:        ADMINISTRATION OF JUSTICE; Courts: INDUSTRY        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        23 FEBRUARY 1940        


Emergency Legislation Gas company cutting off supply Realisation of security Whether leave of court necessary South Metropolitan Gas, Light and Coke Company Act 1842 (c lxxix), ss 159, 161 Courts (Emergency Powers) Act 1939 (c 67), s 1(2)(a)(iv).

Gas Recovery of charges Cutting off supply Gas charges prepaid by slot meter Only outstanding charges for rent of apparatus Right of company to cut off supply South Metropolitan Gas, Light and Coke Company Act 1842 (c lxxix), ss 159, 161.

The occupier of business premises was supplied by the defendants with gas through a slot meter. She also rented certain pans, stoves and other utensils from them, and was in arrears with her payments of rent in respect of these utensils to the amount of £62 15s 5d. The defendants cut off the supply of gas to her, and it was contended that, as all the charges for the supply of gas had been paid and the only outstanding charges were those in respect of the hire of the utensils, the defendants had exceeded their statutory power in cutting off the supply of gas. It was also contended that the cutting off of the supply was a realisation of a security within the meaning of the Courts (Emergency) Act 1939, s 1:

Held (i) the defendants had acted within their statutory powers in cutting off the supply of gas.

(ii) the cutting off of the supply of gas was not a realisation of a security within the meaning of the Courts (Emergency Powers) Act 1939, s 1.

Notes

The Courts (Emergency Powers) Act 1939, is described in its preamble as conferring on the court certain powers in relation to remedies in respect of the non-payment of money. Although the Act deals specifically with nearly every form of remedy for recovering money, it has not made any reference to the statutory powers of public utility companies, which almost invariably include a power to determine the supply.

As to Remedies of Gas Companies, see Halsbury (Hailsham Edn), Vol 15, p 593, para 1028; and for Cases, see Digest, Vol 25, pp 476, 477, Nos 3646.

Motion

Motion for an injunction to restrain the defendants, their agents or servants from stopping the supply of gas, or causing or permitting the supply of gas to be stopped, to the plaintiffs premises. The facts are fully set out in the judgment.

Harry Lester for the plaintiff.

Roger W Turnbull for the defendants.

Lester: The defendants have no right to cut off the supply of gas except in cases where gas itself is supplied on credit. In this case, gas was supplied through a prepaid slot meter. The plaintiffs only debt was in respect of hire-purchase instalments for gas fittings for her business. The object of the South Metropolitan Gas Company Act 1842, s 161, was to give the company a remedy by way of self-help for the purpose of preventing a gas consumer from increasing his indebtedness to the company. In any event, the exercise of such a remedy by the company is contrary to the Courts (Emergency Powers) Act 1939,

Page 592 of [1940] 1 All ER 591

s 1(2)(a)(iv). The preamble describes it as an Act to confer on courts certain powers in relation to remedies in respect of the non-payment of money. Clearly, the cutting off of the gas supply is a remedy exercised by the company because of the non-payment of money. The right to cut off the gas supply is a security given to the company to ensure payment of debts owing to them, and the exercise of this right may fairly be described as the realisation of a security by the company.

Turnbull: The money owed by the plaintiff under the hire purchase clearly comes within s 161 of the Act of 1842, and is, therefore, recoverable. Being a debt recoverable at law, it cannot be described as the realisation of a security by the company.

Harry Lester for the plaintiff.

Roger W Turnbull for the defendants.

23 February 1940. The following judgment was delivered.

MORTON J. In this case, the plaintiff, who is proprietress of a fried-fish-and-chips business at Herne Hill, asks for an injunction to restrain the defendants, their agents or servants, from stopping, or causing or permitting to be stopped, the supply of gas to her premises.

The plaintiffs affidavit states that in 1937 she hired from the defendants for the purposes of her business, at a monthly rental of £2 18s 5d, certain pans, stoves and so on. She says that, owing to the difficulty of getting fish, and because of the war, she has fallen into arrears with the payment of instalments, and now owes the defendants a total of £62 15s 5d on the account. The gas used in the plaintiffs premises is supplied by the defendants, and is obtained through a slot meter. It is said by the plaintiffand it is not disputed, as I understandthat there is not, and there never has been, owing to the defendants any sum whatever in respect of gas supplied to the premises. Again, it is stated by the plaintiff, and not disputed, that on 16 February the defendants cut off the supply of gas, that, owing to the cutting off of this gas supply, she is entirely without means of livelihood, and that all the fittings of her premises are useless.

Whatever sympathy the court may feel with the plaintiff in the unfortunate circumstances in which she finds herself, it is, of course, the duty of the defendant company to endeavour to recover the moneys owing, and they are at liberty to exercise their statutory powers, so long as they do not exceed them. It is my duty to consider whether or not the plaintiff has made out a prima facie case that the defendants are not entitled to do that which they have done. The evidence for the defendants shows that on 5 October 1938, they obtained judgment against the plaintiff for the sum of £55 1s, which included costs, and that the arrears due from the plaintiff to them now amount to £68 16s 9d.

Counsel for the plaintiff raises two points in support of the motion. First of all, he says that the defendants have no power under the South Metropolitan Gas, Light and Coke Company Act 1842, or otherwise, to

Page 593 of [1940] 1 All ER 591

do that which they have done. S 159 of that Act provides as follows:

The said company may let to hire any meter for ascertaining the quantity of gas supplied and any fittings for consuming gas at such rent or sum as shall be agreed upon between the parties and such rent or sum shall be recoverable in the same manner as other rents due to the company, and the said meter and fittings shall not be liable to any landlords distress for rent of the premises.

S 161 provides as follows:

If any person supplied with gas by the company shall neglect to pay any rate, rent, or sum of money due to them at any of the times appointed for payment thereof, it shall be lawful for the company or their lessee to stop the supply of gas to such person by cutting off the service pipe to the premises of such person, or by such means as the company shall think fit …

It is submitted by counsel for the plaintiff that the words “rate, rent or sum of money” in s 161 do not apply to rent which is in arrears for the hire of fittings, and apply only to the charge for the use of gas. He says that, as there has been no default in payment for gas, s 161 does not come into operation. I cannot accede to that contention. It seems to me quite impossible to put such a limitation as that upon the wording of s 161. It is a fact that the defendant company have let to the plaintiff fittings for consuming gas, and it is a fact that rent is in arrear in respect of these fittings. That rent seems to me to come clearly within the provisions of s 161. The second point raised by counsel for the plaintiff is that the Courts (Emergency Powers) Act 1939, prevents the defendants from cutting off the supply of gas without the leave of the court. He refers to the fact that this Act is described as:

An Act to confer on courts certain powers in relation to remedies in respect of the non-payment of money and the non-performance of obligations (including powers in relation to bankruptcy and winding up proceedings), and to make provision for purposes connected with the matters aforesaid.

He also refers to s 1(2)(a)(iv), and suggests that the cutting off of this gas is the realisation of a security by the defendant company. I cannot accede to that contention. It is an ingenious suggestion, but the short answer to it is, in my view, that by cutting off the supply of gas the company cannot be said to be realising a security at all. They are taking a step which was open to them under the Act to which I have referred, and the description of that as “realising a security” would be wholly inappropriate. Counsel for the plaintiff also says that, if it is not within the letter of the Act, it is within the spirit of the Act. However, I can only give effect to such provisions as I find in the Act. I may add that, even if I had thought that this case came within s 1(2) of the Act, the plaintiff might have had some difficultyI say no morein satisfying the court that she was unable to pay the rent by reason of circumstances directly or indirectly attributable to the present war, having regard to the fact, so far as appears from

Page 594 of [1940] 1 All ER 591

the evidence, that she had fallen into arrears before the war began, although it may well be that the war has increased her difficulties. However, it is not necessary for me to express any opinion as to that. In my view, the plaintiff has not made out even a prima facie case for the relief which she claims, and this motion must be dismissed.

Motion dismissed. Costs to be costs in action.

Solicitors: Randolph & Dean (for the plaintiff); Hicklin Washington & Pasmore (for the defendants).

Charles Newton Esq   Barrister.


Friis v Paramount Bagwash Co Ltd

[1940] 1 All ER 595


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        6, 12 FEBRUARY 1940        


County Courts Costs Remitted action Action dismissed with costs Defendants right to High Court costs down to transfer and county court costs thereafter.

In a remitted action by an accountant for the balance of an account for professional services and sums paid on behalf of the defendant company, the county court judge on 11 October 1939, on the application of the plaintiff, granted an adjournment, on condition that £10 on account of costs thrown away should be paid into court within 14 days, and, if the plaintiff failed to pay those costs, the action should stand dismissed with costs. The plaintiff did not pay those costs. On 17 November 1939, the defendant applied for an order dealing with the outstanding costs, and an order was made dealing generally with the costs of the action. It was contended that the order of 11 October could not be a final order, because the judge had to exercise his discretion as to how far the costs should be on the High Court scale and how far on the county court scale:

Held (i) the order of 11 October was final.

(ii) a successful defendant in a remitted action who is awarded costs without more is entitled to tax his costs down to the date of transfer on the High Court scale, and thereafter on the appropriate county court scale.

Notes

The plaintiff, and not the defendant, has the choice whether an action shall be brought in the High Court or in the county court. For this reason, a successful defendant in a remitted action cannot be deprived of his costs on the High Court scale down to the date of transfer otherwise than by the exercise of that general discretion, vested in the judge, of depriving a successful party of costs.

As to Costs of Remitted Action, see Halsbury (Hailsham Edn), Vol 8, pp 357360, paras 758762; and for Cases, see Digest, Vol 13, pp 490492, Nos 404420.

Cases referred to

The City of Manchester (1880) 5 PD 221; 30 Digest 132, 101, 49 LJP 81, 42 LT 521.

Marsden v Lancashire & Yorkshire Ry Co (1881) 7 QBD 641; 30 Digest 132, 102, 50 LJQB 318, 44 LT 239.

Forbes-Smith v Forbes-Smith & Chadwick [1901] P 258; 30 Digest 134, 127, 70 LJP 61, 84 LT 789.

Badcock v Hunt (1889) 38 WR 255; 13 Digest 520, 704.

Goadby v Orridge [1938] 1 KB 641, [1937] 4 All ER 610; Digest Supp, 107 LJCh 313, 158 LT 51.

Fritz v Hobson (1880) 14 ChD 542; 28 Digest 412, 370, 49 LJCh 321, 42 LT 225.

Appeal

Appeal by the plaintiff from an order made by His Honour Judge Bensley Wells at Woolwich County Court on 17 November 1939. The facts are fully set out in the judgment of the court delivered by Slesser LJ.

E M Hoy for the appellant.

H J Astell Burt for the respondents.

Hoy: Having made an order on a certain date, the judge had no

Page 596 of [1940] 1 All ER 595

power to vary it by an order on a later date. The first order, being signed and completed, was final, and the second was irregular, inasmuch as it purported to vary the first in any way. On the expiration of the 14 days from 11 October, the action came to an end. The judge was functus officio, and had no jurisdiction to make the second order.

Astell Burt: After judgment has been passed and entered, the court has jurisdiction to make a supplemental order as to costs if, and so far as, the costs have not been properly dealt with. [Counsel referred to The City of Manchester, Marsden v Lancashire & Yorkshire Ry Co and Forbes-Smith v Forbes-Smith & Chadwick.] In a remitted action, the county court judge, under the County Courts Act 1934, s 73, must determine the question of High Court costs before the date of remission, and thereafter the scale or column of the costs in the county court. As the county court judge had never purported to exercise his discretion under s 73 when making the order of 11 October, it was open to the defendants to make the subsequent application: Badcock v Hunt. [Counsel referred to Goadby v Orridge and Fritz v Hobson.]

Hoy in reply.

E M Hoy for the appellant.

H J Astell Burt for the respondents.

12 February 1940. The following judgment was delivered.

SLESSER LJ (delivering the judgment of the court). The plaintiff sued the defendant company for some £40 alleged to be due for professional services as secretarial and accountancy charges on a balance of account. The action was started by specially indorsed writ in the High Court, dated 15 November 1938. On 28 November 1938, an order was made that the defendant company be at liberty to defend the action and that the matter be remitted to the Greenwich County Court. In the county court, the plaint was issued on 9 December 1938, and a defence and counterclaim, the latter being for £28 18s 3d said to be money recovered by the plaintiff from the inland revenue authorities and converted by the plaintiff to his own use, instead of being accounted to the defendant company, and also for the return of certain books of the defendant company, and damages for their detention.

The case came before the county court judge on 5 July 1939, and, the plaintiff having given his evidence in chief, the cross-examination was adjourned until 11 October. On that date, the plaintiff being represented by another counsel, who was not then ready to proceed with the argument, by agreement the following order was made:

It is ordered that the hearing of this action be adjourned to a date to suit the convenience of both counsel. Costs thrown away to be the defendants in any event. £10 to be paid into court by the plaintiff, Eric Friis, within 14 days as security for the costs of the adjournment. If the costs of the adjournment are in excess of £10, the plaintiff, Eric Friis, to make up the difference. If less, the difference to be allowed to the plaintiff. If the said sum is not paid into court within 14 days, then action to be dismissed with costs and counterclaim dismissed without costs. The books and articles referred to in the counterclaim herein to be returned by the plaintiff to the defendants forthwith. Such return to be without prejudice to the plaintiffs rights.

It was explained to this court that the effect of the order was meant

Page 597 of [1940] 1 All ER 595

to be that, if the sum of £10 was not paid into court within 14 days, the action was to be dismissed and the counterclaim dismissed without costs, and that, if the security so paid in proved to be too much or too little to cover the costs of the adjournment, the matter should be adjusted in the final taxation.

The security was not paid, and the case therefore fell to be dismissed under the order. On 17 November 1939, however, the defendants solicitors applied to the court asking for an order to deal with outstanding costs. The order of 11 October, in our view, for reasons which appear hereafter, was a final determination of all matters, and left nothing to be reserved or worked out. Nevertheless, the court acceding, on 17 November 1939, a further order was made as follows:

Upon application being made at a court holden this day and upon hearing learned counsel for the plaintiff and the defendants it is ordered that (1) the costs of this action be allowed to the defendants on the High Court scale up to the date of remission and on Scale B thereafter, (2) the whole of the costs of the oral examination of the witness Leonard Ambrose senior taken on behalf of the defendant company be allowed, (3) the costs of application to have the case struck out because of non-compliance with the registrars order of June 26 be allowed. (4) the costs of settling the defence by learned counsel be allowed, (5) the costs of this application to be the defendants, and to include a certificate for counsel, (6) costs not specifically dealt with to follow the event and to be costs in cause, (7) liberty to apply, (8) leave to appeal refused.

It is from this order that the plaintiff now appeals.

His case, which appears to us to be well-founded, is that the order of 11 October 1939, constituted a final judgment between the parties, in the event which happenednamely, that the security there mentioned was not paid within 14 days, and that, it there being provided that in that event the action should be dismissed with costs and the counterclaim dismissed, there remained nothing to be done but for the registrar to tax the costs in accordance with the provisions of CCR Ord 47, and that the judge, having given final judgment, had no jurisdiction to make the further order which he purported to make on 17 November 1939.

It is clear that the matters dealt with in cll 2, 3, 4 and 6 of the order made on 17 November are mere matters of taxation with which the judge had no concern unless they came before him on application to review. Clauses 5, 7 and 8 are merely incidental to an order which, in our opinion, the judge had no jurisdiction to make. This leaves only cl 1, with which the argument of counsel for the respondents was mainly concerned, but, in our opinion, the order of 11 October had already dealt fully and finally with this matter. Under that order, the registrar was bound to tax the costs in exactly the way which cl 1 of the order directed. Our reasons for so holding can be stated quite shortly. Under the County Courts Act 1934, s 47, if a plaintiff brings an action in the High Court which could have been brought in the county court, he gets either no costs or only county court costs, according to the amount which he recovers, unless the judge makes a special order giving High Court costs. That section does not deal with the costs of a successful

Page 598 of [1940] 1 All ER 595

defendant, and there is no reason why it should. If the action fails, and the defendant is awarded costs, it follows that he gets High Court costs, and no special order is required for the taxation to be on that scale. He has been brought to the High Court, and so gets the costs applicable to the court in which he is sued. The object of the section is to discourage plaintiffs from proceeding in the High Court when they can sue in the county court. It is not designed to penalise defendants who have not the choice of forum. If, then, an action is remitted to the county court, exactly the same considerations apply.

Under section 73, the county court is given a general power over the costs of remitted actions, so that it can deal not only with costs incurred after, but also with those incurred before, remission, in so far as they have not already been dealt with in the order for transfer. It is provided, however, that the costs in the High Court are to be subject to the provisions of s 47, which, as we have already said, does not deal with the defendants costs at all. The county court judge can, of course, for good reasons, deprive a successful defendant of costs, and, were he to do so, that would apply to all costs, whether incurred before or after transfer. If he awards him costs, however, it must follow, in our opinion, that the defendant is entitled to all the costs to which he has been putsubject, of course, to taxationby reason of the plaintiffs bringing an action against him which has failed. The defendant, therefore, who is given judgment with costs in a remitted action is, without more, entitled to tax on the High Court scale down to the transfer, and on the appropriate scale thereafter.

It is unnecessary to decide whether or not, under the earlier words of s 73, the county court judge can say that the defendant is only to have his costs before transfer on the county court scale. At present, however, we have not been able to visualise any case in which it would be right to make such an order, and we have great doubt if there is any power to do so.

If a plaintiff gets only county court costs, a notional bill has to be taxed. For instance, he gets the costs of a plaint, and not those of a writ. Considering, however, that, except in special cases, such as Admiralty actions and workmens compensation arbitrations, there is no such thing as entering an appearance in the county court, no notional bill could be prepared on behalf of a defendant. Thus, if a defendant in a remitted action were only given costs of the High Court proceedings on the county court scale, he would, as it seems to us, be unable to recover the very first expense which he must incur in order to defend himself against what is, ex hypothesi, an unfounded claim.

In our opinion, it is clear that an award of costs, without more, to a successful defendant in a remitted action gives him High Court costs down to the order of transfer, and county court costs thereafter. The order of 11 October was, therefore, in all respects a final order. The application to the court on 17 November was not only unnecessary, but was

Page 599 of [1940] 1 All ER 595

also one on which the judge had no jurisdiction to make any order, and it ought to have been dismissed with costs to the plaintiff. The judgment of the court, therefore, is that this appeal succeeds with costs.

Appeal allowed with costs.

Solicitors: Morris & Son (for the appellant); Wedlake Letts & Birds (for the respondents).

Derek H Kitchin Esq   Barrister.

Titmus and Titmus v Rose and Watts

[1940] 1 All ER 599


Categories:        EMPLOYMENT; Contract of service        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        10 NOVEMBER 1939        


Master and Servant Apprenticeship Termination Dissolution of partnership by retirement of one partner Notice by retiring partner disclaiming any future liability Apprentice continuing to work for remaining partner and receiving payment Breach of contract of apprenticeship.

The infant plaintiff was apprenticed in 1935 to the two defendants who were trading in partnership. The covenants by the partners in the apprenticeship deed were joint covenants. On 18 October 1938, the first defendant gave notice to the boys father, to his other partners, and to all the apprentices in these terms: “I hereby as one of the partners of or in the firm or business known as the Atlas Engraving Co give you notice that as from this date I have terminated my partnership therein and will not henceforth accept any liability or be answerable in any way for engagements of the said firm, business or company entered into after this date.” After receipt of that notice, the boy continued to serve the firm, and for a period he was paid. After several months his pay was stopped, but he continued to serve, until finally, in May 1939, he was told that he need not return on the following Monday, as a new company was being formed. On several occasions the boys father, the adult plaintiff, was invited to keep the boy with the firm, and he finally consented to a transfer of his sons indentures to a new company to be formed, though he did not consent to an invitation that all wages owing should be considered in the change over and that the first defendant should no longer be responsible or have any connection with the new concern. The business became insolvent, and a receiving order was made, and the plaintiffs then brought an action for damages for breach of the indenture:

Held (i) the mere fact that the boy continued at his work after receiving the first defendants notice, being sometimes paid and sometimes not paid, did not establish an agreement by conduct by him, or by his father, or by both, that he or they were content to regard the first defendant as having ceased to have any obligations.

(ii) the defendants, by dissolving the partnership, had rendered themselves unable to carry out their covenant towards the infant plaintiff, and there was a breach of the contract contained in the deed of apprenticeship. The plaintiffs were, therefore, entitled to succeed.

Notes

It is pointed out in the judgment herein that the difficulty which has here arisen has generally been avoided by making only one partner a party to the apprenticeship deed. If all partners are made parties to the deed and jointly enter into the covenants contained therein, then a dissolution of the partnership is a breach of the covenants, since the retiring partner has put himself in a position in which he will be unable to perform his duties under the deed.

As to Effect of Dissolution of Partnership on Apprenticeship Deeds, see Halsbury (Hailsham Edn), Vol 22, pp 158, 159, para 266; and for Cases, see Digest, Vol 34, pp 517, 518, Nos 43394344.

Page 600 of [1940] 1 All ER 599

Cases referred to

Lloyd v Blackburn (1842) 9 M & W 363; 34 Digest 517, 4340, 11 LJEx 210.

Couchman v Sillar (1870) 22 LT 480; 34 Digest 517, 4342.

Brook v Dawson (1869) 20 LT 611; 34 Digest 517, 4341.

Brace v Calder [1895] 2 QB 253; 34 Digest 104, 776, 64 LJQB 582, 72 LT 829.

Action

Action for damages for breach of the contract contained in the infant plaintiffs indenture of apprenticeship. The facts are fully set out in the judgment.

N K Lindsay for the plaintiffs.

Maurice Share (for O Bertram, on war service) for the defendants.

10 November 1939. The following judgment was delivered.

WROTTESLEY J. In this case, the infant plaintiff became an apprentice in 1935 to Charles Watts and John Hamilton Rose, trading as the Atlas Engraving Co. The covenants, so far as those two persons are concerned, are joint covenants, and those two persons are described as the masters in the covenants. They covenant to do various things, and, amongst other things, of course, they covenant, as usual, to teach and instruct the infant plaintiff, and to pay him certain rates of wages during the period of apprenticeship, which was to be five years. At the end of the apprenticeship, he was entitled to have this indenture handed back to him, with a certificate that he had served his master properly indorsed upon it. Before that time came, two things happened. On 18 October 1938, the first defendant gave notice to the boys father, to his other partners and to all the apprentices in these terms:

I hereby as one of the partners of or in the firm or business known as the Atlas Engraving Co. give you notice that as from this date I have terminated my partnership therein and will not henceforth accept any liability or be answerable in any way for engagements of the said firm business or company entered into after this date.

That notice was signed by the first defendant, and underneath it there appear these words:

Communications to Mr. J. Bertram, Solicitor, 25, Old Buildings, Lincolns Inn.

The only part of that notice which is or can be relied upon in this case is, of course, the first part, which says:

I hereby as one of the partners of or in the firm or business known as the Atlas Engraving Co. give you notice that as from this date I have terminated my partnership therein. …

After that notice, of which the boys father and the boy took no particular notice, the boy went on serving the firm, and for a period of time he was paid. Then, after a few months, his pay was stopped, but still he went on serving. Finally, in May 1939, the boy was told not to come back on the following Monday, because a new company was being formed. It appears from the correspondence that more than once an invitation to keep the boy at work was extended to the boys

Page 601 of [1940] 1 All ER 599

father, and ultimately the father was asked to authorise the transfer of the sons indentures to a new company which was going to be formed. There is no reason to doubt that, beyond the giving of that notice, dated 18 October 1938, which I have already read, the first defendant in fact ceased to have anything to do with the business at all. In a letter which was signed by Evelyn Dowling for the Atlas Engraving Co, in which the firm invited the father to transfer his sons indentures, this is said:

It is understood that all wages owing will be considered in the change over and that John Arnold Hamilton Rose, my late partner, will no longer be responsible or have any connection with the new concern.

That invitation was refused, on the advice of solicitors, and, I should imagine, quite rightly. I understand that the business has been shut down, and is now insolvent, and a receiving order has been made. The receiving order, according to the evidence in this case, states that the partners are Miss Dowling and Mr Rose. As the result of this, the infant plaintiff in this action, claims that his indenture has been broken by the first defendant. The father of the boy makes a similar allegation, and, therefore, they bring their action for damages.

First of all, there arises the question as to whether or not, in behaving as he did, and thereafter taking no part in the business, the first defendant discharged himself from his liability under the deed which he had executed in December 1935. What is relied upon by counsel for the first defendant is that, by going on and attending at the place of business after the receipt of that notice from the first defendant terminating his connection with the firm, the infant plaintiff, or the infant plaintiffs father, or both, really by conduct consented to the agreement being discharged, and it is said, and authority has been cited to show it, that one can discharge a deed without having another deed. It is said that one can discharge a deed by a parol agreement. There is no doubt that by the appropriate methods one can either vary or rescind a previous contract which was under seal. The courts of law follow the principles laid down in equity. It is no longer necessary, in order to bring that about, for either of the parties to go to the court of equity and get an injunction against a person trying to enforce an agreement under seal on the ground that it has been varied or rescinded by another agreement not under seal. The courts of law now apply the same principles. I am perfectly satisfied that a parol agreement could have discharged this contract. I am also satisfied that the same thing can be done by conduct. In other words, it may be done by an implied agreementsomething which was not expressed in writing, but which was implied by the conduct of the parties. Therefore, conduct can, and might, I think, be used to support a claim that an agreement under seal has been discharged by some subsequent agreement. I think that there is no doubt that the conduct must be such that that is the only reasonable inference to draw from the conduct. Of course, if one has that position, then

Page 602 of [1940] 1 All ER 599

I have no doubt that such conduct is the same as an agreement in writing, or a satisfactorily proved oral agreement. I think that it is sufficient to say that in this case what took place was very far from being anything of the kind, and the mere fact that this boy went on attending this work after receiving this notice from the first defendant, being paid sometimes and not being paid at other times, is very far from what is necessary to establish an agreement by him or by his father, or by both, that they were content that the first defendant was now to be regarded as having ceased to have any obligations.

Some time prior to the first defendants leaving the firm, it came to the knowledge of the boy, and, I have no doubt to the knowledge of his father, that the money which was being put into this business was not being found by the first defendant. Can it be said that there was a breach here, inasmuch as all that took place was that the first defendant determined the agreement between himself and his partner or partners? This question has been discussed from time to time in the courts of law in reference to apprenticeships. In that connection, cases were cited to me under that head, such as Lloyd v Blackburn, Couchman v Sillar and Brook v Dawson. They are all cases where there was discussed the question as to what happened when an apprentice was bound, not to one master, but to two masters jointly.

The difficulties created by those decisions were generally avoided by binding people, not to a partnership, but to one of the partners. That is pointed out by Mellor J in Brook v Dawson. From one point of view, it may seem to be rather extraordinary that, if partners took an apprentice, they thereby warranted that they would not dissolve the partnership until the apprenticeship had been completed, but certainly not one of those cases is an authority to the contrary, and Couchman v Sillar certainly points out that, if partners choose to take an apprentice jointly, they must not put themselves in the wrong by preventing themselves from carrying out that indenture by dissolving the partnership. However that may be, it seems to me that this case is really covered by Brace v Calder, a case, not of apprenticeship, but of master and servant. Lopes and Rigby LJJ, the majority of the court in that case, which they described as a case of some difficulty, came to the conclusion that, if the partnership of four members agreed to employ a servant for two years, and, before the two years had expired, dissolved partnership, they were guilty either of a wrongful dismissal of that servant or at least of a failure to carry out their contract to employ that servant for two years. The court pointed out that, if in fact the surviving partners continued to employ the servant, there was nothing wrong. I observe that in that case the court took a certain view, and the plaintiff was awarded no costs, either in the Court of Appeal or in the court below. I think that without doubt technically the position is that by dissolving partnership these two defendants here rendered themselves unable to carry out their covenant

Page 603 of [1940] 1 All ER 599

towards the infant plaintiff, and, that being so, the plaintiffs are entitled to succeed.

I must now go into the question of damages. First of all, with regard to wages, the infant plaintiff is entitled to the agreed rate of wages which were not paid, and that is the sum of £30 11s. Now comes the further point that the plaintiff has received considerably less in wages than he would have received had he received the wages under his indentures. Further, it is said that the loss at the same rate, comparing the partnership rate of wages with what he would have received had the indentures continued in force, and had effect been given to them, was £30 11s, and that is the maximum, I think, for which he can possibly ask in regard to this matter. I do not know whether or not it is suggested that he has not had proper tuition. However, I do not think that there is anything in that.

The other side of the question is this. In fact, I am, of course, entitled to take judicial notice of the fact that a war has supervened, and would have supervened whatever happened to the indentures. That is a matter which I have to consider. It might have a very remarkable effect on the question whether or not it was desirable for any person to continue in a trade of this kind. On the other hand, there is also the fact that the boy has got into a trade which is probably not a bad trade for a boy of his age to be in at a moment like this. Taking everything into consideration, I think that it will be sufficient if, in addition to the loss of wages down to May, which I have given as £30 11s, I award this boy, in respect of these other heads, the sum of £70. As regards the second plaintiff, I think that he is entitled to some nominal damages, and I award him the sum of £5.

Judgment for the first plaintiff for £100 11s and for the second plaintiff for £5 with costs.

Solicitors: Alfred Slater & Co (for the plaintiffs); Julius Bertram (for the defendants).

W J Alderman Esq   Barrister.

Broome and Another v Pardess Co-Operative Society of Orange Growers (Est 1900) Ltd

[1940] 1 All ER 603


Categories:        CONTRACT        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ, CHARLES J        

Hearing Date(s):        20, 21, 22 FEBRUARY 1940        


Contract Implied terms Business efficacy Brokers contract Sale of fruit by agent Advance to grower by agent Shipment unsound on arrival and unsaleable in market Implied term that fruit on arrival to be of merchantable quality.

The plaintiffs, a firm of London fruit brokers, entered into a contract with the defendants, who were producers of oranges in Palestine, to sell the defendants oranges in London on the terms that in any event they should advance to the defendants 7s 6d per case, and that on a sale their charges should be 6d plus 7½ per cent gross per case, all

Page 604 of [1940] 1 All ER 603

surplus on sale above 7s 6d per case to be remitted to the defendants, subject to the right of the plaintiffs to retain their commission and expenses. During the growing season covered by the contract the weather had been abnormally wet, with the result that the oranges, though apparently shipped in good condition, were, on arrival in London, to a large extent unsaleable, and such as were saleable required repacking. The plaintiffs were consequently unable to sell the oranges in the market, and being bound to pay the defendants the guaranteed advance, suffered a considerable loss. They thereupon brought this action for damages, and contended that there was an implied term in the contract that the goods would be of merchantable quality, so that they could be sold in the ordinary course of business. The defendants contended that the contract was complete in itself, and that no term could be implied to give business efficacy to it:

Held (i) the court will not imply a term in a written contract unless such term is a necessary implication to give efficacy to the contract and it can be said that both parties, if asked at the time the contract was entered into, would have said that the term sought to be implied was a term of the contract.

(ii) the plaintiffs had failed to establish that there was any such implied term in the present case. In fact, the contract expressly provided for this contingency.

Judgment of Hilbery J ([1939] 3 All ER 978) reversed.

Notes

The contract here is not one of sale and purchase and is therefore not within the Sale of Goods Act 1893. The contract was one between a grower and shipper in Palestine and a broker on the London market, and the question is not whether all the conditions and warranties of the Sale of Goods Act 1893, should be implied into such a contract, but simply whether, in this particular contract, there should be implied a term that the goods should reach London in a merchantable state.

As to Brokers Contracts, see Halsbury (Hailsham Edn), Vol 29, pp 3842, paras 4248; and for Cases, see Digest, Vol 12, pp 610612, Nos 50445058.

Cases referred to

Atkinson v Ritchie (1809) 10 East 530; 41 Digest 464, 2955.

Paradine v Jane (1647) Aleyn 26; 12 Digest 371, 3088.

Taylor v Caldwell (1863) 3 B & S 826; 12 Digest 371, 3093, 32 LJQB 164, 8 LT 356.

Hamlyn & Co v Wood & Co [1891] 2 QB 488; 12 Digest 610, 5042, 60 LJQB 734, 65 LT 286.

Lazarus v Cairn Line of Steamships Ltd (1912) 106 LT 378; 12 Digest 611, 5051.

Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592; 12 Digest 611, 5052, 87 LJKB 724, 118 LT 479.

Beer v Walker (1877) 46 LJQB 677; 39 Digest 442, 714, 37 LT 278.

Appeal

Appeal by the defendants from a judgment of Hilbery J, dated 21 July 1939, and reported [1939] 3 All ER 978. The facts are fully set out in the judgment of MacKinnon LJ.

J W Morris KC and H C Leon for the appellants.

A T Miller KC and Neville Faulks for the respondents.

Morris KC: The implication for which the respondents contend is not one which can arise in law. It is not an implication which the parties can have intended. The question of repacking was dealt with in the contract. The respondents, however, want to say that it is an implied term that there should be a limit to the amount of repacking.

Page 605 of [1940] 1 All ER 603

The contract expressly provides for repacking on the basis that there will be some wastage. It is not enough for the respondents to say that the term they think should be read into the contract is a reasonable one. One cannot tell if an orange is waterlogged, and so will not remain in good condition for the usual length of time. [Counsel was stopped by the court.]

Miller KC: This is necessarily a case in which the contract must be interpreted by reading into it the meaning of the parties. There are four ways in which business is done at Covent Garden. One is a method whereby the shipper arranges with the broker that the broker shall buy the goods outright. In the absence of any agreement, the Sale of Goods Act 1893, s 14(2), would apply to the contract, and it would be an implied term that the goods should be of merchantable quality. By the second method, the goods are consigned to a broker to be sold on the shippers behalf, and the shipper has to take the risk of the goods not being merchantable on their arrival in London. Under the third method, the shipper receives an advance from the broker. It is called an accommodation advance. The shipper, however, takes the risk of the market, and also of the condition of the goods on their arrival in London. In each of these three cases, it is the grower, or shipper, who takes the risk. The fourth method is the one which has been employed in the present case. The broker has made the shipper a guaranteed advance. The shipper is entitled to retain this advance, provided he fulfils all his obligations, and he is under an obligation to send goods of merchantable quality. The broker has entered into a bargain by which he takes the risk of the market, but he has done so upon the assumption that he will receive merchantable goods. Both parties were contemplating the provision of merchantable goods. Something must be implied as regards freight and duty, and something must be implied as to the shippers obligation to send saleable goods. The clause which provides for repacking applies to normal consignments only. Unless the market went against the broker, the charge would be borne by the shipper. The parties provided for normal wastage only, and not for an abnormal and unusual wastage, due to a breach of the shippers obligation to send merchantable goods. [Counsel referred to Beer v Walker.]

J W Morris KC and H C Leon for the appellants.

A T Miller KC and Neville Faulks for the respondents.

22 February 1940. The following judgments were delivered.

MACKINNON LJ. In this case, the plaintiffs sue the defendants for damages for breach of contract. The defendants are a co-operative society who collect from their members in Palestine oranges grown by those members, and put them on the market in England. The plaintiffs, originally a firm, but later a company, carry on business at Covent Garden as commission agents. The plaintiffs, as commission agents for the defendants goods, had had business relations with them for some years before the particular occasion of this dispute arose.

The oranges are packed in Palestine by the shippers, who are the

Page 606 of [1940] 1 All ER 603

defendants. The defendants had three grades or brandsnamely, (i) the Pardess brand, which was the best, (ii) the Ophir brand, which was the second quality, and (iii) the Tabor brand, which was the third quality. This particular case concerns oranges of the second quality, the Ophir brand.

By the Fruit Export Ordinance 1927, the government of Palestine established a system of inspection of citrus fruit by government officials in Palestine under which a percentageno doubt a sufficient percentage, in the judgment of the inspectorsis opened and examined in Palestine, and every shipment has attached to it, or accompanying it, a certificate issued by the Fruit Inspection Service of the government of Palestine, which certifies that:

The undernoted consignment [all the particulars of it being then given] has been inspected and passed as fit for export.

The plaintiffs, as I have said, arranged, as agents on behalf of the defendants, to market this fruit in Covent Garden. That can be done by persons in the position of the plaintiffs in one out of four different types of transactionsnamely, (i) sale and purchase, (ii) free consignment, (iii) what is called the accommodation advance system, and (iv) what is known as the guaranteed advance system. I need not trouble about the first two. We are only concerned here with the third and fourth systems.

In previous years, in the season 193334 and the season 193435, the plaintiffs had received oranges from the defendants under the accommodation advance system. Under that system, when goods are shipped, the shippers, the defendants, draw on the plaintiffs agents for a certain agreed amount per case, and are to that extent paid in advance for what will ultimately be realised in London. Under that arrangement, the plaintiffs are entitled to an agreed commission and a certain amount for expenses. They receive the goods in London, put them on the market at Covent Garden, and sell them at the best price they can realise. Having done so, they render an account to the defendants. They credit them with the full amount realised by the sales; they deduct the expenses they have paidthe freight and the agreed expensesand they deduct their agreed commission. If the resulting net figure is more than the amount advanced to the defendants by way of the accommodation advance, the plaintiffs will account to the defendants for that difference. If, on the other hand, the sales have not been at sufficiently good prices to realise the amount of the accommodation advance, plus the expenses and the plaintiffs commission, there will be, of course, a deficiency between the net realised prices and the amount which has already been put into the pockets of the defendants upon the accommodation advance. Under that system, it being only an accommodation advance, the defendants have to return to the plaintiffs the deficiency, whatever it is. That system of accommodation advance was one which had been employed between the plaintiffs and the defendants in the seasons 193334, 193435 and 193536. Obviously, under that system,

Page 607 of [1940] 1 All ER 603

the risk of the sales in London not being sufficient to satisfy the advance, the plaintiffs commission, the expenses, the freight, and that sort of thing, is upon the defendants. That is to say, the risk of any deficiency is upon the defendants.

In the season 193637, at the suggestion of the plaintiffs, the parties departed from that system, and adopted what I referred to just now as the fourth systemnamely, the guaranteed advance. The representative of the plaintiffs foresaw that, owing to political difficulties in Spain, the supply of oranges to the London market would be very short. He therefore expected a brisk demand for these Palestine oranges, and he thought that, as a matter of business bargaining, he was in a position to offer to the defendants more attractive terms than those which they had previously enjoyed under this accommodation advance system. He therefore proposed to them that in this year he should receive and market their fruit under the system of guaranteed advance. The essential difference between the accommodation advance and the guaranteed advance was that as an accommodation advance the plaintiffs advanced a certain amount per case to the defendants upon shipment. In this case, it was an amount of 7s 6d per case. There was the usual provision for expenses and commission payable to the plaintiffs. The plaintiffs would then market the goods, and, having done so, they would render an account to the defendants, as they had done in previous years. However, there would be this essential difference between the account rendered in this year and in previous years. If the total realisation, less commission and expenses, was less than the guaranteed advance, the plaintiffs would not be entitled to call upon the defendants to make good that deficiency. It was a guaranteed advance, and the plaintiffs agreed to take, and took, the risk of any failure upon their part, in selling the goods in London, to realise the full amount of their guaranteed advance. That was the system which, at the instance of the representative of the plaintiffs, the parties adopted in the season of 193637.

The arrangement was made by a letter addressed by the defendants to the plaintiffs, accepted in identical terms by the letter in reply by the plaintiffs, dated 10 October 1936. It is addressed by the defendants to the plaintiffs:

We take pleasure in confirming the conversation that our Mr. Salem had with you yesterday when it was agreed to supply you, during the season 193637, 40,000 cases of Ophir oranges at the following terms: quantity 40,000 cases of oranges Ophir brand, approximate basis of shipment being 30 per cent. November to December, and 70 per cent. January to March. Price: guaranteed advance of 7s. 6d. f.o.b. Palestine ports for the entire season. All surpluses over and above this price will be remitted by you to our head office in Tel-Aviv.

It did not mention, but it is obvious, that, if they realised more than 7s 6d per case, including their commission and expenses, any surplus over the guaranteed advance had to be accounted for by the plaintiffs to the defendants. That is what that passage I have just read refers to:

All surpluses over and above this price will be remitted by you to our head office in Tel-Aviv.

Page 608 of [1940] 1 All ER 603

However, there are omitted (as would have been included under the old system of accommodation advance) the words: “Any deficiency over and above this price will be remitted by us to you.” That omission was due to the essential difference between this guaranteed advance and the former system of accommodation advance. Then the third paragraph about specification is immaterial. It stipulates the sizes of the oranges, and the numbers to be packed in each case. Then the fourth paragraph is as follows:

Charges: 6d. and 7½ per cent. net per case.

That was a mistake. It is agreed by both sides that it was an error to put in the word “net.” Either it should have been omitted or the word should have been “gross.” Both sides agree that it should be “Charges: 6d. and 7½ per cent. gross per case.” Then:

These charges will also cover the repacking expenses as and when incurred by you. We trust that you will be able to obtain for us satisfactory prices and await your confirmation of the above arrangements.

The plaintiffs confirmed the arrangement. A very important passage in this contract is the sentence under the heading “Charges”:

These charges [the 6d. per case and 7½ per cent. gross on the proceeds] will also cover the repacking expenses, as and when incurred by you.

That was put in for this reason. Though the oranges are picked and packed, to the best of the ability of the shippers in Palestine, in good and perfect condition, it is well-known that, during the voyage from Palestine to England, a certain number of them go bad. The cases have to be examined on their arrival, either at the docks, or more commonly at Covent Garden, when they are opened and the bad oranges are taken out. A certain number of cases are re-arranged in order to fill up the spaces caused by taking out the bad oranges, so as to get the contents of the case into good condition again. That was an incident of this business. The parties knew it perfectly well, because the necessity for that sort of repacking had occurred in previous seasons to a greater or less extent. During the season 193435, the amount of that wastage by oranges going bad had been as much as a total of 11.96 per cent of the oranges sent. That wastage was in two categories. Some were so bad that they had to be what is called shot as useless, and some had to be sold, not as good oranges, but as wet and wasted. In the 193435 season the total quantity involved under both those heads was 11.96 per cent of the oranges dispatched. In the season 193536, the total amount was 2.9 per cent.

The parties having made that contract, the defendants began to make shipments in accordance with it. During the early part of the season, oranges arrived in a fairly good, normal condition, but unfortunately in January, very disastrously, an excessive amount of bad oranges were found on arrival of the shipments at the docks, or at Covent Garden. That apparently was due to some curious freak of nature in Palestine. There

Page 609 of [1940] 1 All ER 603

was nothing in the appearance of the oranges which would warn the shippers or the government inspectors that the oranges would not carry in the normal way in which these shipments had been carrying in the past. Owing to some excessive rainfall, and consequent drinking up of water out of the ground by the orange trees, it is said that the oranges got into a condition which is popularly known as waterlogged, and they had inherent in them to an excessive degree an unfortunate and disastrous tendency to go bad. During the latter part of this season, a very large amount of them went bad. When I say a very large amount, the total, which had been 11.96 per cent in the 193435 season, went up to as much as about 40 per cent during the season in question.

The plaintiffs did their best with the oranges. They sold those that were good at the best price they could get, but they had to sell a large quantity of the oranges as wet and wasted, and an unhappily large quantity had to be shot as useless. The result of this season was that the total amount realised on selling the oranges left a very considerable deficiency against the guaranteed advance of 7s 6d per case which they had made to the defendants. Clearly, on the express terms of the contract, the plaintiffs had no right to claim from the defendants that the defendants should make good that deficiency. They had agreed to the guaranteed advance. They had promised that any surpluses over that guaranteed advance would be remitted to the defendants. They had not, however, stipulated in their contract that any deficiency on the guaranteed advance should be paid back to them by the defendants.

The present claim is put forward by the plaintiffs, claiming that the defendants are liable to make good that deficiency. It is manifest, as I say, that, on the express terms of the contract entered into by them, there is no clause of the contract under which they can make any such claim. They therefore seek to assertand before the judge who tried the case they have succeeded in assertingthat there was an implied term of this contract, that that implied term was broken by the defendants, and that, therefore, they were entitled to claim this deficiency on the guaranteed advance from the defendants as damages for breach of the conditions of that implied term in the contract.

The whole question, therefore, is whether, as a matter of law, the plaintiffs can establish that this suggested term ought to be implied. One fairly obvious and considerable difficulty for the plaintiffs was the difficulty of formulating the words of that implied in their pleadings. They made two attempts at it. First of all, in their original pleadings, they pleaded in para 2 as follows:

It was a condition of the said agreement to be implied in law that the said oranges should be delivered to the plaintiff firm in a sound and merchantable condition, equal in quality to those delivered in previous seasons, and fit to be re-sold by them as aforesaid and in such condition as to enable them to obtain repayment of the said sum of £15,000 [the guaranteed advance] and further alternatively that each of the cases supplied should contain only oranges of such nature and quality and in such condition on shipment as to be capable of and suitable for carriage to London in the manner customary in the trade and of sale thereafter,

Page 610 of [1940] 1 All ER 603

such carriage as cases of oranges in good merchantable condition, alternatively of Ophir oranges in good merchantable condition.

That was the original implied term which was relied upon and suggested by the plaintiffs. At a late stage of the proceedings, however, apparently during the actual hearing of the case, the claim was amended. The passage I read was deleted, and the following claim was substituted as an even longer implied term:

It was a further term of the said agreement to be implied from the subject-matter and all the circumstances that the plaintiff firm should pay for and on behalf of the defendants (if the defendants did not do so) the freight and duty upon such consignments of oranges and should deduct the sums so expended by them from the amounts so realised as aforesaid and further it was a condition of the said agreement to be implied in law that the said oranges should be delivered to the plaintiff firm in London in a sound and merchantable condition, save as to not more than 5 per cent. of the total shipments and fit to be re-sold by them as Ophir oranges in good merchantable condition; and further or alternatively, that the cases supplied should contain only oranges of such nature and quality and in such condition on shipment as to be capable of and suited for carriage to London in a manner customary in the trade and of sale thereafter, such carriage, save as to not more than 5 per cent. of the total shipments as cases of oranges in good merchantable condition, alternatively of Ophir oranges in good merchantable condition.

That concession in the variation of the alleged implied term, and the insertion of a limitation of not more than 5 per cent, were no doubt brought about because it is quite plain that the contract between the parties expressly contemplates that there may be some oranges that will go bad, because it is expressly provided that the charges to be made by the plaintiffs will cover the repacking expenses, as and when incurred by the plaintiffs. Those repacking expenses arose, and were known to arise, because some of the oranges might not arrive in good condition.

The plaintiffs, somewhat arbitrarily, have said that in any case not more than 5 per cent ought to be bad, though, as I have pointed out, in the 193435 season, when there were dealings with similar goodsthough not under the guaranteed advance, but under the accommodation advance, when the matter did not affect the ultimate profit of the plaintiffsthe amount of bad oranges had been as high as 11.96 per cent.

The fact remains, however, that the plaintiffs, in one form or another, are asking to import an implied term into this contract in regard to a matter as to which there is an express provision in the contractnamely, what is to happen in regard to oranges which turn out to be bad on arrival. It is an express provision that the plaintiffs are to pay the resulting expenses of repacking arising from those bad oranges, and they are to pay those expenses out of their allowance of 6d per case and 7½ per cent commission.

I should have added, perhaps, that the judge eventually formulated the implied condition in these terms, at p 988:

… it appears to me that what the parties would have to read into the contract if they had been asked about it, would be that they should supply during the season 40,000 cases of oranges Ophir brand f.o.b. Palestine in such a condition as to be saleable as Ophir brand oranges on the London market of merchantable quality save for the usual 5 per cent. lost in repacking.

The whole question in this case is whether or not the plaintiffs can

Page 611 of [1940] 1 All ER 603

establish that there was this implied term in this contract. In earlier and simpler times, the answer which would have been given by Lord Ellenborough CJ to such a contention would have been immediate and emphatic. In a classic utterance in Atkinson v Ritchie, Lord Ellenborough CJ says, at pp 533, 534, that the rights and duties of the parties to a contract:

… are conclusively fixed and defined by the terms of their own written contract. No exception (of a private nature at least) which is not contained in the contract itself, can be engrafted upon it by implication, as an excuse for its non-performance. The rule laid down in the case of Paradine v. Jane [p. 27] has been often recognised in courts of law, as a sound one, i.e., that “when the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract.”

If before Lord Ellenborough CJ the plaintiffs had put forward this claim that the defendants were bound to make good to them the deficiency realised by the sale less their guaranteed advance of 7s 6d f.o.b., Lord Ellenborough CJ would have said: “You have not provided for this by your contract. You might have done so. As you have not provided for it by your contract, you cannot rely upon any implied term. The terms of your actual contract bind you, and fix your liability.” It is quite true, of course, that that rigorous principle so laid down by Lord Ellenborough CJ has been very largely departed from. I do not know whether or not it is so historically, but I should think that it is very likely that one of the first occasions on which the rule of Lord Ellenborough CJ that no exception can be engrafted upon a contract by implication was not expressly recognised was in 1863, in Taylor v Caldwell, where Blackburn J stated what is, in my opinion, the true principlenamely, that no court has an absolving power, but it can infer, from the nature of the contract and the surrounding circumstances, that a condition which is not expressed was the foundation on which the parties contracted.

The question is whether the plaintiffs here can establish that this suggested condition, clearly not expressed, was one upon which the parties both clearly contracted. There are several passages in which the courts have been warned as to the care with which they must examine any claim to insert into a contract an implied condition. For instance, in Hamlyn & Co v Wood & Co, Lord Esher MR says, at p 491:

I have for a long time understood that rule to be that the court has no right to imply in a written contract any such stipulation, [any such implied stipulation] unless, on considering the terms of the contract in a reasonable and business manner an implication necessarily arises that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense that I have mentioned.

There are two passages in which Scrutton LJ repeats that warning in language which it is useful to cite here. First, in Lazarus v Cairn Line of Steamships Ltd, he said, at p 380:

I was referred by each side to a number of cases in which, in somewhat similar

Page 612 of [1940] 1 All ER 603

states of fact, contracts had or had not been implied, and defendants had or had not been held liable. I respectfully sympathise with the protests of Lord Esher, M.R., and Bowen, L.J. in Hamlyn & Co. v. Wood & Co. against being compelled to examine numerous cases on other contracts … I have carefully considered the numerous cases cited to me to see what assistance I can get from them. I read them as deciding (1) that the first thing to consider is the express words the parties have used; (2) that a term they have not expressed is not to be implied because the court thinks it is a reasonable term, but only if the court thinks it is necessarily implied in the nature of the contract the parties have made …

In a passage which is usually cited from Reigate v Union Manufacturing Co (Ramsbottom), Scrutton LJ said, at p 605:

These principles, however, have been clearly established: The first thing is to see what the parties have expressed in the contract, and then an implied term is not to be added became the court thinks it would have been reasonable to have inserted it in the contract. A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated some one had said to the parties, “What will happen in such a case,” they would both have replied, “Of course so and so will happen; we did not trouble to say that; it is too clear.” Unless the court comes to some such conclusion as that it ought not to imply a term which the parties themselves have not expressed.

I will add only one observation to those passages. Where the parties have made an express provision as regards some matter with regard to the contract, it is, and must be, extremely difficult for either of them to say in regard to that subject-matter, as to which there is an express provision, that there is also an implied provision or condition in the contract.

Examining this case in the light of those principles, though it might be said from the point of view of the plaintiffs that the provision which has been found to be implied by the judge might have been reasonable, I am entirely unable to satisfy myself that it was a necessary provision.

Taking the test as Scrutton LJ applies it, and supposing that, when this contract was being negotiated, a more imaginative friend had said to the plaintiffs, “You are giving them a rather favourable contract this year with the guaranteed advance of 7s 6d. What is to happen if there is a very large amount of bad oranges? You know there were 11.96 per cent of bad oranges two years ago. There might be even more,” I am quite unable to come to the conclusion that the plaintiffs and defendants would both have said: “Of course, if there are more than 5 per cent. of bad oranges, it will have to be made good.” The defendants, I am satisfied, would have said: “Nevertheless, the whole basis of this contract is that you are to run the risk of the cost of repacking bad oranges. We have provided for that in the contract.” It may be that the result of the imaginative friends interposition would have been to make the plaintiffs aware that they were running a risk of which they had not formerly been aware. It may be that their eagerness to get the supply of Palestine oranges, for which they thought there would be a tremendous demand owing to Spanish troubles, would have been discounted by the thought that possibly there might be a disastrous number of bad oranges, and that, perhaps, this was not so prudent a contract as they had first thought. It may be that the result

Page 613 of [1940] 1 All ER 603

of what I have called the imaginative third partys intervention would have been that the parties would have discussed the matter further, and no contract would have been entered into at all, because, for all I know, if the plaintiffs had said, “We must have this 5 per cent. clause,” the defendants might have said. “No. We will not do that. There is a great demand this year for Palestine oranges. If you are not prepared to give the guaranteed advance of 7s 6d, and then run the risk of repacking such bad oranges as there are, there are other of your competitors in the market who will give us those terms, and we can go to them, instead of coming to you.”

I need not discuss the matter more in detail. I am quite unable to be satisfied that, if this point had, in the words of Scrutton LJ been suggested to the parties, when they were making this bargain, by a more imaginative third party, as a necessary result they would both have agreed that this implied term about more than 5 per cent of bad oranges would have been inserted expressly in the contract. The result is that I think the plaintiffs fail to establish that there is any such implied term, with the consequence that there has been no breach of contract by the defendants, and the judgment for the plaintiffs for damages for breach of a supposed implied term by the defendants cannot stand. This appeal must be allowed with costs.

CLAUSON LJ. I agree, and I have nothing to add.

CHARLES J. I agree.

Appeal allowed with costs in both courts.

Solicitors: Herbert Oppenheimer Nathan & Vandyk (for the appellants); Tanner & Worley (for the respondents).

W K Scrivener Esq   Barrister.

Goodbarne v Buck and Another

[1940] 1 All ER 613


Categories:        INSURANCE        

Court:        COURT OF APPEAL        

Lord(s):        MACKINNON AND CLAUSON LJJ, CHARLES J        

Hearing Date(s):        22, 23 FEBRUARY 1940        


Insurance Motor insurance Third-party risks Policy issued upon proposal form containing false statements Policy subsequently avoided by court “Cause or permit” an uninsured car to be driven Road Traffic Act 1930 (c 43), s 35(1).

The defendant WEB, with the knowledge of the defendant HAB, signed a proposal form for a policy to satisfy the Road Traffic Act 1930, in the name of the defendant HAB as proposer and registered owner of the van, the vehicle to be driven by WEB. The purchase price of the van had been lent to WEB by HAB, but thereafter HAB had no concern with the user of the van, which was employed by WEB in his business. On 26 August 1938, the plaintiffs husband was fatally injured by the negligent driving of the van by WEB. On 12 May 1939, at the suit of the insurance company, the policy was avoided by reason of misrepresentation in the proposal form. An action was subsequently brought against WEB, whose negligence was not denied,

Page 614 of [1940] 1 All ER 613

and against HAB, on the ground that, by reason of the circumstances in which HAB assisted or permitted WEB to obtain an insurance which turned out to be valueless, HAB had caused or permitted WEB to use the van in breach of the Road Traffic Act 1930, s 35(1):

Held in the circumstances, HAB had not caused or permitted the user of the van by WEB.

Decision of Hilbery J ([1939] 4 All ER 107) affirmed.

Notes

The appellant, having obtained a barren judgment against one defendant in a running-down action, and the third-party policy of insurance having previously been declared void on the application of the insurance company, sought to establish liability against the respondent, on the principle in Monk v Warbey, on the ground that he had caused or permitted the user by a third person of an uninsured vehicle. It was held, however, that, as the respondent was not the owner of the vehicle, he could not have so caused or permitted its user. This case emphasises the fact that, contrary to general belief, not every driver of a vehicle involved in an accident is necessarily covered by insurance in respect of third-party liability.

As to Duty to Insure, see Halsbury (Hailsham Edn), Vol 18, pp 561563, paras 908912; and for Cases, see Digest, Supp, Insurance, Nos 3217r3217ee.

Cases referred to

Monk v Warbey [1935] 1 KB 75; Digest Supp, 104 LJKB 153, 152 LT 194.

Watkins v OShaughnessy [1939] 1 All ER 385; Digest Supp.

Richards v Port of Manchester Insurance Co Ltd (1934) 152 LT 261; Digest Supp, affd 152 LT 413.

Daniels v Vaux [1938] 2 KB 203, [1938] 2 All ER 271; Digest Supp, 107 LJKB 494, 159 LT 459.

Appeal

Appeal by the plaintiff from a judgment of Hilbery J, dated 9 October 1939, so far as the decision related to H A Buck, and reported [1939] 4 All ER 107. The facts are fully set out in the judgment of MacKinnon LJ. The appellant asked that judgment be given against H A Buck for the same amount as the judgment of Hilbery J against W E Buck, and that it should be in addition thereto.

Donald McIntyre for the appellant.

The respondent, H A Buck, appeared in person.

McIntyre: It was decided by Hilbery J that, where there is a policy of insurance in existence at the time of the accident, but the insurers obtain a declaration that at all material times they were entitled to avoid the policy, there is at the time of the accident a policy of insurance in force in relation to the user of the vehicle. The judge arrived at that conclusion because he felt that, at the time of the accident, there was in force a voidable, as distinct from a void, policy. That is the point which I wish to challenge. The insurers were never at risk in this matter, because there never was a contract. The proposal form was signed, not by H A Buck, but by W E Buck, who signed it in his brothers name. H A Buck, however, was aware of the fact, and lent his name and his credit to the scheme. There is evidence of causing and permitting the car to be used in contravention of the pro-

Page 615 of [1940] 1 All ER 613

visions of the Road Traffic Act 1930, s 35. The decision in Monk v Warbey is not limited to the case of an owner. Moreover, it is not necessary for Monk v Warbey to apply to show that the tortfeasor knew that the vehicle was being driven uninsured. There was not, at the time of the accident, a valid policy of insurance as regards this particular vehicle. Either H A Buck was the owner of the vehicle or he was sufficiently identified with it, in that he caused or permitted it to be upon the road. H A Buck assisted W E Buck to procure a policy which was valueless. [Counsel referred to Watkiss v OShaughnessy, Richard v Port of Manchester Insurance Co Ltd and Daniels v Vaux.]

The respondent was not called upon.

Donald McIntyre for the appellant.

The respondent, H A Buck, appeared in person.

23 February 1940. The following judgments were delivered.

MACKINNON LJ. This is a very hard case, and one in which I should have been glad if we could have assented to the very careful and very able argument of counsel for the appellant. The action was brought by the widow of a man who was knocked down, and so badly injured that he died, by a Ford van, BXD 883, which was being driven by one William Edward Buck. The action was brought both against William Edward Buck and against H A Buck, his brother. There was no question that the accident was due to the negligent driving of William Edward Buck, and the judge gave damages amounting to a sum of £2,500 against him. William Edward Buck, however, was utterly impecunious. What was still more disastrous was that, at the time when he was recklessly driving this van, he had not an effective policy of insurance covering him against third-party risks. He had procured a policy by putting forward a proposal to the Zurich General Accident Insurance Co, but in earlier proceedings the Zurich company had brought an action against William Edward Buck and Henry Albert Buck claiming that it had a right to avoid that policy. That action was tried by Branson J, who came to the conclusionand he had no option but to come to the conclusionthat the insurance company had made out that the whole business in connection with the proposal was utterly fraudulent, and he set aside that policy. The result was that, when the accident happened, there was no effective policy of insurance, and the plaintiff, who had sustained damage assessed at over £2,000, had the prospect of having no one to answer her claim against William Edward Buck.

In those circumstances, not unnaturally, she sought to find somebody else with sufficient money to pay, at least, a part of these damages. She sought to find that person in H A Buck, the brother of the driver of the van. Her claim against H A Buck is based upon the principle laid down in Monk v Warbeynamely, that, where there has been a breach by the owner of a motor car of the provisions of the Road Traffic Act 1930, s 35(1), not only is the person committing a breach of that section liable in the criminal courts to the penalty provided by

Page 616 of [1940] 1 All ER 613

that section, but he is also liable in damages civilly to a third person who has been injured as a result of his negligence.

The Road Traffic Act 1930, s 35, provides as follows:

(1) Subject to the provisions of this part of this Act, it shall not be lawful for any person to use or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third-party risks as complies with the requirement of this part of this Act. (2) If a person acts in contravention of this section, he shall be liable to a fine not exceeding £50 …

The claim here made is that, though the van had been driven by W E Buck, H A Buck, his brother, was liable to a prosecution under s 35 as having caused or permitted W E Buck to use this van on the road without there being in force any effective policy of insurance. It is said that H A Buck could have been successfully prosecuted and fined £50 under that section, and, therefore, it follows, under the principle of Monk v Warbey, that he is also liable to pay the damages sustained by the plaintiff.

The whole question is whether or not H A Buck could have been successfully prosecuted under this section. The offence is “to cause or permit any other person to use.” There are two different verbs. The second one, “permit,” I think, is much easier to construe and to interpret than the first one, “cause.” In order to make a person liable for permitting another person to use a motor vehicle, it is obvious that he must be in a position to forbid the other person to use the motor vehicle. As at present advised, I can see no ground on which anybody can be in a position to forbid another person to use a motor vehicle except in a case where the person charged is the owner of the car. If one is the owner of a car or of a van, one can forbid or one can permit another to use it. It was no doubt for that reason that considerable effort was made to establish that in this case H A Buck was really the owner of this car. It was in truth registered with the London County Council in his name. It appears on investigation, however, that the truth of the matter is that W E Buck, being impecunious, and having a judgment against him for some other car which he had had under a hire-purchase agreement, in respect of which he could not continue the payment of the instalments, wanted to get the use of a car in his business of a greengrocer in such circumstances that it would not be liable to be taken in execution by his creditors. He therefore got this brother of his, H A Buck, by a wholly discreditable manoeuvre, to lend him a sum of £20, with which he, W E Buck, could buy this second-hand Ford van. The only connection between H A Buck and the van which might show the ownership of the van was that H A Buck had lent his brother £20 in order that the brother should buy this van. The brother did buy the van, and registered it in the name of H A Buck. The truth was, however, that it never was H A Bucks van. It was at all times the property of W E Buck. That being so, the attempt to

Page 617 of [1940] 1 All ER 613

make H A Buck liable under that limb of the section which makes it an offence to permit any other person to use a motor vehicle on the road without a proper insurance policy fails in limine, because it is not established that there was any right in H A Buck to forbid W E Buck to use the car. He could have that right to forbid him to use it only if he were the owner of the car, and he was not.

There remains the question whether or not it could be charged against H A Buck that he caused W E Buck to use the motor vehicle on a road. What happened with regard to that was that H A Buck, also in a very discreditable way, assisted his brother in obtaining from the Zurich company this policy which the Zurich company succeeded in getting set aside in the proceedings before Branson J. With the knowledge of H A Buck, W E Buck put forward to the Zurich company a proposal in which he put forward the name of H A Buck as the proposer and as the owner of the vehicle. There is no evidence that H A Buck ever saw this document, but he made a statement, which has been put in and acted upon, in which he agreed that he knew all about it, and he assented to his brothers account of this transaction. It was, therefore, with the approval and permission of H A Buck that W E Buck went to the insurance company and forged the name of H A Buck as the proposed assured. The proposal signed “H A Buck” was in fact signed by W E Buck. The following details of the proposal may be mentioned: “Full name of proposer, Henry Albert Buck; trade or business, fruiterer and greengrocer.” In fact, H A Buck was a butcher, and it was W E Buck who was the greengrocer. “Business address, 56, Brewery Road, Plumstead.” That in fact was not the business address of H A Buck; though he had a butchers shop next door at No 58. “Purpose for which the vehicle was to be used: own goods.” That was untrue, because it was to be used, not for H A Bucks butchers business, but for W E Bucks greengrocery business. “Are you the actual owner of the vehicle? Yes.” Then the named driver who, as agent and servant of the proposer H A Buck, is to drive the van is put as William Edward Buck. With regard to this matter, what H A Buck did was this. He assisted or permitted or stood by while to his knowledge his brother W E Buck was putting forward this grossly misleading and inaccurate statement to the insurance company, with the result that his brother did obtain from the insurance company an insurance policy purporting to cover Henry Albert Buck, carrying on the business of fruiterer and greengrocer, in respect of this van. That was the policy, with an indorsement stating that it was agreed that it should always be driven by William Edward Buck, as the servant or driver of H A Buck. That was the policy which, by reason of gross concealment and misrepresentation in the proposal, had, at the suit of the insurance company, been set aside. That was the connection which H A Buck had with this insurance. He stood by, knowing that his brother was going to put forward

Page 618 of [1940] 1 All ER 613

this preposterous and fraudulent document to the insurance company.

In those circumstances, can it be said that H A Buck caused W E Buck to use the motor vehicle on the road without there being in force an effective insurance policy against third-party risks? I do not think that it can. As I have said, I would have been only too glad to be able to decide this appeal in favour of this unfortunate plaintiff, who is apparently left with nothing but a useless claim against W E Buck. All that can be said, however, is that H A Buck assisted his brother in getting a worthless piece of paper in place of an effective insurance policy. Yet, even if he did that, and it was proved that he did that, I do not see how he can be prosecuted successfully upon an allegation that he had caused W E Buck to use the vehicle on the road without an effective policy. In the result, I think that the decision of Hilbery J was correct, and that this appeal fails. The respondent to this appeal, H A Buck, has appeared in person, and, in those circumstances, the order of the court will be simply that the appeal will be dismissed without costs.

CLAUSON LJ. I agree.

CHARLES J. I agree.

Appeal dismissed, without costs.

Solicitors: Evill & Coleman (for the appellant).

W K Scrivener Esq   Barrister.

R v Cronin

[1940] 1 All ER 618


Categories:        CRIMINAL; Criminal Procedure        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        CHARLES, HUMPHREYS AND TUCKER JJ        

Hearing Date(s):        26 FEBRUARY 1940        


Criminal Law Appeal New trial Jurisdiction of Court of Criminal Appeal Trial a nullity Deputy recorder not qualified for appointment.

The appellant was convicted at a borough quarter sessions of dangerous driving after a trial before one D, who was purporting to act as deputy recorder by virtue of an appointment in writing under the hand of the recorder, who was himself unable to be present. In fact, D was not a barrister, and was not, therefore, eligible for appointment as a recorders deputy under the Municipal Corporations Act 1882, s 166(1):

Held the proceedings were void ab initio, and the conviction must be set aside and annulled, and the appellant must appear at the next quarter sessions to take his trial upon the indictment.

Notes

In general, the court of Criminal Appeal has no power to order a new trial, but, where the trial has been a nullity, the prisoner has, in effect, never been tried, and the court can then order him to be tried on the indictment.

As to New Trial in Criminal Cases, see Halsbury (Hailsham Edn), Vol 9, pp 278, 279, para 407; and for Cases, see Digest, Vol 14, pp 538542, Nos 60896114.

Page 619 of [1940] 1 All ER 618

Cases referred to

Crane v Public Prosecutions Director [1921] 2 AC 299; 14 Digest 245, 2365, 90 LJKB 1160, 125 LT 642, 15 Cr App Rep 183, affg SC sub nom R v Crane [1920] 3 KB 236.

R v Baker (1909) 2 Cr App Rep 249; 14 Digest 225, 2099.

Appeal

Appeal against a conviction for dangerous driving at Bury St Edmunds Borough Sessions on 31 January 1940. The facts are fully set out in the judgment of the court delivered by Charles J.

J A Boyd-Carpenter for the appellant.

S Cope Morgan for the Crown.

26 February 1940. The following judgment was delivered.

CHARLES J (delivering the judgment of the court). In this case, Terence Cronin is an appellant before this court in somewhat unusual circumstances. Before Sir Francis Dunnell, who was purporting to act as deputy recorder of Bury St Edmunds at the borough sessions, he was found guilty of dangerous driving, and on 29 January he was sentenced, in accordance with what was supposed to be a true verdict, to 9 months imprisonment, and was disqualified from holding a driving licence for 5 years. He appeals against that conviction in somewhat unusual circumstances.

The recorder of Bury St Edmunds was unable to appear at the borough sessions, having been detained unavoidably by the extremely severe weather, so in writing under his own hand, he appointed as his deputy Sir Francis Dunnell, who is chairman of the county quarter sessions. That course was agreed to by all parties. In truth and in fact, Sir Francis Dunnell was not a barrister at all, and he was never eligible for appointment as a recorders deputy, inasmuch as the appointment of a deputy recorder depends upon the Municipal Corporations Act 1882, s 166(1), which provides as follows:

The recorder may, in case of sickness or unavoidable absence, appoint, by writing signed by him, a barrister of 5 years standing to act as deputy recorder at the quarter sessions then next ensuing or then being held, and not longer or otherwise.

It is perfectly plain that, that error having been made, the court was not so constituted as to be empowered to try anyone at all for anything, and the proceedings were, indeed, void ab initio.

What is the proper course to take in order that this unfortunate mistake, for mistake it was, shall be remedied? I think that it should be remedied in this way. I am now reading from the opinion of Viscount Finlay in Crane v Public Prosecutions Director. I need not go into the facts of that case, but I desire to read these words. In that case, there was made an order which the House of Lords said was correct. The Earl of Reading LCJ, in giving judgment in the Court of Criminal Appeal, after stating the course of the proceedings, said ([1921] 2 AC at p 311):

“At the trial, as we now know, both Morton and Crane were given in charge to the same jury, as if they had been jointly indicted under one indictment, whereas in truth there were separate indictments. The result is that there never has been

Page 620 of [1940] 1 All ER 618

a trial at all. It is sufficient for this court to say that the proceedings were void ab initio. It has been argued that the proceedings were only irregular, and that where there was an irregularity in procedure, the court could not treat the trial as a nullity. But that argument cannot be accepted. The court must view the proceedings as if there had been no trial at all.”

It appears that the position here is the same. We therefore propose to take the same course as was taken by the Earl of Reading LCJ in Cranes case and specifically approved by the House of Lords. The Earl of Reading LCJ, after quoting two cases, continues as follows ([1921] 2 AC at p 311):

“These cases are, in our opinion, authority for the course which this court proposes to take in this case, that is, to treat the verdict and sentence as a nullity. Following the course taken in R v. Baker, the verdict and sentence are expunged from the record. That being so, there is the indictment against the appellant on which no trial has taken place. He must stand his trial on that indictment.”

Then the terms of the order are set out, and the order of this court in this case will be in the same terms and as follows:

Upon consideration being this day had by the Court of Criminal Appeal, as duly constituted for the hearing of appeals under the Act, of the appeal of the above-named appellant against conviction, the court doth finally determine the same and doth order that the conviction and judgment on the indictment whereon the appellant was convicted be set aside and annulled, and that the appellant do appear at the next quarter sessions to be holden in and for the borough of Bury St Edmunds, there to take his trial according to law upon the said indictment.

Solicitors: Registrar of the Court of Criminal Appeal (for the appellant); Partridge & Wilson (for the Crown).

W J Alderman Esq   Barrister.

Bayliss v Chatters

[1940] 1 All ER 620


Categories:        LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HUMPHREY AND HILBERY JJ        

Hearing Date(s):        17 JANUARY 1940        


Rates and Rating Liability to be rated Beneficial occupation Bungalows advertised to be let furnished or unfurnished Whether owner in beneficial occupation.

The appellant owned 4 bungalows, which were let furnished from time to time from early in 1937 till 30 September 1938. From that date, however, they were at all times uninhabited. The furniture was removed and the water was turned off. The furniture, however, was stored in a fifth bungalow and a sixth was used for show purposes. Both these bungalows were in the same place and owned by the appellant. The appellant was willing at all times of the year to let the bungalows, either furnished or unfurnished, and they were in the hands of an agent for that purpose, and were advertised as being so to let. It was contended by the respondent, the collector of rates for the urban district in which the bungalows were situated, that the appellant was in beneficial occupation of the bungalows from and after 30 September 1938:

Held the appellant was in beneficial occupation of the bungalows at the material time.

Notes

Beneficial occupation is not defined by statute, and is said not to have been exhaustively defined by judicial decisions. Actual physical occupation is not essential, and in many cases an intention to occupy or to return

Page 621 of [1940] 1 All ER 620

to occupation has been held sufficient. There seems to have been a general impression that, if all the furniture is removed from premises and they are being offered for sale or letting, those facts are conclusive against beneficial occupation. The present case, however, shows that there are cases where such evidence is not sufficient.

As to Beneficial Occupation, see Halsbury (Hailsham Edn), Vol 27, pp 351353, para 782; and for Cases, see Digest, Vol 38, pp 427440, Nos 27112.

Cases referred to

Bootle Overseers v Liverpool Warehousing Co (1901) 85 LT 45; 38 Digest 426, 14.

Gage v Wren (1902) 87 LT 271; 38 Digest 435, 87.

Case Stated

Case Stated by justices for the petty sessional division of Lexden and Winstree in the county of Essex. The facts are fully set out in the judgment of Lord Hewart LCJ.

F D Levy for the appellant.

Arthur Capewell for the respondent.

17 January 1940. The following judgments were delivered.

LORD HEWART LCJ. This is a case stated by justices for the petty sessional division of Lexden and Winstree in the county of Essex. The case arose upon a complaint made by the present respondent, who is a collector of rates for the West Mersea Urban District Council, that the present appellant:

… being a person duly rated and assessed to the general rate of the district in the sum of £9 2s. had not paid [any part of that sum].

The case sets out various facts which were proved or admitted. It appears, among other things, that the appellant was the owner of 6 bungalows in West Mersea assessed at £11 gross and £7 rateable in each case, and that rates were being claimed in respect of 4 of those bungalows for the half-year ending 31 March 1939. The case further finds that the bungalows were let furnished from time to time from the early part of 1937 until 30 September 1937, and afterwards from 1 April 1938, to 30 September 1938, and that at all other times these bungalows were uninhabited. The appellant removed the furniture from the bungalows about 30 September 1938, but he removed it to store it in the fifth bungalow, while he left the sixth bungalow furnished for show purposes. He displayed notices in the window of each bungalow to the effect that the bungalows were to be let. The case further finds that there were no fireplaces in the bungalows, and that after 30 September 1938, the appellant caused the water to be turned off, so that there was no water service in the bungalows. Finally, it was found that the appellant was at all times of the year willing to let all or any of the bungalows, either furnished or unfurnished, if a tenant or tenants could be found. The bungalows were in the hands of an agent for the purpose of finding tenants at any time of the year, either furnished or unfurnished, and they were advertised as being to let either furnished or unfurnished.

In those circumstances, and on those facts, it was contended on the part of the respondent that the appellant was in beneficial occupation

Page 622 of [1940] 1 All ER 620

of the bungalows from and after 30 September 1938, and was, therefore, liable to be rated. On the other hand, the appellant contended that he was not in beneficial occupation from and after 30 September, and was not liable to be rated. The justices, having that contest before them, came to the conclusion that the appellant was in beneficial occupation of the bungalows from and after 30 September 1938, and was, therefore, liable, and have accordingly ordered that a distress warrant be issued.

The question for this court is whether, upon the above facts, the justices came to a correct decision in point of law. There was a time when counsel for the appellant appeared to suggest that the justices had misdirected themselves as to the true meaning of the expression “beneficial occupation.” There is no evidence of that misdirection in the case. It appears to me that, upon this case as stated, there were facts before the justices upon which they were entitled to come to the conclusion that, at the material time, there was beneficial occupation of the bungalows. Having relevant evidence before them, the justices came to that conclusion and acted upon it. It seems to me that it is not correct to sayand, indeed, I do not recollect that it has been saidthat there was no evidence upon which the justices could find that there is beneficial occupation, and I think that there are no materials to indicate that the justices misinterpreted the expression “beneficial occupation.”

Our attention has been directed, among other cases, to Bootle Overseers v Liverpool Warehousing Co, and to Gage v Wren, and, not least, to the judgment in that case of Channell J. In my opinion, the justices, upon the evidence given and the relevant facts which were proved, were entitled to come to the conclusion that there was beneficial occupation, and I think, therefore, that this appeal fails.

HUMPHREYS J. I agree, and I have nothing to add.

HILBERY J. I agree.

Appeal dismissed with costs.

Solicitors: Wilberforce Allen & Bryant, agents for F S Collinge & Co, Colchester (for the appellant); Berrymans, agents for Page & Ward, Colchester (for the respondent).

Michael Marcus Esq   Barrister.


Re Henderson, Public Trustee v Reddie and Others

[1940] 1 All ER 623


Categories:        SUCCESSION; Wills        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        14, 22 FEBRUARY 1940        


Wills Apportionment Tenant for life Interest accruing after death of tenant for life Interest payable in respect of period before death of tenant for life Residuary estate Appropriation without sale Right of legal personal representative of tenant for life Apportionment Act 1870 (c 35), ss 2, 3, 4, 5.

By his will, dated 18 June 1907, the testator directed his trustees, inter alia, to set apart the sum of £150,000 and to invest the same and pay the income thereof to one B during her life, and after her death to raise out of that fund the sum of £100,000 to be held upon trust for the upkeep of a certain house which the testator desired to be used as a convalescent home. The residuary estate was then left to a number of charities. The testator died in 1933, and the trustees duly set apart the sum of £150,000 for investment to pay the income thereof to B. B having died on 6 July 1939, two weeks after her death the trustees appropriated certain investments forming part of the fund of £150,000 for the purpose of raising the fund of £100,000, as provided by the will. By the terms of the will, the trustees were under no obligation to sell any of the investments representing the fund of £150,000. After the date of appropriation, certain interest was paid on the investments so appropriated, the interest so paid being in respect of a period commencing before, and ending after, Bs death. Thereupon, the executors of B claimed that that part of the interest which had accrued up to the date of Bs death was payable to them as legal personal representatives of B:

Held this was not a case of sale, but one of appropriation of investments, and the decision in Re Firth, Sykes v Ball had to be distinguished. The interest which had accrued in respect of the period before Bs death was payable to Bs legal personal representatives, in accordance with the Apportionment Act 1870, s 2.

Notes

The judgment of Farwell J, in Re Firth, Sykes v Ball would, upon its language, appear to apply both to the case of a sale of investments cum dividend and to that of an appropriation cum dividend. It is clear from the judgment in this case that it was intended to apply to a sale only, and that the case of an appropriation where the investments are retained by the trustees is a proper one for apportionment.

As to Apportionment as Between Tenant for Life and Remainderman, see Halsbury (Hailsham Edn), Vol 29, pp 653655, paras 935939; and for Cases, see Digest, Vol 40, pp 677680, Nos 21322157.

Cases referred to

Re Muirhead, Muirhead v Hill [1916] 2 Ch 181; 20 Digest 282, 410, 85 LJCh 598, 115 LT 65.

Re Firth, Sykes v Ball [1938] Ch 517, sub nom Re Firth, Sykes v Hall [1938] 2 All ER 217; Digest Supp, 107 LJCh 251, 158 LT 489.

Re Winterstokes Will Trusts, Gunn v Richardson [1938] Ch 158, [1937] 4 All ER 63; Digest Supp, 107 LJCh 122, 158 LT 404.

Bulkeley v Stephens [1896] 2 Ch 241; 40 Digest 678, 2145, 65 LJCh 597, 74 LT 409.

Re Walker, Walker v Patterson [1934] WN 104; Digest Supp.

Originating Summons

Originating Summons to determine whether or not the income of a certain trust fund was apportionable in respect of payments which had accrued before the death of the tenant for life, but were not made until

Page 624 of [1940] 1 All ER 623

after such death, and on what basis that fund had to be valued. The facts are fully set out in the judgment.

Leslie Mumford for the plaintiff.

John Pennycuick for the first and second defendants, the executors of the will of the tenant for life.

Hector Hillaby for the third defendant, the Hampstead General and North-West London Hospital.

A Andrewes Uthwatt for the Attorney-General.

22 February 1940. The following judgment was delivered.

MORTON J. The testator, James Stewart Henderson, by his will, dated 18 June 1907, appointed David George, William Robert Kington Gibbs and William Littlejohn Law to be executors and trustees thereof. Clause 11 of his will is as follows:

I direct my trustees out of my estate to set apart the sum of £150,000 and to invest the same in their names in manner permitted by law for the investment of trust money with power to vary investments and to pay the income of the invested fund to the said Alicia Frances Burkitt during her life for her separate use without power of anticipation and after her death to raise out of such fund or so far as it may be insufficient out of my residuary estate the clear sum of £100,000 to be held upon the trusts hereinafter declared concerning the same and to stand possessed of the balance if any of such fund and the income thereof as part of my residuary estate.

Clause 12, so far as material, is as follows:

I give to my trustees hereinbefore named and their heirs my freehold house at Hastings called “Abbotsford” and the stables outbuildings gardens pleasure grounds and land held therewith upon trust that my trustees shall permit the said Alicia Frances Burkitt during her life to have the use and enjoyment thereof for her separate use without power of anticipation she paying all rates and taxes and keeping the buildings in a proper state of repair and properly insured against fire as from the day of my death to the satisfaction of my trustees and after her death shall stand possessed thereof upon trust to permit the same to be used and forever enjoyed as a convalescent home for the benefit of poor and necessitous persons residing within the borough of Hampstead and I further direct my trustees to invest the sum of £100,000 bequeathed by the last preceding clause in their names in any investments by law authorised to trustees with power to vary investments and to employ and apply the income of the invested fund as an endowment for the upkeep insurance and maintenance of the said house and grounds for the purposes of such convalescent home and for carrying on such home to the best advantage and in the best interest of the inmates and staff.

Clause 12 also gave the trustees certain powers, but these are not material for the present purpose.

Clause 15 of his will provides as follows:

… all the rest residue and remainder of my real and personal estate of whatsoever kind and wheresoever situate of or over which I shall at my death be possessed or have any power of appointment or disposition I give devise and bequeath to my said trustees hereinbefore named upon trust to sell call in collect and convert into money the said real and personal estate at such time or times and in such manner as shall seem expedient and out of the net proceeds and any ready money forming part of my estate to pay and provide for my funeral and testamentary expenses and debts and the pecuniary legacies and annuities bequeathed by this my will or any codicil thereto and all death duties payable under my will and subject as aforesaid to stand possessed thereof in trust [for 31 charitable institutions therein specifically named, of which the defendant the Hampstead General and North-West London Hospital is one] and also such other charitable institutions or purposes (if any) as my trustees may in their absolute discretion nominate and select.

Then the testator directed that the shares and the manner in which,

Page 625 of [1940] 1 All ER 623

and the conditions, if any, under which, his residuary estate was to be divided pursuant to the clause were to be in the absolute discretion of his trustees. The rest of the will is not material to be stated. By a codicil, dated 17 January 1933, the testator made an alteration in his executors and trustees, but in all other respects confirmed his will.

The testator died on 20 January 1933, without having revoked or altered his will except by the codicil, and his will and codicil were duly proved by the plaintiff and the defendant Charles Dewen Thomson on 28 February 1933, in the principal Probate Registry. The plaintiff and the defendant Charles Dewen Thomson as executors and trustees of the will duly set apart the sum of £150,000, and invested that sum in accordance with the directions in that behalf contained in cl 11 of the testators will, and they paid the income of the invested fund received by them up to the death of Alicia Frances Burkitt to Alicia Frances Burkitt. Alicia Frances Burkitt died on 6 July 1939, having by her will appointed the defendant Samuel George Reddie and the defendant Charles Dewen Thomson to be the executors and trustees thereof. Her will was duly proved by the executors therein named on 4 September 1939.

On 25 July 1939, the plaintiff and the defendant Charles Dewen Thomson, as trustees of the testators will, appropriated certain investments forming part of the £150,000 fund to answer the “clear sum of £100,000” mentioned in cl 11 of the will. These investments were £29,490 5s 2d 3½ per cent war loan, £50,000 3 per cent conversion stock 19481953, £5,200 Brighton Corporation 3 per cent stock 19331953, £10,000 City of Bath 3½ per cent mortgage, and £10,000 Nottingham Corporation 3 9/16 per cent mortgage.

It is to be observed that by cl 11 the trustees are directed to “raise” this sum out of the £150,000 fund, and by cl 12 they are directed to “invest” this sum in any investments authorised by law to trustees, but there is no doubt, in my view, that the trustees could properly appropriate investments of a nature authorised by law, and of the value of £100,000, in satisfaction of this sum of £100,000, without going to the trouble and expense of selling out and reinvesting. For reasons which will appear later, I do not think that the trustees valued these investments on the correct basis, but I shall return to this point when I have decided the question specifically raised by the originating summons.

This question arises in the following circumstances. After the date of appropriationnamely, 25 July 1939the trustees received certain interest on the appropriated investments which was paid in respect of a period commencing before the death of Alicia Frances Burkitt and ending after that death. For convenience, I refer to the sums so received as interest, but it makes no difference to the question which I have to decide if they fall more aptly under the description of “dividends” or of “other periodical payments in the nature of income.” There can be no doubt, in my view, that they fall within the Apportionment Act 1870, s 2, which I shall quote hereafter. The defendants Reddie and Thomson,

Page 626 of [1940] 1 All ER 623

as executors of Alicia Frances Burkitt, claim that the proportion of this interest which accrued up to the date of her death ought to be paid to them as her legal personal representatives. I have to decide whether or not this claim is well-founded.

The Apportionment Act 1870, s 2, provides as follows:

From and after the passing of this Act all rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.

S 5 provides as follows:

… the word “rents” includes rent service, rentcharge, and rent-seck, and also tithes and all periodical payments or renderings in lieu of or in the nature of rent or tithe. The word “annuities” includes salaries and pensions. The word “dividends” includes (besides dividends strictly so called) all payments made by the name of dividend, bonus, or otherwise out of the revenue of trading or other public companies, divisible between all or any of the members of such respective companies, whether such payments shall be usually made or declared, at any fixed times or otherwise, and all such divisible revenue shall, for the purposes of this Act, be deemed to have accrued by equal daily increment during and within the period for or in respect of which the payment of the same revenue shall be declared or expressed to be made, but the said word “dividend” does not include payments in the nature of a return or reimbursement of capital.

In view of s 2, the interest in question must be considered as accruing from day to day, “and must be apportionable in respect of time accordingly.” S 3 of the Act, so far as is material, provides as follows:

The apportioned part of any such rent, annuity, dividend, or other payment shall be payable or recoverable in the case of a continuing rent, annuity, or other such payment when the entire portion of which such apportioned part shall form part shall become due and payable, and not before …

S 4, so far as is material, provides as follows:

All persons and their respective heirs, executors, administrators, and assigns, and also the executors, administrators, and assigns respectively of persons whose interests determine with their own deaths, shall have such or the same remedies at law and in equity for recovering such apportioned parts as aforesaid when payable (allowing proportionate parts of all just allowances) as they respectively would have had for recovering such entire portions as aforesaid if entitled thereto respectively …

In Re Muirhead, Muirhead v Hill, Eve J observed, at pp 185, 186:

In my opinion, whenever there are periodical payments accruing when the event calling for apportionment occurs, the Act is at once brought into operation and must be applied, and when, subsequently, the accruing payments become due and payable they must be distributed in accordance with the Act as applied on the occurrence of the event which brought it into operation.

With that observation I respectfully agree.

I now proceed to apply the Apportionment Act 1870, as interpreted in Re Muirhead, Muirhead v Hill, to the facts of the present case. The investments in respect whereof the interest in question was paid are still in the hands of the trustees of the testators will. The trustees have received the interest in question. This interest must be considered

Page 627 of [1940] 1 All ER 623

as accruing from day to day, and is apportionable in respect of time accordingly. A portion of the interest, therefore, accrued during the life of Alicia Frances Burkitt. Unless the appropriation made on 25 July 1939, in some way defeats the rights of her legal personal representatives, her legal personal representatives are clearly entitled to the portion which accrued during her life. Can the appropriation defeat the rights of the legal personal representatives? In my judgment, it cannot. The Apportionment Act 1870, was brought into operation in regard to the interest in question at the ladys death. The interest in question became due and payable to the trustees at a subsequent date, and was in fact paid to them. On receiving this interest, they were bound to give effect to the rights which had come into existence under the Apportionment Act 1870, and to pay to the legal personal representatives the portion of such interest which accrued during the ladys lifetime. For the moment, I pass over the question as to what would have been the position if the trustees had sold the investments producing this interest, or had transferred these investments to persons absolutely entitled thereto under the testators will, between the date of the ladys death and the date on which the interest in question became payable. The investments were not so sold or transferred, but were still in the names of the trustees. In these circumstances, I can see no answer to the claim of the legal personal representatives of Alicia Frances Burkitt.

Having arrived at this conclusion by the process of applying the words of the Apportionment Act 1870, as interpreted in Re Muirhead, Muirhead v Hill, to the facts of the present case, I must now consider whether there is any authority which leads me to a different conclusion. As will appear, I do not think that there is any such authority, but it is necessary for me to consider carefully Re Firth, Sykes v Ball, and counsel for the Attorney-General has urged me to deal generally with the duty which trustees owe to the legal personal representatives of a deceased tenant for life when investments on which dividends are accruing at the death of the tenant for life are sold by the trustees, or transferred to beneficiaries by the trustees before such dividends have become due and payable. He stated that recent decisions have raised doubts on this matter, and he referred in particular to an apparent conflict (i) as to investments so sold, between the decision of Clauson J in Re Winterstokes Will Trusts, Gunn v Richardson and the views expressed by Stirling J in Bulkeley v Stephens, and by Farwell J in Re Firth, Sykes v Ball, and (ii) as to investments so transferred, between a portion of the decision of Farwell J in Re Firth, Sykes v Ball and the views expressed by Stirling J in Bulkeley v Stephens. I think that I ought to accede to the request of counsel for the Attorney-General, having regard to the facts that the present case involves a consideration of Re Firth, Sykes v Ball and that the judgment in Re Firth, Sykes v Ball contains a full discussion of the decisions in Bulkeley v Stephens and Re Winterstokes Will Trusts, Gunn v Richardson.

Page 628 of [1940] 1 All ER 623

I propose to assume that AB is entitled under a will to receive during his life the income of a trust fund consisting of a number of investments. At the date of ABs death, a dividend, as defined in the Apportionment Act 1870, is accruing on each of these investments. At the date when any such dividend becomes due and payable, the trustees of the will may still retain the investment in respect whereof the dividend is payable, or they may have parted with the investment in a variety of circumstances. I propose to examine three cases. First, let me examine Case A. The investment in respect whereof the interest or dividend is payable is still held by the trustees of the will on the date when the dividend becomes due and payable. In this case, for reasons which I have already stated, the general rule is that the trustees must pay over the proper apportioned part of the dividend to the legal personal representatives of AB. I do not think that it makes any difference whether at this date the trustees held the investment on trust to pay the income thereof to a tenant for life whose life interest arose on the death of AB, or on trust for a person absolutely entitled thereto, or on trust to divide it among a number of persons absolutely entitled. Nor do I think that it makes any difference if a trust for sale, not yet carried out, arose on the death of AB. If the trustees receive the dividend, a portion of it belongs to the estate of AB. There may be exceptions to this general rule, but no exception occurs to me at the moment. Now I come to Case B. The investment in respect whereof the interest or dividend is payable has been transferred to a person absolutely entitled under the will, or divided among a number of persons absolutely entitled under the will, before the dividend becomes due and payable. In my view, the trustees ought not so to have transferred the investment without making some arrangement to ensure that the legal personal representatives of AB would be able to obtain payment of the proper apportioned part of the dividend. Let me assume, however, that the trustees have transferred the investment in question before the dividend becomes due and payable to some person or persons absolutely entitled to the capital, without making any arrangement as to the apportioned part of the dividend. Is the right of the legal personal representatives of the tenant for life thereby defeated? In my opinion, it is not. The transferees claim under the same will which directed payment of the income to AB during his life. They have received a dividend, a portion whereof belongs to the estate of AB, and, in my view, they are bound to pay it over to his legal personal representatives. I think, however, that, if the trustees procure a valuation of an investment with a view to its appropriation in satisfaction, or in part satisfaction, of a share in the trust fund, the valuation should take into account the fact that no such appropriation can defeat the claim of the legal personal representatives of AB to an apportioned part of the dividend.

In Bulkeley v Stephens, the tenant for life died on 2 September 1894. Certain stock was sold cum dividend on 29 January 1895, under an order

Page 629 of [1940] 1 All ER 623

of the court dated 12 November 1894. In June 1895, a “balance dividend” was declared in respect of the year ending 31 December 1894. Stirling J said, at pp 249, 250:

In the present case the trust at the death of the tenant for life is thus expressed: “To pay, transfer and assign my residuary estate and the stocks funds and securities upon which the same shall be invested unto and amongst” a particular class of beneficiaries, who have been proved to be very numerous. That trust would be properly carried out, not by sale of the investments, but by transfer of them to the beneficiaries; and, if so carried out, it would be the duty of the trustee so to transfer that the legal personal representative of the tenant for life should be able (either directly or through the intervention of the trustee) to obtain payment of the apportioned part of the dividend to which the tenant for life was entitled. The order of Nov. 12, 1894, was made, not in the execution of any trust or power for sale vested in the trustees, but in order to facilitate the division of the testators residuary estate. I do not doubt that the order was properly made, but it was made in the absence of the legal personal representatives of Mrs Lyne Stephens [the tenant for life]. If those legal personal representatives had been present they might have urged with success that Mrs Lyne Stephens estate ought not to be placed in a worse position than if the trust had been carried out in the strict and proper modenamely, by transfer to the legatees. That being so, I think that the legal personal representatives may still assert the same right and, under these particular circumstances, the application ought to be acceded to.

This passage seems to show quite clearly that in Case B the legal personal representatives of AB would be entitled to an apportioned part of the dividend, and that this right would not be defeated by any transfer to the persons entitled to the capital. In the particular circumstances of the case before him, Stirling J acceded to the claim of the legal personal representatives even although the stock had been sold, and his reason was that the legal personal representatives [p 250]

… ought not to be placed in a worse position than if the trust had been carried out in the strict and proper modenamely, by transfer to the legatees.

By these words he intimates quite plainly that, in his view, the claims of the legal personal representatives of the tenant for life would not have been defeated if the investments had been transferred to the legatees. For my own part, I cannot see any reason why these claims should be so defeated. A doubt was raised in my own mind, however, by a few words in the judgment of Farwell J in Re Firth, Sykes v Ball, and by one branch of his decision in that case. In Re Firth, Sykes v Ball, Farwell J had to deal with two casesnamely, (i) the case where investments had been sold cum dividend at a date between the death of the tenant for life and the payment of the dividend which was accruing at her death, and (ii) the case where investments had been appropriated and transferred to beneficiaries cum dividend at a similar date. His decision appears to have had the result that in neither case did the legal personal representatives of the tenant for life receive an apportioned part of the dividend, or any sum representing such apportioned part. Farwell J began his judgment by referring to “such investments as were sold or appropriated cum dividend,” and it would appear that his decision may have covered the investments appropriated and transferred to beneficiaries as well as the investments sold. So far as it related to the investments sold, I entirely agree with

Page 630 of [1940] 1 All ER 623

it, as will appear hereafter. So far as it related to the investments appropriated and transferred to beneficiaries, it would seem to be in conflict with the observations of Stirling J in Bulkeley v Stephens, which I have already quoted, and it might also have some bearing on the present case. It would be possible to distinguish the decision of Farwell J on this point from the present case on the ground that Farwell J was dealing with appropriations which had been carried out by transfers to the beneficiaries, while I am dealing with an appropriation which results in the investments still being held by the trustees of the will. In the case before me, the trustees actually received the interest whereof a proportion is claimed by the legal personal representatives of the tenant for life. In Re Firth, Sykes v Ball, the dividends or interest on the appropriated investments were received by the beneficiaries. It seemed to me, however, that this was not a very satisfactory distinction, since I could see no good reason why the beneficiaries to whom investments were transferred in Re Firth, Sykes v Ball should be able to retain, as against the legal personal representatives of the tenant for life, the portion of the dividends which accrued during the life of the tenant for life. Further, I observe that the argument as reported was directed only to the case of the investments which had been sold, and the reasoning of the judgment also appeared to be directed to those investments only. For this reason, I discussed Re Firth, Sykes v Ball with Farwell J before writing this judgment, and he has informed me that, when he delivered that judgment, his mind was directed only to the case of the investments which had been sold. In these circumstances, I cannot regard Re Firth, Sykes v Ball as being an authority for the proposition that the claim of the legal personal representatives of the tenant for life can be defeated by a transfer of investments in respect whereof dividends were accruing at the death of the tenant for life to persons becoming absolutely entitled to the trust fund on the death of the tenant for life. The headnote to that case, which refers only to the case of investments which had been sold, is, in my view, quite correct.

I now come to the third of the three cases which I set out to examineCase C. The investments in respect whereof the interest or dividend is payable have been sold by the trustees cum dividend. That is to say, they have been sold together with the dividend which was accruing at the date of the death of the tenant for life. In this case, the dividend is received by the purchaser, who has contracted that he shall receive it. He cannot, of course, be called upon to pay over any part of it to the legal personal representatives of AB, but the question arises whether or not the legal personal representatives of AB are entitled to receive from the trustees any part of the proceeds of sale. At first sight, it would seem just that they should receive some part of these proceeds. If the investment had not been sold before the dividend became due and payable, or had been sold ex dividend, the legal personal representatives

Page 631 of [1940] 1 All ER 623

of AB would have been entitled to receive a part of the dividend and it is reasonable to assume that the purchase price was greater to some extent by reason of the fact that the investment was sold cum dividend. In my view, however, the general rule is that there is no apportionment of the purchase price in favour of the legal personal representatives of the tenant for life. This general rule was recognised by Stirling J in Bulkeley v Stephens, and was recognised and applied by Clauson J in Re Walker, Walker v Patterson, and by Farwell J in Re Firth, Sykes v Ball. In Re Winterstokes Will Trusts, Gunn v Richardson, Clauson J did not think it right to apply the rule on the facts of the case before him. It would appear from the report of this case that the attention of Clauson J was not drawn to his previous decision in Re Walker, Walker v Patterson, but I appeared as counsel in Re Winterstokes Will Trusts, Gunn v Richardson, and I have a recollection that I cited Re Walker, Walker v Patterson in my argument, and submitted that the facts in Re Winterstokes Will Trusts, Gunn v Richardson justified a departure from the general rule. Whether or not my recollection is accurate, I respectfully agree with the judgment of Farwell J in Re Firth, Sykes v Ball in regard to the investments which had been sold, and I also respectfully agree with his observations on Re Winterstokes Will Trusts, Gunn v Richardson.

I desire to add only a few brief observations. When an investment has been sold cum dividend after the death of a tenant for life, and the trustees ascertain that a dividend was subsequently declared and paid to the purchaser in respect of a period beginning before the date of the death of the tenant for life and ending after that date, there is, of course, no difficulty in determining what proportion of that dividend accrued during the life of the tenant for life. It is a mere matter of arithmetic, and the sum of £2,160 13s 1d, which in Re Winterstokes Will Trusts, Gunn v Richardson was directed to be paid to the executors of the tenant for life, was a sum ascertained by this arithmetical calculation. It is, however, a very different matter if one endeavours to ascertain by what sum the purchase price was increased by reason of the fact that a dividend was accruing at the date of the sale. Let me assume that the dividend is paid half-yearly, that the tenant for life dies when three months of the half-year have expired, and that the investment is sold two months later. Can it ever be ascertained with accuracy what portion of the purchase price represents five-sixths of the half-yearly dividend which is accruing? I suspect that the cases in which this could be ascertained with accuracy are rare, and, if so, it seems difficult to justify the payment to the legal personal representatives of the tenant for life of a sum equal to one-half of the half-yearly dividend which is accruing. This consideration seems to me to afford some justification for the general rule which is, in my view, applicable to Case C.

Page 632 of [1940] 1 All ER 623

Counsel for the hospital suggested that the appropriation made by the trustees in the present case was equivalent to a sale of the investments so appropriated and a re-investment of the proceeds of sale. He described it as a notional sale cum dividend and investment of the proceeds of sale, and he drew attention to the fact that the will directs the “raising” of a sum of £100,000 and the subsequent investment thereof. On this footing, he suggested that the present case fell within Case C, and that there should be no apportionment. I decline to deal with the matter on the footing that the trustees sold the investments in question on 25 July 1939, and received £100,000 as the proceeds of sale. I think that it is right to deal with the matter on a more realistic footing. The trustees did not sell these investments, and the interest in question was not received by a purchaser from them. It was received by the trustees, and part of the interest so received belongs, in my view, to the tenant for life.

I must now deal with the question whether, in view of my decision as to apportionment, the trustees have valued the appropriated investments on the correct basis. In my judgment, they have not, since they valued the investments on the basis that no part of the accruing interest was payable to the legal personal representatives of the tenant for life. Counsel for the Attorney-General suggests that a further sum, equivalent to the sum payable to the legal personal representatives of the tenant for life, ought to be appropriated in order to make the appropriated sums up to £100,000. Counsel for the hospital very properly states that he cannot resist this claim. This must be done, and I shall give general liberty to apply, in case any difficulty arises in regard to this or to any other matter.

Declaration that the income was apportionable, and the fund had to be valued on the basis that the income was so apportionable. Costs as between solicitor and client payable out of fund.

Solicitors: Waltons & Co (for the plaintiff and for the first and second defendants); R S Fraser & Co (for the third defendant); Treasury Solicitor (for the Attorney-General).

F Honig Esq   Barrister.

Re Blaiberg, Blaiberg and Another v De Andia Yrarrzaval (Marquise) and Another

[1940] 1 All ER 632


Categories:        SUCCESSION; Wills, Family Provision        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        28 FEBRUARY 1940        


Wills Conditions Forfeiture Uncertainty “Marry any person not of the Jewish faith.”

The testator by his will declared that, “should any child or grandchild of [his] at any time … marry any person not of the Jewish faith,” such child or grandchild should forfeit his or her interest under the will or any codicil thereto. A grandchild who benefited under a codicil to the will married DK, and the affidavit in support of the summons for the determination of the question whether the interest was

Page 633 of [1940] 1 All ER 632

forfeited stated: “… it being understood by such [grandchild] that DK was not of Jewish ancestry and that at the time of such marriage he was not of and did not profess the Jewish faith”:

Held the condition was far too uncertain for the court to give effect to it.

Notes

The Privy Council has recently stated that the guiding principle in considering the certainty of a condition of forfeiture is that the court at all times can say definitely whether or not that which has been done amounts to a forfeiture. The judgment herein considers carefully the difficulty of ascertaining whether a person holds a particular belief or faith, and it is stated that this is a question which the court has no means of determining.

As to Conditions of Forfeiture, see Halsbury (1st Edn), Vol 28, Wills, pp 593595, paras 11671169; and for Cases, see Digest, Vol 44, p 462, No 2825.

Cases referred to

Sifton v Sifton [1938] AC 656, [1938] 3 All ER 435; Digest Supp, 107 LJPC 97, 159 LT 289.

Re Sandbrook, Noel v Sandbrook [1912] 2 Ch 471; 44 Digest 444, 2686, 81 LJCh 800, 107 LT 148.

Re Exmouth (Viscount) Exmouth (Viscount) v Praed (1883) 23 ChD 158; 44 Digest 441, 2668, 52 LJCh 420, 48 LT 422.

Adjourned Summons

Adjourned Summons to determine whether a forfeiture clause contained in a codicil to a will is valid, or whether it is void for uncertainty. The facts and the relevant portions of the several codicils to the will are fully set out in the judgment.

C V Rawlence for the plaintiffs.

H B Vaisey KC and J F Bowyer for the first defendant.

M Gravenor Hewins for the second defendant.

28 February 1940. The following judgment was delivered.

MORTON J. In this case, I have to determine whether a forfeiture clause contained in a codicil to the will of Solomon Blaiberg is valid, or whether it is void, as it is suggested to be, on the ground of uncertainty. The parties to the summons are as follows. The plaintiffs are the surviving legal personal representatives, and are two of the trustees of the will. The defendants are the testators granddaughter and Alfred Moses Blaiberg, who is the third trustee, and is also interested in the residuary estate.

The testator made his will on 25 June 1902. I do not think it is necessary for me to read any part of the will for the purposes of this case. There were then a first codicil, which is again immaterial, which confirmed the will in all other respects, and a second codicil, which contained the forfeiture clause in question. It is in the following words:

And I do hereby declare that should any child or grandchild of mine at any time whether before or after my decease marry any person not of the Jewish faith such child or grandchild shall forfeit and be deprived of any interest or share under my said will or codicil thereto and my said will and any codicil thereto shall be construed as if such child or grandchild had been dead at the time of his or her contracting any such marriage as above-mentioned.

The third codicil is in the following terms:

I hereby give to each of my grandchildren living at the time of my decease the sum of £100 such legacy to vest and be payable in the case of a grandson on his

Page 634 of [1940] 1 All ER 632

attaining the age of 21 years and in the case of a granddaughter on her attaining that age or marrying under that age provided in any case no marriage as forbidden by me has been contracted.

That codicil bears the same date as that of the second codicil.

There is then a very long fourth codicil, in which the testator, except in certain respects, revokes the provisions of his will and former codicils in regard to the residue of his estate. He deals with his residue in a manner which I need not specify for the benefit of his one daughter and his six sons and their respective families. Clause 20 of the fourth codicil is as follows:

I further declare that if any son daughter or grandchild of mine or the widow of any son of mine shall at any time hereafter and either before or after my death cease or fail to profess or intermarry with any person who shall not profess the Jewish faith then and in any such case such son daughter grandchild or widow shall thereupon and as from that time forfeit and lose all benefits under my said will or any codicil thereto in like manner in all respects as if he or she had died in my lifetime. But this provision shall not prejudice or affect the interest which any child or children of any son daughter or grandchild of mine suffering such forfeiture as aforesaid would have been entitled to under the foregoing provisions if such forfeiture had not taken place.

The testator made fifth and sixth codicils to his will, but they are not material. The granddaughter was born on 15 May 1906, and she was, therefore, born in the lifetime of the testator, who died on 8 April 1909. On 16 December 1924, the granddaughter was married in Paris to one Dimitry Kolomnine, and the affidavit in support of the summons says:

… it being understood by such defendant that the said Dimitry Kolomnine was not of Jewish ancestry and that at the time of such marriage he was not of and did not profess the Jewish faith.

No further evidence is filed on the matter, and it rests, so far, on this. It is said that the defendant “understood” the matters which I have just mentioned. That marriage was dissolved, and on 15 April 1926, the granddaughter was married in London to the Marquis de Andia Yrarrzaval, but that second marriage was dissolved on 23 July 1931. The executors and trustees of the will have never paid the legacy to the granddaughter, because they took the view that she had forfeited it, and no interest has ever been paid in respect of it.

In 1938, a summons was taken out which came before Farwell J who delivered judgment on 14 December 1938. He had to decide upon the validity, not of the forfeiture clause which I am considering, but of the forfeiture clause which I have read, which appears in cl 20 of the fourth codicil. Counsel for the granddaughter suggestedI do not think that I can say that he strenuously argued itthat the forfeiture clause which I have to consider here was superseded by the forfeiture clause of the fourth codicil, and was no longer effective. However, I cannot take that view. I cannot find any revocation of the forfeiture clause in the second codicil, and, further, the legacies given to the grandchildren by the third codicil were given only on condition that no marriage as forbidden by the testator had been contracted. Secondly, counsel for the granddaughter submits that the forfeiture clause is void for

Page 635 of [1940] 1 All ER 632

uncertainty. He does not rely upon any other ground, or suggest that it is void for perpetuity, but he points out that Farwell J found uncertainty in the words, “who shall not profess the Jewish faith,” and he argues that the words “any person not of the Jewish faith” are still more uncertain.

At the conclusion of his judgment, Farwell J stated very definitely that his decision was one on the particular language of that will, and that he did not want it to be taken that his decision in the case created any precedent in any other case, except, possibly, in a case where the language was precisely the same. However, there are passages in the judgment of Farwell J, apart from the actual decision, which I think are helpful, and to which I shall refer. Farwell J said:

In construing the clause, it must be borne in mind that this is a forfeiture clause and, as such, must be construed strictly. It must not be held invalid merely because it is a forfeiture clause if the court is satisfied that it is a certain clause. What exactly is meant in a case of this sort is, I think, illustrated and explained quite plainly in a recent judgment by Lord Romer in the Privy Council in Sifton v. Sifton. I do not think that it is necessary for me to do more than refer to one passage in that judgment. Lord Romer says, at p. 670: “In Re Sandbrook, Noel v. Sandbrook, Parker, J., stated the principle in these words [p. 477]: conditions subsequent, in order to defeat vested estates, or cause a forfeiture, must be such that from the moment of their creation the court can say with reasonable certainty in what events the forfeiture will occur.' In Re Exmouth (Viscount), Exmouth (Viscount) v. Praed, Fry, J., used the following language [p. 164]: “… the condition must be clear and certain. That, in my opinion, includes, not only certainty of expression in the creation of the limitation, but also certainty in its operation. It must be such a limitation that, at any given moment of time, it is ascertainable whether the limitation has or has not taken effect.

After a further quotation from the judgment in that case, Farwell J continues as follows:

As I understand that, it is this. A forfeiture clause is not necessarily void because a person may not be able to know whether the thing which he is doing or is proposing to do will necessarily create a forfeiture. On the other hand, however, it must be such a condition that the courts at all times can say definitely that that which has been done amounts to a forfeiture or does not amount to a forfeiture, as the case may be.

Then Farwell J turns to the words of the clause which he was construing, and adds this:

In my judgment, the court must be in a position to say whether or not some particular act creates a forfeiture.

He then considers in more detail the clause to be construed, and says:

It seems to me that the words “cease or fail to profess” are capable of many meanings, and in many cases it would be impossible, in my judgment, to determine with any certainty whether or not a person had ceased or failed to profess. Whether a person who, while outwardly professing to be a member of the religion, in fact was not a member of it would forfeit under this clause I know not, and it would, I think be impossible to ascertain.

As I read that observation, Farwell J is saying: “It is really impossible to ascertain whether or not a person in his own heart, in his own mind, holds a particular religious belief. It is not a matter which the courts can ascertain with certainty.”

It seems to me that the clause which I have to construe is still more

Page 636 of [1940] 1 All ER 632

uncertain than that which had to be construed by Farwell J. It seems to me that the question whether or not a person is “of the Jewish faith” is something which lies in his or her own conscience, and is a matter of belief. It is not altogether easy to see in what sense the words are used, but, supposing, for example, that the marriage had taken place in a synagogue, to my mind that would not establish that the other contracting party was of the Jewish faith. It seems to me that it depends upon whether or not he holds certain beliefs. What the beliefs are which make a man of the Jewish faith or not of the Jewish faith I do not know. It is possible that the court could ascertain that by evidence. I do not know whether or not there would be any difference of opinion among persons called to define the beliefs which it is necessary for a man to hold in order to be of the Jewish faith, but the further question of whether or not he holds those beliefs, and really believes them, is not, to my mind, a matter which a court can ascertain with certainty. Taking this particular case, and supposing that I held that the condition was a valid one, I think that I should then have to direct an inquiry as to whether or not Dimitry Kolomnine was, on 16 December 1924, of the Jewish faith. It does not seem to me that that is an inquiry which the court would undertake.

I do not think it is at all easy to see in what sense those words are used, but, if they are used in the sense which I have indicated, it appears to me that the matter is one far too uncertain for the court to give any effect to them. I adopt the words of Farwell J when he says that the condition must be such:

… that the courts at all times can say definitely that that which has been done amounts to a forfeiture or does not amount to a forfeiture, as the case may be.

In my view, the condition which I am considering is not such a condition as that, and is void for uncertainty. I do not think that any other authorities are of any real assistance on this question of construction, which turns upon the particular words which this testator has used. No case has been brought to my attention where this phrase “of the Jewish faith”or, indeed, a similar phrase referring to any other faithhas been used.

Solicitors: H E Blaiberg (for the plaintiffs and for the second defendant); Burton & Ramsden (for the first defendant).

Charles Newton Esq   Barrister.


Rippon v Port of London Authority and J Russell & Co (Port of London Authority, Third Party)

[1940] 1 All ER 637


Categories:        TORTS; Tortious Liability        

Court:        KINGS BENCH DIVISION        

Lord(s):        TUCKER J        

Hearing Date(s):        26, 29, 30, 31 JANUARY 1940        


Factories and Shops Occupier Public dry-dock Vessel under repair Firm of ship-repairers renting dock for purposes of repairing ship Factories Act 1937 (c 67), ss 25(1), 26(1), 130(1), 133, 151(1)(i) Shipbuilding Regulations 1931 (SR & O 1931, No 133), reg 1.

Tort Contribution between joint tortfeasors Occupiers of public dry-dock Breaches of statutory duty Law Reform (Married Women and Tortfeasors Act 1935 (c 30), s 6(2).

The first defendants were the owners of a public dry-dock and the second defendants were a firm of ship repairers who were repairing a vessel lying in the dock. The plaintiff, an employee of the second defendants, was walking down some steps into the dock, in order to reach the bottom of the ship, when one of the steps gave way under his weight. He fell to the bottom of the dock and sustained serious injuries. It was found that there had been a breach of the Factories Act 1937, s 25(1), in that the steps had not been properly maintained at the time of the accident, and a breach both of s 26(1) of that Act and of the Shipbuilding Regulations 1931, reg 1, in that a safe means of access had not been provided. The question arose as to who was the occupier of the dock, and, as such, liable for the defective condition of the steps. The second defendants had applied for the use of, and used, the dock on their terms and conditions contained in their application. The second defendants contended in third-party proceedings that a term must be implied in the contract for the use of the dock that it would be in a safe condition and that the first defendants, the third party, would indemnify them against any damages and costs for which they might be liable by reason of any defect in the condition of the dock:

Held (i) the first defendants were the occupiers of the dock for the purposes of the Factories Act 1937. Although they had permitted the second defendants to use the dock for the purposes of repair, they had themselves throughout retained possession of, and control over, the dock. They were, therefore, liable for the breaches of the Factories Act 1937, ss 25(1), 26(1).

(ii) the second defendants were notional occupiers under the Shipbuilding Regulations 1931, for the limited purpose of repairing the ship. They were, therefore, liable for a breach of reg 1 of those regulations, and for the proportion hereinafter stated of the damages awarded to the plaintiff.

(iii) no such term as that contended for by the second defendants could be implied in the contract for letting the dock, and the claim for a complete indemnity failed. In the circumstances of the case, there would, however, be an order for contribution under the Law Reform (Married Women and Tortfeasors) Act 1935, the first defendants to be liable for three-quarters, and the second defendants for one-quarter, of the amount of the judgment.

Notes

This case again explores the meaning of the term “occupier” as used in the Factories Acts and the Regulations made thereunder. It is decided that, although the port authority were the occupiers of the dock under the Acts, the ship-repairers were the notional occupiers, so far as the repair of the ship was concerned, within the meaning of the regulations, and the practical result of this decision is that the ship-repairers have to contribute to the damages recovered by the injured workman.

As to Occupier, see Halsbury (Hailsham Edn), Vol 14, pp 619621, para 1174; and for Cases, see Digest, Vol 24, pp 916918, Nos 117126.

Page 638 of [1940] 1 All ER 637

Cases referred to

Smith v Cammell Laird & Co Ltd [1939] 4 All ER 381; Digest Supp.

Caswell v Powell Duffryn Associated Collieries Ltd [1939] 3 All ER 722; Digest Supp.

Flower v Ebbw Vale Steel, Iron & Coal Co Ltd [1934] 2 KB 132; Digest Supp, 103 LJKB 465, 151 LT 87, on appeal [1936] AC 206.

Action

Action for damages for personal injuries suffered by the plaintiff when he was working at a dry-dock, the property of the first defendants, in the employ of the second defendants. The facts are fully set out in the judgment.

Gilbert J Paull KC and S R Edgedale for the plaintiff.

H U Willink KC and F Wishart for the first defendants.

G Russell Vick KC and Cyril Salmon for the second defendants.

31 January 1940. The following judgment was delivered.

TUCKER J. The claim here is for damages for personal injuries suffered by the plaintiff on 5 November 1938, when he was working at a drydock at Millwall in London. He was employed as a foreman boilermaker plater by the defendants J Russell & Co, a firm of ship-repairers who, at the time, were executing repairs to the Deido, a ship which was lying in the dry-dock at Millwall, the Port of London Authority being the owners of that dock. In the course of his duties on that day, the plaintiff had occasion to go down some steps down the side of the drydock for the purpose of reaching the bottom of the ship. He was carrying a welding plant weighing about 3 lbs. On his way down the steps, something caused him to fall, with the result that he fell to the bottom of the dry-dock and suffered very serious injuries. He sustained a comminuted fracture of the pelvis, and there has been injury to a nerve as a result. He also suffered a fracture of the lower end of the radius of his left arm, and he cannot now use his left arm for any work requiring any strength. He also has arthritis, but the serious part of his injury, in my view, is the result which has followed from this fracture of the pelvis and the damage which has been caused to some nerve in that region.

There have been agreed medical reports in this case, which are Exhibits P 5 and P 5A, both dated 22 January 1940. One, which is agreed upon by four doctors representing the plaintiff and the defendants, states as follows:

Mr. Rippons chief disability at the present time is painneuralgic in characterand attributable to involvement of the left pubic nerve in the injury to the pelvis and referred to the distribution of this nerve, that is to the penis, perineum and rectum. It was agreed that this pain was genuine and disabling and that it had led to Mr. Rippons present nervous condition. It was further agreed that the pain may continue indefinitely or may diminish. If no improvement is obtained in the course of the next six months the question of an operation to divide the left pubic nerve should be raised.

The plaintiff came before me at the end of January 1940, having had this accident in November 1938. It is now agreed that throughout that period he has been suffering intermittent pain almost all the time. He

Page 639 of [1940] 1 All ER 637

cannot keep in one position without suffering pain. He relieves it by occasionally standing up and another time sitting down, and the only real relief he gets is when he is lying on his back. That is the agreed condition of the man. It is further agreed that in the general labour market he is unemployable. He has no earning capacity in the open labour market, but, because of his great experience in the past, and because he is looked upon by his employers as an admirable servant, they have made use of his services in an advisory and clerical capacity for a limited number of hours a day. That has been going on now since August 1939. At that employment he has been paid his old wages, plus the increase of 15 per cent which there has been in the wages of the trade. That employment has really been of a compassionate nature. It is uncertain how long his employers will be able to go on employing him at that sort of work at that wage. If and when they are not able or willing to continue so to employ him, his prospects of getting any employment are negligible. He is a man of 58 years of age. He has been a foreman for 12 years, and he is a man who, it is obvious, is not of the type that desires to exaggerate his injuries, or to remain away from work. From the start, he has been anxious to do some work, and to do it as quickly as possible. In respect of these serious injuries he brings this action against both the defendants, claiming against them breaches of statutory duty and negligence.

First of all, with regard to the facts concerning these steps, evidence has been given on behalf of the plaintiff and on behalf of the Port of London Authority, and certain photographs have been put in. There is a bundle of large photographs of these steps. I think that one has only to look at the photograph which a witness has sworn as roughly representing the condition of the steps at the material time to see that they are really ruinous. The steps are situate in the middle of the dock, and, by reason of their position, they are very inclined to receive damage from ships bumping against the side of the dock. Not only have the steps the irregular and ruinous appearance indicated in that photograph, but also, by reason of the continual damage which they suffer from time to time, they have begun in places to crumble away. The plaintiff, as I have said, was going down these steps, and, as he went down them, he passed a man named Lyall who was coming up. On approaching Lyall, the plaintiff took the outside position of the steps, leaving Lyall nearest to the hand-rail which exists along the inside. He had occasion to speak to Lyall about some matter, and, after having spoken to him, he proceeded on his way down the steps, being then on the outside position. He put one foot forward, and I am satisfied that, as he did so, a portion of the step which was loose gave way under his foot, with the result that he fell into the dry-dock and suffered the injuries which I have described.

The case is put in several ways. First, it is said that one or other of the defendants is liable for breach of the statutory duty which is imposed

Page 640 of [1940] 1 All ER 637

upon the occupier of a dry-dock under the Factories Act 1937. S 151(1) of that Act provides as follows:

(i) Any yard or dry-dock (including the precincts thereof) in which ships or vessels are constructed, reconstructed, repaired, refitted, finished or broken up [is a factory for the purposes of that Act].

S 25(1) provides as follows:

All floors, steps, stairs, passages and gangways shall be of sound construction and properly maintained.

S 26(1) provides as follows:

There shall, so far as is reasonably practicable, be provided and maintained safe means of access to every place at which any person has at any time to work.

S 130 provides as follows:

(1) In the event of any contravention in or in connection with or in relation to a factory of the provisions of this Act, or of any regulation or order made thereunder, the occupier, or (if the contravention is one in respect of which the owner is by or under this Act made responsible) the owner, of the factory shall, subject as hereinafter in this Act provided, be guilty of an offence.

S 133 provides as follows:

If any person is killed, or dies, or suffers any bodily injury, in consequence of the occupier or owner of a factory having contravened any provision of this Act or of any regulation or order made thereunder, the occupier or owner of the factory shall, without prejudice to any other penalty, be liable to a fine …

It appears, therefore, that the occupier is the person responsible for the observance of these statutory duties, except in so far as the statute provides in some sections for the responsibility to be upon the owner. Ss 25 and 26 are not the sections in respect of which an obligation is laid upon the owner. Accordingly, it is the duty of the occupier of the factoryin this case, the dry-dockto see that those sections are complied with. Having regard to what I have already said about these steps, I am satisfied that there was in respect of them a breach of s 25(1), in that they had not been properly maintained at the time of the accident.

The evidence was that these steps were being used by the plaintiff for the purpose of performing some duties in connection with the repair of this ship. Nobody inquired precisely what he was going to do. I do not think anybody asked any question with regard to the precise portion of the ship which he was going to visit, but it was plain that he was going to do something with regard to the work being performed on the bottom of the ship, or in that neighbourhood. There is evidence that on the other side of the dock there are two chutes. The chute is a channel down which goods can be shot, and on each side there are steps with hand-rails. Both are on the opposite side of the dock to that where the plaintiff was. No precise evidence was tendered one way or the other as to whether or not those steps on each side of those chutes on the other side of the dock were safe, or what their condition was. Nor was any evidence given with regard to whether or not those chutes would have been a convenient or practicable means of access to the particular

Page 641 of [1940] 1 All ER 637

spot at which the plaintiff was going to do his work. I think that it is not without interest that, in the preparation of the plan which has been put in evidence by, I think, the Port of London Authority, no other means of access to the bottom of this dock is illustrated except the one which the plaintiff was using. I think that there has also been a breach of the statutory duty imposed upon the occupier by s 26(1), which provides as follows:

There shall, so far as is reasonably practicable, be provided and maintained safe means of access to every place at which any person has at any time to work.

I am satisfied that the means of access in fact provided for this particular man at this particular time was this stairway, which had not been maintained so as to constitute a safe means of access.

The next step is to ascertain who was the occupier within the meaning of these sections of the Factories Act 1937. Before doing so, however, I will refer to the Shipbuilding Regulations 1931. Those regulations, although dated 24 February 1931, are preserved by the Factories Act 1937, and provide for certain things to be done by the occupier. Under the heading of “Duties,” it is provided as follows:

It shall be the duty of the occupier to comply with Parts I to VIII of these regulations.

Reg 1 provides as follows:

Safe means of access shall be provided to all parts of the ship to which persons employed may be required to proceed in the course of their employment.

For the reasons which I have already given with regard to s 26 of the Act, I am of opinion that there has been a breach of reg 1 also. I will deal later with the question of who is the occupier for the purpose of the regulations contained in Parts I to VIII. Before doing so, I merely call attention to the fact that it is provided by the definitions in the regulations that:

“Public dry-dock” means any dry-dock which is available for hire.

It is agreed that the dry-dock in this case was a public dry-dock within that definition. Then under the heading “Duties” there is a proviso in these words:

Provided that, when a ship is being repaired in public dry-dock, the person who contracts with the owner of the ship or with his agent to execute the work of repair, shall be deemed to be the occupier for the purposes of Parts I to VIII and it shall be his duty to comply with the said Parts, except as follows: …

The exceptions are not material to this case.

For the purpose of ascertaining who was the occupier, either for the purposes of the Act or for those of the regulations which I have just read, it is necessary to look into the position somewhat closely. First of all I deal with the Act. Before proceeding to execute repairs to this vessel, and before obtaining the use of this dry-dock, the second defendants had to fill in an application form addressed to the Port of London Authority. It is called “Application for the use of “dry dock,” and is

Page 642 of [1940] 1 All ER 637

primarily applicable to a request on the part of the owners of a ship, but the word “owners” has been struck out and “repairers” substituted, so that it reads as follows:

The repairers [the second defendants] of the s.s. Deido hereby apply for the use by such vessel of a dry-dock, preferably the Millwall Dry-dock after s.s. El Condado (or as soon thereafter as a dry-dock is available) for days under the regulations and conditions issued by the Authority, as stated on the back hereof …

Then the dimensions of the vessel are given, and the document is signed on behalf of J Russell & Co, the name of the owners of the vessel, Elder Dempster Lines Ltd being inserted as well. Then at the bottom of the first page these words appear:

Special attention is directed to the regulations and conditions printed on the back of this form.

On the back of the form there are the words:

Regulations and conditions for the use of the Authoritys dry-docks and appliances in connection therewith.

Then follow 34 separate clauses. That application having been made, the second defendants were given the use of this particular dry-dock for the purposes of the repairing of the Deido, and I am satisfied that they used the dock on the terms and conditions contained in this document, which must be regarded as having been accepted by them as regulating the position between themselves and the Port of London Authority. Many of these regulations have been referred to in the course of this case for various purposes. I do not propose to read them all, but sometimes they speak of the use of a dry-dock and at other times they use the word “occupation.” Reg 3 provides as follows:

The use of a dry-dock is granted to vessels as far as possible in rotation according to their order in the entry book which shall be kept by the dock and traffic manager of the Authority. Precedence may be given to vessels in a damaged condition or in any circumstances which in the opinion of the Authority necessitate their immediate admission to a dry-dock, but any vessel admitted in such circumstances shall only be entitled to the temporary use of the dock for the purpose of being put into a fit state to await in safety her turn for more extensive repairs, if needed, in which case a second booking will be required. The Authority reserve the right of giving priority in the use of any dry-dock to the vessel of a company or firm habitually occupying discharging or loading berths in the docks of the Authority, and of declining to dock any vessel for repairs or work which may necessitate a lengthened occupation of a dry-dock.

Reg 4 provides as follows:

The rate shall not include any right of exclusive occupation of a dry-dock if in the opinion of the Authority the remainder of the space in such dry-dock can be utilised. When two or more vessels next in order of rotation cannot be accommodated together in a dry-dock the Authority may alter the order of rotation and admit with the first vessel a vessel or vessels occupying a lower place in the order of rotation in the entry book if capable of being accommodated in a dry-dock simultaneously with the first vessel.

Reg 9 provides as follows:

Immediate notice must be given in writing by the owner to the Authority whenever circumstances which were not known when the application for admission was made shall be discovered in connection with any vessel which has been placed in a dry-dock and which will necessitate the vessel remaining in the dry-dock for a

Page 643 of [1940] 1 All ER 637

longer period than the time for which she was booked. When such notice has been given, the Authority will endeavour to meet the necessities of the case, subject to these regulations and to the payment of the proper charges, but if one prolonged occupation of the dry-dock can and should in the opinion of the Authority be avoided by the vessel being undocked and re-docked, such course is to be pursued at the risk and expense of the owner, in which case a second booking will be required.

Reg 10 provides as follows:

When two or more vessels occupy a dry-dock at the same time and the owner of any of such vessels desires to extend the period for which his vessel may have been entered the Authority may open the gates for another vessel to leave or enter the dry-dock …

Reg 26 provides as follows:

The use of the dry-docks is granted on the condition that the owner shall comply with the regulations of H.M. Customs and of the Fire Offices Committee and with any bye-laws and regulations of the Authority for the time being in force.

There have been laid down in Smith v Cammell Laird & Co Ltd the matters which are proper to be taken into consideration in determining this question of who is the occupier. In that case, the court was considering who was the occupier of a shipyard, and not who was the occupier of a dry-dock, it is to be observed. Nevertheless, in considering this question of occupation, Lord Atkin uses these words, at p 390:

It was said that to construe this clause as imposing the absolute duty on the occupier in this case leads to such an unreasonable result as to throw doubt upon such a construction. My Lords, I cannot agree. The occupiers of a shipbuilding yard, as are the respondents in this case, have complete control over their yard, and can impose their own conditions upon those who enter the yard, and use either their own plant or that of the occupiers of the yard. They can insist upon the plant being constantly maintained in a safe condition, can terminate the licence to enter the premises or use the plant in case of breach, and can take any indemnities they think fit. In this particular case, the respondents constructed the staging. It appears that, for the use of their own men, they took the very precaution which was necessary to avoid the play of the planks by lashing them to the bearers.

Later, Lord Wright says, at p 397:

The “occupier” on whom the duties under Parts I to VIII are imposed is not defined, but it is, I think, clear that what is meant is the occupier of the yard as a whole, who are, in this case, the respondents. This is confirmed by the specific exception of the person who contracts to repair a vessel in a public dry-dock. Such person is “deemed” to be the “occupier,” as contrasted with the person having the general management and control of the dock, and there are express provisions that certain duties should rest on that person, just as certain other duties are imposed also on the shipowners. It is thus manifest that special provisions are needed to shift the responsibility from the owner or letter of the dock, who would be the occupier of the dock if it were not a public dry-dock. Apart from that provision, it is, I think, clear that, though the regulations do not define the occupier any more than does the Act, they contemplate one single occupier of the whole shipyard.

That was a case of shipbuilding, and not of ship-repairing, it is to be noticed. I think that this case shows that I have to look at the substance of the matter according to the circumstances of the case. The word “occupier” is not defined in the Act. The Port of London Authority grant the use of their dry-dock for varying periods, no doubt, to numbers of shipowners and ship-repairers on the terms of those conditions, some of which I have read. It appeared in evidence that, if

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the second defendants had been minded, or had desired, to execute repairs to these steps, the Port of London Authority would not have allowed them to do so. I think that the Port of London Authority were the occupiers of this dry-dock for the purposes of the Factories Act 1937. I think that they granted to the second defendants the right to use this dock on the terms and conditions laid down in that application form, and subject to the payment of the rates and rent which are prescribed by their regulations.

I do not think that it is conclusive if one finds that the word “occupation” is used sometimes in the clauses of this document. Nor do I think that it is conclusive that the word “use” of the dock is sometimes used. Similarly, the fact that the word “rent” is used affords no guidance. Nobody suggests that the relationship of landlord and tenant existed between these two parties. I think that the true position is that they were granted permission or licence to use the drydock for the purposes of repair on making certain payments, and that the Port of London Authority throughout retained possession and control of the dry-dock, and were at all times the occupiers. It is said that so to hold may result in the Port of London Authoritys being held liable under the Factories Act 1937, for breaches of duties which it would be unreasonable to suppose the legislature intended to put upon such a body. S 14, for example, provides as follows:

(1) Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced …

There are numerous other provisions applicable, no doubt, in the case of ship-repairing, to the work being carried out by the ship-repairers, but to hold that the second defendants were the occupiers would equally lead to results which might appear to be unintended by the framers of this Act. I think that the real answer is to be found in the opinion of Lord Atkin in the passage which I have already read from Smith v Cammell Laird & Co Ltd, from which it appears that the Port of London Authority have the right to impose on the persons to whom they grant the use of this dry-dock any terms and conditions they think proper, and can protect themselves in that way. However that may be, and whatever the results may be, in my view, looking at the whole of the circumstances of the case, I hold that the Port of London Authority, and not J Russell & Co, were the occupiers of this drydock for the purposes of ss 25 and 26.

With regard to Parts I to VIII of the regulations, as I have already stated, there is there a provision that, when a ship is being repaired in a public dry-dock, the person who contracts with the owner of a ship or with his agent to execute the work of repair shall be deemed to be the occupier for the purpose of Parts I to VIII. It is quite clear, therefore, that in this particular casea case of ship-repairingthe Port of

Page 645 of [1940] 1 All ER 637

London Authority are not the occupiers for the purpose of those particular regulations contained in Parts I to VIII, which apply only when a ship is being repaired in a public dry-dock, and when the person who contracts with the owner of the ship or with his agent to execute the work is the person who is deemed to be the occupier. Therefore, in the case of ship-repairing in a public dry-dock, there is what has been described in Smith v Cammell Laird & Co Ltd as a notional occupier for the limited purpose, and it is clear that for that limited purpose the occupiers were J Russell & Co. They were the notional occupiers for the purpose of these regulations, which include reg 1, which provides as follows:

Safe means of access shall be provided to all parts of the ship to which persons employed may be required to proceed in the course of their employment.

It might appear curious that there should be different occupiers for the purposes of the statute and for the purposes of the regulations, but I do not think that that really is the case, because most of these regulations applying to the ship-repairers are dealing with matters which are primarily the concern of the ship-repairers. It so happens, however, that one of these regulations deals with a matter which might be thought to concern the persons who provide the dock. It deals really with the same subject-matter as that of s 26 of the Act, and I think that the result of s 26 of the Act and of these regulations is that, as regards the provision of safe means of access, by the Act liability is put upon the Port of London Authority, whereas under the regulations it falls upon J Russell & Co. The result is that, if the Port of London Authority, as occupiers under the Act, have not complied with the duty laid upon them under s 26, then, and then only, it becomes the duty of the ship-repairers to provide safe means of access. That is to say, it is their duty either to see that the existing means of access is made safe or to provide some other safe means of access. I do not think that there is anything peculiar in that liability being put, in the first instance, upon the Port of London Authority, and, secondly, on the ship-repairers, if they find that safe means of access have not in fact been provided by the persons who have given them the use of the dock.

The result, therefore, is that I hold that the Port of London Authority have failed in their statutory duty under ss 25 and 26, and that the second defendants have failed in the statutory duty which is put upon them under Part I of these regulations. It is not disputed, of course, that the plaintiff is a person who is entitled to the benefit of these regulations in a civil action. That being so, I do not propose to deal with the claim which has been put forward on the basis of negligence at common law. It is sufficient for the purposes of my decision that I hold that there have been these breaches of these statutory duties.

The Port of London Authority say, however, that the plaintiff has been guilty of contributory negligence, which deprives him of the right to recover. The second defendants in their pleading have not relied upon a plea of contributory negligence, and I think that accordingly

Page 646 of [1940] 1 All ER 637

they are not entitled to put forward that plea on the trial of this action. However, as I say, the Port of London Authority have relied upon it, and it is set out in their defence. Under para 6 they allege contributory negligence, and they give particulars as follows:

On or about Nov. 5, 1938, the plaintiff was using the steps in the said dock when he conducted himself so carelessly and negligently and with such complete disregard for his own safety that he fell from one of the said steps into the said dock which is the matter complained of. The plaintiff was further negligent in that: (a) He failed to keep a proper or any look out. (b) He failed to make proper or any use of the hand rail provided at the side of the said steps. (c) Well knowing that it was, or might be, unsafe so to do he stood upon or alternatively, for the purpose of descending the said steps, used the extreme outer edges of the said steps or of some or one of them. (d) He stood upon, or alternatively, stepped so close to the extreme outer edge of the said steps or of some or one of them that he was unable to obtain a proper foothold. (e) He stood upon or, alternatively, stepped so close to, the extreme outer edge of one of the said steps that he failed to retain his balance. (f) He slipped on one of the said steps and fell from the same.

In Caswell v Powell Duffryn Associated Collieries Ltd, the House of Lords have approved what was said by Lawrence J in Flower v Ebbw Vale Steel, Iron & Coal Co Ltd. Lawrence J, in dealing with a plea of contributory negligence against a workman in circumstances such as arise in the present case, said, at p 140:

I think, of course, that in considering whether an ordinary prudent workman would have taken more care than the injured man, the tribunal of fact has to take into account all the circumstances of work in a factory and that it is not for every risky thing which a workman in a factory may do in his familiarity with the machinery that a plaintiff ought to be held guilty of contributory negligence.

Applying that test to the conduct of the plaintiff in this case, I ask whether an ordinary prudent workman would have taken more care than the plaintiff took in this case.

These steps were not provided as one-way steps. It was the normal and proper and permissible user of them that persons should pass each other going up or down. If two persons pass on these steps, one of them has to go to the outer edge, and, if he goes to the outer edge in the vicinity of the particular steps in question, he comes near the part which I have described as being ruinous. The plaintiff has sworn (and I accept his evidence) that he was not aware of the fact that the particular step on which he trod was going to give way under him. That is to say, he was not aware that a piece of loose material was going to come away under his feet. It was obvious to him that the steps were in bad repairnamely, in the condition shown in the photographbut he had to use them. He had to go down them, and he had to put his foot somewhere. He was temporarily on the outside position, and he was not aware that the portion of the step upon which he was going to put his foot, and upon which he quite properly put his foot, was going to give way under him. I am certainly not prepared to hold that he was guilty of any conduct other than that of an ordinary prudent workman using these steps in the course of his work. Accordingly, I am not surprised that, when the second defendants came to put in their defence in this case, they did not rely upon a plea of contributory negligence.

Page 647 of [1940] 1 All ER 637

That being so, the plaintiff is entitled to recover against both defendants, and counsel for the second defendants says that the second defendants are entitled to complete indemnity against the Port of London Authority for the damages which the former have to pay to the plaintiff. That case is contained in the statement of claim in the third-party proceedings, and it is put forward in this way in paras 4 and 5:

4. It was an implied term or condition of the said agreement and the third parties impliedly warranted that the third parties had and/or would before the occupation of the said dry-dock by the defendant company comply with all statutory requirements in respect of the same and that the said dry-dock would be as safe as reasonable care and skill could make it.

5. It was further an implied term or condition of the said agreement that the third parties should indemnify the defendant company against any damages or costs for which they might be liable or any expenses they might incur by reason or arising out of or in connection with any defect and/or danger in the condition of the said dry-dock.

As counsel for the Port of London Authority has pointed out, those two paragraphs are based on contract, and on contract alone. They are based upon an alleged implied term which is to be incorporated in the contract between the parties. I have already in another connection referred to the application form, which, in my view, forms part of the contract between the two defendants, but I refer to it again in connection with these third-party proceedings, because it is to be observed from the heading of the conditions that they are:

Regulations and conditions for the use of the Authoritys dry-docks and appliances in connection therewith.

In dealing with the matter, the parties have laid down in reg 21 what is to be their position with regard to blocks, shores and stage-planks or painting-trestles. I need not read the clause, but provision is made for blocks, breast-shores, bilge-shores, stage-poles and planks. Those are to be provided by the Authority:

The Authority will also provide a gangway for communication with the shore for the use of pedestrians only. Such gangway will be under the control of the master of the vessel, and must not be used for any other purpose. The owner must satisfy himself as to the number, soundness and suitability in all respects of the blocks, shores, stage-planks, trestles or gangways provided in the dock for his vessel, as the Authority do not accept any responsibility in any circumstances for any loss or injury arising out of or in connection with the use thereof or give or imply any guarantee in respect of the strength, soundness or suitability of the gangways, plant, materials, etc., provided.

Reg 31 provides as follows:

The owner of a vessel using the Tilbury New Dry-dock shall be liable for and agrees to indemnify the Authority in respect of any loss, damage or injury, howsoever caused, to or by the leading-in girder and the hydraulic bilge-blocks therein and the men provided by the Authority for the working thereof shall be deemed to be the servants of the owner.

Reg 32 provides as follows:

The Authority shall not be liable for any loss, damage, delay or detention whether occasioned by the neglect of their officers and servants or otherwise (a) which may be sustained [in certain circumstances].

Reg 33 provides as follows:

The men provided by the Authority to work any crane hired from the Authority shall be deemed to be the servants of the owner, who shall be liable for and agrees

Page 648 of [1940] 1 All ER 637

to indemnify the Authority in respect of any loss, damage or injury howsoever caused to or by any such crane.

Therefore, it must be taken that the parties, in entering into this contractual relationship, had to consider a number of matters which might arise as between themselves with regard to the liability in connection with the appliances, and generally in connection with the user of this dock. Having notionally, at any rate, applied their minds to the matter, they have inserted in this contract certain specific provisions with regard to a number of those matters. It is said, however, that I ought to incorporate a further regulation, and/or two further regulations, in the terms of paras 4 and 5 of the statement of claim in the third-party proceedings. I can do so, if it is necessary so to do, only for the purpose of giving some business efficacy to this contract. Furthermore, I must be satisfied that, if the matter had in fact been brought to the minds of the parties to the contract, they would both have agreed that such a clause must form part of the contract, and the condition must be that such clause was not inserted because it was obvious that it must be implied, and it was really quite unnecessary to put it in, or because, if the matter had been brought to the notice of the parties, they would have said: “Of course, such a clause must be inserted.”

Whatever may be the position in tort, and whatever may be the legal position when a person takes a seat at a theatre, or goes to a hotel, where there is no specific contract entered into between the parties, in the circumstances of this particular case, in which the second defendants, who, the evidence shows, knew this dock, and had worked there before, make an application in the form in which this application is made, which contains a number of terms and conditions which form part of the contract, I am not prepared to hold that I must imply a further term either as set out in para 4 or still less as set out in para 5 of the statement of claim in the third-party proceedings.

Accordingly, I think that the claim by the second defendants for complete indemnity from the Port of London Authority fails. Nevertheless, by virtue of the Law Reform (Married Women and Tortfeasors) Act 1935, it is now open to me, in a case such as this, if I am asked so to do by one or more of the defendants, to decide what contribution, if any, there shall be between the defendants, both of whom I have found to be liable to the plaintiff. S 6(2) of that Act provides as follows:

In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage …

Those words are very wide, and provide that the court may do what is just and equitable, having regard to the extent of the persons responsibility for the damage. It may appear curious to decide that the responsibility of one person who has committed a breach of a statutory duty laid down by Act of Parliament is in any way different from that

Page 649 of [1940] 1 All ER 637

of another person who has committed a very similar breach of statutory duty imposed by regulation made under, or confirmed by, the Act of Parliament, but in this case I have held that the Port of London Authority were the occupiers of the dock in substance, and that the second defendants were merely notional occupiers under the regulations for a limited purpose. Having regard to all the circumstances of this particular case, bearing in mind that I am dealing with a stairway down the side of the dock itself, forming an integral part of the dock, which was at all times within complete control of the Port of London Authority, that they were the persons who recognised it as being their duty to inspect and repair from time to time, and that they were the persons who in fact would not allow the second defendants to come and carry out any repairs to those steps, I feel that the responsibility in truth and in fact of the Port of London Authority is considerably greater than that of the second defendants. Doing the best I can, I think it just and equitable that the proportion of the liability which should be borne by the Port of London Authority is three-quarters and that by the second defendants is one-quarter.

I assess the damages at £3,355 11s 3d, including the agreed special damage, for which sum there will be judgment against both defendants. The basis of contribution as between the two defendants I have already fixed.

Judgment for the plaintiff against both defendants for £3,355 11s 3d and costs.

Solicitors: Shaen Roscoe Massey & Co (for the plaintiff); Hubert Le Mesurier, Solicitor to the Port of London Authority (for the first defendants); Blount Petre & Co (for the second defendants).

W J Alderman Esq   Barrister.

Seviour v Somerset Collieries Ltd

[1940] 1 All ER 649


Categories:        HEALTH; Health and safety at work: EMPLOYMENT; Other Employment: TORTS; Tortious Liability        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        16 FEBRUARY 1940        


Workmens Compensation Arising out of and in the course of the employment Act contrary to statutory provision and employers regulations Mine-worker riding on tub Workmens Compensation Act 1925 (c 84), s 1(2).

The workman, a lad of 19 employed as a carting-boy, stated that he was walking along a haulage road when he was struck by a tub and injured, but the county court judge found that he was riding on the journey. It was proved that workmen frequently walked along the road when the rope was travelling, in contravention of the Coal Mines Act 1911, s 43, and of the employers regulations. The question was whether, having regard to the breach of the statutory provision and the employers regulations, the workman was acting within the sphere of his employment at the time of the accident:

Held having regard to the Workmens Compensation Act 1925, s 1(2), the accident arose out of and in the course of the employment.

Page 650 of [1940] 1 All ER 649

Notes

An act is not outside the sphere of employment simply because it is reckless, dangerous and forbidden. If it is shown to be for the purpose of, or in connection with, the employers trade or business, then the workmans right to compensation is saved by s 1(2) of the Act of 1925.

As to Forbidden Acts, see Williss Workmens Compensation (32nd Edn), pp 7995; and for Cases, see Digest, Vol 34, pp 297304, Nos 24712512.

Cases referred to

Victoria Spinning Co (Rochdale) Ltd v Matthews [1936] 2 All ER 1359; Digest Supp, 105 LJKB 521, 155 LT 363, 29 BWCC 242.

Wilsons & Clyde Coal Co v MFerrin, Kerr v Dunlop (James) & Co [1926] AC 377; 34 Digest 301, 2499, 95 LJPC 130, 135 LT 164, 19 BWCC 1, affg SC sub nom McFerrin v Wilsons & Clyde Coal Co Ltd, MAulay v Dunlop (James) & Co Ltd, 18 BWCC 630, 680.

Thomas v Ocean Coal Co Ltd [1933] AC 100; Digest Supp, 102 LJKB 142, 148 LT 219, 25 BWCC 436.

Lancashire & Yorkshire Ry Co v Highley [1917] AC 352; 34 Digest 290, 2425, 86 LJKB 715, 116 LT 767, 10 BWCC 241, revsg (1916) 85 LJKB 1513.

Stephen v Cooper [1929] AC 570; Digest Supp, 98 LJPC 97, 141 LT 300, 22 BWCC 339.

Harris v Associated Portland Cement Manufacturers Ltd [1939] AC 71, [1938] 4 All ER 831; Digest Supp, 108 LJKB 145, 160 LT 187, 31 BWCC 434, revsg 30 BWCC 389.

Hawker v Doncaster Amalgamated Collieries Ltd [1938] 4 All ER 577; Digest Supp, 160 LT 31, 31 BWCC 472.

Reed v Great Western Ry Co [1909] AC 31; 34 Digest 294, 2449, 78 LJKB 31, 99 LT 781, 2 BWCC 109.

Noble v Southern Ry Co [1939] 2 All ER 817; Digest Supp.

Clarke v Southern Ry Co (1927) 96 LJKB 572; Digest Supp, 137 LT 200, 20 BWCC 309.

Appeal

Appeal by the applicant from an award given by His Honour Judge Jenkins KC at the Frome County Court on 22 January 1940.

The applicant, a lad of 19 years of age, was employed as a carting-boy at a coal face, which was 180 yds from the shackling-point at the bottom of the haulage road. At this point, there were two easily legible notices in 1 in lettering, stating that:

No unauthorised person is allowed on the haulage road whilst the haulage is in motion.

At a point 400 yds from the shackling-point, an engine-driver worked a stationary haulage engine. The shackler and driver were in communication by signal and telephone. The road rose 1 ft in 6 ft to the engine. The applicant said in evidence that, when he was walking up the road while the rope was travelling, he was struck and seriously injured by a journey consisting of two full tubs. Workmen frequently walked along the road when the rope was travelling, in breach of the Coal Mines Act 1911, s 43. Precise details of the accident could not be ascertained, but on circumstantial evidence the arbitrator found that the applicant, with his lamp lit, left the shackling-point when the rope was travelling, heard the journey following him at some distance, and had ample time to

Page 651 of [1940] 1 All ER 649

enter a manhole. The journey travelled at 2¾ mph. The applicants brother, who was following him at a little distance, was not hurt. At the place where the applicant was struck, the roof was very low. From the applicants injuries, the arbitrator concluded that he had been riding on one of the tubs.

The county court judge accordingly found that the lad had not proved that he was hit while he was walking along the road. He rejected his evidence, and found that the accident did not arise out of the employment. He said in his judgment that the act of riding on a tub was reckless, dangerous, forbidden and entirely outside the applicants contract of service, and that he had not discovered any authority to warrant his finding that this act arose out of the employment. It was not done for the purpose of, or in connection with, the respondents trade or business. He distinguished between acts of simple disobedience and acts such as riding a moving journey for the sole purpose of avoiding the fatigue of walking, or leaping on to the top of a descending cage to get to the coal face more speedily. He made an award in favour of the respondents. The applicant appealed, on the grounds that the judge misdirected himself in law in holding that the accident did not arise out of and in the course of the employment, that there was no evidence upon which it was open to the county court judge to find that the act was outside the applicants contract of employment, or not done for the purpose of, or in connection with, the respondents trade or business, or that the applicant was riding a tub.

Malcolm McGougan for the applicant.

F W Beney for the respondents.

McGougan: It is not disputed that the workman was proceeding to the pit-bottom at the end of his shift. It was part of his duty to the respondents to go there at that time. The proper test to apply to such a case as this is: Was the act which the workman was performing when he met with the injury one which, apart from any prohibition, arose out of and in the course of his employment? Apart from prohibition, it was open to this workman to proceed from the coal face to the pit-bottom by any means he cared to adopt. The judges description of the act as “dangerous” was irrelevant, for the fact of the prohibition must be excluded from consideration of the facts in this case. Similarly, there was no evidence to support the judges finding that the act was outside the mans contract of employment, for it is not disputed that the workman, in proceeding from the coalface to the pit-bottom, was doing something that he was employed to do. The judge was prepared to hold that the workman was entitled to recover if he had found that the man was walking up the haulage-way and not riding a journey, although to do so was also a breach of the statutory and the employers prohibition. To hold that the man cannot recover because of a finding of fact that he was riding and not walking is to import into the case the doctrine of added peril, an

Page 652 of [1940] 1 All ER 649

argument which is no longer valid. The fact that the man made use of a prohibited method of proceeding is immaterial: Harris v Associated Portland Cement Manufacturers Ltd, Thomas v Ocean Coal Co. [He was stopped by the court.]

Beney: Noble v Southern Railway Co and Clarke v Southern Ry Co are on all fours with the present case. The recent decision of the House of Lords (Harris v Associated Portland Cement Manufacturers Ltd) is to be distinguished from Nobles case, Clarkes case and the long line of cases behind them. It was open to the judge to find that the act was different in kind from anything that the workman was employed or authorised to do; or that, though not different in kind, it had been put outside the range of the employment by a genuine prohibition.

Malcolm McGougan for the applicant.

F W Beney for the respondents.

16 February 1940. The following judgments were delivered.

SLESSER LJ. This case, as counsel for the respondents says, is of considerable importance, and we are informed that, whilst it is notorious that many boys in coal mines do travel upon tubs, some suited and some unsuited for human conveyance, contrary to the provisions of the Coal Mines Act 1911, yet there has been no case in this court where compensation has been claimed as the result of injuries sustained by so travelling since the recent series of decisions culminating in Victoria Spinning Co (Rochdale) Ltd v Matthews.

The facts of this case as found by the county court judge are these. The applicant was engaged to work at the Ludlow Pit as what is called a carting-boy at the coal face, which is:

… situate 180 yds. from the shackling-point at the bottom of the haulage road, at which point there are two electric lamps a few feet apart.

The case for the applicant was that he was walking along this haulage road when he was struck by a tub and injured. In so far as the county court judge has not accepted the applicants view of what he was doing, however, that aspect of the case need not be considered. I accept the county court judges finding of fact as to how the accident happened. It is not necessary for me to go into the reasons why the county court judge arrived at the conclusion at which he did arrive, because he had to come to a conclusion in regard to what happened very largely on circumstantial evidence. However, he does finally come to the conclusion that the applicant was riding on the journey. That is to say, he was riding on the tub. The county court judge, as I have said, gives the reasons why he comes to that conclusion. He came to the conclusion that the applicant was riding on the journey, and that he was riding on the journey in contravention of the Coal Mines Act 1911, and in disobedience to his employers orders.

I entertain little doubt that, had it not been for the amendment of the law in 1923, under the earlier decisions of this court and of the House of Lords, it would have been open to the county court judge on the finding of fact to have come to the conclusion that this statutory and personal

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prohibition against riding on these tubs would have been sufficient to have taken this case outside the sphere of the employment, so that the employers could say: “We never employed you, the workman, to travel upon these tubs. Indeed, we expressly prohibited it, and the statute has prohibited it, and it is not open to you now to say that what you did was within the sphere of your employment.” However, there was passed the Workmens Compensation Act 1923, s 7, which now finds expression in the Workmens Compensation Act 1925, s 1(2), and we have to deal with the situation as it existed after that amendment of the law. I do not think any useful purpose is to be served by dealing with the views which from time to time were taken in this court as to the extent of the change which was produced by that legislation. I would rather go directly to the fountainhead of authority and see what the House of Lords has told us is to be regarded as the present law on the matter.

The cases which we have here to consider begin with the now very famous opinions in Wilsons & Clyde Coal Co v MFerrin, Kerr v Dunlop (James) & Co, which distinguished between the case of a man who was prohibited from doing an act, but was found to be doing an act within the sphere of his employment, and the case of a man who, acting under a similar prohibition, was found to be acting outside the sphere of his employment altogether. From time to time, questions arise in regard to how far the prohibitions as such can be looked at in order to see whether they have affected the sphere of the employment. The matter came up for consideration in Thomas v Ocean Coal Co Ltd. In that case, a man had crossed the bottom of a pit shaft at a time when the cages were ascending and descendingan act prohibited by the Coal Mines Act 1911, and notices of that prohibition were posted in the colliery. There was provided another and a proper way of getting from one side to the other of the bottom of the shaft, but the man dashed across the bottom of the shaft and was killed by one of the descending cages, and his widow claimed compensation. In that case, the county court judge found as a fact that the act was done:

… for the purposes of and in connection with the employers trade or business [a necessary finding, if the mans dependant was to take advantage of the provisions of sect. 1(2)] but found that in committing such an act, the workman had added such a peril to the employment as to take the act quite outside the scope of his employment.

The Court of Appeal upheld the county court judge, and, taking the matter to be a question of fact, came to a conclusion similar to that to which the county court judge had come. The House of Lords, however, took a different view of the matter, and the decisions there laid down have guided this court ever since in the determination of this difficult matter. The position is put very clearly, I think, by Lord Buckmaster, at p 109:

In one sense, every method of performing an operation in the course of a mans employment that is not the safest is an added peril, but the Act contains no pro-

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visions that exclude from its benefits an accident that has arisen through a method of work which was not the safest in the circumstances. Conduct can, of course, be so reckless and so unnecessary as to take it outside the meaning of the statute. …

Then he referred to Lancashire & Yorkshire Ry Co v Highley and Stephen v Cooper. Then he goes on to say that the question was whether, if there had never been a regulation forbidding what the man did, the injury which resulted was due to an accident arising out of and in the course of his employment. That is the problem he puts to himself. Then he says, at p 110:

I think, upon the whole, that it was. It arose out of his employment certainly, and was, in my opinion, in the course of it, seeing that, apart from the prohibition, the action, although hazardous, was due to the mans desire to expedite the process he was engaged to control.

Then Lord Blanesburgh in his opinion indicates, to my mind, very much the same thing. The final conclusion in that case, as I read it, is that, once it is shown that the act is within the sphere of the employment, the mere fact that it is prohibited as such will not take it outside the sphere of the employment, although there may be some prohibitions which of their nature are such that they indicate the limitations of the sphere of employment itself. I have only put paraphrastically what has been repeated in a number of these cases. It is important to notice, for example, that in Harris v Associated Portland Cement Manufacturers Ltd an even greater limitation is put upon the doctrine of added peril, which Lord Atkin describes, at p 77, as an “unfortunate misapplication of the expression, valuable enough in its right context, of added risk. ” Then he points out, dealing with Stephen v Cooper and other cases, that nevertheless [p 79 ([1938] 4 All ER at p 836)]:

Accidents happen to workmen when taking their meals or in other respects not pursuing for the moment their employment.

Then he says, at p 79 ([1938] 4 All ER at p 836):

The Lord Chancellor is in any case only referring to perils which the workman is obliged to encounter: but even so I think the word may be misunderstood, and the test must beare the perils those which he in fact encounters while doing the work which he is employed or authorised to do.

It is also interesting to observe that in that case, it having been held by the Court of Appeal that the question was one of fact, the House of Lords decided that only one conclusion in law could be drawn from the findingsnamely, that the workman was injured by an accident arising out of and in the course of his employment.

Then finally, in Victoria Spinning Co (Rochdale) Ltd v Matthews, Lord Russell of Killowen said, at p 248 ([1936] 2 All ER at p 1362):

… after the Ocean Coal Co. case, it is no longer open to the courts to hold that because the “contravention” by the workman added a peril to the employment, the accident did not arise out of and in the course of the employment, and that consequently subsect. (2) did not apply.

In the present case, I think that it is impossible not to hold that the act here done was done in connection with the respondents trade or

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business. When the county court judge came to the conclusion that it was not so done, I think that he came to that conclusion upon the assumption, with which I will deal in a minute, that the act done was done outside the sphere of the employment. Once it is assumed, however, that the act was done within the sphere of the employment, the evidence is all one waynamely, that this man used the tub for the purpose of getting from his work at the coal face, and for no other purpose, and that, therefore, the act was done for the purpose of the employers trade or business.

That brings me to the final question, and it is critical of the whole decision. On the finding of fact of the county court judge that this man proceeded to the coal face in this tubcrouching on the tub, the tub being partly fullwas there any evidence that this act was not an act within the sphere of the employment? I am not at all sure that I understand the reasons for the county court judges conclusion that this act was outside the mans contract of service. The county court judge says in his judgment:

I have read all the cases to which my attention was drawn in argument, especially those referring to “added peril,” “negligent acts,” “reckless acts,” and to the “splitting of acts into aspects,” but I have not discovered any authority warranting my finding that one of the most reckless and dangerous acts which a miner can perform, which he knows to be forbidden, and which is entirely outside of his contract of service, can be regarded as arising out of his employment.

He gives no reason why he came to the conclusion that it was entirely outside the mans contract, except that he expresses the view that it was “one of the most reckless and dangerous acts which a miner can perform, which he knows to be forbidden,” and he says that he comes to that conclusion not having discovered any authority to the contrary. If he has come to the conclusion that what was done was entirely outside the contract because it was “one of the most reckless and dangerous acts which a miner can perform, and which he knows to be forbidden,” his judgment is clearly the result of a misdirection. Harris v Associated Portland Cement Manufacturers Ltd lays it down that, if the act which the workman was doing at the time when he was injured was within his employment, no degree of recklessness in the doing of it can take it out of his employment. That is the result of the decision in that case, and it is so stated in terms by Lord Atkin. So much, therefore, for the “reckless” and “dangerous” act which the man is said to have committed. Similarly, the fact that he knows the act to be forbidden has already been dealt with in Thomas v Ocean Coal Co Ltd, and also in Victoria Spinning Co (Rochdale) Ltd v Matthews. Neither the fact that the act is reckless nor the fact that the man knows it to be forbidden is a reason for holding that the act is outside the sphere of the employment if the evidence otherwise shows that it was within the sphere of the employment. If the county court judge has come to the conclusion that it was entirely outside his contract of service for reasons other than that it was “reckless” and “dangerous,” and that

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it was forbidden, then, in my opinion, there was no evidence upon which he could come to that conclusion. There is no evidence that the terms of this mans contract of employment excluded from his employment travelling along this road in this way to his work, other than the fact that it was prohibited, and, if we were to allow ourselves, merely because this particular act of travelling in a tub, or in this particular class of tub, in this way was prohibited, to come to the conclusion from that, and from that alone, that this act was outside the sphere of the employment, we should be doing the very thing which possibly the Court of Appeal had been prone to do in earlier cases, and which we were told in Thomas v Ocean Coal Co Ltd was an illegitimate thing to do. It is said, I know, that this particular tub, or type of tub, was not appropriate for human carriage, but, where the consent in writing of the manager is given, to act in the way in which this man acted is not, under s 1(2), even a breach of the regulations.

In those circumstances, it seems to me, first, that, if the county court judge has misdirected himself, as I think he has, and has come to the conclusion that this act was outside the contract of employment because it was reckless, dangerous and forbidden, he is wrong, and, secondly, if he has come to the conclusion that it was outside the contract of service apart from the considerations that it was reckless, dangerous and forbidden, then I think that there is no evidence upon which he can come to that conclusion. If the right view be that it was within the sphere of the employment, the workman is not entitled to rely upon s 1(2), unless it be found that what was done was done for the purpose of, or in connection with, the respondents trade or business. This court has power to draw inferences of fact, and it seems to me that the necessary inference of fact to draw in this case is that what was done was done in connection with the respondents trade or business. If that is so, it would follow that, the act being within the sphere of the employment, the whole matter is covered by the protecting words of s 1(2), and that, therefore, the county court judge was wrong, and that this appeal succeeds.

LUXMOORE LJ. I agree.

GODDARD LJ. I agree. In my opinion, on the facts which were found by the county court judge, he was constrained by the recent decisions of the House of Lords to hold that this act was one which was within the scope of the employment, and that consequently the accident arose out ofas it certainly didand in the course of the employment. I must say that I have some sympathy with the county court judge. I see that no less than 21 cases were cited to him, all of which he says he has read, and it may well be that one would get bemused by reading all those authorities. I myself certainly have been in some danger of that. For myself, I find no assistance at all in considering cases merely because

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they deal with tubs, nor do I find any assistance, or very much assistance, in considering cases which were decided before the alteration of the section in 1923. That remark applies equally to the cases which were decided before Thomas v Ocean Coal Co Ltd, which is really a landmark in this branch of the law. Thomas v Ocean Coal Co Ltd was followed by Victoria Spinning Co (Rochdale) Ltd v Matthews and Harris v Associated Portland Cement Manufacturers Ltd, and I think those cases lay down one or two principles which, if borne in mind, make this class of cases comparatively simplemuch more simple, at any rate, than they were before. I ventured to say in Hawker v Doncaster Amalgamated Collieries Ltd that that case was reasonably clear. What one has to do is to see what the man was employed to dofind what the contract of employment was, and what he was employed to doand then see whether he was doing something which he was not employed to do at all, or whether he was doing what he was employed to do in a way in which he had been forbidden to do it.

In this case, the man was employed to win coal at the coal face, which was some distance from the bottom of the shaft, and consequently an even greater distance from the pit-head. His contract with his employers necessitated his presenting himself for work at the coal face. He had, therefore, to get down the pit-shaft, and proceed from the foot of the pit-shaft to the coal face, in order to do his work. All the time he was going from the pit-head to the coal face, he was doing that which he was employed to do. He had to make a journey along that particular road, and he was forbidden to make that journey by riding on the tubs. That is a prohibition as to the way in which he is to carry out his work. If there had been no such prohibition at all, could there be any doubt that this man was acting within the scope of his employment in riding in a tub along this road? I should have thought that there could not. If that be so, it is clear that this prohibition is only a prohibition against the man doing his work in a particular way. That, I think, is what he was doing.

In Harris v Associated Portland Cement Manufacturers Ltd, Lord Wright, at p 91 ([1938] 4 All ER at p 843), quoted as usefully summarising the position the words of Lord Macnaghten in Reed v Great Western Ry Co:

The problem may be compendiously stated in the words of Lord Macnaghten in Reed v. Great Western Ry. Co., as being whether the man at the time when the accident happened was about his own business, not about the business of his employers.

In this case, of course, the man was not about his own business, but was about the business of his employers, because he was going to work at this particular place.

To my mind, there has been some confusion here between what the man was employed to do and the manner in which he was employed to do it. The findings of the county court judge, to my mind, show beyond

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question that, at the time of the accident, this man was acting within the scope of his employment, but he was carrying out that employment in a way in which he had been forbidden to do it, and, in those circumstances, I think that the judge should not have come to the conclusion to which he did come. I think that he could come to the conclusion to which he did come only by misapprehending the law which applies to the facts which he found. Therefore, the evidence and the facts which he found obliged him to find that this man was acting within the scope of his employment at the time of the accident, and that, therefore, the man was entitled, as the accident was of a serious and permanent nature, to the protection given to him by s 1(2) of the Act. I agree that this appeal should be allowed.

Appeal allowed with costs in both courts. Leave to appeal to the House of Lords.

Solicitors: Arthur Taylor & Co, agents for Titley Long Taylor & Denning, Bath (for the appellant); F E Metcalfe, Bristol (for the respondents).

Derek H Kitchin Esq   Barrister.

Volume 2


Camden Nominees Ltd v Slack and Others

[1940] 2 All ER 1


Categories:        TORTS; Other Torts        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        21, 22, 23, 27 FEBRUARY 1940        


Tort Inducing breach of contract Justification Tenants association Withholding rent.

The plaintiffs were owners of a block of flats let upon tenancy agreements in a standard form, which included the obligation of the tenant to pay the rent and the obligation of the landlord to light and clean the common staircase and maintain constant hot water and central heating. It was assumed that the landlords obligations had not been fulfilled. The defendants were active in forming an association of the tenants, and in calling meetings of the tenants, and otherwise urged upon their fellow-tenants that they should withhold their rent:

Held (i) the defendants had knowingly interfered with the contracts between the plaintiffs and their tenants.

(ii) there was no justification for such interference, either on the ground of common interest in making the plaintiffs perform their obligations or on the ground of the weakness of the position of each of the tenants as compared with that of the plaintiffs.

Notes

The substantial question here is whether the facts of the present case can be brought within the decision in Brimelow v Casson, but it is held that the present is not a comparable case. The question of justification on the ground of common interest is fully considered, and it is decided that a person urging others to break their contracts with a third party cannot justify their action on the ground of common interest.

As to Justification, see Halsbury (Hailsham Edn), Vol 32, pp 164166, paras 233237; and for Cases, see Digest, Vol 42, pp 989, 990, Nos 180194.

Cases referred to

Lumley v Gye (1853) 2 E & B 216; 42 Digest 987, 169, 22 LJQB 463.

Bowen v Hall (1881) 6 QBD 333; 42 Digest 988, 174, 50 LJQB 305, 44 LT 75.

Temperton v Russell [1893] 1 QB 715; 42 Digest 987, 170, 62 LJQB 412, 69 LT 78.

Quinn v Leathem [1901] AC 495; 42 Digest 971, 30, 70 LJPC 76, 85 LT 289.

Read v Friendly Society of Operative Stonemasons of England, Ireland & Wales [1902] 2 KB 732; 42 Digest 988, 176, 71 LJKB 994, 87 LT 493, varying [1902] 2 KB 88.

South Wales Miners Federation v Glamorgan Coal Co [1905] AC 239; 42 Digest 989, 180, 74 LJKB 525, 92 LT 710, affg [1903] 2 KB 545.

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Mogul SS Co v McGregor, Gow & Co (1889) 23 QBD 598; 42 Digest 968, 6, 58 LJQB 465, 61 LT 820.

Smithies v National Assocn of Operative Plasterers [1909] 1 KB 310; 43 Digest 115, 1197, 78 LJKB 259, 100 LT 172.

Pratt v British Medical Assocn [1919] 1 KB 244; 42 Digest 973, 44, 88 LJKB 628, 120 LT 41.

Brimelow v Casson [1924] 1 Ch 302; 43 Digest 115, 1194, 93 LJCh 256, 130 LT 725.

De Jetley Marks v Greenwood (Lord) [1936] 1 All ER 863; Digest Supp.

British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479; Digest Supp, affg [1938] 4 All ER 504, 160 LT 95.

Action

Action claiming an injunction restraining the defendants from doing any acts or making any statements or taking any steps calculated or intended to cause or induce the plaintiffs tenants of a certain block of flats, or any of them, to commit breaches of their tenancy agreements with the plaintiffs by non-payment of rent or otherwise. The facts are fully set out in the judgment.

Sir George W H Jones and S W Magnus for the plaintiffs.

H Lester for the defendants.

Lester: The mere fact that the defendants were respectively secretary and chairman of the tenants association does not mean that they are responsible for having incited or procured the members present at a meeting to come to a decision which is properly voted upon by the members. The report of 2 December was not intended to induce tenants to withhold payment of rent. To induce a breach of contract means to create a reason for breaking it. To advise a breach of contract is to point out the reasons which already exist. The former is actionable, but the latter has never been held to be so: South Wales Miners Federation v Glamorgan Coal Co and Salmond On Torts, 9th Edn, p 389. If it is held on the facts that the defendants or either of them induced the tenants to break their agreement by withholding rent, there was ample justification for their so doing. The plaintiffs had themselves been guilty of grave breaches of agreements, causing injury to the tenants. The defendants and the other tenants had a common interest in their grievances against the plaintiffs and their desire to have them remedied. It is a travesty to assume that one poor tenant is in a position effectively to put forward his case against a rich landlord company. For this reason, because of the privileged position of landlords, tenants are justified in banding together and refusing to pay rent until their grievances have been settled. The limits of justification in inducing a breach of contract have never been settled: Brimelow v Casson, and cases cited therein. In the circumstances of this case, the tenants had no means other than the withholding of rent which might effectively cause the plaintiffs to comply with the terms of their agreement, and they were justified in using those means.

Jones: The evidence submitted by the defendants amounts in law to an admission that they have each severally interfered knowingly with

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the contractual rights of the plaintiff company. There is direct evidence that the defendants attempted to induce other tenants to withhold their rents. If one party without justification knowingly interferes with a contract between two other parties, he commits an actionable wrong. The fact that the tenants have various grievances in respect of certain facts does not of itself justify the withholding of rent, nor can it be said that these facts bring this case within the scope of the decision of Brimelow v Casson. The justification must involve an action taken as a duty, not the mere protection of the defendants own interests: De Jetley Marks v Greenwood (Lord). There can be no justification where the law supplies another remedy for the grievances. The proper course is for the tenants to bring an action. The fact that the landlord has broken his covenant does not justify the tenants in breaking their covenant to pay rent. It was laid down in Smithies v National Assocn of Operative Plasterers that, where there are two independent contracts, the breach of the one by the one party does not entitle the other party to commit a breach of the other contract. Here there are not separate contracts, but there are separate covenants. The most extreme case was Brimelow v Casson.

Magnus: Where there is a sufficient legal remedy elsewhere, nothing can justify a breach of contract. There may be justification where the act has been done as a result of a specific duty on the part of the defendants, as in De Jetley Marks v Greenwood (Lord). This refers only to a legal or moral duty, and not to a self-imposed one. (Counsel referred to British Industrial Plastics Ltd v Ferguson, Read v Friendly Society of Operative Stonemasons of England Ireland and Wales  and Pratt v British Medical Assocn.) Even if the defendants had not, seriously induced the tenants to withhold their rents, if the association, which is an incorporate body, itself did so induce, then Miss Forcey, as chairman, and Mr Bennett, as secretary, are liable.

Sir George W H Jones and S W Magnus for the plaintiffs.

H Lester for the defendants.

27 February 1940. The following judgment was delivered.

SIMONDS J. In this action, the plaintiffs, Camden Nominees, Ltd, claim an injunction restraining the defendants Ethel May Forcey and Ronald Vincent Bennett from doing any acts or making any statements or taking any steps calculated or intended to cause or induce the plaintiffs tenants of Highstone Mansions, Camden Road, London, or any of them, to commit breaches of their tenancy agreements with the plaintiffs by non-payment of rent or otherwise. The matter came before me on motion some short time ago, when, since it appeared that there was an acute conflict of evidence, upon which cross-examination was desirable, I adjourned the hearing for that purpose. Further, since both parties wished it, I assented to the hearing of the motion being treated as the trial of the action without any pleadings. It would have been better if I had not done so, for the pleas upon which the parties rely might then have been stated with precision.

The law as I understand it is that, if A without justification knowingly

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interferes with a contract between B and C, he commits an actionable wrong. It is upon the words “without justification” that the difficulty arises, and it was in order to consider them that I reserved judgment in a case otherwise very clear. Two questions have to be considerednamely, (i) have the defendants knowingly interfered with the contracts between the plaintiffs and their tenants, or do they threaten to do so? (ii) if yea, have they justification in law for doing so?

The facts, as I find them, are shortly as follow. The plaintiffs are the owners of a block of flats known as Highstone Mansions, Camden Road. The flats are let upon tenancy agreements which are in a standard form, each agreement containing (a) an obligation on the tenant to pay his rent, usually by monthly instalments in advance, and other usual obligations, and (b) certain obligations on the landlord, including that of lighting the staircase and landings and keeping them properly cleaned and swept, and of maintaining constant hot water and central heating. The defendant Miss Forcey is the tenant of flat No 49, while the defendant Bennett is the tenant of flat No 44, and there have at all material times been some sixty other tenants in the block.

In the autumn of 1939, certain of the tenants complained that the landlords were not satisfactorily carrying out their obligations under the tenancy agreements. How far their complaints were well-founded I do not propose to consider. I am content to assume that they were made in good faith. On 28 October 1939, the defendant Miss Forcey addressed a long letter to the plaintiffs in which she set out her grievances, demanded their redress and concluded by saying:

Pending satisfaction I am reluctantly compelled to give instructions for withholding rent.

This, she told me, meant that she would cancel her bankers order for payment of rent. A similar course had already been taken by at least one other tenant. It is clear, nor has the contrary been suggested by her counsel, that it is no answer to a claim for rent for the tenant to say that the landlord has not performed his obligation to clean the staircase or furnish hot water. Miss Forcey was, therefore, in her letter taking up a position which in law was not tenable. To her letter of 28 October 1939, and another written on 29 October 1939, she received an answer, dated 6 November 1939, which gave her no satisfaction. In the meantime, she had, naturally enough, taken counsel with other tenants, including her co-defendant Bennett. A small group of them had held a meeting in one of the flats, at which it was resolved to form a tenants association of which Bennett should be secretary. On 10 November a notice signed by Bennett as “secretary pro tem.” was delivered at the flats in the block. It was in these terms:

Dear Sir or Madam, An association of tenants of Highstone Mansions is being formed to deal with difficulties regarding lack of heating, hot water, porterage and other facilities which repeated complaints have failed to improve. It is the intention of the association to approach the landlord and insist on the maintenance of proper services. A meeting of tenants will be held at 8 p.m. on Monday, Nov. 13,

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at No. 44. If you are interested, will you kindly sign this notice and return to me. Yours faithfully, R. Vincent Bennett, secretary pro tem.

The notice at the bottom is in these terms:

I am interested in joining the association. No.. Please state whether you can attend the meeting.

Then the answer is to be filled in. The word “insist” is used. It may be that the authors of this notice had in mind some process of law, or they may have contemplated the use of some other weapon. Upon this there is no satisfactory evidence.

On 13 November the meeting was duly held at the flat of the defendant Bennett. According to the minutes, which were signed by Miss Forcey, there were present 13 persons who were tenants or the wives of tenants, and, in addition, certain persons who were described as “representatives of the St Pancras Tenants Defence League.” Various aspects of the tenancy agreement were discussed, and it was agreed that the tenants had grounds of complaint, and that they held the landlords responsible for breach of contract in regard to several matters set out in the minutes. The representatives of the St Pancras Tenants Defence League explained the objects and activities of their organisation, saying that it operated democratically for civic services and was an unpolitical body, and answered many questions. They then left.

It was then decided to form a tenants association of the tenants of Highstone Mansions, and a committee was elected, of which the defendant Miss Forcey was chairman, the defendant Bennett secretary, and certain other tenants members. It was further resolved that one member on each floor should canvass for new membership to the association, and that the committee should meet on the following day to draft a constitution and formulate a plan of action. The propriety and legality of this gathering, and of its aims as they appear in the minutes, are beyond question. No mention is made of withholding of rent, and, though I find it hard to believe that the meeting met and dissolved without any reference to the weapon which Miss Forcey had herself threatened to use, I should not be justified in finding that any attempt was then made by her or the defendant Bennett to induce other tenants to take that course.

On 14 November and on 16 November meetings of the committee were held. The defendants Miss Forcey and Bennett were both present at both meetings, as a result of which a constitution of the association was drafted after further consultation with the St Pancras Tenants Defence League, and it was decided to affiliate the association to that body. I need not refer to the constitution beyond saying that the objects of the association were defined to be (a) by united co-operative effort to safeguard the rights and interests of tenants of Highstone Mansions, and (b) to affiliate to organisations with similar aims and objects. Such objects are lawful, though the means of attaining them may be lawful or unlawful.

On 17 November the defendant Bennett again circularised all the tenants stating what had been done at the general meeting on 13 November and by

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the committee since that date, and saying that another general meeting would be held on 20 November at 8 pm, and that it was:

… to the advantage of all tenants in no matter what circumstances to attend this meeting.

On 20 November a general meeting was duly held. In addition to the defendant Miss Forcey in the chair and the defendant Bennett as secretary, and other members of the committee, there were present 17 tenants or wives of tenants, and for part of the time also representatives of the St Pancras Tenants Defence League. Certain amendments were made in the draft constitution, which, as so amended, was agreed. It was then resolved that the committee should send a letter forthwith to the landlords setting out a list of the tenants complaints and demanding negotiation and early reply, and it was further resolved (with two dissentients) that, failing satisfactory response by the landlords and the remedying of complaints, rent should be withheld. There is a conflict of evidence about the part played by the defendants at this meeting. I will complete the history of events before dealing with that question.

Immediately after the meeting, the defendant Bennett, as secretary of the association, wrote to the secretary of the plaintiffs a letter, dated 20 November stating the tenants grievances and claims, and asking that representatives of the plaintiffs should meet representatives of the association. He said that he expected to hear from the plaintiffs to that effect by Friday 24 November and that, pending such meeting, any legal action should be stayed forthwith. This referred, I think, to the fact that the plaintiffs had already taken, or threatened, action in regard to certain rent in arrear.

On 21 November, the defendant Bennett sent a further circular to all the tenants. The first two paragraphs of the circular were as follows:

(1) Following up the big meeting of last night, if you have not already done so, will all members (including those who were unable to attend) please write down all their grievances and difficulties of the past and present, and leave at the secretarys addressFlat 44. (2) will those few tenants who were unable to attend let the secretary know that they are supporting the large majority of the tenants, and will make common cause with them. Will members please arrange to sign the constitution at the earliest convenience.

The circular then went on to say that a strong and clear letter had been sent to the landlords demanding a meeting, and finally asked for subscriptions.

On 23 November the plaintiffs solicitors answered the defendant Bennett by a letter which the association no doubt regarded as wholly unsatisfactory. They rejected the complaints as totally untrue, or else as very much exaggerated, and as being an attempt to justify the non-payment of rent, and said that, while they were prepared to deal with individual tenants, they did not propose to recognise the association. On 24 November the defendant Bennett retorted by reasserting the validity of the complaints and saying:

Rent is being temporarily withheld until such time as we are satisfied that the landlord have fulfilled their obligations under the agreements.

Page 7 of [1940] 2 All ER 1

On 27 November, a general meeting of the association was held, at which the defendants and other members of the committee and 13 members of the association attended. It appears that at this meeting the conduct of the committee in their correspondence with the plaintiffs and their solicitors was approved, and a further letter was drafted for tenants to inform the landlords that rent was being withheld. This letter was addressed to the secretary of the plaintiffs, and was as follows:

Sir, I hereby indorse the letter of the Highstone Mansions Tenants Association of Nov. 20, and pending a satisfactory conclusion of the proposed negotiations I have to advise you that I am withholding the rent presently due.

On 28 November, letters in this common form were signed and sent to the plaintiffs by 12 tenants, and on 2 December more such letters were sent by more tenants, including the defendant Bennett. On 2 December, there was issued to all tenants a notice, headed “Report 2.12.39,” for which both defendants admit responsibility. Two paragraphs in it may be noticed. The first runs as follows:

Several tenants have been visited by the landlords representative in an effort to “divide and conquer” and in each case he has been unsuccessful and referred to the association. If, therefore, you receive a visit, please advise a member of the committee. It is to be hoped (and expected) that tenants will stick together in accordance with the democratic resolution of the general meeting. This is the testing time.

Then, after a paragraph that I need not read, there is this paragraph:

If you have not yet (a) paid your sub., (b) signed the constitution, (c) notified the landlords you are withholding rent pending satisfactory conclusion to the communication the association has addressed to them, (d) not sent us details of your own complaints and claims, please communicate with the secretary, chairman, or members of the committeeFlats Nos. 44, 49, 52, 20, either calling personally or leaving a note stating when you are available to be seen.

No further event of any importance took place before 15 December, when the writ in this action was issued.

I return to the meeting of 20 November. The defendants would have me believe that the important resolution then passed for the withholding of rent was something for which they were not in any way responsible, and that the idea of doing so was, in some way which they could not explain, generated in the minds of those present. On the other hand, Miss Dribbell, who was one of the two dissentients, deposed to the fact that Miss Forcey said that she and certain other tenants had stopped paying their rents and requested all the tenants present to do the same, and that it was she who invited the tenants to withhold their rents and asked them to signify their consent by raising their hands. In this she was corroborated by the other dissentient, Mrs Farren. Having heard and seen the witnesses, I have no hesitation in accepting this evidence, which, moreover, accords with probability. Miss Forcey was the protagonist in this dispute. Already on 28 October she had adopted for herself this method of persuading the plaintiffs to remedy her grievance. It would be strange if, realising that such a method would be more persuasive, if not coercive, when adopted by others, she did not advocate

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its adoption. I believe the witnesses who say that she did what I should have expected her to do. Against the defendant Bennett there is no evidence of any spoken word. It is clear, however, that he took a leading part in forming the association and guiding its policy, and the so-called report of 2 December, for which, as I have said, he candidly admitted responsibility, by itself demands that I should find against him upon the issue of endeavouring to persuade his fellow-tenants to break their agreements by withholding rent.

Against both defendants, then, I must find for the plaintiffs on the first question, and then there arises the second questionnamely, whether or not the defendants had justification in law for what they did. This is a field in which it behoves a judge of first instance to walk warily. He has little to guide him. By the end of the nineteenth century, it had been clearly established as the result of a number of cases, of which Lumley v Gye, Bowen v Hall and Temperton v Russell, decided in 1853, 1881 and 1893, respectively, may be taken as the landmarks, that it is an actionable wrong without justification to interfere with the contractual rights of another. That this result was not easily reached may be seen from the powerful dissenting judgment of Coleridge J, in Lumley v Gye and of Lord Coleridge, LCJ, in Bowen v Hall. However, while the general proposition was thus established, and, as is generally accepted, a remarkable development made in the law of torts, no corresponding definition was given of what amounts to justification for such interference. Thus, in Quinn v Leathem, Lord Macnaghten says, at p 510:

… it is a violation of legal right to interfere with contractual relations recognised by law if there be no sufficient justification for the interference.

He does not, however, say what is sufficient justification. In Read v Friendly Society of Operative Stonemasons of England Ireland & Wales, Darling J, after citing the statement of the law by Lord Macnaghten, instances as an example of justification the case of a man who has entered into two inconsistent contracts with A and B, and cannot perform the one without breaking the other. In such a case, it is suggested that A, insisting on his contractual rights, is not liable at the suit of B. He gives no other example of justification. The same case in the Court of Appeal is useful as showing (i) that what is otherwise wrong is not made better by an honest belief that it is very much to the advantage of the person committing the wrong, and (ii) that, where illegal means are used, “just cause” cannot come into the discussion at all. In South Wales Miners Federation v Glamorgan Coal Co, a further discussion of justification will be found. In the dissenting judgment of Vaughan Williams LJ, there are passages which indicate that community of interest might constitute justification, but I do not think that this view is consistent with the judgment of the majority of that court, or with the opinions in the House of Lords, to which I shall presently

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refer. Romer LJ, after referring to the observations of Sir Richard Henn Collins MR, in Reads case, says, at p 574:

I respectfully agree with what Bowen, L.J. said in the Mogul case, when considering the difficulty that might arise whether there was sufficient justification or not [p. 618]: “The good sense of the tribunal which had to decide would have to analyze the circumstances and to discover on which side of the line each case fell.” I will only add that, in analyzing or considering the circumstances, I think that regard might be had to the nature of the contract broken; the position of the parties to the contract; the grounds for the breach; the means employed to procure the breach; the relation of the person procuring the breach to the person who breaks the contract; and I think also to the object of the person in procuring the breach.

He agreed with Stirling LJ, in holding that no such duty lay upon the defendant federation as justified them in acting as they did, but that a duty to interfere which might amount to justification could exist was, in their judgment, clear. Upon this case going to the House of Lords, this general proposition was reasserted, but it is to be observed that their Lordships were careful not to travel beyond the facts of the case before them. The Earl of Halsbury LC, refused to discuss cases where, upon moral or religious grounds, people may be justly advised to refuse to perform what they have agreed to do, and equally he refused to enter into a discussion of the duty or moral right to tender advice. Lord Macnaghten, while saying that he did not doubt that there might be justification for that which was in itself an actionable wrong, and that it would not be difficult to give instances putting aside altogether cases complicated by the introduction of moral considerations, did not give any such instances. Lord James accepted the proposition, but did not in this respect illuminate it. Lord Lindley, after dealing with the proposition that all that the officials of the federation did was to advise the men, and observing that it was not necessary to consider what a parent or guardian might do to protect his child or ward, and that it might be admitted that there were cases in which it was not actionable to exhort a person to break a contract, dismissed as untenable the proposition that the officials of the federation had such a moral or social duty to do their best for the men as justified their action.

In Smithies v National Assocn of Operative Plasterers, it was once again sought, but sought in vain, to justify the procurement of breaches of contract of service by workmen. It was there held that a bona fide belief on the part of the union that the employers were intending to evade a settlement of the dispute in accordance with the agreement, or even an actual intention on the part of the employers so to do, did not constitute justification for inducing the workmen to break their contracts. Again it was recognised that there might be justification, and Buckley LJ, gave the familiar example of inconsistent contracts, but no other example. He added, however, this observation which bears upon the present case, at p 337:

The contention of the defendants here is: “We were entitled to induce Forrester to break his contract with you because you had broken your contract, as contained in the national agreement with us.”  This is setting up that, where there are two

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independent contracts, the breach of the one by the one party entitles a breach of the other by the other party. This contention, in my opinion, cannot be maintained.

In Pratt v British Medical Assocn, McCardie J, sums up the authorities by saying that malice in the sense of spite or in will is not an ingredient of the action, and, secondly, that no justification exists by reason of the fact that the defendants acted either for the advancement of their own trade interests or for the advancement of the interests of those with whom they were associated.

Thus the law stood when in 1924 Russell J, decided in Brimelow v Casson  that the defendants, though they had procured the breach by a number of chorus girls of their contracts of service, had a sufficient justification for their action. After citing the passage from the judgment of Romer LJ, in the Glamorgan Coal Co case, and after considering all the circumstances of the contracts which had been broken, Russell J, said, at p 313:

These defendants, as it seems to me, owed a duty to their calling and to its members, and, I am tempted to add, to the public, to take all necessary peaceful steps to terminate the payment of this insufficient wage, which in the plaintiffs company had apparently been in fact productive of those results which their past experience had led them to anticipate.

In the 16 years which have passed since this decision, there has been, so far as I am aware, no case in which justification has been successfully pleaded.

In De Jetley Marks v Greenwood (Lord), Porter J, in regard to that plea says, at p 873:

The justification must, I think, involve an action taken as a duty, not the mere protection of the defendants own interests.

In British Industrial Plastics Ltd v Ferguson, Slesser LJ, said that he thought that there might be justification, but this was not necessary to his decision, inasmuch as it was not established that the defendants knew that they were procuring a breach of contract, and such knowledge is a necessary ingredient of the tort.

In addition to these, which are the only relevant English authorities of which I am aware, there is a large body of American cases on this branch of the law, but, instructive though they are, I do not think that I can usefully refer to them. The result which plainly emerges is that it is for the defendant to justify, and that his task is a difficult one.

In the present case, if I rightly understand his argument, counsel for the defendants has pleaded that the defendants are justified in their otherwise actionable wrong on two groundsnamely, (i) that they and those whom they would persuade to break their contracts have a common interest in making the landlord perform his obligations, and (ii) that there is such a state of affairs here existingthat is, on the one side tenants who are weak and on the other landlords who are strong, and take advantage of their strengththat it is justifiable for the defendants to use a weapon which would otherwise be wrongful.

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In my judgment, there is no validity in either of these contentions. The defendants owed no duty to their fellow-tenants. They sought their co-operation for their own ends, though no doubt a successful campaign would have been for the benefit of all alike. The end which they sought namely, the performance by the landlord of his obligationswas one which could be reached by process of law. If the landlord broke his contract, the law gave them their remedy by way of damages, or, in a proper case, by way of specific performance. There is neither reason nor authority for the suggestion that in such circumstances a common interest can justify the interference with contractual rights. If A, B, C and D meet together and agree that, in order to persuade or coerce X to a certain course, they will each break their contracts with him, that, I apprehend, is an actionable conspiracy. It would be a strange thing if A, calling together B, C and D, and urging them to break their contracts, could justify that act on the ground of common interest. In my judgment, this contention must fail.

The second contention was one which appeared to be directed less to my reason than to my emotions. The case was put as somewhat analogous to Brimelow v Casson in which any step which put an end to an intolerable position might be regarded as justifiable. Brimelow v Casson stands alone, and has been the subject of a good deal of controversy. In a comparable case, it would be my duty to follow it, though I would humbly suggest that, on the facts stated in the judgment, that case might have been simply disposed of by the application of the maxim ex turpi causa non oritur actio. However that may be, though, there is no real analogy between the two cases. It is a dangerous proposition that inequality in wealth or position justifies a course otherwise actionable, and that tenants may adopt measures of self-help against their landlord because, in their judgment, the law does not afford them adequate remedy for his default.

I would only add, in deference to the argument addressed to me, which I think was intended to be founded on Brimelow v Casson, that neither that case nor any other case supports the view that those who assume the duty of advising the withholding of rent or any other breach of contract can justify their action by protesting that they are performing a public service. Advice which is intended to have persuasive effects is not distinguishable from inducement, and there is no reason to suppose that the giving of such advice is justifiable except by those persons in whom the law recognises a moral duty to give it. In the result, I hold that the defendants without justification interfered with the plaintiffs contractual rights, and it is clear that, at the date of the issue of the writ, they intended to continue to do so. I must, therefore, grant an injunction as asked.

The plaintiffs further claim damages upon the footing that they have suffered some loss by the withholding of rent by the tenants induced thereto by the defendants, but they say that they will be content with

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a nominal sum. Upon this footing, I award them £1 damages, and I order the defendants to pay the costs of the action, the motion being, by consent, treated as the trial of the action.

Injunction granted, and damages of £1 awarded to the plaintiffs.

Solicitors: Phoenix Levinson Walters & Shane (for the plaintiffs); S Seifert & Co (for the defendants).

Charles Newton Esq   Barrister.

Bond v Norman

Bond v Nottingham Corporation

[1940] 2 All ER 12


Categories:        LAND; Property Rights        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        5, 6 MARCH 1940        


Easements Support Interference Demolition of adjoining house by corporation in pursuance of clearance order Liability of corporation Housing Act 1936 (c 51), s 26.

The appellant corporation intimated to the respondent that they intended to demolish certain property included in a clearance scheme, owing to the failure of the owner to demolish the same. The respondent, the legal owner of an adjoining house, was entitled to a right of support for that house from the property ordered to be demolished. The corporation claimed that, as they were performing a statutory duty, they were entitled to disregard the rights of an adjoining owner and to demolish the property comprised in the clearance area without providing equivalent support for the respondents house:

Held on the true construction of the Act, the corporation, in demolishing the property in pursuance of their statutory powers, had power to demolish it only because the owner of the property had failed to do so, and they were in the same position as the owner, and, therefore, under an obligation to provide equivalent support for the respondents house.

Decision of Simonds J ([1939] 3 All ER 669) affirmed.

Notes

In previous proceedings, it was held that the owner of the house to be demolished wasbound to have regard to the right of suppor vested in the adjoining owner. The question here is whether the local authority were under a similar duty when exercising their statutory power to enter and demolish the property included in the clearance order. It was held by Simonds J, and that decision is here affirmed by the Court of Appeal, that the local authority must have regard to the easement of support, and, if they proceed to demolish the premises in accordance with the order and their statutory powers, they must provide equivalent support for the plaintiffs building.

As to Interference with Easement of Support, see Halsbury (Hailsham Edn), Vol 11, pp 368, 369, paras 647, 648; and for Cases, see Digest, Vol 19, pp 173, 174, Nos 12301233.

Cases referred to

A-G v Horner (1884) 14 QBD 245; 42 Digest 743, 1679, 54 LJQB 227, on appeal (1885) 11 App Cas 66.

Colebeck v Girdlers Co (1876) 1 QBD 234; 19 Digest 173, 1223, 45 LJQB 225, 34 LT 350.

Jones v Pritchard [1908] 1 Ch 630; 19 Digest 43, 229, 77 LJCh 405, 98 LT 386.

Union Lighterage Co v London Graving Dock Co [1902] 2 Ch 557; 19 Digest 20, 68, 71 LJCh 791, 87 LT 381.

Page 13 of [1940] 2 All ER 12

Peyton v London Corpn (1829) 9 B & C 725; 19 Digest 170, 1190, sub nom. Peyton v St Thomass Hospital (Governors) 7 LJOSKB 322.

Dodd v Holme (1834) 1 Ad & El 493; 19 Digest 169, 1177.

Metropolitan Asylum District v Hill (1881) 6 App Cas 193; 13 Digest 401, 1230, 50 LJQB 353, 44 LT 653.

Swainston v Finn & Metropolitan Board of Works (1883) 52 LJCh 235; 11 Digest 137, 241, 48 LT 634.

Geddis v Bann Reservoir (Proprietors) (1878) 3 App Cas 430; 13 Digest 399, 1223.

Public Works Comr (Cape Colony) v Logan [1903] AC 355; 11 Digest 109, case k.

East Fremantle Corpn v Annois [1902] AC 213; 13 Digest 401, 1236, 71 LJPC 39, 85 LT 732.

Appeal

Appeal by the defendant corporation from an order of Simonds J, dated 19 July 1939, and reported [1939] 3 All ER 669. The plaintiff in this action died while the judgment of Simonds J, was being considered, and the suit was revived by adding his legal personal representative. Simonds J, made an order restraining the defendant corporation from demolishing certain cottages situate in Aspley Place, Alfreton Road, Nottingham, so as to remove the support afforded to the property of the plaintiff without providing equivalent support in its place. The defendant Norman is the owner of the cottages in question.

C E Harman KC and Wilfrid M Hunt for the appellants.

J Neville Gray KC and E J Rimmer for the respondent.

Harman KC: If the decision of  Simonds J, is correct, the corporation are under an obligation to provide equivalent support to the respondents property before they may take down the cottages which adjoin that property. It is a little difficult to know what is meant by equivalent support and how long it is to last. The corporation is to provide that support on land which is not theirs. If the right of support has been acquired by prescription, it is necessary to show that there are circumstances which brought it to the knowledge of the owner of the servient tenement that the right was being acquired. The Housing Act 1936, s 26, states the duty of the local authority. The only duty of the corporation under the statute is to demolish. An obligation to shore up adjoining property cannot be implied from that. Shoring up is not a necessary incident of demolition. If the corporation had bought the adjoining property, compensation in respect of an easement would have been payable, by reason of the provisions of s 46 of the Act. It is a curious feature of the right to support that it is not a perpetual easement. The servient owner has to provide support only so long as his building remains standing. He may, however, allow it to fall down. The right of support then goes. This is shown by Colebeck v Girdlers Co  and Jones v Pritchard. In order to obtain an easement of support, it is not enough to show enjoyment for 20 years. There must also be something by which notice of the fact is given to ones neighbour: Union Lighterage Co v London Graving Dock Co. In the absence

Page 14 of [1940] 2 All ER 12

of an easement, there is no obligation to shore up an adjoining house: Peyton v London Corpn and Dodd v Holme. No action can lie against a public body for doing that which it is required by statute to do: Metropolitan Asylum District v Hill. There is nothing in the Housing Act 1936, which preserves the rights of the respondent, and therefore it must be assumed that they are taken away: Swainston v Finn & Metropolitan Board of Works. The legislature has made no provision for the payment of compensation in cases where the local authority does not purchase.

Hunt: If Normans house were to fall down, the easement of support claimed by the respondent would go with it, subject to any rights he may have to repair. The legislature has said that the house is not fit to exist, and it directs the local authority to pull it down. The statute under which the local authority is directed to demolish the house says nothing about providing support to an adjoining house. The statute provides that all the materials are to be sold, and all that the local authority can recover from the owner of the property demolished is the expense of demolition. There is an obligation upon the local authority to act promptly. If the owner does not demolish the property within the time allowed, including any extended time, the local authority must demolish. The local authority has no machinery by which it can investigate the title to the property or go into its past history. Consequently, if the decision of Simonds J, is correct, and the local authority demolishes without providing support, the owner of the adjoining property may have a right of action against them, if there should happen to be an easement. The local authority, however, would have no right to recover against the owner of the property demolished.

Gray KC: There is no question, in this case, of the collapse of the property. The only question is whether or not a person is entitled to be compensated if rights are taken away. If the local authority were buying the site, under the provisions of the Housing Act 1936, s 46, they would have to pay compensation in respect of rights which were extinguished. The essential thing is to ascertain the intention of the legislature. In the present case, the intention is made clear by the preamble to the Housing Act 1930. The Housing Act 1936, has the same object as that of the Act of 1930, as is apparent from a consideration of it. The legislature, when providing for clearance, does, in the public interest, disregard the right of the owner in a degree. There is nothing in the Act, however, to indicate that Parliament intended to take away the rights of anybody except a person who comes within the terms of the Act. No Act of Parliament takes away rights by implication, unless it is impossible to arrive at any other conclusion from the terms of the Act itself. Nothing is said as to the rights of owners of adjoining property, except in s 46. If an owner who is ordered to demolish does not do so, the local authority must demolish the property in question. They must, however, demolish the property properly, and

Page 15 of [1940] 2 All ER 12

with regard to the rights of owners of adjoining property. “Demolish” means “demolish having regard to the rights of adjoining owners”: Geddis v Bann Reservoir (Proprietors). It would be negligence to pull down the property in question without giving to the adjoining property the support to which that property is entitled: Geddis v Bann Reservoir (Proprietors). Unless it is driven to it, the court will not decide that, when the legislature takes away a mans rights, it takes them away without giving him compensation: A-G v Horner. The words of Sir William Brett MR, in A-G v Horner were repeated and emphasised by the Privy Council in Public Works Comr (Cape Colony) v Logan. If the contention of the appellant corporation is right, the effect would be to make a present of the respondents rights to the owner of the property which is to be demolished. The respondent would be deprived of his right of support, and the owner of the property to be demolished would be relieved of liability.

Harman KC, in reply: The corporation cannot be bound by the decision of the court given against the owner of the property to be demolished, because the corporation is not his agent. The corporation must do the work as the person who has been appointed by Parliament to do it. A wall cannot be left standing in order that it may give support to adjoining property, because the Act requires the buildings on the clearance area to be demolished and their materials to be sold. It would be putting a great burden upon local authorities if the Act were to be construed in the way proposed. (Counsel referred to Geddis v Bann Reservoir (Proprietors) and East Fremantle Corpn v Annois.)

C E Harman KC and Wilfrid M Hunt for the appellants.

J Neville Gray KC and E J Rimmer for the respondent.

6 March 1940. The following judgments were delivered.

SIR WILFRID GREENE MR. I find myself in agreement with the conclusion of Simonds J, and with the reasons on which it was based. I shall accordingly confine myself to making a few observations which are suggested by the arguments which we have heard. In dealing with a matter of this kind, it is legitimateand, in fact, necessaryto consider the consequences of the one construction of the Act of Parliament and of the other construction, for the purpose of seeing whether or not one of those constructions runs counter to certain principles which the legislature prima facie is supposed to follow. The most relevant consideration in this particular case is that which was stated in a well-known passage by Sir William Brett MR, in the Court of Appeal in A-G v Horner at p 257, which is quoted by Simonds J, in his judgment, at p 671:

… it is a proper rule of construction not to construe an Act of Parliament as interfering with or injuring persons rights without compensation, unless one is obliged to so construe it.

It is not disputed in the present case that the construction contended for by the appellants would result in interfering with the plaintiffs rights without compensation, but it is said that the language of Parliament is so clear that we are obliged to construe it as having that result.

Page 16 of [1940] 2 All ER 12

I think that the admitted fact that the appellants construction will produce that consequence will bear a little addition. The legislation is complicated, but it is not merely that on that construction the plaintiff will be deprived of his rights without compensation, but that that deprivation, according to that construction, will be of a peculiarly capricious character. I say that for this reason. There are in the Housing Acts concernedthe Act of 1936 is the one to which it is convenient to referalternative methods by which a local authority can secure the elimination of buildings which, for the reasons stated in the Act, it is considered desirable to eliminate. One is by an order for the demolition of the buildings in the area, and the other is by purchase by the local authority itself. That purchase may be either by agreement or it may be compulsory. I need not concern myself with the purchase by agreement, but, where the particular choice of the local authority falls upon compulsory purchase, the Act provides for the extinction of easements affecting land purchased, and also for the giving of compensation to the persons entitled to the easement. It is a perfectly intelligible scheme, under which Parliament, for good reasons, takes away a mans rights, but provides for compensation.

Note, however, how different are the consequences if the local authority makes the other choice, and determines to proceed by a clearance order. It is contended that, whether it is the owner or the local authority who does the work consequent upon the making of the clearance order, they are both entitled, in effecting the necessary demolition, to disregard entirely the right of the owner of the easement, which in this case is an easement of support. If the proceeding is by means of a clearance order, the owner of the building, if he demolishes, or the local authority, if it demolishes, can get rid of that easement, or, at the least, according to the argument of counsel for the appellants, can so seriously affect the position of the proprietor of the easement that he has either to allow his house to collapse or himself at his own expense to set up the necessary support.

For the purposes of the consideration to which I am directing my remarks, it matters not which of these two things be right, because in each case the right of the owner of the easement is seriously affected. Accordingly, it would appear that Parliament has produced the resultwhich I cannot characterise as other than capriciousof giving to the owner of the easement compensation if the local authority chooses to take one course, and depriving him of compensation if it chooses to take the other. If Parliament has so decreed, well and good, but no intelligible reason has been suggested to us why Parliament should have drawn a distinction of that character between the two cases, thus leaving it to the decision of the local authority to take a course which may or may not affect the rights of the owner of the easement without consulting him. That is a consideration which I think it is legitimate to take into account.

Page 17 of [1940] 2 All ER 12

There is a further matter, however, which bears upon the same argument, and it is this. Whichever of the two courses the local authority is minded to adoptnamely, clearance order or purchasethe Act provides for a hearing of certain persons at which they can urge their objections to the taking of whichever course is decided upon. The persons entitled to take objections are the owner, who in the Act is defined as the owner in fee, lessee, occupier (but excluding tenants for a month or less), and, if possible to ascertain such persons, every mortgagee. Those provisions will be found in the first and third schedules to the Act. If the inquiry is one relating to a proposal for compulsory purchase, those persons are entitled to appear and be heard. On the other hand, the owner of the easement is not entitled to be heard. He does not belong to any of the classes the members of which are regarded by the legislature as proper persons to be heard in opposition. The fact that he is excluded from taking part in such an inquiry may be galling to him, but he has the consolation at any rate of knowing that, although the effect of the order will be to extinguish his easement, he will get compensation for the loss so suffered. Very different is the position where the inquiry is one which relates to a clearance order. In that case, as in the other case, the owner of the easement is excluded from the room, but in that case his position is doubly galling, because he knows that, not only is he given no opportunity to state his objections, which may be very serious, but also he is faced with the situation that, without his having been heard at all, his easement, or whatever it may be, is going to be taken away from him, or, at the lowest, he is going to be subjected to expense in making it effective without one penny of compensation being given to him. There, again, I cannot help thinking that there would be some capriciousness in the Act of Parliament if that were the consequence.

I mention these matters because it seems to me that, if the appellants construction is right, they do form an aggravation of the simple case of taking away property without compensation, because they mean that the process of taking away that property (or compelling the owner at his own expense to preserve it) without compensation shows, when compared with the other provisions of the Act, a complete inconsistency for which no reasons can be suggested.

Armed with those considerations, it becomes necessary to approach the construction of the Act itself. The question lies in the smallest possible compass, and turns ultimately upon the meaning of one word, read, of course, in the context in which it is found, and in the light of the Act of Parliament as a whole. Counsel for the appellants did not accept the view that Norman, the owner of this building, was under any obligation, if he had carried out the demolition, to provide alternative support for the plaintiffs houses, but he said, and very fairly said, that, even if Norman was under an obligation of that character, such obligation did not extend to the local authority, because, in

Page 18 of [1940] 2 All ER 12

construing the language used in reference to the duties imposed on the local authority, it is unnecessary to consider the nature of the duties in the case of Norman. I think that the proper way of construing the more immediately relevant sectionnamely, s 26 is to consider, in the first place, the powers and duties of the owner. It is to be noticed that the obligation imposed on the owner is in terms the same as that imposed upon the corporation. The words are “shall demolish.” When I consider the position of Norman, confronted, on the one hand, with the existence of the right of support vested in his neighbour, and, on the other, with the direction of an Act of Parliament which tells him that he shall demolish the building which provided the support, it seems to me that, in construing the language of the Act of Parliament, he is bound to construe it in relation to the existing state of affairs as between himself and his neighbour. In that relationship, Norman is not the owner of a building free from any rights in other persons. He is the owner of a building which is the subject of a real right in a neighbour, which qualifies and cuts down the plenitude of his ownership.

The nature of the right of support is not open to dispute. The owner of the servient tenement is under no obligation to repair that part of his building which provides support for his neighbour. He can let it fall into decay. If it does so, and support is removed, the owner of the dominant tenement has no cause for complaint. On the other hand, the owner of the dominant tenement is not bound to sit by and watch the gradual deterioration of the support constituted by his neighbours building. He is entitled to enter and take the necessary steps to ensure that the support continues by effecting repairs and so forth to the part of the building which gives the support. What the owner of the servient tenement is not entitled to do, however, is by an act of his own to remove the support without providing an equivalent. There is the qualification upon his ownership of his own building that he is bound to deal with it subject to the rights in it which are vested in his neighbour, and can deal with it subject only to those rights.

If one takes the case of a person in that situation, what is the proper construction of an Act of Parliament which directs him to demolish his building? It seems to me that, when it is borne in mind that one construction will result in doing the thing which must not be done, according to what Sir William Brett MR, said in A-G v Horner, and the other construction will not, then the only construction which we ought to put upon the words is one which, withoutin my view, at any ratedoing any violence to the language, will avoid the consequence referred to by Sir William Brett MR, and will resolve the difficulty. It seems to me that, when the owner of the servient tenement demolishes his building in such a way as to affect his neighbours right and let down his neighbours house, he may properly be said to be doing something more than merely demolishing his building. He is not merely dealing with what is his. He is dealing with what is not his. He is

Page 19 of [1940] 2 All ER 12

demolishing his building, and, at the same time, affecting what the law recognises as a right of his neighbour in that building.

In those circumstances, it appears to me that the proper construction to put upon the word “demolish” involves that the manner of demolition must be such as not to interfere with the neighbours rights. That does not mean that the demolition is necessarily to stop short at the point where the existing building begins to provide support, for the reason that it is not the right of the owner of the dominant tenement to insist upon the maintenance of that individual and particular building. His right is given effect to, if that building is taken away, by providing that some substitute is put there for it. He is entitled to say to his neighbour: “Either you leave your building, or the necessary part of it, as it is, or, if you choose to pull it down, you must provide a substitute.”

In this case, Norman being confronted with that alternative, it seems to me that the method of demolition which he is ordered to carry out must be one which gives effect to the rights of his neighbour, which he can do, and consistently with the direction of the Act of Parliament may very well be bound to do, by taking down the whole of his building and providing the necessary support. I see no difficulty myself in regarding the totality of these operations as falling within the general process of demolition.

If that view as to Normans position be right, I am quite unable to discover any reason why demolition by the local authority should be affected by any different rule. The local authority is put there to perform a duty primarily imposed upon the owner, but not carried out by him. It is when he makes default in the duty of demolition that the local authority has imposed upon it the same duty of demolition, no more and no less. It seems to me that to construe this Act of Parliament as giving to the duty of the local authority in demolishing a quality different from that which is found in the case of the owner would be quite unjustifiable. Accordingly, in my opinion, both the owner and the local authoritywhose position, without attempting any particular accuracy, for convenience I venture to describe as that of a statutory contractorare under an obligation to adopt that method of demolition which will not interfere with the right of the plaintiff in respect of the building to be demolished and the support to be derived from it.

It was suggested in the argument that the true effect of the Act of Parliament is, so to speak, to substitute a statutory destruction of the building for a destruction which might take place by the processes of time. The local authority was likened to a statutory executioner, to whom was committed the duty of bringing that process about. That imagery is picturesque, but, in my opinion, misleading., I see no reason at all for importing into the construction of this Act of Parliament any such idea as that of a sort of statutory decay or statutory execution. It seems to me that the language of the Act of Parliament can be interpreted without indulging in such fancies.

Page 20 of [1940] 2 All ER 12

Other matters referred to were the difficulties in which the local authority, not being the owner of the land, would find itself in ascertaining whether or not an easement existed. It is very unfortunate, no doubt, but such risks and difficulties have to be faced every day, not merely by local authorities, but also by other owners of property. I can see no reason for giving to this Act of Parliament an interpretation which would relieve them of what may be a troublesome and difficult investigation at the expense of the unfortunate neighbouring owner, whose rights on that view should be affected. For these reasons, as well as for those given in the judgment of Simonds J (which, in my view, is sufficient in itself to dispose of this case), the appeal, in my opinion, fails, and must be dismissed with costs.

MACKINNON LJ. I agree. After the careful judgment of the judge in both parts of the case, in the Norman case and in the case of Nottingham Corporation, now amplified by the judgment of Sir Wilfrid Greene MR, I do not think that I should serve any useful purpose by adding anything.

CLAUSON J. I agree.

Appeal dismissed with costs. Conditional leave to appeal to the House of Lords.

Solicitors: Sharpe Pritchard & Co, agents for J E Richards, Town Clerk, Nottingham (for the appellants); Peacock & Goddard, agents for Hunt Dickins & Willatt, Nottingham (for the respondent).

W K Scrivener Esq   Barrister.

Mellor and Others v Australian Broadcasting Commission

[1940] 2 All ER 20


Categories:        COMMONWEALTH; Commonwealth countries: INTELLECTUAL PROPERTY; Copyright        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT MAUGHAM, LORD PORTER AND SIR GEORGE RANKIN        

Hearing Date(s):        23, 25 JANUARY, 22 FEBRUARY 1940        


Privy Council Australia Copyright Music Infringement Public performance by broadcast Music stated by owners of copyright to be free for public performance Copyright Act 1911 (c 46), ss 1, 2, Sched I Australian Copyright Act 1912 (No 20 of 1912), s 8.

The appellants carried on business as publishers of band music, and were the owners of the sole right of performing in public within Australia a large number of musical works arranged for brass and military bands. They published every year a pamphlet containing a statement of the terms or prices for purchase of their music, and also containing statements saying, inter alia, “We have paid for the performing rights of every piece we issue,” “All our music is free for public performance,” “We make one price cover both the music and the performing rights thereof” and other similar statements. The respondents, who were a corporation authorised by statute to provide and broadcast programmes in Australia, broadcast some of the appellants music played by bands who, or the members of whom, had purchased the pieces on the terms set out in the appellants pamphlets. The Copyright Act,

Page 21 of [1940] 2 All ER 20

1911, subject to modifications not here material, is in force in Australia. The appellants alleged infringement of their copyrights:

Held the licence or consent given in the pamphlets included broadcasting by bands, and there was no infringement.

Notes

The question here is the extent of the licence given by the statements in the pamphlets. It was contended that the licence did not extend to a broadcast performance, but it is held that, if this limitation was intended, it should have been expressly stated.

As to Licence to Perform Copyright Works, see Halsbury (Hailsham Edn), Vol 7, pp 550552, paras 861865; and for Cases, see Digest, Vol 13, p 197, Nos 313323.

Case referred to

Performing Right Society Ltd v Hammonds Bradford Brewery Co Ltd [1934] Ch 121; Digest Supp, 103 LJCh 210, 150 LT 119.

Appeal

Appeal from a judgment of Nicholas J, dated 10 December 1937, in the Supreme Court of New South Wales in its equitable jurisdiction. The facts are fully set out in the judgment of their Lordships delivered by Viscount Maugham.

D P Maxwell Fyfe KC and Hartley Shawcross KC for the appellants.

R F Roxburgh KC and Wilfrid M Hunt for the respondents.

22 February 1940. The following judgments were delivered.

VISCOUNT MAUGHAM. This is an appeal from a judgment of Nicholas J, in the Supreme Court of New South Wales in its equitable jurisdiction. By the judgment, which was delivered on 10 December 1937, the judge dismissed the action, which was brought by the appellants against the respondents, and was founded on alleged infringements of copyright in Australia during 1932 and 1933.

By the Australian Copyright Act 1912 (No 20 of 1912), s 8, it is provided that the British Copyright Act (the Copyright Act 1911) should, subject to any modifications provided by the Australian Act, be in force in the Commonwealth, and should be deemed to have been in force therein as from 1 July 1912. So far as affects the action and this appeal, no modifications are material. The appellants carry on in partnership a business in England under the name of Wright & Round as publishers of band music, and they were at the material times owners of the sole right of performing in public within the Commonwealth a large number of musical works arranged for performance by brass and military bands. They publish each year a pamphlet described as a Band Journal which contains a statement of the terms or prices for purchase of the music of their pieces, and long lists of these pieces and of the parts required for their performance by bands and soloists. It may be mentioned that some of the pieces are arrangements of well-known operas and other works and songs, and others are described as being original compositions. The pamphlet or journal also contains certain statements or guarantees as to the performance of the pieces, which will be stated later. It will be found that this appeal depends on the meaning and effect of these statements.

The respondent is a corporation constituted under the Australian

Page 22 of [1940] 2 All ER 20

Broadcasting Commission Act 1932, and is authorised by law to provide and broadcast throughout the Commonwealth from broadcasting stations known as national broadcasting stations adequate and comprehensive programmes, and to take, in the interests of the community, such measures as, in its opinion, are conducive to the full development of suitable broadcasting programmes.

There is no dispute about the facts. The respondents during the years in question were in the habit of engaging bands to play some of the copyright works of the appellants in studios, or sometimes in other places, with a view to the broadcasting of the performances. The bands, or the members of the bands, had purchased the pieces on the terms, and with the guarantees, set out in the appellants pamphlets or journals. The respondents always approved the programmes of the bands before the performances. The actual broadcasts by the bands were effected in the manner now usual in such cases. There was a microphone placed in position to receive the sounds and to transmit them to modulating and amplifying equipment belonging to the respondents in their control room. Thence the sounds were carried by land line to the respondents transmitting station, where, after again passing through modulating and amplifying equipment, there was a transmission by electro-magnetic waves of a specific wavelength, which were picked up by receiving sets in different parts of the Commonwealth.

It was admitted by counsel for the respondents that there were performances in public of the works in question for which the respondents were responsible if, in the circumstances of the case, there was no consent by the appellants to such performances. The respondents, however, maintain that such consent was in fact given by the circulation to bands and band organisations and music sellers throughout the Commonwealth of the annual pamphlets above-mentioned. The pamphlets during the years in question contained (with an alteration of date for 1933) the following statements:

Please Note: All our music is Free for Public Performance. To the Bands of the British Empire.

Once more it is our privilege to offer you yet another issue, the 58th without a break, of the world-famous Liverpool Journal. All we said of the 1931 journal has been proved to be true by the record sales of it. Thousands of bands have played it, and have thereby justified our assertion that it would be found to be the goods …

The 1932 journal will be found equal to any of its predecessors. We have chosen it with the greatest care from an enormous stock of manuscript scores we have selected a journal, which is all good, and balanced to meet the needs of every band …

All our subscribers should note especially that all our music is “Free for Public Performance” anywhere. See our guarantees below, show them to your patrons, so that they may rest assured that none of our publications will bring them any trouble over “performing fees.” We make One price cover both the music and the performing rights thereof, and the extent of our sales proves that bandsmen appreciate the equity of our policy …

Relying on a continuance of your esteemed patronage and soliciting the favour of early orders.

We remain,

Yours faithfully,

WRIGHT & ROUND.

Page 23 of [1940] 2 All ER 20

Important Guarantees.

We Guarantee that every piece published in the L.J. can be played anywhere, by anyone without fear that any composer or society will pounce upon any Band for Performing Fees.

We Have Paid for the performing rights of every piece we issue, and no Band will buy L.J. Music and discover later that they must not play it at an engagement without paying fees to someone else.

We Guarantee, also, to supply music (in accordance with the terms of subscription) to the value of £3 12s. 6d. (20 parts) for each subscription of £1 17s. 6d.

You will see that Our Price includes Not only the Printed Music, but also Permission to Play it Anywhere, Without Further Payment. This Fact is Important to your Band, and to Every Bandsman Personally.

Before we consider the meaning and effect of the statements and the guarantee, it is desirable to make some general observations. Musical copyright under the Act of 1911 is of a special character. Apart from the right to prevent the multiplication of copies of the piece of musicwith which we are not concerned hereit comprises “the sole right to perform the work or any substantial part thereof in public” and to make any record, perforated roll, cinematograph film or other contrivance by means of which the work may be mechanically performed, as to authorise any of such acts (s 1). “Performance” is declared by s 19 to mean “any acoustic representation of a work.” The copyright is deemed to be infringed by any person who, without the consent of the owner of the copyright, does anything the sole right to do which is by the Act conferred on the owner of the copyright (s 2). Nothing is said in the Act with regard to broadcasting, which is not surprising, having regard to the facts that wireless signal communication was then in its infancy, and that broadcasting of music (and of speech) as now practised was unknown.

It is, however, clear, and it is not in dispute, that the acoustic representation of a musical work by means of wireless, so that the musical work is heard many miles away from the transmitting studio or place of actual performance, is a performance (public or private) of the work within the meaning of the Copyright Act. It is nothing to the purpose that what is heard is the result of the use of various scientific instruments and appliances at the transmitting end, the transformation back into electric impulses at the receiving end, and the use of the receiver or loudspeaker, which finally converts the electric signals into sounds. The Act is concerned with the protection of authors, and is dealing with practical matters. The listeners at the reception end conceive themselves as listening to the musical piece as played in the distant studio, and they do not doubt that they are listening to a performance of that piece.

Here it is necessary to remember that the sole right of the owner of the musical work is to perform it in public, and that anyone may perform the work in private. The original performance in the studio may be, and generally will be, a performance in private. In such a case, the broadcast performance at the receiving end, if in public and unlicensed, will be an infringement of copyright at that place: Performing

Page 24 of [1940] 2 All ER 20

Right Society Ltd v Hammonds Bradford Brewery Co Ltd. If there is merely a broadcast from the studio where the piece is performed in private, there is obviously no performance in public at all. A broadcast per se is not an acoustic representation of the work. If the broadcast is picked up only by listeners in private, it might be difficult to establish that there is a public performance, for each performance would be separate, and each would be private. However, it is not necessary to express an opinion on this point. It cannot be doubted that a broadcast to all and sundry listeners in such a case as those with which we are dealing will include hotels and other places of entertainment or refreshment, which, if not forbidden, will perform the piece to a number of members of the public, and it is clear that such a performance will be a public performance within the meaning of the Copyright Act by the owners or occupiers of those places, for their actions in connection with the receivers which have been installed there, and which they control, have caused the public performances to take place. Whether the studio performance is public or private, if the persons who are responsible for that performance are also responsible for the broadcasting of the piece, there is no doubt that they have facilitated the performance of the work in public by any listener who is in a position to use a loudspeaker, and thus to perform the piece in public. The question as to the position of the broadcasters in such a case, so far as regards infringement, is answered by the language of s 1(2) of the Act. It is sufficient to show that they have “authorised” the performance in public of the works, and this will generally be established by proving that listeners with a licence were entitled to tune in their receivers, and thus to perform the musical works in question in public as well as in private. The respondents, it may be added, did not attempt to limit the general right of the owners of receiving sets to private performances of these pieces. It was probably impracticable so to do. The respondents have admitted, as already stated, that there were performances in public for which they were responsible unless they can rely on the consent or licence contained in the pamphlets above referred to. The terms of these documents must now be considered.

The trial judge has decided the question as to the true meaning of the pamphlets in favour of the respondents, holding that the language used in the pamphlets was a consent to the public performance of the works by the respondents. Their Lordships have arrived at a similar conclusion. It is to be noted in the first place that the right to perform a musical piece by means of a broadcast is a right comprised in “the sole right … to perform the work … in public” conferred by s 1(2) of the Act. (See also Sched I of the Act, where “performing right” has an equally wide meaning.) The appellants are now seeking to split this right into two for the purposes of construing their guaranteenamely, the exclusive right to perform to an assembled audience and the exclusive right to perform by means of a broadcast. Yet the words

Page 25 of [1940] 2 All ER 20

“We have paid for the performing rights of every piece we issue” make no separation between these two rights. Nor do the words at the beginning of the extracts from the pamphlets above set outnamely, “All our music is free for public performance”make such a distinction. The sentences “All our subscribers should note especially that all our music is free for public performance anywhere” and “We make one price cover both the music and the performing rights thereof” enforce the argument that the appellants are not retaining for themselves any performing rights as against the persons who subscribe for, or buy, the musical pieces published by the appellants. Taken as a whole, the extracts above set forth seem to their Lordships to guarantee complete freedom from trouble as to copyrights to bands who, having bought the music published by the appellants, play the musical works in public. As the judge remarked, the appellants “must have known that band performances were frequently broadcast.” If they desired to exclude such broadcastingincluded as it is in the statutory “performing right”it was for them to exclude it.

Their Lordships are, therefore, of opinion that the licence or consent given in the pamphlets included the broadcasting by bands, with any necessary consequences of such broadcasting, such as the use of receivers by persons entitled to use them. It follows that the respondents were entitled to engage bands to do these permitted things, and have not committed a breach of the appellants performing rights by “authorising” the bands to do them. For these reasons, their Lordships will humbly advise His Majesty that the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Blundell Baker & Co (for the appellants); Routh Stacey & Castle (for the respondents).

Charles Shelley Esq   Barrister.

Brown v Sherwood Colliery Co Ltd

[1940] 2 All ER 25


Categories:        INDUSTRY: HEALTH; Other Health        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        13, 28 FEBRUARY 1940        


Workmens Compensation Industrial disease Order of registrar for reference to medical referee Order of judge dismissing appeal therefrom Whether orders of registrar and judge final or interlocutory Workmens Compensation Act 1906 (c 58), Sched I, para 15 Workmens Compensation Act 1923 (c 42), s 11 Workmens Compensation Act 1925 (c 84), ss 17, 18, 19 Workmens Compensation Rules 19131924, rr 57, 76 Workmens Compensation Rules 1926, r 1(2) CCR 19031922, Ord 12, r 11.

A workman suffered from pain, which he attributed to an old injury incurred in his employment with his employers, the appellants. He therefore asked the employers to agree to a reference to a medical referee, but they refused, whereupon he obtained a report from his own doctor, and then applied to the registrar, who made an order for reference. The employers appealed, and the judge made an order dismissing the appeal with costs. The registrar then taxed the costs

Page 26 of [1940] 2 All ER 25

on the basis that the judges order was a final order. The employers thereupon applied to the judge for a review on the ground that the order was an interlocutory one. The judge held that the order was final, and from that decision the employers appealed:

Held the decision of a judge in allowing or dismissing a reference to a referee is no more than a determination of the manner in which evidence is to be adduced, and does not finally determine the rights between the parties as to the liability to pay compensation so as to make an order thereon final. In the present proceedings, the costs should be taxed on the basis that the order made by the judge in dismissing the appeal and the order made by the registrar on the application for reference were interlocutory orders.

Notes

Three different tests have been proposed for determining whether an order is final or interlocutory. The weight of authority is in favour of the simple test stated in the following question: Does the order, as made, determine the dispute? In this question, the dispute means the whole matter in issue between the parties, and an order which is merely conclusive of a subordinate issue is not a final order.

As to Final and Interlocutory Orders, see Halsbury (Hailsham Edn), Vol 19, pp 206210, para 508; and for Cases, see Digest, Vol 30, pp 128130, Nos 6181. See also Yearly Practice of the Supreme Court 1940, pp 12881291.

Cases referred to

Burton v Dobson Ship Repairing Co Ltd [1938] 3 All ER 410; Digest Supp, 31 BWCC 294, affd [1939] 3 All ER 431.

Sapcote & Sons v Hancock (1911) 4 BWCC 184; 34 Digest 376, 3053.

Re Reeves (Herbert) & Co [1902] 1 Ch 29; 30 Digest 135, 138, 71 LJCh 70, 85 LT 495.

Appeal

Appeal by the employers from an order made by His Honour Judge Hildyard, at the Mansfield County Court, dated 10 July 1939. The facts are fully set out in the judgement of Slesser LJ.

Neil Lawson (with him F W Beney) for the appellants.

F A Sellers KC and T T Dineen (with him Norman Winning) for the respondent.

Lawson: The judges order was not a final order, because it did not, in accordance with the tests laid down by the authorities, finally determine the rights of the parties as to the matters in dispute. The dispute between them was the workmans claim for compensation under the Act, and the procedure under s 19 was mere machinery for the purpose of obtaining evidence on a part of the subject-matter of the disputenamely, the workmans capacity for work, and how far his incapacity was due to the accident. The judge was wrong in saying that, having regard to the result of the reference, the order was a final order. In order to test the nature of the order, the order itself as it stands, and not its results, must be looked at. Nothing that the judge or the registrar ordered affected finally the rights of the parties.

Sellers KC: As no other proceedings were pending before the court in relation to the claim for compensation, the judges order must be treated as a final order, because it determined the only matter in dispute in any legal proceedings between the workman and his

Page 27 of [1940] 2 All ER 25

employers. Alternatively, the procedure outlined by s 19 is quite independent of, and distinct from, an arbitration under the Act. Therefore, when a matter comes to court under that section, it is the only dispute between the parties, and in this case the order effectively determined the matter.

Neil Lawson (with him F W Beney) for the appellants.

F A Sellers KC and T T Dineen (with him Norman Winning) for the respondent.

28 February 1940. The following judgments were delivered.

SLESSER LJ. The appeal in this case under the Workmens Compensation Acts is concerned solely with the basis on which certain costs should be taxed by the registrar in the county court, but, as the decision must affect a large number of cases, we have thought fit to reserve our judgment. The problem to be considered arises in this way. In January 1917, a workman, George Brown, met with an accident while in the employment of the Sherwood Colliery Co Ltd. For a time he was incapacitated, and received compensation, but later he returned to work. An attack of nystagmus intervened, out of which nothing now arises, but in February 1939, he suffered pain in his back, and, thinking that it was due to the original accident, he asked the employers to agree to a reference to a medical referee. The employers refused, and on 11 February 1939, the workman was examined by his own doctor, who duly certified, in substance, that the man was fit for light work only. This statement was sent to the employers, who denied that the man was suffering from incapacity arising from the accident of 1917. Thereupon the workman applied to the registrar under the Workmens Compensation Act 1923, s 11, for a reference to a medical referee. The registrar made the order for reference, but the employers appealed from that order to the judge, asking him to refuse to allow the reference. On that appeal, the employers failed, and the judge made an order dismissing the appeal with costs. It is these costs which are the subject of the present litigation.

The registrar proceeded to tax them upon the basis that the judges order was a final order. The employers thereupon applied to the judge for a review, alleging that the order made by the judge when he dismissed the appeal from the registrars order of reference was an interlocutory order. The judge held that the order was final, and from that decision the employers now appeal to this court.

The Workmens Compensation Rules 1926, r 1(2), provide that the Consolidated Workmens Compensation Rules 1926, now extant, made under the Consolidation Act 1928, shall not apply to any case where an accident happened before 1 January 1929, so that this case is governed by the then existing rules. By s 50(1) of the 1925 Act, that Act similarly does not apply to any case where the accident happened before that date, but the enactments in Sched IV, under which the present proceedings were brought, continue to apply. It is this which makes it necessary that the present case shall be considered under the Workmens Compensation Act 1906, Sched I, para 15, as amended by the Workmens Compensation Act 1923, s 11. However, in my judg-

Page 28 of [1940] 2 All ER 25

ment, were this case to have been brought under the consolidating Act of 1925, ss 17, 18, 19, and the Workmens Compensation Rules 1926, which are the corresponding provisions, the result would have been the same. I arrive at this conclusion because, apart altogether from any special rules of the county court previous to 1926 stating that such an order as the judge here made is interlocutory, on general principles, I think it is of an interlocutory nature.

I now deal with the special rules here applicable. First, the Workmens Compensation Rules 19131924, r 57, dealing with applications for reference to a medical referee under Sched I, para 15, provides that, where application is made by any one of the parties to a registrar and, on appeal to the judge, the respective authority, if of opinion that, owing to the exceptional difficulty of the case, or for any other sufficient reason, the matter ought to be settled by arbitrationthese words are reproduced verbatim from s 11 of the 1923 Act, now s 19(2) of the consolidating Act of 1925, and are the provisions on which the employers here relied in their appealshall refuse to allow the reference, and may, in such case, make such order as to the costs of the application as he shall think fit. By r 57(9), the costs of any application to the registrarthere is no mention of the costs of appeal to the judgemay be allowed by special order and in accordance with the provisions of CCR, Ord 12, r 11, so far as applicable. Ord 12 deals with interlocutory proceedings, and, therefore, the costs of an application to the registrar are to be deemed to be interlocutory. By a parity of reasoning, the appeal to the judge from such interlocutory proceedings must also be interlocutory. However, as I have said, I do not come to this conclusion solely on a consideration of the particular rules under the repealed Acts of 1906 or 1923. Both under them and under ss 17, 18 and 19 (the corresponding sections) of the consolidating Act of 1925, application for reference to a medical referee may arise when there is a question between the parties as to the liability to pay compensation, which, in default of agreement, may require arbitration. The need for a reference may arise either where a claim is made, which may be of an informal kind (per Lord Porter in Burton v Dobson Ship Repairing Co Ltd), or where arbitration is pending, or where application is made after weekly payment, as under s 19 of the 1923 Act, now s 12 of the 1925 Act: see Form 49 made under both Acts and rules, where appropriate headings to meet all those contingencies are given. Clearly, before there is also issue as to liability, there is no right or duty in the workman to submit to medical examination. The order of the registrar or judge deciding whether or not there shall be a reference merely determines the manner in which the medical evidence as to the physical condition of the workman shall be establishedwhether finally and conclusively by a certificate of the medical referee, so that a judge at the arbitration cannot entertain evidence contradicting the report (Sapcote & Sons v Hancock), or whether the medical evidence, if the reference be refused, shall be adduced

Page 29 of [1940] 2 All ER 25

by oral testimony. The decision of the judge or registrar in dismissing or allowing the reference to the referee is, therefore, no more than a determination of the manner in which evidence is to be adduced. Emphatically it does not, in my judgment, finally determine the rights between the parties as to the liability to pay compensation, so as to make an order thereon final.

Had the registrar or judge in the present case acquiesced in the employers contention, and so decided that the whole case should be proved before the court, and not certified by the medical referee, it could hardly have been argued that such an order would not have been interlocutory. The fact that, in this particular case, the judge dismissed the appeal and allowed the reference to continue cannot, in my opinion, make the order a final one. Even if the medical referee had decided in favour of the workman (which he did not), that would not conclude the case. It would still have been necessary for the workman to show that his medical condition so certified, unless admitted, was caused by an accident arising out of his employment for which the employer was in law responsible, and that his injury had so produced incapacity as to make the employer liable to pay compensation.

The present rule as to costs under the Workmens Compensation Rules 1926, is r 76, which states that, where no provision as to scales of costs is made, reasonable costs may be allowed not exceeding more than is under the scales to be allowed in respect of proceedings of a like nature. The proceedings are now regulated by CCR, Ord 47. The allowance of costs of and incidental to interlocutory applications is in the discretion of the judge, or of the registrar, if he hears the application, and, by CCR, Ord 47, where the application is interlocutory, and costs are on the higher scale, no fee shall be allowed in respect of counsel unless the judge or registrar certifies that the application is fit for counsel. In my view, in the present proceedings the costs should be taxed on the basis that the order made by the judge in dismissing the appeal and the order made by the registrar on the application for reference were interlocutory orders. This appeal succeeds with costs.

LUXMOORE LJ. I agree that this appeal should be allowed. The question at issue relates to the taxation of the costs of an appeal to the county court judge from an order of the registrar of the Mansfield County Court referring to a medical referee the question of the condition or fitness for employment of a workman named George Brown, who was at all material times in the employment of the Sherwood Colliery Co Ltd. The order was made under the provisions of the Workmens Compensation Act 1906, Sched I, para 15, and of the Workmens Compensation Act 1923, s 11, at a time when no arbitration proceedings were pending. These provisions are applicable by reason of the Workmens Compensation Act 1925, s 50(2). The registrar taxed the costs in question. The employers requested a review of the taxation, on the ground that

Page 30 of [1940] 2 All ER 25

the taxation should have been made on the footing that the proceedings were of an interlocutory nature. The registrar held that the matter was not an interlocutory one, and that the bill submitted for taxation was proper]y drawn. The employers in due course applied to the county court judge for a review. The county court judge upheld the order of the registrar, and certified that the question raised was of general importance. He allowed the workman the costs of the application to review on Scale C.

The employers appeal to this court on the grounds set out in the notice of appeal. These grounds are (i) that the judge was wrong in law in holding that an order for reference made by the registrar was not of an interlocutory nature, and (ii) that the judge was wrong in law in holding that the question as to whether the order of the registrar was final or interlocutory depended upon the effect of the medical referees certificate. It appears to me that there is an error in these reasons, for the matter dealt with in the taxation was not the costs of the order of reference made by the registrar, but those of the appeal to the judge from that order. The bill of costs submitted for taxation contains no item relating to the application to the registrar, the first item on the bill being instructions to oppose the employers appeal to the judge from the registrars order for reference.

In order to understand the question to be determined, it is necessary, I think, to state quite shortly the history leading up to the application to the registrar. It appears partly from the workmans application for the reference and partly from the judges notes. On 8 January 1917, the workman was injured by an accident arising out of and in the course of his employment. The injury sustained was a fractured sternum, with depression of the bone. The workman was incapacitated for a long period, but subsequently returned to his ordinary work. He left his work later on account of an attack of nystagmus. This matter has been dealt with, however, and there is no need to mention it further, for the workman subsequently returned to his ordinary work.

At the beginning of February 1939, he complained of pain in his chest, and alleged that it was the result of his first accident. The employers were asked to agree to the joint appointment of a medical referee, but they refused so to do. Accordingly, on 11 February 1939, the workman was examined by a medical man selected by himself, who reported as follows:

He has an obvious depression of his sternum as the result of an accident sustained by him in 1917. The X-ray report shows an old united fracture and depression of this bone. In my opinion the limitation of movement and pain in his arm are due to stretching of muscles attached to his sternum. As to his working capacity, he is in my opinion only fit for light work which does not entail lifting or stretching. A night watchman might suit him.

A copy of the report was sent to the employers in due course. The employers stated that they were unable to agree that the workman was suffering any incapacity from the accident to his chest.

Page 31 of [1940] 2 All ER 25

The formal application for a medical reference was made by the workman on 22 February 1939. This application was made under the Workmens Compensation Act 1906, Sched I, para 15, and the Workmens Compensation Act 1923, s 11. The material provisions of para 15 are as follows:

Where a workman … has been examined by a medical practitioner selected by himself, and … the workman … has within 6 days after such examination furnished the, other [the employer] with a copy of the report of that practitioner as to the workmans condition, then, in the event of no agreement being come to between the employer and the workman as to the workmans condition or fitness for employment, the registrar of a county court, on application being made to the court by both parties, may … refer the matter to a medical referee.

The Workmens Compensation Act 1923, s 11(1), provides that the power of the registrar of a county court under Sched I, para 15, of the 1906 Act to refer a matter to a medical referee may be exercised on the application of one of the parties as well as on the application of both parties, subject, however, to appeal to the judge, and, where the application is made by only one of the parties, the registrar, or, on appeal, the judge, if he is of opinion that, owing to the exceptional difficulty of the case, or for any other sufficient reason, the matter ought to be settled in default of agreement by arbitration, shall refuse to allow the reference.

Two points appear to be of importance. The first is that an application for the appointment of a medical referee can be made although no other proceedings under the Act are pending, and the second is that, where the application is by one party only, the registrar or the judge ought, in certain circumstances, to refuse to allow the referencenamely, where the tribunal is of opinion that the matter ought to be settled by arbitration in default of agreement between the parties. The latter point seems to recognise the position that arbitration proceedings cannot be instituted if an order for reference to a medical referee is made.

The jurisdiction of the county court in respect of matters arising under the Workmens Compensation Acts is purely statutory, and is governed by the relevant Workmens Compensation Acts and the rules thereunder. Where the county court judge is to be the arbitrator, his powers are derived, so far as the present case is concerned, from Sched II, para 2, of the 1906 Act, which provides that, in certain events, an arbitration under that Act shall be by the judge of the appropriate county court, “according to the procedure prescribed by rules of court.” The appropriate rules in the present case are the Workmens Compensation Rules 19131924. The rules at present in force are not applicable: see the Workmens Compensation Rules 1926, r 1(2). Matters relating to applications for reference to a medical referee under Sched I, para 15, of the 1906 Act are dealt with in the Workmens Compensation Rules 19131924, r 57, which provides as follows:

(1) With respect to applications to the registrar pursuant to para. 15 of Sched. I

Page 32 of [1940] 2 All ER 25

to the Act to refer any matter to a medical referee the following provisions shall have effect …

This subrule is followed by eight other subrules. It is only necessary to refer to part of subrule (3) and to subrule (9). Subrule (3) provides as follows:

When the application is made by only one of the parties, the registrar or on appeal the judge if he is of opinion that owing to the exceptional difficulty of the case or for any other sufficient reason the matter ought to be settled in default of agreement by arbitration shall refuse to allow the reference and may in that case make such order as to costs of the application as he shall think fit.

Subrule (9) provides as follows:

The Costs of any application to the registrar … may be allowed as costs in any subsequent arbitration for the settlement of the weekly payment to be made to the workman or where the application is made after the weekly payment has been settled as costs in any subsequent arbitration as to the review of such weekly payment or may be allowed by special order of the judge on application in that behalf such application to be made on not less than 4 days notice in writing and in accordance with the provisions of C.C.R., Ord. 12, r. 11, so far as applicable.

It will be noticed that the rule is silent with regard to the costs of an appeal from the registrar to the judge. CCR, Ord 12, the order referred to in r 57, relates to interlocutory and interim orders and proceedings. Rule 11 relates to practice on interlocutory applications in the county court. It provides as follows:

Where by any statute or by these rules any application is expressly or by reasonable intendment directed to be made to the court or to the judge or to the judge or registrar or to the registrar then subject to the provisions of the particular statute or of the particular rule applicable thereto and so far as the same shall not be inconsistent therewith [certain provisions shall apply].

These provisions are contained in 6 numbered paragraphs. The material provisions are, I think, those numbered (4) and (5). Subrule (4) provides that the allowance of the costs of and incidental to the interlocutory application shall be in the discretion of the judge or registrar, and that no such Costs shall be allowed on taxation without a special order. Subrule (5) provides that no taxation of costs of interlocutory applications, when allowed, shall take place until the general taxation of the costs without an express order.

In my judgment, CCR, Ord 12, r 11, is incorporated in r 57 as an instruction to the judge as to how the costs of an application to the registrar under Sched I, para 15, are to be dealt with, and, when considered in conjunction with the direction at the beginning of the rule that the Costs of application to the registrar are to be dealt with in any subsequent arbitration, they show with sufficient clarity that the costs of an application to the registrar where there is no subsequent arbitration are to be dealt with in the same manner as the costs of any interlocutory proceeding in the normal jurisdiction of the county court. If, as I think is the case, the costs of the application to the registrar are directed to be treated on the same basis as the costs of an interlocutory proceeding in a county court action, I can see no ground for holding that the costs of an appeal from an order made by the registrar

Page 33 of [1940] 2 All ER 25

on such an application can properly be dealt with except on the same basis, for an appeal from an interlocutory matter must itself be interlocutory.

The Workmens Compensation Rules 19131924, r 76, provide for costs. Rule 76(1) deals with costs of an incidental to an arbitration and proceedings connected therewith. Rule 76(4) provides that, where proceedings are taken for which no provision is made by these rules or by the scales of costs, reasonable costs in respect of such proceedings may be allowed by the registrar, subject to review by the judge or by special order of the judge, not exceeding those which may under the scales be allowed in respect of proceedings of a like nature. The county court judge made an order with regard to the costs of the appeal to him from the registrars order. Although I asked to be allowed to see this order, I was told that there was some doubt if it had ever been drawn up, but that, if it had been drawn up, it was not forthcoming. The parties proceeded on the footing that the judges order was a simple dismissal of the appeal “with costs.” It was contended by counsel for the appellants that these costs can only be taxed as if the appeal to the judge were an interlocutory application. For the reasons I have already stated, I think that this contention is correct. Both before the county court judge and in this court, reliance was placed by counsel for the respondents upon the decision of this court in Re Reeves (Herbert) & Co. In my judgment, this decision has no application to the present case, for, as I have already stated, questions of costs and procedure in the county court under the Workmens Compensation Acts are governed by those Acts, and I find in the present case that, by reason of the provisions of the Workmens Compensation Rules 19131924, r 57, and the incorporation therein of CCR, Ord 12, rr 11, 76, there is a statutory provision with regard to the basis on which the costs of an application to the registrar for the appointment of a medical referee under Sched I, para 15, of the 1906 Act and s 11(1) of the 1923 Act, and also of an appeal to the judge from that order, should be dealt with. I respectfully agree with my brethren that in no event can the question whether the costs in question should be taxed on the basis that the application was final or interlocutory depend upon the effect of the medical referees certificate. For these reasons, I think that the appeal succeeds, and ought to be allowed.

GODDARD LJ. I agree that this appeal should be allowed, but I prefer to base my judgment on the broader ground dealt with by Slesser LJ, and not merely on a consideration of the rules, for, if an order is essentially one of an interlocutory nature, I am not satisfied that a rule of court can turn it into a final order. The only question which arises is whether the registrars order referring a question to a medical referee under Sched I, para 15, of the Act of 1906 and s 11 of the Act of 1923, now replaced by s 19 of the Act of 1920, is final or inter-

Page 34 of [1940] 2 All ER 25

locutory. The order in question is, and was, subject to an appeal to the judge, but the appeal and the order made thereon must have the same character as that of the original order. The test to be applied is whether or not the order finally determines the rights of the parties. To put it in other words, does it finally dispose of the issues between them? It seems to me clear that this order does not. It merely appoints a medical referee to certify on certain matters, and inferentially orders the workman to present himself for examination by the referee. If the latter certifies one way, no doubt this will conclude the matter, but, if it certifies the other way, it will resolve one question onlynamely, whether or not the workman is still suffering from the effects of an accident. It will still be open to the employer to raise any defence he hasfor example, that the accident did not arise out of the employment. In the former case, moreover, it is the certificate of the referee which is conclusive, and not the order. An order may, no doubt, be final although certain things remain to be done as a consequence. An order to wind up a company or an order adjudicating a man bankrupt are instances, and so is an order in a redemption action. In these cases, the rights of the parties are determined, though results have to be worked out involving further inquiries. In the case under consideration, the object of the order is merely to obtain the opinion on a medical question of an independent referee, thus avoiding a conflict of medical evidence. A further point was made that, inasmuch as in this case no proceedings had been started, the order could not be interlocutory, as that term is appropriate only to an order made in the course of some legal proceedings. The Workmens Compensation Act, however, provides a code of procedure of its own. This particular order can be made either when a workman makes a claim which the employer does not admit or when the employer seeks to discontinue payments which he has been making, whether under an award or merely by agreement. In any case, the question between the parties is whether or not the workman is entitled to compensation in the form of a weekly payment. That the Act has provided a form of procedure which can operate before arbitration proceedings have begun is, in my opinion, immaterial, because the order does not determine whether or not the workman is entitled to that which he seeks. It directs something to be done for the purpose of enabling the issue to be determined, which is exactly one of the functions of an interlocutory order. Re Reeves (Herbert) & Co, on which the county court judge relied, is, in my opinion, in no way decisive of this case. In such a case as that, the question is whether or not the client is entitled to the delivery of a bill. The court answers Yes or No, and thereby decides the rights of the parties, and decides that, if a bill has to be delivered, taxation may follow. That no more affects the question of whether the order is final then does the fact that taxation will follow where an action is ordered to be dismissed with costs, when taxation follows as a matter of course. In my opinion, the order appealed from is wrong, and the registrar should be

Page 35 of [1940] 2 All ER 25

ordered to tax the bill on the footing that it relates to an interlocutory matter.

Appeal allowed with costs in both courts, to include the costs of the application to the registrar for review of taxation.

Solicitors: Barlow Lyde & Gilbert, agents for Eking Manning Morris & Foster, Nottingham (for the appellants); Taylor Jelf & Co, agents for Hopkin & Son, Mansfield (for the respondent).

Derek H Kitchin Esq   Barrister.

Cameron v Prendergast

[1940] 2 All ER 35


Categories:        TAXATION; Income Tax, Emoluments from office or employment        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        12, 13 FEBRUARY, 12 MARCH 1940        


Income Tax Remuneration Company director Payment for retaining office Whether payment in discharge of contingent liability of company Income or capital sum Income Tax Act 1918 (c 40), Sched E, r 1.

Towards the end of 1934, C, who had for many years been a director of a company, notified his fellow-directors of his intention to resign, as he was entitled to do under the articles. The other directors thereupon wrote asking him not to serve notice of resignation, saying that, in consideration of his not doing so, the company would pay him a sum of £45,000, and would enter into a formal deed to that effect. Shortly afterwards, the company entered into a deed, which recited that the company, in the circumstances set out in the letter, and for the consideration therein specified, agreed to pay C £45,000, in two amounts of £35,000 and £10,000 respectively. The remuneration of directors was at all material times fixed by resolution of the company in general meeting. C, who, previous to the execution of the deed, had received a salary of £1,500 per annum, agreed to remain a director at £400 per annum, on the understanding that he would devote less time in the future to the companys business. It was contended that the possibility of Cs resigning was a contingent liability on the company, that this liability had in the meantime been discharged by a payment of £45,000, that the case was, therefore, analogous to Dewhursts case, and that the sum of £45,000 was not liable to income tax:

Held (i) this case was distinguishable from Dewhurst's case, in that the sum of £45,000 was paid to the appellant by the company in his capacity as a director of the company, and to induce him to continue to hold the office of director, and was not the compromise of a future and contingent liability to pay a lump sum on the cessation of his tenure of office.

(ii) the sum of £45,000, therefore, came within the charging words of Sched E, r 1, “all salaries, fees, wages, perquisites or profits whatsoever therefrom.”

Order of Court of Appeal ([1939] 1 All ER 223) affirmed.

Notes

The House of Lords have unanimously upheld the decision of the Court of Appeal, where, it will be remembered, Sir Wilfrid Greene MR in a dissenting judgment, examined the consideration for the payment of the sum of £45,000, which was out of all proportion to the annual remuneration of the director. He found that the consideration was the act of the director in acceding to a request not to serve a notice of resignation. The House of Lords have, however,

Page 36 of [1940] 2 All ER 35

rejected this interpretation of the contract, which would have brought this case within the decision in Dewhursts case, where the payment of such a sum was treated as the consideration for the release of the company from obligations which it would have to meet. In their Lordships view, the facts of this case are wholly different from those in Dewhursts case, in that the precise form, as well as the substance, of the documents on which this case depends, leads to the inevitable conclusion that the payment in question was a payment arising from the directors office.

As to Voluntary Payments to Directors and Servants, see Halsbury (Hailsham Edn), Vol 17, pp 213, 214, para 435; and for Cases, see Digest, Vol 28, pp 8588, Nos 490507.

Cases referred to

Inland Revenue Comrs v Westminster (Duke) [1936] AC 1; Digest Supp, 104 LJKB 383, 153 LT 223, 19 Tax Cas 490.

Henry v Foster (A), Henry v Foster (J), Hunter v Dewhurst (1932) 16 Tax Cas 605; Digest Supp, sub nom. Dewhurst v Hunter 146 LT 510.

Gramophone & Typewriter Ltd v Stanley [1908] 2 KB 89; 28 Digest 30, 153, 77 LJKB 834, 99 LT 39, 5 Tax Cas 358.

Ushers Wiltshire Brewery Ltd v Bruce [1915] AC 433; 28 Digest 56, 287, 84 LJKB 417, 112 LT 651, 6 Tax Cas 399, revsg [1914] 2 KB 891.

Appeal

Appeal from an order of the Court of Appeal (Finlay and Luxmoore, LJJ, Sir Wilfrid Greene MR, dissenting), dated 23 January 1939, and reported [1939] 1 All ER 223, affirming an order of Lawrence J, dated 6 April 1938, and reported [1938] 2 All ER 617. The facts and arguments are fully set out in the opinions of their Lordships.

Raymond W Needham KC and R A Willes for the appellant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondent.

12 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC (read by Viscount Maugham). My Lords, the appellant was at the material time a director of a well-known building company, Higgs & Hill Ltd. He had been employed by the company for 44 years, and had been a director of the company since 1919. The company was a prosperous one, and the appellant was largely responsible for its success. In 1934, he was minded to resign his position as director, because he desired a rest, and he informed his fellow-directors of his intention to give notice in writing to the secretary of the company, with the result that, by virtue of art 107(d) of the articles of association, his office would be vacated. Not unnaturally, the company was anxious to retain his services, and on 17 December 1934, by the direction of the board, a letter was written to the appellant informing him that the board had considered his intimation that he intended forthwith to determine his directorship. The letter went on to ask him in the interests of the company not to serve the proposed notice, and stated that, in consideration of the appellant acceding to this request, the company would within 21 days, or by such instalments as he would accept, pay him a sum of £45,000. This undertaking would be embodied in a formal deed reciting the letter. The appellant accepted

Page 37 of [1940] 2 All ER 35

the offer. Accordingly, by a deed, dated 31 December 1934, which recited that the appellant was then a director of the company, and that the company had, in the circumstances set out in the letter of 17 December annexed to the deed, for the consideration specified in the letter, agreed to make Cameron two payments amounting in all to £45,000, the first payment on 31 December 1934, and the second on 31 March 1935, the company bound themselves to make these payments. On the same day, a board meeting was held, at which the appellant was present, and it was resolved that the appellant should remain on the board of directors in an advisory capacity, and that his remuneration should be fixed at the rate of £400 per annum as from the date of the meeting.

The question which arises in this appeal is whether the appellant is liable to income tax in respect of the sum of £45,000, as being a profit arising from the office of director, under the Income Tax Act 1918, Sched E. The special commissioners have held that the appellant received the sum in question for the consideration expressed in the letter and embodied in the deed. They accepted the deed as genuine, and found that the conditions of the deed had been carried out. They therefore held that the sum of £45,000 was not subject to income tax under Sched E in the hands of the appellant, and discharged the assessment. Lawrence J, reversed this decision, on the ground that the true consideration for the payment of the £45,000 must have been the desire of the company that the appellant should continue as a director, with the result that the payment arose from his office as director. The Court of Appeal by a majority approved the judgment of Lawrence J, and this appeal is from their decision.

Tax is charged under Sched E in respect of every public office or employment of profit. Sched E, r 1, provides that tax shall be charged:

… on every person having or exercising an office or employment of profit mentioned in this schedule … in respect of all salaries, fees, wages, perquisites or profits whatsoever, therefrom for the year of assessment …

It is admitted that the appellants directorship was an office of profit, and that he received the sums in question in the year of assessment while holding that office. The only question, therefore, is whether these payments arose from the office held by the appellant. We have been invited by counsel for the appellant, in considering this question, to fix our gaze on the precise words of the letter of 17 December. Reference was made to the decision in Inland Revenue Comrs v Westminster (Duke), in which observations were made by Lord Tomlin and others of your Lordships as to the importance of giving effect to the proper legal interpretation of documents, provided they are bona fide and not only used as a cloak to conceal a different transaction. It had been argued on behalf of the Inland Revenue Commissioners in that case that the substance of the arrangements contained in the material documents must be regarded, and not merely the form. Such a suggestion found no favour with the majority of the noble and learned Lords who

Page 38 of [1940] 2 All ER 35

heard that appeal, and I certainly have no intention of departing in any way from what was there laid down. How does it help the appellant? In this case, the substance and the form of the documents seem to me to be the same. The appellant was anxious to retire, and, but for the inducement offered to him not to do so, he would have signed a notice of resignation. The company valued his services, and they were prepared to pay a large sum to him to induce him to abstain from his intention to resign, and thus to continue as director.

Your Lordships are asked to say that, in these circumstances, the only consideration for the payment was the act of the appellant in acceding to the request of the company not to serve the notice of resignation. If it were not for the approval given by Sir Wilfrid Greene MR, to this submission, I should have thought that it only required to be stated to be rejected. I can see no difference between a promise not to resign and a promise to continue to serve as director. It is true that the appellant did not give any promise in words to continue to serve for any period of time, any more than the board by their resolution of 31 December named a term of service. It is fair to assume that, in the course of the appellants long connection with the company, his fellow-directors had learned that they could trust him. Whether or not it was open to him, having received the sum, to resign immediately afterwards is a question which I find it unnecessary to answer. The appellants colleagues on the board no doubt knew the man with whom they had to deal, and were confident that, if he received the money which they were prepared to pay him, they would get good value for it.

My Lords, like the special commissioners, I accept the deed as genuine. The consideration stated in the deed for the payment of the money is that the appellant should not resign. If he resigned, his office as director would cease. If he did not resign, it would continue. To call the continuance of his office “a by-product of the undertaking not to deliver notice of resignation” seems to me, with all respect to Sir Wilfrid Greene MR, to be a misdescription of the contract. The continuance of the appellant in his office was the essence of the bargain. If anything was needed to make plain the intention of the parties as expressed in the letter and in the deed, the minute of the board dated 31 December is conclusive. I agree with the statement by Luxmoore LJ, that, so far as the company was concerned, the only legitimate ground for making the payment was to induce the appellant not to resign, and so to continue his services as a director. Sir Wilfrid Greene MR, was of opinion that, if having received payment of the £45,000, the appellant had forthwith served a notice of resignation, the companys cause of action would have been for damages for breach of a contract not to serve the notice of resignation. I do not know what damages could be recovered for the breach of such an agreement, if it is to be regarded as a mere contract not to send a piece of paper containing notice of resignation. If, on the other hand, it is something more than that, it could

Page 39 of [1940] 2 All ER 35

only be what the form of words used in the letter seems to me to expressnamely, an agreement to continue as a director of the company in consideration of the payment of £45,000.

Your Lordships were pressed with the decision in Dewhursts case. I agree with all the members of the Court of Appeal, and with Lawrence J, that that decision does not cover this case. The facts were, as Lord Warrington of Clyffe said, very special. Lord Atkin and Lord Thankerton, who decided that case with Lord Warrington of Clyffe in favour of the taxpayer, treated the payment in question as a sum paid for the release of the company from obligations which they would themselves have to meet. The facts of this case are wholly different, and are such as to make it impossible to come to a similar conclusion. The conclusion which I have reached is that the payment in question was a payment arising from the appellants office. This, I think, is the inevitable result of giving effect to the precise form, as well as to the substance, of the documents on which the case depends. It follows that, in my opinion, the order of the Court of Appeal should be affirmed, and this appeal dismissed with costs.

VISCOUNT MAUGHAM. My Lords, as appears from the case stated by the commissioners for the Special Purposes of the Income Tax Acts, the only question on this appeal is whether the appellant is liable to income tax in respect of a sum of £45,000 paid to him by a private limited company carrying on business as builders and contractors in which he was a director. The Crown contended that this was a profit arising from the office of director within the Income Tax Act 1918, Sched E. The commissioners discharged an assessment based on that view. On appeal, Lawrence J, held that the commissioners determination was erroneous. The Court of Appeal (Finlay and Luxmoore LJJ, Sir Wilfrid Greene, MR, dissenting) affirmed the decision of Lawrence J. The appellant appeals to this House.

The material facts cannot be better stated than they were by Lawrence J. He said, at pp 618, 619:

The [appellant] had been for many years a director of a company of builders and contractors. Towards the end of 1934, he had intimated to his follow-directors his intention of resigning, as he was entitled to do under art 107 of the companys articles of association. The other directors then wrote to him a letter of Dec. 17, 1934, in which, after having considered his recent intimation that he intended forthwith to determine his directorship, they asked him, in the interests of the company, not to serve such notice, and said that, in consideration of his acceeding to this request, the company would, within a certain time, pay him a sum of £45,000, and would embody their undertaking so to do in a formal deed. Then, on Dec. 31, 1934, the company entered into the deed which recited that the company, in the circumstances set out in the letter of Dec. 17, 1934, had, for the consideration therein specified, agreed to make the [appellant] the payments thereinafter set outthat is to say, £35,000 and £10,000.

The commissioners have held that the [appellant] received the sum of £45,000 for the consideration expressed in the letter of Dec. 17, 1934, and embodied in the deed of Dec. 31, 1934. They state that they accept the deed as genuine, and find that the conditions contained therein had been carried out.

Page 40 of [1940] 2 All ER 35

The deed of 31 December 1934, between the company and the appellant, omitting parties and formal parts, was in these terms:

Whereas Mr. Cameron is a director of the company and whereas the company in the circumstances set out in the letter hereunto annexed has for the consideration therein specified agreed to make to Mr. Cameron the payments hereinafter set out and it is hereby agreed between the parties that the company shall pay to Mr. Cameron the following sums on the following dates: on Dec. 31, 1934, the sum of £35,000 and on Mar. 31, 1935, the sum of £10,000.

The letter annexed was the letter of 17 December referred to above.

On these facts and findings, the question is whether the sum of £45,000 was paid to the appellant in his capacity as a director, and to induce him to continue to hold his office of a director, so that the sum comes within the charging words of Sched. E, r 1namely, “all salaries, fees, wages, perquisites or profits whatsoever [from the office of a director]”or whether the sum was paid merely to obtain his agreement not to serve the notice for, say, one day, leaving him perfectly free to retire on the next day, in which case the sum, as Sir Wilfrid Greene MR held, would not be a profit arising from the office.

In his dissenting judgment, to which I have given the most anxious consideration, Sir Wilfrid Greene MR seems to have thought that the case was in effect decided by the findings in the special case. He observed, at p 227:

The crucial finding of the commissioners is as follows: “We hold that the respondent received the sum of £45,000 for the consideration expressed in the said letter dated Dec. 17, 1934, and embodied in the said deed made Dec. 31, 1934. We accept the deed as genuine and find that the conditions contained therein have been carried out.” This finding we are not entitled to question, nor are we entitled to say that in substance it means something different from what it says. … The contract did not impose upon the appellant any obligation to act as a director. It is true that, so long as he refrained from serving a notice, he remained as a director, but this was a by-product of his undertaking not to serve the notice, and not the performance of that undertaking.

With the greatest respect to Sir Wilfrid Greene MR, I cannot agree. If the finding of the commissioners is taken literally, I see no reason to quarrel with it. If, however, it is to be taken as meaning what Sir Wilfrid Greene MR, appears to extract from the finding, I am compelled to differ. Inferences from facts stated by the commissioners are matters of law, and can be questioned on appeal. The same remark is true as to the construction of documents. If commissioners state the evidence and hold upon that evidence that certain results follow, it is open to the court to differ from such a holding. I agree with the remarks of Sir H H Cozens-Hardy MR, in Gramophone & Typewriter Ltd v Stanley, at p 95, and also with those of Lord Atkinson in Ushers Wiltshire Brewery Ltd v Bruce, at p 449.

On the facts found by the commissioners, I should come to the conclusion that the sum of £45,000 was paid to the appellant by his co-directors, acting for the company, to induce him to continue to serve the company as a director for at least a reasonable time. That was

Page 41 of [1940] 2 All ER 35

not, I think, a by-product of his undertaking not to serve the notice, but the real and plain meaning of the undertaking. An agreement by the appellant not to resign his office is precisely similar to an agreement to continue to act as a director. His co-directors must be presumed to be honest men, making payment of a large sum in the interest of the company and its shareholders. I hesitate to stigmatise the transaction involved in the payment if it is to be regarded as really meaning that the appellant could have given a notice to retire within a few minutes after he received the sum of £45,000, if not before. We must interpret the findings of the commissioners in the light of common sense and common knowledge. Apart from this view, I think that the inference which I have drawn from the findings is a matter of law, based to a large extent on the well-known law relating to directors of a limited company, and to their inability to make presents out of the funds of the company to a brother director, or to pay him substantial sums for a clearly nominal consideration. Further, it is important to notice that there was a contemporaneous agreement on the part of the appellant to remain as a director at a salary of £400 per annum. This circumstance seems to me to afford strong corroboration of the view of the transaction which Lawrence J, and Finlay and Luxmoore LJJ, have taken. If a sum is paid by a company to a man who has long been, and still is, a director of the company, and whose services are greatly valued, and if the consideration is that he will not resign, but will continue to act as a director, I cannot myself doubt that in such a case the sum is a profit of his office, and is liable to tax, and none the less so because the time during which he will continue to be a director is not fixed. This is the view of the appellants agreement with the company taken by Finlay and Luxmoore LJJ, in affirming the judgment of the trial judge, and I agree with their decision and the reasons they have given for it.

I ought to add that in my opinion Dewhursts case is distinguishable from the present case. It was a curious case, and occasioned a good deal of diversity of judicial opinion, but, in my view, it turned on the unusual circumstance that Commander Dewhurst had only to resign his office as director to become entitled immediately, under art 109 of the companys articles, to a sum exceeding £10,000, whilst, if he did not resign, and remained a director at £250 per annum for any length of time (as suggested), he would forfeit far the greater part of the sum payable under art 109. In these circumstances, it was held by a bare majority in this House that the sum of £10,000 was paid to Commander Dewhurst to obtain a release of his right to a greater sum under art 109. On this view, it was not paid as “wages, perquisites or profits” derived from his office of director. I do not think this case throws any light on the nature of the payment of £45,000 to the appellant. For the above reasons, I am of opinion that this appeal should be dismissed with costs.

Page 42 of [1940] 2 All ER 35

LORD RUSSELL OF KILLOWEN (read by Lord Romer). My Lords, in my opinion, the order of the Court of Appeal should be affirmed. The question is whether the sum of £45,000 which was paid to Cameron was a profit from his directorship. I feel no doubt, upon the facts of this case, that it was. It was paid to him in his capacity of a director, and as a consideration for his agreeing not to cease giving his services as a director to the companyan agreement, which, as Luxmoore LJ, pointed out, necessarily involves an agreement to continue to render those services. Money paid as a consideration for such a bargain appears to me to be clearly a profit from his directorship.

It is said that he was at liberty to determine his directorship immediately he had received the £45,000, because he had merely agreed to refrain, at a particular time, from serving a notice to end his directorship. I do not agree. He would have been bound to serve for a reasonable time, the length of which would be judged on a consideration of all relevant circumstances, including the large amount of the sum paid. The other view imputes to the directors that they paid away this large sum for nothing, in other words that they made a present to their co-director, a thing which neither they nor the company would have any right to do.

It is further said that my view involves a departure from, or a contradiction of, the commissioners findings. That is not the case. Their finding is merely that the deed means what it says, and is not a cloak for some different transaction. What the deed says, however, is a question of construction, and I have indicated what, in my opinion, it means and involves. The case is not covered or governed by the decision in Dewhursts case. The grounds for that decision, so far as they are to be found in the opinions of Lord Atkin and Lord Thankerton, were that the transaction was the compromise of a money claim against the company by the acceptance of a smaller sum. It bears no resemblance to the present case. Finally, it was suggested that the moneys paid to Cameron were in the nature of capital payments. For this I can see no foundation except the size of the sum involved. That feature alone is no justification for the suggestion.

LORD WRIGHT. My Lords, Sched E, r 1, is expressed in very wide terms. The tax is imposed “in respect of all salaries, fees, wages, perquisites or profits whatsoever” from the particular office of profit, which in this case is the appellants directorship. The language thus includes casual or extraordinary profits, whatever their size. These wide terms would naturally seem to include the £45,000 in question, which was paid to the appellant as a director in the past and at the time, and for continuing to be a director, or, what is the same thing, for not resigning his directorship. In my opinion, this was the true nature of the payment, and, therefore, the substance of the transaction. The consideration was correctly and sufficiently expressed in the deed, and in the

Page 43 of [1940] 2 All ER 35

letter which it incorporated. It was there stated that it was in the interests of the company that the appellant should accede to the companys request not to serve a notice of resignation. It is clear that the directors thought it worth while in the interests of the company to pay £45,000 to the appellant to secure the continuance of his services as director. I cannot think that the payment was not a profit from his directorship, even though it was a payment on a generous scale, and not based on any particular estimate of the companys earnings. It was, in fact, an extraordinary payment to secure what the company presumably thought was an adequate advantagenamely, that the appellant should continue as director, and should not cease to serve as such. It is said that the consideration was nugatory, because it was limited to the mere obligation of the appellant not to resign at that moment, so that he would not have broken it by resigning next day. The company, however, were dealing with a man who had served their interests faithfully for over 40 years, and who was not likely to play them a scurvy trick merely because he was generously treated. As a matter of law, however, I do not agree that the appellant would not have been breaking his promise if he had resigned next day. His promise, I think, should be construed as a promise not to resign for a reasonable period. Similarly, under his contemporaneous agreement to serve in an advisory capacity at £400 per annum, which, in my opinion, was an integral part of the transaction, I think it was implied that he would so serve for a reasonable period. It seems to me that the company paid the £45,000 to the appellant as an extra remuneration to him for continuing as a director, and he received it on that same footing. In my judgment, it fell within the category of “profits whatsoever” of his directorship. This conclusion follows in law from the facts stated. It was somewhat faintly suggested that the sum was capital, and not income. I think that this contention is untenable. I fail to see what ground there is for that suggestion. The mere fact that the sum is large is not in itself a ground.

I have not found any help from Dewhursts case, which, whatever it decides, is on different facts. It is difficult to elicit any principle from the majority decision of the House. Lord Warrington of Clyffe expressly decided it on its special facts. Lord Atkin and Lord Thankerton based their decision, as I understand it, on the ground that the money paid was not a profit from the directorship, but was the compromise of a future and contingent liability to pay a lump sum on the cessation of his office. Viscount Dunedin and Lord Macmillan, who agreed with the Court of Appeal, thought that the payment had the quality of deferred pay, and was referable to the terms of the original engagement, and was a profit of the directorship. In any event, the decision, as I have said, turned on different facts, and furnishes no principle which helps in the present case. In my opinion, the appeal should be dismissed.

Page 44 of [1940] 2 All ER 35

LORD ROMER. My Lords, the question to be determined in this case lies within a narrow compass. It can be stated quite shortly as follows. Was the sum of £45,000 paid to the appellant as the consideration for a promise on his part to continue the performance of his services as a director of the company? If this question be answered in the affirmative, the appeal must fail, for the sum would in that case clearly be part of the “salaries, fees, wages, perquisites or profits” from the appellants office of director within the meaning of the Income Tax Act 1918, Sched E, r 1. It matters not that the sum is a lump sum, payable at once, instead of being spread over a number of years, and depending in no way upon the number of years already spent, or to be spent in the future, by the appellant in the office. Nor does it matter that the sum is so large as to present the appearance of a capital, rather than of an income, payment. If a company chooses to pay a directors remuneration in a lump sum, it can, no doubt, lawfully do so, but the sum nevertheless represents income, whatever its amount, and will be taxable as such. Remuneration which, if paid by instalments over a number of years, would be income, is income though paid once and for all in a lump sum, just as much as the capital consideration for a sale, say, of land is capital, even though payable by instalments spread over a number of years.

My Lords, turning now to the question which I have stated above, I confess that to my mind it admits of only one answer, whether one considers the deed of 31 December 1934, and the letter of 17 December 1934, annexed thereto, alone, or whether one considers, as forming part of the same transaction, the deed, the letter, and the minute of the resolution passed at the board meeting of 31 December 1934, together. Taking the deed first, it will be seen that the consideration for the agreement by the company to pay the £45,000 is expressly stated to be that specified in the letter, and the consideration specified in the letter is the acceding by the appellant to the request of the company not to serve a notice exercising his right, under art 107 of the companys articles, forthwith determining his directorship. This surely makes it as plain as language can do that, in consideration of the payment of £45,000, the appellant will not determine his directorship. In other words, for it means precisely the same thing, he will continue to act as a director. It was submitted on behalf of the appellant that this conclusion as to the consideration moving from him for the companys agreement to pay the £45,000 in effect reverses and disregards findings of fact by the Special Commissioners, by which every appellate tribunal was bound. The findings referred to were in the words following:

We hold that the respondent received the sum of £45,000 for the consideration expressed in the said letter dated Dec. 17, 1934, and embodied in the said deed made Dec. 31, 1934. We accept the deed as genuine …

However, the conclusion I have arrived at as to the true nature of the consideration in no way impugns the genuineness of the deed, and is

Page 45 of [1940] 2 All ER 35

in truth founded upon the language of the deed and letter, and on nothing else. I merely differ from the commissioners as to the proper construction of that language, and, as pointed out by Luxmoore LJ, its proper construction is a question, not of fact, but of law.

In my judgment, therefore, the case of the appellant fails even if the deed and the letter are looked at without reference to the minute of 31 December 1934. It is plain, however, that the resolution recorded in the minute must have formed part of the arrangement between the appellant and the company, and cannot in this connection be disregarded, for the deed and letter by themselves would lead to the conclusion that the duties and yearly remuneration of the appellant as a director were to be as theretofore. The minutes, however, show quite plainly that this was not so, and that the deed and letter do not record the whole of the terms of the arrangement then being made. When all three documents are read together, as they should be, the arrangement made becomes quite clear. In consideration of the payment of £45,000, the appellant agreed to continue to act as a director in an advisory capacity at the reduced remuneration of £400 per annum as from 31 December 1934. For how long he was to continue so to act is not specified, but his fellow-directors were no doubt willing to trust to his honour not to resign his directorship unless by reason of ill-health or some such material change of existing conditions he should be compelled to do so. In any case, it would be an implied term of his agreement that he should continue to act for a reasonable time.

It only remains to say a word or two about Dewhursts case upon which the appellant placed great reliance. It is sufficient to say that the agreement which their Lordships had to consider in that case was in many respects different from the agreement in the present one. The case laid down no principle of construction, and can, therefore, have no conceivable bearing upon the question of construction with which your Lordships are now concerned. For these reasons, which are substantially the same as those given by Finlay and Luxmoore LJJ, in the Court of Appeal, I am of opinion that this appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Edell & Co (for the appellant); Solicitor of Inland Revenue (for the respondent).

Michael Marcus Esq   Barrister.


Imperial Smelting Corporation Ltd v Joseph Constantine Steamship Line Ltd

The Kingswood

[1940] 2 All ER 46


Categories:        CONTRACT: SHIPPING        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        12, 13, 14 FEBRUARY, 1 MARCH 1940        


Contract Impossibility of performance Frustration Charterparty Unexplained accident to ship Onus of proof that accident not due to negligence Bursting of auxiliary boiler Accidents of navigation Carriage of Goods by Sea Act 1924 (c 22), Sched art IV, para 2(a).

A ship was chartered to load a cargo, but on the day before she should have proceeded to her berth an explosion occurred in the auxiliary boiler, which made it impossible for her to undertake the voyage. The cause of the explosion could not be definitely ascertained, and, of three possible explanations, only one would have imported negligence on the part of the shipowners. The charterers claimed damages from the shipowners for failure to load a cargo. At the time of the accident, the ship was not an “arrived” ship, and, therefore, neither the express warranties nor the exceptions clauses in the charterparty had attached. The question thus arose whether, on a plea of frustration of the contract, the party setting up the plea had to prove that the frustration was not due to his negligence or whether the party denying the frustration must affirmatively prove negligence on the part of the party setting up the plea:

Held (i) the burden of proving their claim was upon the claimants, and this burden they had failed to discharge, with the result that the claim had to be dismissed.

(ii) the bursting of a boiler was not an accident of navigation.

(iii) the Carriage of Goods by Sea Act 1924, Sched art IV, para 2(a), only refers to damage to goods.

Notes

Although the cases on frustration go back to the early part of last century, if not earlier, the full consideration of the doctrine is almost wholly confined to cases decided since the beginning of the Great War. The doctrine has been based on two alternative theories, (i) that the foundation of the contract has disappeared, or (ii) that a term to that effect would be implied in the contract. It is essential that the frustration should not be a self-induced frustration, and this would exclude a frustration brought about by the negligence of the party setting up the plea. Up to this point, no difficulty arises, but, where it comes to be asked whether the party setting up the plea must disprove his own negligence or whether the other party must prove the negligence of the party setting up the plea, there is an absence of direct authority, and that is the difficulty which arises in the present case. After a consideration of the various cases in which the burden of proof of negligence has arisen, the judge has based his final decision upon the fundamental principle that it is for the plaintiff to prove his case. Thus, if the defendant sets up frustration, and the facts proved are equally consistent with the frustration being due to the defendants negligence and with it not being so due, the plaintiff must fail. The present case, where the cause of the accident leading to the frustration is not known, would seem to be more strongly in favour of the defendant.

As to Frustration, see Halsbury (Hailsham Edn), Vol 7, pp 212217, para 296; and for Cases, see Digest, Vol 12, pp 379383, Nos 31313158.

Cases referred to

Bank Line Ltd v Capel (Arthur) & Co [1919] AC 435; 41 Digest 366, 2136, 88 LJKB 211, 120 LT 129.

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524; Digest Supp, 104 LJPC 88, 153 LT 425.

Page 47 of [1940] 2 All ER 46

Hirji Mulki v Cheong Yue SS Co [1926] AC 497; Digest Supp, 95 LJPC 121, 134 LT 737.

Dahl v Nelson, Donkin & Co (1881) 6 App Cas 38; 41 Digest 517, 3471, 50 LJCh 411, 44 LT 381, affg SC sub nom. Nelson v Dahl (1879) 12 ChD 568.

Blackburn Bobbin Co v Allen (T W) & Sons [1918] 2 KB 467; 12 Digest 398, 3226, 87 LJKB 1085, 119 LT 215, affg [1918] 1 KB 540.

Horlock v Beal [1916] 1 AC 486; 41 Digest 230, 685, 85 LJKB 602, 114 LT 193, revsg [1915] 3 KB 627.

F A Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916] 2 AC 397; 12 Digest 390, 3194, 85 LJKB 1389, sub nom. Re F A Tamplin SS Co Ltd and Anglo-Mexican Petroleum Products Co Ltd 115 LT 315, affg [1916] 1 KB 485, [1915] 3 KB 668.

Court Line Ltd v Dant & Russell Inc [1939] 3 All ER 314; Digest Supp, 161 LT 35.

Re Comptoir Commercial Anversois and Power, Son & Co [1920] 1 KB 868; 12 Digest 396, 3218, 89 LJKB 849, 122 LT 567.

Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705; 41 Digest 418, 2616, 84 LJKB 1281, 113 LT 195, affg [1914] 1 KB 419.

The Glendarroch [1894] P 226; 41 Digest 414, 2580, 63 LJP 89, 70 LT 344.

Paterson Steamships Ltd v Robin Hood Mills (1937) 58 Lloyd LR 33.

Standard Oil Co of New York v Clan Line Steamers Ltd [1924] AC 100; 41 Digest 428, 2691, 93 LJPC 49, 130 LT 481.

The Northumbria [1906] P 292; 41 Digest 417, 2606, 75 LJP 101, 95 LT 618.

Robinson v Davison (1871) LR 6 Exch 269; 12 Digest 378, 3123, 40 LJEx 172, 24 LT 755.

Taylor v Caldwell (1863) 3 B & S 826; 12 Digest 618, 5102, 32 LJQB 164, 8 LT 356.

Rugg v Minett (1809) 11 East 210; 39 Digest 405, 404.

Appleby v Myers (1867) LR 2 CP 651; 12 Digest 618, 5103, 36 LJCP 331, 16 LT 669.

Howell v Coupland (1876) 1 QBD 258; 12 Digest 618, 5104, 46 LJQB 147, 33 LT 832.

Cutter v Powell (1795) 6 Term Rep 320; 12 Digest 406, 3275.

Jesse v Roy (1834) 1 Cr M & R 316; 12 Digest 423, 3401, 3 LJEx 268.

Morgan v Sim, The London (1857) 11 Moo PCC 307; 41 Digest 694, 5246, sub nom. The City of London, Morgan v Sim 30 LTOS 236.

Abrath v North Eastern Ry Co (1883) 11 QBD 440; 22 Digest 46, 227, 52 LJQB 620, 49 LT 618, on appeal (1886) 11 App Cas 247.

Scott v London Dock Co (1865) 3 H & C 596; 36 Digest 91, 601, 34 LJEx 220, 13 LT 148.

The Merchant Prince [1892] P 179; 36 Digest 102, 681, 67 LT 251.

Czech v General Steam Navigation Co (1867) LR 3 CP 14; 41 Digest 425, 2667, 37 LJCP 3, 17 LT 246.

Ballard v North British Ry Co [1923] SC 43; 36 Digest 88, case 581 xix.

MacFarlane v Thompson (1884) 12 R (Ct of Sess) 232; 34 Digest 205, case d.

Fraser v Fraser (1882) 9 R (Ct of Sess) 896.

Walker v Olsen (1882) 9 R (Ct of Sess) 946.

Milne v Townsend (1892) 19 R (Ct of Sess) 830; 36 Digest 88, case 581 xviii.

Wakelin v London & South Western Ry Co (1886) 12 App Cas 41; 36

Page 48 of [1940] 2 All ER 46

Digest 77, 507, 56 LJQB 229, 55 LT 709, affg (1884), [1896] 1 QB 189, n.

Hanson v Lancashire & Yorkshire Ry Co (1872) 20 WR 297; 8 Digest 93, 633.

Powell v MGlynn & Bradlaw [1902] 2 IR 154; 34 Digest 128, case 981 xii.

The Kite [1933] P 154; Digest Supp, 102 LJP 101, 149 LT 498.

Brooks Wharf & Bull Wharf Ltd v Goodman Bros [1937] 1 KB 534, [1936] 3 All ER 696; Digest Supp, 106 LJKB 437, 156 LT 4.

Travers (Joseph) & Sons Ltd v Cooper [1915] 1 KB 73; 3 Digest 74, 140, 83 LJKB 1787, 111 LT 1088.

Morison, Pollexfen & Blair v Walton (1909) cited [1915] 1 KB at p 90; 3 Digest 74, 143.

The Stranna [1938] P 69, [1938] 1 All ER 458; Digest Supp, 107 LJP 33.

Daniel v Metropolitan Ry Co (1871) LR 5 HL 45; 36 Digest 32, 183, 40 LJCP 121, 24 LT 815, affg (1868) LR 3 CP 216, 591.

The Southgate [1893] P 329; 41 Digest 431, 2709.

Svenssons (C Wilh) Travaruaktiebolag v Cliffe SS Co [1932] 1 KB 490; Digest Supp, 101 LJKB 521, 147 LT 12.

Hamilton & Co v Mackie & Sons (1889) 5 TLR 677; 2 Digest 331, 138.

Special Case

Special Case stated by an arbitrator to determine a question of the liability of the owners for failure to load a cargo. The facts are fully set out in the judgment.

Sir Robert Aske KC and Patrick Devlin (for A A Mocatta on war service) for the appellants.

G St C Pilcher KC and Charles Stevenson for the respondents.

1 March 1940. The following judgments were delivered.

ATKINSON J. This is a special case stated in an interim award to determine a question of liability for a claim for damages by the charterers against the owners of a ship for failure to load a cargo. The charterparty was dated 5 August 1936 and was an agreement between the respondents, Joseph Constantine Steamship Line, Ltd, the owners of a vessel named the Kingswood, and certain agents for the claimants. It provided that the vessel should be ready at Port Pirie, South Australia, for the purposes of the charterers, and should there load a full cargo of a certain description. The vessel was estimated to arrive at Port Pirie about the end of December, or early January. Clause 7, which was an exceptions clause, provided as follows:

The act of God [various other exceptions are mentioned] and other accidents of navigation excepted, even when occasioned by the negligence, default, or error in judgment of the pilot, master, mariners, or other servants of the owners … and all the above exceptions are conditional on the vessel being seaworthy when she sails on her voyage; but any latent defects in the machinery, hull, or tackle shall not be considered unseaworthiness: provided the same did not result from want of due diligence of the owner or owners, or any of them, or of the ships husband or manager.

The other relevant clause is cl 29, which provides as follows:

This charterparty is to be read and construed as if every clause therein contained which is rendered illegal or null and void by the Carriage of Goods by Sea Act, 1924, had never been inserted therein or had been cancelled and eliminated therefrom prior to the execution hereof. This charterparty is subject to the terms and provisions of the Sea Carriage of Goods Act, 1924 (Australia), and the conditions

Page 49 of [1940] 2 All ER 46

thereby implied in the bill of lading shall be deemed to form part of and be incorporated in this charter.

The ship left the Tyne for Durban in October 1936. She then proceeded with cargo to Lorenco Marques, and in the first week of December sailed from there in ballast for Port Pirie in order to load the cargo provided for by the charterparty. She anchored in the roads of Port Pirie on 26 December and on the following day the master tendered what purported to be a notice of readiness. This was not accepted as a proper notice, and it was agreed that the steamer should remain at anchorage until 4 January and should then proceed to her berth. It was agreed in the case before me that the steamer never became “an arrived ship.” The case finds follows:

… at approximately 8.55 a.m. on Sunday, Jan. 3, 1937, while the steamer was still anchored in the roads there occurred an explosion of extreme violence from the auxiliary boiler. As to the general features of the explosion there is no dispute. It was internal in the sense that it took place within the circumference of the boiler and it was due to the fact that there was a sudden opening of communication between the water and steam space and one or both of the combustion chambers. There is no doubt that the plain tubes and the majority of the stay tubes became at some stage displaced from their positions in both the front and back tube plates. Further there is common ground as to what immediately supervened. The energy released was such that the main boilers, situated aft of the auxiliary boiler, were set aft by the concussion of the explosion 4 ft. and 5 ft. 6 ins. respectively at which points their movement was arrested, whereas the auxiliary boiler itself was projected forward through two watertight bulkheads finally piercing the collision bulkhead at the forward end of No. 1 hold and breaking the shell plates at the starboard bow. The distance travelled by the auxiliary boiler before it came to rest in the forepeak was approximately 164 ft.

I am told that when it did come to rest the boiler itselfthat is, the outside shellwas still intact. The respondents gave notice that they could not perform the charterparty, and it was agreed between the claimants and the respondents that the delay caused by the damage to the steamer was such as to frustrate the commercial object of the adventure. As the steamer could not be repaired in Australia, it was brought back to this country, and there was the usual examination by surveyors for both parties. There was also a board of Trade inquiry under the Boiler Explosions Acts 1882 and 1890, and there has been a long inquiry before the arbitrator in this case. The result of that inquiry before the arbitrator is expressed in para 7 of the case as follows:

Neither those who were responsible for conducting the Board of Trade inquiry nor any of the witnesses who gave evidence before me claimed to be able to state with any certainty the causes of the disaster or the sequence of events that led up to it. The explosion was one of an unprecedented character, and no sequence of events which was other than improbable was suggested as capable of having given rise to it.

The question of law involved in this case arises in this way. The claimants claim damages for failure to load. The respondents plead the destruction of the ship as a navigable unit, and claim that the contract was thereby frustrated without liability on their part. They also rely on the exceptions clause and the articles of the schedule to the Australian Sea-Carriage of Goods Act 1924. The claimants in reply say that the frustration arose from the default of the respondents, who are not entitled, therefore, to rely upon it.

Page 50 of [1940] 2 All ER 46

The general rule is that impossibility of performance is no answer to a claim for breach of contract. There are, however, certain exceptions to the rule. Among them certainly are personal contracts, where the possibility of performance necessarily depends upon the contractor being alive and in sufficiently good health to perform his contract, and performance becomes impossible through death or illness; and also contracts where the possibility of performance necessarily depends upon the continued existence of a specific subject-matter, and performance becomes impossible owing to the destruction of that subject-matter. In such cases, the contract, or the adventure contemplated by the contract, is said to be frustrated, and the contract is at an end, and no action lies for damages for breach. However, to quote Lord Sumner in Bank Line Ltd v Capel (Arthur) & Co, at p 452:

I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a self-induced frustration; indeed, such conduct might give the other party the option to treat the contract as repudiated.

In Maritime National Fish Ltd v Ocean Trawlers Ltd, a case dealing with the position which arose when a trawler had been requisitioned by the government, in which the facts are not very material for my purpose, Lord Wright said, at p 530:

The essence of “frustration” is that it should not be due to the act or election of the party. There does not appear to be any authority which has been decided directly on this point. There is, however, a reference to the question in the speech of Lord Sumner in Bank Line Ltd v Capel (Arthur) & Co …

Then he reads the passage which I have just read, and continues, at p 530:

A reference to the record in the House of Lords confirms Lord Sumners view that the court below had not considered the point, nor had they evidence or material for its consideration. Indeed, in the wartime the Admiralty, when minded to requisition a vessel, were not likely to give effect to the preference of an owner, but rather to the suitability of the vessel for their needs or her immediate readiness and availability. However, the point does directly arise in the facts now before the Board.

The point arose there because the Admiralty, I think, wanted three trawlers, and the defendants had selected the three which should be handed over, one of the three being the one which was the subject of the contract upon which that particular action was brought. Then Lord Wright continues as follows, at pp 530, 531:

and their Lordships are of opinion that the loss of the St. Cuthberts licence can correctly be described, quoad the appellants, as “a self-induced frustration.” Lord Sumner in Hirji Mulji v. Cheong Yue S.S. Co. quotes from Lord Blackburn in Dahl v. Nelson, Donkin & Co. who refers to a “frustration” as being a matter “caused by something for which neither party was responsible”: and again he quotes the words of Brett, J., which postulate as one of the conditions of frustration that it should be “without any default of either party.” It would be easy, but is not necessary, to multiply quotations to the same effect. If either of these tests is applied to this case, it cannot in their Lordships judgment be predicated that what is here claimed to be a frustration, that is, by reason of the withholding of the licence, was a matter for which the appellants were not responsible or which happened without any default on their part. In truth, it happened in consequence of their election. If it be assumed that the performance of the contract

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was dependent on a licence being granted, it was that election which prevented performance, and on that assumption it was the appellants own default which frustrated the adventure: the appellants cannot rely on their own default to excuse them from liability under the contract.

In passing, it will be noticed that Lord Sumner said that reliance cannot be placed on a frustration which is self-induced. He does not say “on a frustration which is not proved to be not self-induced.” The passage which I have read from the judgment delivered by Lord Wright seems to me to imply the same idea. There, of course, the facts showed conclusively that there had been a self-induced frustration, and he was dealing with it on that assumption.

It was agreed before me that the main question of law raised by the case is this. Is it for the person who has failed to perform his contractual obligation, and is setting up a case of frustration, to prove affirmatively, not only that performance became impossible owing to circumstances bringing him within the second of the exceptions I have indicated, but also that the impossibility was not due to any negligence on his part, or is it for the party claiming damages to prove that the impossibility was due to the negligence of the defaulting party? That is the main point of law raised, and both sides agree that there is no direct authority on it. I put the question in this way. Supposing a ship the subject-matter of a charterparty such as this is lost with all hands on the outward voyage, nothing being known of the circumstancesthat is, nothing from which any inference can be drawndoes the shipowner lose because he cannot disprove negligence, or does the charterer lose because he is unable to prove negligence? I might go a step further. Supposing a ship is lost with all hands by striking a mine, and that much is known, has the shipowner, in order to succeed in establishing frustration, to prove that a proper watch was being kept, and that the ship was being navigated with proper skill, or has the charterer to prove that there was some negligence in the navigation or look-out which might have been responsible for the loss? It has not been argued that, if the burden rests on the claimant, it has been discharged. Perhaps it is not yet finally settled whether the true basis upon which the doctrine of frustration of contract rests is the term to be implied into the contract or whether it arises by operation of law as soon as it appears that the basis of the contract has gone.

In Blackburn Bobbin Co v Allen (T W) & Sons, McCardie J, in putting the principle, said, at p 545:

It was put with clearness by Lord Shaw in Horlock v. Beal, where he said [p. 512]: “The underlying ratio is the failure of something which was at the basis of the contract in the mind and intention of the contracting parties.” It was stated with equal clearness by Viscount Haldane in the Tamplin case, where he said [pp. 406, 407]: “The occurrence itself may … be of a character and extent so sweeping that the foundation of what the parties are deemed to have had in contemplation has disappeared, and the contract itself has vanished with that foundation.” In every case it is now necessary “to examine the contract and the circumstances in which it was made, not of course to vary, but only to explain it, in order to see whether or not from the nature of it the parties must have made their bargain on the footing that a particular thing or state of things would continue

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to exist. And if they must have done so, then a term to that effect will be implied, though it be not expressed in the contract”: per Earl Loreburn in the Tamplin case [p. 403].

One has there three quotations, the first two, from Lord Shaw of Dunfermline and Viscount Haldane, putting it on the basis that the foundation of the contract had disappeared, and the third, from Earl Loreburn, suggesting that a term to the same effect would be implied into the contract.

In Court Line Ltd v Dant & Russell Inc, Branson J, has pointed out that the Court of Appeal in Re Comptoir Commercial Anversois and Power Son & Co had decided in favour of the former view, and said that, so far as a judge of first instance was concerned, the matter was concluded. If I accept what he says is right, that means that some term has to be implied into the contract. In what terms, though, is the implied term to be deemed to be expressed? Are they to be words simply indicating that the destruction of some specific subject-matter should put an end to the contract, or that the continued existence of such specific subject-matter should be deemed to be of the basis of the contract? Does negligence become relevant merely on the same principal that a man cannot rely upon an exceptions clause if his negligence has caused the excepted event, or must the implied term be deemed to contain words putting upon the parties seeking to be relieved the burden of disproving the negligencethat is to say, of proving frustration without defaultand how far has that proof to go? I must seek what guidance I can from analogous cases. I think that I can find some from the way in which the question of proof of negligence has been dealt with in other cases of a character not very dissimilar to that of the case with which I have to deal here.

On the one hand I have cases under the Merchant Shippings Act 1894, s 502, which provides as follows:

The owner of a British sea-going ship…shall not be liable to make good to any extent whatever any loss or damage happening without his actual fault or privity [in certain specific circumstances].

It has been held that the onus of disproving actual fault or privity is on the shipowner. The first case in which that was held was Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd. Hamilton LJ, at page 436, dealt with the point, showing that at any rate in his mind it was one which was not free from doubt:

Can it be said that the cargo was burnt without the actual fault or privity of the owners? Though I think that the whole onus lies on the shipowner of proving as a defence loss by a fire, of which he can predicate that it happened without his actual fault, and that “without his actual fault or privity” in the Merchant Shipping Act, 1894, s. 502, differs in this respect from negligence in connection with excepted perils in a bill of lading (The Glendarroch), I need not decide it, for the facts proved are quite sufficient for the purpose, let the onus lie where it may.

In the House of Lords, it was decided quite clearly that under that section the onus lay, and lay entirely, on the owners setting up the section. That decision has been followedas, of course, it would have to bein

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Paterson Steamships Limited v Robin Hood Mills and Standard Oil Co of New York v Clan Line Steamers Ltd at p 113. The ratio of those decisions seems to be that the section creates a statutory exceptions clause, and that it is for the person setting up the clause to bring himself within it. On the other hand, there are many cases on exceptions clause in charterparties, and it is beyond dispute that, when a loss apparently falls within an exception, the burden of showing that the owner is not entitled to the benefit of the exception on the ground of negligence is on the person so contending: The Glendarroch. That has been followed again and again. It is difficult to see why the implied frustration term should be treated in the same way as a statutory exceptions clause rather than in the same way as an express exceptions clause. Again, if a prima facie case of perils of the sea is made out, and the plaintiff alleges unseaworthiness, the proof is upon the plaintiff alleging it: The Northumbria, at p. 298.

Consider, too, the cases of incapacity through illness. There the principle is the same, as is seen, for instance, in Robinson v Davison. Illness may well be due to neglect, but it has never been suggested in cases dependant on sickness that the sick person must prove absence of negligence, for the reason that illness raises no presumption of negligence. At any rate, I have looked at all the cases I can find on this, and I can find no suggestion anywhere that a person setting up illness as frustrating the possible performance of the contract has been called upon to prove an absence of fault on his part.

Then there are the cases arising under the Sale of Goods Act, 1893, s 7. The language is very much the same, I suppose, as that in which the principle of frustration might be expressed even in an extreme form. Where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby avoided. In Taylor v Caldwell, Blackburn J, referred, not, of course, to the section, but to the law which is embodied in the section, as based on the same implication. It has not been suggested, so far as I can find in any case on that section, that the general rules relating to negligence do not apply. In Taylor v Caldwell, Blackburn J, referred, for example, to Rugg v Minett. In that case, there is no suggestion whatever that the vendor had to prove that he was not responsible for the fire which had destroyed the goods which had been sold and the property in which had passed. There have been many fire cases. Taylor v Caldwell was one. Appleby v Myers was another. I can find no suggestion in any of those cases that the person relying upon fire as an excuse for his breach of contract has been called upon to prove that the fire was in no way due to any negligence on his part. I suppose that fire does not raise a presumption of negligence, but, be that as it may, I have sought vainly for any suggestion that, where fire has produced impossibility of performance, the person setting it up has to

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prove exactly how it happened, and has to prove that it happened through no conceivable fault of his own.

Again, there are the bailee cases. I shall refer to those cases later on in my judgment. I need merely say at the moment that they do not impose upon a bailee anything like the burden which it is sought to impose upon the person setting up frustration in this case. I want to refer to Taylor v Caldwell for this purpose. I am looking at the report in Smiths Leading Cases, Vol 2, p 609. The judge was dealing with the condition which ought to be implied, or with what was the basis of the contract, and he said, at p 609:

These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused.

He says that that rule of law was established by Rugg v Minett. His judgment ended in this way, at p 611:

The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance. In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the music hall at the time when the concerts were to be given; that being essential to their performance.

It will be noted from that that there is not a word said about negligence or proof of negligence or disproof of negligence being deemed to be incorporated, yet it is quite clear from the judges earlier statement of the principle that impossibility of performance caused by the destruction of the thing has to be without the default of the contractor. The inference I draw from that is that the implication is that the destruction of the subject-matter terminates the contract, but that one cannot rely upon it if it is established that ones own default has brought about that destruction. The judge continues as follows, at p 611:

We think, therefore, that the music hall having ceased to exist, without fault of either party, both parties are excused …

It may be a trifling and small indication, but I think it is an indication, that Blackburn J, there seems to be treating negligence in this way, not that the implied term has any reference to it, but that the implied term cannot be relied upon any more than an exceptions clause if the trouble has been brought about by the default of the owner. Howell v Coupland was a potato case. It will be remembered that there was a sale of 200 tons of Regent potatoes grown on land belonging to the defendant at so much a ton, to be delivered by September or October. In March, the defendant had 68 acres ready for potatoes, which were sown

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and were amply sufficient to grow more than 200 tons in an average year. In August, potato blight appeared, and the crop failed, so that the defendant was able to deliver only 80 tons. The plaintiff brought an action for the non-delivery of the other 120 tons, but he failed. The only reason why I refer to this case is that the principle of Taylor v Caldwell was applied, and nowhere was there any suggestion that there was any burden upon the defendant to prove that his potatoes suffered from blight without default of his own. In Appleby v Myers, one gets a little more guidance. There A had contracted to do work and supply materials upon the premises of B for a specific sum to be paid on the completion of the whole. A had done part of the work, when the building was destroyed by fire. He claimed payment for what he had done, and it was held that he had no claim, because he was not entitled to payment until he had completed his contract, and the impossibility of completing it had come about through the fire, and, therefore, he could not recover. Blackburn J, said, at pp 658, 659:

We agree with the court below in thinking that it sufficiently appears that the work which the plaintiffs agreed to perform could not be performed unless the defendants premises continued in a fit state to enable the plaintiffs to perform the work on them; and we agree with them in thinking that, if by any default on the part of the defendant, his premises were rendered unfit to receive the work, the plaintiffs would have had the option to sue the defendant for this default, or to treat the contract as rescinded, and sue on a quantum meruit. But we do not agree with them in thinking that there was an absolute promise or warranty by the defendant that the premises should at all events continue so fit. We think that where, as in the present case the premises are destroyed without fault on either side, it is a misfortune equally affecting both parties …

It will be noted that he said:

… we agree with them in thinking that, if by any default on the part of the defendant, his premises were rendered unfit to receive the work …

That seems to imply some established default, as is clear at the end of the judgment, where Blackburn J, says, at p 660:

… we think that, on the principles of English law laid down in Cutter v. Powell, Jesse v. Roy [and so on] the plaintiffs, having contracted to do an entire work for a specific sum, can recover nothing unless the work be done, or it can be shewn that it was the defendants fault that the work was incomplete; or that there is something to justify the conclusion that the parties have entered into a fresh contract.

In all the cases which I have looked at, that is the only sentence I can find which clearly indicates on whom was the burden“or it can be shown that it was the defendants fault that the work was incomplete.” It was Blackburn J, who laid down the principle in Taylor v Caldwell. When applying that principle in Appleby v Myers, he used an expression which seems to me to indicate that it was, his view that, in the case of a plaintiff claiming damages as on a breach, it was for him to prove that it was the defendants fault that the work was incomplete. I can see myself no reason why the implied term should be so framed as to exclude the general rules governing the incidence of proof in the law of negligence, or why those rules should not apply to the problems raised in this case. Those rules have in the main been built up in actions for

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tort, but they apply equally where the question of breach of contract depends upon whether or not there has been negligence. As a general rule, a party seeking to recover compensation for damage must prove that the party against whom he complains was in the wrong. To quote Lord Wensleydale, in Morgan v Sim, The London, at p 312, he must show:

… that the loss is to be attributed to the negligence of the opposite party. If at the end he leaves the case in even scales and does not satisfy the court that it was occasioned by the negligence or default of the other party, he cannot succeed.

Some helpful rules relating to the onus of proof were laid down by Bowen LJ in Abrath v North Eastern Ry Co at p 456:

Whenever litigation exists, somebody must go on with it; the plaintiff is the first to begin; if he does nothing, he fails; if he makes a prima facie case, and nothing is done to answer it, the defendant fails. The test, therefore, as to the burden of proof or onus of proof, whichever term is used, is simply this: to ask oneself which party will be successful if no evidence is given, or if no more evidence is given than has been given at a particular point of the case, for it is obvious that as the controversy involved in the litigation travels on, the parties from moment to moment may reach points at which the onus of proof shifts and at which the tribunal will have to say that if the case stops there, it must be decided in a particular manner. The test being such as I have stated, it is not a burden that goes on for ever resting upon the shoulders of the person upon whom it is first cast. As soon as he brings evidence which, until it is answered, rebuts the evidence against which he is contending, then the balance descends on the other side, and the burden rolls over until again there is evidence which once more turns the table. That being so the question of onus of proof is only a rule for deciding on whom the obligation of going further, if he wishes to win, rests. It is not a rule to enable the jury to decide on the value of conflicting evidence. So soon as a conflict of evidence arises, it ceases to be a question of onus of proof.

In such a case as this, the plaintiffs begin by proving that the ship did not arrive within the contract time, or at all. If the case stopped there, the plaintiffs would win. However, the respondents then prove an accident which destroyed the ship as a navigable unit. The respondents prove an event which was the immediate, direct and dominant cause of that destruction. If the case stops there, what is the position? Who wins? I do not think that the answer is a simple one, but, in my view, the onus of ultimately satisfying the tribunal that the ship was at fault rests on the claimants. Whether or not they have discharged that onus must be judged by applying the following principlesnamely, (i) if it appears that the accident proved was of such a nature as to raise a presumption of negligencethat is, to afford some evidence of negligencethe onus is on the owner to destroy that presumption created by the nature of the accident, (ii) if it appears that the accident proved was of such a nature as to afford no evidence of negligence, the onus is on the charterers to prove negligence in fact, and (iii) if the onus is upon the owner under the first principle, that onus is discharged by proving facts from which the inference that the accident was not caused by negligence is as strongthat is, equally consistent with the factsas is the inference that it was caused by negligence.

The first principle, of course, rests upon the law laid down by Erle CJ in Scott v London Dock Co at p 601:

There must be reasonable evidence of negligence, But where the thing is shewn

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to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from want of care.

The proper inference to be drawn may be strong or it may be weak.

The Merchant Prince is an example of a case where the inference was very strong, because a ship navigating the entrance to the Mersey ran into a ship which was at anchor. I need not read the case, but the substance of it was that, in a case of that kind, where there was such apparent negligence, which it was very difficult to explain, the presumption had to be rebutted, and the defendant there was called upon to prove that the accident was brought about by some cause for which he was not responsible, which he failed to do. However, how far this presumption ought to be drawn, and the strength of the presumption to be drawn, are perhaps well illustrated by Willes J, in Czech v General Steam Navigation Co at p 19:

I will, however, assume that it is so for the purpose of this case, but it does not therefore, restrict the plaintiffs as to the nature of the evidence by which such negligence shall be proved. To explain this by nn illustration. If a shipment of sugar took place under a bill of lading, such as the present one, and it was proved that the sugar was sound when put on board, and had become converted into syrup before the end of the voyage, if that was put as an abstract case I think the shipowner would not be liable, because there may have been storms which occasioned the injury, without any want of care on the part of the captain or crew; the injury alone, therefore, would be no evidence of negligence on their part. But if it was proved that the sugar was damaged by fresh water, then there would be a strong probability that the hatches had been negligently left open, and the rain had so come in and done the injury, and, though it would be possible that some one had wilfully poured fresh water down into the hold, this would be so improbable that a jury would be justified in finding that the injury had been occasioned by negligence in the management of the ship.

In other words, whether or not a presumption of negligence should be drawn must always depend on the circumstances.

In Ballard v North British Ry Co, there is to my mind a most illuminating opinion of Lord Dunedin on this point. He differed in his conclusion on the facts from the other members of the House, but what he said has been referred to again and again with approval. It was an action for damages, where negligence was alleged in the handling of railway trucks in a goods yard. However, the facts do not really matter for this purpose. Lord Dunedin says, at pp 53, 54:

The foundation of all actions of the kind we are considering must be negligence on the part of the defender, and whether the expression res ipsa loquitur is applicable or not depends upon whether, in the circumstances of the particular case, the mere fact of the occurrence which caused hurt or damage is a piece of evidence relevant to infer negligence. Thus, there is a class of cases dealing with injury occurring to a servant owing to defective plant. …Yet it is significant to notice that these cases may be unduly applied, and Lord Justice-Clerk Moncreiff found it necessary to correct the tendency in MacFarlane v. Thompson. The accident there was due to a casing falling from the boiler on which the pursuer was working and injuring him. His Lordship had been a party to the judgements in Fraser v. Fraser and Walker v. Olsen. Lord Craighill had said, at p. 235: “It would, I think, be very unfair to the master to hold that where the cause of the accident was unascertained, or, it may be unascertainable, it is to be held that that case must necessarily have lain in some defect of the machinery, and that the master must therefore be found liable,” and Lord Justice-Clerk Moncreiff said, at p. 235: “I only add to what Lord

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Craighill has said a single sentence for the purpose of explaining my meaning in the opinions I delivered in the cases referred to. It has been sought to interpret these opinions as authority to the effect that you must presume from the fact that an accident has occurred that there was some defect in the machinery. I do not think that any such interpretation can be put upon what I said there. What I did say was that, provided that it is proved that some defect in the machinery or plant caused the accident, it is not necessary to show the precise nature of that defect, and an onus is thrown upon the master to show that the defect was one for which he was not to blame, but that is a totally different thing from saying you must infer faults or defects in the machinery where there is no evidence to that effect in any of the surrounding circumstances.” … Taking the cases in which the mere fact of the accident is relevant to infer negligence, it is sometimes said, and the Lord Ordinary has said it, that there is then raised a presumption of negligence which the defender has got to rebut. I think that this is too absolute a method of expressing the legal result in all cases. It was this same feeling that, I think, led Lord Adam to say in Milne v. Townsend [p. 836]: “The res can only speak so as to throw the inference of fault upon the defender in some cases where the exact cause of the accident is unexplained.” If indeed “relevant to infer” and “necessarily infers” were the same thing, then I think it would be right to say that, when an accident arises in cases where the doctrine is applicable, then a presumption of fault would arise which must be overcome by contrary evidence, and that is the way that the Lord Ordinary has looked at the matter. But “relevant to infer” and “necessarily infers” are not synonymous, and the difference becomes of moment in a case like the present. I think this is a case where the circumstances warrant the view that the fact of the accident is relevant to infer negligence. But what is the next step? I think that, if the defenders can show a way in which the accident may have occurred without negligence, the cogency of the fact of the accident by itself disappears, and the pursuer is left as he began, namely, that he has to show negligence. I need scarcely add that the suggestion of how the accident may have occurred must be a reasonable suggestion. For example, in Scott v. London Dock Co., a case where a bag of flour fell on a man who was passing along a quay in front of a warehouse, it would not have been sufficient to say that the flour bag might have fallen from a passing balloon. I think this view of mine is borne out by the expressions used in [Scotts case].

Then he quotes the principle which I have already read. The importance of Ballards case is that it indicates when that presumption, if it is fair to raise it from the nature of the accident, is rebutted. In the view of Lord Dunedin, it was rebutted if the defence could show a way in which the accident might have occurred without negligence.

Here, this ship and the boiler being under the respondents management, and the explosion of a boiler being somewhat unusual (perhaps very unusual nowadays), it may be, and I must assume, that these facts afford some evidence of want of care. Whether or not every boiler explosion is an accident of such a nature as fairly to raise such an inference I do not know. However, it is not necessary to come to any decision as to that, because in this case there has been a Board of Trade inquiry, a prolonged examination of the circumstances before an arbitrator, and certain findings, the result of which has been set forth in the case stated. With whatever inferences and presumptions an inquiry may start, and however often the onus may shift as matters of evidence, the ultimate question must be whether or not it has been established that the respondents were to blame for the accident? That is in substance taken from Wakelin v London & South Western Ry Co. It was the case of a woman suing for the death of her husband, caused by the alleged negligence of the railway company. Lord Halsbury, LC, says, at p 44:

… it is incumbent upon the plaintiff in this case to establish by proof that her husbands death has been caused by some negligence of the defendants, some negligent

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act, or some negligent omission, to which the injury complained of in this case, the death of the husband, is attributable. That is the fact to be proved. If that fact is not proved the plaintiff fails, and if in the absence of direct proof the circumstances which are established are equally consistent with the allegation of the plaintiff as with the denial of the defendants, the plaintiff fails … If the simple proposition with which I started is accurate, it is manifest that the plaintiff, who gives evidence of a state of facts which is equally consistent with the wrong of which she complains having been caused byin this sense that it could not have occurred withouther husbands own negligence as by the negligence of the defendants, does not prove that it was caused by the defendants negligence. She may indeed establish that the event has occurred through the joint negligence of both, but if that is the state of the evidence the plaintiff fails …

Then Lord Watson pointed out, at p 47, that it is not enough merely to prove acts of negligence. The defendants may be guilty

… of many negligent acts or omissions, which might possibly have occasioned injury to somebody, but had no connection whatever with the injury for which redress is sought, and therefore the plaintiff must allege and prove, not merely that they were negligent, but that their negligence caused or materially contributed to the injury.

If, in the result, the scales are even, and the tribunal is unable to say that the facts are more consistent with negligence than they are with the absence of negligence, the plaintiff fails.

In Hanson v Lancashire & Yorkshire Ry Co, Brett J, says, at p 297:

“… it seems now to be clearly established that in order to render the company liable for negligence it is necessary to give affirmative proof of negligence on their part, and it is not sufficient merely to prove the occurrence of an accident, and to rely upon that as prima facie evidence of negligence. In some cases, res ipsa loquitur, the accident may be of such a nature as that negligence may be presumed from the mere occurrence of it. But when the balance is even, the onus is on the party which relies upon the negligence of the other to turn the scale.”

In Powell v MGlynn & Bradlaw, Fitzgibbon LJ, said, at p 190:

Where there are two hypotheses, one involving and the other not involving the liability of a defendant, each equally consistent with the evidence, the plaintiff cannot get a verdict.

That principle has been applied in three recent cases. The first is The Kite, which was an Admiralty case, tried by Langton J. There had been a collision between a barge which was being towed and, I think, the buttress of an arch. The passage to which I want to refer is as follows, at p 168:

Have the plaintiffs proved that the defendants were negligent? The plaintiffs say: “You were towing the barge; the barge struck the bridge.” That I think is sufficient to shift the burden of proof for the moment, and it is for the defendants to give an explanation of how this occurred. When they have given that explanation one has still to see whether negligence has been proved. The explanation may be disbelieved; the explanation may not at all exclude negligence, but the explanation may leave the matter still in some doubt as to exactly how the occurrence did happen, but leave an equal possibility that it happened without negligence as with negligence. It may, on the other hand, be sufficient to exclude any question of negligence at all. Those are all possibilities of what may result from the explanation. Before I pass from that I will cite one more case which I think is of great assistance in this question …

Then he referred to Ballard v North British Ry Co, and read that passage which I have read from the opinion of Lord Dunedin, at p 54:

… if the defenders can show a way in which the accident may have occurred without negligence …

and applied it to the case before him.

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The next case to which I want to refer (and this is a bailee case) is Brooks Wharf & Bull Wharf Ltd v Goodman Bros. That was a case of goods which had been deposited in a warehouse, and had been stolen. The law, I think, is clear as to the position of a bailee in those circumstances. If he cannot produce the goods, he has to disprove negligence. He has to explain non-production in some way. The point of the case, for my purpose is that it shows how far a bailee has to go in the disproof of negligence, and it may be difficult to suggest that a shipowner is in a worse position than that of a bailee. What is it that the bailee has to show? The judgment in this case was given by Lord Wright MR, Romer LJ, and Macnaghten J, and the two last-named both agreed with the judgment of Lord Wright MR. The case had been tried by Branson J, who accepted the evidence of the defendants that they had a careful system under which goods were normally safe. It was argued, however, that there had been no explanation as to how and when the goods had been stolen. All that the bailees had done was to say that they had a reasonably good system, and that was not sufficient. It was argued that they had not discharged the onus on them because they had not explained how the goods had gone or how the thieves had got in, or for what purpose. Lord Wright MR, said, at p 539 ([1936] 3 All ER, at p 702):

In the present case, the stealing of the goods being admitted, the plaintiffs have given evidence that they have taken all reasonable precautions to protect the goods against the risk of theft and they [the warehousemen] say they have satisfied the burden of proof which rests upon them, and that they are outside the rulings I have just quoted. They further rely upon a statement of the rule given (in a dissenting judgment, it is true) by Lord Dunedin in Ballard v. North British Ry. Co. …

The plaintiffs were suing for money due to them, and the defendants were counterclaiming for the value of the goods. Then he read the passage which I have read, and continued as follows, at p 539 ([1936] 3 All ER at p 702):

I think this is merely stating the same rule as that stated by Lord Loreburn and Lord Halsbury from another aspect. If the plaintiffs show that they took all reasonable and proper care of the goods, the mere fact that they were, notwithstanding, stolen is not sufficient any longer to make them liable for negligence. Their explanation is, then, that the thieves must have shown ingenuity and daring against which reasonable precautions could not avail. Hence, I think the plaintiffs discharge the burden of proof upon them if they can show that the theft took place notwithstanding that they had taken all reasonable precautions to guard against the danger.

The point is this. If the bailees can show, as Lord Dunedin put it, that the loss may have happened consistently with the absence of negligence on their part, then they have discharged the burden. If it is something that could not happen without negligence on their part, the position is different. In that case, they were able to discharge the onus by saying: “We have shown that we have a reasonable system here. The theft has nevertheless taken place. It is just as consistentthe thieves being specially clever people, who could break in and steal these goods

Page 61 of [1940] 2 All ER 46

notwithstanding our systemwith the absence of negligence as it is with negligence, and, therefore, we have discharged the onus which is upon us.” Lord Wright MR, had quoted certain passages from Travers (Joseph) & Sons Ltd v Cooper. Goods had been loaded into a barge, and the barge, while lying alongside the wharf, had sunk. The barge-owners were being sued by the owners of the goods. Pickford J, had tried the case in the first instance. It was proved that the man who ought to have been on the barge in charge of it had left the barge and was not there. There were two theories as to how the barge had sunk. Mud-sucking was one solution, and underpinning was the other. Pickford J, had held that there was negligence proved because the man was not there, but he said, at p 75:

I have come to the conclusion that it is not proved to me that if he had been there he could have avoided the accident.

Accordingly, he found for the defendants. That decision was reversed in the Court of Appeal. Buckley LJ says, at p 87:

They have proved negligence but the learned judge has held that they fail because they have not proved that the negligence caused the loss. If the learned judge had enjoyed the assistance which we have of the decision of the House of Lords in Morison, Pollexfen & Blair v. Walton, decided on May 10, 1909,  I doubt whether he would have decided this point as he did. The language of Lord Loreburn, L.C., in that case seems to me to be directly in point. It was a case in which a firefloat, which was being towed, was lost, and the reason why she sank was unknown because there was no one on board her as there ought to have been. Lord Loreburn, L.C., said: “Here is a bailee who, in violation of his contract, omits an important precaution, found by the learned judge upon ample evidence to be necessary for the safety of the thing bailed to him and which might have prevented the loss. And his broach of contract had the additional effect of making it impossible to ascertain with precision and difficult to discover at all what was the true cause of the loss. I cannot think it is good law that in such circumstances he should be permitted to saddle upon the parties who have not broken their contract the duty of explaining how things went wrong. It is for him to explain the loss himself, and if he cannot satisfy the court that it occurred from some cause independent of his own wrongdoing he must make that loss good.”

The same thing was said by Lord Halsbury in Morison Pollexfen & Blair v Walton. If the plaintiff can prove negligence in the bailee, then it is for the bailee to prove that that negligence was not the cause of the loss. That principle was applied in Travers (Joseph) & Sons Ltd v Cooper. I think that it will be sufficient if, in the interests of time, I read merely a few word from the judgment of Phillimore LJ at p 97:

And this gives rise to the question, on whom was the burden of proof? It is here that I differ from the learned judge. I think he has imposed the burden of proof on the wrong party. I think that when the bailee of goods has to admit that the goods have been damaged while in his custody and in the absence of the custodian, and it is found that the absence was improper and negligent and that that very absence makes it difficult to determine what was the cause of the damage and the owner can suggest a probable cause which the presence of the custodian might have prevented, the burden is upon the bailee to show that it was not the negligent absence which was the cause of the damage.

The obligation was expressed in very guarded language, and it is based entirely upon the fact that the burden is on the bailee to explain everything if and when it is proved that he has been guilty of some

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definite negligence which might account for the accident. It is not for the plaintiff in such a case to prove that it did. It is for the defendant to prove that it could not. In The Stranna, Langton J, again applied the same principle.

Applying to this case the principles to which I have referred, to what conclusion do the findings of fact lead me? Para 3 of the case describes the accident. No wonder that the arbitrator described it as of an unprecedented character. There was a boiler which was intact at the end of the explosion. There was an internal explosion which produced such extraordinary external pressure in one direction as to cause, without a breach in the boiler, the ships far heavier boilers to shift 4 ft to 5 ft 6 ins and yet at the same time propelled the boiler itself in which the explosion occurred 164 ft, through all obstacles in its path in the opposite direction. Paras 7, 8 and 9 of the case must be referred to. I have read part of para 7. The further part of para 7 sets out the ultimate conclusion as follows:

The explosion was one of an unprecedented character and no sequence of events …

which must include no sequence of events based even on negligence:

… which was other than improbable was suggested as capable of having given rise to it. The matter was rendered still more difficult by reason of the fact that the donkeyman who on the morning in question was the only person to be in the stokehold during the 90 minutes preceding the explosion was not available as a witness. He had been paid off in Australia about 3 weeks after the explosion. No report of his actions during this most material time had been asked for by the respondents and what he did or failed to do is a matter of mere surmise.

There is no suggestion that the owners had any reason for supposing that the evidence of the donkeyman would be material. I do not think that there is any suggestion of bad faith there. It is merely stating the fact, and the position is the same as it would be if he had been killed in the explosion itself and was not there to help.

Then para 8 deals as follows with tubes:

Considerable debate took place before me on the claimants allegation that the stay tubes were corroded and excessively thin and that this condition had caused or contributed to the disaster.

It seems clear from the facts enumerated that some tubes had been renewed in 1934. In 1936, the boiler had passed the annual boiler survey. Para 8 continues as follows:

Though two of the 60 stay tubes had by reason of leaks been blanked off and stoppered at this date, no adverse comment on this known fact was made. During the remainder of the year, 10 more of these stay tubes leaked and were similarly stoppered. Before reaching Durban, the total of stoppered tubes was 7, and at that port 4 more leaked and received the same treatment.

This was reported to England, and the respondents made arrangements to fit a full set of new stay tubes on return to England. Then a twelfth leaked on 27 December. The arbitrator proceeds as follows:

I find, however, that, owing to the impossibility of examining these tubes, it is the recognised practice that they are not renewed until they have shown by repeated

Page 63 of [1940] 2 All ER 46

leaks that they require renewal. The condition of the stay tubes at Port Pirie is no ground for a finding of negligence against the respondents board or superintendent staff. Further, though the frequent failures should have indicated to the chief engineer that there was risk of further similar failures, the consequences of such failures reasonably to be anticipated would not be more serious than delay while the boiler was out of action, together with some risk of scalding men in the stokehold.

I read that paragraph as clearing the respondents from any suggestion of negligence with regard to the tubes. There can be no negligence in the chief engineer. Of course, he must have appreciated that there might be similar failures. It must have been on his information, I imagine, that the new set had been ordered, but, however much he appreciated the presence of the corrosion, he was not responsible for it. Nobody was. That is clear. It is a wear-and-tear process which is inevitable. There it is. One cannot do anything about it until one gets the ship into a place where one can make renewals and put in a new set. All one can do, as soon as the tube leaks, is to blank it off in the way described. There is no danger to be apprehended from a leaking tube. That is proved by the practice which the arbitrator findsnamely, that these tubes are not renewed until it is shown by repeated leakage that they require renewal. It was not the boiler which feeds the ships engine. It was only the auxiliary boiler. I do not see there any suggestion of negligence on the part of anybody on the ship. If anybody was negligent about that, it must have been the owners, who sent the ship out with tubes in such a condition that they could not properly see the voyage through, but negligence on their part was negatived. There is no negligence, however, on the part of people who have to do the best they can with what they have. The arbitrator proceeds in para 9 as follows:

Three principal theories of the disaster were formulatednamely, that, by an improbable collocation of events, an explosive mixture of coal-gas and air was formed in the starboard combustion chamber, that the explosion so caused administered a shock to both combustion chambers and fractured a number of corroded tubes in the port tube nest, and that the port back tube plate, thus weakened, was rendered liable to be set down in the manner found.

There is a theory, not based on negligence at all, that the explosion took place before anything happened to the tubes. That explosion fractured the tubes. However, whether or not they fractured more readily, he has already found that the fact that they had corroded did not import negligence on the defendants part. Therefore, the first theory advanced is a theory which rests upon no negligence on the part of the defendants, and none is established. The second theory was as follows:

… that by reason of one or more of the acts of negligence alleged in the particulars 1 to para. 9 of the points of defence the water was allowed to get too low: that the top of the port combustion chamber thus became overheated (the starboard fire was out during the night of Jan. 2 to Jan. 3): and that the disconnection of the port tubes resulted from ensuing buckling of the port back tube plate.

That is a theory based on negligence. Then the third theory was as follows:

… that the initial explosion was due to some explosive substance accidentally

Page 64 of [1940] 2 All ER 46

present in the coal, the explosion of which in the starboard furnace led to the same result as under (1).

How does the arbitrator go on? He says in para 10:

As to (1), I am not satisfied that the facts occurred as suggested. Accordingly, I am not satisfied that the condition of the tubes contributed in any way to the disaster. On the other hand, I consider this theory to be possibly correct, and accordingly, am not satisfied that the corroded condition of the tubes did not contribute to the disaster.

He has already said that all the suggested theories were not other than improbable, but what he is saying there is: “I cannot say as a fact that it happened in that way. Possibly it did. It is possible that the tubes had in some way contributed to the result, but I have already found that there has been no negligence on the part of the respondents qua the tubes.” Then, as to the second theory, he says:

I am not satisfied that the facts occurred as suggested. I am not satisfied that any of the servants of the respondents were guilty of any of the negligence alleged. On the other hand, I consider the theory to be possibly correct, and, accordingly, I am not satisfied that negligence on the part of servants of the respondents did not cause or contribute to the disaster.

Again, that is not putting it higher than this. There has been suggested a theory which may possibly be correct. It is an improbable theory. There is no evidence whatever to support it. I cannot say that it is not possibly correct. However, is possibility enough? That has been disposed of long ago by Willes J, in Daniel v Metropolitan Ry Co, at p 222:

It is necessary for the plaintiff to establish by evidence circumstances from which it may fairly be inferred that there is reasonable probability that the accident resulted from the want of some precaution which the defendants might and ought to have resorted to …

On appeal to the Exchequer Chamber, Blackburn J, said, at p 593:

We entirely agree with the law laid down by the court below.

Possibility is not enough. Then in para 11 the arbitrator proceeds as follows:

I am not satisfied that the true cause of the disaster has as yet been suggested.

Therefore, it seems to me that in the result the position is this. Various suggestions have been made, and various theories advanced, and none of them is other than improbable. The worst I can say against the defendants is that on one of these improbable suggestions it is possible that their negligence was the cause.

If it is right to apply the principles which I have been laying down, the case against the respondents fails. It is plain that it has not been established that they were guilty of negligence, and there is no finding of any negligence. The worst finding against them is a possibility of negligence.

Can it really be described as a case of “self-induced frustration”? The value of the principle of frustration would be almost destroyed if the mere possibility of relevant default could deprive the person seeking to take advantage of it of that right. If, however, I am wrong in my view as to where the burden rests, in what words must the burden on the owner be expressed in the implied condition? Is it really

Page 65 of [1940] 2 All ER 46

to be a burden which is not discharged by a finding that there was no evidence of default, and that no default which was other than improbable could be suggested as a possible explanation of the accident? Is the burden to be still heavier than that? Is it to be a burden which is discharged only by proof that no default could possibly have contributed to the accident on any theory, however improbable? I cannot bring myself to think that. I am not going to frame the term which is to be deemed to be implied, but, even if there is on the shipowner some burden other than that implied by the ordinary principles of the law of negligence, I cannot think that the term to be implied must be so extreme as to prevent him from availing himself of the principle in a case like this. After all, the basis of an implied term is that it is supposed to be of such a character that, if it had been mentioned at the time of the contract, both parties would have said: “Yes. We both meant that. Put it in.” Am I really to think that the shipowner would readily and as a matter of course have assented to the incorporation of a term which deprived him of the right of relying upon the doctrine of frustration unless he could prove in any circumstances that by no possibility could any negligence of his have accounted for the accident, on any theory, however improbable? In my opinion, on any view, the proper answer to the main question raised is that the burden has not been discharged, and that the claim ought to fail.

There are two other points raised with which I must deal. The respondents say that, if they are wrong about that, nevertheless they are entitled to rely on the exception of “accidents of navigation.” I do not think that the clause applies before the contract voyage begins. Even if it does, I think that The Southgate, at p 336, and Svenssons (C Wilh.) Travaruaktiebolag v Cliffe SS Co make it clear that this would not be “an accident of navigation.” As to the other plea, concerning the incorporation of the Carriage of Goods by Sea Act 1924, art IV, para 2(a), even if those articles apply before the contract voyage has begun, to my mind they only refer to damage to goods. It is quite clear that, where they are in the Act, they refer to goods only. If one reads them into this charterparty, it does not seem to me that one is entitled to change their meaning, and I think that the principle of Hamilton & Co v Mackie & Sons would apply. Even if ono reads them in, one has to give them the same meaning as that which they have where they are in the Act, and, if that be so, they will not afford any assistance to the charterers. In the result, I answer the question in favour of the appellants here, the respondents in the arbitration, and I think that the claimants in the arbitration are not entitled to recover damages.

Judgment for the appellants.

Solicitors: Holman Fenwick & Willan (for the appellants); Parker Garrett & Co (for the respondents).

C St J Nicholson Esq   Barrister.


Landau v Huberman and Others

[1940] 2 All ER 66


Categories:        LANDLORD AND TENANT; Rent        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT AND CLAUSON LJJ        

Hearing Date(s):        11 MARCH 1940        


Emergency Legislation Leave to enforce judgment for rent of business premises Loss in partnership business attributable to war No evidence as to private means of debtor Information required by court Courts (Emergency Powers) Act 1939 (c 67), s 1(4).

A debtor carrying on a business in partnership who applies for relief under the Courts (Emergency Powers) Act 1939, in respect of debts of the business must, in addition to proving that the business has been adversely affected by the war, give details of his private means and personal position, and must show that his own means are insufficient to make good the position of the business and that this is due to circumstances attributable to the war. The court cannot consider as adequate a statement that he has not any available private means. An affidavit stating that the debtor has no available private means is insufficient. He must produce evidence which establishes the position of his private resources, as, for example, a bank pass-book or an affidavit by an accountant who has investigated his private affairs.

Notes

The principle of limited liability has been so generally adopted now that it is apt to be overlooked that partners are liable to be called upon to satisfy the creditors of the partnership out of their private assets. The present decision is not only a reminder of this, but goes on to show the general nature of the statement of the position in that regard which the courts require in an affidavit showing cause for relief under the Emergency Legislation.

As to Emergency Powers, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Case referred to

A v B [1940] 1 KB 217, [1939] 4 All ER 169; Digest Supp.

Interlocutory Appeal

Interlocutory Appeal by the defendants from an order of Tucker J, dated 16 February 1940. The matter arose under the Courts (Emergency Powers) Act 1939. Unconditional leave to proceed under that Act had been given by Tucker J, to enforce an order made against the appellants, reversing an order made by Master Jelf, who had made an order that, on payment of a sum of £250 at once, the order should not be enforced so long as the appellants paid £100 per month until the amount owing was paid off.

John Senter (Valentine Holmes with him) for the appellants, the defendants.

Geoffrey Howard for the respondent, the plaintiff.

11 March 1940. The following judgments were delivered.

SCOTT LJ. This is an appeal from an order of Tucker J, who refused the application of the defendants, under the Courts (Emergency Powers) Act 1939, for relief in respect of payment of rent and certain instalments due under a charge in respect of business premises, where the defendants carried on the business of retailers of ladies costumes, gowns and similar goods. The defendants are individual persons, who are evidently carrying on business at that place in partnership. The rent payable under the lease, which is a lease from a mesne lessor, is £3,800 per annum, in addition to a premium of £11,000, of which £4,000

Page 67 of [1940] 2 All ER 66

was payable upon the execution of the lease and the balance by instalments secured by a charge upon the lease. The defendants made an application under s 1(4) of the Act, asking for relief in respect of their liability under a judgment in an action for arrears of rent and instalments due under the charge. Under that subsection, the court is given a discretion to modify the contractual rights and obligations of the parties. It is therefore essential that the court should be in possession of the fullest information necessary to enable it to exercise the jurisdiction conferred upon it.

The matter was dealt with fully in A v B, which was a decision of the full Court of Appeal. The principles there laid down amount, however, in substance, to two propositions. One is that inability to pay has to be established. The other is that it must be established that the inability has been brought about by circumstances attributable to the war. In the present case, Master Jelf made an order in effect suspending the liability to pay the debts due on condition that a certain sum was paid down and instalments paid thereafter in each month. There was an appeal from that order to the judge in chambers, and Tucker J, reversed the order of the master and gave leave to issue execution.

The defendants appeal to this court, and ask that the order of Master Jelf should be restored. It is obvious that each court ought to have equally full information with regard to the position of the defendants, and, if the defendants are individuals, as in the present case, that information should extend to their own personal assets and liabilities as well as those of the business itself. Information as to the effect of the war upon the business is contained in an affidavit put in by the defendants. It shows that, as regards the sale of ladies costumes and gowns and similar articles, the direct consequences of the war have been very serious for the business. The way in which the war has affected the business is explained in one paragraph of the affidavit, and details are given in the next. On that aspect of the matter, a considerable degree of information is given. The statements are quite explicit, and the defendants show that the result of the war has been to diminish the sales very greatly. There was no application to cross-examine the defendants upon that affidavit, but there are other matters upon which the defendants should satisfy the court if they are to be given the privilege of having payment of their due debts postponed, or altered into payment by instalments. It is essential that they should give details of their private means and of their personal positions, and should show that their own means are insufficient to make good the position of the business. They must also show that that is due to circumstances attributable to the war. In the only paragraph of the affidavit which deals with that matter the defendants say that all their partners are concerned in other businesses, and that the business of one of the other businesses has suffered in a similar manner to the way in which that

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carried on at the premises in question has suffered, and that they have no available resources out of which they can pay the plaintiff the amount claimed in this action. They do not produce a bank pass-book, or any affidavit by an accountant who has investigated their private affairs and is liable to give the court established information. We cannot consider the statement that they have not any available private resources as in any way adequate or sufficient to discharge the duty of an applicant to the court, and to enable the court to deal out justice to the creditor and the debtor. Parliament did not provide that debtors should be preferred to creditors. It provided that they should be preferred only where it is just, in the circumstances laid down in the Act. Where the inability of the debtor to make payment to the creditor is due to the war, the burden should be distributed between creditor and debtor in proportions which the court thinks fair. In the present case, in view of the insufficiency of the affidavit of the debtors with regard to their private means, the judge was right in setting aside the more indulgent order of Master Jelf, and this appeal must be dismissed with costs.

CLAUSON LJ. I agree

Appeal dismissed with costs.

Solicitors: George A Herbert (for the appellants, the defendants); W R Bennett & Co (for the respondent, the plaintiff).

W K Scrivener Esq   Barrister.

Re Wells, Public Trustee v Wells

[1940] 2 All ER 68


Categories:        SUCCESSION; Other Succession        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        29 FEBRUARY 1940        


Rentcharges and Annuities Annuity given free of all deductions Public Trustee appointed trustee of will Whether free of deduction for income tax.

The testator by his will made in 1917 appointed the Public Trustee to be the trustee thereof, and bequeathed to his wife an annuity free of duties of £350, to be paid free of all deductions:

Held the annuity was not given free of income tax.

Re Cowlishaw, Cowlishaw v Cowlishaw distinguished.

Notes

The decision in Re Cowlishaw, Cowlishaw v Cowlishaw appeared to depart from the principle laid down in a long line of authorities, and that case is here distinguished on the ground that, as the Public Trustee was the trustee of the will, and his income fee would, apart from a special direction in the will, have to be deducted from the annuity, there was a deduction to which the words in the will could apply.

As to Direction to Pay without Deduction, see Halsbury (Hailsham Edn), Vol 28, pp 214216, paras 386, 387; and for Cases, see Digest, Vol 39, pp 166168, Nos 572593.

Cases referred to

Lethbridge v Thurlow (1851) 15 Beav 334; 39 Digest 166, 575, 21 LJCh 538.

Page 69 of [1940] 2 All ER 68

Sadler v Rickards (1858) 4 K & J 302; 39 Digest 166, 576, 31 LTOS 396.

Gleadow v Leethham (1882) 22 ChD 269; 39 Digest 167, 581, 52 LJCh 102, 48 LT 264.

Re Saillard, Pratt v Gamble [1917] 2 Ch 401; 39 Digest 167, 584, 86 LJCh 749, 117 LT 545.

Re Loveless, Farrer v Loveless [1918] 2 Ch 1; 39 Digest 167, 585, 87 LJCh 461, 119 LT 24.

Re Cowlishaw, Cowlishaw v Cowlishaw [1939] Ch 654; Digest Supp, 108 LJCh 196, 160 LT 455.

Re Shepherd (1920) Unreported.

Re Bentley, Public Trustee v Bentley [1914] 2 Ch 456; 43 Digest 1035, 4761, 84 LJCh 54, 111 LT 1097.

Adjourned Summons

Adjourned Summons to determine the question whether or not an annuity given to the widow of a testator was, upon the true construction of the will, given free of income tax. The relevant provisions of the will are set out in the judgment.

Wilfrid M Hunt for the plaintiff.

J A Plowman (for J Leonard Stone) for the first defendant.

C L Fawell for the second defendant.

29 February 1940. The following judgment was delivered.

SIMONDS J. In this case, the testator, John Isaac Wells, died in November 1918, having made his will on 9 October 1917. The single question which arises for my decision on the construction of his will is the familiar one as to whether or not an annuity thereby given to his widow is, upon the true construction of the will, given free of income tax. The gift is in these terms:

I bequeath the following annuities free of duties to commence from the date of my death to my said wife: an annuity of £350 during her life or widowhood to be paid free of all deductions by equal quarterly payments the first shall be paid 3 months after my death …

Then he goes on to give other annuities in similar terms, which are not material for the purposes of this decision.

From a long line of authority stretching from Lethbridge v Thurlow, and including Sadler v Rickards, Gleadow v Leetham, Re Saillard, Pratt v Gamble and Re Loveless, Farrer v Loveless, I should have had no doubt whatever that, upon the terms of this will, the annuity is not given free of income tax. There is no case amongst all those which have been cited to me where an annuity has been stated to be free of income tax, unless there is clear upon the face of the will an expressed intention of the testator that, when he refers to freedom from deductions, he is including income tax. Re Cowlishaw, Cowlishaw v Cowlishaw recently came before Bennett J, and the words to be construed in that will bear, it must be said, a remarkably close resemblance to those of the will which I have to construe. Bennett J, came to the conclusion that there the annuity was given “free of income tax.” The great respect which I bear for the judge would, I think, have prevented me from putting a different construction upon this will,

Page 70 of [1940] 2 All ER 68

but for two circumstances. In the first place, it appears from the report that the judge did not have the advantage of having cited to him a large number of authorities which counsel for the second defendant has cited to me, and, in particular, the judge did not have the advantage of being referred to Re Shepherd, before Peterson J, and the Court of Appeal in 1920. In that case, as in Re Cowlishaw, Cowlishaw v Cowlishaw, which came before Bennett J, and in the case which I have to determine, there were two common featuresnamely, (i) a direction that the annuity should be free of all duties, and (ii) a direction that the annuity should be paid “free of all deductions whatsoever.” Nevertheless, the Court of Appeal, affirming Peterson J, came to the conclusion that the annuity was not payable free of tax. In the second place, in addition to those authorities which were not called to the attention of Bennett J, I have here this distinguishing feature. Here the trustee appointed by the will is the Public Trustee, and accordingly the fees payable to the Public Trustee are payable under the statute. At the date when this will was made, it had been decided by Astbury J, in 1914 in Re Bentley Public Trustee v Bentley that the Public Trustees income fee, which may be regarded as payable in respect of an annuity given by will, was properly payable out of the annuity. Accordingly, at the date when this testator made his will and thereby appointed the Public Trustee to be his trustee, there was a deduction which, according to the law as it then stood, was payable out of the annuity which he gave. It is therefore proper to assume that, when the testator gave an annuity free of duty, and then “free of all deductions whatsoever,” he may have had in mind the deduction which, as the law then stood, would have been made from the annuity. It would be wrong, therefore, in this case to say, as Bennett J, found himself constrained to say in Re Cowlishaw, Cowlishaw v Cowlishaw, that no meaning should be given to the words “free of all deductions.” Accordingly, here I have a distinguishing feature which justifies me in saying that I need not follow the decision of Bennett J, in Re Cowlishaw, Cowlishaw v Cowlishaw, and I declare that the annuity was not given “free of income tax.”

Solicitors: Minor & Co (for the plaintiff); E C Kilsby & Son (for the first defendant); John Leigh Wells & Co (for the second defendant).

Charles Newton Esq   Barrister.


DAmbrumenil v Inland Revenue Commissioners

[1940] 2 All ER 71


Categories:        TAXATION; Income Tax, Deduction in computing profits        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        26 JANUARY, 6 FEBRUARY 1940        


Income Tax Alienation of income Covenant to pay annual sums to trustees Obligation of trustees to lend whole amount to covenantor with or without interest Whether alienation effective Whether annual payments diminishing income Income Tax Act 1918 (c 40), s 27(1)(b) Finance Act 1922 (c 17), s 20(1)(a), (b).

Income Tax Disposition for more than 6 years Covenant to pay specific amount for first year and three-quarters of actual income in each of 8 subsequent years Necessary elements in annual payments Whether annual payments diminishing income Income Tax Act 1918 (c 40), s 27(1)(b) Finance Act 1922 (c 17), s 20(1)(b).

Under a deed of covenant, dated 4 February 1937, the appellant covenanted to pay to trustees in respect of the year from 1 February 1936 to 31 January 1937, a sum of £20,000, and in respect of each subsequent year until the year commencing 1 February 1945, a sum equal to three-quarters of his actual income from all sources. The payment of £20,000 for the first year was made, without deduction of tax, on 3 March 1937, and on 4 April 1938, a payment of £20,255 4s 5d was made in respect of the second year. On this occasion, the appellant paid the trustees £10,441 8s 4d, being the amount of £20,255 4s 5d less a deduction for income tax for the 2 years. On the same day, the trustees lent to the appellant a sum of £10,500 in accordance with an obligation under the deed to lend him such sums as he requested, with or without interest, and without responsibility for any loss of moneys so advanced. No payment was ever made to the beneficiary under the deed. The appellant contended that the two sums of £20,000 and £20,255 4s 5d respectively should be allowed as deductions in computing his total income for purposes of assessment to sur-tax for the 2 years in question. The respondents contended that, by reason of the provisions of the Finance Act 1922, s 20(1)(a), (b), the two sums in question were to be deemed to be the income of the appellant, and were not admissible deductions in computing his liability to sur-tax for the 2 years, that there had been no effective payment and no effective charge on the appellants income in either year, and that the whole transaction was a sham. S 20(1)(a) was repealed at a date before it could become applicable to the second amount:

Held (i) the appellant was able, if he chose, without the consent of any other person, so to dispose of matters as to obtain for himself the beneficial enjoyment of the whole of the money. The first payment of £20,000 was, therefore, by reason of the Finance Act 1922, s 20(1)(a), to be deemed to be the income of the appellant.

(ii) having regard to the terms of the trust which governed the trustees after payment, these sums did not constitute effective payments or annual payments reserved or charged whereby the appellants income was, or might be, diminished under the Income Tax Act 1918, s 27(1)(b), and were, therefore, not deductible in computing liability to sur-tax.

(iii) a payment of £20,000 in the first year, and of a constant fraction of the appellants income in subsequent years, for a period of over 6 years was not the payment of income for a period of more than 6 years within the meaning of the Finance Act 1922, s 20(1)(b).

Notes

It is a common practice to grant annuities for a period exceeding 6 years, for the purpose of reducing the grantors liability to income tax. It is here decided that there must be some constant element in such yearly payments of income, and there is no such element where, after payment of a definite

Page 72 of [1940] 2 All ER 71

sum in the first year, the subsequent payments are to be a constant fraction of the grantors annual income.

As to Dispositions for a Period Exceeding 6 Years, see Halsbury (Hailsham Edn), Vol see Halsbury (Hailsham Edn), Vol 17, pp 269, 270, para 538; and for Cases, see Digest, Supp, Income Tax, Nos 576a576e.

Case referred to

Inland Revenue Comrs v Mallaby-Deeley (Sir Harry), Mallaby-Deeley (Sir Harry) v Inland Revenue Comrs [1938] 3 All ER 463; Digest Supp, revsd on the facts [1938] 4 All ER 818.

Case Stated

Case Stated under the Finance Act 1927, s 42(7), and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice. Under a deed of covenant, dated 4 February 1937, which recited that the appellant was anxious to make provision for Beatrice Philp, the appellant covenanted with trustees by cl 1 to pay them the following annual sums:

(1) In respect of the year from Feb. 1, 1936, to Jan. 31, 1937, the sum of £20,000, such payment to be made on Mar. 31, 1937.

(2) In each subsequent year until the year commencing Feb. 1, 1946, a sum equal to three-quarters of the actual income received by the appellant in each year from all sources of income, such payment to be made in arrear on the following Mar. 31. The last payment under the deed falls due on Mar. 31, 1945.

Under cl 2, the trustees were to hold the sums in question upon trust to accumulate them by way of investment, paying to Beatrice Philp such portion of the income arising therefrom as the appellant during his lifetime should direct, and accumulating the balance by investment. Under cl 3, any sums falling due for investment were to be invested as the appellant directed, and the trustees upon the request of the appellant were to advance to him sums of money by way of loan, with or without interest, and without being responsible for any loss of moneys so advanced. The payment to the trustees under cl 1(1) of the deed was made on 3 March 1937, when the appellant handed to the trustees bearer bonds to the value of £19,910 12s 6d and a cheque for £89 7s 6d, making £20,000 in all. The payment due under cl 1(2) was made on 4 April 1938, when the appellant paid to the trustees a cheque to the value of £10,441 8s 4d, being an amount of £20,255 4s 5d due for the year to 31 March 1938, less a deduction for income tax for the 2 years. The total amount received by the trustees was £30,441 8s 4d for the 2 years. On 3 March 1937, the bearer bonds were transferred to the trustees bank account, and the cheque for £89 7s 6d was paid into that account. On 4 April 1938, when the cheque for £10,441 8s 4d was paid to the trustees, they lent the appellant upon his verbal request the sum of £10,500 under the terms of the deed. No payment under the deed was ever made to Beatrice Philp. It was contended on behalf of the appellant that the two sums of £20,000 and £20,255 4s 5d respectively should be allowed as deductions in computing his total

Page 73 of [1940] 2 All ER 71

income for the purposes of assessment to sur-tax for the 2 years in question. It was contended on behalf of the respondents:

… (a) that by reason of the provisions of the Finance Act, 1922, s. 20(1)(a), the sum of £20,000 and £20,256 4s. 5d. were to be deemed to be the income of the appellant.

(b) that in any case, by reason of the provisions of the Finance Act, 1922, s 20(1)(b), the sum of £20,000 was to be deemed to be the income of the appellant.

(c) that there had been no effective payment and no effective charge on the appellants income in either year.

(d) that the whole transaction was a sham.

(e) that the sums of £20,000 and £20,265 4s. 5d. were not admissible deductions in computing the liability of the appellant to sur-tax for the years ending Apr. 5, 1937, and Apr. 5, 1938.

(f) that the appellant had not proved his claims for the deductions, and that the appeal should be dismissed.

The decision of the special commissioners was as follows:

We, the commissioners, held that, in view of the provisions of the Finance Act, 1922, s. 20(1)(a)(b), the appellant was not entitled to deduct either of the sums of £20,000 or £20,255 4s. 5d. in computing his total income for the purposes of assessment to sur-tax for the years in question. In our opinion, the payment of £20,000 on Mar. 3, 1937, made under cl. 1(1) of the deed, bore no relation to the payment, made on Apr. 4, 1938, of the sum of £10,441 8s. 4d. under cl. 1(2). We held that the appeal failed for both years, and adjusted the assessments in accordance with our decision.

Raymond W Needham KC and J S Scrimgeour for the appellant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the respondents.

6 February 1940. The following judgment was delivered.

WROTTESLEY J. Broadly speaking, by the Finance Act 1922, s 20(1)(a)(b), Parliament enacted that, if a disposition of income should be revocable, or not really effective, or should be for a period not exceeding 6 years, the income should be deemed, in spite of the disposition, to be income of the maker of the disposition for the purposes of sur-tax. The effectiveness of such a disposition must, of course, be judged by the words of this section, and the disposition which I have to consider has in it certain elements which, as the Attorney-General contends, cause it to fall within both paragraphs of s 20(1)(a)(b), which are as follows:

(1) Any income (a) of which any person is able, or has, at any time since Apr. 5, 1922, been able without the consent of any other person by means of the exercise of any power of appointment, power of revocation or otherwise however by virtue or in consequence of a disposition made directly or indirectly by himself, to obtain for himself the beneficial enjoyment; or (b) which by virtue or in consequence of any disposition made, directly or indirectly, by any person after May 1, 1922 (other than a disposition made for valuable and sufficient consideration), is payable to or applicable for the benefit of any other person for a period which cannot exceed 6 years [is to be deemed, for the purposes of the enactments relating to sur-tax to be the income of the taxpayers].

Two questions arose at the hearing. First, are the sums of moneynamely, the £20,000 paid on 3 March 1937 (partly by bearer bonds and partly by cheque), and the £10,441 8s 4d paid on 4 April 1938, together with the income tax thereon, £40,255 4s 5d in allincome of which the appellant has, since 5 April 1922, been able, without the consent

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of any other person, by virtue of or in consequence of a disposition, to obtain for himself the beneficial enjoyment? That was the question argued at the hearing. They areor, rather, wereincome, and income of the appellant. Secondly, was this payment of £20,000 income which, by virtue of the deed, is payable to, or applicable for, the benefit of any other person for a period which cannot exceed 6 years? If by this the Act means beneficial enjoyment of this income qua income, the answer is in the negative, for the whole design of this deed is that this income shall go, anyhow in name, into a trust fund. Not less is it the design of this deed that it shall not remain there for a second longer than the giver wishes. The giver can at once borrow every farthing of itpossibly for ever, if in such a connection the word “loan” has any meaning, but certainly for 1,000 yearswithout interest, or security. Moreover, should the giver lose the whole of the money after borrowing it, the trustees are in no event to be liable. Beatrice Philp, the person for whose benefit the trust is apparently created, has no remedy against the trustees or the giver.

If I have the right to borrowthat is to say, to be paidthe whole of a mans income as fast as he receives it, against his will, on terms that I need not repay it in any period which interests either of us or our descendants to the twentieth generation, and need not pay him interest on it, or give him security, which of us can be said to have the beneficial enjoyment of this income, if I exercise those rights? It seems to me that in such a case the income benefits the borrower, and not the lender. The borrower enjoys. The lender may suffer. He certainly cannot be said to enjoy.

Bearing in mind the object of this legislation, I am not disposed to read into the section the words “as income.” I have no doubt that in the case before me the appellant was able, if he chose, to obtain for himself the beneficial enjoyment of all this money. He was able so to dispose of matters that that income should benefit him, and that he, rather than Beatrice Philp, should enjoy it. It now turns out that s 20(1)(a) was repealed at a date which makes it inapplicable to the second sum the subject of this casenamely, the £20,255 4s 5dso that what has been said above applies only to the sum of £20,000 paid on 3 March 1937. However, it leaves for consideration the question whether or not either of these payments, having regard to the terms of the trust which govern the trustees after payment, can be said to be an effective payment by the appellantthat is to say, an annual payment whereby the appellants income was or might be diminished under s 27(1)(b) of the Act of 1918. It seems clear that without a direction by the settlor, of which there is no evidence, and which never need be given, Beatrice Philp will never get the income of this so-called trust, and nor will the substituted beneficiary provided for in cl 5 of the deed of covenant. Moreover, provided that the settlor exercises his right to ask for advances out of what was his own property

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until it reached the trustees, he has only to ask to have his wish gratified, and by that means he controls, not only the income, but also the capital, of the trust. Can a payment made to the trustees in these circumstances and for such purposes be said to be an effective payment whereby the appellants income is, or may be, diminished, or can it be said to be a charge on his income? It seems to me that I can say that any such payment is an effective payment, anyhow until the appellant be dead, and what is necessary here is not a payment which becomes effective only if and when the settlor dies without taking back the money. There is, I find, no evidence upon which the commissioners could find that there was an effective payment. The payments to the trust fund found by the commissioners as facts are not, and do not purport to be, such payments.

The second question which arises concerns only the payment of the £20,000. Was this income which, by virtue of the deed, is payable to, or applicable for, the benefit of any other person for a period which cannot exceed 6 years? What is meant by “income payable for a period” in this connection? The appellant says that the amount is of no importance, and that, provided only some income is payable in respect of each of more than 6 years, this subsection does not apply, and that, for instance, the promise of a substantial payment in one year and of 6 nominal ones in subsequent years would be outside this subsection. Bearing in mind the object of this subsection, I think that the whole object with which a period of years was introduced by Parliament would be entirely set at nought by such an interpretation, quite apart from the fact that this case is covered by authority. To be deductible, the income must be payable for a period of over 6 years, and I think that there must be some constant element in such yearly payments of income. It may be that the constant element introduced by the promise of the same fraction of a mans income for the requisite number of years would be sufficient. In this case, the £20,000 has nothing in common with the subsequent payments, all of which are to be a constant fraction of the givers yearly income. It is a sum payable for a period which cannot exceed 6 yearsnamely, one year. In coming to this conclusion, I think that I am in effect following the decision of Lawrence J, in Inland Revenue Commissioners v Mallaby-Deeley (Sir Harry). That being the conclusion to which I have come, there will be no necessity, so long as my judgment stands, to remit this case to the commissioners.

Appeal dismissed with costs.

Solicitors: Lovell White & King (for the appellant); Solicitor of Inland Revenue (for the respondents).

W J Alderman Esq   Barrister.


Hughes v B G Utting & Co Ltd

[1940] 2 All ER 76


Categories:        TAXATION; Income Tax, Subcontractors in construction industry        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        13, 14 FEBRUARY, 12 MARCH 1940        


Income Tax Profits Speculative builder Lease of house for premium and ground rent Value of ground rent as trading profit Income Tax Act 1918 (c 40), Sched D, Case I.

The respondent company carried on the business of speculative builders, building houses upon land owned by them, and, upon the completion of the building, disposing of some of the houses by granting a 99-years lease in consideration of a premium paid in cash and the reservation of a ground rent. The question raised in this appeal was whether the capitalised value of the ground rent should be brought into the companys profit-and-loss account as a trading receipt:

Held what the respondent company disposed of was not the houses but the leasehold interest, retaining the reversionary estate, and, until the realisation of the reversionary estate, the ground rent ought not to be brought into the company's accounts as a trading receipt. The ground rent was only taxable under Sched A.

Order of Court of Appeal ([1939] 2 All ER 126) affirmed.

Notes

This case has been distinguished from that of Emery (John) & Sons v Inland Revenue Comrs in that in that case the land had been completely parted with and a rentcharge taken in its place. In the present case, the owner of the land had retained the fee simple, and all he had done was to demise the land for a long term in consideration of a small rent and a premium. The effect of such a transaction is rather to place an incumbrance upon the ownership of the land than to part with any interest therein, since, after the determination of the lease, the successors in title of the present owners will again be seised of the land in fee simple.

As to Income Tax on Sale of Properties by Builders, see Halsbury (Hailsham Edn), Vol 17, pp 100, 101, para 194; and for Cases, see Digest, Supp, Income Tax, Nos 122c122f.

Cases referred to

Emery (John) & Sons v Inland Revenue Comrs [1937] AC 91; Digest Supp, 156 LT 87, 20 Tax Cas 213.

Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1905) 5 Tax Cas 159; 28 Digest 23, case b.

Taxes Comr v Melbourne Trusts Ltd [1914] AC 1001; 28 Digest 18, case 92i, 84 LJPC 21.

Church of Scotland Endowment Committee v Provident Assocn of London Ltd [1914] SC (Ct of Sess) 165.

Appeal

Appeal from an order of the Court of Appeal (Scott, Clauson and Du Parcq, LJJ), dated 16 March 1939, and reported [1939] 2 All ER 126, allowing an appeal by the respondent company from an order of Macnaghten J, dated 8 November 1938, and reported [1938] 4 All ER 411. The facts and the arguments are fully set out in the opinions of their Lordships.

The Attorney-General (Rt Hon Sir Donald Somervell KC), J H Stamp and Reginald P Hills for the appellant.

Raymond W Needham KC and J S Scrimgeour for the respondents.

Page 77 of [1940] 2 All ER 76

12 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC (read by Viscount Maugham). My Lords, the respondent company carried on the business of developers of building estates, or, as the special commissioners have found, of speculative builders. In the course of its trade, the company dealt with some of the houses which it had built by granting a lease for 99 years. A ground rent of £9 or £10 was reserved by the company, and a premium was paid to the company by the lessee. The company retained the reversionary estate, and sought to bring into the computation of the profits and gains of the company for the year of assessment in respect of the houses their cost only (or market value if less than cost) until the sale of the reversion. No question now arises as to the premium. The respondent has accepted the decision of the Court of Appeal that this must be brought in as a trading receipt, and I do not doubt the correctness of the view taken by the Court of Appeal on the facts of this case. The position might be different if the consideration for the lease was represented by a premium, and only a peppercorn rent was reserved. On such a case, I express no opinion. The Crowns appeal concerns the capitalised or realisable value of the ground rent. It is claimed that this must also be brought into the companys profit-and-loss account as a trading receipt.

The argument for the Crown may be shortly stated. The respondent is said to have disposed of the houses in question by granting a 99-years lease in return for (i) a premium, and (ii) a ground rent, or, at any rate, to have realised its whole interest for the term of 99 years. The ground rent must be regarded as moneys worth, and is no different in principle from the premium. Money and moneys worth alike must be brought into the account as a trading receipt, and the realisable value of the ground rents must be ascertained for the purpose of the account of profits and gains. The respondent company, on the other hand, denies that it has parted with the whole of its interest in the houses, even for the term of 99 years. As long as the reversionary estate is retained, the respondent company claims to be entitled to treat the houses as part of the stock in trade of its business.

My Lords, the key to the solution of this question seems to me to be found by keeping in view the real transaction. The Attorney-General laid emphasis on the word used by the special commissioners to describe what was done. He said that the respondent company disposed of its houses. What the respondent company disposed of was not the houses, but a leasehold interest, retaining the reversionary estate. The respondent company has not yet disposed of its property so far as the houses in question are concerned. It may do so at any time, and, the company being speculative builders, this is likely to take place sooner rather than later. When it sells the ground rent, it will sell the reversion, and the whole of the respondent companys estate will be converted into an asset which admittedly comes into the trading account. Until that happens, the company, which was the freeholder before the ground rent

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was created, and remained the freeholder after it was created, has only partly realised its property.

The decision in Emery (John) & Sons v Inland Revenue Comrs, which was much relied on by the Crown, rested on the basis that the builders disposed of their entire interest in the land, and in the houses built upon it, in return for cash and certain ground annuals. In the words of my noble and learned friend Viscount Maugham in that case, the right of ownership had been converted by the transaction in question into a different type of propertynamely, ground annuals. In those circumstances, the ground annuals were required to be valued for the purpose of including the proceeds of the realisation of the property in the trading account, so as to compute the companys profits and gains. In the case before your Lordships, the builderthat is, the respondent companyhas retained, as he has a perfect right to do, an interest in the houses of a real and substantial character. This is in the ordinary exercise of the trade or business of a speculative builder, who may have reasons for retaining the reversionary estate in any house or houses until he can realise them all together, or possibly under better market conditions. I see no reason or principle which compels him to pay tax on the capitalised value of the rents which he has reserved. My Lords, I find myself in complete agreement with the judgment of the Court of Appeal delivered by Clauson LJ, and I think that this appeal should be dismissed with costs.

VISCOUNT MAUGHAM. My Lords, the question in this case may be very briefly stated. The respondents carry on the business of builders, contractors and developers of building estates. They have developed two estates by making roads, laying down sewers and drains, and building houses. In some cases, they have sold land with the houses for cash. In other cases, they have granted leases for 99 years in consideration of premiums and yearly ground rents of £10 per house, or thereabouts. The respondents have not sold any of the reversions in respect of which these ground rents are payable. Where the land and houses are sold outright, the amounts paid on them are brought into the respondents accounts as trading receipts, while on the other side of the accounts the cost of the land and buildings sold is brought in as a trading expense. This is plainly on the footing that it is part of the respondents business to build and sell houses. The premiums received where leases have been granted for 99 years have also been treated as trading receipts, and no question has been raised before this House as to that being correct. The question is whether the ground rents should not be valued at so many years purchase and whether the amounts should not, like the premiums, be taken into account as trade receipts in the year in which the leases are granted.

My Lords, it is not in dispute that the respondents are a trading company, that part of their business consists of selling these lands and

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houses, and that the surplus realised by them on a sale of their assets at enhanced prices is a surplus which is taxable as profit under Sched D. Nor is it in dispute that, if their land and buildings should be sold for consols or other investments, or for annuities, or for any other realisable property, the value of the property so obtained on the realisation of the assets in question must be ascertained, and that the profit on the transaction will be assessable under Sched D: Californian Copper Syndicate, Ltd v Harris (Surveyor of Taxes) and Taxes Comr v Melbourne Trusts, Ltd, at p 1010. It is clear, I think, that it is profit obtained on a realisation which is taxable in such a case. We have, therefore, to decide whether the reversions retained by the respondents in the lands and houses in respect of which the 99-years leases have been granted ought to be treated as part of the proceeds of realisation of those properties or whether, on the contrary, these reversions are part of the unrealised assets of the respondents, with the result that, unless and until they are sold, the Crown cannot insist on their market value being brought into the profit-and-loss account of the respondents.

My Lords, I think we cannot shut our eyes to the fact that the reversions in question are in truth the freehold lands of the respondents, which have been parted with by them only in so far as long leases of the lands have been granted in consideration of premiums and annual rents. I am unable to see any essential difference between this case and a case where lands have been retained subject to a 21-years lease which had been granted in consideration of a premium and a rent, or, indeed, a case where a lease has been granted at a rack rent. In any of these instances, the freehold interest is retained, and, when that interest is realised, the proceeds will be brought into account, and the profit, so far as not already accounted for, will come into the trading account.

We were urged to say that the freehold interests retained were in substance wholly new interests, and that, again “in substance,” the respondents had parted with their rights in the lands for 99 years. This, of course, wholly neglects the legal aspect of the case, and, as I think, disregards also the popular and practical view of the position. The landlord in such a case has a good deal more than his right to the rent. The restrictive and repairing covenants which are entered into by the tenant are often of vital interest to the landlord, to the tenant, and even to the neighbourhood. The landlord may obtain, in cases of breach of covenant, an immediate right to re-enter. If the house is burnt down, his rights are sometimes of paramount importance. The Income Tax Acts have always proceeded on the basis that the owner of the reversion, even if leases at ground rents for long terms have been granted, is to be charged under Sched A in respect of his “property in all lands, tenements, hereditaments and heritages” according to the annual value thereof.

Page 80 of [1940] 2 All ER 76

My Lords, I do not think there is any real foundation for the argument that the respondents, in retaining their reversions, ought to be treated as having retained nothing but annuities for 99 years. In Emery ( John) & Sons v Inland Revenue Comrs, that was, with unimportant differences, what the taxpayers had retained in the form of Scottish “ground annuals” payable in perpetuity, and it was precisely because they had parted with all right of ownership in the houses and land attached thereto that this House, affirming the Court of Session, held that the ground annuals must be included at their market value in the trading accounts for the purpose of ascertaining the profits made by the taxpayers in the year in question. It may be mentioned that ground annuals are very similar to rentcharges in England, and that Lord Dundas in Church of Scotland Endowment Committee v Provident Assocn of London observed, at p 172:

But “ground annual” is not a vox signata; I think it simply means a perpetual rent-charge secured in some effectual fashion as a real burden on land.

There is, I think, no difficulty in distinguishing the Emery case from the one now before your Lordships. My Lords, I agree with the conclusion arrived at by the Court of Appeal, and with the reasons given for it. I am, therefore, of opinion that this appeal should be dismissed with costs.

LORD RUSSELL OF KILLOWEN (read by Lord Romer). My Lords, I would dismiss this appeal. I cannot help thinking that some confusion may have been introduced into the case by the wording of the documents used by the respondents, when, instead of realising a plot at once, and in a single transaction, by parting with the fee simple, they demise it for a term of years, and keep unsoldat all events for the time beingthe reversion expectant on the determination of the term. In the documents which they use on those occasions, the transaction is incorrectly described as a sale and purchase, which it most certainly is not. This, it appears to me, may have been the foundation of the statement by the commissioners that the companys houses, when completed, “are disposed of by the company by way of sale,” and may have led the commissioners to regard the granting of a lease as a complete and final realisation by the company of its profit on that particular plot of land.

My Lords, I cannot take that view. The value of the reversion, though no doubt directly related to the rent reserved by the lease, may vary from time to time, and the company has full power under its memorandum of association to retain the reversion unsold and to collect the rent. Until it sells the reversion (and the commissioners find that the company has not yet sold any reversions), the company has not ceased to be interested in the plot, and its profit on the realisation of the plot has not been finally ascertained.

This is not a case like Emerys case, in which the builders no longer retained any interest in the land. They had sold it out-and-out

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for a ground annual, the capital value of which at the date of the sale had of necessity to be brought into account for the purpose of ascertaining the amount of the profit made on the out-and-out sale. The vendors whole interest had been converted from land into another type of property. In the present case, until the interest in the land which the lessor has retained is sold, his whole interest has not been converted into another type of property, and his profit on the realisation of the plot cannot be said to have been ascertained. There is no present necessity, as in Emerys case, for bringing into account the capital value of the annual sum. That will, in effect, be brought into account at the proper timenamely, when the reversion is sold, and the proceeds of that sale are credited to the trading and profit-and-loss account for the year in which the sale is effected.

LORD WRIGHT. My Lords, I agree with your Lordships that the appeal should be dismissed. I think that the reasoning of the judgment of the Court of Appeal delivered by Clauson LJ, is correct. The claim of the Crown is admittedly novel. It is based on certain propositions, which, as I understand them, may be briefly stated as follows. The respondent, it is said on the appellants behalf, is being taxed as a trader under Sched D. His trade is to dispose of completed houses, and his profits come from the difference between the cost of the production and the proceeds of realisation. If he sells the freehold outright, the position is clear. If he disposes of the house by a 99 or a 999-years lease, it is equally clear that he is selling the house for a composite, but still single, consideration, which consists of the premium and the ground rent. Both these elements, it is said, are on a parity. The premium is money, and the ground rents, which are immediately marketable, are moneys worth, which should be expressed in terms of a sum in cash, and this sum should be added to the premium so as to give a single sum, which will then correspond to the price when the freehold is completely realised. In the case of the long lease, it is said, the entire interest of the builder is, in fact, realised. The house goes out of his balance sheet, because, in a business sense, or in substance, he has no further interest in it. The cash premium and the realised or realisable value of the ground rents take the place of the house. The freehold reversion is thus of no practical or business value. Such are the propositions advanced by the Crown.

I think that this way of putting the case is not sound either in law or in a practical or business sense. The speculative builder creates by his expenditure certain assets, including completed houses. As long as the houses are not sold or otherwise disposed of, they go into his accounts at cost or at market value, whichever is lower. When the freehold is completely disposed of, the sums realised take the place of the house, and show a profit or a loss, as the case may be. When, however, instead of the house being sold, it is let on a long-term lease at a ground rent,

Page 82 of [1940] 2 All ER 76

there is, not a complete, but a partial, realisation. An interest is carved out of the freehold. The residue of the complete freehold estate is not disposed of, but is retained by the builder. That interest is the freehold reversion, which normally includes the right to the ground rent, the right to enforce the restrictive covenants in the lease, the right of re-entry for breach of covenants, and the right to resume possession at the end of the term. That is an estate which, in the case envisaged, is not traded away by the speculative builder. It is not correctly described as a new asset, but is a residue of the original asset. The house must now be represented in the accounts by the premiums and the freehold reversion, in practice often described as the ground rents, and entered at cost or at market value, whichever is lower. The speculative builder may find this method of disposing of the houses is, in certain cases, more convenient or profitable to him. He may keep the ground rents in hand until he decides to dispose of them. Until he does dispose of them, he cannot, in my opinion, be taxed on a profit on the footing that it has been realised in the year of charge when it has never been realised, and may never be realised at all. He cannot in such a case be taxed on a notional profit. When he does “sell the ground rents,” the proceeds will then be brought into charge in the appropriate year. According to the evidence of the accountants, set out in the case, this is the practice commonly adopted. I think it is correct.

The Crown have argued that the issue is here determined by the findings of fact by the commissioners. It seems to be said that the business of the residents is only to realise the houses, and not to hold them on rental, or to use them for income, as would be the case if they let them on a rack rent for a period, and, therefore, they must somehow be treated as if they had realised them outright in a case like that now in question. It is clear, however, that to grant a 99-years lease is not ultra vires the respondent company, and the facts stated in the case show that, in the case of a substantial number of the houses, they are leased for 99 years, and not sold outright, and that that method of dealing is not infrequently adopted by the respondents. There is no evidence to justify a finding that the business of the respondents is in fact limited to selling houses outright.

I do not regard Emery (John) & Sons v Inland Revenue Comrs as laying down any general principle, except perhaps that, in the particular circumstances of that case, a presently realisable value might be treated as if it had been turned into cash. That case turned partly on the particular character of ground annuals in Scots law and partly on the circumstances, in particular on the circumstance that the property was completely disposed of, and not leased for 99 years or some other period. I cannot treat it as governing this appeal.

LORD ROMER. My Lords, if the gentleman who attends to the conveyancing side of the respondents business had been a little more

Page 83 of [1940] 2 All ER 76

familiar with the terms usually employed by the practitioners in that art, it is, I think, at least possible that your Lordships would never have been troubled with this case. It is, indeed, one that furnishes a remarkable illustration of the confusion which may result from the use of inaccurate language. Such language in the present case is to be found in the form of agreement that the respondents employ when they adopt the course of granting a lease of one of their houses, instead of disposing of it by way of sale. By such agreement, in which the proposed lessee is described as “the purchaser,” the company purports to agree “to sell,” and the lessee purports to agree to “purchase by way of lease,” for the sum therein specified, the particular land and house in question. It then fixes the date for completion, and provides that, upon completion, a lease of the property will be granted to the “purchaser” for a term of 99 years, at the ground rent therein specified. The expression “a sale by way of lease,” however, is a contradiction in terms. A sale is the antithesis of a lease. The owner of a freehold house may sell it or he may retain it. In the former case, he will receive in money, or, as in Emerys case, in moneys worth, the value of the house based upon its income-producing potentialities. In the latter case, assuming that he does not occupy it himself, he will retain it as an income-producing investment, and will obtain the income by means of letting it upon lease. It would be wholly inaccurate in that case to say that he is “selling” the house by way of lease. He is doing nothing of the kind, whether the lease be short or long, and whether he exacts a premium, which is merely an anticipation of future income, or relies solely upon an annual or monthly or weekly rent.

The inaccurate language used in the agreements for a lease in the present case would, however, have been quite harmless had it not misled the inspector of taxes. Treating the agreements for a lease and the leases granted in pursuance of those agreements as being in truth what the agreements falsely described them as beingnamely, sales of the houses in questionhe not unnaturally asked himself what consideration had been received by the respondents on such sales, for without doubt the net proceeds of all sales effected by the respondents must be brought into account as trading receipts. To the question so put to himself by the inspector of taxes there could be only one answer, assuming that the leases were really sales. The consideration in each case consisted of the premium and the value of the rent reserved. When the matter was brought on appeal before the commissioners for the special purposes of the Income Tax Acts, they were equally misled. What they said was this:

In the course of its trade, the company buys land, develops it, and builds houses thereon, and the houses, when completed, are disposed of by the company by way of sale.

In some cases, houses and land are disposed of freehold. In other cases, leases for 99 years are disposed of at premiums and ground rents of either £9 15s. or £10 10s. per annum.

Page 84 of [1940] 2 All ER 76

Whichever method of disposal is adopted the transaction is a transaction in the course of the companys trading. … Upon the documents or facts before us we hold that, where houses have been disposed of by way of 99-years leases at ground rents, completed sales in the course of the companys trade have been effected, and, in our opinion, the proceeds of those sales must be brought into the companys trading accounts.

If these were findings of fact, there would be no more to be said. They are, however, erroneous conclusions of law, of which the origin is to be traced back to the inaccurate language employed by the gentleman to whom reference has been made in the first line of this opinion. What the commissioners should have concluded from the documents and facts before them was that the company in the course of their trade sometimes effected sales of their houses, but sometimes retained the houses and granted leases of them for 99 years in consideration of a premium and a rent. In the former case, the purchase consideration in money or in moneys worth must be brought into account as a trading receipt. In the latter case, the premium must also be brought into account under Sched D, Case I, as a trading receipt, if the Crown elects so to do, but the rent will represent a profit arising to the company in respect of which it is only taxable under Sched A.

That the premiums can be treated as a trading receipt under Sched D, Case I, was decided by the Court of Appeal, and the correctness of such decision is not now challenged by the respondents. Their contention before that court had been that the premiums were “fines” within the meaning of Sched A, Case II, r 6. The Court of Appeal did not find it necessary to decide that point, in view of the fact that, if they were “fines,” they became chargeable under Sched D, Case III, by virtue of the transfer of such receipts from Sched A to Sched D effected by the Finance Act, 1926. The premiums, however, were certainly trading receipts of the respondents, and, as such, could, since the transfer, be taxed under Sched D, Case I, if the Crown should elect so to do, even if they were fines, and could, as such, also be taxed under Sched D, Case III. The court did not, however, treat the premiums as being the consideration received on a sale. It is no doubt true that, if a lease for 99 years, or for any other long term, were to be granted by the respondents at a peppercorn rent in consideration of a premium, the premium would almost certainly be equivalent to the purchase money which could be obtained upon a sale of the freehold, and the reversion would have no appreciable value. The reversion would nevertheless exist as an asset of the respondents, and the transaction, though in no way differing from a sale in its material results, could not even then be accurately described as one. For these reasons, I am of opinion that the appeal, should be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellant); Royds Rawstorne & Co (for the respondent company).

Michael Marcus Esq   Barrister.


Fife Coal Co Ltd v Young

[1940] 2 All ER 85


Categories:        INDUSTRY: HEALTH; Other Health        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, LORD ATKIN, LORD THANKERTON, LORD RUSSELL OF KILLOWEN AND LORD ROMER        

Hearing Date(s):        5, 6, 7 FEBRUARY, 14 MARCH 1940        


Workmens Compensation Disease Accident Disease existing before date of incapacity Workman incapacitated while working as packer Dropped foot Loss of power of dorsiflexion Workmens Compensation Act 1925 (c 84), s 1(1).

For about a month prior to 27 April 1938, the respondents work was that of a packer employed in building pillars to support the roof of part of the appellants underground workings, and his work necessitated continuous kneeling. During that month the respondent suffered from some loss of the power of dorsiflexion of the right foot, and on that date, 27 April 1938, towards the end of his shift, he felt it numb. He finished his shift, however, and walked home with his fathers assistance. From that date he was totally incapacitated for some months. His total incapacity was due to a condition diagnosed as dropped foot, a paralysis of the muscles of the leg caused by pressure on the peroneal nerve and preventing dorsiflexion of the foot, ie, raising the front part of the foot upwards:

Held the respondent sustained a definite physiological injury in the reasonable performance of his duties, and as the result of the work in which he was engaged at the time of the injury, and such physiological injury, resulting in incapacity, was injury by accident arising out of and in the course of his employment.

Notes

It has long been settled that injury due to disease may be an accident. The most recent statement of the law was in the judgment of the Court of Appeal delivered by Clauson LJ, in Oates v Earl Fitzwilliams Collieries Co [1939] 2 All ER 498, at p 502. The facts of the present case rendered it unnecessary finally to determine whether incapacity due to a disease of gradual onset and progressive development can be an accident within the meaning of the Workmens Compensation Act 1925. Here it was found that the disease, in so far as it produced the incapacity, was caused by the work which the man was doing on a particular day, but it is held that the fact that that disease may have been present in the man for a long time is irrelevant. If, therefore, a workman is capable of doing his work and, by reason of the nature of that work on a particular day, becomes incapable of continuing that work, there is an accident within the meaning of the Act, and it is not legitimate to consider that the same work on previous days will have been inducing an internal condition making the happening of the “accident” possible or likely. At the same time one question is reserved in this decision and that question is stated by Lord Atkin in a striking sentence: “Whether, to constitute an accident, each employment baccillus or flight of bacilli must have its own day, or whether the gradual effect of a succession of them in poisoning the system can be said to be injury by accident, is the question reserved in this decision.”

As to Incapacity due to Disease, see Williss Workmens Compensation, 32nd Edn, pp 1820; and for Cases, see Digest, Vol 34, pp 273275, Nos 23112324.

Cases referred to

Walker v Bairds & Dalmellington Ltd (1935) 153 LT 322; Digest Supp, 28 BWCC 213.

Fenton v Thorley & Co Ltd [1903] AC 443; 34 Digest 266, 2264, 72 LJKB 787, 89 LT 314, 5 WCC 1.

Stewart v Wilson & Clyde Coal Co (1902) 5 F (Ct of Sess) 120; 34 Digest 270, case 2293 iii.

Page 86 of [1940] 2 All ER 85

Brintons Ltd v Turney [1905] AC 230; 34 Digest 464, 3799, 74 LJKB 474, 92 LT 578, 7 WCC 1, affg SC sub nom. Higgins v Campbell & Harrison Ltd, Turney v Brintons Ltd [1904] 1 KB 328.

Marshall v East Holywell Coal Co, Gorley v Backworth Collieries (1905) 93 LT 360; 34 Digest 271, 2303, 7 WCC 19.

Walker v Hockney Brothers (1909) 2 BWCC 20; 34 Digest 273, 2311.

Clover, Clayton & Co Ltd v Hughes [1910] AC 242; 34 Digest 273, 2316, 79 LJKB 470, 102 LT 340, 3 BWCC 275.

Falmouth Docks & Engineering Co Ltd v Treloar [1933] AC 481; Digest Supp, 102 LJKB 708, 148 LT 507, 26 BWCC 214.

Innes (or Grant) v Kynoch [1919] AC 765; 34 Digest 272, 2308, 88 LJPC 85, 121 LT 39, 12 BWCC 78.

Williams v Guest, Keen & Nettlefolds [1926] 1 KB 497, 34 Digest 272, 2310, 95 LJKB 676, 134 LT 459, 18 BWCC 535.

Steel v Cammell, Laird & Co Ltd [1905] 2 KB 232; 34 Digest 271, 2302, 74 LJKB 610, 93 LT 357, 7 WCC 9.

Cole v London & North Eastern Ry Co (1928) 21 BWCC 87; Digest Supp.

Ormond v Holmes & Co Ltd [1937] 2 All ER 795; Digest Supp, 107 LJKB 21, 157 LT 56, 30 BWCC 254.

Partridge Jones & John Paton Ltd v James [1933] AC 501; Digest Supp, 102 LJKB 760, 148 LT 553, 26 BWCC 277.

Walkinshaw v Lochgelly Iron & Coal Co Ltd [1935] SC (HL) 36, 28 BWCC 230.

Appeal

Appeal by the employers from an interlocutor of the First Division of the Court of Session in Scotland. The facts and the arguments are fully set out in the opinions of Viscount Caldecote LC, and Lord Atkin.

Erskine Hill KC and A G Walker for the appellants.

Arthur P Duffes KC and James Walker for the respondent.

14 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC. My Lords, this is an appeal from the First Division of the Court of Session allowing an appeal from an award of the sheriff-substitute of Fife and Kinrose in an arbitration under the Workmens Compensation Act. The facts appear partly from a statement by the sheriff-substitute of admissions at the bar by agents for the parties and partly from a note of facts found by the sheriff-substitute to be proved. The two statements to some extent overlap. Notwithstanding a submission by counsel for the appellants, towards the end of his argument, that there should be a remit to the arbitrator for a further statement, the facts seem to me to be clearly stated, and are sufficient to enable this appeal to be determined.

The claimant had been employed by the appellants for about a month preceding 27 April 1938, as a packer in building pillars to support the roof of the underground workings at Kinglassie Colliery. At the place where he worked, the height of the roof was only 2½ ft to 3 ft, and the position he normally adopted in doing his work as a packer was a crouching attitude, with the outside of his right knee pressing on the pavement. During the month for which the claimant was working as packer, he suffered from some loss of power to dorsiflex his right foot, or, in other words, to raise the front part of his right foot upwards. On 27 April while

Page 87 of [1940] 2 All ER 85

engaged in his ordinary work as a packer, towards the end of his shift he worked in the crouching position already described. After about 20 minutes, he felt his right foot numb. He finished his shift, and was then able to walk home, with the assistance of his father, who was working with him. The claimant consulted his usual medical attendant, who diagnosed his condition as dropped foot. Dropped foot is a paralysis of the muscles of the leg caused by pressure on the peroneal nerve, which passes over the hole below the knee, and resulting in inability to raise the front part of the foot upwards. Incapacity from dropped foot arising in this manner is a comparatively rare condition. The claimant claimed compensation in respect of injury by accident sustained on or about 27 April. His incapacity was admitted to have arisen out of and in the course of his employment, and the only question which your Lordships have to decide is whether, on these facts, the sheriff-substitute was entitled to find that the claimants incapacity was not due to injury by accident within the meaning of the Workmens Compensation Act 1925, s 1. The First Division of the Court of Session held that the sheriff-substitute was not entitled so to find, and from that decision this appeal arises.

The phrase “injury by accident” as used in successive Workmens Compensation Acts has been the subject of repeated and elaborate discussion, and, in the course of the 40 years or more which have passed since the first decisions under the Act of 1897, it is possible, as Lord Tomlin pointed out in Walker v Bairds & Dalmellington Ltd, to trace a gradual but steady extension of its meaning. The early cases seem to have been decided on the footing that the word “accident” was to be interpreted in the sense in which it was understood in policies of insurance as describing some event of a fortuitous and unexpected character. The first case which came to your Lordships House was the case in which the workman had ruptured himself by an act of overexertion: Fenton v Thorley & Co Ltd. The decision reversing the award of the arbitrator and the Court of Appeal was in favour of the workman. Lord Macnaghten came to the conclusion, at p 448, that the expression “accident” was used in the Act:

… in the popular and ordinary … sense as denoting an unlooked-for mishap or an untoward event which is not expected or devised.

He disapproved the use of the word “fortuitous” as a test, and, on the other hand, quoted with approval a passage from the opinion of Lord MLaren in Stewart v Wilson & Clyde Coal Co, at p 122:

… if a workman in the reasonable performance of his duties sustains a physiological injury as the result of the work he is engaged in … [there] is accidental injury in the sense of the statute.

In the same case, Lord Lindley understood “accident” to be not a technical legal term with a clearly defined meaning. He said at p 453:

Speaking generally, but with reference to legal liabilities, an accident means any unintended and unexpected occurrence which produced hurt or loss.

Page 88 of [1940] 2 All ER 85

These statements and the decision in favour of the workman opened the door to claims which up to that time had failed. It is easy to be wise after the event, but to-day Fenton v Thorley & Co Ltd seems a very clear case.

The anthrax case, Brintons Ltd v Turvey, was much more difficult, as may be seen from the opinion of Lord Robertson, who with undeniable force protested against the extension of the definitions given in Fenton v Thorley & Co Ltd in such a way as to cover disease. In view of a later decision, to which I shall refer, it is of some interest to observe the opinion of Lord Robertson that nobody could think of saying that a man who had caught cold had met with an accident. Notwithstanding the protest of Lord Robertson, it was held that the workman who had contracted the disease of anthrax by infection while sorting wool had suffered “injury by accident.”

The two cases, one of “beat hand” and the other of “beat knee,” which came before the Court of Appeal very shortly after the decision of your Lordships House in Brintons Ltd v Turveynamely, Marshall v East Holywell Coal Co, Gorley v Backworth Collieriesfollowed a different line. They were each decided in favour of the employer on the grounds that the injury was the inevitable result of work long continued, and was not anything which could be described as having happened on a particular duty. Walker v Hockney Brothers, the case of the man who gradually over a period of 5 years acquired paralysis by riding a carrier bicycle, was another decision in favour of the employer. There is no reason to doubt the correctness of the decisions in the three cases I have last mentioned. In all of them the facts were such as to make it impossible to identify any event which could, however loosely, be called an accident. In these cases, the workmen failed, not because a disease is outside the purview of the Workmens Compensation Act altogether, but because the burden of proof that there had been an accident was not discharged.

When the workmans claim is in respect of a progressive disease, the difficulty of pointing to a definite physiological change which took place on a particular day is, in general, likely to be almost insuperable, and in 1906 Parliament, in the case of certain diseases, and later, by an enlargement of the schedule of industrial diseases, relieved the workman in the specified cases of this obligation. However, if the circumstances of any claim in respect of incapacity due to disease are such as to make it possible to discharge this burden, I see no reason for thinking that what is called a disease is different in principle from a ruptured aneurism, as in Clover Clayton & Co Ltd v Hughes, or heart failure, as in Falmouth Docks & Engineering Co Ltd v Treloar.

The decision and the reasons for the decision given in your Lordships House in Innes (or Grant) v Kynoch lend support to this view. There the workman was engaged in handling artificial manures which contained poisonous germs, and, on a day while doing this work, he became ill

Page 89 of [1940] 2 All ER 85

with blood-poisoning, and three weeks later died. It was impossible to say with certainty when the infection occurred, though it was probably some days before the man became ill. Lord Birkenhead LC, in referring to the fact that the particular time and place of the poisoning could not be definitely ascertained, said, at p 772:

… all that is material is that the infection should have been the result of contact at some one particular time and that this one particular time should have been during the course of the employment.

In the same case, Lord Buckmaster thought that a finding that the infection was due to the impregnation of germs acquired in the course of and arising out of the claimants employment was not, as a matter of common sense, too remote, and brought the case within the decision in Brintons Ltd v Turvey.

In two of the later cases, Atkin LJ, plainly foreshadowed the further development of the meaning of accident. In Williams v Guest Keen & Nettlefolds, he felt himself bound by Steel v Cammell Laird & Co Ltd, a decision rejecting the claim of a workman who had gradually accumulated lead in his system, to arrive at a similar decision in the case of silicosis, which was not then a scheduled industrial disease. He abstained from expressing any final view as to what the position would have been if it were not for the lead-poisoning decision, though, on the authority of Innes (or Grant) v Kynoch, he thought it was not necessary to prove the precise day, time and place at which the accident happened. In Cole v London & North Eastern Ry Co, at p 95, which was a case of injury by a dust disease, Atkin LJ, referred to his observations in the silicosis case, and, notwithstanding his opinion that the legal definition of “accident” was gradually approximating to the conception of a disease, again felt himself bound by the earlier decisions to reject the workmans claim. In Ormond v Holmes & Co Ltd, the workman was bound to fail, having regard to the finding that the work on which he was actually engaged when he collapsed from a stroke following high blood pressure “neither caused nor contributed to nor accelerated the second stroke.” The case is merely an illustration of the necessity of establishing facts which justify a finding that the injury was due to some specific unlooked for mishap or untoward event. Where those facts are not proved, the workman cannot succeed, and it makes no difference whether the incapacity is due to such an injury as a rupture or sprain or to a disease. For instance, Partridge Jones & John Paton Ltd v James was a case where the workmans widow succeeded, in spite of the fact that the workman was suffering from a severe arterial disease. The basis of the decision that there had been injury by accident was that the heavy work in which he was engaged produced a fatal attack of angina pectoris. The statement of Lord MLaren, to which I have already referred, was once more quoted with approval in the only opinion which was given in your Lordships House.

Two other authorities mark the latest stage in the process which Lord

Page 90 of [1940] 2 All ER 85

Tomlin in Walker v Bairds & Dalmellington Ltd thought had reached its extreme limit. The workman, a colliery foreman, had died from bronchial pneumonia, caused by a chill contracted through exposure to cold and water while cleaning a sump. His widow was held entitled to an award, on the ground, as Lord Tomlin said, that the diseasenamely, the pneumoniaresulted from the sudden and unexpected onset of a chill, contracted in conditions which were normal in carrying out his job in the accustomed manner, and had been frequently experienced by him on previous occasions without ill results. The onset of the chill was “an untoward event,” and not “expected or designed.”

Finally, in Walkinshaw v Lochgelly Iron & Coal Co Ltd, a brusher in a pit, who, though apparently in good health, had long suffered from heart and kidney disease certain to result sooner or later in a cardiac breakdown, and one day had to stop working owing to sudden pain and choking, succeeded. Lord Tomlin said, at p 234:

The hard work on which the claimant was engaged induced the breakdown of his enfeebled heart. This involved a definite change is his condition on Apr. 29.

My Lords, I find it impossible to distinguish in principle the present case from the case I have last mentioned. The pressure on the peroneal nerve during a spell of work on 27 April brought about the paralysis of the claimants muscles which is described as dropped foot. I apply the test of Lord MLaren, often quoted, and always with approval. The claimant sustained a definite physiological injury in the reasonable performance of his duties, and as the result of the work he was engaged in at the time of the injury. The fact that, in the course of his work for a month before the day when he first suffered from dropped foot, he had felt some loss of the power of dorsiflexion of the right foot seems to me in no way to affect his right to compensation. I agree with the opinions given in the Court of Session. Accordingly, I move that this appeal be dismissed with costs.

My Lords, my noble and learned friends Lord Thankerton and Lord Russell of Killowen desire me to say that they concur in my opinion.

LORD ATKIN. My Lords, the question in this case is whether the respondent proved that personal injury by accident arising out of his employment had been caused to him. I need not recapitulate the facts stated in the opinion of Viscount Caldecote LC. I agree with his view of the findings of the sheriff-substitute. In the words of Lord Fleming:

What happened to him on Apr. 27 transformed him from a man who was not suffering from dropped foot into a man who was.

If this be the true result of the findings, I cannot see that any doubt that the man suffered an injury by accident can arise. It is a physiological change brought about by an undesigned untoward event happen-

Page 91 of [1940] 2 All ER 85

ing in the employment, and, if the elements of suddenness or of the event happening on a specified day are material, those elements in this case exist. Accordingly, it is unnecessary to consider the forcible argument of counsel for the appellants that the facts in this case are analogous to the slow and continuous onset of a disease in the course of which no event occurs of which place and time can be specified, and, as a result, according to the argument, no “accident” could have occurred. I reserve, therefore, any question affecting the necessity of being able to specify an event with details of time and place before concluding that there has been an accident.

There are two topics, however, upon which I wish to make some remarks. 1. The legal conception of “accident” within the meaning of the Workmens Compensation Act has undoubtedly been enlarged in the more recent decisions. Such a broadening of view was plainly foretold by Lord Birkenhead LC, in Innes (or Grant) v Kynoch, at pp 770, 771, as the result of the acceptance of the decision of this House in Brintons Ltd v Turvey that the invasion of a workmans body by a bacillus derived from the employment is an accident. In Brintons case, it was anthrax. In Innes case, it was streptococci derived from bone dust. 2. It is necessary to emphasise the distinction between “accident” and “injury,” which in some cases tend to be confused. No doubt the more usual case of an “accident” is an event happening externally to a man. An explosion occurs in a mine, or a workman falls from a ladder. It is now established, however, that, apart from external accident, there may be what no doubt others as well as myself have called internal accident.

A man suffers from rupture, an aneurism bursts, the muscular action of the heart fails, while the man is doing his ordinary work, turning a wheel or a screw, or lifting his hand. In such cases, it is hardly possible to distinguish in time between accident and injury. The rupture which is accident is at the same time injury, from which follows at once, or after a lapse of time, death or incapacity. The distinction between the two must be observed, however. The incidence of a bacillus may be an accident, and an accident arising out of the employment, as in the anthrax and the streptococci from bone dust cases. In such cases, the employment gives rise to the bacillus. The fact that it finds a suitable entrance in an existing wound, scratch or other orifice which itself is not due to the employment is irrelevant. They may be “accidental,” but, if that accident is not related to the employment, it matters not. On the other hand, the employment may give rise to the wound or scratch through which a non-employment bacillus enters. In such cases, the accident has caused the wound or scratch which is the injury. Without the bacillus, the injury is trifling. With the bacillus, the injury becomes so aggravated that it causes incapacity or death. Compensation is awarded because the incapacity so caused is the direct result the accident, just as, if negligence causes a wound, the negligent

Page 92 of [1940] 2 All ER 85

party has to pay in full, whether the wound heals or becomes infected from outside, excepting possibly cases where it could be said that a new agency intervened.

Whether, to constitute an accident, each employment bacillus or flight of bacilli must have its own day, or whether the gradual effect of a succession of them in poisoning the system can be said to be injury by accident, is the question reserved in this decision. In the present case, it may well be that the impact of the ground upon the knee in the crouching position due to the employment produced an injury each time it pressed upon the peroneal nerve, and so affected the foot muscles associated with that nerve. In such a case, there would be a succession of injuries due to accident by the untoward and undesigned pressure on the knee. However, whether or not that be so, there can be no doubt that on 27 April the pressure on the knee for a period of 30 minutes resulted in the injury of “dropped foot.” Whether that was the result of a series of preceding injuries appears to me to be irrelevant. In this discussion, I have not thought it necessary to deal specifically with the authorities. They are fully considered in the opinion of the Lord President, with which I respectfully and completely concur. I agree that the appeal should be dismissed.

LORD ROMER. My Lords, I concur.

Appeal dismissed with costs.

Solicitors: Beveridge & Co, agents for Wallace Begg & Co WS, Edinburgh, and J A McAra, Glasgow (for the appellants); Kenneth Brown Baker Baker, agents for J & A Hastie SSC, Edinburgh, and Macbeth Currie & Co, Dunfermline (for the respondent).

Michael Marcus Esq   Barrister.

Wilson v London, Midland & Scottish Railway Co

[1940] 2 All ER 92


Categories:        COMPANY; Other Company        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        28 FEBRUARY 1940        


Companies Meetings Annual meeting Proxies sent by directors to larger stockholders to ensure quorum Validity of practice Directors also directors of other companies trading with company Questions of internal policy Companies Clauses (Consolidation) Act 1845 (c 16), ss 64, 65, 76, 85, 86.

The directors of the respondent company before an annual meeting sent to stockholders holding stock of the value of £2,500 and over stamped proxies filled in with the names of the directors. The appellant, a smaller stockholder, who had not received a proxy, contended that all stockholders should be treated alike, and that the directors, in taking this course, were contravening the Companies Clauses (Consolidation) Act 1845, ss 64, 65, 76. He also contended that the directors, who were also directors of over 140 other companies trading directly and indirectly with the respondent company, were in the position of paid agents or commercial trustees in all these companies and were, therefore,

Page 93 of [1940] 2 All ER 92

contravening the Companies Clauses (Consolidation) Act 1845, ss 85, 86:

Held (i) the course taken by the directors in sending stamped proxies to some only of the shareholders was a pure question of the policy of the company and one with which the court could not interfere. If, as a matter of policy, the stockholders thought that the practice should be changed, they were entitled, if they could and subject to the statutory provisions, to secure the passing of a resolution to that effect at a meeting of the company.

(ii) the statutory provisions in that regard having been complied with, the interest of directors in the contracts of companies of which they were directors was purely a matter of policy for the company itself, and was therefore not a matter which the courts could consider.

Notes

On the first point, the Court of Appeal have had an opportunity of considering a common practice by which large statutory companies arrange for the more economical transaction of the necessary business at the meeting of the company. Though the matter does not seem to have been one of any real legal difficulty, it is clearly one which the lay mind might think of substance, and the clear decision of the Court of Appeal will be very valuable as approving a method of transacting such business which saves such companies and the public generally considerable expense. On the second point, it will be remembered that Scott LJ, recently pointed out (in Cooper v Luxor (Eastbourne) Ltd [1939] 4 All ER at p 418) that directors of private companies owe a duty of single-eyed service to the company and must strictly observe the machinery and rules of the Companies Act. In the present case, there had been that strict observance, and the matter thus became one of the policy of the company.

As to Proxies, see Halsbury (Hailsham Edn), Vol 5, pp 76, 77, para 136; and for Cases, see Digest, Vol 9, pp 575577, Nos 38253849.

Case referred to

Peel v London & North Western Ry Co [1907] 1 Ch 5; 10 Digest 1155, 8181, 76 LJCh 152, 95 LT 897.

Appeal

Appeal by the plaintiff from an order of Simonds J, dated 12 December 1939. The appeal raised four points, but only two of them require reporting. The company issued stamped proxies to stockholders holding stock of the value of £2,500 and over. The names of directors were inserted in the proxies, and stockholders were asked, in the event of their not intending to be present at the annual meeting, to sign and return the proxies. The appellant complained that the smaller stockholders, of whom he was one, did not participate in this privilege. The appellant stated that his purpose was to endeavour to preserve the privileges of the smaller stockholders, to whom, in the present case, no proxies at all had been sent. He contended that it would not involve additional expense to send proxies to all stockholders, as they need not be stamped, and that he was fighting for equal rights and privileges for all stockholders. Simonds J, dismissed the action on this point.

The appellant appeared in person.

C E Harman KC and A Andrewes Uthwatt for the respondent company.

28 February 1940. The following judgments were delivered.

SIR WILFRID GREENE MR. The appellant on the first part of his appeal is complaining of a practice followed by the respondent company

Page 94 of [1940] 2 All ER 92

in connection with their annual general meetings. For those meetings the company send out to a certain class of stockholders notice of the meeting, accompanied by a stamped proxy form and a stamped envelope in which it may be returned to the company. Such forms and envelopes are only sent to stockholders holding stock to the value of £2,500 or more. The complaint made by the appellantand, if he will allow me to say so, he has put his case with great clearness and without repetition, and he has made it perfectly clear to my mind what it is for which he is contendingis that the railway company ought to treat all the stockholders alike, and that, if they send a proxy form to one, they ought to send a proxy form to all. In other words, it is a question of all or none. The appellant is not saying that the small stockholders, if I may so call them, are entitled as of right to receive a proxy form at all, or a stamped proxy form. What he is saying is that, if the larger stockholders receive those advantages, the smaller stockholders should receive them too. If that contention were right, the exact form of relief which would be founded on it might require consideration. Would it mean that the proxy forms sent out, and the proxies given on those forms, were invalid, or would it merely mean that the directors of the company must not use the companys funds in sending out proxies to some, although they may indisputably use the companys funds for sending out proxies to all? I need not discuss that question, because, in my judgment, the principle for which the appellant contends is one which has no legal foundation. This is not a case where, for the purpose of a controversy which is going to be discussed and fought at a meeting, the directors select certain classes of stockholders for a special approach, with a view to influencing votes, or something of that kind. No consideration of that sort arises in the present case. The reasons why the directors took this course, and do as a matter of practice take this course, are stated in the evidence, and in the judgment of the judge. There is no suggestion, and indeed there can be no suggestion, of any sinister or improper design on the part of the directors. They have taken this course because they honestly think that it is in the best interests of the company and the economical administration of the companys affairs that this system should be adopted. That view of the matter has been accepted by the judge, and, indeed, is not disputed. The principle for which the appellant argues is the perfectly dry but quite intelligible principle that all should be treated alike. I say intelligible because it is a thing which would appeal to many people, and with considerable reason. The view which I take upon it, however, is that the contention has no legal foundation. The question as to whether or not that course is to be followed remains, therefore, a pure question of the policy of the company. If the company by their directors choose to take that course, it is a course which as a matter of law, in the circumstances of the present case, the directors, in my judgment, are entitled to take. If, as a matter of policy, the

Page 95 of [1940] 2 All ER 92

stockholders think that that practice ought to be changed, they are entitled, if they can, to get that policy altered by the ordinary constitutional methods in the company itself. They have no right, however, to call for assistance from the courts, because the action of the directors has not infringed any right which those stockholders have, and has not involved any improper use of the directors powers or of the companys funds. In my opinion, therefore, the judge was perfectly right in his decision upon this part of the case, and the appeal on this part of the case necessarily fails.

MACKINNON LJ. I agree.

CLAUSON LJ. I agree. I think that there is to be found in the judgment of Buckley LJ, in Peel v London & North Western Ry Co some observations which would be quite inconsistent with this case being decided otherwise than the way in which it has been decided by Simonds J. Buckley LJ, says, at p 19:

The true principle seems to me to be this: the company may legitimately do and may defray out of its assets the reasonable expense of doing all such acts as are reasonably necessary for calling the meeting and obtaining the best expression of the corporators views on the questions be be brought before it. It may, or may not, be reasonable to pay for stamps upon proxies. I expect that it is necessary. There are many people who, if they received a proxy without a stamp, would not take the trouble to return it. If it is sent with the proxy stamped and the return postage stamp affixed very likely it will come back. Ascertain, as matter of reason and common sense, is this a reasonable thing to do to get the best expression of the popular voice? If it is, then it is not ultra vires.

Applying those observations to the present case, I think that it is most important that, when the general meeting is convened, there should be present at it the necessary quorum. Otherwise the holding of the meeting would be abortive, and a large amount of expense in advertising and so forth which would have been incurred would be entirely thrown away. One of the first duties of the directors, I should think, is to ensure that there shall be a quorum present. The quorum happens to be large. Perhaps it is not large when one considers the enormous capital of the respondent company, but still it is large. I think that we were told that there were holders of stock to the amount of £1,000,000. What the directors do is to send a stamped proxy to all holders who hold stock to the value of £2,500 and upwards. The effect of that is, of course, that a large number of large stockholders return the proxies, and there will be a quorum present. It would, of course, be perfectly possible to send stamped proxies to all the holders, but the expense of that would be very great, and, if these large stockholders did not return their proxies, there might very well not be a quorum at the meeting. The small stockholders may fill up and return their proxies, but it takes a good many small stockholders of stock valued at less than £2,500 to make up the necessary quorum. I make these observations only to show that what the directors have done seems, on the face of it, to be perfectly reasonable, and a thing which will give effect to that which

Page 96 of [1940] 2 All ER 92

it is their duty to give effect tonamely, with the least possible expense, to procure the presence of a quorum. However, the real point is whether or not their action in doing this has been ultra vires, because unless it is ultra vires, the plaintiff cannot complain of it before this court. If it is only a question as to whether it would be wiser to take some other course, and whether it would not be more expedient to send out stamped proxies to all the holders, that is a question which must be a matter for the domestic tribunal to decide at the general meeting, and cannot be a matter in which this court can be called upon by the plaintiff to interfere. I venture to add these observations, but they are really, I think, perhaps not strictly necessary, because it appears to me that the grounds upon which the judge has based his judgment and the grounds upon which Sir Wilfrid Greene MR, in his observations has explained why it is the court feels bound to support it really cover the whole ground. I accordingly agree that the appeal on this part of the case fails.

The appellant also claimed a declaration that the directors of the company, who held over 140 directorships in other companies trading directly or indirectly with the company, and were in the position of paid agents or commercial trustees, were acting in contravention of the Companies Clauses (Consolidation) Act 1845, ss 85, 86. Simonds J, also dismissed the action on this point.

The Court of Appeal heard and gave judgment on each of the points separately.

SIR WILFRID GREENE MR. On this second point also the appellant has put his case clearly and with moderation, but the judges judgment upon it is one which, in my opinion, is perfectly right, both as regards its conclusion and as regards the reasons upon which that conclusion is founded. The appellant has put before us numerous considerations which, he suggests, make it undesirable that the position of which he complains should continue. It is not the business of this court to consider questions of policy. It is the business of this court to administer the law. Whether or not within the four corners of what the law permits one or other alternative policy is preferable is something with which this court has no concern. Provided that those who are governing a public company are doing what the law tells them to do, and are not doing what the law forbids them to do, the other matters as to the method of running the companys affairs are matters of policy, which must be determined by the ordinary internal machinery of the company, without the interference of these courts. If the appellant thinks that the policy followed by this company is not a good one, he must endeavour, if he can, to get that policy changed. It is not for us to express any view whatever. It is not within our competence. I simply say that in order that he may appreciateand I am quite sure he will appreciate it because he understands the case very wellthe difference between

Page 97 of [1940] 2 All ER 92

what is legally permitted or legally forbidden and what is a pure matter of policy, with which the courts are not concerned. The matters in which he is particularly interested under this head, having regard to the decision of Simonds J, which is affirmed by this court, remain purely as matters of policy. Therefore, we can neither deal with them nor express any opinion upon them. This part of the appeal, therefore, must also fail.

MACKINNON LJ. I agree.

CLAUSON LJ. I agree.

Appeal dismissed on both points.

Solicitor: Alexander Eddy (for the respondent company).

W K Scrivener Esq   Barrister.

B Sunley & Co Ltd v Cunard White Star Ltd

[1940] 2 All ER 97


Categories:        QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        2, 5 FEBRUARY, 11 MARCH 1940        


Damages Measure of damages Breach of contract Deprivation of use of chattel Machine let on hire for short periods Machine idle for one week through delay in transit.

The plaintiff company secured a contract in November 1937, to level the site of a new aerodrome in Guernsey. For the performing of such work it was necessary to remove a tractor and a scraper from a site at Doncaster to the site in Guernsey. The defendants contracted to collect the machine at Doncaster on 10 November 1937, and to transport it to Guernsey, where it should have arrived on the morning of 15 November. The defendants failed to carry out this contract as arranged, and the machine did not reach Guernsey until 22 November. The result was that the machine was kept idle at Doncaster for a week. The machine had been procured from America at a cost of £4,500, and, at the time of the above events, there were only very few such machines in England. The plaintiffs claimed damages in respect of the machine being kept idle, and the defendants contended that they were entitled only to nominal damages and interest on the cost of the machine and overhead charges. There was no evidence that the machines special work would have been accomplished any earlier had it  not been a week late in arriving or that there had been any loss of profit:

Held the machine was a chattel of commercial value and there were 4 possible heads of damage: (i) depreciation, (ii) interest on money invested, (iii) cost of maintenance, and (iv) expenditure of wages thrown away. The plaintiffs could not complain if they were refused relief under heads (ii), (iii) and (iv) for they had not given any evidence on these legitimate topics. £20 would be allowed for depreciation, £10 for interest, maintenance and wagesin all £30against which receipts for £16 must be deducted, leaving a net sum for damages of £14.

Decision of Hallett J ([1939] 3 All ER 641) varied.

Notes

The question here is purely one of the measure of damages. Any unusual advantage or loss arising from a breach of contract is not generally a matter for damages, unless notice thereof is given to the other contracting party. Thus, the damages arising from the special features of the machine in this case appear too remote, but, in dealing with a commercial concern and an object

Page 98 of [1940] 2 All ER 97

of commercial utility, the loss of hire of the machine is a matter to be taken into account. It was held in the court below that the proper measure of damages was the amount the plaintiffs would have made by the use of the machine during the period it was idle, but the Court of Appeal have taken the view that, in the absence of proof of special damage, the plaintiffs can only recover nominal damages based largely upon a mathematical calculation of the rate of depreciation of this expensive machine.

Cases referred to

Mediana (Owners) v Comet (Owners etc), The Mediana [1900] AC 113; 17 Digest 79, 9, 69 LJP 35, 82 LT 95.

Hadley v Baxendale (1854) 9 Exch 341; 17 Digest 93, 101, 23 LJEx 179, 23 LTOS 69.

Erie County Natural Gas & Fuel Co Ltd v Carroll [1911] AC 105; 17 Digest 131, 385, 80 LJPC 59, 103 LT 678.

Mersey Docks & Harbour Board v Marpessa (Owners) [1907] AC 241; 17 Digest 86, 54, 97 LT 1, sub nom. The Marpessa, 76 LJP 128, affg SC sub nom. The Marpessa [1906] P 95.

The Argentino (1888) 13 PD 191; 17 Digest 82, 26, 58 LJP 1; 59 LT 914, affd sub nom. Gracie (Owners) v Argentino (Owners), the Argentino (1889) 14 App Cas 519.

Clydebank Engineering & Shipbuilding Co v Yzquierdo y Castaneda (Don Jose Ramos) [1905] AC 6; 12 Digest 434, 3514, 74 LJPC 1, 91 LT 666.

Admiralty Comrs v Susquehanna (Owners), The Susquehhanna [1926] AC 655; 41 Digest 802, 6624, 95 LJP 128, 135 LT 456.

The Kingsway [1918] P 344; 41 Digest 806, 6671, 87 LJP 162, 122 LT 651.

No 7 Steam Sand Pump Dredger (Owners) v Greta Holme (Owners), The Greta Holme [1897] AC 596; 41 Digest 808, 6689, 66 LJP 166, 77 LT 231, revsg SC sub nom. The Emerald, The Greta Holme [1896] P 192.

Liesbosch (Dredger) v Edison (SS) [1933] AC 449; Digest Supp, 102 LJP 73, sub nom. The Edison 149 LT 49.

Appeal

Appeal by the defendants from the judgment of Hallett J, dated 6 July 1939, and reported [1939] 3 All ER 641. The facts are fully set out in the judgment of the court delivered by Clauson LJ.

A T Miller KC, A J Hodgson and W J K Diplock for the appellants.

G R Blanco White KC and E Holroyd Pearce for the respondents.

Miller KC: On the facts as found by the judge, the damages should have been nominal, as he has found that no damage was sustained or proved by reason of the delay. There is no question of any loss of hire or cost of any substitutes. There is no evidence that the contract to perform the work in Guernsey was delayed by the machines absence for one week, so as to cause any specific pecuniary loss to the respondents, or to show that, if the machine had been delivered earlier, it would have been brought back to England a day earlier. The tractor was working at Doncaster for some time during the week it had been delayed there,

Page 99 of [1940] 2 All ER 97

The respondents must prove not only that they had not the use of the machine for the week, but also that they suffered loss in consequence. The respondents cannot be permitted to recover damages on guesswork or surmise: Erie County Natural Gas & Fuel Co Ltd v Carroll, at p 118. In the present case, the judge had no material on which to base the figure he awarded. He accepted the suggestion that, in the absence of any evidence of loss, he could take into consideration the amount at which the machine could be let on hire for a week. It was neither pleaded nor proved that the machine was late in getting back from Guernsey by reason of the delay.

Blanco White KC: Owing to the fact that the machine was delivered a week late, some damage must have been suffered by the respondents, as they were unable to proceed with the levelling of the ground. This type of claim frequently arises in connection with building contracts, where one often finds that a contractor suffers damage because an owner fails to supply him with an order necessary to enable him to proceed with the work. In the present case, the work was not stopped, as there were other men working on the site. To some extent, however, there must have been damage. It is not possible to quantify the loss, and claim special damage. That, however, is no reason why the respondents should not recover any damages. The third rule in Hadley v Baxendale admittedly does not seem to have been complied with. The respondents lost the use of the machine for a week, and are entitled to pecuniary compensation for that by way of general damages. In assessing damages, the court can consider what the rate of hire would be, if there were one. Prima facie, the damages would be the sum found by the court to be the pecuniary equivalent of the use of the machine for a week. A plaintiff is not obliged to claim and to prove special damage. There is no principle which requires a plaintiff to prove special damage by reason of the fact that he might be able to prove damage in that way. [Scott LJ, referred to Mersey Docks & Harbour Board v Marpessa (Owners).] Special damage cannot be proved. The respondents would not have taken the machine to Guernsey unless it had paid them to do so. The respondents might have obtained £30 for the hire of the machine for a week. They must have suffered some damage on their contract by reason of the fact that the machine was delivered a week late. The court has to consider the measure of damages when special damage is not claimed. In such a case, it would seem to be the pecuniary equivalent of the value of the use of the machine. [Clauson LJ, referred to The Argentino.] If a thing has a hire value, the hire value is some indication of the value of the use of the article to the owner. The measure of damages must be the commercial value of the hire of the machine for a week. The sum awarded by Hallett J, was not excessive. [Counsel referred to Mediana (Owners) v Comet (Owners etc), The Mediana, Clydebank Engineering & Shipbuilding Co v Yzquierdo y Castaneda (Don Jose Ramos), Admiralty Comrs,

Page 100 of [1940] 2 All ER 97

v. Susquehanna (Owners), The Susquehanna, The Kingsway, No 7 Steam Sand Pump Dredger (Owners) v Greta Holme (Owners), The Greta Holme and Liesbosch (Dredger) v Edison (SS).]

Miller KC in reply: It does not follow that, because the machine was delivered a week late, there must have been loss. On the judges findings in this case, the only award should have been nominal damages. The respondents have not proved any actual loss of profits. There is no evidence that the respondents have suffered any loss at all. On the evidence, the machine made as much profit for the respondents as it would have done if delivery had been made to time. In Gracie (Owners) v Argentino (Owners), loss of profit-making time was proved. In the present case, there has been no proof of loss of profit-making time.

A T Miller KC, A J Hodgson and W J K Diplock for the appellants.

G R Blanco White KC and E Holroyd Pearce for the respondents.

11 March 1940. The following judgment was delivered.

CLAUSON LJ (delivering the judgment of the court). In this case, the plaintiffs were public works contractors. In August 1937, they made a contract to level an aerodrome in Guernsey for a payment of £23,385. They had at Doncaster an excavating machine weighing over 22 tons. In November 1937, the defendants agreed to transport this machine from Doncaster to Guernsey for £125. It was to be taken on a lorry by road to Liverpool and there put on board a ship named the Staghound, sailing on 12 November. The defendants got the road transport done by subcontractors. Unfortunately, they sent an unsuitable lorry, with the result that the machine only got to Liverpool in time to be put on board the Beryl, sailing a week later than the Staghound. The plaintiffs claimed damages for this weeks delay. Before action, they claimed £577, and repeated that claim in their statement of claim. As £577 for a week is at the rate of £30,000 per annum for the use of a machine the cost price of which was £4,500 and which was part of the plant to earn £23,385 in all on this job, this claim is obviously extravagant.

The plaintiffs, having suffered a wrong, were entitled to damagesnamely, such a sum as would put them pecuniarily in the position in which they would have been if the wrong had not been done to them. However, as it was the business of the plaintiffs to establish, if it were disputed, that the wrong had been done, so also it was the business of the plaintiffs to prove the amount of pecuniary loss occasioned to them. A great many witnesses were called by the plaintiffs. Unhappily, very little of their evidence was in the least relevant. It was, of course, the basis of the plaintiffs claim that the machine had been left unused at Doncaster for the week in question. A witness, Hinchcliffe, called for the plaintiffs, said that this was untrue, and that it was worked for 46 hours. As he had communicated with the defendants, the question whether the machine had been worked at Doncaster naturally became important, as bearing on the honesty of the plaintiffs claim. So much evidence was directed to this issue that the plaintiffs appear to have neglected to give any material evidence to prove their real damages. Eventually, the fact appeared to be that the machine did do one days work at Doncaster

Page 101 of [1940] 2 All ER 97

and earned £16, and it was agreed that the plaintiffs must give credit for that sum against any claim they might establish. Of material evidence as to their claim, however, there was really none. It was proved that the machine cost £4,500 when new, and that its life was 3 years. There was no evidence as to when it was new, or how old it was at the time of this weeks delay. The only evidence was that it stayed at work in Guernsey till August or September of the following year, when it went back to England. In answer to a question by the court, it was admitted that there was no evidence that its special work would have been accomplished any earlier had it not been a week late. If its cost was £4,500 and it lasted only 3 years, obviously its average rate of depreciation was about £29 per week. There was no evidence as to wages which were paid to the men in charge of the machine for this week, and so wasted, though no doubt some slight wage expense was incurred. There was some evidence that by letting such a machine at a later date the plaintiffs could earn £30 per day. It was not made clear, however, whether this was net profit or whether the plaintiffs had to pay the wages of the men employed to work it. There is a passage as to this which appears to suggest that, out of the £30, the plaintiffs would have to pay all the expenses of working it. What these expenses were is not clear. There are figures which we were told were so much per hour, and one may guess that this meant for an 8-hour day, for 11s multiplied by 8 would be £4 8s, which in 7 days would be a little more than the depreciation of £29, resulting from a 3-years life of a machine costing £4,500. The plaintiffs asserted that in the week lost this machine would have worked 22 hours per day. In fact, it never did that till March or April of the following year, and, except for a vague declaration by one witness that the weeks delay “humbugged it for the rest of the winter more or less, because we never got the job done till the spring, you see,” there was no proof of the assertion.

In these circumstances, the plaintiffs really failed to prove any facts on which their damages could be estimated. In the absence of evidence, they relied on the law, and the judge unfortunately succumbed to the invitation to discuss at great length a variety of cases like The Mediana. Those cases establish that, when a plaintiff is deprived of the use of a chattel which he does not use for making profit, he is not to be debarred from claiming as damages what during that time its use would have been worth to him, had he not been prevented from using it. Those cases, however, are no authority for the proposition that, if the owner of a profit-earning chattel does not prove the loss he has sustained, the judge may make a fortuitous guess and award him some arbitrary sum. The judgment of the judge is lengthy, and is occupied with an elaborate discussion of these cases, which seem to us to be quite irrelevant, except on the broad principle stated by us, which is too well-known to need citation of authorities. His finding as to damages is in these terms, at p 654:

… upon the whole, I feel that the lump sum figure at which I ought to arrive

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is £250. That is a lump sum figure arrived at in consideration of all the circumstances, and any attempts to analyse it by an analytical process will, I think, be doomed to failure.

When the judge warns us against the attempt to discover how he arrived at this figure, it is perhaps rash to act against his warning, but, as £250 per week is £13,000 per annum, it is at least startling to find that a machine which cost £4,500, and was employed as only one part of the plant on a contract to earn £23,385, in all was earning £13,000 per annum profit, whether net or gross, or that in its 3 years of life this machine costing £4,500 would earn £39,000. Upon the evidence as to the damage sustained by the plaintiffs by this one weeks delay, we are satisfied that the sum of £250 is wholly erroneous. There was no evidence of any loss of profit on the Guernsey contract. The only real evidence was that the capital cost of the machine had been £4,500 and that its life was 3 years. Beyond this, there was nothing but the vague evidence about a hiring price of £30 per day. That, the judge says, should be reduced to £22 10s by the saving of £7 10s expenses. As no Sunday work was allowed in Guernsey, even this figure of £22 10s multiplied by 6 equals £135. However, the judge has given £250.

The sole remaining question is whether or not there is any evidence of actual detriment to the plaintiffs caused by the weeks delay. No evidence having been given by them of any loss of profit in connection with their Guernsey contract, their only possible claim must rest on the fact that, by the machine being suddenly thrown on their hands for a week, they were prevented from making it earn its keep, and had to put up with currant outgoings uncompensated by earnings. The long judgment of the judge is almost entirely devoted to a discussion of leading cases upon first principles of the law of damages, especially in collision cases, like The Mediana, where the claimant ship was a non-profit earning vessel. For the present case, such a discussion is unnecessary. It may be assumedalthough it is not necessary for us to decide itthat, when loss of profit does not enter in as an element of loss, the measure of damages caused by a breach of contract for delay in delivery of a chattel is, under the first rule in Hadley v Baxendale, not less than that in a claim in tort for temporary deprivation of the use of a chattel by the defendants negligence.

The machine here was a chattel of commercial value, but, on the facts before us, there are only four possible heads of damagenamely, (i) depreciation which was running on, (ii) interest on the money invested, which was being wasted, (iii) some trivial amount of maintenance which was no doubt involved, and (iv) some expenditure of wages which were thrown away. The plaintiffs could not complain if they were refused any relief whatever on heads (ii), (iii) and (iv), for, having opened their mouth wide for a wholly illegitimate claim, they did not condescend to lead evidence on any of these three legitimate topics. On a pure sinking fund basis, the depreciation would be £29. We cannot believe, however,

Page 103 of [1940] 2 All ER 97

that a machine exposed to such working strains in use that it will last only 3 years depreciates as much when idle as it does when working, and we, therefore, think that £20 for the week is as much as ought to be allowed for depreciation. The sum of £10 for interest, maintenance and wages is liberally £30 in allagainst which receipts for £16 must be deducted, leaving for damages a net sum of £14. The appeal must be allowed with costs, and the judgment below must be varied by entering it for the plaintiffs for £14, with such costs as that sum warrants. The claim ought to have been made in the county court.

Appeal allowed with costs.

Solicitors: Hill Dickinson & Co (for the appellants); Munton Morris King & Co (for the respondents).

W K Scrivener Esq   Barrister.

Attorney-General v Glyn Mills & Co

[1940] 2 All ER 103


Categories:        SUCCESSION; Other Succession        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        14, 15, 19 FEBRUARY, 13 MARCH 1940        


Estate and Other Death Duties Succession duty Succession Private Act of Parliament avoiding restraint upon alienation Whether succession destroyed Succession Duty Act 1853 (c 51), ss 2, 12, 15.

Under a settlement of 1888, out of property brought into settlement by cousins of the deceased, the deceased was given a life interest subject to forfeiture in the event of alienation, and, subject thereto, the settled property was entailed in tail male in the usual form. In 1918, the entail was barred and the settled property made subject to the joint appointment of the deceased and his eldest son. At the same time, the settled property was resettled, the material clause of the resettlement being that the eldest son was given a power to charge the settled property with the payment after the death of the deceased of any sum not exceeding £50,000 free of death duties, such charge not to take effect unless the eldest son survived the deceased. By a private Act, passed in 1921, it was provided that the above power to charge might be exercised whether or not the eldest son survived the deceased, and that, notwithstanding the provision for forfeiture in the event of alienation, the deceased might release his life interest in any sum so charged. The Act also contained a general saving to His Majesty of all estate, right, title, interest, claims or demands. In 1923 and 1925, by three charges the sum of £50,000 was raised. The eldest son died on 30 July 1930. The deceased died on 3 October 1932, and, this date being more than three years after the £50,000 had been raised, there was no claim to estate duty in respect thereof. The Crown contended that the charges were created under the settlement of 1888 and the resettlement of 1918 and claimed succession duty in respect of the £50,000 under the Succession Duty Act 1853, ss 2, 12, 15, upon a succession by the eldest son to the settlors in the 1888 settlement:

Held (i) the indefeasible title to the sum of £50,000 conferred on the eldest son was a new and paramount title derived from s 4 of the

Page 104 of [1940] 2 All ER 103

private Act of 1921, and the private Act was not a “disposition” within the Succession Duty Act 1853, s 2.

(ii) the power conferred by s 4 of the Act of 1921 was a new power, distinct in law from that conferred by the resettlement.

Order of Court of Appeal ([1939] 1 All ER 236) affirmed.

Notes

The substantial point in this case is whether the power conferred by the private Act was a new power or a mere variation of something in the resettlement. It is well settled that acts done under a power of appointment are to be referred to the deed by which the power was created, and it was to bring that principle into operation that it was argued that the power created by the private Act was not a new power.

As to What Constitutes a Succession, see Halsbury (Hailsham Edn), Vol 13, pp 349, 350, para 383; and for Cases, see Digest, Vol 21, pp 8489, Nos 601651. For the Succession Duty Act 1853, see Halsburys Complete Statutes of England, Vol 8, p 53.

Cases referred to

Braybrooke (Lord) v A-G (1861) 9 HL Cas 150; 21 Digest 94, 694, 31 LJEx 177, 4 LT 218, varying (1860) 5 J & N 488.

A-G v Floyer (1862) 9 HL Cas 477; 21 Digest 86, 622, 31 LJEx 404, 7 LT 47, revsg (1861) 7 H & N 238.

Charlton v A-G (1879) 4 App Cas 427; 21 Digest 95, 699, 49 LJQB 86, 40 LT 760, affg (1877) 2 ExD 398.

A-G v Sibthorp (1858) 3 H & N 424; 21 Digest 94, 693, 28 LJEx 9, 31 LTOS 218.

A-G v Selborne (Earl) [1902] 1 KB 388; 21 Digest 102, 753, 71 LJKB 289, 85 LT 714.

Appeal

Appeal by the Crown from an order of the Court of appeal (Sir Wilfrid Greene MR, Finlay and Luxmoore LJJ), dated 23 January 1939, and reported [1939] 1 All ER 236, reversing an order of Lawrence J, dated 8 July 1938, and reported [1938] 3 All ER 605.

The facts and the arguments are fully set out in the opinion of Viscount Maugham.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and J H Stamp for the appellant.

J M Gover KC and J H Bowe for the respondents.

13 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC (read by Viscount Maugham). My Lords, I have had the advantage of reading the opinion which my noble and learned friend Lord Maugham is about to deliver. I agree with it, and, having regard to the very full discussion by my noble and learned friend of the arguments presented to your Lordships, I find it unnecessary to add any observations. This appeal should be dismissed.

VISCOUNT MAUGHAM. My Lords, the present appeal is from an order of the Court of Appeal, delivered by Sir Wilfrid Greene MR, on 23 January 1939, allowing an appeal by the respondents from an order made by Lawrence J, upon an English information. The question raised is whether succession duty is payable upon the death of the fourth Baron Wolverton (whom it will be convenient to call the deceased) in

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respect of a sum of £50,000 raised and paid in his lifetime to his now deceased son, George Edward Dudley Carr Glyn (whom I will call George Glyn).

The facts are conveniently set out in the information, and I think it unnecessary to repeat them at any length. The original settlement was dated 31 December 1888 (herein called the 1888 settlement), and was made by cousins of the deceased, who settled personal property upon trust for investment in the purchase of freehold hereditaments to be settled to the use of the deceased for life (subject to a provision for forfeiture in the event of alienation), with remainder to the use of his first and every other son successively in tail male.

By a disentailing deed, dated 30 December 1918 (which I will call the disentailing deed), George Glyn, the eldest son of the deceased (with the consent of the deceased as protector of the 1888 settlement), disentailed the settled property, and conveyed it (subject to the life estate of the deceased) to such uses and upon such trusts as the deceased and George Glyn should by deed jointly appoint, and, subject thereto, to the use of, or in trust for, George Glyn absolutely.

By a resettlement, dated 31 December 1918 (which I will call the resettlement), the deceased and George Glyn in exercise of the joint power conferred upon them by the disentailing deed appointed that, subject to the life estate of the deceased, the freehold settled property should go to such uses as they should by deed jointly appoint, and, subject thereto, to the use of George Glyn for life, with remainders over. The resettlement also dealt with the settled investments by providing that, subject to the prior interests therein during the life of the deceased and otherwise, they should be held as to part upon trust for George Glyn absolutely if he should survive the deceased, and, subject thereto, upon the same trusts as capital money arising from the settled freeholds under the Settled Land Act, 1882. Clause 9 of the resettlement empowered George Glyn to charge the settled property with payment after the death of the deceased of sums not exceeding £50,000 free from death duties for the benefit of himself or any other persons, with the important proviso that any such charge should not take effect unless George Glyn should survive the deceased. This event did not happen, for George Glyn died on 30 July 1930, in the lifetime of the deceased, who died on 3 October 1932.

In 1921, a private Act of Parliament known as the Wolverton Estate Act was passed. It recited (among other things) the 1888 settlement, the disentailing deed, the resettlement, and the restraint on alienation affecting the life interest of the deceased under the 1888 settlement. It also recited that it was:

… expedient that the power conferred on George Glyn if he should survive Lord Wolverton of charging the property subject to the 1888 settlement and the resettlement with the payment after the death of Lord Wolverton to himself of any sum not exceeding £50,000 … should be varied in manner hereinafter mentioned [and that] the purposes aforesaid cannot be effected without the authority of Parliament.

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S 4 of the Act provided, first, that, notwithstanding anything contained in cl 9 of the resettlement, or in the proviso thereto, George Glyn with the consent in writing of the deceased might:

… exercise the power of charging conferred upon him by the said clause so that any charge made under that power shall take effect after the death of Lord Wolverton [the deceased] whether George Glyn shall survive Lord Wolverton or not.

Secondly, s 4 provided that, notwithstanding the restriction on the deceaseds life interest under the 1888 settlement, the deceased might:

… release or assign and transfer to George Glyn … his life interest in the whole or any part of any sum so charged as aforesaid so as to enable the said sum to be raised and paid during the lifetime of Lord Wolverton.

S 12 provides that no exercise of the powers conferred by the Act shall work a forfeiture of the life estate of the deceased.

By indentures dated 29 November 1923 and 4 November 1925 (which I shall call the charging deeds), George Glyn, in exercise of the power conferred upon him by cl 9 of the resettlement, as extended by s 4 of the private Act, and with the consent of the deceased, charged the settled property with sums amounting in the whole to £50,000 free of death duties for his own absolute benefit, whether he survived the deceased or not. The deceased, by indentures dated 30 November 1923, and 5 November 1925, released his life interest to the extent necessary to make these charges immediately operative, and the sums amounting to £50,000 were paid by the trustees of the settlement to George Glyn.

On these facts, the contention of the Crown, rejected in the Court of Appeal, is that the £50,000 received by George Glyn was a “succession” taken by him under a “disposition” (consisting of the disentailing deed and the resettlement and the charging deeds), that this disposition was, therefore, “made by himself,” that the Succession Duty Act 1853, s 12, is applicable, that his title to the succession was, within s 15 of the Act, “accelerated” by the releases by the deceased of his prior life interest, that the successors are chargeable at the same rate as that at which George Glyn would have been chargeable if no such “disposition” had been madethat is, as if he were taking directly from the 1888 settlementand, accordingly, that the successors are chargeable with duty at 11½ per cent upon the death of the deceased.

The respondents rely on s 4 of the private Act, and say that George Glyn took “a new and paramount title” derived from that section, which they say conferred a new power upon George Glyn, exercisable with the consent of the deceased, and, accordingly, that it is impossible to hold that he took under the “disposition” contained in the 1888 settlement and the resettlement, or that contained in the disentailing deed and the resettlement.

My Lords, I think, subject to a question as to the true construction of s 4 of the private Act, that this case is in effect governed by the decisions of this House in Braybrooke (Lord) v A-G, A-G v

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Floyer and Charlton v A-G. The Succession Duty Act 1853, was no doubt, as has often been observed, a skilfully drafted Act, but it raised questions of remarkable difficulty, and, for my part, I must admit that I should probably have misunderstood some of the results of the first case without the assistance of the other two.

In the Braybrooke case, X, a stranger in blood, devised lands to A for life, remainder to B for life, remainder to the first and other sons of B in tail. A died, and B became tenant for life, with remainder to C, his eldest son, in tail. In 1841, B and C disentailed, and resettled the estates, subject to Bs life estate, to such uses as B and C should appoint, and, in default, if C should survive, to such uses as he should appoint, and, in default, to C for life, remainder to his first and other sons in tail. In 1850, for various considerations not material for the present purpose, B and C exercised their joint power, and appointed the estates, subject to certain annuities and charges, to the same uses as had been declared by the deed of 1841. B died in 1858. In this House, Lord Campbell LC, and Lord Kingsdown (Lord Wensleydale dissenting) decided in terms or by necessary inference a number of points. First, they held that C took under a disposition “made by himself.” Secondly, they held that this disposition was made by himself alone, because he alone was the settlor from whom the interest was derived, and he was, therefore, the sole predecessor. (This is not very clear from Braybrookes case, but it was made clear in Floyers case, at pp 488, 495.) Thirdly, they held that the succession did not in fact take place under the will of the testator, because the deeds of 1841 and 1850 had created quite different interests in the estates from those created by the will, so that “the testator could no longer be considered as the predecessor” (at p 168). Fourthly, they held that the deeds of 1841 and 1850 together constituted one disposition, because “what is done under a power of appointment is to be referred to the deed by which the power was created” (at p 167). Fifthly, they said that, “at the date of the disposition” consisting of the two deeds of 1841 and 1850, C would have been entitled to the estates under the will of X expectantly on the death of B, and, accordingly, they held that he was to be charged under s 12 of the Act “at the same rate as he would have been chargeable with if no such disposition had been made,” and that was, in the circumstances, at the rate of 10 per cent as upon succession from a stranger (at pp 168, 488). It will be observed that, in holding that C took under a disposition by himself, the House declined to treat the disentailing deed and the deed of 1850 as modifications or variations of the original settlement by will, so that the testator might be treated under s 2 as the direct predecessor of C. That view had had support from both bar and bench in A-G v Sibthorp, but it was rejected in this House at pp 167, 168.

It should also be noted that the first branch of the Succession Duty Act 1853, s 4, was not relied on, and that, although the language of that section would have exactly applied to the exercise of the power by C,

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whether it was treated as exercised by him alone or as exercised by B and C jointly. This was not fully explained until 1879, when this House decided in Charlton v A-G that the Succession Duty Act 1853, s 4, did not apply to a power given in a family settlement to a father and son, and that the section “pointed to an absolute power practically equivalent to property.” This conclusion, I think, was arrived at partly at least because in A-G v Floyer the decision reached was that it was s 2, and not s 4, which governed such cases (at pp 438, 442, 445). This decision shows that s 4 has no application to the present case. One other decided point should be referred tonamely, that charges or portions created under a power are treated in substance “as part of the inheritance out of which they are derived,” and that the duty on these sums must “follow the fate of the inheritance.” As Lord Cranworth observed in Floyers case, at p 491:

The interest created by the power must, on well known principles, be treated as arising from the deed creating the power …

(See also Floyers case, at p 497.)

I come now to the facts in the present case. The authorities cited show that, before the passing of the Act of 1921, if Lord Wolverton had died, and George Glyn had survived him and exercised his power of charging, there would have been a succession in respect of which George Glyn was the predecessor under the disposition (by the disentailing deed and the resettlement and the charging deeds) made by himself alone. S 12 would then have applied, and duty would have been chargeable as if those deeds had not been executed.

In the view put forward on behalf of the Crown, the circumstance that the charges derived their validity, in the events which happened, from s 4 of the private Act makes no difference, and it was contended that the £50,000 received by George Glyn was a succession taken by him as the result of his exercise of the power (modified, it was admitted, by s 4 of the private Act) contained in cl 9 of the resettlement. Accordingly, the information (para 11) claims that succession duty became payable at the death of the deceased in respect of the £50,000 under the Succession Duty Act 1853, ss 2, 12, 15, as a succession taken by George Glyn under dispositions contained in the 1888 settlement and the resettlement as effectuated by the charging deeds and accelerated by the two releases. It was also argued before us that the charging deeds might in substance be regarded for the purposes of succession duty as if the existing joint power had been exercised by the deceased and his son for the benefit of the latter, though it is perfectly plain that this power was not exercised. I think all your Lordships were agreed that this last argument could not prevail, since it involves the substitution of a joint power, which was not exercised, for a very different power, which was.

Your Lordships have listened to arguments on both sides on the

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question whether the power in fact exercised by the charging deeds ought to be regarded as a new power created by the private Act or as a power under cl 9 of the resettlement, varied by s 4 of that Act. For my part, I do not think it necessary to answer this question very precisely, for the following reason. The only possible way of arriving at the conclusion that s 12 (by which I mean the earlier part of it) applies in this case is to find as a matter of fair construction that the charging deeds can, in the language of Lord Cranworth in Floyers case, at p 491, “be treated as arising from the deed creating the power,” with the result that the limitations or the trusts can be treated as if they were introduced into the deed creating the power: Braybrooke (Lord) v A-G, at pp 167, 182. That could be done in both those cases. In this case, however, it is clear that it cannot be held, in the events which have happened, that the charging deeds can be introduced into the resettlement without making nonsense of the transaction. The charging deeds created, and were intended to create, new and unconditional legal interests in George Glyn, and, coupled with the deeds of release by the deceased, these interests were made immediate. The chain of succession, if I may so describe it, is thus broken. It is not necessary to consider what the position might have been if George Glyn had survived his father. In fact, he did not, and the £50,000 to which he became entitled was money which he took by reason of the exercise of a power conferred on him (subject to the consent of the deceased) by s 4 of the private Act, and in no other way. George Glyns “succession” (within the meaning of the Succession Duty Act 1853, s 2) was, therefore, conferred on him by his own act in the exercise of a power created or validated, so far as regards the events which actually happened, by s 4 of the private Act, and not by the resettlement. It follows that the Succession Duty Act 1853, s 12, applies, if at all, only as regards the last two lines of that section.

The argument based on the construction of s 4 of the private Act can be dealt with shortly. It is suggested that it should be treated as if it had been so worded as to rectify or amend the power conferred by cl 9 of the resettlement as from the date of that deed. It seems to me sufficient to say that the language of the section shows that that argument is untenable. The section states that it shall be lawful for George Glyn “at any time alter the passing of this Act with the consent,” etc, to exercise the power as altered. The section cannot have a retrospective effect.

Some other points were raised in the Court of Appeal which were not urged before your Lordships, and I shall not take up your time by referring to them, more especially as they were, in my opinion, fully dealt with in the judgment of the Court of Appeal prepared by Sir Wilfrid Greene MR. I should like, however, to add that I fully agree with what Sir Wilfrid Greene MR, said in his judgment in relation to “successions,” and to --G v Selborne (Earl). In the

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result, I agree with the decision of the Court of Appeal, and this appeal should be dismissed. The costs will be provided for under the terms which were imposed as a condition of leave to appeal.

LORD RUSSELL OF KILLOWEN (read by Lord Romer). My Lords, it appears to me to be immaterial whether the effect of s 4 of the private Act is to create a new power in George Glyn, or to amend the power vested in him by cl 9 of the resettlement by striking out the proviso to that clause, and making Lord Wolvertons consent in writing a condition of its exercise. For myself, I would, notwithstanding the recital in the private Act, call it a new power framed by reference (but additional) to the resettlement power, and not an amendment of it, because there is nothing in the private Act which would invalidate a charge of £50,000 by George Glyn (without Lord Wolvertons consent in writing) contingently on his surviving his father. Such a charge would be effective if in fact he survived his father. In other words, after the private Act came into operation, there were two powers vested in George Glyn, one a power, exercisable independently of his father, to create a contingent charge, the other a power, exercisable only with his fathers consent in writing, to create an indefeasible charge. If that be the true view, clearly no succession duty would be payable. Indeed, the contrary was not contended. However, even if it be assumed that the private Act created no new power, but merely amended the resettlement power, the amendment does not relate back to the date of the resettlement. A valid charge under the power could only be made by George Glyn “after the passing of this Act.” No appointment made before the Act would be freed from the operation of the proviso, nor would an appointment made before the Act in terms fulfilling all the requirements of the Act be validated and be effective under the Act.

These considerations satisfy me that, while George Glyn became entitled in respect of the £50,000 to a succession under a disposition by himself as predecessor, yet no succession duty is payable. The succession cannot be said to be taken under dispositions contained in the resettlement. What conferred upon George Glyn an indefeasible title to the £50,000 was the joint operation of cl 9 of the resettlement, the private Act, and the instruments of charge. The date, therefore, when the dispositions were made cannot be the date of the resettlement, but can only be the dates of the instruments of charge. In these circumstances, George Glyn was not, at the date of the dispositions, entitled to the property comprised in the succession expectantly on the death of his father. He was only entitled to a life interest therein. The case, therefore, does not fall within the provisions of the first part of the Succession Duty Act 1853, s 12, but is exempt from duty under the concluding words of that section.

A further argument wa at one time advanced on behalf of the

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appellantsnamely, that the substance of the matter should be looked at, and the case treated as one in which the £50,000 had been charged by the exercise by the father and the son of the joint general power of appointment contained in the resettlement, for, it was said, there was no need to resort to the Act except for the purpose of enabling the father to allow the money to be raised in his lifetime without incurring a forfeiture of his life interest. Therefore, so ran the argument, since everything else could have been done without the Act, the money should be treated as having, in substance, been raised under a disposition contained in the resettlement. My Lords, I have heard some strange propositions advanced, based on the “substance” theory in tax cases, but this is surely the strangest of all. An appointment made by A in pursuance of a power vested in him alone is to be treated as being “in substance” the exercise by A and B of a power vested in them jointly. The argument was, however, ultimately not persisted in, and I say no more about it. It was said, however, that the fact that £50,000 could, by apt conveyancing, have been charged under an exercise of the joint power assisted in some way in arriving at the true construction of s 4 of the private Act. As to that, I can only confess that (owing, no doubt, entirely to my own defects) I could not follow the argument when presented, and I do not understand it now. I agree with the judgment of the Court of Appeal, and I would dismiss this appeal.

LORD WRIGHT. My Lords, I should be content simply to express my concurrence with the judgment of the Court of Appeal delivered by Sir Wilfrid Greene MR, but, out of respect for the ingenious arguments which have been addressed to your Lordships on behalf of the appellant, I shall state very briefly why I arrive at the same conclusion as the Court of Appeal. The Crown in the information alleged that the charges, amounting in all to £50,000, which constituted the succession were created under the settlement of 1888 and the resettlement. The Wolverton Estate Act 1921, was, as I read the information, treated as effective only as accelerating the succession. The claim was thus based on the first part of the Succession Duty Act 1853, s 12, and on the decisions of this House in Braybrookes case and A-G v Floyer. However, this seems to me to be an untenable view. The charges themselves were, in fact, by their express terms created under the settlement of 1888, the resettlement and the private Act. It is clear, in my opinion, that, without the powers contained in s 4 of that Act, the charges could not have been created. Clause 9 of the resettlement contained an express term that charges to take effect after the death of Lord Wolverton, made under the powers to charge therein contained, should be subject to a condition that George Glyn should survive Lord Wolverton. S 4 of the Act provided that, notwithstanding anything contained in that clause, it should be lawful for George Glyn at any time after the passing of the Act, with the consent in writing of Lord Wolverton, to exercise

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the power of charging conferred on him by cl 9, so that any charge made under that power should take effect after the death of Lord Wolverton, whether or not George Glyn should survive Lord Wolverton. In my opinion, this is a new power. Strictly, the Act does not abrogate that original proviso to cl 9, and, it may be, leaves the original power under cl 9 unaffected, the new power being supplemental or alternative, but on any view it modifies cl 9 in such a way as to validate the exercise of a power which, under cl 9 of the resettlement, would have been invalid. I think that the power which it so creates is a new power. It was under that new power that the charges were created. Without it, they could not have been created. In my opinion, it cannot be held that the charges were created under the resettlement when in fact they were created in defiance of the limitations expressed in cl 9. It follows, in my opinion, that the charges did not constitute a succession derived from the dispositions contained in the settlement of 1888 and the resettlement. The continuity of the succession was broken. A new and paramount title was created, under which George Glyn became donor to himself, as successor, in respect of the charges. That title was not contingent on his surviving Lord Wolverton, but was indefeasible on Lord Wolvertons death.

This is enough to defeat the Crowns claim without referring to the other matters dealt with in s 4 of the private Act, though the £50,000 could not have been raised and paid during the lifetime of Lord Wolverton (which was a matter vital to the parties) unless the restriction on Lord Wolvertons power to alienate contained in cl 10 had been relaxed by the Act. In the recitals to the Act, the new power as to charging is described as a variation of the resettlement (“should be varied”), while the change as to Lord Wolvertons powers to alienate is described as the removal of a restriction. I do not attach any importance to the distinction. The change made by the Act, while it varies the resettlement, is so radical as to create a new power, though it may also be described as a variation of the resettlement.

It was argued that the resettlement was in law not to be deemed to be varied, but that the Act must be read retrospectively, so that the terms of s 4 are to be deemed to have been embodied in the resettlement. I cannot construe the Act as retrospective. S 4 expresses that the new power should be exercisable at any time after the passing of the Act, and I think that the Act is clearly intended to speak as and from its date, quoad the variation. An Act is not to be construed as retrospective unless by reason of clear words or necessary intendment. The contention that the Act merely operated as an acceleration under the Succession Duty Act 1853, s 15, is seen to fail when it is observed that s 15 relates to cases where the succession is accelerated by the surrender or extinction of prior interests. It is, I think, clearly inapplicable to a case like this, where a new title, different in its limitations, is created. I concur in the motion proposed.

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LORD ROMER. My Lords, it is plain that, if this appeal is to succeed, it must be shown that the case is governed by the decision of your Lordships House in Braybrooke (Lord) v A-G. The facts of that case and the points which were then decided have been summarised in the opinion of my noble and learned friend Viscount Maugham, which I have had the privilege of reading beforehand. From that summary, it is manifest that the present case can be brought within the decision in Braybrookes case only if, in executing the charging deeds, George Glynn was exercising a power of appointment created by the resettlement of 31 December 1918. The charging deeds cannot otherwise be regarded as constituting part of the disposition made by the resettlement. They can only be so regarded if they fall within the principle applied in Braybrooke (Lord) v A-G, at p 167:

What is done under a power of appointment is to be referred to the deed by which the power was created.

How it can be said that a power of appointment which did not exist until the passing of the Wolverton Estate Act in 1921 was created in 1888 is what I have never been able to understand. The power was given by s 4 of the Act in these words:

Notwithstanding anything contained in cl. 9 of the resettlement or in the proviso at the end of that clause it shall be lawful for George Glyn at any time after the passing of this Act. …

Those words clearly show that, a power is being conferred upon George Glyn, and a power which he did not possess before.

The only difficulty is occasioned by the fact that what the section gives George Glyn power to do after the passing of the Act is:

… with the consent in writing of Lord Wolverton to exercise the power of charging conferred upon him by the said clause so that any charge made under that power shall take effect after the death of Lord Wolverton [the deceased] whether George Glyn shall survive Lord Wolverton or not.

It is nevertheless plain that, in executing the charging deeds, George Glyn cannot have been exercising the power of charging conferred upon him by the resettlement, but was exercising a larger and a different power, conferred upon him by the Act. Had the Act provided that any such appointment as is mentioned in the section should for all purposes be deemed to have been made in exercise of the power conferred upon George Glyn by the resettlement, it would have been a different matter. However, this is just what the Act has not done. It would seem that the framers of the Act preferred to create a new power altogether.

It may further be observed that the power conferred upon George Glyn by the Act was one which could only be exercised with the consent of his father, whereas no such consent was requisite in the case of an exercise of the power conferred by the resettlement. This difference might have had important consequences from the point of view of the Succession Duty Act 1853, having regard to the construction placed

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upon the first part of s 4 of that Act by your Lordships House in Charlton v A-G. Earl Cairns LC, said, at p 439, that the section appeared to point to:

… a general power possessed by one person enabling him to dispose of property as an absolute owner, and not to a power given in a family settlement to a father and son where one is intended to be n check upon the other in the exercise of the power.

In the same case, Lord Selborne said, at p 446, that the first branch of the section points to:

… that kind of absolute power which is practically equivalent to property, and which may reasonably be treated as property for the purpose of taxation. That is the case with a general power exerciseable by a single person in any way which he may think fit. But it is not the case when a power cannot be exercised without the concurrence of two minds; the one donee having, and the other not having, an interest to be displaced by its exercise.

In the present case, the sums appointed under the charging deeds could in any case be brought outside the first branch of s 4, as it seems to me, only if, by reason of the consent of the father being requisite to its exercise, the power could be regarded as a power not exercisable “by a single person in any way which he thinks fit,” and “without the concurrence of the two minds.” The power of charging £50,000 under the resettlement, however, was a general power, exercisable by George Glyn in any way which he might think fit, and without the concurrence of two minds. Had he exercised that power and survived his father, estate duty on his fathers death would have been payable on the sums appointed. Looking at the matter from the point of view of the Succession Duty Act 1853, however, George Glyn would in that case, by virtue of s 4 of the Act, have succeeded to the sums as on a succession from the donor of the power, who, according to Braybrookes case, would have been himself. I would dismiss the appeal.

Appeal dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellant); Bircham & Co (for the respondents).

Michael Marcus Esq   Barrister.


Re Payne, Poplett and Another v Attorney-General

[1940] 2 All ER 115


Categories:        SUCCESSION; Gifts        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        17, 18, 19 JANUARY, 19 MARCH 1940        


Estate and other Death Duties Gift inter vivos Gift by way of settlement Value of settled fund increased before death of deceased Customs and Inland Revenue Act 1881 (c 12), ss 38, 39 Customs and Inland Revenue Act 1889 (c 7), s 11 Finance Act 1894 (c 30), ss 2(1)(c), 5, 7, 8(4) Finance (190910) Act 1910 (c 8), s 59 Administration of Justice (Miscellaneous Provisions) Act 1933 (c 36), s 3.

Estate and other Death Duties Aggregation Gift inter vivos Finance Act 1894 (c 30), s 2(1)(c).

In January 1936, the settlor, by a declaration of trust, settled £10,000 and an option to acquire shares in a company in which he was interested upon trust to hold the same for the benefit of certain members of his family. The option was exercised by the trustees of the fund, and certain investments were made by them in the exercise of the powers conferred upon them, with the result that, at the time of the settlors death, which occurred within three years from the date of the declaration of trust, the value of the fund had greatly appreciated. The question then arose whether the “property” assessable for the payment of estate duty was the sum of £10,000 and the option, ie, the property as it had existed at the time of the establishment of the fund, or whether it was the property as it existed at the time of the settlors death, ie, after the exercise of the option and the acquisition of, and the increase in value of, the investments. The second question was whether the corpus of the settled property was agreeable with the free estate of the settlor so as to form one estate for the purpose of determining the rate of duty:

Held (i) the property assessable for estate duty was the fund in the form in which it existed at the time of the testators death, and not as it had existed at the time of its inception, and, consequently, estate duty was payable on the increased value of the fund at the time of the deceaseds death.

(ii) the corpus of the settled property was agreeable with the free estate of the settlor so as to form one estate for the purpose of determining the rate of duty.

Decision of Simonds J ([1939] 3 All ER 875) affirmed.

Notes

The question here decided for the first time is one which has been the subject of discussion for some years. A gift inter vivos attracts estate duty if the donor dies within three years of the date of the gift, and the principal question arising upon that is whether the property, the subject-matter of the gift, is to be valued at the date of the gift or at the date of the death. The matter is, perhaps, carried a step further here, since there had been a change in the investment of a settled fund, and the question may be asked in this rather different form: is duty payable on the property as it existed at the date of the settlementhere the gift was by way of a voluntary settlementor as it existed at the date of the death? The question is answered that the material date is the date of the death, and, further, that such property must be aggregated with the free estate.

As to Estate Duty on Gifts inter vivos, see Halsbury (Hailsham Edn), Vol 13, pp 269273, paras 272280; and for Cases, see Digest, Vol 21, pp 24, 25, Nos 133137.

Cases referred to

Adamson v A-G [1933] AC 257; Digest Supp, 102 LJKB 129, 148 LT 365.

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A-G v De Préville [1900] 1 QB 223; 21 Digest 10, 42, 69 LJQB 283, 81 LT 690.

A-G v Gosling [1892] 1 QB 545; 21 Digest 129, 954, 61 LJQB 429, 66 LT 284.

Tremayne v Rashleigh [1908] 1 Ch 681; 37 Digest 389, 32, 77 LJCh 292, 98 LT 615.

Re Hodsons Settlement, Brookes v A-G [1939] Ch 343, [1939] 1 All ER 196; Digest Supp, 108 LJCh 200, 160 LT 193.

Strathcona (Lord) v Inland Revenue Comrs [1929] SC 800; Digest Supp.

A-G for Ontario v National Trust Co Ltd [1931] AC 818; Digest Supp, 100 LJPC 215, 145 LT 673.

Wiggins v Watsons Trustees [1934] AC 264; Digest Supp, 102 LJKB 464, 148 LT 482, 17 Tax Cas 728.

Appeal

Appeal by the plaintiffs from a judgment of Simonds J, dated 26 July 1959, and reported [1939] 3 All ER 875, where the facts are fully set out. For the purposes of this appeal the facts are sufficiently stated in the judgment of Scott LJ.

Cyril King KC and Frederick Grant for the appellants, the trustees.

J E Stamp for the respondent, the Attorney-General.

King KC: The appellants case is that, on the true construction of the Customs and Inland Revenue Act 1881, s 38, the property taken under the disposition was £10,000 in cash, and not the securities and investments which, at the time of the death, represented what originally was £10,000. The argument that the property taken under the disposition was not £10,000, but that sum together with the powers given to the trustees to invest the fund and obtain an increment, is based upon the error of looking too much at the vehicle or means by which the property was taken. This is the case of a gift. What was offered and taken was a sum in cash, the only difference in W A Paynes case being that he settled shares instead of cash. That case gives rise to a certain special consideration. The property given was the shares, and they were the subject-matter of valuation. It is quite irrelevant that the shares were dealt with by the trustees and produced an increase. The first general proposition is that, in construing a revenue statute, there can be no implication, but the words must be looked at to see if they are such as to create a charge upon the taxpayer. Adamson v A-G (1) is authority for saying that the Crown must establish that the claim comes within the words of the statute. In A-G v De Préville, it was pointed out by A L Smith LJ, in considering the ambit of s 38 of the Act of 1881, that the property had only to be brought into account if it would have had to be brought in but for the gift. A-G v Gosling is helpful in seeing what are the objects of s 38(2)(c). In the present case, there is no reservation either to M Payne or to W A Payne, so that no charge arises under s 38(2)(c). The intention has to be focused on what was given and what was taken. There is no connection between property given away and property which, after a time, is found to represent the gift, and is in the hands of another. All the

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improvement in the property took place without any control by the donor, as donor, in either case. In either case, he was a trustee. The enumeration in the Customs and Inland Revenue Act 1881, s 39, of persons who are to account does not throw any light upon what they were to account. That is a matter to be determined by s 38(2). It is contended on behalf of the Crown that the gift was not £10,000 simpliciter, but was that sum together with the powers and duties of the trustees. So far as that suggests that a power is property charged by the Act, it is erroneous: Tremayne v Rashleigh. It has never been attempted, on behalf of the Crown, to charge the powers separately. It is sought to charge them as something wrapped up with the gift of £10,000. In the ordinary case of a settlement, no such increase in value would occur. It has happened in the present case because the settlement included a power to invest in the shares of the British Thermostat Co Ltd. The Finance Act 1894, s 5(2), is in no way a charging section, and it does not attempt to define the ambit of the charge on the occasion of the first death. There is great difficulty in distinguishing this case, on the second point, from Re Hodsons Settlement, Brookes v A-G. [Counsel referred to Strathcona (Lord) v Inland Revenue Comrs and A-G for Ontario v National Trust Co Ltd.]

Grant: It is contended on behalf of the Crown that there is a difference between a gift outright and a settled gift. It therefore becomes material to consider what is the property taken within the meaning of s 38, and the method to be used in valuing that which is taken. As regards an outright gift of £10,000, there is no dispute that that would be the amount to be brought into account. The answer must be the same in the case of a settled gift: A-G v De Préville. The point is, what would the donor have had if he had not made the gift? The fact that there is a settlement makes no difference. It can make no difference whether the trustees pay income to the beneficiaries or accumulate it and add it to capital.

Stamp: There is no reason for saying that, where the same disposition comes within the terms of s 38(2)(a) and s 38(2)(c), there is a different effect in one case from the effect there is in the other. If a power of revocation is appended to a disposition, it makes no difference to the disposition unless and until the power of revocation is exercised. If s 38(2)(c) had been absent, and if, in the present case, there had been a power of revocation, it could not have been said that the property was not taxable under s 38(2)(a). The general proposition that a disposition is not affected in its character until the power of revocation is exercised is the foundation of the judgment in the House of Lords in Adamson v A-G. Apart from that proposition, that case could not have been decided in the way in which it was. If a power of revocation had been reserved to the settlor, it would have been just as much a gift inter vivos as in the absence of a power of revocation. Wiggins v Watsons Trustees shows that a disposition which is within the

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Customs and Inland Revenue Act 1881, s 38(2)(a), is not taken out of it by the addition of a power of revocation. If, in the present case, there had been a power of revocation reserved to M Payne, and if it had not been exercised, the position would not be any different from what it is to-day. In order that s 38 can apply, something must be found which can be brought into account as at the date of the death of the donor. In the present case, we are dealing with property which has been settled by the donor within 3 years of his death. Such a disposition is capable of hall-marking property as liable to be brought into account under s 38. The point is, what is the property which is so hall-marked? It has been argued for the appellants that it is the property which the donor parted with. Actually, it is the property taken under the disposition, and that was the property passing at the date of the death of the donor. A-G v De Préville has no bearing upon what is settled property, and, therefore, that case has no bearing upon this case. The thing which is taken must be capable of being valued at the date of the death. There must be an identifiable thing taken, and that thing must be capable of being valued. In the present case, the trust is to trustees, and they are instructed what they are to do with it. They are to make investments, and to apply the income derived from the investments for the benefit of the beneficiaries. The argument that a fund in a settlement must be regarded as one fund is supported by the Finance Act 1894, s 5(2). This has been reduced in scope, but not repealed. The whole of the Succession Duty Act, 1886, implies a continuity of the settled property.

King KC in reply: The argument advanced on behalf of the Crown involves the court placing upon the Customs and Finance Act 1881, s 38(2)(a), a meaning different from that which I have asked the court to place upon it. The reason for the passing of the section was to enable the Crown to get the duty upon property which a man had parted with some little time before his death. The argument for the Crown is that it is not the intuitus of the section which must be looked at, but that the position must be considered as it is under a settlement. The words of s 38(2)(a), however, enable me to say that there may be an immediate gift by a settlement just as effectively as by a gift outright. Under s 38(2)(a), property is taken by trustees just as truly as it is taken by persons absolutely entitled. The property taken is the same thing as the property given. S 38(2)(a) of the Act of 1881 is not affected by the Finance Act 1894, s 5, which is not a charging section, and does not pretend to affect the ambit of the charge of estate duty.

Cyril King KC and Frederick Grant for the appellants, the trustees.

J E Stamp for the respondent, the Attorney-General.

19 March 1940. The following judgments were delivered.

SCOTT LJ. This is an appeal by trustees from a decision of Simonds J, on an originating summons under the Administration of Justice (Miscellaneous Provisions) Act 1933, s 3, taken out by them for the purpose of determining two questions as to the estate duty payable by them under the Finance Act 1894, ss 4(1), 8(4)namely:

1. What was the property on the value of which duty became payable according

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to the Finance Act, 1894, s. 2(1)(c) (as amended) under a voluntary settlement made by one Matt. Payne in Jan., 1936, by way of gift, he having died on Feb. 6, 1937, within 3 years of making it? 2. Is that property to be aggregated under sect. 4 on its value at the date of death, with the rest of the estate of the deceased settlor?

We heard full argument, and were asked by the appellants upon the first question to consider several decisions, but, is the result, the determining points of law are, in the opinion of all of us, dependent on the true construction of certain statutory provisions, upon which the authorities give no direct help. None the less, I cannot help agreeing with the judge that procedure by information rather than by summons would clarify, and probably simplify, the issues better in estate duty cases where there is any degree of complication, even although the Solicitor to the Inland Revenue may assist the subject, as he did here, by writing an informal letter stating the ways in which the Board put their claims.

I have had the advantage of reading the judgments of both my colleagues, who arrive at the same conclusion as I donamely, that the appeal should be dismissedthough by slightly different reasoning. Where Luxmoore LJ, differs from Clauson LJ, a little on the construction of the 1894 Act, I find myself in agreement with the former.

I will deal first with the first question, and it will be convenient to quote on that question certain of the statutory provisions, including the Finance Act 1894, s 1, although the claim is under s 2(1)(c). S 1 provides as follows:

In the case of every person dying … there shall … be levied and paid, upon the principal value … of all property, real or personal, settled or not settled, which passes on the death … estate duty…

S 2(1) provides as follows:

Property passing on the death of the deceased shall be deemed to include the property following, that is to say: … (c) property which would be required on the death of the deceased to be included in an account under the Customs and Inland Revenue Act, 1881, s 38 … if those sections were herein enacted and extended to real property as well as personal property, and the words “voluntary” and “voluntarily” and a reference to a “volunteer” were omitted therefrom …

The Customs and Inland Revenue Act 1881, s 38(2), as subsequently amended, provides as follows:

The personal or moveable property to be included in an account shall be property of the following description, viz.: (a) Any property taken … under a voluntary disposition, made by any person … dying [after 1881] purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made [3] years before the death of the deceased. (c) Any property passing under any past or future voluntary settlement made by any person dying … by deed or any other instrument not taking effect as a will … whereby an interest … is reserved to the settlor, or whereby the settlor may have reserved to himself the right, to restore to himself, or to reclaim the absolute interest in such property.

The Finance Act 1894, s 7(5), provides as follows:

The principal value of any property shall be estimated to be the price which, in the opinion of the commissioners, such property would fetch if sold in the open market at the time of the death of the deceased …

S 22(1) provides as follows:

… unless the context otherwise requires … (f) The expression “property”

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includes real property and personal property and the proceeds of sale thereof respectively and any money or investment for the time being representing the proceeds of … (h) The expression “settled property” means property comprised in the settlement.

The facts were stated at length by Simonds J, and I accept that statement except on two small but not unimportant points, where I agree with Luxmoore LJ. I restate the facts only in so far as is necessary to explain the reasoning by which I reach my conclusion, agreeing in the result with that of the judge. The appellant trustees, whilst admitting liability to duty on a figure of £10,000, contend that that figure is the limit of their liability, on the ground that the settlor merely made a donation of that sum of money, the sterling value of which could not, in the absence of fresh currency legislation, change between the date of the gift and the date of the death. The figure of the Revenues claim, on the other hand, was nearly £50,000, for their contention was that the subject-matter of the gift “taken” by the recipients (whether the trustees or the beneficiaries be regarded as the takers) was the whole settled fund, which had, in the intervening 12 months between the settlement and the death, appreciated up to that value. The judge decided in favour of the Revenue.

The deceased man, Captain M Payne, was evidently an inventive genius with a practical sense of what inventions were likely to prove commercially fruitful. He was director and chairman of a private company called the British Thermostat Co Ltd. He had been in the habit of giving them the free use, without payment, of his inventions. Most of them were fully protected by British and foreign patents, of which he was owner or part owner. Other of his inventions, though not yet patented, were either “accepted” or claimed and provisionally protected. To all of his patent rights I refer inclusively as the patents. His brother, W A Payne, who was also a director, died on 6 May 1937. In regard to him, there is a smaller claim by the Revenue, also pending on appeal before us, similar to the claim in this appeal, but in this judgment it is not necessary further to refer to it.

The companys authorised capital was 25,000 preference and 25,000 ordinary shares of £1 each. It had prospered, having over a period of 7 years ending in July 1935, paid on its ordinary shares an average dividend of 33 ½ per cent, and having also accumulated a general reserve of £7,800 and undistributed profit of nearly £11,800, and having distributed £1 bonus shares to the amount of nearly £12,000. In January 1936, it created another 100,000 ordinary shares of £1 each. In that month, Captain Payne was minded to make provision “as part of a family arrangement” for his parents, wife, issue, and other members of the family by settling his interests in his inventions and patent rights, and in the proceeds of sale thereof, on trusts for them, and on 29 January 1936, he made a declaration by deed poll accordingly, in which he was the settlor, in the following terms. By cl 1 he appointed himself and his brother, W A Payne, the first trustees and authorised the trustees (including subsequent

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trustees) to sell the patents, and so on, and to invest the proceeds in investments authorised by the settlement. Clause 2 contained the family provisions. There was no provision for any ultimate interest reverting to the settlor. Clause 5 was a wide investment clause. The schedules contained a long list of patents granted, accepted, and applied for. Under this deed, the beneficiaries took as a gift the benefit of the equitable right to have the trusts of the settlement executed in accordance with its terms, which included the discretionary right of the trustees not only to sell the settlors interest in the patent and other rights and to invest the proceeds of sale but also to change the investments as they might think fit.

Effect was given to the plan of the declaration, with the assent of the company, by two deeds inter partes, both made after, but on the same day as, the declaration of trust. The first was between M Payne as vendor and the British Thermostat Co Ltd, as purchasers. Under it, the vendor sold all the patents and so on mentioned in the declaration of trust for the sum of £10,000. He also covenanted thereafter to give the purchaser the benefit of any improvements therein which he might invent. On the same day, he entered into another deed, to which his brother, W A Payne, was a party as well as the company. By it, he gave to his brother his “full interest” in one patent, identified in sched (1), and such interest as he had in four other patents, particularised in sched (2), and he and his brother then joined in selling the 5 patents to the company for the sum of £3,883 to be paid to the brother. In other respects, this second deed was similar to the first deed.

The total money consideration paid by the company to the two brothers was thus £13,883, but this was not the only consideration. That figure had been arrived at under an informal and oral agreement with the company on 22 January as appears from the minutes of a meeting of directors on that day, at which the two Paynes and two other directors were present. M Payne, speaking as chairman, there explained that he valued all the patents and inchoate rights at that figure, and the other members of the board approved his valuation. It was then resolved that, on the understanding that no claim would be made by M Payne for the past use by the company of the patents, the company should purchase the patents and rights for that figure, paying £13,883 in cash, and giving to the two brothers as vendors an option to purchase 8,000 £1 ordinary shares in the company at 35s per share. There was attached to the minute a schedule of the patents. It includes both those which a week later M Payne assigned by the first deed and those which he and W A Payne together assigned by the second deed. On the same day, the sums of £10,000 and £3,883 were duly paid by cheque to M Payne and W A Payne respectively, and, on the same day, the option having evidently been already exercised, certain allotments of shares were made to the two Paynes, which I will explain more fully in a moment. Also on the same day, M Payne, pursuant to the declaration of trust, paid his

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cheque into the Westminster Bank, Teddington, to the credit of the trustees account. On 30 January the trustees by cheque drawn on their trust account paid the sum of £10,000 to the company by way of subscription for 5,714 10/35 ordinary £1 shares in the company at 35s, in accordance with the option, and on the same day W A Payne paid his £3,883 to the company, and in addition acknowledged himself to be indebted in a further sum of £117, making £4,000 in all, for 2,285 25/35 shares (which, with M Paynes lot, made up the whole 8,000 covered by the option), and requested the issue of 2,000 to himself, and of the remaining 285 25/35 to the trustees, thus making for them a total of 6,000 shares, paid for at the rate of 35s per share, or £14,000 in all. These transactions on 30 January were in fact merely complementary to the allotment of the above lots of shares by the company to the trustees and W A Payne personally, made on the previous day in execution of the option.

An agreed memorandum contains an account of the actual doings of the company thereafter in relation to its share capital. In April, one bonus ordinary share of £1 was issued to the holder of each ordinary share, whereby the 6,000 £1 shares of the trustees became 12,000. On 1 May the company was converted into a public company, and the ordinary shares were subdivided into 5s shares, the trustees receiving in exchange for their 12,000 shares of £1 each 16,000 founders shares (with extra voting rights) and 32,000 ordinary, all of 5s each. Full particulars of the sales by the trustees and of their re-investments are also contained in this memorandum, but it is unnecessary to state the details. The company continued to prosper greatly, and by 6 February 1937, the date of the death of M Payne, the trust investments and cash together were worth nearly £50,000.

The realand, in my opinion, the onlyissue on the first question is whether the property given by the settlor and “taken” by the donees is in law to be regarded, as the appellants contend, as being a cheque for £10,000that is to say, a gift to the trustees equivalent to that sum in cashor, as the Revenue contend, as being the totality of the equitable interests conferred by the declaration of settlement on the beneficiaries, covering the whole value of the settled fund and entitling them to have that fund administered as a single continuing corpus for their benefit in accordance with the trusts of the settlement. If the contention of the appellants is right, I agree that the value of the property on which duty would be payable would be £10,000. If the Revenues contention is right, it is payable on the settled fund as it was at the date of the deaththat is to say, nearly £50,000. In my opinion, it is the latter.

On the facts of this case, there can be no doubt that, in the words of the Customs and Inland Revenue Act 1881, s 38(2)(a), as re-enacted in the Finance Act 1894, s 2(1)(c), “personal property was taken under a voluntary disposition, made by a person so dying, purporting to operate as an immediate gift inter vivos, by … declaration of trust,”

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and that the gift was not made as long as 3 years before the death, and it is indisputable that the gift did take the form of a declaration of trust, by way of settlement upon trustees for the intended beneficiaries. Even apart from the definition of “property” in the Finance Act 1894, in my view it would be right to hold that the property so given was simply the totality of equitable rights created by that declaration of trust in the beneficiaries under it. The essence of those rights, looked at from that point of view, was the power conferred in equity on each beneficiary to require the trustees to administer the trust in accordance with the declaration, and also, if need be, to apply to the Chancery Division to enforce compliance upon the trustees. No other form or kind of property was the real subject of the gift. The transfer of the legal title to the trustees was mere machinery to effect the gift. The enjoyment of the rights of property so conferred on the beneficiaries did not enure to the trustees, and those equitable rights were ex vi termini, subject to the discretion vested by the trust in the trustees, particularly in regard to the changing of investments. If it be argued that in law the gift was to the trustees, I reply that, for the purpose of estate duty, the duties imposed and the discretionary powers entrusted must be looked at as a whole, and, so regarded, they preclude the contention of the appellants that it was a gift (whether to the trustees or to the beneficiaries) of a sum of money. That contention, in my opinion, assumes a gift absolute in nature and immediate in operation, and both ideas are inconsistent with the discretionary duties and powers of the declaration. As counsel for the Inland Revenue said, this was a continuing trust from the moment of its creation to the date of the settlors death, and his metaphor of a river, the identity of which remains though the particles of water flow on and pass by, illustratesif it is not pushed too farthe true nature of such a continuing trust. There never was a moment during the period of the existence of the trust when any beneficiary could point to any item of the settled fund and say: “That is mine,” or to any interest to which he could lay claim except through the trustees and by calling upon them to carry out the trust in accordance with its tenor. Nor could the trustees at any time say in any true sense: “The settled fund is ours.”

An argument was addressed to us by counsel for the appellants that the £10,000 cheque was given by M Payne after he had already agreed to the arrangement of 22 January that he would sell, and the company buy, the patents for a consideration of £13,883, plus the option to apply for, and be allotted, 8,000 ordinary £1 shares at 35s each, that in equity the patents had already passed to the company, that the declaration of trust could operate only on the proceeds of sale, and, therefore, that the subject-matter of the trust was the money, and not the patents. I think the argument fallacious, for more than one reason, but will content myself here with saying that I agree with the reasons given by Luxmoore LJ, in his judgment.

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Much stress was laid in argument by counsel for the appellants upon the word “taken” in the Customs and Inland Revenue Act 1881, s 38(2)(a), in contrast to the word “passing” in s 38(2)(c). I cannot follow his reasons for that distinction. The word “taken,” to my mind, is merely the correlative of the word “given,” just as is the word “received” in the Finance Act 1894, s 8(4), and I regard the two as synonyms in these contexts. S 8(4) is the operative provision which puts the duty of accounting upon the appellant trustees, to the extent of the property received by them because “the management of it is vested in them.” S 8(1) continues:

The existing law and practice … subject be the provisions of this Act and so far as the same are applicable, apply for the purposes of the collection, recovery and repayment of estate duty …

The word “taken,” therefore, either means the same thing as the word “received” or is replaced by the latter word, just as s 8(4) modifies the Customs and Inland Revenue Act 1881, s 39, and s 8(6) modifies s 40 of the 1881 Act, and as the Finance Act 1894, s 7(5), makes the date of death the determining date for estimating the principal value of the property passing or deemed to pass, and supersedes the provision of a period of 6 months by s 39 of the 1881 Act, upon which Clauson LJ, lays some emphasis. The trustees are made accountable just because they receive the property and have its management. Because the trustees of a settlement are made accountable for the ministerial purpose of collection and recovery of estate duty, however, it does not follow that the character of the property received by them for the purpose of the trusts of the settlement is in any way affected. It is true that the interest of the beneficiaries is equitable, whilst the trustees rights are legal, but it is the settled fund, with its continuing, although changing, character under the investment trusts of the settlement, which constitutes the property charged with estate duty at the time when it passes or is deemed to pass. It is the trustees in office at that time who are accountable, and accountable for the property received by them (the Finance Act 1894, s 8(4)). I express my view with the greatest diffidence, but I cannot entirely agree with either of my two learned but differing colleagues upon the interpretation of the 1881 Act when re-enacted in, and modified by, the Finance Act 1894. It seems to me that the Finance Act 1894, is directed to the nature, state and condition of the property to be valued at the date of the death, whether it be an actual passing under s 1 or a putative passing under s 2. It is a percentage of that property tale quale at that moment, which is cut out and kept by the revenue, and, in the case of a settled fund, it is no more possible to think of it in fact as the trustees sole property, ignoring the beneficiaries, than it is to think of it in law as the beneficiaries sole property, ignoring the trustees. It is a continuing corpus of property made up of various constituent parts, which, under the characteristics imparted to it by the terms of the trust,

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may be, and often is, continually varying. It is not questioned that the trustees in office at the time when the duty to account attaches have then the ministerial duty of accounting, with their rights over against the residue left by the revenue. It seems to me, however, that in essence what is really taxed is the beneficial ownership at that moment, although the machinery of taxation as provided by the Finance Act 1894, s 8, re-enacting, subject to modification, the previous law and practice, is worked for the revenue by the existing trustees.

In my view, it does not matter what the property was, whether patents, cash, or shares, at the moment on 29 January 1936, when the declaration of trust came into operation. Whatever the property was, it instantaneously became subject to the trust, and took form as the settled fund. As such, it remained, however much, or however often, it changed its content as the trustees realised and re-invested. The colours changed, but the chameleon  was still the same animal. On the issue of aggregation, the Attorney-General is, in my opinion, right, and I adopt what Simonds J, said. In the result, my colleagues and I are in agreement upon our final conclusions, and thus concur with Simonds J, in both the conclusions which he reached. The appeal must be dismissed with costs.

CLAUSON LJ. The first question arising on this appeal is whether Simonds J, was right in deciding that the estate duty which admittedly became payable on the death of M Payne in respect of certain property the subject of a declaration of trust of 29 January 1936, is to be calculated upon the value at the date of his death of the assets then held by the trustees of the trust. The facts of the case are fully stated in the judges judgment, and he also refers at length to the somewhat intricate series of sections under which the claim for duty arises. I propose to turn at once to the Customs and Inland Revenue Act 1881, and to examine it with a view to ascertaining what would have been its operation upon the facts of the present case if the declaration of trust had been executed soon after that Act had come into operation, and if the deceased had died within 3 months of its execution. This examination becomes necessary because the criterion for determining in respect of what property the duty under the Finance Act 1894, is to be calculated is whether or not, had the Act of 1881 applied, that property would be required to be included in an account delivered under that Act.

The Customs and Inland Revenue Act 1881, dealt primarily with probate duty. Its aim was to arrange for the collection of probate duty by the procedure of requiring an affidavit of the deceaseds assets to be stamped with an ad valorem stamp on the value of the assets covered by the probate. Incidentally, however, a new scheme was adopted for imposing a duty of the nature of probate duty on certain personal or moveable property which had belonged to the deceased at one time, but would not be covered by the probate, and was of such a character

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that the legislature considered it proper that it should attract duty on much the same lines as if it had not ceased before the death of the deceased to form part of his assets. The Act enumerates in s 38 certain descriptions of personal or movable property, all at one time property of the deceased, and by s 38 and s 39 imposes on every person who, as beneficiary, trustee, or otherwise, acquires possession or assumes the management of property within such descriptions the duty of delivering an account verified by oath and stamped according to the value of the property included in it, the duty to arise upon such person retaining the property for his own use, or distributing or disposing thereof, or in any case within 6 calendar months of the death.

The claim on the trustees of the declaration of trust to deliver a stamped account would have been based on their having acquired possession, or assumed management, of certain property of the description specified in s 38(1)(a)namely, property taken under a disposition made by M Payne purporting to operate as an immediate gift inter vivos by way of declaration of trust made within the specified period before the death. The account is to be stamped according to the value of the property included in it, and it is necessary to ascertain what property is to be included in it.

It is to be observed that no duty to deliver the account arises until the death of the donor, and that, even so, if the person who is to deliver the account is a trustee, he is allowed 6 months from the death for the performance of the duty, unless he distributes or disposes of the property before the expiration of that period of 6 months. It would seem clear that it is contemplated that the property is property which he may possibly be in a position to distribute or dispose of afterbut within 6 months afterthe death. Prima facie, it would not seem likely that the legislature would impose upon a trustee, who has in his hands property of which he is a trustee which he may be in a position to distribute or dispose of, a duty to deliver an account, verified on oath, of any property other than that in his hands. This consideration is reinforced when it appears that he has to expend on stamp duty a sum calculated with reference to the value of that property, an expenditure against which it is obviously contemplated that he should be indemnified out of that property. The property to be included in the account must, however, satisfy the qualification that it is property taken under a disposition made by the donor. In the case where the trustee who is called upon to deliver the account is (as in the case now being dealt with) a trustee on a continuing trust created by a disposition made by the dead man, it seems to me, I must confess, reasonably clear that his duty is to insert in his sworn and stamped account particulars of the property which, at the date of the donors death, is in his hands as property held on the trusts of the disposition made by the donorproperty, I may add, which is saved from having to be inserted in the executors probate affidavit merely by the circumstance that the trustee

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holds it, not for the donor, but upon the trusts marked out by the donors disposition. It is objected that this cannot be right, because, so it is said, the property to be inserted in the account must be property of which it can be predicated that it was taken under a disposition made by the donor. In other words, it is said that the word “taken” in s 38(2)(a) must be taken as meaning, and as meaning only, taken by the original disponee. The word “taken,” in reference to property which ex hypothesi, is being particularised by the trustee in whose sworn account, delivered at or within 6 months after the death, it has to be included, must, in my view, be construed, not as meaning “taken by the original disponee,” but as meaning “in the hands of” the trustee at the material date by virtue of the original disposition of the donor. This is a perfectly possible meaning, and, if it is accepted, the whole scheme of the operation of the Act of 1881 in regard to a trust created by the donor, and continuing as an operative trust at his death, becomes clear and logical. A possible question might be raised as to whether the property to be included in the account should be the trust property as it stood at the donors death or as it stood at the date (that is to say, 6 months after the death, or, in some circumstances, sooner after the death) at which the duty to deliver the account became absolute and enforceable. However, as in the present case there is no suggestion that the property comprised in the trusts of M Paynes declaration of trust varied within the 6 months after his death, this refinement need not be pursued.

These considerations appear to me to lead to the conclusion that the property which, in circumstances corresponding to those of the present case (there being no distribution or disposition within 6 months of the death), would have had to be included in the necessary account under s 38 of the Act of 1881 would be the property which was, at the date of M Paynes death, comprised in the declaration of trust. It follows that that is the property which, under the Finance Act 1894, s 2, must be deemed to pass on his death. Accordingly, I reach the conclusion that the property which is, under the Finance Act 1894, to be deemed to pass on M Paynes death is the property which at M Paynes death was comprised in the settlement, no variation in that property having taken place between the date of M Paynes death and the date when the trustees would (had the Act of 1881 applied) have had to bring in the account. The value of that property will, by reason of the Finance Act 1894, s 7(5), have to be ascertained as at the date when it is to be deemed to passnamely, at the date of M Paynes death. Accordingly, the order made by Simonds J, appears to me to be correct. If I am right in thus holding that the property which attracts duty is that which, at the date of M Paynes death, was the subject-matter of the trusts of his declaration of trust, it becomes unnecessary to examine what the property was which was initially comprised in those trusts, and I accordingly refrain from discussing that matter.

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The only remaining point relates to the question of aggregation. I do not propose to say more on this point than that I am satisfied that the judges decision is correct, for the reasons given by him, and I am prepared to adopt his reasoning as my own. In my judgment, the appeal should be dismissed, with the usual result as to costs.

LUXMOORE LJ. By an order, dated 26 July 1939, Simonds J, declared that estate duty became payable on the death of one M Payne in respect of the property the subject of a gift made by him through the medium of a declaration of trust, dated 29 January 1936, to which I will hereafter refer as the declaration. The judge further declared that the principal value upon which the estate duty is payable is an amount equal to 20/21 of the value at the date of M Paynes death of the assets then subject to the declaration, and that the property at the value so ascertained is to be aggregated with the estate of M Payne for the purpose of ascertaining the rate at which the duty is to be computed.

The order was made on an originating summons issued under the Administration of Justice (Miscellaneous Provisions) Act 1933, s 3, by the present trustees of the declaration as plaintiffs against His Majestys Attorney General as defendant. The reason why the duty is limited to 20/21 of the assets is that certain additional property was made subject to the declaration on the day following its execution by a further disposition made by one W A Payne, a brother of M Payne. It is agreed that this additional property was, at the date on which it was made subject to the declaration, of a value equal to 1/21 of the property settled by M Payne. It is common ground that both M Payne and his brother, W A Payne, died within the period of 3 years from the date of the declaration, and it is admitted that estate duty became payable in respect of the respective dispositions by M Payne and W A Payne, but the contest between the present trustees of the declaration and the Inland Revenue authorities is with regard to the value in each case to be attributed to property the subject of those dispositions, and also to the question of aggregation. A separate originating summons was taken out by the present trustees in respect of the property of which W A Payne disposed. It is unnecessary to state any of the facts with regard to the last-mentioned summons, because, although both cases were heard together in the court below, it was agreed in this court that in some circumstances different considerations might be applicable to the disposition made by W A Payne, and that the more convenient course would be for the second summons to stand over until after this court had given judgment in M Paynes case.

As I have already stated, the present trustees admitted before Simonds J, that estate duty became payable in respect of the disposition made by M Payne. They also contended, both here and in the court below, first, that such duty must be calculated on the sum of £10,000 only on the basis that the property taken under the disposition was a

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sum in cash to that amount, and that, as the property settled was cash, its value must remain unaltered at the death of M Payne, and, secondly, that there is no ground for aggregating that sum with the rest of M Paynes estate for the purpose of ascertaining the rate of duty applicable.

On the other hand, it was contended on behalf of the Attorney-General, both in the court below and in this court, first, that the value of the property on which the duty is to be calculated is the market value of 20/21 of the respective investments and moneys which were in the hands of the trustees of the declaration on 6 February 1937, the date when M Payne died, and, secondly, that to ascertain the appropriate rate at which the duty is to be calculated the value of M Paynes estate must be aggregated with the 20/21 of the value of the respective investments and moneys. Simonds J, declined to accept the contentions of the trustees, and accepted those put forward on behalf of His Majestys Attorney-General. The trustees have appealed from the decision of Simonds J.

There is no dispute of fact, but, although the material facts are stated by Simonds J, it is, I think, necessary to repeat some of them in order that this judgment may be intelligible. In January 1936, M Payne was the sole registered proprietor of a number of patents, and was the joint registered proprietor with his brother, W A Payne, of other patents. He was at the same time a director of, and had a large interest in, the British Thermostat Co Ltd, hereinafter referred to as the company. In the same month, an agreement was made between the company and M Payne and his brother for the purchase of all the patents for the sum of £13,883 in cash, with an option to acquire 8,000 ordinary shares in the company at 35s per share. This agreement is recorded in the minute of a meeting of the directors of the company on 22 January 1936. On 29 January 1936, M Payne executed the declaration. On the same day, in part fulfilment of the agreement already made, the settlor, in consideration of the sum of £10,000 then paid to him by the company, assigned to the company the patentsor, as the case might be, his share and interest in the patentsreferred to in the schedules to the assignment. It appears that the sum of £10,000 was in fact paid by the company to the settlor on the same day by a cheque drawn in his favour, which he then paid into an account opened with the Westminster Bank in the names of himself and his brother as trustees of the declaration. In the assignment, nothing was said about the option to take shares in the company, but there is no doubt but that this option was in fact part of the consideration for the transfer of patents or patent rights, and that it became exercisable by the trustees and W A Payne respectively, in the proportion which £10,000 bore to £3,883. The company on the same day, as appears from the minute of the meeting of its directors of that date, allotted to M Payne and his brother, W A Payne, the trustees of the declaration, the shares of the company which were the subject of the option. It would appear, therefore, that the option had already been

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exercised by the trustees when the allotment was made, and that the judge was in error in stating that it was exercised on 30 January 1936, although the £10,000 was not paid to the company in satisfaction of the price of 5,714 10/35 of those shares until the later date. The capital of the company was from time to time increased, and from time to time bonus shares were issued to the shareholders, including the trustees of the declaration, in respect of their respective holdings. The details are immaterial. In May 1936, the company was converted into a public company. It was exceedingly prosperous, with the result that the shares, which had been subdivided into shares of 5s each, were quoted at a high figure on the Stock Exchange. Of this fact the trustees took some advantage, realising some of the shares before the settlors death, at which date the trust funds consisted of 15,000 ordinary 5s shares and 16,000 founders 5s shares of the company, £911 8s advanced on mortgage, 500 £1 shares in De Haviland Aircraft Co Ltd, 65 £5 shares in Legal and General Assurance Co Ltd, stock to the value of £100 in the British Electric Traction Co Ltd, 500 shares of £1 each in the Assurance and Finance Trust Ltd, £2,500 2 ½ per cent funding loan, and £7,405 11s in cash. It is on the value of these funds at M Paynes death that the claim to duty is made.

To determine the questions raised on the appeal, it is necessary to consider the material sections of the Acts under which the duty is claimed, and its amount is to be ascertained. The duty is claimed under the Finance Act 1894, s 2(1), which, so far as applicable to the present case, provides as follows:

Property passing on the death of the deceased shall be deemed to include the property following, that is to say … (c) Property which would be required on the death of the deceased to be included in an account under the Customs and Inland Revenue Act, 1881, s. 38, as amended by the Customs and Inland Revenue Act, 1889, s. 11, if those sections were herein enacted and extended to real property as well as personal property and the words “voluntary” and “voluntarily” and a reference to a “volunteer” were omitted therefrom …

The Customs and Inland Revenue Act 1881, s 38, as amended, so far as it is applicable to the present case, provides as follows

(2) The personal … property to be included in an account shall be property of the following descriptions, viz., (a) any property taken … under a voluntary disposition made by any person so dying [after Feb. 1, 1894] purporting to operate as an immediate gift inter vivos, whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made 12 months [now 3 years] before the death of the deceased.

The Finance Act 1894, s 7(5), provides that, for the purposes of estate duty:

The principal value of any property shall be estimated to be the price which, in the opinion of the commissioners, such property would fetch if sold in the open market at the time of the death of the deceased …

The first question seems to be what is the meaning in the Customs and Inland Revenue Act 1881, s 38(a), of the phrase “property taken.” The section appears to me to direct attention, in the case of a declaration

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of trust, to the declaration itself, for it is by that document that the disposition of property has been made. It is to be observed that no reference is made to the beneficial interests created under the declaration of trust, nor is any distinction made between the interests of the trustees, if there is an appointment of trustees, and the interests of the beneficiaries. Clauson LJ, whose judgment I have had the opportunity of reading, has come to a conclusion that the meaning of the phrase “property taken” must be ascertained by considering it in the light of the provisions in the 1881 Act, especially s 39, which defines how and by whom the appropriate accounts for probate duty are to be delivered under that Act. In the result, he attributes to the phrase a meaning which admittedly is not the prima facie meaning of the words used. With all respect to his judgment, I see no sufficient ground for departing from that prima facie meaning, especially having regard to the fact that the Finance Act 1894, s 2(1)(c), provides that s 38 of the Act of 1881, as amended by s 11 of the Act of 1889, is to be considered as if it was “herein enacted.”

In my judgment, it is necessary to consider the actual words of the declaration. It contains recitals which set out M Paynes interests in a large number of inventions, and the letters patent and provisional protection relating thereto respectively, and refers to a schedule in which the inventions or patents are specifically identified. For convenience, I will refer to these hereafter as the patents and patent rights. These recitals are followed by one in which is recorded M Paynes desire to make provision for his parents, wife and issue, and other members of his family, by settling “my estate share or interest” in the inventions, patents and patent rights “and in the proceeds of sale thereof and of declaring in respect thereof” certain trusts. The last-mentioned recital is followed by a declaration in these terms:

I do hereby irrevocably declare that I and the trustees hereof to be appointed as hereinafter provided shall hold my estate share or interest in the said inventions and letters patents brevet dinvention and the other foreign patents and patent rights and in the proceeds of sale thereof and the investments and securities which may from time to time by virtue of the provisions hereinafter contained for varying investments represent the same and any cash derived from or representing any part thereof from time to time awaiting investment (all hereafter collectively referred to as the trust fund) [upon certain trusts].

The essential point to notice is that the matters described as subject to the declaration are (a) “the patents and patent rights,” (b) the proceeds of sale thereof, (c) the investments and securities from time to time representing the same, and (d) any cash derived from, or representing, any part thereof from time to time awaiting investment. All these items are described as being collectively referred to as the test fund. It is the fact that, at the time when the declaration of trust was executed, M Payne had entered into an agreement with the company to sell to it the patents and patent rights the subject of the declaration for the sum of £10,000 and an option to acquire ordinary shares of the company at 35s per share. Notwithstanding this agreement, however, the pro-

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perty described in the declaration was the patents rights and the proceeds of sale thereof, and there is no mention of the sum of £10,000. It must, I think, in the absence of evidence to the contrary be assumed that the declaration was the first document executed on 29 January 1936, for the actual form of the documents is contrary to any other assumption. On the same day, M Payne assigned to the company by a separate deed bearing the same date the patents and patent rights, and received in payment therefor a cheque for £10,000 drawn by the company in his favour.

In his judgment, Simonds J, says, ([1939] Ch at p 873; [1939] 3 All ER, at p 879):

It is at least clear what the settlor settled. He had, before executing the declaration of trust, agreed to sell the patents and patent rights the subject of that declaration, and on the footing that the agreement was carried out, as in fact it was, he could and did settle nothing more than the sale price which the company had agreed to pay him, that is to say, the sum of £10,000 with an option to acquire ordinary shares of the company at 35s. a share.

I do not myself appreciate why the actual words of the declaration of trust should be departed from. It is plain that, from the moment the declaration was executed, the trustees thereof had an interest in the patents and patent rights, subject, of course, to the existing agreement for sale, so that, if, by any chance, no matter how remote the assignment to the company had not been executed, it would have been impossible to say that the patents and patent rights were not the property taken under the disposition. The actual form of the document by which the disposition is effected seems to me to be material to the consideration of the question, and, with all respect to the judge, I can see no justification for departing from the description of the property which is contained in the declaration itself. If one has regard to the fact that the agreement for sale of the patents and patent rights must be treated as having been implemented after the execution of the declaration, that which was received by the trustees of the declaration was not £10,000 in cash, but was £10,000, being the proceeds of sale of the patents and part rights settled, and it was, I think, clearly identified as such. No one reading the declaration by itself could have any doubt but that the property taken under the declaration of trust was the patents and patent rights. The fact that, at the moment of execution of the declaration, the patents and patent rights were subject to an agreement for sale, but had not been assigned to the company, is in accord with the actual form of the declaration.

Apart from the description in the declaration, “property” is defined by the Finance Act 1894, s 22, as including:

… real property and personal property and the proceeds of sale thereof respectively and any money or investment for the time being representing the proceeds of sale …

In my judgment, the property taken under the declaration is the patents and patent rights, and this conclusion is sufficient to dispose

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of the first question, and to answer it in the same way as it was answered by Simonds J, for it is admitted that, if the property taken is the patents and patent rights, estate duty is eligible on the value at the death of M Payne of the various items which now represent that property and the proceeds of sale thereof and the investments for the time being representing the same, and consequently estate duty is payable on that value.

The main foundation of the argument that estate duty could not be eligible on any sum in excess of £10,000 was the submission that the property taken under the declaration was £10,000 in cash, although that sum is nowhere mentioned in the declaration. Both in the court below and in this court, counsel for the respondent accepted the proposition that the declaration was a settlement of £10,000, but he sought to differentiate between a gift of £10,000 in cash and a gift of that sum to trustees to invest and hold on behalf of other persons for divers beneficial interests. It may be that there is such a distinction, but the argument appeared to me necessarily to involve the consequence that the words “property taken” in the Customs and Inland Revenue Act 1888, s 38(1)(c), must be construed as if they were “the property taken by the beneficiaries,” for it was contended that the “property taken” was not £10,000, but was an equivalent sum which must be invested in accordance with the directions for that purpose contained in the declaration. In other words, it was argued that the direction to invest was an integral attribute of the property taken, which could not be separated from it, and for this reason differentiated it from £10,000 in cash. I find it difficult to accept this contention, for it seems to me to ignore the position of the trustees, and to consider only that of the beneficiaries, whereas, so far as the property taken is concerned, the fact that the trustees are given the legal interest cannot be divorced from the provisions in the declaration defining the beneficial interests. In my judgment, in considering what is the meaning of the phrase “property taken,” it is necessary to consider, not only the equitable interests of the beneficiaries, but also the legal interests of the trustees, and, consequently, the property taken is that which is transferred to the trustees.

Having regard to the conclusion at which I have arrivednamely, that the property taken under the declaration was the patents and patent rightsI do not think that it is really necessary to consider what consequences might have resulted if the property disposed of had been described in the declaration simply as a sum of £10,000, and I refrain from so doing. I think it right, however, to point out that there is no greater justification for contending that the subject-matter of the declaration is £10,000 in cash than there is for contending that it is the shares in the company actually paid for out of that sum, for, as already stated, it appears from the minutes of the meeting of the directors of the companyat which both M. Payne and W A Payne were present,

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held on 29 January 1936, being the same day on which M Payne assigned the patents and patent rights to the company and received the cheque for £10,000that the shares the subject-matter of the option, which also formed part of the purchase price for the patents and patent rights, were allotted by the company to the trustees of the declaration, and that on the day followingnamely, 30 January 1936the £10,000 was repaid to the company in payment of the shares so allotted. Whether the property taken under the declaration be, as therein expressed, the patents and patent rights in question, or in substance the shares allotted to the trustees in performance of the arrangements between the company and M Payne and his brother, the same result follows, for what was subject to the declaration at M Paynes death represented either the proceeds of sale of the patents and patent rights or the proceeds of sale of the shares originally taken by the trustees in the exercise of the option. Although I have arrived at the same conclusion as that expressed by Simonds J, by a different route, I agree with the answer which he gave to the first question.

The only other question which remains is whether or not the value so to be ascertained is to be aggregated with M Paynes estate for the purpose of ascertaining the appropriate rate at which the duty exigible is to be calculated. It is sufficient to say that I find myself in complete agreement with the judgment of Simonds J, and the reasons there stated, and that I do not desire to add anything to it. I think it right to state that during the argument a number of questions were canvassed on each side to establish that many anomalous results might arise in considering the method of valuing property the subject-matter of an absolute gift. I realise the difficulty in finding a satisfactory answer which provides a uniform, or even a logical, solution for all cases, but, as they do not, in my judgment, arise in the consideration of this case, I have refrained from dealing with them. In the result, I agree that this appeal fails, and should be dismissed with costs.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Wilkinson Howlett & Moorhouse (for the appellants); Solicitor of Inland Revenue (for the respondent).

W K Scrivener Esq   Barrister.


Re Capon, Trustee in Bankruptcy v Knight (RC) & Sons

Re Capon, Trustee in Bankruptcy v Woodward & Woodward

[1940] 2 All ER 135


Categories:        SALE OF GOODS        

Court:        COURT OF APPEAL        

Lord(s):        SCOTT, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        25, 26, 29, 30, 31 JANUARY, 19 MARCH 1940        


Sale of Goods Transfer of property Ascertained goods Purchase price provided by auctioneers Bankruptcy of purchaser Whether property in goods in purchaser or in auctioneers Sale of Goods Act 1893 (c 71), s 17(1).

Both the appellants were auctioneers, and from time to time each of them had given credit to a farmer whereby the latter was enabled to acquire pigs at their respective auctions. In each case, the farmer, before removing the pigs to his farm, signed notes acknowledging that the pigs were the property of the appellants and that they could be removed and sold by them at any time. In the usual course of business, such pigs were later resold by the auctioneers, the farmer receiving the profit on the whole transaction less auctioneers commission. If the pigs were resold through any other agency, the auctioneers received interest on the purchase money at the rate of 5 per cent per annum. On 23 February 1938, the farmer executed a deed of assignment, and in March 1938, was made bankrupt. On 23 February 1938, the appellants entered the farm, seized the pigs and re-sold them. The respondent, the farmers trustee in bankruptcy, claimed the proceeds of sale of the pigs, on the ground that the arrangements made between the appellants and the farmer were ineffectual attempts to obtain security for the money advanced to the farmer, while the appellants contended that the farmer had bought the pigs as their agent, and that at all material times the pigs were their property:

Held the property in the pigs had passed from the vendor to the farmer, and the subsequent seizure and sale of the pigs by the appellants were wrongful. The trustee in bankruptcy was, therefore, entitled to the proceeds of sale of the pigs seized.

Decision of Farwell and Morton JJ ([1939] 4 All ER 554) affirmed.

Notes

The Sale of Goods Act 1893, s 17(1), provides that, on a sale, the property is transferred to the buyer at such time as the parties intend. That refers to the parties to the contract of sale, and, if there is an ascertained buyer, an auctioneer would not be a party to the contract. Upon this ground, it is held that the pigs passed to the farmer, and not to the auctioneer. This, in its turn, in the present case depends upon a finding of fact that the farmer was not an agent of the auctioneers when he was bidding at the auction.

As to Transfer of Property in Specific Goods, see Halsbury (Hailsham Edn), Vol 29, pp 83, 84, paras 9799; and for Cases, see Digest, Vol 39, pp 501, 502, Nos 11871205.

Cases referred to

Re James, Ex p Swansea Mercantile Bank Ltd (1907) 24 TLR 15; 5 Digest 805, 6877.

Devaynes v Noble, Claytons Case (1816) 1 Mer 529, 572; 12 Digest 483, 3961.

McEntire v Crossley Brothers Ltd [1895] AC 457; 3 Digest 94, 249, 64 LJPC 129, 72 LT 731.

Coldman v Hill [1919] 1 KB 443; Digest Supp, 88 LJKB 491, 120 LT 412.

Page 136 of [1940] 2 All ER 135

Appeal

Appeal by two firms of auctioneers, respondents to the motions, from an order of the Divisional Court (Farewell and Morton JJ), dated 20 November 1939, and reported [1939] 4 All ER 554. The facts are fully set out in the judgment of Scott LJ.

D N Pritt KC and A S Orr for the appellants.

C E Harman KC and C L Henderson for the respondent.

Pritt KC: The arrangement between the auctioneers and the bankrupt was, in essence, a contract of agistment. The pigs were bailed in order that they might be fattened for reward. At the time the pigs were knocked down to the bankrupt, it looked like a sale to him, but he was really buying as the agent of the auctioneers. Capon was not to have the property in the pigs until he had paid for them. The whole transactions were transactions in which, in the ordinary course, Capon identified every pig which he sent back to be re-marketed, and paid the appropriate price in respect of it. The custom is general in the case of sale, by auction around Stowmarket. The case for the trustee is that the agistment note is an attempt to create a colourable security over goods sold. One is compelled to recognise, however, that two firms of auctioneers, acting independently, have taken the same course. There is no evidence that the property in the pigs ever passed to Capon, and, therefore, the agistment note cannot be a bill of sale. Unless the court comes to the conclusion that the property in the pigs passed to Capon, no attack on this document under the Bills of Sale Acts can succeed. The proper inference to draw from the evidence is that Capon was bidding as the auctioneers agent, and that all he bought was the auctioneers property, which was passed to him on the terms of the agistment note. There was a contract of agistment on the terms that Capon should have the difference between the price at which the pigs were bought and the price at which they were afterwards sold. [Counsel referred to McEntire v Crossley Brothers Ltd and Re James Ex p Swansea Mercantile Bank Ltd.]

Harman KC: The agistment note might be a perfectly good document if it were registered as a bill of sale. It was a licence to seize. It was an attempt to do by an unregistered instrument not in the proper form that which can only be done by an instrument in the proper form and registered under the Bills of Sale Acts. There is no single document to support the theory of agency at all. Capon says in his affidavit that he was never appointed, and never regarded himself as, an agent. When he was cross-examined in the county court, he stated that nothing had been said to him about being an agent, and that nothing had been said to him about buying the pigs as agent for the auctioneers. The indications are against agency and in favour of ownership. The auctioneers realised that, if they wanted Capons custom, they must finance him. They wanted security for the credit given. They took security in a way which the law does not allow. The agistment notes are not so

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called on their face. They do not purport to transfer the property in the pigs. They assume that the auctioneers already have the property in the pigs, and are really an attempt to finance the transactions, and an attempt to give the auctioneers security for the amount of the purchase price. [Counsel referred to Coldman v Hill. He was stopped by the court.]

Pritt KC in reply: The crucial question is: in whom is the property in the pigs? That question can be determined against the auctioneers, unless the view is taken that Capon was buying as their agent. All parties were agreed, however, that Capon should not have unsecured credit.

D N Pritt KC and A S Orr for the appellants.

C E Harman KC and C L Henderson for the respondent.

19 March 1940. The following judgments were delivered.

SCOTT LJ. This is an appeal from an order of a Divisional Court, consisting of Farwell and Morton JJ, whereby they allowed the appeal of the trustee in bankruptcy of one Harry Urban Capon from an order of His Honour Judge Hildesley KC, sitting in bankruptcy in the Ipswich County Court. The appellants before us are two firms of agricultural auctioneers, R C Knight & Sons and Woodward & Woodward, who hold regular weekly or fortnightly auctions of stock at Stowmarket in Suffolk. I will refer to the firms as Knights and Woodwards, respectively, and to the respective senior partners who gave evidence in the county court as Knight and Woodward. The bankrupt, whom I will call Capon, was a farmer, and on the morning of 23 February 1938 (the day before the commencement of the bankruptcy), there were in his possession 679 pigs in course of fattening, mostly on a farm called Kenton Hall, but some on an adjoining farm, both of which he owned and occupied. I shall refer to Kenton Hall as including both. The pigs had all been knocked down to him as bidder by one or other of the appellants at their auctions. At 10.30 am on 24 February Capon executed a deed of arrangement. That was the act of bankruptcy to which the trustees title related back. Partly on 23 February but mostly on 24 February after 10.30 am, the appellants forcibly, and against the will of Capon, removed all the pigs, and subsequently sold them by auction. This they did on a claim that the pigs belonged to one or other of them, without distinguishing between the two firms, for they made no attempt to allocate the pigs according to their alleged ownership, doubtless because they had no means of identification. The proceeds of sale were £4,408 2s 3d, but the appellants claimed to deduct insurance, carriage and other expenses and commission, amounting to £27 19s, leaving the sum of £4,380 3s 3d. From this sum they deducted £4,151 4s as owing by Capon to them for advances made by them in respect of the original auctionprices fetched, not by the 679 pigs, but by 999 pigs, that is, 320 more than the number still on the farm when they seized. The surplus of £228 19s 3d they admitted was the property of the trustee. Their “realisation account” is a most instructive document, if considered in the light of the true facts, and of the affidavits which I

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analyse later. I regard the case as important, and its facts as illuminating in connection with the public problem of short-term agricultural credit, although the question for our decision is, in the final analysis, quite simple.

The trustee took proceedings in the bankruptcy in Ipswich County Court by two motions, subsequently consolidated, challenging the right of the auctioneers to remove the pigs, primarily on the ground that, till the moment of the act of bankruptcy, the pigs were the property of the bankrupt, and, in effect, on the ground that the auctioneers had wrongfully converted them. The county court judge decided against the trustee, holding that the property was not in Capon, but was in the auctioneers. The trustee appealed to the Divisional Court. That court seems to have assumed that the County Courts Act 1934, s 105, applies even to an appeal from a county court sitting in bankruptcy, so as to bar any appeal except on law, but none the less it held that the judges inferences from the facts were erroneous in law, and it reversed him. The assumption was mistaken. A county court sitting in bankruptcy exercises the same jurisdiction as the High Court (s 103 of the Bankruptcy Act 1914), and, under s 108 of the same Act, an appeal from either is a rehearing, the Divisional Court being at liberty to review the county court judges findings of fact. This position if preserved by the County Courts Act 1934, s 192(5). The appeal to the Court of Appeal in bankruptcy is also a re-hearing, but the judgment there is final, there being no appeal to the House of Lords. From the decision of the Divisional Court the auctioneers appeal to us.

What started the business was that Capon wanted to buy pigs for fattening, but could not buy unless he could get credit for the whole price till such time as he could re-sell the pigs as fattened pigs. Up to a point, the auctioneers version of the facts fits in with the evidence of Capons need of credit. It discloses a system of dealing by which, whatever the parties called it, Capon did in fact obtain delivery without payment, on an indefinite credit, of all the pigs knocked down to him at each auction. Under it, Woodwards or Knights as auctioneers out of their own pocket paid to their principal, the undisclosed vendor, the whole purchase price of each lot sold, less commission, and agreed with Capon not to ask him to reimburse them till after the re-sale of the pigs by him two to four months later, when, in the normal case, the pigs, having been fattened, would fetch 50 per cent to 100 per cent more than they had cost at the original auction. However, the way in which they sought to establish their property in the pigs was by alleging an oral agreement made by Woodwards with Capon before the first deal, by which Woodwards employed him to bid secretly on their behalf and as their agent, so that the property in the pigs would pass to them automatically at the auction on the fall of the hammer, and then remain in them, and never pass out of them to him until the moment when he finally re-sold the pigs, whether by auction through them or by private

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sale without their knowledge. However, as, during the period that they were to have the property in the pigs, it was equally necessary for him to have possession, a plausible pretext for separating their supposed ownership from actual possession had to be invented. This they found in the well-known agricultural custom of agistment, under which stock belonging to A is delivered to B to be agisted by him on his farm. That is to say, it is there to be fed and cared for by him. Very possibly they were aware of the legal point that agisted stock on a farm is safe from the reputed ownership doctrine of the Bankruptcy Act: Re James, Ex p Swansea Mercantile Bank, Ltd. If so, they may well have regarded the use of the word “agistment” as a happy thought. However, whatever they had in their mind, the word “agistment” could not help them unless they really were the owners of the pigs, and so their case at the trial wholly depended on their proving that all oral agreement had been made by Woodwards with Capon before the first transaction took place, that Capon should bid not for himself, but for them as their agent, and similarly by Knights before their first transaction. Counsel for the appellant auctioneers did faintly argue an alternative contention that, even if Capon did not buy as agent for them, he must be considered to have re-sold to them after each auction, but there was not a shadow of evidence to support such a contention.

The substantial question in the case is thus whether this whole alleged system had any reality at all, or whether it was a sham, or, in other words, whether there was any truth in the auctioneers story that Capon was buying, not for himself, but as their agent, in order to enable them as owners really to bail the pigs to him on agistmentor what they called agistment, for it was different from ordinary true agistment.

The general story of the case is told in considerable detail in the judgment of the county court judge, but I disagree with many of his findings and inferences, so it is necessary to re-state the facts as they appear to me. I have the less hesitation in differing from him, first, in that he discredited the evidence of Knight, the first witness called in support of the auctioneers version of the story, and, secondly, because the contemporaneous books of account support the trustees case.

The bankrupt had earlier in his career been a farmer in a large way of business in different parts of Suffolk, but in 1927 his financial position forced him to execute a deed of assignment for the benefit of creditors, with liabilities of £67,000. An arrangement was then made, however and he escaped bankruptcy. In December 1934, he occupied Kenton Hall a fairly large farm, and certain other farms in Suffolk. In that month, he started to obtain pigs at auction sales conducted by Woodwards as auctioneers. In January 1935, he started similarly with Knights. In substance, the course of business with each firm was the same, and there was not much difference in their oral evidence. It was common ground that Capons commercial object was to fatten the pigs on his farm for a period of 6 weeks to 8 weeks, or, as he said, sometimes as long as

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4 months, and then to sell them again at higher prices as fattened pigs. His profit was to come out of the difference between the cost of acquisition and the proceeds of final realisation after allowing for all intermediate expensesnamely, expenses of feeding with purchased feeding stuffs (which are essential for fattening), tending, transporting to and from market, and so on, including also all losses by sickness, accident, and the like, for it was also common ground that he took all risks, and the auctioneers none. Unfortunately, he was financially weak, being short of both cash and credit. Indeed, he could not buy at all unless he could get credit from the moment the hammer fell right up to the time when the pigs would finally be sold. He was able, apparently, to get ordinary unsecured credit from his sellers of feeding stuffs as long as his public credit remained unshaken, but no doubt he realised that the registration of an 1882 bill of sale would have been fatal to such credit, and probably that even a charge given by him to his bank on the pigs, with or without other farming stock, under the Agricultural Credits Act 1928, and registered at the Land Registry, as required by that act, would have been no less fatal.

He began by bidding at an auction held by Woodwards on 14 December 1934. Various pens of pigs were knocked down to him. He was not asked to make any payment, but he was given a sold note, and his name was thereupon entered in the firms journal as purchaser in exactly the same way, and on the same page of the book, as the names of others who were admittedly purchasers in their own right. His ledger account in their books was posted in just the same way as those of other purchasers. On the day of the sale, Woodwards sent their own cheque for the price less their commission to the undisclosed principal, the vendor of the pigs he had bought. The pigs so sold remained in Woodwards possession until removed, usually the next day, by Capon, who, like other purchasers, produced his sale note to the man in charge as his delivery order.

Woodwards story in the county court was that, although they were employed as auctioneers by undisclosed principals to sell at auction, and although Capon bid in the ordinary way and got the lots knocked down to him, and although they knew he could not buy except on credit, and were content to pay their own principals forthwith the full selling price less commission, and so be out of their money, and have to wait for payment of it until the time came when the pigs should be re-sold by Capon as fattened pigs, none the less they did not give him credit at all, that before the first transaction he had already agreed with them to bid as their agent so as to pass the property in the pigs to them on the fall of the hammer, and that they then bailed their own pigs to him on a contract of agistment for reward, his “reward” to be such profit, if any, as he could make on the ultimate re-sale, after defraying all expenses, and after taking all risks of death or accident or illness to the pigs. Woodwards called it agistment, and Knights followed suit, although

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at common law the agister takes none of those risks, but is liable for negligence only.

To establish this story, Woodward relied almost entirely on three documentsnamely, (i) a letter from himself to Capon, dated 18 December 1934, four days after the auction where Capon first bid, (ii) a “receipt” for the pigs, which he enclosed for signature, calling it an “agistment note,” and (iii) Capons reply of 21 December. The actual first “receipt” was not produced in court, but one dated 27 August 1937, prepared by Woodwards and signed by Capon, with a 6d stamp imprinted, was produced, and was said to be in identical form with that of 21 December 1934, except for figure and date. The one of 1934, therefore, no doubt ran as follows:

Received of Messrs. Woodward & Woodward 45 pigs costing £164 19s. which I agree to feed and see after for Messrs. Woodward & Woodward. I acknowledge that the pigs are their property and may be removed and sold by them at any time.

The first letter from Woodward to Capon, dated 18 December 1934, was as follows:

Dear Harry, I now enclose you an agist note in respect of the 43 pigs you purchased on Thursday last for £160 7s. You will no doubt appreciate I particularly want to keep this business on a business footing and immediately these pigs are sold, you to pay us for them. So far as I am concerned, I do not want to handicap you in making the best price possible of the pigs when you re-sell them. Of course naturally we should like to have them come to our sale, but if you decide to sell them at home you to pay us 5 per cent. on the money and to remit the cash at once. I think that for the pigs we sell in the yard, we should be allowed the usual commission of 6d. in the £. I should also like to know if you propose to keep our pigs separate and not to mix them with other pigs. I shall be glad to hear from you that you agree to these terms and that you think they are reasonable.

To that Capon replied as follows on 21 December 1934:

Dear Gordon, Thank you for your letter. I quite agree with your agist agreement and consider it quite reasonable. I have no doubt most of the pigs will come back to your sale and doubtless you will sell more pigs for me than come out of your sale: the private bought pigs I shall expect a slight reduction in the commission. Your pigs will be kept separate almost invariably; when mixed I will let you know. The present ones are in long yard at Blood Hall. Any alteration in the number I will acquaint you.

Before considering these three documents, it is desirable to say a few words about the proceedings in the county court. The consolidated motions were heard together, and the issues in each were the same, but the case against Knights was presented first in evidence. The material before the county court judge was an affidavit in each case by the bankrupt, an affidavit by each auctioneer, the transcript of a prior examination in bankruptcy of each auctioneer, and, finally, the oral evidence of Capon, Knight and Woodward. There is nothing in Capons two affidavits to support the auctioneers allegation of an antecedent agreement with him to act as their agent in bidding. On the contrary, he contradicts it flatly. The nearest he gets to an admission that the pigs were not his property is the single sentence:

Whilst they were in my possession they were to be regarded as belonging to [the auctioneer] and agisted by me.

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It was common ground that he was to be free to sell the pigs as and when he thought fit, and that he was not required to pay their purchase price until he did sell, and, further, that, if he sold the pigs otherwise than through the auctioneer through whom he had bought, he was to pay interest at 5 per cent per annum for the period between his purchase at their auction and the re-sale elsewhere. If they were re-sold through the auctioneers, they were to deduct their full commission. He admitted that he was to bear all risks. Finally, he conceded that he was supposed to keep the pigs acquired through one auctioneer separate from those acquired through the other, and also from pigs acquired by himself elsewhere. He said, however, that such separation was not practicable, and he did not think that “either auctioneer could have picked out his own pigs.” This last point has an important bearing on the main issue of fact. I can see no evidence that there was any effective segregation of any sort, much less any attempt to keep individual lots purchased permanently distinct, so as to enable him or the auctioneers to know the “provenance” of the pigs when re-sold by him, either at their subsequent auctions are elsewhere. The fact is that he kept a current account of pigs as mere units of account, like pounds sterling, treating pigs sold as being those represented by the oldest credit, and applying the criterion of maturity for sale as a modification of the rule in Claytons Case. I can see no possibility of any such identification of pigs sold with pigs bought as would enable either him, or a fortiori the auctioneers, to keep a record of what pigs in his possession were the property of which auctioneer, or of Capon in the case of pigs bought by him elsewhere. Nor, indeed, was there any system or any attempt on the part of either party to preserve any continuing identity of pigs bought with pigs sold. It was no doubt contemplated at the outset of the course of business that the pigs would as a rule be sent back for resale to the auctioneer through whom Capon had bought them, but he was in fact left free to sell by private treaty if he chose, and there was no arrangement for the particular firm to be notified, or for their leave be required, if he wanted to sell otherwise than through them. His unfettered  freedom, and the absence of any method of identification, made the practical observance of any such system impossible, although quite probably the expectation of the auctioneers that they would as a rule get the auctioning of a number of pigs compatible to his purchases operated in their minds as a commercial justification for granting him credit.

I now return to the only documentary evidence there was which gave the least support to the auctioneers storynamely, the original three Woodward documents, which I have already read. The agistment note was primarily a bailees rceipt for the 43 pigs, costing £160 7s. The cost price was obviously irrelevant to an ordinary agistment contract, but, if the reality of the transaction was a purchase by Capon and an advance by Woodward at his request of the purchase price to the

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vendor, the record of its amount would be natural enough. Otherwise, the first three lines do contain the main terms of an ordinary contract of agistment, except that the reward to the agister is omitted. The auctioneers swore that Capons reward was to be his profit on the re-sale of the particular pigs bought, after deducting as expenditure on those pigs up to re-sale, but in saying this they ignored altogether the business risks, very real on the average, of (i) death, (ii) illness, (iii) accident, and (iv) interference with marketing caused by swine fever in the neighbourhood. Yet all of these risks were, on their story, separated from ownership and put upon him, as the agister, with consequences, as the event showed, disastrous to his average profit on the totality of transactions. Nor did they have regard to those pigs which, in accordance with the alleged contract, he might sell elsewhere, with little or no profit, or even at a loss on the averagea very important factor, as, in the absence of any system of identification, he could not know, when he sold, what he had paid for any individual pig.

The last two lines of the “receipt”“I acknowledge that the pigs are their property and may be removed and sold by them at any time”would be mere surplusage in the common agistment contract, in which redelivery on demand is the owners right. However, such right of removal and sale at any time and without notice is definitely inconsistent with even their own evidence of the terms of the contract, which was that Capon was to have an unqualified right to keep the pigs until he regarded them as ripe for resale. That right was essential to his opportunity of earning the profit which they said was his agreed reward. On the other hand, if he was, and the auctioneers were not, the owner of the pigs, and if the agistment note was meant to operate as a licence to seize given to them by him as owner, and conferring on them a right which would prevail against his unsecured creditors, they may well have thought it effective. They were not lawyers, and apparently never took legal advice as to the validity of their plan as a whole. Capon also may have been willing, in his dire need of credit, to sign the receipt, without realising that his “regarding the pigs as their property,” as he said in his affidavit, was wholly ineffectual to give them any right to seize. Alternatively, he may not have cared whether it was valid or not, as long as he got his pigs on credit. He was no doubt ready to do almost anything in order to avoid the fatal damage to his credit which would have resulted from the publicity of any registered document. It was stated in evidence in the county court that the “receipt” had been shown to counsel and passed by him as an effective note of an agistment contract. If it was so shown, we may safely assume that counsel was simply asked the one question, and was not told anything of the facts of the case. It is clear from the receipt that, whilst it assumes the property to be in the auctioneer, it contains no such hint as to how it got there as might have put counsel on his guard. That and several other essential terms of the alleged bargain are absent from

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the receipt. Incomplete references to certain of them appear in the two letters between Woodwards and Capon in December 1934, but, in the main, the appellants were obliged to rely on their oral evidence about them, although in his evidence Woodward seemed really to regard the receipt almost as a document conferring title upon him, and to attach little importance to any oral bargain.

It is difficult to imagine, if such a course of dealing had been really agreed, that a written contract would not have been drawn up. The unreality of such agreement is further shown by Woodwards letter of 18 December which is in certain respects quite inconsistent with it. It speaks of “the pigs you purchased,” and of the price of “the pigs when you resell them.” It assumes complete liberty in Capon to sell “at home”that is, not to auction them publicly, through Woodwardsand calls for interest, in that case, on the money originally advanced. It also assumes a right in Capon not to keep Woodwards pigs separate, for it asks what he “proposes.” The reply of 21 December is entirely consistent with this criticism, for it puts pigs which he calls “private bought” in the same category as those purchased by him at Woodwards auction. It also assumes his right to “mix,” but adds a voluntary promise to notify a change of number.

In Knights case, there was always a similar “receipt” or agistment note, but no letters were exchanged just after their first dealing. Otherwise, their evidence was similar to Woodwards, though Knight was called first. The only real attempt by the auctioneers to answer the trustees case against them was their evidence that it was a notorious custom for agricultural auctioneers to buy through dummy bidders for themselves, the dummies being farmers, and then to give possession to the farmers on so-called agistment terms. It was not necessary, they said, to inform their principals, either beforehand or when sending the cheque for the price realised less commission, and they had not done so in the present case. Knight in evidence said that he did not tell the vendors because they knew it, but no vendor was called to say so in the witness-box. Woodward also said that he did not tell the vendors. On this point, counsel for the auctioneers conceded frankly that such a contract of sale by the vendors through the dummy bidder to themselves would have been voidable, but relied on the fact that it was not avoided as sufficient for his appeal. Knight also asserted in the county court that the practice of his buying for himself and agisting the pigs to the farmer was well-known to the feeding-stuff merchants, who gave the farmer credit (unsecured) for the feeding-stuffs required. This evidence, however, hardly harmonises with para 7 of his own affidavit, in which, narrating the interview which he and Woodward had with Capon on 22 February 1938, the day before they began their removal of the 679 pigs, he swore that:

Capons only allusion to his creditors which I can recollect was an intimation that the removal of the pigs would cause his creditors for feed supplied to require

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immediate payment, and thereby put him in financial difficulties, but I am unable to recollect the precise words he used.

That remark of Capons shows, incidentally, how his credit would have collapsed if the merchants had supposed for a moment that the ostensible ownership of the pigs on his farm was not real.

In the county court, Woodward said that “the agistment note was the bargain,” as in his examination in Capons bankruptcy he had said that the agistment note and the two letters “set out the whole transaction,” but he would not depart from the view stated in his affidavit that by arrangement with him the bankrupt had bid as his firms agent. In my view, however, Capons admitted freedom to do what he chose with his pigs, without any notice to the auctioneers who professed to own them, is one of the fundamental inconsistencies in their story, and shows it to be false. For instance, when swine fever was in the district, towards the end of 1936 and early in 1937, Capon sold 400 pigs to his co-operative society, the Eastern Counties Farmers Trading Society, for immediate slaughter at a low price, but Woodward in the witness-box said that he did “not know till yesterday that a large number went to the Eastern Counties.

The auctioneers books were, in my opinion, the most conclusive evidence against the alleged agreement. Woodwards books of account treated Capons purchases as being purchases for himself, and there is no entry at variance with this vital feature. Indeed, there is not a shred of evidence in those books to indicate anything but a normal purchase, and it was not disputed that all the sales by Capon, whether by private treaty or by auction through either of the appellants, were sales by him, though how they imagined that the property got divested out of them and into Capon did not appear. It is to be remembered, moreover, that they did not even know of his private sales till after the event. Buying notes at the start, and selling notes when he sold by auction, were duly rendered to him, as to every other buyer or seller. In Knights case only is there any entry or method of book-keeping which even appears to throw doubt on Capons ownership from start to finish. Towards the end of 1935, that firm thought fit to start a special book, subsequently labelled by their auditors the “agistment ledger,” for so-called “agistment” transactions, the letters “A/L” being prefixed in the journal to items to be posted from it to the agistment ledger. However, the inference which we were invited by the appellants to draw from Knights change in their book-keepingnamely, that the ownership was really in themdid not appeal to us. In the first place, the fact that an “agistment note” was always signed by Capon, coupled with Knights belief that it conferred some protection on them as creditors, sufficiently accounts for the late adoption of the “agistment” book-keeping practice. In the second place, from such material as we had, it seemed to us that Woodwards books, and also Knights books, as a whole definitely controverted the inference, and pointed to a true purchase by Capon. We

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accordingly had the original books of both firms produced to us in court, and Knights books were very candidly explained to us by their bookkeeper.

It was agreed by counsel for the respective parties that the following information appearing from the books produced and the explanations given to us by the bookkeeper should be treated as being properly in evidence before this court. (1) Interest was paid by the bankrupt on the original purchase price bid by him for pigs at auctions held by Knights where such pigs were subsequently resold by the bankrupt elsewhere than at auctions held by Knights, and such interest was calculated at the rate of 5 per cent per annum for the period during which the original price was in fact outstanding. (2) Knights kept a loose-leaf ledger containing debtor-and-creditor accounts relating to purchases and sales at their auctions in the form appropriate to credit transactions between themselves and their customers, and also a book called an agistment ledger which was kept on precisely the same lines as was the loose-leaf ledger, except that the word “agist,” instead of the word “bought,” was used in it to describe the transactions under which the bankrupt obtained pigs from Knights auction sales. There were other persons who bought at auctions held by Knights under arrangements similar to those exsisting between the bankrupt and Knights. (3) Although the so-called agistment arrangement started in January 1935, no account for the bankrupt was opened in Knights agistment ledger until 28 November 1935.

On the evidence as a whole, the only possible conclusion at which I can arrive is as follows. Capon wanted credit. Indeed, he could not carry on without it. Woodward knew his shaky position, but wanted his custom in order to augment the regular attendance of farmers at his auctions, for his firm lived out of commissions on sales. He was fearful of giving purely personal credit, and wanted to get some kind of security if he could, but he realised that Capons public credit would be badly weakened if it became known that this stock was not his own, and would certainly collapse if, in order to obtain credit, he gave any charge which had to be registered, and that this would be the end of Capon as a supporter of his market. The agistment device occurred to Woodward. Perhaps he had tried it before, for there was no evidence as to when he first used it. He drafted his “agistment note” in the form of a receipt, asked his question of some counsel, got an encouraging answer about the form, and guessed that Capon would sign it is asked. Therefore, he enclosed it in his letter of 18 December 1934, in which he discreetly referred to the pigs as “purchased” by Capon. He was an old friend, having helped Capon to escape bankruptcy in 1927, and it may well be that his friendship made him a little careless of the realities of what he was doing.

Knight came along a few weeks later, availed himself of the start made by Woodward with whom he was evidently intimate, and copied

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him. As I have said, it was only 10 months later that Knight thought of giving the system verisimilitude by opening a special ledger. It may be that both of them supposed that the property in the pigs had somehow passed to them, or it may be that one or both of them realised that the scheme waswhat shall I call it?a try-on. Fortunately, this court need not decide which it was, but I cannot help regarding the whole system as an improper device to get the better of unsecured creditors whilst avoiding the publicity of registration, as would have resulted if Capon had given a documentary charge to the auctioneers under the Bills of Sale Act 1882, or to his bank, under the Agricultural Credits Act 1928. That the two auctioneers should have made Capon sign a document which was to remain secret until wanted, saying that the pigs belonged to them, shows how dangerous these irregular methods of credit may become. That livestock assets of £4,400, ostensibly belonging to a farmer who is receiving large supplies of feeding-stuffs on his personal credita credit created by their very presence on the farm after being purchased by him at public auctionshould in reality belong to the auctioneers would be a monstrous injustice to the merchants and to others who gave him credit, and yet that is the position which the appellants soughtalbeit ineffectivelyto bring about. It is of the very essence of any healthy system of agricultural credit that suppliers should know, or be able to ascertain, where they stand in regard to a farmers ostensible assets, and that is the policy of the 1928 Act. Fortunately, the evil attempt made in the present case has failed.

There is a further aspect of public importance. These two firms of auctioneers, if judged by what they attempted to prove, would seem to have been wholly oblivious of the duties of an agent in three respects. An agent employed to sell may not buy for himself, nor may he put himself in a position where his own interest even may conflict with his principals interest, whether or not it in fact does so. Had these agents really intended to buy their principals pigs, they would have been acting in breach of both duties. They contended that it was not incumbent on them to inform the vendor, their principal, of what they were doing, because it was so common a practice that he must have known of it, and must have been a consenting party. I am satisfied that their own story that Capon was bidding for them is untrue. However, if it had been true, they would certainly, in spite of any conceivable practice, have been under a duty to make the fullest disclosure to their principal. This is the third respect in which they stand convicted on their own evidence of a total disregard of their legal duty. However, I do not for a moment accept the story of any such practicestill less of a trade customof auctioneers as they gave in evidence. If they really meant to swear to a widespread practice that stock knocked down at auction, instead of being purchased and paid for by the bidder (or the third party for whom he is bidding), is secretly purchased by the auctioneer

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through the bidder as his agent, so that it becomes the property of the auctioneer, I do not believe their evidence. It was denied by Capon, and their own books belie it. Indeed, their failure to make any disclosure to the vendor and the complete absence from their minds of any idea that there was anything calling for disclosure in my opinion show that there was no reality in their story of the prevalence of the tortuous practice of a sort of secured credit such as that by which they were trying to forestall Capons unsecured creditors. Such a practice would mean, of course, that the auctioneer employed to sell does not sell at all, but simply retains his principals stock, whilst pretending that he has duly sold it, and that the cheque he sends is the price paid by the independent purchaser to whom it was knocked down.

Nevertheless, it is not possible wholly to disregard the applicants evidence that some kind of general practice does obtain, the more so as Knights agistment ledger and journal do show that they were giving credit to many other farmers besides Capon. There is nothing to justify an inference that secured credit was given, but the evidence does point to the frequency of an unsecured personal credit being given by auctioneers to farmers. Until 1928, there was no legislative attempt to set up in England any public system of short-term agricultural credit. The need had not been recognised by Parliament. All through the nineteenth century, before the amalgamation of the innumerable local private banks into a few large almost semi-public concerns with branches all over the country, the local banker knew personally all the farmers of his district, and their relations, and the family history and financial expectations of his customers, and knew when he could take the risk of giving purely personal credit. However, as the private banks became amalgamated into the “Big Five” of the present day, the personal touch disappeared, or became less effective. In place of the former banking assistance, there grew up, as is well known, a wide-spread practice of agricultural merchants providing personal credit, especially for seeds, fertilisers and feeding-stuffs, and I do not doubt that the practice of auctioneers giving credit to farmers buying stock grew up in the same way. To do so would involve no breach of agents duty, as the loan of money to pay the purchase price would not concern the vendor. The auctioneers duty would have been discharged.

I have no doubt that that was the real transaction on each occasion in the present case, nor do I doubt that the practice is common in England, and that to this extent the auctioneers were speaking the truth. Had they tried to find a witness, as they boasted they could, to prove their fantastic story of a custom for auctioneers to put up farmers as dummies to bid on their behalf, they would have failed, and that, I have no doubt, is why they did not try. We need not decide whether the auctioneers knew that the property was in Capon, and not in them, or whether they really thought that it had somehow passed to them, for their misconception would not matter. The property was always in Capon. The story

Page 149 of [1940] 2 All ER 135

of his buying for them was untrue, and the agistment note was, in that sense, a sham.

I have discussed the facts at length for two reasons. First, a careful analysis of the evidence was necessary, in order to draw the right inferences. In the second place, the subject of short-term agricultural credit is one of great importance to the agricultural industry, and both the evidence given by the auctioneers and the true facts of the case help to throw light on the needs, the difficulties and the dangers connected with that subject. The manufacturer, through an acceptance with or without documents attached at so many months, directly or indirectly gets that length of credit for his purchase of raw materials. “Feeding pigs,” or other store stock, are the farmers raw material, which he converts into his finished product. The use of the bill of exchange has not been found practicable in agriculture, and some other credit method is needed. It is common knowledge that this is largely provided by merchants, and, it may well be, also by auctioneers, and, if the rates are reasonable, a useful service is rendered to farmers. Such credit, however, has its drawback. It tends to commit the farmer to the one channel of sale, and thereby to limit his market freedom. To do them justice, the auctioneers in the present case, if their improper attempt to obtain security be put on one side, did not unfairly hamper Capons market freedom, but the very fact that their story was so plausible as to persuade of its truth so good a judge as his Honour Judge Hildesley KC, shows how dangerous such irregular methods of credit may be in their reactions upon unsecured creditors. I notice in Capons bankruptcy file, which was produced to us, that even the Eastern Counties Farmers Trading Society, a well-known agricultural co-operative society, with an established reputation for good management, is a creditor for a large sum. I am glad to think that they will now get their pro rata share of the pig money. It would be of general service to the agricultural community if the Minister of Agriculture could publish a full return annually of the working of the Agricultural Credits Act 1928. The appeal must be dismissed with costs.

CLAUSON LJ. At the hearing of this appeal, counsel for the appellants failed to satisfy me that the result reached by the Divisional Court was otherwise than correct. The full analyses of the facts contained in the judgments of Scott and Luxmoore LJJ, enforce and justify this conclusion, and make it unnecessary for me to add more. I accordingly concur in the dismissal of this appeal with costs.

LUXMOORE LJ. This appeal occupied a considerable period of judicial time, and a large number of questions were raised in this court and in the courts below, but, when the material documents and the relevant evidence given at various stages of the proceedings in the county court, and the arguments of counsel in this court, are considered, the questions to be determined appear to fall within a small compass.

Page 150 of [1940] 2 All ER 135

The original proceedings were started in the Ipswich County Court on 21 February 1939, by the trustee in bankruptcy of one Harry Urban Capon (to whom I will refer as the bankrupt) by two separate motions, one against a firm of auctioneers who at all material times carried on business at Stowmarket under the style of R C Knight & Sons, and the other against a firm who also carried on a like business at Stowmarket under the style of Woodward & Woodward. The two motions were subsequently consolidated, and were heard together by his Honour Judge Hildesley KC, who decided in favour of the auctioneers, and dismissed the motions with costs. The claim made by the trustee in bankruptcy was that the proceeds of sale of 679 pigs taken by the auctioneers from farms occupied by the bankrupt a few weeks before the adjudication, and without his consent, should be repaid to the trustee in bankruptcy. The trustee in bankruptcy appealed to the Divisional Court, where the appeal was allowed. The auctioneers now appeal to this court from the decision of the Divisional Court, and ask that the order of the county court judge may be restored. The fundamental question to be determined is whether the property in the 679 pigs so sold was in the bankrupt or in the auctioneers.

It is necessary to state the material facts, and to bear in mind that in bankruptcy proceedings the findings of the county court judge are open to review in the Divisional Court, or in this court when exercising its jurisdiction in bankruptcy for in all bankruptcy proceedings, wherever commenced, any appeal is by way of rehearing: see the Bankruptcy Acts 1914 to 1926, s 108, and the Bankruptcy Rules, 1915, rr 3, 134, as amended, and RSC, Ord 48, r 1, incorporated in the Bankruptcy Rules 1916, r 134. In this respect, the position is different from that with regard to findings of fact by a county court judge when exercising his ordinary jurisdiction. I only refer to this because of the statement made by Farwell J, at the beginning of his judgment.

The material facts are as follows. The bankrupt was a farmer, occupying, and carrying on his business at, several farms in Suffolk, in the neighbourhood of Stowmarket. He had carried on that business over a long period with varying success, or want of success. He had in fact executed an assignment for the benefit of his creditors in 1927, when his liabilities amounted to about £67,000. A member of the firm of Woodward & Woodward was the trustee of this deed. In December 1934, the bankrupt was anxious to deal in pigs, and for this purpose he desired to buy pigs in the local markets, and, after fattening the pigs on one or other of his farms, to resell them at the best price obtainable. He had little or no ready money. Accordingly, he approached Woodward & Woodward in December 1934. As the result of his conversations with Gordon Woodward, a member of this firm, it was arranged that the bankrupt should bid for pigs at any of the periodical auction sales held by Woodward & Woodward at Stowmarket. If the pigs were knocked down to the bankrupt, the firm agreed to pay the vendor the price at which the pigs

Page 151 of [1940] 2 All ER 135

were knocked down, the pigs being taken by the bankrupt to one or other of his farms and fattened by him. When the pigs were fattened, they were to be resold. If Woodward & Woodward acted as the auctioneers on the resale, they were to be entitled to a commission of 2 ½ per cent on the resale price, and the bankrupt was to repay to them the original price paid for the pigs at the first auction. If the resale was effected through any other auctioneer or agent, the bankrupt was to repay to Woodward & Woodward the price paid for the pigs at the first auction, together with interest on that sum calculated at the rate of 5 per cent per annum from the date when the original sale price was paid by Woodward & Woodward to the original vendor down to the date of repayment. When the pigs bought at an auction sale were delivered to the bankrupt, he was sent a bought note showing the number of pigs bought and the price paid for them, and, in accordance with an arrangement made between Woodward & Woodward and the bankrupt, the latter signed a receipt in a form prepared by Woodward & Woodward. The following is a typical example of the receipt given by the bankrupt:

Received of Messrs. Woodward & Woodward, auctioneers, Station Road, Stowmarket, 36 feeding pigs costing £134 4s., which I agree to feed and see after for the said Woodward & Woodward. I acknowledge the pigs are their property and may be removed and sold by them at any time.

The receipt was signed by the bankrupt. The substance of this arrangement is set out in two letters, the one, dated 18 December 1934, from Gordon Woodward to the bankrupt, and the other, dated 21 December 1934, from the bankrupt to Gordon Woodward. The first letter, omitting formal parts, is as follows:

I now enclose you an agist note in respect of the 43 pigs you purchased on Thursday last for £160 7s. You will no doubt appreciate I particularly want to keep this business on a business footing and immediately these pigs are sold, you to pay us for them. So far as I am concerned, I do not want to handicap you in making the best price possible of the pigs when you re-sell them. Of course naturally we should like to have them come to our sale, but if you decide to sell them at home, you to pay us 5 per cent. on the money and to remit the cash at once. I think that for the pigs we sell in the yard, we should be allowed the usual commission of 6d. in the £. I should also like to know if you propose to keep our pigs separate and not to mix them with other pigs. I shall be glad to hear from you that you agree to these terms and that you think they are reasonable.

The second letter, also omitting formal parts, is as follows:

Thank you for your letter. I quite agree with your agist agreement and consider it quite reasonable. I have no doubt most of the pigs will come back to your sale, and doubtless you will sell more pigs for me than come out of your sale: the private bought pigs I shall expect a slight reduction in the commission. Your pigs will be kept separate almost invariably; when mixed I will let you know. The present ones are in long yard at Blood Hall. Any alteration in the number I will acquaint you.

In the books of account of Woodward & Woodward, some of which were produced to the Court of Appeal, the transactions between that firm and the bankrupt are entered on both the debit and the credit sides in exactly the same manner as one would expect transactions between a person buying goods on credit and paying for them from time to time would be entered, the only difference being that, when an entry is

Page 152 of [1940] 2 All ER 135

made on the debit side of the account in respect of pigs bought, the number of pigs included in each purchase is stated in the margin. When the pigs were bought under the arrangement a bought note in the form usually given to purchasers at auction sales was sent by Woodward & Woodward to the bankrupt, and, when any of the pigs fattened by the bankrupt were resold by auction by Woodward & Woodward, a sold note in the form usually given to vendors was sent by that firm to the bankrupt. On every resale, the whole of the money produced at that sale was paid over to the bankrupt, who thereupon sent to Woodward & Woodward a cheque for the original purchase price of a specified number of pigs, although on occasions a number of pigs in excess of the specified number was sold at the particular auction.

Arrangements similar to those above stated were made between R C Knight & Sons and the bankrupt, but dealings in pigs thereunder did not start until January 1935. A number of books kept by R C Knight & Sons were shown to us, and we had the advantage of an explanation by their bookkeeper of the books so produced. It was agreed by counsel for the respective parties that the information appearing from the books produced and the explanations given to us by the bookkeeper should be treated as being properly in evidence before this court. I need not restate what the result of the information and explanations were, as they have already been stated in full by Scott LJ.

Both Woodward & Woodward and R C Knight & Sons sought in the affidavits filed on their behalf and in the oral evidence adduced in the county court to establish that the bankrupt purchased all pigs bought at auctions held by either of them as agent for the firm which held the auction, but this was denied by the bankrupt in his affidavits in reply, and also in his evidence before the county court judge. It was argued that, if the bankrupt was the agent for the auctioneers, respectively, then the property in any pigs bought by him in that capacity passed to the auctioneers for whom the bankrupt was acting, on payment to the vendors for the particular pigs. I am prepared to accept this argument for the purposes of this case, although it is, I think, material to point out that, if the auctioneers, without the knowledge of the vendors, became the purchasers of pigs offered for sale by them, any vendor would be entitled to challenge the transaction and have the purchases so made set aside.

This argument was not dealt with expressly by the county court judge, although, as pointed out by the Divisional Court, his judgment can only be founded on the assumption that such agency existed, for there is no other explanation to support the view that the property in pigs knocked down to bids made by the bankrupt passed to the auctioneers. The auctioneers respectively allege that such an agency existed. The bankrupt denies its existence. The only safe guide, in the circumstances, is to ascertain what in fact happened when pigs were knocked down to the bankrupt. It is common ground that the

Page 153 of [1940] 2 All ER 135

only interest which the auctioneers had in pigs so dealt with was either a commission at the rate of 2 ½ per cent on such of them as were resold by the auctioneers at auction sales held by them, or, if the pigs were resold through any other agency, a sum calculated at the rate of 5 per cent per annum. These facts are certainly far more consistent with a purchase by the bankrupt for his own benefit than with a purchase by him as agent for the auctioneers. However, the matter does not end here. It is common ground that, after pigs were knocked down to the bankrupt, they were at his risk, and not at the risk of the auctioneers. Moreover, the auctioneers had no voice in fixing the price to be bid by the bankrupt, nor in the selection of the particular pigs to be bought. The bought and sold notes are inconsistent with the auctioneers contention, and, with the sole exception of the reference in the books of Knight & Sons to agistment transactions, the relevant entries in the books of both Woodward & Woodward and Knight & Sons are more consistent with the view that the bankrupt was the purchaser than with the view that he was acting as agent for the auctioneers. The only circumstance in support of the contrary view is the form of the receipt given by the bankrupt when he took delivery of pigs bought at auctions held by the auctioneers. It is said that these receipts are evidence of the existence of an agreement between the auctioneers and the bankrupt for the agistment of pigs. The features of an agistment agreement are well known. The essentials are, first, that the animals to be agisted are the property of the person delivering them to the farmer, and remain that persons property. The farmers obligation is to feed the animals and deliver them up to the owner on demand, but the animals are not at his risk. He is only liable for injury arising from negligence or neglect of reasonable and proper care of the animals. All the farmer gets out of the agreement is the agreed remuneration for feeding the animals. On the submission made on behalf of the auctioneers, they are under no liability to pay for the feeding of the pigs. They run no risk of loss if any of them die owing to causes for which the bankrupt is not responsible, and, once the pigs have been delivered to the bankrupt, they have no further financial interest in them, provided that the original purchase price is paid, except to receive a commission if they resell any of them at auctions held by themselves at the same rate as they obtained from the original vendorsnamely, 2 ½ per cent on the sale price, or (and this is perhaps the most significant feature of the transaction) interest at the rate of 5 per cent per annum on the original purchase price paid for the pigs for the period between the date when the original purchase price was found by the auctioneers and its repayment to them by the bankrupt. In my judgment, it is improper to describe the arrangements between the auctioneers and the bankrupt as constituting agistment agreements.

The material documents and the facts proved in this case lead to only one conclusion, and that is that the bankrupt, when bidding for

Page 154 of [1940] 2 All ER 135

pigs at auctions held by the auctioneers, was acting, not as their agent, but for himself, and that he became the purchaser of such pigs as were knocked down to him. On this aspect of the case, there can be no room  for doubt but that the property in pigs purchased passed to the bankrupt under the Sale of Goods Act 1893, s 17. This being so, the so-called agistment agreement was inoperative to pass any property in the pigs in question from the bankrupt to the auctioneers, and, in so far as it purports to confer on the auctioneers a right to seize the pigs, is void, because it is admittedly in contravention of the provisions of the Bills of Sale Act 1882.

The auctioneers entered on the bankrupts farm on 23 February and 24 February, and removed therefrom 679 pigs without the bankrupts consent. These pigs were sold by the auctioneers for the sum of £4,408 2s 3d. The auctioneers retained out of this sum the sum of £4,179 3s, and paid to the trustee in bankruptcy the sum of £228 19s 3d, being the amount by which the total net proceeds of sale exceeded the total amount due to the auctioneers for the moneys advanced for the purchase of pigs and the cost of removal of the pigs to the place of sale. The Divisional Court was, in my judgment, right in discharging the order of the county court judge and ordering the auctioneers to repay to the trustee in bankruptcy the proceeds of sale, after deducting the sum of £228 19s 3d, which had been already paid to him. The appeal fails, and must, therefore, be dismissed. The appellants must pay the costs of this appeal.

Appeal dismissed with costs.

Solicitors: Field Roscoe & Co, agents for Gotelee & Goldsmith, Ipswich (for the appellants); Herbert Smith, agent for Westhorp Cobbold & Ward, Ipswich (for the respondent).

W K Scrivener Esq   Barrister.


Mee v Toone

[1940] 2 All ER 155


Categories:        CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        HAWKE, CHARLES AND MACNAGHTEN JJ        

Hearing Date(s):        18 MARCH 1940        


Emergency Legislation Billeting notice on householder Complaint lodged against notice but not heard at time of hearing before justices Refusal to comply with billeting notice Whether billeting notice operative before complaint determined by tribunal Defence (General) Regulations 1939 (SR & O 1939, No 927), reg 22(1), (8), (9).

On 1 November 1939, the respondent, whose husband was the driver of a school omnibus, was served by a properly constituted billeting officer with a billeting notice requiring her to furnish board and lodging for two children. The two children, who were present at the time of the service of the notice on the respondent, were then in quarantine after having suffered from diphtheria. The respondent refused to furnish the board and lodging required, and on 3 November she lodged a complaint against the billeting notice with the tribunal set up by the Defence (General) Regulations 1939, reg 22(9), but, before the complaint had been heard, she was charged, under reg 22 of those regulations with having on 1 November 1939, when served with a billeting notice, failed to comply with the notice. At the hearing before the justices, it was contended on behalf of the respondent that, as she had complained against the billeting notice, it did not become operative until the complaint had been determined by the tribunal. On behalf of the appellant, it was contended that the notice was operative from the moment when it was served, and remained operative unless and until it was cancelled or varied by the tribunal:

Held it was clear from the terms of the regulation that the notice was operative from the moment when it was served, and that its operation was not stayed by the appeal to the tribunal.

Notes

The regulations require a householder duly served with a billeting notice to comply with it, but he has a right of appeal. The only question in this case is whether the lodging of such an appeal operates as a stay and justifies non-compliance with the notice. It is held as a matter of construction that that is not so, but it would appear from the facts of this case that there are cases where it ought so to operate.

As to Billeting, see Butterworths Emergency Legislation Service, Regulations, Vol 1 [13], 31.

Appeal

Appeal by the Crown by way of case stated from a decision of the East Norton (Leicestershire) justices. The respondent, whose husband was the driver of a school omnibus, was asked to receive two evacuated children, who were, at the time of the service of the billeting notice, in quarantine after having suffered from diphtheria. She refused to receive them, and lodged an appeal to the appropriate tribunal. The billeting officer before the appeal could be heard, commenced a prosecution for refusal to receive the children, and the question here in issue is whether the appeal operates as a stay so that the billeting notice ceased to be operative.

Valentine Holmes for the appellant.

R T Paget for the respondent.

18 March 1940. The following judgments were delivered.

HAWKE J. The court are of opinion that this case must go back to the magistrates with a direction that they were wrong in thinking

Page 156 of [1940] 2 All ER 155

that this notice was inoperative. We want to be particularly careful about the form in which we send it back to them, because, although we think that the argument of counsel for the appellant is right, and that the appeal did not operate as a stay of the operation of the notice, the magistrates dealt with it on the ground that the respondent was innocent of any offence under the Defence (General) Regulations 1939. We think that that was wrong. We are respectfully requested to reverse or amend the magistrates determination, or remit the matter to them with the opinion of the court thereon. That we can do, but nothing we say is intended to deprive the magistrates of the complete discretion which they have under the Probation of Offenders Act 1907, s 1. As I understand that section, they can convict, they can inflict a penalty, or they can dismiss the case under the powers of that Act, and we have no wish to fetter any of the powers given them by that Act of Parliament.

As to the case itself, we are asked to come to a conclusion as to the true construction of these regulations. It may be that these regulations show some sign of having been prepared in haste, but I think that their meaning is perfectly clear. If people are to be called upon to take children under this evacuation scheme, a billeting officer is given authority to act in billeting the persons to be billeted. He must serve upon the occupier of the premises a written notice requiring the occupier of those premises to furnish therein, while the notice remains in force, such accommodation as may be specified in the notice for such persons as may be there specified. He is a person to whom a certain degree of discretion is given, because, apart from giving the notice, he can revoke it, and it may be revoked by a tribunal after a time, and, as counsel for the respondent points out, that can be done on appeal. What we have to consider is the position of the notice, if somebody has appealed, pending the hearing of the appeal. We have nothing to do with the merits of the appeal. We have to determine the true construction of these regulations. Reg 22(8) provides as follows:

If any person contravenes or fails to comply with the requirements of a billeting notice [he is guilty of an offence].

Counsel for the respondent asks us to read that regulation, as follows: “If any person contravenes or fails to comply with the requirements of a billeting notice, he is guilty of an offence unless he has first appealed to the tribunal.” I do not think that that is so. There may be reasons for making these regulations. It may be that the government, or those who make these regulations, have to consider what is the greatest good for the greatest number. It is easy enough to conceive cases in which great hardship may result if the notice is given and persisted in. Great hardship may occur pending the decision of the appeal. That is a matter which I think these sections assume must follow these regulations, because we are considering, not an individual, but the population in general.

I think that this case must go back to the magistrates, with the direction that they were wrong in holding that the notice had ceased

Page 157 of [1940] 2 All ER 155

to operate, and they must deal with the case on the assumption that the notice was still operative and that the respondent ought to have complied with its requirements. What their decision will be is a matter for them. We can only say that all their rights and obligations remain.

CHARLES J. I agree, and will only add a few words because we are toldand, I have no doubt, rightly toldthat the decision of this court upon this case stated may affect a very large number of cases all over the country. On 1 November 1939, Mrs Toone, the respondent, was served with a notice by a properly constituted billeting officer, and that written notice required her to furnish at her house board and lodging for two children named in the notice. For reasons which she believed, I have no doubt, to be perfectly correct, and, indeed, perhaps overwhelming from her point of view, she refused to accept the children within the house, and so an information was laid, and heard by the justices for the county of Leicester at East Norton, charging her with failing to comply with the requirements of that notice. The magistrates heard the matter and dismissed the information, on the ground that they considered that, inasmuch as Mrs Toone, in accordance with her undoubted right, had appealed to the tribunal set up by the Defence (General) Regulations 1939, she had stayed the operation of the billeting notice which had been served on her on 1 November 1939. The matter to be considered is put very clearly in paras 5 and 6 of the case stated:

5. After the case for the appellant had been opened, but without any admission by the respondent as to any of the allegations made therein, save as set out in para. 4 hereof, and before any evidence was called by either party, it was submitted on behalf of the respondent that, since she was aggrieved by the service upon her of the said notice, and had complained to the aforementioned tribunal, the said notice did not become operative until such complaint had been determined by the said tribunal, and that, therefore, the respondent could not be guilty of the offence charged. 6. On the part of the appellant, it was submitted that the said notice was operative from the moment when it was served and remained operative unless and until it was cancelled or varied by the said tribunal on the hearing of a complaint by the respondent.

The magistrates accepted the submission made by the respondent, and on that ground they dismissed the summons. They were quite entitled to dismiss the summons under the Probation of Offenders Act 1907, if they considered that the circumstances warranted them in so doing, but they could not, we think, lawfully dismiss the summons on the ground that no offence had been committed. I think myself that a mere reading of reg 22(9) makes it clear that, once the notice is served, it is alive, and remains alive, unless it is removed by revocation by the billeting officer, or by a decision contrary to the billeting officers judgment by the tribunal, for reg 22(9) provides as follows:

… any person who is aggrieved by the service upon him of a billeting notice or by the operation of a billeting notice served upon him, may, subject to, and in accordance with, rules made by the Minister of Health, make a complaint to a tribunal constituted under this paragraph; and upon hearing the complaint the tribunal may cancel or vary the billeting notice as the tribunal thinks fit.

Page 158 of [1940] 2 All ER 155

It is to be observed that no period is given limiting the time within which such an appeal may be made. It might not be made for some time, and, when it was made, the tribunal might cancel or vary the existing notice. It presupposes that the notice is in existence, and it in no way provides for a suspension of the operation of that notice because at some undefined time the recipient of the billeting notice gives notice that she intends to appeal. The policy of these regulations is quite clear. They are emergency regulations, and, although it may be that here and there there may be hard cases, yet, where one is dealing with these regulations, and with tens of thousands of young people, the object of the regulations is to put the children into safety. In doing so, as I say, it may be that here and there, as indeed perhaps in this instance, someone is asked in unfortunate circumstances to give housing room and lodging to children, but still we are concerned only with the interpretation of these regulations, and it appears to me, for the reasons which I have given, that the regulationsalthough I agree with Hawke J, that in some way they do show haste in the way in which they are expressedare really perfectly clear in their meaning. I agree with Hawke J, that this case must be remitted to the magistrates, who can exercise their discretion under the Probation of Offenders Act 1907.

MACNAGHTEN J. I am of the same opinion. The magistrates dismissed the summons on the ground that the billeting notice was not operative because the respondent, 2 days after the service of the billeting notice, had given what has been described as a notice of appeal to the tribunal constituted by the Minister of Health under the statutory regulations which have been put in evidence. Of course, that was no valid reason for dismissing the summons. In my opinion, the notice was operative from the moment it was served. The case must, therefore, go back to the magistrates to hear and determine, and, when they have heard and determined, it will be then open to them to arrive at precisely the same result as that at which they have already arrivednamely, that the summons should be dismissedbecause, by the Probation of Offenders Act 1907, s 1, it is provided as follows:

(1) Where any person is charged before a court of summary jurisdiction with an offence punishable by such court, and the court thinks that the charge is proved but is of opinion that, having regard to the character, antecedents, age, health, or mental condition of the person charged, or to the trivial nature of the offence, or to the extenuating circumstances under which the offence was committed, it is inexpedient to inflict any punishment or any other than a nominal punishment, or that it is expedient to release the offender on probation, the court may, without proceeding to conviction, make an order either (i) dismissing the information or charge; or …

If the magistrates, when they hear the summons, come to the conclusion that the offence was committedwhich seems probable on the facts stated but not yet provedit will be open to them, if they find the facts stated in the notice of appeal proved, to come to the conclusion that

Page 159 of [1940] 2 All ER 155

the offence was committed in extenuating circumstances, and, if they think fit to do so, to dismiss the summons once again.

Appeal allowed and case remitted to justices to hear and determine.

Solicitors: Treasury Solicitor (for the appellant); Bennett Ferris & Bennett, agents for Bray & Bray, Leicester (for the respondent).

Michael Marcus Esq   Barrister.

Tibber v Upcott

[1940] 2 All ER 159


Categories:        LANDLORD AND TENANT; Rent        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        7, 8 FEBRUARY, 4 MARCH 1940        


Landlord and Tenant Rent restriction Registration of premises as decontrolled Effect of failure to register Rent and Mortgage Interest Restrictions Act 1923 (c 32), s 2 Rent and Mortgage Interest Restrictions (Amendment) Act 1933 (c 32), s 2(2) Rent and Mortgage Interest Restrictions Act 1939 (c 71), s 9(3), Sched II.

Certain premises, the rateable value of which was such as to bring them within the Rent and Mortgage Interest Restrictions (Amendment) Act 1933, s 2, were admittedly decontrolled in 1932. The landlord neglected to register the premises as decontrolled in accordance with the provisions of ss (2) of that section:

Held the failure so to register the premises caused them to be controlled premises as from the date of the passing of the Act of 1933.

Notes

The decision here made by the Court of Appeal is implicit in the decision in Stokes v Little, but there the decision was only concerned with the effect of the subsection where the landlord obtained a certificate that there was a reasonable excuse for his failure. In the present case, there was a total failure to register the house as decontrolled, and it is held that the house is recontrolled for all the purposes of the Acts.

As to Registration to Avoid Recontrol, see Halsbury (Hailsham Edn), Vol 20, pp 318, 319, para 378; and for Cases, see Digest, Supp, Landlord and Tenant, Nos 7358d7361c.

Case referred to

Stokes v Little [1935] 1 KB 182; Digest Supp, 104 LJKB 38, 152 LT 18.

Appeal

Appeal by the plaintiff from a judgment of His Honour Judge T E Haydon at Kingston-on-Thames County Court on 19 December 1939. The claim was one by a landlord for rent, and the defence was that the premises were controlled under the Rent Acts and that rent had been overpaid. The facts are fully set out in the judgment of the court delivered by Luxmoore LJ. The county court judge found that the premises were controlled, and the plaintiff appealed.

F W Beney for the appellant.

S N Bernstein for the respondent.

Beney: The premises became decontrolled under s 2 of the Act of 1923 when the plaintiff entered into possession in September 1932. The passing of the 1933 Act did not have the effect of bringing the premises again under control. If, however, in any proceedings in court after

Page 160 of [1940] 2 All ER 159

the passing of the Act of 1933, it appeared that the plaintiff had not applied to register the house as decontrolled in accordance with s 2(2) of that Act, the house would then be deemed to be controlled, notwithstanding that it would otherwise remain decontrolled. By not applying to register with in the proper time, the plaintiff ran the risk that, if proceedings were commenced by either side and the fact that he had not applied came to light in those proceedings, he would lose his right to claim the contractual rent. That part of s 2(2) which provided the tenant with that opportunity was in the nature of a statutory rule of evidence in legal proceedings. On the passing of the Act of 1939, s 2(2) of the Act of 1933, inter alia, was repealed. Thereby, unless the Interpretation Act 1889, s 38, involved a different result, the tenant lost any further right to take advantage in any proceedings of the opportunity given him by s 2(2) of the 1933 Act. The proceedings here were not commenced until after the repeal, and the opportunity which the repealed subsection gave to a tenant could not properly be described as a right or privilege which had accrued to the tenant at the date of the repeal. If the contrary view is true, under these Acts the landlord had 3 months to make application. If he had made application at the end of that period, or on the last permitted day, the result would be that, between 18 July 1933, and the day 3 months afterwards when he applied to register, only a controlled rent would be payable. The tenant could thereby recover any amount overpaid during the 3 months.

Bernstein: By s 4(2) of the 1938 Act, the last date for registering property as decontrolled was 26 May 1939. By s 4(4)(a), the last date for the registration of this house, a C class house, was 26 August 1938that is, 3 months after the passing of the Act. By s 2(2) of the 1933 Act, before premises can be deemed to be controlled, it must be shown that they would have been controlled but for s 2 of the 1923 Act, and also that the landlord had not registered them. For this reason, there could be no further proceedings, for one of the two conditions had not been fulfilled. S 2(2) of the 1933 Act was repealed by the 1939 Act, for the sole reason that it had ceased to have any operative effect.

F W Beney for the appellant.

S N Bernstein for the respondent.

4 March 1940. The following judgment was delivered.

LUXMOORE LJ (delivering the judgment of the court). On 25 October 1939, Maurice Tibber sued the defendant, T H Upcott, in the Kingston-on-Thames County Court for the sum of £20 11s 8d, claimed as arrears of rent for a flat known as No 4, Clarence Road, Wimbledon, which on 12 April 1937, the plaintiff had let to the defendant at a weekly rent of 21s. The defendant resisted the plaintiffs claim. On the ground that at all material times before the passing of the Rent and Mortgage Interest Restrictions Act 1939, the premises were controlled premises within the provisions of the Rent and Mortgage Interest Restrictions Acts 19201938, and on this basis he alleged that he had paid to the plaintiff more rent for the flat than the plaintiff was

Page 161 of [1940] 2 All ER 159

legally entitled to require. The action came before His Honour Judge Haydon at the Kingston-on-Thames County Court by way of preliminary hearing in order to determine the legal questions raised. The judge decided that the premises were not decontrolled at any material date, and that the defendants rights in respect thereof, having all occurred before the passing of the Act of 1939, were to be ascertained under the provisions of the earlier Acts. He therefore remitted the action to the registrar to ascertain the amount of the controlled rent, and to quantify the rights of the parties to the action as the result of such ascertainment.

The plaintiff has appealed to this court from the judges order. He claims that, upon the true construction of the material provisions of the Rent and Mortgage Interest Restrictions Acts 19201938, the premises were decontrolled immediately before the Act of 1939 came into force, and that, although, as is admitted, they became again controlled by reason of the provisions of the 1939 Act, the proper rent which the plaintiff is entitled to require the defendant to pay for the premises is the 21s per week agreed to be paid on 12 April 1937, and that that rent is the rent prevailing at the date when the Act of 1939 came into force.

The material facts are as follows. The plaintiff is, and was at all material times, the owner of a building in Clarence Road, Wimbledon, which contained two separate dwellings within the meaning of the Acts. One of these dwellings was known as No 4, and the other as No 4A, Clarence Road. It is common ground that each of these dwellings was controlled on 31 July 1923, the date of the passing of the Rent and Mortgage Interest Restrictions Act 1923. In 1932, No 4, Clarence Road, was let to a tenant named Weaver. He left the premises on 5 September 1932, and, before there was any reletting, the plaintiff came into possession of them. No 4, Clarence Road, therefore, became decontrolled on 5 September 1932, by reason of the provisions of s 2 of the Act of 1923. The plaintiff subsequently let the premises to one Wild at a weekly rent of 22s 6d, and subsequently there were other lettings. On 12 April 1937, the premises were let to the defendant at a weekly rent of 21s, payable in advance. The defendants claim is that, at the date of the letting to him, the premises were controlled by reason of the failure of the landlord to comply with the provisions of the Rent and Mortgage Interest Restrictions (Amendment) Act 1933. S 2(3) of this Act provides that, if the landlord of any dwelling house let as a separate dwelling immediately before the passing of the Actthat is, 18 July 1933being a dwelling-house of which the rateable value on the appointed daythat is, 6 April 1931does not (as is admitted in this case) exceed the amount mentioned in the proceeding subsection, claims that, by virtue of the provisions of s 2 of the Act of 1923, the principal Acts had ceased to apply to the dwelling house before the passing of this Act, he shall, within 3 months after

Page 162 of [1940] 2 All ER 159

the passing of the Act of 1933, make to the council of the county borough or county district in which the dwelling-house is situated (in this case, the county borough of Wimbledon) application in the prescribed form for registration of the dwelling-house. So far, the provisions of the subsection appear to be straightforward. The difficulties of the case arise from the concluding part of the subsection, which provides as follows:

… if in any proceedings with respect to any dwelling-house which is, or immediately before the passing of this Act formed part of, such a dwelling-house as aforesaid, it is proved that but for the provisions of the said sect. 2 of the Act of 1923 the principal Acts would have applied to the dwelling-house, and that no such application has been made by or on behalf of the landlord within the time aforesaid the dwelling-house shall, subject as hereinafter provided, be deemed to be a dwelling-house to which the principal Acts apply …

This subsection is followed by a proviso to which reference is made later.

It is common ground that no application was made by or on behalf of the plaintiff for the registration of No 4, Clarence Road, as a decontrolled house, in accordance with the provisions of the subsection which has been read. No doubt there was an intention to comply with the subsection, but, by mistake, on 18 July 1933, the plaintiff applied for and obtained the registration of No 4A, Clarence Road, as a decontrolled dwelling-house. The county court judge pointed out that, even if there had been an application to rectify the register, he held no power so to do.

The proviso to the section is in these terms:

Provided that if, on application to the county court of the district in which the house is situated, the court certifies that there was reasonable excuse for the failure to make application for the registration of the dwelling-house within the time aforesaid [3 months after the passing of the Act] and application for registration is made within 7 days after the certificate has been granted, then, if the principal Acts had ceased to apply to the dwelling-house before the passing of this Act, sect. 2 of the Act of 1923 shall, notwithstanding anything in the last foregoing subsection, apply to the dwelling-house as from the date on which the application for registration is made.

No application was made under this proviso in respect of No 4, Clarence Road.

The result of the failure to apply for the registration of No 4, Clarence Road, as a decontrolled house appears to be that the premises became recontrolled as from 18 July 1933. In our judgment, this follows from the decision of this court in Stokes v Little. In that case, a house, of which the standard rent while it was controlled was 8s 6d per week, came into the possession of the landlord on 10 October 1932, and thereupon became decontrolled by reason of the provisions of s 2 of the Act of 1923. The landlord failed to register the dwelling-house as a decontrolled house within the period of 3 months from the passing of the Act of 1933, as required by s 2 of that Act, but subsequently obtained from the county court a certificate that there was reasonable excuse for the failure to register. The landlord duly made the appli-

Page 163 of [1940] 2 All ER 159

cation for registration within the time limited by the Act of 1933, and registered the premises. The Court of Appeal held that the effect of the registration was to place the dwelling-house, as from the date of such registration, in the same position as that in which it would had been if it had been registered within the 3 months allowed by the Act, and: that the landlord suffered no further detriment through the delay than such as might result from the application of the Act of 1933 between the date of the passing of that Act and the application to register. Lord Wright said at p 190:

Sect. 2 of the Act of 1933 first of all enacts that sect. 2 of the Act of 1923 (which provides for the exclusion of dwelling-houses from the application of the principal Act in certain cases) shall not apply to the classes of houses there specified. The effect so far is not only to stop future claims that such houses are entitled to be excluded, but to bring back into the Act, subject to the qualifications set out, even those houses of the specified rental or rateable values which had been excluded by sect. 2 of the Act of 1923, and to abrogate the rights vested in the landlords by that section. This is, no doubt, a harsh measure: but Parliament which gave can take away. The words “shall not apply” accordingly refer in this way to the past option of sect. 2 of the Act of 1923.

It seems to us that it is implicit in this decision that, in the event of non-compliance with the provisions as to registration, whether under the first part of sub-s (2) or under the proviso thereto, the dwelling-house is again brought within the principal Acts, and becomes, by reason of the non-registration, a controlled dwelling-house. Slesser LJ said, at p 197:

It is scarcely disputed that had the landlord duly registered before Oct. 18, 1933, she would have been able to have claimed that sect. 2 of the Act of 1923 would have applied; that, having been in possession, and having satisfied the requirements of sect. 2 of the Act of 1923, her dwelling-house would have been outside the Act. To my mind the proviso does no more, when its conditions are satisfied than to postpone the date when the landlord may claim that her dwelling house is excluded from the Act to the date of the application for registration which follows upon the certificate. To give any further effect to this proviso and to hold, as the learned judge appears to have done, that the proviso does no more than give the landlord a right after the registration to enter into possession and for the first time to take advantage of sect. 2 of the Act of 1923 is to hold that the proviso, when satisfied, has produced an entirely new legal situation, with consequences different from the case where registration is within the three months of the passing of the Act, and that the proviso is not merely dealing with the correction of an omission, with consequences as to the time to which rights may be postponed, but is assuming that, after the lapse of the first period for registration, the subsequent registration will produce a more restricted legal right in the landlord by excluding her right to rely upon the fact that she has already once entered into possession, and to require a further new entry.

However, counsel for the plaintiff landlord has argued that the effect of s 2(2) of the Act of 1933, in the event of its provisions as to registration not being complied with, is limited with regard to recontrol. He claims that, once a dwelling-house has been decontrolled under the provisions of s 2 of the Act of 1923, failure to register under s 2 of the Act of 1933 affects the decontrol only in so far as “any proceedings” are concerned, so that, apart from such proceedings, the dwelling-house remains decontrolled.

The section is obviously difficult to construe. If the contention of counsel for the plaintiff landlord is correct, we find it impossible to

Page 164 of [1940] 2 All ER 159

formulate any purpose for which the decontrol is to remain effective, because all that is required to establish that the dwelling-house has become decontrolled is to start proceedings and to establish therein that there has been no application for registration under s 2 of the Act of 1933. In our judgment, the true meaning of s 2 of the Act of 1933 is that, in the absence of registration under its provisions, a dwelling-house which has become decontrolled under s 2 of the Act of 1923 becomes, for all purposes of the principal Acts, a controlled house.

Counsel for the landlord further argued that the provisions of s 2 of the Act of 1933 were concerned solely with matters of procedure, and that, consequently, such provisions ceased to have any operation after they had been repealed by the Rent and Mortgage Interest Restrictions Act 1939 (see s 9(3) and Sched II of that Act). As already pointed out, we are of opinion that s 2 of the Act of 1933 is not concerned merely with procedure, but gives to a dwelling-house falling within its provisions the status of a controlled dwelling-house. Further, we think that, under the Act of 1933, the tenant of a house within the provisions of s 2 of that Act acquired, by reason of the failure of the landlord to comply with the provisions of that section, such rights and benefits as attach to a house controlled under the principal Acts. There is nothing in the 1938 Act which can be construed as depriving the tenant of such rights, and we are satisfied that, by reason of the provisions of the Interpretation Act 1889, s 38, the defendant, as such a tenant, is entitled to enforce his vested rights. For these reasons, we agree that the decision of the county court judge is right, and, consequently, that the appeal must be dismissed with costs

Appeal dismissed with costs. Conditional leave to appeal to the House of Lords.

Solicitors: Paisner & Co (for the appellant); Barnett Janner (for the respondent).

Derek H Kitchin Esq   Barrister.


R v Carmichael

[1940] 2 All ER 165


Categories:        CRIMINAL; Criminal Law        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        CHARLES, MACNAGHTEN AND OLIVER JJ        

Hearing Date(s):        11, 19 MARCH 1940        


Criminal Law Evidence Admissibility Rule in Russell v Russell Incest Accuseds daughter Accused wishing to adduce evidence of lack of knowledge that girl was his daughter Punishment of Incest Act 1908 (c 45), s 1(1).

The appellant was convicted on 3 counts of an indictment charging him with having had carnal knowledge of S, who was to his knowledge his daughter. On 2 September 1912, the appellant married P, and two children were subsequently bornnamely, E on 11 April 1913, and S, the subject of the charge, on 18 May 1915. The appellant was admittedly the father of E. Throughout the whole of 1914, the appellant and his wife lived apart in different towns, though he visited her during the week-ends. There was evidence that about August 19149 months before S was bornthe appellants wife was associating with W, though there was no evidence of actual misconduct at that time. In November 1916, the appellant petitioned for divorce on the ground of his wifes adultery with W, and in due course the marriage was dissolved. On 10 July 1918, the appellant remarried, and in 1926 the two girls came to live with him and his second wife. In 1932, the husband and his second wife separated, and the appellant then lived with S, who gave birth to 3 children. At the trial, the appellant wished to adduce evidence that his first wife had told him that S was begotten by another man, and also that he had told his second wife that he was not the father of S. The judge ruled, however, that the rule in Russell v Russell precluded the appellant from adducing any such evidence. On appeal from his conviction, the appellant contended that the judge was wrong in law in this ruling, and that by so ruling he had wrongly excluded vital evidence tending to show that the appellant did not know that S was his own daughter:

Held the evidence sought to be adduced by the appellant did not infringe the rule in Russell v Russell, and was admissible. Though it was irrelevant to the question of the paternity of S, it was plainly relevant to the question of whether or not the appellant knew that S was his daughter, since, if the jury were satisfied as to the truth of the evidence, they would have been bound to have returned a verdict of acquittal. The question whether A is Bs daughter is totally distinct from the question whether to Bs knowledge she is his daughter.

Notes

The rule in Russell v Russell is one which many feel should be as restricted as possible in its application. It may be doubted whether it applies in criminal matters, but, however that may be, the present case merely decides that it does not, in a case of incest, preclude the admission of evidence tending to prove that the accused did not know that the person with whom incest was charged was his daughter. Where proof of knowledge is vital to a conviction, the admission of evidence of the prisoners knowledge or want of knowledge is one of the most elementary rights.

As to Incest, see Halsbury (Hailsham Edn), Vol 9, p 484, para 830; and for Cases, see Digest, Vol 15, pp 852, 853, Nos 93529362.

Cases referred to

Russell v Russell [1924] AC 687; Digest Supp, 93 LJP 97, 131 LT 482.

Appeal

Appeal against a conviction by Wrottesley J at the Central Criminal Court on 8 February 1940, of incest with the appellants daughter.

Page 166 of [1940] 2 All ER 165

The facts and arguments are fully set out in the judgment of the court delivered by Charles J.

E Clarke for the appellant.

G Howard for the Crown.

19 March 1940. The following judgment was delivered.

CHARLES J (delivering the judgment of the court). On 8 February 1940, at the Central Criminal Court, before Wrottesley J, John Kinnear Carmichael was convicted of incest with his daughter, Sonia May Carmichael, and was sentenced to 2 years imprisonment. He now appeals against his conviction, on the grounds of the wrongful exclusion of evidence. The indictment contains three counts. The first count charged that on a date unknown between 1 June 1932, and 2 May 1933, the appellant “had carnal knowledge of Sonia May Carmichael, who was to his knowledge his daughter.” The second and third counts charged the commission of similar offences between August 1934, and August 1937.

There was little or no dispute as to the facts of the case. On 2 September 1912, the appellant married Frances May Parker at the register office at Edmonton, in Middlesex, and there were two children of the marriagenamely, Elsie Frances Carmichael, born on 11 April 1913, and Sonia May Carmichaelthe subject of the present chargeborn on 18 May 1915. The appellant was admittedly the father of the elder daughter, Elsie Frances.

Throughout the whole of 1914, the appellants wife lived at Cambridge and the appellant resided in London, where he was engaged in a motor business, and during that year he used from time to time to visit his wife at week-ends. There was evidence that about August 19149 months before the birth of Sonia May Carmichaelthe appellants wife was associating with a man named Harry West, who was giving her lessons in motor-driving, but there was no evidence of any misconduct by her with West at that time. In January 1915, the appellant enlisted in the Army, and in the autumn of that year he went with his regiment to France. While the appellant was away in France, his wife committed adultery with West, and on 17 November 1916, the appellant presented a petition for divorce, and cited West as co-respondent. The petition alleged that during 1916 Mrs Carmichael had frequently committed adultery with West, and that she was at that date pregnant by him. On this petition, a decree nisi was pronounced, and in due course the decree was made absolute and the marriage was dissolved.

On 10 July 1918, the appellant married Violet May Garrick. After the dissolution of his first marriage, the two girls, Elsie and Sonia, lived under the care of the appellants mother, but in 1926 they came to live with the appellant and his second wife. In 1932, the appellant and his second wife quarrelled, and separated. The quarrel was due to the fact that Mrs Carmichael became suspicious about the appellants feelings towards Sonia. After this separation from his second wife, the

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appellant lived with Sonia, and, between the dates mentioned in the indictment, she gave birth to three children. The appellant was admittedly the father of those children, and there was ample evidence that on a number of occasions he had acknowledged that he was the father of Sonia. In his petition for divorce, and in his affidavit verifying the petition, he had stated:

There was living issue of the marriage two childrennamely, Elsie Frances Carmichael, born on Apr. 11, 1913, and Sonia May Carmichael, born on May 18, 1915.

On the evidence set out above, the jury found the appellant guilty of the charges made against him.

Incest was made a criminal offence by the Punishment of Incest Act 1908, s 1, which provides as follows:

(1) Any male person who has carnal knowledge of a female person, who is to his knowledge his grand-daughter, daughter, sister, or mother, shall be guilty of a misdemeanour …

It was therefore incumbent on the Crown to prove to the satisfaction of the jury (i) that the appellant was in fact the father of Sonia, and (ii) that he knew that he was her father. Proof that Sonia was in fact his daughter would not be sufficient to justify a conviction, unless it was also proved that the appellant knew that she was his daughter. If the appellant could have proved to the satisfaction of the jury that he believed she was not his daughter, or even if the jury had reasonable doubt as to that matter, he would have been entitled to a verdict of acquittal.

The grounds of appeal against the conviction are as follownamely, (i) that the judge was wrong in law in holding that the rule in Russell v Russell applied to the case, and that no statement by the appellant or his first wife which tended to bastardise any issue of that wife born in wedlock could be admitted, (ii) that the judge misdirected the jury in his summing up when he told them to disregard all statements made by the defendant or by his first wife which tended to bastardise Sonia May Carmichael, and (iii) that the judge thus wrongly excluded vital evidence tending to show that the appellant did not know that Sonia May Carmichael was his own daughter. This appeal, therefore, raises an interesting and important question with regard to the application, on a trial for incest, of the rule of law, affirmed by the House of Lords in Russell v Russell, that neither a husband nor a wife is permitted to give evidence of non-intercourse after marriage to bastardise a child born in wedlock.

The case for the appellant was this. Conceding that there was no evidence to rebut the presumption that he was the father of Sonia, and that the Crown had proved that fact conclusively, the appellant desired to give evidence that his former wife had told him that Sonia was begotten by another man, and that he honestly believed her statement to be true, and that, therefore, so far from knowing that Sonia was his

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daughter, he believed the contrary. As proof of the sincerity of his belief, he desired to give evidence that he had informed his second wife that he was not Sonias father. Further, he desired to explain how it came about that in his divorce petition and on other occasions he had acknowledged Sonia as his daughter. The judge, however, held that the rule in Russell v Russell precluded the appellant from adducing any such evidence, and the question at issue on this appeal is whether that ruling was right. In our opinion, that ruling was wrong.

At the trial, the question arose first when the appellants second wife, who was called as a witness for the Crown, was giving evidence. Counsel for the appellant desired to ask her in cross-examination whether it was not the fact that the appellant had informed her that he was not the father of Sonia, and the judge, after hearing the matter argued in the absence of the jury, held that the rule in Russell v Russell made any such question inadmissible. After the close of the case for the Crown, the appellant gave evidence on his own behalf. The judge allowed his counsel to ask the appellant this question:

At the time you had intercourse with Sonia, did you know she was your daughter?

To that question he replied:

I knew she was not my daughter.

Directed by the judge, however, that he must answer Yes or No, he replied “No.” Counsel for the appellant then proposed to ask the appellant his reasons for disbelieving that he was the father of Sonia, and formulated the following question: “Who first informed you that Sonia was not your daughter?” The answer to that question would have been that it was the mother of Sonia herself who gave him that information. The judge, however, disallowed the question, on the ground that the answer would infringe the rule in Russell v Russell.

With the greatest respect to the judge, we think that the question was admissible. Evidence by the appellant that his wife had told him that he was not the father of Sonia was no evidence at all that he was not in fact her father, and was irrelevant and inadmissible on the question of the paternity of the child. In our opinion, such evidence would not in any way infringe the rule in Russell v Russell. Though it was irrelevant to the question of the paternity of Sonia, it was plainly relevant to the question whether or not the appellant knew that Sonia was his daughter, since, if the jury were satisfied (i) that Sonias mother did in fact tell the appellant that he was not the childs father, and (ii) that the appellant believed her statement to be true, then they would have been bound to return a verdict of acquittal. Indeed, by the exclusion of this evidence, the appellant was deprived of the right to substantiate his plea that Sonia was not, to his knowledge, his daughter. To preclude a defendant on his trial from giving evidence of his belief, and the ground for it, seems to us to deprive him of one of the most elementary

Page 169 of [1940] 2 All ER 165

rights of an accused person, and to be a negation of justice where the proof of knowledge or no knowledge is vital to conviction or acquittal.

The exclusion of this evidence, moreover, led to the curious result that, while the appellant was permitted to deny on oath that he knew Sonia to be his daughter, not only was he precluded from giving his reasons for believing that he was not her father but the Crown was also precluded from cross-examining the appellant as to his reasons for his alleged belief. Moreover, evidence of admissions by the appellant that Sonia was his child had been adduced on behalf of the Crown, yet statements to the contrary by the appellant, which might have explained away those admissions, were, by the ruling, excluded. In our opinion, the rule in Russell v Russell did not preclude the appellant from giving any relevant evidence in support of his plea that he did not believe that Sonia was his daughter, including an admission or confession by her mother.

It is true that Lord Sumner in the course of his dissenting opinion in Russell v Russell suggests, at p 739, as a reason for differing from the majority, the hardship the rule would work in an incest case, and instances an example closely approximating to the facts of this case. It is to be observed, however, that he treats the matter as if the words of the statute, “who is to his knowledge his … daughter,” form no ingredient in the offence. Thus, he says, at p 739:

His one defence is that, though born of his wife during their marriage and brought up as his child to avoid scandal, he had not begotten her … If he can give this evidence he has a defence to go to the jury; if, on the other hand, the rule applies … he will go to prison.

In our opinion, the question whether A is Bs daughter is totally distinct from the question whether to Bs knowledge she is his daughter. Knowledge is vital to the commission of the offence. While there was evidence in this case on which the jury might well have convicted the appellant, yet we cannot say that, if the evidence which was ruled out had been given, they would have done so, and we have accordingly allowed the appeal and quashed the conviction.

Appeal allowed and conviction quashed.

Solicitors: Registrar of Court of Criminal Appeal (for the appellant), Director of Public Prosecutions (for the Crown).

W J Alderman Esq   Barrister.


United Steel Companies Ltd v Cullington

[1940] 2 All ER 170


Categories:        TAXATION; Income Tax, Deduction in computing profits        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        19, 20 FEBRUARY, 19 MARCH 1940        


Income Tax Deductions against profits Wear and tear Trading losses Carrying forward deductions Amalgamation of companies Right of new company to accrued deductions of constituent companies Income Tax Act 1918 (c 40), Sched D, Cases I and II, rr 6, 11 Finance Act 1926 (c 22), ss 32, 33 Companies Act 1929 (c 23), ss 153, 154(1).

The US & B Mills Ltd, had been carrying on a business for a number of years before 1930, and had at no time made any profit. A large sum had accumulated in respect of allowances for wear and tear and trading losses, which had been carried forward from year to year. The US Co had similarly accumulated allowances in respect of wear and tear and trading allowances. On 22 August 1930, these two companies were amalgamated into one company, but in fact the two businesses were carried on as branches of the one company:

Held (i) the new company was not entitled to carry forward the wear and tear allowances, since they had not been suffered by the new company in the course of its trading.

(ii) the allowances claimed on account of trading losses incurred by the previous owners of the trade were not permissible for the purpose of an assessment to income tax made upon the new company.

Order of Court of Appeal ([1939] 1 All ER 454) affirmed.

Notes

A company formed by the amalgamation of two other companies is in law a legal entity distinct from the two constituent companies, and it is not, for the purposes of income tax, to be treated as a successor to the constituent companies. The terms of r 11 are clear, and cannot be read so as to bring in allowances for wear and tear to which a predecessor was entitled.

As to Carrying Forward Allowances, see Halsbury (Hailsham Edn), Vol 17, p 169, para 344; and for Case, see Digest, Vol 28, p 42, case m.

Case referred to

Donoghue v Doncaster Amalgamated Collieries Ltd, Nokes v Doncaster Amalgamated Collieries Ltd [1939] 2 KB 578, [1939] 2 All ER 668; Digest Supp, 108 LJKB 845, affg [1939] 1 KB 70, [1938] 4 All ER 6.

Appeal

Appeal by the taxpayer from an order of the Court of Appeal (Sir Wilfrid Greene MR, Finlay and Luxmoore LJJ), dated 10 February 1939, and reported [1939] 1 All ER 454, reversing in part an order of Lawrence J, dated 7 April 1938, and reported [1938] 2 All ER 569. The facts and the arguments are fully set out in the opinions of their Lordships.

Raymond W Needham KC, W Gordon Brown and J S Scrimgeour for the appellants.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the respondent.

19 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC. My Lords, the appellant company was formed on 22 August 1930. Its primary object was the acquisition, on the terms of a scheme of arrangement or amalgamation sanctioned by the High Court of Justice, of the undertakings of two companies which

Page 171 of [1940] 2 All ER 170

I will call respectively the steel company and the strip company. The businesses of these two companies were continued by the appellant company as from 22 August 1930, the businesses formerly carried on by the two companies being thereafter treated as branches of the appellant company. The steel company at the date of its acquisition by the appellant company had in its books a sum representing trading losses of the steel company, in respect of which relief under the Finance Act 1926, s 33, had not been given. The strip company had a similar item in its books in respect of which relief had not been given. In addition to this item, the strip company was entitled to a deduction for wear and tear of plant, but it had not been possible, owing to the losses incurred by that company, to give effect to this deduction. The appellant company claimed the right to set off these three sums against its own profits. The special commissioners found that the appellant company succeeded to the trades of the steel company and the strip company and falls to be assessed as if a new trade had been set up or commenced. They accordingly held that the appellant company was not entitled to the deductions claimed. Lawrence J, differed from the special commissioners as to the wear and tear claim, but otherwise upheld their decision. The Court of Appeal reversed Lawrence J as to the wear and tear item, and decided against the contentions of the appellant company on all points.

My Lords, the deductions claimed are a form of relief from the liability to pay income tax upon profits or gains, and the taxpayer must establish his claim upon a correct interpretation of the language of the material enactments. The claim to deduct the wear and tear allowance of the strip company from the profits of the appellant company derives from the Income Tax Act 1918, Sched D, Cases I and II, r 6, but the decision ultimately depends on the effect to be given to r 11, amended by the Finance Act 1926, s 32. Before the passing of that Act, Sched D, Cases I and II, r 11, which in its turn replaced the Income Tax Act 1842, Sched D, r 4, provided that the tax payable by a person succeeding to a trade should be computed according to the profits or gains of the trade during the respective periods prescribed by the Act notwithstanding the succession, unless the person succeeding to the trade proved that the profits or gains had fallen, or would fall, short from some specific cause since the succession took place. If that were the material enactment for your Lordships consideration, the appellant company would clearly be entitled to a deduction of the wear and tear allowance from its profits. The alteration effected by the Finance Act 1926, s 32, was substantial. The new r 11(1) thereby enacted dealt with changes in a partnership, while r 11(2) dealt with successions to a trade. The difference in the treatment is remarkable. In the first case, the computation of tax is to be made notwithstanding the change in the partnership, according to the profits or gains of the trade during the periods prescribed by the Income Tax Acts. In the second case, the tax pay-

Page 172 of [1940] 2 All ER 170

able by the person succeeding is to be computed as if he had set up or commenced the trade at the time he succeeded, and the tax payable by the person carrying on the trade until that time is to be computed as if the trade had then been discontinued. This direction on the face of it seems to me to conclude this question in favour of the Crown, for, if the tax payable by the appellant company as successor to the trades of the two former companies is to be computed as if the company commenced to trade when it succeeded, it would seem impossible to make a deduction in respect of allowances arising in years of assessment before that which must be taken to be the new trade was set up or commenced.

It was, however, strenuously argued on behalf of the appellant company that r 11 introduced by the Finance Act 1926, s 32, did not relate to the method of computation of profits, but merely altered the basic year of assessment in cases where there was a succession to a trade. My Lords, I confess I had some difficulty in following the argument. In computing the tax payable upon the profits or gains of the trade, part of the process is the deduction of any allowances permitted by the income-tax provisions. As long as the profits and gains under Sched D were computed on the basis of an average of 3 years, the deduction was made from the figure resulting from the taking of the average, and the balance was the amount of the profits and gains on which tax was charged. When the profits or gains of the year preceding the year of assessment were substituted for the average of the 3 preceding years, the process was the same, so far as a deduction for wear and tear was concerned. The words of the new r 11 enacted by the Finance Act 1926, s 32, seem to me imperative and clear, and I see no reason for not giving them their natural meaning.

A further contention which can be dealt with more briefly was made with regard both to the claim in respect of wear and tear and to the claim in respect of losses. Originally, the appellant company claimed, so far as losses were concerned, to be within the Finance Act 1926, s 33, apart from the effect of the order of Eve J. That argument was abandoned in the Court of Appeal, and it is now admitted that the relief which s 33 gives is purely personal to the person sustaining the loss. The claim in respect of losses, therefore, rests solely on the sections of the Companies Act and the order of Eve J. The contention now advanced is that the effect of s 154 and of the order of Eve J, transferring the undertakings of the two companies and of their properties was to transfer the right to deductions to the newly-formed appellant company. This, in my opinion, requires an impossible construction of s 154 of the Companies Act and of the order of Eve J. On both points I agree with the judgment of Finlay LJ in delivering the judgment of the Court of Appeal, and I think that this appeal should be dismissed with costs.

VISCOUNT MAUGHAM. My Lords, as appears from the special case, the main questions are whether the appellants, a new company

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amalgamated under the Companies Act 1929, ss 153, 154, are entitled to deduct wear and tear allowances and losses incurred by the constituent companies for the years before the amalgamation. The appellants acquired their business and undertaking on 22 August 1930, under a scheme of arrangement sanctioned by the court pursuant to the Companies Act 1929, ss 153, 154. The two transferor companies were the old United Steel Companies Ltd, and the United Strip and Bar Mills Ltd, whom I shall refer to as the 1915 steel company and the strip company. These companies had not been successful. They had made large losses in respect of which relief could not be obtained under the Income Tax Act 1918, s 34. The strip company had also been unable to make the deductions in respect of wear and tear to machinery which it was entitled to make under the provisions of the Income Tax Act 1918, Sched D, Cases I and II, r 6, a rule which I shall refer to as r 6. The appellants claim is to carry forward and set off against their own profits the losses incurred by the 1915 steel company and the strip company before the amalgamation, and also to deduct from their profits the unapplied balances of the wear and tear allowances of the strip company. The Court of Appeal have decided both these questions in favour of the Crown, varying an order of Lawrence J, who was in favour of the taxpayer, with regard to the allowance for wear and tear. There was a further point suggestednamely, that the appellants were entitled to succeed by virtue of the Companies Act 1929, ss 153, 154, a contention which was described by the Court of Appeal as somewhat startling.

My Lords, I am content with the judgment of the Court of Appeal on all points, and shall trouble your Lordships only with a few observations relative to the claim as regards the wear and tear allowance under r 6. I will begin by observing that the right under r 6 is not a chose in action or an asset of the taxpayer, and that it could not be assigned to the appellants. It relates only to deductions allowable to a taxpayer in charging the profits or gains of a trade as representing the diminished value by reason of wear and tear of machinery or plant used in the trade by, and belonging to, the taxpayer. Rule 6(3) allows the deduction to be added by the taxpayer to the amount of the deduction in a subsequent year if there has not been a previous opportunity of making the deduction out of profits. It is clear that, if the trader goes out of business, this right to carry forward a deduction is lost, unless, indeed, there is a statutory right given to some other trader, presumably a successor, to deduct the diminished value (by wear and tear) of machinery and plant used by the predecessor from the profits or gains of the successor. It will be remarked that the machinery and plant might have been placed on the scrap-heap, or perhaps acquired by the successor for a very small sum. It is a little difficult to see the reason in such a case for giving to the successor the right claimed. However, there is always a possibility of finding in the twists and turns of the income-tax maze some relief or refuge for the harassed taxpayer, and this possibility we must now examine.

Page 174 of [1940] 2 All ER 170

My Lords, I agree with the opinion expressed by the Court of Appeal that the point turns upon the proper construction of r 11, introduced in substitution for an older rule by the Finance Act 1926, s 32. The new rule must now be treated as Sched D, Cases I and II, r 11. We were urged to regard this rule in relation to its history (which is fully stated in the judgment under appeal) and to its context as one of a number of rules into which it was introduced. I have carefully borne this precept in mind, but I am nevertheless of opinion that the true construction and effect of the rule are reasonably clear. There are two parts to the rule. Reading it shortly, the first subrule deals with partnerships, and provides that, if a change in the partners has occurred in any way, one or more partners continuing to be engaged in the business, the tax payable by the continuing partners or partner shall, notwithstanding the change, be computed according to the profits or gains of the trade during the period prescribed by the Income Tax Acts. There is an important proviso to the subrule, which gives the continuing partners a right by a signed notice to the surveyor to require:

… that the tax payable for all years of assessment shall be computed as if the trade, profession or vocation had been discontinued at the date of the change, and a new trade … had been then set up or commenced, and that the tax so computed for any year shall be charged on and paid by such of them as would have been charged if such discontinuance and setting up or commencement had actually taken place …

If such notice is given, “the tax shall be computed, charged, collected and paid accordingly.” Sub-r (2) applies to the case of any person (which includes a company) succeeding to any trade previously carried on by another person, and it provides that the tax payable for all years of assessment by the new owner:

… shall be computed as if he had set up or commenced the trade, profession or vocation at that time, and the tax payable for all years of assessment by the person who until that time carried on the trade, profession or vocation shall be computed as if it had then been discontinued.

My Lords, I am clearly of opinion that, if the proviso to sub-r (1) is brought into operation by an appropriate notice, the new partners cannot obtain the benefit of allowances or deductions available prior to the new trade being commenced. It will be noted that the proviso specifies in some detail the notice which must be given, and such notice itself states the consequencesnamely, that the tax is to be computed for any year, and also charged and paid, as if there were a new trade, profession or vocation. It is stated in the judgment under appeal that counsel for the present appellants did not dispute the view of the proviso which I have stated above. This admission was not made before your Lordships, but I heard no argument which led to the belief that the admission was not rendered necessary by the language of the proviso.

If we turn to the second part of r 11, which deals with succession to trade by a stranger, the language seems to me almost equally clear. The words “at that time” and “as if it had then been discontinued” are strong to suggest that the tax payable is to be computed for all

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purposes as if there were a new trade, profession or vocation. To my mind, it is at any rate clear that there is no possibility of reading into the rule, or into any other existing rule to which we were referred, a right to exercise the remarkable privilege contended fornamely, that of deducting from profits made after a previous business has been discontinued the diminished value of plant and machinery which the successor has perhaps never acquired. For these reasons, and for those given by the Court of Appeal, I agree that this appeal must be dismissed.

LORD RUSSELL OF KILLOWEN (read by Lord Romer). My Lords, the claim of the appellants to be entitled to set off against their own profits allowances for wear and tear which the old companies would have been entitled to carry forward against future profits if they had continued to trade is a claim which, in my opinion, could only be acceded to by completely ignoring, and proceeding in the teeth of, the provisions of Sched D, Cases I and II, r 11(2). It was contended that r 11 did not relate to the manner in which the profits of any year were to be computed, but merely prescribed, in the case of a change in the ownership of a trade, the period the profits of which were to be the measure of assessment for the year of assessment. In my opinion, the new rule introduced by the Finance Act 1926, s 32, goes far beyond that. Under the former r 11, as under the Income Tax Act 1842, the cases of changes in the ownership of a trade within the year of assessment, or within what may be called the basic period, were all treated on the same footing, whether or not there was any continuity of ownershipthat is, irrespective of the question whether anyone who was an owner before the change was also an owner after the change. By the new r 11 a sharp distinction is drawn between the two cases. Para (1) deals with the cases where continuity of ownership exists. Para (2) deals with the cases where there is a complete break in the ownership of the trade. In the first case, the tax payable by the new owners is computed according to the profits earned during the basic periodthat is, earned by the then owners of the trade. The proviso, however, gives an option, if all the owners old and new wish it, of dealing with the matter on the footing of the trade having been discontinued and a new trade set up at the date of the change. Rule 11(2), however, prescribes only one method of computing the tax payable. It postulates that one person has succeeded to a trade “which until that time was carried on by another person.” That is to say, it postulates a complete break in the ownership. In such a case, it provides that the tax payable by the new owner shall be computed as if he had set up the trade when he became owner, and that the tax payable by the old owner shall be computed as if the trade had then been discontinued. In the face of that provision, it is impossible to hold that the new owner (whose business is to be treated, for the purpose of computing the tax payable by him, as

Page 176 of [1940] 2 All ER 170

a brand new business) can have any claim to allowances, in virtue of allowances for wear and tear carried forward by the old owner.

The judgment of Lawrence J on this part of the case is largely, if not entirely, based on a contrast of the wording of the proviso to para (1) with the wording of para (2) of r 11, emphasis being laid upon the words “new trade” in the proviso, and upon the fact that the trade of the new owner in para (2) is not described as a “new” trade. However, if it once be appreciated that the proviso is dealing with cases in which there is some continuity of ownership, and that para (2) is dealing with cases in which there is a complete break in ownership, the reason for the difference of wording becomes apparent, and the point disappears. In the proviso, it was necessary specifically to require the trade to be treated as if it were a new trade, because the existence of continuing owners might well have prevented it from being considered to be, or being treated as, a new trade. In the case of a complete break of ownership, the trade in the hands of the new owner, if treated as then set up for the first time, must necessarily be treated as a new trade, and need not be so described.

It was, however, argued that, even if the true construction of r 11 operated adversely to the contention of the appellants, they were nevertheless entitled to succeed in their claim, and were entitled to exercise the rights which the old companies would have had, had they continued to trade, and this by reason of the order of Eve J, made under the Companies Act 1929, s 154. My Lords, I find a difficulty in discovering in that section any indication that property which the transferor company could not itself have transferred to the transferee company may nevertheless be transferred to that company by the order of the court. It is, however, unnecessary to decide this point, because of the particular right here in question. I desire, however, to reserve for future consideration the question whether Donoghue v Doncaster Amalgamated Collieries Ltd was rightly decided. The right here claimed is not only personal to the old companies, but is a right which can only be asserted in relation to income tax payable by them respectively in respect of the profits of the trades carried on by them respectively, and, even assuming that the order of Eve J, operated to vest that right in the appellants, it does not become in transitu a right exerciseable in regard to income tax payable by the appellants in respect of the profits of the trade carried on by the appellants.

There remains the claim for allowances in respect of losses carried forward by the old companies. This was rested solely upon the order of Eve J and the Companies Act 1929, s 154, and must fail with the other claim. For these reasons, I would dismiss the appeal.

LORD WRIGHT. My Lords, the main argument of the appellants was as to the true construction of r 11(2), as amended by the Finance Act 1926, s 32. The words are in my opinion, quite plain. In the

Page 177 of [1940] 2 All ER 170

most unequivocal language they sharply divide the trade carried on by the person succeeding from the trade up to the time of the succession carried on by the person to whom the former succeeded. The tax on the former is to be computed as if he had set up or commenced the trade at the time when he succeeded. The tax on the latter is to be computed on the footing that the trade carried on by him up to the succession had been then discontinued. I cannot better express my reasons for rejecting the appellants contention than by quoting the words of Finlay LJ, in delivering the judgment of the Court of Appeal, ([1939] 1 KB at p 660; [1939] 1 All ER, at p 461):

The direction to compute the tax payable can only mean that the tax payable has to be ascertained after making all proper allowances on the basis that the trade was set up or commenced on the last mentioned date. This must of necessity exclude any allowances to which the predecessor might be entitled in respect of the period antecedent to the acquisition of the trade by the successor.

I cannot accept the contention on behalf of the appellants that r 11(2), when it speaks of the computation of the tax, is merely concerned with the change in the period of assessment. My view is, I think, fatal to the claim for allowances for wear and tear, and a fortiori to the claim for losses under s 33.

However, it was sought to support both claims by relying on the Companies Act 1929, s 154, and the order of Eve J, made under that Act confirming the deeds of arrangement and amalgamation of the two old companies with the appellant company. The order transferred, so it was contended, to the appellant company the right to the allowances claimed, because, it was said, they were included in the terms of the order, in that it transferred to the appellant company the properties, rights and powers of every description of the old company. It is, I think, a sufficient answer to this argument that the old companies never had any right to these allowances. I question whether the claim to an allowance under the Income Tax Act 1918, Sched D, Cases I and II, r 6, can properly come under the description of a property, right or power. In any case, the old companies never had any such right or property or power, however it is described, in respect of these allowances. All they had was a claim to allowances from their own profits in respect of wear and tear or losses. Neither company during its existence ever had profits or gains from which the deductions now claimed could have been made in whole or in part. The appellant company has been carrying on its own trade as from 1930, and it is in respect of the profits of that trade that the allowances are claimed. The old companies never had any interest in that trade. Their own trade ceased in 1930. This, I think, is a sufficient answer. It would, however, have been a strange result if the Companies Act 1929, had by a side wind amended in a substantial particular the Finance Act 1926. To effect such an amendment, express and apposite words would have been necessary.

The appellants relied, as supporting their construction of the Com-

Page 178 of [1940] 2 All ER 170

panies Act 1929, on the decision in Donoghue v Doncaster Amalgamated Collieries Ltd. That was a decision of the Court of Appeal constituted by the same members as those who gave the judgment under appeal. The powers of s 154 were there held to extend to dealing with a purely personal rightnamely, a contract of employment. If it were material, I should desire most carefully to consider what was there decided, but the reasons for which I reject the appellant companys contention are sufficient quite apart from any questions considered in Donoghues case. Indeed, the members of the Court of Appeal, when they gave their judgment in Donoghues case a few months after their judgment now under appeal, do not refer to the latter, and do not seem to have felt that there was any conflict between their two judgments. I do not here consider it necessary to examine the decision in Donoghues case. I concur in the motion proposed.

LORD ROMER. My Lords, it must be conceded that, were it not for the change in the law effected by the Finance Act 1926, s 32, the appellants would have been entitled to deduct from their profits for the year ending 5 April 1937, the aggregate of the wear and tear allowances which had been made to the strip company up to 22 August 1930, for on this latter date the appellants succeeded to, and continued thereafter to carry on, the very same trade that up to then had been carried on by the strip company. The allowances would accordingly, by reason of the provisions of the Income Tax Act 1918, Sched D, Cases I and II, r 6(3), be added to the amount of the deduction for wear and tear for the year of assessment in question, and be deemed to be part of that deduction. Rule 11 of those rules would have had nothing to do with the matter. It was, in the first place, a rule which dealt only with changes and successions in the persons carrying on a continuous trade or profession occurring within the year of assessment or the period of average upon which the assessment had to be based. In the second place, the rule was solely concerned with the basis on which the profits or gains of the trade or profession were to be computed, where such a change had occurred, and was in no way concerned with what deductions could be made from those profits or gains in respect of allowances under r 6. However, the new r 11, substituted for the old one by the Finance Act 1926, s 32, isso far, at any rate, as successions are concernedin very different terms. It now deals with the tax payable for all years of assessment after the succession has taken place, and enacts (para (2)) that it shall be computed as if the successor had set up or commenced the trade, profession or vocation at that time. The rule no longer seems merely to contemplate, as did the old one, a change in the ownership of a continuous trade, but seems to enact that tax shall be payable as though there had been a change in the trade itself. This was the construction put upon the rule by the Court of Appeal, and, in my opinion, it is the only possible construction. I am unable to attach any import-

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ance to the fact that in the proviso to para (1) of the rule the word “new” occurs, and that it does not occur in para (2). If the successor is to be treated for income-tax purposes as if he commenced the trade at the time of the succession, I am unable to see how the trade then commenced can, for those purposes, be regarded as being other than a new trade. This being so, it is obvious that there can be no deductions allowed in respect of the trade carried on before the succession took place. Such trade has, for the purposes of taxation, to be treated as though it were a different trade altogether from the trade being carried on by the appellants.

My Lords, as to the contention of the appellants based upon the Companies Act 1929, ss 153, 154, and the order of Eve J of 16 August 1930, a contention which relates to the losses incurred by the steel company and the strip company as well as to the wear and tear allowances of the latter company, the decisions of Lawrence J, and the Court of Appeal rejecting such contention appear to me to be plainly right. The effect of the order of Eve J, was that the appellants succeeded to the trades of the two companies within the meaning of r 11(2), but there is nothing in the two sections which can possibly be regarded as excluding the appellants succession from the operation of that rule. It is true that, by virtue of the sections and the order, the appellants succeeded to all the rights possessed by the two companies at the time of the succession, but they did not thereby obtain any right to deduct the losses and wear and tear allowances of the two companies from the profits they might subsequently earn by their own trading, for the two companies had not, and obviously could not have had, any such right themselves. My Lords, I agree that this appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Johnson Weatherall Sturt & Hardy (for the appellants); Solicitor of Inland Revenue (for the respondent).

Michael Marcus Esq   Barrister.

McLeod (or Houston) v Buchanan

[1940] 2 All ER 179


Categories:        INSURANCE        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, LORD THANKERTON, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        24, 25 JANUARY, 14 MARCH 1940        


Insurance Motor insurance Vehicle insured for commercial purposes only Breach of statutory duty Permitting use of uninsured motor vehicle Use of commercial van for private purposes when insured for commercial use only No evidence of owners knowledge of such user or of his express permission to driver Road Traffic Act 1930 (c 43), s 35(1).

A woman whose son was fatally injured as a result of a motor accident obtained judgment for damages and costs against the negligent driver of the vehicle, but failed to recover anything under the judgment. She thereupon brought an action to recover the damages and costs from the owner of the vehicle, alleging that he was in breach of his duty

Page 180 of [1940] 2 All ER 179

under the Road Traffic Act 1930, s 35, in permitting the driver to use the vehicle when it was not insured against third-party risks, in the sense that it was not insured for private purposes when in fact it was being used for a private purpose, but was insured for commercial use only. There was no evidence that the owner knew that the driver was using the vehicle for a private purpose, or that he gave him express permission so to use it:

Held as the respondent permitted the use of the vehicle when it was not insured against third-party risks, contrary to the Road Traffic Act 1930, s 35, and thereby failed in his duty of insuring the vehicle, the appellant was entitled to recover damages from him.

Notes

This case is of importance for two reasons. First, though the point does not seem to have been seriously contested, it is an approval by the House of Lords of the decision of the Court of Appeal in Monk v Warbey. Secondly, the words “permit any other person to use a motor vehicle” have been the subject of two or three decisions recently in the lower courts, and the views of the House of Lords on the proper construction of these words must be very helpful.

As to Duty to Insure, see Halsbury (Hailsham Edn), Vol 18, pp 561563, paras 908912; and for Cases, see Digest, Supp, Insurance, Nos 3217r3217ee.

Case referred to

Monk v Warbey [1935] 1 KB 75; Digest Supp, 104 LJKB 153, 152 LT 194.

Appeal

Appeal by the mother of the deceased from an interlocutor of the First Division of the Court of Session in Scotland, dated 15 July 1938. The facts and the arguments are fully set out in the opinion of Viscount Caldecote LC.

Thos A Gentles KC and Douglas A Donald (for C W Graham Guest, on war service) for the appellant.

G R Thomson KC and G C Cohen (for W Clarke Reid, on war service) for the respondent.

14 March 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC. My Lords, the appellant has had an unhappy experience in her quest for some compensation for the loss of her son, James Houston, who was killed on 30 November 1933, by a motor car belonging to the respondent and driven by his brother, James Buchanan. The history of the prolonged litigation which the appellant has had to meet begins with her action against James Buchanan for damages in respect of the death of her son having been caused by James Buchanans fault. She obtained a verdict for £750 damages, and was also found entitled to expenses amounting to £299 3s 4d. Unfortunately, James Buchanan was unable to pay any part of these sums.

The appellant then took proceedings under the Road Traffic Act 1934, s 10, against the Royal Insurance Co, with whom the respondent was at the time of the accident insured, in respect of third-party liability arising out of the use of the car. She claimed the damages and expenses awarded to her in the action against James Buchanan. The insurance company met the claim by relying on a condition of the policy under the head “limitations as to use”namely, “use in connection with the policyholders business only”whereas the driver, James Buchanan,

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was using the car for his private purposes. The insurance company succeeded, and the appellant then began the present proceedings against the respondent for the recovery of the damages and expenses awarded to her by way of damages for the breach by the respondent of his statutory duty under the Road Traffic Act 1930, s 35. The action was at first dismissed as irrelevant. On appeal to the First Division, the interlocutor of Lord Carmont was recalled and proof allowed. When the proof was taken, the Lord Ordinary, Lord Jamieson, pronounced an interlocutor in favour of the respondent. The appellant once more appealed. The First Division of the Court of Session, consisting of four judges, heard the appeal and, as they were equally divided, a rehearing took place before a court of five judges. Finally an interlocutor was pronounced in favour of the respondent by a majority consisting of the Lord President, Lord Fleming, and Lord Pitman, Lord Moncrieff and Lord Carmont dissenting. The appellant now comes to your Lordships House. The only question now outstanding is as to the appellants right to recover damages, the respondent by his counsel having taken the very reasonable course of admitting at the bar the amount of damages to be the two sums of £750 and £299 3s 4d, if the appellant should be held entitled to succeed.

The Road Traffic Act 1930, s 35, upon which the appellant relies, imposed a duty on the respondent not “to use or to cause or permit any other person to use” his motor car unless there was in force in relation to the user of the vehicle by that other person a policy of insurance in respect of third-party risks complying with the requirements of the Act. S 36 sets out the requirements of the Act in respect of policies. The material requirement is contained in s 36(1)(b). The result of these provisions was to prohibit the respondent from causing or permitting James Buchanan to use the car in question unless a policy of insurance was in force covering third-party risks in respect of the death of, or bodily injury to, any person caused by, or arising out of, the use made of the car. Neither the respondent nor anyone else was insured in respect of the actual use which was being made of the car at the time of the accident. In these circumstances, the only question is, did the respondent use, or cause or permit James Buchanan to use, the car? As the answer depends on all the facts, it is necessary to state them in some detail.

The respondent is a member of a firm of solicitors in Glasgow. In 1932, he became tenant of Garrauld Farm, in order that his brother James Buchanan might carry on a poultry farm as manager for him. The respondents intention was to allow his brother in the course of time to buy him out and to become the proprietor. The respondent took no part in the management of the farm, and James Buchanan had sole control. Garrauld Farm is about 4½ miles from the nearest village, and is 21 miles from Glasgow, and about 14 miles from Milngavie, where the respondent lived. James Buchanan thought the farm was isolated,

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and found it necessary to have the use of a motor vehicle in connection with the business. Accordingly, the respondent bought an old Humber touring car for a few pounds for his brother and for the use of the farm. It seems that the purchase was carried through by James Buchanan. The respondent did not see the car before it was bought, but he paid for it. It was registered in his brothers name, and a proposal form was signed by James Buchanan for a policy of insurance covering the car for 12 months from 28 June 1932, to 28 June 1933. James Buchanan did not remember filling in the details of the form, and it is probable that this was done by one of the clerks in the respondents office. The form used was headed: “Proposal form for motor cars used for private purposes.” In reply to a question, “Will the motor car be used solely for social, domestic and pleasure purposes?” the answer given was: “No” In reply to the next question, “If not, please state other uses,” the answer was: “Also in connection with my poultry farm.” In due course, the proposal was accepted, and a policy was issued in the name of James Buchanan containing the words “no use except for private purposes.” However, by a definition of “private purposes,” the use of the car by James Buchanan (described as “the insured”) in connection with his business or profession was within the terms of the policy. The respondent did not personally interest himself in the matter of the insurance, and only became aware much later that the car was registered and insured in his brothers name. From time to time the respondent visited the farm, for the purpose of showing interest in his brother rather than in the farm. He said that he became aware that the car was used for every purpose, practically, for which a car could be used. As might be expected, the Humber car was not very reliable, and the respondent had bills to pay for repairs. For one reason or another, Mrs Buchanan, the wife of James, was not satisfied with the Humber as their only car, and she bought a small Standard car for her own purposes. Up to the time of the purchase of the Standard, the Humber was freely used by Mr and Mrs James Buchanan for social as well as for business purposes. After the purchase of the Standard, James Buchanan used the Humber for his own private purposes, but not when his wife was with him. The evidence of the respondent, which was given with complete candour, satisfies me that the respondent knew quite well of the use of the Humber car for the private purposes of his brother, and raised no sort of objection. The respondent was not made aware of any difference in the use made of the Humber after the acquisition by Mrs Buchanan of her own car.

James Buchanan grew tired of the Humber and its faults, and asked the respondent if he could get another vehicle. He wanted a Ford van, and the respondent authorised him to buy one. The van was bought in July 1932, and the respondent paid the price. When the necessary steps for insurance were being taken, the respondent saw the registration book and noticed that the new car was registered in his

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brothers name. He gave instructions to have that altered. The insurance proposal form was filled up and signed in the first instance as a proposal by James Buchanan. The form used was the same as in the case of the Humber carnamely, for a car used for “private purposes.” The type of body was declared, in the handwriting of James Buchanan, to be “commercial van,” and, in answer to the question as to the purposes for which the car would be used, the word “Commercial” was written in. Thereupon the insurance company required a fresh proposal to be made on a form “for commercial motor vehicles.” This was duly filled in by the respondents clerk and signed by the respondent, as proposer, described as “poultry farmer.” A policy headed “commercial motor vehicle” was issued, containing in the schedule the words:

Warranted used only for the following purposes: in connection with insureds business.

In the ordinary course, a certificate of insurance was sent to James Buchanan by the respondents firm, containing a statement as to the use of the car being permitted only in connection with the policyholders business. James Buchanan did not read the certificate. The respondent took no interest or part in the insurance of the car, except by affixing his signature. His clerk looked after insurance matters in his office. It is plain that the respondent never addressed his mind to the question of the use of the new car. What he would have said or done if he had given it any thought can only be a matter of surmise. He saw the van on occasions delivering eggs in Glasgow, but he said he had no knowledge as to what kind of use was being made of the van. His evidence was that he never gave his brother any permission to use the van, and did not know of his brother using it, for private purposes. Nor did he ever tell his brother that the insurance was restricted, or make any conditions as to the use of the Ford vehicle. In fact, James Buchanan used it, not only for the farm, but also occasionally to go down to the village for cigarettes, or for other purposes of his own. On the night of the accident, when he and his wife were going to a womens rural institute in the village, there was trouble with the self-starter of Mrs Buchanans car, and he took his wife and a friend in the Ford van to the meeting. He was on his way to pick them up again after the meeting when the accident took place as the result of which the appellants son was killed.

My Lords, what inference is to be drawn from these facts? The Lord Ordinary, Lord Jamieson, thought that the respondent had no ground even for suspicion that the van, which was not adapted for use as a pleasure car, might be used for any other purpose than in connection with the farm. I should be slow to differ on a question of fact from the judge who saw and heard the witnesses, if any facts were in dispute, but this finding appears to me to overlook the undisputed facts with regard to the use of the Humber car. The explanation of the respondents conduct is perhaps to be found in his detachment. He

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showed a generous and trusting disposition towards his brother. He tacitly allowed the Humber car to be used for private purposes, and, when the new van replaced the old touring car, he made no new condition. He left his brother to carry on, without any express, or even implied, restrictions upon the use of the new car. The Lord President attached importance to the fact that, if James Buchanan had read the certificate of insurance of the Ford van when he received the certificate, he would have been put on inquiry. It was said by the Lord President that the respondent might reasonably assume that James Buchanan would read the certificate. Lord Fleming suggested that James Buchanan was under a duty to see that the insurance covered the purposes for which a car under his charge was used, and that the respondent was entitled to rely on his brother. I cannot help feeling that these opinions do not really bear upon the question which your Lordships have to determine. It is not in dispute that there was no policy of insurance in force covering the use of the Ford van for private purposes. Did the respondent in these circumstances permit his brother to use the Ford van for private purposes? I think that the right answer was given to this question by Lord Carmont, who was of opinion that the handing over of the complete control of the vehicle to James Buchanan was unambiguous, and had the effect of sanctioning general use. The respondent never at any time suggested that he had the intention to restrict the user of either of the cars, and, as to the first car, he knew that in fact it was used without restriction. On these undisputed facts, I have come to the conclusion that the respondent permitted the use of the Ford van by his brother for purposes not covered by any insurance. In my opinion, the appellant is entitled to recover the damages, which have been agreed at the sum of the two amounts of £750 and £299 3s 4d. Accordingly, I move that this appeal be allowed, that the interlocutors appealed against should be recalled and that the appellant should be granted a decree for this amount, as also for such costs of this appeal as are usual in pauper cases, and for her expenses in the Court of Session, so far as not already dealt with by the interlocutors dated 24 February 1937, and 18 June 1937, respectively.

My Lords, my noble and learned friend Lord Thankerton desires me to say that he concurs in the opinion which I have just read.

LORD RUSSELL OF KILLOWEN (read by Lord Romer). My Lords, a perusal and consideration of the evidence in the case establish as against the respondent the following facts(i) that from about June 1932, down to the purchase of the Ford van, the farm vehicle (ie the vehicle which formed part of the farm assets, and which belonged to the respondent as owner of the farm) was the Humber car; (ii) that the insurance covered its user for both business and private purposes; (iii) that it was, to the knowledge of the respondent, used by James Buchanan for both business and private purposes, as well after as before

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Mrs James Buchanan had bought her own Standard car; (iv) that the Ford van was bought to take the place of the Humber car, which had broken down; (v) that the insurance company was asked to cover temporarily, and did cover temporarily, the van in substitution for the Humber car under the existing policy; (vi) that the only proposed alteration in the new insurance of which James Buchanan was specifically informed by the respondent was that the new policy was to be in his name, and not, as was the case with the Humber policy, in the name of James Buchanan; and (vii) that the respondents firm on 3 August 1933, forwarded to James Buchanan a certificate of insurance which had been sent to them by the insurance company, and which stated, inter alia, that the insurance was limited to the use of the vehicle “in connection with the policyholders business only.”

The question in this case is whether the respondent permitted James Buchanan to use the Ford van on a road without there being in force in relation to the user of the Ford van by James Buchanan the requisite policy of insurance in respect of third-party risks. But for the forwarding of the certificate to James Buchanan, the answer must, in my opinion, be clearly “Yes.” On the facts of this case, James Buchanan was entitled to assume, unless told otherwise, that the new farm vehicle took the place of, and was substituted for, the old farm vehicle for all purposes. In other words, he was entitled to assume that the permission to use the farm vehicle for private purposes continued, unless and until withdrawn. Indeed, the isolated position of the farm, 4 or 5 miles distant from the nearest village, and the meagre public means of transport available, made such permission almost, if not absolutely, a necessity for whoever acted as resident manager for the respondent. If this was the case, as, in my opinion, it was, then the respondent must, or ought to, have known that, unless James Buchanan was told that the Ford van must not be used for private purposes, he would continue the old Humber practice, and would use the Ford van for those purposes. In those circumstances, if and when James Buchanan used the Ford van for private purposes, the respondent would be permitting that user within the meaning of the Road Traffic Act 1930, s 35(1).

The question then remains whether the sending of the certificate can operate as a withdrawal by the respondent of the old permission, or a prohibition by the respondent of the user of the Ford van for non-business purposes. In my opinion, it cannot operate as either. It was not sent by the respondent, or on his instructions. It does not purport to come from the respondent individually, nor does the accompanying letter purport to be a communication from the farm owner to his manager. It comes from the solicitors office as a matter of routinenamely, the sending to the driver of the vehicle of the certificate which the statute requires, and which is normally kept in the car with the drivers licence. In fact, James Buchanan treated it as a matter of routine. He never read the certificate, but simply placed it at once inside his driving licence.

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He did not know that it referred to any limitation of user. My Lords, in these circumstances, I am of opinion that the respondent committed a breach of the section in question, and that the appeal should be allowed.

LORD WRIGHT. My Lords, I agree with the opinion which has been delivered by my noble and learned friend Viscount Caldecote LC and do no more than state very briefly my reasons for differing from the judgment appealed from.

The courts below proceeded on the footing that the construction and effect of the Road Traffic Act 1930, s 35, were as stated by the Court of Appeal in Monk v Warbey. This was rightly not questioned before your Lordships. S 35 of the Act, while in express terms merely creating a criminal offence, punishable by the penalties stated in the Act, does also by implication, on principles well settled and now familiar in the case of offences under similar statutes, create a civil liability in favour of any one of the class of persons whom the statute is intended to protect when such person is injured by reason of a breach of the statutory duty or obligation. The class of persons whom the section is intended to protect includes those who are likely to be injured by the negligent user of the vehiclethat is, prima facie and generally, persons using the highway. The appellants son, who was killed by James Buchanans negligence in driving the van, clearly falls within that class. The particular mischief which the section is aimed at averting is the danger that the user of the wrongdoing vehicle (if I may call it so) is not covered against third-party risks, so that the injured person has not the right, which he would have had if there had been an insurance, of recourse against the insurers under the Claims against Insurers Act 1930, if the wrongdoer cannot personally answer in damages. The provision is an important element in the policy of the legislature to secure the benefit of insurance for sufferers from road accidents. S 35 accordingly provides that it is an unlawful act for any person to use, or cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person such an insurance against third-party risks as the Act requires. The section is imperative, and precisely specifies the act or default constituting the offence, which is sufficiently established by proof of the matters specified. Intention to commit a breach of the statute need not be shown. The breach in fact is enough. In the present case, the van was not insured as the section required while it was being driven by James Buchanan at the time when the appellants son was killed. The actual policy only covered user for commercial purposes on the business of the farm, whereas at the moment of the accident James Buchanan was using it for private purposes. He was, accordingly, at least prima facie, guilty of a breach of the section. The question is, however, whether the respondent also committed a breach of the section.

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It is clear that the respondent did not “cause” his brother to use the van on the road as the brother was doing. To “cause” the user involves some express or positive mandate from the person “causing” to the other person, or some authority from the former to the latter, arising in the circumstances of the case. To “permit” is a looser and vaguer term. It may denote an express permission, general or particular, as distinguished from a mandate. The other person is not told to use the vehicle in the particular way, but he is told that he may do so if he desires. However, the word also includes cases in which permission is merely inferred. If the other person is given the control of the vehicle, permission may be inferred if the vehicle is left at the other persons disposal in such circumstances as to carry with it a reasonable implication of a discretion or liberty to use it in the manner in which it was used. In order to prove permission, it is not necessary to show knowledge of similar user in the past, or actual notice that the vehicle might be, or was likely to be, so used, or that the accused was guilty of a reckless disregard of the probabilities of the case, or a wilful closing of his eyes. He may not have thought at all of his duties under the section. The Lord President in his judgment stated that both parties before the First Division expressly accepted as the test for the present case:

… did the defender know or ought he to have known that the van was being or was likely to be used by his brother for his own private purposes?

This, so far as it goes, is a compendious and practical way of stating the crucial question. If the answer is in the affirmative, a case of permission is made out. However, Lord Carmont, in his dissenting judgment, with which in substance I agree, has stated the effect of s 35 with a rather different emphasis, and in more general terms:

I think that anyone who parts with the control of a motor vehicle completely without making any definite arrangement with the custodian as to use, impliedly permits all uses, and it is for the permitter to see that there is the requisite insurance cover in force in relation to a use which is in fact unrestricted.

It is not necessary in the present case to consider whether s 35 justifies a statement so unqualified, and whether, for instance, it covers cases where the custodian has used the vehicle in a manner outside what any reasonable person could have contemplated. To impose this unqualified obligation on a person who parts with the control of a vehicle without any definite arrangement as to its use might promote the general policy of securing that all vehicles should be insured, but I question whether the parting with control without definite express restriction gives a permission within the meaning of the section for unrestricted user. A definite arrangement could be shown without express words, by an implication from the circumstances. The statement of Lord Carmont, however, has the effect of putting on the person who parts with the control of the vehicle the onus of showing that the user, prima facie unrestricted, was in fact limited. This may,

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for practical purposes, come to the same thing as the mere test of what user is likely, which is sufficient for the present case. It must also be remembered that, as the section is dealing with a criminal offence, the onus is on the prosecution to prove the case.

In the present case, however, I think that the permission is established. In my opinion, the evidence shows that the control of the vehicle was handed over to James Buchanan for the same user as the Humber car had been handed over to himnamely, for the purposes of the commercial business of the farm, and for such reasonable personal use as was natural and usual where the farm was as remote or solitary as the farm in question. This position was not changed, as regards the Humber, by the acquisition of Mrs James Buchanans car. Her husband might want to go out by himself, or her car might be out of order. James Buchanan was never informed in any way that the terms of the insurance had been altered, or that he was not to use the van for private purposes. The substitution in the policy of the respondents name for that of his brother, of which the brother was aware, did not give that information. The van was perfectly suitable for James to drive by himself, or even to take his wife and friends. The sending of the insurance certificate without any further intimation was not sufficient notice to him of the change. He did not in fact read it. There was in truth no certainty or likelihood that he would. In my opinion, the necessary permission is established, with the result that the appeal should be allowed.

LORD ROMER. My Lords, I have had the privilege of reading beforehand the opinion of my noble and learned friend Viscount Caldecote LC. I agree with it entirely, and concur in the motion which has been proposed.

Appeal allowed.

Solicitors: J K Edmondson & Co, agents for W G Manson & Co, W S, Edinburgh, and Turner MacFarlane & Co, Glasgow (for the appellant); John Kennedy & Co, agents for Macpherson & Mackay, W S, Edinburgh, and McGrigor Donald & Co, Glasgow (for the respondent).

Michael Marcus Esq   Barrister.

Graumann v Treitel

[1940] 2 All ER 188


Categories:        BANKING AND FINANCE        

Court:        KINGS BENCH DIVISION        

Lord(s):        ATKINSON J        

Hearing Date(s):        14, 15, 16, 19 FEBRUARY, 1 MARCH 1940        


Money Rate of exchange Liquidated demand Debt in marks payable in Germany Whether action in debt or for breach of contract Rate of exchange prevailing when payment should have been made.

The parties carried on business in partnership in Berlin, with a branch in London registered as a limited company under English law. At the end of 1937, the partnership was dissolved, and thereafter the business in Berlin was carried on by the defendant. The taking of accounts

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between the partners showed a sum due to the plaintiff, payable in marks on 30 September 1938, in Berlin. In June 1938, the defendant left Germany and emigrated to England, both the parties being then resident in London. The partnership agreement was to be performed in Germany, and, by the currency law of that country, it was illegal to make the payment due there on 30 September 1938, because the plaintiff was then a non-resident. On behalf of the defendant, it was contended that an action would not lie in an English court to recover a debt payable in a foreign country in the currency of that country, the proper form of action being one for damages for breach of contract to pay German marks, and that there had been no breach of contract, because, by German law, no payment could legally be made to the plaintiff in Berlin, he having become a “currency foreigner.” It was found as a fact that there was nothing in German law to prevent a German subject resident outside Germany from paying a debt due to another German also outside Germany:

Held (i) a claim to recover a sum payable in a foreign currency in a foreign country is a claim in debt and not one for breach of contract.

(ii) the plaintiff was entitled to payment of the sum claimed in sterling, at the legal rate of exchange prevailing at the date when the payment should have been made.

Notes

It has been generally assumed for some time that, in the case of a liquidated demand expressed in foreign currency, the conversion has to be made at the rate prevailing on the date the debt became due. A detailed examination of the authorities, however, shows that the point is not free from doubt. The matter is fully explored in the judgment herein and decided in favour of the accepted view. The judgment is also of importance as a review of the effect of the recent currency legislation in Germany.

As to Rate of Exchange, see Halsbury (Hailsham Edn), Vol 23, pp 173, 174, para 251; and for Cases, see Digest, Vol 35, pp 173176, Nos 3863.

Cases referred to

Lloyd Royal Belge Société Anonyme v Dreyfus (Louis) & Co (1927) 27 Lloyd LR 288.

Celia (SS) v Volturno (SS) [1921] 2 AC 544; 17 Digest 159, 602, 90 LJP 385, 126 LT 1, affg SC sub nom The Volturno [1920] P 447, 454, n.

Di Ferdinando v Simon, Smits & Co [1920] 3 KB 409; 17 Digest 159, 604, 89 LJKB 1039, 124 LT 117.

Richardson v Richardson [1927] P 228; Digest Supp, 96 LJP 125, 137 LT 492.

Société des Hôtels Le Touquet Paris-Plage v Cummings [1922] 1 KB 451; 17 Digest 79, 8, 91 LJKB 288, 126 LT 513.

Re British American Continental Bank Ltd, Credit General Liegeois Claim [1922] 2 Ch 589; 17 Digest 160, 609, 91 LJCh 765, 127 LT 284.

Joachimson v Swiss Bank Corpn [1921] 3 KB 110; 21 Digest 639, 2188, 90 LJKB 973, 125 LT 338.

Uliendahl v Pankhurst, Wright & Co (1923) 39 TLR 628; 17 Digest 160, 611.

Peyrae v Wilkinson [1924] 2 KB 166; Digest Supp, 93 LJKB 121, 130 LT 511.

Vionnet (Madeleine) et Cie v Wills [1939] 4 All ER 136; Digest Supp, 161 LT 311.

Kleinwort, Sons & Co v Ungarische Baumwolle Industrie Aktiengesellschaft and Hungarian General Creditbank [1939] 2 KB 678, [1939] 2 All ER 782; Digest Supp, 108 LJKB 861, 160 LT 615, affd [1939] 3 All ER 38.

Page 190 of [1940] 2 All ER 188

De Beéche v South American Stores Ltd and Chilian Stores Ltd [1935] AC 148; Digest Supp, 104 LJKB 101, 152 LT 309.

Lady Duncannon (Owners) v Eisenach (Owners), Simson & Goliath (Owners) v Eisenach (Owners) [1936] 1 All ER 855; Digest Supp, sub nom The Eisenach 155 LT 442.

Action

Action claiming £6,799 6s 3d, the sterling equivalent of RM 78,435.50 payable in Berlin on 30 September 1938, at the official rate of exchange on the due date, with interest. The facts are fully stated in the judgment.

A Aiken Watson for the plaintiff.

Cyril T Miller for the defendant.

Watson: It is clear that the contract may be sued on in this country. An English court can only give judgment in sterling. As to the rate of exchange, there is only one rate of exchange, and that is such a rate as will enable the debtor in England to acquire credit in Germany to the extent of his indebtedness. The mere fact that the English debtor can possess himself of marks in London at a low rate of exchange should not be recognised in this court. Such marks could not be used in Germany for any purpose without a breach of German currency laws, and, by the comity of nations, this court will not countenance such a breach. In any event, such marks would not, on the evidence of the defendants own expert witnesses, be a good discharge in German law of an obligation to pay money in Germany. [Counsel referred to Vionnet (Madeleine) et Cie v Wills, Peyrae v Wilkinson and Kleinwort Sons & Co v Ungarische Baumwolle Industrie Aktiengesellschaft and Hungarian General Creditbank.]

Miller: This is a German agreement to pay in Germany. The parties have now become currency foreigners under German law, but the claim must be determined by that law, so far as the obligation is concerned. The only way in which performance could be made in Germany would be by payment into a blocked account by permission of the authorities, if the creditor agreed to accept it in full satisfaction. The plaintiff refused to give a declaration to that effect, as is required by German law. There has been no breach of an agreement to pay German marks in Germany. The debtor has done all he could do. It is impossible to fulfil an obligation to pay German marks in England. It cannot be that the obligation is to pay sterling. Once the defendant has tendered marks in Germany, the plaintiff cannot ask that a substituted performance should be made here. There has been no breach in Germany. The claim here, if at all, is for damages for breach of contract in Germany. The ascertainment of the rate of exchange is not the proper way of assessing the damages. If the payment tendered had been accepted, the marks could have been bought in London much more cheaply. [Counsel referred to De Beéche v South American Stores Ltd and Chilean Stores Ltd, Kleinwort Sons & Co v Ungarische Baumwolle Industrie Aktiengesellschaft and Hungarian General Creditbank and Lady Duncannon (Owners) v Eisenach (Owners).]

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Watson in reply: It is immaterial whether the form of the claim is for the debt or for damages for breach of contract by non-payment on the due date. If the form is for damages, those damages must be assessed at the date of the breach, which was the due date of the debt.

A Aiken Watson for the plaintiff.

Cyril T Miller for the defendant.

1 March 1940. The following judgment was delivered.

ATKINSON J. This case arises in this way. On 31 March 1933, there was a partnership agreement between the defendant and one Meyer and the plaintiff. They became partners in a German business under the name of Treitel & Meyer, the business being that of manufacturing ladies gowns. Meyer left the firm at the end of 1936, and the business was then carried on by Treitel and Graumann. On 12 June 1937, a fresh partnership agreement was signed, under which they were to carry on together until, in any event, 31 December 1937, and were to carry on for another 3 years unless notice of termination was given. The plaintiffs interest in the capital of that concern amounted to 35 per cent.

In 1934, the firm had registered a company in London for carrying on a similar business, and I accept Graumanns evidence that the object of that was, as he put it, to form a sort of nest-egg in London, so that, when, as they expected might well happen, Jews were more or less compelled to leave Germany, there should be a business for them to retire to in London. No fresh capital was brought into the concern, but capital was provided by exporting from Germany goods to the value of some £2,000, and in that way the English company acquired its capital. When Meyer retired, he retired from all interests in both concerns, and in 1937 the plaintiff and the defendant were the only people interested in these two concerns.

Notice to terminate the partnership was given by the defendant, and the partnership ended at the end of 1937. On 1 January 1938, the plaintiff was appointed sales manager of Treitel & Meyer Ltd, the London concern, until 15 June 1938. In the meantime, the value of his interest in the two concerns was being ascertained, and, this having been ascertained, on 18 June an agreement was signed between the parties providing for the payment out of his capital to the plaintiff. I must just run through that agreement. It is dated 18 June 1938, and it is an agreement between Hans Treitel of Berlin, of the one part, and Julius Graumann of Berlin, of the other part:

Messrs. Treitel and Graumann were the sole proprietors of the partnership carried on under the firm of Treitel & Meyer. Mr. Graumann left the partnership on Dec. 31, 1937, and has already made the necessary documentary statements. …

Then Graumann leaves the business and all assets to Treitel, and the agreement continues as follows:

Mr. Graumann receives (a) the amount of his capital account amounting to approximately RM. 108,000 as may be seen from the balance sheet drawn up; (b) a single indemnity amounting to RM. 80,000. Of the amount due to Mr. Graumann a part amounting to RM. 50,000 has been paid at the end of Mar., 1938; the balance is payable as to RM. 60,000 on the last day of June, 1938, and

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as to the remainder on the last day of Sept., 1938. For every payment 10 days of grace are granted. …

Then there is a provision for interest at the rate of 4 per cent. This action is an action to recover the last of those payments due on 30 September 1938, and there is no dispute about the amount. I should just add that, by an agreement dated 27 November 1938, Treitel sold the German business to one Paul Doerr, who had been in the employ of the firm.

The defendant left Berlin for good on 22 June 1938. The plaintiff had been in London throughout 1938. He went over to Berlin for the signing of this agreement, and returned to England on 19 June. On 3 July, he was in Berlin for two days, and on 10 July for three days. Apart from that, he has not been back to Berlin. In the result, the amount was not paid, and the plaintiff sues for it.

English courts have never had any difficulty in assuming jurisdiction in actions in personam where the defendant is in England, although the cause of action arose in some other country. In Diceys Conflict of Laws (5th Edn), p 228, r 59, it is stated as follows:

When the defendant in an action in personam is, at the time of the service of the writ, in England, the court has jurisdiction in respect of any cause of action in whatever country such cause of action arises.

Then among the illustrations given one finds these, at p 234:

X incurs a debt to A in France. A brings an action against X for the debt. The court has jurisdiction to entertain the action. X a Frenchman makes a contract in France with A for the delivery of goods by X to A in Paris. A brings an action against X for not delivering the goods. The court has jurisdiction.

There are other cases, to which I shall have to refer later on, which make it quite clear that, generally speaking, the mere fact that this was a contract to pay a debt in a foreign currency in a foreign country creates no difficulty whatever about the defendant being sued, if he is in this country at the time when he is served with the writ. One further principle could be invoked, and that is set out as follows in Diceys Conflict of Laws (5th Edn), p 246:

The court has jurisdiction whenever any relief is sought against any person domiciled or ordinarily resident in England.

There is no doubt that the defendant is domiciled in this country, because, when he left Germany, what he did was to come here and carry on the limited company of Treitel & Meyer Ltd.

Is there any reason why the ordinary rule should not apply? Counsel for the defendant says that there are two very good reasons why that ordinary procedure cannot apply. The first one is that the contract was one to be performed in Berlin, and in Berlin only, and that payment there was unlawful. The second one is that it is not true to say that an action for debt can be brought in this country to recover a sum payable in another country in a foreign currency, that the true view is that only an action for damages for breach of contract can be brought, and that there was no breach of contract in Berlin,

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because payment could not lawfully be made there. Therefore, he says, the plaintiff cannot succeed in this action.

In order to appreciate the points, it is necessary to refer to the German currency regulations. The main object of those regulations, of course, is to prevent German marks from leaving the country, and, indeed, to prevent them from coming into the country except under the control of the Devisenstelle, which I gather is some financial authority created by the German government. I have been supplied with a copy of the relevant provisions, and, for the purpose of these regulations, German nationals are divided into two classes. They are either currency inlanders or currency foreigners. Broadly speaking, a currency inlander is a German who is living in Germany or carrying on business out of Germany, with the consent of the authorities, whereas a currency foreigner is a German who is living out of the country or carrying on business out of the country without the permission and consent of the authorities.

At the time when this agreement was entered into, both the parties were currency inlandersthe defendant because he lived in Berlin, and was domiciled there and carried on business there, and the plaintiff because he was carrying on their branch in London with the consent of the authorities.

The difficulty which arises under the various regulations is that, whereas there is perfect freedom as to payment of debts by one inlander to another, there is only one way in which a debt to a currency foreigner can be discharged according to German law, and that way is this. The money has to be paid into a government-controlled bank to the credit of a blocked account of the creditor. A blocked account means an account upon which the creditor cannot draw at will. He can use it only with the consent of the authorities, and, if he wants to take the money out of the country, the only way in which he can do so is to sell that credit to some government-controlled bank in Germany. The price he gets for it varies slightly, but is in general somewhere about 6 per cent of the amount. From the point of view of the currency foreigner, therefore, payment into a blocked account is a very unsatisfactory way of discharging his debt, and even that can be done only with the consent of the Devisenstelle, and that consent will be given only if the creditor signs a declaration that he is willing to accept payment in that way in full discharge of his debt.

There has been a very interesting decision upon the effect of this legislation by the Supreme Court in Germany called the Great Senate for Civil Matters. I do not quite know how cases get to the Great Senate, but I gather that, if there is a difference of opinion between the minor courts, or if there is an appeal from one of the minor courts on some point of law, it goes to this Great Senate, on which, I gather, most of the judges sit together, and answer in a binding way the points submitted to them. The point submitted to them for the purpose of this

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case was that the plaintiff, who had a domicil in Amsterdam, had lent money to some German inlanders and wanted the money back. The defendants had offered payment in the only legal waynamely, into a blocked account. The plaintiff had refused to take it in that way. She had refused to agree, and had refused to sign the necessary declaration, that she would take the money in discharge of her debt. The question was whether or not the defendant was thereby discharged, and, in any case, what the position was. The court held that a currency foreigner was not bound to take payment in that way, but that, if he refused, the only result was that the debt was in suspense, and that the debtor must wait until the creditor was ready to take payment in that way, or until there was a change of circumstances permitting payment to be made in some other way. Perhaps the most interesting part of the judgment is the passage where the court indicates that a debtor could quite lawfully:

… execute his performance if he, too, would have his domicil abroad, or if creditor and debtor would have their domicils in the inland. The hindrance lies with the fact that the German foreign currency legislation, in the event of the creditor having his domicil abroad, the debtor his domicil in the inland, prohibits the debtor from executing his performance by interference of supreme authority. The cause of hindrance rests, therefore, predominantly with the debtor, and not with the creditor.

What they are pointing out there is that the whole difficulty arises because the debtor is in the country, and an inlander, while the creditor is a foreigner, and out of the country. If the position changes, however, and the debtor also changes his domicil and goes abroad, then he can lawfully execute the performance of his contract. On the other hand, if the creditor became an inlander, then they would both be inlanders, and again the debt could be paid. Until one of those events happened, or there was a change in the law, then payment could be made in that one way only.

All this might be very relevant to this case if the defendant had continued to be an inlander, but it is conceded that the defendant ceased to be an inlander within a week or two of 22 June 1938. He left Germany for good on that date, and, in the case of a Jew, the presumption arose almost at once, I am told, that he meant to leave for good. Apparently the authorities gave him credit for a certain amount of intelligence, and therefore presumed that, once he got out of Germany and the conditions in which he was then living, he would take very good care not to come back again. It is common ground that within a few days of 22 June he became a currency foreigner. The plaintiff made up his mind early in September to acquire an English domicil, and well before the end of September he became a currency foreigner. Therefore, by the due date for payment of this debt, both parties had passed out of German currency law altogether, except as to the property of Treitel which remained in Germany, and which was very soon under contract of sale to Paul Doerr.

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There is no doubt that, once they both became currency foreigners, there were no currency restrictions which prevented Treitel from paying his debt. That was also the effect of the decision to which I have just referred.

Then what becomes of this point of illegality? It is perfectly true that the courts here will not enforce a contract if the performance here would be unlawful by the law of the country where it was to be performed. Here payment is not unlawful by any German law and there is no difficulty of that kind in the way of this court enforcing the contract. It seems to me, therefore, that the first point taken fails.

The second contention involves two propositions. First, it is said that an action for debt cannot lie to recover a sum payable in a foreign currency in a foreign country, and that the only remedy is an action for damages for breach of contract. The second proposition involved is that the contract was one for payment in German marks, and in German marks only, in Berlin, and in Berlin only, and that, as payment there could not be made, because the plaintiff would not accept payment into a blocked account, therefore there had been no breach of contract in Berlin, and that, there being no breach of contract in Berlin, the plaintiff could not sue here for damages for breach.

I have given a good deal of thought to that contention, but it seems to me that it must fail for several reasons. It is quite true that the debt was expressed in a foreign currency, but Dr Loewenfeld and Dr Lachmann both took the view that, for all that, it was merely a debt expressed in a foreign currency. They said that German law recognises a distinction between a debt expressed in one currency and a debt where payment in a particular currency is expressly stipulated. That view they based on para 244 of a decree, which was translated in this way:

If a money debt expressed in a foreign currency is payable within Germany, payment may be made in the currency of the empire unless payment in the foreign currency is expressly stipulated for.

There, it is said, is a clear recognition of the difference between a debt expressed in a foreign currency and a debt which, by the terms of the agreement, is expressly stipulated to be paid in only one currency. They also point out that there is nothing in this agreement which provides for performance in Germany or in Berlin only. They say that there is nothing there making it obligatory to pay in Germany or in Berlin only. There is nothing to limit the place of payment at all, although para 269 of the German code provides as follows:

If the place of performance is neither determined nor to be inferred from the circumstances … the performance has to take place where the debtor was domiciled at the time when the relationship creating the obligation arose.

By para 270, it is provided that, if there is no contractual provision to the contrary:

… the debtor has to transmit money at his cost and risk to the creditor at the latters domicil. … If, in consequence of a change of domicil or place of business

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occurring after the relationship creating the obligation has come into existence, the costs or the risk of the transmission is increased, the creditor has to bear the increase of the costs in the former case and the risk in the latter.

It is not as if the contract provided in express terms for payment in one place, and in one place only, and, in any event, the obligation is to send the money to the creditor. The creditor was in London at the time. He had gone over to Berlin only to sign the document. He had been in London for some considerable time. He was going back the next day, and payment would normally have to be made to him there. Indeed, Dr Loewenfeld put it in this way. The primary obligation rested on Treitel to pay the debt. Prima facie, it was payable in Berlin, but, if he and his creditor were in London at the due date of payment, the obligation remained, and could be enforced there. I think that that is a proper summary of his view, and, if his evidence differs from that of Dr Wolff, I prefer it. However, I do not think that it does, because in cross-examination Dr Wolff would not go so far as to express the view that, when they are both in London together, even if the primary place of discharge was Berlin, performance cannot be sought here.

Then comes a much more interesting pointnamely, is the action one for damages for breach of contract or for debt? Counsel for the defendant relied upon Lloyd Royal Belge Société Anonyme v Dreyfus (Louis) & Co. I need not trouble with the facts in that case. There was a dispute between Louis Dreyfus & Co and the plaintiffs, and there were cross-claims, which resulted in an agreement made during some litigation in France, under which a certain sum in francs was payable by Louis Dreyfus & Co to the plaintiffs, and an action was brought here for that money. I think that the contention was that the agreement had not been kept by the other side, and that the rights were greater than those appearing in the agreement, but Roche J held that they were bound by the agreement. They could only enforce the agreement, and he treated it as a claim for debt, and gave judgment for the amount claimed, the rate of exchange to be calculated at the date of payment. He based his view as to that upon various decisions, to which I will refer in a moment, which were cases dealing with debt, and with nothing else. In giving judgment in the Court of Appeal on that point, Bankes LJ said, at p 291:

In an action brought in England, as this is, the only cause of action, when once you accept the agreement, is an agreement to pay fr. 18,000; and if you bring that action in England it seems to me to follow that that must be an action for damages for breach of an agreement to pay fr. 18,000 because you cannot bring an action in debt in England for francs, and there is no law or practice or anything else which entitles you to change the nature of your cause of action by a calculation on the back of the writ in which you say: “My claim is fr. 18,000, and I convert it at such-and-such a rate of exchange into sterling, and I claim that sterling as a debt,” because the agreement was to pay so many francs. That being so, I think that the cause of action must be, technically speaking, a cause of action for damages for failure to pay that amount of francs.

In the same case, Scrutton LJ was very guarded about it, and he

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certainly did not express any assent to that view. In giving judgment, he said, at p 293:

I think there is no doubt that as far as actions for breach of contract or for tort for damages are concerned, the case of The Volturno, which was tort, approving the case of Di Ferdinando v. Simon, Smith & Co., which was contract, has settled that you will take the exchange at the date of breach; and I am not at all sure that in actions for debt it will not always turn out that it is damages for non-payment of money at the agreed time. But I do not think it is necessary to give a final judgment upon that point.

In his judgment, Romer J was as positive about it as Bankes LJ and said, at p 294:

In no other way that I can see, except by bringing an action for specific performance, could the plaintiffs claim, by action in this country, payment of the fr. 18,000; all that they could claim would be damages for failure to deliver that commodity.

The report of that case does not refer to the argument of counsel, nor does it state how far the numerous authorities to the contrary were brought to the notice of the court.

That case has been followed once in the Probate Division by Hill J in Richardson v Richardson, in which, referring to that case, Hill J said, at p 234:

The Court of Appeal has made it clear that the cause of action upon refusal to pay in a foreign currency is for damages and not for debt.

The difficulty is that there is a long line of authorities which make it quite clear that actions for debt do lie in this country. A number of them are referred to in the illustrations in Diceys Conflict of Laws, but I need only begin for my purpose with Société des Hôtels Le Touquet Paris-Plage v Cummings, where the defendant in 1914 contracted in France a debt to the plaintiffs, a French hotel company, of some fr 18,000. She was sued in this country for the money, and the question was whether the debt had been discharged by a certain payment in francs. However, nobody had any doubt in that case, or expressed any doubt, as to whether or not the action for debt would lie. The only point was whether the debt had been paid, and the Court of Appeal decided that it had. In the course of his judgment, Atkin LJ said, at p 463:

Inasmuch as the obligation to pay to the plaintiffs in France Frs. 18,035 was a personal obligation, the plaintiffs would also have been entitled to sue the defendant in the courts of any country where they found her, provided that the municipal law of such country recognised personal obligation contracted outside its own territory as would be the case in most states. The plaintiffs, therefore, have the right to sue the defendant in the English courts to recover the debt of Frs. 18,035 due to them in France. Judgment would only be given in the English courts expressed in English currency. At what date the exchange must be calculated is a matter of controversy that I need not deal with now.

That is one decision. In the same year, the point was dealt with by P O Lawrence J in Re British American Continental Bank Ltd, Credit General Liegeois Claim in the Chancery Division. In that case, the bankers were claiming the right to prove for an overdraft. P O Lawrence J said, at p 593:

From the facts I have stated it will have been gathered that the claim of the

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applicants is simply one by bankers against their customer in respect of an overdraft. The relationship between banker and customer has recently been fully explained by the Court of Appeal in the case of Joachimson v. Swiss Bank Corpn. Applying the principles there laid down the claim of the applicants is for a debt which became due from the bank to the applicants in Brussels in Belgian currency on Jan. 10, 1921.

Then P O Lawrence J proceeded to deal with the question as to the date on which the rate of exchange should be calculated, and he treated it as a claim for debt, and as a claim for debt only.

The same point arose before Rowlatt J in 1923 in Uliendahl v Pankhurst, Wright & Co. The headnote is as follows:

In an action for the price of goods sold and delivered, where the price is payable in a foreign currency, the rate of exchange to be taken is that prevailing at the date when the debt became due …

A large number of cases had been cited to the judge as to the proper date, and in his judgment he is reported as having said, at p 629:

In actual practice the theory that the rate of exchange prevailing at the date of the judgment was that which must be taken would lead to great inconvenience. Clearly it was not so in a case of tort or of damages for breach of contract, and he did not see why it should be so in a case of debt.

There Rowlatt J treated it as a debt, and gave judgment for the debt claimed.

In Peyrae v Wilkinson, an action tried by Bailhache J, the judge was dealing with a claim for some fr 10,000 payable in Lyons. He treated it as a claim for debt, and gave judgment accordingly. He said, at p 167:

With regard to the date at which the rate of exchange ought to be taken it is clear that in actions for damages for breach of contract the rate of exchange current at the date of the breach has to be taken in calculating the damages payable in English currency, but Mr. Monckton has put forward an ingenious argument, namely, that in an action for debt for goods sold and delivered the rate of exchange current at the date of judgment ought to be taken for the purposes of the conversion of the debt into English currency and not the rate of exchange current at the date of payment, as the debt exists in francs until it is converted into sterling.

The judge goes on to say that there is no real difference, and he again treats it as a claim for debt.

To complete matters, only last year in the Court of Appeal there was Vionnet (Madeleine) et Cie v Wills. The case raised the same point as to the date at which the rate of exchange was to be calculated; and the headnote in the Law Times Reports is as follows:

A creditor for a debt incurred abroad in a foreign currency is entitled in a suit in the courts of England to recover the equivalent of the debt in our currency calculated according to the rate of exchange prevailing when the debt first became payable.

The judgment deals first with what the law is on a claim for damages, and then it proceeds to discuss whether or not the same rule applies in an action for debt. Various cases to which I have referred were dealt with, and judgment was given for the debt, the rate of exchange being calculated at the date at which payment ought to have been made.

Page 199 of [1940] 2 All ER 188

The court, of course, must be in a difficulty, as counsel for the defendant was good enough to admit, when there are conflicting decisions of the Court of Appeal and each side can produce a decision of the Court of Appeal deciding the point in its favour. I suppose I am entitled to choose between these decisions. I cannot ignore this long line of authorities, nor can I ignore the fact that Vionnet (Madeleine) et Cie v Wills seems to me to make it perfectly clear that the claim here is one of debt, and not one for damages for breach of contract.

If that is so, there is nothing left of the argument of counsel for the defendant based on this being a claim for damages. I do not think that the claim arises in that way. I think that it was for debt, and that in September there was nothing illegal about payment in London, and that the plaintiff is entitled to his judgment.

There are one or two other points pleaded and relied upon. The first is that, earlier in the year, there had been a payment of 40,000 marks into some bank in Germany to a blocked account for the benefit of the plaintiff. In fact, that bank had no authority from the plaintiff to receive any payment. It was not his bank and had no authority to receive the payment. The plaintiff knew nothing of it. He never assented to it, and obviously that point cannot be relied upon.

Then there was a payment which was made to the plaintiffs solicitor in Berlin on 4 October 1938. It was not the full payment, but it was treated as the full payment, because there was clear readiness and willingness to pay the rest of the money in the same way if the plaintiff would accept it. He refused to take it, saying that he was not bound to do so. His solicitor communicated with the authorities about it, and there are two letters which have some bearing on the matter. On 18 November 1938, the currency authorities wrote as follows to the solicitor:

I am unable to consent to your application of Nov. 11 to accept the sum of RM. 40,000 remitted to you by Treitel & Meyer Berlin in favour of Mr. Julius Graumann, at present residing in London. I would ask you to return to the inland resident paying it, the sum which has been held in trust by your partner Mr. W. Feaux de Lacroix, solicitor and notary in Berlin.

On 17 April 1939, the solicitor, who, wanting to be certain that there was no difficulty about the proceedings here, had applied again to the authorities, received the following letter:

To my regret I am not in a position to grant Mr. Hans Treitel of London the permission to use approximately RM. 78,000 to the debit of his blocked funds in Germany in favour of the emigrant Mr. Julius Graumann of Londons blocked account at the Commerx & Privatbank Dep. Kasse A. in Berlin C.2, Hausvogteiplatz 10, because it is a question of the settlement of a claim of one currency foreigner against another currency foreigner which latter (Mr. Graumann) is in a position to make effective abroad.

There the currency authorities in Berlin are expressing precisely the view which I have formednamely, that they were not going to agree to any payment out of Germany to the plaintiff, because the defendant had now become a currency foreigner. It was a simple question of one currency foreigner paying another in foreign currency, and there was

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nothing to prevent his doing so. Although I do not suppose it was necessary to obtain the consent of the authorities or their view, it is of interest to have it.

A further question arises, not as to the date at which the rate of exchange is to be taken, but as to the rate at which it is to be calculated, and I must say that I have been a little puzzled about that. When I go into it, however, I really do not think that I have any choice but to calculate the sterling at the official current rate of exchange at the time when payment ought to have been made. Again and again in the cases it is put as the current rate of exchange between the two countries, and in this case that was in the neighbourhood of 12 marks to the £. The point of doubt which has arisen in my mind is that in September 1938, the defendant in London could have bought marks on the foreign exchange market here at about 36 or 37 to the £. It seems quite clear that, if he had chosen to produce marks, and to pay to the plaintiff the number of marks which he owed him, that would have been a good discharge. Société des Hôtels Le Touquet Paris-Plage v Cummings would be an authority for that. That position is made quite clear in Diceys Conflict of Laws (5th Edn), p 730:

A contract is clearly discharged by payment under its proper law and if a foreign country re-values its currency no doubt effect will be given to this change in the enforcement in England of any contract whose proper law is foreign. But, failing that, discharge in the legal currency is valid, even if it be worthless paper, or have fallen greatly in value, or, of course, have appreciated.

If the defendant had chosen to acquire marks and to pay, he might have been able to plead a discharge. He has not done that and it has never been suggested that, when, for the purpose of the judgment, one comes to convert the amount of the debt into sterling, one can take the rate at which foreign currency could or might have been bought on the foreign exchange market in London. It appears to me that I am driven to take the official rate of exchange existing at the date when payment ought to have been made, which comes to £6,799 6s 3d. It is fair to point out that, in arriving at the marks to be paid out by the defendant at the dissolution, the value of the English capital was turned into marks at that same rate, and, therefore, there is really no injustice done to the defendant. However, I am bound by the rule, and I have to apply it.

Judgment for the plaintiff for £6,799 6s 3d (being the debt with interest to date of writ) and interest to date of payment with costs.

Solicitors: Kerly Sons & Karuth (for the plaintiff); Buckeridge & Braune (for the defendant).

C St J Nicholson Esq   Barrister.


Evans v Oakdale Navigation Collieries Ltd

[1940] 2 All ER 201


Categories:        QUANTUM: HEALTH; Other Health        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        20, 21 FEBRUARY, 4, 8, 11, 18 MARCH 1940        


Workmens Compensation Compensation Amount Partial incapacity from first accident at time of certification of silicosis Amount of compensation for silicosis Workmens Compensation Act 1925 (c 84), ss 9, 43, 47 Various Industries (Silicosis) Scheme 1931 (SR & O 1931, No 342), paras 5, 8, 9.

On 12 August 1935, while in the employment of the appellant company at a wage of £3 11s 1d per week, the respondent met with an accident to his ribs. While still partially incapacitated from that accident, he was certified as suffering from silicosis, this disability being dated as from 18 November 1936. After certification the appellant company paid him 30s per week compensation, 16s 9d being in respect of the partial incapacity arising from the rib accident and 13s 3d being in respect of the silicosis. On 15 July 1937, the appellant company alleged that the respondent had completely recovered from the rib accident, but continued to pay him 30s per week, all of which was then allocated to the silicosis. On 16 December 1937, the arbitrator, whose award was upheld on appeal, held that the respondent was still suffering from the partial incapacity resulting from the rib accident, and that he was entitled to 16s 9d per week compensation therefore. The appellant company thereupon contended that the compensation in respect of the silicosis should be calculated on the basis that the respondent was a partially incapacitated man. The appellants also contended that under the Workmens Compensation Act 1925, s 9(1)(b), in fixing the compensation for silicosis, the court should have regard to the payment they had made for the same period in respect of the rib injury. The respondent contended that he was entitled to be paid compensation calculated on the basis of his earnings for the 12 months in which he was last employed in the process in which he contracted the diseasenamely, 30s per week compensation based on earnings of £3 11s 1d per week:

Held (i) the respondent was entitled to compensation in respect of the silicosis at the full rate of 30s per week, the rate of compensation being based, not on the earnings of the workman at the date of certification, but on his earnings during the last 12 months in the employment in the process which gave rise to the disease.

(ii) the payments made in respect of the rib accident ought not to be taken into account, as they were made in respect of a different liability.

Notes

The Court of Appeal has distinguished the case where there are two physical accidents from that where one of the accidents is a notional onethat is, certification of an industrial disease. The Act provides a different method of computation of the pre-accident earnings in cases of industrial disease, and, for this reason, where the second accident is a notional one, the workman is not limited in the amount of the compensation in respect of the second accident to the capacity for work remaining after deduction of the incapacity then existing by reason of the first accident.

As to Compensation in Cases of more than one Accident, see Williss Workmens Compensation (32nd Edn), pp 283285; and for Case, see Digest, Supp, Master and Servant, No 3362a.

Cases referred to

Evans v Oakdale Navigation Collieries Ltd [1939] 2 All ER 358; Digest Supp, 32 BWCC 51.

Wheatley v Lambton, Hetton & Joicey Collieries Ltd [1937] 2 KB 426, [1937] 2 All ER 756; Digest Supp, 106 LJKB 667, 156 LT 490, 30 BWCC 171.

Page 202 of [1940] 2 All ER 201

Thompson v London & North Eastern Ry Co [1935] 2 KB 90; Digest Supp, 104 LJKB 515, 152 LT 571, 28 BWCC 95.

Bacon v Wills (A W) & Sons Ltd [1933] 2 KB 493; Digest Supp, 102 LJKB 611, 149 LT 385, 26 BWCC 374.

Harwood v Wyken Colliery Co [1913] 2 KB 158; 34 Digest 348, 2803, 82 LJKB 414, 108 LT 283, 6 BWCC 225.

Cole v Amalgamated Anthracite Collieries Ltd (1933) 26 BWCC 560; Digest Supp.

Colville v Tigue (1905) 8 F (Ct of Sess) 179; 34 Digest 448, case h.

Lysons v Knowles (Andrew) & Sons Ltd, Stuart v Nixon & Bruce [1901] AC 79; 34 Digest 423, 3433, 70 LJKB 170, 84 LT 65, 3 WCC 1, revsg [1900] 1 QB 780, and revsg [1900] 2 QB 95.

Lewis v Wrexham & Acton Collieries Ltd (1916) 85 LJKB 1456; 34 Digest 402, 3283, 115 LT 367, 9 BWCC 518.

Lewis v Cammell, Laird & Co Ltd (1929) 22 BWCC 410; Digest Supp.

Lewis v Guest, Keen & Nettlefolds Ltd, Watkins v Same, Tucker v Same, Ingram v Crawshay Brothers [1928] 1 KB 20; Digest Supp, 96 LJKB 664, 137 LT 386, 20 BWCC 359.

Appeal

Appeal by the respondents from an award given by His Honour Judge Thomas at the Tredegar County Court on 20 January 1940. The facts are fully set out in the judgment of Slesser LJ.

F W Beney and Griffith Williams for the appellant company.

Gilbert Paull KC, G R Blanco White KC and A A Warren for the respondent.

Beney: The measure of compensation must be related to the loss of earning power: Harwood v Wyken Colliery Co. There is no distinction in principle between cases where injury by accident overtakes an already wholly incapable man and cases where such injury overtakes an already partially disabled man. In neither case should the man be compensated for something already lost. The rules as to assessment either in the Act or in the scheme cannot be used to cut down the right to compensation (Lysons v Knowles (Andrew) & Sons Ltd, Stuart v Nixon & Bruce), or to enlarge it (Wheatley v Lambton, Hetton & Joicey Collieries Ltd), and, if the scheme purports to do so, it is to that extent ultra vires. Compensation in cases of industrial disease must be calculated with reference to the earnings of the workman in the employment of the employer who last employed him, but that only means that the compensation for total incapacity must not exceed 50 per cent of those average weekly earnings. Bacon v Wills (A W) & Sons Ltd decided no more than that the words “average weekly earnings during the previous 12 months” in s 9 of the Act should be replaced by the words “average weekly earnings during the 12 months when he last worked for the employer in whose service he contracted the disease.” If the employer who has to pay compensation in respect of an industrial disease has already paid compensation for the same period of incapacity, although such compensation is paid in respect of another accident, he can ask the arbitrator fixing the compensation for total incapacity due to the disease to have regard to the

Page 203 of [1940] 2 All ER 201

payments he has made. [Counsel also referred to Lewis v Wrexham & Acton Collieries Ltd and Thompson v London & North Eastern Ry Co.]

White KC: The later accident is irrelevant. Compensation must be calculated under the scheme in exactly the same way as though the workman had been later injured in an ordinary road accident. This case is covered by Cole v Amalgamated Anthracite Collieries Ltd unless there is anything to the contrary in Wheatley v Lambton, Hetton & Joicey Collieries Ltd, but this latter case decides no more than that compensation cannot be obtained if there is no capacity to be lost. This argument does not apply if there is any capacity at all to be destroyed. Thompson v London & North Eastern Ry Co only decided that, where a man is totally incapacitated, the Act must be applied to his case independently of whether or not he has been the subject of a previous accident: Wheatley & Lambton, Hetton & Joicey Collieries Ltd, Evans v Oakdale Navigation Collieries Ltd, Lewis v Cammell, Laird & Co Ltd and Lewis v Guest, Keen & Nettlefolds Ltd.

F W Beney and Griffith Williams for the appellant company.

Gilbert Paull KC, G R Blanco White KC and A A Warren for the respondent.

18 March 1940. The following judgments were delivered.

SLESSER LJ (read by Luxmoore LJ). On 12 August 1935, Thomas Evans, a collier, met with an accident while working for the appellant company. At the time he was earning £3 11s 1d per week. Several ribs were fractured, and from then until 9 December 1936, he was paid compensation on the basis of total incapacity at the rate of 30s per week. On that date, his employers, asserting that his earning capacity was then to be assessed at £1 17s 6d per week, later taken to be £1 19s, having served notice under s 12 of the 1925 Act after examination by their doctor, there being no counter-notice, reduced the compensation to 19s per week.

On 22 February 1937, the Silicosis Medical Board certified the workman to be suffering from silicosis as a result of his employment, and dated the disability back to 18 November 1936. Thereafter, the employers again paid him 30s, allocated, as the receipts show, as to 16s 9d partial incapacity due to the rib accident, and as to 13s 3d due to silicosis. On 15 July 1937, they served a notice on him alleging that he had wholly recovered from the effects of the 1935 rib accident, but continued to pay him 30s solely, as the receipts show, in respect of silicosis. On 22 August 1938, the workman claimed arbitration, alleging that, apart from the 30s he was receiving in respect of silicosis, he was still entitled to the 16s 9d in respect of the 1935 rib accident.

The judge held on 16 December that on 18 November 1936, the workman at the time of the notional accidentthat is, silicosiswas still partially incapacitated from the rib accident and thereafter, and awarded the workman 16s 9d per week from 15 July 1937, when the employers had stopped that payment. The employers unsuccessfully appealed to this court, and the award was affirmed.

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In that appeal before Sir Wilfrid Greene MR, Clauson and Du Parcq LJJEvans v Oakdale Navigation Collieries LtdSir Wilfrid Greene MR points out, at pp 360, 361, that, in accordance with Wheatley v Lambton, Hetton & Joicey Collieries Ltd:

… so long as the total incapacity from the first accident lasted, no compensation could be recovered in respect of the second accident, although in respect of that second accident a declaration of liability might properly have been made. That would have been the situation on such a finding of fact, but the county court judges finding of fact, if it can be supported, brings the case within the clear authority of the decision of this court in Thompson v. London & North Eastern Ry. Co.

In the present proceedings, the workman, basing his claim solely on the total disablement by silicosis, claimed 30s per week on the basis of total incapacity from 17 December 1936, credit being given for amounts received. He stated that since 15 July 1937, he had received in all only £1 2s 3d per week for silicosis, based on an earning capacity agreed by the employers and workman to be £1 19s, due to his existing partial incapacity on 18 November 1936, which had been brought about by the 1935 rib accident, and contended that, by reason of the provisions of the Various Industries (Silicosis) Scheme 1931, he was entitled to assess his pre-accident earnings before November 1938, for the purpose of assessing compensation for incapacity due to silicosis, on the basis of the earnings of the 12 months in which he was last employed in the process in which he contracted the diseasethat is, from August 1934, to August 1935, when the average weekly earnings were over £3, which sum would entitle him, on the basis that he was then of normal capacity, to compensation at the rate of 30s per week, and not the £1 2s 3d actually paid.

A distinction must be made, in considering cases where one accident follows another, between those cases where both accidents are actual physical ones and those cases where the later accident is notional, arising from a doctors certificate under s 43 of the Act or under the Various Industries (Silicosis) Schemeaccidents certified in case of industrial disease. The reason for this distinction is due to the fact that, in the case of the Various Industries (Silicosis) Scheme 1931, the Metal Grinding Industries Scheme 1927, and s 43 of the Act, in computing the pre-accident earnings, Bacon v Wills (A W) & Sons Ltd, actually decided under the Metal Grinding Industries Scheme 1927, s 8, establishes that, in construing the words “during the previous 12 months” in s 9(2) of the 1925 Act, here to be read with the Various Industries (Silicosis) Scheme 1931, para 9, in computing the amount of compensation, those words in s 9(2) must be read as if they were “the weekly payment shall be a sum not exceeding 50 per cent of the workmans weekly earnings during the 12 months in the employment in the process which gives rise to the disease.”

In the case of two actual physical accidents, where the pre-accident earnings are to be computed on the basis of the previous 12 months according to the plain words of s 9(2) of the Act, and a claim is made

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as regards a second accident while incapacity still exists from a former one, the compensation for the later accident can only be that proportion of incapacity on which the second accident can operate. This basis of ascertainment of the second pre-accident wage, where two physical accidents are concerned, is not here questioned, and is supported by the authority of such cases as Harwood v Wyken Colliery Co, Thompson v London & North Eastern Ry Co, at p 98, and the dicta of Sir Wilfrid Greene MR in Evans v Oakdale Navigation Collieries Ltd, at p 56, which last were made obiter, and are, I think, to be treated as dealing with the earlier cases on this principle only.

Another possibility, which applies whether or not the second accident is notional, is the case where the first accident has produced a state of total disability. In such a case, there is no capacity on which the second accident can operate, and this notwithstanding the interpretation which is required by Bacons case to be put on s 9(2) of the Act in the case of industrial diseases. These were the facts in Wheatley v Lambton, Hetton & Joicey Collieries Ltd, which was a case of a second notional accidentnystagmussupervening on a previous accident which had caused total disability. There, a workman who had been totally incapacitated by a physical injury to his spine, and was receiving 30s full compensation, was subsequently, while in receipt of that compensation, certified to be suffering from miners nystagmus. He claimed a further sum of 24s per week as compensation as well as his 30s for his physical accident on the basis of a lower rate of wages which he had been earning during a temporary return to work after the spinal injury before he became totally incapacitated from that injury. It was held that, so long as he was totally incapacitated from the spinal injury, he could not be regarded as being incapacitated from nystagmus, for he had no capacity left to lose, and the case, for that reason, was distinguished from the cases where there was left after the first accident existing partial capacity on which the second accident could operate.

The problem here raised, however, is a different one, distinguishable from both those mentioned above. On 18 November 1936, unlike the facts in Wheatleys case, there was some capacity, the disability produced by the rib accident being then only partial, which the silicosis could be said to affect, and the question then arises as to how that capacity should be quantified. According to the appellants, owing to the partial incapacity due to the rib injury, on the principle of Harwoods case and Thompsons case, there is left only a capacity of £1 19s, as in the case of two physical accidents. According to the workman, he must be notionally regarded on 18 November 1936, as having then a full earning capacity, which has been totally destroyed by the silicosisan earning capacity of £3 11s 1d per week. The result in compensation would be £1 2s 3d or £1 10s respectively.

In my judgment, Cole v Amalgamated Anthracite Collieries Ltd decides this issue in the workmans favour. There, the average weekly

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earnings were £2 16s 8d when the workman gave up work in November 1929, by reason of illness which proved to be silicosis. From June 1930, to March 1931, he returned to work with the same employers as a whitewasher at the rate of £2 5s 4d per week. On 12 May 1932, he was certified to be suffering from silicosis as from 1 January 1932. At that time, his earning capacity, owing to illness (as here owing to the rib accident), was reduced in reality in that case to £2 5s 4d per week, and the county court judge, treating the case as falling within the principle to be applied where the second accident was not notional, gave judgment for compensation on that lesser basis for £1 2s 8d per week. The workman appealed, asking for 50 per cent of his underground colliers wages of £2 16s 8d, an increase of 5s 8d in the compensation. That is, he asked the court to treat the notional accident as destroying his full capacity. The court, applying Bacons case, allowed the appeal. Romer LJ said, at p 569:

… this court laid down a general principle, as I understand the judgments (in Bacons case) applicable to all cases in which one has to apply the provisions of sect. 9(2) [of the 1925 Act] to such schemes as the Various Industries (Silicosis) Scheme, 1931, with which we have to deal in this case.

He quoted with approval the headnote in the Law Reports in Bacons case:

“The provision in s 9(2) of the Act that the weekly payment of compensation in cases of total incapacity shall be fixed by reference to the workmans average weekly earnings during the previous 12 months must for the purpose of the Various Industries (Silicosis) Scheme, 1931, be moulded so as to apply to the altered circumstances by treating it as referring to the previous 12 months during which the workman was employed in a process coming within the scheme.”

Thus, so generally applying the scheme here, this workman notionally met with his silicosis accident on 18 November 1936, and during the year of his notional injury preceding the accident he is to be deemed to be physically capable of earning £3 11s 1d, his full wage. Thus regarded, his capacity to earn during the period November 1935, to November 1936, although in reality reduced by his rib accident to a partial capacity on 9 December 1936, to £1 19s, was, notionally, to be regarded as unimpaired. The case is taken out of the category of a second physical accident acting upon an already limited capacity, as in Harwoods case and Thompsons case, and must be deemed to be a case where, notwithstanding the actual partial incapacity due to the rib accident, the Various Industries (Silicosis) Scheme 1931, requires the workman, in the circumstances, to be assumed to be of full capacity, and to be assumed to be capable of earning £3 11s 1d per week at the date when he was certified in November 1936, to be totally incapacitated by silicosis.

In Coles case, as I have indicated, a similar situation existed. The workman, having suffered a notional accident on 1 January 1932, by reason of his illness, was capable of working as a whitewasher only. He had been a whitewasher since 1930, and the county court judge there, taking his pre-accident earnings on an average weekly basis from

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1931 to 1932, awarded him compensation at a lower rate. Nevertheless, this court, construing the scheme, as Romer LJ points out, according to Bacons case, went back to the year when, fully capable as a collier, he had contracted the disease. Once it is realised that in industrial disease the legislature, in its humorous wisdom, has ordained that, contrary to natural experience, the injury (the disease) must be regarded as preceding the accident (the certification), the apparent paradox of a notional full capacity when actually there is partial disability is resolved.

Finally, counsel for the appellants contended that the past payments in respect of the rib injury were payments within s 9(1)(b) of the 1925 Act, and should be taken into account in favour of the employer. Such a consideration must fail, because those payments were made in discharge of a different liability arising from a different accident from the liability to pay compensation in respect of silicosis here relied upon.

In the view I have taken, it is not necessary for the workman to rely upon the alleged agreement to pay him 30s per week for compensation for silicosis to be deduced from such payments from July 1937, to November 1938, on receipts shown to be for silicosis alone. The absence of a recording of such an agreement, if found, might be an obstacle to reliance upon it in a claim: Colville v Tigue. In fact, the judge has found no such agreement. I do not think it necessary, in the circumstances, definitively to pronounce upon it.

LUXMOORE LJ. The question raised by this appeal is as to how compensation ought to be assessed under the Workmens Compensation Act 1925, and the Various Industries (Silicosis) Scheme 1931, made and amended under that Act, in respect of the disability of a workman who was certified as totally incapacitated by silicosis as from 18 November 1936, when at that date he was being paid compensation for partial incapacity arising from an injury by accident suffered on 12 August 1935.

The county court judge awarded the workman compensation in respect of the total incapacity from silicosis at the rate of 30s per week, having fixed that sum with reference to the average weekly earnings of £3 11s earned by the workman during the 12 months immediately preceding the cesser on 12 August 1935, of his employment as a coal miner working underground.

The employers, Oakdale Navigation Collieries Ltd (hereinafter referred to as the company), employed the workman, not only before and at the time of the accident of 12 August 1935, but also after that date, when the workman had recovered sufficiently from the results of the injury by accident on 12 August 1935, to be able to do light work. The company contended that the compensation for the disablement by silicosis ought to be fixed with reference to the average weekly wage of £1 19s which the workman was deemed to be capable of earning as a partially incapacitated man immediately before the certificate of total

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disablement was given, and submitted to pay to the workman in respect of the incapacity from silicosis at the rate of £1 2s 3d per week, in addition to the sum of 16s 9d per week which the company was paying to the workman as compensation for his partial incapacity arising from the other injury under an award made by the same county court judge, dated 13 December 1938, and affirmed by this court on 4 April 1939: Evans v Oakdale Navigation Collieries Ltd. The company has appealed from the award of the county court judge in respect of the disablement by silicosis, and has relied on the contention to which I have already referred. The right to compensation in respect of disablement by silicosis is covered by s 47 of the Act of 1925, which gives power by scheme to provide for payment of compensation by employers of workmen in any specified industry involving exposure to silica dust who are certified in the prescribed manner to have suffered total disablement from silicosis. S 47(2) provides that the scale of compensation fixed in the case of total disablement due to silicosis where (as in the present case) it is not accompanied by tuberculosis shall be prescribed by the scheme. S 47(4) provides that any scheme made under the section is to “have effect as if enacted in this Act,” subject to certain conditions to which it is unnecessary to refer. The Various Industries (Silicosis) Scheme 1931, was made and amended from time to time under the powers conferred by s 47, and has statutory force by reason of the provisions of sub-s (4) of that section. The processes covered by the scheme include any operation underground in any coal mine. Para 5 of the scheme provides that, if the workman has been employed in the processes for a period or periods amounting to not less than 5 years, the disease shall be deemed to be due to employment in the processes unless the employer proves the contrary. It is, I understand, common ground that the workman was immediately before the accident on 12 August 1935, employed underground by the company in its coal mine, and had been so employed for more than the preceding 5 years.

By para 8(1) of the scheme, it is provided that the compensation shall be claimed and recoverable from the employer who last employed the workman in the process. The last employer is admittedly the company. By para 9(1) of the scheme, it is provided that in cases of total disablement the compensation under the scheme shall be determined in accordance with the provisions contained in the Act for fixing the compensation in cases of total incapacity. This incorporates into the scheme the provisions of s 9 of the Act. S 9(2)(i) provides that “the weekly payment shall … be a sum not exceeding 50 per cent of the workmans average weekly earnings during the previous 12 months,” subject to the alteration, made by para 9(3) of the scheme, that, in the application of the provisions of the Act, the amount of compensation shall be calculated with reference to the earnings of the workman under the employer from whom compensation is recoverable under the scheme.

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The material provisions of the Act and the scheme, when applied to the present case, if considered apart from any of the decided cases, appear to contradict the contention put forward on behalf of the company. The express words of para 9(3) provide that the earnings to be considered are not those earned by the workman in the 12 months previous to the date of the disablement, but those earned by him under the employer from whom the compensation is recoverable. To apply to the facts of the present case the words referred to, the compensation to be paid to the workman in respect of his total disablement by silicosis is to be calculated with reference to the average weekly earnings of £3 11s 1d, and not with reference to the average weekly earnings of £1 10s which he is deemed to be capable of earning owing to his partial incapacity arising from the accident of 12 August 1935. I am unable to find any words, either in the Act or in the scheme, to suggest that in any case the compensation for total disablement by silicosis is to be calculated with reference to any average weekly earnings other than those of the workman under the employer who last employed the workman in the process in which the notional injury by accident caused by contracting silicosis arose, or with reference to any want of capacity other than total incapacity. It was said that there are a number of reported cases in the books which lead to a different conclusion. During the argument, our attention was called to a large number of these cases. It is not from want of respect for them, or for the skilful argument of counsel for the appellants, that I refrain from dealing with the majority of these cases, for, in my judgment, practically all of them are clearly distinguishable on their facts from the present case. It is sufficient, I think, to point out that there is a material difference between the case where a workman is in the first instance partially incapacitated by an injury by accident other than a notional accident by disease, and is then rendered totally incapable by reason of a second accident, which is also not a notional one, and the case where the original partial incapacity is followed by total incapacity arising from a notional accident caused by industrial disease. In the former case, the compensation in respect of the second accident, which resulted in the partial incapacity from the first accident becoming total incapacity, must, on the true construction of the Act, be calculated with reference to the average weekly earnings immediately preceding the second accident: Harwood v Wyken Colliery Co and Thompson v London & North Eastern Ry Co, at p 98.

Of course, if, as the result of the first accident, the workman suffers total disability, it matters not whether or not he is subsequently certified to be suffering from an industrial disease which also has rendered him totally incapacitated, for in such a case there is no capacity for work on which the notional accident can operate: Wheatley v Lambton, Hetton & Joicey Collieries Ltd. As Sir Wilfrid Greene MR pointed out in Evans v Oakdale Navigation Collieries Ltd, so long as the total incapacity lasted from the first accident, no compensation could be

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recovered in respect of the second accident, although in respect of the second accident a declaration of liability might properly be obtained.

I think that the view I have expressed with regard to the construction of the Act and the scheme is supported by the decision of this court in Cole v Amalgamated Anthracite Collieries Ltd. This case was relied on by the county court judge in support of his finding, and I think he was fully justified in such reliance. In the earlier appeal between the workman and the company, it was held that the workman was entitled to receive the compensation awarded to him in respect of the partial incapacity arising out of the accident of 12 August 1935, notwithstanding the certificate of total incapacity arising from silicosis. I have been unable to find anything in the judgment of the court in that case which could be said to cover the question to be determined on this appeal. In my judgment, this case must be decided on the plain words of the Act and the scheme. On this basis, I am satisfied that the decision of the county court judge is correct, and should be upheld.

Counsel for the appellants also argued that, apart from the question as to the proper construction of the Act and the scheme, during the period of incapacity the company had paid compensation to the workman in respect of his disability arising out of the accident of 12 August 1935, and that, by reason of the provisions of s 9(1)(b) of the Act, the company was entitled to ask the county court judge and this court to have regard to these payments in fixing the compensation for total incapacity due to silicosis. S 9(1)(b) of the Act of 1925 provides that, in fixing the amount of the weekly payments, regard shall be had to any payment, allowance or benefit which the workman may receive from the employer during the period of his incapacity. In my opinion, the payment, allowance or benefit there referred to is, on the true construction of the section, confined to payment, allowance or benefit received from the employer in respect of the incapacity arising from the particular injury under consideration, and does not extend to payment, allowance or benefit received in respect of some other injury, or for some wholly independent reason.

There is one further matter to which I must refer. It was argued on behalf of the workman that the company was unable to contest the award of 30s per week in respect of the total incapacity from silicosis, because the company had from July 1937, to November 1938, paid to the workman a weekly sum of 30s in respect of the silicosis alone, and that this was sufficient to constitute a binding agreement between the parties. To dispose of this argument, it is sufficient to point out that the question whether or not there is in existence an agreement of the nature claimed is one to be determined by the arbitrator: see ss 21 and 23 of the Act of 1925. An unrecorded agreement can only be used as an answer to a request for arbitration or as a defence to an action. It cannot be itself the subject of arbitration

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proceedings under the Act: Colville v Tigue. For the reasons I have expressed, I agree that the conclusions at which the county court judge arrived are correct, and there is no ground for altering his award in any respect. The appeal fails, with the usual consequences.

GODDARD LJ. I agree that this appeal fails. On 22 February 1937, it was certified that the respondent was totally disabled from silicosis and that disablement commenced on 18 November 1936. On the latter date, the respondent was in receipt of compensation for partial disablement due to an injury sustained on 12 August 1935, and that compensation lasted till 15 July 1937, when it ceased. The appellants continued to pay at the rate for total disablement from silicosis down to December 1938, when it was held by the county court judge that the workman had again suffered from the injury which had caused partial disablement since November 1938, and this award was upheld on appeal. As a collier in full work, his earnings averaged £3 11s 1d. As a partially disabled man, his average earnings on light work were £1 19s. When the compensation for partial disablement was restored, the appellants took up the position that the compensation for silicosis should be calculated on the basis that he was a partially disabled man, and that his earnings should have been taken as £1 19s per week, and not £3 11s 1d, and the only question is whether or not this is right.

Under the Various Industries (Silicosis) Scheme 1931, para 8, made under the Act, the compensation is recoverable from the employer who last employed the workman in the process which caused the diseasein this case, coal-mining. By s 9(3), the amount is to be calculated with reference to the earnings of the workman under the employer from whom compensation is payable. If I may have regard only to the words of the scheme, which for this purpose has the effect of a statute, and if I am unhampered by authority, I think that it is clear that all the arbitrator has to do is to see what the man was earning in the process which caused the disease. In this case, the answer is £3 11s 1d. If he worked for employer A at such a process, and earned £3 11s 1d, and afterwards, but before certification, worked for employer B, in whose service he met with an accident which reduced his earning capacity to £1 19s, it seems to me that, if I looked at £1 19s as the basis on which to calculate compensation, I should be disregarding the plain words of the statute, for the workman never earned that sum under the employer by whom compensation for silicosis is payable. It cannot, in my opinion, make any difference that he remains with the same employer, though in a different capacity.

However, counsel for the appellants argued that there are cases binding on this court which decide the contrary. In my opinion, there is no case which so decides. No doubt the cases show that, if a man is working as a partially disabled man at wage X, and meets, while working at that

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wage, with a further accident, his compensation for the latter accident is to be calculated on the wage he was earning at the time when he met with it: Harwood v Wyken Colliery Co and Thompson v London North Eastern Ry Co. The reasoning on which those cases were decided, however, does not apply, in my opinion, to cases of industrial disease, which have a code of their own. In such cases, regard is to be had, not to the wage the man was earning at the date of the certification, which is the date of the notional accident, but to the wage he was earning when he contracted the disease, or, to use the language of the scheme, when he was last employed in the process. The case most relied upon by counsel for the appellants was Wheatley v Lambton, Hetton & Joicey Collieries Ltd, but, when properly understood, that case has no application to the present facts. There a man was totally disabled by an accident in the popular sense, an injury to his spine. While so disabled, he developed nystagmus, and got a certificate of total disablement. The date of that disablement, and, therefore, of the notional accident, was subsequent to that of the accident causing the spinal injury. The court held that one cannot add to totality, or subtract from nothing. Therefore, as, at the date when the “accident” from nystagmus occurred, he was already totally disabled, he could recover nothing for the latter injury, but was granted a declaration of liability in case he recovered from the spinal injury. The man in that case had not at any material time a capacity on which the second accident could operate, while in the present case he had. It is, of course, impossible for the precise question we have to consider to arise except in connection with an industrial disease which gives rise to this conception of notional accident, or notional date of accident, because it is impossible for a workman totally disabled by accident to meet with another accident in the popular sense arising out of and in the course of his employment, which ex hypothesi he is disabled from following.

However, so far as authority is concerned, I think that Cole v Amalgamated Anthracite Collieries Ltd, on which the county court judge relied, is an authority supporting the view he expressed. The workman there contracted the disease when working as a collier. At the date of the certificate, having previously been ill, he was working as a whitewasher, in which latter work he could not have contracted the disease. He was held to be entitled to compensation as a collier.

This court has already had the parties before it in an earlier case arising out of the accident which caused partial incapacity to the workmanEvans v Oakdale Navigation Collieries Ltdbut, having carefully read the judgment in that case, I am satisfied that the court had not to consider the question as to what compensation the workman was entitled to for silicosis, and, accordingly, it is not an authority upon the matter which we have to decide. On the question of whether or not there was an agreement on which the workman could rely, I need say no

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more than that I agree with the judgment of Luxmoore LJ on that point, and that the applicant cannot rely upon it.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Furniss Wells & Co, agents for A J Prosser, Cardiff (for the appellants); Smith Rundell Dods & Bockett, agents for T S Edwards & Son, Newport, Mon (for the respondent).

Charles Shelley Esq   Barrister.

Liffen v Watson

[1940] 2 All ER 213


Categories:        TORTS; Negligence        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        22 FEBRUARY 1940        


Negligence Personal injuries Damages Domestic servant receiving board and lodging as part wages Claim for loss of board and lodging Board and lodging received from parent without payment.

The appellant, a domestic servant, was injured by the negligent driving of the respondent. Her wages were £1 per week and board and lodging. After her discharge from hospital, she went to live with her father, and paid nothing for her board and lodging. She claimed as damages in addition to loss of wages the loss of the board and lodging. The appellant also claimed damages for traumatic neurosis:

Held (i) the damages ought to include a sum in respect of the loss of board and lodging upon the same footing as the loss of wages. Any arrangement the appellant made with her father was immaterial.

(ii) it was no answer to the claim in respect of neurosis that she could avoid the pain by not doing certain things. The fact that she was prevented by the disease from doing those things was a reason for awarding damages.

Notes

In some employments the employees live in, that is to say, their wages are less by reason of the fact that they receive their board and lodging in lieu of part of their wages. It is beyond question that in an ordinary running down case the damages will include a claim for loss of salary, and in the present case it is held that that claim will include a sum for the loss of board and lodging. Such a claim is not defeated by the fact that the plaintiff has, since the accident, received free board and lodging at her own home. The position arising where an accident causes neurosis is one of great difficulty and the consideration here given to some of its aspects in the judgment of Slesser LJ is of great importance.

As to Damages for Personal Injuries, see Halsbury (Hailsham Edn), Vol 23, pp 722732, paras 10131025; and for Cases, see Digest, Vol 36, pp 125127, Nos 831842.

Case referred to

Banco de Portugal v Waterlow & Sons Ltd, Waterlow & Sons Ltd v Banco de Portugal [1932] AC 452; Digest Supp, 101 LJKB 417, 147 LT 101.

Appeal

Appeal by the plaintiff from a judgment of Stable J, delivered in the Kings Bench Division on 6 October 1939, and cross-appeal by the defendant. The plaintiff, a young girl, was injured through the negligent

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driving by the defendants servant of a taxicab in which she was travelling. The judge awarded her £455 special damages, £400 general damages for disfigurement of the face, fright and shock, and £300 general damages for traumatic neurosis. The appeal was brought by the plaintiff on the ground that the damages awarded for the neurosis were not sufficient. In dealing with this matter in his judgment, the judge said that the plaintiff impressed him as a young woman who during the last 3 years had had one major preoccupation in lifenamely, how ill she was. He said: “I am satisfied that, in the surroundings in which she has been placed, she has not been able to work for 3 years, not because there is anything the matter with her at all, except for this neurosis, but, if she could only persuade herself that she could, I am quite satisfied that she would be working and living a perfectly normal life within a couple of months of this action … I am equally satisfied that, if she had made a resolute effort, or if someone had made it for her, to get back to the normal active life of a normal active young woman, and if the circumstances were such that she was compelled to do so, there was nothing in the world to prevent it.” Dealing with the quantum of damages, the judge said: “I do not think that the plaintiff has suffered much during the last 3 years. I think that she has felt this pain. I do not think that she has invented that, and I think that she has perfectly persuaded herself, and honestly persuaded herself, that every time she does something a little energetic it hurts, but, when she does something else, because the pain is really in her mind, it stops aching. I think she has derived a certain amount of enjoyment from contemplating the peculiar sort of existence which she has elected to live.” In her claim for special damage the plaintiff included loss of wages at £1 per week continuing, and loss of board and lodging at 25s per week continuing. At the time of the accident, she was employed at a hotel at Sevenoaks, and received board and lodging as part of her wages. After the accident, she went to live with her father, who was not a party to the action. For board and lodging the judge allowed her nothing. He found no evidence of any agreement that the daughter should pay the father anything, and said that it would be grossly improper for him to imply the existence of a contract which he knew was never contemplated.

Gilbert Beyfus KC and Alan Bell (for D M Wilson on war service) for the appellant.

Serjeant Sullivan KC and F W Beney for the respondent.

22 February 1940. The following judgment was delivered.

SLESSER LJ. This case has been given anxious consideration by the court, and we have had the advantage of a very full argument by counsel on each side, for which the court is very much indebted. Lillian Mary Liffen, a young girl at the time of the accident, was seriously injured as the result of a taxicab, as it was said, being negligently driven on 25 December 1936. The cab skidded and collided with a post, and the girl, as I have said, undoubtedly sustained serious injuries at that time.

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It is not necessary at this stage to discuss the liability of the defendant. That was disputed, but the matter has been considered and tried, and the judge found that the defendant, John Watson, was liable to the plaintiff for the damage which she sustained as the result of negligence. There is no appeal with regard to that matter.

The appeal is brought before this court upon the judges estimation of the damages, which are said, in the circumstances, to be insufficient. The judge has given judgment for the sum of £1,155 with costs, and he has, as he says, with a view to a possible appeal, told this court how he has arrived at that figure. Part of that figure is to be attributed to special damages and part to general damages. I propose to confine my remarks for the moment to the general damages which the judge assessed. He has assessed the general damages at the sum of £700, and, as to £400 of those damages, as he says in his judgment, he deals with it on a different basis from that of the remaining £300. There was a cross-appeal with regard to the £400, which is another matter which I will mention. It is said that the £400 which the judge gave in respect of the scars on the face should be reduced. In fact, the £400 was not limited to the scars on the face. The judge took other matters into consideration in awarding the £400, such as shock and other matters. However, with that, so far as the appeal is concerned, we are not immediately concerned.

The appeal is limited to a complaint with regard to the £300 which is said to have been given upon an erroneous estimate of the damages, the amount of which has been given. The judge states, in his judgment, the proper measure of compensation to be put forward with regard to this matter, and he has given us the benefit of the reasons as to why he has arrived at the figure of £300. As this court has come to the conclusion that in this case, as regards the whole question of damages, apart from the liability, which I have already said has been determined in the plaintiffs favour, there should be a new trial, I wish to refrain from expressing any opinion on the respective cases which were put forward for the plaintiff and for the defendant, more particularly through their doctors. In order to explain how the difficulty has arisen, however, I would simply say this. On behalf of the plaintiff, who had suffered this injury, it was said that, after being treated and returned to her home, she still suffered from pain after the accident, and decided to consult an eminent physician, Dr Ernest Fletcher, on 6 October 1937. She continued to be under his care for a very considerable period of time after that. The last report, which was before the court on this matter is dated 26 September 1939, and in it, after dealing with the plaintiff in very many different ways involving considerable and arduous treatment, her presence in hospital and various suggestions, he says at the end of his report: “I regret the result of the treatment has been so unsuccessful.” Broadly speaking, it is enough for present purposes to say that Dr Fletcher came to the conclusion that this plaintiff had

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suffered a permanent organic injury as the result of this accident. However, as there is to be a new trial, it is not necessary to say more than that, apart from the disability being permanent or otherwise, the treatment was unsuccessful, and the disability remained in greater or less degree. On the other hand, evidence was given by two doctors, also eminent, before the judge, each of whom examined the lady, but not on many occasions, and for the purposes of this case only. They were not attending her for any curative purpose. Their evidence amounts to this: “This lady is not malingering. We do not suggest that her pains and disabilities of which she complains are not real in the sense that she has invented them for the purposes of this action, or even for the purpose really”although the judge seems rather to hover on this point“of self-indulgence.” As the result of this accident, she has a neurosis, and she has pains, which, though they are not caused by any organic trouble, yet are real, and, I suppose, to that extent they must be regarded, as those two doctors say, as actual pain, which, it may well be, will not trouble her if she carefully restricts her occupation, but which at the present time do trouble her, and they do not deny that fact. The judge has come to the conclusion that the evidence on this principle issue between the doctors is conflicting, as, indeed, it must be, and that he prefers the evidence of the doctors on behalf of the defendant. He comes to the conclusion that this plaintiff was not, at the material time, suffering from any organic trouble, that such trouble had long since cleared up, and that the treatment she had received was, therefore, based upon an erroneous assumption as to her physical condition, and that she was in the condition in which she was at the time of the trial as the result of a neurosis. However, in so far as we think that there should be a new trial in this case, for reasons which I will explain in a moment, I do not express any opinion as to which version of this ladys misfortune is to be believed. The judge who will hear the new trial will again have to consider this and any other evidence which the parties may wish to call before him, and he will again have to come to a conclusion, as did Stable J, as to whether the true view is that this plaintiffs condition is neurotic or organic. The reason why we think that there should be a new trial, however, is not because the judge has found that the evidence of the defendants doctors was to be preferred, nor because he has to some extent relied upon the demeanour of the plaintiff herself in the witness-box as the reason for his coming to the conclusion that her condition was neurotic. The reason why we think that there should be a new trial is that, having come to the conclusion that the condition was neurotic, he allowed considerations to enter into his mind which we think, with every respect, must have affected his estimation of the damage which she had suffered in his opinion, and without which it might well be that he would have given her more, possibly considerably more, than £300 upon this head. The two most objectionableif I may use the word with every respectelements in the judg-

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ment, on the assumption that the lady was suffering from neurosis, were these. First of all, he says:

There is nothing the matter with her at all except this neurosis.

On that point I have already commented. Then he says:

… but, if she could only persuade herself that she could I am quite satisfied that she would be working and living a perfectly normal life within a couple of months of this action.

It is not necessary at this stage to review the evidence. It is sufficient to say that neither Major Macmyn nor Mr Morley, giving evidence on this matter, support any such conclusion. I quite agree with counsel for the respondent that, when the judge says “a couple of months,” one is not to treat that as an isolated phrase and say there is no evidence of that. I accept entirely his invitation to treat the words “within a couple of months” as being synonymous with the words “within a short time.” That is quite clear. I find no evidence that the plaintiff, who, in the estimation of these doctors, was genuinely suffering from this neurosis, would recover within a short time. Major Macmyn was asked:

As soon as this case is over, what do you anticipate will be the effect upon this womans symptoms?

His answer was:

I should anticipate a very material improvement, provided, of course, every encouragement is given.

That is a very vague basis upon which to assume that she will recover within two months of the accident. Mr Morley was asked: “When the case is over, will that neurosis continue?” His answer is:

It is very much less likely to continue, although it depends upon how long the suggestion is forced into her. If she goes on having treatment, which is not necessary, it may do. If she gives up treatment, and makes an effort to get back to work, it will cease.

There is no basis which I can discover for saying that she is capable of making an effort to go back to work at once. The very complaint from which she suffersnamely, the neurosismay itself prevent her from making that effort which Mr Morley thinks is necessary in order to make the disability cease. It seems to me to beg the question to say that she will recover if she makes an effort, if part of the neurosis be that she feels she cannot make the effort. All these matters have to be very carefully weighed and considered, and I do not think it is right, upon the evidence givenand there is no other evidence on this pointto say that she “will probably recover within a very short time” or “within a couple of months.”

The other matter, which equally, I think, is unsupported by evidence, and which probably affects the damages, is this. The judge says in his judgment:

On one aspect of the matter you might say the alteration in her outlook (but now she really prefers to do nothing except think about this pain) is a matter for which

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I ought to award heavy damages. I think not. I do not think that the plaintiff has suffered much during the last 3 years [which brings us back almost to the day of the accident]. I think that she has felt this pain. I do not think that she has invented that, and I think that she has perfectly persuaded herself, and honestly persuaded herself, that every time she does something a little energetic it hurts but, when she thinks about something else, because the pain is really in her mind it stops aching. I think she has derived a certain amount of enjoyment from contemplating the peculiar sort of existence which she has elected to live.

First of all, I would say that there is no evidence whatever that this plaintiff has not suffered much during the last 3 years, and there is a considerable body of evidence recorded by the various reports of Dr Fletcherwho, whether he be accepted or not in his medical prognosis, at any rate, may, I think, be regarded as the only evidence as to the plaintiffs condition of painthat she was suffering from continuous pain. Counsel for the defendant argues, as I understood his argument, that, the pain being neurotic, and not organic, if the plaintiff does not attempt to do the things which give her pain, or indulge in that particular kind of activity, then she will not suffer the pain. However, that seems to me to be the dilemma with which counsel for the defendant is faced. If the plaintiff can avoid the pain by not doing certain normal things, then she has been damaged, because she cannot do them. Conversely, if she attempts them and she feels pain, then I do not know on what basis it is said that that pain does not cause much suffering. I can see no evidence on this head at all. However, it is obvious that, if the true conclusion is that she has suffered much pain for 3 years, she will be entitled to more damages than she would be on the view that she had suffered very little pain. I think that that matter can be determined conclusively by merely saying that she is neurotic.

There is still the question of damages which would compensate her for this condition of neurosis into which admittedly the accident has thrown her. I wish to conclude by saying what I said in the beginningnamely, that, in the opinion of this court, if there is to be a new trial, it is not to be assumed that this court has decided that the question as to whether this plaintiffs disability is neurotic or organic is not fully open on the new trial. At the new trial, it will be open to the plaintiff again to persuade the tribunal that her injuries are organic, and not neurotic.

There is one other matter which I wish to mention, and that is this. The matters raised in the cross-appeal will, of course, equally be open at the new trial, but there is one thing which arises in the cross-appeal upon which, I think, an opinion may now be expressed. It is said that this plaintiff has suffered special damage by reason of the fact that she was, at the time of the accident, employed as a maid at a hotel, the Black Boy, in Bank Street, Sevenoaks, and it is said that she there received a weekly wage of £1, plus board and lodging to the value of 25s per week. Dealing with that matter, the judge has allowed her the wage which she has lost as special damages, but has allowed her nothing in respect of the board and lodging. The monetary

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value of the board and lodging I will not discuss, because it is a matter which will have to be estimated on a new trial. However, if the judge at the new trial does come to the conclusion that this plaintiffs contract was that she was to be paid a certain amount in cash and a certain amount in kinda kind of payment which is expressly excepted from the Truck Acts in the case of a domestic servantthen I see no reason why, in estimating the damage, the loss in kind should not stand upon the same footing as the loss in cash, and, if it be that the father has, of his charity, or of his paternal piety, provided the plaintiff with board and lodging after the accident, that is no reason why she should not be heard to say that that loss in kind under the contract is as much a loss as it would have been if she had lost an actual sum in money.

It is said that there is no authority upon this matter. I do not want to discuss authorities, but I think that Banco de Portugal v Waterlow & Sons Ltd, in the House of Lords, establishes as a general principle that, where a wrongdoer causes damage, all the damage which naturally flows from the wrongdoing is to be recompensed to the plaintiff, according to ordinary principles. In my opinion, therefore, there should be a new trial in this case, and the whole of the question of the damages, as distinct from liabilities, should be open to both sides to be ascertained on the new trial. The appeal will be allowed, with costs.

LUXMOORE LJ. I am in entire agreement with the judgment which has just been delivered by Slesser LJ.

GODDARD LJ. I agree, and I only desire to add a few words. The judge, as I understand it, disallowed anything in respect of the board and lodging. Whether or not the plaintiff is entitled to recover the value of her board and lodging does not depend upon whether or not she made a contract with somebody else to give her board and lodging. She lost the board and lodging because she was put out of work by reason of this accident. She lost her wages and she lost her board and lodging. It does not matter in the least whether she is taken in by her father or whether she is taken in by a friend. It might very well be in this sort of case that a woman in this position might say to a friend of hers: “I cannot make a contract with you to pay you, but if I get damages, I shall pay you something towards the cost of my board and lodging.” However, those are considerations which are really immaterial. The only consideration is, what has she lost? She has lost the value of her board and lodging, just the same as she has lost her wages. Therefore, she is entitled to be compensated for that loss. What she does with the compensation when she gets it is a matter for her, and not for anybody else. If she likes to pay her father, she can, and whether or not her father has any claim against her I do not know. However, she is entitled to recover the value of her board and lodging. I have often heard the point raised before,

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and I think it just as well that it should be cleared up, and that the law upon the point should be stated.

Appeal allowed with costs.

Solicitors: Herbert G Greenwood (for the appellant); A E Wyeth & Co (for the respondent).

Derek H Kitchin Esq   Barrister.

Lethbridge Irrigation District Trustees v Independent Order of Foresters and Attorney-General for Canada

R v Independent Order of Foresters and Attorney-General for Canada

[1940] 2 All ER 220


Categories:        COMMONWEALTH; Commonwealth countries: CONSTITUTIONAL        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT SANKEY, VISCOUNT MAUGHAM, LORD ROCHE AND LORD PORTER        

Hearing Date(s):        11, 12, 13, 14 DECEMBER 1939, 4 MARCH 1940        


Privy Council Alberta Constitutional law Conflict between dominion and provincial legislation Interest Reduction of interest on provincially guaranteed securities British North America Act 1867 (c 3), ss 91, 92 Canadian Interpretation Act (RSC, c 1), s 16 Interest Act (Canada) (RSC, c 102) Provincially Guaranteed Securities Proceedings Act (Alberta) 1937 (c 11) Provincial Guaranteed Securities Interest Act (Alberta) 1937 (c 12) Provincial Securities Interest Act (Alberta) 1937 (c 13).

The Provincial Guaranteed Securities Interest Act (Alberta) 1937 in effect reduced the rate of interest payable in respect of securities guaranteed by the province. The Provincially Guaranteed Securities Proceedings Act (Alberta) 1937 enacted that no proceedings should be brought in respect of such interest, or in any way to enforce such security without the consent of the Lieutenant-Governor in Council. The Provincial Securities Interest Act (Alberta) 1937 similarly reduced the interest payable in respect of securities issued by the province:

Held (i) all three Acts were ultra vires in that in their true nature and character they dealt with interest within the meaning of the British North America Act 1867, s 91(19).

(ii) all the Acts were also ultra vires as conflicting with the dominion Interest Act (Canada) 1927.

Notes

The Acts here in question, which, in effect, reduced the rates of interest payable on debentures of the province and public bodies within the province whose issues were guaranteed by the province, are held to be ultra vires as being in relation to a subject reserved to the dominion legislature by the British North America Act.

As to Federal and Provincial Relations in Canada, see Halsbury (Hailsham Edn), Vol 11, pp 91104, paras 156180; and for Cases, see Digest, Vol 17, pp 429445, Nos 99180.

Cases referred to

Great West Saddlery Co v R [1921] 2 AC 91; 17 Digest 440, 168, 90 LJPC 102, 125 LT 136.

A-G for Canada v A-G for British Columbia [1930] AC 111; Digest Supp, 99 LJPC 20, 142 LT 73.

Tennant v Union Bank of Canada [1894] AC 31; 17 Digest 429, 99, 63 LJPC 25, 69 LT 774.

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Citizens Insurance Co of Canada v Parsons, Queen Insurance Co v Parsons (1881) 7 App Cas 96; 17 Digest 436, 145, 51 LJPC 11, 45 LT 721.

Union Colliery Co of British Columbia Ltd v Bryden [1899] AC 580; 17 Digest 439, 159, 68 LJPC 118, 81 LT 277.

Ladore v Bennett [1939] AC 468, [1939] 3 All ER 98; Digest Supp, 108 LJPC 69.

Day v Victoria (City) [1938] 3 WWR 161.

A-G for British Columbia v A-G for Canada, Re Farmers Creditors Arrangement Act [1937] AC 391; Digest Supp, 106 LJPC 67, 156 LT 313.

Madden v Nelson & Fort Sheppard Ry [1899] AC 626; 17 Digest 438, 154, 68 LJPC 148, 81 LT 276.

Appeals

Appeals from the Appellate Division of the Supreme Court of Alberta, who in each case dismissed the appeal of the present appellants from (i) a judgment of Ewing J, dated 29 October 1937, and (ii) a judgment of Shepherd J, dated 11 February 1939. The facts and arguments are fully set out in the judgment of their Lordships delivered by Viscount Caldecote LC.

D N Pritt KC and W S Gray KC for the appellants in both appeals.

G H Steer KC, Frank Gahan and R Bigelon for the respondent in both appeals.

Frank Gahan for the intervener, the Attorney-General of Canada, in both appeals.

4 March 1939. The following judgments were delivered.

VISCOUNT CALDECOTE LC. These two appeals raise questions of the validity of three Acts of the legislative assembly of the province of Alberta, all passed on 14 April 1937. In the first appeal, the Alberta Provincial Guaranteed Securities Interest Act 1937, and the Alberta Provincially Guaranteed Securities Proceedings Act 1937, in so far as it relates to the subject-matter of the proceedings under appeal, have been declared ultra vires by the Appellate Division of the Supreme Court of Alberta, dismissing an appeal from a judgment of Ewing J, dated 29 October 1937. In the second case, the Alberta Provincial Securities Interest Act 1937, has likewise been declared ultra vires the legislature of the province, as the result of a decision of the Appellate Division dismissing an appeal from a judgment of Shepherd J, dated 11 February 1939. Similar questions arise in the two appeals as to the interpretation of the British North America Act 1867, ss 91, 92, and they were heard together. It is necessary now to deal with the two cases separately.

The respondent in the first appeal (the plaintiff in the action) is the holder of a number of debentures, dated 21 May 1921, each of the principal sum of $1,000, issued by the first-named appellant and guaranteed by the province of Alberta. The debentures bore interest at the rate of 6 per cent per annum payable half-yearly in gold coin of or equivalent to the standard of weight and fineness fixed for gold coins at the date of the debentures by the laws of the United States of America upon presentation and surrender of the coupons attached to the debentures,

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as the coupons severally became payable. The debentures provided that payment of interest should be made at the holders option at the principal office of the Imperial Bank of Canada in Toronto, Montreal or Edmonton, or at the office of the Bank of Manhattan Co in New York.

On 15 December 1936, the respondent presented for payment at the Imperial Bank of Canada in Toronto coupons attached to the debentures and dated 1 November 1936, for $30 each, being in respect of interest at the rate of 6 per cent. The bank, acting on the instructions of the government of the province of Alberta, refused payment of the amount of the coupons except to an amount representing interest at the rate of 3 per cent. The respondent thereupon took proceedings in the Supreme Court of Alberta to recover the full amount of the interest. The first-named appellant met the claim by relying on the provisions of the Alberta Provincial Securities Interest Act 1936, reducing the interest payable on the debentures from 6 per cent to 3 per cent and prohibiting any action from being brought or maintained in the courts of the province in respect of the debentures. At the trial of the action, the Act relied on by the first-named appellant was held by Ives J to be ultra vires the legislature, and judgment was given for the amount claimed. Notice of appeal was given, but, before the appeal was heard, the two Acts in question in the present appeal were passed by the legislative assembly, and by the Alberta Provincial Securities Interest Act 1937, s 5, the Alberta Provincial Securities Interest Act 1936, was repealed. A few days later, the appeal from the judgment of Ives J was abandoned.

On 1 May 1937, a further amount of interest became payable, and on 11 May the respondent presented the appropriate coupons for payment at the Imperial Bank of Canada in Toronto. The bank again, on the instructions of the government of the province of Alberta, refused payment of the full amount of the interest. The respondent thereupon began the action out of which the present appeal arises to recover the interest due on the debentures. The first-named appellant in answer to the claim relied on the Alberta Provincial Guaranteed Securities Interest Act 1937, by which the interest due at the rate of 6 per cent was reduced to 3 per cent, and also on the Alberta Provincially Guaranteed Securities Proceedings Act 1937, as a bar to the action without the consent of the Lieutenant-Governor in Council. The question in this appeal is whether these two Acts are within the powers of the provincial legislature, having regard to the provisions of the British North America Act 1867, ss 91, 92, by which the distribution of legislative powers between the Parliament of Canada and the provincial legislatures was made.

The Alberta Provincial Guaranteed Securities Interest Act 1937, effects its object in simple and straightforward language. After defining guaranteed securities so as to include, inter alia, the debentures concerned in this appeal, the Act proceeds by s 3 to reduce the rate of

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interest payable upon any guaranteed security from and after 1 June 1936, “notwithstanding any stipulation or agreement as to the rate of interest payable” in respect of the security. In order to bolt the door more firmly against a holder of any guaranteed security who might wish to test his rights in the courts of the province, it is provided by s 3(2) that “no person shall be entitled to recover in respect of any guaranteed security any interest at a higher rate than the rate” prescribed by the Act, and the rights of the holder of a guaranteed security are stated to be such as are set out in the Act. The Alberta Provincially Guaranteed Securities Proceedings Act 1937, carries the alteration of the rights of the debenture holder a little further. S 2 defines “guaranteed securities” as in the Alberta Provincial Guaranteed Securities Interest Act 1937. S 3, which is the only operative section of the Act, prohibits any action or proceeding of any kind for the recovery of any money payable:

… in respect of any guaranteed security or for the purpose of enforcing any right or remedy whatsoever for the recovery of any such money or for the purpose of enforcing any judgment or order at any time heretofore or hereafter given or made with respect to any guaranteed security or for the purpose of enforcing any foreign judgment founded on a guaranteed security, without the consent of the Lieutenant-Governor in Council.

The validity of these two Acts depends upon the interpretation and application of the British North America Act 1867, ss 91, 92. These sections have been the subject of repeated examination in the Judicial Committee, and there can no longer be any doubt as to the proper principles of their interpretation, difficult though they may be in application. Viscount Haldane, in delivering the judgment of the Judicial Committee in Great West Saddlery Co v R, said, at p 116:

The rule of construction is that general language in the heads of sect. 92 yields to particular expressions in sect. 91, where the latter are unambiguous.

In a later decision of the Judicial Committee, A-G for Canada v A-G for British Columbia, at p 118, Lord Tomlin summarised in four propositions the result of the earlier decisions of the Board on questions of conflict between the dominion and the provincial legislatures. The first proposition is to the effect that the legislation of the parliament of the dominion, so long as it strictly relates to subjects of legislation expressly enumerated in s 91, is of paramount authority, even though it trenches upon matters assigned to the provincial legislatures by s 92. Lord Tomlin referred to Tennant v Union Bank of Canada as the authority for this statement. In applying these principles, as their Lordships propose to do to the present case, an inquiry must first be made as to the “true nature and character of the enactments in question” (Citizens Insurance Co of Canada v Parsons), or, to use the words of Lord Watson in delivering the judgment of the Judicial Committee in Union Colliery Co of British Columbia Ltd v Bryden, as to their “pith and substance.” Their Lordships now address themselves to that inquiry.

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The long title of the Alberta Provincial Guaranteed Securities Interest Act 1937, is:

An Act respecting the interest payable on debentures or other securities guaranteed by the province.

The sole purpose and effect of the Act are to reduce the rate of interest on a number of securities. The holders of the securities affected by the Act were entitled, before the Act was passed, to receive interest at a rate according to the terms on which their securities were issued. The Act substituted a different rate of interest for the agreed rate. The Act clearly deals with interest, and “interest” is one of the classes of subject which by s 91 are reserved exclusively for the dominion legislature. Unless, therefore, a restricted interpretation is to be given to “interest” in s 91(19), instead of its ordinary meaning, it would appear on a first examination that the Alberta Provincial Guaranteed Securities Interest Act 1937, is not within the competence of the province. Their Lordships, however, were invited by counsel for the appellants to say that the inclusion of “interest” in the dominion subjects in s 91 is to be explained by the history of earlier legislation on the subject of usury, and that, therefore, the word “interest” must be read as meaning only interest which is exorbitant or usurious. This interpretation is open to the objection that, as no standard is laid down by which interest is to be adjudged exorbitant or usurious, the word “interest,” standing, as it does in s 91, without any word of qualification or limitation, would seem a very uncertain description of a class of subject for the purpose of defining the exclusive legislative authority of the dominion. Their Lordships attention was called to the Dominion Interest Act 1927, s 4, by which no interest exceeding the rate of 5 per cent per annum shall be chargeable unless the contract contains an express statement of the yearly rate of interest. Legislation of this sort was said by counsel for the appellants to be akin to legislation dealing with usury. Their Lordships would be slow in forming this opinion, but, even if it were so, it carries the argument no further. The dominion parliament, in exercising the power to legislate upon “interest,” might very well include, in an Act dealing generally with the subject of interest, provisions to prevent harsh transactions. Nor does the history of legislation in Canada on the subject of interest support the appellants argument. Their Lordships attention was called to a number of Canadian Acts of Parliament on the subject of usury from 1793 down to 1858. In 1858, an Act was passed by the Parliament of Canada (c 85) which was the forerunner of the Canadian Interest Act 1927. The Act of 1858 by s 2 in effect abolished restrictions as to rates of interest, except in the case of certain persons named in the Act. From that time forward, the usury laws, which the policy of an earlier generation demanded, ceased to have effect. Their Lordships are of opinion that, so far from supporting the argument for a restricted interpretation of s 91(19) in order to confine it to usurious interest,

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the history of the usury laws in Canada destroys it. Their Lordships do not find it necessary to attempt to lay down any exhaustive definition of the word “interest.” The word itself is in common use, and is well understood. It is sufficient to say that in its ordinary connotation it covers contractual interest, and contractual interest is the subject of the Act now in question.

For these reasons, their Lordships have come to the conclusion that the Alberta Provincial Guaranteed Securities Interest Act 1937, is in pith and substance an Act dealing with interest within the meaning of the British North America Act 1867, s 91(19). Having regard to this conclusion, it becomes unnecessary to discuss at length the classes of subjects enumerated in s 92 as being within the powers of provincial legislatures. It was suggested on behalf of the appellants that the Act in question is legislation concerning “municipal institutions in the province” (head 8), or concerning “property and civil rights in the province” (head 13), or, failing these, that the Act fell under head 16, “generally all matters of a merely local or private nature in the province.” Their Lordships are unable to accept any of these contentions. In so far as the Act in question deals with matters assigned under any of these heads to the provincial legislatures, it still remains true to say that the pith and substance of the Act deals directly with interest, and only incidentally or indirectly with any of the classes of subjects enumerated in s 92. Even if it could be said that the Act relates to classes of subjects in s 92, as well as to one of the classes in s 91, this would not avail the appellants to protect the provincial Act against the Interest Act 1927, passed by the Dominion Parliament the validity of which, in the view of their Lordships, is unquestionable. S 2 of the Interest Act is as follows:

Except as otherwise provided by this or by any other Act of the Parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount which is agreed upon.

This provision cannot be reconciled with the Alberta Provincial Guaranteed Securities Interest Act 1937, and, as Lord Tomlin made clear in A-G for Canada v A-G for British Colombia, dominion legislation properly enacted under s 91 and already in the field must prevail in territory common to the two Parliaments.

Their Lordships were pressed with the decision of the Board in Ladore v Bennett. In that case, a provincial legislature passed Acts amalgamating and incorporating in one city four municipalities which were in financial difficulties. As part of the consequent adjustment of the finances of the municipalities, debentures of the new city of equal nominal amount to those of the old municipalities were issued to the creditors, but with the rate of interest reduced. It was held by the Judicial Committee that a provincial legislature, which could dissolve a municipal corporation and create a new one to take its place, could legislate concerning the financial powers of the new corporation, and

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incidentally might define the amount of interest which the obligations incurred by the new city should bear. On this ground, it was decided that legislation directed bona fide to the creation and control of municipal institutions is in no way an encroachment upon the general exclusive power of the dominion legislation over interest. Having come to the conclusion that the pith and substance of the legislation in question related to one or more of the classes of subjects under s 92, the Board had no difficulty in holding that the regulation of the interest payable on the debentures of the new city was not an invasion of dominion powers under s 91(19).

The decision of the Court of Appeal of British Columbia in Day v Victoria (City) holding the Victoria City Debt Refunding Act 1937, intra vires of the provincial legislature was also cited as a case in which it was held permissible for a provincial legislature to pass an Act relating to interest. On examination, the decision is found to give no support to the appellants argument. The Act there in question did not purport to be an Act relating generally to interest, and, while some of its provisions dealt with interest as an incident effecting the general object of the enactment, it was heldrightly, as their Lordships thinknot to be an Act in relation to interest, or to conflict with the Dominion Interest Act. In A-G for British Columbia v A-G for Canada, Re Farmers Creditors Arrangement Act, which was also cited, the question was whether Acts of the Dominion Parliament dealing with the liabilities of farmers and with creditors arrangements came under s 91(21) of the British North America Act, “Bankruptcy and insolvency,” or s 92(13), “Property and civil rights in the province.” The Judicial Committee held that the Acts in question related to “bankruptcy and insolvency.” The case is one more illustration of the rule that, in resolving the questions which are bound to arise between these two famous sections of the British North America Act, it is essential first to examine the “true nature and character” of the legislation in question.

The Alberta Provincially Guaranteed Securities Proceedings Act 1937, prohibiting actions or proceedings to enforce rights with respect to guaranteed securities without the consent of the Lieutenant-Governor in Council, must, in their Lordships judgment, stand or fall with the Alberta Provincial Guaranteed Securities Interest Act 1937. Each of the two Acts applies to “guaranteed securities” as defined in identical terms. The Acts are in fact designed to effect one and the same purposenamely, to reduce the rate of interest on the securities to the level fixed by the Alberta Provincial Guaranteed Securities Interest Act 1937. If the Alberta Provincially Guaranteed Securities Proceedings Act 1937, can properly be passed as relating to one or other of the classes of subjects in s 92, it enables the government of Alberta, acting through the Lieutenant-Governor in Council, to allow proceedings in the courts to recover interest at the rate which the government fix,

Page 227 of [1940] 2 All ER 220

but at no higher rate. By this method, reductions in the rate of interest on the guaranteed securities would be enforceable, regardless of the fate of the Alberta Provincial Guaranteed Securities Interest Act 1937. In other words, the Alberta Provincially Guaranteed Securities Proceedings Act 1937, is an attempt to do by indirect means something which their Lordships are satisfied the provincial Parliament cannot do. This Board has never allowed such colourable devices to defeat the provisions of ss 91 and 92. Reference may be made to the statement of the Earl of Halsbury LC in delivering the decision of the Judicial Committee in Madden v Nelson & Fort Sheppard Ry, at p 627:

… it is a very familiar principle that you cannot do that indirectly which you are prohibited from doing directly.

The substance, and not the form, of the enactment in question must be regarded. Their Lordships cannot come to any other conclusion than that, under colour of an Act relating to the class of subject described in s 92(14), the provincial Parliament have passed legislation which is beyond their powers. In the result, their Lordships agree with the judgments of Ewing J, and of the majority of the Appellate Division of the Supreme Court of Alberta, and they will humbly advise His Majesty that this appeal should be dismissed with costs.

The question in the second appeal is whether the Alberta Provincial Securities Interest Act 1937, is within the powers of the Alberta legislature. The respondent began the proceedings by way of petition claiming that the Act is ultra vires the Alberta legislature and asking for a declaration of the court accordingly. The respondent is a body corporate in accordance with the law of the province, and owns a number of debentures to the amount of $373,000, lawfully issued by the province under powers conferred on the province by statutes of Alberta and orders of the Lieutenant-Governor in Council. The debentures, which were issued at different dates, bear dates of interest varying according to the conditions of the several debentures. The respondent, on presenting interest coupons from time to time, has been refused payment of interest by the defendant at the agreed rates. The defendant relied on, and now pleads, the provisions of the Alberta Provincial Securities Interest Act 1937, entitled:

An Act respecting the interest payable on debentures and other securities of the province.

The Act applies to all debentures theretofore issued by the province. S 3(1) of the Act provides as follows:

Notwithstanding any stipulation or agreement as to the rate of interest payable in respect of any security, on, from and after June 1, 1936, the rate at which interest shall be payable in respect of any security shall be as follows …

The new rates are then set out, and in general they are half the agreed rates. S 3(2) declares the rights of holders of the debentures of the province covered by the Act to be those set out in the Act. These two subsections are the whole Act, apart from a section protecting trustees

Page 228 of [1940] 2 All ER 220

or fiduciaries, and another section repealing the Act of the previous session of which the short title was the Provincial Securities Interest Act 1936.

Their Lordships have considered the Act with a view to ascertaining its “true nature and character,” or “its pith and substance.” It relates in substance, not to borrowing, but to payment of interest in respect of existing debentures and other securities at less than the contract rates. The appellants made submissions similar to those presented in the first appeal, and their Lordships, without repeating the reasons already given in deciding the first appeal, take the same view of this Act as of the Alberta Provincially Guaranteed Securities Proceedings Act 1937, and the Alberta Provincial Guaranteed Securities Interest Act 1937. Their Lordships were invited to hold that the Alberta Provincial Securities Interest Act 1937, could be justified by reference to s 92(3), “the borrowing of money on the sole credit of the province.” The argument, in their Lordships view, is not well-founded, on the facts of this case, and fails by reason of their view that in pith and substance this Act relates to “interest.”

The appellant submitted one other argument with which it is necessary to deal. It was said that the position of the Crown is not touched by the Canadian Interest Act s 2, by reason of the provisions of the Canadian Interpretation Act s 16, which enshrines the doctrine that the Crown is not bound by any Act unless it is expressly mentioned therein. The argument could only be relevant on the assumption that the Alberta Provincial Securities Interest Act 1937, would be valid but for the fact that it conflicts with the Dominion Interest Act. Their Lordships, however, take the view that the provincial Act is ultra vires on the ground that its pith and substance relate to interest. If it were necessary to deal with the appellants submission that the Crown is not bound by the Interest Act, their Lordships would be content to adopt the judgment on this point of Shepherd J. Their Lordships will humbly advise His Majesty that this appeal also should be dismissed. The appellants will pay the respondents costs.

Appeals dismissed with costs.

Solicitors: Blake & Redden (for the appellants in both appeals); Charles Russell & Co (for the respondent and the intervener in both appeals).

Charles Shelley Esq   Barrister.

Note

[1940] 2 All ER 228

LANDLORD AND TENANT; Leases

An appeal in Newman v Real Estate Debenture Corpn and Flower Decorations Ltd has been settled.


R v Barnes

R v Richards

[1940] 2 All ER 229


Categories:        CRIMINAL; Criminal Evidence        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        LORD HEWART LCJ, HILBERY AND HALLETT JJ        

Hearing Date(s):        22, 23 JANUARY 1940        


Criminal Law Accomplice Corroboration Evidence of fellow prisoners inculpating accused but not called by prosecution What persons are accomplices.

Criminal Law Separate trials Discretion of judge.

The appellants were indicted, together with three other persons, a man and two women, for the murder of one A, and were convicted and sentenced to death. They had all been concerned in the preparation, the placing and the explosion of a bomb which had been left on a carrier-cycle outside a shop in the main business street of C on 25 August 1939. In consequence of the explosion 5 persons were killed, including A. Each of the two women made a number of statements, the earlier ones having reference to their own conduct only, while the later ones inculpated the two appellants. The judge pointed out differences between the evidence of the women given at the trial, and the earlier statements made by them. He told the jury that their evidence was evidence against themselves only, but he made no reference to the fact that their evidence was that of accomplices and might need corroboration. The appellants appealed on the grounds (i) that they should have been tried separately, and (ii) that the judge in his summing up had (inter alia) failed to warn the jury not to accept the evidence of the two women prisoners without corroboration:

Held (i) the question whether there should be separate trials is a question for the discretion of the judge. There was no ground here for the contention that it was necessary for the administration of justice that the trials should be separated.

(ii) as the evidence of the women prisoners was not evidence called by the prosecution, nor was the jury asked by the prosecution to act upon it, the necessity for a warning with regard to the evidence of accomplices did not arise.

Notes

The necessity for corroboration of the evidence of accomplices applies only in the case of evidence called by the prosecution. Where accomplices are called by the defence and the jury are not asked by the prosecution to act upon their evidence, there is no need for such corroboration.

As to Corroboration, see Halsbury (Hailsham Edn), Vol 9, pp 222224, paras 309313; and for Cases, see Digest, Vol 14, pp 460467, Nos 48874972.

Cases referred to

R v Baskerville [1916] 2 KB 658; 14 Digest 463, 4934, 86 LJKB 28, 115 LT 453, 12 Cr App Rep 81.

R v Martin (1910) 5 Cr App Rep 4; 14 Digest 456, 4827.

R v Bywaters (1922) 17 Cr App Rep 66; 14 Digest 501, 5519.

R v Tate [1908] 2 KB 680; 14 Digest 535, 6064, 77 LJKB 1043, 99 LT 620, 1 Cr App Rep 39.

Appeals

Appeals against convictions for murder at the Birmingham Assizes on 14 December 1939. The appellants, with three other persons, were indicted for the murder of Elsie Ansell, and were convicted and sentenced to death. The grounds of appeal were (i) that the appellants should have been tried separately, and (ii) that the summing up was insufficient in certain respects, the only objection material for the purposes of this report being that the judge failed to warn the jury not to accept the evidence of two fellow-prisoners without corroboration.

Page 230 of [1940] 2 All ER 229

The appellants, together with other persons, were concerned in the preparation, the placing and the explosion of a bomb which was left in a carrier-cycle outside a shop in the main business street of Coventry on Friday, 25 August 1939. In consequence of the explosion, five persons were killed, including Elsie Ansell. The appellants, with another man and two women, were indicted for the murder of Elsie Ansell. Each of the two women had made a number of statements, the earlier ones having reference to their own conduct only, while the later ones inculpated the two appellants, and more particularly the appellant Barnes. In particular, these statements referred to the purchase of certain sacks of a particular kind which were used in the preparation of a bomb. In his summing up, the judge pointed out the differences between the evidence of the women given at the trial and the earlier statements made by them, and told the jury that their evidence was evidence against themselves only. He made no reference to the fact that the evidence of these women was the evidence of accomplices, and thus might require corroboration.

R A Wood and Douglas Jenkins for the appellants.

Richard OSullivan KC and Arthur Wood for the Crown.

Wood: The statements by the women incriminated the appellants, and that is a good ground for a separate trial: R v Bywaters. The evidence of these women, being accomplices, required corroboration.

OSullivan KC: The omission by the judge to warn the jury of the necessity for corroboration does not render it essential that the conviction shall be quashed. If there is in fact corroboration, the court will allow the conviction to stand: R v Tate. By acquitting the women, the jury have found that they were not accomplices. The necessity to warn the jury arises only in cases where such evidence is given by the prosecution.

R A Wood and Douglas Jenkins for the appellants.

Richard OSullivan KC and Arthur Wood for the Crown.

23 January 1940. The following judgment was delivered.

LORD HEWART LCJ (delivering the judgment of the court). The summing up in this case was of considerable length. In the transcript of the shorthand note, it fills about 50 pages, and it is to be observed that in that summing up, from first to last, neither the word “accomplice” nor the word “corroboration” is to be found. It was made clear in the course of the argument before us that there was a similar state of affairs in the speeches made at the trial. It is common ground that the speeches made by counsel for the various defendants never referred to the topic of corroboration or to the topic of complicity. That seems to us to be an interesting fact, and not without significance in this case, because of the two grounds of appeal which have been urged. One of them is the contention that the judge failed to direct the jury that the evidence of the two women jointly charged with the appellants required corroboration.

The first ground of appeal which was developed by counsel for the appellants in his very careful argument was that, in the circumstances

Page 231 of [1940] 2 All ER 229

of this case, there ought to have been, and there was not, a separate trial of each of the two appellants. His argument was that the statements which had been made by the women prisoners were statements which had the effect of inculpating some, at least, of the appellants, and that, in view of that fact, there was a duty upon the judge to order separate trials.

With regard to the law upon that point, there is no longer any room for doubt or difference. The question whether there should be separate trials is a question for the discretion of the judge. He exercised his discretion in this case. He heard argument, and he acted after the argument had been heard. In our view, there is no ground here for the contention that it was necessary for the administration of justice that the trials should be separated.

Much stress was laid yesterday by counsel for the appellants upon a passage in a case in this court, in which it was said that, where the defence of one prisoner incriminates another prisoner, there ought to be separate trials. However, if that passage is carefully readit is not necessary to read it againIt is quite obvious that what is meant is that, where it appears that the essential part, or an essential part, of one prisoners defence is, or amounts to, an attack upon another prisoner, then a separate trial should take place. In our opinion, it is idle to contend in this case that it was of the essence of the evidence, or, the statements of the other prisoners, to attach either of the appellants. It is quite obvious, when one reads that evidence and those statements, that what those witnesses were concerned with was to excuse themselves, and not to attack others. The mere fact that, in the course of excusing themselves, they made observations which might have the effect of throwing blame upon others who were in the dock is no sufficient reason why the trials should be separated. Apparently, the contention is that the judge, exercising a kind of prophetic power, is to perceive in advance that the effect of the evidence, if given by one prisoner, may inculpate another, and that, in all cases where it may happen, it is the duty of the judge to order a separate trial. That is not a correct statement of the position, and, in our opinion, there was no sufficient reason in this case for ordering separate trials, and there is no ground for the contention that this conviction cannot be supported for the reason that separate trials were not had.

The other grounds of appeal, numerous as they are, are really reducible to two classes, and to two classes only. There are those grounds which are mere errors of fact, mere misstatements, or are immaterial. There is also the ground, which has been developed at some length in the course of the argument, that in this case there ought to have been a direction to the jury that the evidence of the two women prisoners required corroboration. That is really the main point of the argument of counsel for the appellant. It is interesting to observe that nobody at the trial took any such point. It appears to be an afterthought, following a study

Page 232 of [1940] 2 All ER 229

of what then took place. If it were sound, of course, the mere fact that it was an afterthought would be immaterial, but one cannot help thinking that there is some confusion of thought in the contention that in this case it was the duty of the judge to direct the jury that here they were dealing with the evidence of accomplices, and that that evidence must not be accepted in the absence of corroboration.

The witnesses whose evidence, it is said, needed corroboration are the two women prisoners. They were not called as witnesses for the prosecution. They went into the witness-box to give evidence, and they gave evidence on their own behalf. The rule with regard to corroboration of accomplices does not seem to apply to such a case. As was stated in R v Baskerville in this court, at p 665:

The rule of practice as to corroborative evidence has arisen in consequence of the danger of convicting a person upon the unconfirmed testimony of one who is admittedly a criminal. What is required is some additional evidence rendering it probable that the story of the accomplice is true and that it is reasonably safe to act upon it.

In no respect is it true to say that the evidence which is referred to in this part of the notice of appeal was evidence called by the prosecution. Nor was the jury being asked by the prosecution to act upon the evidence given by either of those two women. One looks in vain for any case in which it has been decided that, where prisoners are tried together on the charge of being jointly concerned in the commission of a crime, and they elect to give evidence, and in so doing one of them happens incidentally to give a piece of evidence which tells against another of the accused, it is requisite that the warning as to the evidence of accomplices should be given.

Our attention was directed to R v Martin, which seems to throw useful light upon this part of the argument of counsel for the appellant. In that case, this court said, at p 6:

… Johnson made a statement which implicated Martin to a certain extent, and which Martin did not contradict; he merely said he wished to reserve his evidence. The case was essentially one for the jury, and there was no want of direction which could have led to any miscarriage of justice.

In the opinion of this court, on the facts of this case, and upon the evidence in this case, the necessity for a warning with regard to the evidence of accomplices did not arise. Even if it had arisen, it is manifest that, on the mass of evidence which was before the jury, there was ample and cogent evidence which made it clear what the verdict ought to be. There was ample evidence, apart from that evidence which is saidwrongly, as it appears to usto have required corroboration on the facts of this case. The summing up of the judge, which occupies undoubtedly a good deal of space in the transcript of the shorthand note, was careful, systematic and full, and, in our opinion, there is no ground for the contention that the summing up was defective in any of the respects referred to in the grounds of appeal. In our view, there

Page 233 of [1940] 2 All ER 229

is no ground at all, in this case, for the application which has been made or the appeal which has been urged, and the appeal is accordingly dismissed.

Appeal dismissed.

Solicitors: W J Mealand (for the appellant); Director of Public Prosecutions (for the Crown).

W J Alderman Esq   Barrister.

Re Clayton, Collins v Clayton and Others

[1940] 2 All ER 233


Categories:        PROFESSIONS; Lawyers        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        12 MARCH 1940        


Solicitors Costs Statutory lien or charging order Property sold in administration action Proceeds paid into court Extent of charge Whether order limited to costs incurred in recovery of property Solicitors Act 1932 (c 37), s 69.

The applicants were solicitors acting on behalf of the defendants in an administration action. In the course of that action, certain property was sold by them and the proceeds of sale were paid into court. The applicants asked for an order charging all their costs in the administration action upon the money in court, but it was contended that the charging order should be limited to the costs properly incurred in recovering and preserving the money in court:

Held the charging order should be limited to the costs properly incurred in recovering and preserving the money in court.

Notes

Some doubt appears to have arisen as to the extent of the lien under the Solicitors Act 1932, s 69. While the decision would seem to follow what has generally been considered as the correct view, the matter is now put beyond any doubt.

As to Statutory Lien and Charging Orders, see Halsbury (Hailsham Edn), Vol 31, pp 252261, paras 275282; and for Cases, see Digest, Vol 42, pp 290298, Nos 32503318.

Cases referred to

Re Born, Curnock v Born [1900] 2 Ch 433; 42 Digest 299, 3327, 69 LJCh 669, 83 LT 51.

Greer v Young (1883) 24 ChD 545; 42 Digest 291, 3267, 52 LJCh 915, 49 LT 224.

Emden v Carte (1881) 19 ChD 311; 42 Digest 297, 3315, 51 LJCh 371, 45 LT 328.

Turnbull v Richardson (1885) 1 TLR 244; 42 Digest 296, 3299.

Scholey v Peck [1893] 1 Ch 709; 42 Digest 303, 3371, 62 LJCh 658, 68 LT 118.

Charlton v Charlton (1883) 52 LJCh 971; 42 Digest 292, 3270, 49 LT 267.

Re John Clayton Ltd (1905) 92 LT 223; 42 Digest 296, 3306.

Re Knight, Knight v Gardner [1892] 2 Ch 368; 42 Digest 308, 3436, 61 LJCh 399, 66 LT 646.

Mackenzie v Mackintosh (1891) 64 LT 706; 42 Digest 273, 3069.

Application

Application by the solicitors for the defendants in an administration action for a charge in respect of their costs of the action upon a fund in

Page 234 of [1940] 2 All ER 233

court, being the proceeds of sale of real property sold under an order in the action. The facts are fully set out in the judgment.

G G Solomon for the applicants.

J H Stamp for the Inland Revenue Commissioners.

J F Bowyer for the respondent.

12 March 1940. The following judgment was delivered.

MORTON J. Arthur Victor Clayton died intestate on 28 November 1933, and on 16 January 1934, letters of administration were issued to the defendants, Jane Elizabeth Clayton and Wilfred Albert Reade. The intestate was a builder and estate agent, and he owned a number of properties. There were no fewer than 50 mortgages subsisting on these properties at the time of his death. On 26 June 1935, the plaintiff in this action, Mrs Collins, issued an originating summons for administration of the estate, she being, I understand, the second mortgagee, and on 25 October 1935, an order for administration was made.

The applicants on this summons, a firm of solicitors named Messrs Savage Cooper & Wright, acted throughout the proceedings for the defendants, the administrators of the estate. Of the 50 properties which were the subject of mortgages I am told that 49 were sold by the mortgagees. No balance accrued to the estate from these sales, but there was a property called Oakdene, and in regard to that property a conditional contract was entered into by the defendants on 18 December 1935, for its sale at the price of £2,650. By an order of 29 January 1936, that contract, with a certain immaterial variation, was ordered to be performed. It was ordered that the defendant Jane Elizabeth Clayton and Messrs Savage Cooper and Wright should respectively lodge in court as directed in the schedule to the order certain deposits received by them, the facts being that Mrs Clayton had received £50, part of the deposit, while Messrs Savage Cooper & Wright had received £215. It was further ordered as follows:

That the defendants be at liberty to receive the balance of the purchase money payable upon the completion of the said sale, and after payment thereout to the said Halifax Building Society of the amount due to such society in discharge of principal interest, costs and other moneys secured by a mortgage dated Mar. 24, 1930, and made between the above-named intestate of the one part and the said Halifax Building Society of the other part and being a first charge upon the property described in the said conditional contract and do lodge in court to the credit of this action … the said balance of purchase money.

The sale was duly carried out in March 1936. The applicants in the present application acted as solicitors for the vendors, having procured the mortgagees to consent to the sale. The two deposits of £50 and £215, and also a sum of £756 5s 1d, the balance of the purchase money after discharging the sums due to the mortgagees, were paid into court to the credit of the account. The funds in court now standing to the credit of the action are £18 11s cash, which I understand represents interest accrued on war stock, £265 money on deposit, and £812 16s 5d 3½ per cent war stock.

There is a stop in favour of the Inland Revenue for income tax. The

Page 235 of [1940] 2 All ER 233

applicants have so far had no costs paid to them in the action, which has not yet proceeded to further consideration, and, if they had to look to their clients personally for their costs, according to the evidence before me, they would be unlikely to obtain the costs from them. In those circumstances, the applicants ask that it may be declared that they are entitled to a charge upon the funds in court, to put it shortly, as being property recovered or preserved in this action through the instrumentality of the applicants for the amount of the taxed costs, charges and expenses of the applicants of or in reference to this action as the solicitors of the defendants in this action, down to and including the order to be made in this application. It will be observed that the claim for a charge is not limited to the costs properly incurred in recovering or preserving the propertynamely, the fund in courtbut extends to the whole of the costs of the applicants in the action, down to and including the present date.

The Solicitors Act 1932, s 69, provides as follows:

Any court in which a solicitor has been employed to prosecute or defend any suit, matter or proceeding may at any time declare the solicitor entitled to a charge on the property recovered or preserved through his instrumentality for his taxed costs in reference to that suit, matter or proceeding, and may make such orders for the taxation of the said costs and for raising money to pay, or for paying, the said costs out of the said property as they think fit, and all conveyances and acts done to defeat, or operating to defeat, that charge shall, except in the case of a conveyance to a bona fide purchaser for value without notice, be void as against the solicitor …

Then there is a proviso which is immaterial to the present case. That section differs somewhat in its wording from the Solicitors Act 1860, s 28. In particular, instead of the words “in reference to that suit, matter or proceeding” the Solicitors Act 1860, s 28, uses the words “of or in reference to such suit, matter or proceeding.” Counsel for the applicants contendsand it has not been disputed in argumentthat the words used in the two sections have the same effect, so far as the matter before me is concerned. He submits, first of all, that there is jurisdiction under the section to make the order for which he asks. I do not doubt that there is jurisdiction to make the order if the court thinks fit, and to that extent I do not think that the note in The Annual Practice, 1940, p 2371, under the heading “Extent of” is quite accurate. That note is as follows:

This statutory power given to the court in aid of the common law right, see Re Born … is confined to the costs, charges and expenses incurred in respect of the particular property “recovered or preserved”, as to which see (n.) p. 2375: it is not a general charge for all costs …

I think that in fact the statutory power extends more widely than is stated there, and indeed the contrary was not contended by counsel for the Inland Revenue Commissioners and by counsel for the respondent to this application. They argued that, although the power extends to the whole costs of the solicitor in relation to the whole of the action, it ought to be limited, and ought to be limited as a matter of principle, to the

Page 236 of [1940] 2 All ER 233

costs properly incurred in recovering and preserving the property. Counsel for the Inland Revenue Commissioners has referred me to Creer v Young, and in particular to the observation of Chitty J, at p 550:

A point to which I called counsels attention was that the order had not been so drawn as to limit, as it ought to have done, the costs of the solicitor to his costs properly incurred in recovering and preserving the property.

Counsel for the Inland Revenue Commissioners also relied on the observations of Sir William Brett MR, at p 552:

I do not adopt the idea of salvage as an accurate analogy in all respects but I think the fundamental theory is, that what is recovered by the action of the solicitor is to be treated as if he had earned salvage, and that he is to be paid for his services on the theory that salvage services have been rendered.

Similarly, Bowen LJ said, at p 556:

It appears clear to me that it [the Solicitors Act, 1860, s. 28] is a salvage section. The solicitor is treated as a salvor who has recovered or preserved something in a time of danger by his work and labour. Into whatever hands it may fall it is charged with the salvage.

These passages seem to me to show quite clearly that the principle upon which the court proceeds is that the solicitor is to be rewarded for his efforts to the extent of receiving the costs, charges and expenses properly incurred in recovering or preserving the property. Counsel for the Inland Revenue Commissioners also referred me to Emden v Carte, Turnbull v Richardson and Scholey v Peck as supporting the argument which he put before me. I agree that they do support that argument, and I propose to make an order in accordance with the submission put before me by him.

With regard to Charlton v Charlton, Re John Clayton Ltd and Re Knight, Knight v Gardner the cases cited by counsel for the applicants, I think that in those cases there were circumstances which justified the court in making an order covering all the costs incurred in the action. I do not propose to examine those cases in detail, but I think that they are clearly distinguishable from the present case. In the present case, the solicitors are acting only for the defendants. They have no doubt earned their reward, so far as this fund in court is concerned, to the extent to which costs have been incurred in recovering and preserving the fund. I see no reason for departing from what I conceive to be the general principle and giving them any wider charge than that.

I may add that the three cases referred to in The Annual Practice, 1940, p 2371, do not, in my view, establish the broad statement for which they are quoted as authority, and I think that the note in The Annual Practice, 1940, appears to be based upon a passage in the judgment in Mackenzie v Mackintosh. I do not think that that passage, when read in its context, establishes what is said in the note. For these reasons, I propose to limit the declaration to be made in para (1) of the summons to the costs, charges and expenses properly

Page 237 of [1940] 2 All ER 233

incurred in recovering or preserving the fund in court, and I do not propose to give that charge priority over the stop order which has been imposed in favour of the Inland Revenue. I do not express any view on that matter, as it has not been fully argued. It is a purely academic point, as it is quite obvious that the fund in court will be ample to meet the costs in question without trespassing on the Crowns claims.

Solicitors: Savage Cooper & Wright (for the applicant); Solicitor of Inland Revenue (for the Inland Revenue Commissioners); Forsyte Kerman & Phillips (for the respondent).

Charles Newton Esq   Barrister.

Re Gilt Edge Safety Glass Ltd

[1940] 2 All ER 237


Categories:        COMPANY; Directors        

Court:        CHANCERY DIVISION        

Lord(s):        CROSSMAN J        

Hearing Date(s):        4, 5, 6 MARCH 1940        


Companies Directors Qualification shares Directors not holding requisite number of shares Directors continuing to act Power of court to grant relief Summary Jurisdiction Act 1848 (c 43), s 11 Companies Act 1929 (c 23), ss 141(5), 372(1), (2).

The petitioners had been directors of the respondent company, and had continued to act as such in spite of the fact that, in consequence of a reduction in the capital of the company, they had ceased to hold the requisite number of qualification shares as provided by the articles of association. Thereupon the respondent company had commenced proceedings against them under the Companies Act 1929, s 141(5), which proceedings were still pending before the appropriate court of summary jurisdiction. The petitioners claimed (i) relief under s 372 of the Act from liability in respect of fines or penalties which might have been incurred pursuant to s 141(5), and (ii) relief under s 372 of the Act from future liability in respect of acts done while they were not qualified to act as directors:

Held (i) as, on the facts, the petitioners, although disqualified, had acted honestly and reasonably, the court was entitled, having regard to all the circumstances of the case, to exercise its discretion in their favour, and to protect them against future or apprehended claims.

(ii) the discretion of the court did not, however, extend to the pending proceedings, and the proceedings before the court of summary jurisdiction remained unaffected by the exercise of the discretionary power of the court.

Notes

Where directors have inadvertently acted without qualification they may be granted relief. Upon application to the Chancery Division, they can be granted relief in respect of prospective proceedings, that is to say, proceedings which have not been commenced at the time when the relief is sought. If the proceedings have been commenced, then relief must be sought in the court in which the proceedings are taken, and that is the only court which can grant relief. This is so even where proceedings are taken in a court of summary jurisdiction.

As to Relief in case of Negligence on the part of Directors, see Halsbury (Hailsham Edn), Vol 5, pp 331, 332, para 545; and for Cases, see Digest, Supp, Companies, Nos 3345a, 3345b.

Case referred to

Re Barry & Staines Linoleum Ltd [1934] Ch 227; Digest Supp, 103 LJCh 113, 150 LT 254.

Page 238 of [1940] 2 All ER 237

Petitions

Petitions by disqualified directors for relief under the Companies Act 1929, s 372. The facts are fully set out in the judgment.

Hon Charles R R Romer KC and Valentine Holmes for the petitioners.

G D Roberts KC and Maurice Berkeley for the respondent company.

A Andrewes Uthwatt for the Board of Trade.

6 March 1940. The following judgment was delivered.

CROSSMAN J. These are two petitions which have been heard together, each petition being by a director of Gilt Edge Safety Glass Ltd, asking for relief under the Companies Act 1929, s 372, from liability by reason of certain events which have happened and for which they may be held liable. The actual prayer in the two petitions is in this form:

1. That your petitioner [Maurice Gordon Liverman] may be relieved by this honourable court pursuant to the Companies Act, 1929, s. 372, from any liabilities for fines or penalties which he may have incurred under [the Companies Act, 1929, s. 141] or otherwise by reason of his negligence default breach of duty or breach of trust in having acted without being qualified and while disqualified as a director of the company. 2. That your petitioner may also be relieved by this honourable court pursuant to the said section from any liability which he may be under to the company in respect of his negligence default breach of duty or breach of trust in drawing or receiving remuneration or otherwise acting as a director of the company without being qualified and while disqualified to act as such.

This company, Gilt Edge Safety Glass Ltd, was incorporated in 1929 under another name. In 1931, its capital was increased, to something which has now been reduced, and in 1935 it adopted its present name of Gilt Edge Safety Glass Ltd. At the beginning of 1936, the company known as Lancegaye Safety Glass (1934) Ltd, acquired the whole of the issued share capital of this companynamely, 21,294 ordinary shares of £1 and 17,000 founders shares of 1s. On 26 February 1936, those shares were transferred to Lancegaye Safety Glass (1934) Ltd, which company I propose to call Lancegaye for short. On 18 May 1936, the two petitioners, Maurice Gordon Liverman and Charles Walter Latham, who were directors of Lancegaye, were elected directors of this company, which I will call, in order to avoid confusion, Gilt Edge. They were elected directors of Gilt Edge, and, pursuant to the requirements of the articles of Gilt Edge, 10 ordinary shares of £1 each were transferred to each of them as directors qualification, Lancegaye holding, I think, all the rest of the shares in Gilt Edge. On 8 February 1937, the petitioner Charles Walter Latham was appointed managing director of Gilt Edge at a salary of £500 per annum, he being already entitled under the articles of Gilt Edge to a salary as director, to which Liverman was also entitled. Then on 12 April 1937, an order was made confirming the reduction of the capital of Gilt Edge from £22,850 to £7,381 6s 8d, a very drastic reduction. That order was subsequently registered. The result of the registration of that order and the minute was that the petitioners 10 shares of £1 each became 200 shares of 4d each, and, instead of being of the nominal

Page 239 of [1940] 2 All ER 237

value of £10, they became of the nominal value of £3 6s 8d. The articles of Gilt Edge require as directors qualification that shares of the nominal value of £10 shall be held by the directors. That being the case, as from the registration of this order in April 1937, the company was left without any director at all, because the petitioners were both in the same position, each holding only 10 £1 shares. Then in June 1939, a company called Triplex Safety Glass Ltd, acquired practically all the shares in Lancegaye, Lancegaye then being the holder of all the shares in Gilt Edge. On 29 June 1939, the petitioners purported to resign their directorships. As a matter of fact, they had not any directorships to resign, but as from that date they ceased to act as directors. During the course of their directorships, the first petitioner, Liverman, had received the sum of £116 15s 2d as directors fees, and the other petitioner, Latham, had received the sum of £1,497 13s 2d, partly as ordinary fees and partly as salary as managing director. On 6 October 1939, a summons was issued based on information sworn by the secretary of the Lancegaye company, and the information alleged that the petitioners acted as directors on 29 June 1939, after the expiration of two months from the date of their appointment, contrary to the Companies Act 1929, s 141(5). That information came before the magistrate at the Bow Street police court on 16 October 1939, and it was thereupon adjourned sine die. On 18 October, two days after the adjournment of the summons, a claim was made by Gilt Edge against these two petitioners for repayment by them of the fees received by them as directors from the date when the reduction took effect. On 13 December 1939, the summons at Bow Street police court was restored for 8 January 1940, and on 4 January 1940, the petitioners presented the two petitions praying for that relief which I have already read. On 8 January, the summonses at Bow Street were again adjourned.

I now turn to the articles of association of Gilt Edge to see the position. Art 13 provides as follows:

The qualification of a director shall be the holding of shares of the company of the aggregate nominal value of at least £10, and it shall be his duty to comply with the provisions of the Companies (Consolidation) Act, 1908, s. 73. A director may act before acquiring his qualification.

The Companies (Consolidations Act) 1908, s 73, is the section which is now represented by the Companies Act 1929, s 141. Art 14 provides as follows for disqualification of directors:

The office of a director shall be vacated … (2) If he ceases to be a director by virtue of the Companies (Consolidation) Act, 1908, s. 73.

The position clearly was that, on this reduction taking effect, these two petitioners had vacated their office. They ceased to be directors. Then the Companies Act 1929, s 141(5), provides as follows:

If after the expiration of the said period or shorter time any unqualified person acts as a director of the company, he shall be liable to a fine not exceeding £5 for every day between the expiration of the said period or shorter time or the day on

Page 240 of [1940] 2 All ER 237

which he ceased to be qualified, as the case may be, and the last day on which it is proved that he acted as a director.

I have been referred to the Summary Jurisdiction Act 1848, s 11, which provides that the directors cannot be proceeded against more than 6 months from the time at which the offence occurred, and, therefore, as the last offence occurred on 29 June 1939, no further proceedings under that section can be taken against these two persons. Then I find that s 372 of the Act, which is the section under which I am asked by the petitioners to exercise jurisdiction, provides as follows:

(1) If in any proceeding for negligence, default, breach of duty, or breach of trust against a person to whom this section applies it appears to the court hearing the case that that person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as the court may think fit. (2) Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust he may apply to the court for relief, and the court on any such application shall have the same power to relieve him as under this section it would have had if it had been a court before which proceedings against that person for negligence, default breach of duty or breach of trust had been brought.

Then s 372(4) provides as follows:

The persons to whom this section applies are … (a) directors of a company …

Thus the petitioners, who come within that subsection, can be said to be persons to whom the section applies. The decision of Maugham J in Re Barry & Staines Linoleum Ltd I think is clearly an authority for the proposition that s 372(1) of the Act applies to such proceedings as were commenced in October 1939, at Bow Street police court. In that case, the judge came to a conclusion which made him decide that he could give relief from prospective liability for proceedings under that section, which shows, I think, that he took the view that the phrase “in respect of his negligence, default, breach of duty or breach of trust” included a summons at a police court for payment of a fine in respect of an act of negligence as a director. It seems to me that s 372(1) quite clearly makes the court which hears the case the only court which has jurisdiction to give relief in respect of proceedings which have already been commenced. S 372(2), on the other hand, which was not in the earlier Act, but was added in 1929, was clearly intended to meet the case of proceedings which have not been commenced, but which will be commenced in the future and gives the court jurisdiction to grant relief from prospective liability. If I am right about the effect of sub-s (1), what the petitioners here say in para 1 of the prayer does not seem to me to apply to the Bow Street proceedings at all. That subsection does not enable me to deal in any way with what the magistrate has done or is doing at Bow Street, and those proceedings are untouched, and will be untouched, by any order which I make here. I do not see how I can ignore the expression “the court

Page 241 of [1940] 2 All ER 237

hearing the case.” The court hearing the case must be the court hearing the particular case in which the proceedings are taken, and it is for the magistrate at Bow Street to deal with the summons which is pending there for fines and penalties alleged to have been incurred by these petitioners in respect of their negligence, default, breach of duty or breach of trust. It is true that para 1 of the prayer was not expressly limited to the Bow Street proceedings, but, having regard to s 11 of the Act of 1848, I think that those are the only proceedings, and, therefore, I do not think that I can make any order on para 1 of the prayer.

Para 2 of the petition is an entirely different matter. It seems to me that, if the petitioners bring themselves within the subsection, I have power under sub-s (2) to make an order, provided that it does not apply to the Bow Street proceedings. Those proceedings will be expressly excepted from it. The question which I have to decide is whether I ought to make an order under that subsection relieving them from apprehension of liability. It has been suggested here that the last paragraph of the judgment of Maugham J in Re Barry & Staines Linoleum Ltd shows that I ought not to make any order where the company is unwilling that an order should be made. It seems to me that what Maugham J, is referring to in the last paragraph of his judgment is the necessity of his knowing what view the shareholders in the company take before he comes to a decision as to giving relief under sub-s (2). It does not follow, I think, that, because the shareholders oppose the application, therefore he has no jurisdiction. It is only one of the circumstances which he has to take into account. What I have to consider in this case, having got rid of the first two conditions of the sectionthat is to say, honesty and reasonableness, for I think that it is substantially admitted by the company that in this case the directors acted honestly and reasonablyis whether or not, having regard to all the circumstances of the case, including those connected with their appointment, the petitioners ought fairly to be excused for the particular default, negligence, breach of duty or breach of trust. Here it is admitted that the directors in question had no idea that they had ceased to be directors owing to this reduction of capital. The solicitor who acted in the matter of the reduction has given evidence before me, and it is quite clear that he had not realised it, and I do not think that even an expert lawyer can necessarily be blamed for not having observed that particular result of the reduction. It was a pure accident, I think, that these three men, or the other two, became disqualified when the reduction took place. They did not consider it, and the question is whether their not having thought about it amounts to such negligence as to make them liable under this section. I think that in a sense it may be that they were negligent, and, without knowing it, they committed a breach of duty in continuing to act as directors when they were no longer qualified. However, this

Page 242 of [1940] 2 All ER 237

being a purely technical defect, which, if it had been realised, would have been put right at once, because they were merely representatives of Lancegaye, who held the shares, and they could have transferred sufficient of the 4d shares to meet the qualification, and would have done so, I have no doubt, if they had realised the position, having regard to the fact that they did not in fact hold shares of the nominal value of £10, appears to have made no difference whatever to the company, which suffered no loss from it, and having regard to the circumstances of the case, including those connected with the appointment, I find it difficult to see how I can say that they ought not fairly to be excused from what is a pure technicality. It has been suggested that they were in some way or other neglecting their duty as directors, and that they got more money than they ought to have got. Those points, which came out in the cross-examination of one of the witnesses, seem to me to be wholly irrelevant here, even if I were to accept them as facts. The fact that the Triplex company may have some grievance against the directors of Gilt Edge does not seem to me to justify me in refusing to exercise the discretion, which I have under the section, to say that the directors may be fairly excused from what is a purely technical objection to their conduct. The result is that I think that this is a case where I ought to exercise my jurisdiction to protect these persons from future or apprehended claims, and there seems to be good ground for apprehension, because the companys solicitor says that one may be made.

Order that petitioners be relieved from liability, the order to be drawn in such manner as to leave unaffected the pending proceedings before the court of summary jurisdiction. Costs to be paid by petitioners.

Solicitors: Linklaters & Paines (for the petitioners); Last Riches & Fitton (for the respondent company); Solicitor to the Board of Trade (for the Board of Trade).

F Honig Esq   Barrister.

Note

R v Cronin

[1940] 2 All ER 242

CRIMINAL; Criminal Procedure

The court ordered the new trial to be held at the next sessions for the Borough of Ipswich and not at Bury St Edmunds where the first trial took place.


Oulu Osakayetio of Oulu, Finland v Arnold Laver & Co Ltd and Others

[1940] 2 All ER 243


Categories:        SALE OF GOODS: INSURANCE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        14 MARCH 1940        


Sale of Goods Cif contract Insurance increased premium due to war risk Goods shipped on ship of belligerent state.

Contracts for the purchase of timber to be shipped from Finland to Hull were entered into in October 1938, the shipment to be made in November 1938. The contracts were cif contracts, and provided, by cl 6, for insurance of the goods, including the risks covered by Institute war and strike clauses in force at time of attachment of insurance, any increase of premium for covering such risks beyond the rates ruling on 26 September 1935, to be for buyers account. The rate for covering such war risks was on 26 September 1935, 3d per £100, on 29 October 1938, 2s 6d per £100, and that remained the schedule rate at all material times. From 2 November 1938, when a Spanish Government vessel was sunk by enemy action, the rates on Spanish Government vessels rose rapidly. The cover note for the goods here in question stated that the goods were covered at the schedule rate for sailing on or before 5 November, but subject to 48 hours notice of cancellation unless sailing on or before 28 November 1938. The ship in which the goods were shipped was a Spanish Government vessel, which sailed on 12 November 1938, and on 7 November 1938, the shippers agents informed the buyers that the rate of insurance had been fixed between the sellers and the insurers at £5 per £100. The buyers contended that the sellers were not entitled to charter a ship belonging to a belligerent notoriously weaker at sea than his enemy, and to insure the goods at a premium to be fixed at the discretion of the underwriters on an unknown date of sailing:

Held the language of cl 6 required the comparison of a ruling rate with a ruling rate, and, in so far as there was no ruling rate for Spanish ships at the time when the comparison was said to have been made, the contract had no application as regards the part of the clause putting any increase of premium upon the buyers, and the sellers claim, therefore, failed.

Decision of Atkinson J ([1939] 4 All ER 88) affirmed.

Notes

It is implied in a cif contract that the shippers shall act reasonably in taking steps which impose a burden on the other contracting party, and that they shall take all reasonable steps to mitigate the expense to which that party may be put. The Court of Appeal have stated their view that it is not necessarily unreasonable to ship goods on a ship belonging to a state actually at war, and based their decision wholly on the construction of the relevant clause.

As to Insurance Under cif Contracts, see Halsbury (Hailsham Edn), Vol 29, pp 216, 217, para 288; and for Cases, see Digest, Vol 39, pp 582, 583, Nos 18441853.

Cases referred to

The Moorcock (1889) 14 PD 64; 12 Digest 611, 5048, 58 LJP 73, 60 LT 654.

Hamlyn & Co v Wood & Co [1891] 2 QB 488; 12 Digest 610, 5042, 60 LJQB 734, 65 LT 286.

Appeal

Appeal by the claimant from a judgment of Atkinson J, dated 17 October 1939, and reported [1939] 4 All ER 88. The facts are fully set out in the judgment of Slesser LJ.

H St John Field KC and H G Robertson for the appellants.

F A Sellers KC and Robert E Gething for the respondents.

Page 244 of [1940] 2 All ER 243

14 March 1940. The following judgments were delivered.

SLESSER LJ. In this case, the arbitrator has held in an arbitration heard before him:

… that the respondents are liable to pay to the claimants the full increase in war risks premiumnamely, £4 19s. 9d. per cent.and I award and direct that the respondents do each of them pay to the claimants the said increase in war risks on their respective parcels of wood goods.

The obligation to pay this increased premium is said to arise under three cif contracts with regard to wood goods shipped from the port of Oulu in Finland and to be conveyed to Hull, in which contracts there is a special provision in cl 6 with regard to the payment of the insurance. The language of cl 6 is as follows:

Before or as soon as tonnage is secured the marine insurance of cargo at f.o.b. invoice value, plus 10 per cent. and of freight advance to be covered by sellers with a first-class company or underwriters as per Lloyds form of policy, together with federation clauses printed in margin, losses payable in London and including the risks covered by the Institute war and strike clauses in force at the time of attachment of the insurance.

Then follow these words, which are the material words, on which the claimants must rely in this case:

Any increase in premium payable for covering the whole of such war risks and such strike risks in respect of the country of destination in excess of the rates ruling at Sept. 26, 1935, to be for buyers account.

Then follow these words:

Sellers obligation under this contract to insure against war and/or strike risks is subject to the proviso that such insurance can be covered. Should it not be possible to cover such insurance, or should insurance be cancelled by underwriters, sellers shall give prompt telegraphic advice to buyers who shall thereupon have the option of cancelling the contract.

By agreement, a statement of facts was placed before the arbitrator, and in cl 8 of the agreed statement of facts it is stated as follows:

The war risk rate on cargo from Baltic ports to the United Kingdom ruling on Sept. 26, 1935, was 3d. per cent.

The facts of the case are these. Three contracts dated 6, 7 and 8 October 1938, having been duly entered into, on 18 October 1938, the agents of the shippers chartered a Spanish steamer known as the El Neptuno to convey these goods, and on 26 October copies of the charterparty were sent by the shippers agents to each of the three buyers. Clause 6 provided as follows:

Before or as soon as tonnage is secured the marine insurance of cargo at f.o.b. invoice value plus 10 per cent. and of freight advance to be covered by sellers with a first-class company. …

Under that obligation, on 29 October the shippers through their agents entered into an agreement for insurance to cover the war risk on the goods with Lloyds underwriters at the premium of 3s 6d per cent. The cover note was said to be in the customary manner, and was in these words:

Wood goods in and over including freight advance, if any, per “El Neptuno” to Hull including war etc. risks at 3s. 6d. per £100 sailing on or before Nov. 5, 1938, held covered thereafter at schedule rate on date of sailing but subject to 48 hours notice of cancelment unless sailing on or before Nov. 28, 1938.

Page 245 of [1940] 2 All ER 243

On 6 October 1937, it appears from cl 9 of the agreed statement of facts that Spanish and Greek steamers had been excluded from the agreed minimum rates for war risks fixed by the rates committee appointed by Lloyds underwriters, and the rates were left to the underwriters discretion. The fact is, as appears in cl 10, that, whereas the war risk normally was 2s 6d, at that time, in the case of Spanish ships, and apparently Greek ships, under the discretion the sum of 3s 6d per cent was fixed. Thus, by covering a Spanish ship rather than a ship not excluded from the prevailing rate for war risk, the cover was increased by 1s per cent. After that, events happened which made the disparity still more marked. On 2 November 1938, another ship, the Cantabria, which was also owned by the Spanish Republican Government, was attacked by a Spanish Insurgent auxiliary cruiser in the North Sea and sunk by gunfire 6 miles off Cromer, and again, as a result of that, the war risk on Spanish government vessels rose substantially. There is no suggestion in the admitted facts that the earlier disparity, by which the rate was increased through Spanish and Greek ships being excluded from the prevailing rate, was due to the Spanish war. On Saturday, 5 November 1938, the El Neptuno not yet having sailed, the schedule rate referred to in the cover note became applicable. That note being, of course, for only a very short duration, there was communication with the insurance brokers, who feared that the rate was likely to be increased considerably by the date of sailing. They fixed the premium at £5 per cent, and the vessel sailed on 12 November 1938. Between 5 November, and 12 November, it is interesting to note that the rate for Spanish ships in the North Sea had risen to £10 10s per cent. It is in respect of that sum of £4 19s 9d per centthat is, deducting from the £5 the 3d which had been the war risk on cargo from Baltic ports on 26 September 1935that the claim is made.

In my view, the whole question has to be determined on a proper interpretation of this contract, and more particularly of cl 6. I find in cl 6 some indication of the intention of the parties as expressed in the written document itself. The sellers unusual right to put these expenses of premiums on to buyers account is stated in language which must be carefully considered:

Any increase in premium payable for covering the whole of such war risks and such strike risks in respect of the country of destination in excess of the rates ruling at Sept. 26, 1935, to be for buyers account.

If the case cannot be brought within those words, either expressly or by reasonable implication, that they do not sufficiently express the intention of the parties, and that the proper view is that further implications must have been intended by the parties to give commercial efficacy to the document, then the claim must fail. In my view, this clause contemplates a comparison between like and like. It is dealing with a comparison of the rates ruling at 26 September 1935, and the rates ruling at the time contemplated in the contract, but in both cases what have to be considered are the ruling rates or, as Atkinson J puts them, the schedule rates

Page 246 of [1940] 2 All ER 243

that is, the normal market rates recognised as applicable to ships of this class and flag. There is no doubt that the ordinary ruling rate at the time here to be considered in 1938 would be, as it was admittedly before 6 October 1937, for war risks on cargoes from Baltic ports, and would not include any particular kind of steamers which for one reason or another had been removed from the ruling rate. Such steamers were, after 6 October 1937, Spanish and Greek steamers. In other words, after 6 October 1937, there was no rate ruling which could have applied to a Spanish or a Greek steamer, and, in my view, quite apart from any question of belligerency, the 3s 6d on the cover note is not comparable to the 3d which was the war risk rate ruling on 26 September 1935, in order to discover what, if any was the excess, because the one is in a different category from the other. The one is the case of the prevailing ruling rate and the other is the case of an exceptional rate, fixed by discretion, and not by rule or schedule or general category.

Therefore, in my view, the right way of looking at this matter is that it was never intended by the parties in this agreement in writing, following from the words actually used, that any such rate as 3s 6d should be comparable to 3d. The prevailing rate at the time when the comparison had to be made was 2s 6d, and not 3s 6d. The fact that later on, by reason of the sinking of the Cantabria, the discrepancy became even more marked does not, in my view, affect the principle here to be considered. As I have said, in this particular case it did happen that the actual agreement made was £5 per cent, but, in my view, equally if it had remained at 3s 6d, the excess could not have been ascertained by reference to the rate ruling on 26 September 1935. That view, which I say I derive from the actual language of cl 6, seems to me consistent with good sense. I cannot think that it was the intention of the parties that the buyer should be entirely in jeopardy, that the seller might choose any ship of any quality, flag or condition that he liked, and then that he should be able to say, “It is possible to cover the insurance,” in which case there would be no obligation on the seller to give prompt telegraphic advice to the buyer, who would then have the option of cancelling the contract. In such a case, it would be possible to cover the insurance, possibly at some exorbitant or extravagant rate. That being possible, the buyer would not have the option of cancelling the contract under the last limb of cl 6, and all the unnecessary and swollen excess would be for the buyers account. As I say, I think that that is a very improbable bargain between the parties, and one which I should be very reluctant to accept.

In my view, for the reasons I have stated, it is not necessary here to invoke the principle of The Moorcock or of Hamlyn & Co v Wood & Co, or to import into the contract what is not there. I think that the actual language of the contract requires the comparison of a ruling rate with a ruling rate, and, in so far as there was no ruling rate for Spanish ships at the time when the comparison was said to have been

Page 247 of [1940] 2 All ER 243

made, I think that the contract has no application as regards this part of the clause, and, therefore, the claim must fail.

I would addsince I think that the judge is perhaps mistaken in one way in which he looks at this casethat the question of the reasonableness or propriety of chartering a Spanish ship has nothing to do with the case. It may well be that under this contract as a whole the sellers were fully entitled to charter either a belligerent ship or a non-belligerent ship. The question I have to consider is whether or not, having done so, they have established a right to hold the buyers to account for the difference between the rate which they paid for insurance on chartering such a ship and the rate prevailing at 26 September 1935. For the reasons I have stated, I think that they had no such right, and that the judge was right on the case stated in holding that the arbitrator was wrong in the view to which he came.

LUXMOORE LJ. I agree that this appeal must fail. The question to be determined is whether the sellers can recover from the buyers the difference between the sum actually paid by the sellers for insurance in respect of war risk for goods carried on a Spanish ship chartered by them and the general market rate which was ruling on 26 September 1935. The sum actually paid by the sellers was calculated at the rate of £5 per cent on the value of the cargo. The agreed facts show that the general market rate on 26 September 1935, in respect of war risk on cargoes from Baltic ports to the United Kingdom was 3d per £100, and that on 6 October 1937, the ships of two nationalitiesnamely, Spanish and Greekwere excluded from the general rates ruling on 26 September 1935. The sellers elected to charter a Spanish ship, and I do not think that there is any reason to suggest that they had no right to charter such a ship. At the date of the insurance, there was no general market rate applying to Spanish ships, and the answer to the question which really has to be determined depends entirely, I think, on the construction to be placed on the contract between the parties.

The principal part of the contract which has to be considered is cl 6 of the special conditions which are included in the contract. The clause provides that the sellers shall insure against war risks the goods which are the subject of the contract, and, although it is a cif contract, it contains the unusual provision that, in respect of part of the insurance, the buyers shall be responsible. The material part of the clause, I think, is as follows:

Any increase in premium payable for covering the whole of such war risks and such strike risks in respect of the country of destination in excess of the rates ruling at Sept. 26, 1935, to be for buyers account.

Does that mean any increase in premium which the sellers may choose to pay, no matter whether it is in excess or otherwise of the general market rate, or is it intending to compare like with like? At the date of the insurance, there was a general market rate of 2s 6d per cent of the value for war risk insurance from Baltic ports in respect of all

Page 248 of [1940] 2 All ER 243

ships except Greek and Spanish ships. It seems to me that, when one considers this clause and sees that what has to be paid is an increase in premium over something which was existing on 26 September 1935, and when one appreciates that the rate which was then existing was the general market rate, one must also, when considering the increase to be placed on the buyers, look to see what was the general market rate applicable at the date in question, and that was 2s 6d. If the contract is read in that light, I do not think that there can be any doubt but that the only liability which is placed on the buyers in respect of the war risk insurance is the difference between the general market rate of 2s 6d and the market rate of 3d existing on 26 September 1935. I agree that, for the reasons which have already been stated by Slesser LJ this appeal must fail.

GODDARD LJ. I will only add a few words, because, although I agree with the decision of the judge, I am differing from an arbitrator of great experience in this class of case, and also I do not agree with all the reasons or doubts expressed by the judge below. I do not agree, for instance, that there was either any breach of contract or anything unreasonable in the sellers chartering a Spanish ship. It was open to them to charter any ship they liked. What has to be considered is whether or not they, the sellers under a cif contract, are entitled to put part of the insurance moneys which they had ordinarily to pay upon the buyers, and that depends entirely upon the construction of a few words in cl 6 of the contract. I prefer to base my judgment simply on the ground that I think the words “Any increase in premium” must mean “Any increase in the ruling or market rate of premium for war risks”that is to say, for war risks in general I find support for that, not only in the words themselvesthat is to say, the words of the clause which refer to the excess of the rates ruling on 26 September 1935, and the necessity of comparing like with like, as Slesser LJ puts itbut also in the fact that it seems to me that the only reasonable construction to put upon these words is that they are not apt to cover the case of a special rate of premium, quoted by reason of something peculiar to the particular ship selected by the sellers, or the particular class of ships to which that ship may happen to belong. The ruling rate of premium in this casethe market rate of premiumwas 2s 6d. A particular rate was quoted, but there was no ruling rate for this particular ship, because of the class to which she happened to belong, and I do not think that that is covered by the words of this clause, which I think refer to the market rate only.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Slaughter & May (for the appellants); Pritchard Sons Partington & Holland, agents for Andrew M Jackson & Co, Hull (for the respondents).

Derek H Kitchin Esq   Barrister.


R v Surgenor

[1940] 2 All ER 249


Categories:        CRIMINAL; Criminal Evidence        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        CHARLES, HUMPHREYS AND WROTTESLEY JJ        

Hearing Date(s):        19 FEBRUARY 1940        


Criminal Law Evidence Unsworn evidence of child Judges duty before permitting unsworn evidence to be given Children and Young Persons Act 1933 (c 12), s 38(1).

The appellant was convicted of housebreaking. Part of the evidence against him was that certain foreign coins were found in his possession, and a bag of foreign coins had been stolen from the café which he was alleged to have burgled. To strengthen this evidence the prosecution called a girl of 9 years of age. The recorder was told that the justices in the court below would not allow the girl to be sworn, so, instead of satisfying himself as to whether she was in a position to be sworn as is required by the Children and Young Persons Act 1933, s 38(1), he allowed her evidence to be given without having her sworn. She said that she had seen the appellant put foreign coins in the gas meter, and that she had recognised them when the gas man took them out several days later. The girl was an intelligent child who ought to have been sworn:

Held it is the duty of the presiding judge to satisfy himself as to whether or not a child of tender years is in a position to be sworn. Nevertheless, although there had been an irregularity, there had been no such miscarriage of justice as would invalidate the conviction.

Notes

Before the evidence of a child of tender years can be admitted, the presiding judge must satisfy himself that the child is of sufficient intelligence and understands the duty of speaking the truth, and this is so even where the evidence has been admitted in previous proceedings in the same matter.

As to Evidence of Children, see Halsbury (Hailsham Edn), Vol 9, pp 221, 222, para 308; and for Cases, see Digest, Vol 14, pp 453456, Nos 48064826.

Case referred to

R v Southern (1929) 142 LT 383; Digest Supp, 22 Cr App Rep 6.

Appeal

Appeal by leave from a conviction at the Tenterden Sessions of house-breaking. The facts are fully set out in the judgment of the court delivered by Humphreys J.

Dorothy Dix for the appellant.

John Thompson (for E N Landale, on war service) for the Crown.

19 February 1940. The following judgment was delivered.

HUMPHREYS J (delivering the judgment of the court). In this case, William John Surgenor was convicted at the Tenterden Sessions of housebreaking, and he was sentenced to 15 months imprisonment. He applied to this court for leave to appeal against that conviction, but he took no point such as that which has been mentioned here, and such points as he did make in his notice of appeal this court did not think were of any importance. It was stated by the court itself, however, that there had been an irregularity in the course of the trial, and the court granted leave to appeal so that it might consider whether that irregularity invalidated the conviction.

The charge related to breaking out of a certain café after having stolen a large quantity of property, and the appellants answer was that he

Page 250 of [1940] 2 All ER 249

was not the man. The café was broken into during the night of 13 November by somebody who had climbed on to the roof, reached through an open window to open the main window, and fallen off the roof into the yard below. In that yard there were found spots of blood. There were taken from the café some cigarettes, a substantial quantity of other articles, cash, a bag containing copper coins, and a handbag belonging to one of the assistants. Some of that property was found in a cloth on a flat roof just below the café. The next morning, the appellant was seen and spoken to, and it was found that he was suffering from a cut chin, a grazed eye, and a damaged wrist. He told his landlady that he had fallen off a wall. On that morning he produced a 10s notehe had hitherto been unable to pay the modest sum of 7s per week for his accommodation, and was 3 days in arrears with his rentwhich he gave to his landlady, telling her that she need not produce the change. The next piece of evidence which connected the appellant with the crime was this. When the police came next morning, they found in the toe of one of the appellants shoes a ladys handkerchief. That handkerchief was identified as belonging to one of the girl assistants, who identified it by the one fact that it smelt strongly of Atkinsons Jasmine scent, a bottle of which had been given to her by one of her admirers. Thus, this man had been found in possession of something which had been in the café the night before. His answer was that he had had the handkerchief for some time, having bought it with some old rags a fortnight before, and that that was how it came to be in his possession. Then some foreign coins were found in the appellants possession. A bag of foreign coins had been stolen from the café, and in a drawer in the appellants room were found some half-pennies and a five-centime piece, while in another place was found a South African penny. He denied that he had had any foreign coins at all.

In addition to those matters, when he was asked to account for his injuries, he told the police inconsistent stories, which the jury might have thought were untrue. He told his landlady that he had fallen off a wall, and he told the police that he had been in different public-houses and had got his injuries by falling over three or four times. A doctor expressed the view that the appellants injuries were not caused in that way, but were caused by falling off a high wall on to the ground. That being the evidence against this man, a little girl was called, as the prosecution thought it right to strengthen the evidence as to the appellants possession of foreign coins. The little girl said that she had noticed that the appellant was in possession of foreign coins because she had seen him put in the gas meter a coin which was not an English coin, and, when the gas man came three or four days later, he found a foreign coin in the meter. She recognised it and gave it to her mother, and the coin was eventually produced. The girl was cross-examined and her evidence tested, and counsel for the appellant admitted that it was right, and apologised for having to put the questions in cross-examination.

Page 251 of [1940] 2 All ER 249

Counsel for the appellant admitted that the girl was intelligent for a girl of 9 years old. When the girl went into the witness-box, the recorder was informed that the justices in the court below would not allow this girl to be sworn, as she could not be expected to know the meaning of the oath, and, instead of making an investigation, the recorder said, “Very well,” and allowed the evidence to be called without the child being sworn. That is contrary to the Children and Young Persons Act 1933, s 38(1), which provides as follows:

Where, in any proceedings against any person for any offence, any child of tender years called as a witness does not in the opinion of the court understand the nature of an oath, his evidence may be received, though not given upon oath, if, in the opinion of the court, he is possessed of sufficient intelligence to justify the reception of the evidence, and understands the duty of speaking the truth. … Provided that where evidence admitted by virtue of this section is given on behalf of the prosecution the accused shall not be liable to be convicted of the offence unless that evidence is corroborated by some other material evidence in support thereof implicating him.

That section quite clearly statesand this court has on more than one occasion intimatedthat it is the duty of the presiding judge to satisfy himself whether or not a child of tender age is in a position to be sworn. In this case, there was no such proceeding, and the recorder seems to have elected to abide by the justices view. That was wrong, and this court has said that it is wrong, and must not occur again. Those who preside over criminal trial, ought to remember that it is the duty of the presiding judge to make an investigation for himself. Nevertheless, there was no harm done in the irregularity which occurred in the present case. From her evidence, and from a passage in the summing up of the recorder, the girl appears to be a very intelligent child, who might and ought to have been sworn. The jury presumably accepted her evidence unsworn, and it is extremely unlikely that they would not have accepted it if she had been sworn. The child was not giving evidence of importance, which needed corroboration. It was merely a make-weight to prove what the police and the mother had provednamely, that the appellant had had a foreign coin in his possession and had put it in the gas meter, and that the mother was able to say that it had come out of the gas meter because the gas man had given it to the child. In this case, it cannot be said that there was any injustice done here. There has been an irregularity which may be said to be of the kind referred to in anticipation in R v Southern, where the judgment of the court, of which two of the judges were two of those hearing this appeal, states as follows:

It is too much to say … that it is a rule of law that if, in a case where unsworn evidence has been adduced, the judge does not call the jurys attention to the provisions of the statute, that necessarily invalidates the conviction. …

This court agrees with, and follows, that statement of the law. There may be cases in which the court might quash convictions in those circumstances, but this case is not one of them. The court is satisfied that there was no miscarriage of justice in this case. There has been nothing more than an irregularity, and the appeal is dismissed. However, since

Page 252 of [1940] 2 All ER 249

leave to appeal was granted, the time during which the appellant has been treated in custody as an appellant will count towards his sentence.

Appeal dismissed.

Solicitors: Registrar of Court of Criminal Appeal (for the appellant); Eric W C Weale, County Prosecuting Solicitor, Sessions House, Maidstone (for the Crown).

W J Alderman Esq   Barrister.

Re Fischer

[1940] 2 All ER 252


Categories:        SUCCESSION; Intestacy, Other Succession        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HODSON J        

Hearing Date(s):        11 MARCH 1940        


Executors and Administrators Grant of administration Discretionary grant Enemy national dying in England Persons entitled enemies resident in enemy country Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 162 Administration of Justice Act 1928 (c 26), s 9.

A German national with property in England died there intestate, leaving a widow and three daughters living in Germany and another daughter and a son resident in England. Application was made to the Board of Trade, who stated that there was no objection to the estate being administered in the usual way, provided that a return was made to the Custodian of Enemy Property of any part of the estate demised to, or held for the benefit of, the members of the deceaseds family resident in enemy territory, and provided that no part of the estate or the proceeds thereof was transmitted to such members of his family without the necessary government authority. Application was made to the court for a grant of letters of administration to the estate:

Held letters of administration should be granted under the Supreme Court of Judicature (Consolidation) Act 1925, s 162, as amended by the Administration of Justice Act 1928, s 9, subject to an undertaking to comply with the conditions of the Board of Trade.

Notes

This decision merely shows the practice on a grant of administration to the estate of an enemy alien, more particularly where some of the parties entitled on distribution are resident in enemy country.

As to Discretionary Grants, see Halsbury (Hailsham Edn), Vol 14, pp 246248, paras 424430; and for Cases, see Digest, Vol 23, p 166, Nos 18031818.

Motion

Motion for a grant of administration under the Supreme Court of Judicature (Consolidation) Act 1925, s 162, as amended by the Administration of Justice Act 1928, s 9, in respect of the estate of Hans Heinrich Wilhelm Fischer, deceased. The deceased, who was a German national, died intestate at Nottingham on 3 February 1940, leaving a widow, 4 daughters, and a son, being persons entitled to share in his estate, two of the daughters being minors. The estate was of the value of about £6,000 or £7,000, comprising, inter alia, a leasehold house at Nottingham. A life interest and minority interests arose on intestacy. The applicant was the son of the deceased, who was resident in England. Prior to the outbreak of the present war, the deceased had applied to the Home Office for a certificate of naturalisation as a British subject, but, owing

Page 253 of [1940] 2 All ER 252

to the outbreak of war, that application could not be proceeded with. Shortly after the death of the deceased, the familys adviser communicated with the secretary of the Board of Trade for instructions as to how the deceaseds estate should be dealt with, and received the reply that, if the deceased at the date of his death was resident in this country, there was no objection to his estate being administered in the usual way, provided that a return was made to the Custodian of Enemy Property of any part of the estate demised to, or held for the benefit of, the members of his family resident in enemy territory, and that no part of his estate or the proceeds thereof was transmitted to such members of his family without the necessary government authority. The court was moved for a grant of administration of the estate to the applicant and to Essex Loftus Digby, solicitor, without citing the widow to accept or refuse a grant of administration.

A Richard Ellis for the applicant.

11 March 1940. The following judgment was delivered.

HODSON J. There will be an order as prayed on the applicants undertaking to comply with the directions contained in the communication from the Board of Trade.

Solicitors: Gregory Rowcliffe & Co, agents for Wells & Hind, Nottingham (for the applicant).

J F Compton Miller Esq   Barrister.

NOTE.The following practice note was issued by the Senior Registrar of the Principal Probate Registry with regard to estates of deceased persons coming within the provisions of the Trading with the Enemy Act 1939.

Consent by Custodian of Enemy Property to Grants of Representation.

The consent in writing of the Custodian of Enemy Property, whose office is situate at that of the Public Trustee, Kingsway, London, W.C.2, must be obtained and produced before a grant of representation can issue (i) in respect of the estate of a deceased person of whatever nationality who was resident in enemy territory such territory being defined by the Trading with the Enemy Act, 1939, s. 15(1)(b), (ii) in respect of the estate of a deceased German national, who was resident in neutral territory (iii) to a German national residing in neutral territory in respect of the estate of any deceased.

Such consent is necessary whether the deceased died before or after the outbreak of war.

No grant of representation can issue to any person resident in enemy territory as defined by the aforesaid Act or to his attorney.

Any case in which there is doubt should be referred to the Custodian of Enemy Property for his decision as to the necessity for his consent.


Mills v Mills

[1940] 2 All ER 254


Categories:        FAMILY; Divorce        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, AND GODDARD LJ        

Hearing Date(s):        19 MARCH 1940        


Divorce Maintenance Order discharged by consent Consent order barring liberty to reopen matter without leave of court Whether matter can be reopened Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 190(1), (2) Administration of Justice (Miscellaneous Provisions) Act 1938 (c 63), s 14.

A wife, having obtained a decree nisi in 1932, presented a petition for maintenance, and a consent order that the husband should pay her £5 per week was made in December 1932. The husbands payments fell into arrears, and the wife took out a judgment summons. The parties then came to terms, and the wife agreed to accept £1,250 in satisfaction of all past and future claims. In October 1933, a consent order was made that the husband pay the sum of £1,250, that the existing consent order for maintenance be discharged, and that the maintenance petition be dismissed. It was a term of the order that this matter should not be reopened without leave of the court. On 31 January 1940, the husbands financial position having meanwhile improved, the wife took out a summons asking for leave to apply for maintenance.

Held (i) the original petition for maintenance having been discharged, the court had no jurisdiction to reopen the matter.

(ii) the court had no jurisdiction to include in the order a direction for the payment to the wife of a lump sum. In its proper form, the order would have recited such payment and then, by consent, have discharged the existing order.

Notes

The jurisdiction of the court to order maintenance is one which must be exercised within a reasonable time of the making of the decree. The exact time-limit has never been stated, and it was not necessary here to deal with that point, as it was obvious that a reasonable time had elapsed. If the court wholly discharges an order for maintenance, then any later application for maintenance must be a new proceeding, and liable to be defeated by reason of its being out of time. The whole question in the present case is whether, by adding to a consent order wholly discharging a previous order for maintenance a liberty to reopen the matter with the leave of the court, a right is given to the wife to make a further application. This is held not to be so, since, the previous order having been wholly discharged, a new application must, in practically every case, be defeated by the application of the time-limit referred to above.

As to Order Securing Maintenance, see Halsbury (Hailsham Edn), Vol 10, pp 789, 790, para 1251; and for Cases, see Digest, Vol 27, pp 511513, Nos 54995513.

Cases referred to

Scott v Scott [1921] P 107; 42 Digest 958, 319, 90 LJP 171, 124 LT 619.

Hyman v Hyman [1929] AC 601; Digest Supp, 98 LJP 81, 141 LT 329.

Stephen v Stephen [1931] P 197; Digest Supp, 100 LJP 86, 145 LT 541.

Olding v Olding (1930) 99 LJP 128; Digest Supp, 143 LT 310.

Jenkins v Jenkins (1930) 99 LJP 63; Digest Supp, 142 LT 656.

Robertson v Robertson & Favagrossa (1883) 8 PD 94; 42 Digest 958, 318, 48 LT 590.

Shearn v Shearn [1931] P 1; Digest Supp, 100 LJP 41, 143 LT 772.

Page 255 of [1940] 2 All ER 254

Maidlow v Maidlow [1914] P 245; 27 Digest 505, 5408, 84 LJP 20, 112 LT 804.

Lambert v Lambert [1936] 3 All ER 20; Digest Supp.

Appeal

Appeal by the husband from an order of Bucknill J, dated 19 February 1940. The facts are fully set out in the judgment of Sir Wilfrid Greene MR.

Rt Hon Sir William Jowitt KC, H W Barnard KC and P R Hollins (for S E Karminski, on war service) for the appellant.

A Melford Stevenson for the respondent.

Jowitt KC: When one makes an order, there are two alternative steps which may be taken. One is under the provisions of the Supreme Court of Judicature (Consolidation) Act 1925, s 190(1). Under that subsection, the order has to be made “on” a decree. The other step is under the provisions of s 190(2), as amended by the Administration of Justice (Miscellaneous Provisions) Act 1938, s 14. When the order is made under the first step, it is final; but, if it is made under the second step, the court has power to vary it. The word “on” in s 190(1) means at the time, or within a reasonable time thereafter. The consent order made in October 1933, contains the words: “This matter not to be reopened without leave of the court.” That, however, cannot confer upon the court a jurisdiction which it does not in fact possess. The only jurisdiction possessed by the court is given by the provisions of s 190(1). That jurisdiction is to be exercised on any decree of divorce. There is no jurisdiction under which the court may now make an order allowing the wife to apply for maintenance. No power is given to vary an order which has been made under s 190(1). In the present case, the court is ordering the parties to do something which it has no power to order at all. When the matter came before the judge, he should have said that he had no jurisdiction to deal with it. [Counsel referred to Jenkins v Jenkins, Olding v Olding, Robertson v Robertson & Favagrossa, Scott v Scott, Shearn v Shearn, Stephen v Stephen, Maidlow v Maidlow and Lambert v Lambert.]

Stevenson: There was power to vary the order made in December 1932, by reason of the provisions of the Supreme Court of Judicature (Consolidation) Act 1925, s 190(2). That order was discharged in October 1933, but there was in the later order the qualification: “This matter not to be reopened without leave of the court.” Those words must have been added for some purpose. They have a very important and definite purpose, which is clearly expressed by Lord Atkin in Hyman v Hynan. Effect must be given to every part of the order of 1933. The true view of the order of 1933 is that the court has suspended the operation of the order of December 1932. The word “suspend” is used in the Administration of Justice (Miscellaneous Provisions) Act 1938, s 14. The wife cannot deprive herself of her rights. On the true construction of the order of 1933, the earlier order

Page 256 of [1940] 2 All ER 254

was not discharged. It was merely suspended. The court has not the power to discharge an order. The parties, by consent, cannot confer upon the court power to destroy something which is indestructible.

Rt Hon Sir William Jowitt KC, H W Barnard KC and P R Hollins (for S E Karminski on war service) for the appellant.

A Melford Stevenson for the respondent.

19 March 1940. The following judgments were delivered.

SIR WILFRID GREENE MR. This appeal raises a question of importance, but one which to my mind is not really open to doubt. The facts of the case are shortly these. On 13 May 1932, the wife obtained a decree nisi for dissolution of her marriage. That decree was made absolute on 21 November 1932. On 6 December 1932, the wife presented a petition for maintenance. Upon that petition, an order was made on 29 December 1932, which was a consent order directing the husband to pay to the wife:

… during their joint lives and until further order maintenance at the rate of £5 week free of tax. …

The order went on to add the words “without prejudice to any future order,” an addition the necessity for which I am quite unable to appreciate. The insertion of unnecessary words like these in an order is liable to cause doubt and confusion, and it is a practice which should be avoided in future.

In the summer of 1933, the husbands payments fell into arrear, and a judgment summons was taken out for £90 arrears. Before that summons was heard, negotiations took place, with the assistance of the solicitors for the parties, as a result of which the wife agreed to accept a lump sum of £1,250 in satisfaction of all past and future claims for maintenance. That bargain having been agreed, a summons was taken out by the wife on 5 October 1933, asking that cause be shown why an order should not be made in the form of the order which was eventually made, subject to one qualification which has given rise to the present controversy. I need not read the terms of the summons. The order made upon it by Bateson J on 9 October 1933, was in these terms:

Upon hearing counsel for both parties and by consent I do order that the respondent do pay to the petitioner the sum of £1,250 in satisfaction of all sums now or at any time hereafter payable to the petitioner in respect of maintenance that the existing consent order for maintenance be discharged, that the maintenance petition be dismissed, that the pending judgment summons against the respondent for arrears of maintenance be dismissed, and that the respondent do pay the petitioners costs of this application and of the said judgment summons as taxed or agreed.

Down to that point, the order embodied the arrangement made between the parties. Then, however, the following words were added:

This matter not to be re-opened without leave of the court.

The actual order being a consent order, I think that this part of it must be taken to be inserted in the order by the consent of the parties. It is upon the precise meaning and effect of that sentence that the present dispute really turns.

Subsequent to the making of that order, it is saidand, I think, not disputedthat the husbands financial position improved. There

Page 257 of [1940] 2 All ER 254

is no necessity to go into the reasons for that, but that was the ground upon which the wife based the application which is now before us on the husbands appeal.

On 31 January 1940, the wife took out a summons calling upon the husband to show cause why she should not have liberty to apply for maintenance in accordance with the provision contained in the order dated 9 October 1933. That summons came before Bucknill J, who on 19 February 1940, made an order that:

… the petitioner be at liberty to file forthwith a notice of application for an order for maintenance.

Then he gave leave to appeal. That appeal is accordingly now before us, and it is said that, in the circumstances, the judge had no jurisdiction to make that order. It is not suggested that, if he had jurisdiction, we should be justified in interfering with what, upon that footing, would have been an exercise of discretion. The only matter with which we have to deal is the single matter of the jurisdiction of the court.

The first point to bear in mind is the language of the relevant statutes which confer jurisdiction upon the Divorce Court in respect of maintenance. Those provisions may be found in the Supreme Court of Judicature (Consolidation) Act 1925, s 190, as amended by the Administration of Justice (Miscellaneous Provisions) Act 1938, s 14.

Under s 190 of the Act of 1925, for the present purpose there are two forms of order which the court is empowered to make. One is an order securing to the wife a gross or annual sum of money. That is under s 190(1). The other is an order under s 190(2) for the payment “during the joint lives of the husband and wife” of monthly or weekly sums. An order under that subsection may be made either in addition to, or instead of, an order under s 190(1).

Under the Act of 1925, there was power in the court, in case of an increase in the means of the husband, to vary any order made under s 190(2) for the payment of a periodical sum. That particular proviso has now gone, by reason of s 14 of the amending Act of 1938, under which an order made under s 190(2) of the Act of 1925 can be discharged or varied or suspended. The power of the court with regard to those matters is now wider than it was before, but that circumstance does not affect what we are now called upon to consider.

At the outset, one matter must be remembered with regard to the jurisdiction of the court under the provisions of s 190, to which I have referred. That jurisdiction can only be exercised on any decree for divorce or nullity of marriage. Accordingly, if an application is made by a wife of which it can fairly be said that an order made upon it would not be made “on” such a decree, the court has no power to accede to the application. The precise time-limit within which the application may be made cannot be laid down. It would be unfortunate to attempt to lay it down, and I certainly would not propose to do so. However, that a time-limit must exist, and one which, within certain

Page 258 of [1940] 2 All ER 254

limits, may be varied, has been decided in Scott v Scott. That is a decision of this court establishing the proposition that the words “on a decree” indicate that the time for the application must be a reasonable one in relation to the date of the decree. If the present application had been a new application made in 1940 in reference to a decree of divorce which was made absolute in November 1932, it could not, in my opinion, be suggested for one moment that the court would have had jurisdiction to deal with the application. In my opinion, an order made on an application launched so many years afterwards would not have been an order made on a decree for divorce. The present application can succeed only if it can be treated as in some way referable to the previous proceedings.

Bearing that in mind, it is necessary now to look at the order of 9 October 1933, in order to see on its true construction what it means. Apart from the contested words at the end, it seems to me that the construction of this order is clear beyond any possibility of doubt. The order directs the payment of a lump sum:

… in satisfaction of all sums now or at any time hereafter payable to the petitioner in respect of maintenance. …

It discharges the existing consent order for maintenance, under which the sum of £5 per week was paid, which was dated 29 December 1932. It also dismisses the maintenance petition. Taking that language at its face value (as it is perfectly clear language), the result down to that point is that the existing order for maintenance has gone, and that the petition upon which it was made, and upon which any future application for its variation would have hung, has also gone. The order on the face of it also purports to direct payment of a lump sum. That payment is something which the court had no jurisdiction in itself to order, because the jurisdiction of the court, so far as relevant, is confined to securing, under s 190(1), a gross or annual sum, or under s 190(2), ordering the payment of a periodical sum to the wife. It is settled that the court has not power to order payment to the wife out-and-out of a lump sum, but it has also been held that the court has jurisdiction by consent to make an order of that character. The order, therefore, on the face of it, is an order by consent directing the husband to do something which the court, apart from consent, could never order him to do, and by consent it is discharging the original order, and dismissing the petition upon which it was made. I should have thought that the true construction of an order in those terms could not be subject to controversy, but the main argument put forward on behalf of the wife is to this effect. It is said that, when the order is read as a whole, including the words “This matter not to be reopened without leave of the court,” its true meaning is not that the order of December 1932, was discharged, but is that its operation was merely suspended, with the consequence that the wife at any future time could call upon the court to exercise its jurisdiction (which on that hypothesis the court would have retained) of varying the order

Page 259 of [1940] 2 All ER 254

for payment of a periodic sum, if circumstances justified such variation. That argument is one which I find myself quite unable to accept. It seems to me that such a construction, if any respect is to be paid to language, is treating this order as doing the exact opposite to what it purports to donamely, keeping alive and in force an order which in terms it has discharged. Whatever these words may mean, or may purport to mean, they cannot, in my opinion, be read as in any way qualifying the order in so far as it discharges the original order of maintenance.

If that construction be right, there is really nothing left in the argument. However, it was tentatively suggested by counsel for the respondent, though not pressed, that, if this order, upon its true construction, discharges the original maintenance order, and thereby deprives the court of the statutory power of varying that order, which, apart from discharge, would have remained in its hands, it must be regarded as something which the court had no jurisdiction to do.

It was suggestedand reference was made in support of the suggestion to some observations of Lord Atkin in Hyman v Hymanthat the law does not allow the wife by any bargain to deprive the court of the power to vary an order for maintenance, once it has been made. In other words, such an order, which is inherently variable, once made, must remain alive for all time, and no consent by the parties can ever put an end to it, and any order of the court purporting to put an end to it would be ultra vires. To my mind, that proposition is a startling one. I can see no reason, in the language of the statute, or in the policy of the law, why parties in such circumstances, where an order for maintenance of this nature has been obtained, should not be able by agreement to put an end to it, and to substitute some other provision upon which they may agree. The suggestion that, once an order for maintenance is made, it is indestructible, seems to me to be based upon an extravagant construction of the Act of Parliament, and upon an extravagant view of public policy. It is an argument which I cannot accept, but, as I think I have said, counsel for the respondent really did not press it. He was, moreover, in the further difficulty, which I need not discuss, that this order, in so far as it exercises, or purports to exercise, a jurisdiction which the court conceives itself to have, is one which, on ordinary principles, would be binding upon the parties, not merely according to its terms, but as impliedly containing a decision by the court as to its own jurisdiction, which could only be upset by the parties on appeal. However, I need not enter into any discussion of that matter, because the suggestion that this order, if it be construed in the way in which, in my opinion, it ought to be construed, was in some way ultra vires is one which, as I have already said, I am quite unable to accept.

The position, therefore, is this. The original order went when it was discharged by the order of 9 October 1933. The maintenance petition

Page 260 of [1940] 2 All ER 254

was dismissed, and, from 9 October 1933, onwards, there was not in existence any order for maintenance, or any petition asking for maintenance. The slate was clean. Neither the order nor the petition remained in a state of suspended animation. They were gone. In that state of affairs, the present application is launched. As I indicated some time ago, if one treated it as a new application, not linked up to some existing order of the court, or to some pending application made in due time, it would be hopelessly out of time under the section. The argument as presented was one which, if I may say so, showed a true appreciation of what I conceive to be the law upon this matternamely, that, if one is dealing with an application which, if it were a new application, would be out of time, and beyond the jurisdiction of the court, one must find a peg upon which, so to speak, one can hang it, a peg which had been put in place within the jurisdiction of the court. I think that that appears very clearly in Stephen v Stephen, and I shall not be wasting time if I refer to that case and the nature of the question which there arose. An order was made by the registrar, upon application for maintenance, for payment of a certain sum by the respondent to the petitioner by way of maintenance of the children of the marriage. The order then proceeded as follows:

No order for maintenance of wife; but liberty to apply thereon.

The matter came before the President, and eventually to this court. One of the questions which arose was whether the words “liberty to apply” should be allowed to remain in the order. If I may put it in my own language, the vice of those words lay in the fact that the order appeared to contemplate that a subsequent application for maintenance by the wife would be one which the court would have jurisdiction to entertain. Be it observed that, no order for maintenance having been made, no question could arise as to any variation, because the courts power to vary depends upon there being in existence an order for maintenance which can be varied. The effect of putting in the words “liberty to apply” was to suggest that, notwithstanding the fact that there was no order for maintenance, the wife would be entitled at some future date to apply for such an order. If she had thereafter applied for such an order, it would, of course, have been a new application, because up to then no order had been made. It being a new application, she would be in the difficulty that it would not be an application for an order made “on” the divorce. This court took the view that the insertion of the words “liberty to apply” was incorrect. It was pointed out that the properand, indeed, the onlymethod of preserving some right in the wife, in such circumstances, was to provide what I have called a peg upon which subsequent applications could be hung. Such a peg could be provided by making an order for periodic maintenance, in a nominal sum, which order would remain in force, and would be susceptible of variation if the circumstances called for it. In the absence of such a

Page 261 of [1940] 2 All ER 254

peg, however, no future order could be made, and, therefore, the words “liberty to apply” would be meaningless and misleading.

I think that that concludes all that I need say, but for one matter. The effect of the conclusion to which I have come is that those words should not have been put into the order, because they are not operative to confer upon the court a jurisdiction which it did not possess. Once the order is discharged, the jurisdiction of the court disappears. If these words, on their true construction, purport to confer upon the court some jurisdiction to revive a discharged order, or to make a new order, notwithstanding that the previous order had ceased to be on foot, they would purport to confer upon the court by consent a jurisdiction which is not conferred upon the court by statute. In my opinion, they are wrong from that point of view, and words of that kind should not be inserted in these orders in future. They are misleading and meaningless.

There is one further point, before I leave this matter, on the form of order, on which I should like to comment. I have already said that there is no jurisdiction in the court to order payment to the wife of a lump sum. Such payment can only be consensual. That being so, I take the view that in such cases it is not desirable that the court should direct the payment of such a lump sum, which is merely consensual. There is no necessity for the court to be appearing by consent to be making an order which it has no jurisdiction to make at all. There are many other ways of providing for these matters. What the court has jurisdiction to do is, of course, to discharge its previous order. The sum can be paid first, in which case all that is required is a recital in the order that such-and-such an agreed sum has been paid in full satisfaction, and an order by consent that the existing maintenance order be discharged. If the sum has not been paid, I see no reason why the order should not take the form that, upon payment of the sum, the existing order should stand discharged, when the ordinary routine would be, as is the practice in another division, that, upon the party producing before the registrar an affidavit verifying the payment, the order can provide that the existing maintenance order should be discharged. There are various methods of putting such an order into a perfectly effective shape without adopting what, to my mind, is the objectionable course of inserting in the order a direction for payment which the court has no jurisdiction under the statute to make. The result is that the appeal will be allowed, and the application dismissed with costs here and below.

GODDARD LJ. I agree, and I only want to add one word. We were told that the Divorce Court has for some time been adding to orders of this nature the words: “This matter not to be reopened without leave of the court.” If that is so, it may have been thought that the decision of Lord Merrivale P in Olding v Olding was some justification for those words being added. I think it should be pointed out, as I read that case, and as I read the decision of Bateson J in

Page 262 of [1940] 2 All ER 254

Jenkins v Jenkins, that those cases are no authority for the addition of those words at all. In neither of those cases was there a petition for maintenance.

In Olding v Olding, the wife having obtained a decree and come to an agreement with her husband, a registrars summons was taken out to secure an order embodying the agreement, with the consent of both parties, and the court was asked to make an order. However, there had been no petition presented for maintenance at all. Lord Merrivale P decided that an order should be made [143 LT 311]:

… in the terms of the summons, setting out that the parties had agreed to it, and that the petitioner would not be at liberty to file a petition for maintenance or take like proceedings without the leave of the judge.

The order of Bateson J in Jenkins v Jenkins was in rather a different form and, if I may say so, I think that it was in the preferable form. There he made an order in the following terms [142 LT 656]:

By consent. On the petitioners undertaking not to file any petition for maintenance, whether by way of variation of settlements or maintenance hereafter order in terms agreed.

Some question might arise as to whether or not, if there is no application for maintenance, that sort of order can be made. It seems to me that, where the parties come to an agreement before the application for maintenance is made, the more preferable course would be for the wife to file an application for maintenance, and then on her application an order be made in the terms which Sir Wilfrid Greene MR has just pointed out. I can see difficulties, once a decree absolute has been made, in saying that the court has power to make an order in the form in which Bateson J or Lord Merrivale P made it. The difficulty is, on what proceedings could they make such an order? The suit is at an end, unless proceedings were taken for maintenance. It seems to me, therefore, that the right procedure is for an application to be made for maintenance, and then for the court to be moved that the application be dismissed on terms which have been agreed between the parties.

Appeal allowed with costs in both courts.

Solicitors: Gordon Dadds & Co (for the appellant); Withers & Co (for the respondent).

W K Scrivener Esq   Barrister.


Potts v Pope & Pearson Ltd

[1940] 2 All ER 263


Categories:        INDUSTRY: QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        14, 15, 28 FEBRUARY 1940        


Workmens Compensation Review of compensation Infant workman Fluctuation of rates of remuneration Fluctuation of more than 20 per cent since 12 months previous to review Whether review includes review upon infant attaining full age Workmens Compensation Act 1925 (c 84), s 11(2), (3).

A boy employed as a boy haulier at a colliery was injured in 1924. He was then 14½ years of age. In 1926, he was given light work at the same colliery. In 1931, on attaining the age of 21, he applied for a review under the Workmens Compensation Act 1925, s 11(2), and the compensation was increased in accordance with the provisions of that section, on the footing that, if uninjured, he would probably have been earning wages as a haulage worker. Between a date 12 months before the review in 1931 and 12 months before December 1938 (when his compensation was reduced), the rates of remuneration of adult hauliers had increased by more than 20 per cent, but the increase in the case of boy hauliers was less than 20 per cent. The workman claimed that he was entitled to an increase in the compensation owing to fluctuations in the rate of remuneration, as provided by s 11(3) of the above Act. The county court judge found as a fact that boy hauliers are in a different class from that of adult hauliers:

Held (i) the review referred to in s 11(3) in the words “if the weekly payment has been previously varied on a review” did not include a review under s 11(2)that is, a review upon an infant attaining the age of 21 years of age.

(ii) the class of boy hauliers being different from that of adult hauliers, the workman had not continued in the same class of employment within the meaning of s 11(3), or, if he had so continued, the fluctuation in the wage rates was less than 20 per cent, and no further review was possible.

Notes

The Workmens Compensation Act 1925, s 11(3), uses the word “review” quite a number of times, and the question here is whether, when it is used in the parentheses in the middle of the subsection, it can refer to a review under the preceding subsection. The preceding subsection provides that, where an infant workman has been injured, a review may be had within 6 months of his attaining the age of 21 years. The result is that, upon a review based upon fluctuations in the rates of remuneration, the infants review may be disregarded.

As to Review on Fluctuations of Wages, see Williss Workmens Compensation (32nd Edn), pp 376, 377; and for Cases, see Digest, Vol 34, pp 455, 456, Nos 37353737.

Cases referred to

Tarr v Cory Brothers & Co Ltd [1917] 2 KB 774; 34 Digest 455, 3736, sub nom Cory Brothers & Co Ltd v Tarr, Cory Brothers & Co Ltd v Hopkins 86 LJKB 1340, 10 BWCC 590; sub nom Thomas v Nixons Navigation Co Ltd, Tarr v Cory Brothers & Co Ltd, Hopkins v Cory Brothers & Co Ltd 117 LT 513.

Bevan v Energlyn Colliery Co [1912] 1 KB 63; 34 Digest 414, 3366, 81 LJKB 172, 105 LT 654, 5 BWCC 169.

Brien v Graydon & Co [1936] SC 725, 29 BWCC Supp 37.

Dobson Ship Repairing Co Ltd v Burton [1939] AC 590, [1939] 3 All ER 431; Digest Supp, 108 LJKB 542, 161 LT 64, 32 BWCC 142.

Page 264 of [1940] 2 All ER 263

Hill v Wolverhampton Corrugated Iron Co [1939] 2 KB 469, [1939] 3 All ER 72; Digest Supp, 108 LJKB 536, 161 LT 6, 32 BWCC 129.

Briggs v Dryden (T) & Sons, Talbot v Vickers Ltd [1925] 2 KB 667; 34 Digest 458, 3752, 95 LJKB 275, 133 LT 409, 18 BWCC 163.

Moakes v Blackwell Colliery Co Ltd [1925] 2 KB 64; 34 Digest 410, 3340, 94 LJKB 723, 132 LT 819, 18 BWCC 100.

Appeal

Appeal by the applicant from a judgment and award of His Honour Judge Frankland given in the Wakefield County Court on 19 December 1939. The facts and issues are fully set out in the judgment of the court, and were not in dispute. The county court judge said, in a written judgment, that the applicants claim clearly involved the cumulative application of sub-ss (2) and (3) of s 11 of the Act. In 1931, the applicant had been given a notional pre-accident employment and wage. He now sought to graft on to them a benefit based on a fluctuation of the wages of the notional employment. This the county court judge held to be a misapplication of the Act. If the words in parentheses in sub-s (3) (quoted in the judgment of the Court of Appeal) were omitted, the provisions were quite plain and simple. The workmans actual class of employment was taken as the basis of comparison. Unless the parentheses altered the position, the claim must fail. The object of the parentheses was clearnamely, in a subsequent review to substitute for the actual pre-accident earnings the notional figure obtained in the previous review, and to base the calculation of fluctuation on that figure. The review was limited to the class of applicants created by the subsection itself by the words “as a result of fluctuations in the rates of remuneration.” On those grounds, the county court judge ignored the previous review in 1931, for the purposes of the present application. However, he found a still more convincing reason for his conclusion. In the absence of authority, he said, he would have held that the words “had the workman remained uninjured and continued in the same class of employment as that in which he was employed at the date of the accident” referred to the employment in which the workman was engaged before his accident. To hold otherwise would be to bring about a chaotic state of affairs. The words “class” and “grade” were used in the section only when it was dealing with a case in which it was impossible to compute the rate of remuneration of the man himself and no exactly comparable person was employed by the same employer, and in which the tribunal must compute the earnings of a substitute personality. No such position could be envisaged under s 11(3), where the actual workman was dealt with. His pre-accident earnings were known, and no meticulous definition was required. It was sufficient to indicate by the words “class of employment” that no change of status was to be contemplated. Sub-s (2) expressly included a possible change of status by appropriate words. The county court judge cited Brien v Grayden & Co. He held that the class of employment

Page 265 of [1940] 2 All ER 263

in the present case was that of a boy haulage hand. The applicant was restricted to a consideration of fluctuation in rates of pay of haulage hands: Hill v Wolverhampton Corrugated Iron Co. He therefore dismissed the application with costs.

The applicant appealed, on the grounds that the county court judge was wrong in law in holding that the class of employment was that of a boy haulage hand, and that the words “class of employment” referred to the employment in which a workman was actually engaged before his accident, in ignoring the previous review, in holding that the applicant, having previously obtained an increase in the weekly payment under the provisions of s 11(2), was not entitled to any further increase under the provisions of s 11(3), and in holding that the words “fluctuation in rates of remuneration” in s 11(3) referred only to “fluctuations in rates of wages.”

R Withers Payne for the appellant.

F W Beney for the respondents.

Payne: The appellants class of employment was that of a haulage hand, not that of a boy haulage hand. The term “class of employment” has a wider meaning than has the term “grade of employment,” as is clear from s 10(1), and it is used in the same sense in s 11(3) as it is in s 10(1). The appellants progress from boy haulage hand to adult haulage hand was a change of grade within the same class. Had the appellant remained uninjured, and had he continued in employment as a haulage hand, his average weekly earnings would have increased since the date of the accident, partly by reason of his change of grade from boy to adult and partly by reason of a fluctuation in rates of remuneration of haulage hands exceeding 20 per cent. Since the rates of remuneration of haulage hands had increased by more than 20 per cent, then, whether the earlier period to be taken for purposes of comparison was the 12 months preceding the accident or the 12 months preceding the previous review, the appellant was entitled to an increase in his compensation. The period to be taken for purposes of comparison was the 12 months preceding the previous review. The words in parentheses in s 11(3) refer to any previous review. This is clear from the final sentence in the section. The distinction between the words “section” and “subsection” could not have been made per incuriam. The 1923 Act first introduced the time-limit within which the review must take place, and also first introduced the new ground for reviewnamely, fluctuation in rates of remuneration. It would be surprising if the Acts of 1923 and 1925 had unintentionally deprived an infant workman of a right of review after he had attained the age of 21 years, which he had enjoyed under the Act of 1906. If, on a review under s 11(2), a workman who was formerly an infant workman has been placed notionally in a class different from his pre-accident class, he cannot under s 11(3) claim any variation in compensation owing to a fluctuation in rates of remuneration of workmen in that new

Page 266 of [1940] 2 All ER 263

class, but he may revert to his pre-accident class if that enables him to show such a fluctuation in rates of remuneration as entitles him to an increase in compensation.

Beney: The Act of 1925, being a consolidating Act, makes no important alteration in the law at the date of its coming into force. This accident happened in July 1924, when the Acts of 1906 and 1923 were operative. By s 15 of the Act of 1923 (the predecessor of s 11(3) of the Act of 1925), successive reviews had all to be under the sectionthat is to say, the result of the 20 per cent fluctuation in rates of remuneration. The language of s 11(3), therefore, although it may be read as having a wider application, ought not to be so construed, especially because, by the provisions of the Interpretation Act 1889, s 38, the rights and liabilities arising out of an accident which occurred before 1 May 1926 (the day on which the Act of 1925 came into force), are preserved by that section: Talbot v Vickers Ltd and Moakes v Blackwell Colliery Co Ltd. If, therefore, s 11(3) of the 1925 Act is confined in its operation to successive reviews under its provisions, or under those of s 15 of the Act of 1923, there has not been in this case any earlier review under those provisions, because the only earlier review was under s 11(2) of the 1925 Act, the provisions of which are different, and give an infant workman a right to receive an increase in compensation independently of any percentage in wage-rise. The workman must show, therefore, that there has been a 20 per cent increase in the rates of remuneration payable in the class of employment in which he was engaged when he was injured. His class was that of a boy haulier, in which there has not been any such 20 per cent increase. He cannot claim to compare the rates of pay given to boy hauliers in 1924 with the rates given to adult haulage hands in 1938. [Counsel referred to Brien v Graydon & Co.]

R Withers Payne for the appellant.

F W Beney for the respondents.

28 February 1940. The following judgment was delivered.

SLESSER LJ (delivering the judgment of the court). The material facts of this case, which are not in dispute, may be conveniently summarised as follows. (1) On 16 July 1924, the applicant suffered injury by accident. He was then 14½ years old, and was employed as a boy haulier. His average weekly earnings were 19s 4dthat is, 5¼ shifts at 3s 3d per weekand an award was made on that basis. (2) In 1926, he returned to light work, and received appropriate compensation. (3) In March 1931, the applicant, being still an infant in receipt of 17s 7d per week wages, applied for a review under the Workmens Compensation Act 1925, s 11(2). The applicant claimed that, had he remained uninjured, he would probably have been earning at the time of the review the wages of a worker at the coal face. The respondents contended that he would probably have been a haulage hand earning £1 9s 2dthat is, 3.86 shifts at 7s 5½d per shift. This latter view was accepted by the court, and, the applicants pre-accident earnings thus being notionally raised to £1 9s 2d, his actual earnings being 17s 7d per week,

Page 267 of [1940] 2 All ER 263

an award of 8s per week was made. (4) Thereafter, owing to increases in the applicants actual earnings, from 4 December 1938, to £1 4s 4d per week, the amount payable under the award fell to 3s 4d per week. (5) Between a date 12 months before the last review in March 1931 (the review under s 11(2) above-mentioned), and 12 months before December 1938 (when the compensation was reduced from 8s to 3s 4d per week), the rates of remuneration of adult hauliers had increased by more than 20 per centthat is, 7s 5½d per shift to 10s 2d per shift. (6) During 1924, and for 12 months before December 1938, the wages of boy hauliers had not increased by more than 20 per centthat is, 3s 8d per shift to 4s per shift. (7) This conclusion is in issue. Boy haulage hands are held by the judge to be in a different class from that of adult haulage hands.

The present claim is based primarily on the Workmens Compensation Act 1925, s 11(3), though, as will appear, it involves an application of s 11(2) to sub-s (3), and it is put thus. It is said that, in so far as there has been admittedly an increase in the rates of remuneration for adult haulage workers during the period of 12 months previous to the review of 1931 and the 12 months previous to December 1938, from 7s 5½d to 10s 2d per shiftan increase of more than 20 per centthis workman is now entitled to have his weekly payment varied so as to make it such as it would have been if the rates of remuneration obtaining during the 12 months previous to the present claim for review had obtained during the 12 months previous to the accident. In other words, it is contended that the pre-accident wage, which has been raised notionally under s 11(2) from 19s 4d to £1 9s 2d, should now further be raised notionally under s 11(3) from £1 9s 2d to £2 13s 4dthat is, 5¼ shifts at 10s 2d per shift. The applicants present wages are £1 4s 4d per week. This results in a deficiency due to the accident of £1 9s, and he claims half of this14s 6d per weekas compensation.

S 11(3), on which the workman must ultimately rely to make good his claim, provides as follows:

Where the review takes place more than 6 months after the accident, and it is claimed and proved that, had the workman remained uninjured and continued in the same class of employment as that in which he was employed at the date of the accident, his average weekly earnings during the 12 months immediately preceding the review would, as a result of fluctuations in rates of remuneration, have been greater or less by more than 20 per cent. than his average weekly earnings during the 12 months previous to the accident (or if the weekly payment has been previously varied on a review during the 12 months previous to that review or the last of such reviews), the weekly payment shall be varied so as to make it such as it would have been if the rates of remuneration obtaining during the 12 months previous to the review had obtained during the 12 months previous to the accident. For the purposes of this subsection “review” includes a review under the provision of any Act repealed by this Act corresponding to this section.

In order to avail himself of March 1931, as a date of comparison to ascertain the alleged 20 per cent increase in fluctuation of wage rates, the applicant must depend upon the variation of weekly payments on a review mentioned in the parentheses of s 11(3), and the definition of “review” in that subsection. It is argued in the first place that

Page 268 of [1940] 2 All ER 263

this inclusive definition of the word “review,” which is said to include under the words “corresponding to this section” not only the repealed s 15 of the 1923 Act (now sub-s (3)) but also the repealed proviso of sub-s (16) of the first schedule of the 1906 Act (now sub-s (2)), and also the provisions of the first part of para 16 of the first schedule of the 1906 Act (now sub-s (1)), is sufficiently wide to cover a review under sub-s (2) which corresponds with the provision of Sched 15 of the 1906 Act, and is repealed by this Act, and that, therefore, the word “review” in the parentheses of the operative words of s 11(3) of the 1925 Actnamely, “or if the weekly payment has been previously varied on a review”must include by definition the review by the infant in 1931, when the pre-accident wage of £1 9s 2d per week as a haulier was notionally attributed to him.

In our view, the argument is fallacious. The definition of the word “review” which I have cited from s 11(3) of the 1925 Act was, we think, intended solely to keep alive for purposes of comparison of rate fluctuations, reviews made under corresponding provisions before the passing of the consolidating Act of 1925, which provisions are only to be found in the Workmens Compensation Act 1923, s 15, the language whereof is repeated verbatim in s 11(3) of the consolidating Act of 1925. One reason which supports this view arises from the necessary inclusion of a review in sub-s (3), on the appellants assumption, of the provisions of s 11(1)that is, a general right to review on a change of circumstances.

Before 1923, there were no means of obtaining a review of the notional pre-accident wage on the ground of fluctuation of wages. The review producing a notional pre-accident wage on the basis of infancy dates back to 1906, but a general fall in wages constitutes, among other matters, a change of circumstances entitling the employers to a review under s 11(1), as a rise of wages may entitle a workman to a review: Tarr v Cory Brothers & Co Ltd, but such a general right to review is, of course, entirely different from the notional raising or lowering of the pre-accident wage produced by s 15 of the 1923 Act. Nevertheless, on the appellants argument, a review under s 11(1) equally with a review under s 11(2) would be, by definition, a review under s 11(3) from the date of which the percentage change in rate fluctuations might be ascertained.

Another objection to the appellants case is that the purpose of an infants review under s 11(2) is to produce a notional pre-accident figure, based on a probability of earning at the date of review if the infant had remained uninjured. A review under sub-s (3) is to produce a notional pre-accident figure based upon its being proved that, if the workman had remained uninjured, and had continued in the same employment, there would actually have been the necessary fluctuation in rates of remuneration. S 15 of the 1923 Act, now re-enacted in s 11(3) of the 1925 Act, was intended to give a limited statutory

Page 269 of [1940] 2 All ER 263

recognition to the decision in Bevan v Energlyn Colliery Co in the case of fluctuation of wages, and is a provision entirely separate from any other right to review. We agree with the county court judge in his conclusion that the review mentioned in s 11(3) is limited to that class created by the subsection itself. It is to be noted that s 15 of the Act of 1923 speaks in terms of review under “this section,” and, but for the change in the ambit of the word “section” in s 11(3) of the 1925 Act, so as to make it possible to argue that it appears to include the provisions of sub-ss (1) and (2), the contention as to the extended meaning of the word “review” before 1925 to include the review of 1931 would have been impossible.

It follows that, when the Act of 1925, which is merely a consolidation Act, defines “review” in s 11(3), it does not alter the position as it existed before the passing of that Act. It follows that in this case there never has been any review under s 11(3) before the claim in this casethe infants review in 1931 must be disregardedand, therefore, the case now falls to be considered as if the words in parentheses in s 11(3) had no application. The result is that the only two dates to be considered are (i) the date of the accident in 1924, when the applicant was a boy haulier, and (ii) the 12 months before 1938.

In order to make the comparison of fluctuation required by s 11(3) of the 1925 Act, it is necessary that the workman should be considered not only to have been uninjured but also to have “continued in the same class of employment.” It is found by the county court judge that in 1924 the applicant was in the class of boy hauliers, which is a class as different from that of adults as apprentices may be from journeymen: Brien v Graydon. If he is to be deemed to have continued in that boy class in 1938, the fluctuations in rate would have been less than 20 per cent (see the county court judges finding). If, to take a view corresponding more nearly to actual facts, he has passed from the class of boy haulier to that of adult haulier, then he has not continued in the same class. His notional pre-accident wage having been settled as a result of the application under s 11(2), on his claim for review made 6 months after the workman attained the age of 21 years (see the Workmens Compensation Act 1926, s 1), no further review is possible. His notional pre-accident wage is irrevocably fixed. This, we think, is implicit in the decision of the House of Lords in Dobson Ship Repairing Co Ltd v Burton, and any further change is due to a decreasing difference between the pre-accident wage so notionally fixed and the increase in his actual wage due to his increasing age. This appeal must, therefore, be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Corbin Greener & Cook, agents for Raley & Sons, Barnsley (for the appellant); Barlow Lyde & Gilbert, agents for Day & Yewdall, Leeds (for the respondents).

Derek H Kitchin Esq   Barrister.


Public Trustee v Pearlberg

[1940] 2 All ER 270


Categories:        LAND; Sale of Land        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        21, 22, 23 FEBRUARY, 6 MARCH 1940        


Sale of Land Waiver of right of rescission Action for specific performance still on file when notice of rescission served Validity of notice.

By an agreement dated 29 January 1932, the appellant contracted to purchase a property for £2,400, of which £240 was then paid as a deposit. Clause 27 provided that, if the purchaser should neglect, or fail to comply with, the conditions of sale, the vendor might “give him notice in writing to remedy such neglect or failure, and if after the expiration of 14 days from the receipt of such notice the purchaser shall still be in default, his deposit may be absolutely forfeited to the vendor and the contract rescinded.” The purchaser having failed to complete on the appointed day, the vendor, on 9 November 1932, issued a writ claiming specific performance of the agreement, and damages in addition to, or in substitution for, specific performance. The purchaser entered an appearance on 12 July 1933. No proceedings on the writ were ever taken, but the action was not discontinued or dismissed for want of prosecution, and so remained operative, though dormant, at all material times. On 13 October 1933, the vendor gave the purchaser notice under cl 27 that, unless payment was made within 14 days, the contract would be rescinded, and the deposit forfeited, and on 28 October he wrote saying that the matter must be considered as at an end. On 9 July 1936, the Public Trustee, as trustee of the vendors will, brought action against the purchaser claiming certain ground rent, and the purchaser counterclaimed for £240, the amount of the deposit paid in pursuance of the agreement:

Held as the action for specific performance was still pending, it stood as a plea on the record asserting the existence of the contract, and asserting that the purchaser was still not out of time in completing it. The notice under cl 27 was, therefore, invalid, and as the vendor had, by means of the notice and subsequent letter, purported to rescind the contract, the purchaser was entitled to a return of the deposit which had been paid.

Notes

The authorities are clear that before the Judicature Act 1875, the presence of a bill for specific performance on the file of the Chancery Court was a bar to the rescission of the contract. Since 1875, it has been possible to claim on one writ both specific performance and, in the alternative, rescission, but the writ here was only indorsed with a claim for specific performance or damages in substitution. Such a writ supposes that the contract is still on foot and binding on the parties, and a notice purporting to rescind the contract while such an action is on the file of the court is wholly inoperative.

As to Waiver of Right to Rescind a Contract for Sale of Land, see Halsbury (Hailsham Edn), Vol 29, pp 289, 290, para 381; and for Cases, see Digest, Vol 40, pp 97, 98, Nos 749755.

Cases referred to

Gray v Fowler (1871) LR 8 Exch 249; 40 Digest 162, 1314, 42 LJEx 161, 29 LT 297, on appeal (1873) LR 8 Exch 275.

Warde v Dixon (1858) 28 LJCh 315; 40 Digest 88, 677, 32 LTOS 349.

Duddell v Simpson (1866) 2 Ch App 102; 40 Digest 96, 740, 36 LJCh 70, 15 LT 305.

Hipgrave v Case (1885) 28 ChD 356; 40 Digest 260, 2259, 54 LJCh 399, 52 LT 242.

Howe v Smith (1884) 27 ChD 89; 40 Digest 226, 1959, 53 LJCh 1055, 50 LT 573.

Page 271 of [1940] 2 All ER 270

Palmer v Temple (1839) 9 Ad & El 508; 40 Digest 228, 1981, 8 LJQB 179.

Isaacs v Towell [1898] 2 Ch 285; 40 Digest 97, 746, 67 LJCh 508, 78 LT 619.

Motor Carriage Supply Co Ltd v British & Colonial Motor Co Ltd (1901) 45 Sol Jo 672; 40 Digest 98, 753.

Joyce v De Moleyns (1845) 2 Jo & Lat 374; 40 Digest 154, case c.

Appeal

Appeal by the defendant from a judgment of Croom-Johnson J delivered at Manchester on 13 July 1939. The facts and the arguments are fully set out in the judgments of Slesser and Luxmoore LJJ.

A T Denning KC and David Weitzman for the appellant.

J Neville Gray KC and George Maddocks for the respondent.

Denning KC: So long as the contract is in being, the deposit is not forfeited. It is money in the hands of the vendor, to be applied on completion in part payment. If the vendor lawfully rescinds under the appropriate condition, then perhaps, as upon a repudiation by the purchaser, the deposit is forfeited: Howe v Smith, at p 99, and Williams on Vendor and Purchaser (4th Edn), Vol 1, pp 1006, 1007. If, however, the vendor does not lawfully rescind on one or other of these grounds, but resells or repudiates while the contract remains in being, the deposit is not forfeited, but must be returned to the purchaser as money had and received to his use. The reason is that the vendor has put it out of his power to fulfil the contract, and therefore must return the deposit: Williams on Vendor and Purchaser (4th Edn), Vol 1, p 1012, and Palmer v Temple. There is no lawful rescission under the condition in the contract, because of the action for specific performance. The rule is, perhaps, not one of election properly so-called, but is a rule that, so long as the action is in being, it is a continuing affirmation of the contract, and a party cannot rescind without first getting rid of the action. [Counsel referred to Warde v Dixon, Gray v Fowler, Hipgrave v Case, Isaacs v Towell, Motor Carriage Supply Co Ltd v British & Colonial Motor Co Ltd.]

Gray KC: A party cannot both approbate and reprobate. However, although the filing of a bill was approbation, the issue of a writ, even without an alternative, was not a definite approbation, and something more was necessary. For instance, the contract would be absolutely approbated if the plaintiff delivered a statement of claim pleading that he was ready and willing to complete. This writ was a writ in the alternative, because it asked for specific performance, and damages in addition, or in substitution. In Gray v Fowler, the important fact was that the action was commenced by bill. Joyce v De Moleyns was decided on its own facts.

A T Denning KC and David Weitzman for the appellant.

J Neville Gray KC and George Maddocks for the respondent.

6 March 1940. The following judgments of the court were delivered.

SLESSER LJ. This appeal arises on a counterclaim by Henry Hyman Pearlberg in a suit in which the Public Trustee, who, on the death of one Scholfield, executor of the vendor, became executor of

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Scholfield, and so administered the vendors estate, had successfully claimed £47 13s 1d, the half-years ground-rent, less tax, on certain property. Nothing here turns upon that claim, which was allowed with costs. On the counterclaim, Pearlberg claimed £240, the amount of a deposit paid to one Thomas Greaves by him on 29 January 1932, in respect of the sale by Greaves to Pearlberg of a factory called the Albany Mill, Oldham, together with interest at 4 per cent from that date and damages. The counterclaim was dismissed with costs. The present appeal is limited to so much of the counterclaim as concerns the deposit.

The contract under which admittedly the deposit was paid was for the sale and purchase of a freehold cotton-mill, subject to a term of 999 years, with the benefit of a yearly rent of £271 5s reserved by the lease creating the term. The sale was to be for £2,400, and a receipt for the deposit was given to the purchaser on 29 January 1932, by the vendors solicitors. The date of completion is stated in the contract to be 1 March 1932. By cl 27, it was provided that, if the purchaser should neglect or fail to comply with any of the conditions of sale, the vendor

… may give him notice in writing to remedy such neglect or failure, and if after the expiration of 14 days from the receipt of such notice the purchaser shall still be in default, his deposit may be absolutely forfeited to the vendor and the contract rescinded.

The date for completion having passed, on 6 April 1932, Scholfield & Co, solicitors for the vendor, gave notice to Pearlberg that, unless he completed, they would take action under the agreement, and on 28 June 1932, they notified the solicitors for the purchaser that they had received instructions to commence proceedings for specific performance of the agreement, and damages in addition to, or in substitution for, specific performance.

On 7 July Greaves issued his writ accordingly, but the judge says that he is not satisfied that that writ was ever served. Shortly after, Greaves died, and on 9 November 1932, Scholfield, as executor of Greaves, served a fresh writ for the same relief in the Palatine Court of Lancaster. That writ was not served upon Pearlberg until 4 July 1933. On 12 July, appearance thereto was entered for Pearlberg. No proceedings on this writ were ever taken, but the writ was never taken off the file, and remained operative, though dormant, at all material times.

Next, Pearlberg, having done nothing to complete the purchase, on 6 July 1933, excused himself on the ground that he had difficulties in getting the purchase money. Thereafter, on 13 October 1933, Scholfield, in place of the vendor, gave notice to the purchaser under cl 27 of the agreement that, unless payment was made in 14 days, the contract would be rescinded and the deposit forfeited. On a further appeal for time by the purchaser on 24 October, Scholfields solicitors, on 26 October 1933, say that, if the purchaser can raise the necessary funds within, say, 15 days, they are of opinion that the vendor might be prepared to make a fresh agreement with the purchaser, and, on completion, give him

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credit for the deposit already paid. On 28 October, however, they write as follows:

As your client has failed to comply with the terms of the notice dated Oct. 13 we have received definite instructions from our client that the contract must be rescinded and the deposit forfeited. The matter must, therefore, be considered as at an end.

Nevertheless, on 1 November 1933, the purchaser says through his solicitors that he is prepared to complete on or before 30 November, and to pay the further sum of £200 immediately on account. This offer is rejected on 2 November by Scholfield, whose solicitors write as follows:

Our client, however, is not prepared in any circumstances whatever to reopen the question of the contract which has been rescinded by the notice served on your client.

The vendor then goes on to offer what he describes as “an entirely new contract.” On 3 November 1933, in answer, the purchaser still says he is willing to complete the purchase, but suggests that, if a further contract is to be entered into:

… we shall be glad to know if you will be prepared to sell at the original price of £2,400, plus interest, and to give credit for the deposit already paid, less your costs.

The suggestion for a new contract is again discussed by the vendors on 6 November 1933, and on 11 November 1933, the purchaser points out for the first time that he has not been given notice of discontinuance of the writ for specific performance, and that he intends to tender the money in respect of the purchase. In his evidence at the trial, Pearlberg tried to prove that he did so tender; but the judge rejected all his evidence, and held that he did not tender, and that he knew he could not complete in accordance with the notice, and had no money available. I exclude from my consideration, therefore, any question of Pearlberg tendering any money at all, and assume that he ignored the notice of 13 October 1933. I have considered the history of the case from the correspondence alone.

From the letters and notice, it is clear that, by the notice of 13 October 1933, Scholfield purported to rescind the contract. On 28 October, after the 14 days had expired, he stated that the matter must then be considered as at an end. He was prepared to negotiate for “an entirely new contract,” and told the purchaser so on 2 November, but beyond question he had repudiated the original agreement. If he was entitled to rely on the notice of 13 October, he was within his rights in so doing, and in forfeiting the deposit. If, however, as argued for the appellant, that notice was a nullity, the Public Trustee, in place of Scholfield, can show no case for retaining the deposit paid upon an agreement which Scholfield has purported to rescind, and must fail on this appeal.

The whole question, therefore, in my opinion, turns upon the validity of the notice. That Pearlberg was in default is not disputed, but it is said for the appellant that, by failing to discontinue the action for specific performance, further time has been given to Pearlberg to com-

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plete before the hearing of that action, and that he had taken out of their own hands, and delegated to the court, the burden of deciding at what date the contract should be completed.

Had the action been started by bill in the Court of Chancery before the Judicature Acts, it could scarcely be doubted that, in the circumstances of this case, the notice served on Pearlberg, under cl 27 of the contract of 29 January 1932, would be inoperative so long as the bill was on the file of the court. Authority for this proposition is to be found in Gray v Fowler, approving Warde v Dixon to that effect, a doctrine now to be found in all the current textbooks. A vendor may rescind, notwithstanding that a bill has been filed, if and when the bill is dismissed. As Kelly CB points out in Gray v Fowler, speaking of the practice of the Court of Chancery, at p 272:

… the seller cannot, while his bill for specific performance is pending, put an end to the contract; he must first dismiss his bill with costs. But the whole meaning and essence of that rule (which is a very reasonable rule) is this. You cannot be acting on the contract and assuming it to exist, and at the same time exercising a right to put an end to it by rescinding it.

In that case, it was held that the seller had taken all the means in his power to obtain a dismissal of the bill with costs, and, on the facts, the parties were remitted to their original rights. In the present case, however, the respondents have done nothing to have the writ taken off the record, nor has the purchaser in any way waived his rights to say that the vendor cannot rescind while he still has on the record a writ claiming specific performance against him on the basis that the contract still exists, and that, consequently, he is entitled to say that he is not now out of time, and, therefore, not in default under cl 27 of the contract.

The judge finds, in a passage of Kelly CB in Gray v Fowler, at p 275, authority for the proposition that, by giving notice after the writ, a new ground for rescinding the contract is brought into existence. With respect, I think this conclusion to be erroneous. Kelly CB is there dealing with a case where, to quote his own words, at p 271,

… the seller was entitled to rescind. [His right] had, at the time when the bill was filed, altogether ceased to exist, but was now renewed and revived when the purchaser by his answer insisted on the objection.

That is to say, in Gray v Fowler, notwithstanding that the seller, by filing his bill, had elected not to rescind, on the original objections to title, yet there came a time when, again to quote Kelly CB, at p 272:

… the suit for specific performance is at an end, and therefore the parties are remitted to their original rights.

The Court of Exchequer Chamber, on the facts, deciding that the defendant was entitled to rescind on account of the particular objection raised by the answer, did not question the general proposition laid down in Warde v Dixon by Kindersley VC at p 315, that the bill must be dismissed before the right to rescind could be exercised.

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In Gray v Fowler, Bramwell B expressly speaks of the rule, declaring it thus, at p 268:

… you cannot rescind a contract whilst you have a bill upon the file insisting upon it; you must first of all get rid of the bill; that is all the rule amounts to.

Approval is also expressed by Martin B at p 270. The observations of Cleasby B at p 261, that “the mere circumstance of a bill having been filed does not prevent a vendor from rescinding,” is not inconsistent with the general rule: Duddell v Simpson. As he states, Warde v Dixon assumes that the bill must be dismissed with costs before the right to rescind can be exercised. However, the vendor may recover his power to rescind, provided he gets rid of his bill.

There remains the point, strenuously argued by counsel for the respondent, that the principle stated above, which has been applied to bills in Chancery, cannot properly be acted upon in the case of a writ under the present procedure claiming specific performance. If the writ is equivocal in nature, whereby a statement of claim claiming rescission could be made on a writ for specific performance, I think that there would be force in the argument that such a writ did not necessarily involve action on the contract, and an assumption of its existence. In my opinion, however, the writ in the Palatine Court is not of that order.

The claim indorsed on the writ of 9 November 1932, was for specific performance of the agreement of 29 January 1932, and for damages in addition to, or in substitution for, specific performance. The claim for damages in the alternative, in my view, is merely ancillary to the claim for specific performance, and the relief claimed is on the basis of the continued existence of the contract which the defendant is failing to carry out. In Hipgrave v Case, the principle of Gray v Fowler was applied to a statement of claim. In that case, as here, the plaintiff claimed specific performance, or damages in substitution of performance (per the Earl of Selborne LC, at p 361), the only difference being that, the present claim having gone no further than the writ, there is no express averment that the plaintiff is willing and ready to perform the contract. However, even if there had been a statement of claim, by RSC Ord 3, r 14, and the corresponding practice of the Palatine Court, it is no longer necessary to plead averments, and such an averment is implicit in the claim for specific performance.

It follows that, as the action for specific performance has never been discontinued, dismissed for want of prosecution, or waived, it stands as a plea on the record asserting the existence of the contract, and asserting that the defendant is still not out of time to complete it. Indeed, it is sought to make the court compel him to do so. The answer would be that, owing to the absence of default on his part, in the circumstances the notice of rescission of the contract or claim to forfeit the deposit is bad. The plaintiff himself having repudiated the contract, if not by the notice, at any rate by the letter of 28 October, stating that the contract is at an end, he has lost his title to the deposit, and the defendant

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may claim it back, as he has sought to do in the present counterclaim. I am of opinion that this appeal succeeds, with costs. The order of the court will be as stated by Luxmoore LJ in his judgment.

LUXMOORE LJ. This appeal arises out of a counterclaim made by the defendant Henry Hyman Pearlberg in an action brought against him in the Kings Bench Division on 9 June 1936, by the Public Trustee as trustee of the will of one James Greaves deceased. By an order, dated 3 July 1936, it was ordered that the Public Trustee should be at liberty to enter final judgment for the amount of his claim in the action and costs, and it was further ordered that, if that amount and costs were paid into court within 10 days from the date of the order, execution on the judgment should be stayed pending the trial of the defendants counterclaim. The money was duly paid into court, and the counterclaim was delivered on 8 September 1936. It was based on a written agreement, dated 29 January 1932, entered into by Pearlberg and James Greaves. The agreement was annexed to printed particulars and special and general conditions of sale, and provided that Greaves should sell, and Pearlberg should purchase, the property described in the particulars at the price of £2,400, subject as in those particulars mentioned, and also subject to the special and general conditions already mentioned, so far as the same were applicable to a sale by private treaty. The particulars described a plot of land at Oldham, together with a cotton mill called Albany Mill and other buildings erected thereon, subject to a term of 999 years created by a lease, dated 21 May 1896, but with the benefit of the yearly rent of £271 5s thereby reserved. I will hereafter refer to this property as Albany Mill. The special conditions of sale stated that the purchase should be completed on 1 March 1932, and by the general conditions it was provided by cl 3 that the purchaser should, immediately after the sale, pay to the vendor a deposit of 10 per cent of the purchase money, by cl 4 that the purchaser should, as from the day for completion, be entitled to possession or receipt of the rents of the property, and should pay all outgoings affecting the same, but should not be let into actual possession or receipt of the rents until payment of the remainder of the purchase money and execution and delivery of any conveyance which ought to be executed by him, and by cl 5 that, if from any cause whatever, save as thereinafter provided, the purchase should not be completed at the time appointed, the purchaser should pay interest on the remainder of the purchase money at the rate of 5 per cent per annum from that time until the same should be paid, or the vendor might at his option retain the rents or an apportioned part thereof to the actual completion of the purchase in lieu of interest, and should in that case discharge the outgoings, or an apportioned part thereof, to the same time. By cl 27, a power to rescind the contract for sale was conferred on the vendor in these terms:

If the purchaser shall neglect or fail to comply with any of the conditions of sale

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the vendor may give him notice in writing to remedy such neglect or failure and if after the expiration of 14 days from the service of such notice the purchaser shall still be in default his deposit may be absolutely forfeited to the vendor and the contract rescinded.

As an alternative to rescission, the vendor was given power to resell the property on the terms stated in this clause, but it is not material to refer to them.

On 29 January 1932, Pearlberg paid to Greaves a deposit of £240, in accordance with the provisions of cl 3 of the general conditions. The object of Pearlbergs counterclaim is to recover (i) the deposit of £240, with interest at 4 per cent per annum from 29 January 1932, until repayment, and (ii) general damages for the breach of the agreement of 29 January 1932, for the sale of the Albany Mill. The counterclaim was only set down for trial on 4 May 1939, as the result of an application by the Public Trustee to dismiss the counterclaim for want of prosecution. It was heard by Croom-Johnson J on 13 July 1939. The judge directed that judgment should be entered for the Public Trustee on the counterclaim, with costs to be taxed. Pearlberg has appealed to this court from so much of the order as relates to the counterclaim, and asks that judgment may be entered for him on the counterclaim.

It is necessary to state the history of the agreement of 29 January 1932, between its date and the date of the counterclaim. The vendors title was accepted in due course on Pearlbergs behalf, and a draft conveyance was submitted by his solicitors to the solicitors for Greaves, who approved the draft. On 23 March 1932, Greaves solicitors asked for an appointment to complete. There was some further correspondence between the solicitors without result, and on 17 June 1932, Greaves solicitors again wrote asking for an appointment to complete. Ultimately, on 7 July 1932, a writ was issued in the Chancery of the County Palatine of Lancaster on behalf of Greaves, as plaintiff, against Pearlberg, claiming specific performance of the agreement of 29 January 1932, and damages in addition to, or in substitution for, specific performance. The judge stated that he was not satisfied that this writ was served on Pearlberg.

Greaves died on 24 July 1932. No further step was taken in the action, and no application was made to revive it. This action may, for the purposes of the counterclaim, therefore, be treated as non-existent. Greaves appointed as his executor Thomas Henry Scholfield, a member of the firm of solicitors who had acted for him in connection with the agreement, and on 9 November 1932, Scholfield issued a new writ in the Chancery of the County Palatine of Lancaster against Pearlberg asking for precisely the same relief as was asked by the earlier writ. Nothing further was done in the matter until 4 July 1933, when the writ in the second action was served on Pearlberg, who entered appearance to it on 12 July 1933. On 13 October 1933, a notice on behalf of Scholfield was served on Pearlberg requiring him:

… forthwith to comply with the terms of the agreement of Jan. 29, 1932, and

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to complete the purchase of the Albany Mill the day fixed by the contract for completion being now long past.

The notice ended with the following paragraph:

We hereby give you further notice that should you fail to complete the said purchase within 14 days from the service upon you of this notice the said Thomas Henry Scholfield will rescind the contract and the deposit paid by you will be forfeited under the terms of cl 27 of the general conditions of sale of the contract.

This notice apparently elicited a request from Pearlberg for a completion statement up to Friday, 27 October 1933, for on 19 October 1933, Scholfields solicitors wrote to Pearlberg a letter enclosing such a statement. The letter asked that the engrossment of the draft conveyance which had already been approved should be sent for execution by the vendor, and that an appointment to complete should be made. The completion statement enclosed was not in accordance with the agreement of 29 January 1932, in that it required payment of the sum of £303 4s 2d in respect of the ground rent of the Albany Mill which had not been received by Pearlberg, and the sum of £20 for the costs of the second action, the total sum claimed to be payable by Pearlberg on completion being £2,483 4s 2d.

On 24 October 1933, Pearlbergs solicitors wrote to Scholfields solicitors saying that the purchaser had informed them of his inability to find the balance of the purchase price within the 14 days mentioned in the notice, and asking for an extension of time for two or three weeks. They pointed out that the completion statement was incorrect, and asked what steps had been taken against the liquidator of Albany Mills Ltd, the company which had been in occupation of the Albany Mill, by way of protection of the rent-owners rights. To this letter, Scholfields solicitors replied on 25 October 1933, that, if Pearlberg could raise the necessary funds within 10 days, they were of opinion that Scholfield would be prepared to make a fresh arrangement with him, and, on completion, give him credit for the deposit already paid. On 28 October 1933, Scholfields solicitors wrote again to Pearlbergs solicitors, and said:

As your client has failed to comply with the terms of the notice dated 13 October, we have received definite instructions from our client that the contract must be rescinded and the deposit forfeited. The matter must therefore be considered as at an end.

Apparently, there were conversations between the solicitors, because on 1 November 1933, Pearlbergs solicitors wrote to Scholfields solicitors a letter and referred to conversations and stated that their client was prepared to complete on or before 30 November, and to pay the further sum of £200 immediately on account. This letter was answered on the following day by a letter stating that Scholfield was not prepared

… to open the question of the contract which has been rescinded by the notice served on your client.

The letter went on to suggest that, if Pearlberg still desired to purchase the property, he must enter into a new contract. The subsequent

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correspondence suggested that Pearlberg might be willing to enter into a further contract, but no new contract was made.

On 11 November 1933, Pearlberg wrote to Scholfields solicitors pointing out that notice of discontinuance of the second action had not been given to him, and that, before such a notice as that of 13 October 1933, could be given, notice of discontinuance of that action was necessary. He stated that he proposed to tender the purchase money under the purchase agreement on 13 November, and asked for a corrected completion statement. The judge has held that no tender was made on 13 November 1933, nor on any other date. He declined to accept the testimony of Pearlberg unless it was supported by documentary evidence, and, having read the shorthand note of Pearlbergs examination and cross-examination, I appreciate entirely the reason for this finding.

From the last-mentioned date onwards, the question of the completion of the agreement of 29 January 1932, remained, so far as both parties were respectively concerned, in a state of quiescence. On 14 January 1935, Scholfield sold the Albany Mill to a third party. Scholfield died on 7 April 1935, having appointed the Public Trustee as his executor. The Public Trustee thereby became the legal personal representative of Greaves. On 5 September 1935, Pearlberg wrote to Scholfield & Co stating that he was prepared to complete the purchase of the property:

… which I have been anxious to do all along but which you have prevented my so doing owing to your action for specific performance.

This statement is difficult to understand or to reconcile with the facts. Pearlberg also stated that he proposed forthwith to take proceedings for specific performance of the contract. No such step was taken, nor was anything further heard about the contract until the Public Trustee, who had become the trustee of the will of James Greaves in the place of Scholfield, and also the legal personal representative of James Greaves by devolution, instituted the action out of which Pearlbergs counterclaim has arisen. As I have already stated, there was great delay in bringing the counterclaim to trial, and it was only set down after an application by the Public Trustee for its dismissal for want of prosecution.

Counsel for the appellant very properly admitted that it was impossible for him to put forward a claim for damages for breach of the agreement of 29 January 1932, with any hope of success, having regard to Pearlbergs delay in the prosecution of his claim, but he contended that there was no valid rescission of the agreement of 29 January 1932, in accordance with any of its provisions, and that, consequently, Pearlberg had a legal right to recover his deposit, and that such right was not, and could not be, affected by reason of any delay by Pearlberg in the prosecution of his claim. It is necessary, therefore, to consider the effect on the contract of the notice of 13 October 1933, and the notice of 28 October 1933, that the contract was rescinded. If there had been no pending action by Scholfield for specific performance, there could, I

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think, be no doubt but that both the notice limiting a time for completion and the rescission after failure to comply with that notice were valid. However, it is, I think well-settled that a vendor cannot rescind a contract for the sale of land where he has himself brought an action for specific performance which is pending at the date of the alleged rescission, for the claim for specific performance of necessity implies an affirmance of the contract. The rule is stated in these terms in Williams on Vendor and Purchaser (4th Edn), Vol 1, p 227:

If the vendor takes proceedings to enforce the contract at law or in equity, he waives his right to rescind: though he may revert to it; if he procures his proceedings to be effectually discontinued at his own cost before the matter comes on to be heard.

Reference is made to Warde v Dixon and Gray v Fowler as supporting this statement. Kindersley VC said in Warde v Dixon, at p 322:

… he [the plaintiff] would have to dismiss his bill with costs before he could say he is entitled to rescind the contract.

Each member of the Court of Exchequer Chamber which decided Gray v Fowler refers to the rule in express terms. The reason for the rule is thus stated by Kelly CB at p 272:

Then we are met with a difficulty arising out of the practice of the Court of Chancery that the seller cannot while his bill for specific performance is pending put an end to the contract: he must first dismiss his bill with costs. But the whole meaning and essence of that rule (which is a very reasonable rule) is this: You cannot be acting on the contract and assuming it to exist and at the same time exercising a right to put an end to it by rescinding it.

This, of course, only deals with the question of rescission, and not with the question whether a new time for completion can be fixed by the vendor who has started an action for specific performance while that action is pending. Where, as in the present case, time for completion is not of the essence of the contract, it is always open to a vendor to fix a reasonable time for completion, and so make time of the essence, but, where a vendor starts an action for specific performance, it appears to me that the issue of a writ is equivalent to a notice to the purchaser that he must complete his purchase at a time which will be fixed by the court if the vendor succeeds in his action. The vendor having given notice of this fact, it seems to me to be impossible, while the action is pending, for him to fix some other and shorter time for completion under some provision of the contract. Of course, if the action for specific performance is discontinued, the right to fix a new time for completion under the contract must necessarily revive. Counsel for the plaintiff did not challenge the existence of the rule as to the vendors right to rescind while an action for specific performance instituted by him is pending, but he argued that it did not apply if the vendor showed that he had changed his mind at the time he purported to rescind, and did not then intend to continue his action. In support of this argument, he relied on the fact that in Warde v Dixon as well as in Gray v

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Fowler the vendor was proceeding by bill of complaint, which required an averment that the vendor was ready and willing to carry out his part of the contract, whereas no such averment was implicit in the writ. I do not think that there is any solid foundation for any such distinction, for the relief of specific performance can only be obtained by a person who can perform his contract, subject only to the question of title, if the title has not already been accepted. I agree that, if the writ is equivocal, and there is a claim for specific performance, with an alternative claim for rescission, the vendor has not in fact made a definite choice in favour of the enforcement of the contract. In the present case, the writ is for specific performance of the contract, and for damages in addition to, or in substitution for, specific performance. On such a writ, I am satisfied that the reference to damages in substitution for specific performance has no reference to a possible claim to rescission; and would not include it. In Hipgrave v Case, it was held that a claim for specific performance, or, in the alternative, for damages, must be treated as one for specific performance, with a claim for damages in the alternative as a substitute for specific performance. In the present case, the words “in substitution for specific performance,” which were absent from the claim in Hipgrave v Case, are expressly inserted in the writ. In these circumstances, I can see no ground to support the contention of counsel for the plaintiff that the writ is either equivocal or in a form in which he could, by the statement of claim when delivered, ask for rescission of the contract. Counsel for the plaintiff did not find any adequate argument in answer to the question whether a vendor who has instituted an action for specific performance can, while that action is pending, give a notice making time for completion of the essence of the contract, in view of the fact that it is for the court to fix the time for completion in such an action.

It follows from what I have said that, in my judgment, the notice by which Scholfield purported both to fix a date for completion and to rescind the contract because of Pearlbergs failure to complete by that date were ineffectual, and that there has, therefore, been no valid rescission under cl 27 thereof. If this is so, there cannot have been a forfeiture of the deposit by reason of the notice and Pearlbergs failure to comply with it. Although Gray v Fowler was cited to Croom-Johnson J it does not appear that his attention was called to that part of the judgment which states the rule to which I have referred. The passage in Gray v Fowler to which the judge was referred is in the judgment of Kelly CB at p 271:

Then it is further said by the plaintiff, “You have filed a bill for specific performance against me, and therefore you are not entitled to rescind; you call upon me to act upon the contract, and at the same time claim to rescind and put an end to it.” But the state of circumstances under which the seller was entitled to rescind had, at the time when the bill was filed, altogether ceased to exist, but was now renewed and revived when the purchaser by his answer insisted on the objection.

This passage has no bearing on the existence of the rule that a vendor

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cannot rescind a contract specific performance of which he has sought to enforce by pending action, and is, in fact, directed to a different point. What the judge is saying is that the vendor, by bringing his suit for specific performance, was not entitled to rescind the contract in respect of objections made by the purchaser before the vendors suit was instituted, but that he became entitled to rescind in respect of objections made subsequently to the institution of the suit, provided that the suit had, at the time of rescission, been dismissed, for Kelly CB, immediately after the passage which I read last, states the difficulty caused by the rule, and, after pointing out that the vendors suit for specific performance must be dismissed before rescission, proceeds to demonstrate that the vendor had in the particular case under consideration done everything in his power to obtain a dismissal of his bill with costs, although he had been unable to do so by reason of the death of the purchaser and the attitude adopted by his executor, since the vendor had offered to pay to such executor the costs which would have been payable to the deceased purchaser if he had been alive and the suit had been effectively dismissed with costs. He further points out that, before the vendor rescinded the contract, the action for specific performance had, by reason of an order obtained by the purchasers executor, been dismissed without costs. Counsel for the plaintiff also argued that Pearlberg had in fact agreed with Scholfield that the contract was at an end, and he relied on the correspondence, to which I have already referred, passing between the solicitors for the respective parties at the time of the notice. I am quite unable to spell out of that correspondence any concluded agreement to put an end to the contract of 29 January 1932, and to negotiate for a new agreement on the footing that the contract had been validly rescinded. The judge has stated in his judgment that:

… the defendant [Pearlberg] had long since recognised that the position was that the contract had been lawfully rescinded, and that he had instructed a solicitor to negotiate for a new contract on the basis that the old one had been determined.

If, as I hold, there was no valid rescission of the old agreement, and there was no new agreement entered into, I am unable to see any ground on which Pearlberg can be precluded from enforcing his legal right to have his deposit of £240 returned to him. His legal right is not statute barred, and he is entitled to recover that amount. So far as he claims to recover interest in respect of it, the matter is in the discretion of the court, under the Law Reform (Miscellaneous Provisions) Act 1934, s 3. Having regard to the fact that Pearlberg has delayed bringing his claim until long after the death of both Greaves and Scholfield, and to his unwarranted delay in bringing his counterclaim to trial, we are of opinion that no interest should be allowed. The order of the judge dismissing the counterclaim must be discharged, and the appeal must be allowed as to the sum of £240, which will be ordered to be paid to Pearlberg. In my judgment, there should be no costs of the counter-

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claim in the court below, so that, if Pearlberg has paid the plaintiff such costs, there must be an order for repayment of the amount so paid. I can see no ground for depriving Pearlberg of his costs of this appeal, which must be paid to him by the Public Trustee.

GODDARD LJ. It is unnecessary for me to recapitulate the facts, but I will state my reasons shortly for agreeing that this appeal succeeds. The doctrine laid down in Warde v Dixon and Gray v Fowler not only applies to proceedings in equity but is also a rule of the common law. If one contracting party, either expressly or by conduct, repudiates a contract, the other can either accept the repudiation, and treat the contract as rescinded, or refuse to do so, and regard the contract as still alive, so that his rights will fall to be determined when the time for performance arrives. He cannot, however, insist on performance and at the same time adopt the remedies open to him on rescission. Applying that rule to a case where equity would entertain a claim for specific performance, I think that it follows that, if a vendor, by applying for that remedy, asserts that he regards the contract as subsisting, he loses his right to forfeit a deposit, on the footing that the contract has been rescinded by the purchasers default. However, he may resile from the position he has thus taken up, and, if he abandons his action by discontinuing it in the manner provided by the rules of court, he can, if the purchaser is still at fault, accept the repudiation and forfeit the deposit. If he so acts, he will have to pay the costs of the proceedings, which have become abortive because he himself has put an end to his cause of action. The present case forms a good example of the necessity for this rule. When the plaintiff, having given his notice purporting to forfeit the deposit, delivered a completion statement, he claimed that the defendants should pay the costs of the abortive action. I can see no possible ground on which he could base such a claim. If he desired to rescind and forfeit the deposit, the action was wholly unnecessary, and he could no longer persist in his suit, because, by his own volition, he had extinguished his cause of action. If he did not proceed with the action, the defendant could, no doubt, obtain an order for dismissal for want of prosecution, or, if a statement of claim had been delivered, he could have put in a defence alleging that the cause of action had been extinguished, and then, if the plaintiff still did not discontinue, I suppose the defendant could set the case down, so as to obtain judgment for his costs. This, I think, shows the anomalousand, indeed, absurdposition which results from attempting to rescind the contract while the action is still in being.

Counsel for the plaintiff argued that there was a difference between merely issuing a writ, unaccompanied, or not followed by, a statement of claim. I cannot agree. Under RSC Ord 1, an action in the Supreme Court is substituted for a proceeding by bill in the High Court of Chancery, and by RSC Ord 2, an action is commenced by a writ of summons. The procedure in the Palatine Court is, I understand, the same.

Page 284 of [1940] 2 All ER 270

There is no magic in the form of the process. What matters is that the proceeding asserts the existence of the contract. I do not stay to consider whether it was open to the plaintiff to expand the relief claimed on the writ by asking in his statement of claim for the alternative relief of rescission, because, in my opinion, one has only to see what was being asserted by the plaintiff when he purported to rescind. The relief claimed by the writ is unambiguous. The plaintiff claims to have the contract specifically performed, or to have damages in lieu of that remedy, which I think means no more than that, if the court considers damages an adequate remedy, he will ask that they be awarded to him.

The judge seems to me to have thought that a vendor can at one and the same time claim the remedy of specific performance, and, while so claiming, enforce the inconsistent right to rescind and retain the deposit. From some passages in the judgment, I think that he may have had in mind the doctrine prevailing between mortgagee and mortgagornamely, that the former may exercise all his rights at once. No one doubts that a plaintiff in an action for specific performance can claim the alternative remedy of rescission, but that is no more than saying that, if the court, for any reason, thinks that, though the defendant is in default, specific performance cannot be granted, then the plaintiff asks that it may be declared that he can rescind the contract and exercise his rights of forfeiture. No inconsistent position arises, because, if the judgment is for rescission, it follows ex hypothesi that the claim for specific performance is thereby ended.

The plaintiff, then, having rescinded the contract when he was not entitled to do so, it follows that there can be no defence to an action by the defendant for a return of the deposit as money had and received. Laches forms no bar to a legal claim, and I cannot, on the facts proved, find that the defendant so acquiesced that we ought to infer an agreement by him that the matter should be ended on the terms that the action should be dropped and the deposit taken by the plaintiff instead, and in satisfaction of whatever rights he might have.

Whether or not a plea of estoppel would have succeeded I need not inquire, as it was neither pleaded nor was evidence led on that issue. However, in view of the shifty conduct of the defendant, and his really unpardonable and unexplained delay, especially when it is remembered that he made no claim in the lifetime of the vendor, nor even of the vendors executor, and the embarrassment which this claim must cause to the present representatives of the vendors estate and the beneficiaries, I agree that he ought not to have any costs of the action, and, for the same reasons, no interest on the amount he has recovered.

Appeal allowed with costs.

Solicitors: Linsley-Thomas Heald & Co (for the appellant); Hewitt Woollacott & Chown, agents for T H Scholfield & Co, Manchester (for the respondent).

Derek H Kitchin Esq   Barrister.


John Jaques & Son Ltd v Chess (a Firm)

[1940] 2 All ER 285


Categories:        INTELLECTUAL PROPERTY; Trade Marks        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, MACKINNON AND CLAUSON LJJ        

Hearing Date(s):        29 FEBRUARY, 1, 19 MARCH 1940        


Trade Marks and Trade Names Passing off “Staunton chessmen” “Genuine Staunton chessmen” “Genuine.”

The respondents were manufacturers of chess sets of a particular design, with which the name Staunton was associated. The appellant advertised for sale sets of chessmen which he described as “genuine Staunton chessmen.” They were made according to the Staunton design, but were not of the respondents manufacture. The respondents sought to restrain the appellant from offering for sale chessmen not of their manufacture as “genuine Staunton chessmen” or “Staunton chessmen,” contending that the name “Staunton,” and a fortiori the words “genuine Staunton,” meant their goods exclusively. The appellant contended that the words meant no more than chessmen of a particular pattern. The judge held that the respondents had not established that in the market as a whole the word “Staunton” denoted their chessmen exclusively, but that, on analogy with Havana Cigar & Tobacco Factories Ltd v Oddenino, the word was to some extent ambiguous, and that, in those circumstances, the use of the word “genuine” when attached to the word “Staunton” must be calculated to lead to the belief that the word was used as referring to the respondents goods:

Held as the judge had found that the description “Staunton chessmen” was not calculated to deceive, the addition of the word “genuine,” since that word imported a reference to correctness of design rather than to commercial origin, could not render those words a description calculated to deceive.

Decision of Crossman J ([1939] 3 All ER 227) reversed.

Notes

In the present case, there was a distinction between the understanding of dealers in the trade of the name “Staunton” and that of the general public interested in chess. It was only dealers in the trade who would in any way associate this name with the plaintiffs business. This being so, it was argued that the word “genuine” added to the name “Sttaunton” must form a combination which would be calculated to make the trade, at any rate, believe that the goods so described were products of the plaintiffs business, but the court of Appeal, differing from the view taken by the judge of first instance, have found that the addition of the word “genuine” would appear to emphasise the correctness in point of design rather than to indicate that the goods were the product of a particular manufacturer.

As to Trade Names of Goods, see Halsbury (Hailsham Edn), Vol 32, pp 638647, paras 947956; and for Cases, see Digest, Vol 43, pp 271279, Nos 10621106.

Cases referred to

Havana Cigar & Tobacco Factories Ltd v Oddenino [1924] 1 Ch 179; 43 Digest 279, 1106, 93 LJCh 81, 130 LT 428, affg [1923] 2 Ch 243.

General Electric Co Ltd v Pryces Stores, British Thomson-Houston Co Ltd v Pryces Stores (1933) 50 RPC 232; Digest Supp.

Ford v Foster (1872) 7 Ch App 611; 43 Digest 231, 747, 41 LJCh 682, 27 LT 219, revsg SC sub nom Re “Fords Eureka Shirt,” Ford v Foster 20 WR 311.

Cocks v Chandler (1871) LR 11 Eq 446; 43 Digest 280, 1113, 40 LJCh 575, 24 LT 347.

Appeal

Appeal by the defendant from an order of Crossman J, dated 26 May 1939, and reported [1939] 3 All ER 227. The facts are fully

Page 286 of [1940] 2 All ER 285

set out in the judgment of the court delivered by Sir Wilfrid Greene MR.

J Silverman for the appellant.

F E Bray KC and James Mould for the respondents.

Silverman: The appellant is entitled to use the word “genuine” and the judge was wrong in restraining him from doing so. In the circumstances, there was not, and there could not have been, any deception. The market to be considered in this case consists of the chess-playing public, which is the market in which the appellant sells his goods. The basis of the respondents case was that they objected to the appellants use of the word “Staunton” as well as to his use of the words “genuine Staunton.” They were willing, however, that the appellant should use the words “Staunton pattern,” if he so desired. At no stage during the hearing was any distinction made between “Staunton” and “genuine Staunton” by the witnesses on either side. The judge was in error with regard to the market which he had to consider. The market, in the present case, should be confined to chess players. It should not be extended so as to include dealers. Havana Cigar & Tobacco Factories Ltd v Oddenino and General Electric Co Ltd v Pryces Stores, British Thomson-Houston Co Ltd v Pryces Stores, show that the court has to consider the market in which the goods are sold, and to consider what the word complained of would mean in that particular market. In the present case, no deception has been proved, and it is perfectly obvious that none could have been proved.

Bray KC: Although the respondents may have made out their case that the word “Staunton” is known to indicate their goods, and that the use of the word by others is deceptive, if the court comes to the conclusion that the possibility of deception is not sufficient to justify an injunction with regard to the use of the word “Staunton” alone, the court would be justified in granting an injunction if the possibility of deception is increased by describing the goods as “genuine Staunton.” Whether or not a right has been infringed depends upon the possibility of deception. There is a possible legitimate use of the word “Staunton” by anyone who wishes to describe the pattern or design of his goods. He must not, however, couple with the word anything which increases the possibility of deception. Either the addition of the word “genuine” is meaningless or its use resolves the doubts which people may have had as to the manufacturer of the goods. The doubts may be resolved by the use of the word “genuine” causing people to believe that the goods are of the respondents manufacture. The respondents are the original manufacturers of Staunton chessmen, and for a long period they had a proprietary right in the name. Although the name is not now exclusively connected with their goods, there is a particular association between the word “Staunton” and the respondents. The word “genuine” is commonly used to indicate that goods

Page 287 of [1940] 2 All ER 285

are those of the original manufacturer. That conclusion should be drawn, and that is sufficient to justify the granting of an injunction. Ford v Foster shows the test as to whether or not a word which was originally a trade mark has become publici juris. The test must be whether or not the use of the word by others is calculated to deceive the public. An original manufacturer of goods is entitled to designate them as “the original”: Cocks v Chandler.

Mould: For a considerable period, the respondents were the only persons who had any reputation in the market in connection with the sale of Staunton sets. After the design registration period had expired, they could not prevent others from making the design and calling the goods “Staunton pattern sets.” The evidence called before Crossman J falls into two categories. One class consists of trade witnesses, who are unanimous in saying that to them the word “Staunton” indicates the goods of the respondents, and indicates theirs alone. The other class of witnesses consists of chess players. They had entered into very few commercial transactions relating to chessmen, and there was no sort of unanimity amongst the players called.

J Silverman for the appellant.

F E Bray KC and James Mould for the respondents.

19 March 1940. The following judgment was delivered.

SIR WILFRID GREENE MR (delivering the judgment of the court). The respondents, who were plaintiffs in the action, carry on an old-established business of manufacturers of sports and games requisites, including chessmen. They make and sell sets of chessmen of a particular design, with which is associated the name of Staunton, a well-known English chessplayer in the first part of the last century. In their statement of claim, they allege that the description “Staunton” or “genuine Staunton” used in reference to sets of chessmen indicates chessmen of their manufacture exclusively.

The appellant, Baruch Harold Wood, is the proprietor of a periodical called Chess in one number of which he advertised for sale sets of chessmen not of the respondents manufacture which he described as “genuine Staunton chessmen.” The chessmen so advertised were made according to the design referred to above. The respondents alleged that by so describing his chessmen the appellant was passing them off as chessmen of their manufacture, and they claimed the appropriate injunction to restrain the appellant from offering chessmen not manufactured by the respondents as “genuine Staunton chessmen” or “Staunton chessmen.”

At the trial before Crossman J, the respondents case broke down on the facts, so far as regards the phrase “Staunton chessmen.” Having regard to the widespread use of the word “Staunton” as describing chessmen of a particular design without reference to any particular commercial source, the judge found as follows, at p 234:

In my judgment, the plaintiffs have failed to establish the first thing which they have to establish so far as regards the use of the word “Staunton”namely, that the word “Staunton” means in the market, when applied to chessmen, chessmen made by the plaintiffsand, in my judgment, the plaintiffs are not entitled to stop the defendant from using the word “Staunton” alone in connection with chessmen.

Page 288 of [1940] 2 All ER 285

This finding was not challenged by the respondents, and, in our opinion, it was manifestly correct.

The legal effect of the judges finding of fact is in no way altered by the circumstance that, as he finds, at p 230:

… some, though not all, of the well-known dealers in games in England, and a very few chess players, regard the word “Staunton,” when applied to chessmen, as indicating chessmen manufactured by the plaintiffs, and distinguish chessmen of Staunton design made by persons other than the plaintiffs by calling them Staunton pattern chessmen.

The fact which is frequently found in passing-off actionsnamely, that a number of persons, or even a particular class of persons, regards a name or description as indicating the plaintiffs goodsdoes not of itself lead to the result that the plaintiff has a general right to restrain the use of that name or description by others. This does not mean that another trader is entitled to use the name or description in addressing a person or class of persons who to his knowledge will understand it as referring to the plaintiffs goods. In the particular circumstances of such a case, user of this kind would in fact be fraudulent. Nothing of the kind has happened or is threatened in the present case, since, in any event, the appellants advertisements are not addressed to the trade, and the evidence shows that the trade would not be deceived, in view of the terms of the offer taken as a whole. The effect of the decision of the judge is that, speaking generally, the use of the name “Staunton” is not deceptive, and that no right of the respondents has been infringed by the appellants use of it in his advertisement.

The judge, however, went on to find, at p 235, that:

… the use of the word “genuine,” when attached to the word “Staunton,” must be calculated to lead to the belief that the term is used to mean “made by Jaques & Son, Ltd.,” the plaintiffs.

The passage quoted is prefaced by the words: “In these circumstances, I find that …” and, accordingly, for a proper understanding of the judges reasoning, it is necessary to examine the circumstances which led to this conclusion of fact. They are to be found in the immediately preceding paragraph of the judgment, which is as follows, at pp 234, 235:

I think, however, that in the present case I must have regard to the fact that the evidence of the class of dealers differs from the evidence of the class of chess players. Just as in Havana Cigar & Tobacco Factories, Ltd. v. Oddenino the word “Corona,” when applied to cigars, was to some extent ambiguoussometimes meaning a cigar made by the plaintiffs and sometimes meaning a cigar of a particular shape or sizeso in the present case I think that the word “Staunton” as applied to chessmen is to some extent ambiguous. Certainly to a considerable number of traders it means chessmen made by the plaintiffs. To chess players generally, however, it means chessmen of the design known as “Staunton.”

The crucial finding here is the finding that the word “Staunton” is to some extent ambiguous because to a considerable number of traders it means chessmen made by the plaintiffs. If we rightly understand the two paragraphs in question, the judge means that, whereas those persons who understand the word “Staunton” as being merely descriptive would not attach any distinctive meaning to the added word “genuine,”

Page 289 of [1940] 2 All ER 285

traders (who ex hypothesi already regard the word “Staunton” as distinctive) will be deceived by the phrase “genuine Staunton.” That this is what the judge must have meant appears from his reference to Havana Cigar & Tobacco Factories Ltd v Oddenino. In that case, the word “Corona,” as applied to cigars, might refer to shape and size or it might refer to a particular brand. To most persons, the latter would be its meaning, and this was the original meaning of the word, which had never been lost. It follows, therefore, that, if a person desiring to purchase a cigar asked for a “Corona” cigar, he would probably expect to receive a cigar of the brand in question, although he might expect to receive a cigar of Corona size and shape of any brand. These facts a vendor of cigars must be taken to know. Accordingly, when in that case the defendants customer asked for a Corona cigar, the defendant, if he supplied a cigar of Corona size and shape, but not of the Corona brand, would to his knowledge in all probability be deceiving the customer. It was therefore held that the defendant was not entitled to resolve the ambiguity in his own favour, but was bound to make an appropriate inquiry of the customer as to what he meant by the word “Corona.”

With all respect to the judge, we are unable to regard Havana Cigar & Tobacco Factories Ltd v Oddenino as in any respect analogous to the present case. If such an analogy existed, its application would be, not to the phrase “genuine Staunton,” but to the word “Staunton” itself, and the result would be that, in response to an order for Staunton chessmen, the appellant would be bound to inquire whether or not the customer required chessmen of the respondents manufacture. This would be equivalent to saying that, by offering chessmen as Staunton, the appellant would be guilty of passing off, which is the very thing which the judgment negatives. We say that it would be equivalent because in our view, the principle applied in Havana Cigar & Tobacco Factories Ltd v Oddenino was no different from that which falls to be applied in every other case of passing off. The special form of the injunction was due to the particular way in which orders are given in restaurants, and the injunction might as well have been in a more usual form: per Sargant LJ, at p 202. In supplying, without inquiry, a cigar not of the Corona brand in response to a request for a Corona cigar, the defendant was in principle doing precisely the same thing as he would have done had he initiated the conversation by offering a cigar not of Corona brand as a “Corona cigar.” In view of the findings of fact in the case, such a spontaneous offer would have infringed the plaintiffs rights, since the word “Corona” still retained for the majority of persons its original meaning as a brand name, and the probabilities were that the customer would understand the offer to refer to a cigar of the Corona brand. In other words, the injunction granted in Havana Cigar & Tobacco Factories Ltd v Oddenino would not have been granted if, on the facts of the case, an offer of “Corona cigars” would not have been calculated to deceive. In the present case, the offer of “Staunton

Page 290 of [1940] 2 All ER 285

chessmen” is not calculated to deceive, as the judge has found, and, accordingly, the analogy breaks down. Even if the reasoning of the judge is assailable, however, his judgment could be supported if he had found as a fact, or if this court were to find as a fact, on the evidence, that, whereas the word “Staunton” must be taken as publici juris, the addition to it of the word “genuine” confines its reference to the respondents goodsnot necessarily to the mind of everyone, but to the minds of such a high proportion of those concerned as to make it possible to say as a general proportion that the phrase “genuine Staunton” is calculated to deceive, although the word “Staunton” is not. There is, however, no such finding by the judge. Moreover, an obvious difficulty arises at the outset. If the respondents are unable to contend that the word “Staunton” by itself indicates commercial origin, having regard to the widespread use of the word as referring solely to design, it is prima facie difficult to see how the addition of the word “genuine” can import a reference to a particular manufacturer. Rather it would appear to emphasise the correctness in point of design of the chessmen so described. Nevertheless, this difficulty could be surmounted if the evidence were sufficient to show that the addition of the word “genuine” did import a reference to the respondents manufacture.

It was argued before us that the evidence is sufficient to establish this proposition. By way of background to the argument, it was contended that, as a matter of history, the word “Staunton” originally denoted the respondents manufacture exclusively, that in course of time it had (unlike the word “Corona” in Havana Cigar & Tobacco Factories Ltd v Oddenino), lost its meaning as a brand name, but that the fact that a monopoly had originally belonged to the respondents meant that a very slight addition to the word, such as the addition of the word “genuine,” would refer back to that original monopoly. With regard to this contention, it is enough to say that the evidence to which we were referred is, in our opinion, insufficient to establish the existence of any such monopoly in former times, and, even if it had been sufficient, the argument would have had little weight.

It is necessary to refer shortly to the evidence on which the main argument was based. The respondents came into court to support what was their main casenamely, that the use of the word “Staunton” was by itself calculated to deceive. It was to this proposition that the evidence which they called was directed. They were not setting up what would in truth have been an alternative casenamely, that, if the use of the word “Staunton” was not by itself calculated to deceive, the use of the expression “genuine Staunton” was. To support such an alternative case, the proper evidence would have been that of witnesses who did not regard the word “Staunton” as referring to the respondents, but did regard the expression “genuine Staunton” as so referring. No such evidence was called on behalf of the respondents, for the simple

Page 291 of [1940] 2 All ER 285

reason that their witnesses were there to support the proposition that the word “Staunton” by itself referred to the respondents. It would obviously have been useless to ask such witnesses what the expression “genuine Staunton” would have conveyed to them if, contrary to their own evidence, the word “Staunton” did not refer to the respondents. Speaking generally, the evidence of the respondents witnesses leaves on our minds the clear impression that they regarded the expression “genuine Staunton” as referring to the respondents because they regarded the word “Staunton” by itself as doing so, and not because the word “genuine” imported some reference to the respondents which was not to be found in the word “Staunton” alone. We therefore refrain from a detailed examination of the evidence given by the respondents witnesses.

Reliance was also placed upon passages in the evidence of certain of the appellants witnesses. To build up a case which was not supported by the plaintiffs own witnessesand, indeed, was not put to them in examination-in-chiefby searching the evidence of the defendants witnesses is no easy task, and the court will not readily conclude that it has been successfully achieved. In the present case, we are quite unable to find in these passages anything which would justify us in coming to the conclusion that, in describing his chessmen as “genuine Staunton,” the appellant was representing them as the goods of the respondents. In the result, the appeal is allowed, and the action is dismissed. The respondents must pay the costs here and below.

Appeal allowed with costs in both courts.

Solicitors: Sparks Russell Isard & Co, agents for W Ritson Morry, Sutton Coldfield (for the appellant); Radford Frankland & Mercer (for the respondents).

W K Scrivener Esq   Barrister.

Re Royce, Turner v Wormald and Others

[1940] 2 All ER 291


Categories:        CHARITIES        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        15, 18, 19 MARCH 1940        


Charities Charitable purposes Religious purposes “For the benefit of the choir” Gift of part of residue General charitable intent Scheme.

The testator by his will gave a legacy of £1,000 to the vicar and churchwardens of a church “for the benefit of the choir.” He also gave a one-fifth share of his residuary estate for the same purpose, the remaining shares of the residuary estate being given to various charities:

Held (i) the words “for the benefit of the choir” did not intend the personal benefit of a body of persons, but intended a gift for the maintenance and improvement of the musical services of the church, particularly by means of a choir.

(ii) the gifts were valid charitable gifts, as being for the advancement of religion through musical services.

(iii) there was a general charitable intent, and, as there would probably be a greater sum available than was required for the maintenance of the particular choir, a direction was made for a scheme to be

Page 292 of [1940] 2 All ER 291

settled for the establishment of the charity for the advancement of religion through musical services.

Notes

It would appear that there is a decision of Lord Hardwicke LC, that a gift for a choir is not a good charitable gift, but this appears to be based upon reasoning which cannot now be supported.

As to Religious Purposes, see Halsbury (Hailsham Edn), Vol 4, pp 118122, paras 155160; and for Cases, see Digest, Vol 8, p 249, Nos 8386.

Cases referred to

A-G v Whorwood (1750) 1 Ves Sen 534; 8 Digest 246, 62.

A-G v Oakaver (1736) cited in 1 Ves Sen 536; 8 Digest 249, 83.

Turner v Ogden (1787) 1 Cox Eq Cas 316; 8 Digest 249, 93, subsequent proceedings (1794) cited in 3 Ves 333.

Re Hendry, Watson v Blakeney (1887) 56 LT 908; 8 Digest 286, 619.

Re Wilson, Twentyman v Simpson [1913] 1 Ch 314; 8 Digest 313, 948, 82 LJCh 161, 108 LT 321.

Re Monk, Giffen v Wedd [1927] 2 Ch 197; Digest Supp, 96 LJCh 296, 137 LT 4.

Hutchins v Denziloe & Loveland (1792) 1 Hag Con 170; 19 Digest 287, 773.

Re Palatine Estate Charity (1888) 39 ChD 54; 19 Digest 459, 3064, 57 LJCh 751, 58 LT 925.

Wyndham v Cole (1875) 1 PD 130; 19 Digest 302, 1005.

Re King, Kerr v Bradley [1923] 1 Ch 243; Digest Supp, 92 LJCh 292, 128 LT 790.

Re Robertson, Colin v Chamberlin [1930] 2 Ch 71; Digest Supp, 99 LJCh 284, 143 LT 36.

Adjourned Summons

Adjourned summons to determine whether certain gifts in the will of a testator are good and valid charitable gifts for the maintenance of the musical services in a certain church. The facts are fully set out in the judgment.

C D Myles for the plaintiff.

A Andrewes Uthwatt for the Attorney-General.

H B Vaisey KC and H E Salt for the vicar and churchwardens.

R F Roxburgh KC and R W Goff for the next of kin.

Humphrey-King for the choristers.

Uthwatt: This is a perpetual gift, and means that the income is to be applied to the improvement of the musical services of the church. It is an out-and-out gift to the vicar and churchwardens. The only ground for supporting the gift is that it is a gift for the advancement of religion. [Counsel referred to Re Monk, Giffen v Wedd, Re King, Kerr v Bradley and Re Robertson, Colin v Chamberlin.]

Roxburgh KC: The words here are too wide, because the gift is not for the vicar or churchwardens, but for the benefit of the choir, the word “benefit” necessarily importing a discretion larger than the ambit of charitable purposes. In Re Hendry, Watson v Blakeney, the “choir fund” is something a good deal narrower than “for the benefit of the choir.” The real question is whether the reasoning in the case of Hutchins v Denziloe & Loveland applies. This is the only case which goes into the question of music in churches. If this gift enables the

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vicar to hold musical festivals and the singing of Latin anthems, then that would not be in accordance with ecclesiastical law. However, we must consider that which is charitable, and not that which is unlawful: Turner v Ogden. This gift fails, both on the ground of illegality and on that of uncertainty, for, if the intention was that the fund should be set aside, and the income should be used, then it is a perpetuity, and fails, unless it is a charity. The purposes are not necessarily charitable.

Goff: The principle is not whether the testator intended to promote the charitable object in some sort of way, nor is it whether the gift will in fact promote the charitable object. The question is whether or not, as a matter of construction, the words used confine the discretion of the trustees with charitable objects. When one looks at the words, one finds that they are not words which confine the trustees to charitable objects. The gift is not for the advancement of charitable uses. It is a gift for the benefit of the choir. If there is one way of benefiting the choir which is not charitable, the gift transgresses the rule.

Vaisey KC: The function of the modern choir, as opposed to that of the pre-Reformation choir, is confined to the religious service. The “clerks” referred to in the burial service mean the choristers to-day. The words “say” or “sing altogether” can only mean, or refer to, a choir. [Counsel referred to Re Palatine Estate Charity and Wyndham v Cole.]

Roxburgh KC in reply: If this testator had intended to give these gifts for general charitable purposes, nothing would have been simpler than to give the money to the vicar and churchwardens. The fact that he mentioned a particular purpose means that he intended that purpose and no other. There is here no context to throw any light on the question of another purpose.

C D Myles for the plaintiff.

A Andrewes Uthwatt for the Attorney-General.

H B Vaisey KC and H E Salt for the vicar and churchwardens.

R F Roxburgh KC and R W Goff for the next of kin.

Humphrey-King for the choristers.

19 March 1940. The following judgment was delivered.

SIMONDS J. In this case, the testator, David Needham Royce, died on 26 December 1938, leaving a large fortune. He was, I believe, himself of an advanced age. He made his will on 30 September 1938, and the question which I have to determine arises upon a pecuniary bequest and a bequest of a share of his residuary estate. The pecuniary bequest, which was one of a large number of legacies to friends and for various charitable purposes and to charitable institutes, was in these terms:

To the vicar and churchwardens of Oakham Church for the benefit of the choir the sum of £1,000.

Then the residuary bequest was in these terms. He gave and devised his real estate and the residue of his personal estate to his trustees upon trust for sale, and directed them:

… to stand possessed of the residue in the trust as to two-fifths thereof for the before-mentioned Royce Institute Southgate Leicester absolutely as to a further one-fifth thereof for the vicar and churchwardens of Oakham Church aforesaid for the purposes declared concerning the legacy given to them as aforesaid [the legacy

Page 294 of [1940] 2 All ER 291

of £1,000 just stated] as to a further one-fifth for the Leicester Royal Infirmary and as to the remaining one-fifth for the Rutland Memorial Hospital.

The question which I have to determine is as to the meaning and validity of the gift:

To the vicar and churchwardens of Oakham Church for the benefit of the choir. …

The first thing I have to determine is what those words “for the benefit of the choir” mean. They are, perhaps, susceptible of several meanings. “The choir” may mean a certain part of the fabric of the church. I only mention that in order to dismiss it. It is clear that this is not a gift for the benefit of the fabric, or of any part of the fabric, of the church. Next, it may mean a gift for the benefit of the persons who, at the date of the testators will, or his death, were the persons who formed the choir of Oakham Church. That is a possible meaning, and a member of the choir at that date has been added as a respondent to these proceedings for the purpose of arguing that that view is the right one. It is right that I should say at this point that counsel for the choristers, whose duty it was to argue that point, was under a duty to argue it inasmuch as his client was a representative, and a representative of a number of persons, some of whom were infants, and could not, therefore, give up any benefit to which they were justly entitled. He has, therefore, argued on their behalf that it is a gift for the benefit of members of the choir. That is a meaning which I must not take. It is quite clear, in my view, that this gift is not intended to be personal to the particular members of the choir, but rather has the impersonal meaning, which I may state. That is surely this. Where a testator gives a sum (and in this case a very substantial sumnot only a £1,000 pecuniary legacy, but also a share of the residuary estate, which may amount to as much as £12,000), he does not intend the personal benefit of a body of persons, but he intends an impersonal giftnamely, a gift for the advancement and improvement of the musical services in the church by means of a choir. That, I think, is the natural meaning which I should attribute to a gift of this kind, where the testator gives the money to the vicar and churchwardens for the benefit of the choir. That is a loose expression, but the testator is looking to the improvement of that part of the church service which consists of music, and, in particular, of the choir. Therefore, I find as a matter of construction that this is a gift for the maintenance and improvement of musical services in the church of Oakham, particularly by means of a choir.

That being what the gift is, the next question arises as to its validity. I am bound to say that I should have had no doubt whatever as to its validity. I was, however, faced with a decision given nearly 200 years ago by Lord Hardwicke LC, in A-G v Whorwood. This passage appears, not, indeed, as part of the judgment in that case, but as part of the argument and the interlocutory observation of Lord Hardwicke LC, at p 536:

In A.-G. v. Oakaver, Feb., 1736, the Master of the Rolls established [that is,

Page 295 of [1940] 2 All ER 291

held valid] a stipend given to keep up an organ and for the organist: but as to £40 per annum to the choristers he refused it: on appeal your Lordship affirmed the decree, as the choristers never were allowed in parochial churches.

Lord Hardwicke, L.C., said, what he went on was, that it was contrary to the constitution of the Church of England to have them in parochial churches and that they would be under no rule of government as they are in other churches; and the law would not allow they should be under the government of the heir at law—’

Then the observation closes with a dash. What his Lordship meant to add, nobody will ever know. Therefore, I have the statement of Lord Hardwicke LC, (if it is accurately reported) that, at least in 1736, it was contrary to the constitution of the Church of England to have themthat is to say, choristersin parochial churches. It has been suggested that that is an authority binding on me to-day which precludes me from holding that a gift for the improvement of musical services in a church through a choir is a valid gift. Upon that decision of Lord Hardwicke LC, there appears to have been remarkably little comment. I find, however, this reference to the authority in Tyssens Law of Charitable Bequests (2nd Edn), p 84. After referring at p 84, to A-G v Whorwood, the editor goes on as follows, at p 85:

It may be doubted, however, whether a bequest for choristers in a parish church would now be held void as being illegal. In Turner v. Ogden, a very similar gift was considered to be charitable; and in Re Hendry, Watson v. Blakeney … North, J., seems to have considered a choir fund to be a charitable object.

I think I am right in saying that in neither of those cases was the attention of the court called to the decision of Lord Hardwicke LC. However that may be, it seems to me quite clear that in 1940, when one considers the constitution of the Church of England and its practice over these many centuries, it is quite impossible to hold that there is any illegality in having in a parochial church choristers or a choir, and in having musical services conducted with their aid. What, perhaps, Lord Hardwicke LC had in mind when he said that it was contrary to the constitution of the Church of England to have choristers in a parochial church was no more than that, in contradistinction to a cathedral or collegiate church, of which the choristers might still remain part of the body, in parochial churches undoubtedly after the Reformation the choristers were not recognised as part of the church body. However, the proposition that then, or at any time, it was illegal to have a choir, appears to me to be a proposition for which there is no authority.

Counsel at the bar, who are learned in these matters, have not been able to suggest that it is now, or, I may say, in these many centuries past it has ever been, suggested that there was any illegality in having in a parish church a choir or choristers to assist in the religious services there carried on. Accordingly, it seems to me impossible now to say that there is any illegality in this gift, which is intended by means of a choir to maintain and improve the religious services of the church. If that is so, that is the end of the matter. Here I have a valid gift, which has to be devoted to that particular charitable purpose. That it is charitable is beyond question, for it is a gift for the advancement of religion by a particular mode.

Page 296 of [1940] 2 All ER 291

That brings me, then, to the last question. It has been suggested that, if the fund is to be devoted only to those purposes which fall strictly within the terms of the gift as I have construed it, then there may be an excess left over, and it is argued that that excess must go to the next-of-kin, upon the footing that here there is no general charitable intent, but only a particular charitable intent, and, if there is a particular charitable intent which is satisfied before the fund is exhausted, then the balance must go to the next-of-kin. That involves the consideration of whether there is here a general charitable intent or only a particular charitable intent. That is a very artificial distinction.

In Re Wilson, Twentyman v Simpson, Parker J, after a consideration of the cases, divides it in this way, at pp 320, 321:

First of all, we have a class of cases where, in form, the gift is given for a particular charitable purpose, but it is possible, taking the will as a whole, to say that, notwithstanding the form of the gift, the paramount intention, according to the true construction of the will, is to give the property in the first instance for a general charitable purpose rather than a particular charitable purpose, and to graft on to the general gift a direction as to the desires or intentions of the testator as to the manner in which the general gift is to be carried into effect … Then there is the second class of cases, where, on the true construction of the will, no such paramount general intention can be inferred, and where the gift, being in form a particular gifta gift for a particular purposeand it being impossible to carry out that particular purpose, the whole gift is held to fail. In my opinion, the question whether a particular case falls within one of those classes of cases or within the other is simply a question of the construction of a particular instrument.

In this case, therefore, I have to construe this instrument to see within which class of cases it falls.

One must observe this, in the first place. Here I need only deal with a share of residue. There is no question about the legacy of £1,000 being applied for the particular charitable purpose modo et forma. I deal, therefore, with the residue, and I find that the testator has given a share of residue. He did not know, and could not know, within precise limits to what that share of residue would amount. He must be taken, therefore, as having given a sum unqualified for the purpose of the benefit of the choir. That leads one to the suspicion that he must have had in mind the possibility of a particular mode of charity being exhausted before that share of residue was exhausted.

Next, it is to be observed that this is a perpetual gift given out-and-out to the vicar and churchwardens, and in more than one case it has been held that a gift out-and-out to the vicar and churchwardens, or to any body of trustees who form the estate, is an indication that the testator intended that the whole of the fund was to be employed, if not in a particular mode, then according to a general intent.

Nextand I think this is the consideration which appeals most to mea gift simply for the musical services in a church is not charitable unless one considers its underlying intent. The charitable intentionand I use the word “charitable” in its legal sensein giving money for the purpose of giving musical services in a church is for the advancement of religion, and it is only the particular mode of carrying out that intent

Page 297 of [1940] 2 All ER 291

which is indicated when the testator directs that the money is to be applied in the promotion of musical services. I find here, therefore, in the very language of the testator, his real intentnamely, the advancement of religion through musical servicesand, if that is the real meaning of his words, then I have a general charitable intent to which effect can, and ought to, be given, if the fund is more than sufficient for carrying out that general charitable intent by a particular mode.

Lastlyand this is again, within my recollection, a matter which has influenced the court in determining into which of the two categories of cases a particular gift fallshere I find the gift of residue one of several gifts, all charitable, to which the testator has devoted his residuary estate, and that, I think, is a factor which has more than once been taken into account in determining whether or not there is a general charitable intent.

Accordingly, upon all those groundsto which perhaps I should add the authority of Re Monk, Giffen v Wedd, the last case, I think, on this branch of the law, which came before the Court of AppealI must come to the conclusion here that there is a general charitable purpose. Accordingly, I must direct a scheme to be settled for the establishment of the charity constituted by these two gifts, the pecuniary legacy and the gift of the share of residue.

Solicitors: Peacock & Goddard (for the plaintiff and the vicar and churchwardens); Treasury Solicitor (for the Attorney-General); Field Roscoe & Co (for the next of kin); Horne & Birkett (for the choristers).

Charles Newton Esq   Barrister.

Re Cutcliffes Will Trusts, Brewer v Cutcliffe

[1940] 2 All ER 297


Categories:        CONFLICT OF LAWS: SUCCESSION; Intestacy        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        29 FEBRUARY, 13 MARCH 1940        


Conflict of Laws Intestate succession Succession to proceeds of sale of settled land Whether movables or immovables Settled Land Act 1925 (c 18), s 75(5).

The deceased died in 1897 domiciled in Ontario. At the date of his death he was entitled under a settlement to an interest in remainder expectant on the death of the survivor of three persons, and later that interest fell into possession. The settled property consisted of (a) certain lands in England and (b) stock of English companies bought with the proceeds of sale of land subject to the settlement. The land and stock were at all times vested in trustees resident in England and the settlement was created by the will of an English testatrix. The summons asked whether the heir-at-law or the next of kin of the deceased was entitled to the land and stock:

Held (i) the question whether settled property was a movable or an immovable was to be determined by the lex situs, ie, by English law.

(ii) the stock representing the proceeds of sale of settled land was by English law an immovable and devolved as such.

(iii) both the land and the stock passed to the heir-at-law of the deceased.

Page 298 of [1940] 2 All ER 297

Notes

The main point of this decisionnamely, whether the stock was to be treated as realty or personaltyis for practical purposes decided in Re Cartwright, but the matter here arises in rather different circumstances. The previous case arose in considering whether such property was personalty within the meaning of the Wills Act 1861, but there now seems to be no reason to suppose that the proceeds of sale of settled land, whether they be money or investments, are to be treated as realty.

As to Intestate Succession, see Halsbury (Hailsham Edn), Vol 6, pp 245, 246, para 299; and for Cases, see Digest, Vol 11, pp 367369, Nos 468491.

Cases referred to

Re Berchtold, Berchtold v Capron [1923] 1 Ch 192; Digest Supp, 92 LJCh 185, 128 LT 591.

Re Hoyles, Row v Jagg [1911] 1 Ch 179; 11 Digest 340, 290, 80 LJCh 274, 103 LT 817.

Re Cartwright, Cartwright v Smith [1939] Ch 90, [1938] 4 All ER 209; Digest Supp, 108 LJCh 51, revsg [1938] 3 All ER 391.

Originating Summons

Originating summons to determine whether under the intestacy of the heir-at-law of a certain testatrix, certain property devolved in accordance with the law of England or in accordance with the law of his domicil. The facts are fully set out in the judgment.

G A Rink for the plaintiff.

J F Bowyer for the first defendant, the eldest son and heir-at-law of the heir-at-law of the testatrix.

W G H Cook for the second defendant, one of the children of the heir-at-law of the testatrix.

13 March 1940. The following judgment was delivered.

MORTON J. Sophia Ilbert Cutcliffe, of Barnstaple, Devon, whom I shall call the testatrix, died on 24 October 1884. Her heir-at-law was her nephew, John Charles Cutcliffe. He died on 11 April 1897, intestate and domiciled in the province of Ontario in the dominion of Canada. His wife predeceased him. According to English law, his heir-at-law was his eldest son, the first defendant, Ashton Bluett Cutcliffe, and his next-of-kin were his 7 children, who survived him, of whom the second defendant, De Courcy Bluett Cutcliffe, is one. Under the law of the province of Ontario, the real and personal estate of a man dying on 11 April 1897, intestate and domiciled in that province, leaving surviving him children but no wife, and no descendants of children who had died in his lifetime, would have been distributable equally among such surviving children.

The question which I have to determine is whether, under the intestacy of J C Cutcliffe, certain property devolved in accordance with the law of England or in accordance with the law of his domicil. The events giving rise to the question are as follows. By her will, dated 20 September 1879, the testatrix devised her real estate, all of which was in England, to the trustees of her will upon certain trusts, which I need not state in detail. In the events which happened, she effectively and completely disposed of two-fifths of her real estate. John C Cutcliffe took the income of these two-fifths during his life, and on his death the capital passed to

Page 299 of [1940] 2 All ER 297

his children. The testatrix also effectively disposed of the income of the remaining three-fifths thereof, until the death of the survivor of J C Cutcliffes three sisters, her nieces, upon trusts in favour of those nieces. No one of the nieces ever had any children. The survivor of the three nieces was Isabel Prestwood Watts, and she died on 20 December 1916. At the date of her death, she was receiving the income of three-fifths of the testatrixs real estate under the trusts of the will. The will contained the following proviso:

Provided always that if any of them my said nephew and nieces shall die without leaving issue who being a son or sons shall attain the age of 21 years or being a daughter or daughters shall attain that age or marry then I direct that the shares or share to the income of which such nephew or niece is entitled for life under the trusts hereinbefore declared shall be held in trust for the issue of the others or other of them my said nephew and nieces who shall die leaving issue in equal shares per stirpes such interest to be vested in males on attaining the age of 21 years and in females on attaining that age or on marriage.

The testatrix gave her residuary personal estate to her trustees upon certain trusts for sale, for payment of her debts and funeral and testamentary expenses and the legacies bequeathed by her will, and upon trust to invest the surplus of the proceeds of sale as therein mentioned. She directed her trustees to hold such investments, and the interest, dividends and income arising therefrom:

… upon such and the like trusts in all respects whatsoever as are hereinbefore declared and contained of and concerning my said real estate and the income thereof respectively.

On 1 July 1936, Crossman J made an order the material part of which is as follows:

This court doth declare that on the true construction of the will of the above-named testatrix Sophia Ilbert Cutcliffe and in the event that happened of the late plaintiffs Ilbert Mary Cutcliffe Ida Elizabeth Cutcliffe and Isabel Prestwood Watts dying without issue the shares of the testatrixs residuary personal estate to the income of which they had respectively been entitled for life under the trusts of the testatrixs will were undisposed of by that will as from the death of the late plaintiff Isabel Prestwood Watts.

This being the result of the proviso which I have quoted, as regards three-fifths of the testatrixs residuary personal estate, it was conceded in the argument before me that three-fifths of the testatrixs real estate was also undisposed of as from the death of Isabel Prestwood Watts.

In these circumstances, it seems clear that, on the death of the testatrix in 1884, her heir-at-law, J C Cutcliffe, became entitled to three-fifths of her real estate in remainder, expectant on the decease of the survivor of the three nieces named in the will. His interest in remainder was liable to be defeated wholly or partially if all or some one or more of his sisters had children, but this event did not happen. It would seem equally clear, but for the events which I am about to mention, that, on the death of J C Cutcliffe intestate, his interest in this real estate, being an interest in immovables situate in England, would devolve upon his eldest son and heir-at-law, the first defendant. However, during the period between the death of the testatrix in 1884 and the death of

Page 300 of [1940] 2 All ER 297

J C Cutcliffe in 1897, certain parts of the real estate devised by the will of the testatrix were sold under the provisions of the Settled Land Acts. The proceeds of such sales were paid to two persons resident in England, who, by an order of 4 December 1886, had been appointed trustees for the purposes of the Settled Land Act 1882, of the settlement made by the will of the testatrix. The trustees invested part of the proceeds of sale in the purchase of other lands and the remainder in the purchase of £1,962 Caledonian Railway 4 per cent debenture stock, which is now represented by £1,962 London, Midland & Scottish Railway 4 per cent debenture stock.

Thus, in the events which happened, when J C Cutcliffe died in 1897, he was entitled to a vested interest (liable to be divested in certain events) in remainder, expectant on the death of the survivor of his three sisters, in (a) certain lands in England settled by the will of his aunt, and (b) a sum of Caledonian Railway debenture stock, representing the proceeds of sale of other lands subject to the same settlement. It is admitted that the interest of J C Cutcliffe in the lands above-mentioned was an interest in immovables, and passed on his death to the first defendant or his heir, according to English law, but it is argued that his interest in the debenture stock was an interest in a movable, and passed, under the law of Ontario, to all his children living at his death in equal shares.

I have to decide whether in 1897 this debenture stock was a movable or an immovable. If it was a movable, the devolution of J C Cutcliffes interest therein would be governed by the law of Ontario. If it was an immovable, the devolution of J C Cutcliffes interest therein would be governed by the law of England. This question is still of some importance, since the provisions of the Settled Land Act 1882, s 22(5), to which I shall shortly refer, are reproduced, in substance, in the Settled Land Act 1925, s 75(5). I start with the rule, which is, I think, well-established, that the question whether particular property is a movable or an immovable is decided according to the lex situs: see, for example, Re Berchtold, Berchtold v Capron, at p 199. It seems to me clear that this investment, being debenture stock of a British company, and being capital moneys held by the trustees, resident in England, of a settlement of land in England made by the will of an English testatrix, must be regarded as being situate in England for the purposes of the rule stated above.

Was this stock in 1897 a movable or an immovable, according to the law of England? In my view, it was an immovable. The Settled Land Act 1882, s 22(5), provides as follows:

Capital money arising under this Act while remaining uninvested or unapplied, and securities on which an investment of any such capital money is made, shall, for all purposes of disposition, transmission, and devolution, be considered as land, and the same shall be held for and go to the same persons successively, in the same manner and for and on the same estates, interests, and trusts, as the land wherefrom the money arises would, if not disposed of, have been held and have gone under the settlement.

Page 301 of [1940] 2 All ER 297

The important words are: “shall, for all purposes of … devolution, be considered as land.” The question which I am considering is a question as to the devolution of this stock under the intestacy of J C Cutcliffe and, in my judgment, this section tells me that for this purpose I must treat the stock as being an immovable.

Considering the matter without reference to any previous decisions, I should arrive at the conclusion that J C Cutcliffes interest in this stock passed on his death to his heir-at-law, the first defendant. It is suggested by counsel for the second defendant, however, that such a conclusion would conflict with certain observations of Russell J, in Re Berchtold, Berchtold v Capron. The decision in that case is accurately summarised in the headnote, which is as follows:

When a person domiciled in a foreign country dies intestate leaving an interest in the proceeds of sale of English freeholds which are subject to a trust for sale but not yet sold, such an interest is an immovable, and the succession thereto is governed by the lex situs.

Thus it is clear that the question which Russell J had to decide was not the same as that which I have to decide. However, counsel for the second defendant relies on the following passage from the judgment of Russell J, at pp 205, 206:

On behalf of the Countess Szokolyi it was argued that according to English law land directed to be sold and turned into money must be considered to be money; and that on the principle that equity considers done what should be done, the Birmingham freeholds are, in the eye of the law, money. This argument, to be effective, must add the words “for all purposes.” That the Birmingham freeholds are to be treated as money for some purposes, no one doubts. Thus the interest of the taker is personal estate. But this equitable doctrine of conversion only arises and comes into play where the question for consideration arises as between real estate and personal estate. It has no relation to the question whether property is movable or immovable. The doctrine of conversion is that real estate is treated as personal estate, or personal estate is treated as real estate; not that immovables are turned into movables, or movables into immovables. As Farwell, L.J., pointed out in Re Hoyles, Row v. Jagg, the fact that a mortgage is regarded as personal estate for certain purposes in questions between our fellow-subjects here has no bearing on the question whether such a mortgage should be regarded as a movable or not in the question of international law.

It is clear from this passage that, in the view of Russell J, the equitable doctrine of conversion did not operate to transform land held upon trust for sale into a movable, so as to make it devolve according to the lex domicilii.

In the present case, however, I find that there is a statutory provision which says that the stock in question shall, for all purposes of devolution, be considered as land. In my view, that provision has the effect that, in deciding whether the law of England or the law of Ontario governs the devolution of J C Cutcliffes interest in this stock, I must consider that this stock is land. I do not know what decision Russell J would have given in Re Berchtold, Berchtold v Capron if there had been in existence in 1923 a statute which provided that “land held upon trust for sale, while remaining unsold, shall for all purposes of disposition, transmission, and devolution, be considered as money.” There was not in 1923, and there is not to-day, any such statute. Russell J

Page 302 of [1940] 2 All ER 297

was considering only whether or not the equitable doctrine of conversion transformed land into a “movable.” This being so, I do not think that his decision, or his reasons for that decision, compel me to treat the stock in question as a movable, and to hold that its devolution is governed by the law of Ontario. In my view, having regard to the rule which I have stated above, and to the provisions of the Settled Land Act 1882, s 22(5), I ought to regard this stock as an immovable, and to hold that the devolution of J C Cutcliffes interest in this stock was governed by the law of England. If this is so, his interest passed to the first defendant as his heir-at-law. I am supported in this view by certain observations of Sir Wilfrid Greene MR, in Re Cartwright, Cartwright v Smith, at p 104 ([1938] 4 All ER, at p 215):

The next argument is the one which came first in order of time, that the Settled Land Act, 1925, s. 75(5), only effects conversion for the purposes of disposition, transmission and devolution under the settlement itself, and does not operate to affect the nature of capital money and its disposition, transmission and devolution for any purpose outside the settlement. I have some difficulty in following the logic of that argument in the circumstances of this case. At the date when the settlor died there was in existence property which for the purposes of this argument is to be assumed to have been at that moment in the eye of the law real estate. The question is: Is that property personal estate for the purpose of Lord Kingsdowns Act? If in the eye of the law it was at that moment real estate, the answer is in the negative. I cannot see how there is any room for a suggestion that in some way or another what we are dealing with here is something outside the four corners of the settlement altogether. If you have something which had got out of the settlement, so to speak, there is nothing left for subsect. (5) to operate upon, but when you look at the critical moment, namely, the moment of death, and ascertain what was the nature of the property at that moment, it seems to me that the answer is quite clear.

These observations were based on the Settled Land Act 1925, s 75(5), which reproduces the Settled Land Act 1882, s 22(5), with certain variations which seem to me immaterial for the present purpose.

Counsel for the second defendant put forward the alternative argument that there had been some election by J C Cutcliffe during his lifetime which operated to make his interest in this stock devolve on his death as personalty. In my judgment, this argument is wholly without foundation. In the first place, J C Cutcliffe was not, at any time during his life, in a position which entitled him to make any such election. In the second place, if I assume that he could have so elected, there is not a shred of evidence that he did so elect. The cases referred to by counsel in support of this argument were decisions on facts which differ widely from those in the present case. In my view, they afford no support to the argument put forward in the present case, and it is unnecessary to examine them in detail. For these reasons, I decide that, on the death of J C Cutcliffe, his heir-at-law, the first defendant, became entitled to the interest of J C Cutcliffe in three-fifths of the debenture stock in question. That interest became an interest in possession on the death of Isabel Prestwood Watts on 20 December 1916.

Solicitors: Vandercom Stanton & Co (for all parties).

Charles Newton Esq   Barrister.


Re Judgment Debtor (No 266 of 1940), Judgment Creditors v Judgment Debtor

[1940] 2 All ER 303


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR, SCOTT AND LUXMOORE LJJ        

Hearing Date(s):        5 APRIL 1940        


Emergency Legislation Leave to enforce judgment Execution suspended provided £10 paid on 1 February 1940, and £10 per month thereafter “Thereafter.”

An order under the Courts (Emergency Powers) Act 1939, s 1, gave the judgment creditor leave to enforce the judgment, but provided for a stay of execution if the debtor paid £10 “on Feb. 1, 1940, and £10 per month thereafter.” £10 was paid on 1 February, but the next payment of £10 was not made until 5 March. On 2 March, the judgment creditor issued a bankruptcy notice, contending that the latest date for the second payment was 1 March. The debtor contended that he had the whole of the month of March in which to make that payment:

Held upon the proper construction of the notice, the word “thereafter” referred to the date on which the first payment was to be madenamely, 1 Februaryand the last day for payment of the second instalment was accordingly one calendar month after that date, that is, 1 March.

Notes

The matter decided here is purely one of the construction of the order, but the order is in a common form, and the decision of the Court of Appeal upon its proper interpretation will be of considerable importance. If the right of creditors to enforce their remedies is to be postponed, it is essential that the extent of the postponement be precisely defined.

As to Stay of Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Case referred to

Brown v Black [1912] 1 KB 316; 42 Digest 145, 1436, 81 LJKB 458, 105 LT 982.

Appeal

Appeal by the judgment creditors from a decision of Mr Registrar Parton setting aside a bankruptcy notice. The facts are fully set out in the judgment of Sir Wilfrid Greene MR.

R F Levy KC and Cyril Salmon for the appellants.

Alban Gordon and Sebag Shaw for the respondent.

Levy KC: The sympathies of the registrar seem to have been aroused on behalf of the debtor. The registrar took the view that the second instalment was not due until the end of March. He had no power to set aside the bankruptcy notice as being irregular. The motion was to set aside the bankruptcy notice. The debtor would have had to show that it was irregular in order to succeed on the motion. The appellants obtained judgment against the debtor, and proceedings were taken to enforce the judgment under the Courts (Emergency Powers) Act 1939. An order was made, and the first instalment under that order was made payable on 1 February 1940. The second instalment was not paid until 5 March 1940. The bankruptcy notice was issued on 2 March. The registrar came to the conclusion that the debtor had the whole of March in which to pay the second instalment. He said that

Page 304 of [1940] 2 All ER 303

the whole of March was the following month. [Counsel referred to Brown v Black.]

Shaw: The word “month” means a calendar month. When making the order, the master may have been intending to give a special indulgence to the debtor by giving him an opportunity of paying at the end of March. If the first payment had had to be made on 5 February 1940, the position would have been the same, and the second payment would have had to be made during and in the course of March. The order says “per month.” In Lewis & Shorts Latin Dictionary, the word “per,” in reference to time, is stated to mean “through, throughout, during, for, in the course of.” The words “per month” must mean in each month thereafter beginning on the first day and ending on the last day of each month. If the language is ambiguous, it ought to be construed in the way which is favourable to the debtor.

R F Levy KC and Cyril Salmon for the appellants.

Alban Gordon and Sebag Shaw for the respondent.

5 April 1940. The following judgments were delivered.

SIR WILFRID GREENE MR. This appeal raises a curious point upon the construction of an order made by Master Jelf on 11 January 1940. The matter arises in this way. The present appellants obtained a judgment against the respondent, and then applied for leave to issue execution on, or otherwise proceed to the enforcement of, the judgment under the Courts (Emergency Powers) Act 1939, s 1. That leave they obtained, subject to a provision which was inserted in the order to the following effect:

And it is further ordered that execution be suspended provided that £10 be paid on Feb. 1, 1940, and £10 per month thereafter.

The respondent duly paid the £10 on 1 February. The next payment of £10 was in fact not paid till 5 March, for reasons into which it is not relevant to enter. We are concerned here, not with the merits of the matter, but with a bare question of law. The payment not having been made on 1 March, which was the latest date on which the appellants contended it ought to have been made, a bankruptcy notice was issued on 2 March. That was followed by an application by the respondent, the debtor, to set aside the bankruptcy notice. Mr Registrar Parton acceded to that application, and set aside the bankruptcy notice. From his decision the present appeal is brought.

The contention which found favour with the registrar was that, upon the true construction of the provision in the order which I have read, the debtor had the whole of March in which to pay the second instalment, and, accordingly, that, payment having been made on 5 March, no default had occurred. As against that, it is contended by the judgment creditors, the appellants, that the last day for the payment of the second instalment was 1 March, that, accordingly, there was a default, and that the bankruptcy notice was properly issued.

The point is a very short one. We start off with the fact that in this order the word “month” has to be construed as meaning “calendar month,” pursuant to the provisions of RSC Ord 64, r 1. Accordingly,

Page 305 of [1940] 2 All ER 303

the phrase “£10 per month thereafter” must be construed as meaning “£10 per calendar month thereafter.”

In approaching a matter of this kind, I do not think that it is putting it too high to say that one expects to find that the periodical payments which are contemplated will fall to be made at regular intervals. True it is that, if the language points to irregularity, it must be given its full effect, but I think that we are entitled to approach the construction of this phrase with a leaningI put it no higher than thattowards regularity in the intervals for payment. The contention which found favour with Mr Registrar Parton leads to irregularity in the periods of payment of a very strange kind. If the argument is correct, the second payment could be made on 2 March, the next payment on 3 April, the next payment on 4 May, and so on, or at other intervals. However, when the last day of a month had been reached by that processfor example, the end of Augustthe next payment would have to be made in the month of September, and there would not be more than a month for that particular payment. In other words, the irregularity in the intervals of payment would automatically come to an end in that way. If the order, when properly construed, has a meaning of that kind, due effect must be given to its language. In my opinion, however, that is not the meaning of this order. The phrase, if I may repeat it again, is “£10 be paid on Feb. 1, 1940, and £10 per month thereafter.” The word “thereafter” points to some time from which the subsequent months are to be calculated. The construction put forward by the respondent is that the word “thereafter” refers to February, and that, accordingly, when the order says “£10 be paid on Feb. 1, 1940, and £10 per month thereafter,” it means that for every calendar month subsequent to February a payment of £10 is to be made, which would mean that the months there referred to would be the named months of the calendar. That construction would obviously be very much more difficult if the date for the first payment were not 1 February, but were some other date in February. However, quite apart from that, I cannot construe the word “thereafter” as referring to February. In my opinion, it refers to the date on which the first payment is to be madenamely, 1 February. The problem is, therefore, to find out in relation to each month the latest date when the payment of £10 must be made. If the months thereafter are to be calculated from 1 February, the second month will begin at midnight on 1 February2 February, and will end at midnight on 1 March2 March. Accordingly, the last day for payment of the second instalment would be 1 March, and so on in subsequent months. That appears to me to be the true meaning to be given to the word “thereafter.” That construction, to my mind, has the great advantage of producing in the payments of instalments that regularity which one would expect to find in an order of this sort. The point is a very short one, but, in my opinion, the registrar was in error when he construed the order as he did. He ought to have dismissed the application to set aside the bankruptcy

Page 306 of [1940] 2 All ER 303

notice. In my opinion, therefore, this appeal should be allowed, with costs here and below.

SCOTT LJ. I agree.

LUXMOORE LJ. I also agree.

Appeal allowed with costs in both courts.

Solicitors: Woolfe & Woolfe (for the appellants); J F B Satchell (for the respondent).

W K Scrivener Esq   Barrister.

Toogood v Wright

[1940] 2 All ER 306


Categories:        ANIMALS        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND CLAUSON LJJ AND SINGLETON J        

Hearing Date(s):        5 APRIL 1940        


Animals Liability of owner Negligence Racing greyhounds Animals not on highway Animals under control of two boys.

The plaintiff was bitten by one of two racing greyhounds who were in the charge of two boys aged 10 and 12 years respectively. The greyhounds were at the time in a 10-ft way, which, though freely used by the public, was not in fact a highway. The dogs at the time were attacking a cat, and the plaintiff was bitten when attempting to rescue the cat. There was no proof of scienter, and it was found as a fact that many types of dogs are prone to chase cats and to bite anyone attempting to rescue a hunted animal:

Held there was no duty on the owner to take special precautions in the case of these dogs as being dangerous animals, and, no scienter being proved, the plaintiff could not recover.

Notes

There being no proof of scienter, it was necessary to show that the racing greyhounds were animals which it was dangerous to allow to be taken out without special precautions against their getting out of control. On this point, the evidence is clear that such animals are not more dangerous in this respect than many other types of dogs, and, upon this finding, it is held that it is impossible to say that the law casts any especial duty in this respect upon the owner of racing greyhounds.

As to Negligence in Relation to Domestic Animals, see Halsbury (Hailsham Edn), Vol 1, p 542, para 932; and for Cases, see Digest, Vol 2, pp 229233, Nos 201220.

Cases referred to

Turner v Coates [1917] 1 KB 670; 2 Digest 235, 230, 86 LJKB 321, 115 LT 766.

Deen v Davies [1935] 2 KB 282; Digest Supp, 104 LJKB 540, 153 LT 90.

Heaths Garage Ltd v Hodges [1916] 2 KB 370; 2 Digest 234, 226, 85 LJKB 1289, 115 LT 129.

Aldham v United Dairies (London) Ltd [1939] 4 All ER 522; Digest Supp.

Pitcher v Martin [1937] 3 All ER 918; Digest Supp.

Clinton v Lyons & Co Ltd [1912] 3 KB 198; 2 Digest 236, 235, 81 LJKB 923, 106 LT 988.

Jones v Owen (1871) 24 LT 587; 2 Digest 233, 219.

Page 307 of [1940] 2 All ER 306

Appeal

Appeal by the plaintiff from a judgment of His Honour Judge Mitchell Banks KC, given at Kingston-upon-Hull County Court on 15 February 1940. The facts are fully set out in the judgment of Slesser LJ. The county court judge found as a fact that neither of the dogs had ever attacked any animals except wild rabbits, and that neither was peculiarly ferocious. It was common knowledge, however, that greyhounds were prone to chase any animal which fled from them, and, if they caught such animal, anybody who tried to take it away was likely to be bitten. Many other dogs, especially terriers, have the same characteristic. The dogs had been out many times under the care of the little boys, and had not chased a cat before. He could not limit his judgment to greyhounds: Clinton v Lyons & Co Ltd. He could not find that the defendant was negligent in allowing the dogs to be taken out by the little boys. He distinguished Jones v Owen and Pitcher v Martin. In any event, the owner could not be expected to foresee that the dogs would bite a human being. It was not a probability or natural consequence of leaving a dog uncontrolled that it would chase a cat, catch it, and bite anyone who tried to rescue the cat. The plaintiff appealed.

G H B Streatfeild KC and R Withers Payne for the appellant.

The respondent did not appear and was not represented.

Streatfeild KC: These dogs were greyhounds trained for racing, and, therefore, should not be regarded as in the ordinary category of dogs. They required more than normal control. They were especially likely to chase and kill cats, if they could. To send them in charge of two small boys into a town where they were likely to meet cats frequently amounted to negligence. [Counsel referred to Deen v Davies, Aldham v United Dairies (London) Ltd and Pitcher v Martin.]

G H B Streatfeild KC and R Withers Payne for the appellant.

The respondent did not appear and was not represented.

5 April 1940. The following judgments were delivered.

SLESSER LJ. The facts are these. On 18 September 1939, the plaintiff, Mrs Rose Toogood, was in the dining-room of her house when she heard a scream from her little girl in the garden. She ran out and found that in a 10-ft way, as it is called, behind her garden, which, though it is not a highway, is a place used freely and without hindrance by the public, two greyhounds were worrying her cat. She made several attempts to rescue the cat, but it was killed by the dogs. In the course of these attempts one of the dogs bit her. These two dogs were racing greyhounds, the property of the defendant, and they had been taken out by two small boys, aged 10 years and 12 years respectively, who were physically quite unable to control these powerful dogs when the dogs proposed to chase anything.

In the court below, there was an attempt made to prove scienter, but the evidence on that matter failed to satisfy the judge, who held that the defendant was not possessed of any knowledge that the dogs were of a fierce or mischievous nature, accustomed to bite mankind or attack cats, and no appeal is founded upon that matter. The case before us, therefore,

Page 308 of [1940] 2 All ER 306

is sought to be put merely on the ground of negligence. The way in which the case was argued was this. It is said that the evidence proved, and that the county court judge has found in his judgment, that greyhounds are prone to chase any animal which flees from them, such as a rabbit or a cat, and that, that being so, although they are domestic animals, this defendant must be taken to have known that these particular domestic animals which he cherished were prone to chase cats, and, further, that, if they caught a cat, anybody who tried to take it away from them might be bitten. The judge has also found that other animals also are similarly prone to chase animals. He says:

I am satisfied on the evidence, as well as from common knowledge, that many other types of dogs would be just as likely to chase a cat, and to bite the rescuer of a cat, as these dogs are.

Therefore, as it seems to me, he has found that there are no such special circumstances, in the way in which these dogs were dealt with, as would enable the plaintiff to say that there was placed upon the defendant any particular duty as having under his control particularly dangerous animals.

In cases like Turner v Coates, for example, where an unbroken pony was allowed to go loose behind a mare, it was found, at p 670:

… that it was well-known … that a young unbroken colt when loose on the highway is apt, when startled, to rush about and to kick, and that there is grave risk of danger to the public in allowing such a colt to go loose on the highway in the dark …

As I read the judgment in the present case, the county court judge has declined to hold that there was any peculiar danger to be expected in the particular case of a dog known as a racing greyhoundnamely, that it would chase catswhich would not equally apply to other types of dogs, which, to quote the county court judge, are “just as likely to chase a cat and to bite the rescuer.” He has found that the evidence failed to satisfy him that there is any peculiar peril attaching to keeping a racing greyhound which does not attach to the keeping of many other types of dogs. Indeed, in giving evidence, one Goby, proprietor of a dog-track, having stated that “A greyhound will chase anything moving, it has an instinct to chase,” said: “Foxterriers are often just as bad.” I am rather afraid that the argument of counsel for the appellant, if acceded to, would lead to the compulsory imprisonment of a large portion of the canine race. I for one am not prepared to say that the county court judge was wrong in coming to the conclusion that, in the absence of any scienter, or of any knowledge of mischievous propensities, there was no negligence on the part of the owner of these dogs in allowing them to go out in the way in which he did. It seems to me that there was ample evidence to satisfy the county court judge that there was no such particular duty attaching in this particular case. As the county court judge very properly points out, there may be cases where inadequate control of animals may lead to a breach of duty, such as Deen v Davies and Heaths Garage Ltd v Hodges, and other cases

Page 309 of [1940] 2 All ER 306

which have been cited to the court in the present case, but here the evidence was amply sufficient for the county court judge to come to the conclusion that there was no reason why this particular owner should know, or have any reason to believe, that these dogs more than any other dogs, or many other classes of dogs, would be likely to do the damage which was in fact done. In those circumstances, I think that the county court judge was right, and that this appeal fails.

CLAUSON LJ. I agree. I venture only to add this. The damage to the plaintiff occurred within the curtilage of her own garden, where the dog bit her. This is not a case of a complaint by a person using a highway that his user of the highway was being improperly interfered with by reason of some negligence on the part of an owner of a domestic animal. I say that only in order that there may not be any misunderstanding as to the ambit of the decision in the present case.

SINGLETON J. I agree. The claim which was brought was clearly based on an allegation that there was negligence on the part of the defendant. The county court judge finds:

These dogs had been out many times under the care of the little boys, and had not chased a cat before, till on this particular morning Mrs. Toogoods cat appeared on the pavement only a few yards from them, when they instantly succumbed to the temptation and gave chase, and the little boys were unable to hold them.

The boys were 10 years of age and 12 years of age respectively. The county court judge further said:

I do not think that I ought to find that the defendant was negligent in allowing the dogs to be taken out by the little boys.

With that finding and with that statement I am in complete agreement.

Appeal dismissed.

Solicitors: Russell Jones & Co, agents for Pearlman & Rosen, Hull (for the appellant).

Derek H Kitchin Esq   Barrister.

Goodchild v Romford Borough Council

[1940] 2 All ER 309


Categories:        LAND; Property Rights        

Court:        KINGS BENCH DIVISION        

Lord(s):        STABLE J        

Hearing Date(s):        18, 19 MARCH 1940        


Emergency Legislation Air-raid precautions Provision of air-raid shelter Commercial building Arcade consisting of number of buildings in each of which less than 50 persons employed Air-raid Precautions Act 1937 (c 6) Civil Defence Act 1939 (c 31), ss 14, 15, 16, 17, 19, 30, 89(5), 90.

The plaintiff was a freeholder of land which he had developed as an arcade. It consisted of a number of shops, and included a covered footway, which, however, had never been dedicated to the public as a highway. Some 160 persons were employed in the various premises owned and let by the plaintiff, but in no one of the separate lettings were 50 persons employed. The plaintiff had conveyed a part of the site of the arcade to a company which had erected a number of shops structurally connected with those of the plaintiff and forming part of the arcade. A substantial part of the property was leased to a company

Page 310 of [1940] 2 All ER 309

which built on that and on other adjoining land a large building structurally connected with the plaintiffs buildings but in itself quite a separate building. The action was for a declaration that the property in question was not “a commercial building” within the meaning of the Civil Defence Act 1939, and that in consequence the notice was ultra vires:

Held the plaintiffs premises were not a commercial building within the meaning of the Civil Defence Act 1939, s 89(5), and he could not be required to furnish air-raid shelter for the persons employed therein.

Notes

Considerable difficulty has been found in properly construing the definition of a commercial building in the Civil Defence Act 1939. The matter is one of importance, since onerous duties, involving in some cases heavy expenditure, are put upon the owners of such buildings. The case also considers the position of the owner of part of a building which, considered as a whole, is a commercial building.

As to Commercial Buildings, see Butterworths Emergency Legislation Service, Statutes, p 33 et seq.

Cases referred to

A-G v Mutual Tontine Westminster Chambers Assocn Ltd (1876) 1 ExD 469.

Moir v Williams [1892] 1 QB 264; 34 Digest 583, 46, 61 LJMC 33, 66 LT 215.

Kimber v Admans [1900] 1 Ch 412; 40 Digest 318, 2698, 69 LJCh 296, 82 LT 136.

Grant v Langston [1900] AC 383.

Yorkshire Fire & Life Insurance Co v Clayton (1881) 8 QBD 421; 42 Digest 681, 929, 51 LJQB 82, 45 LT 697, 1 Tax Cas 479.

Ilford Park Estates Ltd v Jacobs [1903] 2 Ch 522; 40 Digest 318, 2700, 72 LJCh 699, 89 LT 295.

St Marylebone Assessment Committee v Consolidated London Properties Ltd [1914] AC 870; 38 Digest 454, 202, 83 LJKB 1251, 111 LT 553.

Consolidated London Properties Ltd v Johnstone [1932] AC 351; Digest Supp, 101 LJKB 224, 17 Tax Cas 231.

R v St Giles without Cripplegate (Inhabitants) (1863) 4 B & S 509; 31 Digest 52, 2002, 33 LJMC 3, 9 LT 411.

Action

Action for a declaration that certain property of the plaintiff is not a commercial building within the meaning of the Civil Defence Act 1939, and for a consequent declaration that a notice served on the plaintiff by the defendants requiring him to provide air-raid shelter in respect of those premises was invalid and ultra vires. The facts are fully set out in the judgment.

W H Cartwright Sharp KC and A Karmel (for Denis Murphy on war service) for the plaintiff.

A T Denning KC and Percy Lamb for the defendants.

Sharp KC: The plaintiff is the freeholder of part only of the arcade, and the various shops in it are let on lease to his tenants and are separate buildings. The arcade is not one commercial building within the Act.

Denning KC: The arcade is really one building. From a structural point of view, the building includes, not only the plaintiffs property referred to in the notice, but also the property of the London Co-operative

Page 311 of [1940] 2 All ER 309

Society Ltd, J Lyons & Co, and Upsons. What is the effect of a building being in different ownership? Each owner is liable for his own part. There is no provision for an apportionment. There is no reason why the section should not apply to a part of a building: s 30(2). The structure may be divided into many buildings for the purposes of the Act. Ownership is the right test: s 15(4) of the Act. [Counsel referred to Grant v Langston, Kimber v Admans, Ilford Park Estates Ltd v Jacobs, St Marylebone Assessment Committee v Consolidated London Properties Ltd, Consolidated London Properties Ltd v Johnstone, A-G v Mutual Tontine Westminster Chambers Assocn Ltd and R v St Giles without Cripplegate (Inhabitants).]

W H Cartwright Sharp KC and A Karmel (for Denis Murphy on war service) for the plaintiff.

A T Denning KC and Percy Lamb for the defendants.

19 March 1940. The following judgment was delivered.

STABLE J. In this case, the plaintiff sues the Romford Borough Council for a declaration that certain property of his in the Quadrant Arcade at Romford is not a commercial building within the meaning of the Civil Defence Act 1939, and for a consequent declaration that the notice, dated 1 December 1939, which was served on him by the defendant council is invalid and ultra vires. The council by their defence challenge the plaintiffs right to the relief which he seeks, and ask for a declaration that something or another which belongs to the plaintiff is a commercial building within the meaning of the Civil Defence Act 1939. What that something or another is is put in the alternative in the counterclaim, and I am left to decide, first of all, whether or not there is a commercial building of which the plaintiff is the owner in the Quadrant Arcade, Romford, and, if so, what part of the arcade it is. The question very largely depends on the construction of the Civil Defence Act 1939, in relation to these premises at Romford. Whether it is really a question of construction for me to judge, or whether it is a question of fact which would be left to the jury if the case were being tried by a jury, I do not know, and perhaps it does not matter, as I have to perform both those roles.

The facts are really hardly in dispute. Goodchild is the owner of a considerable area of land within the Romford Borough. He acquired the land with the idea of developing it into what may be roughly described as a shopping centre, and by a conveyance, dated 23 February 1933, he conveyed a part of his purchase to a limited company named Upsons. In the conveyance by which he conveyed that land, there were a number of mutual convenants the effect of which was that Upsons were to develop the part of the land which they were buying by building a part of an arcade with shop property, the land having a substantial frontage to South Street, and the balance of the land was to remain in Goodchilds ownership, and, when the time came, he was to develop that along similar lines. Upsons took to themselves and their successors and all persons authorised by them a right of way and passage at all times and for all purposes, but on foot only, over and along the intended arcade to be known as the Quadrant Arcade leading from South Street to Market Place, Romford. Under the terms of the conveyance, Goodchild retained

Page 312 of [1940] 2 All ER 309

or acquired a right to tie his part of the arcade when it was built, which came up to Upsons part of the arcade, into Upsons wall.

After Upsons had completed the building on their site, Goodchild got to work on his, and in due course he built a frontage on to Market Place, which frontage consists of shop fronts, topped by two storeys of offices, which appear at least in two cases to be let to insurance companies. Down the length of the arcade, and round the turn to the right in the direction of Upsons, he built a number of shops. I might mention in passing, without going into the matter in elaborate detail, that a substantial part of Goodchilds property was leased by him to the London Co-operative Society Ltd, and that part forms a part of the London Co-operative Societys building, or premises, to use a neutral term, the remainder of which is on land of which Goodchild is not the owner in fee simple. One of his shops, No 25, which was let to J Lyons & Co, has had the entrance into the arcade blocked up. The back wall has been removed, and it has been incorporated into the remainder of Lyons & Cos shop, which fronts on South Street. Hills & Steeles shop, which has a big frontage on Market Place, also comprises part of the shop No 28 which fronts on the Quadrant Arcade, so that it has access, first of all, to Market Place, and also to the Quadrant Arcade. The rest of the property consists of shops, with the qualification that there are two floors of offices over the building which fronts on Market Place.

The first questionand, indeed, I think, the only question, apart from the main questions in issueas to which there is any real difference between the parties is the exact status of the Quadrant Arcade. Counsel for the plaintiff put forward an argument as if the Quadrant Arcade had been dedicated to the public. That course is completely open to him if this matter goes further than this court, but his argument on that point was somewhat curtailed by me, for the reason that, as I was in his favour on other grounds, it seemed an unnecessary use of time on a matter which was not going to affect my decision.

In my view, there is no evidence in this case upon which I can find that the Quadrant Arcade ever has been dedicated to the public, or that the public as such has any right which can be permanently asserted as against Goodchild to pass down the arcade from South Street to Market Place or from Market Place to South Street. The public, of course, does use the arcade, but the public uses the arcade because in various leases Goodchild has granted certain privileges to the tenants who have taken his shops. He has expressly created benefits to the tenants by conferring on them a right of way to themselves, their servants, workmen and others wishing to visit their shops, over the Quadrant Arcade from Market Place to South Street to and from the shops.

In those circumstances, it seems to me that the proper inference which ought to be drawn as to why people use, or by what right people are allowed, a right of way through the arcade is that, for the benefit of his tenants, Goodchild contracted with them that their shops should

Page 313 of [1940] 2 All ER 309

be made available to the public in that way. To deal with matters of pure fact, it was proved before me that up to November 1937, Goodchild was in the habit of blocking up the arcade at each extremity with a sort of portable trellis-work, but that, in deference to a complaint by one of the tenants, that practice had been abandoned. The only obstruction to-day is a black-out screen, which does not prevent people from going down the arcade. As to the actual passageway, I should add that Goodchild is responsible for the cleaning of the passage, and for the lighting, and so forth.

As I have said, the various propertiesor premises, again to use a neutral phrasewhich comprise Goodchilds property are let out to a variety of shopkeepers who carry on a variety of businesses, and some of the offices are let as well. It is said by the borough council that Goodchild is the owner of a commercial building as defined by the Civil Defence Act 1939, and that, accordingly, he is under an obligation to provide air-raid shelter. It is common ground that a notice was served on Goodchild by the defendant borough council. As to any question which there may be as to whether the notice precisely defines the commercial building, or whether the notice was at fault either by including something that was not a commercial building, or a part of a commercial building, or by leaving out something which properly was a part of a commercial building, if there was a commercial building at all, no point expressly dealing with those grounds was taken. The parties desired the matter to be decided on principle, and, if the borough council was right and Goodchild was wrong, and if Goodchild was the owner of a commercial building within the meaning of the Act, then no point was taken as to any defect which there might be in the notice.

The question is whether or not at the material times Goodchild was the owner of a commercial building as defined by the Act of Parliament. When one looks at the Civil Defence Act 1939, one finds that that Act and the Air-raid Precautions Act 1937, impose, first of all, on the local authority, putting it in quite general terms, an obligation to provide the public with a protection against raids from the air. That is an obligation which is placed on various local authorities. That seems to be their duty, and the Minister has power to make them do it. In the Civil Defence Act 1939, Part III, there are certain provisions relating to the construction of what are called private shelters, and to training as respects the routine to be followed in certain factories, mines and buildings in the event of an air raid, so that a certain degree of discipline and order shall be observed where masses of people are working together. Of the various sections of the Civil Defence Act 1939, s 14 provides that it shall be the duty of every person who is the owner of any commercial building to do certain things. Then s 15 confers on the owner of a commercial building powers of various kinds which he would not otherwise have, including the power to provide air-raid shelter on land which does not happen to belong to him. S 16 enables the local authority to

Page 314 of [1940] 2 All ER 309

serve on the owner of a commercial building a notice in writing requiring him to provide air-raid shelter of the approved standard for all or any of the persons working or living in the commercial building. Then there are various provisions about the notice, one being for the infliction of penalties on persons who receive the notice and do not comply with the terms of it. S 16 is also important in that it is one of the sectionsand only one of the sections, for there are otherswhich make it quite plain that this legislation contemplates a possible case where the owner of a particular commercial building is not the occupier of the whole of it, or, indeed, of any of it. S 17 deals with appeals to the Minister. I do not think I need dwell upon that. S 19 is important. It contains a number of provisions as to commercial buildings where the owner does not occupy the whole building. The effect of the section can be summarised by saying that it enables the owner who is not the occupier of the whole building, and who has had to incur expense in providing air-raid shelter, to get the money back from the occupiers. It also enables the occupiers whose property has depreciated in value by the provision of air-raid shelter to obtain relief in respect of that. There are a number of other sections in the Act to which I do not think that I need refer.

Then we come to s 30. A good deal of stress was laid on s 30. That section providesagain to summarise the wording of the Actthat the owner of a building or block of buildings which are residential buildings is placed under an obligation to provide air-raid shelters for the persons living and working in the building or block, and there is a proviso that so much of the building or block of buildings as consists of, or is comprised in, any factory premises or commercial building shall be disregarded.

Counsel for the defendants cited that section as indicating that the legislature must have had in mind the possibility that a commercial building, or an entity which could properly be described as a commercial building within the meaning of the Act, might also form part of another building. In other words, they must have had in mind the possibility that a commercial building might be a part as well as a whole. I do not think that I need refer to anything very specific in the Act until we come to s 89, the all-important definition section. S 89(5) provides as follows:

In this Act the expression “commercial building” means a building in which more than 50 persons work. …

Then certain things are excludedschools, colleges, and so on, and buildings wholly occupied by public utility undertakers. Then there is a proviso as follows:

Provided that (i) no building which forms part of any factory premises or mine shall be deemed to be a commercial building; and (ii) any residential part of a building (that is to say, any part which is used, or, so far as unoccupied, intended for use, for residential purposes) shall, if it is provided with a means of normal egress from the building which is not available to occupants of the non-residential part of the build-

Page 315 of [1940] 2 All ER 309

ing, be disregarded for all the purposed of the provisions of this Act relating to commercial buildings.

Then in s 90 we have the following definition of an “owner” in relation to a commercial building:

… (a) where there is no lease of the whole of the premises or building the unexpired term of which is 10 years or more, the person in whom the fee simple of the premises or building is vested; or (b) where there is such a lease, the person in whom the term created by that lease is vested or, if there are two or more such leases, the person in whom is vested that one of those leases on which all the others are reversionary.

To clear the ground, apart from certain leases I think that all Goodchilds shops are let for unexpired periods of more than 10 years, and in none of the properties comprised in the several leases are there more than, or as many as, 50 persons employed. If one takes all the shops and offices, and so on, held under lease from Goodchild, the number of employees is something between 160 and 200. That is the figure given in evidence, but I do not think that it professes to be more than an approximate figure. The point of it is that, if one takes the whole of the premises in the aggregate, not more than 50 people are employed in any one shop. If one takes any one shop or block of offices, in none of them are there anything like as many as 50 persons employed. My attention was also called to the section in the Civil Defence Act 1939, which introduces a recital which is applicable to Scotland alone. That actually appears in s 91(11). I mention that, but I am bound to say that I do not think that that subsection really assists me one way or the other in this case.

The question here is whether or not Goodchild was the owner of a commercial building within the meaning of the Civil Defence Act 1939. The question may be quite simple, but the answer, I think, is difficult. That Goodchild was the owner of something there is no doubt. In him was vested the fee simple of this large area of land and everything which stood on it. Nor was there in existence a person who held a lease of the whole of that land, although there was a very large number of persons who held leases of various parts of it. Goodchild was the owner of something. Was that something a commercial building as defined by the Act? The meaning of “commercial building” is, first of all, that it is a building, and then it has to be not merely a building but also a building in which more than 50 persons work. I need not refer again to the fact that certain classes of buildings which otherwise would come within that definition are excludedschools, colleges, universities, hotels, restaurants, clubs, places of public entertainment, and so on. The word “building” is a word which can quite accurately be used to give a general description of a number of vastly different things. Westminster Abbey may be described as a building, and so may a pig-sty, provided that it is a substantial one, and between the two there is an infinite variety, when regarded from the point of view of the material of which they are constructed, the architectural appearance, and the use to which

Page 316 of [1940] 2 All ER 309

the building is put. If one is asked to define a building, however, it may be extremely difficult, and I am certainly not going to attempt to provide a definition which would satisfy everybody. On the other hand, if one were shown a concrete object and were asked, “Is that a building?” one would have extremely little difficulty in saying Yes or No, although opinions might differ as to whether the Law Courts, together with the addition of the Probate Divorce and Admiralty Division, could be more accurately described as one building consisting of two wings, or two buildings joined together by a passage. Speaking generally, however, there is little difficulty, in dealing with an erection of bricks and concrete, in indicating to anybody what one means by a building, and of what the building consists.

At the outset, the borough council here seem to me to be in the difficulty that, although their counsel, if I may say so, with great clarity endeavoured to persuade me that Goodchild is the owner of a building, he had considerable difficulty in telling me of what that building consisted. If I may deal with the case simply in the light of pure common sense, looking at these plans in the first place, I think that no one in his senses could describe this as a building. Obviously it is nothing of the kind. How many buildings it consists of it is not very easy to say offhand, without going round the whole arcade. The front on Market Place is a totally different building from all the little shops running along the L-shaped arcade. It is totally different from that part of Goodchilds property which now forms a part of the London Co-operative Societys buildinga part which is simply let in to the Co-operative Societys building, a great deal of which stands on somebody elses land. Again, it is a totally different building from the building which one sees in certain of the photographs in evidence, and we know that the front on South Street was completed by Upsons, different owners, before the work on Goodchilds land was even begun.

It is argued here that I must say that this conglomeration of commercial premises, the rows of shops, the offices, and the entrance part of the London Co-operative Societys shop, the bit which stands on Goodchilds land, without any sort of partition, and merges into the rest of the Co-operative Societys shop, which is on somebody elses land, is all a commercial building. I think that the answer is that it is not. One has only to look at it to see that. What is there to make it a commercial building? What is it that can be said to weld it into one entity? It is said, first of all, that, because Goodchild owns all of it, that makes it one building. The answer to that seems to me twofold. First of all, Goodchild does not own all of it if we regard the structural whole as being the “it” about which we are talking, because part of it belongs to Upsons. It has been said that, because Goodchilds property happens to be in one ownership, that can turn it into a building. The mere fact that the ownership is in the same hands cannot, in my judgment, alter the nature of the thing itself. A lot of different things, a con-

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glomeration of shops and offices, and all the rest of it, cannot be turned into a building merely because those things happen to belong to the same man. It seems to me that that is not the factor. That is looking at the problem from the wrong point of view. One has to look at the thing itself, and ask: “Does it come within the definition of a commercial building in this Act of Parliament?” What is there to make this conglomeration into a commercial building? It is saidand I accept itthat there is a certain structural unity. That, however, is no more than can he said of every street of houses which happen to touch one another. Goodchilds arcade is pinned into Upsons wall, and, therefore, a certain amount of support is derived from Upsons property, and so all down the chain until we reach the entrance in Market Place. To that extent, there is a certain structural unity about the whole property. Let it be remembered, however, that that structural unity is not a unity which consists of Goodchilds property. It is a unity which comprises Goodchilds property, Upsons property, and a considerable part of the property which is in the occupation of, and under lease to, the London Co-operative Society.

Another very strong point which was urged on me was that this is a commercial building because each part of it has ingress to, and egress from, the arcade. That is right. All these shops have access to the arcade, with the exception of the shop which J Lyons & Co now occupy. They deliberately closed the access which they could have had to the arcade, but there is nothing to prevent them from renewing that access if they want to do so. Just as a common doorway and a common staircase, and so on, are some of the determining factors in deciding whether a particular structure is one building or more than one building, so the existence of this arcade, beginning at Market Place and turning to the right, cannot bring all the properties adjacent to it into the category of buildings which are one building. It seems to me that there is no real parallel between the staircase which runs up and down a building and an arcade which may be miles long, and which, indeed, may be fringed by a number of buildings which may be wholly and absolutely detached one from the other. The mere fact that what are two buildings in the common sense both have access to, and egress from, the same arcade does not make the two buildings one, and I do not think that it has that effect in the case which is before me now.

Before parting with the case, I think that I ought to make a brief reference to the authorities. The first one, I think, was A-G v Mutual Tontine Westminster Chambers Asscn Ltd, which was in the Court of Appeal. It depended on the construction of a Revenue Act, and it was held that, under the provisions of that Act of Parliament, and more particularly r 6, the association were rightly assessed as the occupiers of one building, as the position involved a finding that the particular building in question was in the category of a house, and those words were used in the Act of Parliament in

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question. Sir George Jessel MR decided, at p 476, that he had to take the word “house” as being used in its ordinary sense, and, using the word in its ordinary sense, and looking at the building he was dealing with, he said that the question was whether or not that was a house, and he held that it was. I venture to think that the answer to the question I have to decidenamely, whether this is one building or a number of buildingsis perfectly obvious. It is that here we have a number of buildings, and not one.

The next case is Moir v Williams. In that case, which comes under another Act of Parliament, the building consisted of one large building in which were erected a series of structures containing 14 sets of chambers, and the district surveyor claimed to be entitled to a fee in respect of each set of chambers as a separate building. He was demanding a fee in respect of each of the 14 sets of chambers, and the court held, in dealing with that claim under that Act of Parliament, that, having regard to the subject-matter, the surveyor was entitled to one fee, and to one fee alone, in respect of the whole structure, because, although there were 14 different sets of chambers in it, it was only one building.

The next case is Kimber v Admans, which is a case of a covenant not to erect more than a certain number of houses. The defendant, who had given the covenant, purported to erect one building, which contained several residential flats under the same roof, and it was held that so to do was not a breach of the covenant. Vaughan Williams LJ says, at p 416:

… I think one must, in construing this restrictive covenant, ask oneself what was the object of the covenant and if I found myself in such a position that I could see no object in the covenant if it was simply limited to the bricks and mortar erection, I should have been disposed to put upon the word “house” a meaning which would cover the user of the house as distinguished from the physical erection. But I do not find myself in that position, and I do not think that anyone who is familiar with building estates in London would have any difficulty in ascertaining the object of this covenant, if we construe it as a covenant in which the word “house” means the physical erection and not the interior arrangement.

The next case is Grant v Langston, the headnote to which reads as follows:

The appellant was the owner of a building of two storeys under one roof situate in Portobello, Edinburgh. The ground-floor was occupied by the appellant to carry on the trade of a licensed retailer of spirits … The upper storey was occupied by the appellant as his dwelling-house … Access to the dwelling-house was by a door opening from the public street and by a staircase from that door which led up to the upper story. Access to the public-house was by a different door also opening from the street. There was no internal communication between the dwelling-house upon the upper storey and the public-house on the ground-floor:

Held, reversing the decision of the First Division of the Court of Session, that the public-house was exempt from inhabited house duty, and that the duty ought to be confined to the value of that portion of the building used as a dwelling-house.

I think that it is important and particularly helpful to deal with the observations of the Earl of Halsbury LC, at pp 391, 392:

I think the original idea of an inhabited house was that of a building inhabited by one person (with his family) responsible for the tax, who was himself the inhabitant of the whole of the house. But very soon questions began to be raised as to what constituted the unity of a house; one side of a whole street is in one

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sense structurally one building, but the separate unity of each of the structures with all its arrangements for occupation by one family and its head was of course recognised as a house separately liable to the tax. Even semi-detached houses were always recognised as two houses, although they were structurally one and protected by one roof; but controversies have arisen in respect of rating for the poor, for purposes of taxation and for the franchise, and decisions have been arrived at not always satisfactory or reconcilable with each other. An outer door and a common or separate staircase have been most commonly the tests applied, and I am not myself able to see how the case of chambers in an Inn of Court and the decision of the Westminster case are reconcilable with each other. But the legislature went further, in spite of artificially creating more artificial houses than one out of a house which was in every ordinary sense one taxable house, by giving from time to time exemptions from taxation to parts of structures which were structures adapted and probably intended originally for the occupation of one inhabitant as head of a family. Sir George Jessel, M.R., himself in Yorkshire Fire & Life Insurance Co. v. Clayton said [p. 424] … “in modern times a practice has grown up of putting separate houses one above the other. They are built in separate flats or storeys, but for all legal and ordinary purposes they are separate houses.”

Now, it appears to me that, apart from the exemption created by the Act 41 & 42 Vict. c. 15, s. 13, I should have great difficulty in holding this building to be one inhabited house within the various alterations which the legislature has introduced into what it has for fiscal purposes called a “house.” It appears to me that in the language of Sir George Jessel, M.R., there are two houses built one above the other. I suppose no one would dream of calling them one house if the same conditions which are found to exist here were found to exist in the same structures built side by side, and not one above the other, and, if it is possible to have one house built over another house, then all that has been held to constitute a separate house exists here: there is nothing which is held in common, the one structure is superposed upon the other, and that is all.

In this case, I see nothing in common between these various buildings except that they are parts of the same structure in the sense in which the Earl of Halsbury LC uses that wordnamely, that one side of a whole street is in one sense structurally one building.

The last case to which I was referred was Ilford Park Estates Ltd v Jacobs, in which the headnote is as follows:

A building structurally divided into two tenements on different floors, with no internal communication, common staircase, or common front door, constitutes two houses within the meaning of a covenant not to erect more than one house on the site.

The important part of that case is that, although these houses were divided into two tenements, they had no internal communication. They had no common staircase or common front door. The two front doors did meet under a common archway, but the common archway was not regarded as sufficient to constitute the two tenements one house as opposed to two.

I have referred to these cases. There were other cases cited, but I do not think that I need deal with them all, because one has to consider the particular Acts of Parliament which were under discussion in each particular case, and I think that really all these cases come down to this question of factnamely, if one has regard to the Act of Parliament one is considering, is this building one commercial building or not? That can only be answered in one way. It is not a commercial building. It is a number of buildings, and each of those buildings would be a commercial building if it was big enough to have 50 people or more employed inside it. Because it is not big enough, one cannot con-

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glomerate them all into a sort of whole and say: “Pool the lot. Call them a commercial building, because they all look out on to the same arcade, and are all linked together by a wall, and all belong to the same man.” I do not think that this case comes within the Civil Defence Act 1939, which seems to me to call on the owner of what is obviously to anybody a building in which more than 50 people are at work to provide those people with air-raid shelter. That is a totally different thing from calling on the owner of a vast number of different shops spread out in an arcade to provide air-raid protection for people who are working in those shops. That obligation seems to rest on the local authority, and I see no particular reason why in this case that obligation should be shifted from the local authority to Goodchild.

There is just one further matter with which I think I should deal. It was urged that, on the evidence, it was really quite plain that what I may call the structural unity was comprised in, or extended to, the London Co-operative Societys building, Upsons building and the buildings fronting on Market Place, as well as the shops along the arcade, and it was said that there is there a commercial building. I find, whether it be law or fact, that that entity was not a commercial building at all. It was a number of commercial buildings. If I am wrong in that, then, in my judgment, the claim of the borough council fails, because Goodchild never was the owner of that building. He was the owner of some part of that building, and there is no machinery or provision in the Act of Parliament whereby the owner of a part of a commercial building can be made to provide a shelter such as is required in this case. It may be, of course, that there are cases in which, where one has separate ownerships, and a different user of different parts of the structure which are in different ownerships, that may well constitute two buildings. That case, of course, may arise, but, where one has what is obviously one building, and one building only, and there is nobody who owns all that building, then, in my view, there is no machinery in the Act whereby the owner of part of that building can be made responsible for the provision of air-raid shelter either for the persons who work in the part which he owns or for the persons who work throughout the whole of the building.

In my view, the claim of the Romford Borough Council fails on that ground as well, but, on the principal ground, it is clear, in my judgment, that there never was any building which one can describe as a commercial building of which Goodchild was the owner. He was in fact the owner of a number of buildings used for commercial purposes, any one of which would be a commercial building if, as I have said, there happened to be more than 50 people employed in it. In the result, the action succeeds, and Goodchild must be entitled to the relief which he asks.

Judgment for the plaintiff with costs.

Solicitors: Hunt & Hunt (for the plaintiff); Sharpe Pritchard & Co, agents for J Twinn, Town Clerk, Romford (for the defendants).

C St J Nicholson Esq   Barrister.


Attorney-General v Oldham

[1940] 2 All ER 321


Categories:        SUCCESSION; Gifts        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        29, 30 JANUARY, 23 FEBRUARY 1940        


Estate and Other Death Duties Gifts inter vivos Gift of ordinary shares Issue of bonus shares to ordinary shareholder on capitalisation of reserves Whether estate duty payable in respect of bonus shares Customs and Inland Revenue Act 1881 (c 12), s 38(2) Customs and Inland Revenue Act 1889 (c 7), s 11(1) Finance Act 1894 (c 30), ss 1, 2(1)(c), 7(5), 22(1)(f) Finance (190910) Act 1910 (c 8), s 59(1).

On 26 January 1934, the defendants father gave to his daughter, the defendant, 25,000 shares in T & L Ltd. On 9 May 1935, the company capitalised £1,360,000 out of its general reserve by issuing 1,360,000 new ordinary shares to the ordinary shareholders in the proportion of 2 such shares for every 5 existing shares, with the result that the defendant was allotted 10,000 further ordinary shares. The defendants father died on 30 April 1936, and the Crown claimed that estate duty was then payable under the Customs and Inland Revenue Act 1881, s 38(2) (as amended by the Customs and Inland Revenue Act 1889, s 11(1), and the Finance (190910) Act 1910, s 59(1)), and the Finance Act 1894, s 2(1)(c), in respect of both the 25,000 and the 10,000 shares. The defendant admitted that duty was payable in respect of the 25,000 shares, but contended that it was not so payable in respect of the 10,000 shares:

Held the 10,000 shares which the company chose to distribute to the defendant were not taken by her under the gift of the ordinary shares on 26 January 1934, and therefore estate duty was not payable in respect of them upon the death of the defendants father. Where the parties have clearly and truly stated the nature of the transaction, what may be said to be the substance of the transaction ought not to be regarded.

Notes

The decision in this case must be compared with that in Re Payne, Poplett v A-G. The matter which has to be determined in each case is what, upon its proper construction, passes under the deed of gift. Increments to a gift can more readily be traced where there is a trust fund, for then all such increments will be held by the trustees as part of the fund. The decision here, however, is based upon the construction of the taxing statute, and it is held that the definition of the property charged with the duty does not include the bonus shares here in question.

As to Estate Duty on Gifts Inter Vivos, see Halsbury (Hailsham Edn), Vol 13, pp 269273, paras 272280; and for Cases, see Digest, Vol 21, pp 24, 25, Nos 133137.

Cases referred to

Lethbridge v A-G [1907] AC 19; 21 Digest 18, 99, 76 LJKB 84, 95 LT 842, revsg [1905] 2 KB 323.

A-G v Montagu (Lord) [1904] AC 316; 21 Digest 25, 140, 73 LJKB 707, 90 LT 726.

Cape Brandy Syndicate v Inland Revenue Comrs [1921] 2 KB 403; 42 Digest 666, 765, 90 LJKB 461, 125 LT 108, 12 Tax Cas 358.

Inland Revenue Comrs v Westminster (Duke) [1936] AC 1; Digest Supp, 104 LJKB 383, 153 LT 223, 19 Tax Cas 490.

Strathcona (Lord) v Inland Revenue Comrs [1929] SC 800; Digest Supp.

A-G for Ontario v National Trust Co Ltd [1931] AC 818; Digest Supp, 100 LJPC 215, 145 LT 673.

Re Payne, Poplett v A-G [1939] 1 Ch 865, [1939] 3 All ER 875; Digest Supp, 161 LT 254, affd [1940] 2 All ER 115.

Page 322 of [1940] 2 All ER 321

Re Kuypers, Kuypers v Kuypers [1925] Ch 244; 40 Digest 661, 1997, 94 LJCh 253, 133 LT 468.

Introduction

Information to recover estate duty upon the death of George Booth Tate in respect of certain shares as property comprised in a voluntary disposition made by the deceased less than 3 years before his death. On 26 January 1934, the deceased transferred by way of gift to the defendant, his daughter, 25,000 ordinary shares of £1 each in Tate & Lyle Ltd. At this date, the capital of the company was £4,500,000, divided into 3,400,000 ordinary shares of £1 each and 1,100,000 6½ per cent preference shares of £1 each, all of which had been issued. On 9 May 1935, the company passed resolutions to the effect that the capital of the company be increased to £6,200,000 by the creation of 1,700,000 new ordinary shares of £1 each, and that the sum of £1,360,000 standing to the credit of the general reserve be capitalised and applied in paying up 1,360,000 of the new shares, and that such shares be distributed among the holders of the ordinary shares in the proportion of 2 such shares for every 5 existing shares. Pursuant to these resolutions, the company allotted to the defendant 10,000 ordinary shares of £1 each credited as fully paid. The day before the company decided to make the distribution, the ordinary shares were worth £5 7/16, and the day after they made the distribution they were worth £3 13/16. The deceased died on 30 April 1936. The Inland Revenue Commissioners claimed that estate duty at the appropriate rate became payable upon the death of the deceased under the Customs and Inland Revenue Act 1881, s 38(2) (as amended by the Customs and Inland Revenue Act 1889, s 11(1), and the Finance (190910) Act 1910, s 59(1)) and the Finance Act 1894, s 2(1)(c), in respect alike of the 25,000 shares in the company comprised in the original gift to the defendant and of the 10,000 bonus shares in the company allotted to her as holder of the 25,000 shares. The defendant admitted that duty was payable in respect of the 25,000 shares, but contended that duty was not payable in respect of the 10,000 shares.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and J H Stamp for the informant.

R F Roxburgh KC and F Heyworth Talbot for the defendant.

23 February 1940. The following judgment was delivered.

WROTTESLEY J. The defendants liability must depend upon the Finance Act 1894, ss 1, 2, 22. The relevant parts of these sections are as follows:

1. In the case of every person dying after the commencement of this part of this Act, there shall … be levied and paid, upon the principal value ascertained as herein-after provided of all property, real or personal, settled or not settled, which passes on the death of such person a duty, called “estate duty.”

2(1). Property passing on the death of the deceased shall be deemed to include the property following, that is to say. …

Then follows in para (c) a reference to property which would be required on the death of the deceased to be included in an account under the

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Customs and Inland Revenue Act 1881, s 38(2), as subsequently amended. So far as this case is concerned this statutory provision now reads thus: “Any property … taken under a disposition made by a person dying after Aug. 1, 1894, purporting to operate as an immediate gift inter vivos … which shall not have been bona fide made 3 years before the death of the deceased.” To return now to s 1, this property, taken under such a disposition, is to bear estate duty levied on its principal value, and s 7(5) provides that the principal value of any property shall be estimated to be the price which, in the opinion of the commissioners, such property would fetch if sold in the open market at the time of the death of the deceased. Finally, by s 22, the definition section, it is provided by sub-s (1)(f) that, unless the context otherwise requires:

The expression “property” includes real property and personal property and the proceeds of sale thereof respectively and any money or investment for the time being representing the proceeds of sale …

Thus, the question is whether or not these bonus shares, issued to the defendant by the company in the manner I have indicated, are property taken under the dispositionthat is to say, the gift which the deceased made of the ordinary shares, and which took place admittedly less than 3 years before his death. There are many and obvious difficulties in answering this question in the affirmative. These shares are property, but they are not gathered in by the definition section, for they are not the proceeds of sale of the ordinary shares, nor an investment for the time being representing the proceeds of sale of the ordinary shares.

The case for the Crown depends, not on any literal reading of the relevant taxing statutes, but rather on my looking at the substance of the transaction. It is put thus. The thing which the deceased gave has in part changed its form in a way which arises from its inherent nature. The shares given represented certain rights against the companynamely, a right to receive in proportion any profit that was distributed, whether by way of dividend or by way of capital. There was this large sum of accumulated profit, and all that has happened is that the company has chosen to distribute this profit to the shareholders in the form of bonus shares. Thus, the 25,000 ordinary shares have now become 35,000 shares, and, after that accretion of capital, the shareholder is exactly where she was vis-à-vis the company and the other shareholders. Where she had 5 shares she now has 7, but, since that happened to every shareholder, they are all as they were. Thus, her father gave the defendant, not 5 shares, as he thought, but 7 shares, as we now know, and the values illustrated by the stock exchange prices before and after the distribution show clearly that that is so.

The debate has wandered over a wide area. Counsel for the informant have put before me cases tending to show that a literal construction will not do. For instance, if shares are divided up, it is said, one share becoming two, there is no difficulty in identifying the two shares with

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the one which gave rise to them. Nor is there. Then comes the mare which was believed to be in foal when given, or the cow in like case, the pedigree herd of cattle, the herd of deer, which I think counsel for the informant must mean to be in a park, as wild deer would hardly be an appropriate illustration. In another category is the block of shares settled on trustees. Here different considerations come into play, for the law will, as it were, isolate and identify the subject-matter of a trust, even if the definition section of the Act of 1894 were not there to enable the Crown to follow the thing given into the proceeds of sale, and beyond it into the investment of those proceeds. Illustrations of this kind are interesting and instructive as showing how the abstract rule can be applied easily, or with difficulty, to concrete cases. Some of them present real difficulties. The line of approach is seductive. If one can depart from the literal where a share loses its identity by being split, why stop there? However, neither the practice of the Crown in dealing with these cases nor the concessions which it is said the Crown makes in some of these cases really throws any light on what the words of the statutes mean, provided those words are reasonably clear. I am invited to have regard to the substance of the transactionthat is to say, the companys act in distributing their reserves in the form of bonus shares. Lethbridge v A-G is relied upon, and especially what was said by Lord Atkinson, at p 26:

It has many times been decided that in dealing with questions arising on the Finance Act of 1894 and the Succession Duty Acts regard regard should be had to the substance of the transactions on which these questions turn rather than to the forms of conveyancing which the parties to them may have adopted to carry out their objects.

If what is contended for is that the court must not close its eyes to what a transaction really provides, should that be different from what the form of the transaction appears to provide, there is no doubt that that is the duty of the court. That is what was in question in A-G v Montagu (Lord). In this case, however, I have to deal with a transaction the bona fides and true meaning of which are not challenged and not in doubt. It is no more wrong or mala fide that a man should give to his children before he dies what he no longer needs, or is prepared to part with, than that he should keep it until he dies and then leave it to them. The fact is that in this case we are not in a region where right or wrong or good or bad faith obtains. Here the company decided to distribute the reserves as capital, for reasons which were, I suppose, satisfactory to the shareholders. They had nothing whatever to do with this case. The substance to which I am invited to have regard is a different kind of substance. In effect, I am invited to fill in the gaps in the Act of 1894, and the only convincing reason why I should take on my shoulders this burden, which is really legislation rather than construction, is that, unless I do so, a subject will go to some extent untaxed in respect of a monetary advantage which came to her by reason of a gift from her father, and which is itself subject to tax. It is, of

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course, desirable that all subjects in like case should suffer the same tax, but, before I fill in such a gap, I must remember what Rowlatt J said in Cape Brandy Syndicate v Inland Revenue Comrs, at p 366:

Now of course it is said and urged by Sir William Finlay that in a taxing Act clear words are necessary to tax the subject. But it is often endeavoured to give to that maxim a wide and fanciful construction. It does not mean that words are to be unduly restricted against the Crown or that there is to be any discrimination against the Crown in such Acts. It means this, I think; it means that in taxation you have to look simply at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to a tax; you read nothing in; you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax.

I must also remember what Lord Tomlin said in Inland Revenue Comrs v Westminster (Duke), at pp 19, 20:

Apart, however, from the question of contract with which I have dealt, it is said that in revenue cases there is a doctrine that the court may ignore the legal position and regard what is called “the substance of the matter,” and that here the substance of the matter is that the annuitant was serving the Duke for something equal to his former salary or wages, and that therefore, while he is so serving, the annuity must be treated as salary or wages. This supposed doctrine (upon which the commissioners apparently acted) seems to rest for its support upon a misunderstanding of language used in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting “the incertain and crooked cord of discretion” for “the golden and streight metwand of the law” (4 Inst. 41). Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. This so-called doctrine of “the substance” seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable.

If, then, I need it, I have excellent authority for not accepting the invitation, however tempting, to theorise as to what Parliament must have intended to include in the phrase “property taken under a disposition” other than what is said. In plain English, it means “given to” a person. If it can be said that the defendant was given these bonus shares by her father, then equally it can be said that she was given every dividend which has accrued to her in respect of the ordinary shares. This appears to me not to be common sense. If the defendant were asked whether or not her father had given her those dividends, it would be an abuse of language for her to say that he had.

Another line of approach, though really leading to the same goal, is that through the cases on the method of valuation intended by the Act. Here again the problem posed by the Act is by no means always easy to solve. If one must treat something which a man gives early in 1934 as though he did not in fact do so, but kept it until he died in 1936, and then bequeathed it by will, one may easily find oneself in difficulties if one tries to value it at the later date and tax the donee on the latter value. In Strathcona (Lord) v Inland Revenue Comrs, the Court of Session had to consider how this valuation should be done, and the judgments in that case show how differently the problem may be

Page 326 of [1940] 2 All ER 321

approached and solved by different minds. I do not think that I can derive any assistance in this case from any of the judgments in that case. The decisionanyhow of the majoritywas that the valuation was to be made at the date of the donors death, and that, in the case of shares, it would be the market price at the date of the donors death. I accept that decision, which was upheld by the Privy Council in A-G for Ontario v National Trust Co Ltd, and it is therefore the fact that in the case before me the ordinary shares which will anyhow bear the duty were (partly owing to the distribution of the reserves by way of bonus shares in 1935) less valuable, and so less productive of duty, than they would have been if that distribution had not taken place. That, of course, leaves unanswered the question of what value the shares would have had if the reserves had been distributed by way of dividend, as they might quite well have been.

Then came Re Payne, Poplett v A-G, where the subject of the gift was settled and included the benefit of an option. The result was that on the date of death £10,000 and an option had become shares worth about £49,000. In that case, Simonds J held that, in the case of settled funds, the trust fund, in the condition in which it was at the date of the death of the donor, must be valued at the date of the donors death, but he in terms confined his decision to the case of settled funds. Indeed, the whole of the argument and the grounds for the decision showed why the judge so confined his decision. Counsel for the informant says that the Act makes no special reference to settlement, and that, if settled funds can be followed through such changes, that is only because there is an underlying identity, and that Simonds J must have relied on this. The report of this case discloses no such necessity. In the case of a trust fund, the problem of identity is solvedor, at any rate, easedby the circumstances which always surround such a fund, even if the definition section in the Act is not applicable. In the case before me, I have no such artificial aid to identification, and the definition section, as I have pointed out, does not apply. On the other hand, if I am to adopt what Lord Sands said was the right course in Strathcona (Lord) v Inland Revenue Comrs, and to treat the matter as though the deceased had kept these shares till he died, bequeathing them by will at the moment of the gift, then, having regard to the date of the distribution of the bonus shares, the result is clear from Re Kuypers, Kuypers v Kuypers. The bonus shares would not have gone to the defendant by reason of such a bequest. Incidentally, there will be found in the judgment of Tomlin J in that case some interesting observations on how to trace and identify shares where an additional issue, not unlike the one in this case, had taken place. However, I do not base my decision on this ground. I look at the words of this taxing Act. I believe I look at the substance of it, in so far as its substance is to be gathered from its words. It might have contained words which would include these bonus shares. In fact, it contains no such words. I apply

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the simplest test which can be used. I will assume that it had been to the defendants interest to make out that in fact her father gave her these bonus shares. Could she truthfully have sworn that she received these bonus shares from her father? It is apparent, anyhow to me, that, if she had so sworn, she would have been guilty, if not of perjury, at any rate of concealing the truth. For this simple reason, I find that the bonus shares which the company chose to distribute to the defendant were not taken by her under the only disposition which can be relied uponnamely, the gift of the ordinary shares on 26 January 1934.

Information dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the informant); Pennefather & Co (for the defendant).

W J Alderman Esq   Barrister.

Inland Revenue Commissioners v Wolverton (Lady)

[1940] 2 All ER 327


Categories:        TAXATION; Income Tax        

Court:        KINGS BENCH DIVISION        

Lord(s):        WROTTESLEY J        

Hearing Date(s):        30, 31 JANUARY 1940        


Income Tax Sched A Occupation Widow continuing to live in husbands house after his death and before residue of estate ascertained Whether occupation in her own right or as representative of executors Income Tax Act 1918 (c 40), Sched A.

The respondent was the widow and residuary legatee of W, who died on 3 October 1932. Prior to his death, they had lived together on a partly leasehold and partly freehold property owned by him, and after his death the respondent continued to live there, employed and paid the servants, and kept up the grounds. The executors did not question her living there, and did not try to eject her. The residue of the estate was not ascertained until 20 July 1937. On 24 October 1934, the executors assented to the vesting of the leasehold part of the property in the respondent, and on 13 January 1938, they assented to the vesting of the freehold part of the property in the respondent. The question arose as to whether the annual value of the property should be included in the computation of the respondents sur-tax for the years ending 5 April 1933 to 5 April 1937. It was contended on behalf of the respondent that the annual value of the property should not be so included, because, until the residue of the estate had been ascertained, she could not be said to be an occupier within the meaning of the Income Tax Acts, as her occupation of the property was not in her own right, and that she was occupying it as the representative of the executors:

Held the respondent was the occupier of the property under the Income Tax Act 1918, Sched A.

Notes

Where a person takes an interest under a will, there is a period of time during which that person has no right to deal with the property the subject of the gift. The interest under the will is said to be inchoate, and the full benefit of interest does not vest in the beneficiary until the executor has assented to the gift. Until that time arrives, the executor can at any time take the property for the purpose of discharging the debts of the testator, paying duties or discharging administration expenses. For this reason, it has been held in some cases that the tax upon the income of such property is to be assessed upon the executor, and not

Page 328 of [1940] 2 All ER 327

upon the beneficiary. In the present case, however, a distinction is made, and the occupation of the house by the widow is held to be the occupation of the widow for the purposes of assessment under Sched A.

As to Occupier for Purposes of Sched A, see Halsbury (Hailsham Edn), Vol 17, pp 5053, para 98104; and for Cases, see Digest, Vol 28, pp 14, 15, Nos 7174.

Case Stated

Case stated under the Finance Act 1927, s 42(7), and the Income Tax Act 1918, s 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Kings Bench Division of the High Court of Justice. The respondent, Lady Wolverton, was the widow of Lord Wolverton, who died on 3 October 1932. Under his will, she became entitled to an absolute interest in his residuary real and personal estate. The question raised in the appeal was whether or not the annual value of certain freehold and leasehold property, known as Queensbury House, Newmarket, part of the free estate of the testator, should be included in the computation of the respondents sur-tax for the years ending 5 April 1933, to 5 April 1937. The commissioners found that the residue of the estate was not ascertained until 20 July 1937. The respondent lived at Queensbury House at periods throughout the years in question. She employed and paid the servants, and kept up the grounds. The executors did not question her being there, and did not try to eject her. On 24 October 1934, they assented to the vesting in the respondent of the leasehold, and on 13 January 1938, of the freehold, part of the property. It was contended on behalf of the respondent that the annual value of the property at Newmarket should not be included in the computation of her total income for the purposes of sur-tax, because, until the residue of the estate had been ascertained, she could not be said to be an occupier within the meaning of the Income Tax Acts, as her occupation of the property was not in her own right, and she was occupying it as the representative of the executors of the will. On behalf of the appellants, it was contended as follows:

(a) that throughout the period in question the respondent was the occupier of the property in question and occupied the same beneficially in the capacity of a tenant at will, and not as a caretaker or otherwise as the representative of the executors, and the fact that the residue of the estate was not ascertained was immaterial, and that, accordingly, the annual value thereof formed part of the total income; (b) that in any event having regard to the Administration of Estates Act, 1925, s. 36(2), the annual value of the property formed part of the total income of the respondent from the date of the death of her husband; (c) alternatively, that in any event the annual value of the leasehold part of the property were income of the respondent from Oct. 24, 1934.

The finding of the special commissioners was as follows:

We, the commissioners, found on the evidence that the residue of the estate was ascertained on July 20, 1937. We held that prior to this date the annual value of the Newmarket property was not income subject to taxation in the hands of the respondent, and must be excluded in computing the sur-tax computations for the years in question. We allowed the appeal for all the said years.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Reginald P Hills for the appellants.

F Heyworth Talbot for the respondent.

Page 329 of [1940] 2 All ER 327

31 January 1940. The following judgment was delivered.

WROTTESLEY J. This case appeared to bring forward for debate, the question whether or not a lady in the position of Lady Wolverton, benefited by Lord Wolvertons will, and (to use untechnical language) due to receive Queensbury House on the Newmarket estate, provided the estate should pay the debtsI think that that was broadly the positionand who in fact for some years after her husbands death continued to reside in the house, could nevertheless be said to be an occupier under the Income Tax Act 1918, Sched A, anyhow until the residue of her husbands estate had been ascertained. It is concededit appears from the casethat she was there for many years before the residue of that estate was ascertained. When that happened, steps could be taken to wind up the estate, get rid of the liabilities, and vest the property in Lady Wolverton. The Crown, through the Attorney-General, has disposed of any suggestion that, merely because the residue of Lord Wolvertons estate had not been ascertained, therefore Lady Wolverton, by living in what had been her husbands house after his death, could not be an occupier within the meaning of the Income Tax Acts. It is conceded by counsel for the respondent, with his experience, that, of course, it is possible that she could have been an occupier within the meaning of those Acts. She might have been a tenant at will, no rent being reserved. She might have been granted a lease, or at any rate a tenancy. She might have been there on leave and licence. All that is accepted by counsel for the respondent. Nor does he make anything of the leaseholds which were occupied in conjunction with the house both before Lord Wolvertons death and by Lady Wolverton after he died, so that the point of law with which, apparently, the commissioners minds were filled in the course of the hearing is no longer a point which needs to be discussed or resolved. There is a further matter, however, and counsel for the respondent has put it very shortly and clearly. He draws my attention to the findings of fact, all of which are contained in one paragraph of the case. It is evidence which was given, and which the commissioners accepted:

[Lady Wolverton] lived at the house, known as Queensbury House, on the Newmarket estate at periods throughout the years in question [1932 to 1937], she employed and paid the servants and kept up the grounds. The executors never questioned her being there or tried to eject her. Estate duty interest and legacy duty were assessed on July 20, 1937.

Thus, it appears that, so far as the facts are concerned, Lady Wolverton did what many other widows have done when their husbands have diednamely, lived on in the husbands house for some years intermittently, employing and paying the servants, and keeping up the grounds. As far as the position she occupied there was concerned, I think that it may be fairly put as being that neither she nor the executors bothered about it at all. They did not question her being there, and they did not try to eject her. That is to say, they did not ask her to go.

It is said that, amongst the arguments put forward on her behalf, apart from the fact that, until the residue of the estate had been

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ascertained, she could not be called an occupier, there was the argument that in fact, quite apart from any question of law, her occupation of the house during those years was not in her own right, and that she was occupying it as the representative of the executors of the will. I have not the least doubt, on the form of the case, that the ground for that suggestion was what had gone beforenamely, that the residue of the estate had not been ascertained. It is now suggested that perhaps there were other reasons, and that perhaps there was some matter of fact upon which the commissioners could have found that. It has even been hazardedit was indeed a hazardthat the executors said to Lady Wolverton, “It is always a good thing to have the house occupied. Continue there. Keep the house warm,” (if I may use that vulgarism), and that it was in that way that she came to reside there. I am quite certain that, if anything of that kind ever occurred, these commissioners would have put it forward amongst the facts which they heard, and which they doubtless would have accepted. The fact that nothing of that kind appears in the facts indicates to me that nothing of the kind took place.

What is left, therefore, is only that a widow living on in her late husbands house, in the circumstances in which Lady Wolverton did, is, as a matter of law, the representative of the executors. It is conceded (because counsel for the respondent knows that he must concede it) that he cannot put that forward, and he is not, I suppose, going to involve himself in propositions of law which, if they are not going to succeed, may result in his client having to pay even more costs than she already has to pay. There is certainly no ground for suggesting that, if a widow continues to live in her late husbands house, she is on that account the representative of the executors of her husbands will. There is every reason in this case, as I say, to suppose that nothing was said. I have read the passage. The executors did not question her, and did not ask her to go. There is no ground in law, therefore, for suggesting that, merely because she went on living there, and no agreement or arrangement was made, she was in any sense the representative of the executors. It seems to me that, in those circumstances, I should only be adding needlessly to the costs of debating this question by asking the commissioners whether or not something happened when I am absolutely certain that it did not, or it would have already appeared in the case.

I find that the commissioners came to an erroneous conclusion in finding that the annual value of the Newmarket property must be excluded in computing the sur-tax payable by the respondent.

Appeal allowed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellants); Waterhouse & Co (for the respondent).

W J Alderman Esq   Barrister.


Cohen v Cohen

[1940] 2 All ER 331


Categories:        FAMILY; Divorce        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, LORD WRIGHT AND LORD ROMER        

Hearing Date(s):        29 FEBRUARY, 15 APRIL 1940        


Divorce Desertion Previous proceedings for divorce abandoned Whether period of desertion continues to run Matrimonial Causes Act 1937 (c 57), ss 2, 6(3).

The petitioner sought a divorce, on the ground that her husband had deserted her for a period of at least 3 years immediately preceding the presentation of her petition, which was dated 2 March 1938. The husband had deserted the petitioner in 1925. On 31 March 1930, the petitioner had presented a petition for divorce based on adultery, which petition was dismissed on 4 May 1937, on her application. She presented a further petition on 25 May 1937, also founded on adultery, which petition was dismissed on 1 March 1938, on her application. Both these earlier petitions had been served on the respondent:

Held (i) there was nothing connected with either petition which had deterred the respondent from putting an end to the desertion, and in the circumstances of the present case, he had no reasonable cause for not trying to bring the desertion to an end, and the necessary period of desertion without cause was, therefore, uninterrupted.

(ii) the question whether a deserting spouse has reasonable cause for not trying to bring the desertion to an end, and the corresponding question whether desertion without cause has existed for the necessary period, must always be questions of fact, and their determination must depend upon the circumstances of each particular case.

Stevenson v Stevenson overruled.

Order of Court of Appeal ([1939] 2 All ER 596) reversed.

Notes

The filing of a petition for divorce has been regarded as an act which necessarily causes the parties to live apart, and, it as argued, necessarily causes an interruption in a period of desertion which is running at the time of the presentation of the petition. This was the reason for the decision in Stevenson v Stevenson. The House of Lords have been unable to find any support for that decision in any of the earlier authorities. Even after the filing of a petition, the Divorce Court would never discourage a friendly attempt at reconciliation, for it exists, not for the purpose of promoting the dissolution of marriages, but for the purpose of dissolving marriages when all hope of reconciliation has come to an end. The house of Lords have found that there is no general principle applicable to all cases of desertion. Each case must be decided on its own particular facts, for it is clear that where one party brings wholly unfounded charges against the other, the latter could not be said to be deserting without cause. Incidentally, they have expressed the view that the principle laid down in Stevenson v Stevenson has not received legislative recognition in the Matrimonial Causes Act 1937, s 6(3). That subsection deals with an order of the court enforcing separation, and not with a petition upon which no order has been made.

As to Effect of Petition on Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 658, 659, paras 968, 969; and for Cases, see Digest, Vol 27, pp 319321, Nos 29782999.

Cases referred to

Stevenson v Stevenson [1911] P 191; 27 Digest 320, 2986, 80 LJP 137, 105 LT 183.

Bowron v Bowron [1925] P 187; 27 Digest 561, 6168, 94 LJP 33, 132 LT 773.

Page 332 of [1940] 2 All ER 331

Pratt v Pratt [1939] AC 417, [1939] 3 All ER 437; Digest Supp, 108 LJP 97, 161 LT 49.

Kay v Kay [1904] P 382; 27 Digest 308, 2850, 73 LJP 108, 91 LT 360.

Harriman v Harriman [1909] P 123; 27 Digest 321, 2995, 78 LJP 62, 100 LT 557.

Lapington v Lapington (1888) 14 PD 21; 27 Digest 320, 2984, 58 LJP 26, 59 LT 608.

Wood v Wood (1887) 13 PD 22; 27 Digest 378, 3667, 57 LJP 48.

Kettlewell v Kettlewell (1880) 41 LT 737; 27 Digest 320, 2982.

Marthews v Marthews [1939] P 97, [1938] 4 All ER 377; Digest Supp, 108 LJP 41, 160 LT 297.

Bush v Bush [1939] P 142, [1938] 4 All ER 598; Digest Supp, 108 LJP 46.

Appeal

Appeal from a decision of the Court of Appeal (MacKinnon and Luxmoore LJJ, and Macnaghten J), dated 2 May 1939, and reported [1939] 2 All ER 596, affirming an order of Hodson J, dated 18 January 1939. The facts of the case are fully set out in the opinion of Lord Romer. The respondent did not enter any appearance to the petition. Having regard to the importance of the case, the House desired the assistance of the Attorney-General.

H B D Grazebrook KC and J E N Russell for the appellant.

The Solicitor-General (Sir Terence OConnor KC) and S E Karminski for the Attorney-General.

15 April 1940. The following opinions were delivered.

VISCOUNT CALDECOTE LC (read by Viscount Maugham). My Lords, I have had the advantage of reading the opinion prepared by my noble and learned friend Lord Romer, which entirely expresses my views on the matter, and I have nothing to add.

VISCOUNT MAUGHAM. My Lords, on my own behalf I wish to say that I too have had the advantage of reading the opinion which I have just mentioned, and, as I entirely agree with it, I too have nothing to add. I am requested to say that Lord Russell of Killowen also has had the advantage of reading the opinion prepared by my noble and learned friend Lord Romer, and that he entirely agrees with it.

LORD WRIGHT. I also have had the same advantage, and, like the noble and learned Lords who have already spoken, I am fully in accord with the opinion which is about to be delivered by my noble and learned friend Lord Romer. I have nothing to add.

LORD ROMER. My Lords, the appeal in this case raises a question of divorce law which is of considerable importanceof all the greater importance, perhaps, now that desertion is of itself a ground for divorce. The question is this. Where one of the spouses has committed the matrimonial offence of desertion, does that desertion necessarily come

Page 333 of [1940] 2 All ER 331

to an end by the presentation and service upon the deserting spouse of a petition by the other one asking for a dissolution of the marriage?

The facts giving rise to that question in the present case are the following. The appellant, Dorothy Gertrude Cohen, was married to the respondent, Max Jaques Cohen, on 21 March 1921, and a son, the only child of the marriage, was born in April 1923. About two years after the birth of the child, the respondent deserted the appellant without cause, and since then has never himself taken any step, or indicated any intention or desire, to bring that desertion to an end. On 11 March 1929, upon the application of the appellant, an order was made under the Summary Jurisdiction (Separation and Maintenance) Acts 1895 to 1925, on the ground that the respondent had wilfully neglected to provide reasonable maintenance for the appellant and her child, that the respondent should pay a total sum of £1 per week for such maintenance, the custody of the child being given to the appellant. The order, however, contained no provision under s 5(a) of the Act as to cohabitation. The sum of £1 per week was, upon the respondents application, reduced to 12s 6d per week, by order dated 4 January 1933. The respondent frequently made default in payment of these weekly sums, and, soon after the date of the last-mentioned order, he seems to have disappeared for a time, and ceased to make any payments towards the support of the appellant and her child. In the meantimenamely, on 31 March 1930the appellant presented a petition in the High Court for the dissolution of the marriage on the ground of the respondents adultery. The petition was duly served upon the respondent, who put in an answer denying the adultery, but, owing, as the appellant says, to her want of means and the difficulty of serving the woman named in the petition, it was not further proceeded with, and, on 4 May 1937, it was dismissed upon the application of the appellant in the following circumstances. On 15 October 1936, the appellant received from the respondent a letter, dated 2 October 1936, which, so far as material, was in these terms:

Dear Dorothy

As it is now so many years that we have lived together and now things have happened which for both our sakes has made same impossible, I hope you will agree that we both need our freedom to enable us to do the right thing for the future.

So am enclosing the evidence you have been wanting for same.

Yours,

Max C.

Enclosed in the letter was a receipted hotel bill, which indicated that the respondent and a woman referred to in the bill as “Mrs. Cohen” had passed the night together at the hotel on 25 July 1936.

In consequence of the receipt of this letter and enclosure, the appellant obtained an order on 4 May 1937, dismissing the petition then on the file, and on 25 May 1937, she presented a fresh petition for dissolution of her marriage, on the ground of the respondents adultery as evidenced by the hotel bill. The respondent was duly served with this petition,

Page 334 of [1940] 2 All ER 331

but, in the light of subsequent information tending to show that no adultery had in fact been committed by him at the hotel, the appellant did not for the time being proceed further with it. On 1 January 1938, there came into force the Matrimonial Causes Act 1937, which by s 2(b) made desertion without cause for a period of at least 3 years immediately preceding the presentation of the petition a ground for divorce. Accordingly, on 2 February 1938, the appellant applied to the court for leave to file a supplemental petition on the ground of the respondents desertion. This application was refused as being inconsistent with a practice note which directed that, in order to obtain relief under the new Act in such circumstances, a fresh petition must be filed. The petition dated 25 May 1937, was, accordingly, dismissed by an order dated 1 March 1938, made upon the appellants application, and on 2 March 1938, she presented a fresh petition for the dissolution of her marriage, based solely on the ground of the respondents desertion without cause for a period of at least 3 years immediately preceding its presentation. This petition was duly served upon the respondent, but no appearance was entered on his behalf, and in due course it came on for hearing before Hodson J as an undefended cause. The judge was satisfied upon the evidence that the respondent had deserted the appellant without cause in 1925, and, but for the fact of the presentation and service of the two earlier petitions, he would have been prepared to hold that such desertion had continued without interruption up to 2 March 1938. There was, however, the fact that between 31 March 1930, and 4 May 1937, and between 25 May 1937, and 1 March 1938, there were petitions on the file, both of which had been served upon the respondent, in which the appellant was asking for the dissolution of the marriage. In these circumstances, the judge felt, though with regret, that he was unable to hold that desertion without cause had subsisted for the 3 years immediately preceding 2 March 1938, the date of the presentation of the petition then before him. He was, he said, precludedas, indeed, he wasfrom doing so by the decision of the Court of Appeal in Stevenson v Stevenson. The petition was, therefore, dismissed, by order dated 18 January 1939. The appellant then took the matter to the Court of Appeal, where it was heard on 2 May 1939, before MacKinnon and Luxmoore LJJ, and Macnaghten J. The court held that it was impossible to distinguish the case from Stevenson v Stevenson, and the appeal was dismissed, leave being given to appeal to your Lordships House.

My Lords, from this narrative of the facts, it is abundantly clear that the respondent in 1925 committed the matrimonial offence of desertion, and that, from that date down to the filing of the present petition, he has shown no indication by word or deed of any intention or desire on his part to bring that desertion to an end.

In Bowron v Bowron, where the intention of a husband to desert his wife had been established, it was said by Scrutton LJ, that the

Page 335 of [1940] 2 All ER 331

intention is presumed to continue unless the husband proves genuine repentance and sincere and reasonable attempts to get his wife back. There were certainly no such attempts in the present case. However, as was said by Lord Macmillan in Pratt v Pratt, at p 420 ([1939] 3 All ER, at p 438), a case in which a wife had deserted her husband:

In fulfilling its duty of determining whether on the evidence a case of desertion without cause has been proved the court ought not, in my opinion, to leave out of account the attitude of mind of the petitioner. If on the facts it appears that a petitioning husband has made it plain to his deserting wife that he will not receive her back, or if he has repelled all the advances which she may have made towards a resumption of married life, he cannot complain that she has persisted without cause in her desertion.

In the instances given by Lord Macmillan in this passage, it would have been unreasonable to expect the deserting spouse to make any attemptsor any further attempts, as the case might beto put an end to the desertion. Other instances, as will presently appear, can be given of circumstances in which it would be unreasonable to expect the deserting spouse to make attempts to end the desertion. The deserting spouse is only bound, in the language of Scrutton LJ, to make reasonable attempts. Had, then, the appellant in the present case done anything on her part to excuse the respondent from making any attempt to put an end to his desertion?

Before answering this question, it is necessary to consider in some detail the decision of the Court of Appeal in Stevenson v Stevenson. In that case (decided under the Act of 1857), in July 1910, a wife had presented a petition for judicial separation on the ground of her husbands adultery. In January 1911, she presented a supplemental petition, alleging desertion by her husband in December 1908, and praying for a dissolution of the marriage. The adultery was proved, and also the desertion. However, at the date of the original petition, 2 years had not elapsed since the original desertion, although they had done so at the date of the supplemental petition. Bargrave Deane J, however, refused to make a decree nisi for dissolving the marriage, on the ground that the filing of the petition for a judicial separation had put an end to the desertion. The Court of Appeal consisting of Sir H H Cozens-Hardy MR, and Farwell and Kennedy LJJ, held that he was right in so refusing. After alluding to the fact that, at the date of the petition, the desertion had lasted only 18 months, Sir H H Cozens-Hardy MR, said, at p 194:

The presentation of the petition and its continuance on the files of the court prevented the subsequent desertion from being without excuse. She was praying the court to require her husband to keep away. When the supplemental petition was filed there had not been desertion for two years without excuse. Bargrave Deane, J.s, judgment seems to me to be in strict accordance with the very careful judgment of Gorell Barnes, J., in Kay v. Kay and with the judgment of the full Court of Appeal in Harriman v. Harriman. Butt, J.s, decision in Lapington v. Lapington is also a direct authority against the petitioner.

The two Lords Justices merely agreed, without giving any reasons of their own. It will be observed that Sir H H Cozens-Hardy MR,

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did not base his decision upon any facts peculiar to the case before him. He laid down a general principle applicable to all cases where the deserted spouse places upon the file a petition for judicial separation or divorce. The subsequent desertion cannot, he held, be treated as being without cause while the petition remains on the file. I shall consider the reason which he gave for coming to this conclusion at a later stage in this judgment. For the moment, I merely propose to call attention to the singular fact that, of the three cases to which he referred as justifying his conclusion, the first two in no way establish, and the third seems to be inconsistent with there being, any such general principle as he was laying down.

The facts in Kay v Kay, so far as material for the present purpose, were these. In May 1902, a wife filed her petition for divorce on the ground of her husbands adultery and cruelty. In December 1903, she filed a supplemental petition, alleging desertion without reasonable excuse for 2 years and upwards. At the trial of the cause before Gorell Barnes J, the charges of cruelty and adultery were negatived by the jury. It was then contended on the wifes behalf that she was entitled to a decree of judicial separation by reason of the husbands desertion, which, she alleged, took place in July 1900that is to say, less than 2 years before the original petition, but more than 2 years before the supplemental petition. In point of fact, the desertion in July 1900 was not proved, but the judge went on to consider what would have been the result if it had been. He said, at p 395:

It seems to me that if nothing has happened during the 2 years to entitle the wife to refuse to return to the husband, if he desires to put an end to the desertion, the petitioner, by filing a petition for divorce in the interval, and making and maintaining throughout charges which are in fact unfoundedand by that I mean charges which it is shewn give her on the real facts of the case no right to say to him, “I will not have you back if you offer to return”; and then, as an incident in those proceedings, obtains an order for alimony and enforces itthat, I think, puts it out of the power of the respondent to do anything, and it seems to me it is a position in which, by her own act, the petitioner is showing that she is no longerno matter what his attitude isready to receive him back, and can, I think, no longer be held entitled to treat him as continuing to desert her.

This is very far from laying down any such general principle as was enunciated by Sir H H Cozens-Hardy MR, in Stevenson v Stevenson. In deciding the question whether or not the petition by the deserted wife in that case put an end to the desertion, Gorell Barnes J took into consideration (i) the conduct of the deserting husband, (ii) the fact that the wife in the petition made unfounded charges against her husbandcharges which the judge stigmatised as having “no reasonable basis,” “no reasonable prospect of success,” and as charges “unfounded in their character” which had been “flung” against himand (iii) the fact that she actively maintained the petition by obtaining and enforcing orders for alimony. After the filing of the petition in that case, the husband could not reasonably have been expected to take steps to end the desertion. Nor had the husbands conduct been such as to entitle the wife to refuse to return to him had he

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desired to put an end to the description, and the conduct of the husband is always a material consideration in such cases. If, for example, he is living in adultery with another woman as his wife, it would be absurd to think that it is the petition of the wife which is responsible for the continuance of his desertion.

Harriman v Harriman was a decision of the full Court of Appeal given in these circumstances. A husband deserted his wife in July 1905. In March 1906, the wife obtained an order under the Summary Jurisdiction (Married Women) Act 1895, s 5, that her husband should pay a weekly sum for her support, but the order contained a provision under s 5(a) of that Act that the wife should no longer be bound to cohabit with her husband, and this provision, by virtue of the subsection, had the effect of a decree of judicial separation. In December 1907, the wife presented a petition for dissolution of the marriage on the grounds of the husbands adultery and desertion for 2 years without reasonable excuse. It was held that the effect of the non-cohabitation clause was to prevent the continuance of the desertion after the date of the order. There had been a decree, or what was equivalent to a decree, of the court, in the face of which it was out of the question that the husband should make any attempt to return to the matrimonial domicil. The case is no authority whatsoever for the proposition that the mere filing and service of a petition for divorce or judicial separation have of themselves the same effect.

In Lapington v Lapington, a husband deserted his wife in June 1886. In August 1886, the wife presented a petition for dissolution of her marriage, on the ground of the husbands adultery and cruelty. In July 1888, she obtained leave to amend her petition by alleging in addition a charge of his desertion without reasonable cause for 2 years and upwards. At the hearing, the petitioner abandoned the charge of cruelty and relied only upon the adultery and desertion. Butt J refused to make a decree, but solely upon the grounds that, at the date of the petition, the desertion had not continued for the necessary 2 years, and that the difficulty was not got over by amending the petition. He said, at pp 21, 22:

The cause of action did not exist when the suit was commenced. At common law if a man issues a writ before the credit has expired he cannot obtain judgment on that writ by a simple amendment … I am ready to grant you now a judicial separation on the ground of adultery, which will not prevent further action on your part to turn it into a decree nisi for dissolution on the ground of desertion but it must be by a fresh suit.

How this can be regarded as an authority for saying that the desertion was put an end to by the filing of the petition and would cease to exist while the petition remained on the file passes my comprehension. It is true that Butt J did not say in terms that the desertion had not been put to an end by the filing of the petition, but it is clear that he must have thought that it had not, for the decree of judicial separation which he was ready to grant would necessarily bring the desertion to

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an end, in accordance with the decision in Harriman v Harriman. The strong impression left on my mind by this case is that what I may call the Stevenson principle was unknown to Butt J. It would also appear to have been unknown to so great an authority upon the subject as Sir James Hannen P. In Wood v Wood, the relevant facts were (i) a petition by a wife in February 1886, praying for dissolution of the marriage on the ground of adultery and desertion since January 1884, (ii) the hearing of the petition in June 1886, when it was adjourned, desertion for 2 years not having been shown, but only a desertion beginning in October 1884, (iii) a supplemental petition filed in August 1887, alleging desertion since October 1884, and (iv) a decree nisi for dissolution pronounced by Sir James Hannen P, in December 1887. It will be observed that, although during the whole period from February 1886 to December 1887, the wifes petition was on the file, Sir James Hannen P treated the desertion as continuing. In Kettlewell v Kettlewell, a wife petitioned for dissolution of her marriage on the ground of her husbands adultery and cruelty. He had also deserted her, but the 2 years had not elapsed at the date of the petition. At the hearing of the petition, the charge of cruelty was not proved, but, 2 years having at that time elapsed since the original desertion, Sir James Hannen P gave the wife leave to amend her petition by alleging desertion for 2 years. Whether or not a decree for dissolution was then made does not appear from the report, though presumably one was in fact pronounced. In any case, Sir James Hannen P would not have given leave to make such an amendment if the presentation and service of the petition had brought the desertion to an end.

My Lords, it is unnecessary to trouble your Lordships with decisions pronounced since Stevenson v Stevenson was decided, because that case was undoubtedly binding upon all tribunals other than this House. I must, however, make an exception in the case of the recent decision of Langton J, in Marthews v Marthews, for Langton J expressed the view in that case that the principle laid down in Stevenson v Stevenson had received legislative recognition in the Matrimonial Causes Act 1937, s 6(3). With all respect to Langton J, I am unable to take this view. The subsection is in these terms:

For the purposes of any such petition for divorce, a period of desertion immediately preceding the institution of proceedings for a decree of judicial separation or an order under the said Acts having the effect of such a decree shall, if the parties have not resumed cohabitation and the decree or order has been continuously in force since the granting thereof, be deemed immediately to precede the presentation of the petition for divorce.

The subsection is dealing with a case where a decree of judicial separation, or an order having the same effect, has actually been made, and not with a case where a petition has been filed without any order having been made upon it. The subsection would, therefore, appear to have been directed to avoiding the difficulty occasioned by the decision in Harriman v Harriman, which was unquestionably rightly decided. I can

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draw no inference in favour of Stevenson v Stevenson from the fact that the subsection does not deal with the difficulty which has been created by that case. Nor have I been able to find any support for that decision in any of the earlier authorities. I did not, indeed, expect to do so, for, with all respect to the eminent judges who were parties to the decision, I cannot agree that, when a wife presents a petition for divorce or judicial separation, she is “praying the court to require her husband to keep away,” if that be meant, as Sir H H Cozens-Hardy MR, intended it to be meant, to refer to the period between the filing and the hearing of the petition. Nevertheless, that was the ground upon which the decision was based. There may be casesKay v Kay was one of themwhere the petition contains gross charges against the husband so reckless and so unfounded that he cannot reasonably be expected to make any attempt to bring his desertion to an end. In a case such as the present, however, I can see no reason at all why the husband should be treated as being absolved from his duty to make any such attempt by the presentation and service of the petition. He must not, of course, try to “force himself into the matrimonial home,” to use the words of Sir Boyd Merriman P, in Bush v Bush, at p 144 ([1938] 4 All ER, at p 600). Any such molestation would very properly be punished by the court. The court, however, would never discourage a friendly attempt at reconciliation on the husbands part, as, for example, by letter. It would, on the contrary, be only too ready to encourage any such attempt. The Divorce Court does not exist for the purpose of promoting the dissolution of marriages, but for the purpose of discharging the painful duty of dissolving them when all reasonable hope of reconciliation between the parties has come to an end.

My Lords, in my opinion, in laying down a general principle applicable to all cases in which a deserted spouse presents a petition for divorce or judicial separation, the decision in Stevenson v Stevenson was wrong, and should be overruled. The question whether a deserting spouse has reasonable cause for not trying to bring the desertion to an end, and the corresponding question whether desertion without cause has existed for the necessary period, must always be questions of fact, and the determination must depend upon the circumstances of the particular case. I deprecate attempts to lay down any general principle applicable to them all.

It only remains to consider whether, in the case now before your Lordships, the respondent can be said to have had any reasonable excuse for making no attempt to put an end to his desertion of the appellant. For this purpose, it is only necessary to consider the filing and service upon him of the two earlier petitions. No one has suggested, or could suggest on the facts that I have stated, that he could have had any other excuse. It is true that the first petition, which was filed on 14 April 1930, charged the respondent with adultery. It was never

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proceeded with, and the charge has never been proved. However, it was never disproved, and there is nothing in the history of this case which even remotely suggests that the petition, while it was on the file, deterred the respondent in the very least from taking steps to end his desertion. Beyond serving the respondent, nothing was done by the appellant under the petition, and it remained neglected on the file until it was dismissed on 4 May 1937. In the meantime, the appellant had been making more or less fruitless attempts to make the respondent pay the 20s per week for the maintenance of herself and her child which had been ordered by the court of summary jurisdiction, and the respondent had successfully applied to that court for an order reducing the allowance to 12s 6d per week. He paid this sum for a short time, but then disappeared, and made no further payments. His next appearance on the scene was when he wrote to his wife the letter of 2 October 1936, enclosing the hotel bill as evidencethough apparently untrue evidenceof his adultery. Thereupon, having got the first petition dismissed, she filed and served the second. No further proceedings were taken under it, and on 1 March 1938, it was dismissed, for the reasons I have mentioned in an earlier part of this judgment. It is abundantly plain that there was nothing connected with this second petition which could in any way have induced the respondent to refrain from putting an end to his desertion, had he had the slightest desire to do so.

My Lords, in my opinion, the desertion by the respondent without cause, which began in 1925, continued to be desertion without cause uninterruptedly down to the filing of the present petition in March 1938. Therefore, for the reasons that I have given, I would allow the appeal. The order of Hodson J, of 18 January 1939, and that of the Court of Appeal of 2 May 1939, should be discharged, and the case should be remitted to the Probate Divorce and Admiralty Division to make a decree nisi for the dissolution of the marriage between the appellant and the respondent.

Appeal allowed. Case remitted to Probate Divorce & Admiralty Division to grant decree nisi.

Solicitors: Percy Bono & Griffith (for the appellant); Treasury Solicitor (for the Attorney-General).

Michael Marcus Esq   Barrister.


Barking Borough Rating Authority v Central Electricity Board

[1940] 2 All ER 341


Categories:        LOCAL GOVERNMENT        

Court:        KINGS BENCH DIVISION        

Lord(s):        LORD HEWART LCJ, HUMPHREYS AND HILBERY JJ        

Hearing Date(s):        11, 12, 15 JANUARY, 2 APRIL 1940        


Rates and Rating Basis of assessment Electricity undertaking Limiting profits basis to accounts for year preceding date of assessment Whether “special circumstances” rendering profits basis inapplicable Rating and Valuation Act 1925 (c 90), s 31(5).

The hereditament occupied by the respondents in the area of the appellants, consisting of pilot wires of an electricity substation or transformer station and certain transmission towers and lines, was assessed in the appellants valuation list at a rateable value of £1,244 and on 26 May 1934, the respondents by a proposal objected to the assessment on the ground that it was excessive and unfair. On 18 January 1935, the appellants made a proposal to amend the list by increasing the assessment to £8,436, and the respondents duly objected thereto. The proposals and the objection were heard by the local assessment committee on 19 October 1936, and 15 March 1937, when they decided to amend the list by increasing the assessment to £2,100, which increase was affirmed on appeal to quarter sessions by the appellants, who then appealed against the decision of quarter sessions. At the hearing before quarter sessions, evidence relating to the estimates and the accounts of the respondents subsequent to 1934 was excluded as irrelevant. The appellants contended that there was no justification in law for limiting the profits basis to the accounts for the year preceding the date of the assessment, and that there were “special circumstances” existing as at 1 April 1934, which in law made the profits basis inapplicable, or required it to be modified. The respondents contended that the statutory hypothetical tenant from year to year was not a tenant for a term certain, and in particular not a tenant for a term of 10 years, that the evidence was thus rightly excluded as irrelevant, and that there were no special circumstances rendering the profits basis inapplicable:

Held (i) there were no special circumstances which rendered the profits basis inapplicable.

(ii) evidence relating to the accounts subsequent to 1934 was rightly excluded as irrelevant.

(iii) as the estimates subsequent to 1934 were private documents of the respondents, they could not be forced to produce them and to put them in evidence.

Notes

The rateable value is usually based upon the rent, but, in the case of public utility undertakings, the actual profits made upon the property to be valued have long been taken as a basis upon which to calculate the rateable value. The present case is mainly concerned with the period over which the inquiry concerning profits shall extend and the extent to which the assessment authority can call for the production of estimates of the profits of the undertaking. The property to be assessed in the present case presented a peculiar difficulty in that a large part of the receipts of the undertaking arose from the sale of electricity to other undertakers, who had generated it.

As to Assessment on Profits Basis, see Halsbury (Hailsham Edn), Vol 27, pp 390, 391, para 824; and for Cases, see Digest, Vol 38, pp 480493, Nos 386484.

Cases referred to

Kingston Union v Metropolitan Water Board [1926] AC 331; 38 Digest 547, 901, 95 LJKB 605, 134 LT 483, affg SC sub nom Metropolitan Water Board v Kingston Union Assessment Committee [1925] 2 KB 509.

Page 342 of [1940] 2 All ER 341

St James & Pall Mall Electric Light Co Ltd v Westminster Assessment Committee [1934] AC 33; Digest Supp, 103 LJKB 9, 150 LT 123.

Mersey Docks & Harbour Board v Birkenhead Assessment Committee [1901] AC 175; 38 Digest 526, 735, 70 LJKB 584, 84 LT 542.

Great Central Ry Co v Banbury Union, Sheffield Union v Great Central Ry Co [1909] AC 78; 38 Digest 543, 875, 78 LJKB 225, 100 LT 89, revsg [1907] 1 KB 717, and [1908] 1 KB 750.

R v London, Brighton & South Coast Ry Co (1851) 15 QB 313; 38 Digest 518, 695, 20 LJMC 124, 16 LTOS 533.

Appeal

Appeal by way of case stated from a decision of the court of quarter sessions for the county of Essex. At the hearing before quarter sessions, the following facts were proved or admitted:

The respondents do not generate electricity, though in certain circumstances they would have the power to do so. The generation of the electricity purchased by the respondents is for the most part concentrated at certain selected stations which are operated under the control of the respondents, and the whole output of which is purchased by the respondents. Subject to the right of the respondents to sell energy to railway companies, all the energy purchased by the respondents is sold by them in bulk to other authorised undertakers, who in turn sell it either to yet other authorised undertakers or to consumers. The owner of a selected station may also be an authorised undertaker. He sells his whole output of energy to the respondents and buys back so much as he requires for his own distribution at a statutory price. So much of the energy produced at that station as is re-purchased by the owner does not pass on the grid. The selected stations are so linked up by the grid that the amount of spare generating plant for use in emergencies and at peak working can be kept at a minimum for the country as a whole. For the purpose of the respondents undertaking, the country is for the present divided into 9 areas including 2 areas in Scotland. The hereditament in question is included in the area known as South-East England. The grid was not completed in all areas at the same time. The expression “general trading” is used when a tariff under the Electricity (Supply) Act, 1926, s. 11, fixed by the respondents and approved by the electricity commissioners has come into operation in any area. Prior to such tariff being fixed, the respondents trading in the area was known as “preliminary trading.” By the Electricity (Supply) Act, 1926, s. 11, the tariff to be charged by the respondents (being the sale price of electricity sold by the respondents to authorised undertakers other than authorised undertakers who own selected stations, and who may under the Electricity (Supply) Act, 1926, ss. 7, 13, be entitled to purchase their requirements of electricity from the respondents at a special price) has to be fixed so that, over a term of years to be approved by the electricity commissioners, the receipts on income account of the respondents shall be sufficient to cover their expenditure on income account, with such margin as the electricity commissioners may allow. The term of years fixed by the respondents in respect of the first tariff period, and approved by the electricity commissioners under the Electricity (Supply) Act, 1926, s. 11, was generally 10 years. In the case of some areas, a shorter term was fixed. The termination of the tariff periods did not in all cases synchronise. The respondents cannot require a supply of electricity to be purchased from them by any authorised undertaker other than the owner of a selected station, except under the Electricity (Supply) Act, 1926, ss. 10, 14. A percentage of 89.8 per cent. of the total sales of electricity by the Board in 1934 was to the owners of selected stations. Of these sales, 14.5 per cent. were at tariff prices and 75.3 per cent. were at a price agreed on the principles set out in the Electricity (Supply) Act, 1926, s. 13. Any increase in the tariff rate would increase the number of owners of selected stations who would be in a position to demand a supply on the terms set out in the Electricity (Supply) Act, 1926, s. 13. The initial construction of the grid was completed early in 1934, but the grid had only come into use up to a fraction of its capacity. During 1933, general trading was being carried on in 2 areas only. General trading commenced in the South-East and East England areas and in one other area on Jan. 1, 1934, and in a sixth area on Apr. 1, 1934. By 1937, general trading was being carried on in 8 areas. In 1933, two valuers appointed by the central valuation committee and the respondents respectively recommended that, for the purposes of the second valuation list under the Rating and Valuation Act, 1925, and subject to reconsideration when the grid came into full or fuller operation, the respondents transmission lines should be assessed at certain values per mile, according to voltage and circuits. The

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central valuation committee advised all rating and assessment authorities to give effect to that recommendation, and proposed that the position should be examined afresh early in 1936. No recommendation was made with regard to transformer stations. The cost of a double-circuit 132,000-volt line, with towers, but without allowing for land, was 27s. per yard. Five per cent. on that figure equalled 1s. 4¼d. per yard, and the figure adopted by the appellants for the purpose of their valuation hereinafter referred to was 1s. 3d. per yard. Figures similarly calculated were used by the appellants for the purpose of valuing the other transmission lines. At the hearing before the assessment committee, the respondents contended that, on an application of the profits basis, the rateable value of the hereditament in question was nil, but they offered to accept an assessment of £2,100, which was based on a valuation of the transmission lines according to the recommendation of the central valuation committee amounting to £173, and on a valuation of the said transformer station at 1 per cent. on a capital cost of £164,570 plus the ground rent of £125that is, £1,770. The valuation of £173 gives an average net annual value for the lines, towers and land of about 2d. per yard. For wayleaves for the transmission towers in the appellants area the respondents pay £445 annually. In addition, the lands in which certain towers in the area are placed have been purchased by the respondents at a cost which is equivalent to an annual payment of £55. The assessment of the respondents undertaking for the year commencing Apr. 1, 1934, if calculated by the application of the profits basis to the respondents actual accounts for 1933 or 1934, would be nil. There had been prepared by the electricity commissioners and published by His Majestys Stationery Office during 1927 to 1931 electricity schemes for each of the 9 areas. Among other estimates prepared by the electricity commissioners and published with the schemes were: “Estimated expenses of central electricity board (other than costs of generation) and unit charge necessary to meet such expenses.” The estimates were made by the commissioners for a varying number of years, year by year. These estimates were put forward by the electricity commissioners as illustrations of a manner in which the schemes as prepared by them might be operated. The schemes as adopted by the respondents varied from the schemes for each of the 9 areas, particularly in relation to the number of selected stations. General trading commenced in each area two to three years later than was expected by the electricity commissioners. Before obtaining the approval of the electricity commissioners in respect of each of the tariffs fixed by them under the Electricity (Supply) Act, 1926, s. 11, the respondents prepared estimates of their receipts and expenditure in each of the years included in the period proposed by them to be fixed as the tariff period. The estimates made by the respondents were based on tariffs which they were satisfied complied with the provisions of the Electricity (Supply) Act, 1926. That is to say, over the term of years fixed by the respondents and approved by the electricity commissioners, the receipts on income account should be sufficient to cover the expenditure on income account, with such margin as the electricity commissioners may allow. The estimates made by the respondents were never made public, and, except for 1933 and 1934, in so far as they related to areas then engaged in general trading, they were not produced in evidence. The account for 1933 for those areas in which general trading had commenced showed a surplus of revenue over expenditure of about £6,500, as against a deficiency of £244,000 estimated by the respondents for that year as the first year of a 10-year period. The comparable figures disclosed by the 1934 account and the estimate for 1934 were a surplus of about £96,000 against an estimated deficiency of £119,000. During the various tariff periods, the hereditaments occupied by the respondents would vary from time to time. The average rate of interest payable by the respondents on borrowed capital during 1933 and 1934 was 5.375 per cent. The capital expenditure up to 1934 on that part of the respondents undertaking in which general trading had commenced was £19,554,107, and a total rateable value by taking 5 per cent. on that figure would be £977,705. If the respondents had paid rates on that rateable value during 1934, the payment for rates at an average of 11s. in the £ would have been £537,738. During that year, the actual net interest charge on all money borrowed by the respondents other than money borrowed for the purpose of standardising frequencies amounted to £1,285,721. This charge was capitalised by the respondents under the powers conferred by the Electricity (Supply) Act, 1926, s. 27(2)(b), and was not charged to revenue, which in fact amounted only to £96,000.

The case stated the evidence as follows:

At the hearing before quarter sessions, the appellants asked for the respondents estimates made prior to Apr. 1, 1934, for each area for each year up to 1939 to be produced, but, on a submission by the respondents, quarter sessions ruled that

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estimates other than those for 1933 and 1934 in respect of the areas which were actually engaged in general trading in those years were inadmissible. On a submission by the respondents, quarter sessions also ruled that the published accounts for any year after 1934 were also inadmissible, although at an earlier stage extracts from the respondents published accounts for 1935 to 1937 inclusive had already been put in evidence by the appellants without any specific objection at the time by the respondents, but, in cross-examination of appellants witness who produced them, counsel for the respondents refused to treat these accounts as in any way relevant. The appellants produced a valuation based on the published estimates of the electricity commissioners, together with the appellants own estimates for the year 19411942 in respect of the 4 areas for which the electricity commissioners had not made an estimate, which showed that over a period of 10 years from 19321933 to 19411942 a sum of money might be earned which would be sufficient to justify a rateable value of 4.24 per cent. on capital expenditure if the whole of that period were looked at. For the reason that general trading commenced two to three years after the date expected by the electricity commissioners, the appellants submitted that 4.24 per cent. was an underestimate, and that 5 per cent. would be justified. In support of their valuation, the appellants produced a comparison of the electricity commissioners estimates for 1933 to 1937 with the actual results achieved by the respondents, as disclosed by their published accounts. The appellants further relied on the fact that, in so far as the respondents did not pay rent for their undertaking, they were paying sums by way of interest which amounted to not less than 5 per cent. on the capital expended on the undertaking.

Sydney G Turner KC (for A M Trustram Eve KC on war service) and J Scott Henderson for the appellants.

W Craig Henderson KC and C Erskine Simes for the respondents.

2 April 1940. The following judgment was delivered.

HILBERY J (delivering the judgment of the court). This appeal by way of case stated raises two questions. To adopt the words of counsel for the appellants, the substantial question is whether the court of quarter sessions was right in law in holding itself bound to arrive at the rateable value of the hereditaments in question on what is known and recognised as “the profits basis.” It was laid down by the House of Lords in Kingston Union v Metropolitan Water Board, that, in the case of a water company or other body supplying water in a number of different parishes and possessed in those parishes of reservoirs, mains and other property necessary for the purposes of the undertaking, the rateable value of the hereditaments of the undertaking in any particular parish should be ascertained on the profits basis. To that rule of general application where such undertakings were concerned Viscount Cave LC added this proviso, at p 345:

… I do not mean that in no case can another method be adopted by a rating authority in assessing waterworks for rating purposes; but in order to justify that course it would be necessary that the authority should be satisfied that there are special circumstances in the case sufficient to make it necessary for them to exclude the recognized formula of assessment and to resort to some other principal …

The word “necessary” in that context, it is not disputed, means necessary in order to assess the rateable value of the hereditaments in question in any particular case. It was conceded by counsel for the appellants that that decision would be applicable to the respondents undertaking, and that the profits basis would be the right method to apply were it not that the facts disclosed, as the appellants contended, special circumstances sufficient to make it necessary to exclude this recognised formula of assessment.

Page 345 of [1940] 2 All ER 341

Before I deal with what were said to be the special circumstances making it necessary to exclude the profits basis, it is worthy of note that neither the assessment committee nor the court of quarter sessions felt any difficulty in applying the recognised method to the facts of this case. It must be essentially a matter for the body which has the duty of making the assessment to say whether it finds in the facts circumstances which make it necessary to depart from the recognised formula and to employ another.

A question of law for this court might well be said to arise if the assessment committee misdirected itself by refusing to apply the recognised formula without regard to the question whether or not there were special circumstances compelling resort to another method, since it is now the law that an undertaking of the nature dealt with in Kingston Union v Metropolitan Water Board must be rated in all the parishes where it has rateable hereditaments according to this recognised formula. If, however, as here, the assessment committee and quarter sessions, rightly applying the law, decide the rateable assessment by the recognised formula, there is no law which decides what shall or shall not be special circumstances making it necessary for them to adopt another method. If those tribunals examine the facts and decide the question whether or not the facts compel them to depart from the formula which the law says they must employ, their decision on that question is one of fact, and not one of law. That the Kingston case went through all the courts was due to the fact that the decision of the justices had been given as a decision of law. In that case, it was pointed out by Viscount Cave LC, that it was evident that the justices were of opinion that in law the profits basis was inapplicable to such an undertaking as was there in question, since it was carried on in performance of a statutory duty, and not for profit. Viscount Cave LC said, at p 341:

It would have been difficult for them to indicate more clearly that the question which they intended to submit was one of rating law and not of fact …

That, of course, is wholly different from a case like the present. Here the case as stated shows that the justices did what the law required them to donamely, took the profits basis formula as prima facie applicableand then correctly directed themselves to inquire whether there were circumstances which made it necessary for them to resort to some other method. Once they had thus directed themselves, they were the tribunal to decide whether in fact they were compelled to adopt another method than the profits basis. In the language of Viscount Cave LC, already quoted, they were that rating authority which had to be satisfied that there were special circumstances making it necessary to depart from the recognised formula. It would be strange if this court had the duty of deciding as a matter of law what circumstances in the case under consideration ought to have made the assessment committee and quarter sessions feel and find that they were unable to employ the recognised formula.

The first point taken by the respondentsnamely, that what is said

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to be the substantial question is not a question of law, but is one of factappears to us, therefore, to be right. In view, however, of the argument which was presented, it is desirable to state our views on the appellants contention that, in the facts of the case, there were special circumstances making it necessary that the assessment committee should not apply the profits basis formula. The special circumstances which, according to the appellants, the committee of assessment and quarter sessions ought to have decided made it necessary for them to depart from the recognised formula are set out in para 14 of the special case. The first is stated in the case in these terms, in para 14(1):

That by law the respondents had so to fix their tariff that over a period of years the revenue receipts would be sufficient to cover the revenue expenditure including interest and sinking fund charges together with such margin as the electricity commissioners might allow.

To that it may be answered that the Metropolitan Water Board, who were the parties to, and the subject of, the Kingston case, have to do the same thing. True it is that the water board is required to do it each year and the respondents may do it over a period of years approved by the commissioners, and the commissioners have approved their doing it over a period of 10 years, but that is fortuitous. If the assessment committee looks at accounts covering the latest period antecedent to the making of the rate, it may be easier to use them if they are balanced yearly than if they are only a part of accounts intended to be balanced over an incompleted period of 10 years. The difference between using the one set of accounts and the other, however, is a question of convenience, and not of principle.

The second alleged special circumstance is said to be this:

That by law the respondents were enabled to budget for revenue deficits in the earlier years of the tariff period by being given power to pay interest out of capital and to suspend the sinking funds, such revenue deficits to be made good by surpluses to be derived from the larger volume of business in the later years of the tariff period, and that such revenue deficits have in fact been incurred.

That provision is not new in legislation affecting statutory bodies with particular functions to perform but belonging to the same genus as that of the respondents. Our attention was called to the Port of London (Consolidation) Act 1920, ss 104, 105, which enable that authority to suspend for 10 years payments to the sinking funds which they are bound to provide to redeem or repay stock or money borrowed and redeemable or repayable in 90 years, and give power to charge to capital interest on moneys laid out on constructional work from which revenue may be derived after its completion. Other examples of the same thing were given to us, such as the Grampian Electricity Supply Act 1922, ss 88, 89, and the Electricity Supply Act 1922, s 1, of which the Electricity (Supply) Act 1926, s 27, is merely a repetition. Local authorities who own electricity undertakingsand there are many such all over the countryhave similar powers under the Local Government Act 1933, s 198. No case was cited to us where such undertakings as

Page 347 of [1940] 2 All ER 341

are carried on under, or pursuant to, the provisions of these various Acts were rated upon any formula other than that of the profits basis, nor was the statement that all such undertakings were in fact rated upon that basis challenged by counsel for the appellants. Furthermore, it was pointed out by Lord Atkin in St James & Pall Mall Electric Light Co Ltd v Westminster Assessment Committee, at p 42:

… the amount of the landlords or tenants share of the fund does not depend upon the use to which they put their shares when received, whether voluntarily or under statutory obligation. It is well established, for instance, that sinking funds to satisfy capital obligations whether imposed by statute or not are not permissible deductions in calculating the fund to be divided.

For rating valuation, therefore, payment or suspension of payments to the sinking fund is irrelevant. Again, whether or not interest is capitalised or paid can make no difference for rating purposes, since interest payments are not deductible in arriving at gross rateable value. Such payments are an allocation out of profits made by the landlord, and are a landlords charge. They are no part of the measure of annual value which the assessing body is seeking to ascertain. As was said by Lord Davey in Mersey Docks & Harbour Board v Birkenhead Assessment Committee, at p 186:

… it is perfectly immaterial what becomes of the amount which is the result of carrying on the business on the hereditament after paying the expenses and other outgoings. It is immaterial whether it is applied for public uses, or the payment of debt and other charges as in the present case, or whether it goes into the pockets of the occupiers. What you have to look at is this: Is the occupation “beneficial” in the sense in which the term is used in that passage?

The interest which a landlord may be called upon to pay upon the capital expended on the erection of the hereditament in question cannot be a measure of the rent which the hypothetical tenant would be ready to pay for his occupation of the hereditament, nor could it be a matter which the hypothetical tenant could be supposed to take into consideration in calculating what rent he could pay. In Great Central Ry Co v Banbury Union, Lord Loreburn LC said, at p 87:

The real objection is that cost is not a measure of rent. Many houses constructed at enormous expense notoriously fetch very moderate rents.

In these circumstances, it is impossible to say that the second alleged special circumstance is such as could make it necessary or proper to depart from the profits basis.

The third, fourth and fifth special circumstances were as follows:

(3) That the accounts for 1933 had little relation to the undertaking which had to be valued at Apr. 1, 1934, since at the latter date 5 areas were in general trading whilst in 1933 only 2 areas were engaged in general trading. (4) That the accounts for 1933 do not comprise receipts (other than preliminary trading receipts) earned in the area in which the said hereditament is situated. (5) That the grid was not completed until early in 1934 and that the undertaking which had to be valued as at Apr. 1, 1934, was different in size, quality and user from that which earned the receipts shown by the 1933 accounts.

These facts, however; did not make the application of the profits basis impossible. The rating authority dealt with all the facts available

Page 348 of [1940] 2 All ER 341

to them down to the date when the rate was madenamely, 1 April 1934. Accounts are only one form of material for consideration. The accounts for 1933 were the latest accounts available to them giving actual figures in relation to such trading as there had been. There is nothing in the case, however, to show that the authority did not take into consideration all such facts as could be ascertained down to the latest time, antecedent to the date when they were making the rate. An authority such as the respondents, or any other large electricity undertaking, obviously cannot create the whole of its system at once, and will necessarily be coming into actual trading progressively, in new districts and parishes. In this connection, it must be remembered that a rate, once made, is not final. A fresh proposal can be made at any time under the Rating and Valuation Act 1925, s 37(10).

The sixth alleged special circumstance has only to be read to be recognised as argument, and not as a fact or circumstance. It is stated as follows:

That notwithstanding the results of the said accounts a tenant of the undertaking on the basis of the definition of net annual value contained in the Rating and Valuation Act, 1925, s. 22(1)(b), would be prepared to pay rent for the said undertaking.

The seventh and last alleged special circumstance is said to be this:

That a large part of the gross receipts of the undertaking are receipts for electricity which the respondents sell immediately to the undertakers who generate it, thus making the accounts of the undertaking of an unusual character, the gross receipts being artificially inflated, which materially affects the calculation usually made on the profits basis to arrive at tenants share.

The transaction alluded to does not artificially inflate the respondents gross receipts. It is a transaction which the respondents actually have to enter into in order to conduct the business which they are by statute created to conduct. They are obliged by statute to make the purchase and sale here referred to. The amount bought back from the respondents may be less than they buy or it may be the same. When sold back to undertakers who generate, it is sold back at the respondents statutory price, subject to certain rights reserved by the statute. The transactions alluded to are, therefore, real transactions, forming a necessary part of the respondents business. Moreover, if it inflates gross receipts, as it is said it does, that does not make it necessary to abandon the profits basis. That circumstance can be taken into account by the assessment committee like any other special feature in accounts which they have to consider when arriving at the rateable value and considering the tenants share. In dealing with the tenants share, they are not bound to take gross receipts, and the percentage which they decide upon is entirely a matter for them. In our view, therefore, there were no special circumstances making it necessary to apply some formula other than that which is known as the profits basis.

The other question for the opinion of the court is whether or not evidence relating to the estimates and accounts of the respondents

Page 349 of [1940] 2 All ER 341

subsequent to 1934 was rightly excluded. With regard to accounts, the assessment committee and quarter sessions looked at the 1933 accounts. The rate had to be made on 1 April 1934. Those accounts were taken into consideration because they represented facts. They contained statements of fact known at the time when the rateable value was being fixed.

In R v London, Brighton & South Coast Ry Co, Coleridge J said, at p 367:

The only remaining point in this case turns upon the narrow question, from what date the overseers ought to make their calculations as to the assessment on the company.

This was a railway company in which there had been brought into action an additional mileage of track. Then Coleridge J continues as follows, at pp 367, 368:

The date of the rate is Nov. 20, 1847; and, as regards the company, it is based on a half-yearly statement published by them on Aug. 10, but made up only to the June 30 preceding. In the interval between June 30 and Nov. 20, the value of the working plant of the company had been, as the sessions have found, not improperly, increased from £260,000 to £350,000. The deduction on this outgoing the company claim to be entitled to: and we think they are entitled to it. If this allowance had been attended with the consequence of quashing the rate, we should have been of a different opinion: but, as the rate may be amended, the sessions ought to avail themselves of every light that can be afforded them down to the latest period antecedent to the actual making of the rate, in order to bring it to the greatest possible accuracy. The overseers, in making a prospective rate, are to make it on the supposed prospective value ascertained by them, as well as they can, from the latest evidence in their power as to antecedent value. It cannot be required of them that the assumed value and the actual value should correspond with perfectly minute accuracy … So, now and equally, we think, if the sessions are put in possession of a fact which existed before the rate made, as it is not the absolute duty of the company to volunteer information, if the fact will have the effect of reducing the assessment and approximating it more nearly to actual accuracy, they should amend the rate accordingly.

The court was not there saying, and never has said, that quarter sessions or the assessment committee might pay regard to matters affecting the valuation which had occurred after the date of the making of the rate. What was said was that quarter sessions might look at matters which had occurred after the date at which the companys accounts were closed, and between the date of the closing of the accounts and the date of the making of the rate. The court was emphasising that, as the rate might be amended, the sessions ought to avail themselves of every light that could be afforded them down to the latest period antecedent to the making of the rate. It is not an authority, nor is there any authority, laying down that the rateable value can be fixed on materials which only come into existence after the making of the rate. An assessment based on profits can be based on ascertained returns. The trend of the returns, as shown by such accounts as are existent, is material in considering the tenants share, for it may reasonably be supposed that an ordinary tenant would pay regard to it, but the accounts and the trend of the return must be examined as they are known at the date of the assessment, and not in the light of facts which

Page 350 of [1940] 2 All ER 341

have only happened and come to be known afterwards, and which could not, therefore, have been considered by either the hypothetical tenant or the landlord at the date of the assessment. The rateable value is not to be fixed, though it may be amended, on the basis of the wisdom which comes after the event. The court is of opinion that quarter sessions was right in paying regard to the last accounts before the date of assessment, and would not have been right in looking at the subsequent accounts.

The situation with regard to the estimates is quite different. The form of the questionnamely, whether or not evidence relating to the estimates subsequent to 1934 was rightly excludedsuggests that these estimates were produced and tendered in evidence, but rejected as inadmissible. Para 10 of the case, however, coupled with what we were told by counsel for the respondents took place at quarter sessions (and his statement about these facts was not challenged), shows that no such thing occurred. The estimates in question, according to para 10, were estimates made by the respondents prior to 1 April 1934, for each area for each year up to 1939. Supplementing this with what we were told, it appears that these estimates were private documents of the respondents, that they were not tendered by the respondents nor offered in evidence, that it was the appellants who asked that these documents should be produced and put before the court of quarter sessions, and that, when the respondents objected to produce them, the appellants sought a ruling that the respondents should be forced to produce them. It was in these circumstances, apparently, that quarter sessions ruled that they were inadmissible.

It is well established that an inquiry with the object of fixing the rateable value is not an inquisition, and that the court does not compel the production of private material. If, when quarter sessions ruled, as the case states, that the documents were “inadmissible,” they were using this expression in the sense that they would not force the respondents to produce them and to put them in evidence, the court of quarter sessions were clearly right. Furthermore, if the court of quarter sessions meant, not merely that, but also that, in their view, these estimates would not contain matter which it was right for them to take into consideration, they were, in our opinion, justified in this view, for these estimates were not, on the facts stated, documents containing any statements of actual facts. They were merely estimates containing hypothetical figures which might be used by the respondents for the purpose of framing tariffs. They did not represent any existent facts, nor did they include or record any facts which had already happened from which a deduction could be made about the probable trend of receipts. Every one of the assumptions which they made might be falsified by the actual events. There are no facts stated in the case which satisfy us that these estimates could have afforded, adopting the language already quoted, any light on the problem which had to be resolved

Page 351 of [1940] 2 All ER 341

“down to the latest period antecedent to the actual making of the rate.” The answer, therefore, to both questions asked is in the affirmative. The appeal is, therefore, dismissed.

Appeal dismissed with costs. Leave to appeal to the Court of Appeal.

Solicitors: S A Jewers, Town Clerk, Barking (for the appellants); Richard H Fox, Solicitor, Central Electricity Board (for the respondents).

Michael Marcus Esq   Barrister.

West Cheshire Water Board v Crowe

[1940] 2 All ER 351


Categories:        ENVIRONMENTAL        

Court:        KINGS BENCH DIVISION        

Lord(s):        HAWKE, CHARLES AND HILBERY JJ        

Hearing Date(s):        4 APRIL 1940        


Water Supply Statutory company Power to pay interest from revenue on money borrowed Power to borrow for payment of interest on money borrowed out of capital Whether power to borrow interest already paid out of revenue West Cheshire Water Board Act 1925 (c cxiii), s 83 West Cheshire Water Board Act 1927 (c cxxiii), ss 41(1)(c), 46(1)(d).

The West Cheshire Water Board Act 1925, s 83, directs the appellants to pay out of revenue interest on moneys borrowed for the purposes of the appellants undertaking. By the West Cheshire Water Board Act 1927, s 46(1)(d), the appellants may borrow for the payment out of capital of interest on money borrowed for the construction of works until the completion thereof. For 9 years the appellants paid the interest out of revenue amounting to £51,000. Thereafter, as they required money to extend their works, the appellants sought to borrow the sum of £51,000, by virtue of the powers conferred by s 46(1)(d) of the Act of 1927, for the payment out of capital of interest on money borrowed for the construction of works, which sum had already been paid out of revenue by way of interest. This item was disallowed by the district auditor:

Held (i) the auditor was right in holding that s 46(1)(d) of the Act of 1927 does not empower the appellants to borrow the sum for the purpose of paying out of capital interest already paid in previous years out of revenue under s 83 of the Act of 1925.

(ii) as s 83 of the Act of 1925 provides for the apportionment of any surplus of revenue among the constituent authorities, it is of vital importance that the statutes should be complied with.

Notes

A water board empowered to borrow money for the payment out of capital of interest on money borrowed for certain purposes cannot repay to itself money already paid in respect of interest, but paid out of income. Having discharged the interest out of income, it has no subsequent right to reopen the transaction, so far as its own accounts are concerned, and charge those payments against capital.

As to Finance of Statutory Water Companies, see Halsbury (Hailsham Edn), Vol 33, pp 483487, paras 790796; and for Cases, see Digest, Vol 43, pp 1100, 1101, Nos 291300.

Notice of Motion

Notice of motion for an order that the disallowance by the district auditor, by a certificate dated 26 May 1939, should be quashed. The facts are fully set out in the judgments.

Sydney G Turner KC and C Erskine Simes for the appellants.

R M Montgomery KC and H G Robertson for the respondent.

Page 352 of [1940] 2 All ER 351

4 April 1940. The following judgments were delivered.

HAWKE J. We are all of the opinion that the point which should determine this case is a very short one. We think that Mr Wyndham Crowe was right in his decision. The West Cheshire Water Board Act 1927, s 46(1)(d) means: “To borrow money in order to enable you to pay interest from time to time as you have to pay interest on money borrowed.” The words are not susceptible of referring to payments made years previously. It does not matter whether it is eight years or a year or so, but the point is made more clear if one says “years previously.” These words do not refer to interest which became due years previously and which has been paid out of revenue and finished with. This statute never contemplated anything of that sort. The argument of counsel for the appellants, admirable though it was, really amounted to this. This being a statutory body, its powers are, therefore, determined by the express words of the statute creating it. That statute did not give it the power which it now claims. What the board did was something very near that which was permitted by the statute. There is, however, no cy près doctrine dealing with cases of this sort, and it has to keep strictly within its powers. What it is proposing to do now is to borrow money, not for the purpose of paying interest. It will get no receipt from anybody for a payment of interest, because nobody will be paid interest. There is nobody to whom any interest is owing. Such a borrowing does not come within the terms of the statute.

I want to make one further observation. Counsel for the respondent has shown quite convincingly, to my mind, that this is a matter which could have made a good deal of difference to ratepayers within the area served by the board, and I am not prepared to accept the suggestion of counsel for the appellants that it has made no difference to anybody. If in fact all it has done is to deprive those ratepayers of the chance of getting some relief, they have been deprived of that, and that makes a difference. If this body is an elected one, I can quite understand what the views of the electors and the elected would be if rates were not reduced when they might be. I think that in this case there is certainly something of which the ratepayers have been deprived. It may be only a chance, though I should think probably it is a great deal more, but, on the plain reading of s 46(1)(d) of the Act, I think that this money has been borrowed for a purpose which does not come within the words of that section, and that Mr Wyndham Crowe was perfectly right in the decision to which he came. In my opinion, therefore, the motion must be dismissed.

CHARLES J. This matter comes before the court by notice of motion made on behalf of the West Cheshire Water Board:

… for an order that the disallowance by John Wyndham Crowe, Esq., the district auditor for No. 5 Audit District by a certificate given under his hand dated May 26 1939, of so muchnamely, in each case the sum of £47,622of the items of account of £51,000 entered in folios 130 and 286 of the ledger of the said West Cheshire

Page 353 of [1940] 2 All ER 351

Water Board for the year ended at Mar. 31, 1938, as represents the loan interest on loans raised under the West Cheshire Water Board Act, 1927, s. 41(1)(c), charged to the revenue account in the financial years prior to the year commencing on Apr. 1, 1937, should be quashed.

The grounds of appeal are as follows:

… [the] entries in the accounts of the said board are correct in law. That the item of account of £51,000 was a borrowing on capital account of the sum necessary to pay out of capital interest on money borrowed for purposes of the West Cheshire Water Board Act, 1927, s. 41(1)(c), and as such was duly authorised by sect. 46(1)(d) of that Act.

It is agreed by all that the West Cheshire Water Board act, and can only act, strictly within the limits of the statutes which give them their being. By the West Cheshire Water Board Act 1925, s 83, they are directed:

… [to] apply all money received by them on account of the revenue of the undertaking in the manner and in the order following … (2) In payment of the interest on moneys borrowed by the board for the purposes of the undertaking …

The West Cheshire Water Board Act 1927, s 46, provides as follows:

The board may from time to time borrow at interest … for the purposes mentioned in the first column of the following table … (d) For the payment out of capital of interest on money borrowed for the purposes (c) mentioned in this subsection until the completion of works Nos. 1, 2 and 3 by this Act authorised …

They have two alternatives. They can pay interest on the money which they have raised out of revenue. If they do that, they pay the lender his interestas, indeed, they are bound to doyear by year, and presumably receive receipts year by year for the interest so paid out of their revenue. For 9 years, that is what they did. They thought that that was the most proper, and the appropriate, way of satisfying the interest. Then, however, they wanted money in order to extend their works. They could go to the Minister for further borrowing if they liked, but they did not. They said that a convenient method would be to borrow, or to affect to borrow, under s 46(1)(d) of the Act of 1927, which empowers borrowing for the payment out of capital of interest on money borrowed. When one comes to look into it, one sees exactly how this matter arose. Although it is said that there had been some simmerings in the minds of the board and the chairman and the manager which would lead one to believe that at some time there might be a borrowing, strangely enough it is on 9 March 1937, that an interview is held with one Harry Prescott Hill, the engineer. At that interview, says the affidavit of one Robinson:

The said Harry Prescott Hill expressed the view that the board should borrow the sum already paid out of revenue by way of interest.

That amounted to the sum of £51,000, and that is the money which they wanted to get into their hands. Was it for the purpose of paying interest? Let us see vis-à-vis the unfortunate auditor. The district auditor comes to that sum and says: “Have you any vouchers for interest?” “No, but I will tell you what we have got. If you go back 9 years, I can show you one gentleman who was paid interest out

Page 354 of [1940] 2 All ER 351

of revenue account.” The auditor says: “What has that got to do with it? You have been satisfying the interest out of revenue. We do not go into past history.” It was a complete transaction, and a transaction which, apparently, was carried out every year with perfect regularity and propriety, in accordance with s 83 of the Act of 1925. Then in the ninth year it is sought to borrow under the Act of 1925 the whole of that sum which has been so paid out of revenue, the board saying that it can be designated as money borrowed for the payment out of capital of interest on money borrowed for the purposes (c), which is the construction of works. I cannot bring myself to believe that s 46(1)(d) means anything of the sort, or that it can possibly be applied to this set of circumstances. I was very attracted by the admirable argument of counsel for the appellants, in which he indicated that really it was only one manner of collecting money taking the place of another. Nothing else had happened. No one was hurt. The position of no one was altered, and it was all perfectly correct. If one looks at the last part of s 83 of the Act of 1925, one finds that there may have been a very great affecting of others by the course which was adopted:

Lastly, the surplus (if any) including the interest on the reserve fund when such fund amounts to the prescribed maximum shall after retention by the board of such sum as is required for carrying on the undertaking be apportioned among and paid to the constituent authorities in proportion to the respective assessable values of their respective constituent areas.

The constituent areasthat is, in effect, the ratepayerswere vitally concerned in the method which was adopted. The method which was adopted was a perfectly proper method. The attempt to replace that perfectly proper method by what I venture to think, without offence, was an improper method ought not to be allowed. The auditor stopped it, and the appeal is from his decision. We come to the conclusion that his decision was a perfectly correct one.

HILBERY J. I agree.

Appeal dismissed with costs

Solicitors: Lees & Co, agents for E Cecil Francis, Ellesmere Port, Solicitor to the West Cheshire Water Board (for the appellants); Sharpe Pritchard & Co (for the respondent).

Michael Marcus Esq   Barrister.


King Features Syndicate Inc and Segar v O and M Kleemann Ltd

[1940] 2 All ER 355


Categories:        INTELLECTUAL PROPERTY; Copyright        

Court:        CHANCERY DIVISION        

Lord(s):        SIMONDS J        

Hearing Date(s):        6, 7, 20 MARCH 1940        


Copyright Infringement Cartoons depicting sailor Reproduction in form of brooches and toys Whether cartoons designs capable of being registered under Patents and Designs Acts 19071938 Copyright Act 1911 (c 46), s 22(1).

S was the author of a large number of drawings or cartoons depicting as the central figure a grotesque and fictitious character known as “Popeye” or “Popeye the Sailor,” and it was admitted that if there was copyright in these drawings or cartoons, which were published from 1929 onwards in the United States of America and simultaneously in Canada, it was vested in the plaintiffs or one of them. The defendants, without the consent of the plaintiffs, caused to be made and imported into the United Kingdom, and have there sold, representations in various forms of a figure which they admitted to be the figure of a sailor. The material forms in which this figure was embodied were brooches or charms, plaster dolls and mechanical toys largely composed of celluloid. The plaintiffs claimed that the figure was that of “Popeye the Sailor,” and sued the defendants for damages for infringement of copyright and for an injunction. At the hearing they produced 55 drawings selected from among many thousands of drawings of Popeye which had appeared, and upon this it was contended on behalf of the defendants that, as their articles were admittedly copied from articles made by the plaintiffs licensees, and as it had not been proved or admitted that the latter articles had been copied from the 55 rather than from the thousands of other drawings, it was not proved that any copyright had been infringed:

Held (i) where an artistic work in which copyright is claimed is a drawing in two dimensions, the copyright can be infringed by a toy figure which is in three dimensions.

(ii) it is immaterial whether the infringing article is derived directly or indirectly from the original work.

(iii) the plaintiffs works were not designs capable of being registered under the Patents and Designs Acts 19071938, and were therefore protected by the Copyright Act 1911.

(iv) the plaintiffs had not differentiated between the selected 55 drawings, so far as publication was concerned, and made no admission upon which the defendants could rely for the suggestion that there were Popeye drawings in which no copyright subsisted. The plea on this ground was ill-founded.

Notes

This case confirms previous decisions which have recognised an infringement of the copyright of a drawing in two dimensions by a figure or solid in three dimensions. The more important part of the decision, however, is whether designs such as the well-known Popeye cartoons are designs capable of being registered under the Patents and Designs Acts 19071938, for, if they were, they would not be protected by the Copyright Act 1911, by reason of the exception enacted in s 22(1) of that Act. This, of course, is purely a question of construction, and the decision is against these being designs capable of such registration.

As to Exclusion of Certain Designs from Copyright, see Halsbury (Hailsham Edn), Vol 7, pp 528, 529, para 831; and for Cases, see Digest, Supp, Copyright, Nos 108a111a.

Cases referred to

Bradbury, Agnew & Co v Day (1916) 32 TLR 349; 13 Digest 210, 459.

Burke & Margot Burke Ltd v Spicers Dress Designs [1936] Ch 400, [1936] 1 All ER 99; Digest Supp, 105 LJCh 157, 154 LT 561.

Page 356 of [1940] 2 All ER 355

Hanfstaengl v Empire Palace Ltd [1894] 3 Ch 109; 13 Digest 210, 460, on appeal, sub nom Hanfstaengl v Baines & Co [1895] AC 20.

Ex p Beal (1868) LR 3 QB 387; 13 Digest 210, 453, 37 LJQB 161, sub nom Graves v Beal 18 LT 285.

West v Francis (1822) 5 B & Ald 737; 13 Digest 217, 539.

Pytram Ltd v Models (Leicester) Ltd [1930] 1 Ch 639; Digest Supp, 99 LJCh 381, 143 LT 227.

Wood v Stoddarts Ltd (1931) Macgillivrays Copyright Cases (1928 to 1935) 294.

Con Planck Ltd v Kolynos Incorporated [1925] 2 KB 804; Digest Supp, 94 LJKB 923, 133 LT 798.

Ware v Anglo-Italian Commercial Agency Ltd (1922) Macgillivrays Copyright Cases (1917 to 1923) 346.

Action

Action for damages for alleged infringement of copyright and for an injunction to restrain the defendants from continuing in such alleged breach. The facts are fully set out in the judgment.

E J Macgillivray KC and Frank Gahan for the plaintiffs.

K E Shelley KC and A D Russell-Clarke for the defendants.

20 March 1940. The following judgment was delivered.

SIMONDS J. The plaintiffs King Features Syndicate Inc are an American corporation. The plaintiff Frank Cecil Betts is the personal representative of Elzie Crisler Segar, an American artist who died on 13 October 1938. Segar was the author of a large number of drawings or cartoons depicting as the central figure a grotesque and fictitious character known as “Popeye,” or “Popeye the Sailor.” It is admitted that, if there is copyright in these drawings or cartoons, which were published from 1929 onwards in the United States of America, and simultaneously in Canada, it is vested in the plaintiffs, or one of them. The defendants, O & M Kleemann Ltd, without the consent of the plaintiffs have caused to be made and imported into the United Kingdom, and have there sold, representations in various forms of a figure which they admit to be the figure of a sailor, and which the plaintiffs claim to be the figure of “Popeye the Sailor.” The material forms in which this figure is embodied are brooches or charms, plaster dolls and mechanical toys largely composed of celluloid.

Apart from the serious question which arises under the Copyright Act 1911, s 22, it is not disputed that the drawings in question, so far as they have been published in Canada simultaneously with their publication in the United States of America, are “artistic work” in which copyright subsists under the Copyright Act 1911, s 1, nor that, under s 1(2) of that Act, the sole right to produce or reproduce such work or any substantial part thereof in any material form whatsoever is vested in the plaintiffs. By s 22 of the Act, it is provided that the Act shall not apply to designs capable of being registered under the Patents and Designs Act 1907 (now the Patents and Designs Acts 19071932), with the exception therein contained.

The questions which I have to determine are (i) whether, apart from s 22 of the Act, the brooches, dolls, toys, or any of them are such

Page 357 of [1940] 2 All ER 355

reproductions in a material form of the plaintiffs work as to constitute infringement of copyright, and (ii) whether in any case the work in which the plaintiffs claim copyright consists of designs which are capable of being registered under the Patents and Designs Acts, and which do not fall within the exception contained in s 22.

Some further facts must be stated before these questions can be determined. The figure of “Popeye” is the central figure of a great many comic strips, running, it was said, into many thousands, which appeared in newspapers and journals in the United States of America and in Canada, and afterwards in this country. It is not to be doubted that his face, features, figure and general get-up became very popular and well-known. His obvious peculiarities made it easy both to recognise and to imitate him. It was natural, therefore, that the plaintiffs should try to exploit his popularity in another medium, and, accordingly, in or before 1937, they granted licences to certain persons or companies, amongst others Cecil Coleman Ltd, and Moritz & Chambers Ltd, to manufacture and sell in the United Kingdom brooches and mechanical dolls of certain types, simulating the figure of “Popeye.” Large quantities of such articles were sold, and the plaintiffs were paid substantial sums by way of royalties.

The defendants, who are manufacturers and vendors of toys, saw possibilities of doing business. They first approached a company whom they addressed as “The Paramount Films,” under the impression that they were the owners of the copyright, and it is significant that they asked:

… what terms you are prepared to issue a licence to us for the marketing of “Popeye the Sailor.”

They had then no doubt either of the unique character of “Popeye” or of the subsistence of copyright in the plaintiffs work. Eventually they got into touch with the plaintiffs, but were unable to accept the terms upon which a licence was offered. In the meantime, they had been in correspondence with one of their directors, then travelling in Japan, to whom on 24 February 1937, they had sent a sample, which they thus described:

A sample of brooch, Popeye Sailor, which is being sold in large quantities to showmen.

They added:

It is being sold by Cecil Coleman at 12s. per gross, and I think we could do quite a big business in this.

As the result of this letter, an order was given to Winckler & Co, of Kobe, and goods were despatched by them to the defendants in the United Kingdom, those goods being invoiced with the description:

Popeye Brooches each on a card, 200 gross, 5s. 6d. per gross.

The sterling value of the consignment was stated to be approximately £400. This was followed by numerous other consignments of similar

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brooches, one consignment alone being of 2,000 gross, and, at a later date, by consignments of celluloid mechanical figures and plaster dolls described as “Cell. Popeye,” or “Plaster-filled Popeye,” or “Clay-filled figure Popeye,” or “Mechanical Popeye toy,” or by some similar title. Some of these importations were made after the writ in this action had been issued, but I was invited by counsel on each side to ignore that fact for the purpose of my decision.

The plaintiffs claim that all the articles so imported infringe their copyright. They further claim that their copyright has been infringed by the designs annexed to two applications made by the defendants in September 1937 and November 1937, for registration under the Patents and Designs Acts. These are designs respectively of the brooch and doll which the defendants had imported from Japan. Perhaps these applications may be regarded as a manoeuvre in the contest between the parties. The issue is sufficiently raised by the articles which have been imported and sold.

The first question which has been debated is whether or not, where the artistic work in which copyright is claimed is a drawing in two dimensions, it can be infringed by something such as a toy figure which is in three dimensions. It appears to me that the introduction into the Copyright Act 1911, s 1, of the words “in any material form whatsoever,” which were not in the Fine Arts Copyright Act 1862, lays at rest any doubt which might have been felt upon this point. This was the view taken by Coleridge J, in Bradbury, Agnew & Co v Day, in which he held that so-called “living pictures” might be possible subjects of infringement of copyright in an artistic work. In my judgment, it would be contrary to the plain meaning and spirit of the Act if a copy of an artistic work were an infringement only if made in the same dimensions, so that, for example, copyright in a sketch would not be infringed if the exact design were reproduced either in a frieze made with some measure of relief or in a sculptured pediment. It may be that, where an artistic work in two dimensions is reproduced in a different medium in three dimensions, much will be added to it by the genius of the reproducer, and it may be difficult to recognise the original in the reproduction. However, the same difficulty arises in literary copyright where the original is a novel and the alleged infringement a drama, or in musical copyright where the original is an operatic air and the infringement a piece of dance music embodying some part of it. This only means that the question of infringement of copyright is usually a question of degree, and that, where the medium is not the same, the question is apt to be one of greater difficulty. The defendants have relied upon the decision of Clauson J, in Burke & Margot Burke Ltd v Spicers Dress Designs. There is nothing in the judges judgment, however, to suggest that he thought that there could not be infringement of copyright in a sketch by reproduction in a three-dimensional form. He decided merely that in that case there was no infringement.

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Next, it was urged on behalf of the defendants that the alleged infringing articles did not reproduce any substantial part of the plaintiffs work, and in this connection it was contended that they could not be reproductions of the plaintiffs work because they were copied from the articles made by the plaintiffs licensees, who had themselves made use of the plaintiffs work. The latter contention is untenable. It must be immaterial whether the infringing article is derived directly or indirectly from the original work. The standard is objective. The question is whether or not the original work, or a substantial part thereof, has been reproduced. If it has been, then it is no answer to say that it has been copied from a work which was itself, whether licensed or unlicensed, a copy of the original. For this proposition there is ample authority: see, for example, Hanfstaengl v Empire Palace Ltd, at p 116, where Stirling J cites and applies the words of Blackburn J, in Ex p Beal [p 394]:

When the subject of a picture is copied, it is of no consequence whether that is done directly from the picture itself or through intervening copies …

This view of copyright law has never, I think, been doubted, and is plain common sense.

The question then is whether or not the defendants articles reproduce the plaintiffs work, or a substantial part thereof. In my judgment, they clearly do. In West v Francis, Bayley J said, at p 743:

A copy is that which comes so near to the original as to give every person seeing it the idea created by the original.

Whatever test is applied or definition used, whether or not there is sufficient resemblance to constitute infringement remains a question of degree. In the present case, the characteristic peculiarities which persist through scores of drawings of “Popeye” are repeated in the brooches, toys and dolls. These articles recall to the mind of the public, as they are meant to recall, the familiar figure which they have so often seen in the newspaper comic strips. They are called “Popeye” brooches or toys or dolls just in order to attract the attention of a friendly clientèle. It cannot be doubted that here is the essential “Popeye,” greeting his admirers in a new material form.

A final argument upon this part of the case must be noticed. In opening the case, counsel for the plaintiffs said that, of the thousands of drawings of “Popeye” which had appeared, he had selected 55, so as not to overburden the court, and was content to rest his case upon them. These 55 were all admitted to have been published in Canada. Upon this, counsel for the defendants contended that, as the defendants articles were admittedly copied from the articles made by the plaintiffs licensees, and, as it had not been proved or admitted that the latter articles had been copied from the 55 rather than from any other of the thousands of drawings, or that any drawings other than the 55 had been published in Canada simultaneously with publication in the United States of America, it was not proved that any copyright had been

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infringed. I should not think it necessary to notice this somewhat unattractive argument had it not been developed at some length. It is, in my opinion, ill-founded. No such plea is to be found in the defence, and it rests upon taking out of its context part of counsels opening statement. Counsel for the plaintiffs did not differentiate between the selected 55 drawings so far as publication was concerned, and made no admission upon which counsel for the defendants could rely for the suggestion that there were “Popeye” drawings in which no copyright subsisted. I come, then, to the conclusion that, apart from s 22 of the Act, the plaintiffs owned copyright in the “Popeye” drawings, and that the defendants have in each of the articles infringed it.

I turn to the question whether the plaintiffs sketches are designs capable of being registered under the Patents and Designs Acts 19071932. If they are such designs, then copyright under the Copyright Act 1911, cannot be claimed for them unless they fall within the exceptionthat is, unless they are not used, or intended to be used, as models or patterns to be multiplied by any industrial process. What are “designs capable of being registered” under the relevant Act? Under the Patents and Designs Acts 19071932, s 93:

… “design” means only the features of shape, configuration, pattern or ornament applied to any articles by any industrial process or means, whether manual, mechanical, or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principal of construction …

This definition presents many difficulties when read in conjunction with the Copyright Act 1911. S 22 of that Act assumes the possibility of the existence of something in which copyright might subsist, and which is yet capable of registration under the Patents and Designs Acts. I must make the same assumption, and, for this purpose, must proceed so far as I can upon the footing that, just as the Copyright Act affords protection, not for ideas, but for the embodiment of ideas in the form of words or music or artistic works, so the Patents and Designs Acts afford protection, not for an abstraction, but for features of shape, configuration, and so on “applied to any article by any industrial process or means,” so that, in each case, it is the concrete form, and not the abstract idea, which is protected. If it were not so, no effect could be given to the Copyright Act 1911, s 22, for it would not be possible to co-relate the two Acts.

It is important to bear this in mind, for the word “design” in relation to art may in ordinary usage mean either (i) a plan, idea or conception, or (ii) the artistic idea as executed, or the combination of artistic details which go to make up the picture or other work of art, and it is difficult to avoid the conclusion that the distinction has not been clearly observed in the definition and treatment of “design” in the Patents Acts. For instance, the same design may be registered in more than one class. It is something, then, which may be applied to different sorts of articles. It is surely, then, a conception which

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may be applied to a material article, not a material article to which a conception has been applied. However, if in truth a “design” is only a conception, then no artistic work to which the Copyright Act would otherwise apply is capable of registration as a design, for the Copyright Act gives no protection to ideas. Further, the protection which the Patents Acts give to designsdesign-copyright as it may be calledis the exclusive right to apply a design to articles in a particular class, and not the exclusive right to copy or reproduce an artistic work in any material form. It is apparent, I think, that the marriage of copyright under the Copyright Act and design copyright under the Patents Acts in s 22 of the former Act must lead to serious confusion, and so in truth it has.

In Pytram Ltd v Models (Leicester) Ltd, the question arose in regard to a model of a wolf cubs head produced from a mould in papier maché and intended to be displayed as their totem on the tops of poles by the Boy Scouts Association. This was an artistic work in which the plaintiffs had copyright apart from s 22 of the Act, and the problem was whether or not s 22 of the Act applied so as to exclude that right. Clauson J held that the model fell within the definition of “design” in the Patents Acts. He must, I think, be taken to have rejected in regard to works of sculpture the argument addressed to him on behalf of the plaintiffs to the effect that application to an article means application to an article which does not exist merely as a vehicle for the expression of the artistic conception, for he says, at pp 646, 647:

As I read the Act, the copyright in that article of sculpture is given to the author of it in the first instance, but that copyright is taken away by the first part of sect. 22 if (as would at all events in many cases, if not all, be the fact) the sculpture comes within the term “design” as defined in the Act of 1907 and is, accordingly, capable of being registered under that Act … I see no escape from the position that this model was a design capable of being registered under the Act.

What is true of the model of a wolf cubs head must be true of the model of anything else, and I must regard this decision as an authority for the proposition that every piece of sculpture is, prima facie, a “design” capable of registration under the Patent Acts. In Wood v Stoddarts Ltd, the same view was taken by Farwell J, in regard to a plaster model of the human figure or of an animal made for the purpose of casting metal toys. The judge held that such models were capable of registration, and, therefore, were not protected by the Copyright Act.

So far, I have considered the case of sculpture. I turn to what is the only authority upon the application of s 22 to artistic drawings or sketches. In Con Planck Ltd v Kolynos Incorporated, the plaintiffs were the owners of the copyright, if it subsisted, in two sketches for cut-out advertisement showcards representing a pierrot and pierrette with large faces and diminutive bodies, and the question was whether or not these sketches were designs capable of registration

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under the Patents Acts. Sankey J held that they were, but perhaps the important part of his judgment is that he by no means laid down the proposition that all sketches or all pictures are “designs” capable of registration. On the contrary, whilst holding that the particular sketches were “designs,” he was disposed to favour the view that [p 815]:

… a design is something produced as a pattern to assist one in making some other article … a thing which has no market in itself but is meant to be applied to some other article.

This is the view which had been expressed in Copingers Law of Copyright (5th Edn), but was, at any rate in regard to works of sculpture, rejected by Clauson J. I am not aware of any other case which can guide me. Cases such as Ware v Anglo-Italian Commercial Agency Ltd, in which a drawing is intended to be a design for a commercial article, do not throw any light on this case.

If the defendants are right in saying that the plaintiffs sketches here in question are capable of registration, then all sketches are capable of registration, and, if all sketches, then all paintings. I cannot differentiate. For example, a picture exhibited in the Royal Academy is capable of registration as a design. It may or may not fall within the exception. That might depend on whether or not it was used as a pattern to be multiplied by the industrial process of photography or by any other process. Must I hold that this is the law? I do not think, though perhaps the distinction is a fine one, that the cases upon works of sculpture or models are decisive in regard to sketches. It may be, as Clauson J said in Pytram Ltd v Models (Leicester) Ltd, that there is no escape from the position that a model is capable of registration as a design. In the model itself there are features of shape or configuration applied to an articlethat is, a substance artificial or natural. It might, I would respectfully suggest, be open to question whether the features had been applied to the article by any “industrial process or means.” Nevertheless, however that may be, if the question is asked whether or not, for instance, an oil painting comes within the definition “the features of shape, configuration, pattern or ornament applied to any article by any industrial process or means …” to me at least the answer seems a simple onenamely, that it does not. If it does not, an oil painting cannot be registered as a design. It appears to me that the distinction to which Sankey J referred in Con Planck Ltd v Kolynos Incorporated is, in regard to sketches, a valid one. It is repeated in Copingers Law of Copyright (7th Edn), p 67, where the subject is treated with admirable lucidity. If I look at a picture and ask myself whether or not it is an article to which, by some industrial process or means, features of shape, configuration, pattern or ornament have been applied, I am equally at a loss to know what is the article to which by some industrial process or means features of shape and so on have been applied, and what is the industrial process or means by which they

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have been applied. I see no reason why I should enlarge the plain meaning of the definition in order to bring within it the case of an ordinary painting, drawing or sketch.

I have abstained from considering the general rules, which, by the Copyright Act 1911, s 22(2), were authorised to be made under the Patents and Designs Acts 19071932, s 86, for determining the conditions under which a design is to be deemed to be used as a model to he multiplied by any industrial process, for it cannot, in my judgment, assist in solving the question whether or not a picture is capable of registration as a design under the Patents Acts to read the rules which are made to determine whether or not, for the purpose of the Copyright Act, a design otherwise registrable is to be excepted. I come to the conclusion that the plaintiffs sketches are not capable of registration as designs, and that they are, therefore, protected by the Copyright Act. I will grant the appropriate injunction and direct the usual inquiry as to damages. The defendants must pay the costs of the action.

Judgment for the plaintiffs with costs. Injunction granted.

Solicitors: Shaen Roscoe Massey & Co (for the plaintiffs); Derick R Martin & Co (for the defendants).

C St J Nicholson Esq   Barrister.

Re Eyre Coote, Cavers and Another v Kaye and Others

[1940] 2 All ER 363


Categories:        SUCCESSION; Wills        

Court:        CHANCERY DIVISION        

Lord(s):        MORTON J        

Hearing Date(s):        7, 8, 12, 13 MARCH 1940        


Wills Heirlooms to be enjoyed by person for time being “actually” entitled to mansion house Proviso against absolute ownership by tenant in tail unless attaining 21 or dying under that age leaving lawful issue Death over 21 by first tenant in tail by purchase when prior life interests still existing Whether actual possession condition of ownership.

By his will, dated 18 June 1857, the testator bequeathed to his trustees certain chattels upon trust to permit them to be enjoyed as heirlooms “by the person who shall for the time being be actually entitled to my said mansion house … yet so that the same shall not vest absolutely in any person hereby made tenant in tail by purchase of my said mansion house unless such person shall attain the age of 21 years or dying under that age shall have lawful issue living at his or her death.” The first tenant in tail by purchase under the provisions of the will attained the age of 21 years, but did not survive his father and did not come into actual possession, his interest at the time of his death being subject to the life interests of his father and uncle:

Held the first tenant in tail by purchase was entitled to the heirlooms absolutely, since he attained the age of 21 years, and since the testator, by using the words “actually entitled,” had not indicated with reasonable certainty that he intended to make ownership of the heirlooms dependent upon the tenant in tail coming into actual possession of the mansion house.

Notes

It is often desired to settle chattels to devolve with a tittle. Before 1926, this desire was often frustrated, since it was not possible to create an entailed interest in personalty. Several devices were employed to prevent the

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absolute vesting of the heirlooms in the tenant in tail. Among these devices was one providing that the heirlooms should not vest absolutely in a tenant in tail by purchase unless he attained the age of 21 years or died under that age leaving lawful issue. In the present case, the tenant in tail attained the age of 21 years, but died before the determination of the prior life interest by the death of his father. There was a condition that the heirlooms should be enjoyed only by the person who for the time being should be actually entitled to the mansion house. After a consideration of all the authorities, and particularly Re Parker, Parker v Parkin, it is held that the testator had not sufficiently indicated an intention that the ownership of the heirlooms should be conditional upon actual possession of the mansion house.

As to Settlement of Personalty to Devolve with Realty, see Halsbury (Hailsham Edn), Vol 29, pp 797802, paras 11051108; and for Cases, see Digest, Vol 40, pp 794796, Nos 32363245.

Cases referred to

Foley v Burnell (1785) 4 Bro Parl Cas 319; 44 Digest 947, 8017, affg (1783) 1 Bro CC 274.

Scarsdale (Lord) v Curzon (1860) 1 John & H 40; 44 Digest 944, 8003, 29 LJCh 249, 3 LT 29.

Re Parker, Parker v Parkin [1910] 1 Ch 581; 44 Digest 949, 8028, 79 LJCh 161, 101 LT 943.

Portman v Portman (Viscount) [1922] 2 AC 473; 44 Digest 949, 8032, 91 LJCh 708, 128 LT 129, affg SC sub nom Re Harcourt, Portman v Portman [1921] 2 Ch 491.

Re Angerstein, Angerstein v Angerstein [1895] 2 Ch 883; 44 Digest 949, 8026, 65 LJCh 57, 73 LT 500.

Re Fothergills Estate, Price-Fothergill v Price [1903] 1 Ch 149; 44 Digest 945, 8009, 72 LJCh 164, 87 LT 677.

Re Cheshams (Lord) Settlement, Valentia (Viscount) v Chesham (Lady) [1909] 2 Ch 329; 44 Digest 946, 8010, 78 LJCh 692, 101 LT 9.

Re Beresford-Hope, Aldenham v Beresford-Hope [1917] 1 Ch 287; 44 Digest 949, 8030, 86 LJCh 182, 116 LT 79.

Re Fowler, Fowler v Fowler [1917] 2 Ch 307; 44 Digest 945, 8005, 86 LJCh 547, 117 LT 500, on appeal [1917] 2 Ch p 324.

Re Lewis, Busk v Lewes [1918] 2 Ch 308; 44 Digest 949, 8031, 87 LJCh 652, 119 LT 564.

Adjourned Summons

Adjourned summons to determine upon what trusts the trustees of the will, dated 18 June 1857, of Eyre Coote, who died on 23 August 1864, held certain chattels settled by the will, together with the mansion house, West Park, to be enjoyed as heirlooms “by the person who shall for the time being be actually entitled” to the mansion house. The summons asked, inter alia, whether the heirlooms were held on trust (a) as to one half for Mrs Kaye and as to the other half for John Aubrey Coote Sykes, (b) as to the whole for the personal representatives of Charles Gartside Eyre Coote, or (c) as to the whole as part of the testators residuary personal estate, or on what other trusts.

The testator devised the mansion house to trustees to the use of his eldest son for life and proceeded as follows:

… and from and immediately after the decease of my said son to the use of his first and other sons successively according to their respective seniorities in tail male and in default of such issue to the same or the like uses in favour of my second and other sons successively according to their respective seniorities and

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their first end other sons successively in tail male respectively and in default of such issue to the use of the first and other sons of my oldest son successively according to their respective seniorities in tail and in default of such issue to the use of the daughter or daughters of my oldest son in tail if more than one as tenants in common with cross remainders in tail and in default of such issue to the same or the like uses in favour of the first and other sons and the daughter or daughters of my second and other sons successively according to seniority and in default of such issue to the use of my eldest daughter and her assigns for her life without impeachment of waste (except as aforesaid) …

I give and bequeath unto [the trustees] their executors administrators and assigns all my plate and plated articles glass china pictures prints statues bronzes articles of vertu books household furniture and effects goods and chattels (except wines and liquors and other consumable articles) which shall be my property in or about or belonging to or ordered for my said capital mansion house called West Park aforesaid and also all my family jewels swords armour and arms firearms and all articles presented to me or any of my ancestors upon trust to permit the same to go and be held and enjoyed by the person who shall for the time being be actually entitled to my said mansion house under the said limitations of this my will as or in the nature of heirlooms yet so that the same shall not vest absolutely in any person hereby made tenant in tail by purchase of my said mansion house unless such person shall attain the age of 21 years or dying under that age shall leave lawful issue living at his or her death yet nevertheless such tenant shall during his or her respective minority be entitled to the use and enjoyment of all the said chattels and effects. …

Then there followed a provision as to inventories, which referred to the inventories being signed by the person or persons for the time being entitled to the use and enjoyment of the chattels and effects, thus indicating that the testator did contemplate that more than one person might be entitled for the time being to the use and enjoyment of the chattels. Then the testator gave his moneys, securities for money and the rest and remainder of the personal estate and effects whatsoever and wheresoever unto the trustees, their executors, administrators and assigns:

… upon trust for the persons to whom and in the shares and proportions in which the same would be distributed under the statute for the distribution of the personal estate and effects of persons who have died intestate.

A Andrewes Uthwatt for the plaintiffs, the trustees.

G A Rink for the infant defendant.

Hubert Rose and E J Heckscher for the first and second defendants, personal representatives of the first tenant in tail.

Edward Bagshawe and George A Russo for the third and fourth defendants, next of kin of the testator.

13 March 1940. The following judgment was delivered.

MORTON J. The facts are these. The testator died on 23 August 1864, having made a codicil to his will which is immaterial for the present purpose. He had four childrennamely, Eyre Coote, who died without issue on 6 May 1925, Charles Henry Eyre Coote, who died on 23 November 1938, a son who died an infant in 1876, and the defendant Lady Northbrook. Thus, under the will the successive tenants for life of West Park were (i) the testators eldest son, Eyre Coote, and (ii) his second son, Charles Henry Eyre Coote. Charles Henry Eyre Coote had three children. The first child was Charles Gartside Eyre Coote, to whom for brevity I shall refer as Charles. He was born on 2 December 1896,

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and died unmarried on 22 March 1918. He was thus the first tenant in tail by purchase under the provisions of the will, and he did attain the age of 21 years, but he did not come into actual possession (to use a phrase which appears in many of the cases) of West Park, because at the time of his death his interest as tenant in tail was subject to the life interest of his uncle and his father. The second child of Charles Henry Eyre Coote was the defendant Mrs Evelyn Gertrude Eyre Kaye. She is of age. The third child of Charles Henry Eyre Coote was Nina Violet Eyre Sykes, who was married in 1931 and died in 1935, leaving her surviving two children, of whom the elder was the defendant John Aubrey Coote Sykes, an infant. The position is, therefore, that on his birth Charles became, as I have said, first tenant in tail male by purchase of West Park, but he never came into actual possession of that mansion house. When Charles father died in 1938, the persons who became entitled to West Park, subject to a statutory trust for sale (which is imposed by the Settled Land Act 1925, s 36), and subject to a certain rentcharge, were these. As to one half, Mrs Kaye became entitled as tenant in tail by purchase, and, as to the other half, John Sykes (as I shall call him) became entitled as the tenant in tail by descent, and there were cross-remainders in tail.

In those circumstances, the question which I have to decide is who it was that became entitled to the heirlooms on the death of Charles father in 1938. There are four claimants. In the first place, counsel for the defendant Mrs Kaye says that, on the death of Charles Henry Eyre Coote, she became the only person who answered the description of:

… the person who shall for the time being be actually entitled to my said mansion house under the said limitations of this my will …

He contends that Charles was cut out from this gift by reason of the fact that he did not survive his father. The words “actually entitled,” he submits, mean entitled to the actual possession of the mansion house, and he endeavours to dispose of the claims of John Sykes by saying that he is not a tenant in tail by purchase, as is the fact, and that he is not qualified under the description. The second contention is that of counsel for the infant defendant, who says that Mrs Kaye and the infant defendant both answer the description of the person who is to take these chattels, and that they are entitled to the chattels in equal shares. The third contention is that of counsel for the personal representative of Charles, who says that the chattels vested in Charles on his birth, and that, as he attained the age of 21 years, his interest in them was never divested. Lastly, counsel for the last two defendants, who represent the testators next-of-kin, submits that there is an intestacy.

I think that the first question which I have to consider is whether or not Charles was cut out of the gift by reason of the fact that he failed to survive his father. In dealing with the claims which I have mentioned, I must bear in mind the rule which was settled at least as long ago as Foley v Burnell. That rule was in full force when the

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testator died in 1864, and had been re-stated in 1860 by Sir W Page Wood V-C, in Scarsdale (Lord) v Curzon. It was thus re-stated by Parker J, in Re Parker, Parker v Parkin, at pp 584, 585:

It is, in my opinion, clear, both on principle and on authority, that, where chattels are simply directed to pass as heirlooms with real estate, the first person who under the limitations of the settlement becomes entitled to the real estate for a vested estate of inheritance, whether in possession or remainder, becomes absolutely entitled to the chattels, subject, of course, to his interest being defeated by any event which would defeat his estate in the realty, and, if such estate is in remainder, subject to all prior limited interests such as interests for life. This rule is thought to give effect, and does, in my opinion, give effect, to the testators expressed intention as nearly as the nature of the property admits, it being impossible wholly to effectuate such intention, because the law does not allow the creation of estates or heritable interests in personal property, and has rules against perpetuities. A settlor may, of course, use words showing an intention to modify the rule, but the words relied on for this purpose must indicate such intention with reasonable certainty. Thus it is possible to introduce a provision defeating the interest of a tenant in tail by purchase who dies under the age of 21 years, but such a provision will not be implied merely by a direction that the real estate and chattels shall go together as long as the rules of law and equity permit. There must be an express provision to that effect. Similarly it is possible to introduce provisions defeating the interest of a tenant in tail who does not come into actual possession of the property; but words which are to have this effect must be reasonably clear and certain. Further, in considering whether the testator has manifested an intention contrary to the ordinary rule, the court ought not to be influenced by the actual events which have occurred. If the real estate be settled on a father for life, with remainder to his first son in tail, and a son is born and dies in early infancy, probably a settlor would say that it would not effectuate his intention to give the son an absolute interest in the heirlooms which the father would take as his administrator; but this would be no reason why the court should lay hold of doubtful expressions and infer therefrom an intention to defeat the sons interest unless he came into actual possession, for had the son attained 21 and joined with his father in resettling the realty, it is equally probable that the settlor would have said that his intention could only be effectuated by a resettlement of the heirlooms, which would be impossible unless the son had a vested interest, although he had not become entitled to actual possession of the realty. Indeed, it is precisely for this reason that, in the opinion of conveyancers, provisions defeating the interest of a tenant in tail unless he comes into possession are desirable.

In construing this clause, therefore, I must bear in mind this rule. As a matter of first impression, and apart altogether from the rule, I might possibly have arrived at a different conclusion. I do not know. However, I must approach the clause before me bearing in mind the fact that, in the absence of words to the contrary, Charles would have become entitled to those chattels on his birth, and absolutely. There are clear words excluding him in the event of his not attaining the age of 21 years, but are there words which, to use the language of Parker J, make it reasonably clear and certain that Charles is excluded if he fails to come into actual possession of West Park? The rule which I have just quoted was referred to with approval by Viscount Birkenhead LC, in Portman v Portman (Viscount), at p 485. What is the effect in this will of the words “actually entitled to my said mansion house under the said limitations of this my will”? I think that I can start by saying that, if the word “actually” had not appeared in this clause, I should be bound to hold, in view of the rule which I have stated, and in view of previous decisions, that Charles interest was not dependent upon his coming into actual possession of the mansion

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house. Counsel for the defendant Mrs Kaye in his very helpful argument referred me to a number of cases. In the first place, he referred to Scarsdale (Lord) v Curzon, which I have already mentioned. In that case, the relevant words were [p 67]:

In trust for the person or persons who for the time being shall, by virtue of the limitations hereinbefore expressed and contained, be seised of or entitled to the actual freehold of the said capital messuage or mansion-house.

It is important to note that in that case the phrase “actual freehold” was used in other parts of the will in such a sense that Sir W Page Wood V-C said, at p 66:

… but I think it impossible to give to the words “the person seised of or entitled to the actual freehold” any other meaning than the person in possession. I am far from saying that the words “actual freehold” have any such technical sense; nor do I rest my opinion on the phraseology pointed out in some passages of Coke upon Lyttleton; but, on the whole of this settlement, I have no doubt about the meaning of these words. It is not necessary to go through all the clauses which have led me to this conclusion, but I may mention, by way of example, the powers of jointuring given to children, “whether they shall or shall not be in possession or entitled to the actual freehold.” There you cannot deprive the word “actual” of all special significance without making nonsense of the clause, because there could be no children who would not be entitled to the freehold simpliciter, either in possession or remainder. “Actual,” therefore, must mean in possession, or the clause would have no meaning. That is the strongest instance; but there are numerous examples of the same kind.

Then he gives other examples. Thus, on the wording of the will which Sir W Page Wood V-C had to consider, he felt that he could only come to the conclusion that, when the words “actual freehold” were used, they signified freehold in actual possession. Contrasting that case with the case before me, I find that the word “possession” does not appear at all in the clause which I have to construe, and yet in other parts of the will the testator repeatedly uses the words “actual possession,” so that he was perfectly familiar with the phrase, and, if he had wanted to make the interest of the tenant in tail dependent upon his coming into actual possession, there would have been no difficulty in saying “who shall for the time being be entitled to the actual possession of my said mansion house.” Instead of that, he has used the words “actually entitled,” and, for my part, I find great difficulty in giving to the words “actually entitled” any meaning different from that which I give to the word “entitled.” In some ways, if the testator had made his own dictionary, as was the case in Scarsdale (Lord) v Curzon, the words might well be given the significance for which counsel for the defendant Mrs Kaye and counsel for the infant defendant contend, but, in my view, in this will they remain words of doubtful significance, and I cannot find that they are reasonably clear and certain. I have some suspicion that the testator may have intended the words “actually entitled” to refer to actual possession, but I do not feel at all convinced upon the point, bearing in mind, as I think I must, that, if the words had been “entitled to my said mansion house under the said limitations of this my will,” there would have been no doubt that actual possession was not essential in order to enable the tenant in tail to take. The next

Page 369 of [1940] 2 All ER 363

case to which counsel for the defendant Mrs Kaye referred was Re Angerstein, Angerstein v Angerstein. In that case, there were two contrasted clauses, one being “shall … be entitled to the actual possession of my said freehold estates in the county of Norfolk,” and the other being “entitled in possession to my said freehold mansion house.” In that case, Kekewich J thought that the introduction of the word “actual” made a large and important difference. In the case of one of those clauses, he held that actual possession was essential, and, in the case of the other clause, he held that it was not. Again, in Re Fothergills Estate, Price-Fothergill v Price, Swinfen Eady J had to consider again two contrasted clauses, one being “in the actual possession or entitled to the receipt of the rents and profits” of certain real estates, and the other being “entitled to the possession or receipt of the rents” of the settled estates. Again, Swinfen Eady J drew a distinction between those two clauses, and held that one denoted actual possession and the other did not. Counsel for the defendant Mrs Kaye then referred to Re Cheshams (Lord) Settlement, Valentia (Viscount) v Chesham (Lady), which can perhaps be described as the highwatermark of the decisions to the effect that actual possession is essential. There the headnote is as follows:

By a settlement of real estates made in 1877, plate, pictures, and chattels were assigned to trustees “upon trust to permit the same to be used, held, and enjoyed with the mansion house aforesaid by the person who for the time being shall be entitled to the said mansion house under the limitations thereof herein contained,” yet so that for the effect of transmission they should not vest absolutely in any person thereby made tenant in tail male by purchase who should not attain the age of 21 years.

That case has never been overruled. It was referred to in Portman v Portman (Viscount) by Viscount Birkenhead LC, in the following terms, at pp 487, 488:

It is clear from the judgments that the Court of Appeal was influenced by former decisions, though these were not binding upon them. The only question was whether the court was satisfied that it was intended that no person should take unless he became tenant in tail in possession of the settled estate. The court was so satisfied on the ground that the words “with the mansion house” were an essential part of the trust, and unless the tenant in tail were in actual possession the enjoyment of the chattels might be divorced from the enjoyment of the mansion house whereas the chattels were only to be enjoyed with the house. I am satisfied that the court considered that the trust was an application of the fourth rule in Scarsdale (Lord) v. Curzon and that there is nothing in the decision which throws doubt upon the principles laid down in the earlier cases. The decision has been criticised and commented upon in Re Beresford-Hope, Aldenham v. Beresford-Hope; Re Fowler, Fowler v. Fowler; and Re Lewis, Busk v. Lewes, and it may, without excessive irony, be said that it has been distinguished with more zest than it has been followed. I agree with Warrington, L.J., that it is “very difficult to reconcile the decision with Foley v. Burnell” and I find it proper to add that the force attributed to the verbs used, and in particular to the word “enjoyed,” goes beyond the decision in any other case, whether earlier or later. The words used in the bequests of Colonel Harcourt, to which I now turn my attention, are however, not such as render it necessary to consider whether in Re Cheshams (Lord) Settlement, Valentia (Viscount) v. Chesham (Lady) was rightly decided or should be overruled; Re Parker, Parker v. Parkin was nearer to Cheshams case than the present appeal, and there Parker, J., distinguished it and in my opinion he was right in so doing. I do not myself regard Cheshams case as being more than a particular application of the principles governing this class of cases or as having laid down any principle or exception of general application.

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I think that it is clear from that passage that, although Re Cheshams (Lord) Settlement, Valentia (Viscount) v. Chesham (Lady) has never been overruled, the decision was not regarded by Viscount Birkenhead LC, with any great favour. The next case referred to by counsel for the defendant Mrs Kaye was Re Parker, Parker v. Parkin, to which I have already referred for the statement of the general rule. In that case, the words were [pp 581, 582]:

… shall be considered as or in the nature of heirlooms and shall pass with my said house in the same manner as if they were land or other real property appendant or appurtenant thereto, and shall accordingly continue annexed to my said mansion house so long as the law will permit, and be inherited or enjoyed by the several persons who shall succeed to my said mansion house under or by virtue of the limitations in my said will and hereinbefore contained respecting the same, and be subject to the rules of law or equity applicable thereto, and in no wise pass under or by any bequest of my personal or residuary estate or effects, but subject nevertheless to reasonable wear and deterioration by use.

In that case, notwithstanding the words “shall accordingly continue annexed to my said mansion house … and be inherited or enjoyed by the several persons who shall succeed to my said mansion house,” Parker J held that a son who had died in the lifetime of the tenant for life took the chattels. Lastly, counsel for the infant defendant referred me to Re Lewis, Busk v Lewes, in which the words were [p 308]:

… “upon trust to permit the same from time to time to go and be held and enjoyed with the said mansion house so far as the rules of law and equity will permit by the person or persons who for the time being shall be entitled to the possession of my real estates …”

This was followed by a clause precluding the chattels from vesting absolutely in any tenant in tail by purchase unless he attained 21, but entitling him to the use and benefit thereof during minority. In regard to this case, counsel for the defendant Lady Northbrook relied in argument upon the fact that, under the clause which I have to consider, the proviso “so that the same shall not vest absolutely in any person hereby made tenant in tail by purchase of my said mansion house unless such person shall attain the age of twenty-one years or dying under that age shall leave lawful issue at his or her death” is followed by the words:

… yet nevertheless such tenant shall during his or her respective minority be entitled to the use and enjoyment of all the said chattels and effects.

He pointed out that in Scarsdale (Lord) v Curzon, Sir W Page Wood V-C referred to those words as being very strong words, but he very rightly referred me to Re Lewis, Busk v Lewes, because in that case no great importance seems to have been attached to them. For my part, I think that these words must be read as giving the enjoyment to the infant tenant in tail, subject to any life interest which may be subsisting. They do not lead me to the conclusion that there are in this will words reasonably clear and certain making the title to the chattels depend upon actual possession of the mansion house. In Re Lewis, Busk v Lewes, Astbury J, after considering a series of authorities, held

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that the vesting of the chattels was not postponed until actual possession of the real estate, and that they vested absolutely in the first tenant in tail by purchase when he attained the age of 21 years, although only a remainderman, and, therefore, never in actual possession. That was one of the cases in which Re Cheshams (Lord) Settlement, Valentia (Viscount) v Chesham (Lady) was distinguished.

After listening to the very able arguments which have been addressed to me, I feel great doubt as to whether or not this testator intended to make ownership of these chattels dependent upon the tenant in tail coming into actual possession of the estate. That doubt is increased by the fact that the word “possession” does not occur in this clause, although the words “actual possession” are used repeatedly in other parts of the will. In those circumstances, applying as best I can the general rule which I have just quoted, which was laid down by Parker J, in Re Parker, Parker v Parkin, I think that it is right to decide that Charles, since he became the first tenant in tail by purchase and attained the age of 21 years, became entitled to the heirlooms in question. I should mention, however, that counsel for the defendant Lady Northbrook was prepared to contend that there was no effective disposition of the chattels at all by this clause, on certain grounds which he was prepared to put before me in argument. If that were so, the chattels in question would fall into the gift of residue. However, by the time he came to put his argument, I had heard all the arguments on the question of whether or not Charles became entitled to these heirlooms, and counsel said that he did not desire to add to those arguments, and I thought it fair to him to intimate the view which I have just stated. On that, counsel informed me that all his arguments in favour of the chattels falling into residue were dependent upon the proposition that Charles could not take unless he survived his father, and that, that being so, he did not think it right to put those arguments before me.

Solicitors: Evelyn Jones & Co, agents for Jackson & Sons, Ringwood (for the plaintiff and for all the defendants other than the infant defendant); Baileys Shaw & Gillett (for the infant defendant).

Charles Newton Esq   Barrister.


R v Army Council, Ex parte Sandford

[1940] 2 All ER 372


Categories:        CONSTITUTIONAL; Armed Forces        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, LUXMOORE AND GODDARD LJJ        

Hearing Date(s):        13 MARCH 1940        


Royal Forces Army Conviction by court-martial Confirmation by Army Council Jurisdiction of Court of Appeal “Criminal cause or matter” Army Act s 57(2) Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 31(1)(a).

The appellant was convicted on five charges of felony before a court-martial, and sentence of dismissal from the service was promulgated on 5 March 1934. In May 1934, the Army Council, having reviewed the proceedings at the appellants request, quashed the convictions on four of the charges, but did not mitigate, remit or commute the sentence in view of the serious nature of the remaining charge. A motion for a writ of mandamus that the Army Council be commanded to mitigate, remit or commute the sentence so passed upon the appellant was dismissed in the Kings Bench Division. A preliminary objection to an appeal against that decision was taken, and it was contended that, although the proceedings before the court-martial were in the nature of a criminal cause or matter, the consideration of the matter by the Army Council and their decision thereon were not:

Held the decision of the Army Council was a decision in a criminal matter, and the Court of Appeal had, therefore, no jurisdiction to hear the appeal.

Notes

In the case of a criminal cause or matter, the decision of the Divisional Court is final. The contention here is that the Army Council, in reviewing sentences, does not act as a court or a judicial body, but merely performs a statutory duty, and that, therefore, the decision could not be one in a criminal cause or matter.

As to Criminal Cause or Matter, see Halsbury (Hailsham Edn), Vol 9, pp 740, 741, paras 1261, 1262; and for Cases, see Digest, Vol 14, pp 551554, Nos 62716298.

Cases referred to

Re Clifford & OSullivan [1921] 2 AC 570; 39 Digest 341, 269, 90 LJPC 244, 126 LT 97.

R v Board of Education [1910] 2 KB 165; 42 Digest 614, 141, 79 LJKB 595, sub nom R v Board of Education, Ex p Swansea, Oxford Street (Church of England) School Managers 102 LT 578, affd sub nom Board of Education v Rice [1911] AC 179.

R v Fletcher (1876) 2 QBD 43; 14 Digest 553, 6285, 46 LJMC 4, 35 LT 538.

R v Garrett, Ex p Sharf [1917] 2 KB 99; 14 Digest 553, 6287, 86 LJKB 894, 116 LT 398.

Appeal

Appeal by the applicant from an order of the Kings Bench Divisional Court, dated 19 October 1939, and reported [1939] 4 All ER 102. The facts are fully set out in the judgment of Slesser LJ, but, for the purposes of this appeal, are of secondary importance, the only question being whether the court had jurisdiction to hear the appeal at all. Giving judgment in the Divisional Court, Lord Hewart LCJ dealt with the merits of the application for a mandamus, and dismissed the motion, holding that it depended on fundamental errors of construction of the relevant section of the Army Act. The applicant appealed, and on the appeal the Attorney-General took the preliminary objection that

Page 373 of [1940] 2 All ER 372

the Court of Appeal had no jurisdiction, because the appeal was from a judgment of the High Court in a criminal cause or matter.

D N Pritt KC and S A Kyffin for the appellant.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Valentine Holmes for the respondents.

13 March 1940. The following judgments were delivered.

SLESSER LJ. This is an appeal from an order of the Divisional Court, dated 19 October 1939, dismissing a motion by Herbert Ronald Sandford:

… for an order of mandamus that the Army Council be commanded, according to law, to mitigate, remit or commute a sentence promulgated on Mar. 5, 1934, whereby the said applicant was dismissed the service His Majestys Army in India upon the grounds set forth in the copy statement served herewith, used on the application for leave to issue this notice of motion.

On this appeal being brought before the present court, by way of preliminary objection the Attorney-General takes the point that this court, having regard to the provisions of the Supreme Court of Judicature (Consolidation) Act 1925, s 31(1)(a), has no jurisdiction to hear this appeal, because it is an appeal from a judgment of the High Court in a criminal cause or matter.

The case which came before the Divisional Court arose out of certain charges of forging documents with intent to defraud, and three charges of uttering forged documents knowing the same to be forged with intent to defraud brought against Ronald Sandford and tried between 8 January 1934 and 29 January 1934, by a general court-martial held at Quetta and Karachi on those five charges under the Army Act, s 41. At that time, Sandford was a Lieutenant-Colonel in the Royal Engineers in the Army in India. He was found guilty of the charges. The findings were duly confirmed, and by sentence promulgated on 5 March 1934, he was dismissed the service. On 2 May 1934, he petitioned the Army Council to review the proceedings which had taken place before the court-martial, and the Army Council duly reviewed the proceedings. They decided that the convictions on the first, second, fourth and fifth charges should be quashed, that “all record of the convictions on those charges is to be erased,” and that Sandford was to be relieved of the consequences of the convictions. I read from the intimation sent to Sandford on 19 July 1934, on behalf of the Army Council, which continues as follows:

In view of the nature of the third charge upon which the conviction stands, the Army Council can see no ground for interfering with the sentence passed by the court, and the necessary notification will be published in the London Gazette of Aug. 3, 1934.

In substance, Sandford says that the Army Council had no power to come to that conclusion, having quashed the other charges. However, in so far as we have come to the conclusion that there is no jurisdiction to deal with this matter by way of appeal, it is unnecessary, and it would be improper, to express any opinion on the merits of Sandfords con-

Page 374 of [1940] 2 All ER 372

tention. I mention those facts only in order that the matter of jurisdiction, which we have here to consider, may appear clear.

Counsel for Sandford concedes that the proceedings before the court-martial were themselves certainly in the nature of a criminal cause or matter. If authority be needed for that, which I have said counsel for the appellant concedes, it is to be found both in the opinion of Viscount Cave and in that of Lord Sumner in Re Clifford & OSullivan. He contends, however, that the proceedings of the Army Council here in question were not criminal proceedings, so that any matters affecting those proceedings by way of mandamus would not be themselves proceedings in a criminal cause or matter. On this point also a number of authorities have established beyond question that matters such as prohibition, certiorari and mandamus in relation to causes or matters which are criminal are themselves criminal causes or matters, excluding this court from exercising appellate jurisdiction. That principle is not only to be found in the observations in the House of Lords in Re Clifford & OSullivan, but is also affirmatively established in a number of authorities which have been cited to us.

The real question we have here to consider is whether or not these proceedings before the Army Council, which were by way of petition, were themselves a criminal proceeding and raised questions of criminal matters to be determined. As has been pointed out to us, the jurisdiction of the Army Council to deal with these matters arises from two separate sources. First of all, there is the question whether or not the proceedings, as such, shall be quashed. The power of the Army Council to deal with that matter is derived from the Kings Regulations, which are themselves promulgated by the authority of the Kings prerogative, more particularly in reg 681. That matter seems to me, so far, clearly and without any question a criminal matter. The Army Council have to consider whether convictions before a court-martial are illegal or involve substantial injustice to the accused, and the findings and sentence are varied or mitigated, as the regulation itself says, by quashing the findings or by reduction of the sentence. The consequential remedy, when it is thought remedy should be given, is a matter dealing with the proceedings of the court-martial. The rules, which I need not read, but which are in reg 681, are expressly said to apply when the proceedings of a court-martial, after confirmation, come under the review of any of the authorities specified in the Army Act, s 57(2). That section, which is thus imported into the prerogative regulations, also gives specific power to the authority, here the Army Council, for it provides as follows:

When a sentence passed by a court-martial has been confirmed, the following authorities shall have power to mitigate or remit the punishment thereby awarded, or to commute such punishment for any less punishment or punishments to which the offender might have been sentenced by the said court-martial …

It is clear to my mind that, whereas it might conceivably be argued that the remission of a sentence was not itself necessarily a judicial

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actan illustration has been given of the exercise of His Majestys prerogative on the advice of the Home Secretary in the case of a person convictedthe language here extends to dealing with the punishment itself. It is to mitigate, or remit, or commute such punishment. It appears to me, therefore, that the competent authority dealing with this matter is as much exercising judicial functions in this aspect as is the Court of Criminal Appeal when it is called upon to reduce the punishment which has been awarded by the criminal judicial authority. It is said by counsel for the appellant that the Army Council is not a court, but the question is not whether or not it is a court in any narrow sense of the word. The question is whether or not the decision of the Army Council is a decision in a criminal cause or matter. If it be a decision in a criminal matter, we have no jurisdiction. In civil cases, bodies, not being specifically courts or tribunals, very frequently exercise judicial or quasi-judicial functions. R v Board of Education and cases against the Ministry of Health have abundantly displayed that principle, and in such cases those quasi-judicial functions are generally exercised civilly. It is a question of law, however, whether it is exercised civilly or criminally, and, if the right view be that the tribunal is vested with criminal jurisdiction which is of a judicial or quasi-judicial nature, then any matter affecting the exercise of that jurisdiction by prerogative writ, mandamus, certiorari or prohibition is similarly, on the authorities, a proceeding in a criminal cause of matter.

I would only add that something has been said in regard to the fact that the Army Council derives part of its power from the prerogative and part from statute. I do not think that that matter is decisive of the question in any way. There are many tribunals exercising criminal jurisdiction in this country which derive their authority originally from the common law, prerogative or charter, and not from statute. Many of their powers were derived, indeed, before the adoption of the present method of promulgating edicts by Parliament. The question is whether or not the body is exercising a criminal function. In my opinion, the Army Council, in considering whether or not it will commute a sentence under the statute, or whether or not it will quash charges under the prerogative, is in both cases acting in a criminal cause or matter.

Finally, I would say only that this case seems to me entirely different from that of the so-called military court which fell for consideration in Re Clifford & OSullivan. It was pointed out by Viscount Cave in that case, at p 581, that it was:

… a body of military officers entrusted by the commanding officer with the duty of inquiring into certain alleged breaches of his commands contained in the proclamation, and of advising him as to the manner in which he should deal with the offences; and its “sentences,” if confirmed, will derive their force not from the decision of the military court, but from the authority of the officer commanding His Majestys forces in the field.

On that principle, the so-called military court in that case was held (Lord Sumner dissenting) not to be a court or judicial tribunal. Here,

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however, there is no question but that the court-martial was performing its ordinary criminal functions under the Army Act, and, as I have said, the Army Council, which has the duty of supervising and remitting in the case of offences, and of considering whether or not it will quash the sentence in the case of conviction, is performing a function as a superior body analogous to that which the court-martial itself, admittedly acting in a criminal cause or matter, performed. For this reason, I think that this preliminary point succeeds, and that this court has no jurisdiction to entertain the appeal.

LUXMOORE LJ. I entirely agree with the judgment which has just been delivered, and do not think it necessary to add anything.

GODDARD LJ. In my opinion, it is desirable to keep as strictly to the facts of this case brought before us as one can. I take the definition of a criminal cause or matter from the opinion of Viscount Cave in Re Clifford & OSullivan, at p 580:

It must involve the consideration of some charge of crime, that is to say, of an offence against the public law (Imperial Dictionary, tit. “Crime” and “Criminal”); and that charge must have been preferred or be about to be preferred before some court or judicial tribunal having or claiming jurisdiction to impose punishment for the offence or alleged offence. If these conditions are fulfilled, the matter may be criminal, even though it is held that no crime has been committed, or that the tribunal has no jurisdiction to deal with it (see R. v. Fletcher, per Amphlett, J.A., and R. v. Garrett, Ex p. Sharf, per Bankes, L.J.), but there must be at least a charge of crime (in the wide sense of the word) and a claim to criminal jurisdiction.

In the same case, Viscount Cave showed that a court-martial was a court for this purpose. Here we have a charge of felony preferred against the applicant for the rule (the appellant in this case), and that charge was preferred before a court-martial, which was a judicial tribunal having jurisdiction to impose punishment. The court-martial having convicted and sentenced the appellant, the case came, under the Army Act, s 57, before the confirming authority, who confirmed it. That sentence having been confirmed, the Army Act, s 57(2), confers on the Army Council a power to mitigate, or remit, or commute the sentence. When the matter was brought before the Army Council in the manner provided by the Kings Regulationswhich for this purpose are analogous to the rules of the courtthe Army Council then had to consider whether or not it would mitigate, remit, or commute, and it came to a decision upon the matter. I cannot see why, in those circumstances, the Army Council was not acting as a court just as much as the original court-martial. They were both performing duties imposed upon them by the Army Act. The Army Council was acting as a court, and consequently this is a criminal cause or matter within the authorities, and this court has no jurisdiction to entertain an appeal.

Appeal dismissed with costs upon the preliminary objection to jurisdiction.

Solicitors: Henry Mossop & Syms (for the appellant); Treasury Solicitor (for the respondents).

Derek H Kitchin Esq   Barrister.


Pooley v Bryning

[1940] 2 All ER 377


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SIR WILFRID GREENE MR AND GODDARD LJ        

Hearing Date(s):        19 MARCH, 10 APRIL 1940        


Practice Action commenced in district registry Defendants right to have proceedings removed to London RSC Ord 5, rr 1, 2 RSC Ord 12, rr 4, 6, 7 RSC Ord 35, rr 13, 14, 15, 16, 17 RSC Ord 36, rr 1, 10.

The plaintiff commenced this action in a district registry. The defendant gave notice under RSC Ord 35, r 14, that he desired the action to be removed to London. The plaintiff then applied for the action to be retransferred to the district registry, and an order was made to that effect. The ground for the application was that the parties and all the witnesses resided within the district:

Held the words “other good cause” in RSC Ord 35, r 14, cannot be construed ejusdem generis with the remainder of the rule. Merely to show facts which would be a good ground for fixing the trial within the district of the registry is not sufficient to deprive a defendant of the right given by RSC Ord 35, rr 13, 14, to have the action removed to London. Something more is necessary, as, for instance, that expense will be saved or that some hardship will be caused to the plaintiff.

Notes

Under RSC Ord 35, r 13, the defendant is given a right to remove an action from the district registry to London. This right, in the case of a substantial defendant, is absolute, and the removal is complete upon his giving the requisite notice. The plaintiff, however, has a right to apply that the action may remain in the district registry notwithstanding the notice. The removal will only mean that the interlocutory matters will be dealt with in London. The trial will be at the Assizes unless a further order is made. To avoid the removal the plaintiff must show that the removal to London will place some hardship on him.

As to Transfer of Action to London, see Halsbury (Hailsham Edn), Vol 26, p 47, para 73; and for Cases, see Digest, Practice, p 530, Nos 19501952. See also Yearly Practice of the Supreme Court 1940, pp 575, 576.

Cases referred to

Smelting Co of Australia v Inland Revenue Comrs [1897] 1 QB 175; 36 Digest 676, 1577, 66 LJQB 137, 75 LT 534.

Walker v Crabtree [1883] WN 197; Digest, Practice, 530, 1952.

Smith v Bell [1883] WN 196; Digest, Practice, 530, 1951.

Appeal

Appeal by the defendant from an order of Macnaghten J, dated 27 February 1940, refusing to set aside an order of Master Simner, dated 2 February 1940, ordering that the action be transferred to the Manchester District Registry. The notice of appeal asked that the order should be rescinded and that the action should proceed in London. The writ in the action was issued in the Manchester District Registry. The defendant gave notice, and thereby the action was transferred to London. The

Page 378 of [1940] 2 All ER 377

plaintiff, however, obtained an order retransferring the action to Manchester, and it was from that order that this appeal was brought.

RSC Ord 35, rr 13, 14, provide as follows:

13. In any action which would, under the foregoing rules, proceed in the district registry, the action may, subject to r. 14, be removed from the district registry as of right in the cases and within the times following: (1) Where the writ is specially indorsed under R.S.C., Ord. 3, r. 6, and the plaintiff does not within 4 days after the appearance of such defendant give notice of an application for an order against him under R.S.C., Ord. 14, then such defendant may remove the action as of right at any time after the expiration of such 4 days, and before delivering a defence, and before the expiration of the time for doing so: (2) Where the writ is specially indorsed and the plaintiff has made such application as in the last paragraph mentioned, and the defendant has obtained leave to defend in manner provided by R.S.C., Ord. 14; then such defendant may remove the action as of right at any time after the order giving him leave to defend, and before delivering a defence and before the expiration of the time for doing so: (3) Where the writ is not specially indorsed under R.S.C., Ord. 3, r. 6, any defendant may remove the action as of right at any time after appearance, and before delivering a defence, and before the expiration of the time for doing so: (4) In an Admiralty action in rem, any person who may have duly intervened and appeared may remove an action from a district registry as of right.

14. Any party or person desirous to remove an action as of right under the last preceding rule may do so by serving upon the other parties to the action, and delivering to the district registrar, a notice, signed by himself or his solicitor, to the effect that he desires the action to be removed to London, and the action shall be removed accordingly: Provided, that if the court or a judge shall be satisfied that the defendant giving such notice is a merely formal defendant, or has no substantial cause to interfere in the conduct of the action, or that there is other good cause for proceeding in the district registry, such court or judge may order that the action may proceed in the district registry notwithstanding such notice.

J F F Platts Mills for the appellant.

A Melford Stevenson for the respondent.

Platts Mills: The judge took the view that, on the balance of convenience, the action should proceed in the district registry, but balance of convenience is not the test. The only issue was whether or not the plaintiff could show “good cause” within the meaning of RSC Ord 35, r 14. What amounts to “good cause” must be determined by comparing r 14 with rr 16 and 17. Those rules speak of “sufficient reason.” The whole scheme of the rules in this part of the order must be followed. The defendant has a right to have the action removed, and not merely a right to make an application. The words “good cause” cannot be extended to mean any cause whatever. If the legislature had intended that, some indication of the fact would have been given. The legislature has said that the court may make an order to retransfer the action for any sufficient cause within r 14 and its proviso. The proviso limits the meaning of “good cause.” The admission by the defendant that the action is one for trial at Manchester cannot possibly be “good cause” within the meaning of the rule. I rely upon the test placed upon the words by Field J, in Walker v Crabtree. There is no evidence that the plaintiff would suffer any hardship by the action proceeding in London. [Counsel referred to Smith v Bell.]

Page 379 of [1940] 2 All ER 377

Stevenson: The judge was satisfied in fact, and, therefore, it is not open to the appellant to challenge the matter. A possible explanation of the words “as of right” in RSC Ord 35, r 14, is that they are intended to make it clear that an action can be transferred from a district registry to London by the service of a notice. The right, however, is subject to the proviso in r 14.

J F F Platts Mills for the appellant.

A Melford Stevenson for the respondent.

10 April 1940. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). This is an appeal from an order of Macnaghten J, in chambers, dismissing an appeal from a master who has ordered that the action should be transferred from London to the Manchester District Registry. The application to the master was made under RSC Ord 35, r 14, and the point of the appeal is as to the meaning to be attributed to the words “other good cause” in that rule. There is but little authority on the matter, and it does not appear ever before to have been considered in this court, although the rule has been in existence at least since 1883. The parties to the action both live in the district of the Manchester District Registry, out of which the writ was issued. The defendant accordingly was obliged, by RSC Ord 12, r 4, to appear in the registry, and, having appeared, he served notice under RSC Ord 35, r 14, that he desired the action to be removed to London. The action was thus removed, as, once the notice is served, the removal is automatic. The plaintiff then applied under the proviso to the rule for a transfer to the Manchester District Registry. The master made an order in those terms, though in strictness it should have been that the action should proceed in the district registry notwithstanding such notice.

On the hearing of the summons, the only evidence was an affidavit setting out in substance that the parties and all the witnesses resided within the district. It was in fact just the sort of affidavit which would be filed had it been desired to alter, under RSC Ord 36, r 1, the place of a trial which had already been fixed. There is no suggestion that any place other that Manchester should be the venue, and we were informed that, when counsel for the defendant told the judge that it was conceded that Manchester was the proper place for trial, the judge made the order now under appeal. If there was material upon which the judge could thus exercise his discretion, we should not consider that in this case it would be right to interfere. The question is, however, whether the fact that the parties and all the witnesses live within the district, without more, is good cause for depriving the defendant of his right to have the action proceed in London, although the trial must be in Manchester.

It is necessary to consider briefly the various orders dealing with proceedings in district registries. Under the combined effect of RSC Ord 5,

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rr 1 and 2, a plaintiff can issue his writ out of any district registry he pleases or out of the Central Office. Under RSC Ord 12, r 4, if the defendant resides or carries on business within the district of the registry out of which the writ is issued, he must appear in that registry. If he does not, he can appear either in the registry or in the Central Office. If he elects to appear in the latter, the action proceeds in London. If he appears locally, r 6 provides that the action shall proceed in the registry, but this is expressly subject to the power of removal conferred by RSC Ord 35, rr 1316. RSC Ord 35, r 13, provides that, subject to r 14, an action may be removed to London as of right, but it is clear from the words of the rule that it is only a defendant, or one of the defendants, who has this right of removal. Rule 14 provides for the removal by serving a notice, but it is also provided that, if the court is satisfied that a defendant who gives such a notice is merely a formal defendant, or has no substantial cause to interfere in the conduct of the action, or that there is other good cause for proceeding in the district registry, the court may order the action to proceed in the registry notwithstanding such notice.

The first contention of counsel for the appellant was that the court should apply to this rule the rule of construction generally known as ejusdem generis, so that the meaning of the words “other good cause” must be limited to considerations affecting the defendants real interest in the suit. In support of this argument, he called attention to r 16, which deals with the removal of matters not provided for in rr 13 and 14as, for instance, originating summonsesand to r 17, which provides for the converse case of removal from London to a district registry, neither of which contains any reference to the nature of the defendants interest in the suit. He also referred to RSC Ord 12, r 7, which provides that, if a defendant appears in London, the action shall proceed there, but provides for transfer to the district registry if a defendant who has appeared in London has no real interest in the suit. In this rule, there is no mention of any other good cause. The combined effect of RSC Ord 12, r 7, and RSC Ord 35, r 17, is to give a plaintiff a right to apply for a transfer from London to a district registry on any ground. However, he has to satisfy the court that there is sufficient reason for doing so. He cannot do it as of right, and terms may be imposed upon him as a condition of transfer, except where the ground is lack of substantial interest in the suit on the part of the defendant. We do not think, however, that it would be right to put a limited construction on the words “other good cause.” The rule of construction which is called the ejusdem generis rule, or sometimes the doctrine noscitur a sociis, is one which ought to be applied with great caution, because it implies a departure from the natural meaning of words in order to give them a meaning which may or may not nave

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been the intention of the legislature, as was said by Rigby LJ, in Smelting Co of Australia v Inland Revenue Comrs, at p 182. We can conceive of many cases where it would or might be a real hardship on a poor plaintiff to have the case removed to the Central Office, so that all the interlocutory matters had to take place in London. Each case must be decided on its own particular facts. However, it still remains to be considered whether facts which point, and point clearly, to the area of the district registry as the appropriate venue for trial are sufficient, without more, to deprive the defendant of the privilege, given to him by the rule, of having the case removed to London for all purposes other than triala privilege which, it is to be noticed, is given as of right. If the proviso gives the court authority to deprive the defendant of this right merely on what, when considering venue, is called the balance of convenience, it would seem that the privilege is more apparent than real. If a defendant who has an option chooses to appear in the district registry, he does so presumably because he wishes the case to proceed there. He may, no doubt, change his mind. The question is far more likely to arise, however, where he is bound to appear in the registry, and yet may wish the case to proceed in London. In the great majority of cases where a writ is issued from a district registry against a defendant living in that district, the case will naturally be what may be called a local case. If that fact is to be a good cause for depriving him of the right to remove the case to London, it is difficult to see the object of giving him this right. The rule does not require him to show a good ground for removal. We can well imagine the case of an action brought against a landowner who lives in the area of a district registry in respect of property situate also within that district. It may well be that his affairs have always been in the hands of London solicitors, whom he would desire to conduct the action. He could then exercise the right, although all the witnesses as well as the parties live in the district of the registry. The convenience of the parties and their witnesses, and the date at which a trial can be had, and such matters, are all, by RSC Ord 36, r 10, to be taken into account when fixing the place of trial, but there are no such provisions in the rule which we are now considering.

In our opinion, it is not sufficient to deprive a defendant of the right given to him by RSC Ord 35, rr 13, 14, merely to show facts which would be a good ground for fixing the trial within the district of the registry. Something moreas, for instance, that expense will be saved, or that it can be shown that some hardship will be caused to the plaintiffis required. We do not say that questions of convenience are to be entirely ruled out. They might, in a doubtful case, turn the scale. By themselves, however, they are not enough. The only authority to be found on this matter is Walker v Crabtree. That was a case decided by Field J, during the period when he was sitting in chambers for

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the purpose of settling the practice under the new rules. It appears to us that he was invited to apply the ejusdem generis rule and declined to do so, but at the same time he refused to deprive the defendant of his right of removal in spite of considerations not at all unlike those which arise in this case. He seems, therefore, to have arrived at the same conclusion as to the meaning of the rule as that at which we have arrived. The result is that the appeal is allowed and the order of the judge and that of the master will be discharged. The costs here and below will be the defendants in any event.

Appeal allowed with costs.

Solicitors: R I Lewis & Co (for the appellant); Sharpe Pritchard & Co, agents for Pickstone & King, Radcliffe (for the respondent).

W K Scrivener Esq   Barrister.


Noble v Southern Railway Co

[1940] 2 All ER 383


Categories:        INDUSTRY: HEALTH; Other Health        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD WRIGHT, LORD ROMER AND LORD PORTER        

Hearing Date(s):        5, 6, 7 MARCH, 18 APRIL 1940        


Workmens Compensation Accident arising out of employment Railway employee killed while walking along line Forbidden route Whether act done for purposes of employers business Workmens Compensation Act 1925 (c 84), s 1(2).

The deceased, a fireman employed by the respondents, was ordered to proceed from an engine-shed to a railway station. The permitted routes for this journey did not involve walking along the railway lines, and several warnings had been issued by the respondents to their staff forbidding them to walk along the lines unless they were using a permitted route. The deceased proceeded to walk along the lines, and was killed by a train:

Held as the evidence established that the deceased was acting for the purposes of, and in connection with, his employers trade or business, and was acting within the sphere of his employment, the accident must be deemed to have arisen out of and in the course of his employment, although the act was in contravention of the employers rule. The widow was, therefore, entitled to recover compensation.

Clark v Southern Ry Co overruled.

Order of Court of Appeal ([1939] 2 All ER 817) reversed.

Notes

To those acquainted with the many decisions under the Workmens Compensation Act 1925, s 1(2), it will be sufficient to say that this decision removes the difficulty created by the presence among those decisions of the case of Clark v Southern Ry Co, where the facts were very similar to those in the present case. The House of Lords, though not expressing a decided opinion, appears to have been inclined to think that the Court of Appeal might have held that the decision in Clarkes case was inconsistent with later cases in the House of Lords and have declined to follow its own decision. If the Court of Appeal had done so, the position would not have been clarified by the opinions of their Lordships in the present case. In the case of death or serious and permanent injury, an accident may arise out of and in the course of the employment even though the man is acting in disobedience to regulations or orders. This is still the case even where the doing of the prohibited act involves an added peril to the mans occupation, but, on the other hand, the man must not do something outside the sphere of his employment, and he must be acting for the purposes of, and in connection with, the employers trade or business. In the course of his opinion, Lord Atkin approves the judgments in the recent decision of the Court of Appeal in Seviour v Somerset Collieries Ltd.

As to Relief under Section 1(2) of the Act, see Williss Workmens Compensation (32nd Edn), pp 6983; and for Cases, see Digest, Vol 34, pp 299301, Nos 24872497.

Cases referred to

Clarke v Southern Ry Co (1927) 96 LJKB 572; Digest Supp, 137 LT 200, 20 BWCC 309.

Thomas v Ocean Coal Co Ltd [1933] AC 100; Digest Supp, 102 LJKB 142, 148 LT 219, 25 BWCC 436.

Moore (A G) & Co v Donnelly, Fife Coal Co v Sharpe, Fife Coal Co v Fyfe [1921] 1 AC 329; 34 Digest 302, 2501, 90 LJPC 49, 124 LT 578, 13 BWCC 458.

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Wilsons & Clyde Coal Co v MFerrin, Kerr v Dunlop (James) & Co [1926] AC 377; 34 Digest 301, 2499, 95 LJPC 130, 135 LT 164, 19 BWCC 1, affg SC sub nom McFerrin v Wilsons & Clyde Coal Co Ltd, MAulay v Dunlop (James) & Co Ltd 18 BWCC 630, 680.

Victoria Spinning Co (Rochdale) Ltd v Matthews [1936] 2 All ER 1359; Digest Supp, 105 LJKB 521, 155 LT 363, 29 BWCC 242.

Lancashire & Yorkshire Ry Co v Highley [1917] AC 352; 34 Digest 290, 2425, 86 LJKB 715, 116 LT 767, 10 BWCC 241, revsg (1916) 85 LJKB 1513.

Harris v Associated Portland Cement Manufacturers Ltd [1939] AC 71, [1938] 4 All ER 831; Digest Supp, 108 LJKB 145, 160 LT 187, 31 BWCC 434.

Davies v Gwauncaegurwen Colliery [1924] 2 KB 651; 34 Digest 313, 2572, 94 LJKB 229, 132 LT 221, 17 BWCC 181.

Stokoe v Mickley Coal Co Ltd (1928) 138 LT 566; Digest Supp, 21 BWCC 70.

Seviour v Somerset Collieries Ltd [1940] 1 All ER 649; Digest Supp.

Stephen v Cooper [1929] AC 570; Digest Supp, 98 LJPC 97, 141 LT 300, 22 BWCC 339.

Knowles v Southern Ry Co [1937] AC 463, [1937] 2 All ER 403; Digest Supp, 106 LJKB 339, 156 LT 461, 30 BWCC 76.

Barnes v Nunnery Colliery Co Ltd [1912] AC 44; 34 Digest 299, 2489, 81 LJKB 213, 105 LT 961, 5 BWCC 195.

Plumb v Cobden Flour Mills Co Ltd [1914] AC 62; 34 Digest 288, 2415, 83 LJKB 197, 109 LT 759, 7 BWCC 1.

St Helens Colliery Co Ltd v Hewitson [1924] AC 59; 34 Digest 280, 2364, 93 LJKB 177, 130 LT 291, 16 BWCC 230.

Dennis v White (A J) & Co [1917] AC 479; 34 Digest 321, 2627, 86 LJKB 1074, 116 LT 774, 10 BWCC 280, revsg [1916] 2 KB 1.

Appeal

Appeal from an order of the Court of Appeal (MacKinnon and Luxmoore LJJ and Macnaghten J), dated 15 May 1939 and reported [1939] 2 All ER 817, affirming an award made by His Honour Judge Sir Gerald Hurst KC, at the Croydon County Court, dated 17 March 1939. The facts are fully set out in the opinion of Lord Porter.

F W Beney and Neil Lawson for the appellant.

A T Denning KC and W H Duckworth for the respondents.

18 April 1940. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, the husband of the appellant, Thomas Noble, was killed on 25 August 1938 by an electric train. He was in the employment of the respondents as a “passed fireman,” but he was still graded as a fireman. He was 37 years old, had been attached to the locomotive depot at Norwood Junction since March 1936, and was, in fact, employed on “piloting duties,” meaning that, when a driver was not acquainted with the railroad, he had to travel in the engine cab and show it to him.

About midnight of 24 August 1938 he reported at the engine shed, part of the locomotive depot, and was then told to go to East Croydon, travelling as a passenger from Norwood Junction station by a train due to leave at 12.25 am. To catch that train he had to walk to the

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junction station. There is a recognised route to that place, which has been specified as the right way since the locomotive depot was opened in July 1925. It is along a footpath on the respondents property, then over a footbridge on to another footpath, then along Penge Road, over Goat House Bridge, along the High Street, Portland Road and a further footpath. This somewhat devious route is adequately lighted at night, and is almost perfectly safe. The total distance is 1,002 yds. There is, however, a short cut along the lines of the railway, the total distance of which is 841 yds. This direct route is dangerous, because of the presence of point rods, elevated live rails, various obstructions, and electric trains passing in both directions. It is very dangerous at night, as it is not lighted. Its use by employees of the respondents (unless they are required to use it in the execution of their duty) is strictly prohibited. Moreover, a notice had been issued specifying the exact route which had to be taken between the junction station and the locomotive depot.

Thomas Noble unhappily took the direct route along the rails, and he was killed at 12.14 am or 12.15 am by an electric train coming up behind him. The night was a dark one. He was struck at a point 242 yds from the locomotive shed, and was carried along the track to a point 312 yds from the shed, at which point his body was recovered. The award makes it quite clear that when he was killed he had departed from the recognised and safe route, and was walking along the highly dangerous route between, or in close proximity to, the rails used by the electric trains. In that sense, he was in a place where the respondents had expressly forbidden him to go. In order to appreciate the problem before your Lordships, it is necessary to state that the workman was doing a prohibited act, involving an added risk, in a place where he was, by the prohibition, forbidden to go.

The arbitrator in his award has made a clear and exhaustive statement of the relevant facts. Unfortunately, he appearsand, if I may say so, very naturallyto have lost his way a little in the jungle of decisions on the construction and effect of the Workmens Compensation Act 1925, s 1(2). Moreover, a decision of the Court of Appeal in Clarke v Southern Ry Co, the facts of which were really indistinguishable from those of the present case, compelled him, as I think, to hold that s 1(2) did not avail the workman. His award was accordingly in favour of the respondents. In the Court of Appeal, MacKinnon and Luxmoore LJJ, with some reluctance came to the conclusion that they were bound by the decision in Clarkes case, while Macnaghten J also thought that, according to the award, the appellant had failed to prove that Noble went along the permanent way where he was killed for any purpose of the respondents. I will return to this question of fact later on.

My Lords, there are over 50 decisions which deal with problems very similar to the one with which we are dealing, including not less than

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10 decisions of this House. We are, of course, bound by the latter, so far as they decide questions as to the construction of the Act of Parliament, but there are dicta, sometimes difficult to reconcile, by which we are not bound. It must also be remembered that each case depends on the findings of the arbitrator, which are binding unless it is shown that he has misdirected himself in some material matter, or unless there is no evidence to justify his finding. For my part, I am very reluctant to go outside the terms of s 1 of the Act, with the exception that I think the history of sub-s (2) must be borne in mind. That history is to be found stated in this House in Thomas v Ocean Coal Co Ltd, at pp 124, 127, and I will not repeat it. It is plain that the object of s 7 of the Act of 1923 (which was in the same language as s 1(2) of the Act of 1925) was to enable workmen and their dependants to obtain compensation in the case of injuries resulting in death or serious and permanent disablement (but not in other cases), although they would have failed to do so according to the decision of this House in Moore (A G) & Co v Donnelly. The method adopted by the legislature was, not to alter the ruling in Donnellys case, but to provide that in certain cases the accident shall be deemed to have arisen out of and in the course of the workmans employment. If this is so, the result is to make the employer liable under s 1, subject only to the proviso, which we need not consider in this case. Sub-s (2) merely provides an artificial extension of the actual scope of employment of the workman in the particular circumstances mentioned, and subject to the special condition that the act which was being done at the time of the accident was done for the purposes of, and in connection with, not the workmans job, but his employers trade or business. In saying this, I am only repeating in my own words what Viscount Dunedin stated in Wilsons & Clyde Coal Co v MFerrin, at pp 386, 387. The sub-section has, I think, no application unless the workman, when the accident happened, was acting in contravention:

… of any statutory or other regulation applicable to his employment, or of any orders given by or on behalf of his employer, or that he was acting without instructions from his employer …

For brevity, I shall describe that phrase as “regulations or orders.” This is clear from the history of the subsection and from the use of the word “notwithstanding,” which in its context explains the object of it. I may perhaps add here that I agree with the explanation by Viscount Dunedin of the words relating to the man “acting without instructions from his employer”namely, that they were meant to apply to a case where it might be argued that the prohibition was an implied prohibition: see Wilsons & Clyde Coal Co v MFerrin, at p 386.

In my opinion, we are compelled by the section in such a case as the present, where death has resulted from the accident, and no serious and wilful misconduct is alleged, to answer the following questions. First, looking at the facts proved as a whole, including any regulations

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or orders affecting the workman, was the accident one which arose out of and in the course of his employment? Secondly, if the first question is answered in the negative, is the negative answer due to the fact that, when the accident happened, the workman was acting in contravention of some regulation or order? Thirdly, if the second question is answered in the affirmative, was the act which the workman was engaged in performing done by the workman for the purposes of, and in connection with, his employers trade or business?

My Lords, in the light of the recent decisions of this House, it seems to be clear that there are no tests of universal application which will give material assistance in answering these questions of factquestions which ought, of course, to be answered in the award. What has been described as the doctrine of “added peril” was, I think, not the ratio decidendi in any decision of this House. I agree with what Lord Buckmaster said about it in Thomas v Ocean Coal Co Ltd, at p 109, as explained by my noble and learned friend Lord Russell of Killowen in Victoria Spinning Co (Rochdale) Ltd v Matthews. Originally designed as a test for the scope or sphere of the employment, the doctrine seems sometimes to have been used for a wider purpose. It may be of use as a test in some cases, but, for my part, I think that it will be misleading in others. It is plain that manyperhaps mostof the regulations and orders applicable to a mans employment are designed simply to prevent added perils being occasioned to him and his fellow-workmen in that employment. Yet it is clear, that, if the case comes within sub-s (2), the man will be entitled to compensation notwithstanding the added risk which he has run by his disobedience. That obviously is the very object of the sub-section in the case of death or serious and permanent disablement being caused by the accident. For this reason, it is clear, I think, that the “added peril” test is quite inapplicable to sub-s (2). In my opinion, it is only useful in its application to sub-s (1) if it is a matter of doubt whether or not a particular act is within a mans employment. In such a case, the circumstance that the act in question involves an added peril may help to the conclusion that the act was not intended to be within the scope of the mans employment. I do not think that Lord Sumner meant anything more than this in the oft-quoted statement from Lancashire & Yorkshire Ry Co v Highley, at p 372. I will add on this point that I agree in all respects with the opinion of my noble and learned friend Lord Atkin in Harris v Associated Portland Cement Manufacturers Ltd, at pp 78, 79.

I venture to add a comment on the proposition that, in answering the question whether sub-s (2) applies, the test is whether, if there had been no regulation forbidding what the man did, the injury would have been due to an accident arising out of and in the course of his employment. I think that this test is a useful one, provided that the regulation is only a prohibition as to an act which, but for the prohibition, would be within the scope of the mans employment. The regulation, however,

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may be one limiting the scope or sphere of the mans employment, or it may be a regulation with both effects, and in those cases the result of wholly disregarding it will be to alter the contract between the employer and the workmanwhich cannot be intended. Thus, suppose that there is a regulation stating that men engaged to clean certain machines are not to set them in motion. If a man engaged as a cleaner does an act outside his job by setting a machine in motion, he will not, speaking generally, be entitled to the benefit of sub-s (2) merely because there is a prohibition against his doing so: Wilsons & Clyde Coal Co v MFerrin.

My Lords, on the facts found by the arbitrator, the answers to the three questions I have formulated must be as follows. First, the accident did not arise out of the employment. The man was given a safe route, but chose to take one which was prohibited because of its dangers: Moore (A G) & Co v Donnelly. Secondly, the answer to the first question is solely due to the circumstance that the accident to the workman occurred while he was contravening the regulations as to his proper route from the engine-house to the station. The prohibited route was along the railway line of the respondents, and it was clearly prohibited merely because of its danger to a man who, in the course of his duty, is going from the engine-house to the station, or in the reverse direction. In these circumstances, the test above referred to can properly be applied. If there were no prohibition, would the act have been one which arose out of and in the course of the mans employment? The answer must be in the affirmative. The third question must also, I think, be answered in the affirmative. I cannot think that the county court judge rejected this view, as Macnaghten J thought. It is true that there was no emergency, but it seems to me impossible to believe, or reasonably to conjecture, that the man was walking along the line a little after midnight on a dark night in the direction of the junction station for any other purpose than to catch the 12.25 am train to East Croydon. The facts are found in the award. The man had entered upon his employment at the engine-shed. He was told to go to the station for the purpose of getting on to the 12.25 train. He was killed, shortly after leaving the shed, on the railway lines of the respondents, whilst going by the most direct (though a prohibited) route to the station. There is no suggestion that he deviated from the safe route to fulfil any purpose of his own. He was still on the respondents premises, and was going about his allotted job. The necessary inference is that he was walking along the line “for the purposes of and in connection with his employers trade or business.” The arbitrator seems to have come to an opposite conclusion as the result of a desire to follow a statement by Atkin LJ in Davies v Gwauncaegurwen Colliery, at p 665. The statement was perfectly correct, if I may say so, on the facts of that case, but it was not intended to lay down any general rule as regards prohibited areas.

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If the views above expressed are correct, it must follow that the decision in Clarke v Southern Ry Co is erroneous, and cannot be relied on.

My Lords, I have hesitated on the question whether the case ought not to be remitted to the arbitrator for findings on the questions which I have defined above, or some similar questions which your Lordships might approve, but, on the whole, I think that he has found all the facts which are necessary for deciding the matter, and that we ought not, in the circumstances, to shrink from deciding whether or not these facts entitled the appellant to succeed. On the fullest consideration, I am of opinion that the case comes within the terms of s 1(2) of the Act, that the accident must be deemed to arise out of and in the course of the employment, and that the appellant is, therefore, entitled to succeed on this appeal. For these reasons, the judgment of the Court of Appeal should be reversed and the award set aside. The matter must be remitted to the arbitrator, unless the parties agree, for the purpose of fixing the amount of the compensation.

LORD ATKIN. My Lords, this is another case illustrating the difficulties which have been occasioned in the course of the working of the Workmens Compensation Act 1925, in giving effect to s 1(2) of the Act. There can be no doubt that the subsection, when introduced as s 7 of the Act of 1923, was intended to be, and still remains, a provision giving important and extended relief to workmen as compared with that to which they had been held to be entitled under the then-existing legislation. The extent of the new relief given had to be determined by the courts, and must be taken to be defined by the decision of this House in 1926 in Wilsons & Clyde Coal Co v MFerrin. Whether that decision construed the section as favourably for the workmen as the legislature may have intended is not now a subject for judicial discussion. It is authoritative, and, as in duty bound, I accept it. The effect of the decision seems to be that, in ascertaining whether a workman is entitled to the benefit of the sub-section, you still have to consider whether he was acting within the scope of his employment, but for that purpose you are to ignore the regulations or orders in contravention of which he was acting. If, apart from them, you discern his employment, you must decide in respect of that employment whether the accident arose out of and in the course of it. I personally do not find this very easy. I find it difficult to abstract from the definition of the employment all the regulations and orders made or given in respect of it, contravention of any one of which is ex hypothesi to be ignored. I find this all the more difficult when I find that prohibitions which before 1923 were held to be prohibitions limiting the scope of the employment, as in Moore (A G) & Co v Donnelly, are amongst those to be ignored: see Wilsons & Clyde Coal Co v MFerrin, at p 388. I must, therefore, ignore at any rate some scope-limiting regulations. No doubt that is why by the

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section the accident is not said to arise in the course of employment, but is deemed so to arise. Moreover, the effect of scope-limiting regulations on the ascertainment of the scope of the employment still seems to survive in cases not falling within the section, which only applies in cases of death or serious and permanent disablement. It would appear, therefore, that in little injuries you are to give full effect to the scope-limiting regulations, while in big injuries you disregard them, or some of them, if they have been contravened, and it is deemed that they do not limit the scope of the employment. It seems to follow from this that, to ascertain the scope of the employment, you may still take into account the whole body of regulations and orders which affect the employment, but, if serious injury results from the contravention of one of them while the workman is acting for the purposes of, and in connection with, his employers business, the scope of the employment is deemed to be extended. I also think that, notwithstanding the prohibition and its contravention, and altogether disregarding the prohibition, it may be possible to show that the injured workman was injured outside his employment. The guard is not employed as engine driver, and, if injured while driving the train, would prima facie not have suffered injury arising out of and in the course of his employment, even though the employers had made an express regulation that no guard was to drive an engine. I except cases of emergency, where the duty may be considered to be extended. Similarly, a packer in the warehouse would not be employed as a weaver, whether or not there was a prohibition against his acting as such. In the present case, ignoring, as I think is right, the prohibition contained in r 15 of a circular issued by his employers, what is there to indicate that the deceased workman Noble was not injured while acting within the scope of his employment? He was a fireman. He had reached his place of work, the engine-shed. He had received orders to proceed to the station to catch a train which would take him to his working job. In obedience to the orders he was walking to the station. Everything happened in regular course of employment, except that he was proceeding by a route forbidden by the prohibition. I am not clear from the judgment of the county court judge whether he meant to decide that the man was not acting for the purposes of his employers business. It is, to my mind, quite clear that he was, and that there was no evidence to the contrary. I wish to affirm the decision in Stokoe v Mickley Coal Co Ltd that in such cases the motive with which the man was acting is irrelevant. Few men disobey a prohibition except for the reason that they find it irksome, and that it is more convenient for them to disregard it. If motive in this sense negatived the condition, the section might as well never have been passed. I come to the conclusion, therefore, that the only evidence in the case establishes that the man was acting for the purposes of, and in connection with, his employers trade or business, and that, in the circumstances,

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the accident must be deemed to arise out of and in the course of his employment. I have not thought it necessary to deal with the numerous cases referred to in argument. The county court judge had 20 cases cited to him. We had 60. I suppose with a due sense of proportion, the Court of Appeal had 40. I venture to think that the more recent decisions have rendered many of the earlier ones useless for the purpose of construing this section, and I agree with Goddard LJ in Seviour v Somerset Collieries Ltd that Thomas v Ocean Coal Co Ltd is a landmark in this branch of the law. It appears to me to cover this case, and, together with Wilsons & Clyde Coal Co v MFerrin and Harris v Associated Portland Cement Manufaturers Ltd, which deals with the associated subject of negligence, affords authority which should be sufficient to determine most of the problems which arise in connection with this section. It is apparent that earlier decisions on the section must be read in the light of these cases. I doubt, for instance, whether I could adhere to some of the remarks I made in my own judgment in Davies v Gwauncaegurwen Colliery, one of the earliest pronouncements of the courts on the section when it was first introduced in 1923. The decision in Clarke v Southern Ry Co, which was treated rather reluctantly by the majority of the Court of Appeal as binding on them, is inconsistent with the recent cases, and must now be treated as overruled. Since this case was argued, Seviour v Somerset Collieries Ltd has been reported in the Court of Appeal. It was very similar to this, and the judgment of Slesser LJ, appears to me to be convincing. I think that the appeal should be allowed, and the case remitted to the county court judge for him to make an award for the admitted amount of compensation.

LORD WRIGHT. My Lords, I do not imagine that your Lordships would ever have been troubled with this case if it had not been for the decision of the Court of Appeal in Clarke v Southern Ry Co. In that case, the facts were in no material respect distinguishable from the present. The man was actually injured by slipping as he jumped on a moving engine, but, on the facts, the county court judge held that the attempt to board the engine did not affect the claim. However, he was injured when contravening the very order to proceed by a particular route which the deceased man was contravening in the present case. The county court judge in Clarke v Southern Ry Co, showing a just appreciation of the law as laid down in Wilsons & Clyde Coal Co v MFerrin, held, on the facts which he found, that the man, though contravening an order, was doing the work for which he was employed, and was acting for the purposes of, and in connection with, his employers trade or business. On these findings, the case fell within s 1(1), (2), of the Act. The accident arose out of and in the course of the employment, save in the one respect that the man was contravening an order of his employers, but, under s 7 of the Act of 1923,

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now s 1(2) of the Act of 1925, as the accident resulted in serious disablement, it was deemed so to arise, subject to the condition which was found to have been fulfilled. On the judges findings, the case fell precisely within the ruling of MFerrins case, and the judge properly so held. His decision was, however, overruled by the Court of Appeal, not on the facts, which it was not competent to the court to question, but, so far as I can understand, on grounds completely inconsistent with what this House decided in MFerrins case. I feel no doubt that the decision of the Court of Appeal was wrong. I can understand the difficulty in which both the county court judge and the Court of Appeal were placed in the present case. What a court should do, when faced with a decision of the Court of Appeal manifestly inconsistent with the decisions of this House, is a problem of some difficulty in the doctrine of precedent. I incline to think that it should apply the law laid down by this House, and refuse to follow the erroneous decision. However, I cannot blame the Court of Appeal for leaving it to this House to point out that the decision in Clarke v Southern Ry Co was at the time inconsistent with MFerrins case, and is also inconsistent with what this House said later in Thomas v Ocean Coal Co Ltd and Harris v Associated Portland Cement Manufacturers Ltd. It is enough here to say that Clarkes case was wrongly decided. Indeed, the contrary is unarguable. Judgment in the present case, therefore, should be entered for the appellant.

There are two points on which I have felt any question. One was the absence in the county court judges statement of the facts of any express finding that Noble was acting for the purposes of, and in connection with, the employers trade or business. On the facts, however, it is clear that he was doing so. In proceeding to East Croydon station, he was doing what his employment required him to do. His motive, in the narrower sense of the immediate urge in choosing to go by the prohibited route, is immaterial, whether it was to save time or to save himself trouble. The test is objective, and depends on the fact that his proceeding to the station was within the sphere of his employment. The case is thus precisely within the language of Viscount Dunedin  in MFerrins case, at p 388:

The only reason for saying that the accident did not arise out of the employment was … that the prohibition … made it clear that what the workman was doing was not within the scope of his employment, but that is precisely the case for the application of sect. 7 [now sect. 1(2) of the Act of 1925]. The accident is to be deemed to have arisen out of the employment notwithstanding the prohibition.

As it is impossible, in my opinion, on the facts of this case, to arrive at any conclusion other than that the man was proceeding for the purposes of, and in connection with, his employers trade or business, I do not think that any importance can be attached to the absence of a finding on the part of the county court judge. Then there is the question whether the case should not be remitted to the county court judge to

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reconsider his decision in the light of the ruling of this House. I think it is not obligatory to do so. The facts are free from dispute, and I am of opinion that the precedent established in similar circumstances in Thomas v Ocean Coal Co Ltd should be followed. This House there took upon itself the responsibility of deciding whether the case fell within the statute, and the same course should be followed in this appeal. I apprehend that the amount of compensation is now likely to be in dispute. If it is, the county court judge must decide what it is.

This case seems to me to be so clearly within the principles established by this House in MFerrins case and again in Thomas v Ocean Coal Co Ltd that I find it hard to realise how some days were spent in argument, and, as my noble and learned friend Lord Atkin has pointed out, no less than 60 authorities were cited. I cannot remember how many authorities were cited in Thomas v Ocean Coal Co Ltd, but I feel no doubt that a great number were cited in argument. In the end, however, and perhaps earlier, it was clear that MFerrins case concluded the matter, and here it is doubly clear that the matter is concluded by these decisions of the House. Along with the other Lords who took part in the debate, I have said all that I can usefully say on the question in Thomas v Ocean Coal Co Ltd, and, on the more general kindred question of the construction of the Act, in Harriss case. If I attempt to repeat myself, I shall only again add to the number of phrases or paraphrases which have accumulated round the Act, and have furnished material for the ingenuity of advocates and the embarrassment of county court judges. I have often reflected with sadness that the Act was intended to be administered with as little technicality as possible, yet thousands of reported cases have accumulated round it, and fresh ones are likely to go on accumulating so long as the Act remains in its present form. Most of these cases, in truth, depend on questions of fact, yet in Lancashire & Yorkshire Ry Co v Highley Lord Finlay LC wisely observed, at p 359:

… a finding of fact in one case cannot be a safe guide as to a finding of fact in another case.

The fundamental and initial question in every claim under the Act must be whether the accident arose out of and in the course of the employment. That is a question of fact, which can only be decided by the county court judge by applying his common sense and his knowledge of industrial conditions to the evidence before him, though with due regard to any principles laid down by the courts. When he has come to a conclusion on that point, he will, as a matter of construction of the Act, observe that the mans negligence is immateriala principle, I hope, cleared up for good and all by the decision in Harriss caseand that, if the accident results in death or serious and permanent disablement, the claim is not barred because the accident is attributable to serious or wilful misconduct, and he will in proper cases observe

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further that it is not barred if the case falls within s 1(2) of the Act.

I think it is true to say that, as time has gone on, the courts have taken a fairer and more common-sense view of the circumstances which justify an affirmative finding on this point. I question if Highleys case or Stephen v Cooper would now be decided, on the facts, against the claimant. In the former case, the man was negligent in not seeing, before he ran between the wagons, that an engine was not coupled to the train, and, in the latter, he was negligent in not stopping the knives of the mower when he walked along the pole to do what was necessary for the conduct of the worknamely, refix the chain on the hook. In the latter case, his manner of doing the job was grossly, even recklessly, negligent, but was it more? In the last resort, these cases seem to turn almost entirely on issues of fact. It is in general futile to argue by analogy from one case to another, though certain generalisations laid down in the authorities may need to be applied or considered in particular cases, and the decision must be based on the actual words of the Act, and on any decisions construing them. Thus, for instance, in any similar case, the arbitrator would have to apply the principles laid down in Wilsons & Clyde Coal Co v MFerrin or in Harriss case. Neither Highleys case nor Stephen v Cooper is relevant in this case, because neither case involved disobedience to orders or directions, or acts done without instructions. If that had been so, the rules to be applied are to be found in the decisions of this House, which I think is not so ready as it was in the past to forget that it is simply construing a statute, or to import limitations and refinements for which the words of the statute afford no justification. I feel no doubt that the action of the legislature in denying to the courts the power (in the case of death, etc) to exclude a claim on the ground that the man was infringing a prohibition, and the action of this House in making it clear that the workmans negligence, by adding a risk, did not bar his claim so long as the accident arose out of and in the course of his employment, have done much to change the general attitude of the courts in considering these cases. The amendment embodied in s 7 of the Act of 1923 has had a wider influence than what it immediately enacted. Thus, the view of the law stated by Lord Sumner in Highleys case was, indeed, adopted by this House in Moore (A G) & Co v Donnelly, but, when that case is seen to be overruled because of the amendment of the law by s 7 of the Act of 1923, now s 1(2) of the present Act, as explained in MFerrins case, the somewhat narrow view stated by Lord Sumner can no longer be regarded as law. I concur in the motion proposed.

LORD PORTER. My Lords, I am asked by my noble and learned friend Lord Romer to say that he concurs in the opinions which your Lordships have expressed.

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My Lords, on 25 August 1938 the appellants husband Thomas Noble was knocked down and killed by an electric train on the respondents railway. Thomas Noble was employed by the respondents as a “passed fireman.” That is to say, he was qualified to act as a driver of a steam locomotive, but was still graded as a fireman. He had been attached to the locomotive depot at Norwood Junction since March 1936. At the time of his death, he was employed on “piloting duties.” That is to say, when a driver was not acquainted with the railroad, Thomas Noble was sent to accompany him and show him the way. On the night of 24 August25 August 1938, Thomas Noble had reported for duty at the engine-shed of the depot at Norwood Junction about midnight. He was then instructed by the foreman to go to East Croydon and carry out piloting duties there. In order to get to East Croydon, it was necessary for him to walk from the locomotive depot to the station at Norwood Junction, and from there to proceed as a passenger by train to East Croydon. After receiving his instructions, he was entitled to occupy 10 minutes in reading notices and 13 minutes in walking from the depot to the station. His train started from Norwood Junction at 12.25 am.

It was the practice of the company to issue a blue book to each member of their staff, and one such book was issued to Thomas Noble on 6 December 1932. Rule 15 in that book was in the following terms:

Employees are expressly prohibited from walking upon the line or crossing the rails (except at a public level crossing) unless they are required to do so in the execution of their duty or are proceeding to or from their work by a route permitted by the company. Any employee walking upon the line or crossing the rails, except as aforesaid will be acting outside his employment.

The locomotive depot at Norwood Junction was opened on 6 July 1935 and on 5 July a notice to all concerned was issued in these terms:

A new locomotive depot will be brought into use on Saturday night, July 6, 1935.

Enginemen and others must note that the route to be taken is from the up side of the station, via: Companys footpath, Causeway, Portland Road, South Norwood High Street, Goat House Bridge, Penge Road. West Croydon locomotive depot will be closed from that date.

Apparently, in spite of the instructions issued to their staff not to walk along the metals, numerous accidents had occurred as a result of the breach of r 15, and a fresh circular was issued, again calling attention to its terms.

So far as Thomas Noble was concerned, the facts appear to be that he did not follow the route indicated in the notice issued on 5 July 1935, but, instead of crossing the line over the footbridge and proceeding along the footpath leading to Penge Road, he continued along the companys line, and was struck by an electric train travelling in the same direction as that in which he was walking, carried for some 70 yds and killed. The accident took place at 12.14½ am. It was found by the county court judge that he had reasonable time to reach the station if he had proceeded by the indicated route. It appears

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that he left the engine shed at 12.14 am and no evidence was given as to his reasons for proceeding by the railway line instead of by the prescribed route. In these circumstances, the county court judge held that the appellant was not entitled to recover compensation, and this decision was affirmed by the Court of Appeal, from whose judgment the present appeal is brought.

The determination of the question at issue appears to depend largely upon the true meaning of the Workmens Compensation Act 1925, s 1(1), (2). Sub-s (1) is too well-known to require repetition. Sub-s (2) provides as follows:

For the purposes of this Act, an accident resulting in the death or serious and permanent disablement of a workman shall be deemed to arise out of and in the course of his employment, notwithstanding that the workman was at the time when the accident happened acting in contravention of any statutory or other regulation applicable to his employment, or of any orders given by or on behalf of his employer, or that he was acting without instructions from his employer, if such act was done by the workman for the purposes of and in connection with his employers trade or business.

From that sub-section, it is apparent that, in order to entitle an applicant to recover, though the injury upon which reliance is placed must arise out of and in the course of the mans employment, yet, in deciding whether it so arises, the fact that the workman was acting in contravention of any statutory or other regulation, or of any orders of his employer, or without instructions from his employer, is to be neglected. That is to say, if the act would be within the scope of the mans employment but for the regulation or order, or lack of instructions, it is none the less within his employment despite those regulations, orders, or want of orders. The object of this provision appears to have been to deal with the difficulties created by the decision in Moore (A G) & Co v Donnelly, in which it was held that the prohibition of an act otherwise within the scope of a workmans employment might be sufficient to take it outside this scope, and to prevent the workman or his dependants from losing the right to compensation merely because of the breach of such statutory or other regulation. This advantage, however, was only to be obtained subject to the proviso that the forbidden act must have been done for the purpose of, and in connection with, the employers trade or business.

In the present case, the county court judge found that the act of walking along the railway line was not within the sphere of the workmans employment, but, though his language is a little obscure, he appears to have thought that, in spite of the terms of s 1(2) of the Act, the prohibition contained in r 15 could so limit the scope of the workmans employment as to make an act in contravention of it outside his employment. He said:

The prohibition, in my view, placed the act of walking on the permanent way outside the scope or sphere of his employment. If the familiar test laid down by Lord Sumner in Lancashire & Yorkshire Ry Co v. Highley, at p. 372, were put in relation to the present arbitration, it could not possibly be said that it was part of Nobles employment to hazard, to suffer or to do what caused his injury.

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He also seems to have thought that the act of walking along the metals could not in any case have been done for the purposes of, and in connection with, the employers business, and was, therefore, not within the proviso to s 1(2). His words are as follows:

His [the workmans] action [in Thomas v. Ocean Coal Co., Ltd.], though hazardous, was held by Lord Buckmaster, at p 110 to be “… due to the mans desire to expedite the process he was engaged to control.” That can hardly be said in the present case … Where defined areas are forbidden to a workman, the main current of authority is against applying subsect. (2). In Davies v Gwauncaegurwen Colliery, Austin L.J., at p 665, laid down that in such an area a workman can have no business, and, therefore, he can only be there for his own purposes … Finally, in Knowles v Southern Ry. Co., Lord Russell held in most sweeping terms, at p. 472, that the subsection only applies “to acts merely incidental to the employment,” and that, where acts are expressly forbidden, they can “by no stretch of imagination … be said to be [acts] done by the workman for the purposes of and in connection with [the] employers trade or business.

The respondents representatives, recognising, I think, that the words of Lord Sumner were used before the passing of the provisions of the Workmens Compensation Act 1923, which were afterwards re-enacted in s 1(2) of the Act of 1925, and that they could not be applied without the limitation necessitated by that Act, did not attempt to support the county court judges conclusion that the prohibition prevented the act leading to the injury from being within the scope of the mans employment. They said, however, that to pass along the permanent way, whether forbidden or not, was no part of his duty. In the first place, they contended that the route by which he was to go from shed to station was prescribed in the notice of 5 July 1935 and for the man to go by any other route was for him to leave his work and undertake a task outside its scope. If this view be true, he would not be within the sphere of his employment if, instead of passing along the footpath to the west of the railway line, he had crossed by Portland Road Bridge and then walked along Clifford Road to his destination, though to do so would only be to use a route along a metal road instead of a route along a footpath. I cannot think that such a conclusion is justified, or that every variation of the route prescribed, however safe, must be regarded as outside the work which he was employed to do. In my view, the so-called prescribed route is not a limit outside which the man has ceased to be acting within his employment. He may, indeed, be acting in contravention of his masters orders, but, except in this respect, he is not going outside the sphere of his duties, and, if he were only acting contrary to orders, he would still be deemed to be within the sphere of his duties under the provisions of s 1(2) of the Act of 1925.

Then it was said, however, that, even if he might make his way along one of the other roads without leaving his employment, he was no more entitled to walk along the railway line than to engage in plate-laying or other work on the permanent way. The risks which he undertook by so acting were, it was contended, not those of a “passed fireman,” but those of the repairing staff. For this contention, reliance

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was placed chiefly on the words of Lord Sumner in Lancashire & Yorkshire Ry Co v Highley, at p 372:

There is, however, in my opinion, one test which is always at any rate applicable because it arises upon the very words of the statute, and it is generally of some real assistance. It is this: Was it part of the injured persons employment to hazard to suffer, or to do that which caused his injury?

Reliance was also placed upon the decision in Clarke v Southern Ry Co, but a series of cases, beginning with Barnes v Nunnery Colliery Co Ltd and ending with Stephen v Cooper, was also called in aid.

In applying these decisions, however, care must be taken to differentiate between those in which it was held that a contravention of orders had taken an act which would otherwise be within a mans employment outside its scope and those in which the act which caused the injury was not within the mans work for reasons other than that it was prohibited. Since the Workmens Compensation Act 1923, afterwards re-enacted in s 1(2) of the Act of 1925, a mere contravention of orders is not sufficient. Some, indeed, of the cases quoted undoubtedly do deal with the question of the limitation of the mans employment quite apart from any contravention of orders. Even in the latter cases, however, though any determination of principle is helpful, findings of facteven in circumstances somewhat similar to the case under considerationare of no real assistance. Each case must depend upon a careful consideration of its own facts. As Lord Dunedin said in Plumb v Cobden Flour Mills Co Ltd, at pp 65, 66:

It is well, I think, in considering the cases, which are numerous, to keep steadily in mind that the question to be answered is always the question arising upon the very words of the statute. It is often useful in striving to test the facts of a particular case to express the test in various phrases. But such phrases are merely aids to solving the original question, and must not be allowed to dislodge the original words. Most of the erroneous arguments which are put before the courts in this branch of the law will be found to depend on disregarding this salutary rule. A test embodied in a certain phrase is put forward, and only put forward, by a judge in considering the facts of the case before him. That phrase is seized on and treated as if it afforded a conclusive test for all circumstances, with the result that a certain conclusion is plausibly represented as resting upon authority, which would have little chance of being accepted if tried by the words of the statute itself.

The distinction now to be made between cases in which s 1(2) is applicable and those in which it is not is perhaps best illustrated by the decision in Wilsons & Clyde Coal Co v MFerrin Kerr v Dunlop (James) & Co, in which your Lordships House considered the cases of two separate workmen, one of whom returned to a shothole in the mistaken belief that a shot which he had fired had exploded, and was injured. In so returning, he was acting contrary to a statutory regulation, but was nevertheless held entitled to recover. The other, who was a miner, coupled an electric cable to a detonator for the purpose of firing a shot. This act was also contrary to a statutory regulation, but, in any case, was no part of the duty of a miner. The first man recovered because the only ground for refusing compensation was that his act was prohibited. The second failed to recover, because, quite

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apart from the prohibition, he had arrogated to himself the duties of a fireman, which duties were not his, in any case, to perform. Indeed, in the course of the argument before us, both sides accepted the position laid down by Viscount Dunedin in Wilsons & Clyde Coal Co v MFerrinnamely, that one ought to disregard the fact that the workman, at the time when he met with his accident, was acting in contravention of a regulation, and to determine, without reference to that fact, whether the accident arose out of and in the course of his employment. No doubt this question may often be a matter of some nicety, and a question of degree. I can imagine an employee ordered to proceed to France at the present day arguing that he was entitled to travel by steamer, or train-ferry, or even by air, but I should not think it permissible for him to cross by row-boat, or to proceed by canoe. Whether, if he had ample time, it would be permissible for him to proceed by sailing boat might be a matter of more doubt.

Since the decision in Harris v Associated Portland Cement Manufacturers Ltd, it is plain that mere danger, or even recklessness, is not enough to take an act, otherwise within the scope of a mans employment, outside it. It is true that Lord Buckmaster says in Thomas v Ocean Coal Co Ltd, at p 109:

Conduct can, of course, be so reckless and so unnecessary as to take it outside the meaning of the statute …

These words, however, must be read in the light of his previous observations, at p 109:

In one sense, every method of performing an operation in the course of a mans employment that is not the safest is an added peril, but the Act contains no provisions that exclude from its benefits an accident that has arisen through a method of work which was not the safest in the circumstances.

They must also be read in the light of the observations of Lord Atkinson in Barnes v Nunnery Colliery Co Ltd, at p 49:

In these cases under the Workmens Compensation Act a distinction must, I think, always be drawn between the doing of a thing recklessly or negligently which the workman is employed to do, and the doing of a thing altogether outside and unconnected with his employment. A peril which arises from the negligent or reckless manner in which an employee does the work he is employed to do may well be held in most cases rightly to be a risk incidental to his employment. Not so in the other case.

The words of Lord Buckmaster mean, I think, no more than that the man must be really engaged in attempting to perform his duty, and not, as in Stephen v Cooper, engaging in a frolic of his own under the pretence of doing his masters work.

Disregarding r 15, then, was the workman in the present case engaged on his proper work at the time of his death, and did the accident arise out of his employment? He appears to me to have been so engaged. He had signed on at the depot. He had read the notices, and he was passing from one part to another of his employers premises in the course of reaching a station, from which, again, he was to proceed for the purpose

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of his work. It was not a case such as St Helens Colliery Co Ltd v Hewitson, where the workman was proceeding towards his employers premises, and was 6 miles from them when the accident occurred. In that case, as Lord Wrenbury pointed out, the employers had no right to give an order at the place where the man was injured. In the present case, the mans work was not confined to the footplate, and he had already reached the ambit of those premises on which his employers orders would have to be obeyed. He was not arrogating to himself some new duty. He was engaged on the duties of his employment, however negligently or recklessly he may have been performing them.

It is said, however, that this is not enough. The workman must not only fulfil the substance of s 1(2). He must also be shown to have come within the proviso to it. That is to say, he must obtain a decision from the county court judge that, in disobeying the prohibition imposed upon him, he was acting for the purposes of, and in connection with, his employers business. No doubt it is true that his fulfilment of the proviso must be proved, and, if the county court judge had found as a matter of fact that, at the time of the accident, he was not fulfilling his masters purposes, and if the evidence supported that finding, the appellant must fail. In the present case, however, the county court judge has not, in my view, based himself upon a finding of fact. He has misdirected himself on a question of law. Perhaps this view, is best exhibited in the words which he quotes from Lord Russell of Killowen in Knowles v Southern Ry Co, which have been set out abovewords which were applicable to the facts of the case then under consideration, but have no application to the present case. The mistake which I think he makes is in believing that a prohibited act cannot be said to be done for the purposes of, and in connection with, the employers business. Such a result would make the section meaningless, since, if it were correct, the workman might, indeed, be deemed to be within the sphere of his employment, but could never be acting for the purposes of, or in connection with, his employers business in doing a prohibited act. In the present case, all the facts proved show that the man was proceeding to Norwood Junction station for the purposes of his work, and that he was just as much acting in connection with it as a workman proceeding from one portion of his employers warehouse to another in order to execute some work at the spot to which he was making his way. Having regard to the facts proved, I do not think that it was open to the county court judge to come to any conclusion other than that the deceased man was passing along the permanent way for his employers purposes, and in connection with their business.

However, just as it was said that, in order to succeed, the appellant must obtain a determination in her favour that the proviso had been fulfilled, so, it was contended, she required a finding by the county court judge that, at the time of the accident, Thomas Noble was acting in the course of his employment, and that the accident arose out of it

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a finding which she had not obtained. Here again, I think, the county court judge has misdirected himself in thinking that the prohibition placed the route taken by the deceased man outside the scope of his employment. To take such a view is, I think, to disregard s 1(2) of the Act of 1925, and leaves your Lordships free to determine whether the act was within the mans employment. A similar conclusion was reached in Thomas Ocean Coal Co Ltd and Dennis v White (A J) & Co, in both of which cases your Lordships House felt itself free to draw its own conclusions from the facts found by the county court judge, and reversed his finding that the workman was not entitled to recover. The observations of Lord Buckmaster in Thomass case, at p 108, and those of Lord Parker of Waddington in Denniss case, at p 493, state, I think, the principles on which your Lordships should act. I would allow the appeal and reverse the decisions of the county court judge and the Court of Appeal. I am glad to feel that the majority of the Court of Appeal would have reached a similar conclusion if they had not felt themselves bound by Clarke v Southern Ry Co, which, I think, must now be regarded as overruled.

Appeal allowed with costs.

Solicitors: Kenneth Brown Baker Baker (for the appellant); H L Smedley, Solicitor, Southern Railway (for the respondents).

Michael Marcus Esq   Barrister.

Knightsbridge Estates Trust Ltd v Byrne and Others

[1940] 2 All ER 401


Categories:        LAND; Mortgages        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD WRIGHT, LORD ROMER AND LORD PORTER        

Hearing Date(s):        2, 3, 4, 22 APRIL 1940        


Mortgage Mortgage by company Principal repayable by instalments over period of 40 years Postponement of redemption Reasonableness of postponement Clog on equity Rule against perpetuities Whether mortgage a debenture Companies Act 1929 (c 23), ss 74, 380.

An estate company borrowed a sum of £310,000 from an insurance company, and as security mortgaged to the lenders property consisting of 75 houses, 8 shops and a block of flats. It was a term of the mortgage that the principal should be repaid by 80 half-yearly instalments spread over a period of 40 years. The mortgagees remedies became immediately exercisable if the mortgagors should sell the equity of redemption without the consent of the mortgagees. There was no power under which the mortgagors could sell any one of the properties mortgaged free from the mortgage. The mortgagors were restrained from granting leases for more than 3 years without the consent of the mortgagees. The term for repayment was suggested by the mortgagors. The mortgagors claimed that they were entitled to redeem the mortgaged property after the expiration of 6 months notice upon their paying to the lenders the principal, together with interest and costs. It was contended that a provision that the mortgage should not be redeemed until the expiration of a period of 40 years was void as being a clog on the equity of redemption, and that the mortgage deed infringed the rule against perpetuities. For the respondents, it was contended that

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any doubt as to the validity of the provisions postponing the right of redemption was removed by the fact that the mortgage was a debenture within the meaning of the Companies Act 1929, s 74, having regard to the definition in s 380 thereof:

Held (i) the mortgage was a “debenture” within the meaning of the Companies Act 1929, s 74, as defined by s 380 thereof, and accordingly the provisions which postponed the right of redemption were valid in any event.

(ii) the rule against perpetuities does not apply to mortgages.

(iii) read in the light of the provisions of s 74 of the Act of 1929, the terms of the mortgage were neither so stringent nor so oppressive as to justify the interference of the court.

Order of Court of Appeal ([1938] 4 All ER 618) affirmed on other grounds.

Notes

The decision of the Court of Appeal in this case that the right of redemption could be so long postponed was generally thought to be contrary to the view expressed by the majority of textbook writers. The consideration of the matter by the House of Lords was, therefore, a matter of no little importance, and there will be some regret that the House have not found it necessary to consider this aspect of the case. In the court of first instance, Luxmoore J, held that the deed here in question was not a debenture. This question the Court of Appeal did not find it necessary to decide, but the House of Lords have taken it first, since, if it was a debenture, clearly the other points do not arise. On this point, the House has decided that this deed, though in form a mortgage, is a debenture within the meaning of the Companies Act 1929. For the purposes of s 74 of that Act, which removes the equitable rule against securities being irredeemable or redeemable only on a remote contingency, the term debenture has the meaning given to it by s 380 of the Act, but their Lordships find it difficult to give any precise definition of the term “debenture.”

As to Meaning of Debenture, see Halsbury (Hailsham Edn), Vol 5, pp 474, 475, para 769; and for Cases, see Digest, Vol 10, pp 743, 744, Nos 4637, 4638.

Cases referred to

Levy v Abercorris Slate & Slate & Slab Co (1887) 37 ChD 260; 7 Digest 31, 156, 57 LJCh 202, 58 LT 218.

British India Steam Navigation Co v Inland Revenue Comrs (1881) 7 QBD 165; 6 Digest 500, 3172, 50 LJQB 517, 44 LT 378.

Lemon v Austin Friars Investment Trust Ltd [1926] Ch 1; Digest Supp, 95 LJCh 97, 133 LT 790.

Samuel v Jarrah Timber & Wood Paving Corpn Ltd [1904] AC 323; 10 Digest 782, 4892, 73 LJCh 526, 90 LT 731, affg [1903] 2 Ch 1.

Re Southern Brazilian Rio Grande do Sul Ry Co Ltd [1905] 2 Ch 78; 10 Digest 733, 4582, 74 LJCh 392, 92 LT 598.

Floyer v Lavington (1714) 1 P Wms 268; 35 Digest 355, 984.

Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25; 35 Digest 241, 20, 83 LJCh 79, 109 LT 802.

Lindsay v Cundy (1876) 1 QBD 348; 42 Digest 679, 910, 45 LJQB 381, 34 LT 314, on appeal (1878) 3 App Cas 459.

Ely (Dean) v Bliss (1852) 2 De G M & G 459; 42 Digest 679, 908, 20 LTOS 35.

Appeal

Appeal from an order of the Court of Appeal (Sir Wilfrid Greene MR, Scott LJ, and Farwell J), dated 1 December 1938 and reported [1938] 4 All ER 618, reversing an order of Luxmoore J,

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dated 13 April 1938 and reported [1938] 2 All ER 444. The facts and the arguments are fully set out in the opinion of Viscount Maugham.

H B Vaisey KC and J H Stamp for the appellants.

J M Gover KC and Wilfrid M Hunt for the respondents.

22 April 1940. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, this appeal raises the question whether the appellants, who are mortgagors, are entitled to redeem on the usual notice a mortgage, dated 6 November 1931, made between the appellants of the one part and the respondents (who are trustees of the Royal Liver Friendly Society) of the other part, notwithstanding a provision in the mortgage for repayment of the loan of £310,000 by 80 half-yearly instalments. It was not in dispute before your Lordships that, on the true construction of the mortgage, the appellants were not entitled to pay off the loan otherwise than by the instalments, and at the times, provided in the mortgage, so that the appellants would not be entitled to the free enjoyment of their property for 40 years except by a voluntary concession from the respondents.

Three questions of law emerged on the argument before your Lordships which may be stated as follows: (i) whether the provisions in the mortgage which purported to postpone for so long a period the right of redemption were not void in equity, as preventing redemption for an unreason able length of time, having regard to certain circumstances which, it was alleged, made the provisions as to such postponement oppressive on the appellants, and unnecessary for the protection of the respondents, (ii) whether any of the provisions of the mortgage were invalidated by the rule against perpetuities, and (iii) whether the mortgage was a debenture within the meaning of the Companies Act 1929, s 74, having regard to the definition contained in s 380 of that Act. The first two questions raised the points on which the appellants relied. The third was a contention on the part of the respondents, who claimed that s 74 of the Act in effect removed any doubt as to the validity of the provisions postponing the right of redemption.

The action was heard by Luxmoore J, who held by his judgment, dated 13 April 1938, that the provision in the mortgage deferring redemption for a period of 40 years, taken in conjunction with clauses in the deed which he regarded as unusual and oppressive, was unreasonable, and constituted an unlawful clog upon the right of the appellants to redeem the mortgage, and that the appellants were entitled to redeem the mortgage on the usual notice. The judge further held, in favour of the respondents, that the rule against perpetuities has no application to mortgages, and, in favour of the appellants, that a common mortgage of freeholds is not a “debenture” within the meaning of the Companies Act 1929, s 74. The respondents appeal to the Court of Appeal (Sir Wilfrid Greene MR, Scott LJ, and Farwell J) was allowed. Judgment was delivered on behalf of the court by Sir Wilfrid Greene MR. It was thereby held that, while the court would not

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enforce any provision in a mortgage which was unconscionable, or which operated to prevent the mortgagor from exercising his right of redemption after the specified date for redemption, or which rendered the right of redemption illusory, the court is not further concerned with the question whether the terms of the mortgage are reasonable, and a provision that the date for redemption shall be postponed for a given period, however long, is not on that ground alone unenforceable. It was also held that in the present case, where the mortgage represented a commercial agreement between two important corporations experienced in such matters, the provision for repayment by instalments and the other terms above mentioned were open to no objection which justified the interference of the court. The court also held that the rule against perpetuities has no application to mortgages, but expressed no opinion as to whether the mortgage is a debenture for the purpose of the Companies Act 1929, s 74.

In the course of the able arguments for the appellants, it became manifest that logically the first matter to be determined was the third question above statednamely, the question whether the Companies Act 1929, s 74, applied. That section is in the following terms:

A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that the debentures are thereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long, any rule of equity to the contrary notwithstanding.

Section 380 of the Act, so far as relevant, provides:

(1) In this Act, unless the context otherwise requires, the following expressions have the meanings hereby assigned to them (that is to say) … “Debenture” includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not …

If, then, the mortgage was a debenture within s 74, it was difficult to see how the appellants could succeed on the main point. Your Lordships, therefore, after fully hearing counsel for the appellants, thought it right to call on counsel for the respondents on the question arising under s 74, and eventually did not think it necessary to call on the respondents for an argument on either of the other two points which I have stated. In these circumstances, it would not be right for me to express any opinion on the first question, and I wish to reserve full liberty to consider that question if it should arise in a case where s 74 did not apply. On the other hand, I must make some observations on the second question, as to the application of the rule against perpetuities, a matter as regards which none of your Lordships felt any doubt that the decisions of Luxmoore J and the Court of Appeal were right.

My Lords, the judgment of Luxmoore J contains an elaborate statement of the history of s 74, and of the reasons which led him to the conclusion that the section did not apply to the mortgage in the present case. Unfortunately, his attention does not seem to have been

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called to the Companies Act 1928, which was not a consolidating but an amending Act, and he accordingly thought that the extended definition of the word “debenture” was first found in the Companies Act 1929, which, as he justly observed, was a consolidating statute. In fact, the extension of the definition is to be found in Sch II of the Act of 1928, where the added words are to be found as an amendment of the Companies Act 1908, s 285: see s 99 of the Act of 1928. The consolidating Act of 1929 reproduced as part of the consolidation the amended definition of the word “debenture,” and there is, therefore, no room for any such presumption excluding an amendment of the existing law by a consolidating statute as the judge relied on.

The position, therefore, is as follows. The substance of s 74 of the Act of 1929 was first found in the Companies Act 1907, s 14, where it was prefaced by the words “for removing doubts it is hereby declared that. …” There was no definition of the word “debenture,” and there is strong ground for thinking that, whatever be the ambit of the word, it did not in that section include an ordinary mortgage of land. The consolidating Act of 1908 reproduced the provision of the Companies Act 1907, s 14, omitting the introductory words. It was in the exact terms of the present s 74 of the 1929 Act. The definition clause (s 285) stated that “ debenture includes debenture stock,” which perhaps made it even clearer that “debenture” did not include a mortgage of land in ordinary form. The amending Act of 1928, however, contained the provision that at the end of the definition of “debenture” in s 285 of the 1908 Act:

there shall be added the words “bonds and any other securities of a company whether constituting a charge on the assets of the company or not.”

It is perhaps worth pointing out that the words “unless the context otherwise requires” which we find in the consolidating Act of 1929 are not to be found in the amending Act of 1928. I attribute little weight to this fact, for, in my opinion, some such words are to be implied in all statutes where the expressions which are interpreted by a definition clause are used in a number of sections with meanings sometimes of a wide, and sometimes of an obviously limited, character. On the other hand, I think due weight ought to be attributed to the words “otherwise requires” in the Companies Act 1929, and it is incumbent on those who contend that the definition does not apply to s 74 to show with reasonable clearness that the context does in fact require a more limited interpretation of the word “debenture” than s 380 has assigned to it.

If we begin by asking what the word “debenture” means, apart from any definition, the reply must be that it has no precise meaning. Chitty J observed in Levy v Abercorris Slate & Slab Co, at p 264, that the word:

… means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a “debenture.”

An interesting extract from Skeats Etymological Dictionary, 1882,

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will be found in a footnote to the case, at p 264. Lindley J had previously stated simply in British India Steam Navigation Co v Inland Revenue Comrs, at p 172

Now what the correct meaning of “debenture” is I do not know.

In Lemon v Austin Friars Investment Trust Ltd, the same ignorance was professed in the Court of Appeal. Warrington LJ, in particular, after observing at p 17 that it had been said “by a wiser man than myself” that it was impossible to give an exhaustive definition of the word “debenture,” went on to remark that he did not propose to incur the reproach of venturing where wise men fear to tread. The textbooks are agreed at least in thisthat no accurate definition of the word can be found. I think it sufficient to cite Buckley, Law and Practice under the Companies Acts (11th Edn), p 174, on the point. It is clear, therefore, that it was desirable to insert a definition of the word in any consolidation of the Companies Acts.

We must next ask ourselves whether there was any reason for limiting s 74 of the Act of 1929 to debentures of a series issued to a number of subscribers in one of the forms now in common use, or in some such way. The reason for the section is explained in the note to the section in Buckley, Law and Practice under the Companies Acts (11th Edn), pp 154, 155. Enormous sums had been borrowed by companies formed under the general Companies Acts on debentures and debenture stock the principal of which was (in terms) either not repayable at all or only in certain specified events. Doubts had been expressed whether these restrictions on the right of redemption were valid (Samuel v Jarrah Timber & Wood Paving Corpn Ltd, at p 15, and Re Southern Brazilian Rio Grande do Sul Ry Co Ltd), and it seemed desirable to remove these doubts by the Companies Act 1907. The equitable rule was based on the hypothesis that, in a contract for a loan, the borrower is not usually contracting on equal terms with the lender. I find the reason quaintly stated in Floyer v Lavington by Sir Joseph Jekyll as counsel in a case heard by Cowper LC. He explained the ground for holding that a mortgage cannot be rendered irredeemable thus, at p 269:

… as the borrower is commonly necessitous, this would put it in the power of the scrivener to make advantage of such necessities, and would let in oppression, and foreclose the power and jurisdiction of this court.

In saying that this was the real foundation of the interference of the court of equity with the legal right of the mortgagee, I am not forgetting the technical account of the matter given by Viscount Haldane LC and Lord Parker in Kreglinger v New Patagonia Meat & Cold Storage Co Ltd. Viscount Haldane LC himself truly observed, at p 36, that the lending of money, on mortgage or otherwise, was looked on with suspicion, and the court was on the alert to discover want of conscience in the terms imposed by lenders.

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My Lords, loans made to limited companies on the security of their assets are in general very different from loans made to individuals. Companies may be wound up, in which event their debts have, if possible, to be paid, but they do not die. To the knowledge of both the company and the lender the loan is intended in most cases to be in the nature of a permanent investment. The former can only in the rarest of circumstances be at the mercy of the latter. There is no likelihood of oppression being exerted against the company. Considerations such as these make it manifest that clauses in debentures issued by companies making them irredeemable, or redeemable only after long periods of time, or on contingencies ought to be given validity. It may be conceded that the ground for excluding the rule in equity is stronger in the case of a series of debentures issued in one of the usual forms than in the case of mortgages of land to an individual, but some of the reasons still remain. It is difficult to see any real unfairness in a normal commercial agreement between a company and, for example, an insurance society for a loan to the former on the security of its real estate for a very prolonged term of years. Both parties may be equally desirous that the mortgage may have the quality of permanence. There is a great deal to be said in such a case for freedom of contract.

I do not think that there is any strong argument for suggesting that s 74 of the Act of 1929, or any of its predecessors, ought, by reason of its nature, to be confined to what may be called ordinary debentures. As we have seen, some definition was certainly desirable, and the very wide terms used by the legislature in the Act of 1928 and reproduced in the consolidating Act of the following year seem to me to show that it was intended to give freedom of contract as regards the particular matter involved in s 74 in relation to any securities granted on loan by a company registered under the Companies Acts. It is contended that the context otherwise requires. I am unable to find any such context. It is, of course, true that some of the ss 7378, which are to be found under the heading “Special provisions as to debentures,” are not dealing with mortgages of land by a company to an individual. S 73, for example, is apparently dealing with debentures issued in a series and registered. S 75 is, perhaps, also limited in the same way. It does not seem to me, as at present advised, that s 76 and s 78 require any such qualification. We are dealing with an Act in which the word “debenture” is used in numerous sections, and, it must be admitted, in more than one sense. The practice of inserting a definition in such a case has often been criticised. It was described by Blackburn J in Lindsay v Cundy, at p 358, as a modern innovation which frequently does a great deal of harm, and by Lord St Leonards LC in Ely (Dean) v Bliss as an attempt to put a general construction on words which, in the different senses in which they are introduced in the various clauses of an Act, do not admit of such. It is probably too late to add to these and other complaints. All we can do is to see whether the interpretation

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clause in this case can reasonably be applied to s 74 without leading to any startling result, and whether there is any context which requires us to reject some of the words of the definition. The fact that a particular section contains a provision relating to a particular kind of debenture does not assist us. We do not, for example, use the word “man” in a restricted sense if we make a statement about white men. “Men” has its ordinary meaning. It is the word “white” which qualifies the statement and makes it applicable to some men only. So here s 74 itself applies only to debentures creating a charge. That is because the section applies only to debentures creating a charge capable of being redeemed. It is not a reason for holding that a security of a company creating a mortgage of land is not a debenture within s 74. Finally, it should be noted that the mortgage with which we are concerned on the present appeal could without difficulty have been drafted in the form of an ordinary company debenture with a charge on its face, followed by the provisions as to the instalments by which it is to be paid off, and, if desired, with the various conditions and provisos printed on the back. For these reasons, I am of opinion that the word “debentures” in s 74 must be given the meaning attached to it by s 380.

The contention that the rule against perpetuities applies to the mortgage has not been very strongly urged by counsel for the appellant, who candidly admitted that he raised the point because the reason often given for exempting mortgages from the rule against perpetuities was that a condition in a mortgage precluding redemption for over 21 years would be void in equity. Both Luxmoore J and the Court of Appeal pointed out that the rule has never been applied to mortgages, and they declined to depart from the established view that mortgages were not within the rule. In my opinion, they were justified in taking that course. I will only add that, since the Law of Property Act 1925, came into force, it seems to be more difficult than ever to invoke the rule in the case of mortgages. Where, as in the present case, there is a mortgage term for 3,000 years, with a statutory provision for cesser of the mortgage term on discharge of the money secured by the mortgage, it would seem difficult to consider the case as being within the rule. In saying this, I do not wish to throw any doubt upon the view that mortgages before 1926 were an exception to the rule.

My Lords, the question remains whether, accepting the view that the Companies Act 1929, s 74, applies, the appellants can obtain a declaration that they are entitled, on the usual notice, to redeem the mortgage upon payment of principal, interest and costs. In my judgment, the section establishes that the fact that the mortgage is made irredeemable for 40 years is not itself a ground for the application of the rule of equity, assuming that, but for the section, it would apply. I am not forgetting the words “by reason only that the debentures …” but the word “only” does not, I think, detract from the fact that the main ground for attack on the present mortgage is the length of time

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which must elapse before the right of redemption will exist, according to its terms. Apart from the provision postponing the right of redemption, there would be no objection to the mortgage. The word “only” in the section leaves open for consideration by the court cases where there has been hardship or oppression by the mortgagee, but I am unable to take the view in this case that the terms of the mortgage are so stringent, and the restrictions which it imposes on dealings by the appellants with the mortgage properties are so oppressive, that these matters, read in the light of the provisions of s 74, would justify the interference of the court. In this connection, it is right on the question of hardship to take into account the circumstances in which the mortgage was entered into, the great experience of the solicitors on both sides, and the care with which the negotiations were conducted. The appellants executed the mortgage with their eyes wide open. In such a case, the court in these days must be slow to interfere with a contract deliberately entered into, and, having regard to the view above expressed as to s 74 and its consequences, I must come to the conclusion that the appellants claim to redeem contrary to the terms of the mortgage must fail. For these reasons, I am of opinion that the appeal should be dismissed with costs.

LORD ATKIN. My Lords, I have had an opportunity of reading in advance the opinion which has just been delivered by my noble and learned friend Viscount Maugham, and also the opinion which is about to be delivered by my noble and learned friend Lord Romer. I agree with them, and I have nothing to add.

LORD WRIGHT. My Lords, I also have had a similar advantage. I agree with the opinion of my noble and learned friend Viscount Maugham, and with that about to be delivered by my noble and learned friend Lord Romer.

LORD ROMER. My Lords, at the conclusion of the interesting arguments of counsel for the appellants, it became clear that it was desirable to ascertain in the first place whether the mortgage of 6 November 1931 was a debenture within the meaning of the Companies Act 1929, s 74, and, if that question be answered in the affirmative, whether the claim of the appellants to be entitled to redeem the mortgage at the present time must not necessarily fail in view of the provisions of that section. Your Lordships accordingly requested counsel for the respondents to confine his argument to those particular questions. I understand that, on due consideration of the arguments on the one side and the other, all your Lordships have come to the conclusion that both the questions should be answered adversely to the appellants. In that conclusion I concur, and will now state quite shortly my reasons for so doing.

The Companies Act 1929, s 74, provides as follows:

A condition contained in any debentures or in any deed for securing any

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debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that the debentures are thereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long, any rule of equity to the contrary notwithstanding.

The history of this section is set forth by Luxmoore J in his judgment in the present case. Shortly stated, the history is as follows. It first appeared in substantially the same form as now in the Companies Act 1907, s 14, and it was repeated in the Companies Act 1908, s 103. Luxmoore J has examined those Acts, and has given reasons which, to my mind, are conclusive for thinking that an ordinary mortgage of freehold property was not a debenture, or a deed for securing debentures, within the meaning of those sections. As was said in Buckley, Law and Practice under the Companies Acts (11th Edn), p 174:

No one seems to know exactly what “debenture” means.

As “no one” in this passage presumably included Lord Wrenbury himself, I am not ashamed to say that it certainly includes me. This much, however, I can say without hesitation. The word “debenture” as ordinarily employed in legal and commercial circles did not in 1908 include an ordinary mortgage of land. When, therefore, the Companies Act 1908, s 103, was reproduced word for word in s 74 of the Act of 1929, the conclusion to which one would have come at first sight would have been that it was not the intention of the legislature to bring such a mortgage within the operation of the last-mentioned section. This conclusion would have been strengthened by a consideration of the other provisions of the 1929 Act, until one arrived at the definition of the word “debenture” contained in s 380. It is to be observed, for instance, that s 74 is contained in Part II of the Act, the heading of which is “Share capital and debentures,” and which contains (s 34) provisions relating to prospectuses inviting persons to subscribe for shares in, or debentures of, a company, provisions (s 63) as to the transfer of shares in, or debentures of, the company by a proper instrument of transfer, and provisions (s 67) as to the issue of certificates of shares, debentures, and debenture stock allotted or transferredprovisions which scarcely seem applicable to ordinary mortgages of land. Then, again, s 74 itself forms one of a fasciculus of sections under the heading “Special provisions as to debentures,” the first of which sections confers upon the registered holder of any debentures and any shareholder of the company, but apparently upon no one else, a right of inspecting the register of holders of debentures. This may usefully be contrasted with the provisions in s 82(3), which give a right of inspection of the register of charges to any member of the public who cares to pay the prescribed fee for the privilege. It might, too, have been reasonably expected that, if s 74 was intended to apply to an ordinary mortgage of land, it would have appeared in Part III of the Act, which is dealing with the registration of chargesa word which includes mortgages (s 79(10)(a))rather than in Part II,

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so many of the provisions of which are inapplicable to an ordinary mortgage of land.

Section 380 of the Act, however, provides that, unless the context otherwise requires, the expression “debenture” in the Act includes:

… debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not …

The considerations to which I have referred certainly arouse a suspicion in my mind that, when enacting s 74 of the Act, the legislature had not ordinary mortgages of land in its contemplation. I find it quite impossible, however, to say that those considerations require that such mortgages should be excluded from the operation of the section. When applied to such mortgages, the provisions of the section are quite sensible. They involve no absurdity and no inconsistency. On the contrary, if it be thought desirable that debentures in their popular meaning may be made irredeemable, it would seem to be both absurd and inconsistent to forbid a company to make its ordinary mortgages of land also irredeemable. I can find no legitimate reason for not attributing to the word “debentures” in s 74 the meaning given to it by s 380.

The reason which induced Luxmoore J to come to the opposite conclusion was this. Regarding the Act of 1929 as beingas, indeed, it isa consolidating statute, he rightly said that it must be construed ordinarily so as to exclude any amendment of the previously existing law. His attention, however, was not drawn to the Companies Act 1928. That was an amending Act passed with a view to the consolidation of the law which was effected by the Act of 1929, and one of the amendments made by the Act of 1928 was an amendment of the definition of the word “debenture” contained in s 285 of the Act of 1908. As a matter of fact, the legislature had not in that section attempted to do what no one had succeeded in doing beforenamely, give an exhaustive definition of the word “debenture.” It contented itself with saying that “debenture” includes debenture stock. Then came the Act of 1928, in which a number of minor amendments to sections of the 1908 Act were set out in Sch II. Among them was this:

Sect. 285. At the end of the definition of debenture there shall be added the words “bonds and any other securities of a company whether constituting a charge on the assets of the company or not.”

Hence the “definition” of debentures in s 380 of the consolidating statute of 1929.

It was contended on behalf of the appellants, however, that the words “any other securities” should be construed as referring only to securities ejusdem generis as the genus to which debentures belong. All I can say about this is that, if no one seems to know exactly what “debenture” means, no one can be expected to know what is ejusdem generis with it. Indeed, the very fact that no one seems to know exactly what “debenture” means indicates pretty plainly that “debenture” is itself the name of a genus, and not of a species. In my opinion, the words

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“any other securities” mean what they say, and include all other securities of any kind whatsoever.

It was finally urged on behalf of the appellants that they are not attacking the provisions of the mortgage of 6 November 1931, by reason only of the fact that it is irredeemable until the expiration of a period too remote, but by reason of the other conditions contained in the mortgage when read in combination with the postponement of the right of redemption. It is quite plain, however, that what the appellants are complaining of is the denial of their right to redeem at the present time, and that the materiality of the other conditions to which they called your Lordships attention is merely that their existence renders it essential for the appellants if they can possibly do so, to redeem forthwith. If it were not for the conditions in the mortgage making it irredeemable until the expiration of 40 years from its date, the appellants would have no cause of complaint. For these reasons, I am of opinion that this appeal should be dismissed with costs.

LORD PORTER. My Lords, I concur.

Appeal dismissed with costs.

Solicitors: Clifford-Turner & Co (for the appellants); Sharpe Pritchard & Co, agents for Bremner Sons & Corlett, Liverpool (for the respondents).

Michael Marcus Esq   Barrister.

R v Recorder of Burnley, Ex parte New Empire (Burnley) Ltd

[1940] 2 All ER 412


Categories:        ADMINISTRATION OF JUSTICE; Courts        

Court:        KINGS BENCH DIVISION        

Lord(s):        HAWKE, CHARLES AND HILBERY JJ        

Hearing Date(s):        9 APRIL 1940        


Courts Borough quarter sessions Recorder Custom for magistrates to sit with recorder Validity of proceedings.

At the hearing of an appeal against the valuation of a cinema theatre, the recorder of the borough, sitting as solo judge, was accompanied on the bench by a local magistrate, who did not assist the recorder in adjudicating upon the appeal, but on one occasion, as an accountant, suggested a question to the recorder, who invited counsel to put it to the witness. As counsel did not ask it, the recorder put it himself. The recorder heard the case at great length, and reserved his decision for months. It was now sought on this ground to challenge the regularity and legality of the recorders exercise of his functions and duties:

Held the presence of the borough magistrate on the bench and the fact that he suggested a question to the recorder had in no way influenced the recorders decision. He had exercised his functions and duties as recorder in a regular and legal manner, and the objection taken was without foundation.

Notes

In boroughs having the franchise of a separate court of quarter sessions, the recorder is the sole judge of the court, but it has long been the custom for some of the local magistrates to sit with him on the bench. It has been said that this is a matter of courtesy, and it is certainly well understood that the magis-

Page 413 of [1940] 2 All ER 412

trates have no right whatever to take any part in the determination of the cases heard. The legality of this custom does not seem to have been questioned in any previous case, and the present case goes one step further than to decide its legality, for it is held that, although the magistrate here suggested a question which might be put to a witness, this did not amount to taking any part in the proceedings.

As to Recorders, see Halsbury (Hailsham Edn), Vol 8, pp 616, 617, para 1339; and for Case, see Digest, Vol 33, pp 287, 288, No 36.

Rules

Rules nisi, for writs of certiorari and mandamus for the purpose of removing and quashing a certain provisional rating valuation list. The facts are fully set out in the judgments. The applicants raised several contentions, the decision on only one of which calls for a report.

J W Stansfield for the applicants.

C Erskine Simes for the respondents.

9 April 1940. The following judgments were delivered.

HAWKE J. In the opinion of this court, there is nothing in the contention that the powers and duties of this court of quarter sessions were not exercised by the recorder as sole judge, because the recorder sat, as recorders have done since time immemorial, with a local magistrate sitting beside him. It has been known to everybody who has acted as recorder for any time in any borough of any importance whatever that local magistrates like to sit with the recorder, out of what has been called in this case courtesy. If counsel for the applicants could show that the recorders judgment was influenced by anything which this magistrate said, in my humble opinion, speaking for myself, I think that this court agrees that then we should have had to consider that very carefully, and in all probability we should have granted some, if not the whole, of the relief for which he asks. We are shown by the shorthand note of the proceedings that, during the re-examination by counsel for the applicants of a witness called for the appellants at quarter sessions, the recorder said: “Would you ask a certain question?” Let me take it that he said as much as this, although I do not think that he did: “Would you ask a certain question? A gentleman, who is an accountant, is sitting next to me, and he has rather suggested to me a question. I want the answer to it. Will you ask it?” Counsel did not refuse to put the question to the witness, but did not actually do so. Thereupon the recorder asked it himself. How are we to begin to believe that that has influenced his decision? He says in his affidavit that it did not. He has pointed out to us that he heard this case, as we can see, at great length, and that he reserved his decision for months. Nobody suggests that this trespassing magistrate, if one can use that expression, went and spent a month or two with the recorder whilst he was dealing with this matter. In other words, in our view, this is a point of no substance whatever.

CHARLES J. The objection taken was that the recorder did not act as sole judge of the court because he

… was accompanied on the bench and assisted by one Frederick Augustus Hargreaves, a magistrate for the county borough of Burnley.

Page 414 of [1940] 2 All ER 412

That, of course, has to be supported by affidavit, and one would suppose that the deponent would have been very careful to put into that affidavit what in fact happened. He did nothing of the sort. It is because he did nothing of the sort that I think I ought to call attention to it. Let us see what he says:

During the whole of the hearing [he was not present during the whole of the hearing] the learned recorder was accompanied on the bench by a gentleman who sat next to him and who took an active part in the proceedings. From time to time the proceedings were interrupted while the learned recorder conversed with this gentleman and questions [not “a question”] appeared to be put to various witnesses by the recorder as a result of such conversations. During the time when the secretary of the applicant company was giving evidence this was particularly noticeable, and when the applicants accounts were produced they were perused by the learned recorder and this gentleman together.

Let us see what the truth is. The recorder states in his affidavit, which we have had an opportunity of comparing with the shorthand notes:

In accordance with the usual custom, a magistrate of the borough accompanied me on the bench as a matter of courtesy. He did not assist me in adjudicating upon the appeal, and in fact I reserved my judgment, which I did not deliver until I had had the opportunity of perusing the transcript of the proceedings and a list of the films exhibited at the three No. 1 cinemas owned by the appellant company in Burnley, which it was agreed by counsel for the appellants and respondents should be supplied to me. During the evidence of Mr. McCracken, the secretary of the applicant company, the magistrate asked me a question on the accounts of the applicant company which were being dealt with by the witness, and, as appears from the transcript of the shorthand notes of the proceedings, I immediately informed counsel as to the question. The magistrate took no other part in the proceedings, and no objection was made by counsel for the appellants.

That is the truth, and that which appears in the other affidavit is, I regret to say, not true. I agree that the result must be as Hawke J has said.

HILBERY J. I think it perhaps desirable that I should say a few words as to what is my view, because this is a case in which a wholly unjustifiable attack has been made upon a recorder. It is objected here that the way in which the recorder exercised his function and duties as recorder of the borough of Burnley was irregular and illegal.

It has been asserted that a magistratedisqualified, of course, either to sit, or to hear, or to determine this mattersat with the recorder, and it was asserted that that magistrate, accompanying the recorder on the bench, actually so participated in the hearing and the determination that the determination of the matter was not the determination of the recorder, who alone had jurisdiction to determine the appeal. I can only say that suspicion of such a thing, I should have thought, would not even have occurred to a person of experience in the practice of the law, even from the circumstance which is set out in the affidavit here as sworn by the solicitor in support of this application. When one observes what is stated by the recorder in his affidavit, and when one refers to the shorthand note to see what actually occurred at the triala matter which I need not reiterate, because both Hawke and Charles JJ have already stated what appears therethe suggestion

Page 415 of [1940] 2 All ER 412

that there was any participation by this magistrate in the hearing or in the determination of this matter becomes as apparently without foundation as are all the other objections taken before us. The recorder has stated to us, and has stated with perfect frankness, that there was an occasion, as is shown in the shorthand note, when he asked a question and told the parties that he had sitting beside him a magistrate who was an accountant, but he informs us, and his judgment clearly indicates, that he alone heard and considered and determined the matter, and that this magistrate, sitting there as a matter of courtesy with him, did nothing which amounted to any interference with, or sharing of, the duties of the recorder in hearing and determining this case. I agree with Hawke and Charles JJ that this application must be dismissed.

Rules discharged with costs.

Solicitors: Peacock & Goddard, agents for Percy H Barker & Co, Manchester (for the applicants); Kenneth Brown Baker Baker, agents for Harry Plowman, Town Clerk, Burnley (for the respondents).

Michael Marcus Esq   Barrister.

Re Gaumont-British Picture Corporation Ltd

[1940] 2 All ER 415


Categories:        COMPANY; Other Company        

Court:        CHANCERY DIVISION        

Lord(s):        CROSSMAN J        

Hearing Date(s):        8 APRIL 1940        


Companies Accounts and audit Inspector appointed by Board of Trade Examination of officer of company Refusal of officer to answer questions in presence of shorthand writer Whether presence of shorthand writer reasonably necessary Companies Act 1929 (c 23), s 135(1), (3), (4), (5), (6).

An inspector appointed by the Board of Trade under the Companies Act 1929, s 135(1), to investigate the affairs of a company arranged for the examination of the managing director. A shorthand writer was present to take a note of the proceedings for the inspectors use, whereupon the managing director objected to his presence and refused to answer any questions while he remained, on the ground that under the section there was no authority for the presence of a shorthand writer:

Held the presence of the shorthand writer was reasonably necessary to enable the inspector properly to carry out his duties under the Act. The managing director was, therefore, not justified in refusing to answer questions, and was in effect guilty of contempt of court.

Notes

The House of Lords decided in Hearts of Oak Assurance Co Ltd v A-G that at a statutory inquiry which was not to be held in public there might yet be present all such persons as were reasonably necessary to enable the person conducting the inquiry to carry out his duties in a proper and efficient manner. It was here objected that the presence of a shorthand writer at an inquiry into a companys affairs under the Companies Act 1929, s 135, made the inquiry a public one, but this contention is rejected, and it is held that the shorthand writer was one of those persons whose presence was reasonably necessary for the proper conduct of the inquiry within the decision of the House of Lords in the above case.

As to Inquiry by Inspector Under Companies Act 1929, s 135, see Halsbury (Hailsham Edn), Vol 5, pp 386, 387, para 635; and for Case, see Digest, Vol 9, p 587, No 3933.

Page 416 of [1940] 2 All ER 415

Cases referred to

Hearts of Oak Assurance Co Ltd v A-G [1932] AC 392; Digest Supp, 101 LJCh 177, 147 LT 41.

Re Grosvenor & West End Railway Terminus Hotel Co Ltd (1897) 76 LT 337; 16 Digest 388, 2290.

Motion

Motion by an inspector appointed by the Board of Trade to investigate the affairs of Gaumont-British Picture Corporation Ltd, pursuant to the Companies Act 1929, s 135, asking the court to inquire into the refusal of the respondent, Mark Ostrer, the managing director of the company, to answer any questions put to him by the applicant as such inspector, and otherwise to inquire into the case. The substantial question at issue was whether the inspector was entitled to have the assistance of a shorthand writer, the objection being that his presence was not compatible with the private nature of the proceedings. The facts are fully set out in the judgment.

The Companies Act 1929, s 135(1), provides as follows:

The Board of Trade may appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the board direct …

Sub-s (3) provides as follows:

It shall be the duty of all officers and agents of the company to produce to the inspectors all books and documents in their custody or power.

Sub-s (4) provides as follows:

An inspector may examine on oath the officers and agents of the company in relation to its business, and may administer an oath accordingly.

Sub-s (5) provides as follows:

If any officer or agent of the company refuses to produce to the inspectors any book or document which it is his duty under this section so to produce, or refuses to answer any question which is put to him by the inspectors with respect to the affairs of the company, the inspectors may certify the refusal under their hand to the court, and the court may thereupon enquire into the case, and after hearing any witnesses who may be produced against or on behalf of the alleged offender and after hearing any statement which may be offered in defence, punish the offender in like manner as if he had been guilty of contempt of the court.

Sub-s (6) provides as follows:

On the conclusion of the investigation the inspectors shall report their opinion to the Board of Trade, and a copy of the report shall be forwarded by the board to the registered office of the company, and a further copy shall, at the request of the applicants for the investigation, be delivered to them. The report shall be written or printed, as the board direct.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and A Andrewes Uthwatt for the applicant.

C E Harman KC and H C Marks for the respondent.

8 April 1940. The following judgment was delivered.

CROSSMAN J. This is a motion by the inspector appointed to investigate the affairs of Gaumont-British Picture Corporation Ltd. The inspector was appointed by the Board of Trade on an application by the necessary proportion of the shareholders of the company on 31 July 1939. On 10 January 1940 he summoned Mark Ostrer, the respondent to

Page 417 of [1940] 2 All ER 415

the present motion, before him for examination, and the examination was thereupon commenced. The result of that was embodied in his report, which was made on 5 February 1940 as follows:

I, Russell Kettle, of 5, London Wall Buildings, Finsbury Circus, in the city of London, chartered accountant, being the inspector appointed by order of the Board of Trade dated Jan. 31, 1939, to investigate the affairs of the above-named company and to report thereon in such manner as the board may direct hereby certify to this court as follows: (1) As such inspector I arranged pursuant to the Companies Act, 1929, s. 135, for the examination on Jan. 10, 1940, at the companys offices of Mr. Mark Ostrer of 142150 Wardour Street, London, W.1, the managing director of the company. (2) On that day Mr. Mark Ostrer accompanied by Mr. W. B. Robinson, the secretary of the company (who had been summoned for examination under the same section), attended at the companys offices for examination. In accordance with arrangements made by me a representative of Messrs. Cherer & Co., shorthand writers, was present with the object of taking for my use a shorthand note of the proceedings and of supplying me with a transcript thereof. (3) Mr. Mark Ostrer objected to the presence of a shorthand writer and said that neither he nor Mr. Robinson was prepared to be examined if anyone was in the room besides myself. He gave two reasons for his objection(i) that under sect. 135 there was no authority for the presence of a shorthand writer, and (ii) that, as the examination would involve the disclosure of private information concerning the companys private affairs, he was not prepared for the information to be divulged to a third party. I asked Mr.Ostrer how he suggested the proceedings should be recorded, and he said that I would have to write them out in longhand. I told him that in my opinion his attitude was unreasonable, in that such a course was impracticable, in view of the extent and nature of my proposed examination, and not in accord with ordinary business procedure. I added that, even assuming I myself made the notes, they would subsequently be typed in my own office. He refused, however, to proceed with the examination if I insisted that a shorthand writer should be present. I told him he left me no alternative but to withdraw and report the matter to the court. (4) It was also my intention, as I explained to Mr. Mark Ostrer, for my representative in charge of the investigation to be present solely for the purpose of facilitating my reference to papers and thus expedite the examination, and I told him that my representative would, in any event, become acquainted with the proceedings. Mr. Ostrer, however, said he could not agree, and I did not press for my representatives attendance.

That is the report, and, as I understand the effect of the evidence which has been filed on this applicationthere is an affidavit of the applicant, and also an affidavit of Mark Ostrerthat report is accepted and represents the facts. The fact is that Ostrer refused to answer a question as long as any person other than the inspector was in the room. The question is whether he was justified in doing that. Counsel for the respondent relies solely upon the proposition that the inspector had no right to have a shorthand writer in the room during the examination. With that contention I am quite unable to agree. It seems to me perfectly plain, in view of a decision to which I will refer in a moment, that there is no reason why the inspector should not have in the room any person whose presence is reasonably necessary for the proper performance of his duty. If it is a fact that a shorthand writer to take down the proceedings as a record for the inspectors use in preparing his report is necessary, then it seems to me that there is no question but that the inspector is entitled to have the shorthand writer present.

Conveniently in this case I have the advantage of the decision of the House of Lords in Hearts of Oak Assurance Co Ltd v A-G to assist me. That was a decision under a different Act of Parliament, and not in the same language, but, fortunately for me, the House of Lords dealt

Page 418 of [1940] 2 All ER 415

with it by reference to the Companies Act 1929, s 135. I am able to use that as a parallel case which shows the meaning of the proviso with regard to such examination as took place under this section. What was decided in that case was that an examination under the Friendly Societies Act 1896, and the Industrial Assurance Act 1923, is not a legal proceeding, and ought to be held in private. In that case Lord Thankerton said, at p 398:

The nearest analogy to the present case is to be found in the Companies Act 1929, s. 135, under which the Board of Trade is entitled to appoint inspectors to investigate the affairs of a company and to report thereon; the provisions are very similar, except that the Board of Trade can only so act on the application of a prescribed number of shareholders, and that if the board, on receipt of the report, are of opinion that an offence has been committed they are to refer the matter to the criminal authorities. It has been held that an investigation under the corresponding provisions of the Companies Act, 1862, is not a judicial proceeding: see Re Grosvenor & West End Railway Terminus Hotel Co., Ltd. The reasons against publicity in such an investigation would be equally strong in my opinion.

On that, the House came to the conclusion that it was not right to hold an inquiry under the Industrial Assurance Act 1923, in public, and that it ought to be held in private, but they accepted and made part of the order of the House the following declaration [p 406]:

Declared that an inspector appointed by the Industrial Assurance Commissioner under the Industrial Assurance Act, 1923, s. 17(1), for the purpose of examining and reporting on the affairs of the plaintiffs is not entitled to conduct the inspection in public, but this shall not prevent him from admitting from time to time any persons the presence of whom is reasonably necessary to enable him properly to carry out his duty under the statute …

It seems to me that exactly the same thing applies here, and that that covers this case. What I have to consider is simply the question whether the presence of the shorthand writer is something which is reasonably necessary to enable the inspector properly to carry out his duty under the statute. I come to the conclusion here without any hesitation that it is necessary to enable him to do it. It is not for the purpose of recording it and publishing it, or anything of that kind. It is for the purpose of enabling the inspector to prepare his report. When he comes to prepare his report, he wants a record of what has occurred, and the shorthand note is for that purpose. To have a shorthand writer in his room for his own purposes, and not as a public shorthand writer, to enable him to have a record of, and to bear in mind, what has in fact been said, and what the evidence is, is, in my view, reasonably necessary to enable him properly to carry out his duty under the statute. In this case, Ostrer refused to answer any questions simply because of the presence of the shorthand writer, who, in my view, was entitled to be present. Therefore, he was completely unjustified in refusing to answer the questions, and he is, in effect, in the same position as if he had been guilty of contempt of court, having regard to s 135(5). In those circumstances, having regard to the fact that he has in his evidence and by his counsel apologised for what amounts to a contempt of court, conditional upon its being held that he is in fact wrong, I do not think

Page 419 of [1940] 2 All ER 415

that I ought to take any step in the nature of punishment beyond the step of ordering him to pay the costs of the proceedings.

Solicitors: Solicitor to the Board of Trade (for the applicant); Lawrance Messer & Co (for the respondent).

W J Alderman Esq   Barrister.

Page v Skelt

[1940] 2 All ER 419


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        9 APRIL 1940        


Emergency Legislation Settlement after commencement of Act of action commenced before commencement of Act Agreed sum to be paid by instalments with liberty to sign judgment on default “Judges order if necessary” Default in payment of instalment Judgment for balance of claim Whether leave of court necessary to proceed to execution Courts (Emergency Powers) Act 1939 (c 67), s 1(1)(b).

In April 1939, the plaintiff issued a writ claiming from the defendant a sum of £2,225 as money had and received. When the action was about to come on for trial, terms of settlement were arrived at by which the defendant admitted liability for part of the sum claimednamely, £1,324 11s 2dand agreed to pay this amount by instalments. It was provided that, in the event of any instalment remaining unpaid within 3 days after the due date, the plaintiff should be at liberty to sign judgment for the balance then outstanding and “Judges order if necessary.” These terms were approved by the judge with the addition of the words “Liberty to apply.” The defendant having subsequently failed to pay an instalment, the plaintiff, on 22 February 1940, applied to the judge in pursuance of the terms of settlement and obtained judgment for the balance outstandingnamely, £1,149 11s 2d. The plaintiff then applied to the master under the Courts (Emergency Powers) Act 1939, s 1, for leave to enforce the judgment. Leave was given on terms, but on appeal to the judge on the question of the terms imposed, it was held that the judgment came within the proviso in s 1(1)(b) of the Act, as being a judgment on a contract entered into after the commencement of the Act, and that the plaintiff was entitled to proceed to execution without the leave of the court:

Held the judgment was not a judgment for the recovery of a debt which had become due by reason of the contract of settlement, but was a judgment for the recovery of the balance of the debt claimed by the writ. The matter did not, therefore, fall within the proviso in s 1(1)(b) of the Act, and the leave of the court was necessary to proceed to the enforcement of the judgment.

Notes

The Courts (Emergency Powers) Act 1939, does not apply to contracts made after the commencement of the Act. The question here is whether a settlement of an action in the nature of a compromise entered into after the Act is a contract to which the Act does not apply, or whether it can be referred back to the commencement of the action, that being before the commencement of the Act. It must be noted that in the present case liberty was reserved to the plaintiff to apply to the court and obtain an order for judgment to be entered for so much of the money due under the settlement as should be outstanding at the time of the application. It may be that, to secure the advantages of the Act, it is necessary to effect the settlement in this way.

As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Page 420 of [1940] 2 All ER 419

Interlocutory Appeal

Interlocutory Appeal by the debtor from an order made in chambers by Oliver J on 13 March 1940. The plaintiff obtained judgment on 22 February 1940 and on 8 March 1940 Master Simner made an order in chambers that the plaintiff be at liberty under the Courts (Emergency Powers) Act 1939, s 1, to issue execution on, or otherwise proceed to the enforcement of, the judgment. He assessed costs, and suspended leave provided that the defendant paid to the plaintiff £10 per month, the first payment to be made within 14 days. On appeal by the plaintiff, the judge gave the plaintiff liberty to proceed unconditionally under the Courts (Emergency Powers) Act 1939, s 1. The defendant appealed, asking for the restoration of the masters order. The facts are fully set out in the judgment of Clauson LJ.

Robert Fortune for the appellant.

C L Henderson for the respondent.

9 April 1940. The following judgments were delivered.

CLAUSON LJ. In the month of April 1939, the plaintiff issued a writ against the defendant claiming a sum of £2,225 for money had and received by the defendant as solicitor for and on behalf of the plaintiff. On 22 February 1940 Tucker J ordered, and on the same day the order was complied with, that judgment be entered for the plaintiff for £1,149 11s 2d and certain costs. The order was drawn up in the proper form: “It is this day adjudged that the plaintiff recover from the defendant [that sum].” On that statement, with nothing more, it would appear to be plain that the judgment so adjudged on 22 February 1940 was not a judgment for the recovery of a debt which became due by virtue of a contract made after the commencement of the Courts (Emergency Powers) Act 19391 September 1939and, accordingly, if that was all that was in the case, the result would have been that the plaintiff could not proceed to execution of, or otherwise enforce, that judgment without the leave of the appropriate court. The plaintiff applied for leave, and the master, taking the view that the Courts (Emergency Powers) Act 1939, applied to the case (as, on the very jejune statement I have made up to this moment, seems to me to be quite plain), made an order giving leave to proceed on certain terms, with the details of which it is not necessary to trouble. The plaintiff, not being satisfied with those terms, appealed to the judge, who took the view, for reasons which will appear when I state the facts at greater length, that this was a judgment for the recovery of a debt which had become due by virtue of a contract made after the commencement of this Act, and, accordingly, took the view that there was nothing to prevent the plaintiff from proceeding to the enforcement of his judgment. The matter being, by virtue of that subsection, wholly outside the purview of the Courts (Emergency Powers) Act 1939, the order was drawn up in the form of giving leave to proceed to enforcement under s 1 of the Act. That is per incuriam. The point of it is that the judge held that there was nothing to prevent the plaintiff from

Page 421 of [1940] 2 All ER 419

proceeding to enforce his judgment. There is now an appeal by the defendant to us, and he asks us to say that the judge was wrong in holding that the case did not come within that Act, and that accordingly either the order of the master which gave only conditional leave to proceed to enforcement should be restored, or some opportunity should be given, if necessary, for the terms of that order to be reconsidered. Anyhow, the point made by the appellant is that the judge was wrong in holding that the judgment in question came within the proviso.

I must now proceed to state somewhat more fully what has occurred. The writ, as I have stated, was issued claiming £2,225. There were pleadings in the usual way, but I do not think that it is necessary to go into the details of the claim. When the matter was about to come on for trial before Tucker J on 11 December 1939, counsel having met, terms of settlement were come to in a form which is very familiar according to the practice of the Kings Bench Division. The real importance of the matter is that we are asked to construe these terms. That involves construing, and giving an opinion upon, the effect of scheme for settling an action, which is an everyday occurrence in the Kings Bench Division, and, for that reason, it is most desirable that the matter should be dealt with on principle, and correctly. The terms of the settlement are these, so far as it is necessary to refer to them for the present purpose. By para 1, the defendant (who had been sued, it will be borne in mind, for £2,225) admits that he is indebted to the plaintiff in the sum of £1,324 11s 2d and agrees to pay the plaintiff the sum of £100 towards his costs. It is perhaps superfluous to point out that those words mean that he is indebted in the sum of £1,324 11s 2d in respect of the liability which, in the writ, the plaintiff claims to be a liability which entitled him to payment of the larger sum of £2,225. The defendant says: “I am not liable for the £2,225, but, in respect of the subject-matter of this action, I am liable for £1,324 11s 2d and that I admit.” By para 2, the plaintiff agrees to accept payment of the amount of the costs and the agreed debt by certain instalments. By para 3, it is agreed that, until the total moneys have been paid, the plaintiff is to be entitled to hold certain securities, with the details of which it is not necessary to trouble. By para 4, the plaintiff agrees that, upon the total moneys mentioned in para 1namely, the £1,324 11s 2dbeing paid to him, he will, at the expense of the defendant, transfer the securities. Then comes para 5, which is as follows:

In the event of any of the instalments mentioned in para. 2 hereof being unpaid within 3 days after the due date of payment the plaintiff will be at liberty to sign judgment for the whole of the balance then outstanding and on the happening of that event the plaintiff shall hold the aforesaid equitable sub-mortgages as collateral security until the whole amount of the judgment obtained is satisfied. Judges order if necessary.

Those terms were settled between counsel and were reduced into writing. The matter was then mentioned to Tucker J, who was told, no doubt,

Page 422 of [1940] 2 All ER 419

that the matter had been settled upon agreed terms, and there is a note of the terms of settlement which both counsel agree represents accurately the terms approved by Tucker J, with the addition of the words: “Liberty to apply.” Thus, the terms of settlement were those which I have read or summarised, with the addition of the words: “Liberty to apply.” What happened afterwards was this. Certain instalments were paid, which would, of course, as nobody disputes, go in diminution of the £1,324 11s 2d. Then, at the moment when an instalment was due and was not paid within what one may call the days of grace, the plaintiff had to make up his mind what he would do. What he did was to apply to the judge in chambers, who happened to be Tucker J, and ask, in pursuance of the right given to him by the terms of the settlement, for such judges order as was required in order to enable the plaintiff (as it is said, not quite accurately) to sign judgment for the whole of the balance outstanding. The application was really for a judges order to enable judgment to be entered for the balance outstanding. I think that that is a mere technical inaccuracy about which we obviously need not trouble. The plaintiff went before Tucker J, when, though it is not material, the defendant was not represented. In any case, the judge ordered that judgment be entered for the plaintiff for the sum which, on the evidence produced before him, was, as he was satisfied, the balance then outstandingnamely, £1,149 11s 2d. Accordingly, the proper officer of the court under that order drew up the formal order adjudging that the plaintiff should recover from the defendant the sum of £1,149 11s 2d, that order being made in the action commenced by the writ, as I have stated.

It is true in a sense to say that it was by virtue of the terms of the settlement and the contract there made between the plaintiff and the defendant through their counsel that the figure to be recovered in the action was quantified at a figure which, having regard to the subsequent payments, became the £1,149 recorded upon the judgment. It is true to say that the figure for which the parties were bound to permit the judge to give judgment was reached through settlement having been made. In the judgment, however, what does that figure mean? That figure means that the court adjudged, as I understand it, that, in respect of the claim made in the writ, the sum to be recovered, having regard to everything which has supervened in the course of the action, is to be, not the sum claimed in the writ, but £1,149 11s 2d. Accordingly, that judgment is a judgment, not for the recovery of a debt which has become due by reason of the contract of settlement, but for the recovery of so much of the debt claimed by the statement of claim in respect of a liability accrued before the commencement of the Courts (Emergency Powers) Act 1939, as now remains owing and for which it is proper for the court to give judgment in favour of the plaintiff. In other words, the case does not, in my view, fall within the proviso at all. The Courts (Emergency Powers) Act 1939, applies to it, and some such order as

Page 423 of [1940] 2 All ER 419

the master madewhether or not the terms are right ones may be a matter for discussionwas properly made. It will be observed that in coming to that conclusion I have come to it upon the ground that I construe these terms of settlement, where the phrase “Judges order if necessary” is used, to mean, not that, if necessary, the parties may apply in the action for some order to enforce the terms, but that one of the terms is that a judgment shall be taken, if necessary, for part of the sum claimed in the action. If that necessity arises, the parties will concur in, or will not oppose, the necessary order being made by the judge. That, as it seems to me, is the effect of the terms, and, when the judge added the words “Liberty to apply,” that was only the court authorising what had happenednamely, that the action should not be finally determined upon the day on which it came in the judges paper, on 11 December 1939. The court, however, acquiesced in the action remaining incompletely heard, with the view that, if necessary, at some moment it should be completely tried by giving the judgment which would then be found to be the right judgment to give, having regard to the arrangement into which the parties had entered. That is shown to be the view of the present transaction adopted by the court. When one turns to the judgment, one finds that it is quite properly framed in this way:

This action having on Dec. 11, 1939, and Feb. 22, 1940, been tried before Tucker, J., without a jury, in the county of Middlesex, and Tucker, J., on Feb. 22, 1940, having ordered that judgment be entered for the plaintiff for £1,149 11s. 2d. with costs of this days application; it is this day adjudged that the plaintiff recover from the defendant £1,149 11s. 2d. and costs of the application of Feb. 22, 1940, to be taxed.

The truth is that this method of procedure for the settlement of an action (which is very common) is, technically, this. The judge is asked not to try the action for the present, but to leave it in such a position that such a judgment as is proper, having regard to the arrangement between the parties, may be given at some future date if it becomes necessary, and that the trial should then be complete. A little confusion is sometimes imported into a case of this kind by the fact that there is quite a different method of settling an action which is not uncommon in the Chancery Division, although it would be very difficult, I imagine, to adapt it to the normal procedure of the Kings Bench Division. In the Chancery Division, it is not uncommon to say to the judge when the action is coming on: “We have settled this action. Will you please stay all proceedings and put an end to the action, but with the limitation that it is the desire of all parties that, if a question arises on the construction or the working out or the enforcement of the terms of settlement, it should be dealt with as though the action were for that purpose still alive.” The object thus to be attained is effected by an order staying proceedings on the terms of the settlementand they are usually scheduled to the orderwith liberty to apply to the judge. It is not liberty to apply to the judge to given judgment in

Page 424 of [1940] 2 All ER 419

the action, but liberty to apply to the judge to make such order as, having regard to the terms of the settlement, the parties consensually agree should be made in order to enforce their intentions.

For these reasons, in my judgment, the judge came to a wrong conclusion. It is to be borne in mind, however, that there may still be a question which was not dealt with by the judge. It was not necessary for him to deal with it in the view which he took of the legal matter, but the question is whether the terms which the master has imposed are the right terms, or whether they ought to be modified. Accordingly, the order which this court will make will be this. The appeal will be allowed with costs. The order of the judge will be discharged, and the appeal to him from the master will be referred back to the judge in chambers, in order that he may deal with it having regard to the decision of this court. Then that will leave it to the judge to say, as the plaintiff, I understand, wishes to ask the judge to say, that the terms which the master imposed are not the terms which ought to be imposed.

LUXMOORE LJ. I agree entirely with the judgment which has just been delivered by Clauson LJ and do not desire to add anything to it.

Appeal allowed with costs.

Solicitors: J Howard Smith & Skelt (for the appellant); Harris Chetham & Cohen (for the respondent).

Derek H Kitchin Esq   Barrister.

Mansey v Mansey

[1940] 2 All ER 424


Categories:        FAMILY; Divorce        

Court:        PROBATE DIVORCE AND ADMIRALTY DIVISION        

Lord(s):        HENN COLLINS J        

Hearing Date(s):        4, 5, 9 APRIL 1940        


Divorce Desertion Both spouses alleging desertion Husbands right to choose locus of matrimonial home Reasonable accommodation offered Wife on refusal becomes deserting spouse.

A husband petitioned for divorce on the ground of his wifes desertion, and the wife by her answer denied desertion and alleged that the husband had deserted her, the date of the alleged desertion in each case being 28 November 1934. After an uneasy married life over a period of years, and after an interval of separation, the parties came together again in January 1934. From then until the following November the parties lived together, but during that time the wife mismanaged the household, and refused to cook for her husband, so that he was finally driven in November 1934, to selling the furniture, and to moving to a boarding-house kept by Mrs S. From then onwards he made repeated offers to his wife to induce her to live with him at this boarding-house, but she refused to do so on the ground that she did not like the locality, and that she had taken a dislikewhich at the trial she admitted to be unreasonableto Mrs S. It was common ground that the accommodation in itself was perfectly suitable:

Held (i) assuming the husband to have been guilty of desertion, he had put an end to it by his subsequent offers of alternative accommodation, which were made in good faith. The wife was bound to accept

Page 425 of [1940] 2 All ER 424

the accommodation offered, and had, by her refusal, been guilty of desertion.

(ii) on the facts, the husband had not been guilty of desertion, and was entitled to a decree nisi.

Notes

In this case, the right of the husband to choose the place where the matrimonial home shall be is affirmed. In making such a choice, the husband must not act unreasonably, but, subject to this, the refusal of the wife to live with him in the home chosen by him will be desertion on her part.

As to Desertion, see Halsbury (Hailsham Edn), Vol 10, pp 654658, paras 963967; and for Cases, see Digest, Vol 27, pp 307316, Nos 28402939.

Husbands Defended Petition

Husbands Defended Petition for dissolution of marriage on the ground of his wifes desertion. There was a cross-prayer by the wife for a decree of judicial separation on the ground of desertion and for the custody of the children. The facts are fully set out in the judgment.

Allister Hamilton for the petitioner.

W T Fielding for the respondent.

9 April 1940. The following judgment was delivered.

HENN COLLINS J. This is a petition by Arthur Mansey for the dissolution of his marriage on the ground of his wifes desertion. The wife by her answer denies that desertion, and asserts that it was the husband who deserted her. She states that the desertion commenced on 28 November 1934, that being the date which the petitioner also alleges as the date of the desertion by the wife. The wife by her answer has a cross-prayer for judicial separation on the ground of that alleged desertion, and a prayer for the custody of the children. That brings into prominence the date of 28 November 1934 and, though it is not the logical sequence of events, I deal with the wifes answer first. For the moment, I assume that on 28 November 1934, the husband deserted the wife. If that were the position, it is necessary to see whether after that event he has made a bona fide offer to resume cohabitation in circumstances in which his wife ought to have accepted it. One cannot look at the correspondence which passed between him and his wife and between their respective solicitors from and after the end of November without seeing that he was making repeated offers to his wife to induce her to live with him. The only question I have to ask myself on that is whether those offers were made in good faith, and whether they were such as the wife ought to have accepted, or whether they were put forward merely for the purpose of inviting a refusal from the wife, being themselves such as she ought not to be expected to accept as wholly lacking in sincerity. I do not think that there is any sufficient colour for the suggestion that the husband was not acting in good faith. He offers, as he had offered before 28 November accommodation at a boarding-house kept by Mrs Smith. It is common ground that that accommodation was in itself perfectly suitable, and, indeed, I think it is common ground that it was exceptionally good of its class. The reason which the wife gave for not going there was that she had taken a quite unreasonable dislike to Mrs Smith, a dislike for which she could assign no reason and which she herself admitted to have been unreasonable.

Page 426 of [1940] 2 All ER 424

She seems to have taken up the position that she was entitled to dictate to her husband where he should live. The rights of a husband as they used to be have been considerably circumscribed in favour of the wife, without very much, if any, curtailment of his obligations, but we have not yet got to the point where the wife can decide where the matrimonial home is to be, and, if the husband says he wants to live in such-and-such a place, then, assuming always that he is not doing that to spite his wife, and that the accommodation is of a kind which one would expect a man in his position to occupy, the wife is under the painful necessity of sharing that home with him. If she will not, she is committing a matrimonial offence. She is deserting him.

Even if the husband had deserted the wife on 28 November, I am perfectly satisfied that he was making these offers in good faith, and, as I shall point out in a moment, was for good reason offering accommodation elsewhere which he was prepared to occupy had his wife come to him there. In those circumstances, if there had been desertion on 28 November by the husband, he had put an end to it by his subsequent offers of alternative accommodation, all of which the wife refused, first on one ground and then, as that was met, enlarging the ambit of her objection until it covered the whole of Waterloo, and, I think, eventually, even a larger district. However that may be, she did not accept what, in my view, she was bound to acceptnamely, the accommodation which her husband was offering, or, if one prefers the phrase, dictating, as he was entitled to do.

That, of course, disposes of the wifes cross-answer, even on the assumption most favourable to her, that it was her husband who deserted her on 28 November. But did he? He sent away the furniture from the house on that date, and in that sense broke up the home. If, in so doing, he had turned his wife into the street without making any provision for her, I can well understand the court holding that to be desertion, but that is not the impression left on my mind at all as to what happened on that date. After a very uneasy married life over a period, and after an interval of separation, the parties came together again in January 1934, and they lived an uneasy sort of existence between then and November. I find it scarcely surprising that their relations were uneasy, for as long ago as April 1928, the wife first thought of getting a separation from her husband, and was always of that mind, with the important proviso from her point of view that she should have a measure of control over the children, access to them, and, I think, above all, provision made for herself. That desire for a separation expressed itself in a succession of futile applications to justices on one alleged complaint or another, all of which failed, and in January 1934, the wife settled down, with what grace she could gather, to live the married life. The husband says that during that period she was refusing to cook for him, and not applying his money to the proper maintenance of the household, and that he was driven, if he was to live with her

Page 427 of [1940] 2 All ER 424

ashore, to taking the household management out of her hands, and therefore driven to living in a boarding-house. It was that consideration, he tells me, which impelled him to seek lodgings at Mrs Smiths. I accept that account of the circumstances which drove him from Brook Road West, and I do so the more because it clearly is not an afterthought invented for the purpose of this case, because, when I asked the wife whether he was making those complaints of her at the time, she acknowledged that it was so. She says that the complaints were unfounded, but the fact that they were made at the time is strong, in my view, to bear out, first of all, that they are not the invention of the moment for the purpose of answering questions in the witness-box, and, secondly, that they are true, the latter more particularly because the wife says: “I was not getting enough money to feed him as he wanted to be fed.” Thus, we have the fact common between the two parties that he was not being properly fed. I accept, as I say, the husbands version of that, which gives a perfectly good reason for his leaving Brook Road West. I do not want it to be thought, however, that I am saying that the husband was not, in his discretion, entitled to leave Brook Road West and live in a boarding-house without entitling his wife to say: “I am not going there.” Very far from that, he would have been entitled to do so, assuming always, as I have said, that the accommodation was perfectly suitable to the wifes station of life.

In those circumstances, I am perfectly certain that the desertion was not by the husband, and that entitles himsubject only to the fact that he has to ask for the discretion of the court before he can get his decreeto a decree in his favour. [His Lordship then exercised his discretion in the husbands favour.]

Decree nisi granted.

Solicitors: Helder Roberts Giles & Co, agents for John A Behn Twyford & Reece, Liverpool (for the petitioner); Stocken May Sykes & Dearman, agents for Wright Becket & Pennington, Liverpool (for the respondent).

J F Compton Miller Esq   Barrister.

Stewart v Hancock

[1940] 2 All ER 427


Categories:        COMMONWEALTH; Commonwealth countries        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT SANKEY, LORD THANKERTON, LORD RUSSELL OF KILLOWEN AND LORD ROCHE        

Hearing Date(s):        4, 5 MARCH, 5 APRIL 1940        


Privy Council New Zealand Negligence Highways Motor cyclist colliding with unlighted stationary car.

Privy Council New Zealand Evidence Admissibility Running-down action Admission of liability made by passenger in car not in hearing of driver Whether any miscarriage of justice.

The appellant, while riding his motor cycle along a main highway on the night of 8 December 1935, came into collision with an unlighted stationary motor car owned by the respondent. This car was standing

Page 428 of [1940] 2 All ER 427

at the side of the road facing in the same direction as that in which the appellant was travelling, while on the opposite side and some 30 yds beyond was another stationary car facing in the opposite direction and showing lights. This car had stopped in response to a signal from the respondent. The appellant reduced his speed from about 35 mph to about 25 mph when approaching this latter car, and after passing out of the beams of its headlights, saw the respondents car, braked and swerved, but came into collision with the near-side rear mudguard and sustained injuries in respect of which he brought action against the respondent. At the trial counsel for the appellant led evidence as to an admission made by a passenger in the respondents car, who, being asked by the appellant “Where are your lights?” said: “This is our fault entirely and we will take care of everything.” This remark was made out of the respondents hearing, and it was therefore contended that the evidence on this point had been wrongly admitted. The evidence had been led and admitted on the assumption that it could be proved that the remark was heard by the respondent:

Held (i) there was proper and ample evidence before the jury that the appellant, whilst dealing with a situation of some difficulty, created by the respondent himself, and whilst keeping a proper lookout, properly attended for a sufficient time to an element of possible dangernamely, the other carto account for the fact that he did not see the respondents unlighted car in time to avert the consequences of its naturally unexpected presence. It cannot be said that, where there is an unlighted obstruction in the roadway, a careful driver is bound to see it in time to avoid it and must, therefore, be guilty of negligence if he runs into it.

(ii) there had been no admission of the evidence complained of. There had been a sufficient direction, when the evidence was conditionally taken, subject to proof of other matters, that, unless those conditions were fulfilled, it was not evidence in the case, and, in any event, there had been no substantial wrong or miscarriage of justice.

Notes

There is little difficulty in stating the principles applicable to negligence, and, indeed, those applicable to the present case might be said to have been settled since the decision in Davies v Mann (1842) 10 M & W 546; 36 Digest 113, 751. It is the change in the nature of the vehicles used on the highway that has made their application difficult. In the case of a collision with an unlighted vehicle, it has been said that the driver is in the dilemma that he was either not keeping a sufficient look out, or, if he was keeping a sufficient look out, he was driving too fast to avoid the accident, but, in reported cases at least, the driver has succeeded as often as not in escaping from that dilemma and has been successful in the action.

As to Collisions with Unlighted Vehicles, see Halsbury (Hailsham Edn), Vol 23, pp 639, 640, para 899; and for Cases, see Digest, Supp, Negligence, Nos 389a389f.

Case referred to

Tidy v Battman [1934] 1 KB 319; Digest Supp, 103 LJKB 158, 150 LT 90.

Appeal

Appeal by the plaintiff from an order of the Court of Appeal of New Zealand (Ostler Smith and Johnston JJ, Smith J, dissenting) reversing a judgment of Fair J in an action for damages. The facts are fully set out in the judgment of their Lordships delivered by Lord Roche.

F A Sellers KC and H G Rowley (for Alexander Ross on war service) for the appellant.

Gilbert H Beyfus KC and Humfrey E Edmunds for the respondent.

Page 429 of [1940] 2 All ER 427

5 April 1940. The following judgments were delivered.

LORD ROCHE. This is an appeal in forma pauperis by the appellant, the plaintiff in the action, from a judgment of the Court of Appeal of New Zealand whereby it was ordered that the action be remitted to the Supreme Court at Auckland for judgment to be entered for the respondent, the defendant in the action, with costs.

The circumstances giving rise to this appeal were as follow. The appellant, just after midnight on 8 December 1935, was proceeding on his motor cycle along a main road leading from Hamilton to Auckland, and was riding on his proper side in the direction of Auckland. At this time, the defendants motor car had come to a standstill on the same side of the road, facing in the same directionthat is to say, towards Aucklandshowing no rear or other light. The lights had been switched off by the respondent whilst the car was stopped. At the same time, there was another motor-car stationary in the roadway and showing lights. This car, whilst proceeding from Auckland towards Hamilton, had been hailed to stop by the defendant when his own car was stopped, and the driver of this other car, one Singer, complied with the request so made and brought his car to rest on his side of the road some 30 yds, or thereabouts, past the defendants car and on the opposite side of the road. In this situation, the appellant on his motor cycle approached and passed by Singers car, reducing his speed from about 35 mph to about 25 mph, and, when he had passed out of the beams of its lights, saw the loom of the respondents car, braked and swerved, but came into collision with the near-side rear mudguard of the car, and sustained injuries.

The action was brought to recover damages for such injuries, and was tried before Fair J and a jury on 30 and 31 July 1936. Evidence was called on the part of the appellant, the plaintiff in the action, and, when his case was closed, counsel for the respondent asked for a non-suit, on the ground that, upon the evidence thus called, and upon the undisputed facts of the case, the appellant was guilty of contributory negligence in (i) failing to keep a proper look out, (ii) proceeding as he did when dazzled by the lights of another (Singers) car, and (iii) proceeding at such a pace as would not enable him to stop in time to avoid anything which might have been on the road. There was no argument upon this submission at the trial, but the point was reserved until after verdict for further consideration and argument. The respondents counsel then addressed the jury and called evidence. The respondents explanation of his lights being off was that he switched them off in order to spare his battery whilst he was trying to re-start his car by means of the starting handle, and that he forgot to switch them on again. The negligence of the respondent was not admitted on the pleadings, and was in issue at the trial.

The judge directed the jury that, if they found that the plaintiff had the last opportunity of avoiding the accident and negligently failed to avail himself of it, or that he was negligent in any of the respects alleged and such negligence was a proximate cause of the accident, there should

Page 430 of [1940] 2 All ER 427

be a verdict for the defendant. He also told the jury that, if they found that negligence of the defendant was the sole proximate cause of the accident, there should be a verdict for the plaintiff. It was not suggested that these directions were not correct in law, or were open to any objection on the part of the respondent. The jury returned a verdict for the appellant for damages amounting to £1,259 8s 2d. Judgment was entered in accordance with the verdict, leave being reserved to move to set aside the judgment.

Pursuant to such leave, the court was moved to set aside the judgment, and was asked either to enter judgment for the defendant, or for a non-suit on the grounds submitted at the close of the plaintiffs case at the trial, or to order a new trial on the grounds that the damages were excessive and that certain evidence given for the appellant had been wrongly admitted. On 13 October 1936 the judge gave a considered judgment dismissing the motion. As to the question of non-suit, he held that, on the facts, it was impossible to say that, as a matter of law, the appellant was guilty of contributory negligence, and that there was evidence fit for consideration by the jury as the judge of fact upon which they could reasonably find that negligence in the appellant was not established. On the question of the suggested wrongful admission of evidencea matter which will be discussed in more detail later in this judgmentthe judge held that there was no wrongful admission of evidence, and in any case there was no miscarriage of justice. The question of amount was dealt with and the verdict and judgment upheld, and this matter was not raised upon appeal in New Zealand or before their Lordships.

The respondent appealed to the Court of Appeal of New Zealand, and the appeal was heard by Ostler, Smith and Johnston JJ. The appeal was allowed, the court by a majority (Smith J dissenting) holding that judgment should have been entered for the respondent, on the ground that it was conclusively proved that the proximate cause of the accident was the appellants own negligence and that the verdict of the jury was so unreasonable as to be perverse. Smith J took the contrary view on this point, and agreed with the trial judge, but held that evidence had been wrongly admitted and that a new trial should be had. It was not necessary that the judges in the majority should express an opinion on this latter point, and they did not in fact do so. With this conflict of judicial opinion, the appeal came before their Lordships, and was carefully and elaborately argued. On the main point, their Lordships are of opinion that the correct view and conclusion was that expressed by the trial judge and in the dissenting judgment of Smith J, in the Court of Appeal, and they approve of the reasoning of those judges.

Numerous cases were cited in the Court of Appeal and before their Lordships, including cases of collisions by motor vehicles with stationary unlighted objects. Their Lordships are of opinion that no useful purpose would be served by a further discussion of those cases, and still less by a

Page 431 of [1940] 2 All ER 427

consideration of the question of whether any particular one of them was rightly decided on the facts. They agree with the summary of their legal effect presented by Ostler J, who, in dealing with Tidy v Battman, a judgment of Macnaghten J, approved by the Court of Appeal, read the following passage from the judgment of Macnaghten J, at pp 320, 321:

At night time the visibility of an unlighted obstruction to a person driving a lighted vehicle along the road must necessarily depend on a variety of facts, such as the colour of the obstruction, the background against which it stands, and the light coming from other sources … It cannot, I think, be said that where there is an unlighted obstruction in the roadway, a careful driver of a motor vehicle is bound to see it in time to avoid it, and must therefore be guilty of negligence if he runs into it.

Then Ostler J proceeded as follows:

With that passage I respectfully agree. It might be paraphrased and shortened into a statement that negligence is a question of fact, not of law: that each case must depend upon its own facts: and that there is no rule of law which in every case disqualifies a motorist from recovering damages where he has run into a stationary unlighted object.

Agreeing as they do with this admirable summary of the law applicable to this case, their Lordships pass to an examination of the facts of this case in more detail, and to their reasons for differing from the conclusion of Ostler and Johnston JJ, that there were no facts in the present case fit for consideration by a jury, or of any value so as to justify a verdict for the appellant.

The facts, and in particular those as to weather conditions, are compendiously and correctly summarised in the judgment of Smith J, as follows:

Were, then, the circumstances such that reasonable men might not find that the respondent was not guilty of negligence? The jury had before them the following facts that the appellants unlit and stationary car occupied 4 ft. 6 ins. of a bitumen road 20 ft. wide. The car was dark in colour. It was not disputed that the bitumen road was of the same colour, and, indeed, that is common knowledge. There was thus no contrast between the car and the road. There is no exact evidence as to the atmospheric conditions at the place and time of the accident, but there is evidence from which the jury might infer that the conditions of visibility were then and there such that it was not easy for a motorist proceeding normally with good lights to pick up this unlighted obstruction. There is divergent evidence about the state of the moon, whether it was obscured by clouds or not whether the night was clear or dark. There is evidence from which the jury could conclude that about midnight, when the accident took place, the moon was five-sixths of its way across the sky. There is also evidence of fog at some distance from the scene of the accident, which might indicate to the jury an excess of moisture in the atmosphere. In my opinion, the jury might think that, at the scene of the accident, vision was difficult. For example, after William Arthur Singers car had passed the appellants car and had drawn up at a distance of say, 90 ft. from the appellants car, Singer said that, when he looked back, he could not see the appellants car from where he was. Furthermore, the jury might think that conditions existed at or about the scene of the accident in which the lights of a motor car or motor cycle were partially absorbed by the bitumen surface. This inference is supported, I think, by the evidence of the occupants of Singers car which approached the appellants stationary car from the direction of Auckland … In my opinion, then, the jury were entitled to think that the conditions of visibility were difficult and peculiar when Singers car approached the appellants car from the north. They were, I think, entitled to conclude that a similar difficulty existed when the respondents motor cycle approached from the south, and to think that the difficulty was greater because the respondent had then to contend

Page 432 of [1940] 2 All ER 427

with the headlights of Singers car, which had its front wheels turned slightly at an angle, ready to go back on the road, and, as a consequence, had its headlamps showing at a slight angle across the road.

Some suggestion was made in argument that the appellant must have had a light less powerful than was required by the regulations in force, but it became manifest that no such case could be made, and that the real point was whether or not the appellant was keeping a proper look out. As was pointed out by Smith J, no allegation complaining of the appellants light was made in the pleadings, and the point was abandoned below. The appellant gave evidence as to his look out and observation of the road. The salient features of the evidence were that the appellant on approaching the two cars in question, justifiably concluded that the only car on the road was Singers car, and that, but for it, the road was clear. As to other objects, such as possible foot-passengers, it is to be observed that the road was a country road, and the time after midnight. In such circumstances, the appellant said that he reduced his speed and approached Singers car, and, when he appreciated that it was stationary, directed his attention to that car, and that, though he was not dazzled by the lights of Singers car, which were dipped, there was a slight blinding effect from them. He spoke to the facts already mentioned in this judgment, as to the colouration of the road and of the respondents car, and as to the distance at which he picked it up, and the action he took to avert a collision. Their Lordships agree with the opinion of Smith J, thus expressed:

In my opinion, the jury might infer from this evidence, not only that the respondent glanced towards Singers car because he thought he had had engine trouble, but also that the respondent would look towards Singers car after slowing down because he thought people might step out from behind Singers car, and that he did so look after passing Singers car, because, when he “looked back,” the unlighted car was looming ahead about 20 ft. to 30 ft. away. The lights of Singers car had a slight blinding effect at the moment of passing, but the jury might infer I think, that, during the operation of the blinding effect, the respondent would have covered some part of the distance between Singers car and the appellants. In these circumstances, and those affecting the illumination of the road, the jury might conclude, reasonably, I think, that the respondent was exposed to a special hazard, in the first place, in meeting at night on a main highway in the country a stationary car (a) with lights showing across the road and causing a slight blindness as he passed it, (b) in such circumstances that it properly required some attention after the cyclist had recovered his sight, and (c) in such circumstances that he was induced to move further over to his left, and, in the second place, in being thus brought more into direct line with an unlit stationary car only 90 ft. away from Singers car, which was not shown up by the light of his cycle before his attention was engaged by Singers car, and which, as the jury might think, was only 20 ft. to 30 ft. away from respondent when he again looked ahead after looking to the rear of Singers car to see if people might step out there.

The question, it need hardly be said, is not whether their Lordships would have arrived at the same conclusion as that at which the jury arrived after seeing and hearing the witnesses, but whether the jury arrived at an unreasonable conclusion, or one unsupported by evidence fit for their consideration. As to this, their Lordships hold a clear opinion that there was proper and ample evidence before the jury that the appellant, whilst dealing with a situation of some difficulty, created by the respondent himself, and whilst keeping a good look out, properly

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attended for a sufficient time to an element of possible dangernamely, Singers carto account for the fact that he did not see the respondents unlit car quite in time to avert the consequences of its naturally unexpected presence. With regard to the appellants speed, it was contended that this was excessive, and that he should have stopped if he could not see. This was a consideration which no doubt was urged by counsel in addressing the jury, and was no doubt considered by the jury, but, having regard in particular to the fact that, so far as all appearances and observation could show, there was no car but Singers car to be considered, it seems to their Lordships to be impossible to hold that the jury was bound to find negligence in this regard. For these reasons, their Lordships hold that the Court of Appeal was wrong in directing that judgment should be entered for the respondent.

There remains to be considered the other question of the alleged wrongful admission of evidence as affording ground for an order for a new trial. The facts and the ruling of the trial judge are thus stated in his judgment upon further consideration:

The next ground upon which a new trial was sought was that counsel for the plaintiff led evidence early in the hearing as to an admission made by Miss Vincent, a passenger in the defendants car, after the collision as to the defendants responsibility as follows: “Was anything said by you to the people there?I said to a young lady present: “Where are your lights?

“Was anything said in reply to that?She said: This is our fault entirely and we will take care of everything. [Mr Towle objects.]”

Counsel for the plaintiff, when this evidence was led, assumed that he could prove that the defendant was within hearing when the admission was made, and stated that he had two witnesses who could depose to this fact. I ruled that its admissibility was dependent on its being shown to have been made in his hearing. It subsequently appeared, however, that this could not be shown. There was no evidence that Miss Vincent had authority to make such an admission. She herself denied having made it.

In order that this may be a ground for a new trial, it should appear that some substantial wrong or miscarriage of justice was occasioned to the defendant by this evidence: Code of Civil Procedure, r 277. I do not think that this can be said. The negligence of the defendant is not now seriously contested. The only questions requiring detailed consideration by the jury were those as to the contributory negligence of the plaintiff. In some circumstances, the evidence complained of might have had a material effect upon the view taken by the jury of the facts, but, in the present case, the jury was well aware, from the evidence the conduct of the case, the addresses of counsel, and the summing up, that the real question was as to the plaintiffs contributory negligence. The members of the jury would also be aware that the opinion of Miss Vincent (if it had been given as deposed to by the plaintiff) was entitled to little or no weight on that question and that it must be determined on the facts presented in evidence before it.

Moreover, although this evidence was heard by the jury, it was ruled to be inadmissible upon the facts as they emerged. Counsel might have dealt with this matter in his address or asked that it be dealt with in the summing up. Possibly it was thought that a reference to its inadmissibility might lead to its being brought prominently before the jury, and neither course was followed. In these circumstances, I do not think it can now be said that the evidence was improperly admitted or that any substantial wrong or miscarriage was caused.

On these facts, their Lordships in this respect find themselves in agreement with the trial judge and in disagreement with the contrary opinion expressed by Smith J in the Court of Appeal, and are of opinion that there was no admission of the evidence complained of, that, when it was conditionally taken, subject to proof of other matters, there was a

Page 434 of [1940] 2 All ER 427

sufficient direction that, unless those conditions were fulfilled, it was not evidence in the case, and that, having regard to the course of the trial, the trial judge was not wrong, and was probably wise, in not again reminding the jury of matters which counsel in their concluding speeches had thought it right to ignore. In any event, their Lordships are of opinion that no substantial wrong or miscarriage of justice can, in these circumstances, be said to have occurred.

Their Lordships will accordingly advise His Majesty that the appeal should be allowed, with such costs as are proper in the case of an appeal to His Majesty in Council in forma pauperis, and that the judgment for the appellant for the sum of £1,259 8s 2d and costs should be restored, and that the appellant should have the costs of the appeal to the Court of Appeal.

Appeal allowed with costs.

Solicitors: Wray Smith & Halford (for the appellant); Wedlake Letts & Birds (for the respondent).

Charles Shelley Esq   Barrister.

Pembery v Lamdin

[1940] 2 All ER 434


Categories:        LANDLORD AND TENANT; Other Landlord and Tenant        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, CLAUSON AND LUXMOORE LJJ        

Hearing Date(s):        10 APRIL 1940        


Landlord and Tenant Repairs Landlords covenant to keep external walls in tenantable repair Old house Dampness “External wall.”

A lessor demised certain old premises not constructed with a damp course or with waterproofing for the outside walls, and covenanted to keep the external part of the demised premises other than the shop front in good and tenantable repair and condition. The tenant claimed that, under the covenant, the landlord was liable to waterproof the outside walls, and so render the place dry:

Held (i) the obligation on the landlord was only to keep the premises in repair in the condition in which they were when demised, and, as they were old premises, he was not liable to do any more than point the brickwork.

(ii) an external wall is one forming part of the enclosure of the premises, and is not necessarily exposed to the atmosphere, but may adjoin another building.

Notes

The extent of repair necessary to comply with the covenant in the usual form has always been defined in general terms. In the case of old houses, a very common defect is dampness, and this is a matter which the local sanitary authorities often ask to have remedied. This decision defines the landlords liability under the usual covenant in respect of external walls, and Luxmoore LJ, has confirmed a longstanding definition of the external wall.

As to Extent of Landlords Covenant to Repair, see Halsbury (Hailsham Edn), Vol 20, pp 201, 202, para 219; and for Cases, see Digest, Vol 31, pp 314319, Nos 45614608.

Cases referred to

Lister v Lane & Nesham [1893] 2 QB 212; 31 Digest 328, 4700, 62 LJQB 583, 69 LT 176.

Page 435 of [1940] 2 All ER 434

Lurcott v Wakely & Wheeler [1911] 1 KB 905; 31 Digest 332, 4757, 80 LJKB 713, 104 LT 290.

Hewitt v Rowlands (1924) 93 LJKB 1080; 31 Digest 319, 4607, 131 LT 757.

Green v Eales (1841) 2 QB 225; 31 Digest 318, 4599, 11 LJQB 63.

Appeal

Appeal by the plaintiff from a judgment of His Honour Deputy-Judge Sturges KC, delivered at Marylebone County Court on 7 March 1940. The facts are fully set out in the judgment of Slesser LJ. The deputy-judge found that, to cure dampness mainly due to the old porous bricks and mortar, the wall would have had to be practically renewed, at a cost, with certain other necessary repairs, of £202. On the law, he held, following Fletcher Moulton LJ in Lurcott v Wakely & Wheeler, that the lessor was bound to keep the external part of the demised premises in good and tenantable repair and condition, even if to do so it should be necessary to make part of the premises in a better condition than that in which they were when they were originally demised. He gave judgment on the counterclaim for £175, that sum to exclude damage for the loss of use of the basement. The plaintiff appealed, on the grounds that the deputy-judge was wrong in law in holding (i) that the plaintiff was liable to repair the basement by renewing the walls, or to put or keep it in such a condition that it could be used as a cocktail bar; (ii) that the covenant to repair was not to be construed with reference to the condition of the premises at the beginning of the lease; (iii) that there was evidence before him on which he could find a breach of the landlords covenant; (iv) that the measure of the damages for any breach was the cost of carrying out the repairs required to remedy such breach, and on the ground that there was no evidence that the plaintiff had suffered any damage by any breach of the covenant, and that the sum awarded as damages was excessive.

Serjeant Sullivan KC and T Dawson for the appellant.

W Arthian Davies for the respondent.

10 April 1940. The following judgments were delivered.

SLESSER LJ. In this case, Alfred Charles Pembery, the landlord, sued Florence Maud Lamdin, the defendant, for 1½ quarters rent of premises known as 62, Blandford Street. That was rent owing under a lease made between the parties and dated 2 August 1939. As regards that rent, final judgment for £56 5s and £10 11s 6d was signed before Master Simner, but it was ordered that execution be stayed pending the trial of the counterclaim, if the counterclaim be set down in 14 days. Then followed certain conditions as to costs. The counterclaim was duly set down, but was not formulated by way of pleading. The defendant relied by way of counterclaim, as she was entitled to do, upon an affidavit which she swore on 20 December 1939, in which she states in para 2 as follows:

On Aug. 2, 1939, I entered into a lease with the plaintiff of the shop and premises on the ground floor, together with the basement situate and known as 62, Blandford Street, in the parish of St. Marylebone. The term was for 16 years 4 months

Page 436 of [1940] 2 All ER 434

and 10 days, to commence from Aug. 10, 1939. The rent payable was £150 for the first year and thereafter £250 per annum.

Then in para 3 she states as follows:

By a covenant in the said lease the plaintiff agreed that he would keep the external part of the demised premises (other than the shop front) in good and tenantable repair and condition.

Then in paras 4 and 5 she states as follows:

(4) I opened a wine bar on the ground-floor premises, and it was my intention, as the plaintiff well knew, to open a cocktail bar in the basement of the premises. I accordingly opened the bar on the ground floor and was making arrangements to have the necessary parts of the basement converted when I was informed that this would be impossible owing to the state of the basement, as the result of rain-water penetrating the premises owing to the fact that the outside walls were in a bad state of repair. (5) I accordingly called in a surveyor, who reported on the premises to me on Oct. 19, 1939.

In that report of the surveyor, Mr Bowden, which is exhibited to the defendants affidavit, he states that, having inspected the basement of the property, he found:

… that the worst portions of the basement are at the front and rear. In the front, water is percolating through the defective pavement lights, and travelling along the steel joists supporting them and wetting the brickwork, but, in addition to this, I am of the opinion that, owing to the age of the brickwork, and, probably that no steps were taken to waterproof it externally at the time it was built, water is penetrating into the brickwork from the earth under the paving-stones, both on the front and side roads. At the back of the premises, in the room which you had commenced to alter for the purpose of using as a cocktail lounge, the walls here are absolutely saturated with water, and again I feel that is due to the age of the brickwork and the probability that it was not waterproofed externally at the time they were built.

Then he goes on to discuss how much it would cost to put this matter right. He gives the opinion that the work would have to be done internally:

… owing to the fact that the rear wall abuts against the store at the rear of the fire station, and it would not be possible to get down the outside of your basement wall without taking up the floor of the store at the rear of the fire station. …

Then he says:

To successfully waterproof this room would, in my opinion, necessitate removing all the panelling and battening from the walls, cleaning them down, raking out the brickwork, asphalting the walls, and building a 4½ ins. wall inside to keep the asphalt in position, and laying new concrete floor about 4 ins. thick to prevent water coming under the walls, as it does at present, and trickling across the existing floor. With regard to the dampness along the flank wall of the house that is the corridor and side of the staircase, in my opinion the cause is the same penetration of water from the earth under the pavement, and in addition there is a patch of broken defective rendering to the cement plinth along the side of the house. Here it would be possible for the wall to be waterproofed externally.

That being the substitute for the pleading, in those circumstances the case came on for hearing before the county court judge. Certain facts in this case are really not in dispute. First, it is not in dispute that this lady, a vintner, took these premises, the ground-floor and the basement, for the purpose of providing accommodation for the public for drinking cocktails and wines. She agreed with the landlord that, in consideration of her doing certain necessary physical repairs to fit the

Page 437 of [1940] 2 All ER 434

premises for her new business, she should pay £150 instead of £250, which was to be the rent in succeeding years. Secondly, it is common ground that the way in which those premises are built is such that the greater part of the basement is underground. The road which adjoins it, Blandford Street, slopes downwards, and, whereas one portion of the basement is completely underground, the other end is very near to the surface. The walls, which are said to be in this damp state are walls which for the most part are in immediate contact with the damp earth, and always have been in contact with it. It is an old house, 100 years or more in age, and it was built at a time when modern devices for avoiding the consequences of damp were unknown. As the surveyor points out in his report, there was no provision for waterproofing it. When one comes to construe the repairing covenant, and looks (as directed by the authorities) to the nature of the premises demised, it is clear from the evidence, the judgment, and the surveyors report that this was a house of the old type, with a cellar for the most part built into the ground, without any precautions against damp oozing through the porous bricks into the cellar. The house above fortunately may have remained dry, but that was the kind of house which was demised.

The repairing covenant on which the defendant sought to recover a considerable sum by way of damages is as follows:

The lessor hereby covenants with the lessee as follows that is to say that the lessor will keep the external part of the demised premises in good and tenantable repair and condition. …

The first question which arises in this case is what was the nature of the obligation to repair. In order to ascertain that, it is first necessary to consider the nature of the premises which had to be repaired under the covenant. I think that, for the purposes of this case, the principle, which has never been doubted, is to be found stated in a short passage in a judgment of Lord Esher MR in Lister v Lane & Nesham. That is a case which has been subsequently followed and approved in Lurcott v Wakely & Wheeler. In Lister v Lane & Nesham, after reviewing the earlier authorities, Lord Esher MR, who was speaking there of a tenant, says, at pp 216, 217:

Those cases seem to me to shew that, if a tenant takes a house which is of such a kind that by its own inherent nature it will in course of time fall into a particular condition the effects of that result are not within the tenants covenant to repair. However large the words of the covenant may be a covenant to repair a house is not a covenant to give a different thing from that which the tenant took when he entered into the covenant. He has to repair that thing which he took; he is not obliged to make a new and different thing …

Applying that to a landlord, in the same way as it is in that case applied to a tenant, if the counterclaim here made by Mrs Lamdin be correct, she is entitled to receive at the hands of this landlord “a different thing” from that which she took when she entered into the covenant. She took this old house with a cellar without any waterproof protection, and she is asking the landlord so to repair that house as to give her a cellar which has a waterproof protection and is dry. That is not a

Page 438 of [1940] 2 All ER 434

right which she can possibly maintain, because the obligation of the landlord is to repair that which is demised, and not to give her something much drier in its nature than that which was demised.

For myself, for the purposes of this case, I do not feel it necessary to go into any further authorities, but I will point out that Sir H H Cozens-Hardy MR in Lurcott v Wakely & Wheeler, says substantially the same thing, at p 914:

Is what has happened of such a nature that it can fairly be said that the character of the subject-matter of the demise, or part of the demise, in question has been changed?

In the same case, Fletcher Moulton LJ, says the same thing, at p 916:

Now what is the meaning of keeping old premises in good condition? I can see no difficulty in deciding the meaning of that. It means that, considering that they are old premises, they must be in good condition as such premises.

If for the words “old premises” are substituted the words “not water-proofed,” we have here the exact case. They have to be kept in repair in the condition of the house when it was demised, according to the character of the house. Buckley LJ gives judgment to the same effect, approving of what was said in Lister v Lane & Nesham.

In those circumstances, it would seem that the greater amount of the damp which can be complained of in this case is due to the absence of this waterproofing, which is estimated to cost £202, according to the evidence of Mr Bowden, the surveyor who made the report. That evidence attributes the dampness to the external brick walls being porous because of their age. It is true that he adds that the mortar, being partly perished, allowed the water to pass through. On that, it is said that, whatever the condition and nature of these walls, the landlord would be liable under his covenant to repair to render the premises dry, or, at any rate, to have the mortar pointed. The whole sum involved, says Mr Bowden, would be £202. As I understand, the cost of pointing would be a very small portion of that.

However, the defendant in her counterclaim entirely failed to produce any evidence to show, first, that, even if this repair to the mortar had been made, the damp, which, according to the surveyor, naturally exists in the house without its being waterproofed in the basement would not, in the circumstances, have been effectively less. Much less does the surveyor say that that particular increase in damp, which might conceivably be measured by a scientific instrument, would in any real sense have caused the defendant, who wished to use these rooms as a cocktail bar, any increase in the damage over and above the damage which would have resulted anyhow, even if the mortar had not been repaired. I do not think that the case was fought upon an award of nominal damages which might have flowed from the fact that the mortar had not been pointed. As the judges judgment shows, I think, quite clearly, it was fought on the general principle that there was a general obligation

Page 439 of [1940] 2 All ER 434

on the landlord, under his covenant to repair, to keep this basement dry. In that, I think, as I have said, that the judge has misdirected himself, and has misunderstood the effect of what Fletcher Moulton LJ said in Lurcott v Wakely & Wheeler.

The only matter left outstanding is this. In order that the landlord may be held liable, notice must be given to him requiring him to make the repairs. There was another matter of liability, which was to repair the pavement lights, which were said to be defective. It is said that, as a result of that notice, the pavement lights were repaired, but were repaired insufficiently. No further notice was given, and the claim with regard to the repair of pavement lights failed here for want of notice requiring a fresh repairing of those lights. I entirely agree with the criticism which counsel for the appellant directed to the judgment of the judge in that regard. Even if there were to be held, as I do not think there should, a general liability under the covenant, it was only subsidiary to the matter on which damages have here been assessed. The judge appears to have thought that, once it was shown that it would cost, not the whole of the £202 which was asked for, but a lesser sum of £175, all those were damages which were attributable to the breach of covenant to repair. In taking that view, he overlooked the principles which are set out in Hewitt v Rowlands, where Bankes LJ said, at p 1082:

Prima facie the measure of damage for breach of the obligation to repair is the difference in value to the tenant during that period between the house in the condition in which it now is and the house in the condition in which it would be if the landlord on receipt of the notice had fulfilled his obligation to repair.

The judge never directed his mind to that matter. He seems to have treated the case rather as if it were one of breach of contract under the Sale of Goods Act 1893, or something like that. At any rate, he did not apply those principles. Inasmuch as I am of opinion that there has been no failure on the part of the landlord in the performance of his covenant, it is unnecessary to consider what damages ought to have been awarded on the basis that he so failed. Having regard to the character and nature of this house, I think that there was no obligation to put it into a condition other than that in which it was when it was demised. As the evidence of the surveyor goes to show that, in the absence of waterproofing, this basement, with porous bricks, was always liable to be damp, it follows that the tenant cannot be heard to say that the landlord has failed to repair that which he gave to her in the demise, which he never undertook to put in better condition than that in which it was when she took it. To hold otherwise, as the judge has held, seems to me to be doing the very thing which was said to be wrong in this court in Lister v Lane & Nesham, and to give to the tenant a different thing from that which she took when she entered into the lease. For these reasons, I think that this appeal succeeds.

CLAUSON LJ. I agree.

Page 440 of [1940] 2 All ER 434

LUXMOORE LJ. I also agree. There is only one point on which I should like to add a few words, because Slesser LJ has not dealt with it. I refer to the argument put forward by counsel for the appellant with regard to the construction of this particular covenant. He said that, on the true construction of this covenant, the particular wall which was in dispute between the parties was not an external wall of the premises. The covenant is that the lessor:

… will keep the external part of the premises in good tenantable repair and condition. …

As I understand the argument, it was suggested that this could not be an external part of the premises, because there was no part of it exposed to the atmosphere, and the only part which could be reached was the face of the wall which was to be found in the interior of the premises.

This precise covenant was construed in Green v Eales as long ago as 1841. In that case, at the time of the demise, the house had another house adjoining it. The wall between that house and the adjoining house rested on the adjoining house, and could not be reached from the outside. It was said that, consequently, it was not an external part of the premises. The adjoining house was in fact pulled down, so that, at the time the case was decided, the wall was exposed to the atmosphere. Lord Denman CJ said, however, that, even before the adjoining house had been pulled down, the court was of opinion that the wall in question was an external part of the premises. It is quite true that it is an obiter dictum, but he said, at p 237:

The external parts of premises are those which form the inclosure of them, and beyond which no part of them extends: and it is immaterial whether those parts are exposed to the atmosphere, or rest upon and adjoin some other building which forms no part of the premises let.

That definition of “the external part” of premises has always been recognised as a proper and adequate definition of the term, and I think that there can be no question that, upon the true construction of this covenant, the wall in question is an external part of the premises. As I said, I agree entirely with what Slesser LJ has said with regard to the rest of the case, and I agree that this appeal should be allowed.

Appeal allowed with costs. Counterclaim dismissed with costs.

Solicitors: MacDonnell & Co (for the appellant); Whelan & Co (for the respondent).

Derek H Kitchin Esq   Barrister.


Hills v Co-Operative Wholesale Society Ltd

[1940] 2 All ER 441


Categories:        CIVIL PROCEDURE        

Court:        KINGS BENCH DIVISION        

Lord(s):        MACNAGHTEN J        

Hearing Date(s):        15, 18 APRIL 1940        


Estoppel Previous proceedings in respect of same cause of action Proceedings under Employers Liability Act 1880 Proceedings in High Court against employers for servants negligence.

The plaintiff brought an action in the High Court founded on the negligence of the defendants servants. Fearing that this action would be defeated by a defence based on the doctrine of common employment, he brought proceedings under the Employers Liability Act 1880, in the county court. In these proceedings, the defendants paid into court with a denial of liability the whole sum which the plaintiff could recover, and the plaintiff accepted that sum in satisfaction of his claim. In the High Court action, the defendants raised the defence of common employment, and later submitted as a preliminary point of law that the acceptance of the sum paid into court in the county court proceedings debarred the plaintiff from recovering any sum in the High Court action:

Held the cause of action was the same in both these proceedings, and, in the circumstances, the High Court action was barred.

Notes

The object of the Employers Liability Act 1880, was to give the workman some relief against the operation of the doctrine of common employment. The Act only applies to a restricted class of claims, and the amount recoverable is also subject to severe restriction. It is decided, however, that the cause of action is the same in both proceedings, and recovery in one bars the prosecution of the other.

As to Res Judicata, see Halsbury (Hailsham Edn), Vol 13, pp 410414, paras 465469; and for Cases, see Digest, Vol 21, pp 198216, Nos 434529.

Case referred to

Thomas v Quartermaine (1887) 18 QBD 685; 36 Digest 8, 10, 56 LJQB 340, 57 LT 357.

Preliminary Issue of Law

Preliminary Issue of Law to determine a question of estoppel. The facts are fully set out in the judgment.

W B Frampton for the plaintiff.

C L Henderson for the defendants.

18 April 1940. The following judgment was delivered.

MACNAGHTEN J. In this action, which was commenced by a writ of summons dated 3 October 1938, the plaintiff, Ruben Sidney Hills, is suing the defendants, the Co-operative Wholesale Society Ltd, to recover damages for personal injuries caused by the negligence of the defendants servant or servants at the defendants works, Lincoln Road, Ponders End, in the county of Middlesex. By his statement of claim, the plaintiff alleged that he was a general labourer employed by the defendants at those premises, and that on 12 August 1938, the plaintiff

… on the instructions and under the supervision of Mr. Russell, the under-manager of the defendants, was engaged at the defendants said premises in assisting to assemble a veneer press.

By para 3, it is alleged as follows:

In the course of carrying out the said work the plaintiff was required to assist in the transport of certain steel press plates of about one ton each in weight from

Page 442 of [1940] 2 All ER 441

one part of the defendants said premises to another, for which purpose the defendants supplied a wooden bogey truck.

Then para 4 is as follows:

The platform of the said bogey truck was 4 ft. in length by 2 ft. 3 ins. in breadth the dimensions of the said steel press plates were approximately 5 ft. 6 ins. in length by 4 ft. 6 ins. in breadth. …

Then it is alleged that the plates were in a greasy condition. Then in para 5 it is alleged as follows:

On the date and at the place aforesaid the plaintiff was engaged in carrying out his said work in transporting one of the press plates when, by reason of the negligence of the defendants, the bogey truck collapsed under the weight of the said press plate, so that it fell upon and knocked down the plaintiff, whereby he sustained severe personal injuries, and suffered and incurred loss, damage and expense.

Then follow particulars of the alleged negligence.

On 14 December 1938 the defendants delivered their defence. Subject to certain admissions which were made, the defence traversed the allegations contained in the statement of claim, and the defendants denied that they had been guilty of the alleged negligence, or of any negligence at all. By way of alternative defence, they set up the defence of volenti non fit injuria. On 14 February 1939 the defendants amended their defence, pursuant to leave which had been given by Master Simner. They amended their defence by adding para 6, which is as follows:

In the further alternative, the defendants say that the accident to the plaintiff was solely caused by the negligence of the plaintiff and of his fellow-employees in common employment with him, and engaged with him in the operation of assembling a veneer press. The plaintiff and his fellow-employees were negligent in that they failed to keep the bogey truck under control, or pushed and pulled the same at too great a speed on an uneven surface.

The delivery of that defence had no doubt been anticipated by the plaintiffs advisers, and on 10 February they issued a plaint on behalf of the plaintiff Hills in the Edmonton County Court, making a claim under the Employers Liability Act 1880, similar to that which they had made in the High Court action. The particulars of claim in those proceedings in the county court reproduced all the relevant allegations in the original statement of claim in the High Court action. In the county court action, the defendants denied liability, but brought into court the sum of £468, which was the maximum amount which the plaintiff could recover in the action in the county court. The plaintiff in the county court action took that money out of court, as he was entitled to do under the rules of court, in satisfaction of his claim. Thereupon the defendants re-amended their defence, inserting in it para 8, which reads as follows:

By plaint No. T. 578 dated Feb. 10, 1939, issued in the Edmonton County Court the plaintiff instituted proceedings under the Employers Liability Act, 1880 against the defendants in respect of the matters complained of in this action. The plaintiff has recovered from the defendants in the said proceedings the sum of £468, which said sum was paid into court with a denial of liability by the defendants.

Page 443 of [1940] 2 All ER 441

The said sum was taken out of court by the plaintiff on Mar. 30, 1939. The defendants will contend that, by reason of the premises, the plaintiff is debarred from claiming or recovering any sum from the defendants in this action.

Thereupon an order was made in chambers under RSC Ord 52, r 2, that the issues raised by that paragraph of the defence should be set down for hearing and disposed of before the trial of the action. Thus, the case comes before me to have that issue determined.

This is apparently the first time that a person who has recovered judgment in the county court under the Employers Liability Act 1880, has sought to pursue a claim for negligence in respect of the same injuries in the High Court. There is no authority expressly on the point. On behalf of the plaintiff, it is pointed out that the Employers Liability Act 1880, contains no such provision as is contained in the Workmens Compensation Act 1925, which expressly provides that a workman who has recovered compensation under that Act cannot pursue any remedy in the High Court or in the county court, either at common law or under the Employers Liability Act 1880. It was urged that the cause of action under the Employers Liability Act 1880, was different from that which the plaintiff would have at common law, if he had been injured by the negligence of the defendants. On the other side, it was said that the plaint under the Employers Liability Act 1880, is in reality an action based on negligence, and on nothing else, and that the Employers Liability Act 1880, conferred no new cause of action at all.

In those circumstances, it is necessary to look at the Employers Liability Act 1880, to see whether in fact it gives the workman a cause of action different from that which he had at common law. S 1 provides as follows:

Where after the commencement of this Act personal injury is caused to a workman (1) by reason of any defect in the condition of the ways, works, machinery, or plant connected with or used in the business of the employer; or (2) by reason of the negligence of any person in the service of the employer who has any superintendence entrusted to him whilst in the exercise of such superintendence; or (3) by reason of the negligence of any person in the service of the employer to whose orders or directions the workman at the time of the injury was bound to conform, and did conform, where such injury resulted from his having so conformed; or (4) by reason of the act or omission of any person in the service of the employer done or made in obedience to the rules or bye-laws of the employer, or in obedience to particular instructions given by any person delegated with the authority of the employer in that behalf; or (5) by reason of the negligence of any person in the service of the employer who has the charge or control of any signal, points, locomotive engine, or train upon a railway, the workman, or in case the injury results in death, the legal personal representatives of the workman, and any persons entitled in case of death, shall have the same right of compensation and remedies against the employer as if the workman had not been a workman of nor in the service of the employer, nor engaged in his work.

Then the Act goes on to make certain exceptions, and then limits the amount recoverable, and limits the time within which the action must be brought. Then it provides for deduction from the money recoverable of anything which the workman has received in the way of money under any penalty which may have been paid in pursuance of any other Act of Parliament. Then it is provided that every action for recovery of

Page 444 of [1940] 2 All ER 441

compensation under this Act is to be brought in the county court, but may, on the application of either plaintiff or defendant, be removed into a superior court. Provision is also made for notice of the injury sustained being served on the employer.

It seems to me that the sole effect of the provisions of s 1 is that, when an action is brought under the Employers Liability Act 1880, although the workman is in fact a person in the service of the employer, the action is to be determined on the fiction that he was not in fact in the employ of the employer. It resembles somewhat what used to obtain in the procedure of the court before the Common Law Procedure Act in actions of ejectment. It is true that there was no such person as John Doe, and it was true that no demise had been made to John Doe, but, by the rules of the court, the defendant in such an action, on entering appearance, was bound to concede that John Doe did exist, and that a demise had in fact been made to John Doe. So, too, in an action under the Employers Liability Act 1880, in which the plaintiff was in fact a workman in the employment of the defendant, the defendant had to admit, contrary to the fact, that the plaintiff was not in the employment of the defendant.

In my view, there is nothing in the Employer Liability Act 1880, which confers on the injured workman any cause of action different from that which he would have had by the law of England but for the doctrine of common employment. The real effect of the Employers Liability Act 1880, is, as it has been generally understood, to preclude the employer, when sued in such an action, from setting up the defence of common employment. If I had any doubt about the matter, it is concluded by authority. Counsel engaged in the case have assisted me greatly by referring to all the cases which have any bearing on the matter, direct or indirect, and I think it is only necessary to refer now to Thomas v Quartermaine. That was a decision of the Court of Appeal, consisting of Lord Esher MR, and Bowen and Fry LJJ. The headnote is as follows:

The plaintiff was employed in a cooling room in the defendants brewery. In the room were a boiling vat and a cooling vat, and between them ran a passage which was in part only 3 ft. wide. The cooling vat had a rim raised 16 ins. above the level of the passage, but it was not fenced or railed in. The plaintiff went along this passage to pull a board from under the boiling vat. The board stuck fast and then came away suddenly so that he fell back into the cooling vat and was scalded. In an action under the Employers Liability Act, 1880:

Held (by Bowen and Fry, L.JJ., Lord Esher, M.R., dissenting), that the defence arising from the maxim volenti non fit injuria had not been affected by the Employers Liability Act, 1880 and applied to the present case, and that there was therefore no evidence of negligence arising from a breach of duty on the part of the defendant towards the plaintiff, and that the plaintiff was not entitled to recover.

In his judgment, Bowen LJ said, at p 691:

Two alternative views have been submitted to us as to the effect of the Employers Liability Act, 1880. Is the true conclusion that the Act has removed certain special obstacles to a workmans right to sue which would not have existed in the case of other persons, and which had been held previously to arise by implication out of the relation of master and servant; and that the Act has only placed an injured

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workman (as regards his remedies) in the same position (with specified exceptions) as he would have occupied if he had not been in the masters employ? Or has the Act gone further, and imposed on masters new duties and liabilities towards their servants which the masters would not be under towards the general public or the servants of anybody else. This is the first question we have to solve.

Then Bowen LJ proceeds to deal with the various arguments which led to the conclusion expressed in pp 693, 694:

The true view in my opinion is that the Act, with certain exceptions, has placed the workman in a position as advantageous as but no better than that of the rest of the world who use the masters premises at his invitation on business. If it has created any further or other duty to be fulfilled by the master I do not know what it is, how it is to be defined, or who is to define it.

Judgment to the same effect was delivered by Fry LJ. Although Lord Esher MR, dissented from the conclusion at which Bowen and Fry LJJ arrived, his decision was not on the point at issue in this case. It was on the question of whether or not the doctrine of volenti non fit injuria applied. The majority of the court held that it did apply. Lord Esher MR thought that it did not apply. For these reasons, I have come to the conclusion that the issue submitted to me must be decided in favour of the defendants, and that the action must stand dismissed.

Action dismissed.

Solicitors: Scott Duckers & Co (for the plaintiff); W Stanley Eastburn (for the defendants).

W J Alderman Esq   Barrister.

Southern Foundries (1926) Ltd and Federated Foundries Ltd v Shirlaw

[1940] 2 All ER 445


Categories:        COMPANY; Directors        

Court:        HOUSE OF LORDS        

Lord(s):        VISCOUNT MAUGHAM, LORD ATKIN, LORD WRIGHT, LORD ROMER AND LORD PORTER        

Hearing Date(s):        7, 11, 12, 13 MARCH, 22 APRIL 1940        


Companies Directors Managing director Contract appointing managing director for term of years Change of articles Directorship of managing director terminated before expiration of term Breach of contract Implied terms.

S was appointed managing director of S F Ltd for a period of 10 years, the agreement being dated 21 December 1933. The articles of that company, as they existed on that date, gave power to the company to appoint one of the directors as managing director, and provided that the managing director should be subject to the same provisions as to removal and resignation as those to which the other directors were subject but “subject to the provisions of any contract between him and the company.” In April 1936, S F Ltd adopted a new set of articles, owing to F F Ltd having acquired financial control of S F Ltd. The new articles gave power to F F Ltd to remove from office any director of S F Ltd. On 25 March 1937, F F Ltd removed S from his office of director of S F Ltd and his appointment as managing director ipso facto terminated. It was contended that an implied term to the effect that S F Ltd would not remove S from his office of director could not be read into his contract:

Held (Viscount Maugham and Lord Romer dissenting) the removal of S from his office of director by F F Ltd under the altered

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articles was a breach of contract on the part of S F Ltd because, when F F Ltd acted upon the power conferred on them by the new articles, they bound S F Ltd, if they acted in such a way that action by S F Ltd on the same articles would be a breach. The alteration of the articles was not in itself a breach of contract.

per Lord Atkin: it is not a question of agency, but of acting under powers conferred by contract, to interfere with a contract between the party granting the power and a third person.

per Lord Wright: a contract is a consensual agreement between A and B, between whom the rights and liabilities exist. I do not understand on what principle B can be ejected from his contractual rights by the stranger C, with whom he has no privity.

Order of Court of Appeal ([1939] 2 All ER 113) affirmed.

Notes

This case has given rise to considerable difference of judicial opinion and it is to be noted that the Chancery judges have ranged themselves on one side and the common-law judges on the other. It may, perhaps, be questioned whether this is not a decision upon the particular facts of this case, but the opinions of the majority would seem to support the proposition that if A gives a general power to B and B uses that power in a particular instance to alter the position of C, then, if C is a person having a contract with A, and the effect of the particular exercise of the power by B is to bring about a breach of the contract between A and C, A is liable to C for breach of that contract. The general power could no doubt in many cases be exercised without in any way affecting any contractual rights, and therefore the giving of the power is in no way a matter of which complaint can be made.

As to Managing Directors, see Halsbury (Hailsham Edn), Vol 5, p 348, para 575; and for Cases, see Vol 9, pp 528532, Nos 34843513.

Cases referred to

Stirling v Maitland (1864) 5 B & S 841; 12 Digest 616, 5091, 34 LJQB 1, 11 LT 337.

Rhodes v Forwood (1876) 1 App Cas 256; 12 Digest 622, 5123, 47 LJQB 396, 34 LT 890.

Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656; 9 Digest 568, 3771, 69 LJCh 266, 82 LT 210, varying [1899] 2 Ch 40.

Baily v British Equitable Assurance Co [1904] 1 Ch 374; 9 Digest 559, 3698, 73 LJCh 240, 90 LT 335, revsd on other grounds SC sub nom British Equitable Assurance Co Ltd v Baily [1906] AC 35.

Swabey v Port Darwin Gold Mining Co (1889) 1 Meg 385; 9 Digest 561, 3724.

Re Argus Life Assurance Co (1888) 39 ChD 571; 10 Digest 1078, 7533, 58 LJCh 166, 59 LT 689.

Measures Brothers Ltd v Measures [1910] 2 Ch 248; 9 Digest 529, 3494, 79 LJCh 707, 102 LT 794.

Mackay v Dick (1881) 6 App Cas 251; 12 Digest 610, 5045.

Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 ChD 339; 9 Digest 528, 3490, 59 LT 345.

Nelson v Nelson (James) & Sons Ltd [1914] 2 KB 770; 9 Digest 529, 3492, 83 LJKB 823, 110 LT 888.

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524; Digest Supp, 104 LJPC 88, 153 LT 425.

Bluett v Stutchburys Ltd (1908) 24 TLR 469; 9 Digest 529, 3491.

Appeal

Appeal by the companies from an order of the Court of Appeal (MacKinnon and Goddard LJJ, Sir Wilfrid Greene MR dissenting), dated 17 March 1939, and reported [1939] 2 All ER 113,

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affirming a judgment of Humphreys J, dated 16 June 1938, whereby it was ordered that the respondent should recover from the appellants £12,000 damages and costs. The facts and the arguments are fully set out in the opinions of their Lordships.

The articles of association of Southern Foundries (1926) Ltd, which regulated the position of the respondent as director at the time of his appointment included the following:

84. Until otherwise determined by a general meeting, the number of directors shall be not less than 2 nor more than 8. Subject to the rights of the holders of any of the debentures hereinafter mentioned for the time being outstanding 4 directors shall be appointed by the subscribers to the memorandum of association.

85. The qualification of a director shall be the holding in his own right alone and not jointly with any other person, of not less than 200 ordinary shares of the company, and such qualification shall be acquired within 2 months after appointment as director.

89. Subject as herein otherwise provided or to the terms of any subsisting agreement, the office of a director shall be vacated: (A) If he become bankrupt or insolvent or compound with his creditors. (B) If he become of unsound mind or be found a lunatic. (C) If he be convicted of an indictable offence. (D) If he cease to hold the necessary qualification in shares or stock or does not obtain the same within 2 months of the date of his appointment. (E) If he wilfully absent himself from the meetings of the directors for a period of 6 consecutive calendar months without special leave of absence from the other directors and they pass a resolution that he has by reason of such absence vacated his office. (F) If he gives the directors one months notice in writing that he resigns his office. But any act done in good faith by a director whose office is vacated as aforesaid shall be valid unless prior to the doing of such act written notice shall have been served upon the directors or an entry shall have been made in the directors minute book, stating that such director has ceased to be a director of the company. A director may hold any other office or place of profit under the company (except that of auditor) in conjunction with his office of director, and on such terms as to remuneration and otherwise as the directors shall arrange.

90. The directors may from time to time appoint any one or more of their body to be managing director or managing directors for such period and upon such terms as they think fit, and may vest in such managing director or managing directors such of the powers hereby vested in the directors generally as they may think fit and such powers may be made exercisable for such period or periods, and upon such conditions and subject to such restrictions and generally upon such terms as to remuneration and otherwise as they may determine. The remuneration of a managing director may be by way of salary or commission or participation in profits, or by any or all of these modes.

91. A managing director shall not while he continues to hold that office be subject to retirement by rotation, and he shall not be taken into account in determining the rotation of retirement of directors, but he shall, subject to the provisions of any contract between him and the company, be subject to the same provisions as to resignation and removal as the other directors of the company, and if he cease to hold the office of director he shall ipso facto and immediately cease to be a managing director.

98. Subject to the provisions of these articles, one-third of the directors for the time being (if any), or if their number is not a multiple of 3 then the number nearest to but not exceeding one-third, shall retire from office at the ordinary general meeting in 1927 and in every subsequent year.

105. The company may by extraordinary resolution remove any ordinary director before the expiration of his period of office, and may, if thought fit, by ordinary resolution appoint another director in his stead but any person so appointed shall retain his office only until the next following ordinary general meeting of the company, and shall then be eligible for re-election.

Arts 7 and 8 of the new articles adopted in April 1936 provided as follows:

7 The number of the directors shall be not less than 2 or more than 10.

8 Subject to the immediately preceding article, Federated Foundries Ltd shall have power at any time and from time to time by an instrument in writing

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subscribed on its behalf by 2 of its directors and its secretary to appoint any person to be a director of the company and to remove from office any director of the company. Every such instrument shall be deposited at the registered office of the company and shall take effect as at the time of such deposit.

Art 11 provided as follows:

… that the directors should not have power except with the prior sanction of the Federated company. … (b) to appoint any person to be a managing director. …

These articles also incorporated Table A, with the omission of certain of the articles. Art 68, dealing with the appointment of a managing director, was retained, and was in the following form:

The directors may from time to time appoint one or more of their body to the office of managing director or manager for such term and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they may think fit, and a director so appointed shall not, while holding that office, be subject to retirement by rotation or taken into account in determining the rotation or retirement of directors; but his appointment shall be subject to determination ipso facto if he ceases from any cause to be a director, or if the company in general meeting resolve that his tenure of the office of managing director or manager be determined.

Art 72, dealing with the vacation of the office of director, and arts 7380, dealing with the rotation and removal of directors, were struck out.

Valentine Holmes and J G Strangman for the appellants.

H U Willink KC and J P Ashworth for the respondent.

22 April 1940. The following opinions were delivered.

VISCOUNT MAUGHAM. My Lords, the facts in this case are not in dispute, and may be stated as follows. The appellants (whom I shall call Southern) were incorporated in 1926 as a private company with the object of carrying on the business of iron-founders. The respondent became a director of Southern in 1929.

On 21 December 1933 an agreement was entered into between Southern the respondent, and Sir Berkeley Sheffield (who was at that time the holder of all the debentures, and nearly the whole of the capital, of Southern) whereby the respondent was appointed managing director of Southern for a term of 10 years. The agreement contained, amongst others, the following clauses:

1. Mr. Shirlaw shall be and he is hereby appointed managing director of the company and as such managing director he shall perform the duties and exercise the powers which from time to time may be assigned to or vested in him by the directors of the company.

2. Mr. Shirlaw shall hold the said office for the term of 10 years from Dec. 1, 1933.

3. Mr. Shirlaw shall unless prevented from ill-health throughout the said term devote the whole of his time attention and abilities to the business of the company (subject however to cl. 10 hereof) and shall obey the orders from time to time of the board of the company and in all respects conform to and comply with the directions and regulations made by such board and shall well and faithfully serve the company and use his utmost endeavours to promote the interests thereof.

9. If before the expiration of this agreement the tenure of office by Mr. Shirlaw shall be determined by the winding up of the company (other than for the purpose of reconstruction or amalgamation) Mr. Shirlaw shall have no claim against the company or Sir Berkeley Sheffield for damages in respect of such determination.

The agreement provided for payment to the respondent as managing director of a salary of £1,700, rising by annual increments of £100 to £2,000 per annum, and of commission at the rate of 5 per cent on the

Page 449 of [1940] 2 All ER 445

net profits of the company available for dividend in any year. The respondent bound himself not during the continuance of the agreement or within 3 years after its termination without the consent of the company to carry on or be engaged in the business of a foundry within 100 miles of the companys works at Croydon. The agreement also contained provisions relating to the furnishing by Sir Berkeley Sheffield of finance for a company named Steel Parts Ltd, in which the respondent was interested. Clause 10 (referred to in cl 3) provided that the respondent might hold a directorship in Steel Parts Ltd, and devote a specified part of his time to that company.

In 1935, it was agreed by Southern and some 10 other companies engaged in similar businesses to effect what was called an ironfounders merger, and with that object in view the appellants Federated Foundries Ltd (whom I shall call Federated), were incorporated on 6 December 1935. The amalgamation was carried through by transfers of all the shares in the capital of the associated companies to Federated or its nominees on the terms of the accountants report. The holders of the shares so transferred were to receive, and did receive, in exchange allotments of preference and ordinary shares in Federated credited as fully paid. Part of the arrangement for amalgamation was that the associated companies would adopt new articles of association in similar terms. This was done at extraordinary general meetings of the companies, the resolution in the case of Southern being passed on 17 April 1936. The matter had been completed by 23 April 1936, except that certain transfers of shares had to be executed in relation to qualification shares in the associated companies, and, in order to provide the associated companies with one shareholder in addition to the Federated, one share in each of those companies had to be transferred to a nominee of Federated. When all these things had been done, the position was that Federated owned beneficially every share in each of the associated companies, and was in complete control of those companies, each of which had adopted new articles of association in order to make such control effective to the same extent in relation to each of those companies. The new articles were very different in many respects from the previous articles of the associated companies, including those of Southern. Table A of the First Schedule to the Companies Act 1929, so far as not excluded or altered, was to apply, but the articles as regards the directors were almost entirely new. [His Lordship read arts 7 and 8 of the new articles and art 68 of Table A.]

Table A, art 72, which provides that the office of director shall be vacated in a number of events, including bankruptcy, lunacy, and resignation in writing, was not incorporated, and apparently the only way of terminating the appointment is under art 8.

The new article clearly put it in the power of Federated to remove the respondent from his office as a director whenever it seemed to Federated desirable so to do. Directors of the other companies were

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in the same position. There is no suggestion, however, that this article was aimed in any way at the respondent, or that it was unreasonable from the point of view of an amalgamation of the interests of the 11 companies. Nor is it pleaded in the action that the adoption of the articles was a breach of the contract of 21 December 1933, and counsel for the respondent disclaimed at the bar any intention to set up such an argument. It must, therefore, be accepted that the articles of Southern were lawfully and properly changed, without a breach of the contract with the respondent.

There is no reason to think that the events which followed and led to this action were anticipated by any of the parties. Negotiations took place in November 1936 and subsequently between Federated and the managing directors of the associated companies, including, of course, the respondent, with a view to the adoption of fresh agreements with all the managing directors. The respondent declined to accept the new agreement proposed to be entered into between himself and Southern, the terms of which were less favourable to him than those of the existing agreement. After various efforts to settle the dispute, on 25 March 1937 the directors of Federated came to the conclusion that an exception could not be allowed in the respondents case from the principle that the managing directors of all the associated companies should accept the new agreements offered by Federated in lieu of their current agreements (as all the other managing directors had done), and a resolution was passed that the respondent be removed forthwith from the board of Southern. On 25 March 1937 an instrument in writing removing the respondent from his office as a director of Southern was signed on behalf of Federated by 2 directors and the secretary, and was delivered to Southern and deposited at the registered office of Southern on 27 March 1937. The respondent thereupon ceased to be a director of Southern, and, as is admitted, necessarily ceased at the same time to be the managing director of Southern.

The respondent issued his writ on 10 June 1937 against Southern and Federated. The statement of claim (para 4) alleges that Federated wrongfully resolved to remove the plaintiff from his directorship of Southern, and purported to do so by the instrument in writing of 25 March 1937. Para 5 alleges that Southern adopted and accepted the removal, and thereby wrongfully repudiated the agreement of 21 December 1933, or, alternatively, have treated the plaintiffs appointment as managing director as terminated, and have refused to allow him to perform his duties as managing director. There is no other breach of contract alleged. The claim against Federated (para 6) is that that defendant wrongfully caused and induced Southern to be guilty of “the aforesaid breaches of the said agreement.” It was agreed in the Court of Appeal and before your Lordships that, if the claims against Southern were well-founded, Federated were also liable for the reason alleged. I need not, therefore, say anything further on this

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part of the case. The trial judge (Humphreys J) decided in favour of the respondent and gave judgment in his favour for £12,000 and costs. The Court of Appeal (MacKinnon and Goddard LJJ, Sir Wilfrid Greene MR dissenting) affirmed Humphreys J.

My Lords, I think that this case, like many cases which involve written agreements between limited companies and their officersagreements which are necessarily affected to some extent by the articles of associationis a difficult case. It is indisputable that the agreement of 21 December 1933 did not and could not appoint the respondent to be a director of Southern. He had already been appointed to be a director in the only possible waynamely, according to the articlesand it is plain, I think, that he would cease to be a director in any of the events specified by the articles. If some new terms as to his directorship were desirable, the only course was to alter the articles. It is equally indisputable, as I think, that the respondent would cease to be managing director as soon as he ceased to be a director, and that, as Sir Wilfrid Greene MR, pointed out, the two positions, that of director and that of manager, involve different qualifications, duties and responsibilities. It is quite erroneous, in my opinion, to contend that there was anything in the provisions of art 89 (above set forth) which did not apply to the respondent after the agreement, though, on the other hand, it is possible that there was an implied term in the agreement that he would not during the 10 years give notice to resign his office, and would be committing a breach of this implied agreement if he did.

There are, however, a number of difficult questions which do arise as to the agreement, and one or two of them require an answer. In my opinion, it is quite impossible, having regard to art 89, to treat the agreement as containing any sort of guarantee that the respondent should remain a managing director during the term of 10 years. That suggestion, indeed, has been given up. It is, I think, equally impossible to agree to the argument which was pressed upon the Court of Appeal that it was an implied term that the respondent should not cease to hold the office of director “by any means within the control of himself or the company.” For myself, I agree with nearly the whole of the judgment of Sir Wilfrid Greene MR. The only doubt I have felt is in regard to the well-known principle laid down by Cockburn CJ, in Stirling v Maitland, at p 852:

… if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.

This, as Sir Wilfrid Greene MR, observed, is not a rigid rule. It is capable of qualifications in any particular case, and it is a rule the application of which depends on the true construction of the agreement. An excellent example of this is to be found in the decision of this House in Rhodes v Forwood, at pp 256, 274, where the rule contrary to the decision of the Exchequer Chamber was held to be inapplicable. On

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the whole, however, I have come to the conclusion in this case, reading the agreement in the light of the surrounding circumstances, that a negative stipulation such as that formulated by Cockburn CJ, may properly be implied, but, in my opinion, the words “of his own motion” should be borne in mind, and the implication must be taken to extend only to direct acts, and not to the indirect and unforeseen consequences which may follow from acts of the party which, on the face of them, do not necessarily, or even probably, alter “that state of circumstances under which alone the arrangement can be operative.” In my view, it would be unwarrantable in this case to imply a term that the articles of Southern should not be altered, however essential it was in the interests of the company, merely because such an alteration might possibly at some future date lead to the termination of the respondents position as a director. The right of a company under the Companies Act 1929, s 10, to alter its articles is statutory. It is conferred in the widest terms, and is, I think, subject only to the implied qualification that it must be exercised in good faith for the benefit of the company (Allen v Gold Reefs of West Africa Ltd, at p 671), but the alteration may not excuse a breach of contract, for which the company may be liable in damages: Baily v British Equitable Assurance Co, at p 385.

The right to alter the articles being inherent, if it is desired by a contract to give an employee or a third person a right of action if there should be an alteration of the articles which causes damage to him, I think it is very desirable to express such a term in clear language. Such a prohibition cannot be implied without very strong reasons: Swabey v Port Darwin Gold Mining Co, Re Argus Life Assurance Co and Baily v British Equitable Assurance Co. In my opinion, it would have been a breach of the negative term, properly understood, for Southern to have removed the respondent under art 105 from his position as director during the 10 years. I am also of opinion, however, that it was not a breach of any implied term in the agreement for Southern to alter its articles as was done, and to include in the altered articles the new art 8. I may add that cl 9 of the agreement shows clearly that the exact words of the term suggested by Cockburn CJ would not be applicable without some qualification, for that clause makes it clear that Southern could wind up and distribute its assets without committing a breach of the agreement, though that would involve the dismissal of the respondent. For the above reasons and those given by Sir Wilfrid Greene MR, I cannot agree with the view of MacKinnon LJ, that we can properly imply a term in the agreement that the company should not exercise or create any right to remove the respondent from his directorship, if that involves the results of an alteration of the articles. It seems to me that a winding-up resolution would be within these words. Nor can I agree with the opinion of Goddard LJ, that it was a breach of the agreement for Southern

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to put it within the power of some other person or company under new articles and in different circumstances to remove the respondent. After all, an implied term ought to be one which the parties must necessarily have intended at the date of the agreement, and I do not myself think that either of the parties can be taken to have been providing for a state of things which would result from the de facto amalgamation of interests, which no one contemplated at the date of the agreement, but which in fact took place.

My Lords, the question which remains is whether the act of Federated, under art 8 of the articles of Southern, in removing the respondent from his office of director of that company by an instrument in writing signed by two directors and the secretary of Federated, was a breach by Southern of its agreement with the respondent, or a repudiation of that agreement. It was the act of Federated which had the effect of removing the respondent from his directorship. After the new articles had been adopted, Southern was powerless to prevent that act. Southern, indeed, was completely controlled by Federated, who held beneficially every share in Southern, as in all the other associated companies. With all respect to those who think otherwise, I cannot understand the suggestion that Federated was acting as an agent or, which is the same thing, as a mandatory, of Southern in that matter, since Southern had notand, indeed, never hadany power or influence whatever over Federated. It held not a single share in Federated. It was Federated who held the shares in Southern. Nor was there any contractual relation between Federated and Southern which might have enabled Southern to object to the act of Federated under art 8. I think that I understand the doctrine of anticipatory breach, but it is not alleged to apply here. If, under an agreement between A and B, A can lawfully do an act (for instance, by a sale of property) which gives power to an independent third party, C, to do a number of things, some one of which may injure B, I do not see that A can be sued for a breach of the agreement which he cannot prevent. I repeat that it is not alleged in the pleadings or at the bar that the adoption of the new articles by Southern was a breach of the contract with the respondent, or was done in bad faith as regards him. If A enters into a contract of service with B, and then gives power to C to discharge B, and C does so contrary to the terms of the contract, A is plainly liable, because C has acted with his authority, and, in that sense, as his agent, in breaking the contract. In the present case, however, the contract is between a limited company and a director, and it was an implied term of the contract that the company by altering its articles could give wide powers to a third party, including a power to dismiss the companys directors. B cannot complain if he is so dismissed by the third party, for it is, as I think, impossible for B to take up the position that he is bound under his contract by the new articles, but can sue the company for breach of that contract based on things lawfully done under the new articles.

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My Lords, in my opinion, it has not been established in this case that Southern has committed any breach of the agreement or has repudiated the agreement, and the action therefore fails. At the conclusion of his judgment, Sir Wilfrid Greene MR expressed a view on the hypothesis, which he did not accept, that a certain implied undertaking, which I think his colleagues were accepting, had been broken. I do not think that he would have expressed himself as he did if the hypothesis had included a statement that the alteration of the articles and the insertion of art 8 were not prohibited by any implied term in the agreement. For the reasons stated, I should be in favour of allowing this appeal. However, if a majority of your Lordships are of a contrary opinion, it must be dismissed.

LORD ATKIN. My Lords, the question in this case is whether the appellant company have broken their contract with the respondent, made in December 1933, that he should hold the office of managing director for 10 years. The breach alleged is that, under the articles adopted by the company after the agreement, the respondent was removed from the position of director of the company by Federated Foundries Ltd. There can be no doubt that the office of managing director could only be held by a director, and that, upon the holder of the office of managing director ceasing for any cause to be a director, the office would be ipso facto vacated. Under the articles in existence at the date of the agreement, by art 89 the office of a director could be vacated on the happening of 6 various events, bankruptcy, lunacy, etc, including the giving by the director of one months notice to resign, while by art 105 the company by extraordinary resolution could remove him from his office. I feel no doubt that the true construction of the agreement is that the company agreed to employ the respondent, and the respondent agreed to serve the company, as managing director for the period of 10 years. It was, by the constitution of the company, a condition of holding such office that the holder should continue to be a director, and such continuance depended upon the terms of the articles regulating the office of director. It was not disputed, and I take it to be clear law, that the companys articles so regulating the office of director could be altered from time to time, and, therefore, the continuance in office of the managing director under the agreement depended upon the provisions of the articles from time to time. Thus the contract of employment for the term of 10 years was dependent upon the managing director continuing to be a director. This continuance of the directorship was a concurrent condition. The arrangement between the parties appears to me to be exactly described by the words of Cockburn CJ in Stirling v Maitland, at p 852:

… if a party enters into an arrangement which can only take effect by the continuance of an existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.

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That proposition, in my opinion, is well-established law. Personally, I should base the law, not so much on an implied term, as on a positive rule of the law of contract that conduct of either promisor or promisee which can be said to amount to himself “of his own motion” bringing about the impossibility of performance is in itself a breach. If A promises to marry B, and, before performance of that contract, marries C, A is not sued for breach of an implied contract not to marry anyone else, but for breach of his contract to marry B. I think it follows that, either if the company of its own motion removed the respondent from the office of director under art 105, or if the respondent caused his office of director to be vacated by giving one months notice of resignation under art 89, either of them would have committed a breach of the agreement in question. As Kennedy LJ said in Measures Brothers Ltd v Measures, at p 258, in discussing this very question of the effect upon a contract of employment as managing director of the managing director resigning his office of director, it is elementary justice that one of the parties to a contract shall not get rid of his responsibilities thereunder by disabling the other contractor from fulfilling his part of the bargain. I cannot agree with the view of the contract taken by Sir Wilfrid Greene MR, that the parties must be taken to have agreed that the term, though expressed to be for 10 years, was subject to be determined by any cause, including the will of either party expressed in accordance with the articles, and that such determination, therefore, could not constitute a breach. I should have construed the agreement as I do on the first two clauses alone, but the remaining clauses, and particularly those dealing with the mutual obligations between the respondent and Sir Berkeley Sheffield in this tripartite agreement, in my view, strongly reinforce that construction. I agree, therefore, with the trial judge, with the majority of the Court of Appeal, and with, I believe, all your Lordships, in thinking that, if during the term the respondent had given a notice of resignation, or if the company had exercised its power of removal under art 105, either would have committed a breach of the contract.

The question which remains is whether, if the removal by the company would have been a breach by the company, the removal under the altered articles by Federated Foundries Ltd, was a breach by the company. In this matter, Sir Wilfrid Greene MR agreed with the other members of the Court of Appeal, but all the members of this House are not agreed. My Lords, it is obvious that the question is not as simple as in the case just considered of the removal being by Southern Foundries Ltd, but I venture respectfully to think that the result must be the same. The office of director involves contractual arrangements between the director and the company. If the company removes the director, it puts an end to the contract. Indeed, the contract relations cannot be determined except by events stipulated for in the contract, by operation of law, or by the will of the two parties. The

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altered art 8, which gives power to Federated Foundries Ltd, to remove from office any director of the company, is when analysed, a power to Federated to terminate a contract between Southern and its director. It is an act which binds Southern as against its promisee, and, if a wrong to the respondent if done by Southern, it surely must be a wrong to the respondent if done by Federated, who derive their power to do the act from Southern only. If a landlord gives power to a tenant to discharge the landlords servants, gardener or gamekeeper, it is the master, the landlord, who is bound by the consequences of that discharge, whether rightful or whether wrongful and so involving the payment of damages. If a man buys goods and contracts with a sub-purchaser to take delivery direct from his vendor, and contracts with his vendor to give delivery to the sub-purchaser, the latters recourse for breach of contract to deliver is against his own intermediate seller, and not against the head vendor. If, then, Federated of their own motion determine the concurrent condition, it appears to me that necessarily they cause Southern to break the contract. I can quite see that the position may be altered where Federated remove a director from office for such reasons as those contained in the old art 89, or in Table A, art 72, which was not incorporated in the new articles. In such a case, it may well be said that the company is not acting of its own motion, but is reasonably moved to act by the acts or omissions of the director. In the present case, however, no such question arises. The action of Federated was, I think I may say, avowedly taken for the sole purpose of bringing the managing directors agreement to an end. I do not think that it could be said that Southern committed any breach by adopting the new articles, but, when Federated acted upon the power conferred upon them in the new articles they bound Southern if they acted in such a way that action by Southern on the same articles would be a breach. It is not a question of agency, but of acting under powers conferred by contract to interfere with a contract between the party granting the power and a third person. For these reasons, I am of opinion that this appeal should be dismissed with costs.

LORD WRIGHT. My Lords, the respondent in this action is claiming damages from the appellants for breach by them of their contract to employ him as managing director for 10 years. The respondent has been held entitled to succeed in his claim for damages by Humphreys J and, in the Court of Appeal, by MacKinnon and Goddard LJJ, Sir Wilfrid Greene MR dissenting. The only claim considered in this House has been that against Southern Foundries (1926) Ltd. A claim against the second company for procuring a breach of contract has wisely been withdrawn.

The agreement founded upon, which was under seal dated 21 December 1933, was made between the appellant company and the respondent and Sir Berkeley Sheffield. The provisions directly material to this appeal

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are those between the appellant company and the respondent. Clauses 1 and 2 must be quoted in full:

1. Mr. Shirlaw shall be and is hereby appointed managing director of the company and as such managing director he shall perform the duties and exercise the powers which from time to time may be assigned to or vested in him by the directors of the company.

2. Mr. Shirlaw shall hold the said office for the term of 10 years from Dec. 1, 1933.

Then followed clauses providing for the faithful discharge of his obligations. He was to be paid a commencing salary of £1,700 per annum, rising by annual increments to £2,000, and, further, a commission on net profits. Clauses 8 and 9 provided as follows:

8. If Mr. Shirlaw shall fail for 6 consecutive months to fulfil his obligations to the company hereunder the company may by notice in writing determine this agreement.

9. If before the expiration of this agreement the tenure of office by Mr. Shirlaw shall be determined by the winding up of the company (other than for the purpose of reconstruction or amalgamation) Mr. Shirlaw shall have no claim against the company or Sir Berkeley Sheffield for damages in respect of such determination.

There were other clauses not directly material. The respondent agreed to be subject to stringent restrictive covenants for 3 years after the termination of the agreement. Sir Berkeley Sheffield, who was a director of the appellant company, agreed to pay the respondent his living expenses in London for a period and the cost of removing himself and his family from Birmingham to London.

This agreement is unqualified in regard to the term of 10 years, save in the two events in which the appellant company was to be entitled to determine the agreement before the expiration of the term. Apart from the express language, however, the period of 10 years is also qualified by the general rules of the law of employer and employed. Thus, the agreement would end if the respondent were to die or become permanently incapacitated, and the appellant company would presumably have a right to dismiss him on the ground of misconduct, as, for instance, embezzlement, or disgraceful conduct leading to conviction for an indictable offence. These and similar matters would not specifically fall within cl 8. The employment has a double aspect. The respondent is both manager and director. It is clear merely ex vi termini that the respondent could not cease to be director, without ceasing to be managing director. The directorship is an integral and necessary element in the composite office. Hence, if the appellant company were to remove him from his directorship during the term, save for some legal excuse, they would necessarily break their agreement to employ him for 10 years as managing director. To do so would be a breach of their express promise, and not of any implied term. The articles of association are not referred to in the agreement, but the respondents claim in this case would not be prejudicially affected by anything in the articles of association as they existed at the date of the agreement. Art 90 gave the directors power to appoint out of their body a managing director or directors for such period

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and upon such terms and with such powers as they should think fit. Art 91 provided that a managing director should not, while in the office, be subject to retirement by rotation:

… but he shall subject to the provisions of any contract between him and the company be subject to the same provisions as to resignation and removal as the other directors of the company and if he ceases to hold the office of director he shall ipso facto and immediately cease to be a managing director.

Art 91 was thus expressly subject to the provisions of the agreement, so far asor rather, if in any eventit should conflict with the provisions of the agreement, such as the 10-years term of engagement. It is also necessary to mention art 89, which contained an enumeration of events upon any one of which the office of a director should be vacated, such as bankruptcy or insolvency, lunacy, conviction of an indictable offence, and similar matters which do not affect this case. Head (F) calls for special notice. It provides that the office of a director is to be vacated:

If he gives the directors one months notice in writing that he resigns his office.

That provision is clearly excluded under art 91 as being inconsistent with the agreement to serve for 10 years under cll 1, 2 and 3. The respondent could not without just cause rightfully give such a notice. That is, if he did so, he would break his agreement and be liable to a claim for damages. However, as the agreement would not be specifically enforced against him, his resignation, though a breach of contract, would have the effect of vacating his directorship, and hence his office as managing director. In the same way, art 105, which empowers the company by extraordinary resolution to remove any director, is equally excluded in the case of a managing director by art 91. If the company under art 105 had passed an extraordinary resolution to remove the respondent during his term of 10 years, he would no doubt have ceased to hold office, because a claim by him for specific performance or kindred relief would, I assume, fail, but the removal would have been a breach of the agreement, unless for good cause.

In the result, then, the articles, if they were regarded as qualifying the express agreement, would not in any substantial respect affect it. In my opinion, the appellant company would beyond question have been guilty of a breach of contract sounding in damages if without just cause they had removed him from his directorship and thus terminated his tenure of office, as was done in April 1937, in the circumstances which will appear later. The case would have been simply a case of wrongful dismissal of a servant or employee. The servant or employee is, in such a case, effectively dismissed. His employment is terminated, but the termination is wrongful, and the employer has to answer in damages. The employers here are the appellant company, but for this purpose they are like any other employers. The articles may give them the power to dismiss, but the power to dismiss is to be distinguished from the right to dismiss. I do not think that in this particular case the fact that the office includes that of a director affects this conclusion. It is said

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that it is impossible to accept that a company would guarantee to a director a 10-years tenure of his office. The answer is, however, that they have actually done so, according to the terms of the contract, though subject to the express exceptions of the contract and to the general exceptions which the law reads into the contract. The word “guarantee” is inappropriate. No one, individual or company, can be compelled against his or their will to employ a man, though, if the contract is broken, damages will have to be paid. When the respondent was appointed managing director for 10 years, the contract necessarily meant that the appellant company would not without good cause remove him from his directorship during that period, because, if they did so, they would ipso facto terminate his employment. There is no question of implying a term that the appellant company would not remove the respondent from his directorship. He could not serve for the agreed term of 10 years unless the appellant company continued him in his office. As Lord Blackburn said in Mackay v Dick, at p 263:

… where in a written contract it appears that both parties have agreed that something shall be done [as here that the respondent shall hold office for 10 years] which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing …

The agreement involved for its fulfilment the concurrence of the appellants and the respondent, and imported that each should do its part in carrying it out.

The question in the case, however, arises out of an alteration in the articles of association made in 1936, when the agreement had still about 7 years to run. It had been decided to effect a combination of the operations of a number of companies engaged in the iron foundry trade, including the appellant company. A new company was incorporated, named Federated Foundries Ltd, with that object, and it acquired the whole share capital of these companies. The respondent took part in these transactions, and became one of the first directors of Federated Foundries Ltd, and was present at a meeting of the board of that company which unanimously resolved that each of the amalgamated companies should adopt similar articles of association. On 17 April 1936 at an extraordinary general meeting of the appellant company, at which the respondent was present, it was unanimously resolved by a special resolution that the existing articles of association should be abrogated and new articles decided upon by the Federated company should be adopted. It is not suggested that the action of the respondent as a director or shareholder had any bearing on his contractual rights. Of these new articles, art 8 is so material that it should be set out in extenso. [His Lordship read the article set out above.]

Art 68 made a managing directors appointment subject to determination if for any cause he should cease to be director, and omitted the reservation of existing contracts. It likewise gave the company power to determine the tenure of a managing directors office.

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Negotiations took place between the respondent and the appellant company in which it was sought to vary the terms of the respondent appointment, but these failed. On 23 March 1937 Federated Foundries Ltd, served on the appellant company a notice pursuant to the new art 8, whereupon under that article his appointment as director terminated, and consequently by Table A, art 68, his appointment as managing director also terminated. The question is, however, whether the appellants can claim that it was rightfully terminated, and can resist the judgment for damages made against them. Assuming that there was the power under the articles to terminate the appointment, I repeat that the power to dismiss and the right to dismiss are two different things. This is true both of companies and of individuals in their capacity of employers. The appellant company, however, take a more subtle point. They say that the employment was in fact terminated, but not by them, or by their responsibility, but by an outside person, Federated Foundries Ltd, exercising the powers vested in that company by the appellant company when it altered its articles in 1936.

Before dealing with this submission, it will be convenient to refer shortly to certain authorities. In Boston Deep Sea Fishing & Ice Co v Ansell, the question arose whether the managing director, who had been rightfully dismissed, was entitled to be paid his salary quarterly or yearly. The articles provided that salaries were to be paid quarterly. Cotton LJ said, at p 359:

What we have to consider is not whether, as a shareholder, he could have insisted on their performing that agreement, but whether, under the contract by which he agreed to be managing director of the company, he had that right …

It was held that the contract prevailed. The converse case is illustrated by Allen v Gold Reefs of West Africa Ltd, where it was held that a company, by altering its articles under which there was no lien on fully paid shares so that the altered articles did impose such a lien, could enforce that lien against a shareholder indebted to the company. The members rights depended on the articles, which were altered in good faith by the company under its statutory powers. However, Lindley MR observed, at p 672:

… it does not by any means follow that the altered articles may not be inapplicable to some fully paid up shareholder. He may have special rights against the company, which do not invalidate the resolution to alter the articles, but which may exempt him from the operation of the articles as altered.

Later, at p 673, he considers the case of a special contract made with a company in the terms of, or embodying, one or more of the articles, and adds that this may raise the question whether in such a case an alteration of the articles so embodied is consistent or inconsistent with the real bargain between the parties. He points out, at p 673, that “a company cannot break its contract by altering its articles.” Lindley MR is emphasising the distinction between power or capacity and right. Romer LJ at p 680, said that the shares became bound by the companys alteration of its articles unless he [the shareholder] could show

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some special bargain with the company or some special obligation incurred towards him by the company in respect of his fully paid up shares. This he failed to do. The alteration must, of course, be made in good faith.

In Baily v British Equitable Assurance Co, the question related not to articles of association, but to bye-laws, of the insurance company. The Court of Appeal treated the bye-laws as comparable to articles of association and the question as being whether the alteration of the bye-laws which prejudiced the rights of policyholders as regards sharing in profits was effective against them under the principles laid down in Allens case. Cozens Hardy LJ, delivering the judgment of the court, said, at p 385:

It would be dangerous to hold that in a contract of loan or a contract of service … there is any greater power of variation of the rights and liabilities of the parties than would exist if, instead of the company, the contracting party had been an individual. A company cannot, by altering its articles, justify a breach of contract.

This expression of opinion, with which I agree, is very pertinent to this case. That case came to this House, which reversed the decision of the Court of Appeal, on the ground that no special contract existed but did not question the principle stated by the Court of Appeal.

In Nelson v Nelson (James) & Sons Ltd, the plaintiff was appointed managing director of the defendant company under an agreement which provided that he was to hold the office so long as he should remain a director of the company and should perform his duties efficiently. The appointment was made under articles of association which empowered the directors to appoint the managing director for such period as they deemed “fit, and might revoke the appointment.” The Court of Appeal held that the directors power was in effect to appoint for a fixed time, and that this power was inconsistent with a power in the board to revoke the appointment at any time. As Swinfen Eady LJ said, at p 781:

… the power to appoint and the power to revoke the appointment arc in the board, but the power to revoke is to be subject to the terms of the contract for the time being between the managing director and the company.

Hence, when the directors dismissed the plaintiff without just cause while still fulfilling the conditions of his contract, he was held entitled to recover damages for wrongful dismissal against the company. It follows, I think, in the present case that, if the appellant company had dismissed the respondent under either art 105 of the original articles or art 8 of the altered articles (assuming for the moment that the power to remove was vested in them), they would have committed a breach of their contract, there not being any just cause for dismissal. The special bargain would override the article. The article must be construed either as not applying to the respondent or as qualified by, and subject to, the express contract.

However, the appellant company rely on the further point to which I have referred, which is that the altered art 8 vests in Federated Foundries Ltd, the right to remove a director by means of a written instrument

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deposited at the appellant companys office. The article has been validly passed by the appellant company. Under that article, it is claimed, the respondent has been removed from his directorship. He has not been removed, it is said, from his office of managing director, though that consequence follows inevitably. In that removal, the appellant company say they have no part or lot and no responsibility. It is the act of an independent person, but, all the same, is effective to terminate the employment. If it is a wrongful termination, the appellant company are not liable for it, and hence are entitled to succeed in this appeal. Such is the argument. The appellant companys case on this point found favour with no member of the Court of Appeal. It depends purely on a question of the law of contract. For the reasons already explained, I do not consider that questions of company lawfor instance, those relating to the original or altered articlesmaterially affect the question. They go to questions of powers as between the two companies, whereas the question is as to the right to dismiss. As I follow the appellant companys case, it is that a contract between A and B can, apart from any express or implied condition in the contract, be dissolved at the will of C, a stranger to the contract, without the consent of B, one of the contracting parties. It is contended that this is so because, by an arrangement between A and C, A has vested this power in C. No authority is cited to justify such a proposition. A contract is a consensual agreement between A and B, between whom the rights and liabilities exist. I do not understand on what principle B can be ejected from his contractual rights by the stranger C, with whom he has no privity. The appellants promised that the respondent should hold the office of managing director for 10 years, subject to the express or implied conditions. The appellants now have to justify his removal while the contract period was running. No doubt there might be cases in which, apart from the contract provisions, the appellants could resist a claim for damages. There might, for instance, be a change in the law, or there might be a requisition by the government of the works and undertaking of the appellant company which might in certain events frustrate and dissolve the contract irrespective of the will of the parties. Even in such cases, however, it has been held that the requisition must not be self-induced, to use the phrase employed in Maritime National Fish Ltd v Ocean Trawlers Ltd. Even if the present case were, what it was not, analogous to such a case, the appellants could not say that the intervention of Federated was not self-induced, since in fact, if art 8 had not been adopted in place of the earlier articles, Federated would have had no power to intervene. It is clear, however, that such intervention has no analogy to a requisition by government or to any change by operation of law. It follows from a private arrangement between Southern and Federated, which is res inter alios acta so far as concerns the respondents contractual rights, even if in fact it terminates his directorship and managing directorship. Apart from government interference, or the like, the contract can only

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rightfully be dissolved by the will of the parties who entered into it. That will may be evinced by the conditions, express or implied, which were originally agreed to, and by action in accordance with them, or by a subsequent agreement to rescind the contract. Nothing of the sort, however, can be shown by the appellants. They have to justify the determination of the contract, or the case will be one of breach or repudiation. If their only justification is the action of Federated, that, in my opinion, is no defence. The alteration of the articles did not constitute a breach of contract by the appellant company as against the respondent, but his removal the following year did, and entitled him to damages. In my opinion, the appellant company fail in their defence, and the appeal should be dismissed.

LORD ROMER. My Lords, the question to be determined upon this appeal is whether the appellants Southern Foundries (1926) Ltd, to whom I shall hereafter refer as Southern, have committed a breach of any of the obligations, express or implied, imposed upon them by their contract with the respondent of 21 December 1933. If they have not, the respondent has no cause of action against either Southern or their co-appellants, Federated Foundries Ltd, and this appeal must necessarily succeed. That there has been no breach by Southern of any express provision of this agreement is, in my judgment, quite plain. It is true that the respondent was appointed managing director of Southern for ten years from 1 December 1933, and that Southern ceased so to employ him on 27 March 1937, but that was because on this latter date he ceased to be a director of Southern. His appointment as managing director for 10 years was necessarily subject to the implied qualification “if he shall so long remain a director,” because, as was pointed out by Sir Wilfrid Greene MR, a managing director who is not a director is a contradiction in terms, and also because of the concluding words of art 91 of Southerns original articles of association. If, therefore, any one of the events specified in art 89 of Southerns original articles of association had occurred, or Southern had removed the respondent from the board under the power conferred upon it by art 105, the appointment of the respondent as managing director would have come to an end in accordance with the terms of his employment. Even if his directorship had been terminated by the action of Southern themselves, there would have been no breach by them of any express provision contained in the agreement. Nor would there have been any breach by the respondent of any express obligation on his part contained in the agreement had his directorship been brought to an end by his resignation under art 89(F).

However, the agreement by Southern to employ the respondent, or his agreement to serve them, could only take effect for the full 10 years if the respondent continued to be a director during that period. In these circumstances, there was, in my opinion, an implied engagement

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on the part of Southern that they would not during that period exercise their power of removing him from his directorship under art 105, and an implied obligation on his part that he would not, during that period, serve notice of resignation under art 89(F). In Stirling v Maitland, Cockburn CJ said, at p 852:

… if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.

The principle so enunciated does not, however, warrant the implication in the present case of any further obligations on the part of Southern and the respondent than those I have mentioned, for the principle is one which is founded upon good reason and good sense, and is, therefore, to be applied in any particular case only so far as, in the circumstances of the case, good reason and good sense may require. It would be impossible, for instance, to suppose that the respondent committed a breach of an implied obligation under the agreement if he were to compound with his creditors, or be convicted of an indictable offence. It would be equally impossible to suppose that Southern committed a breach of any implied obligations if the respondent were made bankrupt on their petition, or if, before para (D) of art 89 was deleted in January 1936, Southern had enforced by sale any lien they might have held on the respondents qualification shares. In my opinion, the only obligation on the part of Southern which the principle requires to be implied is an obligation to abstain from any act of which the direct object is to bring the respondents directorship to an end, and not an obligation to abstain from every act of which the cessation of the respondents directorship may be the indirect and unintended consequence.

My Lords, for these reasons, I am of opinion that, when Southern exercised their statutory right of altering their articles of association, they committed no breach of any implied obligation which they were under towards the respondent, even though one of the indirect and unintended consequences of the alteration was that the respondent was removed from his directorship. That his removal was both an indirect and unintended consequence of the alteration is plain. In view of what has been called, though incorrectly, the merger of Southern and the other 9 companies, it was obviously convenient and in the best interests of Southern that all 10 companies should have identical articles of association. There was, therefore, nothing sinister about the adoption by Southern of the new articles. No one can suggest, or, indeed, ever has suggested, that the adoption was made for the purpose of having the respondent removed, or that the possibility of such removal resulting from the adoption was ever in the contemplation of Southern. He was in fact removed, as we know, by the exercise by the appellants Federated Foundries Ltd (hereinafter referred to as

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Foundries), of the general power over the directors of Southern conferred upon them by art 8 of the new articles of association. The conferring of this power on Foundries, however, was no breach of any obligation they owed the respondent, as I have already pointed out, and I am wholly unable to see how it could become a breach by any subsequent exercise of the power by Foundries. Had Southern in any way instigated the subsequent exercise of the power by Foundries, their instigation could, no doubt, have been regarded as a breach of their implied obligation, but of any such instigation no trace is to be found. The removal of the respondent would appear to have been the spontaneous act of Foundries in the exercise of their free and unfettered discretion. Nor can Foundries be regarded as being in any way the agents of Southern in effecting the respondents removal. It must be remembered in this connection that in the new articles of association Table A, art 72, was not incorporated. There was, therefore, no article corresponding to art 89 in the original articles. The result of this was that no director of Southern would vacate his office on the occurrence of any of the events specified in art 89, and this, no doubt, was the reason for conferring upon Foundries, as being the beneficial owners of all the shares in Southern, the general power of removal of the Southern directors. Should one of them, for instance, become bankrupt, or of unsound mind, or be convicted of an indictable offence, he would nevertheless continue to be a director unless and until Foundries chose to remove him. Had one of these calamities befallen the respondent, and had Foundries removed him from his directorship, could it be said that Southern had committed a breach of their implied obligation? Plainly not. This being so, however, the alleged breach of contract on their part is reduced to thisnamely, that they omitted to insert in the new articles a provision that until 1 December 1943, Foundries should not remove the respondent from his directorship for any reasons other than those specified in paras (A) (B), (C), (E) and (F) of the old art 89, and that this breach of contract on their part resulted in the respondent being damaged when Foundries removed him in March 1937.

I have already given my reasons for thinking that Southern were under no implied obligation to make any such provision in the new articles. Their only implied obligation, so far as I can see, was not to remove him themselves except for one of the reasons specified in the old art 89. The fact that, when they adopted the new articles of association, they took a step which indirectly, and without any intention on their part, made it possible for Foundries to remove him seems to me beside the mark. If a landowner agrees that he will himself do nothing on his land which may interfere with the light coming to the windows of his neighbours house, he does not commit any breach of that agreement by selling his land to a third party who subsequently interferes with the light. Such interference would be merely an indirect and unintended result of the sale. For these reasons, I would allow the appeal.

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LORD PORTER. My Lords, this is an appeal from a judgment of the Court of Appeal affirming a decision of Humphreys J by a majority. The action out of which the appeal arises was brought by the respondent against the appellants, who are two companies incorporated under the Companies Acts. The first appellants were incorporated in 1926 as a private company with the object of carrying on the business of iron-founders. The second appellants were incorporated in December 1935, with the object of bringing about the combination of 11 companies engaged in the foundry business, of which Southern was one. The desired result was attained through the acquisition by the Federated company of a controlling interest in the share capital of each of the 11 companies.

The respondent became a director of the Southern company in 1929. At that moment, one Sir Berkeley Sheffield was the holder of substantially the whole of the shares of the Southern company, and an agreement was entered into between him, the Southern company and the respondent under which the respondent was appointed managing director of the Southern company for the term of 10 years from 1 December 1933. At the date of this appointment, the articles of association of the Southern company authorised the appointment of a managing director in the following terms. [His Lordship read the original articles set out above.]

After the Federated company was formed, each of the 11 companies whose shares were acquired by it adopted new articles of association in identical form. This action was taken by the Southern company at an extraordinary general meeting held on 17 April 1936, at which the existing articles were revoked and new articles were adopted. At that time, the Federated company had already acquired all the shares of the Southern company except one, which was held by the respondent, but only as nominee of the Federated company. [His Lordship read the provisions of the new articles set out above.]

On 25 March 1937 the board of directors of the Federated company passed a resolution removing the respondent from his office as a director of the Southern company, and an instrument in writing subscribed on behalf of the Federated company by 2 of its directors and its secretary was sent to the office of the Southern company, and was received by it on 27 March 1937. Upon receipt of this document, the respondent admittedly ceased to be a director of the Southern company, and consequently ceased to be managing director. The respondent, however, contends that he was thereby wrongfully dismissed from his office as managing director by the Southern company, and that that company is liable to him in damages for breach of the agreement of 21 December 1933. He also contends that the Federated company is liable to him in damages for procuring that breach. No question arises for the determination of your Lordships House as to whether or not the latter claim is sustainable, since the appellants were content to treat the result of the action against the Southern company as binding also upon the Federated

Page 467 of [1940] 2 All ER 445

company, and in the remarks which follow I deal only with the right of action of the respondent against the Southern company. Humphreys J, before whom the action came in the first instance, decided in favour of the respondent, and in the Court of Appeal this decision was upheld by MacKinnon and Goddard LJJ, Sir Wilfrid Greene MR, dissenting.

Before dealing with the more difficult question whether the removal of the respondent from his position as director either by the Southern or by the Federated company constituted a breach of his contract of service as managing director, it is necessary to determine whether that contract was itself, at the time at which it was made, one for 10 years certain, or was only for such period as the Southern company chose to retain him as a director. The same question might perhaps be put in another waynamely, to what extent was the respondent subject to the terms of arts 89, 98 and 105 of the original articles. It is to be observed that the contract provides for his engagement for 10 years without qualification, that art 90 authorises the appointment of a managing director for such period as the directors think fit, and that art 91 provides that, when so appointed, though he is not subject to art 98, yet, unless his contract otherwise provides, he is subject to removal under art 105, and authorised to resign under art 89(F). I think that your Lordships are agreed that the contract does, however, otherwise provide. Clause 2 states that the respondent shall hold office for the term of 10 years. Clause 3 provides that throughout that term he shall devote the whole of his time to the business. Clause 4 fixes his salary at a rate which increases until the fourth year is reached. Clauses 8 and 9 provide, in the event of the winding up of the company, except for certain purposes, for the respondents dismissal and right to damages in terms which are more consistent with a fixed tenure of 10 years than with a contract terminable at the will of the company or of the respondent. Clauses 11 and 12, which prohibit the setting up or joining a competing business and soliciting or dealing with customers of the Southern company, contain provisions which would be surprising in the case of a man whose office might rightfully be determined at any moment, more particularly as he is by cl 12 prohibited from dealing with or soliciting any person who has been a customer during 3 years before his appointment endsa period which, if the company could get rid of him at any time, might long precede the beginning of the contract.

Apart from these considerations, however, it has to be borne in mind that Sir Berkeley Sheffield was also a party to the contract, and that he not only undertook by cl 13 to pay an extra sum for the respondents living expenses and the cost of his removal to London up to 12 months after the date of the contract, but also entered into an arrangement with the respondent as to the subscription for, and the non-transference of, preference shares in another company so long as the obligations of the respondent under the contract were duly and punctually performed.

Page 468 of [1940] 2 All ER 445

In my view, therefore, the terms of the contract lead to the conclusion that it is one for 10 years, and is not subject to the provisions of arts 89(F), 98 and 105. Having regard to the provisions of arts 90 and 91, it could not be, and was not, contended that such an appointment was ultra vires.

The application of the rest of the terms of art 89 to a managing director is somewhat different. The true view may well be that, in the case of the happening of any of the events foreshadowed in (A) to (D), the respondent would cease to be a director, and, therefore, a managing director. The same is, I think, true in the case of art 89(E), but, as a similar provision is contained in cl 3 of the contract, its materiality is not great. In none of these events, however, would either party be liable to an action for breach of contract, and this result follows whether one regards the contract as incorporating the articles, save where its terms are inconsistent with them, or whether the termination of the directorship in such cases is regarded as not being due to the intervention of either party. However this may be, in my view, unless the articles were altered, the company, except in certain specified cases, could not dismiss the respondent nor the respondent leave the company for 10 years without being liable to be sued for breach of contract. This was, in my view, the position when the contract was entered into. What, then, was the effect of the arrangement with the Federated company and the alteration of the articles?

It is common ground, and, indeed, long-established law, that a company cannot forgo its right to alter its articles, but it does not follow that the alteration may not be, or result in, a breach of contract. The principle is perhaps most clearly enunciated, first, in Allen v Gold Reefs of West Africa Ltd, a case in which a company was held entitled to alter its articles so as to obtain a lien on fully paid shares, though before the alteration it had a lien only upon partially paid shares. Lindley MR states the position thus, at pp 673, 674:

A company cannot break its contracts by altering its articles, but, when dealing with contracts referring to revocable articles, and especially with contracts between a member of the company and the company respecting his shares, care must be taken not to assume that the contract involves as one of its terms an article which is not to be altered. … It is easy to imagine cases in which even a member of a company may acquire by contract or otherwise special rights against the company, which exclude him from the operation of a subsequently altered article.

The principle was also clearly enunciated in Baily v British Equitable Assurance Co, in which a participating policyholder had taken out a policy which the Court of Appeal thought entitled him to have the whole of the profits distributed, and he was held entitled to a declaration that the assurance company ought to distribute the whole of such profits. The action was necessitated because the company, which, when the policy was taken out, had been formed, and was operating, under a deed of settlement providing for the distribution of the whole of the profits, at a later date proposed to register itself with limited liability,

Page 469 of [1940] 2 All ER 445

to substitute a memorandum and articles for the deed of settlement, and, under the terms of the articles, to carry part of the profits to a reserve fund. The Court of Appeal affirmed a declaration by Kekewich J that the company ought to continue to distribute the entire profits arising from the participating branch of its business, and Cozens Hardy MR said, at p 385:

But the case of a contract between an outsider and the company is entirely different, and even a shareholder must be regarded as an outsider in so far as he contracts with the company otherwise than in respect of his shares. It would be dangerous to hold that in a contract of … service … validly entered into by a company there is any greater power of variation of the rights and liabilities of the parties than would exist if, instead of the company, the contracting party had been an individual.

The general principle, therefore, may, I think, be stated thus. (i) A company cannot be precluded from altering its articles thereby giving itself power to act upon the provisions of the altered articles, but so to act may nevertheless be a breach of contract if it is contrary to a stipulation in a contract validly made before the alteration. (ii) Nor can an injunction be granted to prevent the adoption of the new articles. In that sense, they are binding on all and sundry, but for the company to act upon them will none the less render it liable in damages if such action is contrary to the previous engagements of the company. If, therefore, the altered articles had provided for the dismissal without notice of a managing director previously appointed, the dismissal would be intra vires the company, but would nevertheless expose the company to an action for damages if the appointment had been for a term of (say) 10 years and he were dismissed in less. Once it is established that the appointment is for a time certain and the dismissal before its termination, the result follows, and I do not understand the appellants to contend to the contrary. The complication lies in the facts (i) that the respondent has been dismissed, not from his office of managing director, but has been removed from his position of director, and (ii) that the removal has been effected, not by the Southern company, but by the Federated company. So far as the first matter is concerned, the decision must, I think, be reached by applying the well-known principle laid down by Cockburn CJ in Stirling v Maitland, at p 852:

I look on the law to be that, if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative. I agree that if the company had come to an end by some independent circumstance, not created by the defendants themselves, it might very well be that the covenant would not have the effect contended for; but if it is put an end to by their own voluntary act, that is a breach of covenant for which the plaintiff may sue. The transfer of business and the dissolution of the company was certainly the act of the company itself, so that they have by their act put an end to the state of things under which alone this covenant would operate.

If, therefore, the Southern company had altered their articles in such a way as to enable them to remove the respondent from his director-

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ship at will, and had so removed him, I, in common, I believe, with all your Lordships, would regard their action as coming under the dictum of Cockburn CJ, as an actionable breach of contract.

In reaching this conclusion I find myself unable to accept the dissenting judgment of Sir Wilfrid Greene MR, who took the view that under the contract the plaintiff was expressly appointed managing director, not for 10 years, but only for such a period not exceeding 10 years as he remained a director, and that no term could be implied which would prevent the company from terminating the respondents directorship, with the result that he ceased to be capable of retiring his position as managing director.

However, no such alteration was made. The new articles did away with all former grounds of removal and termination of the directors office, and left it to the Federated company at their absolute discretion to keep or remove a director of the Southern company. That change, it is said, is no breach, or, at any rate, is not contended to be a breach, of the respondents contract, and his later removal is the act of Federated, and not of the Southern company, and one, therefore, for which the latter company is not responsible. This contention was negatived by Sir Wilfrid Greene MR, as well as the other two members of the Court of Appeal. As, however, the main argument appears to have been grounded upon the question of the true construction of the contract, the matter now under consideration was treated as subsidiary, with the consequence that it was dealt with very shortly in the Court of Appeal.

I cannot say that 1 have found the solution an easy one, and obviously, having regard to the divergence of view in your Lordships House, the matter is one which lends itself to a conflict of opinion. Some support for the appellants contention was sought in Bluett v Stutchburys Ltd. The case is very shortly reported, and the exact grounds of the decision are not easy to ascertain, but they lend some countenance to the appellants argument, inasmuch as in that case, as in this, the articles had been altered so that the retention or dismissal of the director from his directorship was left to the determination of a third party. Cozens Hardy MR, is reported to have said that, in such circumstances, if the third party deprived the managing director of his directorship, and he necessarily ceased to be managing director, the company could not prevent that action, and were in no sense the authors of the dismissal.

If the true view be that the only action taken by the company was the alteration of the articles, and if, indeed, thereafter they were in no way implicated in the act of the Federated company in removing the respondent, and could not help themselves, then the appeal must succeed. However, though it is true that ultimately the Southern company could not prevent the Federated company from removing the respondent from his directorship, the act of removal is not, I think, solely the act of the Federated company. Rather it is the combined act of both, an act impossible to the latter but for the act of the former,

Page 471 of [1940] 2 All ER 445

and not resulting in a breach of contract until the power of dismissal given by the former was acted upon by the latter. To say that the Southern company could have helped themselves if they removed the respondent from his directorship, but could not do so where they authorised the removal by another, would seem to me to treat what is at best a technicality as if it were the substance of the case. It is the Southern companys act which has resulted in the respondents removal, and none the less so though his dismissal required two acts, and not one, for its accomplishment. I would affirm the judgment of the Court of Appeal.

Appeal dismissed with costs.

Solicitors: Allen & Overy (for the appellants); Slaughter & May (for the respondent).

Michael Marcus Esq   Barrister.

Harling v Celynen Collieries Workmens Institute

[1940] 2 All ER 471


Categories:        TAXATION; Income Tax, Deduction in computing profits        

Court:        KINGS BENCH DIVISION        

Lord(s):        LAWRENCE J        

Hearing Date(s):        11 JANUARY, 20 MARCH 1940        


Income Tax Deductions against profits Loss Carrying forward of loss “Six following years of assessment” Finance Act 1926 (c 22), s 33(1).

The respondents sustained a loss in the year ending 31 December 1930, which formed the basis of assessment for the year 5 April 1931 to 5 April 1932, and sought relief under the Finance Act 1926, s 33, by carrying forward and deducting the unexhausted balance of this loss from the profits in the year of assessment 193738. The inspector of taxes contended that, as, under the section, relief was allowable “as far as may be” for the 6 years following the year of loss, but no further, no part of this loss could be carried forward and deducted from profits after the year 193637:

Held upon the proper construction of the Finance Act 1926, s 33(1), the words “the 6 following years of assessment” did not include the year in which the loss formed the basis of assessment, and the respondents were, therefore, entitled to deduct the balance of this loss from the profits for the year 193738.

Notes

The Finance Act 1926, s 33(1), allows the carrying forward of losses for the 6 following years of assessment. The only question here is the construction of the phrase “for the 6 following years of assessment,” with particular reference to the last year in which it is possible to set off a loss so carried forward.

As to Carrying Forward of Loss, see Halsbury (Hailsham Edn), Vol 17, pp 332, 333, paras 666, 667; and for Cases, see Digest, Vol 28, pp 46, 47, Nos 233236.

Case referred to

Inland Revenue v Adamson [1933] SC 23; Digest Supp, 17 Tax Cas 679.

Case Stated

Case Stated under the Income Tax Act 1918, s 149, by the Commissioners for General Purposes of the Income Tax for the division of Bedwellty in the county of Monmouth for the opinion of the High Court

Page 472 of [1940] 2 All ER 471

of Justice. The respondents appealed to the commissioners against an assessment made on them under the Income Tax Act 1918, Sched D, in respect of profits from a cinema and dance-hall of £451 for the year ending 5 April 1938, less a loss brought forward of £28, being the loss shown by the accounts for the year ending 31 December 1933. They claimed relief under the Finance Act 1926, s 33, in respect of the unexhausted balance of a loss of £1,639 incurred and shown by the accounts for the year ending 31 December 1930. The amount of the unexhausted balance of the loss of £1,639 not allowed up to the year of assessment 193637 amounted to £426. The question at issue was as to whether the expression “the 6 following years of assessment” in s 33 included the year of assessment 193738.

It was contended on behalf of the respondents:

(a) That under the Finance Act, 1926, s. 33, they were entitled to set off the unexhausted balance of the loss of £1,639 incurred in and shown by the accounts for the year ended Dec. 31, 1930, against the assessment of £451 together with £25 of the £28 loss incurred in the year ended Dec. 31, 1933, and, therefore, to have the net assessment reduced to “Nil”; (b) that the expression “the 6 following years of assessment” in the Finance Act, 1926, s 33, as applied to the right to set off the loss of £1,639, must include the year of assessment 193738, because there was not, and could not be, an assessment for the year 193132, (c) that Inland Revenue v. Adamson and the dictum therein of Lord Morison had no application to the case under consideration, the respondents being an old-established concern, and not a new business.

On behalf of the inspector of taxes, it was contended as follows:

(a) That sect. 33 referred to an actual loss sustained in any year, and not to a statutory loss computed by reference to the loss actually sustained in a preceding year; (b) that relief was allowable “as far as may be” against the assessments for the 6 years immediately following the year of loss, but no further; (c) that, in this particular case, it happened that the assessment for the year 193132, which was the year immediately following the year of loss, was “Nil,” and, therefore, the set-off under sect. 33 was “Nil.” The year 193132 was, however, the first year subsequent to 1930, and it therefore followed that the year 193637 was the sixth and final year of assessment for which relief in respect of the unexhausted balance of the loss of £1,639 could be allowed; (d) that Inland Revenue v. Adamson and the dictum therein of Lord Morison clearly showed that sect. 33 referred to an actual loss.

The commissioners, having considered the facts and arguments submitted to them, were of opinion that the balance of the loss incurred in 1930 was allowable as far as might be against the assessment for the year 193738 under the Finance Act 1926, s 33. The assessment was, therefore, amended to £451, less losses brought forward £451.

The Finance Act 1926, s 33(1), provides as follows:

Where a person has in any trade, profession or vocation carried on by him, either solely or in partnership, sustained a loss (to be computed in like manner as profits or gains under the rules applicable to Sched. D, Cases I and II) in respect of which relief has not been wholly given under the Income Tax Act, 1918, s. 34 (which relates to relief in respect of certain losses), or under Sched. D, Cases I and II, r 13 (which provides for the setting-off of losses against profits or gains in a distinct trade), or under any other provision of the Income Tax Acts, he may claim that any portion of the loss for which relief has not been so given shall be carried forward and, as far as may be, deducted from or set-off against the amount of profits or gains on which he is assessed under Sched. D in respect of that trade, profession or vocation for the 6 following years of assessment: Provided that in so far as relief in respect of any loss has been given to any person under this section that person shall not

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be entitled to claim relief in respect of that loss under any other provision of the Income Tax Acts.

The Solicitor-General (Sir Terence OConnor KC) and Reginald P Hills for the appellant.

Frederick Grant for the respondents.

20 March 1940. The following judgment was delivered.

LAWRENCE J. The question in this case is as to the meaning of the words “the 6 following years of assessment” in the Finance Act 1926, s 33(1). Do the 6 years of assessment include the year in which the loss forms the basis of assessment? The respondents contend that, as in the year of assessment which follows the year in which the loss was incurred no deduction can be made, it cannot have been the intention of the legislature to count that year in the 6 years. In the present case, the taxpayer sustained a loss in the year ending 31 December 1930, which formed the basis of assessment for the year 5 April 1931 to 5 April 1932, and the revenue authorities contend that no part of this loss can be carried forward and deducted from profits after the year 5 April 1936 to 5 April 1937, whilst the respondents contend, and the commissioners have held, that the loss can be carried forward and deducted from the profits of the year of assessment 5 April 1937 to 5 April 1938. I have come to the conclusion, that the decision of the commissioners is correct. The section provides that the loss shall be carried forward, and, as far as may be, deducted from the profits for the 6 following years, and, in my opinion, it cannot be said that the loss is carried forward, and, as far as may be, deducted, in the year in which the loss forms the basis of assessment. It cannot, I think, fairly be said that a loss may be carried forward and deducted in a year in which it can neither be deducted nor have any effect. The words “as far as may be” are perfectly intelligible in after years, because, of course, in any of the 6 following years there may be no profits from which to deduct the loss, but, in the year in which the loss itself is the basis of assessment, there cannot be any profits to deduct from, and to use the words “as far as may be” as applying to that year seems to me ironical and unnatural. The appeal will, therefore, be dismissed with costs.

Appeal dismissed with costs.

Solicitors: Solicitor of Inland Revenue (for the appellant); Collyer-Bristow & Co, agents for D Granville West, Newbridge (for the respondents).

W J Alderman Esq   Barrister.


Brandon v Reidy

[1940] 2 All ER 474


Categories:        LANDLORD AND TENANT; Leases        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, SCOTT AND GODDARD LJJ        

Hearing Date(s):        23, 24 APRIL 1940        


Emergency Legislation Execution on judgment Discretion of court Order for possession Landlord liable to pay £350 per annum under head lease Tenants interest mortgaged Mortgage supported by life policy Mortgagee not party to application Whether any provision made for payment to mortgagee “Unable immediately to do so” Whether tenant must show ultimate ability to pay Courts (Emergency Powers) Act 1939 (c 67), s 1(4).

A landlord obtained judgment against his tenant for possession, one quarters rent and mesne profits. The premises were a house in Harley Street upon which the defendant, a doctor, had spent £7,000 in making it suitable for letting as doctors consulting rooms. To provide that £7,000 the defendant had mortgaged his sublease of the premises to an insurance company, and, as further security, had taken out with them an endowment policy on his life at a premium of £320 per annum. The landlord was paying a rent of £350 per annum under the head lease, and the tenant had to pay a rent of £500 per annum under his sublease. Just before the outbreak of war, the whole of the premises was let, and the defendant was in a position to meet his liabilities in respect of the premises. Owing to the war, the greater part of the premises had become vacant. An order had been made under the Courts (Emergency Powers) Act 1939, ordering that the judgment for possession should be stayed so long as £10 per month was paid by the defendant. It was shown that the defendant had a sum of about £340 per annum available to meet his liabilities in respect of the premises:

Held (i) the words in the Courts (Emergency Powers) Act 1939, s 1(4), “is unable immediately to do so by reason of circumstances directly or indirectly attributable to” the war do not place upon the defendant the necessity of proving that he will be able to pay the full amount at some later date.

(ii) as the mortgagees were not parties to the application, no provision could be made for payment of their interest and the premium on the life policy, but the whole £340 must be made available for the landlord.

Notes

This case raises two new points under the Courts (Emergency Powers) Act 1939. The first is whether the introduction of the word “immediately” has placed upon the defendant the burden of proving that he would at some future time be able to meet the whole of his liability. It was said that the fact that he was unable “immediately” to liquidate the claim implied that he would at some future time be able to do so in full. The second point is that the court need consider only those parties who are before it. In the present case, the mortgagees of the tenants interest were obviously more interested in this application than other unsecured creditors of the same debtor would be; but the court has ordered the payment to the landlord to be increased to the full amount of the sum shown to be available, leaving no part of that sum to be applied to the payment of the mortgagees interest or of the premiums due under the insurance policy.

As to Leave to Issue Execution, see Halsbury (Hailsham Edn), Vol 14, pp 810, para 13; and for Cases, see Digest, Vol 21, pp 428, 429, Nos 92103.

Case referred to

A v B [1940] 1 KB 217, [1939] 4 All ER 169; Digest Supp, 161 LT 325.

Interlocutory Appeal

Interlocutory Appeal by the plaintiff from an order made in chambers by Oliver J on 12 April 1940. The facts are fully set out

Page 475 of [1940] 2 All ER 474

in the judgment of the court delivered by Goddard LJ. The judge in chambers affirmed the order of the master.

R T Paget for the appellant.

B L A OMalley for the respondent.

Paget: The Act is an Act of moratorium, not an Act of oblivion. It was passed to assist those debtors who might be able to pay their debts if they were given time, not those who could never hope to pay. The word “immediately” in sub-s (4) must be construed as it would be construed in a letter from a debtor in which he said: “I am not able immediately to pay.” That is to say, it must be construed as meaning temporarily unable to pay. By the alternative construction, the word “immediately” is meaningless. This is unlikely, since in sub-s (5), where bankruptcy is dealt with, the word “immediately” is omitted. Landlords and judgment creditors, therefore, are to be kept from their remedy only in those cases in which time will be of assistance to the tenant or debtor, but the tenant or debtor is in all cases to be protected where the penal provisions of the bankruptcy law come into consideration. The judge was wrong in principle when he said that he could not look to the interests of creditors among themselves. The debtors ability to pay depends upon the relations of his creditors. The tenant here is capable of paying £340 per annum in respect of this house, and that £340 should be paid to the landlord, as the priority creditor, in preference to the mortgagee of the leasehold, who is a postponed creditor.

OMalley: The insurance company not being before the court, there is nothing to show what their position in the case is. It is not just to increase the amount of the mesne profits payable, for then the debtor having only £340 per annum available, will be unable to pay the mortgagees, and, if he failed to do so, they would take possession. Then the £7,000 which the debtor has expended on the premises will be lost to him, and one of the mischiefs which the Act was designed to preventthe ejection from his place of business of a citizen unable to pay his debtswould befall. Admittedly, under the masters order, the plaintiff would have to continue paying £350 per annum to the superior landlords, while he was receiving only £120 from the defendant. On the other hand, as soon as the war finishes, the order will come to an end, and then, if the debtor fails to pay all arrears, the plaintiff will have the full benefit of the £7,000 expended in improvements.

R T Paget for the appellant.

B L A OMalley for the respondent.

24 April 1940. The following judgment was delivered.

GODDARD LJ (delivering the judgment of the court). This is an appeal from an order of Oliver J in chambers who affirmed the order of Master Horridge made on an application by the plaintiff in the action for leave to proceed to enforce judgment in which he stayed the execution under the Act so long as £10 per month was paid by the defendant, the first payment to be made on 27 April 1940. The action is by a landlord against a tenant, a young surgeon just hoping to start in practice when the war broke out and now serving his country.

Page 476 of [1940] 2 All ER 474

The landlord claimed possession of the premises, No 148, Harley Street, one quarters rent and mesne profits from 29 September. The action was undefended, and judgment was obtained for possession and for a quarters rent, and for mesne profits at the rate claimednamely, £41 13s 4d.

The main question in the proceedings under the Courts (Emergency Powers) Act 1939, was whether or not the plaintiff was to have liberty to enforce his judgment for possession. It is only right and fair to the defendant to say that, after the judgment, he paid the quarters rent due on 29 September, for which judgment had been obtained. The case is one of very great misfortune for all parties and the greatest possible sympathy can properly be felt for the defendant. The head landlords are the Commissioners of Crown Lands. The plaintiff, who is their tenant, has to pay them £350 per annum, and, though this is not very material, he had to pay some premium for the lease. The sublease to the defendant reserves a rent of £500 per annum. When the defendant was just about to qualify, he thought that it would be a good investment, as no doubt it would have been, to take this house, reconstruct it and redecorate it, spend a considerable amount of money on it and have his own consulting rooms there. I do not know whether he intended himself to live there, but that does not matter. He intended to carry on his practice there, and to let various other rooms as consulting rooms to other doctors. He arranged that satisfactorily, but, to enable him to do it, he had to borrow £4,000 from the Equity & Law Life Assurance Society on mortgage, at 6 per cent interest, reducible to 5½ per cent, and, in addition to that, he had to take out an endowment policy on his life, for which he had to pay the not inconsiderable premium of something over £320 per annum. In addition to that, the defendant has other debts, largely family debts. His financial position was not very hopeful, but, at the time when war broke out, he had succeeded in letting these consulting rooms to various doctors, and was apparently making the place pay, or, at any rate, was running it without loss. When the war broke out, most of the doctors left their consulting rooms and took commissions in the Services, where the pay is not equivalent to what a doctor in Harley Street can usually make. Some of these doctors who were the defendants tenants have not been able to pay their rents to him, and he is left with the place on his hands now, with some tenants, but, as we gather, running at a loss.

The question is, what is to be done? The defendant, not unnaturally, takes up this position. He says: “I have spent a great deal of money on this house. I have incurred a debt of £4,000 to the Equity & Law Life Assurance Society on mortgage. I have put in other moneys of my own, and, if this lease goes, I suffer a very severe loss.” On the other hand, the landlord says: “I am paying out of my pocket at the present moment £350 per annum as rent, and what you are asking me to do means that I should be content with receiving only £120 per annum. I am having to pay £230 per annum out of my own pocket for the benefit

Page 477 of [1940] 2 All ER 474

of the tenant and the benefit of the Equity & Law Life Assurance Society.”

The first point counsel for the appellant took in his argument was this. He said that this is not a case in which the court can exercise its jurisdiction under the Courts (Emergency Powers) Act 1939, because s 1(4) of that Act is as follows:

If … the appropriate court is of opinion that the person liable to satisfy the judgment or order or to pay the rent or other debt, or to perform the obligation, in question is unable immediately to do so by reason of circumstances directly or indirectly attributable to any war in which His Majesty may be engaged, the court may refuse leave for the exercise of that right or remedy, or give leave therefore subject to such restrictions and conditions as the court thinks proper.

The argument of counsel for the appellant was that this is an Act intended to provide a moratorium and not a release of people from their obligations for all time, and that the presence of the word “immediately” in the section shows that what Parliament was contemplating was the case of a man who cannot at the moment pay, but will be able to in the future. He argues that the position which is shown here is such that it is hopeless to suppose that the defendant will be able to pay in the future, and that the court, therefore, has no jurisdiction to give relief. This court is not prepared to take such a narrow view of the section as that, or to construe “immediately” in the way that that argument would invite us to do. Were we to give such a narrow construction as that to the Act, it would very seriously circumscribe the beneficial object which the Act has in mind. We think that the presence of the word “immediately” results in no more than this. If the debtor shows that he cannot pay at the time when the judgment is obtained against him, then he can come to the court and ask for relief, and, while the court can take into account a great many matters, as was shown in the case of A v B recently before this court, it is not incumbent upon the debtor to show that at any particular time, or, indeed, at any time, he will be able to pay. The court must exercise its discretion in the best way it can, bearing in mind that it is always open to either party to go back to the court and ask for a review of the circumstances and a new order to pay.

The position with regard to the defendants present financial position is this. It seems to be agreed on all hands that he has a sum of about £340 per annum available, provided that matters remain in their present state, that such doctors as are left in the consulting rooms pay their rents, and that the outgoings and expenses go no higher. Counsel for the defendant has argued that the £340 ought to be utilised partly in paying the landlord and partly in paying the mortgagees, who are the Equity & Law Life Assurance Society.

It is to be observed that the mortgagees are not before the court, and the court think that the attention of the rule-making authority under this Act might perhaps be called to this particular case, where there are really three persons interested. We do not mean to suggest

Page 478 of [1940] 2 All ER 474

that, in every case where a debtor asks for relief and says he owes money to A, B, C, D, E and F, in addition to the plaintiff, all those people should be brought before the court, but, in a case such as this, where there is a mortgage of a lease, and where the three people vitally interested in the matter are the landlord, the tenant and the mortgagees, it might be well that the court in a proper case should be able to have the mortgagees before them. An attempt has to be made to do what Scott LJ has called a certain amount of distributive justice, and distribute between the various people what the debtor may be able to pay. Of course, in the present case, if the landlord could get nothing, it would not be right that he should be kept at bay entirely while the mortgagees were getting everything. On the other hand, one can see quite well that, so far as the debtor is concerned, he is vitally interested in the attitude which the mortgagees may take up, and we have no certain knowledge as to that. Of course, if they do not get paid either the premium on the policy or the interest on the mortgage, they may take proceedings which may have to come before the court later.

The question with which we are concerned is whether or not the defendant should be given relief in this case. That is to say, should he be allowed to keep this house, paying only £120 per annum off a rental of £500 per annum? We do not think that it is right. If there is £340 per annum now available, it seems to the court that the person who ought to have that money is the landlord, who has to pay £350 per annum, practically the same amount, as rent to the Commissioners of Crown Lands, or be liable to a forfeiture. We cannot think that it is right, considering that the landlord has no interest in the mortgage whatever, that the court by its order should, in substance, order the landlord to pay out of his pocket £230 per annumfor that is what it comes toto keep alive this lease for the benefit of the tenant and the mortgagees. We think, therefore, that the proper order to make is that the appeal should be allowed, and the order should be varied by increasing the amount to be paid under the order to the sum of £28 6s 8d per month from the date of the next payment, which is 27 April. Counsel for the plaintiff has been instructed not to ask that the payment made in March should be increased, and that is, we think, a generous attitude for the landlord to adopt.

The court thinks it right to say that, in making this order, we are dealing with the matter only as it is immediately before us now. It does not prevent either party from going back to the court under the Courts (Emergency Powers) Rules 1939, r 18, asking for a variation of the order. It does not follow that circumstances may not arise which would justify the court in reducing that order. Equally, it does not follow that in time the court may not say: “You cannot be allowed to go on occupying this house without paying a proper rent for it, and simply to pile up debt to be liquidated hereafter.” We express no opinion as to what order is to be, or can be, made hereafter. All we are dealing

Page 479 of [1940] 2 All ER 474

with is the matter which is immediately before us, and all we do is to vary the judges order which he made in chambers by increasing the sum to be paid per month from £10 to £28 6s 8d.

Solicitors: L A Hart (for the appellant); Ballantyne Clifford & Co (for the respondent).

Derek H Kitchin Esq   Barrister.

True v Amalgamated Collieries of W A Ltd

[1940] 2 All ER 479


Categories:        COMMONWEALTH; Commonwealth countries        

Court:        PRIVY COUNCIL        

Lord(s):        VISCOUNT CALDECOTE LC, VISCOUNT SANKEY, LORD THANKERTON, LORD RUSSELL OF KILLOWEN AND LORD ROCHE        

Hearing Date(s):        5, 7, 8 MARCH, 5 APRIL 1940        


Privy Council Australia Master and servant Industrial award or agreement Period of limitation of action Industrial Arbitration Act (Western Australia) 191235, s 176.

The Industrial Arbitration Act (Western Australia) 191235, s 176, enacts that no person is entitled to contract out of an industrial award or agreement, and that the worker shall be entitled to payment at the rate prescribed by such award or agreement, and to enforce such payment by action, subject to the limitation that such action must be commenced within 12 months of the time when the cause of action arose. The appellant entered into a contract of service under which he was to be paid wages at the appropriate rates under an award affecting his particular employment. He worked for one year. He complained that his wages had been wrongly calculated under the award, and some six months after the determination of the employment he commenced an action to recover the amount which he contended he had been underpaid during the year he was working:

Held the claim in these circumstances was one under the contract of service and the time limit under the above section did not apply. That time limit applied only to a statutory claim based on the award and, at the same time, inconsistent with the terms of the contract of service.

Notes

Though there is here only a question of construction, the case is one of general importance. A special limitation must be confined to the particular claims to which the statute applies it, and here, when the facts are properly understood, it will be seen that the workman was claiming under his contract, and not enforcing a statutory right. Some complication arises from the fact that the contract provided for wages to be paid at the rates settled by the award, but it is for that reason that, though the man is asking to be paid the prescribed rates, yet his claim is under his contract which gives him that right, and not under the statute.

As to Special Periods of Limitations, see Halsbury (Hailsham Edn), Vol 20, pp 774777, paras 10651073; and for Cases, see Digest, Vol 32, pp 531, 532.

Appeal

Appeal from an order, dated 4 April 1938, of the High Court of Australia (Latham CJ, Starke Dixon Evatt and McTiernan JJ), varying an order, dated 29 October 1937, of the Supreme Court of Western Australia (Northmore CJ, and Dwyer J).

The relevant facts may be stated shortly as follows. The appellant was employed under a contract of employment which provided for remuneration under the appropriate award. His claim was for the sum

Page 480 of [1940] 2 All ER 479

by which he had been underpaid, alleging that he had not been paid the full wages due to him under the awardwhich, of course, were also those due to him under his contract of service, since that provided for payment to be made to him in accordance with the rates prescribed by the award. The plaintiff was, therefore, suing upon his contract of service, and not for a greater sum than that there provided for, which, by statute, he might be entitled to claim.

D Ll Jenkins KC and J H Stamp for the appellant.

D N Pritt KC and Victor Wolff (for C M Cahn, on war service) for the respondent company.

5 April 1940. The following judgments were delivered.

LORD RUSSELL OF KILLOWEN. The question for decision on this appeal is whether the appellants action is to any extent time-barred under the Industrial Arbitration Act (Western Australia), 191235, s 176(2), and the answer depends upon the true construction of that section. The Act establishes a Court of Arbitration with jurisdiction to deal with and determine all industrial matters, including power to make awards, each of which while in force operates (s 83) “as a common rule of any industry to which it applies.” The courts authority may be delegated to an industrial board. At the dates relevant to this appeal, there was in force, as regards the parties to this appeal, an award (No 32 of 1934), being an award (No 10 of 1931) made by the Industrial Board as amended in August 1934, by the Court of Arbitration. The admitted facts show that the appellant was verbally engaged by the respondents to work for them as a miner at tonnage rates, and not at day wages, upon the terms and conditions of the award No 32 of 1934. His contract of service, therefore, contained, as part thereof, all the relevant provisions of that award, including the appropriate provisions as to wages. Pursuant to that engagement, the appellant worked for the respondents for one year, ending on 26 September 1936 and was paid wages which are alleged by him to be insufficient, under the terms of his contract of service, by an amount of £8 1s 9d. On 12 April 1937 he commenced proceedings by summons in the local court at Collie, Western Australia, claiming payment of that sum. The respondents raised two defences, one which, if successful, would defeat the whole claim, the other being that, as to £4 12s 11d, the claim was time-barred under s 176(2) of the Act. In the local court, the magistrate acceded to the first defence, and entered judgment for the respondents. On appeal, the Full Court of the Supreme Court of Western Australia (Northmore CJ and Dwyer J) set aside that judgment, and entered judgment for the appellant for the full amount of £8 1s 9d. The respondents then appealed to the High Court of Australia, with the result that, by order of that court dated 4 April 1938, the order of the Supreme Court was varied by substituting the sum of £3 8s 10d for the sum of £8 1s 9d. All the judges in the High Court were in agreement in rejecting the first ground of defence, but Latham CJ and Starke and Dixon JJ were of opinion that, as to £4 12s 11d,

Page 481 of [1940] 2 All ER 479

the action was time-barred under the section, while Evatt and McTiernan JJ were of opinion that the section did not apply. The action is a test action, and, by order in council, leave was given to the appellant to appeal to His Majesty in Council. There is no appeal from the decision of the High Court in regard to the first ground of defence. The only question for their Lordships consideration is whether the appellants claim is, as to £4 12s 11d, time-barred under s 176. That section provides as follows:

(1) Subject to sect. 39 no person shall be freed or discharged from any liability or penalty or from the obligation of any industrial award or agreement by reason of any contract made or entered into by him or on his behalf, and every contract in so far as it purports to annul or vary such award or agreement, shall, to that extent, be null and void without prejudice to the other provisions of the contract which shall be deemed to be severable from any provisions hereby annulled. (2) Every worker shall be entitled to be paid by his employer in accordance with any industrial agreement or award binding on his employer and applicable to him and to the work performed, notwithstanding any contract or pretended contract to the contrary, and such worker may recover as wages the amount to which he is hereby declared entitled in any court of competent jurisdiction, but every action for the recovery of any such amount must be commenced within 12 months from the time when the cause of action arose.

In the judgments in the High Court, and in the course of the argument before the Board, decisions were cited upon other and different enactments by other legislatures, but, having considered those authorities with care, their Lordships have found that they afford no real assistance or guide in answering the question which arises on this appeal. The section, they think, must be construed upon a consideration of the language used, and of the Act in which it finds a place. The Supreme Court appear to have thought the position reasonably plain. They held that the subsection applied only where the workman could not, under the provisions of his contract, obtain the full amount of wage fixed by the award, but was forced to have recourse to the subsection in order to obtain the difference between his contract wage and the amount fixed by the award, and that, since the appellant sued on his contract alone, he had no need to pray the subsection in aid, and was not, therefore, subject to the subsections time-bar. The majority in the High Court thought that, in every case in which a worker was seeking to recover wages of an amount which was fixed by an award, he was (whether or not entitled to it by the provisions of his contract) seeking to recover an amount to which s 176 declared him to be entitled, and that, accordingly, the 12-months limitation applied. On the other hand, Evatt and McTiernan JJ took the same view of the section as that adopted by the Supreme Court. They were of opinion that, as the appellant was entitled to his wages under his contract, he had no need to assert the right given by the section, and was not, therefore, bound by the limitation therein contained.

In view of this conflict of eminent judicial opinion, the question obviously cannot be said to be plain or easy of solution, but, on consideration, their Lordships find themselves in agreement with the views of Evatt and McTiernan JJ and the Supreme Court. The section is, in their

Page 482 of [1940] 2 All ER 479

opinion, a section dealing with a particular subject-matternamely, contracting out. That is, it deals with contracts of service which are inconsistent with industrial agreements or awards. Sub-s (1) annuls any provision in a contract of service inconsistent with an industrial award or agreement. If one of the offending provisions should be the provision as to wages, a difficult situation for the servant might arise. There might be a difficulty in suing on a quantum meruit, or on an implied promise to pay the amount fixed by the industrial award or agreement, in view of the fact that the parties had de facto purported to stipulate for a specified and a different sum. Sub-s (2) meets and overcomes this difficulty by declaring that, notwithstanding the contract, or pretended contract, to the contrary, the worker shall be entitled to be paid in accordance with the industrial agreement or award, and may recover the amount to which by the subsection he is declared entitled “as wages,” but subject to the short period of limitation. In other words, sub-s (2) presupposes the existence of a contract of employment which, as to its wages provision, is inconsistent with an industrial agreement or award, and deals with such a case by giving the workman a statutory right to recover “as wages” the amount fixed by the industrial agreement or award, as the case may be. It is that statutory right alone which is subject to the time-bar of 12 months. If he claims against the terms of his contract, he is given the shortened time limit, but the time within which he may sue to enforce the terms of his contract is not affected.

Their Lordships think that this construction is the only one which gives due effect to all the words of the section. The effect of the rival view would be to reduce the normal period of limitation from 6 years to 12 months in the case of every worker to whom an industrial agreement or award appliesan enormous industrial field, even if one were to except, as Dixon J does, the cases in which the contract wage exceeds the amount fixed by the industrial agreement or award. It would be strange to find so drastic and sweeping a change in the laws of limitation in a contracting-out provision, or enacted otherwise than in the clearest possible terms. The subsection, if that had been intended, need only have provided that every worker to whom an industrial agreement or award applied might recover wages in accordance therewith, but that every action for the recovery of wages the amount of which was in fact fixed by an industrial agreement or award must be commenced within 12 months from the time when the cause of action arose.

On the other hand, the construction which their Lordships prefer to adopt assigns an operation and effect to every word in the subsection. It attributes to the words “such worker” a qualifying meaning which narrows the general expression “every worker” by limiting it to a worker whose contract, or pretended contract, is “to the contrary.” It attributes to the words “as wages” the meaning that the workman may recover as if payable under a contract of service money due as a statutory right. It attributes to the words “is hereby declared entitled” the meaning

Page 483 of [1940] 2 All ER 479

that a new right is being conferred by the subsection. It attributes to the words “such amount” the meaning of the amount which the worker is so given the right to recover as wages. For the reasons indicated, their Lordships are of opinion that the appeal should be allowed, the order of the High Court discharged except as to costs, and the order of the Supreme Court restored. They will humbly advise His Majesty accordingly. The respondent will pay the costs of this appeal.

Appeal allowed with costs.

Solicitors: Blyth Dutton Hartley & Blyth (for the appellant); M L Moss & Son (for the respondent).

Charles Shelley Esq   Barrister.

Heywood & Bryett Ltd v A Heywood & Son

[1940] 2 All ER 483


Categories:        QUANTUM        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, SCOTT AND LUXMOORE LJJ        

Hearing Date(s):        22 APRIL 1940        


Workmens Compensation Indemnity Contractor and subcontractor Whether negligence of contractor answer to claim for indemnity Workmens Compensation Act 1925 (c 84), s 6.

The applicants were builders who employed subcontractors. A servant of the subcontractors was injured, and was entitled to workmens compensation. This was paid by the applicants, who sought to be indemnified in respect thereof by the subcontractors. It was contended that the right to indemnity could be defeated by showing that the applicants were guilty of negligence which caused the accident, or, alternatively, that the accident was due to a breach of statutory duty by the applicants:

Held the right to indemnity was absolute, as the Workmens Compensation Act 1925, s 6, contained no limitation of that right.

Notes

It is thought that the reason for the insertion of the provisions here dealt with was to give the workman a right against the main contractor, who would probably be in a more substantial position financially than the subcontractor. The contention that the claim to indemnity can be resisted on the ground that the accident was due to the fault of the principal or his workman is supported by certain obiter dicta, which have been noted in the textbooks. The Court of Appeal, however, have decided against this contention, and, therefore, against the view previously held, which, however, was not based on binding authority.

As to Right of Principal to be Indemnified, see Williss Workmens Compensation (32nd Edn), p 220; and for Cases, see Digest, Vol 34, p 265, Nos 22552258.

Cases referred to

Greenwood Ltd v Hawkings (1906) 23 TLR 72; 26 Digest 223, 1755.

Topping v Rhind (1904) 6 F (Ct of Sess) 666; 34 Digest 265, case 2256i.

Cory & Son Ltd v France, Fenwick & Co Ltd [1911] 1 KB 114; 34 Digest 496, 4094, 80 LJKB 341, 103 LT 649.

Mowbray v Merryweather [1895] 2 QB 640; 34 Digest 182, 1488, 65 LJQB 50, 73 LT 459.

Page 484 of [1940] 2 All ER 483

Appeal

Appeal by the respondent from an award of His Honour Judge Forbes, sitting as an arbitrator in the West London County Court on 14 March 1940. The facts are fully set out in the judgment of Slesser LJ.

F A Sellers KC and Gilbert Dare for the appellants.

J F F Platts Mills for the respondents.

Sellers KC: The obligation was not absolute. The claim to indemnity by the principal can be defeated in at least three ways. The first is by showing that the accident to the workman was caused by the principals breach of contract with the contractor: Mowbray & Merryweather. Secondly, the principals could not recover because they were themselves guilty of the negligence which caused the accident: Willss Workmens Compensation (32nd Edn), p 220, Greenwood v Hawkings, Topping v Rhind and Cory v France & Fenwick. Thirdly, the principal was bound under his contract to provide for the contractor and the contractors workman a scaffold which complied with the Building Regulations 1926. The principal broke these regulations, and, therefore, could not recover. The wording of s 30(2),which was dealt with by the Court of Appeal in Cory v France & Fenwick is similar.

Platts Mills was not called upon.

F A Sellers KC and Gilbert Dare for the appellants.

J F F Platts Mills for the respondents.

22 April 1940. The following judgments were delivered.

SLESSER LJ. In this case, it has been ordered that the respondents do pay to the applicants the sum of £108 paid by them as compensation for personal injury caused to one Albert Edward Taylor. The case is one brought under the provisions of the Workmens Compensation Act 1925, s 6(2), by an employer, therein called the principal, against the immediate employer of the workman, who is called the contractor. S 6(1) provides as follows:

Where any person … in the course of or for the purposes of his trade or business, contracts with any other person … for the execution by or under the contractor of the whole or any part of any work undertaken by the principal the principal shall be liable to pay to any workman employed in the execution of the work any compensation under this Act which he would have been liable to pay if that workman had been immediately employed by him; and where compensation is claimed from or proceedings are taken against the principal, then, in the application of this Act, references to the principal shall be substituted for references to the employer.

In the circumstances of this case, the judge has come to the conclusion that the applicants here, Heywood & Bryett Ltd were principals within the meaning of s 6(1), and that the respondents, A Heywood & Son, were the contractors.

The facts of the case, so far as material, are these. The applicants are builders, and for the purpose of their business they have found it necessary in the erection of their buildings to employ subcontractors. They did the navvying and carpentry themselves, but they had subcontractors for a number of operations, including plumbing, and for that purpose they employed the respondents. The injured workman was the servant

Page 485 of [1940] 2 All ER 483

of the respondents, but the judge has come to the conclusion, after a consideration of the written terms of the contract between the builders and the respondents, that it was the business of the applicants, the builders, to provide matters other than the actual labour of doing the plumbing. That is to say, the scaffolding which was used for the purpose of doing the plumbing should be provided by the applicants. His actual words are:

I think the implication of that estimate, accepted orally, was that, in the particular circumstances of this case, the applicants should provide scaffolds for exterior work or external plumbing work, as it is called in the estimate, and that the respondents should use scaffolding provided by the applicants.

Therefore, it is clear that, within the meaning of s 6(1) of the Act, the applicants, the builders, were principals, and the respondents, the plumbers, were the contractors. The judge has come to the conclusion that, in the imperfect provision of guards to this scaffolding, and in the failure of the applicants, the principals, to fix the structure firmlyreferring particularly to a door frame which stood erect, and was unstable, and gave way, although it appears to have been used as a part of the scaffoldingthe applicants were guilty of a breach of the Building Regulations, 1926, reg 13, made under the Factory and Workshop Act 1901. Reg 13 provides as follows:

Where a scaffold has not been erected by or under the superintendence of the employer whose workmen use it, the employer, before allowing workmen to proceed thereon, shall satisfy himself, either personally or by his agent, that the scaffolding is in a stable condition, and that the materials used in its construction are sound, and that the required safeguards are in position.

I think that he has also come to the conclusion that the applicants were negligent in that they provided this defective scaffolding, but none the less he has come to the conclusion that the applicants are entitled to the indemnity which they seek, though he says that he regrets it. The reason, apparently, which has moved him to come to that conclusion is that, although he thinks that the applicants would not be entitled to their indemnity by reason of the fact that they were guilty of a breach of statutory regulations, or were negligent, he comes to the conclusion that the respondents were also negligent, and that the two acts of negligence cancel one another out, and, therefore, in the result, the respondent cannot rely upon the alleged negligence of the applicants. I mention that because, in my judgment, the judge was quite wrong in the conclusion to which he came in assuming, in the first place, that the negligence of the applicants, which he has found, would in itself disentitle them to their indemnity, and, although I have come to the conclusion, for reasons which I will explain, that this appeal fails, yet it is for reasons quite other than those which are stated by the judge in his judgment. Of course, I assume the facts to be as he has found them, and there is no question that there was not evidence on which he could come to that conclusion.

In my opinion, this case turns entirely on a proper consideration of s 6(2). As I have said, under s 6(1) it is clear, in the circum-

Page 486 of [1940] 2 All ER 483

stances of this case, that the applicants were principals and A Heywood & Son were contractors. In those circumstances, the injured workman was entitled, not only to seek compensation, as he would have been, apart altogether from this section, from the respondents, his immediate employers, but also to seek compensation from the principals, and, as I have said, he did in fact recover compensation from them to the extent of £108. That is a provision under s 6(1) for the advantage of the workman. It gives him a right to obtain compensation from somebody who is not the employer, but who is to be deemed to be the employer if he satisfies the requirements of that subsection. He could, of course, if he liked, from the outset have sued his own employer for compensation, on the principle that he had met with an accident arising out of and in the course of his employment. S 6(2) provides as follows:

Where the principal is liable to pay compensation under this section, he shall be entitled to be indemnified by any person who would have been liable to pay compensation to the workman independently of this section.

Those words appear to me to be absolutely clear and unambiguous, and, as has frequently been stated, where the language of an Act is clear and explicit, we must give effect to it, whatever may be the consequences, for in that case the words of the statute speak the intention of the legislature. I ask myself where any words of limitation are to be found in the words: “Where the principal is liable to pay compensation under this section.” I have already explained that this principal was liable by reason of sub-s (1), and, whether the accident arising out of and in the course of the employment which created the liability to pay the compensation was caused by the negligence of the employer, by the negligence of the workman, by an accident, by an act of God or by any other means, the liability to pay compensation is exactly the same. The only qualification in the case of the workman may arise in certain cases of misconduct, which are referred to in the statute, where the disability is only partial, but, so far as the employer is concerned, it matters not, if the accident arose out of and in the course of the employment, whether it was due to a breach of statutory regulation, or to negligence, or to any other cause. True it is that these matters may give rise to rights in the employer to bring actions for damages other than the duty to pay compensation, but the liability to pay compensation, if the provisions of s 1 of the Act are satisfied, is unqualified. The employer being liable to pay compensation, s 6(2) continues as follows:

… he shall be entitled to be indemnified by any person who would have been liable to pay compensation to the workman independently of this section.

I have already pointed out that, independently of this section, the respondents would have been liable to pay compensation to the workman, and, therefore, the principal is entitled to be indemnified, in the circumstances. There is nothing very startling about this provision. It was passed, as I have said, for the benefit of the workman, and it merely

Page 487 of [1940] 2 All ER 483

amounts to this. Though the workman is given recourse both to the employer and to somebody else who was not the employer, at his option, if that other person satisfies the conditions of sub-s (1), the employer, if that other person seeks indemnity, is no worse off than any other employer who is liable to a workman who recovers as a result of injury sustained by accident in his employment. That determines this case in favour of the respondents in this appeal. The applicants have shown that they are entitled to the indemnity within the plain language of sub-ss (1) and (2) of this section, and that, really, on the findings of fact of the judge which bring the principal and the contractor within s 6, would put an end to this appeal.

However, there are certain observations in cases which have been cited to us to which it is right one should have regard. First of all, there is Greenwood v Hawkings, a judgment of Bigham J, in which he came to a conclusion with regard to an accident indemnity under the Workmens Compensation Act 1897, that there he was satisfied that the plaintiffs, who were the building contractors who had employed subcontractors, were not negligent. However, he did make the observation that he had some doubt at first as to whether the plaintiffs had not so far contributed to the accident by what might be called their negligence as to make it impossible for them to recover. If those observations are directed to the provisions of s 6(1), (2), and deal with similar language, then, respectfully, I would point out, first of all, that they are only obiter, since the judge decided that the plaintiffs were not negligent. Secondly, I do not think that the contribution to the accident by negligence could make it impossible for a person availing himself of what is the equivalent now of s 6(2) to recover, but I do not regard that case as a case where Bigham J can be considered properly to have decided any such question.

The other case which is immediately dealing with this subsection or its earlier equivalent is Topping v Rhind. There Lord Kinnear, dealing with this matter, which again is only dealt with as obiter, says, at p 675:

But there remains the third point which the reclaimer argued. He said that the pursuer could not recover from his subcontractor in this case, because the injury caused to the workman was due to the pursuers own fault. I do not know if it is necessary in this case to decide that that would be a complete answer, but there is certainly very high authority for that view …

I have been unable to find any such high authority, and the highest authoritynamely, the High Court of Parliamentseems to have declared to the contrary effect. Lord Kinnear continues as follows, at p 675:

… and as at present advised, I cannot see that sect. 6 of the statute could receive full effect unless it had the effect maintained by the reclaimer. If a contractor has injured one of his workmen by his own fault, he cannot according to the argument recover an indemnity from a subcontractor, because the statute says that wherever an injury is caused under circumstances creating a legal liability against someone other than the employer, and if compensation be paid under this

Page 488 of [1940] 2 All ER 483

Act by the employer, the employer shall be entitled to be indemnified by the defaulting person.

The reference there to the words “under circumstances creating legal liability” to pay does seem to deal, I should have thought, with words which in terms appear in s 30, and not in s 6. The language of s 6 is, as I have already quoted, “liable to pay any workman compensation,” but, however that may be, that case, I think, can be no authority here, and I think that Lord Kinnear was there directing his mind, having regard to the language used, rather to s 30 than to s 6, though I am aware that Williss Workmens Compensation (32nd Edn), seems to think that the language is directed to s 6. In any case, as I point out, the words are not “a legal liability,” but “the liability to pay compensation” which may raise a very different question.

Finally, we have been referred to Cory & Son Ltd v France Fenwick & Co Ltd, which admittedly deals with s 30 and not s 6 of the Act at all. I for one do not propose to embark on the difficult question at all as to the ambit of s 30, which, I think, has no direct bearing on the present case, but I would point out, in the first instance, that s 30 is dealing with a legal liability to pay damages, and it may raise all sorts of questions in regard to liability in tort and the liability of tortfeasors which do not apply at all to s 6. It is to be observed that the condition, “If the workman has recovered compensation … the person by whom the compensation was paid, and any person who has been called on to pay an indemnity … shall be entitled to be indemnified,” is all conditional on there being a liability to pay damage, and I think, is dealing with an entirely different subject-matter. I think that this is one of the few occasions where I have regretfully come to the conclusion that the note which is to be found in Williss Workmens Compensation (32nd Edn), cannot be relied upon. It is stated, at p 220:

The contractor from whom indemnity is claimed by the principal can successfully resist the claim on the ground that the accident was due to the fault of the principal, eg, his negligence, or that of his workmen.

As at present advised, I do not see that there is any ground on which the contractor can refuse to pay the indemnity to the principal where the principal is liable to compensation under the section and has been paid compensation in the cases provided for in s 6(1). I come to the conclusion, therefore, that this appeal must fail, but I dissent from the view of the judge that it fails because both parties were guilty of negligence. In my view, the absence of presence of negligence in the case makes no difference to the unqualified operation of s 6(1), (2).

SCOTT LJ. I agree, but venture to add a few words upon the interpretation of s 6. The subject-matter with which that section deals is the liability to pay compensation created by s 1 of the Act,

Page 489 of [1940] 2 All ER 483

and there is no underlying subject-matter except that. The section is not dealing with liability at common law either in tort or in contract. Its object is to ensure that a workman in certain cases shall be protected against the risk of his immediate employer being financially weak, and, therefore, perhaps unable fully to discharge his obligation to pay compensation under the Act. In order to achieve that purpose, the workman is given by Parliament a right to claim his compensation from a person in the position described by sub-s (1) of the section and there called “the principal.” In relation to him, the workmans own immediate employer is in law an independent contractor, but, in a popular sense, he is, as it were, a quasi-employer, inasmuch as the premises where the work is done are his, and all men engaged upon work about them are doing work in his interest. The Act, therefore, taking that view, imposes upon him an obligation in law to pay the statutory compensation, and a responsibility in money to make the necessary payments, but, on the other hand, gives him the right to recover indemnity for those payments, or the liability for those payments, from the direct, and, in most cases, smaller, immediate employer, with whom he has made an independent contract for the execution of some of the work. Sub-ss (2) and (3), read together, as I think they should be, make that position quite clear. There being no reference in the section to any common law liability, I see no justification for reading into sub-s (2) anything whatever to do with negligence, either on the part of the respondent to the application or on the part of the principal who makes the application. Those notions are wholly foreign to the section, which is a section concerned solely, as it seems to me, with compensation under the Workmens Compensation Act 1925. I therefore agree with the judgment pronounced by Slesser LJ.

LUXMOORE LJ. I agree.

Appeal dismissed with costs.

Solicitors: Walter O Stein (for the appellants); Hewitt Woollacott & Chown (for the respondents).

Derek H Kitchin Esq   Barrister.

R v Fuschillo

[1940] 2 All ER 489


Categories:        CRIMINAL; Criminal Law        

Court:        COURT OF CRIMINAL APPEAL        

Lord(s):        HAWKE, CHARLES AND HILBERY JJ        

Hearing Date(s):        15 APRIL 1940        


Criminal Law Receiving stolen property Proof of theft Proof of recent thefts of goods of the same kind No actual proof of theft or of ownership of the goods subject of charge Whether surrounding circumstances sufficient proof.

The appellant was convicted of receiving sugar well knowing it to have been stolen. There was no actual proof as to the ownership of the goods, or that they had been stolen. The appellant, who had been granted an allowance of 1¾ cwt of sugar per week by the food executive officer had upon his premises 26 cwt of sugar. The appellant,

Page 490 of [1940] 2 All ER 489

upon being cautioned by the police and told that there was reason to suppose that the sugar had been stolen, said, “I dont know why I took it,” and, upon being asked if he would say where it came from, said: “Be satisfied, and take it away, but dont take me.” It was contended that there was not sufficient evidence for the jury to consider whether, when he received the sugar, he knew that it had been stolen:

Held the surrounding circumstances provided sufficient evidence to go to the jury on the charge, and the conviction was amply justified by the evidence.

Notes

Although, on a charge of receiving stolen goods, there must be proof that the goods have been stolen, the circumstances in which an accused person has received the goods may of themselves be sufficient proof that they have been stolen, and, further, may prove that he knew this when he received them. It is not a rule of law that there must be strict evidence of the theft, but the court may find, as it has found here, that there are sufficient circumstances to prove that the goods, to the knowledge of the accused, had been stolen.

As to Receiving Stolen Goods, see Halsbury (Hailsham Edn), Vol 9, pp 554, 555, para 941; and for Cases, see Digest, Vol 15, pp 962965, Nos 10,75310,772.

Case referred to

R v Sbarra (1918) 87 LJKB 1003; 15 Digest 963, 10,757, 119 LT 89, 13 Cr App Rep 118.

Appeal

Appeal against a conviction and sentence at the Central Criminal Court of receiving sugar well knowing that it had been stolen. The facts are fully set out in the judgment of the court delivered by Charles J.

E J P Cussen for the appellant.

E Anthony Hawke for the Crown.

15 April 1940. The following judgment was delivered.

CHARLES J (delivering the judgment of the court). In this case, Silvio Edward Fuschillo was convicted at the Central Criminal Court of receiving sugar well knowing at the time he received it that it had been stolen. He was sentenced to 18 months imprisonment, and he now appeals against his conviction and sentence.

The case presents some rather unusual aspects of the law relating to receiving goods well knowing them to have been stolen. There was no actual proof as to the ownership of the goods, and there was no actual proof that the goods had been stolen, but it was argued by counsel for the Crown that this case was akin to R v Sbarra. The circumstances of that case are not exactly the same as the circumstances of this case, but it was laid down in that case by the court (Darling Coleridge and Salter JJ) as follows, at p 1004:

The circumstances in which a defendant receives goods may of themselves prove that the goods were stolen, and, further, may prove that he knew it at the time when he received them. It is not a rule of law that there must be other evidence of the theft. We have come to the conclusion that the circumstances here were enough to prove that the goods had been stolen.

Thus it becomes necessary to see what the circumstances were in this case. On 2 October the food controlleror, as he is called, the food executive officerfor the district of Bermondsey saw Fuschillo, and asked him, in accordance with his powers, to declare what stock of sugar he had. Fuschillo declared that he had 5 cwt, and asked for 3 cwt per

Page 491 of [1940] 2 All ER 489

week, and was granted an allowance of 1¾ cwt per week. The shop in which the sugar was found was a very small shop indeed. It was kept by the appellants mother, and managed by him, in the front room of a corner house in Bermondsey. What was found in that little shop? All sorts of things. In the scullery and side passage, which, it is to be observed, could be reached from the side street, were found twelve 2-cwt sacks of granulated sugar and two 1-cwt sacks of granulated sugar, and the sacks had various marks on them. The police, who were inquiring into the theft of commodities of this sort, in consequence of information they had received, went to the appellants house. The appellant was not there, and this enormous quantity of sugar was found in the shop. There was no room in the shop for all the sugar, and much of it was found in the passage. When the appellant came in and saw the police, he said that he had been a fool and stated that his mother knew about it. Then he was cautioned and was told that there was reason to believe that the sugar was stolen. He replied:

I dont know why I took it in. Im a fool. This means going away.

There he was a true prophet, because he did go away. The police officer seems to have acted with great propriety and with due care, for he said: “Do you care to tell me where it came from?” The appellant said: “Be satisfied, and take it away, but dont take me.” On the way to the police station, the appellant said: Cant we do something about this? For the old ladys sake, take the stuff away, and dont charge me.

These were the surrounding circumstances in this case, and it was suggested to us by counsel for the appellant, who has argued the case with great tenacity and ability, that there was no sufficient evidence for the jury to consider on the question whether or not he knew at the time he received the sugar that it was stolen. It is to be observed that Fuschillo himself did not take advantage of the rule of law which allows him to give evidence on his own behalf. We have come to the conclusion on every point of view that there was evidence to go to the jury on the charge. He was sentenced to 18 months imprisonment, and it is to be observed that the police officer said that there had been a number of these thefts from lorries, and that it was in the hope that they would discover where that sugar went that they got a search warrant to search this little shop. The appellant is not a man who has always borne a good record. At the County of London Sessions in April 1938, he received a sentence of 6 months for receiving eggs, and now he has received 18 months for receiving sugar well knowing that it was stolen. We have come to the conclusion that the conviction was amply justified by the evidence, and the appeal is dismissed.

Appeal dismissed.

Solicitors: J Albert Davis & Co (for the appellant); Metropolitan Police Solicitor, New Scotland Yard (for the Crown).

W J Alderman Esq   Barrister.


Re Sykes, Younghouse v Sykes and Others

[1940] 2 All ER 492


Categories:        SUCCESSION; Wills        

Court:        CHANCERY DIVISION        

Lord(s):        BENNETT J        

Hearing Date(s):        11 APRIL 1940        


Wills Construction Option to purchase shares Donee assigning benefit of option and dying without exercising it Whether option exercisable by donees executors or by assignees.

The testator by his will dated 15 February 1911, gave his son an option to purchase certain shares upon the death of the testators wife or previously thereto whenever the trustees should proceed to realise that part of his estate. During his lifetime, the son assigned the benefit of the option to trustees for the purpose of securing an annuity for his wife. He survived the testators wife, but died without having exercised the option:

Held the option to purchase was personal to the son, and was not exercisable after his death by his executors or assignees.

Notes

An option to purchase property given by a will is prima facie personal to the donee of the option, and it would appear to be necessary to find express words in the will pointing to a transmissible option if the contrary construction is to be adopted.

As to Options to Purchase in Wills, see Halsbury (Hailsham Edn), Vol 28, Wills, pp 529531, para 1045; and for Cases, see Digest, Vol 44, p 211, Nos 384386.

Cases referred to

Re Cousins, Alexander v Cross (1885) 30 ChD 203; 23 Digest 294, 3597.

Belshaw v Rollins [1904] 1 IR 284; 44 Digest 211, case 385i.

Adjourned Summons

Adjourned Summons to determine whether an option given by a testator to one of his sons to purchase certain shares in a named company, the option being given to the son by the testators will, is exercisable by the son only, or whether, the son having died, the option is exercisable either by his legal personal representatives or by assignees to whom during his lifetime he had assigned the benefit of the option. The facts are fully set out in the judgment.

E M Winterbotham for the plaintiff.

Roger W Turnbull for the first defendant, the second son of the testator.

T A C Burgess for the second and third defendants, legal personal representatives of the first son of the testator.

L M Jopling for the fourth defendant, one of the trustees, to whom was assigned the benefit of the option in the testators will.

11 April 1940. The following judgment was delivered.

BENNETT J. The testator made his will on 15 February 1911 and died on 9 September 1916. The will was proved on 16 November 1916, by his widow, Clara Victoria Sykes, and his son Edward Musgrave Sykes, a second son, Leonard Musgrave Sykes, named as an executor in the will, having renounced probate. The testators widow, Clara Victoria Sykes, died on 18 May 1939 and his son Edward Musgrave Sykes died on 29 June 1939, his legal personal representatives being the defendants Alan John Skelton and Joe William Dyson. New trustees of the testators will were appointed on 4 January 1940, they being the plaintiff and the first defendant, Leonard Musgrave Sykes.

Page 493 of [1940] 2 All ER 492

The provisions of the testators will are these. He gives all his real and personal estate whatsoever and wheresoever to his executors upon trust for realisation and conversion, with power to postpone the sale or conversion of the whole or any part or parts of his trust property, and he directs his executors to pay his just debts, funeral and testamentary expenses, and to invest the residue in their names, and to pay the income of the trust moneys and the investments thereof for the time being to his dear wife for and during her natural life, and from and after the decease of his wife he declares that his trustees are to stand possessed of all the proceeds, moneys and trust premises upon trust for his sons Edward Musgrave Sykes and Leonard Musgrave Sykes in equal shares, and, in the event of either of them predeceasing his wife without leaving issue, his share of his real and personal estate shall pass to the survivor of his sons absolutely, but, if married and having left issue who shall survive his wife and shall attain the age of 21 years, his surviving child or children shall, on attaining the age of 21 years, enter into possession of the fathers share of his estate, and, if more than one, in equal shares.

Then there is an investment clause, and following the investment clause is the provision which gives rise to the question raised by this summons. The terms of that provision are as follow:

Whereas part of my estate consists of the shares in the English Card Clothing Co., Ltd., now standing in the name of my son Edward Musgrave Sykes as registered owner, and I am desirous that my said son shall have the opportunity of becoming absolute owner of the same shares now I hereby declare and direct that upon the decease of my said wife or previously thereto in case or whenever my trustees shall proceed to realise the part of my estate consisting of or including such shares and my beneficial right thereto and ownership thereof my son Edward Musgrave Sykes shall have the option of purchasing and becoming absolute owner of the said shares or any part thereof and all my estate interest right and title therein and thereto the value of such shares for the above purpose to be estimated at par value.

The son Edward Musgrave Sykes was registered as the holder of 300 shares, each of £10, in the English Card Clothing Co Ltd, at the time when the testator died. The company was a private company, and art 42 of its articles of association provided as follows:

No transfer of a share or shares shall be made without the same being first offered to the directors at the market price to be ascertained in accordance with art. 43. Should the directors within 30 days of the same being offered to them accept the share or shares on behalf of one or more of their number or his or their nominee or nominees, the share or shares shall be transferred accordingly. If the directors do not accept or decline the offer within 30 days the shareholder shall be at liberty to deal with the share or shares as he may think fit, subject to art. 42.

Then there follows art 43, which contains provisions for enabling the market price of the shares to be ascertained. After the testators death, those 300 shares, of £10 each were converted into 3,000 ordinary shares of £1 each, and, subsequently, as the result of a capitalisation of profits, 1,500 fully-paid ordinary shares were issued to Edward Musgrave Sykes in respect of his holding of 3,000 ordinary shares. In his lifetime, on 26 July 1932, for the purpose of securing an annuity to his wife, from

Page 494 of [1940] 2 All ER 492

whom he had been divorced, the benefit of the option given to him by the testators will was assigned to trustees, the defendant Alan John Skelton and the defendant Norman Hugh Matthews.

As I have said, after the death of the widow, Edward Musgrave Sykes died on 29 June 1939. He never exercised the option, given to him by the testators will, of purchasing these shares in the English Card Clothing Co Ltd. After his death, on 29 November 1939, his executors gave notice in writing to one Leonard Sykes, who was then entitled to the whole of the residuary estate of the testator, “and to all whom it may concern,” exercising the option given to Edward Musgrave Sykes by the testators will in respect of 4,500 shares. On 14 February 1990 the defendants Skelton and Matthews, as trustees of the deed of assignment of 26 July 1932, upon the footing that they were assignees of the option given to Edward Musgrave Sykes by the testators will, also exercised the option given to Edward Musgrave Sykes by the will, and notice of that exercise was also given to Leonard Musgrave Sykes and to all whom it might concern.

The question which I am going to decide, the first one raised by the originating summons, is whether, upon the true construction of the will of the testator, the option thereby given to his son Edward Musgrave Sykes of purchasing and becoming the absolute owner of certain shares in the English Card Clothing Co Ltd, therein described, ceased to be exercisable on the death of Edward Musgrave Sykes. In my judgment, it did, and I so decide upon what I conceive to be the authority of the decision of the Court of Appeal in Re Cousins, Alexander v Cross. In Jarman on Wills, Vol I, p 73, there occurs this passage:

An option of purchase given by will to A.B. is prima facie personal to him, and does not pass to his executors on his death …

In support of that proposition, Re Cousins, Alexander v Cross is cited. The authors go on to state that the will may be so expressed as to confer a transmissible interest, and in support of that proposition an Irish authority, Belshaw v Rollins, is cited.

It is contended on behalf of the executors of Edward Musgrave Sykes, and also on behalf of the trustees under the deed of assignment of 26 July 1932, that Re Cousins, Alexander v Cross is no authority upon any question of principle, and that the question turns entirely upon the construction of the will of the testator whose testamentary dispositions were under consideration in the Court of Appeal. At one time, I inclined to that view, but I think that, when one looks carefully at the language used by Cotton and Lindley LJJ, in their judgments in that case, their language does support the proposition stated in Jarman on Wills, Vol I, p 73, and does establish that prima facie an option to purchase given by will to a named person is personal to him, and does not pass to his executors or confer a transmissible interest. Sir William Brett MR and Lindley and Cotton LJJ, distinguish the case of a will from that of an option granted by a contract, and I think that the decision is rested by Cotton and Lindley LJJ, on the ground that

Page 495 of [1940] 2 All ER 492

prima facie an option given by will is personal, and that there must be found in the will which gives the option some indication that it is exercisable by the executors of the person to whom it is given if the contrary is to be held.

In this will, in my judgment, there is nothing which can form the foundation for an argument that the testator has shown an intention that the option he gave to his son was to be exercisable by anyone other than the son. On the contrary, I think, for the reasons advanced by counsel for the first defendant upon the dispositions made by the testator of his estate, that it looks as if the testator were contemplating and intending that the option should be exercisable by the son only. However, I am not deciding the case on that ground. I am deciding it upon the ground that, in my view, the decision in Re Cousins, Alexander v Cross does support the proposition stated in Jarman on Wills, Vol I, p 73, and in this will I can find no language to indicate that the option given by the testator to his son is to be exercised by any person other than the son, and I so answer the question raised by the summons. The costs of all parties as between solicitor and client must be paid out of the testators estate.

Solicitors: Skelton & Co, Manchester (for all parties other than the fourth defendant); S F Miller, Mathews & Co, agents for Taylor Kirkman & Mainprice, Manchester (for the fourth defendant).

W J Alderman Esq   Barrister.

Hotel Regina (Torquay) Ltd v Moon

[1940] 2 All ER 495


Categories:        LEISURE AND LICENSING        

Court:        KINGS BENCH DIVISION        

Lord(s):        HAWKE, CHARLES AND HILBERY JJ        

Hearing Date(s):        18 APRIL 1940        


Intoxicating Liquors Offences Sale of liquor by retail without excise licence Sale of bottled beer by servants of hotel to guests Liability of manager and proprietors Finance (190910) Act 1910 (c 8), s 50(3).

The appellants, who were respectively the proprietors and the managers of an unlicensed hotel, were charged and convicted, together with two employees, the head waiter and the boots, of selling beer by retail without licence, contrary to the Finance (190910) Act 1910, s 50(3). The employees, who pleaded guilty to the charge, obtained liquor from a neighbouring licensed house, stored it in a cupboard in the hotel, and sold it to guests when it was ordered. The profits were shared between the employees, no portion being paid to the appellants. It was found as a fact that the manager, who attended the hotel daily, but did not reside there, knew that the employees were selling beer:

Held on the facts, the appellants had an indirect interest in the sale of liquor, and took part in the sales, and were, therefore, liable under the statute, as they had no excise licence.

Notes

The main question here is whether the offence actually committed by the servants can be made the subject of a charge against the manager and proprietors of the hotel. There is also a discussion based upon a contention

Page 496 of [1940] 2 All ER 495

that only a person having the actual property in goods can sell them, but this contention is rejected without difficulty.

As to Sale of Intoxicating Liquor Without Excise Licence, see Halsbury (Hailsham Edn), Vol 19, pp 131, 132, para 311; and for Cases, see Digest, Vol 30, pp 77, 78, Nos 608616.

Case referred to

Mellor v Lydiate [1914] 3 KB 1141; 30 Digest 78, 615, 84 LJKB 8, 111 LT 988.

Appeal

Appeal by way of case stated from a decision of justices for the borough of Torquay.

Two customs and excise officers booked a room at the appellants hotel, which was not licensed, and at dinner the head waiter supplied them with two bottles of light ale, for which they paid 1s 2d. Before taking the order, the waiter said that any liquor which they might order would be sent for from licensed premises adjoining the hotel. On the following day, the two customs and excise officers were again supplied at lunch and dinner by the head waiter and the hotel boots with beer, for which they paid. The beer was obtained from a cupboard in the hotel, which, according to the appellants, was provided by them as a place for the waiters to store intoxicating liquor purchased elsewhere by, and belonging to, guests staying in the hotel. The cupboard contained about 60 bottles of beer, stout and cider, in crates. None of the bottles bore a label indicating that it had been purchased by a guest in the hotel. A price list issued by a licensed house in the vicinity, showing the prices which guests were to be charged for beer and cider, was in the cupboard. The beer and cider in the cupboard were used for sales to guests in the hotel, and the profits derived from sales were shared between the head waiter and the boots, no portion thereof being paid to the appellants. The head waiter was authorised by the appellants to receive orders for liquor from the guests and to keep the liquor in the cupboard. The head waiter and boots pleaded guilty to the charge of selling beer by retail without licence, contrary to the Finance (190910) Act 1910, s 50(3), and were convicted and fined. Similar charges were preferred against the appellants, who were convicted and fined. The appellants were proprietors and occupiers of the hotel. The directors of the appellant company were Plum and his wife, who were also the managers who attended at the hotel daily, but did not reside there. Evidence was given for the appellants that the head waiter and the boots had no authority to sell the beer contrary to law, and that Plum had no knowledge that they were so doing. The justices found that Plum knew that his employees were selling the beer and committing the offences to which they pleaded guilty. It was contended, on behalf of the appellants, that the matter was res judicata, owing to the conviction of the employees, and that the appellants could not also be convicted of selling beer contrary to the statute, that there was no evidence upon which the justices could find that the sale was

Page 497 of [1940] 2 All ER 495

with Plums knowledge, that the appellants and Plum had derived no monetary profit from the sales, that the employees had no authority from the appellants to sell the beer, and that there was no sale on behalf of the appellants. For the respondents, it was contended that there was evidence on which the justices could find that the appellants knew of the sales, and that they, or Plum, had received indirect benefit by the facilities afforded to guests for obtaining intoxicants easily and without delay, and at any hour.

G O Slade for the appellants.

The Attorney-General (Rt Hon Sir Donald Somervell KC) and Valentine Holmes for the respondent.

18 April 1940. The following judgments were delivered.

HAWKE J. In this case, I think that I can speak of the appellants as Plum, who, in the name of a company, keeps a hotel in Torquay. Two persons were convicted of selling beer on those premises without a licence. The question which arose in this case was whether the manager or the company was involved in the two sales of which they were convicted. This licence duty was imposed so that intoxicating liquors sold on licensed premises should make their contribution to the national exchequer. The Finance (190910) Act 1910, s 50(3), provides as follows:

If any person sells by retail any intoxicating liquor, for the retail sale of which he is required to take out a licence under this Act, without taking out such a licence, he shall be liable in respect of each offence …

We have only to find out what the facts were and what part these appellants took in that sale. They provided the accommodation where the sale should take place. They provided light and heat, and the usual accessories of a place of residence. They attracted purchasers, and thereby introduced them to the persons who actually sold the beer. They provided the cupboards in which it was to be kept, although I agree that the case does not say so. They provided the glasses or other receptacles out of which the beer was consumed. They intended to have the transaction carried through, because they had an interest in the transaction being carried through. The magistrates have said that they had an indirect interest in it. I think that the magistrates found that as a fact, although counsel for the appellants points out to us that, as first stated in the case, it is only a contention. However, what they said afterwards shows, I think, that they found it as a fact. What that indirect interest was the magistrates have not said in so many words, but it seems to us that it must be one of two things, if not bothnamely, that these sales tend to improve and increase their own business, and that, this being a perquisite of the servants, by reason of those perquisites they will probably get servants at lower wages than if there were no such perquisites. Counsel for the appellants says that that amounts to mere connivance. He also says that nobody can be convicted under this statute save the person who actually has

Page 498 of [1940] 2 All ER 495

the property in the particular commodity passing on the sale. We do not agree with that. We think that all the facts which I have mentioned clearly show that these appellants took part in the sale, and that, therefore, they are liable to be fined under the statute, because they had no excise licence. The magistrates came to a correct determination and decision in point of law upon the facts stated, and this appeal ought to be dismissed.

CHARLES J. I entirely agree, and have nothing to add.

HILBERY J. I entirely agree. I only desire to add a few words upon what lies at the basis of the very clear argument addressed to us by counsel for the appellants. At the very basis of that argument lies the proposition that the only person who can effect a contract of sale is the person in whom rests the ownership of the goods. That statement is, in my view, completely fallacious. It is true that, under the contract of sale, the legal property in the goods is passed, and that a vendor must be able to pass property in the goods. That is quite a different thing, however, from saying that the only person who can sell an article is the person who is the legal owner. I gave counsel for the appellants an example of a sale by a person entrusted with goods on sale or return. That is a perfectly good selling of the goods by him, though he is not the person who has the legal ownership of the goods, because he has sufficient property in them to pass a good title. I agree with what the Attorney-General pointed outand counsel for the appellants conceded this in his replythat Mellor v Lydiate could not have been decided as it was decided if that proposition was complete and correct. If we treat it as a matter of everyday affairs, and not as an occasion for legal sophistry, I think that this case is a simple one.

Appeal dismissed with costs.

Solicitors: Walter Crimp & Co, agents for Kitsons Hutchings Easterbrook & Co, Torquay (for the appellants); Solicitor for Customs and Excise (for the respondent).

Michael Marcus Esq   Barrister.


Jacoby v Prison Commissioners

[1940] 2 All ER 499


Categories:        CIVIL PROCEDURE: PRISONS        

Court:        KINGS BENCH DIVISION        

Lord(s):        MACNAGHTEN J        

Hearing Date(s):        17 APRIL 1940        


Public Authorities Limitation of actions Prisoner on remand provided with furnished cell in pursuance of contract with prison commissioners Injury suffered through alleged defect in china chamber provided Whether prison commissioners a public authority Prison Act 1877 (c 21), ss 6, 9, 39 Public Authorities Protection Act 1893 (c 61), s 1 Prison Rules 1933 (SR & O 1933, No 809), r 122.

The plaintiff was committed to prison on remand, and, in consideration of a sum of 12s per week paid by him to the prison commissioners, was provided with a furnished cell, which contained, inter alia, a china chamber. While the plaintiff was using this chamber on 7 March 1938, it split into a number of pieces, owing to pressure put upon it, and one of these pieces pierced the plaintiffs spine. On 11 May 1939, the plaintiff issued a writ against the prison commissioners in respect of injuries thereby suffered, and the prison commissioners raised the defence, inter alia, that the action was barred by reason of the provisions of the Public Authorities Protection Act 1893. The prison commissioners are a body corporate constituted under the provisions of the Prison Act 1877, s 6. S 39 of that Act, and the rules made thereunder, permit a prisoner on remand to occupy, on payment of a small sum fixed by the commissioners, a cell specially fitted and suitably furnished, and it was assumed that it was in pursuance of a contract made with the commissioners in accordance with those provisions that the plaintiff was provided with the cell and with the chamber:

Held the provision of the china chamber was an act done by the prison commissioners in pursuance or execution or intended execution of a public duty, and the action was, therefore, out of time and barred by reason of the Public Authorities Protection Act 1893.

Notes

A person detained on remand is, of course, in a position very different from that of a convict. The only question here is whether, in their dealings with a person on remand, the prison commissioners are able to take advantage of the protection given by the Public Authorities Protection Act 1893, s 1.

As to Who is a Public Authority, see Halsbury (Hailsham Edn), Vol 26, pp 290297, paras 610616; and for Cases, see Digest, Vol 38, pp 102106, Nos 732760.

Case referred to

Lyles v Southend-on-Sea Corpn [1905] 2 KB 1; 38 Digest 102, 733, 74 LJKB 484, 92 LT 568.

Preliminary Issue of Law

Preliminary issue of law to determine the question whether an action was barred by the provisions of the Public Authorities Protection Act 1893, s 1. David Jacoby, whose address on the writ was given as His Majestys Prison, Wandsworth, sued the prison commissioners to recover damages for injuries suffered, and consequential loss, by reason of the negligence and/or breach of contract and/or warranty of the defendants, their servants or agents. In the statement of claim, it was alleged that on 5 March 1938, he was committed to Brixton Prison upon remand upon a charge of larceny, and that, in consideration of 12s per week paid by him to the prison commissioners, the latter agreed to, and did, provide him whilst upon remand in the prison with a cell which was furnished, in that it contained a bed and other furniture, including a

Page 500 of [1940] 2 All ER 499

china chamber. From the particulars, it appeared that the alleged contract was oral, and was made with a warder. The statement of claim alleged that it was an implied condition of the contract that the china chamber was fit to be used by the plaintiff for the purpose for which it was required, and that the prison commissioners impliedly warranted to that effect. The statement of claim continued as follows:

In breach of the said contract and/or warranty the said china chamber was not fit to be used for the purpose for which it was required and/or the defendants provided a china chamber which was not so fit and/or which was unsafe or dangerous. … On or about Mar. 7, 1938, at about 7.30 a.m. the plaintiff used the said china chamber when by reason of the defendants breach of contract and/or warranty and/or negligence in providing a china chamber not fit for the purpose for which it was required but which was unsafe or dangerous the said china chamber split into a number of pieces one of which pierced the base of the plaintiffs spine to a depth of 1½ inches.

The plaintiff claimed special damage to the amount of £495 5s.

The prison commissioners defence was a denial of the contract and the warranty. They also denied the negligence alleged against them. They alleged that the injury which the plaintiff sustained was due to his own negligence in using the chamber for a purpose other than that for which it was provided, and in failing to avail himself of the water-closet accommodation provided in the prison. The prison commissioners further alleged that the action was not commenced within 6 months next after the act, neglect or default complained of, and was barred by reason of the provisions of the Public Authorities Protection Act 1893. Thereupon an order was made by Master Ball that the point of law thus raised by the defendants be set down as a preliminary issue of law.

David Weitzman for the plaintiff.

Valentine Holmes and John Senter for the defendants.

17 April 1940. The following judgment was delivered.

MACNAGHTEN J. The prison commissioners are a body corporate constituted under the provisions of the Prison Act 1877, s 6, which provided that Her Majesty might:

… on the recommendation of the Secretary of State, at any time and from time to time [after the passing of this Act] by warrant under her sign manual appoint any number of persons to be commissioners during Her Majestys pleasure, so that the whole number of commissioners appointed do not at any one time exceed 5, and may, on the recommendation of the Secretary of State on the occasion of any vacancy in the office of any commissioner by death resignation or otherwise, by the like warrant, appoint some other fit person to fill such vacancy. The commissioners so appointed shall be a body corporate with a common seal, with power to hold land without licence in mortmain so far as may be necessary for the purposes of this Act, and shall be styled “the prison commissioners.”

They are to appoint all such officers of the prison as are by the Prison Act 1865, declared to be subordinate officers of the prison. Then s 9 provides as follows:

… The prison commissioners shall also make contracts, and do all other acts necessary for the maintenance of the prisons and prisoners within their jurisdiction. The prison commissioners shall, in the exercise of their powers and jurisdiction under this Act, conform to any directions which may from time to time be given to them by the Secretary of State.

Page 501 of [1940] 2 All ER 499

S 39 of the Act, which deals with the case of persons who are awaiting trial, provides as follows:

Whereas it is expedient that a clear differences shall be made between the treatment of persons unconvicted of crime and in law presumably innocent during the period of their detention in prison for safe custody only, and the treatment of prisoners who have been convicted of crime during the period of their detention in prison for the purpose of punishment, and that, in order to secure the observance of such difference there shall be in force in every place in which prisoners are confined for safe custody only, special rules regulating their confinement in such manner as to make it as little as possible oppressive, due regard only being had to their safe custody, to the necessity of preserving order and good government in the place in which they are confined, and to the physical and moral well-being of the prisoners themselves: Therefore, be it enacted, that the Secretary of State shall make, and when made may from time to time repeal, alter, or add to, special rules …

Then come three subsections setting out the subject-matter of the rules which may be made by the Secretary of State. It is the third of these classes which is relevant to this casenamely, that the Secretary of State shall make special rules:

(3) With respect to arrangements whereby prisoners may provide themselves with articles of diet, or may be furnished with a sufficient quantity of wholesome food, and may be protected from being called upon to perform any unaccustomed tasks or offices; also any matter which the Secretary of State may think conducive to the amelioration of the condition of a prisoner who has not been convicted of crime, regard being had to such matters as are in this section directed to be regarded.

Under the provisions of that section, the Secretary of State made the Prison Rules 1933. Rule 122 provides as follows:

The Governor or Visiting Committee may, on the application of any prisoner awaiting trial, permit him: (1) to occupy, on payment of a small sum fixed by the Commissioners, a suitable room or cell specially fitted for such prisoners, and furnished with suitable bedding and other articles in addition to or different from those furnished for ordinary cells, and to have at his own cost the use of private furniture and utensils approved by the Governor; (2) on payment of a small sum fixed by the Commissioners, to be relieved from the duty of cleaning his room or cell and from the performance of other such unaccustomed tasks or offices.

Standing Order 266, which was presumably made by the commissioners, and not by the Secretary of State, provides as follows:

Special cells shall be put apart for their use. A prisoner who occupies a room or cell especially fitted and furnished shall pay 5s. per week and in addition the sum of 1s. a day for being relieved from the performance of unaccustomed tasks or offices.

Apparently it is pursuant to the statutory provisions contained in the Prison Act 1877, s 39, and the rules made by the Secretary of State pursuant to the power conferred upon him by that section, that David Jacoby was provided with a cell of the character described in the rule and was charged the sum of 5s for it and 1s per day for the cleaning of it by some other prisoner.

The provisions of the Public Authorities Protection Act 1893, s 1, relevant to this case are as follows:

Where after the commencement of this Act any action, prosecution, or other proceeding is commenced in the United Kingdom against any person for any act done in pursuance, or execution, or intended execution of any Act of Parliament, or of any public duty or authority, or in respect of any alleged neglect or default in the execution of any such Act, duty, or authority, the following provisions shall have effect: (a) The action, prosecution, or proceeding shall not lie or be instituted

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unless it is commenced within 6 months next after the act, neglect, or default complained of, or, in case of a continuance of injury or damage, within 6 months next after the ceasing thereof …

The act, neglect or default complained of by David Jacoby is alleged to have occurred on 7 March 1938. The writ in this action was issued on 11 May 1939, and, therefore, if the action is an action for any act done in pursuance, or execution, or intended execution of any Act of Parliament or of any public duty, it is barred by the provisions of the Public Authorities Protection Act 1893, and so the question which has to be determined is whether the provision of this china chamber was an act done in pursuance or execution or intended execution of any public duty.

Counsel for the plaintiff argues that this matter has to be determined on the footing that the allegations contained in the pleading are true. The allegation in the statement of claim is that there was a contract between the prison commissioners and David Jacoby, and, although to some people that might seem to be a fantastic statement, nevertheless the matter must, for the decision of the preliminary issue of law, be dealt with on the footing that such was really the case, and that there really was an oral contract made between the prison commissioners and this plaintiff, and it must be assumed that the contract provided for the provision of a utensil suited to the use to which the prisoner put it. On the other side, it is said that in providing this cell and the furniture of this cell the prison commissioners were merely discharging a public duty imposed upon them by the Prison Act 1877, and the rules made by the Secretary of State under s 39 of that Act. I think that that contention is right. The prison commissioners are, of course, men who obey the requirements of the statute and of the rules made by the Secretary of State. They have no authority to accommodate a prisoner on remand with a special cell and with special furniture of their own motion. They can only do so under the rules when the governor of the prison or the visiting committee has given permission that such a specially-fitted room or cell should be provided. The fact may perhaps be regarded as rendering it impossible for the prison commissioners to have made a contract, but, whether or not a contract was made, when once the governor or the visiting committee have given the prisoner permission to occupy a specially-fitted room or cell, it is plainly the duty of the prison commissioners to comply with their direction in the matter. Assuming that there was a contract between the prison commissioners and the prisoner for accommodating him with a specially-fitted cell, it was merely a contract to do that which, under the statute and the rules made under the statute, the prison commissioners were under a duty to do. I think that counsel for the defendants is quite right in saying that the matter is concluded by Lyles v Southend-on-Sea Corpn. The headnote to that case runs as follows:

A municipal corporation constructed and worked an electric tramway under the authority conferred on them by an order made by the Light Railway Commissioners, in pursuance of the Light Railways Act, 1896, and confirmed by the Board of Trade,

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and having therefore, by sect. 10 of that Act, the force of a statute. On the construction of the order the court held that it imposed on the corporation an obligation, after the tramway had been opened for traffic, to run cars and to carry passengers in them. A passenger on one of the cars, who had paid his fare and had taken a ticket in the ordinary form, without any special conditions, was while travelling injured by the fracture of the conducting-rod, which fell upon him. He brought an action against the corporation for damages, alleging that the accident had happened through the negligence of the defendants or their servants:

Held, that the action was in substance founded on a breach by the defendants of their duty as a public authority under their Light Railways Order; that they were entitled to the protection given by the Public Authorities Protection Act, 1893; and that, as the action had not been brought within 6 months from the happening of the injury, it must fail.

That was a decision of the Court of Appeal. In that case, undoubtedly, there was a contract between the plaintiff and the defendants, as evidenced by the ticket which the plaintiff took, and, although there was a contract, it was a contract made pursuant to a statutory duty imposed upon them, and the court held that, in those circumstances, the Public Authorities Protection Act 1893, applied. So, too, in this case, assuming there is a contract between the prison commissioners and the prisoner on remand, that contract was merely a contract to do what the prison commissioners were bound to do under the statute and the rules made thereunder, if and so far as they are responsible for the actual management of each individual prison. I have read the section which deals with the duties of the prison commissioners. Whether they are actually responsible for what is done by the visiting committee does not arise in this case, but, assuming that they are, I think that in this case the action, in order to be maintained, must be brought within 6 months from the date of the alleged injury, and, as it is brought out of time, my answer to the point which is submitted to the court is that the action fails, and must be dismissed.

Action dismissed with costs.

Solicitors: Hart Leverton & Co (for the plaintiff); Treasury Solicitor (for the defendants).

W J Alderman Esq   Barrister.

Johnston v Charles Osenton & Co

[1940] 2 All ER 503


Categories:        CIVIL PROCEDURE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER AND CLAUSON LJJ AND SINGLETON J        

Hearing Date(s):        5 MARCH, 15 APRIL 1940        


Practice and Procedure Referring action to official referee Claim based on negligence of professional man Finality of official referees decisions of fact Supreme Court of Judicature (Consolidation) Act 1925 (c 49), s 89(b) Administration of Justice Act 1932 (c 55), s 1.

The plaintiff entrusted the defendants, a firm of estate agents, with the development of certain land as a housing estate. He subsequently brought an action against them for breach of contract and for negligence in performance of the obligations thus undertaken, alleging that they had been negligent in many matters in connection with the lay-out of the estate, more especially in respect of the system of drainage recommended by them and the density of houses on the estate. The

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plaintiff applied for an order under the Supreme Court of Judicature (Consolidation) Act 1925, s 89(b) that the action be referred to an official referee, on the ground that it could not be conveniently tried by a judge, and the master made an order accordingly, which was upheld by the judge on appeal. It was mentioned both to the master and the judge that under the Administration of Justice Act 1932, s 1, the official referees decision on questions of fact would be final:

Held (Clauson LJ dissenting) having regard to the number of plans which might have to be examined, to the questions of a scientific nature involved in the consideration of the technique of the lay-out of the estate, and of the drainage problems raised, and also to the very probable need for considerable local investigation, there was ample material upon which the judges discretion could be exercised, and, as it had been mentioned that the official referees decision on questions of fact would be final, it could not be said that the judge had exercised his discretion on any wrong principle.

Notes

The judgments in this case, which show some difference of judicial opinion, discuss how far the enactment in the Administration of Justice Act 1932, that the decision of an official referee on a question of fact was not to be subject to appeal, has affected the exercise of the courts discretion in sending a case to be tried by one of the official referees where a serious question, such as negligence by a professional person, is raised. If the case were tried in the ordinary way, the defendant could have it retried by the Court of Appeal on a question of fact, but, if referred, the decision of the official referee will be final.

As to Referring Action to Official Referee, see Halsbury (Hailsham Edn), Vol 26, p 87, para 158; and for Cases, see Digest, Practice, pp 567, 568, Nos 22502253. See Yearly Practice of the Supreme Court 1940, pp 622625.

Cases referred to

Evans v Bartlam [1937] AC 473, [1937] 2 All ER 646; Digest Supp, 106 LJKB 568, 157 LT 311.

Hoch v Boor (1880) 49 LJQB 665; 2 Digest 623, 2514, 43 LT 425.

Sacker v Ragozine & Co (1881) 44 LT 308; 2 Digest 623, 2520.

Cooper v Cooper [1936] WN 205; Digest Supp.

Gardner v Jay (1885) 29 ChD 50, 58; Digest, Practice, 535, 1987, 54 LJCh 762, 52 LT 395.

Interlocutory Appeal

Interlocutory appeal by the defendants from an order made in Chambers by Tucker J, on 13 February 1940. The facts and arguments are fully set out in the judgment of Slesser LJ.

Gilbert Beyfus KC and Montague Berryman for the appellants.

J P Ashworth for the respondent.

15 April 1940. The following judgments were delivered.

SLESSER LJ. In this case, the plaintiff applied to the master for an order that the action be referred to an official referee. The master made an order accordingly, and on appeal the judge affirmed his decision.

The defendants carry on business as estate agents and surveyors. According to the statement of claim, on 24 March 1936, the plaintiff agreed to buy a property known as the Tilehouse Estate, Guildford, and instructed them to prepare a scheme for the lay-out of the property as a housing estate. In May 1938, they were entrusted

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by the plaintiff with the development of the Tilehouse Estate and another property known as the Stoughton Farm Estate, which the plaintiff had agreed to buy on 13 April 1937.

The complaint made is that in discharging the obligations which the defendants undertook in the development of the properties they were negligent in various waysnamely, generally, that the defendants failed to advise as to proper levels for drainage, suggesting an inappropriate method of drainage, or mismanaged the negotiations with the local authority as to drainage, delayed the whole scheme of development, failed to plan for the right values of the houses on the estate and arranged to lay out a drainage system which proved defective. These complaints are actually formulated in the statement of claim as follows:

5. For the purpose of preparing a scheme for the lay out of property as a housing estate it is necessary or alternatively the recognised and usual practice to obtain forthwith a complete grid of levels of the property. In particular the said levels are required for the purpose of considering and preparing a system of drainage for the property. Notwithstanding the fact that the defendants received instructions as aforesaid in Mar., 1936, they failed to obtain a complete or any grid of levels of the said properties or either of them until some date after May, 1937. The plaintiff is unable to specify the exact date until after discovery.

6. On or about July 10, 1936, the defendants submitted to the town clerk of Guildford a plan of the proposed lay-out of the said Tilehouse Estate, and on or about Aug. 13, 1936, a further plan together with a request for an interim development order under the Town and Country Planning Act, 1932, and the Town and Country Planning (General Interim Development) Order, 1933. The said plan was disapproved by the borough council of Guildford upon the ground that main drainage was not available and notice of the said disapproval was given to the defendants by letter from the town clerk dated Sept. 30, 1936. Notice of appeal against the said disapproval was lodged with the Ministry of Health on Oct. 20, 1936. On the same date the plaintiff supplied the defendants with a report from Messrs. Burns Brothers (London), Ltd., wherein a proposal was made for discharging sewage from the said estate into a public sewer or sewers situate near the said estate by means of a pumping plant. The defendants failed to pay any or any sufficient regard to the said proposal or to consider sufficiently or at all whether cesspool drainage could be avoided by means of the said proposal or a proposal similar thereto.

7. The said appeal was accordingly prosecuted by the plaintiff in accordance with the defendants advice and was allowed on Dec. 30, 1936, and an interim development order was issued on Jan. 27, 1937. The plaintiff on many occasions verbally informed the defendants of his desire to proceed promptly with the development of the said estates but the defendants failed until Aug., 1937, to submit the requisite plans to the borough council of Guildford for their approval.

8. By reason of the defendants failure to consider properly or at all the possibility of installing a system of main drainage by means of pumping plant and by reason of their continued recommendation of a scheme of cesspool drainage the plaintiff was compelled to enter into an agreement dated Nov. 11, 1937, with the borough of Guildford. By the said agreement it was provided (inter alia) (1) that pending provision of main drainage the plaintiff should deposit a sum of £8 upon the sale of each plot of land shown on the plan annexed to the said agreement; (2) that in the event of cesspool drainage being provided for any of the said plots in respect whereof the said sum of £8 should have been paid a sum of £3 should be repaid to the plaintiff upon main drainage being provided; (3) that after provision of main drainage the plaintiff should pay to the said council a sum of £8 upon the sale of each further plot of land shown on the said plan; (4) that within 5 years from the date of the said agreement the said council should provide a main outfall sewer at a specified place and at such a depth as would effectively drain the sewers on the said Tilehouse Estate. The plaintiffs will refer to the said agreement more particularly at the trial for its full terms and effect.

9. As a result of the matters hereinbefore set out completion of the purchase of the said Tilehouse Estate was postponed from Oct. 5, 1936, being the date fixed by the aforesaid contract until July 1, 1937. Further, the completion of the purchase

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of the said Stoughton Farm Estate was postponed until Feb. 15, 1938. If the defendants had produced proper plans for the development of the said estates and each of them, neither of the said postponements would have occurred.

10. The plans prepared by the defendants for the purpose of constructing sewers on the said estates provided for a soil sewer to be laid beneath a road described on the said plans as Road G. The said plans were prepared without any or sufficient regard to the levels of the land included in the said estates, and the said proposed soil sewer would not have been capable of receiving sewage from a large number of houses to be erected on the said estate. Further if the said proposed soil sewer had been constructed in accordance with the said plans, a sewer proposed to be connected therewith for the purpose of receiving sewage from houses constructed along a road marked C on the said plans could not in fact have been constructed at all.

11. As the defendants were at all material times well aware, it was in the plaintiffs interest and his express wish that construction of houses on the said estates should be begun as soon as possible. At all material times there was available a sewer situate within a distance not exceeding 45 ft. from the southernmost boundary of the said Tilehouse Estate, which said sewer was capable of receiving drainage from 75 houses or thereabouts. The defendants failed to make any provision for using the said sewer and the aforesaid plans for the lay-out and drainage of the said estate were prepared without any regard to the existence thereof.

12. On many occasions the dates whereof the plaintiff is unable to specify he emphasised verbally to the defendants the importance of preparing the scheme for the lay-out of the said estates in such a manner as to secure the greatest number of houses thereon. The number of houses per acre permitted for the said estates was 12. The defendants failed to provide for the erection of houses of the density aforesaid or any sufficient density. In particular in respect of an area comprising 19 acres or thereabouts and known as the Saffron Platt area the number of houses erected in accordance with the defendants plans was 175 whereas the said area was sufficient for the erection of 228 houses. Further the total number of plots in the said estate proposed in accordance with the defendants plans submitted in Aug., 1937, was 781 which said number was increased in Nov., 1937, to 872. In fact the said estates were sufficient to comprise 1,140 plots or thereabouts, or alternatively, if 5¾ acres forming part of the said estates are reserved for shops, cinemas, or church sites 1,071 plots or thereabouts.

13. By notice dated Sept. 1, 1937, the defendants were informed by the borough surveyor of Guildford that approval had been given by the borough council to a plan deposited by the defendants for the proposed lay-out of new roads and sewers on the said Tilehouse Estate. The said approval was expressly made subject to the sizes of surface-water sewers and piping of ditches being to the borough surveyors satisfaction. The defendants failed to make any or sufficient inquiry as to the borough surveyors requirements and by letter dated Sept. 8, 1937, instructed Messrs. Franks Harris Brothers, Ltd., to proceed with the laying (inter alia) of surface-water sewers. Thereafter the borough surveyor refused to approve of the size of the said sewers and it became necessary to remove so many thereof as had already been laid.

14. The aforesaid requirements of the borough surveyor had regard (inter alia) to the fact that surface water had prior to the plaintiffs purchase been drained or discharged on to the said estates from land situate on the western side of a highway known as Worplesdon Road adjoining the said estates. There was not at any material time any easement or right in the owner or occupier of the said land or in any other person or body to cause the said surface water to be drained or discharged on to the said estates. The defendants failed to make any or sufficient inquiries as to the circumstances in which the said surface water was so drained or discharged, or to make any or sufficient endeavour to procure an alteration of the said requirements of the borough surveyor.

15. By reason of the premises the development of the said estates was seriously prejudiced and delayed and the plaintiff has suffered damage. But for the defendants breach of duty as aforesaid it is estimated that an additional 500 houses or thereabouts could already have been erected and sold. Further the agreement referred to in para. 8 hereof and the payments thereunder could have been avoided. The plaintiffs costs of and in connection with the appeal to the Ministry of Health could have been avoided. The cost of laying and removing the sewers referred to in para. 13 hereof amounted to £230 or thereabouts. Further the plaintiff has paid to the defendants a sum of £341 5s. in respect of the services alleged to have been rendered by them in connection with the said estates, which said sum is in the premises money thrown away.

The matters complained of in the statement of claim are substantially

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traversed in the defence, save that in para 5 the defendants admit that the plan submitted by them to the town clerk was disapproved by the borough council of Guildford “upon the ground inter alia that main drainage was not available.”

The master and the judge were of opinion that the case fell within the Supreme Court of Judicature (Consolidation) Act 1925, s 89(b), which, in substance, replaces the Arbitration Act 1889, s 14, and came to the conclusion that the cause required a prolonged examination of documents or scientific or local investigation which could not, in the opinion of the court, conveniently be made before a jury, or conducted by the court through its ordinary officers. This appears to be an order, prima facie, well within the discretion of the judge, if there was proper material on which he could exercise it. In my view, having regard to the number of plans which may well have to be examined, and questions of a scientific nature involved in the consideration of the technique of the lay-out of the estate and of the drainage problems raised, and also the very probable need for considerable local investigation, I think that there was ample material on which that discretion could be exercised, having regard to the issues raised in the pleadings. The real ground for the appeal is that to make such an order in this case would be to work an injustice, and that, therefore, in accordance with the principles laid down in Evans v Bartlam, more particularly in the dicta of Lord Atkin, at p 480 ([1937] 2 All ER, at p 650), and Lord Wright, at p 486 ([1937] 2 All ER, at p 654), to allow this reference would result in injustice. However, as Lord Wright states at p 486 ([1937] 2 All ER, at p 654), the Court of Appeal should not interfere with the discretion of a judge acting within his discretion unless the court is clearly satisfied that he was wrong.

The grounds here generally relied upon are apparently (i) that, the defendants being estate agents of considerable reputation, a finding of negligence in a court not generally frequented by the public would be very injurious, and (ii) that, since by the Administration of Justice Act 1932, s 1(1) an appeal lies to the Court of Appeal from any decision of an official referee only on a point of law, the defendants would be precluded from seeking a review of the facts upon a re-hearing which they would be entitled to ask for, were an appeal to be lodged on a finding of fact by a judge. As to the second matter, I am not disposed to say that the judge should not have regard to the limitation of the grounds of appeal imposed by the 1932 Act. However, this matter was argued by the respondents before him for his consideration, and I have no reason to suppose that he failed to have regard to it.

As to the more general argument that a plea of negligence should be treated, as regards the question of reference, as one akin to a charge of fraud, in that, in the ordinary way, it should not be sent to the referee, the authority of Hoch v Boor seems to me to be against the defendants contention. That case went so far as to say that, even where there were

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issues involving a charge of fraud, the case might, if it be otherwise proper, be compulsorily referred, if it involved a prolonged examination of documents. Although counsel contended there, in an argument very similar to that used here, that negligence had been alleged, and that, therefore, apart from fraud, character was at stake, Brett LJ, stating, at p 426, that “the defendant says that while in his service the plaintiff misconducted himself, was negligent and incompetent,” none the less the court upheld the order of the judge referring the matter to the official referee, and, though in that case the referee was to make a report to the judge, I read the judgment as of general application. Thesiger LJ said, at p 427:

Prima facie issues involving the character of the plaintiff or the defendant in an action ought not to be referred.

Nowhere is it suggested in the judgment, however, that a mere accusation of negligence as such raises any such prima facie presumption against reference. Hoch v Boor was followed in Sacker v Ragozine & Co, where also a complaint of habitual negligence in duty as well as misconduct and disobeying orders was alleged. Denman J said, at p 309:

The law as it now exists is, I think, to be found in the case I called attention to, Hoch v. Boor.

In Sackers case, Pollock B said that the facts scarcely amounted to fraud, and, the case being therefore treated on the basis of misconduct and negligence, it was nevertheless referred to an official referee.

Generally, I see no reason why, if it is to be said that the judge was wrong in this case, every building contract involving accusations of negligenceand there are few which do notin which reference was ordered should not be appealable when the judge thinks fit to refer the case for other sufficient reasons to the official referee. In my view, this appeal fails, and must be dismissed with costs.

CLAUSON LJ. By the Supreme Court of Judicature (Consolidation) Act 1925, s 89, it is enacted that, in any cause or matter (other than a criminal proceeding by the Crown), if the cause or matter requires any prolonged examination of documents or any scientific or local investigation which cannot, in the opinion of the court or a judge, conveniently be made before a jury or conducted by the court through its other ordinary officers, the court or a judge may, at any time, order the whole cause or matter to be tried before an official referee or officer of the court. In the present action, the plaintiff claims (as appears from the writ and the statement of claim) damages for breach of contract, or alternatively, negligence.

The defendants are a firm of estate agents and surveyors. They were consulted as such by the plaintiff, and were instructed by him to prepare a scheme for the lay-out of certain properties as housing estates. The

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plaintiff alleges that it was the duty of the defendants to act with due skill and diligence, to make all proper inquiries and obtain all necessary information, and to take all proper steps to further the interests of the plaintiff in and about the development of the properties. The plaintiff further alleges that, in breach of that duty, the defendants acted negligently and without any, or any sufficient, regard to the plaintiffs interests. The complaints as appearing in the pleadings may, for the present purpose, be sufficiently summarised as follows: (i) the defendants failed to acquaint themselves with the levels of the property, an essential preliminary to the working out of a proper system of drainage, (ii) the defendants advised a system of cesspool drainage, and failed to consider whether cesspool drainage could be avoided by an alternative means of pumping sewage into a public sewer, (iii) the plaintiff on this account was to his detriment forced to enter into an arrangement with the local authority in regard to temporary cesspool drainage, and to the provision by the local authority at some future time, and at some cost to the plaintiff, of main drainage facilities, (iv) owing to the defendants action in regard to these matters, the development scheme was delayed, (v) the defendants provided for laying certain sewers which either could not be laid at all or could be laid only with disadvantage to the plaintiff, (vi) the defendants plans did not provide, as they should have done, for securing the greatest number of houses permitted on the property by the Housing Acts, (vii) the defendants arranged for laying certain sewers, which, as they knew, or ought to have known, would not be, and were not, passed by the local authority, and had ultimately to be removed, (viii) the defendants failed to take certain steps necessary for enabling a proper system of surface drainage to be installed. The defendants defence was, in substance, that the plaintiff knew throughout, and had, indeed, been informed by them, of difficulties arising or likely to arise owing to the fact that main drainage was not available, and that the defendants had not been in any way unskilful or negligent.

Those being shortly the issues raised on the pleadings, it was proposed that an order under the Supreme Court of Judicature (Consolidation) Act 1925, s 89, for reference of the action to an official referee should be made, on the footing that the hearing would require a prolonged examination of documents or a scientific or local investigation which could not conveniently be conducted by the court through its ordinary officers. The pleadings were before the judge, but no evidence, and it was suggested that he should infer from the nature of the issues that the hearing would require a prolonged examination of documents, or a scientific or local investigation which could not be conveniently conducted by the court through its ordinary officers. The master took the view that it was a case for reference to an official referee. The judge, after some consideration, took the same view. From the pleadings, I should infer that the case would involve the consideration of detailed plans of the locus, and of lay-out and drainage plans, possibly some expert evidence

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as to the recognised way of dealing with such drainage problems as arose, and a careful consideration of the bearing on the matter of the rights and powers of the local authority in regard to such matters, and possibly also in regard to the Housing Acts.

Without further evidence, I should, speaking for myself, be quite unable to hold that the plaintiff (who supports the order for a reference) had discharged the onus which lay on him of establishing that the action required a prolonged examination of documents or a scientific or local investigation which could not conveniently be conducted by the court through its ordinary officers. That the action might well last several days, and would thus be likely to hamper the progress of the non-jury list, I can well believe. If the matter rested with me, however, I should be prepared to hold that the plaintiff had failed to establish the existence of the conditions required by the relevant provisions of the Act before the matter can be compulsorily referred to an official referee, and on that ground I should allow the appeal. In my view, on an application for a compulsory reference, the judge should require to be satisfied as to what are, generally speaking, the documents which are said to require prolonged examination, and as to the nature of, and the reasons for, the prolonged examination of documents, and the scientific or local investigation which it is suggested is of such a nature that it cannot be conducted by the court through its ordinary officersnamely, in this case, a judge trying cases in the long non-jury list. I can see no material before the court on which the judge could properly come to a conclusion on these points.

As, however, I understand that my brethren consider that the plaintiff has made out his case under this head by a mere reference to the pleadings, it becomes necessary to consider whether the judge, thus finding the action to be within the class of actions which he has power to refer, made a correct order. If the matter now in question had arisen before the Administration of Justice Act 1932, s 1, came into force, there would be no great difficulty. The effect of the order would merely be to substitute an official referee for a judge, to the manifest relief of the non-jury list. The parties would lose the services of a judge, but would have a public hearing by an experienced officer, with the same opportunities, in case of error (to which all officers, and even judges, are liable), to have the matter reconsidered before this court. The effect of the last-mentioned section, however, is to put it out of the power of the judge to refer such a case as this to an official referee without at the same time depriving the parties of the right of appeal in case of error of fact, which they would have in the case of a trial before a judge. It is obvious that, whether or not this was the intention of the legislature, the position of a judge who is asked to order a compulsory reference in a case to which this section applies is now far more difficult than it was before the Act came into force. It is not for him a mere question of weighing up the comparative advantages of various modes of trial. He has to weigh up

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the advantages of a trial before an official referee, such as that of providing a continuous, and, if necessary, local, and possibly earlier, hearing, and at the same time affording relief to a possibly overcrowded non-jury list, against the very serious circumstance that, in case of error of fact, the litigants will be without remedy. It may well be that in many cases, such as that of partnership and like accounts, where the errors, if any, are unlikely to be other than errors of quantum in regard to a few among many items, the circumstance that appeal on fact is excluded may be of comparatively small importance. Nevertheless, the circumstance must obviously be considered and weighed.

It appears that in the present case the Administration of Justice Act 1932, s 1, was mentioned to the judge, but, unfortunately, this court has no information as to the reasons for his Lordships refusal to treat the absence of a right of appeal as countervailing the advantages of a trial by an official referee.

I entirely disclaim any intention of laying down any rule as to the weight to be attached to this factor in the mind of the judge or court which has to consider whether a case is to be compulsorily referred, with the result that there will be no appeal on error of fact. In the present case, however, the defendants are charged with dereliction of professional duty, due, it may be, to incompetence, or, it may be, to carelessness. The issue is not even as to the incompetence or negligence of some subordinate, for which the defendants are to be held responsible. The issue is as to the personal competence, or possibly the personal conscientiousness, of that one of the partners in this firm of professional men who had the business in hand. The judge, whether he realised it or not, has forced the defendants to submit this question, of the most vital importance to the firm and individual concerned, to be decided, without possibility of revision on points of fact, by an officer of the court who, if I may say so with respect, is not less likely, though I will admit not more likely, to err on a matter of fact than a High Court judge. The defendants are thus deprived of the protection against error to which they are by law entitled if the case comes before the normal tribunal of a High Court judge. With the fullest respect for the judge, I am convinced that his order was erroneous, and that, if it stands, the defendants will run a serious risk of suffering what I can only describe as an injustice. There is the highest authority for the view that, with this conviction, it is my duty to refuse to concur in supporting what is, as I am satisfied, an erroneous order. Accordingly, if the matter rested with me, the appeal would be allowed, and the judges order reversed.

SINGLETON J. The defendants are a firm of estate agents and surveyors at Guildford. The order of Tucker J, against which this appeal is brought, affirmed an order of Master Ball that the case be tried before an official referee. It is clear from the statement of claim and from the defence that there are numerous questions to be tried,

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questions both of length and of difficulty. Furthermore, it seems to me that the case is one which involves prolonged examination of documents, and that it may well require both scientific and local investigation. I am satisfied that there were materials on which the court or judge could come to the conclusion that the trial could not conveniently be conducted through its ordinary officers.

In such circumstances, the court or judge may at any time order the whole cause or matter to be tried before an official referee, as is provided in the Supreme Court of Judicature (Consolidation) Act 1925, s 89. It is to be observed that the word “may” is used. It is for the judge to consider the matter in all its bearings, and to exercise his discretion upon the question as to whether or not he should order the case to be tried before an official referee.

Counsel for the defendants raised two points. The first was that there was no jurisdiction to make an order that the case be referred to an official referee on the materials which were before him. As to this, I have already said that, in my view, there were materials on which such an order could be made. At the same time, I do not overlook the fact that judges try many cases of as complicated a nature as this appears to be. The second point was that in any event such an order ought not to be made, having regard to the nature of the case, which involves various allegations against professional men, and especially so as the judgment of an official referee has been final on all questions of fact since the coming into force of the Administration of Justice Act 1932, s 1. Why, counsel asked, should a professional man, against whom are made charges which may ruin him, or his firm, be deprived of the right of appeal in this way? I confess that this argument appeals to me. I hold the view that no litigant ought lightly to be deprived of his right of appeal, and that applies particularly in the case of a professional man against whom charges of negligence are made. At the same time, it is to be borne in mind that in 1932 the legislature thought it right to enact, and did enact, that no decision of an official referee should be called in question by appeal or otherwise except on a point of law, and it can hardly be said that, by reason of that, no case involving charges against a professional man ought thereafter to be referred to an official referee for trial.

Counsel for the plaintiff submitted that the fact that there was now no right of appeal from an official referee on questions of fact had nothing to do with this appeal, that it was the duty of the court or judge to consider whether the case fell within the words of the Supreme Court of Judicature (Consolidation) Act 1925, s 89, and that, if it did, it was in the discretion of the judge to make the order independently of whether or not there was a right of appeal on questions of fact. I do not agree with this argument. I regard the cutting down of the right of appeal as one of the factsand possibly the most important of themwhich the judge must bear in mind in exercising his discretion. It was for this

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reason that I ventured to ask during the argument whether it was pointed out to the judge that the effect of upholding the order of the master would be to deprive the appellant of any right of appeal on fact. We were informed that, both before the master and before the judge, this point was urged. That was common ground.

After hearing the matter fully argued, I feel bound to say that I should not have made the order which Tucker J made. I should have taken the view that it was on the whole undesirable to leave the defendants without any appeal on facts in a case involving many complications, even though it might appear that the case could be more conveniently tried before an official referee. That does not mean that I am of opinion that Tucker J is wrong. The matter was one for the exercise of his discretion. It is not one for the exercise of my discretion. Unless we are clearly satisfied that the judge wrongly exercised his discretion, we ought not to interfere.

In Evans v Bartlam, Lord Atkin said, at pp 480, 481 ([1937] 2 All ER, at p 650):

But while the judge has such a discretion as I have mentioned, I conceive it to be a mistake to hold, as Greer, L.J., seems to do, that the jurisdiction of the Court of Appeal on appeal from such an order is limited so that, as Greer, L.J., said [in Cooper v. Cooper, at p. 209]: the Court of Appeal “have no power to interfere with his exercise of discretion unless we think that he acted upon some wrong principle of law.” Appellate jurisdiction is always statutory: there is in the statute no restriction upon the jurisdiction of the Court of Appeal: and while the appellate court in the exercise of its appellate power is no doubt entirely justified in saying that normally it will not interfere with the exercise of the judges discretion except on grounds of law, yet if it sees that on other grounds the decision will result in injustice being done it has both the power and the duty to remedy it.

Can it be said that the decision will result in injustice being done if it remains? If so, clearly we ought to set the order aside. The word used by Lord Atkin is “will,” not “may.” I fail to see that we can dispose of this case by saying that injustice will result if the order stands. If the defendants lose in the court of first instance, and appeal to the Court of Appeal, they may still lose, and, if they succeed in the Court of Appeal, the plaintiffs in the action may appeal to the House of Lords, and may succeed. It is impossible to say that injustice will result by reason of the judgment of the court of first instance being final on fact in any particular case, however undesirable it may be that in an important case a litigant should be deprived of his right of appeal on fact. Moreover, one must not overlook the possibility of the defendants succeeding in the court of first instance. Indeed, trial before an official referee might turn out to be a blessing rather than otherwise, for, after the hearing before the referee, the parties will know where they stand on the facts of the case, whereas there is no finality if the trial is before a judge of the Kings Bench Division.

In Evans v Bartlam, Lord Russell of Killowen said, at p 482 ([1937] 2 All ER, at p 651):

In the case now under discussion the judge in chambers thought it proper, in the exercise of his discretion, to set aside the judgment; and unless an appellate

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court is satisfied that the discretion has been wrongly exercised and should have been exercised in the contrary way, the judges order should be affirmed.

In the same case, Lord Wright said, at pp 486, 487 ([1937] 2 All ER, at p 654):

It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. But the court is not entitled simply to say that if the judge had jurisdiction and had all the facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a wrong principle. The court must if necessary examine anew the relevant facts and circumstances in order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in interlocutory matters the judge might be regarded as independent of supervision. Yet an interlocutory order of the judge may often be of decisive importance on the final issue of the case and one which requires a careful examination by the Court of Appeal. Thus, in Gardner v. Jay Bowen, L.J., in discussing the discretion of the judge as regards mode of trial, says [p. 58]: “That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it it will be reviewed.”

Then he says, at p 488 ([1937] 2 All ER, at p 655):

In my opinion this House must consider, on all the circumstances of the case, the contentions on behalf of the respondent that the order of Greaves-Lord, J. was wrong, and that on the merits the default judgment should not be set aside.

I have looked at the facts anew. I arrive at the conclusion that I should not have made the order which Tucker J made. I am not clearly satisfied that he was wrong, though in the exercise of my discretion I should have decided in a different way. All the relevant facts were before him, and he considered them. At least he is as likely to exercise his discretion properly as I am. In these circumstances, I do not consider that it is the duty of this court to interfere with the exercise of his discretion by the judge. It is impossible to say that he proceeded on any wrong principle. It is equally impossible to say that injustice will result from his order, and I am not prepared to say that he exercised his discretion wrongly simply because I should have taken a different view.

If I am wrong, and if this appeal ought to be allowed solely on the ground that by the order the defendants are deprived of any appeal on questions of fact, it follows that, apart from consent, no cases ought to be referred to an official referee which may affect a litigant in a sense other than the pecuniary sense. The effect of such a practice would clearly be to cut down very considerably the number of cases with which the official referees deal. My difficulty in this case has arisen entirely through the Administration of Justice Act 1932, s 1(1)(b). I can well understand the undesirability of appeals on questions of fact where accounts are being considered. There must be some finality. Nevertheless, I fail to see why the official referee, or an appellate court, should not be enabled to give leave to appeal on a question, or questions, of fact in an appropriate case. I agree that the appeal should be dismissed.

Appeal dismissed with costs. Leave to appeal to the House of Lords.

Solicitors: Berrymans (for the appellants); Gregory Rowcliffe & Co, agents for Gilbert H White & Co, Guildford (for the respondent).

Derek H Kitchin Esq   Barrister.


English v Western

[1940] 2 All ER 515


Categories:        INSURANCE        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        29 APRIL 1940        


Insurance Policy Conditions Policy against third-party risks Exception “Member of the assureds household.”

A young man of about 20 years of age was insured against third-party risks in respect of a motor car. The policy contained an exception of the “death or injury to any member of the assureds household” carried in or upon the car. A claim was made under the policy in respect of an accident to the sister of the insured at a time when the insured was living in his fathers house and receiving an allowance from him:

Held the exception in the policy being ambiguous, it must be construed in the sense least favourable to the insurers. Since, in one sense, the insured was not a householder, the exception did not apply and the general liability under the policy, therefore, remained. The insured was, therefore, entitled to recover.

Decision of Branson J ([1939] 4 All ER 345) reversed.

Notes

The decision in this case tests the extent of a common exception in motor car policies, the word to be construed being the word “household.” The term “householder” is commonly used to denote an occupier of premises responsible for the rent and outgoing payable in respect of them, and it is suggested that only a householder can have a household. The term “household” was, however, given a wider significance in the court below. In the Court of Appeal the majority of the Lords Justices have adopted the view that the exception was ambiguous and, applying the rule that any ambiguity in the exception must be construed against the insurers, have held that the exception did not apply.

As to Construction of Policies, see Halsbury (Hailsham Edn), Vol 18, pp 426431, paras 613616; and for Cases, see Digest, Supp, Insurance, Nos 3217a3217t.

Cases referred to

Lake v Simmons [1927] AC 487; Digest Supp, 96 LJKB 621, 137 LT 233.

Re Etherington & Lancashire & Yorkshire Accident Insurance Co [1909] 1 KB 591; 29 Digest 396, 3148, 78 LJKB 684, 100 LT 568.

Appeal

Appeal by the plaintiff from a judgment of Branson J, dated 14 November 1939, and reported [1939] 4 All ER 345. The facts are fully set out in the judgment of Slesser LJ.

B L A OMalley (for N A J Cohen on war service) for the appellant.

C N Shawcross for the respondent.

OMalley: An ordinary reasonable man reading the words “member of the assureds household” would ask himself if the insured had a household. In this case, he would answer himself in the negative. If the word “household” can mean either a household of which the insured is the head or one of which he is a member, then it is ambiguous, and the principle verba chartarum fortius accipiuntur contra proferentes should be applied: Re Etherington & Lancashire & Yorkshire Accident Insurance Co. No doubt it would be to the advantage of the insurers to extend the meaning of the words “member of the assureds household” to all members of the household of which the assured was a member.

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Nevertheless, they were offering to indemnify him against all claims in respect of passengers. If they had intended to cut down this advantage, they should have done so in clear and unmistakable terms. They have not done this, for the words are ambiguous. The assured was entitled to read the word “passenger” as giving him the widest possible rights, subject only to the limitation that members of the household of which he was the head were excluded.

Shawcross: On the only reasonable construction of this clause, it excludes all other members of the household of which the insured is a member. Among the reasons for inserting this clause in the policy is the fact that members of the assureds household are likely to be in the car very often, and, therefore, are likely to increase the risk to an unreasonable extent. The word “household” has been defined by standard dictionaries as “inmates of a house collectively.” “A womans household” is referred to in the Authorised Version of the Bible in such a connection that she could not be the head of it. The word “householder” is a much later word, and was imported into legal language by an early Reform Act. It is used in connection with the franchise and liability to rates, with the meaning of a person who holds a house as a tenant or owner and is not necessarily the head of the household. The rule of contra proferentes must not be applied so as to discover an ambiguity where none really exists: per Viscount Sumner in Lake v Simmons, at p 509. In any event, the words here are not ambiguous in the sense of the rule, because it is possible to construe their meaning. The rule applies only when, by all canons of construction, the words clearly have two possible meanings.

B L A OMalley (for N A J Cohen on war service) for the appellant.

C N Shawcross for the respondent.

29 April 1940. The following judgments were delivered.

SLESSER LJ. The plaintiff claimed a declaration that he was entitled to be indemnified by the defendant under an insurance policy subscribed by the defendant in respect of compensation which the plaintiff might become legally liable to pay to George Robert English and Rita Elaine English in respect of an accident which occurred on 28 May 1938, while the plaintiff was driving a motorcar insured by the policy.

The defendant is an underwriter subscribing the policy, and the critical portion of the policy which has to be considered is contained in para 5. The facts, so far as they are material, may shortly be stated thus. On 28 May 1938, the plaintiff was driving a motor car, which came into collision with another motor car of a different make from, and another car of the same make as, that which he was driving. Considerable damage was done to the cars, the plaintiffs becoming a total wreck, and a lady was unfortunately killed. The defendant, who is representing underwriters generally on the policy, and his fellow-underwriters have agreed to indemnify the plaintiff in respect of the loss of the car and various third-party claims, with the exception of a claim made in respect of injuries to Rita Elaine English, the plaintiffs sister, who was a passenger

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in the plaintiffs car at the time of the accident. They are both the children of George Robert English. Both the plaintiff, who at the time of the accident was a very young man, being born in 1918, and his sister, who was born in 1920, lived with their father, George Robert English, at No 21, Queens Gate Place, London, and were in receipt of an allowance from him, paying nothing to the upkeep of the house. An action for damages was brought on 3 March by the sister, Rita Elaine English, by her father, George Robert English, as next friend, against the plaintiff here, her brother. Judgment was signed in default of appearance, but the assessment of the damages was postponed by agreement pending the determination of this special case. The judge has held that, in construing para 5 of this policy which has here to be considered, the words which cause the difficulty have a very definite meaning. It is necessary in the first place to read those words, and see how far one finds oneself in agreement with the judge as to the words having a definite meaning and having the meaning which he has ascribed to them. Paragraph 5 of the policy deals generally with third-party risks, and says this:

All sums which the assured shall become legally liable to pay by way of compensation for (A) injury to persons, death of or bodily injury to any person (including passengers) caused by or arising out of the use of the car …

There is a liability, therefore, generally for indemnity for death or bodily injury to any person, including passengers. This girl was a passenger in the car. If the matter stood there, there could be no question but that the insurance company would be liable. However, the words proceed as follows:

… but excluding (a) death or injury arising out of and in the course of employment of such person by the assured, (b) death or injury to any member of the assureds household who is being carried in or upon, or entering or getting on to or alighting from the car …

The remaining words do not apply.

It is said by the insurance company that this exclusion of liability extends to the sister of the insured in this case, in that she is a member of the insureds household. On the other hand, it is said on behalf of the plaintiff: “No. This limit of liability applies to a member of the insureds household only where the insured himself is in a position to have, or has, a household in the sense that he is a householder, and, as this plaintiff was not a householder, but was living in his fathers house, supported entirely by his father, the exception contained in (b) does not apply. Therefore, the general obligation of the insurance company to indemnify only in the cases stated where any persons, including passengers, have sustained bodily injury, applies to this case.” Branson J has come to this conclusion ([1940] 1 KB, at p 148 [1939] 4 All ER, at p 346):

… the words “member of the assureds household” mean a member of the same household as that of which the assured is a member, just as one speaks of a member of a mans college or a member of a mans club. The words are com-

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pletely apt to cover that construction. Indeed, to my mind, they seem more apt to cover that construction than any other.

Then the judge goes on to give reasons why the limitation has been so made. In my view, however, it is not right to say that those words are apt to cover that construction in the sense that they are not equally apt to cover the other construction which is contended for here by the plaintiffnamely, that the insureds household refers to a person capable of having a household, namely, a householder. I think that those words are equivocal. I think that they are equally capable of either construction, and, in the circumstances, I feel that the judge should have considered what principles of law he ought to have applied to the construction of this policy, as, no doubt, he would have done had he come to the conclusion that those words were as equivocal as I think they are. If the words be equivocal or ambiguous, then I find no difficulty for myself in ascertaining the true principle to be applied. I think that the doctrine generally known as contra proferentes should here be applied. I quote from Macgillivray on Insurance Law (2nd Edn), p 1029, where the authorities are conveniently set out:

If there is any ambiguity in the language used in a policy, it is to be construed more strongly against the party who prepared it, that is in the majority of cases against the company. A policy ought to be so framed that he who runs can read. A party who proffers an instrument cannot be permitted to use ambiguous words in the hope that the other side will understand them in a particular sense, and that the court which has to construe them will give them a different sense, and therefore where the words are ambiguous they ought to be construed in that sense in which a prudent and reasonable man on the other side [the side by whom the policy is proffered] would understand them.

In my view, if that principle be here applied, if those words be ambiguous, one arrives at this result. There is given by the opening words of para 5 a general indemnity to the insured in respect of passengers, and, if the insurance company cannot rely upon these words in the exception as necessarily including the household in the sense which Branson J has indicatednamely, that he is one member of the household which includes his sisterthen I think that they are not entitled to adopt that favourable construction in order to exclude a construction which is said by the plaintiff to be the proper constructionnamely, that this exception has no relation to his case at all, because he was not at any material time a householder, and had not a household. The exception, therefore, must be ruled out in this case, and the general words of liability apply. That seems to me to state the principles on which the construction of an ambiguous document should be dealt with in favour of the profferee. The result is that I come to the conclusion that Branson J was wrong, that the appeal should be allowed, and that the judgment in this case should be entered for the plaintiff.

CLAUSON LJ. I need scarcely say that it is with the utmost diffidence that, in a matter which involves a question of the construction of a policy of insurance, I find myself differing from the judgment of

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Branson J, but, as I have formed a reasonably clear opinion that his decision in this case is not correct, I will proceed to explain my reasons for so holding. A man may be related to a household in two ways. He may be a member of the household or he may be the head of the household. The insurance company, while insuring the insured against his liability to passengers, excepts in its own favour his liability to a passenger who is a member of the insureds household. The question is, accordingly, whether or not, on the true construction of the policy, the exception covers, not only the narrower class of members of a household of which the plaintiff is the head, but also the wider class of members of a household of which the plaintiff is a member. Branson J took the view that the more natural meaning of the phrase is covering the wider classnamely, members of the household of which the plaintiff is a member.

The question seems to me to be the relationship connoted in this phrase by the possessive pronoun which, in the actual clause, is concealed beneath an apostrophe s. It appears to me that the word “his” may equally well connote the one relation which I have stated as the other. In other words, in my judgment, either of the two competing meanings of the phrase “a member of the assureds household” is possible and natural, and, accordingly, there is, in the truest sense, an ambiguity in the phrase. There is no doubt that, if the phrase used in the policy is in this sense ambiguous, that meaning which is less favourable to the insurance company which has put forward the policy must be chosen. It may well be that one would have expected the insurance company, possibly for very good reasons, to have intended the phrase to carry the wider connotation, but that seems to me to be quite immaterial if one once reaches the conclusion that the phrase is ambiguous. If the insurance company desired the wider meaning to be placed upon it, it was their duty to make that desire clear by using unambiguous language.

For these reasons, I find myself bound to hold that the phrase of exception covers only the narrower class, the member of a household of which the plaintiff is head, and, accordingly, the case is a case outside the exception, and the company is liable. It follows, if this view be correct, that the appeal succeeds, the judgment below is reversed, and the company declared liable.

GODDARD LJ. Though I regret that I am unable to share the view expressed by Slesser and Clauson LJJ, I at least have the satisfaction of finding myself in agreement with the view of Branson J, whose judgment on these matters of insurance has always been regarded with such respect. I find his judgment so convincing that I should have been content to adopt it as my own, but I propose to add a very few words as to why I have come to a different conclusion from that at which Slesser and Clauson LJJ have arrived in this court. It is true,

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I agree, that the words “assureds household” can be construed in one of two ways. It is also true to say that, where one finds a proviso inserted in an insurance policy for the benefit of the underwriters, if the words are ambiguous, or not clear, one is to construe those words more strongly against the underwriters than against the insured. However, the doctrine generally spoken of as a construction contra proferentes is limited to this. If one can show a perfectly good reason for adopting one construction, and can show no reason, or very little reason, for construing the clause in the other way, one should prefer the construction which affords good reason for the presence of the proviso.

Then it seems to me that the reasons given by the judge are very strong for construing it in the way contended for by the underwriter. He says, ([1940] 1 KB, at p 148, [1939] 4 All ER, at p 346):

One can see some reason for a limitation so framed, but it is very difficult to follow the reason for a limitation such as that which the assured seeks to put on the words. It is reasonable to exclude from the benefits of a policy of this kind members of the assureds household, giving that word a meaning rather wider than that of “family,” because it must be envisaged by the underwriters that the members of a household in that sense would probably be very frequently at risk in the car and would, therefore, be people who, if they were to be covered would normally be covered only for some additional premium.

I am reminded, too, of the words of Viscount Sumner in Lake v Simmons, at p 509:

Every one must agree that commercial contracts are to be interpreted with regard to the circumstances of commerce with which they deal, the language used by those who are parties to them, and the objects which they are intended to secure.

We are here dealing with an insurance in which the insurers are willing to give the insured an indemnity greater than that which he is obliged by statute to procure for himselfin other words, an indemnity against claims which may be made against him by passengers in his car, who may be injured and allege that they were injured by the drivers negligence. However, the underwriter is not content to give an unlimited cover. It seems to me that the object of this proviso is to prevent underwriters from being exposed to the risk of claims by people who may be expected to be very frequent passengers in the car. To construe it in the way contended for by the insured seems to me to lead to the curious result that, if the father has a car and the son has a car, and each is insured by separate policies, the son gets a far wider cover than the father would get. I cannot think that that was intended. In my opinion, the words “assureds household” in this policy, when one bears in mind the object with which the proviso was inserted, are meant to exclude from the benefit of the policy the members of the common establishment in which the insured lives. For these reasons, I would dismiss the appeal.

Appeal allowed with costs. Leave to appeal to the House of Lords.

Solicitors: Edward Betteley Smith & Stirling (for the appellant); William Charles Crocker (for the respondent).

Derek H Kitchin Esq   Barrister.


Dormer and Others v Newcastle-upon-Tyne Corporation

[1940] 2 All ER 521


Categories:        LOCAL GOVERNMENT: TORTS; Nuisance        

Court:        COURT OF APPEAL        

Lord(s):        SLESSER, CLAUSON AND GODDARD LJJ        

Hearing Date(s):        30 APRIL 1940        


Public Authorities Statutory powers Erection of barrier along pavement in front of plaintiffs building Nuisance Invasion of private rights of property Newcastle-upon-Tyne Improvement Act 1865 (c ccl), ss 22, 65.

The defendant corporation had erected a barrier, consisting of posts and rails, along the edge of the pavement in front of a block of shops and offices owned by the plaintiffs, with the object of providing that persons walking on the pavement should, when wishing to cross the street, use the pedestrian crossing at either end of the barrier. The barrier constituted a nuisance and a serious invasion of the plaintiffs right of access to the carriageway of the street. The corporation had been empowered by s 22 of their private Act to place posts, pillars, rails, etc, in the streets for, inter alia, the protection of passengers and traffic, but s 65, which was one of a number of sections under a general heading “Sewers. Sanitary Arrangements,” contained a proviso that “nothing in this Act shall authorise the corporation … to do … any act … amounting to a nuisance.” It was contended that s 65 prevented the corporation from exercising their powers under s 22 so as to commit a private nuisance:

Held (i) s 65 did not in any way qualify the power given to the corporation under s 22 to place posts, rails, etc, in the street regardless of whether or not they thereby caused a public or private nuisance.

(ii) the word “nuisance” in s 65 was not restricted to a private nuisance.

(iii) per Goddard LJ: the extent of the railing along the street was a question entirely in the discretion of the corporation, and one which could not be reviewed by the court.

Decision of Wrottesley J ([1940] 1 All ER 219) reversed.

Notes

It has been thought necessary for the safety of the public to erect railings at the edge of the footpath to ensure that pedestrians cross the road by the pedestrian crossing. The railings necessarily restrict the access to the carriageway from business premises, and it is here held that the statutory powers of the local authority were sufficient to justify the erection of these rails, irrespective of the question whether they were a public or a private nuisance. In construing the private Act here in question, which was divided into parts by italicised headings, the court has confined the operation of a restrictive clause to the part of the Act within one such heading.

As to Permissive Authority, see Halsbury (Hailsham Edn), Vol 26, pp 259, 260, para 573; and for Cases, see Digest, Vol 38, pp 2131, Nos 112175.

Cases referred to

Vernon v St James, Westminster, Vestry (1880) 16 ChD 449; 38 Digest 232, 620, 50 LJCh 81, 44 LT 229.

Goldberg & Son Ltd v Liverpool Corpn (1900) 82 LT 362; 38 Digest 29, 161.

R v Dibdin [1910] P 57; 42 Digest 660, 689, sub nom R v Dibdin, Ex p Thompson 79 LJKB 517, 101 LT 722, on appeal, sub nom Thompson v Dibdin [1912] AC 533.

Cohen v South Eastern Ry Co (1877) 2 ExD 253; 8 Digest 56, 368, 46 LJQB 417, 36 LT 130, affg SC sub nom Cohen v Great Eastern Ry Co (1876) 45 LJQB 298.

Page 522 of [1940] 2 All ER 521

R v Newark-upon-Trent (Inhabitants) (1824) 3 B & C 59; 42 Digest 659, 679.

A-G v Leeds Corpn (1870) 5 Ch App 583; 38 Digest 47, 276, 39 LJCh 711.

Appeal

Appeal by the defendants from a judgment of Wrottesley J, dated 21 December 1939, and reported [1940] 1 All ER 219, where the facts are fully set out.

Rt Hon Sir William Jowitt KC and G D Squibb (for A Capewell on war service) for the appellants.

Cecil R Havers KC and C E Rochford for the respondents.

30 April 1940. The following judgments were delivered.

SLESSER LJ. The plaintiffs claimed a declaration that the defendants had:

… no lawful right to erect and have no lawful right to maintain guard rails on the pavement in Blackett Street, Newcastle-upon-Tyne … so as to interfere with the private rights of the plaintiffs or any of them to free access to the said street or with the public rights of the plaintiffs or any of them to an unobstructed way across the pavement [in front of Grainger House] …

They also claimed a mandatory order for the removal of the guard rails, and an injunction restraining the defendants from:

… erecting or continuing to erect guard rails in the said street and in front of Grainger House aforesaid so as to be a nuisance to the plaintiffs or any of them [and damages].

In August 1938, the defendants, purporting to exercise their powers under the Newcastle-upon-Tyne Improvement Act 1865, s 22, placed guard rails in front of Grainger House in the highway between the pavement and the roadway. The guard rails, which existed for a distance of about 138 ft, were erected to protect passengers and traffic and to render the crossing less dangerous to passengers. This is a dangerous crossing in a densely populated part of Newcastle. The fences which have been put up appear to be efficacious to canalise the traffic going across the road so that it will not spread throughout this dangerous area.

In answer to the allegation that a nuisance, public or private, has been created by their act, the defendant corporation rely upon the powers which they say are given to them under the Newcastle-upon-Tyne Improvement Act 1865, s 22, which provides as follows:

The corporation may continue, or from time to time place and maintain, in any street any posts, pillars, rails, bars, chains, or other fence, permanent or temporary for the protection of passengers and traffic, and for preserving any footway clear from annoyance, and for prevention of accidents, and may place posts in the carriageway of any street so as to make the crossing thereof less dangerous to passengers, and may place fountains in convenient parts of the footways or carriage-ways of streets.

At the side of that provision there is inserted in italics the word “Streets.” It extends from s 22 over a considerable number of sections, so that it is clear that streets are the subject-matter of those provisions. Actually, it extends to s 61, after which a new subject-matter, indicated by the words “Sewers. Sanitary Arrangements” in italics, begins at s 62.

Page 523 of [1940] 2 All ER 521

I entertain no doubt that, had there been nothing more than s 22 in this Act dealing with this question, the corporation, in putting up these railings, would have been acting within their powers. It seems to me that the effect of the exercise of those powers must necessarily be to create a situation which would otherwise constitute a nuisance, whether it be public or private. The maintenance in a street of posts, pillars, rails and fences must constitute an obstruction to the highway and an obstruction to those whose property is adjacent to the highway. As Cotton LJ pointed out in Vernon v St James, Westminster, Vestry, at p 468:

If it could be made out that such an erection, wherever placed and however guarded, must of necessity be a nuisance, then it would be true that the Act of Parliament had authorised a nuisance, and the court could not have interfered …

The judge here has found in addition that this erection did not, in his view, constitute an unreasonable use of the powers of the corporation entitling the court to interfere. In my view, that is the only possible conclusion which could be reached in this matter.

It may be that, if a council do not exercise their powers bona fide, as was indicated in Goldberg & Son Ltd v Liverpool Corpn, at p 364, the court would interfere, but, once it is found that the discretion of the corporation to carry out the duties or powers imposed on them under s 22 has been, not corruptly, but unimpeachably, carried out, then it is for them to decide the nature of the post or fence necessary to render the crossing of the street less dangerous to passengers. It follows, therefore, by the nature of the case, as I have said, that, if the matter ended with the powers given by s 22, the acts of the corporation, albeit they would constitute a nuisance were it not for those powers, are expressly authorised by the legislature, and, being so expressly authorised, the question of the manner of their exercise so as to cause a nuisance scarcely arises. One example, and a very familiar example, of a public nuisance is that of obstructing the highway or making it less commodious for traffic. So also the obstruction of a highway may cause special and peculiar damage to an individual, or may create a nuisance in the sense of obstructing some right of access. In all these cases, I think that s 22 has expressly authorised the corporation to do the very matter which is complained of as a nuisance.

The matter does not end there, however, because reliance is placed by the respondents upon s 65 of the same private Act. S 65 is the part of the Act following the fasciculi of sections dealing with streets, which is indicated, as I have said, by the italicised heading at s 62: “Sewers. Sanitary Arrangements.” Ss 62, 63 and 64 deal respectively with the power to construct sewers, the power to construct works for the utilisation of sewage, and the power to contract for the utilisation of sewage. S 65, which we have here to consider, provides as follows:

Provided always, that nothing in this Act shall authorise the corporation or any lessee of the corporation to do or be party to any act or thing amounting to a nuisance.

Page 524 of [1940] 2 All ER 521

The judge, though the matter was not very completely argued before him, and was reserved for argument in this appeal, has taken the view that those words, properly construed, are repugnant to the language of s 22, in that they are purporting to say that nothing in the Act shall authorise any act or thing amounting to a nuisance, whereas s 22 by its very nature authorises many things which would amount to a nuisance. If that view is adopted, then I think certain difficulties which pressed the judge might well arise. In my view, however, there is no such inconsistency or repugnancy when s 65 is rightly construed. It is to be observed in the first instance that s 65 operates by way of a proviso. As I have said, it is a proviso to the group of sections dealing with sewers and sanitary arrangements. It has been said by Fletcher Moulton LJ, in R v Dibdin, at p 125:

It sins against the fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as a proviso. It treats it as if it were an independent enacting clause instead of being dependent on the main enactment.

If the main enactment here be, as I think it is in this matter, an enactment relating to sewers, then it is clear, to my mind, that the proviso is limited to those potential nuisances which may arise out of the exercise of the powers in ss 62, 63 and 64, which, unlike the powers in s 22, can be exercised without creating a nuisance.

Another reason for coming to the conclusion that the provision is so limited was indicated by Clauson LJ, in the argument. The proviso is not only directed to the corporation, but also provides:

… nothing in this Act shall authorise the corporation or any lessee of the corporation to do or be party to any act or thing amounting to a nuisance.

The consideration of the insertion of the words “any lessee” is very material in dealing with s 64, which contains the power to contract with other persons for the utilisation of sewage, and deals with the obligation of disinfecting the sewage and/or leasing any land belonging to the corporation. It brings the lessee immediately within the ambit of this section dealing with the power to contract for the utilisation of sewage. On the face of it, it has no meaning or relation to the power in s 22 to set up posts for guarding footways. It is another indication that s 65 is so limited. Again, I think it would be wrong to take the view that s 65 was anything other than a limitation of the power otherwise given in the sections dealing with sewers if consistent sense can be made of the provision without introducing an absurdity.

There are other reasons which bring one to the same conclusion. S 160 is dealing with what are called miscellaneous provisions. There one would expect to find some general enactment applying to all the provisions of the Act, but we find in fact that this proviso as to nuisance is not placed there, but in a section dealing with sewers. Moreover, by s 187, it is provided that certain clauses of the Towns Improvement Clauses Act 1847, are incorporated with the Act. Many

Page 525 of [1940] 2 All ER 521

of those (with which I need not here deal) must, if exercised, inevitably cause nuisances, public or private, to the persons whose rights would be invaded by the exercise of the powers dealing with all kinds of matters, sewers, streets, cellar-flaps, buildings, footways, removal of nuisances, and many other things. It would stultify the whole operation of this Act were it to be held that powers which can only be exercised by causing what at common law would be nuisances could not be exercised by reason of s 65, and I, for one, repudiate the suggestion that this Act requires any such absurd interpretation.

There is ample authority for the view that one is entitled to have regard, not only to the subject-matter preceding the proviso, but also to the indicia afforded by the arrangement of the sections, and from other indications, as is pointed outand, I think, correctlyin Craies on Statute Law (4th Edn), p 190:

It was at one time supposed that courts of law would not recognise the division into parts or the headings as substantive parts of the Act. But they are gradually winning recognition as a kind of preamble to the enactments which they precede, limiting or explaining their operation.

It is pointed out in the same work that the method of dividing words into sections is comparatively recent, dating from 1850. Before that time, it was usual to preface each distinct portion of the Act by words indicating that the division into sections had no legislative authority. As Mellish LJ pointed out in Cohen v South Eastern Ry Co, at p 260:

If some absurdity or inconvenience followed from holding it to apply to the whole Act, it might be reasonable to confine the incorporation to clauses relating to some particular subject-matter …

That, I think, is what is asked to be done here. Finally, on this matter I would cite a passage from the judgment of Holroyd J, in R v Newark-upon-Trent (Inhabitants), at p 71:

Then follows the proviso upon which the present question arises, and which is printed as part of the second section; but whether it be printed as part of the second section, or had been separated from it by the printer, and made into a third section, can make no difference in the construction of the statute; for in the construction of a statute, the question whether a proviso in the whole or in part relates to, and qualifies, restrains, or operates upon the immediately preceding provisions only of the statute, or whether it must be taken to extend in the whole or in part to all the preceding matters contained in the statute, must depend, I think, upon its words and import, and not upon the divisions into sections that may be made, for convenience of reference in the printed copies of the statute. The same construction must prevail, I apprehend, in this case, as if the proviso, which has been printed as if incorporated in the second section …

Therefore, as I see it, having regard to the context and the mischief, in case of any possible ambiguity, it is a matter of construction to consider what is the meaning of the proviso. As I have indicated, in my view it is limited to the case of possible nuisances which may arise by the exercise of powers under that part of the Act which is dealing with sewers and sanitary arrangements.

The only other matter which remains for consideration is the distinction which the judge, being faced, as he thought, with an apparent repugnancy and absurdity, sought to make between public and private nuisances.

Page 526 of [1940] 2 All ER 521

If s 65 had not the meaning which I am inclined to attach to it, for myself, I see no reason for restricting the word “nuisance” to a private nuisance. It seems to me that, if it is to operate so as to forbid a nuisance, there is no reason why we should introduce, by words which are not there, a limit to the type of nuisance to which it should refer. In other words, I think that, strictly applied, if it is to be applied generally to s 22, it would stultify all those acts done under s 22, whether they produce a public or a private nuisance. The class of case to which the judge refers seems to me, with every respect to him, not to be in point here. Those cases are dealing with matters, as was pointed out in A-G v Leeds Corpn by Lord Hatherley LC, at p 593, which they would be at liberty to do, such as draining into a river without creating a nuisance.

The question may always arise in those classes of cases which have come before the court, where an authority, being given power by statute to do a thing, has done it in such a way as to injure the property of another, or create a public nuisance, or where it has not acted reasonably. Here, however, the obligation seems to me to be absolute. In those circumstances, were I to come to the conclusion, which I do not, that s 65 was to be read with s 22, I should have come to the conclusion that acts done under s 22, and which produced any nuisance, would, by reason of the wording of s 65, not be authorised, and, therefore, would be unlawful, and that, unless the corporation could find some way of placing in the carriageway or footway posts, pillars, rails, bars, chains, or other fence which would not constitute a nuisance, they would be acting unlawfully. Directly their acts constitute a nuisance, whether it be a public or whether it be private, equally they would be doing something under s 65 for which they had no authority. I see no reason for distinguishing in this context between public and private nuisance. In my opinion, however, the question does not arise, because I do not think that s 65 in any way qualifies the power which the corporation have under s 22 to set up posts and the like regardless of whether or not so doing causes a public or private nuisance. For these reasons, I think that this appeal succeeds.

CLAUSON LJ. I am of the same opinion. S 65 of the private Act is not to be read as a proviso to s 22, and I am content to rest my opinion on the grounds which have been stated by Slesser LJ.

GODDARD LJ. I agree. In justice to the judge, from whom we are differing, I desire to say that it seems to me that before him counsel who then represented the defendants did not really put forward, or at any rate did not insist upon, the point which is really the most complete defence to this action. That does not prevent us from dealing with it, as it involves the consideration and application of an Act of Parliament, and counsel now representing the defendants put it in the forefront of his argument.

Page 527 of [1940] 2 All ER 521

I think that it is beyond argument that s 65, being, as it purports to be, a proviso, is a proviso only to the section dealing with sewers immediately preceding it, and was never intended to be applicable to the whole Act. If it were applied to s 22, it would simply mean that Parliament had given with one hand what it took away with the other. The judge, being apparently invited to treat the section as applicable to the whole Act, had to see if he could reconcile the sections, and did so by differentiating between a public and a private nuisance, holding that the section did not authorise a private nuisance, though it did authorise a public one. I confess, however, that I know of no principle on which this construction could be supported. However, I need not consider his reasons, because, in my opinion, it is clear that s 65 is not a proviso to s 22.

Then it was sought to be argued that this court could consider whether the corporation had exercised the powers conferred by the Act reasonably or unreasonably. Apart from the fact that the judge has distinctly thought that it was a reasonable exercise of the power, let me consider what the power is. It is a power to place railings, fences, and so forth, in a street to ensure the safety of the public. Of course, if, in the exercise, or purported exercise, of that power, the corporation put up a close-boarded fence 10 ft or 12 ft high along the edge of the path, it might very well be that the frontagers whose light was interfered with could say: “This is not the sort of thing which Parliament ever intended that you should have the right to do. It is not an exercise of the powers which have been given to you, because, while you are purporting to exercise that power, in fact you are doing something entirely different.” In this case, it is merely a question of whether or not the railing which the corporation put up, which no one suggests is not a proper railing for the purpose of affording protection to foot passengers, should extend for a particular distance. The plaintiffs do not like it extending in front of their shop. The corporation, in the exercise of their discretion, came to the conclusion that it was necessary for the protection of the public in Newcastle that it should. I do not think that this court, or any other court, has any right to canvass the decision of a local authority on a matter of that sort, which Parliament has placed in their hands for decision. It is not a question of whether the Ministry of Transport or the police or the watch committee or anybody else took this view or that view. It is entirely a question for the corporation as a corporation to decide, and their decision on the length or extent of this fence cannot be reviewed by this or any other court.

Appeal allowed with costs. Leave to appeal to the House of Lords.

Solicitors: Collyer-Bristow & Co, agents for John Atkinson, Town Clerk, Newcastle-upon-Tyne (for the appellants); Dawson & Co (for the respondents).

Derek H Kitchin Esq   Barrister.